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

                                   FORM 10-QSB

            |X| Quarterly Report Pursuant to Section 13 or 15 (d) of
                       the Securities Exchange Act of 1934

                    For the quarterly period ended June 30, 2002

            |_| TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                 For the transition period from __________ to ___________

                         Commission File Number 0-11038



                      ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC.
            (Exact name of small business issuer as specified in its charter)

         California                                            33-0644381
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 Incorporation or organization)

              10675 Sorrento Valley Road, Suite 200, San Diego, CA 92121
                    (Address of Principal Executive Offices)

                                 (858) 450-7600
                           (Issuer's telephone number)


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



                       APPLICABLE ONLY TO CORPORATE FILERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:  21,231,627 shares of common stock as
of August 16, 2002.

Transitional Small Business Disclosure Format (check one): Yes  __ No  X
<PAGE>

<TABLE>
<CAPTION>

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

                                                          Three Months Ended June 30,           Six Months Ended June 30,
                                                          2002               2001                  2002             2001
                                                                         (As restated                          (As restated
                                                                         see Note 1)                           see Note 1)
<S>                                                       <C>                <C>                 <C>              <C>

REVENUES:
Communications                                          $ 1,647,774         $ 1,647,713         3,252,691       $ 3,381,820
Video compression                                           984,839             404,790         1,908,313         1,116,345
Satellite transmission technology                           771,568           2,519,911         1,809,945         3,171,145
                                                      --------------    ----------------   ---------------  ----------------
TOTAL REVENUES                                            3,404,181           4,572,414         6,970,949         7,669,310
                                                      --------------    ----------------   ---------------  ----------------

COSTS AND EXPENSES:
Communications                                              732,908             697,747         1,402,220         1,424,236
Video compression                                           435,092             115,306           751,702           272,608
Satellite transmission technology                           460,878             857,243           885,777         1,268,552
                                                      --------------    ----------------   ---------------  ----------------
Gross margin, excluding depreciation and amortization     1,775,303           2,902,118         3,931,250         4,703,914
Selling, general and administrative                       3,897,297           2,540,425         7,391,889         5,153,104
Research and development                                    255,374             584,540           435,720           771,931
Asset Impairment                                         11,821,590                            11,821,590
                                                      --------------    ----------------   ---------------  ----------------
LOSS FROM OPERATIONS                                    (14,198,958)           (222,847)      (15,717,949)       (1,221,121)
Interest expense - net                                     (150,965)           (190,112)         (285,177)         (374,950)
                                                      --------------    ----------------   ---------------  ----------------
LOSS BEFORE TAXES                                       (14,349,923)           (412,959)      (16,003,126)       (1,596,071)
Income tax benefit                                        3,524,550              90,603         3,886,602           350,178
                                                      --------------    ----------------   ---------------  ----------------

NET LOSS                                               $(10,825,373)         $ (322,356)     $(12,116,524)     $ (1,245,893)
                                                      ==============    ================   ===============  ================

BASIC LOSS PER SHARE                                        $ (0.51)            $ (0.02)          $ (0.57)          $ (0.06)

DILUTED LOSS PER SHARE                                      $ (0.51)            $ (0.02)          $ (0.57)          $ (0.06)

WEIGHTED AVERAGE COMMON SHARES
  OUTSTANDING, BASIC AND DILUTED                         21,261,627          21,114,635        21,237,925        21,102,844

Dilutive effect of:
Employee stock options                                      -                    -                 -                 -
Warrants                                                    -                    -                 -                 -
Weighted average of common shares outstanding,
  assuming dilution                                      21,261,627          21,114,635        21,237,925        21,102,844


<FN>

See notes to consolidated financial statements.
</FN>
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS



                                                                           June 30,               December 31,
                                                                       ------------------       ------------------
ASSETS                                                                       2002                     2001
                                                                          (Unaudited)
<S>                                                                          <C>                     <C>

CURRENT ASSETS:
  Cash                                                                        $1,026,195                 $268,731
  Accounts receivable - net                                                    2,476,611                3,810,809
  Inventories - net                                                              879,724                1,572,944
  Prepaid expenses and other assets                                              898,778                  541,962
                                                                       ------------------       ------------------
        Total current assets                                                   5,281,308                6,194,446

DEPOSITS & OTHER ASSETS                                                          191,281                  289,849
PROPERTY - net                                                                   574,254                  487,402
CAPITALIZED SOFTWARE - net                                                       103,265                  234,871
GOODWILL - net                                                                 4,890,083                5,434,138
PATENT - net                                                                   1,621,785               13,607,983
                                                                       ------------------       ------------------

TOTAL                                                                        $12,661,976              $26,248,689
                                                                       ==================       ==================

LIABILITIES AND STOCKHOLDERS' (DEFICIT)/EQUITY

CURRENT LIABILITIES:
  Accounts payable                                                            $1,985,580               $2,746,200
  Accrued expenses                                                             1,752,675                1,015,982
  Deferred Revenue                                                             1,012,779                2,052,838
  Current portion of notes payable                                             1,710,664                6,685,065
                                                                       ------------------       ------------------
        Total current liabilities                                              6,461,698               12,500,085

DEFERRED REVENUE                                                               1,809,134                1,570,613
DEFERRED TAX LIABILITY                                                                                  4,364,333
NOTES PAYABLE                                                                  4,749,399                -

STOCKHOLDERS' (DEFICIT)/EQUITY:
  Convertible preferred series C stock, no par value: 1,000,000
    shares authorized, 6,667 shares of series C-1 issued, 4,000
    shares of series C-2 issued, liquidation preference $300 per
    share for series C-1 and $500 per share for series C-2                     3,631,242
  Convertible preferred series B stock, no par value: 1,000,000
    shares authorized, 351.25 shares issued, liquidation
    preference $10,000 per share                                               3,512,500                3,512,500
  Common stock, no par value; 100,000,000 shares authorized,
    21,231,627 and 21,201,627 shares issued and outstanding
    at 2002 and 2001, respectively                                            22,655,466               22,280,750
  Accumulated deficit                                                        (30,157,463)             (17,979,592)
                                                                       ------------------       ------------------
        Total stockholders' (deficit)/equity                                    (358,255)               7,813,658
                                                                       ------------------       ------------------

