UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 50549

                                   Form 10-KSB
(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, 2001

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934 For the transition period from _______ to ____________

         Commission file number: 000-30722

                      Microwave Transmission Systems, Inc.
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                 (Name of small business issuer in its charter)

                                      Texas
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         (State or other jurisdiction of incorporation or organization)

                                   75-2197372
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                      (I.R.S. Employer Identification No.)

                    541 Sterling Drive, Richardson, TX          75081
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               (Address of principal executive offices)         (Zip Code)

Issuer's telephone number: (972) 669-0591

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: Common Stock

         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports. Yes X No

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by referenced in Part III of this Form
10-KSB or any amendment to this Form 10-KSB [X]






<PAGE>

State issuer's revenues for its most recent fiscal year: $20,412,562

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of March
15, 2002: $7,441,977.

State the number shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 11,828,880.






                                     PART I

         We make forward-looking statements in this document. Our
forward-looking statements are subject to risks and uncertainties. You should
note that many factors, some of which are described in this section or discussed
elsewhere in this document, could affect our company in the future and could
cause our results to differ materially from those expressed in our
forward-looking statements. Forward-looking statements include those regarding
our goals, beliefs, plans or current expectations and other statements regarding
matters that are not historical facts. For example, when we use the words
"believe," "expect," "anticipate" or similar expressions, we are making
forward-looking statements. Factors that could affect our forward-looking
statements include:

         the outcome of our growth strategy;

         future results of operations;

         liquidity and capital expenditures;

         construction and acquisition activities;

         the availability of capital to finance construction of towers that we
         may own;

         regulatory developments and competitive conditions in the
         communications site and wireless carrier industries;

         projected growth of the wireless communications and wireless carrier
         industries;

         the implementation of new wireless technologies and the adoption of
         applications that use wireless technologies; and

         general economic conditions.

         We are not required to release publicly the results of any revisions to
these forward-looking statements we may make to reflect future events or
circumstances.

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Item 1. Description of Business.

General

         We are a holding company and the sole shareholder of MTSI, Inc., a
Texas corporation ("MTSI"), CKS Management, Inc., ("CKS"), a Texas corporation,
EPIC Communications, Inc., a Texas corporation ("Epic"), Viper Communications
Systems Inc., a Texas corporation ("Viper")and Site Communications, ("Site"),
which collectively are our only assets and the entities through which we conduct
our operations. All references herein to "we," "us" or "our" with respect to our
business operations refer to the combined business operations of Microwave
Transmission Systems, Inc., MTSI, CKS, EPIC, VIPER AND SITE, unless specifically
stated otherwise.

         Our principal business is the construction and maintenance of wireless
communications transmitting and receiving facilities for providers of wireless
communication services. Approximately 49% of our revenues are derived from
operations in Texas,14% Florida, 7% N. Carolina, 6% Oklahoma, with the other 23%
derived from operations in other regions of the United States and
internationally. We have participated in the development of more than 4000,
antenna sites in the United States. MTSI commenced operations in 1987, and was
principally engaged in the construction of microwave towers. As part of this
original effort, MTSI developed the skill to calibrate the antennae and
instruments used in these towers and thereby assure the tower's robust
operation, a value added skill that is used in implementing the construction and
maintenance work on technologies utilized in later years. In the early 1990's
MTSI began work on a variety of other wireless technologies lead by the sharp
increase in use of cellular telephone systems, an analog technology. These other
technologies included paging technologies as well as Specialized Mobile Radio
and Enhanced Specialized Mobile Radio technologies. In the late 1990's MTSI
began working Personal Communications Systems or PCS technologies, a technology
that utilizes efficiencies of digital technology for the transmission of voice
and data.

         Immediately prior to acquiring MTSI in August 1999, our name was RBSC
Acquisition Corp, we had more than 1000 stockholders, and we had no operations.
RBSC Acquisition Corp., a Texas corporation, was formed by the merger in
December 1997 of RBSC, Inc., a California corporation, into RBSC Acquisition
Corp. In March 1997, RBSC, Inc. had filed a petition in bankruptcy and, as a
result of that proceeding, canceled all of the issued and outstanding stock of
the stockholders who were such on the date of the filing of the petition in
bankruptcy. As part of the bankruptcy proceeding, we issued 500,084 shares of
Common Stock to creditors of RBSC, Inc. and Halter Financial Group, Inc. RBSC,
Inc. was formed in California in 1962 as West Covina Auto Parts, Inc. and in
1993 Reddi Brake Supply Company, Inc. merged into West Covina Auto Parts, Inc.
At that time the corporation's name was changed to RBSC, Inc.

         With the acquisition of MTSI in August 1999, we issued 5,750,000 shares
of Common Stock to P. David Spurlin, which constituted 92% of our then issued
and outstanding stock, and thereby obtained operations. In January 2000, we
changed our name to Microwave Transmission Systems, Inc.

         On August 30, 2001, the Company closed the acquisition via merger of
CKS, Viper and Epic, three Texas corporations engaged in the same business as
the company of constructing and maintaining wireless communications transmitting
and receiving facilities for providers of wireless communication services (the
"Acquired Businesses"). The transactions are structured as mergers of the
Acquired Businesses into three wholly owned subsidiaries of the Company formed

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<PAGE>

for the purpose of effecting the mergers. The Acquired Businesses will continue
to operate as separate subsidiaries under their same names before the
transactions. Consideration for the mergers consisted of 5,378,796 shares of the
Company's Common Stock and cash in the amount of $2,514,168. Of such
consideration, 2,017,932 shares of common stock were issued, and $894,975 of the
cash was paid to P. David Spurlin, the Chief Executive Officer of the Company
and the controlling shareholder of the Acquired Businesses.

         In continuation of our organic growth business model, in November 2001,
we formed a corporation named Site Communications, Inc. This corporation was
modeled after our successful Viper and Epic corporations who provide the same
type of services. Site is located in Gallatin, Tennessee.

Industry Background

         The number of wireless transmissions that an antenna on a communication
facility can process is limited. Wireless devices such as cellular telephones
using analog technology, PCS telephones using digital technology, and other
devices such as pagers and personal digital assistants or PDA's that use both
analog and digital technology, all use radio frequencies to transmit to
communication facilities, usually antennae located on towers near the user. The
number of frequencies that are available to transmit to a communication facility
and the capacity of that frequency to carry a given number of radio signals are
limited. Heavy usage in a given area congests the frequencies and may result in
a frequency or frequencies being unavailable. To increase capacity, the
geographic area that an antenna serves is decreased through increased
construction of antenna, thereby reducing the number of transmissions to a given
antenna. As the number of users of wireless services increases, whether by
increased number of users utilizing an existing technology or by increased usage
of a new technology such as internet usage by PDA's, more towers and antennae
must be built to reduce congestion.

         Our principal customers are enterprises providing mobile telephone
communication services. These service providers use both analog and digital
technologies. PCS services or digital services are increasingly replacing
cellular services or analog services. While cellular and PCS providers now
dominate our business, the construction and maintenance of microwave facilities
continues to provide a significant portion of our revenues. In addition, new
uses for older wireless technologies such as specialized mobile radio technology
and enhanced specialized mobile radio technologies, technologies that were used
in radio communications such as that used in taxi cabs, are now being used for
voice and data communications. We anticipate that wireless technologies will be
used increasingly for non-voice communications through devices such as PDA's as
well as voice and data communications from fixed locations.

         A device, usually a portable telephone, transmits a radio signal to the
nearest communication tower using analog or digital transmission. The
communications facility contains an antenna or antennae connected by wireline or
short haul microwave to a nearby switching office. The switching office
processes signals for several cellular facilities. For transmission from a
mobile telephone to a telephone that is not a mobile phone, the switching office
connects the telephone signal to a local telephone exchange. For transmission
between two mobile telephones, the switching office locates the receiving
cellular communication facility to which the receiving telephone is connected
and completes the connection by transmitting the signal to that facility. If one
or both of the cellular telephones is moving, such as a car phone, the local
switching station hands the signal off to a different facility as the phone
moves from one area to another.

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         We initially constructed microwave and cellular transmission
facilities, and installed electronic lines and components. As microwave
technology evolved and matured, so did the construction and installation
services relating to those technologies. In fact, we often return to previously
built facilities to upgrade the equipment. Recent years have seen the rise of
the use and demand for cellular telephones and PCS. We design, build, and
install towers and rooftop sites that house cellular telephone and PCS antennae.
These facilities are currently designed for use with microwave, cellular
telephone, pager, specialized mobile radio and satellite based radio
technologies.


Business

         Our revenue is predominantly generated by construction and construction
management services for wireless communications, principally towers built for
microwave, cellular and PCS services. We also perform inspection and maintenance
services on previously built towers, many of which were not originally
constructed by us. We provide the infrastructure necessary for the latest
wireless communications systems by fabricating, building, inspecting and
maintaining wireless and satellite based communication transmitting and
receiving facilities for providers of wireless telecommunication services.

         Much of the process of designing, engineering and constructing a system
of antennae for a wireless system occurs prior to a client contracting with us
for the actual construction of towers and installation of antennae. While we can
provide some or all of these preliminary services, prior to engaging us, a
provider of wireless services has usually analyzed the sites available for
construction of antennae or towers, the Radio Frequency requirements in those
areas, zoning regulations and the availability of co-location opportunities. The
wireless service provider has also secured the right from the property owner to
construct a tower or co-locate on the site as well as obtained local zoning and
permitting.

