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

                                   FORM 10-K/A

(Mark One)
[ X ]           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1999

                                       OR

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

     For the transition period from __________________ to ________________

                         Commission file number 0-17020

                               Sensar Corporation
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                    Nevada                                     87-0429944
---------------------------------------------------        -----------------
        (State or other jurisdiction of                    (I.R.S. Employer
         incorporation or organization)                    Identification No.)

50 West Broadway, Suite 501, Salt Lake City, Utah                84101
---------------------------------------------------        -----------------
    (Address of principal executive offices)                   (Zip Code)

Registrant's telephone number, including area code          (801) 350-0587

Securities registered under section 12(b) of the Act:

     Title of each class             Name of each exchange on which registered
           None                                        None
     -------------------             -----------------------------------------

Securities registered under section 12(g) of the Act:

                         Common Stock, Par Value $0.001
--------------------------------------------------------------------------------
                                (Title of class)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the  Securities  Exchange  Act of
1934  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[ ]

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ ]

         As of March 27,  2000,  there  were  6,545,746  shares of the  Issuer's
common stock,  par value $0.001,  issued and  outstanding.  The aggregate market
value of the  Issuer's  voting  stock  held by  nonaffiliates  of the Issuer was
approximately  $360,000,000,  computed at the closing quotation for the Issuer's
common stock of $60 as of March 27, 2000.

                       DOCUMENTS INCORPORATED BY REFERENCE

         List hereunder the following documents if incorporated by reference and
the part of the Form 10-K (e.g.,  Part I, Part II, etc.) into which the document
is  incorporated:  (1) any annual report to security  holders;  (2) any proxy or
information  statement;  and (3) any prospectus filed pursuant to Rule 424(b) or
(c) under the  Securities Act of 1933.  The listed  documents  should be clearly
described for identification purposes. None.

<PAGE>

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                                TABLE OF CONTENTS
--------------------------------------------------------------------------------

Item Number and Caption                                                     Page
-----------------------                                                     ----

PART I
------
1.       Business............................................................ 3

2.       Properties.......................................................... 8

3.       Legal Proceedings................................................... 8

4.       Submission of Matters to a Vote of Security Holders................. 8


PART II
-------
5.       Market for Registrant's Common Equity and Related Stockholder
         Matters............................................................. 9

6.       Selected Financial Data.............................................10

7.       Management's Discussion and Analysis of Financial Condition and
         Results of Operations...............................................11

8.       Financial Statements and Supplementary Data.........................14

9.       Changes in and Disagreements With Accountants on Accounting
         and Financial Disclosure............................................14


PART III
--------
10.      Directors and Executive Officers of the Registrant..................15

11.      Executive Compensation..............................................17

12.      Security Ownership of Certain Beneficial Owners and Management......22

13.      Certain Relationships and Related Transactions......................23


PART IV
-------
14.      Exhibits, Financial Statement Schedules, and Reports on Form 8-K....25


SIGNATURES...................................................................27

                                        2

<PAGE>

                                     PART I
                                ITEM 1. BUSINESS

FORWARD LOOKING STATEMENTS

         This report on Form 10-K contains  certain forward  looking  statements
and   information   relating  to  the  Company  and  its  proposed  merger  with
Net2Wireless  Corporation.  These forward  looking  statements  are not based on
historical  facts,  but reflect the Company's  current  expectations  concerning
future results and events.  Such statements  generally  describe the objectives,
goals, and plans of the Company and are not intended to be accurate descriptions
of the future. The proposed merger with Net2Wireless Corporation is subject to a
number of conditions, including approval by the shareholders of both the Company
and  Net2Wireless  Corporation,  the Company  eliminating any liabilities it may
have other than up to $50,000 in current liabilities,  and the satisfaction of a
number of standard closing conditions, that may or may not be met. The potential
products and services of  Net2Wireless  are still in the  development  stage and
have not yet been tested in a  commercial  setting.  Consequently,  the proposed
business of Net2Wireless has not advanced beyond research and  development.  The
proposed  business  and  potential  products and  services of  Net2Wireless  are
subject to the  substantial  risks  associated  with new  market  introductions,
including  the  ability  of  Net2Wireless  to  successfully  develop  commercial
products  based on its  technology,  the  ability  of  Net2Wireless  to  address
technical and manufacturing problems in producing new products, favorable market
acceptance of any products  produced,  the ability of  Net2Wireless  to obtain a
price  for  its  products  and  services  sufficient  for it to  make a  profit,
Net2Wireless'  ability  to  enter  into  favorable  strategic  alliances,  joint
ventures,   or  other  collaborative   arrangements  with  established  industry
partners,  the success of the marketing efforts of Net2Wireless,  the ability of
Net2Wireless  to  successfully  protect  its  intellectual  property  to prevent
competitors from benefiting from the technology,  the ability of Net2Wireless to
compete with larger, more established entities,  and the ability of Net2Wireless
to obtain the  necessary  financing  to  successfully  complete  its  goals.  In
addition,  Net2Wireless  proposes to conduct business and develop products for a
market that is only just emerging.  There may not be significant consumer demand
for  some  or  all  of  the  proposed  products  and  services  of  Net2Wireless
Corporation.  One or more of the  factors  listed  above,  or other  factors  or
influences   that  may  develop  in  the  future  or  that  may  currently  seem
inconsequential, may change the actual results of the Company significantly from
those described in the forward looking  statements.  The Company does not intend
to update these forward looking  statements,  except as may occur in the regular
course of its periodic reporting obligations.

OVERVIEW

         Sensar  Corporation  (the  "Company") was  historically  engaged in the
design,  development,  manufacturing,  and  marketing of  analytical  scientific
instrumentation. In November 1997, the board of directors, due in part to missed
product  deadlines  and  significant  ongoing  operating  losses,  replaced  the
existing executive management of the Company.  Andrew C. Bebbington was retained
as the new chief  executive  officer of the Company and  undertook  an immediate
evaluation of all aspects of the Company's operations,  including manufacturing,
research and  development,  sales and  marketing  approaches,  product  options,
personnel and management,  contractual arrangements, and overall cost structure.
As a result of  recommendations by Mr. Bebbington in December 1997, the board of
directors approved  significant  restructuring  steps and certain changes in the
strategic direction of the Company.

                                       3
<PAGE>

         Goals and  targets  were  then  established  for each of the  remaining
business lines for 1998.  Executive  management continued to monitor each of the
technologies in the Company's  portfolio,  measure developments against budgeted
goals,  and institute  cost-cutting  measures in order to reduce the substantial
losses  being  suffered  by the  Company  at that time.  Sales of the  Company's
products  did not meet  budgeted  expectations  and,  despite  the  cost-cutting
measures taken, the Company continued to suffer significant losses,  although at
a reduced rate. As a result of these ongoing losses and the  continuing  decline
in the market price for the Company's  common  stock,  the Company was unable to
attract outside  financing on terms  acceptable to it and was forced to consider
the sale of a portion of its assets to fund its cash requirements.

         During  1998,  new  management  had  continued  to  invest  in  product
development  in the acoustic  instrumentation  business,  while at the same time
implementing  cost-cutting  measures and imposing operational  discipline.  As a
result, a significant  improvement in the performance of the acoustics  business
based on year-to-year  comparisons was obtained.  This improvement permitted the
Company to identify and negotiate an agreement with a purchaser of the acoustics
business. A definitive agreement concerning this transaction was signed November
30, 1998 and,  following the approval of the  stockholders  at a special meeting
held March 18, 1999,  was completed  March 31, 1999. At about the same time, the
Company  decided to terminate its development  work involving its  supercritical
fluid  chromatography  instruments.  This minor line of  business  was sold to a
group of former  employees,  none of whom were members of executive  management.
Shortly  thereafter,  in July 1999,  the Company  completed the sale of its real
property to the purchaser of the acoustic instrumentation business.

         The  Company  used a  portion  of the  proceeds  from  the  sale of its
acoustic  instrumentation  business  to  retire  the  remaining  1998  Series  A
Preferred Stock then outstanding. This preferred stock had a floating conversion
feature   based  on  the  trading   price  for  the  common  stock  that  became
disadvantageous  to  the  common  stockholders  as  the  Company's  stock  price
continued to decline. Some of the remaining proceeds of the sale of the acoustic
instrumentation  business were used to attempt the finalization of the Company's
Jaguar mass spectrometer products.

         During the end of 1998 and the early part of 1999, the trading price of
the Company's  common stock continued to decline to well below the minimum price
required for continued listing on the Nasdaq National Market, which is $1.00 per
share.  Consequently,  at the March 18, 1999 stockholders  meeting, the board of
directors proposed,  and received  stockholder  approval for, a consolidation of
the issued and outstanding stock of the Company.

         At the same time,  the  Company  had  scheduled  a hearing  with Nasdaq
concerning  an  earlier  letter  that had been  sent to the  Company  indicating
Nasdaq's  intent to  terminate  the  listing of the  common  stock on the Nasdaq
National  Market  System.  While  it was  hoped  that the  consolidation  of the
outstanding  stock would increase the stock price above the $1.00  minimum,  the
Company was also temporarily  below the $5 million public float  requirement and
Nasdaq expressed concern about the Company's ability to continue to meet the net
tangible asset requirement for the Nasdaq National Market System in light of its
limited revenues and history of significant  ongoing  operating  losses.  At the
NASD hearing, the Company and the NASD negotiated a resolution pursuant to which
the Company's common stock would be moved from the Nasdaq National Market System
to the Nasdaq  SmallCap  System and would  continue to be listed there  provided
that the  consolidation  resulted  in a market  price in excess of the $1.00 per
share minimum.

                                       4
<PAGE>

         As a result of the array of business and financial  issues  confronting
the  Company,  it did not  have  access  to  traditional  sources  of  financing
necessary to continue its  development of its mass  spectrometry  and CrossCheck
technologies.  Consequently,  Mr. Bebbington and the board of directors began to
engage in conversations about his willingness to continue as the chief executive
officer of the  Company.  The  outside  members of the board of  directors  also
indicated  their  unwillingness  to remain on the  board in the  absence  of Mr.
Bebbington's continued participation.

         At this time,  Howard S. Landa met with Mr.  Bebbington  and proposed a
wholesale change in management and the board of directors. Mr. Landa was at that
time a senior partner of Kruse, Landa & Maycock,  L.L.C.,  outside legal counsel
to the  Company.  As a result of this  relationship,  the Company  retained  the
services  of an  independent  legal firm and  convened a special  meeting of the
board of directors to consider Mr. Landa's proposal.

         On April 21, 1999, the then current  directors of the Company  resigned
and a newly elected board of directors was  appointed.  Concurrently,  Mr. Landa
was  appointed  as the  new  chief  executive  officer  of the  Company  and Mr.
Bebbington  resigned,  although he agreed to  continue  to provide  transitional
services as a consultant to the Company. The new board of directors  immediately
implemented a consolidation  of the outstanding  stock on the basis of one share
for each five shares  previously  outstanding,  arranged for a $1 million equity
financing, and approved the execution of agreements to investigate the potential
acquisition of two start-up internet  entities.  While these  investigations did
not lead to an  acquisition,  it was the beginning of the  Company's  aggressive
search  for  an  acquisition  that  could  potentially   provide  value  to  the
stockholders of the Company.

         Under an  agreement  put in place  while Mr.  Bebbington  was the chief
executive officer of the Company, the Company had granted distribution rights to
its  Jaguar  mass  spectrometer  products  to a  Japanese  firm  engaged  in the
scientific  instrumentation  business.  The obligation to market the instruments
was  subject  to  the  testing  and  acceptance  of  those  instruments  by  the
distributor.  Delivery  of  the  initial  instruments  was  delayed  because  of
manufacturing  problems,  and ultimately the Company agreed to deliver the first
six instruments by June 30, 1999. When the manufacturing  team failed to deliver
any  instruments  acceptable  to the  distributor  by that  date,  the  board of
directors  reclassified the Jaguar mass  spectrometer  operations as assets held
for sale and renewed the  Company's  efforts to negotiate a  transaction  with a
potential  buyer  of  this  technology.  These  efforts  lead  to  a  sale  to a
privately-held  corporation engaged in the scientific  instrumentation business,
of the Jaguar mass spectrometer technology in August 1999. At the same time, the
Company  abandoned the  CrossCheck  technology  that it had held under a license
agreement, and returned this technology to the holder of the patent. The Company
also sold its  residual  interest  in airport  noise  monitoring  software.  The
business based on this software had been sold to a third party in 1995.

         Subsequent to the new management team assuming  operational  control in
April 1999, the Company actively began searching for an acquisition, focusing in
the high technology, internet arena. The Company reviewed a number of businesses
and business plans during this period.  While some of the investigations lead to
letters  of  intent,  and the  Company  did make  two  small  minority  interest
investments in other  companies,  none of the  investigations  and  negotiations
resulted in the execution of a material agreement until the fall of 1999.

                                       5
<PAGE>

         In September 1999, the Company entered into  negotiations  and signed a
letter of intent to acquire a wireless communications technology that ultimately
led  to  the   execution  of  an   agreement   with   Net2Wireless   Corporation
("Net2Wireless")  on December 8, 1999, that was subsequently  amended on January
4, 2000, and March 21, 2000 (the "Reorganization Agreement").

NET2WIRELESS CORPORATION

General

         Net2Wireless is a privately-held  Delaware  corporation with a research
and development  subsidiary located in Israel.  Net2Wireless maintains a website
at  www.net2w.com.  Net2Wireless is developing  technology  which is intended to
enable and enhance a wide variety of wireless  communication  services. The goal
of Net2Wireless  is to permit the following  services to be provided to cellular
subscribers  carrying wireless devices such as palm computers,  personal digital
assistants, and cellular phones:

                  (a)      browsing the internet through standard websites and
                           using standard browsers;

                  (b)      transmission of live video over the 9600 bps wireless
                           link to the wireless device;

                  (c)      providing instant messaging with full graphics
                           support;

                  (d)      providing messaging services (e-mail, voice mail,
                           fax, etc.); and

                  (e)      providing full graphics applications with network
                           based storage.

         Net2Wireless  currently has an installation  at Partner  Communications
Company, Ltd., the third largest cellular carrier in Israel, which is conducting
a  beta-site  test of the  Net2Wireless  products.  Net2Wireless'  products  and
services  are  still  in  development,  and  there  can  be  no  assurance  that
Net2Wireless will be successful in achieving its goals.

         Net2Wireless  recently completed a private placement for gross proceeds
of  approximately  $29 million to provide  funding for its ongoing  research and
development efforts and the expansion of its work force.

PROPOSED MERGER

         The  Reorganization  Agreement  provides for the merger of Net2Wireless
with and into the Company in exchange for the issuance of  18,295,060  shares of
common stock and the  assumption  of options and warrants to acquire  14,766,649
shares of common  stock.  Such  warrants  and  options  have a weighted  average
exercise price of $2.03 per share. In addition, the Company will issue 1,000,000
shares to certain individuals involved in introducing the two entities.

         Under the terms of the Reorganization  Agreement, the Company agreed to
advance  Net2Wireless  up to $2  million  prior to the  merger  to  assist it in
meeting its  ongoing  development  and growth  expenses.  The  Company  advanced
$500,000  of this amount to  Net2Wireless  in February  2000.  Net2Wireless  has
recently completed a private placement of its securities which resulted in gross
proceeds  to it of  approximately  $29  million.  The  Company  does not know if
Net2Wireless  will request that the additional $1.5 million be advanced prior to
the merger, but it may do so.

                                       6
<PAGE>

         The  Reorganization  Agreement  requires  the Company to have a minimum
amount of cash and collectible  notes  receivable and no liabilities at closing,
other than current accounts payable not to exceed $50,000.  In order to meet the
requirement  with respect to the  elimination  of  liabilities,  the Company has
provided for the termination of its deferred compensation plan and the executive
employment  agreement with Mr. Landa, the assumption of the lease to which it is
currently a party,  and the  indemnification  of the  Company by Mr.  Landa with
respect  to  pending   litigation.   See  "CERTAIN   RELATIONSHIPS  AND  RELATED
TRNSACTIONS."

