<PAGE>

                    U.S. SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                  FORM 10-KSB
(Mark One)
    X          ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
---------      EXCHANGE ACT OF 1934

                  For the Fiscal Year Ended December 31, 2000

_________      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
               EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________
               TO ____________

                          Commission File No. 0-11933

                                  AXCESS Inc.
                        (formerly Lasertechnics, Inc.)
                (Name of small business issuer in its charter)

              Delaware                                 85-0294536
    (State or other jurisdiction of      (I.R.S. employer identification no.)
    incorporation or organization)

3208 Commander Drive, Carrollton, Texas                   75006
  (Address of principal executive offices)              (Zip Code)

                                (972) 407-6080
               (Issuer's Telephone Number, Including Area Code)

       Securities registered pursuant to Section 12(b) of the Act: NONE

          Securities Registered Pursuant to Section 12(g) of the Act:

<TABLE>
<S>                                                                  <C>
              Title of Class:                                        Name of exchange on which registered:
Voting Common Stock, par value $.01 Per Share                               NASDAQ SmallCap Market
</TABLE>

                                   3,478,086
              (Number of Shares Outstanding as of March 15, 2001)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. YES
   X     NO__________
-------

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B 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 reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [_]

The issuer's revenues for the fiscal year ended December 31, 2000 were
$2,350,736.

On March 15, 2001, the aggregate market value of voting and non-voting common
equity held by non-affiliates of the registrant was approximately $6,932,021.
This amount was calculated by reducing the total number of shares of the
registrant's common stock outstanding by the total number of shares of common
stock held by officers and directors, and stockholders owning in excess of 5% of
the registrant's common stock, and multiplying the remainder by the average of
the bid and asked price for the registrant's common stock on March 15, 2001, as
reported on the over-the-counter NASDAQ SmallCap Market. The information
provided shall in no way be construed as an admission that any officer, director
or more than 5% stockholder of the issuer may be deemed an affiliate of the
issuer or that such person is the beneficial owner of shares reported as being
held by such person, and any such inference is hereby disclaimed.

There were 112,492 shares of non-voting common stock outstanding as of March 15,
2001.

                      Documents Incorporated by Reference

Portions of the registrant's Proxy Statement for the 2001 Annual Meeting of
Stockholders, to be held on June 6, 2001, are incorporated by reference into
Part III.

Transitional Small Business Disclosure Format (check one):
YES _____________        NO  X
                            ---

================================================================================
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                                    PART I

Forward Looking Statements

This annual report on Form 10-KSB includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), which can be identified by the use of forward-
looking terminology such as, "may," "believe," "expect," "intend," "plan,"
"seek," "anticipate," "estimate," or "continue" or the negative thereof or other
variations thereon or comparable terminology. All statements other than
statements of historical fact included in this annual report on Form 10-KSB,
including without limitation, the statements under "Item 1. Description of
Business" and "Item 6. Management's Discussion and Analysis or Plan of
Operation" and located elsewhere herein regarding the financial position and
liquidity of the Company (defined below) are forward-looking statements.
Although the Company believes that the expectations reflected in such forward-
looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Important factors with respect to
any such forward-looking statements, including certain risks and uncertainties
that could cause actual results to differ materially from the Company's
expectations ("Cautionary Statements"), are disclosed in this annual report on
Form 10-KSB, including, without limitation, in conjunction with the forward-
looking statements and under the caption "Risk Factors." In addition, important
factors that could cause actual results to differ materially from those in the
forward-looking statements included herein include, but are not limited to,
changes from anticipated levels of sales, future national or regional economic
and competitive conditions, changes in relationships with customers, access to
capital, difficulties in developing and marketing new products, marketing
existing products, customer acceptance of existing and new products, validity of
patents, technological change, dependence on key personnel, availability of key
component parts, dependence on third party manufacturers, vendors, contractors,
product liability, casualty to or other disruption of the production facilities,
delays and disruptions in the shipment of the Company's products, and the
ability of the Company to meet its stated business goals. All subsequent written
and oral forward-looking statements attributable to the Company or persons
acting on its behalf are expressly qualified in their entirety by the Cautionary
Statements.

As used herein, references to the "Company" are to AXCESS Inc., a Delaware
corporation ("AXCESS") and its subsidiaries.

Item 1.   DESCRIPTION OF BUSINESS

The Company

AXCESS provides computer network-based asset management solutions to improve
asset utilization, operations productivity, physical security, manufacturing
logistics, enterprise resource planning (commonly referred to as "ERP"), and
financial reporting. The Company's products are based on hands-free, long range
radio frequency identification ("RFID") technology used to track and monitor
people, assets, inventory and vehicles, as well as patented digital video
compression technology for enterprise multi-media transmission and digital
recording. The Company's intellectual property includes patented technologies in
wireless, automatic identification and multi-media. In 2000, the Company's
products were further developed as network add-on appliances and coupled with
browser-based software. This enabled the Company to sell complete systems as
opposed to discrete products. The browser software delivers information tailored
to each end user via the enterprise network/Internet, with an added capability
to provide custom alerts in the form of e-mail, or pages to wireless application
protocol ("WAP") enabled devices. The Company's principal offices are located at
3208 Commander Drive, Carrollton, Texas, 75006, and its telephone number is 972-
407-6080.

Company Evolution

The Company was formed in November 1982 as Lasertechnics, Inc. Prior to 1999,
the Company, through two subsidiaries, sold high-end dye-sublimation card
printers and high-speed laser marking equipment. During 1998, the Company
determined that it could not be consistently profitable selling these products.
Accordingly, in October 1998 the Company discontinued the operations of its 96%
owned subsidiary, Sandia Imaging Systems Corporation, which was engaged in
distributing and reselling high-end dye-sublimation card printers and
consumables. The Company sold this business in December 1998. A second
subsidiary, Lasertechnics Marking Corporation ("LMC"), was engaged in
fabricating, distributing and selling high-speed laser marking equipment. In
April 1999 the Company sold LMC to affiliates of Amphion Capital Management, a
major stockholder of the Company. See "Item 6. Management's Discussion and
Analysis of Financial Condition and Results of Operation." See also "Item 12.
Certain Relationships and Related Transactions."

In September 1998, the Company consummated the acquisition of the RFID based
intellectual property assets of ASGI, Inc. and Nauta, Inc., unaffiliated
entities to AXCESS. The intellectual property assets included a patent, trade
secret rights, software, hardware, product designs and all other technical
information necessary for the Company to manufacture and market RFID products to
the

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access control and asset management markets.

In July 1999, the Company acquired substantially all of the assets, including
the network video technology, of Prism Video, Inc. Prism Video, Inc. was engaged
in the design, manufacture and marketing of video security technology and video
storage products.

In July 1999, the Company hired new senior management, including a new president
and chief executive officer, chief financial officer, and vice president of
sales.

Markets

For business organizations, the 1990s were characterized by dramatic efforts to
provide efficiencies such as organizational flattening, the use of the Internet
for more efficient sales channels (e-commerce), and a move towards business-to-
business Internet development to further provide efficiencies for activities
between companies. AXCESS is focused on the next phase of this revolution, to
leverage the corporate network to gain better utilization from the personnel and
hardware assets of the enterprise. The continued development of the networked
based solutions has provided the Company access to several new and growing
markets over and above its existing industrial security market channels. The
improved asset utilization solutions provided by the Company's products can
benefit all types of organizations from service companies to manufacturing
companies. AXCESS has identified 3 major markets that it believes can quickly
realize benefits through the use of AXCESS' RFID and digital video systems:

          .    Data Centers/Co-Location Centers - AXCESS'
               wireless RFID products provide around the clock
               information regarding the location and
               operational status of servers and other critical
               equipment. Additionally, using the same wireless
               RFID infrastrucure and digital video products,
               web hosts can control access to the building and
               sensitive areas and provide information directly
               to customers.

          .    Healthcare (Hospitals) - hospitals rely on large
               amounts of expensive and mobile equipment to
               provide critical care to patients. Locating this
               equipment requires resources that would be better
               served treating patients. Lack of control costs
               the hospitals lost equipment and lost revenue.
               Additionally, to maintain accreditation hospitals
               must maintain stringent maintenance programs on
               their medical equipment. Using AXCESS' wireless
               RFID products hospital administrators can keep up
               to date on equipment location and operational
               status including hours of service.

          .    Educational - with school safety becoming
               critical, the Company believes that its digital
               video solutions provide an economical way for
               school administrators and law enforcement
               officials to observe and record activities
               throughout a school system. Using existing
               networks in the schools, AXCESS digital video
               cameras and recording capabilities provide both
               real time and archived viewing of activities
               throughout a school campus.

Products and Services

RFID  Solutions

The ActiveTag(TM) System offers network-based resource management tools designed
to leverage the customer's local area network ("LAN") to identify, locate and
track mission-critical people and assets right from the desktop. From protecting
office computers to monitoring personnel and inventory movements, this system
brings total visibility to business operations.

     The ActiveTag(TM) System provides a single-system approach to a variety of
     automatic monitoring and tracking applications, including:

               .    Asset Management
               .    Personnel & Vehicle Access Control
               .    Personnel Monitoring
               .    Production and Process Control Inventory
               .    Tracking

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     The ActiveTag(TM) System is comprised of 4 major components:

          .    Tags - small battery powered wireless transmitters that can be
               attached to assets, vehicles and inventory or used as personnel
               identification ("ID"). The tags operate on dual frequencies to
               conserve battery power allowing them to operate for 3-5 years.
               Additional features allow the tag to transmit sensor information
               such as temperature levels, on/off indicator and open/close
               indications. The tag has read/write capabilities and can be made
               tamper proof for asset applications.

          .    Activators and antennas - the activator is the cornerstone of the
               ActiveTag Control Point architecture. The activator is a stand-
               alone transmitter that connects directly to an application
               specific antenna to provide a low frequency activation signal to
               awaken tags as they pass through the antenna's field. The
               activator writes its location ID to the tag, which is then
               retransmitted along with the tag's unique ID to provide the tag's
               precise location at time of activation. By adjusting the power
               output on the activator, the activation area can be expanded or
               reduced, thus creating control points from a few feet in diameter
               to tens of feet across.

          .    Receivers - network-capable general-purpose receivers detect tag
               signals, convert them into data and forward the information via
               the LAN. Multiple receivers can be networked throughout multiple
               facilities to enable enterprise-wide monitoring and tracking of
               assets, personnel and other mission-critical resources. The
               receiver processes and filters information received from any tag
               whether automatically activated at a control point or when
               triggered by a tamper or panic alarm. Tag transmissions can be
               received at a distance of about 35 feet in a typical office
               environment, with greater distances achievable in open air, line-
               of-sight applications.

          .    ActiveTrac(TM) Software - provides a personnel, asset and vehicle
               monitoring solution, with integrated logging, tracking, alarming
               and reporting functions. ActiveTrac(TM) has a range of
               application uses including resource management, asset protection,
               personnel time and attendance, compliance monitoring, and
               inventory logistics. ActiveTrac(TM), coupled with the Company's
               ActiveTag(TM) automatic identification products, offers customers
               the ability to easily monitor and track asset and personnel
               movements throughout a facility. Identification and location data
               broadcast by the tags is gathered by network receivers and
               forwarded to the ActiveTrac(TM) application. The software time
               stamps, displays and logs the event information in a general-
               purpose database where it can be accessed via standard queries
               and reports.

Digital Video Solutions

AXCESS' Prism Video solution offers digital video and recording and remote video
supervision. Delivering high speed, real-time video and audio, the Prism
products provide field-proven, low-cost network video solutions including
cameras, transmitters, and recorders as well as easy to use desktop software.

     Prism Video products are the perfect solution for:

               .    Covert Surveillance
               .    Video Alarm Verification
               .    Physical Security
               .    Compliance Monitoring
               .    Asset Management
               .    Operations Management
               .    Traffic Management
               .    Central Station Video

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By mixing and matching any of the following components a customized digital
video solution can be formed:

          .    LANcam(TM) - a TCP/IP addressable digital video camera provides
               streaming video over a customer's existing LAN or wide area
               network ("WAN"). The LANcam(TM) has dynamic bandwidth throttling
               allowing bandwidth consumption as low as 9.6 kbps and multi-level
               user security features to prevent unauthorized access to the
               video.

          .    LANconnect(TM) - a TCP/IP addressable digital video transmitter
               allows the customer to connect any existing standard CCTV camera
               to the LAN or WAN.

          .    LANcorder(TM) - a powerful digital video recording alternative to
               time-lapse VCR's. By utilizing patented compression technology
               ("CODEC"), the LANcorder can digitally record up to 16 TCP/IP
               video streams simultaneously. LANcorder allows for simultaneous
               recording and viewing of recorded digital images from any node on
               the network equipped with the LANcorder viewer software.
               LANcorder will play back in a 4x4 (16 images) format all recorded
               cameras or will playback any individual video stream
               independently. An Open database communication ("ODBC") compliant
               driver used for logging events, alarms, Location ID, camera
               labels etc. Snapshots can be stored on an event basis.

          .    PCPeek(TM), LANview(TM), and LANplayer(TM) software - this
               software suite delivers real time and recorded multi-media over
               various telecommunications facilities including phone lines,
               ISDN, and digital links using the TCP/IP communications protocol.
               Live video alarms can be received. Automatic video guard tours
               save labor cost. In addition to various recording capabilities
               such as event and full period recording, the software controls
               over 25 industry pan/tilt/zoom devices.


Enterprise Software Solutions

onlinesupervisor is a software platform that improves management productivity by
providing a custom "supervisor information system" for each user.
onlinesupervisor offers managers of any size business the ability to monitor and
supervise operations at multiple remote locations from a standard web browser
using the corporate network and the Internet. Operations activity throughout the
enterprise is observed at the desktop using wireless RFID tags and networked
video. Management by exception is automated, providing notification and on-line
video clips of critical events that have occurred. Facility access is controlled
and assets are automatically tracked and protected using the wireless
identification tagging. The business manager can access live or archived video
activities and review event data reports on personnel and asset activity at a
site.

Additionally, onlinesupervisor has the added feature of automatically notifying
the business manager via email or pager of predefined alarm or alert events
immediately when they occur. The manager can then quickly access the site and
make informed management decisions based on real-time Prism Video(TM) and
ActiveTag(TM) RFID tag data from the site.

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Research and Development

The Company plans to continually develop new products utilizing its existing
technology and plans to bring new products to market throughout 2001. During
2000, the Company developed new applications for its technology outside of the
security industry, including inventory management and asset management
applications. The following new products were released in 2000 and are in full
production and available for sale:

          RFID                          Digital Video
          ----                          -------------
          Plex Antenna                  LANplayer(TM)
          onlinesupervisor              LANcorder(TM)
          ActiveTag(TM)                 LANconnect(TM)
          ActiveTrac(TM)                LANview(TM)
          Beacon tag                    LANconnect(TM)


During 2000 and 1999, the Company spent $2,551,680 and $1,733,119, respectively,
for research and development and plans to continue spending similar amounts in
fiscal year 2001 to develop products to support the Company's continued revenue
growth.

Patents and Proprietary Technology

The Company relies on a combination of patents, trade secrets, technology
licenses, and other intellectual property rights. The Company was awarded two
new patents in 2000, one in digital video compression and one in RFID automatic
identification. The Company has received 14 U.S. patents with international
coverage around the globe. The Company has 14 patents in various stages of
prosecution with foreign patent authorities and several additional patents being
prepared for filing. The period covered by the Company's issued patents ranges
from 7 to 17 years. The Company intends to protect and enforce its intellectual
property rights and to preserve its rights relating to its key product
technologies to the extent commercially reasonable. The Company has registered a
number of trade and service marks, including but not limited to the following:
AXCESS Inc.(TM), the AXCESS Inc. (logo)(TM), LANcam, ActiveTag(TM),
onlineaccess.com(TM), and LANcorder (TM).

Competition

The market for our products and services is intensely competitive and is
characterized by rapidly changing technology, evolving user needs and the
frequent introduction of new products.

A number of our competitors are more established, benefit from greater name
recognition and have substantially greater financial, technical and marketing
resources than we do. We believe that the principal factors affecting
competition in our market include product functionality, performance,
flexibility and features, use of open standards technology, quality of service
and support, company reputation, price and overall costs of ownership. In order
to compete, the Company seeks to provide products that are technologically
superior, and that deliver better value.

Manufacturing and Suppliers

The Company outsources the manufacturing of its products and consequently
depends on outside manufacturers to supply finished product. A large number of
manufacturers in the U.S. have the capability to produce the Company's products.
The Company periodically seeks bids for manufacturing and has multiple
manufacturing sources for each of its products.