TOTAL                                                                        $12,661,976              $26,248,689
                                                                       ==================       ==================
<FN>

See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

                                                                    Six months ended June 30,
                                                                 2002                    2001
                                                                                     (As restated
Operating activities:                                                                see Note 1)

<S>                                                                <C>                  <C>

Net loss                                                        $(12,116,524)          $ (1,245,893)
  Adjustments to reconcile net loss
   to net cash provided by (used in) operating activities:
    Asset impairment                                              11,821,590
    Loss on disposal of property                                                              7,531
    Write off of capitalized software, net                           105,153
    Deferred tax                                                  (4,364,333)              (225,001)
    Depreciation and amortization                                  1,007,020              1,187,100
    Issuance of common stock to vendor                                 9,000
    Adjustment to stock options and warrants                         365,716
Changes in assets and liabilities:
    Dividends payable                                                (61,347)
    Deposits & other assets                                           84,678                (83,392)
    Accounts receivable, net                                       1,334,198                899,013
    Inventories, net                                                 693,220               (122,427)
    Prepaid expenses and other assets                               (356,816)              (443,597)
    Deferred revenue                                                (801,539)             2,251,810
    Accounts payable and accrued expenses                            501,071              1,046,466
                                                           ------------------      -----------------

Net cash (used in) provided by operating activities               (1,778,913)             3,271,610
                                                           ------------------      -----------------

Investing activities:
   Capitalized software                                                    -                 69,338
   Capital expenditures                                             (344,866)              (106,447)
                                                           ------------------      -----------------

Net cash used in investing activities                               (344,866)               (37,109)
                                                           ------------------      -----------------

Financing activities:
  Proceeds from line of credit                                             -                200,000
  Payments on line of credit                                        (750,000)              (150,000)
  Issuance of series C preferred stock, net                       3,631,243                       -
  Principal payments on notes payable                                                    (2,575,361)
                                                           ------------------      -----------------

Net cash provided by (used in) financing activities                2,881,243             (2,525,361)
                                                           ------------------      -----------------

Net increase in cash                                                 757,464                709,140

Cash at beginning of period                                          268,731                  2,089
                                                           ------------------      -----------------

Cash at end of period                                            $ 1,026,195              $ 711,229
                                                           ==================      =================

SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:

Common shares issued for accounts payable                            $ 9,000              $ 20,000
Reclassification of accrued interest to note payable               $ 524,999

<FN>

See notes to consolidated financial statements.
</FN>
</TABLE>





                  ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying  consolidated  financial  statements as of the six months ended
June 30, 2002 and 2001 are unaudited  and have been prepared in accordance  with
accounting  principles  generally  accepted in the United  States of America for
interim  financial  information  and  with  the  instructions  to  Form  10-QSB.
Accordingly,  they do not include all of the information and footnotes  required
by accounting  principles generally accepted in the United States of America for
complete  financial  statements.  In the opinion of management,  all adjustments
considered  necessary  for a fair  presentation  have been  included.  Operating
results for the six months ended June 30, 2002 are not necessarily indicative of
the results  that may be expected for any other  interim  period or for the year
ending December 31, 2002.

Restatement  - ARCOMS'  quarterly  report on Form  10-QSB  for the three and six
month period ended June 30, 2001 was amended to restate  Items 1 and 2 of Part I
of our  original  Form 10-QSB to reflect  the  restatement  of our  consolidated
financial  statements.  This restatement relates to certain capitalized software
costs and revenue recognition of one particular licensing agreement.

Subsequent  to the issuance of our  consolidated  financial  statements  for the
quarter ended June 30, 2001, we determined  that certain  software  products for
which costs had been  capitalized  had not met the  definition of  technological
feasibility  as  provided  in  Financial  Accounting  Standards  Board  ("FASB")
Statement of Financial  Accounting  Standards ("SFAS") No. 86.  Accordingly,  we
restated our financial  statements for this quarter to reflect the  presentation
of such costs as  research  and  development.  The  restatement  resulted  in an
increase in research and  development  expenses of $547,676 and $674,373 for the
three and six months ended June 30, 2001, respectively.

In addition, subsequent to the issuance of our consolidated financial statements
for the  quarter  ended June 30,  2001,  we  determined  that it would have been
preferable  to recognize one time based license fee ratably over the term of the
agreement  based on guidance  provided  by Staff  Accounting  Bulleting  No. 101
issued by the U.S.  Securities and Exchange  Commission ("SAB No. 101"),  rather
than  recognizing  the  entire  fee  upon  receipt.  The  amount  of the fee was
$1,200,000  all of which we had  recognized in the quarter ended March 31, 2001.
The term of the agreement is 18 months.  The restatement  results in an increase
to satellite  transmission  technology  revenue of $200,000 for the three months
ended June 30, 2001 and a decrease to satellite transmission  technology revenue
of $933,333 for the six months ended June 30, 2001.