         Additional  shares  of common  stock may be issued to the  Net2Wireless
stockholders  in the event that the net cash held by the  Company at the closing
of the merger,  as defined in the Agreement,  plus all amounts  collected on the
note  receivables  held by the  Company  within  60 days of the due date of such
receivables,  is less than $4.45 million.  The number of additional shares to be
issued will be determined by dividing any shortfall by $1.86.  These  contingent
shares will be delivered to former Net2Wireless  stockholders within 10 business
days of the final  determination of the number of shares.  At December 31, 1999,
the  Company  had $5.0  million  of net cash  under the  definition  used in the
Reorganization  Agreement,  assuming  the  full  collection  of  all  short-term
receivables. At March 27, 2000, the Company had cash of approximately $4,330,000
and the note receivable from  Net2Wireless of $500,000 with current  liabilities
of  approximately  $50,000.  In addition,  the Company had notes receivable from
other  parties of  approximately  $1,370,000.  The Company has not  received any
notice that such  receivables are subject to any claim or offset,  and currently
expects these amounts to be collected in due course.  Consequently,  the Company
does  not  anticipate  that  additional   shares  will  be  issued  under  these
provisions.

         On completion of the merger,  the current  shareholders of Net2Wireless
will hold  approximately 65% of the outstanding  common stock of the Company and
warrants  and  options  that will permit them to  increase  their  ownership  to
approximately 77% of the Company on exercise.  In addition the current directors
and  officers of the Company will resign and  nominees of  Net2Wireless  will be
appointed in their place. As a result,  the current  shareholders and management
of Net2Wireless will control the Company subsequent to the merger.

         Completion of the merger is subject to the approval of the  transaction
by the shareholders of both the Company and Net2Wireless and the satisfaction of
additional  standard  closing  conditions.  If  the  merger  is  completed,  the
corporate  domicile of the Company will be moved from Nevada to Delaware and its
name will be changed to "Net2Wireless Corporation."

Employees

         The Company currently has two employees, Mr. Landa, the chief executive
officer of the Company, and his assistant.

                                       7
<PAGE>

--------------------------------------------------------------------------------
                               ITEM 2. PROPERTIES
--------------------------------------------------------------------------------

         The Company sold its  administrative  and  manufacturing  facilities in
Provo,  Utah,  to PCB during 1999 in  connection  with the sale of its acoustics
instrumentation business.

         Until  recently,  the Company  leased  1,692 square feet of space at 50
West Broadway, Suite 501, Salt Lake City, Utah 84101, for monthly lease payments
of $2,256 under the terms of a three-year lease. As of March 1, 2000, this lease
was  assumed  by Mr.  Landa,  the chief  executive  officer of the  Company,  as
required by the terms of the agreement with  Net2Wireless.  Mr. Landa has agreed
to permit the  Company to continue to use the  facilities  on a rent-free  basis
pending  the closing of the  proposed  merger with  Net2Wireless.  See  "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS."

--------------------------------------------------------------------------------
                            ITEM 3. LEGAL PROCEEDINGS
--------------------------------------------------------------------------------

         On September 28, 1999, an action  entitled  Edgar Lee, et al. v. Sensar
Corporation  was filed in the Fourth  Judicial  District  Court in Utah  County,
Utah, Civil No. 990403473. The action was brought by several former employees of
the Company,  seeking the payment of a bonus based on the successful  completion
of the sale of certain of the Company's assets, technologies, and/or businesses.
The Company does not believe the  employees  are  entitled to such a bonus,  has
filed a motion to dismiss a portion of the  claims,  and  intends to  vigorously
defend its position.  Mr. Landa has agreed to indemnify the Company  against all
future costs or liabilities associated with this litigation after March 1, 2000,
under  the  provisions  of the  indemnification  agreement  contemplated  by the
Reorganization Agreement. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."

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

         During the three  months ended  December 31, 1999,  the Company did not
hold a  shareholders'  meeting and no matters  were  submitted  to a vote of the
security  holders  of the  Company,  through  the  solicitation  of  proxies  or
otherwise.

                                       8
<PAGE>

                                     PART II

--------------------------------------------------------------------------------
                ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
                           RELATED STOCKHOLDER MATTERS
--------------------------------------------------------------------------------

         The  Company's  common  stock is traded on the Nasdaq  SmallCap  Market
under the trading  symbol  "SCII." The  following  table sets forth high and low
closing sale prices for the Company's common stock as reported on Nasdaq for the
periods  indicated.  Such quotations do not include retail  markups,  markdowns,
commissions, or other adjustments. All amounts have been adjusted to give effect
to the  1:5  consolidation  of  the  outstanding  common  stock  of the  Company
effective May 3, 1999 and the 2:1 forward split of the outstanding  common stock
effective January 17, 2000.

         The following  table sets forth the  approximate  range of high and low
closing  sale  prices for the common  stock of the  Company  during the  periods
indicated.

                  Quarter Ended            High Bid             Low Bid
                  -------------            --------             -------
                  March 31, 1998           $   9.219            $  5.781
                  June 30, 1998            $   7.969            $  4.375
                  September 30, 1998       $   5.000            $  1.094
                  December 31, 1998        $   1.484            $  0.625
                  March 31, 1999           $   1.094            $  0.703
                  June 30, 1999            $   3.594            $  0.859
                  September 30, 1999       $   2.797            $  1.500
                  December 31, 1999        $  34.250            $  2.094

         On March 27,  2000,  the last  reported  sales price for the  Company's
common stock as reported by Nasdaq was $60.

         On March 27, 2000, the Company had  approximately  285  stockholders of
record.

         The Company has not paid  dividends  with respect to its common  stock.
There are no  restrictions  on the  declaration  or payment of  dividends in the
articles of  incorporation or bylaws of the Company or in any of its contractual
agreements,  other than under the  Reorganization  Agreement  for the period the
merger is pending. However, it is anticipated that any potential earnings of the
Company and,  subsequent to the merger,  the combined company,  will be retained
for  working  capital and  investment  in the growth and  expansion  of business
operations.  Consequently,  it is not  anticipated  that the Company,  before or
after the proposed merger, will pay dividends in the foreseeable future.

                                       9
<PAGE>

--------------------------------------------------------------------------------
                         ITEM 6. SELECTED FINANCIAL DATA
--------------------------------------------------------------------------------

CERTAIN FINANCIAL DATA

         The following  statement of operations and balance sheet data as of and
for the periods ended December 31, 1999, 1998, and 1997, 1996, and June 30, 1996
and  1995,  were  derived  from the  Consolidated  Financial  Statements  of the
Company.  In January 1997, the Company  changed its fiscal year end from June 30
to  December  31  effective  December  31,  1996.  The  Consolidated   Financial
Statements of the Company for the fiscal year ended December 31, 1999, 1998, and
1997, for the six months ended December 31, 1996, and for the fiscal years ended
June 30,  1996 and 1995,  have been  audited  by  independent  certified  public
accountants.  The selected  financial  data below should be read in  conjunction
with the Consolidated  Financial Statements of the Company and the notes thereto
and "ITEM 7.  MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION AND
RESULTS OF OPERATIONS."
<TABLE>
<CAPTION>
                                                                                      Six Months
                                                                                        Ended                  Year Ended
                                               Year Ended December 31,                 December                 June 30,
                                 -----------------------------------------------         31,         -----------------------------
                                     1999             1998              1997            1996           1996(2)           1995(3)
                                 ------------      -----------      ------------     -----------     -----------        ----------
Statement of Operations
Data(1):
<S>                              <C>               <C>              <C>              <C>             <C>                <C>
  Revenues:                      $    147,944      $   137,814      $    140,870     $    59,638     $    12,320        $    7,302
                                 ============      ===========      ============     ===========     ===========        ==========
  Income (loss) from
     continuing operations       $(11,995,158)     $(1,221,025)     $ (2,324,262)    $  (326,242)    $  (463,637)       $ (510,863)

  Income (loss) from
    discontinued operations            22,528       (5,702,419)      (12,493,549)     (1,317,678)     (1,242,611)          199,246

  Gain on sale of
     discontinued operations        3,268,250                -                 -               -               -                 -
                                 ------------      -----------      ------------     -----------     -----------        ----------
  Net loss                       $(8,704,380)      $(6,923,444)     $(14,817,811)    $(1,643,920)    $(1,706,248)       $ (311,617)
                                 ============      ===========      ============     ===========     ===========        ==========
  Basic earnings
     (loss) per common
     shares from
     continuing operations       $      (2.11)     $     (0.51)     $      (0.51)    $     (0.08)    $     (0.16)       $    (0.21)

  Basic earnings (loss)
     per common share from
     discontinued operations             0.58            (1.12)            (2.71)          (0.32)          (0.38)             0.08
                                 ------------      -----------      ------------     -----------     -----------        ----------
  Basic earnings
     (loss) per common
     share                       $      (1.53)     $     (1.63)     $      (3.22)    $     (0.40)    $     (0.54)       $    (0.13)
                                 ============      ===========      ============     ===========     ===========        ==========
  Weighted average
     common shares
     outstanding                    5,693,514        5,073,463      $  4,603,080       4,164,328       3,255,489         2,440,397

Balance Sheet Data:
  Working capital                $  5,034,089      $ 4,038,840      $  6,784,305     $15,584,953     $15,737,295        $6,549,131
  Total assets                   $  5,568,839      $ 4,317,769      $  7,104,476     $15,716,524     $16,032,158        $6,827,550
  Long-term liabilities
     and deferred gain           $  5,542,040      $         -      $          -     $         -     $    45,792        $  134,354
  Stockholders' equity
     (deficit)                   $   (154,959)     $ 4,049,572      $  6,853,003     $15,591,513     $15,661,097        $6,415,511
  Cash dividends declared
     per common share            $          -      $         -      $          -     $         -     $         -         $       -
</TABLE>
                     (footnotes contained on following page)

                                       10
<PAGE>

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

(1)  During the year ended  December  31,  1999,  the Company  discontinued  the
     operations of its analytical instrumentation business. The results of these
     operations have been segregated from continuing  operations for all periods
     presented.

(2)  Effective October 27, 1995, the Company acquired Sensar  Instruments,  Inc.
     (formerly  Sensar  Corporation),  in  a  transaction  accounted  for  as  a
     purchase.

(3)  During  the  year  ended  June  30,  1995,  the  Company  discontinued  the
     operations of its airport noise monitoring  business.  The results of these
     operations have been segregated from continuing  operations for all periods
     presented.

--------------------------------------------------------------------------------
                 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

         The  following  discussion  should  be read  in  conjunction  with  the
consolidated financial statements and related notes contained herein.

OVERVIEW

         During the year ended December 31, 1999, the Company completed the sale
or  disposition  of its various  product lines and  technologies.  The principal
transactions were:

         o        The  completion  of the sale of the assets of the acoustic and
                  vibration  product  line to PCB Group,  Inc.  ("PCB") in March
                  1999;

         o        The sale of the Company's real estate to PCB in July 1999;

         o        The  sale  of the  assets  associated  with  the  Jaguar  mass
                  spectrometer  product line to LECO Corporation in August 1999;
                  and

         o        The  discontinuance of continued research and development with
                  respect to the CrossCheck technology in August 1999.

         The results of operations and cash flows  associated with the foregoing
have  been  accounted  for and  segregated  as  discontinued  operations  in the
accompanying  consolidated financial statements.  All periods have been restated
to reflect the treatment of these operations as discontinued.

         In conjunction with the disposition of its historical  operations,  the
Company  undertook a search for a suitable  business or  technology  to acquire,
which led to the  execution of an agreement  with  Net2Wireless  Corporation  on
December  8,  1999.  The  Company  was  able to  negotiate  the  agreement  with
Net2Wireless in part because of its strong liquidity position resulting from the
previous  asset sales.  At December 31, 1999,  the Company had current assets of
$5,215,847,  primarily  consisting of cash and short-term notes receivable,  and
current  liabilities  of $181,758.  At March 27,  2000,  the Company had current
assets of  approximately  $6,200,000 and current  liabilities  of  approximately
$50,000.

                                       11
<PAGE>

RESULTS OF OPERATIONS

Comparison of Years Ended December 31, 1999 and 1998

         Revenues

         With the  disposition of the assets of its historical  operations,  the
Company's sole source of revenue from continuing  operations was interest income
of $147,944 for 1999 and $137,814 for 1998 earned on temporary cash  investments
and notes receivable.

         Costs and Expenses

         General  and   administrative   expenses   associated  with  continuing
operations  increased  from  $708,890 for the year ended  December 31, 1998,  to
$893,416  for the year ended  December 31,  1999.  The increase was  principally
related to  increases  of  approximately  $99,000  for legal fees and $27,000 in
travel  costs  associated  primarily  with the due  diligence  review of various
potential candidates for business transactions.

         During the year ended December 31, 1999, the Company recorded  non-cash
compensation  related to stock options of $5,885,833.  The principal  element of
this charge,  $5,618,740,  relates to stock  options to acquire  240,000  shares
granted  to  management  that  have a  cashless  exercise  provision.  Generally
accepted  accounting  principles require that compensation be recorded for stock
options with such provisions.  The amount of compensation is equal to the change
in the stock  price  above the  exercise  price.  Additionally,  the Company has
recorded  non-cash  compensation  expense  during 1999 of $267,093  for the fair
value of stock options granted to certain  non-employees to acquire an aggregate
of 270,000 shares of common stock.

         During 1999, the Company also recorded a non-cash deferred compensation
expense  of  $5,342,040  for the  accrual  of  amounts  earned  under a deferred
compensation  plan  established in 1999. This plan created an unfunded  deferred
compensation pool based on specified percentages of the Company's net income and
increases in market  capitalization.  As of December 31, 1999, the entire amount
of the  deferred  compensation  pool is  attributable  to the increase in market
capitalization   of  the  Company.   See   "EXECUTIVE   COMPENSATION:   Deferred
Compensation  Plan" and Note E to the Consolidated  Financial  Statements of the
Company for additional information about this plan.

         The Company has also recorded a net credit of $31,663 for unusual items
during the year ended December 31, 1999. This credit  principally  consists of a
recovery of  approximately  $145,000 on notes  receivable  from the  exercise of
stock options which were previously reserved,  net of a termination benefit paid
to the former chief executive officer of $125,000.

                                       12
<PAGE>

Comparison of Years Ended December 31, 1998 and 1997

         Revenues

         With the  disposition of the assets of its historical  operations,  the
Company's sole source of revenue from continuing  operations was interest income
of $137,814 for 1998 and $140,870 for 1997 earned on temporary cash  investments
and notes receivable.

         Costs and Expenses

         General  and   administrative   expenses   associated  with  continuing
operations  decreased  from  $1,081,168 for the year ended December 31, 1997, to
$708,890  for the year ended  December  31,  1998.  The decrease of $372,278 was
principally  related to a reduction of  approximately  $408,000 for professional
services,  consulting, and certain other outside service costs that resulted due
to a change in general  corporate  objectives from obtaining funding and seeking
to acquire  technologies to internal  research and development and the operation
of the Company's business.

         The  Company  recorded  unusual  charges   associated  with  continuing
operations of $649,949 for 1998 compared to  $1,383,964  for 1997. In 1998,  the
unusual charges were  principally  composed of (1) an allowance of approximately
$165,000 for a receivable from a former chief  executive  officer of the Company
for withholding taxes paid by the Company on his behalf,  the  collectibility of
which was then in doubt;  and (2) an allowance of $400,000 against certain notes
from former executive  officers arising from the exercise of stock options,  the
collectibility  of which was then  uncertain  due to the decline in the price of
the Company's stock. In 1997, the unusual items related to the termination costs
for former executive officers of the Company arising out of the restructuring of
the Company in November 1997 and paid to the former officers in the form of cash
and common stock.

LIQUIDITY AND CAPITAL RESOURCES

         At  December  31,  1999,  the  Company  had  total  current  assets  of
$5,215,847,  including cash and cash equivalents of $3,735,115.  The Company had
total current liabilities of $181,758 at December 31, 1999, resulting in working
capital of $5,034,089.

         The Company's  primary  source of cash for the year ended  December 31,
1999,  was the net cash  provided  by the  sale of  discontinued  operations  of
approximately  $5.6  million.  The  Company's  primary uses of cash for the year
ended  December 31, 1999,  was net cash used in  operations  of  $1,089,815  and
$3,071,437 used to redeem the Company's remaining 1998 Series A Preferred Stock.