Although the Company depends on a number of outside suppliers for components of
its products, the Company has designed its current line of products so that it
is not dependent on a single source for any of its products' components.
Although the Company has generally been able to secure adequate suppliers, the
inability of the Company in the future to obtain sufficient suppliers of
component parts could have material adverse effects on the Company's results of
operations.

There are currently no long-term agreements between the Company and its
manufacturers or suppliers.

Sales Channels

The Company primarily sells through indirect channels using either
dealer/integrators or distributors to reach the end users. During 1999 the
Company sold primarily through security related channels but with the
development of the networked based products the Company is targeting the
information technology ("IT") channel to sell products. In the IT channel the
Company is identifying and

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partnering with network integrators and value added resellers ("VAR") to reach
the end users. In many instances the Company will identify and begin discussions
with an end user, then bring a partner integrator into the transaction. Through
this process the Company has more knowledge and better control of the end user.
With the full system sales the Company has seen the sales cycle increase versus
the security channel but the transaction potential is much larger. During 2000
the Company had over 175 customers. Of these customers, 25 made up 80% of the
2000 revenue.

Employees

As of December 31, 2000, the Company had 50 full-time employees and 1 part-time
employee.

Government Regulation

Government regulations have not had, nor are they expected to have, a material
effect on the Company's financial condition, results of operations or
competitive position.  FCC approval is required for some of the Company's
principal products.

Environmental Factors

There has been, and it is anticipated that there will continue to be, no
material effect upon the Company's capital expenditures, earnings, or
competitive position due to compliance with existing provisions of federal,
state and local laws regulating the discharge of material into, or otherwise
relating to the protection of, the environment.

Risk Factors

We operate in a changing environment that involves numerous risks, some of which
are beyond our control. The following highlights some of these risks.

Ability to Continue as a Going Concern

Our auditors have included an explanatory paragraph in their audit opinion with
respect to our consolidated financial statements at December 31, 2000. The
paragraph states that our recurring losses from operations and resulting
continued dependence on access to external financing raise substantial doubts
about our ability to continue as a going concern. Furthermore, the factors
leading to and the existence of the explanatory paragraph may adversely affect
our relationship with customers and suppliers and have an adverse effect on our
ability to obtain financing.

Need for Additional Financing

The Company's business plan for 2001 is predicated principally upon the
successful marketing of its RFID products and the digital video products
acquired from Prism Video, Inc. in July 1999. The Company anticipates that its
existing working capital resources and revenues from operations will not be
adequate to satisfy its funding requirements in 2001 and that it will be
required to raise additional capital.

Failure to obtain additional capital could cause delay or abandonment of our
business plans. The Company anticipates that it will depend on outside sources
of capital to fund operating losses for at least the next twelve months.
Additional capital may also be required for a variety of other reasons,
including unforeseen delays, unanticipated expenses, increased capital
requirements, engineering design changes and other technology risks or other
corporate purposes. These additional funds may not be available. Even if those
funds are available, we may not be able to obtain them on a timely basis, or on
terms acceptable to us. Failure to obtain additional funds could result in the
delay or abandonment of our development and expansion plans and we may be unable
to fund our ongoing operations. Furthermore, the Company has substantial
indebtedness in the form of demand notes and does not have the financial ability
to satisfy a demand if made.

History of Losses and Expectation of Future Losses; Uncertainty of Future
Profitability

From our incorporation in 1982 through December 31, 2000, we have incurred an
accumulated loss of approximately $111.6 million and have been profitable in
only one fiscal year during that time. There can be no assurance that we will
generate sufficient revenues to achieve profitability in the future. If the
Company is unable to generate sufficient revenues, then the valuation of
purchased intellectual property may be impaired, resulting in the write-down of
such assets and the recognition of losses. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of an asset to
future net cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the asset exceeds the fair value of the
asset. Continued slow

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revenue growth and operating losses by the Company may indicate circumstances
requiring an impairment to be recorded.

Future Development of Products

Introducing new technology involves, without limitation, risks of "bugs", prior
release compatibility, customer modifications affecting standard interfaces, and
unanticipated application environment anomalies. Although we use rigorous
testing procedures and protocols, delays in product introductions or shipments
could have a material adverse effect on our results of operations.

Much of our ability to compete depends on trade secrets, know-how and
proprietary technical knowledge that is unprotected by patents. Although we
continue to implement protective measures and intend to defend our proprietary
rights vigorously when appropriate, there can be no assurance that these efforts
will be successful. Such protections may not preclude competitors from
developing products similar to ours. In addition, the laws of certain foreign
countries do not protect intellectual property rights to the same extent as do
the laws of the United States. There can also be no assurance that third parties
will not assert intellectual property infringement claims against us. Any such
infringement claim could result in protracted and costly litigation and could
have a material adverse effect on our results of operation regardless of the
outcome.

Obsolete Technology

The technology we use may become obsolete or limit our ability to compete
effectively within the wireless, automatic identification and multi-media
applicable industries. These industries are characterized by rapidly changing
technology, evolving industry standards and frequent new product introductions.
The introduction of products embodying new technologies or the emergence of
industry standards can render existing products obsolete and unmarketable. Our
success will depend on our ability to enhance our existing products. Our success
will also depend on our ability to develop and introduce, on a timely and cost-
effective basis, new products that keep pace with technological developments and
emerging industry standards and that address increasingly sophisticated customer
requirements.

Our business would be adversely affected if we were to incur difficulties or
delays in developing new products or enhancements or if those products or
enhancements did not gain market acceptance. Specifically:

     .    we may not be successful in identifying, developing and marketing
          product enhancements or new products that respond to technological
          change or evolving industry standards;

     .    we may experience difficulties that could delay or prevent the
          successful development, introduction and marketing of these products;
          and

     .    our new products and enhanced products may not adequately meet the
          requirements of the marketplace and achieve market acceptance or may
          not keep pace with advances made by our competitors.

Outsourcing; Dependence on Manufacturers and Suppliers to Produce Systems

Because we outsource portions of our business, particularly for manufacturing,
we depend heavily on third-party vendors, suppliers, and contractors. The
failure by any of our vendors, suppliers, or contractors to fulfill their
contractual obligations to us could adversely affect our operations. If we are
unable to obtain sufficient components and manufacturers for the products, or
develop alternative sources, delays in product introductions or shipments could
occur and could have a material adverse effect on our results of operations.

NASDAQ Listing

Our common stock is listed on the NASDAQ SmallCap Market, which requires
maintenance of certain quantitative and other standards for continual listing
thereon.

On August 22, 1998, the Securities and Exchange Commission approved the new
NASDAQ listing requirements for continued listing on the NASDAQ SmallCap Market.
In particular, the new NASDAQ listing requirements require that a company
currently included in NASDAQ meet each of the following standards to maintain
its continued listing: (i) either (A) net tangible assets (defined as total
assets, minus goodwill, minus total liabilities) of $2 million, (B) total market
capitalization of $35 million, or (C) net income (in the latest fiscal year or
in two of the last three fiscal years) of $500,000; (ii) public float of at
least 500,000 shares, with a market value of at least $1 million; (iii) minimum
bid price of $1; (iv) at least two market makers; (v) at least 300 round lot
beneficial shareholders; and (vi) compliance with certain corporate governance
requirements. As of March 15, 2001, the closing bid price of our common

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stock was $4.00 per share, which is in excess of the minimum bid price of $1.00
per share established by the new NASDAQ listing requirements.

As of December 31, 2000, our net tangible assets were in excess of the $2
million threshold established by the new NASDAQ listing requirements.

Although management believes that we will be able to preserve the listing of our
common stock on the NASDAQ SmallCap Market, there can be no assurance that we
will be able to do so. There can be no assurance that our continued losses or
other factors beyond our control will not cause us to fail to meet such
requirements.

If our common stock were delisted from the NASDAQ SmallCap Market, trading, if
any, would likely be conducted in the over-the-counter market on the National
Association of Securities Dealers' OTC Bulletin Board and/or on the pink sheets
of the National Quotation Bureau. As a result, an investor may find it more
difficult to dispose of, or to obtain accurate quotations as to the price of our
common stock. In addition, our common stock would be subject to rules
promulgated under the Exchange Act applicable to penny stocks. The Commission
has adopted regulations that generally define a "penny stock" to be an equity
security that has a market price (as determined pursuant to regulations adopted
by the Commission) or exercise price of less than $5.00 per share, subject to
certain exceptions. By virtue of being listed on the NASDAQ SmallCap Market, our
common stock will be exempt from the definition of "penny stock." If, however,
our common stock is removed from the NASDAQ SmallCap Market, our securities may
become subject to the penny stock rules that impose additional sales practice
requirements on broker-dealers who sell penny stocks to persons other than
established customers and accredited investors. Consequently, the penny stock
rules may adversely affect the ability of broker-dealers to sell our common
stock and may affect the ability of purchasers of our common stock to sell such
securities in the secondary market.

Small Trading Volume and Volatility of Stock Price

The weekly trading volume of our common stock in the over-the-counter market
during 2000 varied from a few thousand shares to 324,000 shares, which may tend
to increase the volatility of the price. From January 2000 through December 31,
2000, the closing bid price of our common stock in the over-the-counter market
has varied from a low of $3.50 to a high of $11.63 per share. There can be no
assurance that the price volatility will not continue in the future.

Dependence on Key Personnel

We believe that our ability to successfully implement our business strategy is
highly dependent on our management and product development team. The loss of
services of one or more of these individuals might hinder the achievement of our
development objectives. We cannot give any assurance that we will continue to be
able to hire and retain the qualified personnel needed for our business. The
loss of the services of or the failure to recruit key technical personnel could
adversely affect our business, operating results and financial condition.

Potential Adverse Effect of Shares Eligible for Future Sale; Outstanding
Convertible Securities and Warrants

Future sales of our common stock in the public market by existing stockholders,
warrant holders and holders of convertible securities subsequent to the date
hereof could adversely affect the market price of our common stock. At March 15,
2001, 3,478,086 shares of common stock were issued and outstanding with
approximately 1,400,000 shares freely tradable without restriction under the
Securities Act. If exercised, the convertible debt, convertible securities,
warrants and options outstanding at March 15, 2001, would result in over
18,000,000 additional shares of common stock issued and outstanding. See Notes
10, 11, and 12 in Notes to Consolidated Financial Statements.

Item 2. DESCRIPTION OF PROPERTIES.

The Company leases a 14,508 square foot facility in Carrollton, Texas used for
administrative, engineering and sales offices. This facility is rented under a
one year agreement that terminates in November 2001. The monthly rent is $9,068.
The Company leases 3,171 square feet in Tustin, California used for engineering
space. This lease will terminate in September 2005. The monthly rent is $5,549.
The Company's facilities are suitable and adequate to accommodate the Company's
operations. The Company's management considers each of these facilities to be in
good condition and is of the opinion that the facilities are adequately covered
by insurance.

                                       8
<PAGE>

Item 3. LEGAL PROCEEDINGS.

None.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

                                    PART II

Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

The Company's common stock trades on the NASDAQ SmallCap Market tier of the
NASDAQ Stock Market under the symbol AXSI.  The table below sets forth high and
low closing prices for the common stock during each of the periods indicated, as
reported by the NASDAQ. Such price quotations represent inter-dealer prices
without retail markup, markdown or commission and may not necessarily represent
actual transactions.

<TABLE>
<CAPTION>
                                                2000                              1999
                                                ----                              ----
               QUARTER ENDED             LOW            HIGH                LOW          HIGH
               -------------            -----           ----               -----         ----
               <S>                      <C>            <C>                 <C>           <C>
               March 31                 $5.13          $11.63              $1.25         $2.94
               June 30                   4.94           10.25               2.31          3.06
               September 30              5.88            8.25               2.19          3.44
               December 31               3.50            7.13               2.69          6.00
</TABLE>

As of March 15, 2001, the Company had 1,311 holders of record of voting common
stock and one holder of record of non-voting common stock. The Company estimates
that there were approximately 4,680 beneficial owners of its common stock as of
the same date.

The Company has not paid dividends on its common stock and does not anticipate
the payment of cash dividends in the foreseeable future as it contemplates
retaining all earnings to finance the continued growth of the Company's
business.  All series of preferred stock rank senior in right of payment to the
Company's common stock and on a parity with all series of preferred stock as to
dividends.

Recent Sale of Unregistered Securities

During 2000 the Company issued unregistered securities in connection with each
of the transactions described below. The issuance of the preferred stock, common
stock and warrants were exempt from the registration requirements of the
Securities Act by virtue of Section 4(2) thereof as a transaction not involving
a public offering and an appropriate restrictive legend was affixed to the stock
certificates and warrants.

On September 30, 1999 the Company signed a 10% convertible note with Amphion
Ventures, L. P. under which the Company borrowed $5,986,395 through December 31,
1999. On December 31, 1999 Amphion Ventures, L.P. elected to convert $3,323,423
of these borrowings into 332 shares of the Company's Series 2000 Non-Voting
Preferred Stock, par value $.01 per share (the "Series 2000 Preferred Stock").
On April 1, 2000, Amphion Ventures, L.P. elected to convert an additional
$150,000 of these borrowings into 15 shares of Series 2000 Preferred Stock. On
September 30, 1999 and October 2, 2000 the Company issued warrants to purchase
180,362 shares and 117,999 shares respectively of common stock for $2.10 in
connection with the issuance of the 10% convertible note.

On March 29, 2000, the Company completed a private equity placement with the
incuVest LLC. In connection with that transaction the Company received
$5,000,000 and issued 500 shares of Series 2000 Preferred Stock. The Series 2000
Preferred Stock is subject to the optional redemption at any time by the
Company, in whole or in part, at a redemption price per share equal to its
stated value of $10,000, plus any accrued, but unpaid dividends thereon. The
Company's optional right of redemption is subject to Series 2000 Preferred Stock
holder's right to convert Series 2000 Preferred Stock, into non-voting common
stock, within ten business days after the Company's notice of redemption. The
Series 2000 Preferred Stock is also subject to the mandatory conversion by the
Company into shares of the Company's non-voting common stock if (a) the closing
bid price of the Company's common stock on the NASDAQ SmallCap Market is greater
than $7.50 per share for a period of at least twenty consecutive trading days
and (b) the trading volume of the common stock on the NASDAQ SmallCap Market is
at least 50,000 shares per day as measured by NASDAQ during each of such twenty
consecutive trading days.

On September 14, 2000 the Company issued a 9.5% note, in the principal amount of
$400,000 (plus additional amounts shown on the

                                       9
<PAGE>

schedule of advances to the note), to incuVest LLC. The principal outstanding
under this Note may be converted into securities of the Company at the option of
incuVest LLC. At December 26, 2000, borrowings under this note totaled
$3,391,106, and were due and payable on demand by incuVest LLC. On December 26,
2000 incuVest LLC elected to convert $3,300,000 of these borrowings into 330
shares of Series 2000 Preferred Stock, leaving a balance of $91,106 outstanding
at December 31, 2000.

On December 14, 2000, J. P. Morgan Investment Corporation agreed with the
Company to extend the maturity date of the $400,000 balance remaining under the
Note Purchase Agreement originally due December 31, 1999 by one year. The
balance of the indebtedness under the senior notes issued under the Note
Purchase Agreement is now due in full by the Company on December 14, 2001. The
Company issued warrants to purchase 8,000 shares of common stock for $5.00 in
consideration for extending the term of indebtedness. The warrants were valued
at $13,600, which is being amortized to interest expense over the remaining term
of the loan.

During 2000, the Company issued (a) 5,999 shares of Series A Preferred Stock to
the holders thereof as payment in full for $155,961 of accrued, but unpaid
dividends on the Series A Preferred Stock, (b) 5,492 shares of Series B
Preferred Stock to the holders thereof for $155,961 of accrued, but unpaid
dividends on the Series B Preferred Stock, and (c) 3,685 shares of Series C
Preferred Stock to the holders thereof for $111,239 of accrued, but unpaid
dividends on the Series C Preferred Stock.

During 2000, the Company issued (a) 53 shares of Series I Preferred Stock to the
holders thereof for $526,128 of accrued, but unpaid dividends on the Series I
Preferred Stock, and (b) 154 shares of Series J Preferred Stock to the holders
thereof for $1,534,301 of accrued, but unpaid dividends on the Series J
Preferred Stock.

During 2000, the Company issued (a) 11 shares of Series 1999 Preferred Stock to
the holders thereof as payment for $107,013 of accrued, but unpaid dividends of
the Series 1999 Preferred Stock, and (b) 59 shares of Series 2000 Preferred
Stock to the holders thereof for $593,445 of accrued, but unpaid dividends of
the Series 2000 Preferred Stock.