         We typically contract with the wireless service provided to construct a
tower and antennae on a fixed fee or turnkey basis. Our inspection and
maintenance services, however, are usually contracted for on a time and material
basis.

         Once we are engaged to work on a site development project, we dispatch
a site development team from headquarters to the project site and establish a
temporary field office for the duration of the project. The site development
team is typically composed of our permanent employees and supplemented with
local hires employed only for that particular project. A team leader is assigned
to each phase of the site development project and reports to a project manager
who oversees all team leaders. Upon the completion of a site development
project, the field office is closed and all of our permanent employees are
either relocated to another project or directed to return to headquarters.

Maintenance and Management

         Once constructed, we maintain and manage our communication sites
through a combination of in-house personnel and independent contractors.
In-house personnel are responsible for oversight and supervision of all aspects
of site maintenance and management, and are particularly responsible for
monitoring security access and lighting, RF emission and interference issues,
signage, structural engineering and tower capacity, tenant relations and
supervision of independent contractors. We hire independent contractors locally
to perform routine maintenance functions such as landscaping, pest control, snow

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removal, vehicular access, site access and equipment installation oversight. We
engage these independent contractors on either a fixed fee or time and materials
basis.

         As new technologies are developed, we are engaged to return to an
existing structure to install the newer technology. These new technologies may
relate to the upgrading of an existing system that is becoming obsolete or may
relate to the implementation of an additional technology such as microwave or
digital technology.


Customers

         We have performed site development services for many of the largest
wireless service providers over the past several years. The majority of our
contracts have been for PCS broadband, ESMR (Enhanced Specialized Mobile Radio),
cellular and paging customers. We also service PCS narrowband, SMR (Special
Mobile Radio) and MDS (Multiple Address Systems) wireless providers. In 2001,
our largest customers were Cingular Wireless, Alcatel, Alltel Corporation and
MCI Worldcom representing 28.1%, 23.3%, 6.4% and 5.6% of our revenues,
respectively. In 2000, our largest customers were Cingular Wireless, Alltel
Corporation, MCI Worldcom and Alcatel representing 27.6%, 11.4%, 10.2% and 8.1%
of our revenues, respectively. No other customer represented more than 10% of
our revenues during these periods. See "Item 6. Management's Discussion and
Analysis Of Financial Condition And Results Of Operations."


Business Development

         Our business growth has been based on the growth of the wireless
communication industry. Initially we derived our revenues from the construction
and installation of microwave transmission systems and then cellular systems.
Cellular systems are primarily used in the United States for mobile telephone
communications. PCS technology is supplanting cellular systems because of its
use of digital technology. Microwave transmission systems, however, remain a
significant portion of our business because microwave technology is used in
towers to transmit radio signals to switching offices and remains a choice for
long distance transmission of signals where the cost of running a wireline
exceeds the cost of microwave communications, a use that is independent of
retail wireless communication systems.

         Our growth is based upon the continued and increasing use of mobile and
other wireless telecommunication technologies. Increased use of wireless mobile
technologies requires a larger number of towers. Improved technologies
frequently require the implementation of these technologies on existing
facilities. Additional uses of wireless technologies such as the wireless
internet require the additional construction of towers where existing capacity
is insufficient to handle increased usage. As the towers are built to implement
these wireless technologies, they will need to be maintained.

         We continually evaluate the prospects of opening additional offices
throughout the United States. Our opening of additional offices will be driven
by the needs of our existing customer base. Where our existing customers are
upgrading major installations or are embarking upon a new market, we will
consider the efficiencies to be gained in opening offices in those locations.

         While we believe that improving technologies, increased usage of
existing technologies and new applications will continue to drive the growth of
our business, we will, when we believe that the construction provides an
adequate return, construct towers that we own and lease space on these to

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providers of wireless communication services. We would build the tower to the
specifications provided by the service provider. The service provider would then
lease one or more antenna sites on the tower from us. We anticipate that these
towers will be able to accommodate multiple tenants. By working with one or more
"anchor" tenants, we will seek to develop a comprehensive plan for a particular
network by locating new sites in areas identified by our customers as optimal
for their network expansion requirements. Companies leasing antenna sites are
expected to come from a wide range of industries, including cellular, PCS,
enhanced specialized mobile radio, paging, fixed microwave, radio and
television.

         We have in the past negotiated to provide multiple antennae to such
potential clients but have not entered into agreements because the construction
and operation of those projects did not provide an adequate return or, in the
opinion of our management, the return was too speculative. We continue to pursue
opportunities to construct towers that we would own and may, in the appropriate
case, build such sites speculatively. Presently, we own three towers on which we
lease space.

Competition

         Summary. The industry for wireless infrastructure building and
implementation services is highly competitive and fragmented. Most industry
participants are small companies with fewer than fifty employees. Other
participants in the market are wireless equipment manufacturers that provide
services in conjunction with the sale of wireless equipment and non-wireless
engineering and construction companies and non-wireless subcontractors. As
demand for wireless infrastructure building increases, we expect that more
non-traditional competitors will enter the market, thereby increasing
competition.

         Maintenance And Management Competition. The following companies are
primarily competitors for our site management activities: AAT, APEX, JJS
Leasing, Inc., Motorola, Signal One, Subcarrier Communications and Tower
Resources Management.

         Site Development and Tower Construction Competition. We also compete
for development and new tower construction opportunities with wireless service
providers, site developers and other independent tower operating companies and
believe that competition for site development will increase and that additional
competitors may enter the tower market, some of whom may have greater financial
resources than we do. We believe that the majority of our competitors in the
site development business operate within local market areas exclusively, while
some firms appear to offer their services nationally, including American Tower
Corporation, SpectraSite, Accelera Wireless, Wireless Facilities, 02Wireless
Solutions and LCC International. Our market includes participants from a variety
of market segments offering individual, or combinations of, competing services.
The field of competitors includes site development consultants, construction
companies, tower owners/managers, radio frequency engineering consultants,
telecommunications equipment vendors (which provide end-to-end site development
services through multiple subcontractors) and provides internal staff. We
believe that providers base their decisions on site development services on
certain criteria, including a company's experience, track record, local
reputation, price and time for completion of a project, and believe that we
compete favorably in these areas.

EMPLOYEES

         As of March 15, 2002, we had 162 employees, none of whom is represented
by a collective bargaining agreement. All of our employees are full-time
employees. Of our total employees, fourteen work in management, twenty in

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administration and 128 in construction. We consider our employee relations to be
good, and we have never experienced a work stoppage. From time to time, we also
employ independent contractors to support our operation.

         Our future success will depend in part upon our ability to attract,
retain and motivate highly qualified technical and management personnel, for
whom competition is intense. As part of our retention efforts, we seek to
minimize turnover of key employees by emphasizing our industry experience, our
work environment and our competitive compensation packages. Due to the nature of
our business, we experience a "run-up" and "run-down" in employees as contracts
are completed in one area of the country and are commenced in a different area.

Regulatory And Environmental Matters

         Federal Regulations. Both the Federal Communications Commission ("FCC")
and Federal Aviation Administration ("FAA") regulate towers used for wireless
communications transmitters and receivers. These regulations control the siting
and marking of towers and may, depending on the characteristics of particular
towers, require registration of tower facilities. Wireless communications
devices operating on towers are separately regulated and independently licensed
based upon the particular frequency used.

         Pursuant to the requirements of the Communications Act of 1934, the
FCC, in conjunction with the FAA, has developed standards to consider proposals
for new or modified antennae. These standards mandate that the FCC and the FAA
consider the height of proposed antennae, the relationship of the structure to
existing natural or man-made obstructions and the proximity of the structure to
runways and airports. Proposals to construct or to modify existing antennae
above certain heights are reviewed by the FAA to ensure the structure will not
present a hazard to aviation. The FAA may condition its issuance of a no-hazard
determination upon compliance with specified lighting and/or marking
requirements. The FCC will not license the operation of wireless
telecommunications devices on towers unless the tower has been registered with
the FCC or a determination has been made that such registration is not
necessary. The FCC will not register a tower unless the tower has been
registered with the FAA. The FCC may also enforce special lighting and painting
requirements. Owners of wireless transmissions towers may have an obligation to
maintain painting and lighting to conform to FCC standards. Tower owners may
also bear the responsibility of notifying the FAA of any tower lighting outage.
Failure to comply with the applicable requirements may lead to civil penalties.

         The Telecommunications Act of 1996 amended the Communications Act of
1934 by giving state and local zoning authorities jurisdiction over the
construction, modification and placement of towers. The new law preserves local
zoning authority by prohibiting any action that would (1) discriminate between
different providers of personal wireless services or (2) ban altogether the
construction, modification or placement of radio communication towers. Finally,
the 1996 Telecom Act requires the federal government to help licensees for
wireless communications services gain access to preferred sites for their
facilities. This may require that federal agencies and departments work directly
with licensees to make federal property available for tower facilities.