         Management  believes  that the  current  cash  balances  are more  than
sufficient to meet the existing  commitments  of the Company for the next fiscal
year.

YEAR 2000

         With  the  sale  or  disposal  of  its  historical  product  lines  and
associated assets, the Company currently has no information systems,  customers,
or suppliers on which it is dependent.  The Company has obtained assurances from
its banking institution that it is Year 2000 compliant. Accordingly, the Company
expects no future costs to be incurred on Year 2000 issues.

                                       13
<PAGE>

INFLATION AND ENVIRONMENTAL REGULATION

         The Company's  operations  have not been,  and in the near term are not
expected to be, materially affected by inflation or changing prices.

         The Company  does not believe  that any  recently  enacted or presently
proposed  environmental  legislation  will have a material adverse effect on its
results of operations.

--------------------------------------------------------------------------------
               ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
--------------------------------------------------------------------------------

         The  financial   statements  and  supplementary   data  are  set  forth
immediately following the signature page.

--------------------------------------------------------------------------------
            ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                       ACCOUNTING AND FINANCIAL DISCLOSURE
--------------------------------------------------------------------------------

         The Company and its current auditors have not disagreed on any items of
accounting treatment or financial disclosure.

                                       14
<PAGE>

                                    PART III

--------------------------------------------------------------------------------
           ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------------------------------------

         Set  forth  below  is the name and age of each  executive  officer  and
director of the Company,  together with all positions and offices of the Company
held by each and the term of office and the period during which each has served:

                                      Position and            Director and/or
              Name             Age    Office Held        Executive Officer Since
              ----             ---    -----------        -----------------------
         Howard S. Landa       52     CEO and Chairman
                                      of the Board           April 21, 1999

         Brian B. Lewis        52     Director               April 21, 1999

         Steven P. Strasser    50     Director               April 21, 1999

         Mickey Hale           52     Director               May 5, 1999

         A  director's  regular term is for a period of three years or until his
successor is duly elected and qualified. The terms of the board are staggered so
that one-third of the board is subject to election at each annual  shareholders'
meeting. The current term of Howard S. Landa expires at the 2001 annual meeting;
the current terms of Brian B. Lewis, Steven P. Strasser,  and Mickey Hale expire
at  the  2002  annual  meeting.  On  completion  of  the  proposed  merger  with
Net2Wireless,  the current  officers and directors of the Company will resign in
favor of nominees of Net2Wireless.

         There  is no  family  relationship  among  the  current  directors  and
executive officers. The following sets forth brief biographical  information for
each director and executive officer of the Company.

         Howard S. Landa,  age 52, was  appointed  as a director and chairman of
the board of the Company on April 21,  1999.  Mr.  Landa was a founder of Kruse,
Landa &  Maycock,  L.L.C.  in 1978.  Mr.  Landa  spent his  professional  career
specializing in corporate  acquisitions,  taxation, the infusion of new capital,
and  management  advice.  Mr. Landa has taken a leave of absence from his former
firm in order to dedicate  his full  business  time to the  Company.  Mr.  Landa
received  his juris  doctorate  from  Hastings  College  of Law,  University  of
California, in 1973 and an LL.M. in taxation from New York University in 1974.

         Brian B. Lewis,  age 52, was  appointed as a director of the Company on
April 21,  1999.  Mr.  Lewis is an attorney  and a founder of the law offices of
Brian B.  Lewis.  Mr.  Lewis has  extensive  experience  in  advising  start-up,
emerging,  financially distressed,  and growth companies. Mr. Lewis has previous
management  experience  serving as interim chief  executive  officer and general
counsel to Honey Hill  Farms,  Inc.,  in  1991-1992  and interim  president  and
general  counsel of Ahead  Technology,  Inc., in 1989-1991.  Mr. Lewis currently
serves on the board of directors of Plato Labs, Inc., Surface Solutions Products
Group,  Inc.,  and  Florentine  Restaurant  Group,  Inc. Mr. Lewis  received his
bachelor  of  science

                                       15
<PAGE>

degree in industrial  management from San Jose State  University in 1969 and his
juris doctorate from Hastings College of Law, University of California, in 1973.

         Steven P. Strasser,  age 50, was appointed as a director of the Company
on April 21,  1999.  Since  1987,  Mr.  Strasser  has been  engaged in stock and
venture  capital   investments  on  his  own  behalf.  Mr.  Strasser  served  as
co-chairman  of Modula  Computer  from  1980 to 1987.  Prior to that  time,  Mr.
Strasser was  involved in  investment  banking  first with Edwards & Handley and
then with J. Franklin Investments. Mr. Strasser received his bachelor of science
degree  in  economics  from  the  University  of Utah in 1970 and a  masters  of
business administration from Columbia University in 1972.

         Mickey Hale,  age 52, was appointed as a director of the Company on May
5, 1999.  Ms. Hale has been  president and chief  executive  officer of Imperial
Development  Corporation  and related travel  services and real estate  entities
since 1990. Ms. Hale was an investment  advisor at Shearson Lehman Brothers from
1987-1990 and served in the same capacity at Paine Webber from 1980-1987.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section  16(a) of the  Securities  Exchange  Act of 1934,  as  amended,
requires the Company's  directors and  executive  officers,  and persons who own
more than 10% of a registered class of the Company's  equity  securities to file
with the Securities  and Exchange  Commission  initial  reports of ownership and
reports of changes in ownership of equity  securities of the Company.  Officers,
directors, and greater than 10% shareholders are required to furnish the Company
with copies of all Section 16(a) forms they file.

         Other than the report on Form 4 of Jeffrey  Cohen,  formerly  the chief
operating  officer of the Company,  for the month of November,  1999,  which was
filed in  mid-December,  1999, the Company believes that all reports required by
Section 16(a) for transactions in 1999 have been timely filed.

                                       16
<PAGE>

--------------------------------------------------------------------------------
                         ITEM 11. EXECUTIVE COMPENSATION
--------------------------------------------------------------------------------

         The following  table sets forth the annual and  long-term  compensation
awarded  to,  earned by, or paid to the chief  executive  officer  and the other
executive officer of the Company who received compensation in excess of $100,000
for the periods indicated.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                                                 Long Term Compensation
                                                                           -----------------------------------
                                                Annual Compensation                 Awards           Payouts
                                          -------------------------------- ------------------------- --------- ---------------
            (a)                  (b)         (c)        (d)        (e)        (f)          (g)         (h)          (i)
                                                                  Other                 Securities
                                                                 Annual    Restricted   Underlying               All Other
                                                                 Compen-     Stock       Options/      LTIP       Compen-
         Name and                          Salary      Bonus    sation(1)   Award(s)       SARs      Payouts       sation
    Principal Position          Year         ($)        ($)        ($)        ($)          (#)         ($)          ($)
---------------------------- ------------ ---------- ---------- ---------- ----------- ------------- --------- ---------------
<S>                          <C>           <C>       <C>         <C>         <C>      <C>             <C>       <C>
  Howard S. Landa, CEO       12/31/99(2)    $66,585         $0         $0          $0  1,000,000(10)       $0   $3,908,810(8)
    and Chairman of the
    Board

  Andrew C. Bebbington,      12/31/99(3)   $175,631    $50,000     $2,316          $0    750,000(3)        $0     $125,000(9)
    Former CEO and           12/31/98      $250,000   $100,000     $6,569          $0    400,000(7)        $0      $53,303(6)
    Chairman of the Board    12/31/97(4)    $31,250         $0       $575          $0    400,000(7)        $0              $0

  Jeffrey S. Cohen,          12/31/99       $83,060    $30,000     $6,948          $0     40,000           $0      $70,000(9)
    Former Chief                                                                                                   $29,238(6)
    Operating Officer and    12/31/98(5)   $128,333    $45,000     $6,001          $0    120,000           $0      $14,577(6)
    Director
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-------------------------

(1)  These  amounts  reflect  the  benefit to the named  executive  officers  of
     amounts paid by the Company for health, disability, and life insurance.

(2)  Mr. Landa accepted the positions of chief executive officer and a member of
     the  board of  directors  effective  April  21,  1999.  Mr.  Landa  was not
     previously an employee of the Company. The foregoing table reflects amounts
     paid,  awarded,  or accrued for Mr. Landa from April 21, 1999,  to December
     31, 1999.

(3)  Mr.  Bebbington  resigned his position with the Company April 21, 1999. The
     amounts shown for 1999 include  payments of $98,714 made to Mr.  Bebbington
     as a  consultant  subsequent  to his  resignation  and  options  to acquire
     650,000 shares of common stock granted to Mr. Bebbington in November 1999.

(4)  Mr.  Bebbington  accepted the  positions of chief  executive  officer and a
     member  of  the  board  of  directors  effective  November  17,  1997.  Mr.
     Bebbington was not previously an employee of the Company.  The 1997 amounts
     in the foregoing  table reflect amounts paid,  awarded,  or accrued for Mr.
     Bebbington from November 17, 1997, to December 31, 1997.

(5)  Mr. Cohen accepted the positions of chief operating officer and a member of
     the board of  directors  effective  February  2,  1998.  Mr.  Cohen was not
     previously  an employee of the Company.  The 1998 amounts in the  foregoing
     table reflect amounts paid, awarded, or accrued for Mr. Cohen from February
     2, 1998, to December 31, 1998.

(6)  These amounts  reflect amounts paid by the Company to, or on behalf of, the
     named  executive  officers for relocation  costs in conjunction  with their
     employment by the Company.

(7)  In 1997,  as part of his  employment  by the Company,  Mr.  Bebbington  was
     granted an option to acquire 400,000 shares of common stock. In March 1998,
     the option  granted in 1997 was terminated in favor of an option to acquire
     400,000  shares of common stock with  modified  provisions  for vesting and
     exercise prices.

                                       17
<PAGE>

(8)  This amount represents Mr. Landa's share of the deferred  compensation pool
     accrued for 1999.  As described in Note (10) below,  Mr. Landa will forfeit
     his  interest in this plan if the 800,000  options  subject to  stockholder
     approval are approved.

(9)  This amount represents severance payments made to these former officers.

(10) Of these options granted,  800,000 are subject to stockholder  approval. If
     approved by the stockholders,  Mr. Landa has agreed to forfeit his interest
     in the deferred compensation plan described in Note (8) above.

OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

         The following  table sets forth  information  respecting all individual
grants of  options  made  during  the last  completed  fiscal  year to the named
executive officers of the Company.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
          (a)                (b)            (c)            (d)          (e)           (f)            (g)
                                        % of Total
                             Number of Options/SARs
                              Securities Granted to
                          Underlying     Employees     Exercise or
                         Options/SARs     During       Base Price    Expiration
         Name            Granted (#)    Fiscal Year     ($/share)       Date         5%($)         10%($)            0%
------------------------------------------------------------------------------------------------------------------------------
<S>                      <C>                 <C>           <C>          <C>        <C>           <C>             <C>
Howard S. Landa          1,000,000           55.9%         (1)          (1)        $1,831,188    $ 2,235,000     $1,100,000

Andrew C. Bebbington       750,000           41.9%         (3)          (3)        $1,431,961    $ 1,732,969     $1,031,250

Jeffrey S. Cohen            40,000            2.2%         (2)          (2)        $   35,763    $    53,100     $        0
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-------------------------

(1)  Options to acquire  200,000  shares of common  stock expire April 27, 2002,
     and are 50% exercisable at $1.50 per share and 50% exercisable at $2.50 per
     share.  The remaining  options to acquire 800,000 shares are exercisable at
     $2.00 per share,  expire  November 16, 2001, and are subject to shareholder
     approval.

(2)  These options to acquire 40,000 shares of common stock have been exercised,
     but  originally  would have expired April 27, 2002.  These options were 50%
     exercisable at $1.50 per share and 50% exercisable at $2.50 per share.

(3)  Options to acquire  100,000 and 650,000 shares of common stock were granted
     in  April  and  November  1999,  respectively,   in  conjunction  with  Mr.
     Bebbington  acting as a consultant  to the Company.  The options to acquire
     100,000 shares are 50%  exercisable at $1.50 per share  (exercised in 1999)
     and 50% exercisable at $2.50 per share (expire April 27, 2002). The options
     to acquire  650,000  shares  are  exercisable  at $2.00 per  share,  expire
     November 16, 2001, and are subject to shareholder approval.

                                       18
<PAGE>

         The following table sets forth the  information  concerning the options
exercised  by the named  executive  officer  during the year ended  December 31,
1999, and the value of unexercised options as of December 31, 1999.
<TABLE>
<CAPTION>
               AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                          AND FY-END OPTION/SAR VALUES

           (a)                     (b)                 (c)                  (d)                     (e)
                                                                         Number of
                                                                        Securities                Value of
                                                                        Underlying              Unexercised
                                                                        Unexercised             In-the-Money
                                                                      Options/SARs at         Options/SARs at
                                                                        FY End (#)               FY End ($)
                             Shares Acquired                           Exercisable/             Exercisable/
           Name              on Exercise (#)   Value Realized ($)      Unexercisable           Unexercisable
--------------------------------------------------------------------------------------------------------------------
<S>                           <C>                <C>                <C>                   <C>
Howard S. Landa                     0                  $0             200,000/800,000      $5,550,000/$22,200,000

Andrew C. Bebbington             50,000             $518,748          50,000/650,000       $1,362,500/$18,037,500

Jeffrey S. Cohen                 40,000              $68,750                0/0                    $0/$0
</TABLE>

EXECUTIVE EMPLOYMENT AGREEMENTS

         The Company  has an  employment  contract  with Howard S. Landa with an
initial term through  December 31, 2002, that provides for monthly  compensation
of $8,000.  This  employment  agreement  will  terminate  on  completion  of the
proposed  merger  with  Net2Wireless.  The Company  does not have an  employment
agreement with any other person.

DEFERRED COMPENSATION PLAN

         The Company adopted a deferred compensation plan on June 24, 1999, when
the strategy to identify potential acquisitions was being implemented. Under the
terms of the plan,  Mr. Landa has a 30% interest in the  compensation  pool, the
outside  directors  were each  granted a 3%  interest,  and  consultants  to the
Company were granted a 2% interest.

         The  deferred  compensation  pool  consists of two  components:  (a) an
increasing  percentage  of 3% to  7-1/2%  of  the  net  income  of  the  Company
subsequent  to March 31, 1999, in excess of $2 million,  excluding  gains on the
sale of the  technologies  then held by the Company and  excluding  compensation
charges  related  to the  granting  of  options,  but  including  75% of any net
unrealized  gain on  investments  made by the Company in  marketable  securities
subsequent to March 31, 1999;  and (b) an amount equal to 7-1/2% of any increase
in the market  capitalization  of the  Company  above $13.4  million  that is in
excess of 150% of the  increase in the Russell  2000 Index over the same period.
The maximum amount permitted to be included in the compensation pool under these
two  components  is $25  million and $50  million,  respectively.  The  deferred
compensation pool is fixed at December 31, 2002, or, if sooner, on any change of
control, such as the proposed merger with Net2Wireless. In the event of a change
of control, the deferred  compensation pool may not be less than $5 million. The
pool is required  to be paid in cash unless  payment in stock of the Company has
been approved by the shareholders, which has not occurred.

                                       19
<PAGE>

         While the Company has not realized  income to date sufficient to affect
the compensation  pool, the increase in market  capitalization of the Company as
of March 27,  2000,  giving  effect to the  proposed  merger,  would result in a
compensation pool in excess of the $50 million limitation  provided by the terms
of the  deferred  compensation  plan.  Under  the  terms  of the  Reorganization
Agreement  with  Net2Wireless,  the Company is obligated  to eliminate  the cash
liability  associated with the deferred  compensation plan as a condition to the
closing of the proposed merger. Each of the holders of interests in the deferred
compensation  plan has  agreed  to  relinquish  their  interest  on  stockholder
approval  of options  granted to them by the board of  directors.  See  "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS."