Preferred Stock Conversion Terms

Series A, B and C Preferred Stock.  Each share of Series A, B, and C Convertible
Preferred Stock is convertible at the option of the holders into voting common
stock on a share-for-share basis.  The Company may redeem the Series A, B and C
Convertible Preferred Stock at any time at the $26.00, $28.40 and $30.20 stated
value, respectively, plus accrued dividends, subject to the stock holder's right
to convert to voting common stock for 10 business days following receipt of the
Company's notice of redemption.

Series I and J Preferred Stock.  Each Share of Series I Preferred Stock and
Series J Preferred Stock is convertible in whole or in part at any time at the
option of the holder into shares of voting or non-voting common stock of the
Company, respectively, equal to the quotient of (a) the aggregate original issue
price of $10,000 per share divided by (b) the conversion price of $4.00 per
share. The Series I Preferred Stock and the Series J Preferred Stock are both
subject to the optional redemption at any time by the Company, in whole or in
part, at a redemption price per share equal to the $10,000 stated value, plus
any accrued, but unpaid dividends thereon. The Company's optional right of
redemption is subject to each Series I Preferred Stock or Series J Preferred
Stock holder's right to convert such preferred stock into voting or non-voting
common stock, as the case may be, within ten business days after the Company's
notice of redemption.

The Series I Preferred Stock and the Series J Preferred Stock are also subject
to the mandatory conversion by the Company into shares of the Company's voting
or non-voting common stock, as the case may be, if the closing bid price of the
Company's common stock on the NASDAQ SmallCap Market is at least $10.00 per
share for a period of at least ninety (90) consecutive trading days.

Series 1999 Preferred Stock and Series 2000 Preferred Stock.  Each share of
Series 1999 and Series 2000 Preferred Stock is convertible in whole or in part
at any time at the option of the holder into a number of shares of voting or
non-voting common stock of the Company, as the case may be, equal to the
quotient of (a) the aggregate original issue price of $10,000 per share divided
by (b) the conversion price of $2.50 or $3.50, respectively.

The Series 1999 Preferred Stock and the Series 2000 Preferred Stock are both
subject to the optional redemption at any time by the Company, in whole or in
part, at a redemption price per share equal to the $10,000 stated value, plus
any accrued, but unpaid dividends thereon. The Company's optional right of
redemption is subject to each Series 1999 Preferred Stock or Series 2000
Preferred Stock holder's right to convert such preferred stock into voting or
non-voting common stock, as the case may be, within 10 business days after the
Company's notice of redemption.

The Series 1999 Preferred Stock and the Series 2000 Preferred Stock are also
subject to the mandatory conversion by the Company into shares of the Company's
voting or non-voting common stock, as the case may be, if (a) the closing bid
price of the Company's

                                       10
<PAGE>

common stock on the NASDAQ SmallCap Market is at least $7.50 per share for a
period of at least twenty consecutive trading days and (b) the trading volume of
the common stock on the NASDAQ SmallCap Market is at least 50,000 shares per day
as measured by NASDAQ during each of such twenty consecutive trading days.


Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.

Background

In September 1998, the Company acquired its active radio frequency
identification ("RFID") technology. The Company determined this technology to be
its primary and core strategic focus, based on market demand, market size,
product differentiation, competitive environment and other factors.

Accordingly, in March 1999, the Company entered into a definitive agreement to
sell its Lasertechnics Marking Corporation ("LMC") subsidiary to affiliates of
Amphion Capital Management, a major stockholder of the Company. The Company's
rights and interests in certain products and technology under development with
XL Vision, Inc. were also included in the sale. On April 30, 1999, the Company
completed the sale and received $500,000 in cash, $2,000,000 in debt
cancellation, a $4,000,000 note receivable due March 2002 (or 2004 under certain
conditions), a $500,000 demand note receivable and a warrant with an exercise
price of $2.50 per share to purchase equity in the Amphion-controlled enterprise
to which Amphion transferred these businesses and assets representing
approximately 8% of that enterprise. The gain from the disposition of LMC and
the technology assets totaled approximately $3,900,000 and was recorded in the
quarter ended June 30, 1999.

On July 28, 1999, the Company completed its acquisition of substantially all of
the assets of Prism Video, Inc. ("Prism"), a privately held corporation engaged
in the design, manufacture and marketing of video security technology and video
storage products. The purchase price for the assets included a note payable to
Prism Video, Inc. in the amount of $4,000,000, 125 shares of a new series of 8%
convertible preferred stock and a warrant to acquire 500,000 shares of the
Company's common stock. The Company will satisfy its obligations under the
purchase note through an assignment to Prism Video, Inc. of the principal
payments due the Company under its $4,000,000 note receivable from Amphion
Ventures L.P., which was issued to the Company as partial consideration for the
sale of its LMC subsidiary and certain unrelated technology assets.

As a result of these transactions, the Company now provides computer network-
based solutions for improving the utilization of corporate assets to improve
operations productivity, physical security, asset management, manufacturing
logistics and enterprise resource planning (commonly referred to as ("ERP"), and
financial reporting. The Company's products include hands-free, long range RFID
technology used to track and monitor people, assets, inventory and vehicles as
well as patented digital video compression technology for enterprise multi-media
transmission and digital recording. The Company's products incorporate patented
technologies in wireless, automatic identification and multi-media.

Results of Operations

Sales and Gross Profit. Sales for the year ending December 31, 2000 and 1999
were $2,350,736 and $1,246,880, respectively. The Company realized gross profits
of $501,231 in 2000 and $490,689 in 1999.

RFID product sales were $823,601 and $429,459 for 2000 and 1999, respectively.
Cost of sales were $906,322 in 2000, which includes warranty costs of $315,710.
A one time charge to cost of sales of $268,823 was recorded during 2000 for
warranty costs due to a tag manufacturing problem that might have resulted in
reduced battery life causing tags to die prematurely. All potentially affected
tags were replaced. Management believes that the corrections made to the tag
manufacturing process will reduce future warranty costs to historical levels.
See note 1 of notes to financial statements.  In 1999 cost of sales was
$368,092. As a result gross profits (loss) from RFID products were $(82,721) in
2000 and $61,367 in 1999.

Digital video product sales were $1,527,135 and $817,421 for 2000 and 1999,
respectively. Cost of sales were $943,183 in 2000 and $388,099 in 1999. As a
result gross profits from digital video products were $583,952 in 2000 and
$429,322 in 1999. The Company began producing and selling digital video products
in July 1999.   The increase in sales was due to the products being available
for the full year.

Operating Expenses. Operating expenses were $10,102,242 and $7,890,589, in 2000
and 1999, respectively. This increase was due to

                                       11
<PAGE>

an increase in research and development in connection with the development of
new products and an increase in selling and marketing expenses.

Corporate general and administrative expenses were $2,573,321 and $2,639,166 in
2000 and 1999, respectively. The decrease is attributable to a reduction in
September 1999 of employee headcount by approximately twenty percent to
eliminate overlapping duties resulting from the July 1999 acquisition of Prism
Video.

Research and development expenses were $2,551,680 in 2000 and $1,733,119 in
1999, respectively. This increase was due to an increase in research and
development in connection with the development of new products associated with
the both the RFID and digital video technologies.

Selling and marketing expenses were $3,204,995 in 2000 and $2,560,739 in 1999.
The Company increased its advertising and marketing expenses to expand product
awareness beyond the security industry.

Other income (expense), net was $(790,423) and $1,291,332 in 2000 and 1999,
respectively. A gain of $2,044,109 was realized in 1999 from the sale of the
Company's rights and interests in certain products and the technology under
development in connection with the sale of LMC.  Interest expense was $1,176,321
and 624,494 in 2000 and 1999, respectively.  This increase reflects the
increased note payable balance in 2000.  This increase in notes payable was a
result of the purchase of Prism in 1999.  Interest income was $374,854 and
$233,370 in 2000 and 1999, respectively.  This increase was a result of an
increase in notes receivable from the stockholder of the Company.  The increase
in notes receivable from the stockholder occurred as a result of the sale in
1999 of the Company's LMC subsidiary and certain technology assets under
development.

Loss from continuing operations was $10,391,434 and $6,108,568 in 2000 and 1999,
respectively.  Losses increased by $4,282,866 in 2000 compared to 1999. On April
30, 1999 the Company recorded a nonrecurring gain on sale, in the amount of
$2,044,109, for the sale of the Company's LMC subsidiary and certain technology
assets under development. This nonrecurring gain reduced the loss reported in
1999.  This increase in loss in 2000 can also be attributed to the RFID warranty
reserve recorded in 2000 and increased operating expenses associated with the
development of new products and increased selling and marketing expenses.

Gain from discontinued operations was $1,708,545 in 1999. A gain on the disposal
of the LMC subsidiary was realized in 1999. See note 4 of notes to financial
statements.

Liquidity and Capital Resources

Since inception, the Company has utilized the proceeds from a number of public
and private sales of its equity securities, the exercise of options and warrants
and more recently, convertible debt and short-term bridge loans from
stockholders to meet its working capital requirements. At December 31, 2000, the
Company had a working capital surplus of $22,378.

The Company's operations continued to generate losses in 2000. The Company's
cash increased $384,924 during 2000 with operating activities using $8,650,725
of cash. The Company funded operations primarily through private sales of its
equity securities and debt offerings with financing activities providing net
cash of $9,492,051.

No additional borrowings were available under the 10% convertible note from
Amphion at December 31, 2000 or 1999.

The Company's business plan for 2001 is predicated principally upon the
successful marketing of its RFID products and the digital video products
acquired from Prism Video, Inc. in July 1999. The Company anticipates that its
existing working capital resources and revenues from operations will not be
adequate to satisfy its funding requirements in 2001 and that it will be
required to raise additional capital.

The Company's future working capital requirements will depend upon many factors,
including the extent and timing of the Company's product sales, the Company's
operating results and the status of competitive products. The Company's actual
funding needs will depend on numerous factors, including actual expenditures and
revenues generated from its operations compared to its business plan. If the
Company's losses continue, the Company will have to obtain funds to meet its
cash requirements through business alliances, such as strategic or financial
transactions with third parties, the sale of securities or other financing
arrangements, or the Company may be required to curtail its operations or seek a
merger partner. Any additional funding may be on terms that are unfavorable to
the Company or disadvantageous to existing stockholders. In addition, no
assurance may be given that the Company will be successful in raising additional
funds or entering into business alliances.

The Company is actively seeking investors to raise additional capital. Through
March 16, 2001, incuVest provided $1,675,000 of additional working capital
through loans under demand notes.  However, no assurance can be given that such
funding will continue, and incuVest has the right to call the balance of the
demand notes at any time.  The Company does not have the ability to satisfy such
a demand, if made.

                                       12
<PAGE>

Other

Inflation. Inflation has not had and is not expected to have a material impact
on the operations and financial condition of the Company.



Item 7. FINANCIAL STATEMENTS.

<TABLE>
<CAPTION>
                                                                                            Page
<S>                                                                                         <C>
                    Report of Ernst & Young LLP, Independent Auditors..................     F-1

                    Consolidated Financial Statements:

                    Consolidated Balance Sheets at December 31, 2000 and 1999..........     F-2
                    Consolidated Statements of Operations for the
                       Years Ended December 31, 2000 and 1999..........................     F-3
                    Consolidated Statements of Stockholders' Equity
                       for the Years Ended December 31, 2000 and 1999..................     F-4
                    Consolidated Statements of Cash Flows for the
                       Years Ended December 31, 2000 and 1999..........................     F-5
                    Notes to Financial Statements......................................     F-6
</TABLE>


Item 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.
None.

                                   PART III

Item 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

The information regarding Directors, Executive Officers, Promoters and Control
Persons is incorporated by reference in this Form 10-KSB to the sections
entitled "Principal Shareholders," "Management," and "General" in the Company's
Proxy Statement to be filed with the Commission in connection with the Annual
Meeting of Stockholders to be held on June 6, 2001.

Item 10. EXECUTIVE COMPENSATION.

The information required by this item is incorporated by reference in this Form
10-KSB to the section entitled "Management" in the Company's Proxy Statement.

Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information required by this item is incorporated by reference in this Form
10-KSB to the sections entitled "Principal Shareholders" and "Management" in the
Company's Proxy Statement.

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information required by this item is incorporated by reference in this Form
10-KSB to the section entitled "Management" in the Company's Proxy Statement.

Item 13. EXHIBITS AND REPORTS ON FORM 8-K.

(a)  Exhibits

                                       13
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number                                       Description
------     ----------------------------------------------------------------------------------
<S>        <C>
3.1        --Certificate of Incorporation of the Company. Incorporated herein by reference to
           Exhibit 3.1 to the Company's Registration Statement on Form S-1 (Registration No.
           2-80946).

3.2        --By-laws of the Company. Incorporated herein by reference to Exhibit 3.2 to the
           Company's Registration Statement on Form S-1 (Registration No. 2-80946).

3.3        --First Amendment to Certificate of Incorporation of the Company dated June 6,
           1986. Incorporated herein by reference to Exhibit 3.3 to the Company's Annual
           Report on Form 10-KSB for the year ended December 31, 1987.

3.4        --Second Amendment to Certificate of Incorporation of the Company dated May 27,
           1987. Incorporated herein by reference to Exhibit 3.4 to the Company's Annual
           Report on Form 10-KSB for the year ended December 31, 1987.

3.5        --Third Amendment to Certificate of Incorporation of the Company dated November 11,
           1994. Incorporated herein by reference to Exhibit 4.4 to the Company's Registration
           Statement on Form S-3 (Registration No. 333-10665).

3.6        --Fourth Amendment to Certificate of Incorporation of the Company dated July 28,
           1995. Incorporated herein by reference to Exhibit 4.5 to the Company's Registration
           Statement on Form S-3 (Registration No. 333-10665).

3.7        --Fifth Amendment to Certificate of Incorporation of the Company dated June 25,
           1997. Incorporated herein by reference to Exhibit 4.6 to the Company's Registration
           Statement on Form S-3 (Registration No. 333-10665).

3.8        --Sixth Amendment to Certificate of Incorporation of the Company dated March 31,
           1998. Incorporated herein by reference to Exhibit 99.1 to the Company's Current
           Report on Form 8-K dated April 13, 1998.

3.9        --Seventh Amendment to Certificate of Incorporation of the Company dated March 31,
           1998. Incorporated herein by reference to Exhibit 99.2 to the Company's Current
           Report on Form 8-K dated April 13, 1998.

3.10       --Eighth Amendment to Certificate of Incorporation of the Company dated April 9,
           1998. Incorporated herein by reference to Exhibit 99.3 to the Company's Current
           Report on Form 8-K dated April 13, 1998.

3.11       --Ninth Amendment to Certificate of Incorporation of the Company dated June 9,
           1999.  Incorporated herein by reference to Exhibit 3.11 to the Company's Annual
           Report on Form 10-KSB for the year ended December 31, 1999.

3.12       --Certificate of Amendment of Certificate of Incorporation of the Company dated
           June 6, 2000.  Incorporated herein by reference to Exhibit 3.1 to the Company's
           Quarterly Report on Form 10-QSB for the period ended June 30, 2000.

4.1        --Certificate of Designation of the Company's Series A, B and C Preferred Stock,
           dated December 27, 1995. Incorporated herein by reference to Exhibit 4.7 to the
           Company's Registration Statement on Form S-3 (Registration No. 333-10665).

4.2        --Certificate of Designation of the Company's Series I Preferred Stock.
           Incorporated herein by reference to Exhibit 4.2 to the Company's Annual Report on
           Form 10-KSB for the year ended December 31, 1998.

4.3        --Certificate of Designation of the Company's Series J Preferred Stock.
           Incorporated herein by reference to Exhibit 4.3 to the Company's Annual Report on
           Form 10-KSB for the year ended December 31, 1998.

4.4        -Certificate of Designation of the Company's Series 1999 Preferred Stock.
           Incorporated herein by reference to Exhibit 4.4 to the Company's Quarterly Report
           on Form 10-QSB for the period ended June 30, 1999.

4.5        -Certificate of Designation of the Company's Series 1999 Non-Voting Preferred
           Stock. Incorporated herein by reference to Exhibit 4.5 to the Company's Quarterly
           Report on Form 10-QSB for the period ended June 30, 1999.
</TABLE>

                                       14
<PAGE>

               4.6       -Certificate of Designation of the Company's Series
                         2000 Non-Voting Preferred Stock. Incorporated herein by
                         reference to Exhibit 4.6 to the Company's Annual Report
                         on Form 10-KSB for the year ended December 31, 1999.