Business  Conditions -  Management's  Plan to Continue as a Going  Concern - The
accompanying  consolidated  financial  statements  have been prepared on a going
concern basis,  which contemplates the realization of assets and satisfaction of
liabilities  in the ordinary  course of business.  As shown in the  accompanying
consolidated  financial  statements,  the  Company  has  incurred  net losses of
$10,825,373  for the quarter  ended June 30, 2002 and net losses of  $12,116,524
for the six  months  ended  June 30,  2002 and  additionally  had net  losses of
$4,850,555,  $9,111,425,  and  $926,288  for the years ended  December 31, 2001,
2000,  and 1999,  respectively.  The loss for the  quarter  ended June 30,  2002
includes  a  non-cash  impairment  charge  of  $11,821,590  related  to a patent
recorded as a result of the  acquisition  of Enerdyne and a goodwill  impairment
charge at Boatracs  Gulfport and Canada.  The years ended  December 31, 2001 and
December  31,  2000  included  non-cash  impairment  charges of  $2,300,000  and
$6,000,000,  respectively,  related  to  goodwill  recorded  as a result  of the
acquisition of Enerdyne.  In addition,  during 2001, 2000, and 1999, the Company
undertook significant research and development efforts and refined its marketing
and manufacturing processes,  all of which contributed  significantly to its net
losses for those years. At June 30, 2002, the Company had an accumulated deficit
of $30,157,463 and at December 31, 2001, the Company had an accumulated  deficit
of  $17,979,592.  Working  capital was negative  $1,180,390 at June 30, 2002 and
negative  $6,305,639  at December 31, 2001. At December 31, 2001 the Company had
classified  borrowings from the sellers of Enerdyne as a current  liability.  At
June 30, 2002,  the  borrowings  have been  classified  as long term due to debt
modifications (see following "Recapitalization Arrangement.")


As more fully discussed below under  "Recapitalization  Arrangement," on May 31,
2002,  the Company  sold  shares of its  preferred  stock for gross  proceeds of
$4,000,000 and extended the maturity dates of its debt  agreements with its bank
and the two former owners of Enerdyne. The Company does not have sufficient cash
available to fund operations for the next twelve months. In order to continue as
a going  concern,  the Company  must raise  additional  funds and  significantly
reduce operating expenses.  There can be no assurance that additional funds will
be available on acceptable terms, if at all, or that the Company will be able to
reduce operating expenses to the point where internal cash flow is sufficient to
fund operations.  (See Item 2, Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources.)

Recapitalization Arrangement
On May 31, 2002,  the Company  entered into an  agreement  (the "Stock  Purchase
Agreement")  with two  private  companies  (the  "Purchasers").  Under the Stock
Purchase Agreement,  the Company sold an aggregate of 10,667 shares of two newly
designated classes of the Company's preferred stock (series C-1 and series C-2),
having a total aggregate purchase price of $4,000,000 to the Purchasers pursuant
to a private  placement  exempt from  registration  under the  Securities Act of
1933.  As  part  of  the  total  purchase  price,   $500,000  was  paid  through
cancellation/conversion  of a  promissory  note that was entered into on May 16,
2002 (see Note 4). In addition,  the Company offered all existing holders of its
Series B  Preferred  Stock to  exchange  such shares for shares of a third newly
designated  class of its preferred stock (see Item 5 "Other  Information").  The
holders of all classes of the preferred stock are entitled to receive,  when and
if declared by the Board of Directors,  cumulative cash dividends, in preference
and priority to  dividends  on any junior  stock at 10% per annum.  In addition,
each share of the newly  designated  classes of preferred  stock is  convertible
into common stock at $.30 per share for series C-1 preferred  stock and $.50 per
share  for  series  C-2  preferred   stock  and  may  be  adjusted  for  certain
recapitalization events.

As part of the transaction  described above, the Chairman of the Company's Board
of  Directors  resigned  his  chairmanship  as well  as the  position  as  chief
executive  officer and president,  and four of the remaining five members of the
Company's Board of Directors resigned their  directorships.  In addition,  three
new directors  were appointed to the Company's  Board of Directors,  one of whom
was also  appointed  Chairman of the Company's  Board of Directors and its Chief
Executive   Officer.   In  addition,   the  Stock  Purchase  Agreement  required
modifications  of the Company's debt agreement with its bank as well as its debt
agreements  with the two former  owners of  Enerdyne  Technologies,  Inc.  These
modifications extended the maturity dates of the loans and waived all violations
of the relative  covenant  requirements  through the date of the agreement  (see
Note 4). In addition,  the Stock  Purchase  Agreement  grants the  investors the
exclusive right, exercisable by delivery of written notice to the Company during
the period from August 2, 2002  through  June 1, 2003 to purchase  the assets of
the Company's Boatracs division at a purchase price as defined in the agreement.
In the event that the  investors  exercise  their  option to purchase  Boatracs'
assets,  they may tender the Series C Preferred Stock toward the purchase price,
which shall be valued at their  original  purchase price plus accrued but unpaid
dividends thereon.

In conjunction with the Stock Purchase Agreement,  the Company also entered into
an employment  contract with the Chief Executive Officer (the  "Executive"),  in
accordance  with  which and upon the  approval  of the Board of  Directors,  the
Company granted the Executive  nonstatutory  stock options to purchase 3,000,000
shares of the Company's common stock.

Settlement with QUALCOMM
Under a license and distribution  agreement (the  "Distribution  Agreement") the
Company has with Qualcomm, Incorporated ("QUALCOMM"), the Company is required to
comply with "minimum  purchase  requirements"  annually.  In accordance  with an
amendment to the  Distribution  Agreement,  the Company and QUALCOMM agreed that
commencing  January  1,  2000 and  annually  thereafter,  the  required  minimum
purchase  requirements will be mutually agreed upon by QUALCOMM and the Company,
except that for each  subsequent  annual  period  thereafter,  the Company shall
purchase an  additional  number of units equal to at least ten percent  (10%) of
the minimum purchase requirement for the immediately preceding year. On March 7,
2002, QUALCOMM asserted that the Company was in default of the "minimum purchase
requirements"  for  2001.  The  Company  directed  QUALCOMM's  attention  to the
applicable  amendment to the Distribution  Agreement and had invited QUALCOMM to
enter into  negotiations  for the purpose of agreeing upon the minimum  purchase
requirements.  The Company had, also under  protest,  issued a purchase order to
QUALCOMM for a sufficient  number of units to comply with  QUALCOMM's  demand in
order to preserve the  Company's  rights,  which was  rejected by QUALCOMM.  The
Company and QUALCOMM then entered into good faith  negotiations in an attempt to
agree  to  minimum  purchase  requirements  without  prejudice  to the  parties'
respective asserted positions.