COMPENSATION OF DIRECTORS

         The Company  compensates its outside directors for service on the board
of  directors  by  payment  of  $1,000  for  each  board  meeting  attended  and
reimbursement of expenses incurred in attending board meetings. The Company does
not  separately  compensate  its board  members  who are also  employees  of the
Company  for  their  service  on the  board.  Each of the  members  of the board
received  an option to acquire  200,000  shares of stock at a  weighted  average
exercise  price  of $2.00  per  share at the time  they  became a  director.  In
addition,  each of the non-executive directors were awarded an option to acquire
50,000 shares of stock at an exercise price of $2.00 in November  1999.  Each of
the three non-executive  directors holds a 3% interest in the Company's deferred
compensation  plan.  These  individuals have agreed to waive their rights in the
deferred  compensation  plan if the  options  previously  granted  to  them  are
approved by the shareholders of the Company.

COMPENSATION  COMMITTEE  INTERLOCKS AND INSIDER  PARTICIPATION  IN  COMPENSATION
DECISIONS

         The Company does not have a compensation  committee.  The entire board,
other than the particular individual executive officer involved, participates in
the setting of compensation for senior management.

Report on Executive Compensation

         Management  compensation  is overseen by the board of  directors of the
Company, which consists of one member of senior management, Howard S. Landa, and
three outside directors who are not employees of the Company.

         Compensation Philosophy.  The board of directors recognizes the need to
attract and retain  qualified  executives with  appropriate  experience.  During
1999, the Company was seeking to sell its existing  technologies  and identify a
suitable  acquisition which had the potential for increasing  stockholder value.
The compensation package reflected this challenging  environment by establishing
a low base-line  salary for the chief executive  officer and adopting a deferred
compensation plan with benefits tied to the achievement of pre-determined profit
targets and increases in stockholder value measured by the market capitalization
of the Company.

         Chief  Executive   Compensation.   The  Company  has  entered  into  an
employment  contract  with Mr. Landa with an initial  term through  December 31,
2002, providing for annual compensation of $96,000.

                                       20
<PAGE>

         Deferred  Compensation Pool and Stock Options.  Mr. Landa was granted a
30% interest in the Company's deferred compensation plan. This plan provides for
compensation  based on Company earnings  subsequent to March 31, 1999, in excess
of $2 million dollars and increases in the market  capitalization of the Company
in excess of 150% of the increase in the Russell 2000 Index.

         Options to acquire  1,000,000  shares of common stock have been granted
to Mr. Landa at exercise prices of $1.50 for 100,000  shares,  $2.50 for 100,000
shares and $2.00 for  800,000  shares.  800,000 of these  options are subject to
shareholder  approval.  A portion of these  options were granted to Mr. Landa in
exchange  for  his  agreement  to  relinquish   his  interest  in  the  deferred
compensation pool on stockholder approval of the options.

         Review of  Performance.  Mr.  Landa joined the Company with the goal of
seeking a suitable  acquisition and increasing  stockholder  value. The board of
directors  believes the compensation of the chief executive  officer is fair and
reasonable for both the officer and the shareholders of the Company.

                               Board of Directors:
                                 Howard S. Landa
                                 Brian B. Lewis
                                 Steven P. Strasser
                                 Mickey Hale

                                       21
<PAGE>

--------------------------------------------------------------------------------
                         ITEM 12. SECURITY OWNERSHIP OF
                    CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------------------------

         The table  below sets forth  information  as to each  person  owning of
record or who was known by the Company to own  beneficially  more than 5% of the
common  stock  of  issued  and  outstanding  stock  as of March  27,  2000,  and
information  as to the  ownership of the  Company's  common stock by each of its
directors  and by the directors  and  executive  officers as a group.  Except as
otherwise indicated, all shares are owned directly, and the persons named in the
table have sole  voting and  investment  power with  respect to shares  shown as
beneficially owned by them.
<TABLE>
<CAPTION>
                    Name and Address                      Nature of              Number of
                of Beneficial Owners(1)                   Ownership            Shares Owned        Percent(2)
        -----------------------------------------    --------------------    ------------------    -----------
        Principal Stockholder
        ---------------------
        <S>                                          <C>                      <C>                  <C>
            S.A.C. Capital Advisors(3)               Common Stock                   443,600              6.8%

        Directors
        ---------
            Howard S. Landa                          Common Stock(4)                 56,076              0.9%
                                                     Options(5)                   1,000,000             13.3%
                                                                             ------------------
                                                     Total                        1,056,076             14.0%

            Brian B. Lewis                           Common Stock(6)                  9,000              0.1%
                                                     Options(7)                     250,000              3.7%
                                                                             ------------------
                                                     Total                          259,000              3.8%

            Steven P. Strasser                       Common Stock                    12,500              0.2%
                                                     Options(7)                     250,000              3.7%
                                                                             ------------------
                                                                             ------------------
                                                     Total                          262,500              3.9%

            Mickey Hale                              Common Stock                    16,700              0.3%
                                                     Options(7)                     250,000              3.7%
                                                                             ------------------
                                                                             ------------------
                                                     Total                          266,700              3.9%

        All Executive Officers and                   Common Stock                    94,276              1.4%
          Directors as a Group (four persons)        Options                      1,750,000             21.1%
                                                                             ------------------
                                                     Total                        1,844,276             22.2%
</TABLE>
-------------------------

(1)  Except as otherwise  indicated,  to the best knowledge of the Company,  all
     stock is owned beneficially and of record by the indicated person, and each
     shareholder has sole voting and investment power.

(2)  The percentages  shown are based on 6,545,746 shares of common stock of the
     Company issued and outstanding as of March 27, 2000. The percentages  shown
     for  options  assume  the  exercise  of all  options  held  solely  by that
     individual  and a  corresponding  increase  in the issued  and  outstanding
     common stock.  The percentage shown for total holdings assumes the exercise
     of all options held by the individual and a  corresponding  increase in the
     issued and outstanding common stock.

(3)  These  shares are held  jointly with S.A.C.  Capital  Associates,  LLC, and
     Steven A. Cohen.

                                       22
<PAGE>

(4)  These shares are held by the spouse and children of Mr. Landa and a limited
     liability  company in which Mr. Landa is a minority owner. Mr. Landa denies
     direct beneficial ownership and control of these shares.

(5)  Options  to  acquire  800,000  shares  have been  approved  by the board of
     directors,  but are subject to the further  approval of the shareholders of
     the Company.

(6)  These shares are held on behalf of the children of Mr. Lewis.

(7)  These options are subject to the further  approval of the  shareholders  of
     the Company.


--------------------------------------------------------------------------------
             ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------------------------------

         In  connection  with the change of  management of the Company in April,
1999, Andrew C. Bebbington,  the former chief executive officer,  resigned.  Mr.
Bebbington and Jeffrey S. Cohen,  the then chief  operating  officer,  agreed to
terminate their former  employment  agreements in exchange for cash payments and
in the case of Mr. Bebbington,  a consulting  agreement,  and in the case of Mr.
Cohen, a new employment agreement.  Under the terms of the consulting agreement,
Mr.  Bebbington  was  retained as the chief  consultant  of the Company  through
December  31,  1999,  at a rate of $10,000 per month.  Mr.  Cohen  continued  to
provide services as chief operating officer through December 31, 1999, also at a
rate of $10,000 per month,  although the Company was  reimbursed for one-half of
this cost by PCB because Mr. Cohen also  provided  transitional  services to it.
Mr.  Bebbington  received an initial  cash  payment of  $125,000  and a bonus at
December 31,  1999,  of $50,000.  Mr. Cohen  received an initial cash payment of
$70,000  and a bonus at  December  31,  1999,  of $30,000.  Mr.  Bebbington  has
continued as a consultant to the Company subsequent to December 31, 1999.

         The  current  chief  executive  officer and all members of the board of
directors  received options when they were appointed in April and May 1999. Each
of these individuals received additional options in November, 1999. In addition,
each of them is a beneficiary of the deferred  compensation  plan adopted by the
Company in June, 1999. See "EXECUTIVE COMPENSATION."

         The Company has entered into an  indemnification  agreement with Howard
S. Landa.  Under that  agreement,  Mr. Landa has agreed to indemnify the Company
for any costs  arising  out of the  litigation,  Edgar  Lee,  et al.  v.  Sensar
Corporation,  subsequent  to March 1, 2000,  including  costs of defense and the
payment of any  settlement or judgment.  Under the terms of the  indemnification
agreement,  the Company  has agreed to transfer to Mr.  Landa the assets held by
the Company's subsidiary,  Eagle Lake Ventures, Inc., including the right to use
that name.  These assets had a book value of $352,992 at December 31, 1999,  and
include two minority investments in unrelated  companies,  with a total combined
cost to the Company of  $325,000.  In  addition,  Mr. Landa agreed to assume the
lease for the office space  located at 50 West  Broadway,  Suite 501,  Salt Lake
City,  Utah.  Mr. Landa will receive  miscellaneous  office  furniture and other
fixed assets located at that office.  Finally,  Mr. Landa has agreed to make any
space that the Company would like to have at the Salt Lake City office available
prior to the  merger  at no  charge  and  thereafter,  for a period  of one year
subsequent  to the  closing of the  merger,  at a cost of $1.00 per month.  This
agreement  was  approved  by the board of  directors  of the Company but was not
negotiated at  arms-length.  Because of the contingent  nature of the litigation
and the  inability  of the  parties to  currently  predict  the  outcome,  it is
uncertain  what the cost  would  have  been to the  Company  to  obtain  similar
benefits from an unrelated third-party.

                                       23
<PAGE>

         In addition  to the  indemnification  agreement,  Mr.  Landa  agreed to
terminate the unexpired  term of his employment  agreement with the Company,  to
provide 100 hours of transitional  services without charge to the Company and to
forego his 30% interest in the  compensation  pool under the terms of a deferred
compensation  plan  approved by the board of  directors  of the Company in June,
1999. The 41% interest granted to Mr. Landa and others had a value of $5,342,040
as of December 31, 1999, as reflected on the balance sheet of the Company. As of
March 27, 2000,  this pool,  assuming the completion of the proposed merger with
Net2Wireless,  would exceed the $50 million limitation set forth in the plan. On
November 16, 1999, Mr. Landa was granted an option to acquire  800,000 shares of
stock at $2.00  per  share.  The  termination  of Mr.  Landa's  interest  in the
deferred  compensation  plan is contingent upon the approval by the stockholders
of this option.

         Each of the  directors,  other than Mr.  Landa,  received  an option to
acquire 50,000 shares of common stock at an exercise price of $2.00 per share on
November 16, 1999.  Each of the  directors has agreed to forgo their 3% interest
in  the  deferred  compensation  plan,  subject  only  to  the  approval  by the
stockholders  of these  options and the  options  for  200,000  shares that were
granted at the time that each of these individuals  became a member of the board
of directors in April and May, 1999.

                                       24
<PAGE>

                                    PART IV

--------------------------------------------------------------------------------
              ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
                               REPORTS ON FORM 8-K
--------------------------------------------------------------------------------

FINANCIAL STATEMENTS AND SCHEDULES

         The  financial  statements,   including  the  index  to  the  financial
statements, are included immediately following the signatures to this report.
<TABLE>
<CAPTION>
EXHIBITS

                      SEC
Exhibit           Reference
   No.                No.           Title of Document                                   Location
   ---                ---           -----------------                                   --------
<S>                 <C>             <C>                                                 <C>
   1                (3)             Articles of Incorporation, as amended               Exhibit to report on
                                    November 3, 1987                                    Form 10-K for the year
                                                                                        ended June 30, 1988*

   2                (3)             Certificate of Amendment to the                     Exhibit to report on
                                    Articles of Incorporation                           Form 10-K for the year
                                    filed July 3, 1989                                  ended June 30, 1989*

   3                (3)             Designation of Rights, Privileges, and              Registration Statement
                                    Preferences of 1995 Series Preferred Stock          filed on Form SB-2,
                                                                                        Exhibit 3, SEC File
                                                                                        No. 33-59963*

   4                (3)             Designation of Rights, Privileges, and              Exhibit to report on
                                    Preferences of 1998 Series A Preferred Stock        Form 8-K dated
                                                                                        February 13, 1998*

   5                (3)             Bylaws                                              Registration Statement
                                                                                        filed on Form S-18,
                                                                                        Exhibit 5, SEC File
                                                                                        No. 33-3365-D*

   6                (10)            Agreement by and among Sensar                       Exhibit to report on
                                    Corporation and Net2Wireless, Inc.,                 Form 10-K for the year
                                    dated December 8, 1999                              ended December 31, 1999*


   7                (10)            First Amendment to Agreement by and                 Exhibit to report on
                                    between Sensar Corporation and                      Form 10-K for the year
                                    Net2Wireless, Inc., dated January 4, 2000           ended December 31, 1999*


   8                (10)            Second Amendment to Agreement by and                Exhibit to report on
                                    between Sensar Corporation and                      Form 10-K for the year
                                    Net2Wireless Corporation (formerly                  ended December 31, 1999*
                                    Net2Wireless, Inc.), dated March 21, 2000

                                       25
<PAGE>
<CAPTION>
                      SEC
Exhibit           Reference
   No.                No.           Title of Document                                   Location
   ---                ---           -----------------                                   --------
<S>                 <C>             <C>                                                 <C>
   9                (10)            Executive Employment Agreement of                   Exhibit to report on
                                    Howard S. Landa effective                           Form 10-Q for the
                                    April 22, 1999                                      quarter ended
                                                                                        June 30, 1999*

   10               (10)            Deferred Compensation Plan                          Exhibit to report on
                                    Adopted by the Board of Directors                   Form 10-K for the year
                                    Effective May 1, 1999                               ended December 31, 1999*

   11               (10)            1997 Stock Option and Award Plan                    Exhibit to report on
                                                                                        Form 10-Q for the
                                                                                        quarter ended
                                                                                        March 31, 1997*

   12               (10)            Asset Purchase Agreement by and among               Exhibit "A" to Proxy
                                    PCB Group, Inc., Beehive Acquisition Corp.,         Statement dated
                                    LarsonoDavis Incorporated, and LarsonoDavis         February 16, 1999*
                                    Laboratories, dated November 30, 1998,              and Exhibit to report
                                    as amended February 16, 1999, and                   on Form 10-K for the
                                    March 31, 1999                                      year ended
                                                                                        December 31, 1998*

   13               (10)            Asset Purchase Agreement between                    Exhibit to report on
                                    Sensar Instruments, Inc., Sensar                    Form 8-K dated
                                    Corporation, and LECO Corporation,                  August 19, 1999*
                                    dated August 19, 1999

   14               (10)            Form of Market Stand Off and                        Exhibit to report on
                                    Redemption Agreement by and between                 Form 10-K for the
                                    LarsonoDavis Incorporated and Investors             year ended
                                    of 1998 Series A Preferred Stock,                   December 31, 1998*
                                    dated January, 1999

   15               (21)            Subsidiaries of LarsonoDavis Incorporated           Exhibit to report on
                                                                                        Form 10-KSB for the
                                                                                        year ended
                                                                                        June 30, 1996*

   16               (23)            Consent of Grant Thornton LLP                       This Filing

   17               (27)            Financial Data Schedule                             Exhibit to report on
                                                                                        Form 10-K for the year
                                                                                        ended December 31, 1999*
----------------------
</TABLE>
*Incorporated by reference

REPORTS ON FORM 8-K

         During the last quarter of the fiscal year ended December 31, 1999, the
Company  filed three  reports on Form 8-K,  dated  October 7, 1999,  October 12,
1999,  and December 14, 1999.  Subsequent to December 31, 1999,  the Company has
filed three  reports on Form 8-K,  dated January 4, 2000,  January 5, 2000,  and
March 16, 2000, respectively.

                                       26
<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of section 13 or 15(d) of the Securities
Exchange  Act of 1934,  as  amended,  the  Company  has caused this report to be
signed on its behalf by the undersigned, hereunto duly authorized.