               10.1      --1991 Incentive Stock Option Plan, dated August 14,
                         1991. Incorporated herein by reference to Exhibit 10.10
                         to Lasertechnics' Annual Report on Form 10-KSB for the
                         year ended December 31, 1991. +

               10.2      --Purchase of common stock and Convertible Note
                         Agreement between the Company and J. P. Morgan
                         Investment Corporation, dated July 8, 1994.
                         Incorporated herein by reference to Exhibit 10.19 to
                         the Company's Annual Report on Form 10-KSB for the year
                         ended December 31, 1994.

               10.3      --Note Purchase Agreement dated June 25, 1997, by and
                         among the Company, J. P. Morgan Investment Corporation
                         and Wolfensohn Associates L.P. Incorporated by
                         reference to Exhibit 10.15 to the Company's Quarterly
                         Report on Form 10-QSB for the period ended September
                         30, 1997.

               10.4      --Amendment to Notes and Note Purchase Agreement dated
                         December 31, 1998, by and among the Company, Antiope
                         Partners L.L.C. and J. P. Morgan Investment
                         Corporation. Incorporated herein by reference to
                         Exhibit 10.16 to Amendment No. 1 to the Company's
                         Annual Report on Form 10-KSB for the year ended
                         December 31, 1997.

               10.5      --Series H Preferred Stock Purchase Agreement dated
                         December 29, 1997, by and among the Company and Amphion
                         Ventures L.P. Incorporated herein by reference to
                         Exhibit 10.17 to Amendment No. 1 to the Company's
                         Annual Report on Form 10-KSB for the 10.1 year ended
                         December 31, 1997.

               10.6      --Preferred Stock Purchase Agreement dated October 21,
                         1998 by and between the Company and Amphion Ventures
                         L.P. Incorporated herein by reference to Exhibit 10.8
                         to the Company's Annual Report on Form 10-KSB for the
                         year ended December 31, 1998.

               10.7      --Form of Warrant to purchase shares of the Company's
                         common stock issued to Antiope Partners L.L.C. and
                         Amphion Ventures L.P. Incorporated herein by reference
                         to Exhibit 10.20 to Amendment No. 1 to the Company's
                         Annual Report on Form 10-KSB for the year ended
                         December 31, 1997.

               10.8      --Settlement Agreement dated as of April 21, 1998, by
                         and between the Company and Xerox Corporation.
                         Incorporated herein by reference to Exhibit 10.21 to
                         Amendment No. 1 to the Company's Annual Report on Form
                         10-KSB for the year ended December 31, 1997.

               10.9      --Note Payable Conversion Agreement dated December 31,
                         1998, by and between the Company and Amphion Ventures
                         L.P. Incorporated herein by reference to Exhibit 10.12
                         to the Company's Annual Report on Form 10-KSB for the
                         year ended December 31, 1998.

               10.10     --Note Payable Conversion Agreement dated December 31,
                         1998, by and between the Company and Antiope Partners
                         L.L.C. Incorporated herein by reference to Exhibit
                         10.13 to the Company's Annual Report on Form 10-KSB for
                         the year ended December 31, 1998.

               10.11     --Note Payable Conversion Agreement dated December 31,
                         1998, by and between the Company and J. P. Morgan
                         Investment Corporation. Incorporated herein by
                         reference to Exhibit 10.14 to the Company's Annual
                         Report on Form 10-KSB for the year ended December 31,
                         1998.

               10.12     --Stock and Asset Purchase Agreement dated March 30,
                         1999, by and between the Company and Amphion Ventures
                         L.P. Incorporated herein by reference to Exhibit 10.15
                         to the Company's Annual Report on Form 10-KSB for the
                         year ended December 31, 1998.

               10.13     --Asset Purchase Agreement dated July 15, 1999, by and
                         between the Company and Prism Video, Inc. Incorporated
                         herein by reference to Exhibit 2.1 to the Company's
                         Current Report on Form 8-K dated July 28, 1999.

               10.14     --Convertible Note Payable dated September 30, 1999,
                         executed by the Company payable to Amphion Ventures
                         L.P. in the stated principal amount of up to
                         $6,000,000. Incorporated herein by reference to Exhibit
                         10.12 to the Company's Quarterly Report Form 10-QSB for
                         the period ended September 30, 1999.


                                       15
<PAGE>

               10.15     --Form of Dividend Conversion Agreement by and between
                         the Company and Amphion Ventures L.P. and Jackson Hole
                         Management Co. Incorporated herein by reference to
                         Exhibit 10.13 to the Company's Quarterly Report on Form
                         10-QSB for the period ended September 30, 1999.


               10.16     --Registration Rights Agreement dated September 30,
                         1999 by and between the Company and Amphion Ventures
                         L.P. Incorporated herein by reference to Exhibit 10.14
                         to the Company's Quarterly Report on Form 10-QSB for
                         the period ended September 30, 1999.

               10.17     --Letter Agreement dated December 30, 1999, by and
                         between the Company and Amphion Ventures L.P. regarding
                         the Convertible Note Payable dated September 30, 1999.
                         Incorporated herein by reference to Exhibit 10.17 to
                         the Company's Annual Report on Form 10-KSB for the year
                         ended December 31, 1999.

               10.18     --Non-Voting Common Stock Purchase Warrant dated
                         September 30, 1999, to purchase 180,362 shares of the
                         Company's non-voting common stock, issued to Amphion
                         Ventures L.P. Incorporated herein by reference to
                         Exhibit 10.18 to the Company's Annual Report on Form
                         10-KSB for the year ended December 31, 1999.

               10.19     --Employment Agreement dated July 16, 1999, by and
                         between the Company and Allan Griebenow. Incorporated
                         herein by reference to Exhibit 10.19 to the Company's
                         Annual Report on Form 10-KSB for the year ended
                         December 31, 1999. +

               10.20     --AXCESS Inc. Stock Option Plan. Incorporated herein by
                         reference to Exhibit 4.1 to the Company's Registration
                         Statement on Form S-8 (Registration No. 333-80857). +

               10.21     --AXCESS Inc. Director Compensation Plan. Incorporated
                         herein by reference to Exhibit 4.1 to the Company's
                         Registration Statement on Form S-8 (Registration No.
                         333-80843). +

               10.22     --Stock Purchase Agreement dated March 29, 2000, by and
                         between the Company and incuVest LLC. Incorporated
                         herein by reference to Exhibit 10.22 to the Company's
                         Annual Report on Form 10-KSB for the year ended
                         December 31, 1999.

               10.23     --AXCESS Inc. Non-Employee Directors' Stock Option
                         Plan. Incorporated herein by reference to Exhibit 4.(a)
                         to the Company's Registration Statement on Form S-8
                         (Registration No. 333-98160). +

               10.24     --Amendment No. 1 to the AXCESS Inc. 1991 Incentive
                         Stock Option Plan dated April 26, 2000. Incorporated
                         herein by reference to Exhibit 10.2 to the Company's
                         Quarterly Report on Form 10-QSB for the period ended
                         June 30, 2000. +

               10.25     --Commitment letter dated August 16, 2000, from
                         incuVest LLC regarding the purchase of 500 shares of
                         Series 2000A Preferred Stock. Incorporated herein by
                         reference to Exhibit 10.2 to the Company's Quarterly
                         Report on Form 10-QSB for the period ended September
                         30, 2000.

               10.26     --Demand Note dated as of September 14, 2000, executed
                         by the Company payable to incuVest LLC in the principal
                         amount of $400,000. Incorporated herein by reference to
                         Exhibit 10.1 to the Company's Quarterly Report on Form
                         10-QSB for the period ended September 30, 2000.

               10.27     --Senior Promissory Note dated December 14, 2000,
                         executed by the Company payable to J.P. Morgan
                         Investment Corporation, in the principal amount of
                         $400,000.*

               10.28     --Voting Common Stock Purchase Warrant dated December
                         14, 2000, to purchase 8,000 shares of the Company's
                         voting common stock, issued to J.P. Morgan Investment
                         Corporation.*

               10.29     --Letter dated December 26, 2000, from incuVest LLC
                         regarding conversion of the Demand Note dated September
                         14, 2000, executed by the Company payable to incuVest
                         LLC. in the principal amount of $400,000.*

               10.30     --Letter dated December 29, 2000, from Amphion
                         Ventures, LP to the Company regarding Series A, B, and
                         C Preferred Stock Dividends.*

               10.31     --Letter dated December 29, 2000, from Jackson Hole
                         Management Co. to the Company regarding Series C
                         Preferred Stock Dividends.*


                                       16
<PAGE>

               10.32     --Demand Note dated as of January 12, 2001, executed by
                         the Company payable to incuVest LLC in the principal
                         amount of $264,000.*

               10.33     --Subordinated Promissory Note dated April 30, 1999
                         executed by Amphion Ventures L.P. payable to the
                         Company, in the principal amount of $4,000,000.*

               10.34     -- Security Agreement dated April 30, 1999 by Amphion
                         Ventures L.P. in favor of the Company regarding the
                         Stock and Asset Purchase Agreement dated March 30, 1999
                         by and among Amphion Ventures L.P., Antiope Partners,
                         L.L.C. and the Company.*

               10.35     --Notice of Assignment dated July 28, 1999 from the
                         Company to Amphion Ventures, L.P. regarding the April
                         30, 1999 Purchase Note executed by Amphion Ventures
                         L.P.*

               10.36     --Security Agreement dated July 28, 1999 among the
                         Company and Prism Video, Inc. regarding the
                         Subordinated Promissory Note dated as of April 30, 1999
                         executed by Amphion Ventures L.P. payable to the
                         Company.*

               10.37     --Purchase Note dated July 28, 1999 executed by the
                         Company payable to Prism Video, Inc. and BIL Far East
                         Holdings Limited, in the principal amount of
                         $4,000,000.*

               21.1      --Subsidiaries of the Company.*

               23.1      --Consent of Ernst & Young LLP.*

_________

* Filed herewith
+ Denotes management contract or compensatory plan.

(b) Reports on Form 8-K.
None.

                                       17
<PAGE>

                                  SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 29th day of March, 2001.

                                AXCESS INC.


                                By: /s/ Richard C.E. Morgan
                                    ------------------------------------------
                                    Richard C.E. Morgan, Chairman of the Board

In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the registrant and in the capacities indicated,
on the 29th day of March, 2000.

     SIGNATURE                   CAPACITY

/s/ Richard C.E. Morgan          Chairman of the Board
-----------------------------
Richard C.E. Morgan

/s/ Allan Griebenow              Director, President and Chief Executive Officer
-----------------------------    (Principal Executive Officer)
Allan Griebenow


/s/ James R. Craig               Chief Financial Officer and Secretary
-----------------------------    (Principal Accounting and Financial Officer)
James R. Craig


/s/ Paul J. Coleman, Jr.         Director
-----------------------------
Paul J. Coleman, Jr.


/s/ Robert J. Bertoldi           Director
-----------------------------
Robert J. Bertoldi

/s/ David J. Illingworth         Director
-----------------------------
David J. Illingworth

/s/ Gregory W. Haskell           Director
-----------------------------
Gregory W. Haskell

                                       18
<PAGE>

               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
AXCESS, Inc.

We have audited the accompanying consolidated balance sheets of AXCESS, Inc.
(the Company) as of December 31, 2000 and 1999, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
two years 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. 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 financial position of AXCESS, Inc., at December 31,
2000 and 1999, and the results of its operations and cash flows for the two
years then ended in conformity with accounting principles generally accepted in
the United States.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company's recurring losses from
operations and resulting continued dependence upon access to additional external
financing raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 2. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

                                               /s/ ERNST & YOUNG LLP

Dallas, Texas
February 9, 2001

                                      F-1
<PAGE>

                                  AXCESS INC.
                          Consolidated Balance Sheets
                          December 31, 2000 and 1999


<TABLE>
<CAPTION>
                                                                                                    2000           1999
                                                                                               -------------   ------------
ASSETS
<S>                                                                                            <C>             <C>
Current assets:
    Cash and cash equivalents............................................................      $     454,374   $     69,450
    Accounts receivable - trade, net of allowance for doubtful accounts of
      $23,954 and $0 at December 31, 2000 and 1999, respectively.........................            209,793        459,654
    Inventory............................................................................          1,245,003        845,400
    Prepaid expenses and other...........................................................          1,091,435        695,334
                                                                                               -------------   ------------

        Total current assets.............................................................          3,000,605      2,069,838

Property, plant and equipment, net.......................................................            493,729        544,441
Long-term note receivable - stockholder..................................................          3,902,375      3,902,375
Intellectual property, net...............................................................          4,792,154      6,043,142
Other assets.............................................................................             34,716             --
                                                                                               -------------   ------------

        Total assets.....................................................................      $  12,223,579   $ 12,559,796
                                                                                               =============   ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Accounts payable.....................................................................      $   1,079,154   $    447,889
    Other accrued liabilities............................................................            824,287      1,233,650
    Notes payable:
         Stockholder.....................................................................          1,071,106        980,000
         Other...........................................................................                 --         22,309
    Dividends payable....................................................................              3,680          8,448
                                                                                               -------------   ------------
        Total current liabilities........................................................          2,978,227      2,692,296

    Noncurrent notes payable to Stockholders.............................................          6,078,269      5,921,999
                                                                                               -------------   ------------

        Total liabilities................................................................          9,056,496      8,614,295
                                                                                               -------------   ------------

Stockholders' equity:
    Convertible preferred stock, 7,000,000 shares authorized; 165,187 shares issued
     and outstanding in 2000 and 148,889 in 1999; $45,233,025 aggregate
     liquidation preference in 2000 and $33,598,919 in 1999..............................         45,233,025     33,598,919
    Common stock, $.01 par value, 50,000,000 shares authorized in 2000 and 12,000,000
     in 1999; 3,466,486 shares issued and outstanding in 2000 and 3,298,368 in 1999......             34,665         32,984
    Non-voting convertible common stock, $0.1 par value, 2,250,000 shares authorized;
     112,492 shares issued and outstanding in 2000 and 1999, convertible into common
     stock on a one share for one share basis............................................              1,125          1,125
    Additional paid-in capital...........................................................         69,490,368     61,387,968
    Accumulated deficit..................................................................       (111,592,100)   (91,075,495)
                                                                                               -------------   ------------
        Total stockholders' equity.......................................................          3,167,083      3,945,501
                                                                                               -------------   ------------

        Total liabilities and stockholders' equity.......................................      $  12,223,579   $ 12,559,796
                                                                                               =============   ============
</TABLE>

                            See accompanying notes.

                                      F-2
<PAGE>

                                  AXCESS INC.
                     Consolidated Statements of Operations
                    Years Ended December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                                                                        2000            1999
                                                                                   ------------    -----------
<S>                                                                                <C>             <C>
Sales.........................................................................     $  2,350,736    $ 1,246,880
Cost of sales.................................................................        1,849,505        756,191
                                                                                   ------------    -----------

        Gross profit..........................................................          501,231        490,689
                                                                                   ------------    -----------

Expenses:
    Research and development..................................................        2,551,680      1,733,119
    General and administrative................................................        2,573,321      2,639,166
    Selling and marketing.....................................................        3,204,995      2,560,739
    Depreciation and amortization.............................................        1,772,246        957,565
                                                                                   ------------    -----------
        Operating expenses....................................................       10,102,242      7,890,589
                                                                                   ------------    -----------

        Loss from operations..................................................       (9,601,011)    (7,399,900)

Other income (expense):
    Interest expense..........................................................       (1,176,321)      (624,494)
    Interest income...........................................................          374,854        233,370
    Other.....................................................................           11,044      1,682,456
                                                                                   ------------    -----------
        Other expense, net....................................................         (790,423)     1,291,332
                                                                                   ------------    -----------
        Loss from continuing operations.......................................      (10,391,434)    (6,108,568)

Discontinued operations:
    Loss from operations......................................................               --       (148,080)
    Gain on disposal of discontinued operations...............................               --      1,856,625
                                                                                   ------------    -----------
        Gain from discontinued operations.....................................               --      1,708,545
                                                                                   ------------    -----------

        Net loss..............................................................      (10,391,434)    (4,400,023)

Preferred stock dividend requirements.........................................      (10,125,171)    (3,024,905)
                                                                                   ------------    -----------

        Net loss applicable to common stock...................................     $(20,516,605)   $(7,424,928)
                                                                                   ============    ===========

Basic and diluted net loss per share:

    Continuing operations.....................................................     $      (6.10)   $     (2.90)

    Discontinued operations...................................................                -           0.54
                                                                                   ------------    -----------

    Net loss applicable to per common share...................................     $      (6.10)   $     (2.36)
                                                                                   ============    ===========

Weighed average shares of common stock outstanding............................        3,365,950      3,146,846
                                                                                   ============    ===========
</TABLE>

                            See accompanying notes.