         Owners and operators of antennae may be subject to, and therefore must
comply with, environmental laws. The FCC's decision to license a proposed tower
may be subject to environmental review pursuant to the National Environmental
Policy Act of 1969, which requires federal agencies to evaluate the
environmental impacts of their decisions under certain circumstances. The FCC
has issued regulations implementing the National Environmental Policy Act. These
regulations place responsibility on each applicant to investigate any potential

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environmental effects of operations and to disclose any significant effects on
the environment in an environmental assessment prior to constructing a tower. In
the event the FCC determines the proposed tower would have a significant
environmental impact based on the standards the FCC has developed, the FCC would
be required to prepare an environmental impact statement. This process could
significantly delay the registration of a particular tower.

         Environmental Regulation. As an owner and operator of real property, we
are subject to certain environmental laws that impose strict, joint and several
liability for the cleanup of on-site or off-site contamination and related
personal or property damages. We are also subject to certain environmental laws
that govern tower placement, including pre-construction environmental studies.
Operators of towers must also take into consideration certain RF emissions
regulations that impose a variety of procedural and operating requirements. The
potential connection between RF emissions and certain negative health effects,
including some forms of cancer, has been the subject of substantial study by the
scientific community in recent years. To date, the results of these studies have
been inconclusive. We believe that we are in substantial compliance with and we
have no material liability under all applicable environmental laws. These costs
of compliance with existing or future environmental laws and liability related
thereto may have a material adverse effect on our prospects, financial condition
or results of operations. We had no costs from our compliance with these laws
during the past three years.

         State And Local Regulations. Most states regulate certain aspects of
real estate acquisition and leasing activities. Where required, we conduct the
site acquisition portions of our site development services business through
licensed real estate brokers or agents, who may be our employees or hired as
independent contractors. Local regulations include city and other local
ordinances, zoning restrictions and restrictive covenants imposed by community
developers. These regulations vary greatly, but typically require tower owners
to obtain approval from local officials or community standards organizations
prior to tower construction. Local zoning authorities generally have been
hostile to construction of new transmission towers in their communities because
of the height and visibility of the towers.


Item 2. Description of Property.

         MTSI leases our primary office facility in Richardson, Texas from
Preston David Spurlin, our Chief Executive Officer, President, and majority
shareholder. The lease was for an initial three year term that expired 1999,
with a month-to-month renewal thereafter, and has been classified as an
operating lease. Total rent expense associated with this lease was $56,400 for
each of the years ended December 31, 2001 and 2000, respectively.

         MTSI also leases a house from Preston David Spurlin. The house provides
lodging for out-of-town employees and contractors in lieu of incurring hotel and
other travel related charges. The lease began in April 1999 and continues on a
month-to-month basis. Total rent expense associated with this lease was $8,400
for each of the years ended December 31, 2001 and 2000, respectively.

         Epic leases its office facility in Austin, Texas from Ben White
Business Park, LTD. The lease was for an initial two-year term expiring August
31, 2001, with a new lease dated September 1, 2001 through February 28, 2002
which renews March 1, 2002 through August 31, 2002. The lease shall
automatically renew for 6 months unless Epic provides written notice of intent
to vacate 60 days prior to the end of the lease term (Renewal Period). Total

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rent expense associated with this lease was $18,658 and $18,239 for the years
ended December 31, 2001 and 2000, respectively.

         Site leases their office located in Gallatin, Tennessee from Volunteer
Leasing Company. The lease is for an initial three-year term expiring August 31,
2004, with a month-to-month renewal thereafter. Total rent expense associated
with this lease was $9,750 for the year ending December 31, 2001.

         Viper in Ocala, Florida owns its property. Viper in North Carolina
leases its office facility in Concord, North Carolina from Bobby H. Elliott and
Sara C. Elliott. The lease is for an initial two-year term expiring May 1, 2002.
Total rent expense associated with this lease was $25,000 for the year ending
December 31, 2001.

         MTSI owns the property and manufacturing facility located in Melissa,
Texas which serve as the operating headquarters for MTSI's Fabricator RSI.

         CKS owns the property and offices at both locations, one is located in
Jacksonville, Texas and the other in Yukon, Oklahoma.

         Total rental expense for all of our operating leases was $119,763 and
$83,039 for the years ended December 31, 2001 and 2000, respectively.

         We believe that the condition of our lease facilities are excellent,
and are sufficient for our use and operation at our present level of operations.
We believe that these facilities will be sufficient for our operations for the
foreseeable future. In the opinion of our management, these properties are
adequately insured, in good condition and suitable for their anticipated future
use.


Item 3. Legal Proceedings.

         From time to time, we are involved in various legal proceedings
relating to claims arising in the ordinary course of business. We are not
currently a party to any such legal proceedings, the adverse outcome of which,
individually or taken together with all other legal proceedings, is expected to
have a material adverse effect on our prospects, financial condition or result
of operations.


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

         None



                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters.

         Market Information. Our common stock was approved for trading on the
NQB Pink Sheets on March 23, 2000 and the set bid and ask price was $.50.
Following registration of our Common Stock under the Securities Exchange Act of
1934, our stock commenced trading on the Nasdaq OTC Bulletin Board under the
symbol MWVT.OB.

         The following table sets forth the high and low closing prices for the
Company's Common Stock for the periods indicated. Such information was obtained
from Commodity Systems Inc. The quotations represent interdealer quotations
without adjustment for retail markups, markdowns or commissions and may not
represent actual transactions.

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                                                 High             Low
2000                                             ----             ---
Third Quarter                                  $ 1.688          $   .750
Fourth Quarter                                 $ 2.250          $  1.469

2001
First Quarter                                  $ 2.000          $   .516
Second Quarter                                 $ 4.000          $  1.010
Third Quarter                                  $ 3.750          $  1.650
Fourth Quarter                                 $ 2.500          $  1.320


         Holders. As of March 15, 2002, there were a total of 11,828,880 shares
of our common stock outstanding, held by 1,089 shareholders of record.

         Dividends. We have not declared any dividends on our common stock
during the last two fiscal years. Our current lines of credit agreements require
prior written consent for any payment of dividends.

         Issuance of Stock. On August 30, 2001, we issued 5,378,796 shares of
Common Stock in connection with the acquisitions of three business entities.
These shares were issued to six individuals. The issuance of these shares was
exempt from registration under the Securities Act pursuant to Section 4 (2)
thereof as not involving a public offering.


Item 6. Management's Discussion And Analysis Of Financial Condition And Results
Of Operations.

GENERAL

         Most of our revenues, 60% in fiscal 2001, are derived from the
installation of wireless transmission and receiving facilities used by cellular
and PCS telephones. Generally, 15% of our revenues are derived from maintenance
of those and similar facilities and another 15% are derived from fabricating,
grounding, painting facilities and antenna testing. The remaining 10% of our
revenues are derived from the erection of microwave towers.

         In fiscal 2001 we saw two new trends that affected the results of our
operations. An increased portion of our operations came from the build out of
systems of towers in a single geographical location rather than the construction
of one or a few towers in many locations. Where we can concentrate construction
of several towers in a single location, our employees work more efficiently and
our mobilization expenses are reduced. Secondly, our clients have traditionally
provided materials and equipment used for construction projects. Beginning in
late 2000 and continuing through the second quarter of 2001, we began to
purchase these materials and equipment for some of our clients with the result
that the sales of construction materials and equipment have comprised a greater
percentage of net revenues, 15.2% for fiscal year 2001 compared to 5.3% for the
same period in 2000. The effect of these purchases and sales increased our
revenues but offset the gains in margins that we would have otherwise achieved
from our personnel's greater efficiency. This trend diminished significantly in
the fourth quarter of 2001, significantly contributing to the decline in
revenues in the fourth quarter of 2001 when compared to the fourth quarter of
2000.

         On a case-by case basis, we continue to evaluate the ownership and
management of towers used in cellular and PCS communications, but will not
engage in this activity unless the financial return is attractive. We will not
dedicate resources to actively seek these opportunities and will require that
any investment not jeopardize operations or strategic expansion plans.

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Results of Operations

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

         Our net earnings increased 30% to $1,257,837 in 2001 from $971,193 in
2000. Our income before taxes and minority interest increased to $2,557,477 in
2001 from $2,117,695 in fiscal year 2000, an increase of 21%.

         Our revenues in 2001 increased 25%, to $20,412,562 from $16,369,135 in
2000. Most of this increase reflects more sales of materials and equipment
between the comparable periods and an increase in the number of projects
awarded. In addition, the amount of jobs in progress increased from December 31,
2001 to December 31, 2000 by $132,755, or 21%, reflecting projects which we have
started but not completed. Our gross profit for 2001 increased approximately
21%, to $7,759,228, or 38% of revenues, from $6,391,465, or 39% of revenues.

         Operating expenses increased approximately 18% for the year compared to
the same period in 2000, largely reflecting increased general and administrative
expenses of a larger organization, the cost of being publicly held, particularly
the expenses for legal, accounting, other financial professionals, and financing
and merger expenses incurred in the third quarter for the acquisition of three
entities. We believe we can continue to grow our revenue base without a
corresponding percentage increase in operating expenses, resulting in improved
operating leverage and profit margin. For the twelve months ended December 31,
2001, operating expenses to net sales were 25%, compared to 26% for the
comparable period in 2000.