                                            SENSAR CORPORATION


Dated:  September 29, 2000                  By /s/ Howard S. Landa
                                               ----------------------
                                               Howard S. Landa, CEO and Chairman
                                               of the Board (Chief Executive
                                               Officer and Principal Financial
                                               and Accounting Officer)


         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Company and in the capacities and on the dates indicated:

Dated:  September 29, 2000                  By /s/ Howard S. Landa
                                               ----------------------
                                               Howard S. Landa, Director

Dated:  September 29, 2000                  By /s/ Brian B. Lewis
                                               ---------------------
                                               Brian B. Lewis, Director

Dated:  September 29, 2000                  By /s/ Steven P. Strasser
                                               -------------------------
                                               Steven P. Strasser, Director

Dated:  September 29, 2000                  By /s/ Mickey Hale
                                               ------------------
                                               Mickey Hale, Director

                                       27
<PAGE>

                       SENSAR CORPORATION AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                            Page

Consolidated Financial Statements:

     Report of Grant Thornton LLP, Independent Certified Public Accountants on
          the December 31, 1999, 1998 and 1997 financial statements F-2

     Consolidated Balance Sheets as of December 31, 1999 and 1998           F-3

     Consolidated Statements of Operations and Comprehensive Loss
          for the Years Ended December 31, 1999, 1998 and 1997              F-4

     Consolidated Statements of Stockholders' Equity (Deficit)
          for the Years Ended December 31, 1999, 1998 and 1997              F-5

     Consolidated Statements of Cash Flows for the Years Ended
          December 31, 1999, 1998 and 1997                                  F-7

     Notes to Consolidated Financial Statements                             F-9


Financial Statement Schedules:

All financial statement schedules are omitted because they are not applicable or
because the required information is contained in the Consolidated Financial
Statements or the Notes thereto.

<PAGE F-1>

                              REPORT OF INDEPENDENT

                          CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Sensar Corporation and Subsidiaries

We have audited the accompanying consolidated balance sheets of Sensar
Corporation and Subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of operations and comprehensive loss, stockholders'
equity (deficit), and cash flows for each of the three years in the period ended
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Sensar Corporation
and Subsidiaries as of December 31, 1999 and 1998, and the consolidated results
of their operations and their consolidated cash flows each of the three years in
the period ended December 31, 1999, in conformity with generally accepted
accounting principles.

                                 /s/ Grant Thornton LLP
                                 Grant  Thornton  LLP

Salt Lake City, Utah

January 21, 2000 (except for Notes
K and N, as to which the date is
March 23, 2000)

<PAGE F-2>
<TABLE>
<CAPTION>
                       Sensar Corporation and Subsidiaries

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

                                                                December 31,
                                                         -------------------------
                                                             1999          1998
                                                         -------------  ----------
<S>                                                      <C>            <C>
CURRENT ASSETS
Cash and cash equivalents                                $   3,735,115  $  694,959
Notes receivable (Note B)                                    1,455,134     120,000
Other current assets                                            25,598         609
Net assets of discontinued operations (Note B)                       -   3,491,469
                                                         -------------  ----------
Total current assets                                         5,215,847   4,307,037
OFFICE EQUIPMENT AND FURNISHINGS,

net of accumulated depreciation                                 27,992      10,732
INVESTMENTS (Note D)                                           325,000           -
                                                         -------------  ----------
                                                         $   5,568,839  $4,317,769
                                                         =============  ==========
<CAPTION>

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

                                                                December 31,
                                                         -------------------------
                                                             1999          1998
                                                         -------------  ----------
<S>                                                      <C>            <C>
CURRENT LIABILITIES
Accounts payable                                         $     31,438   $    125,742
Accrued liabilities                                           150,320        142,455
                                                         ------------   ------------
Total current liabilities                                     181,758        268,197
LONG-TERM LIABILITIES AND DEFERRED GAIN

Deferred compensation (Note E)                              5,342,040              -
Deferred gain                                                 200,000              -
                                                         ------------   ------------
Total liabilities and deferred gain                         5,723,798        268,197
                                                         ------------   ------------
COMMITMENTS AND CONTINGENCIES (Notes C, E and K)                    -              -
STOCKHOLDERS' EQUITY (DEFICIT)
(Notes C, G, H, J and N)

Preferred stock, $.001 par value; authorized
10,000,000 shares; issued and outstanding
zero shares at December 31, 1999 and

3,039.95 shares at December 31, 1998                                -              3
Common stock, $.001 par value; authorized
290,000,000 shares; issued and outstanding
6,326,038 shares at December 31, 1999 and
5,228,366 shares at December 31, 1998                           6,326          5,228
Additional paid-in capital                                 34,850,817     30,701,333
Accumulated deficit                                       (35,012,102)   (26,282,308)
Notes receivable from exercise of options                           -       (374,684)
                                                         ------------   ------------
Total stockholders' equity (deficit)                         (154,959)     4,049,572
                                                         -------------  ------------
                                                         $  5,568,839   $  4,317,769
                                                         ============   ============
</TABLE>

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

<PAGE F-3>
<TABLE>
<CAPTION>
                                    Sensar Corporation and Subsidiaries

                                   CONSOLIDATED STATEMENTS OF OPERATIONS
                                           AND COMPREHENSIVE LOSS

                                                              Year ended December 31,
                                                     ------------------------------------------
                                                           1999          1998          1997
                                                     ------------   -----------   -------------
<S>                                                  <C>            <C>           <C>
Revenues
Interest income                                      $    147,944   $   137,814   $    140,870
                                                     ------------   -----------   ------------
Costs and expenses
General and administrative                                893,416       708,890      1,081,168
Compensation expense for stock options (Note J)         5,885,833             -              -
Deferred compensation expense (Note E)                  5,342,040             -              -
Unusual charges (credits), net (Note M)                   (31,663)      649,949      1,383,964
Interest expense                                           31,811             -              -
Other                                                      21,665             -              -
                                                     ------------   -----------   ------------
                                                       12,143,102     1,358,839      2,465,132
                                                     ------------   -----------   ------------
Loss from continuing operations
before income taxes                                   (11,995,158)   (1,221,025)    (2,324,262)
Income taxes (Note F)                                           -             -              -
                                                     ------------   -----------   ------------
Loss from continuing operations                       (11,995,158)   (1,221,025)    (2,324,262)
Gain on sale of discontinued operations (Note B)        3,268,250             -              -
Income (loss) from discontinued operations (Note B)        22,528    (5,702,419)   (12,493,549)
                                                     ------------   -----------   ------------
Net loss                                               (8,704,380)   (6,923,444)   (14,817,811)
Other comprehensive income - foreign
currency translation adjustments                                -       (64,512)       (15,848)
                                                     ------------   -----------   ------------
Comprehensive loss                                   $ (8,704,380)  $(6,987,956)  $(14,833,659)
                                                     ============   ===========   ============
Loss per common share (Note I)

Continuing operations

Basic and diluted                                    $      (2.11)  $     (0.51)  $      (0.51)
Discontinued operations
Basic and diluted                                    $       0.58   $     (1.12)  $      (2.71)
Net loss
Basic and diluted                                    $      (1.53)  $     (1.63)  $      (3.22)
Loss from continuing operations applicable
to common stock                                      $(12,020,572)  $(2,567,588)  $ (2,339,262)
Weighted average common and
common equivalent shares outstanding
Basic and diluted                                       5,693,514     5,073,463      4,603,080
</TABLE>

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

<PAGE F-4>
<TABLE>
<CAPTION>
                                          Sensar Corporation and Subsidiaries

                                   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                                          Years ended December 31, 1999, 1998 and 1997

                                      Preferred stock                Common stock            Additional
                                  ------------------------     -------------------------      paid-in          Accumulated
                                   Shares         Amount          Shares        Amount        capital           deficit
                                  ----------    ----------     ----------     ----------     ----------      --------------
<S>                               <C>           <C>            <C>              <C>          <C>             <C>
Balances at
January 1, 1997                      200,000    $ 200          4,287,116        $   4,287    $20,005,806     $  (4,418,780)

Shares issued for services
  rendered (Note H)                        -        -             21,940               22        262,137                 -

Shares issued upon exercise
  of options (Note J)                      -        -             87,052               87        115,538                 -

Shares surrendered in payment
  of advance (Note H)                      -        -               (696)              (1)        (9,999)                -

Shares purchased under
  employee stock purchase
  plan (Note J)                            -        -              6,163                6         83,995                 -

Shares issued upon exercise
  of warrants (Note J)                     -        -            345,045              345      4,497,034                 -

Shares issued to former
  executives (Note J)                      -        -             80,000               80      1,149,920                 -

Conversion of preferred
  stock (Note G)                    (200,000)    (200)            23,537               24            176                 -

Adjustment for translation
  of foreign currency                      -        -                  -                -              -                 -

Preferred dividends                        -        -                  -                -              -           (15,000)

Net loss for the year                      -        -                  -                -              -       (14,817,811)
                                  ----------    ------        ----------       ----------     ----------       -----------
Balances at
December 31, 1997                          -        -          4,850,157            4,850     26,104,607       (19,251,591)

Shares issued for services
  rendered (Note H)                        -        -             19,499               19        148,294                 -

Shares issued upon exercise
  of options (Note J)                      -        -            110,546              111        726,079                 -

Shares purchased under
  employee stock purchase
  plan (Note J)                            -        -             29,273               29         81,143                 -

Shares issued upon exercise
  of warrants (Note J)                     -        -             29,634               30        359,794                 -

Shares issued in private
  placement (Note G)                3,500.00        3                  -                -      3,281,605                 -

Conversion of preferred
  stock (Note G)                     (460.05)       -            189,257              189           (189)                -

Collection of and allowance
  on notes receivable from
  exercise of options
  (Note J)                                 -        -                  -                -              -                 -

Adjustment for translation
  of foreign currency                      -        -                  -                -              -                 -

Preferred dividends                        -        -                  -                -              -          (107,273)

Net loss for the year                      -        -                  -                -              -        (6,923,444)
                                  ----------    ------        ----------       ----------     ----------       -----------
Balances at
December 31, 1998                   3,039.95        3          5,228,366            5,228     30,701,333       (26,282,308)

Shares issued upon exercise
  of options (Note J)                      -        -            105,880              106           (106)                -

Shares issued upon exercise
  of warrants (Note J)                     -        -            411,764              412        231,967                 -

Conversion of preferred
  stock (Note G)                     (101.20)       -            128,032              128           (128)                -

Collection of and allowance
  on notes receivable from
  exercise of options
  (Note J)                                 -        -                  -                -              -                 -

Shares issued in private
  placement (Note H)                       -        -            500,000              500        986,105                 -

Redemption of preferred
  stock (Note G)                   (2,938.75)      (3)                 -                -     (2,938,747)                -

Conversion of debenture
  (Note H)                                 -        -             17,778               18         39,982                 -

Settlement of litigation
  (Note J)                                 -        -            (65,782)             (66)       (86,312)                -

Capital contribution for
  compensation from
  stock option grants
  (Note J)                                 -        -                  -                -      5,885,833                 -

Capital contribution for
  beneficial conversion
  feature                                  -        -                  -                -         30,890                 -

Preferred dividends                        -        -                  -                -              -           (25,414)

Net loss for the year                      -        -                  -                -              -        (8,704,380)
                                  ----------    ------        ----------       ----------     ----------       -----------
Balances at
December 31, 1999                          -   $    -          6,326,038       $    6,326    $34,850,817      $(35,012,102)
                                  ==========   =======        ==========       ==========    ===========      ============
</TABLE>

                                                      (Continued)
<PAGE F-5>
<TABLE>
<CAPTION>
                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - CONTINUED
                                Years ended December 31, 1999, 1998 and 1997
                                                (Continued)

                                     Notes           Accumulated
                                   receivable           other
                                     from            comprehensive
                                    exercise           income
                                   of options          (loss)             Total
                                  -------------      -------------     -------------
<S>                               <C>                <C>               <C>
Balances at
January 1, 1997                   $       -          $ 80,360          $ 15,671,873

Shares issued for services
rendered (Note H)                         -                 -               262,159

Shares issued upon exercise
of options (Note J)                 (69,375)                -                46,250

Shares surrendered in
payment of advance (Note H)               -                 -               (10,000)

Shares purchased under
employee stock purchase
plan (Note J)                             -                 -                84,001

Shares issued upon exercise
of warrants (Note J)                      -                 -             4,497,379

Shares issued to former
executives (Note J)                       -                 -             1,150,000

Conversion of preferred
stock (Note G)                            -                 -                     -

Adjustment for translation
of foreign currency                       -           (15,848)              (15,848)

Preferred dividends                       -                 -               (15,000)

Net loss for the year                     -                 -           (14,817,811)
                                  ---------         ---------          ------------

Balances at
December 31, 1997                   (69,375)           64,512             6,853,003

Shares issued for services
rendered (Note H)                         -                 -               148,313

Shares issued upon exercise
of options (Note J)                (726,190)                -                     -

Shares purchased under
employee stock purchase
plan (Note J)                             -                 -                81,172

Shares issued upon exercise
of warrants (Note J)                      -                 -               359,824

Shares issued in private
placement (Note G)                        -                 -             3,281,608

Conversion of preferred
stock (Note G)                            -                 -                     -

Collection of and allowance
on notes receivable from
exercise of options
(Note J)                            420,881                 -               420,881

Adjustment for translation
of foreign currency                       -           (64,512)              (64,512)

Preferred dividends                       -                 -              (107,273)

Net loss for the year                     -                 -            (6,923,444)
                                  ---------         ---------          ------------
Balances at
December 31, 1998                  (374,684)                -             4,049,572

Shares issued upon exercise
of options (Note J)                       -                 -                     -

Shares issued upon exercise
of warrants (Note J)                      -                 -               232,379

Conversion of preferred
stock (Note G)                            -                 -                     -

Collection of and allowance
on notes receivable from
exercise of options
(Note J)                            265,371                 -               265,371

Shares issued in private
placement (Note H)                        -                 -               986,605

Redemption of preferred
stock (Note G)                            -                 -            (2,938,750)

Conversion of debenture
(Note H)                                  -                 -                40,000

Settlement of litigation (Note J)   109,313                 -                22,935

Capital contribution for
compensation from
stock option grants
(Note J)                                  -                 -             5,885,833

Capital contribution for
beneficial conversion
feature                                   -                 -                30,890

Preferred dividends                       -                 -               (25,414)

Net loss for the year                     -                 -            (8,704,380)
                                  ---------         ---------          ------------
Balances at
December 31, 1999                 $       -         $       -          $   (154,959)
                                  =========         =========          ============
</TABLE>

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

<PAGE F-6>
<TABLE>
<CAPTION>

                                             Sensar Corporation and Subsidiaries

                                            CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                            Year ended December 31,
                                                                                    -----------------------------------------
                                                                                        1999           1998          1997
                                                                                    ------------   -----------    -----------
<S>                                                                                 <C>            <C>            <C>
Increase (decrease) in cash and cash equivalents
  Cash flows from operating activities

Loss from continuing operations                                                     $(11,995,158)  $(1,221,025)   $(2,324,262)

Adjustments to reconcile loss from continuing
operations to net cash used in continuing operations

Depreciation                                                                               6,385         2,475          4,294

Compensation expense for stock options (Note J)                                        5,885,833             -              -
Deferred compensation expense (Note E)                                                 5,342,040             -              -
Stock issued in payment of compensation                                                        -        46,338      1,188,041

Interest expense from beneficial conversion feature                                       30,890             -              -
Provision for (recovery of) impairment losses                                           (157,239)      621,549              -
Changes in assets and liabilities

Other current assets                                                                     (24,989)       26,886        (84,218)

Accounts payable                                                                         (94,304)      (35,614)        97,871

Accrued liabilities                                                                      112,138        57,201         69,520
                                                                                    ------------   -----------    -----------
Net cash used in
continuing operations                                                                   (894,404)     (502,190)    (1,048,754)

Net cash used in
discontinued operations                                                                 (195,411)   (2,207,682)    (4,073,303)
                                                                                    ------------   -----------    -----------
Net cash used in
operating activities                                                                  (1,089,815)   (2,709,872)    (5,122,057)
                                                                                    ------------   -----------    -----------
  Cash flows from investing activities

Purchase of office equipment and furnishings                                             (23,645)       (9,022)          (200)

Collection of notes receivable                                                           365,411             -              -
Issuance of note receivable                                                              (35,000)            -              -
Increase in investments                                                                 (325,000)            -              -
                                                                                    ------------   -----------    -----------
Net cash used in investing activities of
continuing operations                                                                    (18,234)       (9,022)          (200)