                                      F-3
<PAGE>

                                  AXCESS INC.
                Consolidated Statements of Stockholders' Equity
                    Years Ended December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                                        CONVERTIBLE                               NON-VOTING
                                                      PREFERRED STOCK        COMMON STOCK        COMMON STOCK
                                                   ---------------------  -------------------  ----------------
                                                   NUMBER                  NUMBER              NUMBER             ADDITIONAL
                                                     OF         PAR          OF        PAR       OF       PAR      PAID-IN
                                                   SHARES      VALUE       SHARES     VALUE    SHARES    VALUE     CAPITAL
-------------------------------------------------  -------  ------------  ---------  --------  -------  -------  ------------

<S>                                                <C>      <C>           <C>        <C>       <C>      <C>      <C>
Balance at December 31, 1998.....................  148,247   $27,179,880  2,879,368   $28,794  112,492   $1,125   $58,515,848
  Issuance of Series 1999 Preferred Stock........      125     1,250,000         --        --       --       --            --
  Conversion of convertible notes
     payable to stockholders' into
     Series 2000 Preferred Stock.................      332     3,323,423         --        --       --       --            --
  Issuance of Series I, Series J and
     Series 1999 Preferred stock for
     dividends payable...........................      185     1,845,616         --        --       --       --            --
  Warrant issued in connection with
     acquisition of Prism Video, Inc.
     assets......................................       --            --         --        --       --       --     1,035,000
  Warrants issued with convertible
     debt........................................       --            --         --        --       --       --       422,011
  Issuance of common stock in connection with
   technology license acquisition................       --            --    300,000     3,000       --       --       372,000
  Issuance of common stock upon                                                                     --       --
     exercise of stock options...................       --            --    119,000     1,190       --       --       370,930
  Preferred stock dividends......................       --            --         --        --       --       --       672,179
  Net loss.......................................       --            --         --        --       --       --            --
                                                   -------   -----------  ---------   -------  -------  -------   -----------
Balance at December 31, 1999.....................  148,889    33,598,919  3,298,368    32,984  112,492    1,125    61,387,968
  Purchase of Series 2000 Preferred Stock........      500     5,000,000         --        --       --       --            --
  Conversion of convertible notes
     payable to stockholders' into
     Series 2000 Preferred Stock.................       15       150,000         --        --       --       --            --
  Issuance of Series A, Series B and
     Series C Preferred stock for
     dividends payable...........................   15,176       423,161         --        --       --       --            --
  Issuance of Series I and Series J
     Preferred stock for  dividends payable......      207     2,060,487         --        --       --       --            --
  Issuance of Series 1999 and 2000
     Preferred stock for dividends payable.......       70       700,458         --        --       --       --            --
  Conversion of demand notes
     payable to stockholders into
     Series 2000 Preferred Stock.................      330     3,300,000         --        --       --       --            --
  Warrants issued with convertible
     debt........................................       --            --         --        --       --       --       680,293
  Issuance of common stock upon
     exercise of stock options...................       --            --    168,118     1,681       --       --       476,274
  Preferred stock dividends......................       --            --         --        --       --       --     6,945,833
  Net loss.......................................       --            --         --        --       --       --            --
                                                   -------   -----------  ---------   -------  -------  -------   -----------
Balance at December 31, 2000.....................  165,187   $45,233,025  3,466,486   $34,665  112,492   $1,125   $69,490,368
                                                   =======   ===========  =========   =======  =======  =======   ===========

<CAPTION>
                                                                          TOTAL
                                                       ACCUMULATED    STOCKHOLDERS'
                                                         DEFICIT          EQUITY
-------------------------------------------------    ---------------  --------------

<S>                                                  <C>              <C>
Balance at December 31, 1998.....................     $ (83,650,567)   $  2,075,080
  Issuance of Series 1999 Preferred Stock........                --       1,250,000
  Conversion of convertible notes
     payable to stockholders' into
     Series 2000 Preferred Stock.................                --       3,323,423
  Issuance of Series I, Series J and
     Series 1999 Preferred stock for
     dividends payable...........................                --       1,845,616
  Warrant issued in connection with
     acquisition of Prism Video, Inc.
     assets......................................                --       1,035,000
  Warrants issued with convertible
     debt........................................                --         422,011
  Issuance of common stock in connection with
   technology license acquisition................                --         375,000
  Issuance of common stock upon
     exercise of stock options...................                --         372,120
  Preferred stock dividends......................        (3,024,905)     (2,352,726)
  Net loss.......................................        (4,400,023)     (4,400,023)
                                                      -------------    ------------
Balance at December 31, 1999.....................       (91,075,495)      3,945,501
  Purchase of Series 2000 Preferred Stock........                --       5,000,000
  Conversion of convertible notes
     payable to stockholders' into
     Series 2000 Preferred Stock.................                --         150,000
  Issuance of Series A, Series B and
     Series C Preferred stock for
     dividends payable...........................                --         423,161
  Issuance of Series I and Series J
     Preferred stock for dividends payable.......                --       2,060,487
  Issuance of Series 1999 and 2000
     Preferred stock for dividends payable.......                --         700,458
  Conversion of demand notes
     payable to stockholders into
     Series 2000 Preferred Stock.................                --       3,300,000
  Warrants issued with convertible
     debt........................................                --         680,293
  Issuance of common stock upon
     exercise of stock options...................                --         477,955
  Preferred stock dividends......................       (10,125,171)     (3,179,338)
  Net loss Other.................................       (10,391,434)    (10,391,434)
                                                      -------------    ------------
Balance at December 31, 2000 Net loss............     $(111,592,100)   $  3,167,083
                                                      =============    ============
</TABLE>

                            See accompanying notes.

                                      F-4
<PAGE>

                                  AXCESS INC.
                    Consolidated Statements of Cash Flows
                    Years Ended December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                                                                                         2000           1999
                                                                                                    ------------    -----------
<S>                                                                                                 <C>             <C>
Cash flows from operating activities:
    Loss from continuing operations...............................................................   $(10,391,434)   $(6,108,568)
    Adjustments to reconcile net loss to
      net cash used by operating activities:
        Depreciation and amortization.............................................................      1,772,246        957,565
        Amortization of financing discount and issuance costs.....................................        341,263        158,302
        Gain on sale of assets....................................................................         (6,143)    (2,027,983)
        Changes in operating assets and liabilities:
          Accounts receivables....................................................................        249,861       (302,192)
          Inventory...............................................................................       (402,476)      (176,782)
          Prepaid expenses and other..............................................................       (430,817)      (158,984)
          Other assets............................................................................         (8,000)        10,061
          Accounts payable........................................................................        631,265       (377,938)
          Other liabilities.......................................................................       (406,490)      (666,359)
                                                                                                     ------------    -----------

             Net cash used by operating activities................................................     (8,650,725)    (8,692,878)

Cash flow from investing activities:
    Capital expenditures..........................................................................       (456,402)      (197,954)
    Proceeds from sale of assets..................................................................             --        902,527
    Principal payments on note receivable.........................................................             --         98,249
                                                                                                     ------------    -----------
             Net cash provided (used) by investing activities.....................................       (456,402)       802,822
Cash flow from financing activities:
    Borrowings under financing agreements.........................................................      6,071,399      6,079,139
    Principal payments on financing agreements....................................................     (2,057,302)    (1,188,182)
    Net proceeds from issuance of common and preferred stock......................................      5,477,954        372,120
                                                                                                     ------------    -----------
             Net cash provided by financing activities............................................      9,492,051      5,263,077
    Net cash provided by discontinued operations..................................................             --      1,121,000
                                                                                                     ------------    -----------
    Net increase (decrease) in cash and cash equivalents..........................................        384,924     (1,505,979)
Cash and cash equivalents, beginning of period....................................................         69,450      1,575,429
                                                                                                     ------------    -----------
Cash and cash equivalents, end of period..........................................................   $    454,374    $    69,450
                                                                                                     ============    ===========
Supplemental information:
    Cash paid during the year for interest........................................................   $    295,109    $    78,677
                                                                                                     ============    ===========
</TABLE>

                            See accompanying notes.

                                      F-5
<PAGE>

                                AXCESS INC.
                  Notes to Consolidated Financial Statements
                               December 31, 2000


(1)    Summary of Significant Accounting Policies

   (a) Description of Business

       AXCESS provides computer network-based asset management solutions to
improve asset utilization, operations productivity, physical security,
manufacturing logistics, enterprise resource planning (commonly referred to as
"ERP"), and financial reporting. The Company's products are based on hands-free,
long range radio frequency identification ("RFID") technology used to track and
monitor people, assets, inventory and vehicles, as well as patented digital
video compression technology for enterprise multi-media transmission and digital
recording. The Company's intellectual property includes patented technologies in
wireless, automatic identification and multi-media. In 2000, the Company's
products were further developed as network add-on appliances and coupled with
browser-based software. This enabled the Company to sell complete systems as
opposed to discrete products. The browser software delivers information tailored
to each end user via the enterprise network/Internet, with an added capability
to provide custom alerts in the form of e-mail, or pages to wireless application
protocol ("WAP") enabled devices.

       The future results of operations and financial condition of the Company
will be impacted by the following factors, among others: technological change,
dependence on identifying, developing and marketing product enhancements and new
products, dependence on third party manufacturers, vendors, suppliers and
contractors, dependence on key personnel, intellectual property rights, and
product liability.

   (b) Company Organization and Basis of Presentation

       The accompanying consolidated financial statements include the accounts
of the Company and its majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.

       The Company has received working capital in various forms from Amphion
Ventures, L. P. and affiliates of Amphion Ventures, L. P. including Amphion
Partners, Amphion Investments, Antiope Partners, XL Vision, Inc. and incuVest
LLC (collectively, the "Amphion Group"). If the Amphion Group were to exercise
warrants options which it holds and convert its holdings of convertible
preferred stock, debt and non-voting common stock to common stock, it would have
majority ownership and voting control of the Company. See Notes 9, 10 and 11.

   (c) Use of Estimates

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

   (d) Statements of Cash Flows

       The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.

   (e) Inventory

       Inventory is valued at the lower of cost or market using the first-in,
first-out method. Inventory was comprised of the following at December 31:

                                                   2000         1999
                                               ----------   ----------
                    Raw materials..........    $  571,230   $  585,608
                    Work-in-process........        65,350      113,447
                    Finished goods.........       608,423      146,345
                                               ----------   ----------
                                               $1,245,003   $  845,400
                                               ==========   ==========

                                      F-6
<PAGE>

   (f) Fair Value of Financial Instruments

       The carrying amounts of cash equivalents, accounts receivable, accounts
payable and accrued liabilities approximate fair value because of the short-term
maturity of these instruments.

       The carrying value of the Company's note receivable from stockholder
approximates fair value as it bears interest at rates approximating current
market rates.

       The outstanding borrowings under the Company's long-term notes payable
bear interest at current market rates, and therefore, the carrying amount of
debt approximates estimated fair value at December 31, 2000 and 1999.

   (g) Revenue Recognition

       The Company recognizes revenue on sales of its products when the products
are shipped from the Company. Company policy does not allow customers to return
products for credit. The Company currently provides a one year warranty on all
products. Provision is made at the time the related revenue is recognized for
estimated product repair costs.

       In September 2000, the Company identified a flaw in the manufacturing
process of its version 5.0 RFID tags. Due to the flaw, the effective life of the
tags may be shortened. The Company immediately corrected the manufacturing
process and implemented a plan to replace all version 5.0 RFID tags that had
been sold. The replacement plan was completed in November 2000. The cost of
replacing these tags was $268,823 which was accrued during the three months
ended September 30, 2000 as a component of cost of goods sold. The components of
cost of sales at December 31, 2000 and 1999, are summarized as follows:

                                                  YEARS ENDED DECEMBER 31,
                                                  ------------------------
                                                      2000        1999
                                                   ----------    --------
                          Product Cost             $1,361,034    $692,706
                          Warranty Expense            488,471      63,485
                                                   ----------    --------
                             Cost of sales         $1,849,505    $756,191
                                                   ==========    ========


   (h) Research and Development Costs

       Research and development costs are expensed as incurred. The Company
capitalizes certain costs incurred during an internal-use software development
project, including costs related to applications, infrastructure and graphics
developments. Capitalizable costs consist of (a) certain external direct cost of
materials and services incurred in developing or obtaining internal-use computer
software, (b) payroll and payroll-related costs for employees who are directly
associated with and who devote time to the project and (c) interest cost
incurred. Costs that are considered to be related to research and development
activities, are incurred during the preliminary project stage, or for data
conversion activities, training, maintenance and general administrative or
overhead costs are expensed as incurred. Costs that cannot be separated between
maintenance of, and relatively minor upgrades and enhancements to, the Company's
internally developed software are also expensed as incurred.

   (i) Depreciation and Amortization

       Depreciation of property and equipment is recorded using the straight-
line method over the estimated useful lives of the respective assets. Internally
developed software and purchased technologies (Note 3) are amortized over the
estimated useful lives of the respective technology.

   (j) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

       Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the asset exceeds the fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. Revenues from the sale of the Company's
purchased technologies (Note 3) have grown slowly and the Company has

                                      F-7
<PAGE>

experienced operating losses since the dates of acquisition.  Continued slow
revenue growth and operating losses could result in the recording of an
impairment by the Company.

     (k)  Stock-Based Compensation

          The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees," in the primary financial
statements and has provided supplemental disclosures required by Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (see Note 10).

          In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation" (FIN 44), an interpretation of APB 25. FIN 44, which was adopted
prospectively by the Company as of July 1, 2000, requires certain changes to the
previous practice regarding the accounting for certain stock compensation
arrangements. FIN 44 does not change APB 25's intrinsic value method, under
which compensation expense is generally not recognized for grants of stock
options to employees with an exercise price equal to the market price of the
stock at the date of grant, but it has narrowed its application. The adoption of
FIN 44 did not have a significant effect on the Company's existing accounting
for its employee stock options.

     (l)  Income Taxes

          Deferred tax assets and liabilities are 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. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount more
likely than not to be realized. Income tax expense is the total of tax payable
for the period and the change during the period in deferred tax assets and
liabilities.

     (m)  Net Loss Per Common Share

     Basic loss per share data is computed by dividing the net loss applicable
to common stock by the weighted average number of common shares outstanding
during the year. Diluted earnings per share, which includes the dilutive effect
of the conversion of convertible preferred stock and the convertible debt and
exercise of options and warrants has not been presented because, due to the net
losses recorded by the Company for all periods presented, their inclusion would
be antidilutive. Conversion of convertible preferred stock, convertible debt and
the exercise of options and warrants would result in 18,510,284 and 15,617,476
common shares outstanding at December 31, 2000 and 1999, respectively.

     (n)  Segment Reporting

          The Company operates in one industry segment selling two primary
product lines, digital video and RFID. Sales, cost of sales and gross profits
for each product line are as follows:

                              Digital Video                  RFID
                         ----------------------      --------------------
                            2000         1999          2000        1999
                         ----------    --------      --------    --------
          Sales          $1,527,135    $817,421      $823,601    $429,459
          Cost of Sales     943,183     388,099       906,322     368,092
                         ----------    --------      --------    --------
          Gross Profit   $  583,952    $429,322      $(82,721)   $ 61,367
                         ==========    ========      ========    ========

     (o)  Recent Accounting Pronouncements

          In June 1998, Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"), was
issued. SFAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as "derivatives") and for hedging
activities. It requires that all derivatives be recognized as either assets or
liabilities at fair value. The accounting for gains and losses from changes in
fair value of a derivative depends on the intended use of the derivative and its
resulting classification as one of three designated types of hedges or as a non-
hedging instrument. SFAS 133 was adopted by the Company January 1, 2001. The
adoption of this statement did not have a material impact on the Company's
financial statements and related disclosures.

                                      F-8
<PAGE>

(p)    Advertising Costs

       Advertising costs are expensed as incurred and totaled approximately
$716,440 and $225,128 during 2000 and 1999, respectively.

(2)    Operations, Liquidity and Going Concern

       The Company's operations in 2000 and 1999 generated operating losses of
$10,391,434 and $6,108,568 respectively. Although the Company raised gross
proceeds of approximately $9 million and $6 million during 2000 and 1999,
through equity and debt financing transactions, the Company's operations,
capital expenditures and debt service requirements have utilized substantially
all of such proceeds through March 2001. These factors raise substantial doubt
about the Company's ability to continue as a going concern.

       The Company's business plan for 2001 is predicated principally upon the
successful marketing of its RFID and digital video products. The Company
anticipates that its existing working capital resources and revenues from
operations will not be adequate to satisfy its funding requirements in 2001.