On June 3, 2002, the Company executed an amendment to the Distribution Agreement
(the  "Amendment")  and paid  QUALCOMM  $500,000 in order to  reinstate  ARCOMS'
exclusivity  rights  under  the  Distribution  Agreement.  The  exclusivity  was
reinstated   through   September  30,  2002  without  any  additional   purchase
requirements.  In accordance with the Amendment,  ARCOMS  released  QUALCOMM and
waived any existing or future claims,  liabilities,  or arguments contesting the
number of units to be purchased to meet the minimum  purchase  requirements  for
maintaining  exclusivity under the Distribution Agreement for 2003 and all prior
years.  The Amendment  also defined the revised  minimum  purchase  requirements
under the Distribution  Agreement. In accordance with SFAS No. 5 "Accounting for
Contingencies,"  the Company  recorded  the payment of $500,000 to QUALCOMM as a
contingent  liability  as of March 31,  2002 with a  corresponding  increase  to
selling, general and administrative expenses for the quarter then ended.

Reclassification  - Certain balances in the prior quarter have been reclassified
to conform to the presentation adopted in the current quarter.

Use of estimates - In preparing the financial statements, we have made estimates
and assumptions that affect the following:
         Reported amounts of assets and liabilities at the date of the financial
         statements; Disclosure of contingent assets and liabilities at the date
         of the  financial  statements;  and  Reported  amounts of revenues  and
         expenses during the period.
Actual amounts could differ from those estimates.

In the three months ended June 30 2002, the Company wrote off certain previously
capitalized software development costs aggregating  approximately  $105,000, net
of accumulated amortization.  This charge was primarily the result of lower than
anticipated sales of certain software  products and the Company's  determination
to discontinue the development of certain of its technologies.

NOTE 2 - NEW ACCOUNTING PRONOUNCEMENTS

In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with Exit or Disposal Activities." This statement addresses financial accounting
and  reporting  for  costs  associated  with  exit or  disposal  activities  and
nullifies  Emerging  Issues  Task  Force  ("EITF")  Issue No.  94-3,  "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)."  This statement
requires  that a  liability  for a cost  associated  with an  exit  or  disposal
activity be recognized when the liability is incurred.  Under EITF Issue 94-3, a
liability  for an exit  cost,  as  defined,  was  recognized  at the  date of an
entity's  commitment  to an exit plan.  The  provisions  of this  statement  are
effective for exit or disposal  activities that are initiated after December 31,
2002 with earlier application encouraged.

In April 2002, the FASB issued SFAS No. 145,  "Rescission of FASB Statements No.
4, 44, and 64,  Amendment of FASB Statement No. 13, and Technical  Corrections."
SFAS  No.  145  updates,   clarifies,   and   simplifies   existing   accounting
pronouncements. This statement rescinds SFAS No. 4, which required all gains and
losses from extinguishment of debt to be aggregated and, if material, classified
as an  extraordinary  item, net of related income tax effect.  As a result,  the
criteria in Accounting  Principles  Board Opinion No. 30 ("APB No. 30") will now
be used to classify  those gains and losses.  SFAS No. 64 amended SFAS No. 4 and
is no longer  necessary as SFAS No. 4 has been  rescinded.  SFAS No. 44 has been
rescinded  as it is no longer  necessary.  SFAS No.  145  amends  SFAS No. 13 to
require that certain lease  modifications  that have economic effects similar to
sale-leaseback  transactions  be accounted  for in the same manner as sale-lease
transactions.  This  statement  also makes  technical  corrections  to  existing
pronouncements.  While those  corrections are not substantive in nature, in some
instances, they may change accounting practice. This statement is not applicable
to the Company.

Effective  January  1,  2002,  the  Company  adopted  SFAS  No.  141,  "Business
Combinations,"  SFAS No. 142, "Goodwill and Intangible Assets" and SFAS No. 144,
"Accounting  for the Impairment or Disposal of Long-Lived  Assets." SFAS No. 142
sets forth the accounting for goodwill and intangible  assets already  recorded.
Commencing  January 1, 2002,  goodwill is no longer being amortized.  Factors we
consider important which could trigger an impairment review include  significant
under-performance  relative to expected historical or projected future operating
results,  significant changes in the manner of our use of the acquired assets or
the strategy for our overall business and significant  negative economic trends.
During the second quarter,  the Company employed outside  consultants to perform
an independent  valuation  analysis of the Company's total invested capital.  In
the analysis of the Company,  the consultants  utilized valuation techniques and
methodologies deemed appropriate under the circumstances.  The first step of the
valuation  test  compares  the fair value of a reporting  unit with its carrying
amount to identify  potential  impairment.  If the carrying value of a reporting
unit  exceeds its fair value,  the second step of the test is then  performed to
measure the amount of any impairment.  The fair value of the Company's patent at
Enerdyne  was  determined  utilizing an income  approach  based on a relief from
royalty method of valuation.  It was concluded that the fair value of the patent
is reasonably  stated in the amount of $800,000,  net of related deferred taxes.
Accordingly,  the patent was written  down to this value,  resulting in an asset
impairment  charge of  $11,277,535.  Goodwill was also evaluated and the Company
recorded an impairment charge to goodwill at Boatracs Gulfport and Canada in the
aggregate amount of $544,055 after evaluating the current technology at Gulfport
and projected future sales at both locations. With the adoption of SFAS No. 142,
the  Company  reassessed  the  useful  lives  and  residual  values of all other
acquired   intangible   assets  to  make  any  necessary   amortization   period
adjustments. No amortization period adjustments were necessary.