Net cash provided by (used in) sale of
discontinued operations and other investing
activities of discontinued operations                                                  5,566,491        37,495       (854,011)
                                                                                    ------------   -----------    -----------
Net cash provided by (used in)
investing activities                                                                   5,548,257        28,473       (854,211)
                                                                                    ------------   -----------    -----------
</TABLE>

<PAGE F-7>
<TABLE>
<CAPTION>
                                             Sensar Corporation and Subsidiaries

                                       CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

                                                                                            Year ended December 31,
                                                                                    -----------------------------------------
                                                                                        1999           1998          1997
                                                                                    ------------   -----------    -----------
<S>                                                                                 <C>            <C>            <C>
  Cash flows from financing activities
Net proceeds from issuance of common
stock and exercise of options and warrants                                             1,628,984     3,743,485      4,627,630

Redemption of preferred stock                                                         (3,071,437)            -              -
Preferred dividends paid                                                                       -             -        (15,000)
Proceeds from issuance of convertible debenture                                           40,000             -              -
                                                                                    ------------   -----------    -----------
Net cash provided by (used in) financing
activities of continuing operations                                                   (1,402,453)    3,743,485      4,612,630

Net cash used in financing activities of
discontinued operations                                                                  (15,833)   (1,515,088)      (104,583)
                                                                                    ------------   -----------    -----------
Net cash provided by (used in)
financing activities                                                                  (1,418,286)    2,228,397      4,508,047
                                                                                    ------------   -----------    -----------
Effect of exchange rates on cash                                                               -       (64,512)       (15,848)

Net increase (decrease) in cash and cash equivalents                                   3,040,156      (517,514)    (1,484,069)
                                                                                    ------------   -----------    -----------
Cash and cash equivalents at beginning of year                                           694,959     1,212,473      2,696,542
                                                                                    ------------   -----------    -----------
Cash and cash equivalents at end of year                                            $  3,735,115    $  694,959    $ 1,212,473
                                                                                    ============    ==========    ===========
Supplemental disclosures of cash flow information
  Cash paid during the year for
Interest                                                                            $     29,839    $  146,510    $   299,438
Income taxes                                                                                   -             -              -

Significant noncash investing and financing activities
  Acquisition of equipment through long-term obligations                            $          -    $        -    $   326,960
  Notes receivable issued in exercise of stock options                                         -       726,190         69,375
  Conversion of debenture into common stock                                               40,000             -              -

</TABLE>

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

<PAGE F-8>

                       Sensar Corporation and Subsidiaries
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998

NOTE A  -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

1.     Business activity and principles of consolidation

Sensar  Corporation  (formerly  Larson-Davis  Incorporated)  (the  Company)  was
primarily  engaged  in  the  design,  development, manufacture, and marketing of
analytical  instruments.  The  Company  has  sold  or  otherwise disposed of all
product  lines  of  this  business  (Note B) and has no current operations.  The
accompanying  consolidated  financial  statements  of  the  Company  include the
accounts  of the Company and its wholly-owned subsidiaries; SECO, Inc. (formerly
Larson-Davis  Laboratories  Corporation),  Sensar  Instruments,  Inc.  (formerly
Sensar  Corporation),  Eagle  Lake  Ventures,  Inc., and Larson Davis Ltd. (a UK
Corporation).  All subsidiaries except Eagle Lake Ventures, Inc. are inactive at
December  31, 1999.  All significant intercompany transactions and accounts have
been eliminated in consolidation.

2.     Depreciation

Office equipment and furnishings are stated at cost. Depreciation is provided in
amounts sufficient to relate the cost of depreciable assets to operations over
estimated service lives of three to five years. The straight-line method of
depreciation is followed for financial reporting purposes and accelerated
methods are used for income tax purposes.

3.     Income taxes

The Company utilizes the liability method of accounting for income taxes. Under
the liability method, deferred tax assets and liabilities are determined based
on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. An allowance against
deferred tax assets is recorded when it is more likely than not that such tax
benefits will not be realized.

4.     Cash and cash equivalents

For purposes of the financial statements, the Company considers all highly
liquid debt instruments with an original maturity of three months or less when
purchased to be cash equivalents.

<PAGE F-9>

                       Sensar Corporation and Subsidiaries
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998

NOTE A  -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

5.     Net loss per common share

The Company follows the provisions of Statement of Financial Accounting
Standards No. 128 "Earnings Per Share" (SFAS No. 128). SFAS No. 128 requires the
presentation of basic and diluted EPS. Basic EPS are calculated by dividing
earnings (loss) available to common shareholders by the weighted average number
of common shares outstanding during each period. Diluted EPS are similarly
calculated, except that the weighted average number of common shares outstanding
includes common shares that may be issued subject to existing rights with
dilutive potential.

6.     Concentrations of credit risk

The Company's financial instruments that are exposed to concentration of credit
risk consist primarily of cash equivalents and notes receivable. The Company
maintains its cash and cash equivalents principally at one major financial
institution. Cash equivalents are invested through a daily repurchase agreement
with the financial institution. The agreement provides for the balance of
available funds to be invested in an undivided interest in one or more direct
obligations of, or obligations that are fully guaranteed as to principal and
interest by, the United States Government, or an agency thereof. These
securities are not a deposit and are not insured by the Federal Deposit
Insurance Corporation.

At December 31, 1999, approximately $1 million of the total notes receivable is
owed by one debtor and arose out of the sale of the Jaguar product line.
Although the note is unsecured, the Company reviewed the credit worthiness of
the note holder and believes that the balance is fully collectible.

7.     Use of estimates

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

8.     Fair value of financial instruments



The estimated fair value of financial instruments is not presented because, in
management's opinion, the carrying amounts and estimated fair values of
financial instruments in the accompanying consolidated balance sheets are not
materially different due to the short period of time to maturity of the
financial instruments.



<PAGE F-10>

                       Sensar Corporation and Subsidiaries
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998

NOTE A  -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

9.     Stock options



The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its employee stock options rather than adopting the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123). For options granted to
employees that do not qualify for fixed plan accounting (i.e., options with
cashless exercise provisions) under APB 25, the Company recognizes compensation
expense equal to the change in the stock price above the exercise price. For
options granted for services from non-employees, the Company follows the
provisions of SFAS 123 and records compensation expense equal to the fair value
of options granted.



NOTE B  -  DISCONTINUED OPERATIONS

Historically, the Company developed and marketed various products in one
industry segment, analytical instrumentation. These historical product lines
were sold or otherwise disposed of as follows:



1. During 1998, the Company sold its supercritical fluid chromatography (SFC)
product and abandoned its TOF2000 mass spectrometer product. The SFC product was
not significant to the operations of the Company. With the abandonment of the
TOF2000 product, the Company recognized an unusual charge of $2,458,004
principally related to write off of intangible assets and a charge to cost of
sales of $490,882 for the write off of inventory.



2. At March 31, 1999, the Company sold the assets and operations associated with
its acoustics division to PCB Group, Inc. (PCB), except for certain real estate,
which was sold to PCB in July 1999. The Company received gross cash proceeds of
approximately $5.3 million, a note for $500,000, and the assumption or payoff of
approximately $1.7 million of liabilities. The note bears interest at 7.28
percent and is payable at $22,450 per month with the balance due April 2000.



3. The Jaguar mass spectrometer assets and operations were sold to LECO
Corporation (LECO) in August 1999. The Company received proceeds of
approximately $1.8 million, consisting of cash of approximately $800,000 (net of
certain expenses, payments, and third quarter losses, but without deductions for
losses incurred prior to June 30 or the delivery of two Jaguar units to Brigham
Young University at no charge), and a non-interest bearing note with a carrying
value of $1,000,000 (interest imputed at 6.92 percent). The note is due August
2000 and is not collateralized. The Company recognized a gain of approximately
$416,000 on the sale.





4. The CrossCheck technology was returned to Brigham Young University and the
associated license agreement was terminated during the quarter ended September
30, 1999. The Company recognized a loss of approximately $76,000 from the
disposal of this technology.



<PAGE F-11>

                       Sensar Corporation and Subsidiaries
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998

NOTE B  -  DISCONTINUED OPERATIONS - CONTINUED



5. In August 1999, the right to receive royalty payments on the ANOMS
intellectual property was assigned to Lochard Pty Ltd for installment payments
totaling $200,000 to be received between August 1999 and February 2000, plus
contingent payments based upon future performance. The Company recognized a gain
of approximately $189,000 on the transaction.



The analytical instrumentation operations of the Company have been accounted for
as discontinued operations, and accordingly, these assets and liabilities have
been segregated as "net assets of discontinued operations" in the accompanying
consolidated balance sheets. The results of operations and cash flows associated
with these assets and liabilities are segregated and reported as discontinued
operations in the accompanying consolidated statements of operations and cash
flows. All periods presented have been restated to reflect the discontinued
operations. Information related to the discontinued operations of the analytical
instrumentation business is set forth below:

<TABLE>
<CAPTION>
                                                                      Year ended December 31,
                                                           ------------------------------------------
                                                                1999          1998           1997
                                                           ------------   -----------    ------------
<S>                                                        <C>            <C>            <C>
Net sales                                                  $  1,763,711   $  8,729,192   $  8,313,328

Costs and operating expenses:

Cost of sales                                                  (970,730)    (5,241,186)    (6,074,883)
Research and development                                       (653,605)    (2,919,945)    (4,860,993)
Selling, general and administrative                            (833,608)    (3,346,298)    (4,938,114)


Unusual credits (charges), net                                  537,258     (2,786,784)    (4,553,391)


                                                           ------------   ------------   ------------
Operating loss                                                 (156,974)    (5,565,021)   (12,114,053)
Other expense, net                                              (70,470)      (137,398)      (379,496)
Less loss subsequent to measurement

date of June 30, 1999 charged against gain on disposition

                                                                249,972              -              -
                                                           ------------   ------------   ------------
Income (loss) from discontinued operations

                                                           $     22,528   $ (5,702,419)  $(12,493,549)
                                                           ============   ============   ============
</TABLE>

<PAGE F-12>

                       Sensar Corporation and Subsidiaries
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998

NOTE B  -  DISCONTINUED OPERATIONS - CONTINUED



Unusual credits (charges), net is comprised of the following:

<TABLE>
<CAPTION>
                                                           Year ended December 31,
                                                  ------------------------------------------
                                                     1999           1998            1997
                                                  ----------    ------------    ------------
<S>                                               <C>           <C>           <C>
Termination payments to personnel of
  discontinued operations and other
  related costs                                   $(129,000)              -        (87,906)

Provision for costs and estimated losses on
  the discontinuance of the TOF2000 and
  SFC products and closure of machine
  shop                                              106,330        (351,626)             -

Settlement, net of expenses                         466,765               -              -

Writedowns of assets:
TOF2000                                                   -      (2,458,004)             -
Long-term contractual arrangement                         -               -     (2,556,903)
ENOMS and other intangibles                               -               -     (1,649,373)
U.K. property and equipment                               -               -        (75,878)

Other                                                93,163          22,846       (183,331)
                                                  ---------     -----------    -----------
                                                  $ 537,258     $(2,786,784)   $(4,553,391)
                                                  =========     ===========    ===========
</TABLE>


Net assets of discontinued operations consist of the following elements at
December 31, 1998 (none at December 31, 1999):

<TABLE>
<CAPTION>

<S>                                          <C>
Trade accounts receivable, net               $1,681,755
Inventories                                   2,046,871
Other current assets                             93,160
Property and equipment, net                   1,316,516
Assets under capital lease obligations, net     202,026
Intangible assets, net                          322,779
Accounts payable                               (412,379)
Accrued liabilities                            (779,228)
Long-term debt                                 (682,982)
Capital lease obligations                      (297,049)
                                             ----------
Total                                        $3,491,469
                                             ==========
</TABLE>

<PAGE F-13>

                       Sensar Corporation and Subsidiaries
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998



NOTE C  -  CHANGE IN EXECUTIVE MANAGEMENT



Effective April 21, 1999, the then current members of the board of directors of
the Company resigned and a new board and chief executive officer were appointed.
The Company entered into an employment agreement with a new chief executive
officer which provides for annual compensation of $96,000. The term of the
employment agreement is through December 31, 2002, but renews automatically such
that there is always one year remaining under the agreement. In the event this
agreement is terminated, other than for cause, the Company is required to pay
the chief executive officer the greater of the amount of salary remaining under
the term of the contract or the salary for a one-year period.

In connection with the appointment of the new chief executive officer, he was
granted an option to acquire 200,000 shares of common stock, half of which is
exercisable at $1.50 per share and the other half at $2.50 per share. The option
is immediately exercisable, expires three years after grant, and has a cashless
exercise provision.

Under the employment agreements of the former chief executive officer and former
chief operating officer, each had the right to terminate his employment
agreement for cause with the sale of the assets of the acoustics division (Note
B) and to receive compensation equal to his base salary remaining under his
employment agreement, which would have been approximately $560,000 in the
aggregate for the two officers. In lieu of this payment the new board of
directors negotiated a termination benefit of $195,000 in the aggregate
(recorded as unusual charges) and consulting/employment arrangements whereby the
former chief executive officer would provide transitional consulting services to
the Company and the former chief operating officer would continue as the chief
operating officer of the Company to supervise the ongoing operations of the
Company in exchange for monthly compensation of $10,000 each and aggregate
options to acquire 140,000 shares of common stock, half of which were
exercisable at $1.50 per share and the other half at $2.50 per share.

NOTE D  -  INVESTMENTS

The Company invested $150,000 in PayStation.com, Inc. (PayStation) in the form
of $75,000 for a convertible promissory note and $75,000 for 15,000 shares of
convertible preferred stock, representing 2.5 percent of the offering.
PayStation has repaid the promissory note, leaving a balance of $75,000 as the
Company's investment. PayStation is an internet-based company that has the
capability to deliver internet-based financial services to consumers who prefer
to pay bills through the internet. The Company's investment in PayStation is
accounted for under the cost method of accounting.

The Company also participated in the second round funding of Durect Corporation
(Durect), a pioneer in drug therapy treatments, employing subcutaneous delivery
technology and paid $250,000 for preferred stock convertible into approximately
1 percent of Durect. The Company's investment in Durect is accounted for under
the cost method of accounting.

<PAGE F-14>

                       Sensar Corporation and Subsidiaries
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998

NOTE E - DEFERRED COMPENSATION PLAN

On June 24, 1999, the board adopted a deferred compensation plan to provide
long-term incentive compensation to the members of the board and certain other
consultants or members of management. The plan establishes an unfunded deferred
compensation pool, based on specified percentages of the Company's net income
and increases in its market capitalization. No earnings compensation will be
paid into the pool until the cumulative net income from the operations under the
new board has exceeded $2,000,000 and no amounts will be paid for increases in
market capitalization unless the increase in market capitalization exceeds 150
percent of any increase in the Russell 2000 Index (with appropriate adjustments
for additional capital infusions or acquisitions). The chief executive officer,
received an initial 30 percent ownership in the pool and may grant the other 70
percent to persons other than himself and his family. To date, he has granted a
total of 11 percent to others. On December 31, 2002, amounts due, if any, will
be paid out to the participants. However, in the event of a change of control of
the Company, as defined in the agreement, or in the event the deferred
compensation plan is terminated by the board of directors, a distribution of the
deferred compensation pool will be required. In either of these two events, the
amount of the distribution would be equal to the amount in the deferred
compensation pool or $5 million, whichever is greater. Additionally, in the
event the employment agreement of the chief executive officer is terminated,
other than for cause, he is entitled to his share of the deferred compensation
pool, but not less than $1.5 million. In connection with the planned acquisition
of Net2Wireless discussed in Note N to the financial statements, the deferred
compensation plan would be terminated and the participants in the plan would
abandon their interest in the plan subject only to shareholder approval of
options previously granted to the participants.

Deferred compensation expense is measured based on the changes in factors which
determine the amount of the deferred compensation pool, which to date has solely
been the change in market capitalization of the Company's common stock. For the
year ended December 31, 1999, the Company recognized deferred compensation
expense of $5,342,040 representing the current amount of the deferred
compensation pool multiplied by 41 percent for the interests granted through
December 31, 1999.