       The Company's future working capital requirements will depend upon many
factors, including the extent and timing of the Company's product sales, the
Company's operating results and the status of competitive products. The
Company's actual funding needs will depend on numerous factors, including actual
expenditures and revenues generated from its operations compared to its business
plan. If the Company's losses continue, the Company will have to obtain funds to
meet its cash requirements through business alliances, such as strategic or
financial transactions with third parties, the sale of securities or other
financing arrangements, or the Company may be required to curtail its operations
or seek a merger partner. Any additional funding may be on terms that are
unfavorable to the Company or disadvantageous to existing stockholders. In
addition, no assurance may be given that the Company will be successful in
raising additional funds or entering into business alliances.

       The Company is actively seeking investors to raise additional capital.
Through March 16, 2001, incuVest provided $1,675,000 of additional working
capital through loans under demand notes. However, no assurance can be given
that such funding will continue, and incuVest has the right to call the balance
of the demand notes at any time. The Company does not have the ability to
satisfy such a demand, if made.


(3)    Acquisitions

   (a) Prism Video Assets

       On July 28, 1999, the Company acquired substantially all of the assets,
including the network video technology, of Prism Video, Inc. ("Prism"), a
privately held corporation engaged in the design, manufacture and marketing of
video security technology and video storage products.

       The purchase price, which is subject to adjustment in accordance with the
terms of the purchase agreement, consisted of:

<TABLE>
<S>                                                                                               <C>
                    Non-interest bearing note payable, due December 31, 2002
                       discounted at 10%....................................................      $3,100,725
                    125 shares of Series 1999 Voting Preferred Stock, $10,000 per
                      share stated value, convertible into 500,000 shares of common
                      stock at a conversion price of $2.50 per share........................       1,250,000
                    Warrant to purchase 500,000 shares of common stock at $2.50 per
                      share.................................................................       1,035,000
                    Assumption of accounts payable..........................................         358,887
                                                                                                  ----------
                                                                                                  $5,744,612
                                                                                                  ==========
</TABLE>

       The note payable has a face amount of $4,000,000 and is secured by the
Company's $3,902,375 note receivable from Amphion Ventures, L.P. ("Amphion
Ventures") (Note 4). Pursuant to the Asset Purchase Agreement between AXCESS and
Prism, AXCESS assigned Prism all payments of principal to be made by Amphion
under the note receivable until the balance of the note receivable is paid in
full or the balance due under the note payable to Prism is paid in full,
whichever occurs first. In addition, the shares of common stock which Prism may
acquire upon conversion of preferred stock or by exercise of the warrant are
subject to a

                                      F-9
<PAGE>

three-year lockup from the date of the closing, which may be reduced to two
years upon the occurrence of certain events. The warrant is exercisable on or
before July 28, 2004.

       The purchase price has been allocated to the assets and liabilities
acquired as follows:



           Accounts receivable...................    $  138,443
           Inventory.............................       412,402
           Purchased technology..................     5,079,483
           Other assets, net.....................       114,284
                                                     ----------
           Total purchase price..................    $5,744,612
                                                     ==========

       The purchased technology consists of proprietary digital video
compression technology used in video and closed circuit television (CCTV)
products as well as the related U.S. and international patent rights. The
purchased technology is being amortized over an average life of five years.

       The following unaudited pro forma information presents the Company's
results of operations as if the acquisition of the Prism assets had occurred as
of January 1, 1999. The pro forma information has been prepared by combining the
results of operations of the Company and Prism for the year ended December 31,
1999, adjusted for the additional amortization of the purchase technology. This
pro forma information does not purport to be indicative of what would have
occurred had the acquisition occurred as of that date, or of results of
operations that may occur in the future.


           Revenue                                            $ 1,793,347
                                                              ===========
           Net loss                                           $(8,916,785)
                                                              ===========
           Basic and diluted net loss per common share        $     (2.83)
                                                              ===========

 (b)   RFID Technology

       In September 1998, the Company consummated the acquisition of the RFID
based (Radio Frequency Identification) intellectual property assets of ASGI,
Inc., and Nauta, Inc. (collectively, the "Sellers"). The intellectual property
assets acquired included a patent, trade secret rights, software, hardware,
product designs and all other technical information necessary for the Company to
manufacture and market radio frequency identification products in the areas of
access control and asset management. At closing, the Company made a cash payment
of $415,000, signed a one-year promissory note for $685,000, interest at the
prime rate, and delivered 400,000 shares of its common stock. The note was paid
in full in 1999. Up to an aggregate of an additional $6,000,000 is payable by
the Company to the Sellers only if certain net operating profit targets are
realized during each of the next five years. Such amounts will be treated as
additional cost of the RFID technology, if and when paid, and amortized over the
remaining economic life of the technology. At December 31, 2000 no additional
consideration was due to the Sellers.

(4)    Discontinued Operations

       On April 30, 1999, the Company completed the sale of its Lasertechnics
Marketing Corporation ("LMC") subsidiary to companies included in the Amphion
Group. The Company's rights and interests in certain products and technology
under development were also included in the sale. The Company received $0.5
million in cash, $2.0 million in debt cancellation, a $4.0 million note
receivable due March 2002 (or 2004 under certain conditions), a $0.5 million
demand note receivable and a warrant to purchase equity in the Amphion Group
controlled enterprise to which these business and assets were transferred with
an exercise price of $2.50 per share, representing approximately 8% of that
enterprise. If LMC is subsequently sold prior to April 2001 by the Amphion Group
controlled enterprise, the Company has the option to exchange its warrant for
20% of the excess profits (as defined in the acquisition agreements) from any
such sale. The Company realized a gain of $3,900,734 from the disposition of LMC
and the technology assets in the quarter ended June 30, 1999. Of the gain,
$1,856,625 resulted from the sale of LMC and was reported as a gain from
discontinued operations. The remainder of the gain, $2,044,109, was attributable
to the sale of the other technology assets and was included in continuing
operations. The results of the imaging business and LMC are presented as
discontinued operations in the accompanying statement of operations for the year
ended December 31, 1999.

     A claim has been made by the Amphion Group controlled enterprise regarding
representations and warranties contained in

                                     F-10
<PAGE>

the purchase and sale agreement. The Company is vigorously contesting this
matter and believes that their ultimate resolution of this matter will not have
a material adverse effect on its consolidated financial position, results of
operations or cash flows. The purchaser's ability to assert additional claims
for indemnification expired on December 31, 1999. As of December 31, 2000 no
additional claims have been made with respect to this matter.

(5)    Prepaid Expenses And Other Current Assets

       Prepaid expenses and other consists of the following at December 31:

                                                         2000        1999
                                                     ----------   --------
                     Prepaid insurance.............  $    8,143   $ 66,325
                     Prepaid interest..............     513,053    316,508
                     Prepaid other.................      84,255    151,850
                     Interest receivable...........     485,984    160,651
                                                     ----------   --------
                                                     $1,091,435   $695,334
                                                     ==========   ========

       Prepaid interest results from the warrants issued in connection with the
10% convertible note payable to the Amphion Group and a warrant issued in
connection with the extension of the J P Morgan note payable. See Note 10.
Interest receivable results from the note receivable from the Amphion Group. See
Note 4.

(6)    Property, Plant and Equipment

       Property, plant and equipment consists of the following at December 31:

<TABLE>
<CAPTION>
                                                                                               AMORTIZATION/
                                                                                               DEPRECIATION
                                                                        2000         1999         PERIOD
                                                                     ----------   ----------   -------------
<S>                                                                  <C>          <C>          <C>
               Leasehold improvements.. ....................         $   80,775   $   64,189     Lease term
               Machinery and equipment......................          1,294,828    1,151,651       5 years
               Furniture and fixtures.......................            113,909       99,362    5 to 10 years
                                                                     ----------   ----------
                                                                      1,489,512    1,315,202
               Accumulated depreciation and
                 Amortization...............................           (995,783)    (770,761)
                                                                     ----------   ----------
               Property, plant and
                 equipment, net.............................         $  493,729   $  544,441
                                                                     ==========   ==========
</TABLE>

       Depreciation totaled $231,165 and $206,775 during 2000 and 1999,
respectively.

(7)    Intellectual property, net


       Intellectual property, net consists of the following at December 31:




                                                        2000          1999
                                                        -------    ----------
                   Purchased RFID technology         $ 1,714,449   $1,714,449
                   Purchased Video technology          5,087,483    5,079,483
                   Internally developed software         282,093           --
                                                     -----------   ----------
                                                       7,084,025    6,793,932
                   Accumulated amortization           (2,291,871)    (750,790)
                                                     -----------   ----------
                   Intellectual property, net        $ 4,792,154   $6,043,142
                                                     ===========   ==========

       Amortization expense of intellectual property totaled $1,541,080 and
$750,790 during 2000 and 1999, respectively.

                                     F-11
<PAGE>

(8)    Accrued Liabilities

     Accrued liabilities consist of the following at December 31:

<TABLE>
<CAPTION>
                                                                                       2000            1999
                                                                                     --------       ----------
<S>                                                                                  <C>            <C>
               Accrued vacation................................................      $220,831       $  151,005
               Accrued interest................................................       317,532          224,911
               Accrued legal, litigation settlements and other.................       285,924          857,734
                                                                                     --------       ----------
                                                                                     $824,287       $1,233,650
                                                                                     ========       ==========
</TABLE>

(9)    Lease Obligations

       The Company leases its office space and certain equipment under operating
leases. The rental expense recorded for operating leases was $263,391 and
$235,668 for the years ended December 31, 2000 and 1999, respectively. At
December 31, 2000, future minimum lease payments on operating leases were as
follows:

                  YEARS ENDING DECEMBER 31,
               ---------------------------------

                 2001...........................    $205,174
                 2002...........................      99,016
                 2003...........................      72,572
                 2004...........................      69,148
                 2005...........................      47,169
                                                    --------
                                                    $493,079
                                                    ========

(10)   Notes Payables

       Note payables consist of the following at December 31:

<TABLE>
<CAPTION>
                                                                                  2000             1999
                                                                               ----------       ----------
<S>                                                                           <C>               <C>
              Due to stockholders:
                 Amphion Convertible Note.............................         $2,477,979       $2,662,972
                 Non interest bearing note, due December 31, 2002,
                   discounted at 10% (Note 3).........................          3,600,290        3,259,027
                 Note Purchase Agreement..............................            400,000          400,000
                 10% note payable to Amphion..........................            580,000          580,000
                 9.5% demand note payable to incuVest.................             91,106               --
                                                                               ----------       ----------
                                                                                7,149,375        6,901,999
                 Less current maturities..............................          1,071,106          980,000
                                                                               ----------       ----------
                 Non-current notes payable to stockholders............         $6,078,269       $5,921,999
                                                                               ==========       ==========

              Other current notes payable                                      $       --       $   22,309
                                                                               ==========       ==========
</TABLE>

       On September 30, 1999, the Company signed a 10% convertible note maturing
September 30, 2002 ("Amphion Convertible Note"), under which the Company could
borrow up to $6,000,000 from Amphion Ventures. Amphion Ventures may convert all
or any portion of the indebtedness into Series 1999 Non-Voting Preferred Stock
of the Company. Initial borrowings totaling $3,787,275 were used to refinance a
portion of the outstanding borrowings and accrued interest under the Note
Purchase Agreement and the 10% note payable to Amphion. In consideration for the
financing arrangement, the Company issued warrants to acquire 180,362 shares in
1999 and 117,999 shares in 2000 of the Company's non-voting common stock at an
exercise price of $2.10 per share. The Company may be required to issue
additional warrants covering up to an aggregate of 558,782 shares of non-voting
common stock based on the outstanding balance of the convertible notes on the
second anniversary date. The warrants issued in 1999 and 2000 were valued at
$422,011 and $666,694, respectively, and recorded as prepaid interest amortized
over 12 months. On December 31, 1999, the Amphion Group elected to convert
$3,323,423 of borrowings into 332 shares of Series 2000 Non-Voting Preferred
Stock. On April 1, 2000, Amphion Ventures, L.P. elected to convert $150,000 of
borrowings under the Amphion Convertible Note into 15 shares of the Company's
Series 2000 Non-Voting Preferred Stock. No additional borrowings were available
to the Company under the Amphion

                                     F-12
<PAGE>

Convertible Note at December 31, 2000 or 1999. See (Note 10).

     On September 14, 2000 the Company issued a 9.5% note, in the original
principal amount of $400,000 to incuVest LLC (incuVest). At December 26, 2000,
borrowings under this note totaled $3,391,106. The principal outstanding under
this note may be converted into equity securities of the Company at the option
of incuVest. On December 26, 2000 incuVest elected to convert $3,300,000 of
these borrowings into 330 shares of the Company's Series 2000 Non-Voting
Preferred Stock, par value $.01 per share (the "Series 2000 Preferred Stock").
The outstanding borrowings are due and payable on demand by incuVest.

     On December 14, 2000, J. P. Morgan Investment Corporation agreed with the
Company to extend the maturity date of the $400,000 balance remaining under the
Note Purchase Agreement due December 31, 1999 by one year. The balance of the
indebtedness under the senior notes issued under the Note Purchase Agreement is
now due in full by the Company on December 14, 2001. The Company issued warrants
to purchase 8,000 shares of common stock for $5.00 in consideration for
extending the term of indebtedness. The warrants were valued at $13,600, which
is being amortized as interest expense over the remaining term of the loan.

     The aggregate maturities of the Company's note payables for 2001 are
$1,071,106 and 2002 are $6,078,269.


                                     F-13
<PAGE>

                  (11)     Preferred Stock

         The Company has authorized 7,000,000 shares of convertible preferred
stock, of which shares designated in seven series were outstanding during 2000
and 1999. Information with respect to the series of preferred stock outstanding
at each balance sheet date is summarized below:


<TABLE>
<CAPTION>
                                                         Series A     Series B          Series C    Series I
                                                       ------------- -----------      ------------ -----------
                    <S>                               <C>           <C>              <C>          <C>
                    Number of shares authorized.....    1,500,000    1,500,000         1,500,000      2,500

                    Stated value....................  $     26.00   $    28.40        $    30.20   $ 10,000

                    Number of shares issued and
                      outstanding:

                         December 31, 1998..........       57,692       52,817            35,427        623

                         December 31, 1999..........       57,692       52,817            35,427        635

                         December 31, 2000..........       63,691       58,309            39,112        688

                    Conversion ratio (or
                      conversion price) of
                      preferred shares into
                      common........................  1 to 1 into    1 to 1 into        1 to 1 into   $4.00 into
                                                         voting         voting             voting       voting
                                                         common         common             common       common
                                                         stock           stock              stock        stock

                    Liquidation preference.......... Stated value     Stated value     Stated value   Stated value
                                                      plus accrued     plus accrued     plus accrued  plus accrued
                                                       dividends        dividends       dividends      dividends

                    Dividend rights.................    10% per          10% per         10% per      8% per
                                                         annum,           annum,          annum,      annum,
                                                       cumulative       cumulative      cumulative  cumulative
</TABLE>

<TABLE>
<CAPTION>
                                                                            Series    Series 2000
                                                            Series J         1999      Non-Voting
                                                         --------------  ----------- -------------
                    <S>                                  <C>             <C>         <C>
                    Number of shares authorized.....            2,500        2,500         2,500

                    Stated value....................      $    10,000     $ 10,000    $   10,000

                    Number of shares issued and
                     outstanding:

                         December 31, 1998..........            1,688            -             -

                         December 31, 1999..........            1,857          129           332

                         December 31, 2000..........            2,011          140         1,236

                    Conversion ratio (or
                      conversion price) of
                      preferred shares into
                      Common........................      $4.00 into      $2.50 into  $3.50 into
                                                          non-voting        voting    non-voting
                                                            common          common      common
                                                            stock           stock        stock

                    Liquidation preference..........   Stated value     Stated value   Stated value
                                                       plus accrued     plus accrued   plus accrued
                                                          dividends       dividends    dividends

                    Dividend rights.................        8% per          8% per      8% per
                                                            annum,          annum,      annum,
                                                          cumulative      cumulative  cumulative
</TABLE>

In addition, 2,500 shares of Series 1999 Non-Voting Preferred Stock were
authorized in 1999 in connection with the

                                     F-14
<PAGE>

Amphion convertible note. Through December 31, 2000, no shares had been issued.

       All series of preferred stock rank senior in right of payment to the
Company's common stock and on a party with all series of preferred stock as to
dividends or upon a liquidation or dissolution of the Company.

  (a)  Series A, B and C Convertible Preferred Stock

       Each share of Series A, B, and C Convertible Preferred Stock is
convertible at the option of the holders into voting common stock on a
share-for-share basis and entitled to vote as if converted into voting common
stock. The Company may redeem the Series A, B and C Convertible Preferred Stock
at any time at stated value plus accrued dividends, subject to the stockholder's
right to convert to voting common stock for 10 business days following receipt
of the Company's notice of redemption.