LIQUIDITY AND CAPITAL RESOURCES

         We maintain a line of credit to manage fluctuations in cash flows. At
December 31, 2001, the total borrowing capacity under our line of credit was
$2,550,000. At December 31, 2001, the Company had borrowed $1,910,624 under the
line of credit. We believe that cash flows provided by operations and
availability of the line of credit, supplemented by our cash position, will be
adequate to meet and sustain moderate growth. Management believes that any
growth that cannot be met through internal operations and existing credit
facilities can be met through increasing the line of credit and additional
borrowings for equipment. However, there is no assurance that financing would be
available when and if needed, or that it would be available on suitable terms.

         We do not anticipate becoming significantly involved in a build to suit
program whereby we would construct wireless communications facilities for our
own account. Consequently, we do not presently anticipate incurring the large
capital expenditures such a program would entail.

         We are reviewing the possibility of acquiring other wireless
enterprises and such acquisitions may entail additional capital resources.


Item 7. Financial Statements.

         The response to this item is submitted on a separate section on this
Form 10-KSB.

                                       12
<PAGE>

Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.

         On January 17, 2002, the registrant filed a current report on Form 8-K,
Item 4 regarding the appointment of Grant Thornton LLP as its independent
auditors to replace the firm of King Griffin & Adamson P.C. who was dismissed
contemporaneously therewith. King Griffin & Adamson had submitted a letter to
the Securities & Exchange Commission to the effect that it has no disagreements
with management of the Company related to matters that are material to the
Company's 2000 financial statements.



                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons' Compliance
With Section 16(a) of the Exchange Act.

         The following table sets forth certain information regarding the
Company's directors and executive officers as of March 15, 2002.

Name                    Age        Position

Preston D. Spurlin      42         Chief Executive Officer, President, Director
Susan King              57         Vice President of Finance, Director
David Story             40         Vice President of Operations, Director
Michael D. Sutton       46         Vice President of Field Services, Director
Carl Moore              47         Director
S. Kerry Tassopoulos    44         Director
Lou Strenger            52         Director


         Preston David Spurlin is the founder of MTSI, Inc. and has served as
its Chief Executive Officer, President and Director since its inception in 1987.

         Susan King is the Company's Vice President of Finance, a position she
assumed upon joining the Company in May 1988. Ms. King has more than 35 years
experience in accounting and accounting management and became a director of the
Company in December 2000.

         David Story is a Vice President of Operations for the Company, a
position he assumed upon joining the Company in 1995. Mr. Story became a
director of the Company in December 2000.

         Michael D. Sutton is Vice President of Field Services for the Company,
a position he assumed upon joining the Company in 1987. Mr. Sutton became a
director of the Company in December 2000.

         Carl Moore was a Vice President of Fort Worth Tower prior to its sale
to an investment group in 1997. In 1999 Mr. Moore became president of Fort Worth
Tower after its repurchase. Fort Worth Tower manufactures material used in the
wireless communications industry.

         S. Kerry Tassopoulos is Director of Global Legal Resources for Mary
Kay, Inc., a personal care, cosmetic and vitamin products company. Prior to Mary
Kay, Mr. Tassopoulos served as Director of Government Affairs and Assistant
General Counsel for Excel Communications, a provider of long distance
telecommunications. Mr. Tassopoulos became a director of the Company in December
2000.

                                       13

<PAGE>

         Lou Strenger has been a business and management consultant since 1983
as a principal of ELESCO Financial Services and of Media97. He has consulted or
participated in joint ventures primarily in financial services and media. He has
been a health organization administrator and a hospital authority internal
auditor. Mr. Strenger became a director of the Company in February 2001.

         Committees Of The Board Of Directors. Our Board of Directors has one
committee, an audit committee, which has one member, Lou Strenger. The duties of
the Audit Committee are to recommend to the entire Board of Directors the
selection of independent certified public accountants to perform an audit of the
financial statements of the Company, to review the activities and report of the
independent certified public accountants, and to report the results of such
review to the entire Board of Directors. The Audit Committee also monitors the
internal controls of the Company. All 401K plans will be integrated during
fiscal 2002

     Compliance  with Section 16(a) of the Exchange Act. On November 6, 2001, P.
David  Spurlin  filed a Form 4 reflecting  the  acquisition  by him of 2,017,932
share of Common  Stock  acquired  in  connection  with the  acquisitions  by the
Company of CKS Management,  EPIC  Communications,  and Viper  Communications  on
August 30, 2001.


Item 10. Executive Compensation.

         The information set forth below concerns the cash and non-cash
compensation to the named executive officers of the Company for each of the past
three fiscal years ended December 31, 2001, 2000 and 1999. No executive officer
of the Company has an employment agreement with the Company and all executive
officers serve at the discretion of the Board of Directors.

Summary Compensation Table
     Name and              Fiscal      Annual    Compensation  All Other
Principal Position          Year       Salary       Bonus     Compensation

Preston David Spurlin       2001      $115,013     $4,952       $17,995
Chief Executive Officer     2000       114,123      2,054        17,426
                            1999       108,056      1,956        21,689
David Story                 2001       102,537      9,094        16,745
Vice-President              2000       101,743      5,369        16,067
                            1999        75,871      8,146        12,603
Mike Sutton                 2001        95,200      2,656        14,678
Vice President              2000        78,037      3,785        10,679
                            1999        67,947      3,244        21,689
Susan King                  2001        81,701     11,830        14,030
Vice-President/Secretary    2000        87,148      3,060        13,531
                            1999        65,249      4,268        10,428

(1)      Included in Other Compensation is premium paid on term life insurance
         policies on behalf of Preston David Spurlin and employer contributions
         under the Profit Sharing Plan described below.
(2)      Included in Other Compensation are employer's contributions under
         MTSI's Profit Sharing Plan.
(3)      Included in Other Compensation are director's fees of $4,000.

                                       14

<PAGE>

         Employee Benefit Plan. We offer a profit-sharing plan, the Microwave
Transmission Systems, Inc. Profit Sharing Plan, which covers all of our
employees and all employees of MTSI who have attained age 18 or older and have
at least six months of service with us as of the semi-annual Plan entrance
dates. We make non-matching contributions at the discretion of the Plan's
Trustees with the exception of CKS Employees. CKS did not make a non-matching
contribution for 2001. Employees' profit sharing accounts are fully vested after
seven years. In accordance with the Profit Sharing Plan provisions, we cover all
costs associated with the administration of the Profit Sharing Plan. Employer
discretionary contributions for the years ended December 31, 2001 and 2000 were
$572,446 and $544,704, respectively. All 401K plans will be integrated in 2002.

Stock Option Grants

     On November 20, 2001,  the Company  granted  options for a total of 515,000
shares of Common Stock. The following table summarized  options received for the
indicated individuals during fiscal 2001.

Name                    Number of       % of      Exercise      Expiration
                        Shares          Total     Price         Date
Mike Sutton             28,000          5.4       $1.32         11/20/11
Susan King              26,000          5.0       $1.32         11/20/11
David Story             16,000          3.1       $1.32         11/20/11
                                       15
<PAGE>

Item 11. Security Ownership of Certain Beneficial Owners and Management.

         At March 15, 2002, we had issued and outstanding 11,828,880 shares of
common stock. The table below sets forth, as of March 15, 2002, certain
information with respect to the beneficial ownership of our capital stock by (1)
each person who we know to be beneficial owner of more than 5% of any class or
series of our capital stock; (2) each of the directors and executive officers
individually and (3) all directors and executive officers as a group.

Name and Address of             Number of              Percent
   Beneficial Owner           Shares Owned               Owned

P. David Spurlin(1)             7,767,940                 66%

Susan King(1)                      17,550                  1%

David Story(1)                     13,200                  1%

Michael Sutton(1)                   5,000                  0%

James A. Conant, Jr.              916,670                  8%

Donald D. Jones                   916,670                  8%

Dwayne Griffin                    674,997                  6%

Carl Moore                          2,000                  0%
4104 Flower Garden
Arlington, TX 76016

S. Kerry Tassopoulos                 -                     0%
8750 N. Central Expwy, #2000
Dallas, TX 75231

Lou Strenger                          500                  0%
P.O Box 515922
Dallas, TX 75251

All executive directors
and officers as a group
(Seven people)                  7,806,190                 66%


(1) The address of the indicated individual is 541 Sterling Drive, Richardson,
TX 75081


Item 12. Certain Relationships and Related Transactions.

         The Company maintains a line of credit for $2,550,000 with a bank, and
borrowings under that line of credit are guaranteed by Mr. Spurlin.

         We have a note receivable from Mr. Spurlin which totaled $0 and
$257,561 at December 31, 2001 and 2000, respectively. Interest on the loan is
charged at 6% per annum and is paid monthly. The loan was repaid in full in
2001.

         We lease our office facility from Mr. Spurlin. The facility is leased
on a month-to-month basis, and has been classified as an operating lease. Total

                                       16

<PAGE>

rent expense associated with this lease was $56,400 for each of the years ended
December 31, 2001 and 2000.

         We also lease a house from Mr. Spurlin. The house provides lodging for
out-of-town employees and contractors in lieu of the Company incurring hotel and
other travel related charges. The lease began in April 1999 and continues on a
month-to-month basis. Total rent expense associated with this lease was $8,400
for each of the years ended December 31, 2001 and 2000, respectively.