<PAGE F-15>

                       Sensar Corporation and Subsidiaries
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998

NOTE F  -  INCOME TAXES

The income tax expense (benefit) reconciled to the tax computed at the statutory
federal rate of 34 percent is as follows:

<TABLE>
<CAPTION>
                                                        Year ended December 31,
                                               ---------------------------------------
                                                   1999          1998           1997
                                               -----------   -----------   -----------
<S>                                            <C>           <C>           <C>
Income taxes (benefit) at statutory rate       $(2,959,489)  $(2,353,971)  $(5,038,056)
State income taxes (benefit)
net of federal tax effect                         (287,245)     (228,474)     (488,988)
Amortization of acquired technology                      -       900,420        60,797
Settlement with former directors                    33,723        70,427       165,750
Operating losses with no current tax benefit     3,199,056     1,605,535     5,292,150
Other, net                                          13,955         6,063         8,347
                                               -----------   -----------   -----------
Income tax expense                             $         -   $         -   $         -
                                               ===========   ===========   ===========
</TABLE>

Deferred income tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
                                                      December 31,
                                             -----------------------------
                                                  1999           1998
                                             -------------   -------------
<S>                                          <C>             <C>
Deferred tax assets
Benefit of net operating loss carryforwards  $   8,340,728   $   7,831,621
Compensation expense for stock options           2,141,656               -
Deferred compensation expense                    1,992,581               -
Capitalized software development costs and
amortization of intangible assets                  257,383         796,526
Inventory allowances                                     -         376,365
Accrued liabilities                                 34,664         113,199
Allowance for doubtful accounts                     27,043         256,287
Other, net                                           4,364           4,345
                                             -------------   -------------
                                                12,798,419       9,378,343

Less valuation allowance                       (12,798,310)     (9,373,873)
                                             -------------   -------------
                                                       109           4,470
Deferred tax liabilities

Depreciation of property and equipment                (109)         (4,470)
                                             -------------   -------------
Net deferred tax asset                       $           -   $           -
                                             =============   =============
</TABLE>

<PAGE F-16>

                       Sensar Corporation and Subsidiaries
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998

NOTE F  -  INCOME TAXES - CONTINUED

The Company has sustained net operating losses in each of the periods presented.
There were no deferred tax assets or income tax benefits recorded in the
financial statements for net deductible temporary differences or net operating
loss carryforwards because the likelihood of realization of the related tax
benefits cannot be established. Accordingly, a valuation allowance has been
recorded to reduce the net deferred tax asset to zero and consequently, there is
no income tax provision or benefit for any of the periods presented. The
increase in the valuation allowance was $3,424,437, $1,614,711, and $5,268,566
for the years ended December 31, 1999, 1998, and 1997, respectively.

As of December 31, 1999, the Company had net operating loss carryforwards for
tax reporting purposes of approximately $22,000,000 expiring in various years
through 2014. Utilization of approximately $3,100,000 of the total net operating
loss is dependent on the future profitable operation of Sensar Instruments, Inc.
under the separate return limitation rules and limitations on the carryforward
of net operating losses after a change in ownership. If the planned acquisition
of Net2Wireless discussed in Note N to the financial statements is consummated,
it is expected that the availability of all of the net operating losses will be
substantially restricted because of the change of control and lack of continuity
of business interests.

NOTE G  -  PREFERRED STOCK

     1998 Series A Preferred Stock

In February 1998, the Company completed the private placement of shares of 1998
Series A Preferred Stock (the "Preferred Stock") and warrants to purchase common
stock for gross proceeds of $3,500,000. Of this amount, approximately $549,000
was assigned as the value of the warrants and the balance was assigned as the
value of the Preferred Stock. The Preferred Stock bore an annual dividend of
four percent per annum and had a liquidation preference equal to $1,000 per
share plus all accrued, but unpaid dividends. The Preferred holders voted as a
class with the common stockholders.

The Preferred Stock was convertible at the election of the holders into that
number of shares of common stock calculated by dividing $1,000 plus any accrued
but unpaid dividends, by the lower of (1) $9.00 or (2) 85 percent of the average
closing price of the common stock for the ten trading days preceding the
conversion. During the years ended December 31, 1999 and 1998, holders of 101.20
shares and 460.05 shares of Preferred Stock converted their shares into 128,032
and 189,257 shares of common stock, respectively.

<PAGE F-17>

                       Sensar Corporation and Subsidiaries
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998

NOTE G  -  PREFERRED STOCK - CONTINUED

In an attempt to eliminate the potential market disruption of a significant
conversion of the Preferred Stock into common stock, the Company used part of
the proceeds from the sale of the assets of the acoustic division (Note B), to
reacquire and cancel 100 percent of the outstanding shares of Preferred Stock
for approximately $3.07 million, including accrued but unpaid dividends. The
Company agreed to reprice one-half of the associated warrants at $1.25 per share
and to cancel the other half of the warrants.

     1995 Series Preferred Stock

During the year ended June 30, 1995, the Company issued 200,000 shares of 1995
Series Preferred Stock in payment of $500,000 of short-term debt. The Preferred
Stock had a liquidation preference equal to $2.50 per share, plus unpaid
dividends. This Preferred Stock paid cumulative dividends at a rate of $0.225
per share per annum, payable monthly. The Preferred Stock was convertible into
common stock at the option of the holder or the option of the Company at the
rate of $7.50 per share divided by an amount equal to the average of the closing
bid prices for the common stock for the twenty consecutive trading days
immediately prior to the date that the holder provided notice of such
conversion. The Preferred Stock was converted, in accordance with the governing
provisions of the designation, into 23,537 shares of common stock effective
April 30, 1997.

NOTE H  -  COMMON STOCK

At a special meeting of stockholders held on March 18, 1999, a one-for-five
consolidation of the issued and outstanding common stock of the Company was
approved. The board of directors implemented the consolidation of the common
stock effective at the close of business on April 30, 1999. At the close of
business on January 17, 2000, a forward two-for-one stock split became effective
for the issued and outstanding common stock of the Company. All common share and
per common share information included in the accompanying financial statements
has been retroactively restated to reflect the one-for-five consolidation and
the two-for-one forward stock split.

<PAGE F-18>

                       Sensar Corporation and Subsidiaries
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998

NOTE H  -  COMMON STOCK - CONTINUED

In May 1999, the Company completed a private placement of 500,000 shares of
common stock at $2.00 per share. The net proceeds to the Company, after
associated expenses, were approximately $987,000. The stock issued was
subsequently registered for resale with the Securities and Exchange Commission.
During 1999, the Company also issued a convertible debenture in the amount of
$40,000, which was converted into 17,778 shares of common stock in December
1999.

During the years ended December 31, 1998 and 1997, the Company issued 19,499
shares and 21,940 shares, respectively, of common stock valued at prices ranging
from $5.75 to $11.58 per share and $8.45 to $33.13 per share, respectively, for
services rendered. During the year ended December 31, 1997, an officer
surrendered 696 shares of common stock in payment of a noninterest-bearing
advance.

NOTE I  -  EARNINGS (LOSS) PER COMMON SHARE

The following data show the amounts used in computing net loss per common share
from continuing operations, including the effect on net loss for preferred stock
dividends and a beneficial conversion feature associated with preferred stock
and warrants. The following data also show the weighted average number of shares
and rights to acquire shares with dilutive potential. For 1998, loss from
continuing operations applicable to common stock includes a noncash imputed
dividend to the preferred shareholders related to the beneficial conversion
feature on the 1998 Series A Preferred Stock and related warrants (Note G). The
beneficial conversion feature is computed as the difference between the market
value of the common stock into which the Series A Preferred Stock can be
converted and the value assigned to the Series A Preferred Stock in the private
placement. The imputed dividend is a one-time, noncash charge increasing the net
loss per common share.

<TABLE>
<CAPTION>
                                                                      Year ended December 31,
                                                            ------------------------------------------
                                                                1999           1998            1997
                                                            ------------   ------------   ------------
<S>                                                         <C>            <C>            <C>
Loss from continuing operations                             $(11,995,158)  $ (1,221,025)  $ (2,324,262)
Dividends on preferred stock                                     (25,414)      (107,273)       (15,000)
Imputed dividend from beneficial conversion feature                    -     (1,239,290)             -
                                                            ------------   ------------   ------------
Loss from continuing operations applicable to common stock  $(12,020,572)  $ (2,567,588)  $ (2,339,262)
                                                            ============   ============   ============
</TABLE>

<PAGE F-19>

                       Sensar Corporation and Subsidiaries
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998

NOTE I  -  EARNINGS (LOSS) PER COMMON SHARE - CONTINUED

<TABLE>
<CAPTION>
                                                                                                      Year ended December 31,
                                                                                                    -------------------------------
                                                                                                    1999 1998       1997
                                                                                                  ---------   ---------  ---------
<S>                                                                                               <C>         <C>        <C>
Common shares outstanding during the entire year                                                  5,228,366   4,850,157  4,287,116
                                                                                                  ---------   ---------  ---------
Weighted average common shares issued during the year                                               465,148     223,306    315,964
                                                                                                  ---------   ---------  ---------
Weighted average number of common shares used in basic EPS                                        5,693,514   5,073,463  4,603,080

Dilutive effect of stock options and warrants                                                             -           -          -
                                                                                                  ---------   ---------  ---------
Weighted average number of common shares and dilutive potential
common stock used in diluted EPS                                                                  5,693,514   5,073,463  4,603,080
                                                                                                  =========   =========  =========
</TABLE>

For the years ended December 31, 1999, 1998 and 1997, none of the options and
warrants that were outstanding, as described in Note J, were included in the
computation of diluted EPS because to do so would have been anti-dilutive.

NOTE J  -  STOCK OPTIONS AND WARRANTS

1.     Stock-based compensation plans

During the periods presented in the accompanying financial statements, the
Company had stock options that were granted under four stock option plans: the
1991 Director Stock Option Plan (the 1991 Director Plan); the 1996 Director
Stock Option Plan (the 1996 Director Plan); the 1997 Stock Option and Award Plan
(the 1997 Employee Plan); and the 1987 Stock Option Plan (the 1987 Employee
Plan). The Company has also granted options under executive employment
agreements.

A summary of the status of the options granted under the Company's stock option
plans and employment agreements at December 31, 1999, 1998, and 1997 and changes
during the years then ended is presented in the table below:

<PAGE F-20>

                       Sensar Corporation and Subsidiaries
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998

NOTE J  -  STOCK OPTIONS AND WARRANTS - CONTINUED

1.     Stock-based compensation plans - continued
<TABLE>
<CAPTION>
                                                Year ended December 31,
                          ---------------------------------------------------------------------
                                 1999                    1998                   1997
                          ---------------------  ---------------------- -----------------------
                                     Weighted-               Weighted-               Weighted-
                                      average                 average                 average
                                      exercise                exercise                exercise
                           Shares      price       Shares      price       Shares      price
<S>                       <C>        <C>         <C>         <C>         <C>         <C>
Outstanding at beginning
of year                    924,990   $    10.53  1,014,736   $    13.55  1,219,936   $    12.18
                          ---------              ----------  ----------
Granted                    560,000         2.05    704,000         9.95    480,800        15.35
Exercised                 (105,880)        1.61   (110,546)        6.58   (116,000)        6.70
Forfeited                 (830,178)        9.44   (130,400)       12.88          -            -
Canceled                   (24,000)        7.34   (552,800)       15.55   (570,000)       13.53
                          --------                --------               ---------
Outstanding at end
of year                    524,932   $     5.17    924,990   $    10.53  1,014,736   $    13.55
                          ========                ========               =========
Exercisable at
end of year                515,144   $     5.03    482,994   $    10.20    469,742   $    11.23
                          ========                ========               =========
</TABLE>

The weighted-average fair value of each option grant is $0.89, $2.88 and $7.60
for the years ended December 31, 1999, 1998 and 1997, respectively, and is
estimated on the date of grant using the Black-Scholes option pricing model with
the following weighted-average assumptions used for grants during the years
ended December 31, 1999, 1998 and 1997, respectively: risk-free interest rates
of 5.1 percent, 5.5 percent, and 6.0 percent; expected dividend yields of zero
for all periods; expected lives of 2.5, 5.4, and 5.8 years; and expected
volatility of 114 percent, 46 percent, and 42 percent.

A summary of the status of the options outstanding under the Company's stock
option plans and employment agreements at December 31, 1999 is presented below:

<TABLE>
<CAPTION>
                                          Weighted-
                                          average        Weighted-                 Weighted-
                                          remaining      average                   average
                              Number      contractual    exercise    Number        exercise
Range of exercise prices   outstanding    life (years)   price       exercisable   price
------------------------   -----------    ------------   ---------   -----------   ---------
<S>                        <C>            <C>            <C>         <C>           <C>
$1.50 - $2.00               120,000        2.40           $ 1.58      120,000       $ 1.58
$2.01 - $3.00               270,000        1.96             2.50      270,000         2.50
$3.01 - $17.50              134,932        2.56            13.71      125,144        13.78
                            -------                                   -------
$1.50 - $17.50              524,932        2.28           $ 5.17      515,144       $ 5.03
                            =======                                   =======
</TABLE>

<PAGE F-21>

                       Sensar Corporation and Subsidiaries
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998

NOTE J  -  STOCK OPTIONS AND WARRANTS - CONTINUED

1.     Stock-based compensation plans - continued

In January 1996, the Company granted options to three executives under newly
executed employment agreements. The agreements granted options to acquire an
aggregate of 330,000 shares of common stock at an exercise price of $10.625 per
share. The options under the employment agreements vested 20 percent on the
grant date and 20 percent for each year of service thereafter, and would have
expired in January 2006. All of the options granted in 1996 were canceled in
1997.

In 1998 and 1997, two former executives exercised options to acquire 110,546
shares and 12,000 shares, respectively, of common stock in exchange for notes
receivable in the aggregate amount of $726,190 and $69,375, respectively. In
1998, the Company established a reserve of $400,000 against these notes due to
the uncertainty of their collection in light of the decline in the price of the
Company's common stock. During 1999, the Company agreed to accept substantially
all of the proceeds from the sale of the common stock held by one of the former
officers of approximately $438,000 in satisfaction of his notes totaling
$726,190. The note for $69,375 was extinguished as part of a settlement of
litigation against the other former officer.

In conjunction with the 1997 employment of a new chief executive officer, the
Company granted options to acquire 400,000 shares of common stock. The options
were granted at $14.375 per share, but were exercisable at the lower of the
grant price or 80 percent of the trading price on the date of exercise (but not
less than $9.00 per share). During 1998, this option was canceled in favor of an
option to purchase 400,000 shares of common stock at prices ranging from $9.00
to $16.25 per share. During 1998, the Company granted options to acquire 120,000
shares of common stock to a new chief operating officer at prices ranging from
$7.475 to $13.75 per share. All of the foregoing options were forfeited in April
1999 with the resignation of both officers from the board of directors (Note C).



A new chief executive officer was appointed in April 1999 (Note C). In
conjunction with his appointment, the chief executive officer was granted an
option to acquire 200,000 shares of common stock, half of which are exercisable
at $1.50 per share and half at $2.50 per share. During April and May, three new
non-executive directors were appointed to the board. On appointment, each
received an option to acquire 200,000 shares of common stock, half of which are
exercisable at $1.50 per share and half at $2.50 per share. Under Nasdaq
corporate governance rules, these options to acquire 600,000 shares of common
stock are subject to shareholder approval, which approval will be sought at the
next meeting of shareholders. If approved by the shareholders, these options to
acquire 600,000 shares will be considered granted for accounting purposes on the
date of shareholder approval and accounted for accordingly. Additionally,
options to acquire an aggregate of 360,000 shares of common stock have been
granted principally to nonemployees, at prices ranging from $1.50 to $2.50 per
share. All of these options are immediately exercisable, generally expire three
years after grant, and have a cashless exercise provision.