       During 2000, the Company issued (a) 5,999 shares of Series A Preferred
Stock to holders thereof as payment in full for $155,961 of accrued, but unpaid
dividends on the Series A Preferred Stock, (b) 5,492 shares of Series B
Preferred Stock to the holders thereof for $155,961 of accrued, but unpaid
dividends of the Series B Preferred Stock and (c) 3,685 shares of Series C
Preferred Stock to the holders thereof for $111,239 of accrued, but unpaid
dividends on the Series C Preferred Stock.

       The holders of the Company's Series A, B, and C Preferred Stock are
entitled to receive quarterly dividends on each such share held at the annual
rate of 10% of the original issue price of each share payable in arrears, when,
as and if declared by the Company's board of directors, in cash or additional
shares of preferred stock at the option of the holder. There were no dividends
in arrears on the Series A, B, and C Convertible Preferred Stock at December 31,
2000 and 1999. There were no dividends payable for Series A, B and C Preferred
Stock at December 31, 2000. Dividends payable for Series A, B and C Preferred
Stock totaled $1,424 at December 31, 1999.

  (b)  Series G, H, I and J Convertible Preferred Stock

       In connection with the issuance of the Company's Series G Preferred Stock
and the Series H Preferred Stock during 1997 and 1998, the Company agreed with
the initial holders of the Series G Preferred Stock and the Series H Preferred
Stock, that if, at any time prior to December 31, 1999, the Company were to
complete an equity financing raising at least $3,000,000 in new equity, such
initial holders would have the non-assignable right (the "Reset Right"), but not
the obligation to exchange all or a portion of their shares of Series G
Preferred Stock or Series H Preferred Stock for shares of a new series of
preferred stock with substantially the same terms and conditions offered to the
participants in the new equity financing.

       In connection with its exercise of the Reset Right, Amphion Ventures
exchanged all 405 shares of Series G Preferred Stock held by it for 405 shares
of Series I Preferred Stock and all 792 shares of Series H Preferred Stock held
by it for 792 shares of Series J Preferred Stock. Also, Antiope Partners
converted all 50 shares of Series G Preferred Stock held by it for 50 shares of
Series I Preferred Stock and the other holder converted all 40 shares of Series
G Preferred Stock held by it for 40 shares of Series I Preferred Stock.

       Each Share of Series I Preferred Stock and Series J Preferred Stock is
convertible in whole or in part at any time at the option of the holder into a
number of shares of voting or non-voting common stock of the Company,
respectively, equal to the quotient of (a) the aggregate original issue price of
$10,000 per share divided by (b) the conversion price of $4.00 per share. The
Series I Preferred Stock and the Series J Preferred Stock are both subject to
the optional redemption at any time by the Company, in whole or in part, at a
redemption price per share equal to the stated value, plus any accrued, but
unpaid dividends thereon. The Company's optional right of redemption is subject
to each Series I Preferred Stock or Series J Preferred Stock holder's right to
convert such Series I Preferred Stock or Series J Preferred Stock into voting or
non-voting common stock, as the case may be, within ten business days after the
Company's notice of redemption.

       The Series I Preferred Stock and the Series J Preferred Stock are also
subject to the mandatory conversion by the Company into shares of the Company's
voting or non-voting common stock, as the case may be, if the closing bid price
of the Company's common stock on the NASDAQ SmallCap Market is at least $10.00
per share for a period of at least ninety (90) consecutive trading days.
Although the Company's non-voting common stock may be converted to common stock
at any time by a holder thereof, Amphion Ventures has agreed not to convert any
shares of non-voting common stock to voting common stock without the prior
consent of the Company.

       The dividends on the Series I Preferred Stock and the Series J Preferred
Stock are payable semi-annually in cash or additional shares of preferred stock
at the Company's option. During 1999 the Company offset accrued dividends
payable to the Amphion Group

                                      F-15
<PAGE>

against a $1,030,624 note receivable from the Amphion Group. During 2000 and
1999, the Company issued (a) 53 and 12 shares, respectively, of Series I
Preferred Stock to holders thereof as payment in full for $526,186 and $120,000,
respectively, of accrued but unpaid dividends on the Series I Preferred Stock
and (b) 154 and 169 shares, respectively, of Series J Preferred Stock to holders
thereof as payment in full for $1,534,301 and $1,684,073, respectively, of
accrued, but unpaid dividends on the Series J Preferred Stock. Dividends payable
of $3,680 and $6,673 for Series I and J Preferred Stock were accrued at December
31, 2000 and 1999, respectively.

  (c)  Series 1999 and 2000 Preferred Stock

       In connection with the purchase of the Prism video assets during 1999,
the Company issued 125 shares of Series 1999 Preferred Stock ("Series 1999
Preferred Stock"). Dividends are payable semi-annually in cash or in additional
shares of Series 1999 Preferred Stock at the option of the Company.

       The shares of common stock which Prism may acquire upon conversion of the
Series 1999 Preferred Stock are subject to a three-year lockup from the date of
the closing, which may be reduced to two years upon the occurrence of certain
events.

       As described in Note 9, the Company had borrowed a total of $5,986,395
from the Amphion Group under the terms of the Amphion Convertible Note. In
December 1999, the Amphion Group elected to convert $3,323,423 of the
outstanding indebtedness of the Company under the Amphion Convertible Note into
shares of Series 2000 Non-Voting Preferred Stock ("Series 2000 Preferred
Stock"). As a result of this debt conversion, the Company issued 332 shares of
Series 2000 Preferred Stock to the Amphion Group. On April 1, 2000, Amphion
Ventures, L.P. elected to convert an additional $150,000 of borrowing under the
Amphion Convertible Note into 15 shares of the Company's Series 2000 Preferred
Stock.

       On March 29, 2000, the Company completed a private equity placement with
the Amphion Group. In connection with that transaction the Company received
$5,000,000 and issued 500 shares of Series 2000 Preferred Stock.

       On December 31, 2000, incuVest LLC elected to convert $3,300,000 of
borrowings under a 9.5% demand note (Note 9), into 330 shares of the Company's
Series 2000 Preferred Stock.

       Each share of Series 1999 and Series 2000 Preferred Stock is convertible
in whole or in part at any time at the option of the holder into a number of
shares of voting or non-voting common stock of the Company, as the case may be,
equal to the quotient of (a) the aggregate original issue price of $10,000 per
share divided by (b) the conversion price of $2.50 or $3.50, respectively.

       The holders of Series 1999 and Series 2000 Preferred Stock are entitled
to receive semi-annual dividends on each such share held by the annual rate of
8% of the original issue price of each share payable in arrears, when, as and if
declared by the Company's board of directors, in cash or additional shares of
preferred stock at the option of the Company.

       During 2000 and 1999, the Company issued (a) 11 and 4 shares,
respectively, of Series 1999 Preferred Stock to the holders thereof as payment
in full for $107,013 and $41,543 of accrued, but unpaid dividends of the Series
1999 Preferred Stock and (b) 59 shares of Series 2000 Preferred Stock to the
holders thereof as payment in full for $593,445 of accrued, but unpaid dividends
of the Series 2000 Preferred Stock. There were no dividends payable for Series
2000 Preferred Stock at December 31, 2000. Dividends payable of $351 were
accrued at December 31, 1999.

       The Series 1999 Preferred Stock and the Series 2000 Preferred Stock are
both subject to the optional redemption at any time by the Company, in whole or
in part, at a redemption price per share equal to the stated value, plus any
accrued, but unpaid dividends thereon. The Company's optional right of
redemption is subject to each Series 1999 Preferred Stock or Series 2000
Preferred Stock holder's right to convert such Series 1999 Preferred Stock or
Series 2000 Preferred Stock, as the case may be, into voting or non-voting
common stock, as the case may be, within ten business days after the Company's
notice of redemption.

       The Series 1999 Preferred Stock and the Series 2000 Preferred Stock are
also subject to the mandatory conversion by the Company into shares of the
Company's voting or non-voting common stock, as the case may be, if (a) the
closing bid price of the Company's common stock on the NASDAQ SmallCap Market is
at least $7.50 per share for a period of at least twenty (20) consecutive
trading days and (b) the trading volume of the common stock on the NASDAQ
SmallCap Market is at least 50,000 shares per day as measured by NASDAQ during
each of such twenty (20) consecutive trading days.

                                      F-16
<PAGE>

  (d)  Preferred Stock dividend requirements

       Preferred stock dividend requirements consisted of the following:


                                            YEARS ENDED DECEMBER 31,
                                            ------------------------
                                               2000         1999
                                            -----------   ----------
Accrual of preferred stock dividend         $ 3,179,338   $1,212,231
Beneficial conversion features                6,945,833      672,179
                                            -----------   ----------
                                            $10,125,171   $1,884,410
                                            ===========   ==========

       On December 31, 1999, the Company issued 109 and 4 shares of Series J and
Series 1999 Preferred Stock, respectively, to its preferred stockholders for
payment of accrued dividends on the Series A, B, C, I, J and 1999 Preferred
Stock.  As the shares of Series J and 1999 Preferred Stock granted were
convertible into shares of common stock at a price less than the fair market
value of the common stock at December 31, 1999, the Company recorded additional
preferred stock dividends of $672,179.

       On March 31, 2000, as a result of a private equity placement with the
Amphion Group, the Company received $5,000,000 and issued 500 shares of Series
2000 Preferred Stock.  These shares of Series 2000 Preferred Stock were
convertible into shares of common stock at a price less than the market value of
the common stock on the date of issuance.  As a result, the Company recorded
additional preferred stock dividends of $5,000,000 for this beneficial
conversion feature.

       On September 30, 2000, the Company issued 39, 114, 8, and 41 shares of
Series I, J, 1999, and 2000 Preferred Stock, respectively, to its preferred
stockholders for payment of accrued Preferred Stock dividends totaling
$2,014,447.  As the shares were convertible into shares of common stock at a
price less than the fair market value of the common stock at September 30, 2000,
the Company recorded additional preferred stock dividends of $1,431,642.

       On December 26, 2000, incuVest LLC (incuVest) elected to convert
$3,300,000 of borrowings (Note 9) into 330 shares of the Company's Series 2000
Preferred Stock. As the shares of 2000 Preferred Stock granted were convertible
into shares of common stock at a price less than the fair market value of the
common stock at December 26, 2000, the Company recorded additional preferred
stock dividends of $471,429.

       On December 29, 2000, the Company issued 3 shares and 18 shares of Series
1999 and Series 2000 Preferred Stock, respectively, to its preferred
stockholders for payment of accrued dividends totaling $209,673.  As the shares
of Series 1999 and 2000 Preferred Stock granted were convertible into shares of
common stock at a price less than the fair market value of the common stock at
December 29, 2000, the Company recorded additional preferred stock dividends of
$42,762.

(12)   Stock Options and Warrants

   (a) Stock Option Plans.

       Under the Company's 1991 Stock Option Plan, the Company may grant up to
2,000,000 shares of common stock to its employees. The exercise price of each
option is not less than the market price of the Company's stock on the date of
grant and an option's maximum term is ten years. Options granted vest over a
four-year period. The Company has issued stock options to various members of the
Board of Directors and officers of the Company under this plan. Options are
generally granted each year and have various vesting requirements. During 2000
and 1999, the Company made grants of 150,000 and 750,000 options, respectively,
as an inducement for the employment of certain officers of the Company, which do
not reduce the 2,000,000 options available for grant under the stock option
plan.


                                      F-17
<PAGE>

     In 1998, the Company adopted a director compensation plan pursuant to which
it pays each director who is not employed by the Company and who does not
beneficially own more than 5% of the shares of common stock outstanding an
annual grant of 5,000 options to acquire common stock of the Company at an
exercise price equal to the fair market value per share of the common stock at
the time the option is granted (the "Annual Grant"). The Annual Grant
customarily occurs on the date of the Company's annual meeting. The director
compensation plan also provided for an one-time initial grant of 15,000 to each
director of the Company as of July 21, 1998, the date the director compensation
plan was approved by the Company's stockholders (the "Initial Grant"). The
Company has authorized 150,000 shares for issuance under this plan.

     Stock option transactions for the years ended December 31, 2000 and 1999
are summarized below:

<TABLE>
<CAPTION>
                                                                                           2000                     1999
                                                                                   ---------------------     -------------------
                                                                                                WEIGHTED                WEIGHTED
                                                                                                AVERAGE                 AVERAGE
                                                                                                EXERCISE                EXERCISE
                                                                                   OPTION        PRICE       OPTION      PRICE
                                                                                   -------      --------     ------     --------
<S>                                                                               <C>           <C>        <C>          <C>
                Options outstanding at
                   Beginning of year...........................................   1,216,127      $2.66       684,891     $  3.00
                Options granted................................................     683,211       5.57     1,034,500        2.60
                Options exercised..............................................    (168,118)      2.84      (119,040)       3.13
                Options forfeited..............................................     (28,982)      4.07      (366,224)       2.97
                Options canceled...............................................          --                  (18,000)       3.00
                                                                                  ---------                ---------
                Options outstanding at
                   end of year..................................................  1,702,238       3.79     1,216,127        2.66
                                                                                  =========                =========
                Options exercisable at
                   end of year..................................................    237,749       2.59       119,750        3.00
                                                                                  =========                =========
                Options available for
                   grant at the end of
                   the year.....................................................  1,197,762                  340,710
                                                                                  =========                =========
</TABLE>



     The options outstanding at December 31, 2000 have exercise prices which
range from $2.50 to $6.25 and a weighted average remaining life of 9.3 years.

 (b) Statement of Financial Accounting Standard No. 123 ("FAS 123")

     FAS 123 requires disclosure of pro forma net earnings and net earnings per
common share information computed as if the Company had accounted for its
employee stock options under the fair value method set forth in FAS 123. The
fair value of the Company's outstanding stock options was estimated at the date
of grant using a Black-Scholes option-pricing model with the following weighted
average assumptions:

<TABLE>
<CAPTION>
                                                                      YEARS ENDED DECEMBER 31,
                                                                   ---------------------------
                                                                       2000           1999
                                                                   ------------   ------------
<S>                                                                <C>            <C>
          Expected option life in years..........................       5.00           5.00
          Risk-free interest rate................................       6.17%          5.85%
          Volatility factor......................................       0.87%          1.05%
</TABLE>



     The Company does not have a history of paying cash dividends and none have
been assumed in estimating the fair value of its options.

     The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including expected stock price
volatility. Because, among other things, changes in the subjective input
assumptions can materially

                                      F-18
<PAGE>

affect the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable measure of the fair value of its employee
stock options. For purposes of pro forma disclosures, the estimated fair value
of the options is amortized to expense over the options' vesting periods.

<TABLE>
<CAPTION>
                                                                                             YEARS ENDED DECEMBER 31,
                                                                                      -------------------------------------
                                                                                           2000            1999
                                                                                      -----------------   -----------------
<S>                                                                                   <C>                 <C>
                Pro forma net loss applicable
                  to common stock.................................................         $(21,404,375)        $(7,657,948)
                                                                                           ============        ===========
                Pro forma basic and diluted
                  net loss per share..............................................                (6.36)        $     (2.43)
                                                                                           ============         ===========
                Weighted average fair value of options granted during the
                  Year............................................................         $       3.99         $      2.05
                                                                                           ============         ===========
</TABLE>


     The Company has issued warrants to purchase common stock in connection with
issuance of notes payable to stockholders, convertible debentures, and preferred
stock. The following table summarizes warrants outstanding at December 31:

<TABLE>
<CAPTION>
                                             2000                                                   1999
                        ------------------------------------------------        --------------------------------------------------
                                           EXERCISE                                               EXERCISE
                         WARRANTS           PRICE            EXPIRATION         WARRANTS            PRICE            EXPIRATION
                        ---------       --------------      ------------        ---------        -------------     ---------------
<S>                   <C>               <C>                 <C>                 <C>              <C>               <C>
                        1,134,390       $ 2.10 - 10.00      01/01 - 10/05       1,063,391        $ 2.10 - 10.00      12/00 - 10/05
                           47,481        10.01 - 20.00      07/02 - 12/02         119,866         10.01 - 20.00      08/00 - 12/02
                           58,441        20.01 - 56.25      01/01 - 12/01          70,784         20.01 - 56.25      08/00 - 12/01
                      -----------                                               ---------
                        1,240,312                                               1,254,041
                      ===========                                               =========
</TABLE>

(13) Commitments and Contingencies

     On February 28, 1996, an investor group filed suit against the Company.
This lawsuit arose out of the Company's refusal to recognize the investor
group's attempt to exercise an option to purchase 70,000 shares of common stock
at $9.90 per share. The option had been granted to the Company's former
president and chief executive officer that attempted to transfer his option to
an investor group on the last day of the option term in September 1995. On that
same day, the investor group attempted to exercise the option. The Company
refused to recognize the attempted transfer of the option to the investor group
on the primary grounds that the option was granted personally to the Company's
former president and chief executive officer and the Company believed that it
was not transferable to third parties. The lawsuit sought monetary damages that
the investor group alleged to be not less than $2,800,000. In March 1999, the
parties agreed to the principal terms under which the lawsuit would be settled
and dismissed, with prejudice. Under a settlement reached in the third quarter
of 1999, the Company paid $1,000,000 to the investor group in 1999 and $750,000
in 2000.