<TABLE>
<CAPTION>

                                                              As of June 30, 2002
                                       Gross Carrying Amount             Accumulated Amortization
<S>                                           <C>                                 <C>
Amortized Intangible Assets
      Patent                                      $1,633,323                         $11,538

      Non-compete Agreements                         125,000                          81,025
                                                    --------                         -------
      TOTAL                                       $1,758,323                         $92,563
                                                   ---------                         -------
Unamortized Intangible Asset
      Goodwill                                   $ 8,173,495                      $3,283,412

Aggregate Amortization Expense:
For the quarter ended June 30, 2002                 $222,481


 Estimated Amortization Expense:
 For year ending December 31, 2002                  $948,420
 For year ending December 31, 2003                  $205,560
 For year ending December 31, 2004                  $180,085
 For year ending December 31, 2005                  $177,780
 For year ending December 31, 2006                  $177,780

</TABLE>

The following  table  reflects the  reconciliation  of reported net loss and net
loss  per  share  to  the  amounts   adjusted  for  the  exclusion  of  goodwill
amortization:

<TABLE>
<CAPTION>

                                               Three Months Ended June 30,         Six Months Ended June 30,
                                                 2002               2001             2002             2001
<S>                                             <C>                 <C>             <C>                <C>

 Net Loss                                     $(10,825,373)      $(322,356)      $(12,116,524)    $(1,245,893)
 Add Back: Goodwill Amortization                         0         222,481                  0         444,962
                                                      ----         -------                ----        -------
 Adjusted Net Loss                            $(10,825,373)       $(99,875)      $(12,116,524)      $(800,931)
                                                ----------         -------         -----------        -------
 Basic and Diluted Loss Per Share:                 $(.51)          $(.02)            $(.57)           $(.06)
 Add Back:  Goodwill Amortization                      0             .01                 0              .02
                                                     ----           ----               ----             ----
 Adjusted Net Loss                                 $(.51)          $(.01)            $(.57)           $(.04)
                                                     ----           ----               ----             ----
</TABLE>

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal  of  Long-Lived  Assets,"  which  addresses  financial  accounting  and
reporting for the  impairment or disposal of long-lived  assets.  While SFAS No.
144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of," it retains many of the fundamental
provisions of SFAS No. 121,  including the  recognition  and  measurement of the
impairment  of long-lived  assets to be held and used,  and the  measurement  of
long-lived  assets to be disposed of by sale.  SFAS No. 144 also  supersedes the
accounting  and reporting  provisions of APB No. 30,  "Reporting  the Results of
Operations--Reporting  the Effects of  Disposal of a Segment of a Business,  and
Extraordinary,  Unusual and Infrequently Occurring Events and Transactions," for
the disposal of a segment of a business.  However, it retains the requirement in
APB No.  30 to  report  separately  discontinued  operations  and  extends  that
reporting to a component of an entity that either has been disposed of (by sale,
abandonment,  or in a distribution to owners) or is classified as held for sale.
SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. At
June 30,  2002,  the  adoption  of SFAS No.  144 did not have an  effect  on the
Company's consolidated financial statements.

NOTE 3 - BALANCE SHEET DETAILS
                                               6/30/2002         12/31/2001

                                           ----------------   ----------------
 Accounts receivable                          $2,775,862           $3,936,044
  Less allowance for doubtful accounts          (299,251)            (125,235)
                                           ----------------   ----------------
                                              $2,476,611           $3,810,809
                                           ----------------   ----------------
 Inventory:
      Raw materials                             $890,744             $927,575
      Work in progress                            74,244              270,242
      Finished goods                              70,099              463,186
                                           ----------------   ----------------
                                              $1,035,087           $1,661,003
Less allowance for obsolete inventory           (155,363)             (88,059)
                                           ----------------   ----------------
                                                $879,724           $1,572,944
                                           ----------------   ----------------
Property:
    Computers and equipment                   $1,702,480           $1,357,615
    Furniture and fixtures                       219,953              219,953
    Leasehold improvements                        84,531               84,531
                                          ----------------   ----------------
                                               2,006,964            1,662,099
        Less accumulated depreciation         (1,432,710)          (1,174,697)
                                          ----------------   ----------------
                                                $574,254             $487,402
                                          ----------------   ----------------

Goodwill                                     $8,173,495           $9,102,022
    Less accumulated amortization            (3,283,412)          (3,667,884)
                                          ----------------   ----------------
                                             $4,890,083           $5,434,138
                                          ----------------   ----------------

Patent                                       $1,633,323          $18,299,990
     Less accumulated amortization              (11,538)          (4,692,007)
                                          ----------------   ----------------
                                             $1,621,785          $13,607,983
                                          ----------------   ----------------


NOTE 4 - LINE OF CREDIT AND NOTES PAYABLE

On January 29, 2002,  the Company  signed a Change in Terms  Agreement  with its
bank,  extending  the maturity date to April 30, 2002 from January 31, 2002 on a
line  of  credit.  On May  29,  2002  the  Company  signed  a Loan  Modification
Agreement" (the  "Agreement")  extending the maturity date on the line of credit
to May 30, 2003. The Agreement also required a payment of $750,000  bringing the
principal balance to $1,500,000, and the interest rate was changed to prime plus
one and one-half percent, but in no event less than 6.5%. In addition,  the line
of credit was converted from a revolving to a non-revolving  term loan facility,
and the Company has no right to further draws or disbursements.

The  interest  rate at June 30,  2002 was  6.5% and the  balance  on the line of
credit was  $1,500,000.  The  Company is required  to meet  certain  restrictive
financial and operating  covenants under the line of credit. The Company was not
in compliance  with the debt  covenants on December 31, 2001 nor March 31, 2002.
In  addition  the bank  replaced  certain  of the  existing  covenants  with new
covenants.  At  June  30,  2002  the  Company  was in  compliance  with  the new
covenants.  The bank has also  prohibited  the  Company  from  making  principal
payments totaling  approximately $2.9 million on notes payable to the two former
owners of  Enerdyne  Technologies,  Inc.  through  June 30,  2002,  and  further
prohibited  making any future principal  payments on the notes until the balance
of the line of credit has been fully paid.  The maturity dates of the notes have
been extended  through  January 1, 2004, and the  noteholders  have  permanently
waived all events of default through May 29, 2002.  Accrued  interest as of June
30, 2002 has been reclassified as note payable.