<PAGE F-22>

                       Sensar Corporation and Subsidiaries
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998

NOTE J  -  STOCK OPTIONS AND WARRANTS - CONTINUED

1.     Stock-based compensation plans - continued

Generally accepted accounting principles require that compensation be recorded
each period for stock options with cashless exercise provisions granted to
management, equal to the change in the stock price above the exercise price. If
the price of the stock declines during the period, a credit is recorded against
previously recorded compensation expense, but not in excess of the cumulative
compensation recorded since the grant date. During the year ended December 31,
1999, the Company recognized $5,618,740 as a non-cash compensation charge as a
consequence of the cashless exercise provisions of the options granted to
management to acquire an aggregate of 240,000 shares. Additionally, the Company
has recorded non-cash compensation expense during the year ended December 31,
1999, of $267,093 for stock options granted to nonemployees to acquire an
aggregate of 270,000 shares of common stock. The compensation expense was based
on the fair value of options granted using the assumptions discussed earlier in
this Note.

In November 1999, the board of directors approved options to acquire an
aggregate of 1,600,000 shares of common stock for $2.00 per share to the chief
executive officer, to the non-executive members of the board of directors, and
to the Company's chief consultant. These grants are subject to shareholder
approval, which approval will be sought at the next meeting of shareholders. If
these options are approved by the shareholders, the participants in the deferred
compensation plan have agreed to abandon their interests in the deferred
compensation pool and the board of directors has agreed to terminate the
deferred compensation plan. If approved by the shareholders, the Company would
record compensation expense as measured under generally accepted accounting
principles on the date of shareholder approval, less the amount of the deferred
compensation liability terminated at that date.

Under the 1991 Director Plan, the Company granted options to acquire 12,000
shares of common stock annually to each director. Under this plan, the Company
may grant up to an aggregate of 300,000 options. Options granted under this plan
vested immediately and expired five years after the grant. The 1991 Director
Plan terminated July 1, 1996.

<PAGE F-23>

                       Sensar Corporation and Subsidiaries
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998

NOTE J  -  STOCK OPTIONS AND WARRANTS - CONTINUED

1.     Stock-based compensation plans - continued

Under the 1996 Director Plan, the Company reserved 560,000 shares of common
stock to be granted to directors of the Company. In 1996, the Company granted
options to each director to acquire 80,000 shares of common stock (for a total
of 400,000 options) at $17.50 per share. Options under the 1996 Director Plan
vested 25 percent on the grant date and 25 percent for each year of service
thereafter and expire five years after their vesting date. Of the options
granted in 1996, options with respect to 240,000 shares were canceled in 1997.
During 1998, options with respect to an additional 120,000 shares were canceled
or forfeited, leaving options for 40,000 shares outstanding at December 31,
1999. The 1996 Director Plan terminated May 9, 1999.

Under the 1987 Employee Plan, as amended in 1994, the Company could grant
options to acquire up to 300,000 shares of common stock, of which options to
acquire 152,923 shares were exercised and no options are outstanding as of
December 31, 1999. The 1987 Employee Plan terminated November 9, 1997.



The 1997 Employee Plan reserves 300,000 shares of common stock for issuance
pursuant to stock options or stock awards granted, of which options to acquire
151,880 shares have been exercised or are outstanding and 105,554 shares have
been awarded to employees and others as of December 31, 1999. Concurrently with
the granting of certain options in 1998, the Company canceled existing options
previously granted to certain employees to purchase 72,800 shares of common
stock at prices ranging from $11.725 to $26.25 per share. Shares awarded
primarily consist of stock issued to former management in November 1997 in
connection with their termination and were recorded at fair value of $1,150,000
on the date of their termination.



The Company adopted the 1997 Employee Stock Purchase Plan (the Stock Purchase
Plan) effective as of February 1, 1997. The maximum number of shares of common
stock which are available under this plan is 40,000 shares. The Stock Purchase
Plan provided an opportunity to the employees of the Company to purchase shares
of common stock in the Company at 85 percent of fair market value on each
offering date. During the years ended December 31, 1998 and 1997, the employees
of the Company purchased 29,273 and 6,163 shares of common stock for gross
proceeds of $81,172 and $84,001, respectively. The Stock Purchase Plan expired
December 31, 1998.

<PAGE F-24>

                       Sensar Corporation and Subsidiaries
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998

NOTE J  -  STOCK OPTIONS AND WARRANTS - CONTINUED

1.     Stock-based compensation plans - continued



The Company accounts for options granted to management and to the members of the
board of directors under APB 25 and its related interpretations and the opinions
of the Emerging Issues Task Force. Had compensation cost for these plans been
determined based on the fair value of the options at the grant dates for awards
under these plans consistent with the method prescribed by SFAS 123, the
Company's net loss and loss per common share would have been changed to the pro
forma amounts indicated below. The significant decrease in pro forma net loss
for 1999 is principally associated with options to acquire 240,000 shares of
common stock granted to management for which $5,618,750 of compensation was
recorded under APB 25, but for which only $139,212 would have been recorded
under SFAS 123 using the Black-Scholes model.



<TABLE>
<CAPTION>
                                                  Year ended December 31,
                                          -----------------------------------------
                                               1999         1998          1997
                                          ------------  -----------   -------------
<S>                          <C>          <C>           <C>           <C>
Net loss                     As reported  $(8,704,380)  $(6,923,444)  $(14,817,811)
                             Pro forma     (3,492,019)   (7,337,855)   (16,118,507)

Net loss per common share    As reported  $     (1.53)  $     (1.63)  $      (3.22)
                             Pro forma          (0.62)        (1.79)         (3.50)
</TABLE>

2.     Stock warrants

In 1998, in connection with a private placement of the Preferred Stock, the
Company granted warrants to purchase 280,000 shares of common stock at $11.25
per share. In connection with the redemption of the remaining Preferred Stock in
1999, the Company canceled one half of the remaining warrants and reduced the
exercise price of the other half to $1.25 per share.

In conjunction with a private placement of common stock in May 1995, the Company
issued warrants to a group of investors to acquire common stock of the Company.
After that time, the Company issued additional warrants to this group as the
previously outstanding warrants were exercised.

In January 1997, the board of directors approved a reduction in the exercise
price, from $15.625 to $13.25 per share, of certain of these warrants related to
686,333 shares of common stock. In consideration of this reduction, the holders
of the warrants agreed to the early exercise of the warrants which were
otherwise permitted to be exercised until November 1, 1998. The holders agreed
to exercise 307,124 shares on or before January 31, 1997, which exercise
occurred and resulted in gross proceeds to the Company of $4,069,393. This
initial issuance was priced at $15.625 per share and resulted in the issuance of
260,441 shares, with 46,683 shares held in reserve, because the reduced pricing
was contingent upon the timely exercise of the warrants related to all 686,333
shares.

<PAGE F-25>

                       Sensar Corporation and Subsidiaries
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998

NOTE J  -  STOCK OPTIONS AND WARRANTS - CONTINUED

2.     Stock warrants - continued

The agreement relating to the exercise of the remaining 379,209 warrants was
amended on November 14, 1997. The exercise price remained at $13.25 per share or
an aggregate of $5,024,517 to be paid in ten equal installments commencing
November 15, 1997, and continuing on the day that was five weeks subsequent to
the preceding payment until the full amount was paid. On receipt of each
payment, the Company agreed to issue a certificate representing the stock then
being acquired, calculated at an exercise price of $13.25 per share, and issue a
replacement warrant covering the same number of shares. Additionally, on receipt
of the first payment, the Company agreed to deliver certificates representing
the 46,683 shares held in reserve and to issue replacement warrants for the
307,124 shares, exercised in January 1997, referred to in the previous
paragraph. Replacement warrants had an exercise price of $21.875 per share and
were exercisable at any time through April 16, 2003. In the event that a warrant
holder failed to make one or more payments when due, that portion of the
outstanding warrants that was then due would thereafter have an exercise price
of $15.625 per share and the holder would not be entitled to a replacement
warrant, if and when the outstanding warrant was exercised. Due to the declining
market price of the Company's common stock, this group only exercised 67,555
warrants after the amendment, and the remaining warrants expired in November
1998.

In November 1999, the exercise price of 374,680 warrants and 44,900 warrants
with exercise prices of $21.875 and $11.25, respectively, were reduced to $2.00
per share.

A summary of the status of common stock underlying the warrants issued and
changes during the years is presented in the table below:

<TABLE>
<CAPTION>
                                        Year ended December 31,
                   --------------------------------------------------------------------
                           1999                   1998                   1997
                   ----------------------   --------------------   --------------------
                                Weighted-              Weighted-              Weighted-
                                average                average                average
                                exercise               exercise               exercise
                    Shares      price       Shares     price       Shares     price
                    ------      ---------   ------     ---------   ------     ---------
<S>                <C>          <C>         <C>        <C>         <C>        <C>
Outstanding at
beginning of year   654,680     $17.33       840,067   $17.23       840,067   $15.63
Granted             537,130       1.84       309,634    12.28       345,045    21.88

Exercised          (411,764)      1.79       (29,633)   13.25      (345,045)   13.25


Expired                   -          -      (465,388)   14.03             -        -

Canceled           (777,246)     14.91             -        -             -        -
                   --------                 --------               --------

Outstanding at
end of year           2,800     $ 1.25       654,680   $17.33       840,067   $17.23
                   ========                 ========               ========
</TABLE>

<PAGE F-26>

                       Sensar Corporation and Subsidiaries
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998

NOTE K  -  COMMITMENTS AND CONTINGENCIES

1.     Litigation

In September 1999, certain former employees of the Company filed a lawsuit
against the Company seeking damages for non-payment of a bonus arrangement, plus
penalties and attorneys fees. The Company denies that the conditions of the
bonus were met, has filed a motion to dismiss certain claims, and intends to
vigorously defend its position. Management of the Company believes that it has
substantial defenses to the claims and does not believe that the ultimate
outcome of this litigation will have a material impact on the financial position
of the Company. In March 2000, the chief executive officer agreed to indemnify
the Company for all costs and expenses, including any judgments, arising out of
this litigation subsequent to March 1, 2000.



In October 1998, the Company filed suit against Brian G. Larson, a former chief
executive officer, seeking reimbursement of withholding taxes it paid on his
behalf in the amount of $164,826. Mr. Larson filed a counterclaim, which was
subsequently dismissed by the court without prejudice. In June 1999, these
matters were settled by (1) Mr. Larson returning 65,782 shares of common stock
to the Company; (2) Mr. Larson giving the Company a note in the amount of
$35,545; (3) the Company forgiving a note from Mr. Larson in the amount of
$109,313 from the exercise of options; and (4) the Company granting Mr. Larson
an option to acquire 50,000 shares of common stock at $2.50 per share. The
settlement resulted in a net recovery to the Company of $12,035.



2.     Operating lease

The Company leases certain office space under an operating lease for $2,256 per
month. At December 31, 1999 the chief executive officer of the Company is a
guarantor on the lease and in March 2000, he assumed responsibility for payment
of the lease through its expiration in September 2002. Minimum future payments
under this non-cancelable operating lease at December 31, 1999 are as follows:

<TABLE>
<CAPTION>

<S>                         <C>
Year ending December 31,
------------------------
2000                        $27,343
2001                         28,436
2002                         21,961
Thereafter                        -

                            $77,740

</TABLE>

NOTE L  -  RELATED PARTY TRANSACTION

The Company entered into a consulting arrangement during 1997, with a
corporation owned and controlled by a former director of the Company who
resigned in April 1998. Under the terms of the arrangement, the corporation
agreed to provide the Company with advisory and consulting services concerning
the commercialization of the technology held by Sensar Instruments, Inc., the
identification of markets for such products, the establishment of marketing
contacts, and the development of an operational plan for the development and
marketing of products based on this technology. Under the arrangements the
Company incurred compensation expense of $95,540 in 1997 (none in 1999 or 1998),
plus the reimbursement of third-party expenses incurred on behalf of the
Company.

<PAGE F-27>

                       Sensar Corporation and Subsidiaries
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998

NOTE M  -  UNUSUAL CHARGES

The Company has incurred the following unusual charges (credits) during the
years covered by the financial statements:

<TABLE>
<CAPTION>
                                                                           Year ended December 31,
                                                                     ---------------------------------
                                                                        1999         1998       1997
                                                                     -----------  ---------  ---------
<S>                                                                  <C>          <C>        <C>
Termination benefits paid to former executive
  management                                                         $ 125,000    $      -   $1,383,964
Write down (recovery) of receivable from former
  executive officer and related litigation costs                       (12,035)    187,492            -
Write down (recovery) of notes receivable and
  accrued interest from former executive
  management for exercise of stock options                            (144,628)    456,723            -
Other charges                                                                -       5,734            -
                                                                     ---------    --------   ----------
                                                                     $ (31,663)   $649,949   $1,383,964
                                                                     =========    ========   ==========
</TABLE>



NOTE N  -  AGREEMENT WITH NET2WIRELESS



The Company has entered into an agreement with Net2Wireless Corporation, that
gives the Company the right to acquire Net2Wireless in exchange for the issuance
of 18,295,060 shares of the Company's common stock. Net2Wireless acquired the
wireless division of I.T.E.S Ltd., and is a startup company that is focused on
developing wireless internet communications, including multimedia applications.
In the event of a merger, options and other rights to acquire Net2Wireless stock
then outstanding would be converted into rights to acquire 14,766,649 shares of
the Company's common stock. The number of shares to be issued to the
Net2Wireless stockholders will be increased in the event that the cash held by
the Company at closing, plus all amounts collected on the notes receivable held
by the Company, less all cash liabilities is not at least $4.45 million. The
number of additional shares to be issued will be determined by dividing the
short fall, if any, by $1.86. The Company will also issue 1,000,000 shares to
certain individuals involved in identifying Net2Wireless.

As part of this agreement, the Company has agreed to provide Net2Wireless with
short-term financing of up to $2 million, of which $500,000 was advanced in
February 2000. The advance bears interest at 8 percent per annum and is due in
full on or before September 30, 2000. The financing will be used to allow
further recruitment of technical staff for ongoing development work by
Net2Wireless.

<PAGE F-28>

                       Sensar Corporation and Subsidiaries
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998



NOTE N  -  AGREEMENT WITH NET2WIRELESS - CONTINUED



As part of the transaction, the Company has agreed to the following:

1.     Maintain  a  minimum  of  $4.5  million  in  cash  and  notes  receivable
(including  the  advance  to  Net2Wireless  discussed  above)  with only nominal
current liabilities, not to exceed $50,000;

2.     Cause  to  be exercised all options, to acquire stock of the Company held
by current management and directors; and

3.     Have  no more than 9,000,000 shares outstanding, including shares subject
to options at the time of closing.

In order to eliminate the Company's liabilities other than nominal current
liabilities, the Company will terminate all employment and consulting
agreements, will terminate its deferred compensation plan, and has entered into
an agreement effective March 1, 2000 with the chairman of the board whereby the
chairman has agreed to indemnify the Company with respect to pending litigation
and assume the real property lease to which the Company is a party. Termination
of the deferred compensation plan and the chief executive officer's employment
agreement are contingent on stockholder approval of options previously granted
by the board of directors to management, non-executive directors, and the chief
consultant.



In exchange for the indemnification and the assumption of the lease in March
2000, the Company distributed to the chairman of the board the minority
investment interests held by the Company with a book value of $325,000 at
December 31, 1999,and the office furniture and equipment located at the
Company's Salt Lake City office with a book value of $27,992 at December 31,
1999. The distribution of assets in exchange for the indemnification will be
accounted for as an unusual charge to continuing operations in the quarter
ending March 31, 2000. The chairman has also agreed to provide 100 hours of
transitional services to the Company to assist new management.



The agreement is subject to the satisfaction of several conditions, including
the approval of the shareholders of the Company and Net2Wireless. The agreement
may be terminated by the mutual consent of the parties, by either party if the
closing has not taken place by December 31, 2000, by either party if there is a
breach by the other party, or by the failure of the Company or Net2Wireless to
receive shareholder approval of the transaction.

It is contemplated that, at closing, the current officers and directors of the
Company will resign and Net2Wireless will appoint new directors and executive
officers of the Company. After the acquisition, the shareholders of Net2Wireless
will own a majority of the common stock of the Company then outstanding.
Accordingly, for financial reporting purposes, the merger will be treated as a
reverse acquisition accounted for as a recapitalization of Net2Wireless.

<PAGE F-29>