         On August 30, 2001, we acquired three companies, each of which Mr.
Spurlin was a stockholder. In connection with these acquisitions, we issued
2,017,932 shares of Common Stock to Mr. Spurlin and paid him $894,975.

         Total rental expense for operating leases was $64,800 for each of the
years ended December 31, 2001 and 2000.


Item 13. Exhibits and Reports on Form 8-K.

(a)      Reports filed on Form 8-K

         Form 8-K dated January 17, 2002, Item 4 relating to the appointment of
         new auditors.

         Forms 8-K dated August 30, 2001, and as amended November 13, 2001, Item
         2 relating to the acquisition via merger of CKS Management, Inc., Viper
         Communication Systems, Inc. and Epic Communications, Inc.

         Form 8-K dated May 17, 2001, Item 5 relating to a press release
         announcing the execution of letters of intent to acquire CKS
         Management, Inc., Viper Communication Systems, Inc. and Epic
         Communications, Inc.

(b)      Exhibits

2.2.1    Agreement and Plan of Merger dated August 19,2001 regarding CKS
         Management, Inc.

2.2.2    Agreement and Plan of Merger dated August 19,2001 regarding Viper
         Communication Systems, Inc.

2.2.3    Agreement and Plan to Merger dated August 19, 2001 regarding Epic
         Communications, Inc.

3.1      Articles of Incorporation of Microwave Transmission Systems, Inc. (with
         amendments).*

3.2      Restated Bylaws of Microwave Transmission Systems, Inc.*

6.1      Stock Exchange Agreement by and among Microwave Transmission Systems,
         Inc., the Sole Shareholder of Microwave Transmission Systems, Inc., RBS
         Acquisition Corp., and Halter Financial Group, Inc. dated August 6,
         1999.*

6.2      Consulting Agreement by and between Microwave Transmission Systems,
         Inc. and Halter Financial Group, Inc. dated July 29, 1999.*

6.3      Commercial Lease Agreement dated January 17, 1996 by and between
         Microwave Transmission Systems, Inc. (now MTSI, Inc.) and P. David
         Spurlin.*

6.4      Lease Agreement dated April 1, 1999 by and between Microwave
         Transmission Systems, Inc. (now MTSI, Inc.) and P. David Spurlin.*

*Previously filed.


                                       17
<PAGE>

                      Consolidated Financial Statements and
               Report of Independent Certified Public Accountants


                      MICROWAVE TRANSMISSION SYSTEMS, INC.
                                AND SUBSIDIARIES


                           December 31, 2001 and 2000





                      MICROWAVE TRANSMISSION SYSTEMS, INC.
                                AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



                                                                           Page
                                                                           ----
Report of Independent Certified Public Accountants..........................21

Consolidated Financial Statements

   Consolidated Balance Sheets at December 31, 2001 and 2000................23

   Consolidated Statements of Income for the years ended
        December 31, 2001 and 2000..........................................25

   Consolidated Statement of Shareholders'
        Equity for the years ended December 31, 2001 and 2000...............26

   Consolidated Statements of Cash Flows for the years
        ended December 31, 2001 and 2000....................................27

   Notes to Consolidated Financial Statements...............................29






                                       18
<PAGE>



               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



To the Board of Directors and Shareholders of
Microwave Transmission Systems, Inc.

We have audited the accompanying consolidated balance sheet of Microwave
Transmission Systems, Inc. and Subsidiaries as of December 31, 2001, and the
related consolidated statements of income, shareholders' equity, and cash flows
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Microwave
Transmission Systems, Inc. and Subsidiaries as of December 31, 2001, and the
results of their consolidated operations and their consolidated cash flows for
the year then ended, in conformity with accounting principles generally accepted
in the United States of America.



                                         GRANT THORNTON LLP


Dallas, Texas
March 22, 2002
















                                       19
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



To the Board of Directors and Shareholders of
Microwave Transmission Systems, Inc.

We have audited the accompanying consolidated balance sheet of Microwave
Transmission Systems, Inc. and Subsidiaries as of December 31, 2000, and the
related consolidated statements of income, shareholders' equity, and cash flows
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Microwave
Transmission Systems, Inc. and Subsidiaries as of December 31, 2000, and the
results of their consolidated operations and their consolidated cash flows for
the year then ended, in conformity with accounting principles generally accepted
in the United States of America.




                                         KING GRIFFIN & ADAMSON P.C.


Dallas, Texas
March 20, 2002






                                       20
<PAGE>

                      MICROWAVE TRANSMISSION SYSTEMS, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2001 and 2000


                                                        ASSETS


                                                           2001          2000
                                                        -----------   ----------
Current assets

    Cash and cash equivalents                          $   404,388   $  150,862
    Marketable securities                                   20,702        1,634
    Accounts receivable - trade, net of allowance
     for doubtful accounts of $33,844 and $35,174
     in 2001 and 2000, respectively                      4,376,465    3,522,093
    Unbilled receivables                                   201,353      319,802
    Jobs in progress                                       565,952      314,748
    Inventory                                              349,222        5,937
    Prepaid and other current assets                       154,709      122,139
                                                       -----------   ----------


      Total current assets                               6,072,791    4,437,215


PROPERTY AND EQUIPMENT                                   4,535,553    2,982,427
    Less accumulated depreciation                       (1,043,805)  (1,010,639)
                                                       -----------   -----------
      Net property and equipment                         3,491,748    1,971,788

OTHER ASSETS
    Goodwill                                             5,082,183           --
    Notes receivable                                           166      264,061
    Other assets                                            26,771           --
                                                       -----------   -----------


         Total other assets                              5,109,120      264,061
                                                       -----------   -----------

            Total assets                               $14,673,659   $6,673,064
                                                       ===========   ==========



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


                                       21
<PAGE>

                      MICROWAVE TRANSMISSION SYSTEMS, INC.
                                AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS (Continued)
                           December 31, 2001 and 2000



                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      -------------------------------------

                                                         2001             2000
                                                      -----------      --------
Current liabilities

    Borrowings on line of credit                     $   300,000     $  475,653
    Current portion of long-term debt                    483,166        225,786
    Accounts payable                                     766,090        241,181
      Accrued liabilities                                915,572        721,976
      Income taxes payable                               752,780        638,912
    Deferred income tax liability                        732,438        550,328
                                                     ----------       ---------

                  Total current liabilities            3,950,046      2,853,836

    Income taxes payable                                      --        249,602
    Deferred income tax liability                             --         21,282
    Long-term debt, less current portion               3,042,616        166,429
                                                     -----------      ---------
            Total long-term liabilities                3,042,616        437,313

    Minority interest in consolidated subsidiaries            --        770,612

Shareholders' equity

    Preferred stock, $0.001 par value; 10,000,000
    shares authorized; none issued or outstanding             --             --
    Common stock $0.001 par value; 40,000,000 shares
    authorized; 11,828,880 and 8,358,016 shares
    issued and outstanding, respectively                  11,829          8,358
    Additional paid-in capital                         4,773,525         72,960
    Accumulated other comprehensive income (loss)          1,430         (1,366)
    Retained earnings                                  2,894,213      2,531,351
                                                     -----------     -----------
         Total shareholders' equity                    7,680,997      2,611,303
                                                     -----------     -----------
         Total liabilities and shareholders' equity  $14,673,659     $6,673,064
                                                     ===========     ===========



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


                                       22
<PAGE>

                      MICROWAVE TRANSMISSION SYSTEMS, INC.
                                AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME
                 For the Years Ended December 31, 2001 and 2000



                                                         2001            2000
                                                      -----------    -----------

Net sales                                            $20,412,562    $16,369,135
Cost of sales                                         12,653,334      9,977,670
                                                      -----------    -----------
         Gross profit                                  7,759,228      6,391,465

General and administrative expenses                    5,016,564      4,240,044
                                                      -----------    -----------

         Operating income                              2,742,664      2,151,421

Merger costs                                              72,555             --
Interest expense, net                                    112,632         33,726
                                                      -----------    -----------
         Income before income taxes
           and minority interest                       2,557,477      2,117,695

Provision for income taxes                               955,555        810,382
                                                      ------------   -----------

         Income before minority interest               1,601,922      1,307,313

Minority interest                                       (344,085)      (336,120)
                                                        ----------   -----------
            Net income                                $1,257,837    $   971,193
                                                      ==========    ============

Net income per common share - basic and diluted       $     0.13    $     0.12
                                                      ==========    ============

Weighted average number of common shares outstanding
  Basic                                                9,555,542      8,293,877

  Diluted                                              9,560,352      8,293,877







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


                                       23
<PAGE>

                      MICROWAVE TRANSMISSION SYSTEMS, INC.
                                AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                 For the Years Ended December 31, 2001 and 2000
<TABLE>
<CAPTION>
                                                           Additional           Other
                                      Common Stock          Paid-in             Comprehensive       Retained
                                     Shares     Amount      Capital             Income (loss)       Earnings         Total
                                   ---------    -------   -----------           -------------       ----------      ------------
Balances at
<S>                                <C>          <C>       <C>                   <C>                 <C>              <C>
January 1, 2000                    8,268,016    $ 8,268   $   (5,250)           $    -              $1,560,158       $1,563,176
  (restated - see
  Note 3)
Unrealized loss
on marketable
securities                              -          -            -               (1,366)                   -              (1,366)