On May 16 2002, the Company entered in a secured  promissory note with a private
company in the amount of $500,000  accruing  interest at prime plus 3.25%.  This
note  was  converted  into  preferred  stock  on May  31,  2002.  (See  Note  1,
"Recapitalization Agreement.")

NOTE 5 - GEOGRAPHIC AND BUSINESS SEGMENT INFORMATION

The Company operates three reportable business segments:  communications,  video
compression  and satellite  transmission  technology.  The Company's  reportable
segments  are  strategic  business  units  that  offer  different  products  and
services.  They are managed separately based on fundamental differences in their
operations.

The  communications  segment  consists of the  operations of Boatracs,  Boatracs
Gulfport   ("Gulfport"),   ARCOMS  Europe   ("Europe")  and  OceanTrac   Limited
("OceanTrac").  The communications  segment has exclusive distribution rights in
the  United  States  for  marine  application  of  the  OmniTRACS(R)  system  of
satellite-based  communication  and tracking  systems  manufactured  by QUALCOMM
Incorporated ("QUALCOMM"). In addition, the Company's wholly owned subsidiaries,
Europe  and  OceanTrac,  have  agreements  with  QUALCOMM's  authorized  service
providers in Europe and Canada for marine  distribution of OmniTRACS(R) in parts
of Europe and  Canada.  Gulfport  is a provider  of  software  applications  and
service  solutions  to  the  commercial  work  boat  and  petroleum  industries,
including customers of Boatracs.

The  video   compression   segment   consists  of  the  operations  of  Enerdyne
Technologies,  Inc.  ("Enerdyne").  Enerdyne  is a provider of  versatile,  high
performance  digital video  compression  products and multiplexing  equipment to
government and commercial markets.

The satellite  transmission  technology  segment  consists of the  operations of
ICTI.  ICTI  is  engaged  in  designing  and  implementing  bandwidth  efficient
multimedia  satellite  networks and develops  customized  software  solutions to
manage and allocate available satellite  power/bandwidth resources to optimize a
satellite system's lifecycle costs.

Corporate overhead expenses have been allocated based on revenue  percentages of
each segment to total revenues.

Information by business  segment for the three months ended June 30, 2002 is set
forth below.
<TABLE>
<CAPTION>

                           Commun-               Video                Satellite
                          Ications            Compression            Technology          Consolidated
                       ----------------     ----------------      ------------------  ---------------------
<S>                         <C>                   <C>                    <C>                <C>

Revenues                    $1,647,774              $984,839               $771,568          $3,404,181
Income (loss) from
operations                   $(103,945)          $(1,560,405)             $(713,018)        $(2,377,368)
Asset impairment             $(544,055)         $(11,277,535)                              $(11,821,590)
Interest expense, net          $17,797               $10,584               $122,584            $150,965
Depreciation and
amortization                   $25,757              $441,797                $31,447            $499,001
</TABLE>

Information by business  segment for the three months ended June 30, 2001 is set
forth below.

<TABLE>
<CAPTION>

                           Commun-               Video               Satellite
                          ications            Compression            Technology          Consolidated
                       ----------------     ----------------     ------------------   ------------------
<S>                            <C>                  <C>                   <C>                <C>

Revenues                    $1,647,713              $404,790            $2,519,911         $4,572,414
Income (loss) from
operations                    $299,157           $(1,196,517)             $674,513          $(222,847)
Interest expense, net          $15,984              $149,578               $24,550           $190,112
Depreciation and
amortization                   $45,012              $388,288              $154,490           $587,790

</TABLE>

Information  by business  segment for the six months  ended June 30, 2002 is set
forth below.
<TABLE>
<CAPTION>

                           Commun-               Video               Satellite
                           ications            Compression           Technology          Consolidated
                        ----------------     ----------------     ------------------  ------------------
<S>                            <C>                <C>                   <C>                  <C>
 Revenues                    $3,252,691          $1,908,313            $1,809,945          $6,970,949
 Income (loss) from
 operations                   $(360,389)        $(2,571,844)            $(964,126)        $(3,896,359)
 Asset impairment             $(544,055)       $(11,277,535)                             $(11,821,590)
 Interest expense, net          $35,027            $230,915               $19,235            $285,177
 Depreciation and
 amortization                   $54,265            $901,912               $50,868          $1,007,045
 Total assets                $1,842,421          $4,105,737            $6,713,818         $12,661,976

</TABLE>


Information  by business  segment for the six months  ended June 30, 2001 is set
forth below.

<TABLE>
<CAPTION>

                            Commun-               Video               Satellite
                           ications            Compression           Technology         Consolidated
                        ----------------     ----------------     ------------------ -----------------
<S>                            <C>                 <C>                  <C>               <C>

 Revenues                    $3,381,820          $1,116,345           $3,171,145         $7,669,310
 Income (loss) from
 operations                    $488,713         $(1,667,910)            $(71,924)       $(1,251,121)
 Interest expense, net          $34,688            $307,363              $32,899           $374,950
 Depreciation and
 amortization                  $107,907            $763,813             $315,380         $1,187,100
 Total assets                $3,721,666         $20,332,032           $8,149,503        $32,203,201
</TABLE>


The  Company  has two  foreign  subsidiaries:  Europe and  OceanTrac.  Europe is
located in the Netherlands and provides  communication  services to the European
market.  OceanTrac  provides  communication  services  in  Eastern  Canada.  The
financial  position and results of  operations of our foreign  subsidiaries  are
generally   determined  using  the  U.S.  dollar  as  the  functional  currency.
Transactional  gains and losses are included in  determining  net income for the
period in which the exchange rate changes. Such amounts have remained immaterial
in the  aggregate.  In  addition,  Enerdyne  and ICTI have  foreign  sales.  The
following  tables  present  revenues  and  long  lived  assets  for  each of the
geographical areas in which the Company operates:

<TABLE>
<CAPTION>

                            Three months ended 6/30/02                   Three months ended 6/30/01
                                               Long                                           Long
                      Revenues             Lived Assets               Revenues            Lived Assets
<S>                      <C>                   <C>                         <C>                <C>
United States         $1,809,342               $2,490,384              $2,059,834         $25,632,262
International          1,594,839                      201               2,512,580
                                                                                                3,875
                 -------------------    --------------------    ---------------------    -------------
Total                 $3,404,181               $2,490,585              $4,572,414         $25,636,137
                 -------------------    --------------------    ---------------------    -------------

</TABLE>

                                  Six months ended      Six months ended
                                       6/30/02               6/30/01
                                      Revenues                Revenues
 United States                        $4,702,072             $4,390,816
 International                         2,268,877              3,278,494
                                   ---------------         -------------
 Total                                $6,970,949             $7,669,310
                                   ----------------        -------------


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

Overview

The Company has three business segments:
1. Boatracs, the communications segment,
2. Enerdyne Technologies, Inc. ("ENERDYNE"), the video compression segment, a
   wholly owned    subsidiary, and
3. Innovative  Communications  Technologies,  Inc. ("ICTI"),  the satellite
   technology segment, a wholly owned subsidiary.

Statements  within this Form 10-QSB which are not  historical  facts,  including
statements  about  strategies and  expectations  for new and existing  products,
technologies,  and opportunities,  are  forward-looking  statements that involve
risks and  uncertainties.  The  Company  wishes to  caution  readers to the risk
factors inherent to the business  including,  but not limited to, the continuing
reliance  upon  QUALCOMM,  one of the major  suppliers of equipment  sold by the
Boatracs business segment,  reliance upon QUALCOMM's Network Management Facility
through which the Boatracs' business segment message transmissions are formatted
and processed,  the  development of more advanced  technology by competitors and
continuing  technological  innovation by the Company.  These and other risks are
more fully described in the Company's  Annual Report on Form 10-KSB for the year
ended December 31, 2001.

Critical Accounting Policies and Estimates

Valuation of long-lived and intangible assets and goodwill.

As discussed  under Note 2, effective  January 1, 2002, the Company adopted SFAS
No. 142 and  reassessed  the useful  lives and  residual  values of all acquired
intangible  assets.  In the quarter ended June 30, 2002, the Company  determined
that the value of its patent was impaired based on utilizing an income  approach
based on a relief from royalty  method of  valuation.  As a result,  the Company
recognized  an  impairment  loss to its  patent  of  $11,277,535  prior to a tax
benefit of  $4,130,079  in the quarter  ended June 30, 2002.  In  addition,  the
Company  recorded an  impairment to goodwill  recorded at Boatracs  Gulfport and
Canada  in  the  aggregate  amount  of  $544,055  due  to an  evaluation  of the
technology being used at Gulfport and future projected sales at both locations.

Change in Estimates

In the quarter ended June 30, 2002, the Company determined that the useful lives
of certain of its assets that were primarily used for demonstration purposes had
changed. This change in estimate resulted in a charge to earnings in the quarter
ended June 30, 2002 of $134,609.

Capitalized Software

In the three months ended June 30 2002, the Company wrote off certain previously
capitalized software development costs aggregating  approximately  $105,000, net
of accumulated amortization.  This charge was primarily the result of lower than
anticipated sales of certain software  products and the Company's  determination
to discontinue the development of certain of its technologies.

For the three months ended June 30, 2002 and 2001

Total revenues for the quarter ended June 30, 2002,  were  $3,404,181 a decrease
of  $1,168,233 or 26% compared to total  revenues of $4,572,414  for the quarter
ended June 30, 2001.

Communications  revenues,  which  consist of revenues  from the sale of Boatracs
systems, software and data transmission and messaging, were $1,647,774 or 48% of
total  revenues for the quarter  ended June 30, 2002,  compared to $1,647,713 or
36% of total  revenues for the quarter  ended June 30, 2001.  Revenues  from the
sale of  Boatracs  systems  are  recognized  under SAB No. 101 over a three year
period,  which is the estimated  period of time over which the Company  provides
messaging services to its customers. The Company is required to maintain certain
minimum purchase  requirements  under an agreement with the supplier of Boatracs
systems. For the supplier's fiscal year ending September 30, 2003 the Company is
required  to  purchase  a total of 150 units.  The net change in  communications
revenues  was  caused  by an  approximate  decrease  of  $44,000  or 3% in  data
transmission  and  messaging  revenues  and also an 8%  decrease  in system  and
software  sales,  partially  offset by an increase in sales of Boatracs units of
9%.

Video  compression  revenues  were  $984,839  or 29% of total  revenues  for the
quarter  ended June 30,  2002,  an increase  of  $580,049  or 143%,  compared to
$404,790 or 9% of total revenues in the prior comparable  quarter.  The increase
was primarily due to the completion of engineering  and the sale of new products
and a  stronger  focus on sales and  marketing  and  building  new  distribution
channels.

Revenues from satellite  transmission  technology  were $771,568 or 23% of total
revenues for the quarter  ended June 30, 2002 compared to revenues of $2,519,911
or 55% of total revenues in the second quarter of 2001. The decrease in revenues
of $1,748,343 or 69% is due primarily to a license termination fee in the amount
of $1 million  recorded  in the second  quarter of 2001 and a decrease in system
integration revenues in the second quarter of 2002.

Communications  expenses were $732,908 or 44% of communications revenues for the
quarter ended June 30, 2002, an increase of $35,161 or 5%,  compared to $697,747
which represented 42% of communications revenue in the comparable quarter of the
prior year.  Overall,  gross margin for communications  decreased 2% to 56% from
58% in the prior second quarter.