     The Company is also involved in various other claims which are generally
incidental to its business. The Company is vigorously contesting all such
matters and believes that their ultimate resolution will not have a material
adverse effect on its consolidated financial position, results of operations or
cash flows.

     A claim has been made by the Amphion Group controlled enterprise regarding
representations and warranties contained in the purchase and sale agreement. The
Company is vigorously contesting this matter and believes that their ultimate
resolution of this matter will not have a material adverse effect on its
consolidated financial position, results of operations or cash flows. The
purchaser's ability to assert additional claims for indemnification expired on
December 31, 1999. As of December 31, 2000 no additional claims have been made
with respect to this matter.

(14) Income Taxes

     Due to the Company's losses, no income tax expense was recorded for the
years ended December 31, 2000 and 1999. At December 31, 2000 and 1999, the
Company had a net operating loss carryforward of approximately $33,000,000 and
$25,000,000, respectively for U.S. federal income tax purposes, which will begin
expiring in 2001. On December 31, 2000 and 1999 the tax benefit of the Company's
federal net operating loss carryforwards (approximately $10,000,000 and
$6,200,000, respectively) and certain other deferred tax assets (approximately
$255,000 and $142,000, respectively) have been fully offset by a valuation
allowance, because the Company cannot currently conclude that it is more likely
than not that the benefits will be realized. The valuation allowance increased
by approximately $2,800,000 and $1,200,000 during 2000 and 1999, respectively. A
change in ownership, as defined for purposes of the Internal Revenue Code,
occurred in 1996 and the Company believes that a subsequent ownership change
occurred during 1998, each of which limit the annual utilization of the U.S.
federal net operating loss carryforward under the applicable Internal Revenue
Service

                                      F-19
<PAGE>

                               INDEX TO EXHIBITS

           Exhibit
           Number                             Description
           ------    -----------------------------------------------------------
           3.1       --Certificate of Incorporation of the Company. Incorporated
                     herein by reference to Exhibit 3.1 to the Company's
                     Registration Statement on Form S-1 (Registration No. 2-
                     80946).

           3.2       --By-laws of the Company. Incorporated herein by reference
                     to Exhibit 3.2 to the Company's Registration Statement on
                     Form S-1 (Registration No. 2-80946).

           3.3       --First Amendment to Certificate of Incorporation of the
                     Company dated June 6, 1986. Incorporated herein by
                     reference to Exhibit 3.3 to the Company's Annual Report on
                     Form 10-KSB for the year ended December 31, 1987.

           3.4       --Second Amendment to Certificate of Incorporation of the
                     Company dated May 27, 1987. Incorporated herein by
                     reference to Exhibit 3.4 to the Company's Annual Report on
                     Form 10-KSB for the year ended December 31, 1987.

           3.5       --Third Amendment to Certificate of Incorporation of the
                     Company dated November 11, 1994. Incorporated herein by
                     reference to Exhibit 4.4 to the Company's Registration
                     Statement on Form S-3 (Registration No. 333-10665).

           3.6       --Fourth Amendment to Certificate of Incorporation of the
                     Company dated July 28, 1995. Incorporated herein by
                     reference to Exhibit 4.5 to the Company's Registration
                     Statement on Form S-3 (Registration No. 333-10665).

           3.7       --Fifth Amendment to Certificate of Incorporation of the
                     Company dated June 25, 1997. Incorporated herein by
                     reference to Exhibit 4.6 to the Company's Registration
                     Statement on Form S-3 (Registration No. 333-10665).

           3.8       --Sixth Amendment to Certificate of Incorporation of the
                     Company dated March 31, 1998. Incorporated herein by
                     reference to Exhibit 99.1 to the Company's Current Report
                     on Form 8-K dated April 13, 1998.

           3.9       --Seventh Amendment to Certificate of Incorporation of the
                     Company dated March 31, 1998. Incorporated herein by
                     reference to Exhibit 99.2 to the Company's Current Report
                     on Form 8-K dated April 13, 1998.

           3.10      --Eighth Amendment to Certificate of Incorporation of the
                     Company dated April 9, 1998. Incorporated herein by
                     reference to Exhibit 99.3 to the Company's Current Report
                     on Form 8-K dated April 13, 1998.

           3.11      --Ninth Amendment to Certificate of Incorporation of the
                     Company dated June 9, 1999. Incorporated herein by
                     reference to Exhibit 3.11 to the Company's Annual Report on
                     Form 10-KSB for the year ended December 31, 1999.

           3.12      --Certificate of Amendment of Certificate of Incorporation
                     of the Company dated June 6, 2000. Incorporated herein by
                     reference to Exhibit 3.1 to the Company's Quarterly Report
                     on Form 10-QSB for the period ended June 30, 2000.

           4.1       --Certificate of Designation of the Company's Series A, B
                     and C Preferred Stock, dated December 27, 1995.
                     Incorporated herein by reference to Exhibit 4.7 to the
                     Company's Registration Statement on Form S-3 (Registration
                     No. 333-10665).

           4.2       --Certificate of Designation of the Company's Series I
                     Preferred Stock. Incorporated herein by reference to
                     Exhibit 4.2 to the Company's Annual Report on Form 10-KSB
                     for the year ended December 31, 1998.

           4.3       --Certificate of Designation of the Company's Series J
                     Preferred Stock. Incorporated herein by reference to
                     Exhibit 4.3 to the Company's Annual Report on Form 10-KSB
                     for the year ended December 31, 1998.

           4.4       --Certificate of Designation of the Company's Series 1999
                     Preferred Stock. Incorporated herein by reference to
                     Exhibit 4.4 to the Company's Quarterly Report on Form 10-
                     QSB for the period ended June 30, 1999.
<PAGE>

           4.5       --Certificate of Designation of the Company's Series 1999
                     Non-Voting Preferred Stock. Incorporated herein by
                     reference to Exhibit 4.5 to the Company's Quarterly Report
                     on Form 10-QSB for the period ended June 30, 1999.

           4.6       --Certificate of Designation of the Company's Series 2000
                     Non-Voting Preferred Stock. Incorporated herein by
                     reference to Exhibit 4.6 to the Company's Annual Report on
                     Form 10-KSB for the year ended December 31, 1999.

           10.1      --1991 Incentive Stock Option Plan, dated August 14, 1991.
                     Incorporated herein by reference to Exhibit 10.10 to
                     Lasertechnics' Annual Report on Form 10-KSB for the year
                     ended December 31, 1991.

           10.2      --Purchase of common stock and Convertible Note Agreement
                     between the Company and J. P. Morgan Investment
                     Corporation, dated July 8, 1994. Incorporated herein by
                     reference to Exhibit 10.19 to the Company's Annual Report
                     on Form 10-KSB for the year ended December 31, 1994.

           10.3      --Note Purchase Agreement dated June 25, 1997, by and among
                     the Company, J. P. Morgan Investment Corporation and
                     Wolfensohn Associates L.P. Incorporated by reference to
                     Exhibit 10.15 to the Company's Quarterly Report on Form 10-
                     QSB for the period ended September 30, 1997.

           10.4      --Amendment to Notes and Note Purchase Agreement dated
                     December 31, 1998, by and among the Company, Antiope
                     Partners L.L.C. and J. P. Morgan Investment Corporation.
                     Incorporated herein by reference to Exhibit 10.16 to
                     Amendment No. 1 to the Company's Annual Report on Form 10-
                     KSB for the year ended December 31, 1997.

           10.5      --Series H Preferred Stock Purchase Agreement dated
                     December 29, 1997, by and among the Company and Amphion
                     Ventures L.P. Incorporated herein by reference to Exhibit
                     10.17 to Amendment No. 1 to the Company's Annual Report on
                     Form 10-KSB for the 10.1 year ended December 31, 1997.

           10.6      --Preferred Stock Purchase Agreement dated October 21, 1998
                     by and between the Company and Amphion Ventures L.P.
                     Incorporated herein by reference to Exhibit 10.8 to the
                     Company's Annual Report on Form 10-KSB for the year ended
                     December 31, 1998.

           10.7      --Form of Warrant to purchase shares of the Company's
                     common stock issued to Antiope Partners L.L.C. and Amphion
                     Ventures L.P. Incorporated herein by reference to Exhibit
                     10.20 to Amendment No. 1 to the Company's Annual Report on
                     Form 10-KSB for the year ended December 31, 1997.

           10.8      --Settlement Agreement dated as of April 21, 1998, by and
                     between the Company and Xerox Corporation. Incorporated
                     herein by reference to Exhibit 10.21 to Amendment No. 1 to
                     the Company's Annual Report on Form 10-KSB for the year
                     ended December 31, 1997.

           10.9      --Note Payable Conversion Agreement dated December 31,
                     1998, by and between the Company and Amphion Ventures L.P.
                     Incorporated herein by reference to Exhibit 10.12 to the
                     Company's Annual Report on Form 10-KSB for the year ended
                     December 31, 1998.

           10.10     --Note Payable Conversion Agreement dated December 31,
                     1998, by and between the Company and Antiope Partners
                     L.L.C. Incorporated herein by reference to Exhibit 10.13 to
                     the Company's Annual Report on Form 10-KSB for the year
                     ended December 31, 1998.

           10.11     --Note Payable Conversion Agreement dated December 31,
                     1998, by and between the Company and J. P. Morgan
                     Investment Corporation. Incorporated herein by reference to
                     Exhibit 10.14 to the Company's Annual Report on Form 10-KSB
                     for the year ended December 31, 1998.

           10.12     --Stock and Asset Purchase Agreement dated March 30, 1999,
                     by and between the Company and Amphion Ventures L.P.
                     Incorporated herein by reference to Exhibit 10.15 to the
                     Company's Annual Report on Form 10-KSB for the year ended
                     December 31, 1998.

           10.13     --Asset Purchase Agreement dated July 15, 1999, by and
                     between the Company and Prism Video, Inc. Incorporated
                     herein by reference to Exhibit 2.1 to the Company's Current
                     Report on Form 8-K dated July 28, 1999.
<PAGE>

           10.14     --Convertible Note Payable dated September 30, 1999,
                     executed by the Company payable to Amphion Ventures L.P. in
                     the stated principal amount of up to $6,000,000.
                     Incorporated herein by reference to Exhibit 10.12 to the
                     Company's Quarterly Report Form 10-QSB for the period ended
                     September 30, 1999.

           10.15     --Form of Dividend Conversion Agreement by and between the
                     Company and Amphion Ventures L.P. and Jackson Hole
                     Management Co. Incorporated herein by reference to Exhibit
                     10.13 to the Company's Quarterly Report on Form 10-QSB for
                     the period ended September 30, 1999.

           10.16     --Registration Rights Agreement dated September 30, 1999 by
                     and between the Company and Amphion Ventures L.P.
                     Incorporated herein by reference to Exhibit 10.14 to the
                     Company's Quarterly Report on Form 10-QSB for the period
                     ended September 30, 1999.

           10.17     --Letter Agreement dated December 30, 1999, by and between
                     the Company and Amphion Ventures L.P. regarding the
                     Convertible Note Payable dated September 30, 1999.
                     Incorporated herein by reference to Exhibit 10.17 to the
                     Company's Annual Report on Form 10-KSB for the year ended
                     December 31, 1999.

           10.18     --Non-Voting Common Stock Purchase Warrant dated September
                     30, 1999, to purchase 180,362 shares of the Company's non-
                     voting common stock, issued to Amphion Ventures L.P.
                     Incorporated herein by reference to Exhibit 10.18 to the
                     Company's Annual Report on Form 10-KSB for the year ended
                     December 31, 1999.

           10.19     --Employment Agreement dated July 16, 1999, by and between
                     the Company and Allan Griebenow. Incorporated herein by
                     reference to Exhibit 10.19 to the Company's Annual Report
                     on Form 10-KSB for the year ended December 31, 1999.

           10.20     --AXCESS Inc. Stock Option Plan. Incorporated herein by
                     reference to Exhibit 4.1 to the Company's Registration
                     Statement on Form S-8 (Registration No. 333-80857).

           10.21     --AXCESS Inc. Director Compensation Plan. Incorporated
                     herein by reference to Exhibit 4.1 to the Company's
                     Registration Statement on Form S-8 (Registration No. 333-
                     80843).

           10.22     --Stock Purchase Agreement dated March 29, 2000, by and
                     between the Company and incuVest LLC. Incorporated herein
                     by reference to Exhibit 10.22 to the Company's Annual
                     Report on Form 10-KSB for the year ended December 31, 1999.

           10.23     --AXCESS Inc. Non-Employee Directors' Stock Option Plan.
                     Incorporated herein by reference to Exhibit 4.(a) to the
                     Company's Registration Statement on Form S-8 (Registration
                     No. 333-98160).

           10.24     --Amendment No. 1 to the AXCESS Inc. 1991 Incentive Stock
                     Option Plan dated April 26, 2000. Incorporated herein by
                     reference to Exhibit 10.2 to the Company's Quarterly Report
                     on Form 10-QSB for the period ended June 30, 2000.

           10.25     --Commitment letter dated August 16, 2000, from incuVest
                     LLC regarding the purchase of 500 shares of Series 2000A
                     Preferred Stock. Incorporated herein by reference to
                     Exhibit 10.2 to the Company's Quarterly Report on Form 10-
                     QSB for the period ended September 30, 2000.

           10.26     --Demand Note dated as of September 14, 2000, executed by
                     the Company payable to incuVest LLC in the principal amount
                     of $400,000. Incorporated herein by reference to Exhibit
                     10.1 to the Company's Quarterly Report on Form 10-QSB for
                     the period ended September 30, 2000.

           10.27     --Senior Promissory Note dated December 14, 2000, executed
                     by the Company payable to J.P. Morgan Investment
                     Corporation, in the principal amount of $400,000.*

           10.28     --Voting Common Stock Purchase Warrant dated December 14,
                     2000, to purchase 8,000 shares of the Company's voting
                     common stock, issued to J.P. Morgan Investment
                     Corporation.*

<PAGE>

           10.29      --Letter dated December 26, 2000, from incuVest LLC
                      regarding conversion of the Demand Note dated September
                      14, 2000, executed by the Company payable to incuVest LLC.
                      in the principal amount of $400,000.*

           10.30      --Letter dated December 29, 2000, from Amphion Ventures,
                      LP to the Company regarding Series A, B, and C Preferred
                      Stock Dividends.*

           10.31      --Letter dated December 29, 2000, from Jackson Hole
                      Management Co. to the Company regarding Series C Preferred
                      Stock Dividends.*

           10.32      --Demand Note dated as of January 12, 2001, executed by
                      the Company payable to incuVest LLC in the principal
                      amount of $264,000.*

           10.33      --Subordinated Promissory Note dated April 30, 1999
                      executed by Amphion Ventures L.P. payable to the Company,
                      in the principal amount of $4,000,000.*

           10.34      -- Security Agreement dated April 30, 1999 by Amphion
                      Ventures L.P. in favor of the Company regarding the Stock
                      and Asset Purchase Agreement dated March 30, 1999 by and
                      among Amphion Ventures L.P., Antiope Partners, L.L.C. and
                      the Company.*

           10.35      --Notice of Assignment dated July 28, 1999 from the
                      Company to Amphion Ventures, L.P. regarding the April 30,
                      1999 Purchase Note executed by Amphion Ventures L.P.*

           10.36      --Security Agreement dated July 28, 1999 among the Company
                      and Prism Video, Inc. regarding the Subordinated
                      Promissory Note dated as of April 30, 1999 executed by
                      Amphion Ventures L.P. payable to the Company.*

           10.37      --Purchase Note dated July 28, 1999 executed by the
                      Company payable to Prism Video, Inc. and BIL Far East
                      Holdings Limited, in the principal amount of $4,000,000.*

           21.1       --Subsidiaries of the Company.*

           23.1       --Consent of Ernst & Young LLP.*

________________

*Filed herewith