Net income                              -          -            -                    -                 971,193          971,193
Comprehensive income                                                                                                 ----------
                                                                                                                        969,827

Issuance of common stock
to employees for
compensation
                                      90,000         90       78,210                 -                    -              78,300
                                  ----------    -------   ----------            -------             ----------       ----------
Balances at
December 31,2000                   8,358,016      8,358       72,960            (1,366)              2,531,351        2,611,303

Unrealized gain on
marketable securities
                                        -          -            -                2,796                    -               2,796
Net income                              -          -            -                    -               1,257,837        1,257,837
Comprehensive income                                                                                                 ----------
                                                                                                                      1,260,633

Cash payments for the
interests of P. David
Spurlin in businesses
acquired
                                        -          -            -                    -                (894,975)        (894,975)

Acquisition of minority
interests in subsidiaries

                                   3,360,864      3,361    4,903,501                 -                    -           4,906,862

Subsidiaries' capital
changes                                 -          -        (285,326)                -                    -            (285,326)

Issuance of common stock
to employees for
compensation
                                      10,000         10        7,490                 -                    -               7,500

Purchase of land                     100,000        100       74,900                                                     75,000
                                  ----------    -------   ----------            -------             ----------       ----------
Balances at December 31,
2001                              11,828,880    $11,829   $4,773,525            $1,430              $2,894,213       $7,680,997
                                  ==========    =======   ==========            ======              ==========       ==========
</TABLE>

The accompanying notes are an integral part of this consolidated financial
statement.
                                       24
<PAGE>

                      MICROWAVE TRANSMISSION SYSTEMS, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 For the Years Ended December 31, 2001 and 2000



                                                           2001          2000
                                                       ----------     ----------
Cash flows from operating activities

Net income                                             $1,257,837  $  971,193
    Adjustments to reconcile net income to net cash
      provided by operating activities:
      Minority interest                                   344,085     336,120
         Depreciation and amortization                    602,016     340,434
         Loss (gain) on disposal or sale of
            property and equipment                         20,044     (68,089)
         Common stock issued as compensation                7,500      78,300
         Deferred income taxes                            160,828     (37,999)
         Provision for doubtful accounts                   (2,648)     35,174
         Other                                             46,644          -
      Changes in operating assets and liabilities:
        Accounts receivable - trade                      (872,426)   (958,760)
            Unbilled receivables                          118,449    (319,802)
            Jobs in progress                             (251,204)       (858)
        Inventory                                        (343,285)     (5,937)
        Prepaid and other current assets                   23,899     (40,005)
        Accounts payable                                  524,909     122,073
        Accrued liabilities                               193,596     189,149
        Income taxes payable                             (135,734)    573,454
                                                       ----------   ---------

         Cash flows provided by operating activities:   1,694,510   1,214,447

Cash flows from investing activities

    Purchase of minority interest                      (1,619,193)         -
    Purchases of property and equipment                (1,742,814)   (977,004)
    Proceeds from sales of property and equipment          45,094      95,193
    Issuance of notes receivable                           (7,558)   (155,655)
    Payments received on notes receivable                 271,453      74,104
    Purchase of marketable securities                         -       (80,000)
    Proceeds from sales of marketable securities            1,634      77,000
                                                       ----------   ---------

         Cash flows used in investing activities       (3,051,384)   (966,362)



                                       25
<PAGE>

                      MICROWAVE TRANSMISSION SYSTEMS, INC.
                                AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                 For the Years Ended December 31, 2001 and 2000



                                                        2001             2000
                                                    -----------       ----------
Cash flows from financing activities

    Proceeds from line of credit, net                $1,542,432       $ 781,448
    Payments on line of credit                         (200,000)       (706,601)
    Payments on long-term debt                             -           (267,895)
    Proceeds from long-term debt, net                 1,162,943          33,247
    Purchase of interest of controlling
      shareholder in acquired businesses               (894,975)           -
                                                     -----------      ---------

      Cash flows provided by (used in)
         financing activities                        $1,610,400       $(159,801)

Net increase in cash and cash equivalents               253,526          88,284
Cash and cash equivalents, beginning of year            150,862          62,578
                                                     ----------       ---------
Cash and cash equivalents, end of year               $  404,388       $ 150,862


Supplemental disclosures for cash flow  information:

Cash paid during the year for:

   Interest                                          $  100,911       $  49,585
                                                     =========        =========
   Income taxes                                      $  587,400       $ 265,764
                                                     =========        =========

Noncash investing and financing activities:

   Common stock issued:
     Purchase of minority interests                  $4,906,862            -
     Purchase of property                                75,000            -

   Purchase of property financed by debt                360,000            -











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

                                       26
<PAGE>

                      MICROWAVE TRANSMISSION SYSTEMS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 For the Years Ended December 31, 2001 and 2000


1.       NATURE OF OPERATIONS

         Microwave Transmission Systems, Inc. (the "Company" or "MTSI"), is a
         Texas corporation formed on August 7, 1987. The Company's principal
         business is the construction and maintenance of wireless communications
         transmitting and receiving facilities for providers of wireless
         communication services. MTSI operates primarily in the United States
         and is based in Richardson, Texas.


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Principles of Consolidation

         The accompanying consolidated financial statements include the accounts
         of Microwave Transmission Systems, Inc. and its wholly-owned
         subsidiaries, MTSI Inc., CKS Management Inc., Epic Communications Inc.,
         Site Communications Inc. and Viper Communication Systems Inc. All
         significant intercompany transactions and balances have been eliminated
         in consolidation.

         Cash and Cash Equivalents

         For purposes of the statement of cash flows, the Company considers all
         highly liquid investments purchased with an original maturity of three
         months or less to be cash equivalents.

         Marketable Securities

         Marketable equity securities are classified as available for sale and
         are carried at market value. Unrealized holding gains and losses are
         reported as a separate component of shareholders' equity until
         realized. Realized gains and losses on the sales of investments are
         based upon the specific identification method and are included in the
         statement of income.

         Accounts Receivable

         The Company extends unsecured credit in the normal course of business
         to virtually all of its customers. Management has provided an allowance
         for doubtful accounts which reflects its opinion of amounts which may
         ultimately become uncollectible. In the event of non-performance of
         accounts receivable, the maximum exposure to the Company is the
         recorded amount shown on the balance sheet.

         Fair Value of Financial Instruments

         The carrying values of cash, cash equivalents, marketable securities
         and debt approximate fair value.


                                       27
<PAGE>


                      MICROWAVE TRANSMISSION SYSTEMS, INC.
                                AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                 For the Years Ended December 31, 2001 and 2000


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Inventory

         Inventory, which consists primarily of materials used in the
         construction and maintenance of wireless transmitting facilities, are
         valued using the lower of cost or market on a specific identification
         basis.

         Property and Equipment

         Property and equipment are carried at cost. Expenditures for
         maintenance and repairs are charged directly against income. Major
         renewals and betterments are capitalized.

         Depreciation of property and equipment is calculated on the
         straight-line method over the estimated useful life of the asset, with
         useful lives ranging from 3 to 40 years. Leasehold improvements are
         amortized by the straight-line method over the shorter of the lease
         term or estimated useful life of the asset.

         Income Taxes

         The Company provides for income taxes under the asset and liability
         method. This method requires that deferred tax assets and liabilities
         be recognized for the future tax consequences attributable to
         differences between the financial statement carrying amounts of
         existing assets and liabilities and their respective tax bases.
         Deferred tax assets and liabilities are measured using enacted tax
         rates expected to apply to taxable income in the years in which those
         temporary differences are expected to be recovered or settled. The
         effect on deferred tax assets and liabilities of a change in tax rates
         is recognized in income in the period that includes the enactment date.

         Goodwill

         Goodwill, all of which relates to acquisitions made in August 2001, is
         not being amortized pursuant to the requirements of Statement of
         Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other
         Intangible Assets". The Company evaluates goodwill and other long-lived
         assets for impairment whenever events or changes in circumstances
         indicate that the carrying amounts may not be recoverable, as required
         by SFAS No. 121. Impairment is recognized when the carrying amounts of
         such assets cannot be recovered from the undiscounted cash flows they
         will generate.

         Beginning January 1, 2002, SFAS No. 142 requires goodwill be tested for
         impairment annually and whenever there is an impairment indicator.
         Impairment will be recognized if the fair value of goodwill is less
         than the carrying amount.


                                       28

<PAGE>

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Minority Interest in Consolidated Subsidiaries

         Minority interest in results of operations of consolidated subsidiaries
         represents the minority shareholders' share of the income of various
         subsidiaries. The minority interest in the consolidated balance sheets
         reflects the original investment by the minority shareholders in the
         consolidated subsidiaries, along with their proportional share of the
         earnings of these subsidiaries.

         Revenue Recognition

         The Company uses the completed contract method of revenue recognition
         since all of its current contracts are of a short-term nature. Under
         this method, revenue and its related expenses are not recognized until
         a project, or a significant phase of the project, is completed. Costs
         incurred, which primarily consist of labor and materials, on
         uncompleted projects are capitalized as jobs in progress. Provisions
         for estimated losses on uncompleted contracts are made in the period in
         which such losses are determined. Amounts not yet billed for completed
         contracts are recorded as unbilled receivables.

         Comprehensive Income

         Comprehensive income (loss) consists of unrealized gains or losses on
         available-for-sale securities.

         Income Per Common Share

         Basic income per share is computed by dividing income available to
         common shareholders by the weighted-average number of common shares
         outstanding during the year. Diluted earnings per common share is
         computed by dividing income available to common shareholders by the
         weighted-average number of common shares outstanding plus the number of
         additional shares that would have been outstanding if potentially
         dilutive securities had been converted. A reconciliation of the
         denominators of the basic and diluted net income per share computations
         for 2001 and 2000 follows:
<TABLE>
<CAPTION>

                                                                                           2001               2000
              Weighted average number of common shares                                  ---------           ---------
<S>                                                                                     <C>                 <C>
                  outstanding                                                           9,555,542           8,293,877
              Effect of dilutive options                                                    4,810                -
                                                                                        ---------           ---------
              Weighted average number of common shares
                  outstanding, assuming dilution                                        9,560,352           8,293,877
                                                                                        =========           =========
</TABLE>


                                       29

<PAGE>

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Use of Estimates

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

         Reclassifications

         Certain 2000 amounts have been reclassified to conform with 2001
         presentation.

         New Accounting Pronouncements

         In July 2001, the Financial Accounting Standards Board issued SFAS No.
         141, "Business Combinations" and SFAS No. 142, "Goodwill and Intangible
         Assets." SFAS No. 141 is effective for all business combinations
         completed after June 30, 2001. SFAS No. 142 is effective for fiscal
         years beginning after December 15, 2001; however, certain provisions of
         this Statement apply to goodwill and other intangible assets acquired
         between July 1, 2001 and the effective date of SFAS No. 142.

         Major provisions of these statements and their effective dates are as
         follows:

         o intangible assets acquired in a business combination must be recorded
           separately from goodwill if they arise from contractual or other
           legal rights or are separable from the acquired entity;

         o goodwill, as well as intangible assets with indefinite lives,
           acquired after June 30, 2001, will not be amortized;

         o effective January 1, 2002, all previously recognized goodwill and
           intangible assets with indefinite lives will no longer be subject to
           amortization;

         o effective January 1, 2002, goodwill and intangible assets with
           indefinite lives will be tested for impairment annually and whenever
           there is an impairment indicator.

         The Company intends to complete a transitional fair value based
         impairment test of goodwill as of January 1, 2002 by June 30, 2002.
         Impairment losses, if any, resulting from the transitional testing will
         be recognized in the quarter ended March 31, 2002, as a cumulative
         effect of a change in accounting principle.

                                       30

<PAGE>

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         In August 2001, the Financial Accounting Standards Board issued SFAS
         No. 144 "Accounting for Impairment or Disposal of Long-Lived Assets."
         SFAS No. 144 addresses financial accounting and reporting for the
         impairment or disposal of long-lived assets. This statement is
         effective for fiscal years beginning after December 15, 2001. The
         Company does not believe that the implementation of this standard will
         have a material effect on its financial position, or results of
         operations.

         Advertising

         The cost of advertising is expensed as incurred. Total advertising
         expense was $159,059 and $104,633 in 2001 and 2000, respectively.

3.       ACQUISITIONS

         On August 30, 2001, the Company closed the acquisitions via merger of
         CKS Management, Inc. (CKS), Viper Communication Systems, Inc. (Viper),
         and Epic Communications Inc., (Epic), three Texas corporations engaged
         in the same business as the Company of constructing and maintaining
         wireless communications transmitting and receiving facilities for
         providers of wireless communication services (the "Acquired
         Businesses"). The transactions were structured as mergers of the
         Acquired Businesses into three wholly-owned subsidiaries of the Company
         formed for the purpose of effecting the mergers. The Acquired
         Businesses will continue to operate as separate subsidiaries.
         Consideration for the mergers consisted of 5,378,796 shares of the
         Company's common stock, valued at $7,853,043, and cash in the amount of
         $2,514,168. Such cash was obtained from the proceeds of a bank loan. Of
         such consideration, 2,017,932 shares of common stock were issued, and
         $894,975 of the cash was paid, to P. David Spurlin, the Chief Executive
         Officer and the controlling shareholder of the Company.

         All of the Acquired Businesses were under the control of P. David
         Spurlin. Therefore, the portion of Acquired Businesses that was
         acquired from Mr. Spurlin has been recorded at historical cost. The
         cash consideration paid for Mr. Spurlin's interest has been reflected
         as a dividend in the consolidated financial statements. Financial
         statements for periods prior to the mergers have been restated to
         combine the Company and the Acquired Businesses in a manner similar to
         a pooling of interests. Accordingly, shareholders' equity at January 1,
         2000 has been increased from the amount previously reported by
         $452,225.
                                       31

<PAGE>

ACQUISITIONS - Continued

         The separate sales and net income of the Company and the Acquired
         Businesses for periods prior to the merger are as follows:
<TABLE>
<CAPTION>
                                                                              Eight months
                                                                                 ended                Year ended
                                                                               August 30,             December 31,
                                                                                 2001                  2000
                                                                              -------------          ------------
                                                                               (Unaudited)

         Sales:
<S>                                                                             <C>                  <C>
              Company                                                           $ 7,894,386          $  8,147,734
              Acquired businesses                                                 6,996,058             9,505,715
              Intercompany transactions                                          (1,981,744)           (1,284,314)
                                                                                -----------          ------------
                  Combined                                                      $12,908,700          $ 16,369,135
                                                                                ===========          ============
         Net income:
              Company                                                           $   293,027          $    621,353
              Acquired businesses                                                   700,949               685,960
              Minority interest                                                    (344,085)             (336,120)
                                                                                -----------          ------------
                  Combined                                                      $   649,891          $    971,193
                                                                                ===========          ============
</TABLE>

         The portion of the Acquired Businesses purchased from non-controlling
         interests was accounted for by the purchase method of accounting. For
         periods prior to August 30, 2001, the acquisition date, the
         non-controlling interests have been reflected as Minority Interests in
         the Company's financial statements. The purchase of the non-controlling
         interests resulted in goodwill in the amount of $5,082,183. The Company
         has no tax basis in the goodwill.

         The amounts and components of the purchase price along with the
         allocation of the purchase price to the interests acquired from
         non-controlling shareholders of the Acquired Businesses are as follows:
<TABLE>
<CAPTION>

                                                             CKS            Epic          Viper          Total
                                                         ---------      ----------      ----------      --------
         Consideration

<S>                                                     <C>             <C>             <C>              <C>
           Cash                                         $  600,000      $  170,758      $  848,435       $ 1,619,193
           Stock                                         1,244,694         985,500       2,676,668         4,906,862
                                                        ----------      ----------      ----------       -----------
              Total consideration                        1,844,694       1,156,258       3,525,103         6,526,055

         Fair value of non-controlling
           interests                                       601,687         177,212         664,973         1,443,872
                                                        ----------      ----------      ----------       -----------
         Goodwill recorded in purchase
           of non-controlling interests                 $1,243,007      $  979,046      $2,860,130       $ 5,082,183
                                                        ==========      ==========      ==========       ===========
</TABLE>

                                       32

<PAGE>

4.       NOTES RECEIVABLE - RELATED PARTIES

         The Company had a note receivable from an officer of $257,561 at
         December 31, 2000. Interest on the loan was charged at 6% per annum.
         The loan was repaid in full during 2001. Interest on the note was
         $7,558 and $13,419 for the years ended 2001 and 2000, respectively.


5.       PROPERTY AND EQUIPMENT

         Property and equipment consists of the following at December 31, 2001
         and 2000.

                                                   2001             2000
                                                ----------        ----------

         Buildings and improvements            $  610,130        $  316,133
         Land                                     460,069           104,280
         Tower                                     68,699                 -
         Leasehold improvements                   146,765            94,031
         Furniture and fixtures                   182,671           141,676
         Production equipment                     918,880           616,220
         Trailers                                 106,334            84,521
         Vehicles                               2,042,005         1,625,566
                                               ----------        ----------
                                                4,535,553         2,982,427
           Less accumulated depreciation
             and amortization.                 (1,043,805)       (1,010,639)
                                               ----------        ----------
                                               $3,491,748        $1,971,788
                                               ==========        ==========

6.       LINE OF CREDIT

         At December 31, 2001 and 2000, the Company had $300,000 and $475,653
         outstanding under credit with a bank payable upon demand. Upon the line
         of credit terms, the Company may borrow up to $500,000 or up to a
         percentage of the borrowing base (as defined). The line of credit is
         collateralized by accounts receivable, inventory and other tangible
         assets.


                                       33

<PAGE>

7.       LONG-TERM DEBT
         Long-term debt at December 31, 2001 and 2000 consists of the following:
<TABLE>
<CAPTION>


                                                                                   2001            2000
                                                                                -----------     -----------

            $2,550,000 revolving credit facility with a bank maturing
                  on August 31, 2003.  Interest is payable monthly at
                  the bank's prime rate plus 0.5% (5.25% at December
                  31, 2001).  The revolving credit facility is
                  collateralized by substantially all of the
                  Company's tangible assets and guaranteed by the
                  majority shareholder, P. David Spurlin. The credit
                  agreement contains certain cash flow and tangible
<S>                                                                             <C>             <C>
                  net worth covenants.                                          $1,610,624      $    -

            Term loan agreement with a bank that
               matures in August 2006. Interest is
               payable at the bank's prime rate
               (4.75% at December 31, 2001). The
               debt is collateralized by
               substantially all tangible assets
               of the Company.                                                   1,050,329            -

            Installment note agreement with a bank.
               The note matures in June 2007 and
               has an interest rate of 7.98%.  The
               note is payable monthly in interest
               only payments of $2,394 through June
               2002, principal and interest payments
               of $3,288 through June 2007 and a
               balloon payment of $294,346 in June
               2007. The note is collateralized by
               real property and the personal
               guarantee of the majority shareholder.                              360,000            -

            Borrowings under financing agreements,
               interest from 0% to 5.25%,
               collateralized by vehicles, due in
               installments through July 2005.                                     504,829         392,215
                                                                                -----------     ----------
                                                                                 3,525,782         392,215
               Less current portion                                               (483,166)       (225,786)
                                                                                -----------     ----------

                                                                                $3,042,616      $  166,429
                                                                                ===========     ==========
</TABLE>
                                       34

<PAGE>

7.       LONG-TERM DEBT (Continued)

     At December 31, 2001, scheduled maturities of long-term debt are as
     follows:
                2002                    $   483,166
                2003                      1,980,842
                2004                        339,132
                2005                        235,467
                2006                        185,031
                Thereafter                  302,144
                                        -----------
                                        $ 3,525,782
                                        ===========


8.       INCOME TAXES

         Deferred tax assets (liabilities) are comprised of the following at
         December 31, 2001:

                                                 2001             2000
                                             -----------      ------------

    Deferred tax assets
       Accounts payable and accrued
          liabilities                       $   77,269        $  162,808
       Property and equipment                       -              1,811
       Other                                    20,215              -
                                            ----------        ----------
          Total deferred tax assets             97,484           164,619

   Deferred tax liabilities
      Accounts receivable                     (783,433)         (639,728)
      Jobs in progress                         (27,025)          (73,408)
      Property and equipment                   (19,464)          (23,093)
                                            ----------        ----------
          Total deferred tax liabilities      (829,922)         (736,229)
                                            ----------        ----------
          Net deferred tax liability        $ (732,438)       $ (571,610)
                                            ==========        ==========


                                       35

<PAGE>

8.       INCOME TAXES (Continued)

         Deferred tax assets and liabilities included in the balance sheets are
         as follows at December 31, 2001 and 2000:

                                                     2001              2000
                                                  ---------         ----------

          Net current deferred tax liability      $(732,438)          (550,328)

          Net non-current deferred tax liability        -              (21,282)
                                                  ---------         ----------

          Net deferred tax liability              $(732,438)        $ (571,610)
                                                  =========         ==========



         The components of income tax expense for the years ended December 31,
         2001 and 2000 are as follows:

                                                         2001           2000
                                                    ------------     ----------
          Federal:
             Current                                  $ 729,820      $ 792,033
             Deferred                                   160,828        (31,498)
                                                      ---------      ---------
                                                        890,648        760,535

          State                                          64,907         49,847
                                                      ---------      ---------
          Total                                       $ 955,555      $ 810,382
                                                      =========      =========

         The effective income tax rate for the years ended December 31, 2001 and
         2000 varied from the statutory rate due to the following:

         Income tax expense at statutory rate           34.0%             34.0%
         State taxes, net of federal benefit             1.7               0.5
         Other                                           1.7               3.8
                                                       ------            ------
                                                        37.4%             38.3%
                                                       ======            ======


                                       36

<PAGE>

9.       LEASES

         The Company leases one of its office facilities from the president and
         majority shareholder of the Company. The facility is leased on a
         month-to-month basis, and has been classified as an operating lease.
         Total rent expense associated with this lease was $56,400 for each of
         the years ended December 31, 2001 and 2000.

         The Company also leases a house from the president and majority
         shareholder. The house provides lodging for out-of-town employees and
         contractors in lieu of the Company incurring hotel and other travel
         related charges. The lease began in April 1999 and continues on a month
         -to-month basis. Total rent expense associated with this lease was
         $8,400 and $11,900 for the years ended December 31, 2001 and 2000,
         respectively.

         The Company leases other office facilities under noncancellable leases
         expiring through August 2004. The future minimum lease payments are as
         follows:

            Years ending
            December 31,
            -------------
                2002                                  $48,340
                2003                                   23,400
                2004                                   15,600
                                                      -------
                                                      $87,340
                                                      =======

         Total rent expense was approximately $119,763 and $83,039 in 2001 and
         2000, respectively.

10.      EMPLOYEE PROFIT SHARING PLAN

         The Company offers a profit sharing plan, Microwave Transmission
         Systems, Inc. Profit Sharing Plan ("Plan"), which covers all employees
         of the Company who have attained age 18 and six months of service with
         the Company as of the semi-annual Plan entrance dates. The Company
         makes non- matching contributions at the discretion of the Plan's
         trustees. Employees' profit sharing accounts are fully vested after
         seven years. In accordance with the Plan provisions, the Company covers
         all costs associated with the administration of the Plan. Employer
         discretionary contributions for the years ended December 31, 2001 and
         2000 were $572,446 and $544,704, respectively.

                                       37

<PAGE>

11.      RELATED PARTY TRANSACTIONS

         As described in Note 3, the Company completed in 2001 the acquisition
         of three companies in which the majority shareholder of MTSI had a
         controlling interest.

         As described in Note 4, the Company had a note receivable from an
         officer at December 31, 2000.

         As discussed in Note 9, the Company leases real estate from the
         president and majority shareholder of the Company.


12.      BUSINESS AND CREDIT CONCENTRATIONS

         During the year ended December 31, 2000, sales to two customers
         comprised 27% and 19% of total revenue. During the year ended December
         31, 2001, sales to two customers comprised 24% each of total revenue.

         At December 31, 2000, four customers accounted for 10%, 10%, 11%, and
         20% of accounts receivable. At December 31, 2001, four customers
         accounted for 28.1%, 23.3%, 6.4% and 5.6% of total revenue.

13.      STOCK OPTIONS

         The Company has a stock option plan adopted in 2001 which provides that
         options for 800,000 shares of the Company common stock may be granted
         to officers, directors and key employees of the Company at the market
         value on the date of grant. The options expire 10 years from the date
         of grant and vest 25% immediately and the balance over a three year
         period. During 2001, options for 515,000 shares were granted.

         Information about stock options outstanding at December 31, 2001 is
         summarized as follows:
<TABLE>
<CAPTION>
                                                    Weighted
                                                     Average         Weighted                         Weighted
         Range of Exercise                          Remaining         Average                          Average
             Prices               Number           Contractual       Exercise          Number         Exercise
                               Outstanding            Life            Price         Exercisable       Price
        ------------------     -----------         -----------       --------       -----------       --------
<S>       <C>                    <C>               <C>               <C>              <C>             <C>
          $1.32                  515,000           9.9 years         $1.32            128,250         $1.32
</TABLE>

                                       38

<PAGE>

13.      STOCK OPTIONS (Continued)

         Had compensation cost for the Company's stock options plans been
         determined consistent with the fair value method of Statement of
         Financial Accounting Standards (SFAS No. 123), the Company's net income
         would have been decreased to the pro forma shown below:

                                                        2001        2000
                                                      --------     -------
         Net Income:
             As reported                             $1,257,837    $971,193
             Pro forma                                1,134,960     971,193

         Net income per share:
             As Reported
               Basic                                      $0.13      $0.12
               Diluted                                    $0.13      $0.12
             Pro forma:
               Basic                                      $0.12      $0.12
               Diluted                                    $0.12      $0.12


         The fair value of each option grant was estimated on the grant date
         using the Black-Scholes option pricing model with the following
         weighted average assumptions:

                                                               2001
                                                             --------

                  Risk free interest rate                    4.19%
                  Expected dividend yield                     0.0%
                  Expected volatility                         217%
                  Expected term (years)                        5

         The weighted average fair value of options granted in 2001 was $1.30
         per share.




39
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized



Date:    March 28, 2002                    /s/ P. David Spurlin
                                           --------------------
                                           P. David Spurlin


                                POWER OF ATTORNEY


Know all Persons By Those Present, that each person whose signature appears
below constitutes and appoints P. David Spurlin and D. Susan King, or either of
them, his or her attorneys-in-fact, for such person in any and all capacities,
to sign any amendments to this report and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that either of said
attorneys-in-fact, or substitute or substitutes, may do or cause to be done by
virtue hereof.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized



Date:    March 26, 2002                             /s/ P. David Spurlin
                                                    ---------------------------
                                                    P. David Spurlin


Date:    March 26, 2002                             /s/ D. Susan King
                                                    --------------------------
                                                    D. Susan King


Date:    March 26, 2002                             /s/ David Story
                                                    --------------------------
                                                    David Story


Date:    March 26, 2002                             /s/ Carl Moore
                                                    --------------------------
                                                    Carl Moore


Date:    March 26, 2002                             /s/ S. Kerry Tassopoulos
                                                    --------------------------
                                                    S. Kerry Tassopoulos


Date:    March 26, 2002                             /s/ Lou Strenger
                                                    --------------------------
                                                    Lou Strenger