Video compression  expenses were $435,092 or 44% of video  compression  revenues
for the quarter  ended June 30, 2002 an increase of $319,786 or 277% compared to
$115,306  or 28% of video  compression  revenues in the same period of the prior
year.  Gross margin decreased 16% to 56% in the second quarter compared to a 72%
gross  margin in the same quarter of the prior year  primarily  due to the write
off of obsolete  inventory  and an  increase in the sale of products  with lower
gross margin in the quarter ended June 30, 2002.

Satellite  transmission  technology  expenses  were $460,878 or 60% of satellite
transmission technology revenues for the quarter ended June 30, 2002, a decrease
of $396,365  or 46%,  compared  to  $857,243  or 34% of  satellite  transmission
technology revenues in the prior year second quarter. The gross margin decreased
26% to 40% from 66% in the prior year primarily due to a license termination fee
of $1  million  recorded  in the  second  quarter  of 2001  which  did not  have
associated costs of good sold.

Selling,  general and  administrative  expenses were $3,897,297 or 114% of total
revenues for the quarter  ended June 30, 2002, an increase of $1,356,872 or 53%,
compared to $2,540,425 or 56% of total revenues in the prior comparable quarter.
Salary  expense  increased to  $1,422,111  from  $896,915,  due to normal annual
salary  increases,  a head count  increase in  engineering  and technical  staff
positions at the video compression segment and a severance agreement for a prior
executive.  Accounting  expense  increased  by  $72,262  or  109%  due to  costs
associated with a change in auditors and financial statement  restatements.  Bad
debt expense increased by $175,015 to $200,015, reflecting management's estimate
of the level of reserve  necessary to  accommodate  business  conditions  at the
balance  sheet  date.  Other  significant  increases  to  selling,  general  and
administrative  expenses  included the recognition of costs  associated with the
modification  of the  terms  of  previously  issued  options  and  warrants  and
consulting  fees  associated  with the  Recapitalization  Arrangement  (Note 1).
Amortization  expense decreased  $210,308 to $312,472 due to the  implementation
SFAS No. 141, which no longer requires the amortization of goodwill.

Research and development  expenses were $255,374 or 8% of total revenues for the
quarter  ended June 30, 2002, a decrease of $329,166 or 56% compared to research
and  development  expenses  of  $584,540  or 13% of total  revenues in the prior
comparable quarter. Research and development expenses for the quarter ended June
30, 2001 have been restated (Note 1). Research and development  expenses for the
quarter ended June 30, 2002 includes $150,400 of previously  capitalized  patent
and software  development  costs. Of this amount,  $81,928 relates to a software
project that attained  technological  feasibility  in 1999, but abandoned in the
quarter ended June 30 2002. The remaining  $68,471 relates to projects where the
Company  determined  that the net  realizable  value  was less  than the  amount
capitalized.

Interest  expense,  net was $150,965 for the second quarter of 2002 and $190,112
for the second  quarter of 2001,  a decrease of $39,147 or 21% due  primarily to
the  repayment of the Company's  term note with a bank in the second  quarter of
2001.

The income tax  benefit  for the  quarter  ended  June 30,  2002 was  $3,524,550
compared to an income tax benefit of $90,603 the prior comparable  quarter.  The
income tax benefit for the quarter ended June 30, 2002,  includes the benefit of
asset impairment write-offs.

For the six months ended June 30, 2002 and 2001

Total  revenues  for the six  months  ended June 30,  2002,  were  $6,970,949  a
decrease of $698,361 or 9% compared to total  revenues of $7,669,310 for the six
months ended June 30, 2001.

Communications  revenues,  which  consist of revenues  from the sale of Boatracs
systems, software and data transmission and messaging, were $3,252,691 or 47% of
total revenues for the six months ended June 30, 2002, a decrease of $129,129 or
4% compared to $3,381,820 or 44% of total revenues for the six months ended June
30, 2001. The decrease in  communications  revenues was caused by an approximate
decrease of $107,491 or 4% in data transmission and messaging  revenues and also
a decrease in system and software sales.

Video compression  revenues were $1,908,313 or 27% of total revenues for the six
months  ended June 30,  2002,  an  increase  of  $791,968  or 71%,  compared  to
$1,116,345 or 15% of total revenues in the prior comparable period. The increase
was  primarily  due to the  completion  of  engineering  of new  products  and a
stronger focus on sales and marketing and building new distribution channels.

Revenues from satellite transmission  technology were $1,809,945 or 26% of total
revenues  for the six  months  ended  June 30,  2002  compared  to  revenues  of
$3,171,145 or 41% of total  revenues in the six months ended June 30, 2001.  The
decrease  in  revenues  of  $1,361,200  or  43% is due  primarily  to a  license
termination  fee in the amount of $1 million  recorded in the second  quarter of
2001 and a decrease  in system  integration  revenues  in the second  quarter of
2002,  partially  offset by the accretion of deferred revenue under a time based
license arrangement sold in the prior year.

Communications  expenses were $1,402,220 or 43% of  communications  revenues for
the six months  ended June 30,  2002,  a decrease of $22,016 or 2%,  compared to
$1,424,236  which  represented 42% of  communications  revenue in the comparable
quarter of the prior year. Overall, gross margin for communications decreased by
1% to 57%.

Video compression  expenses were $751,702 or 40% of video  compression  revenues
for the six months ended June 30 2002,  an increase of $479,094 or 176% compared
to $272,608 or 24% of video compression revenues in the same period of the prior
year.  Gross margin  decreased  15% to 61% in the six months ended June 30, 2002
compared  to a 76%  gross  margin in the same  period  of the prior  year due to
increased costs of a long term project and the write off of obsolete inventory.

Satellite  transmission  technology  expenses  were $885,777 or 49% of satellite
transmission  technology  revenues  for the six months  ended June 30,  2002,  a
decrease  of  $382,775  or  30%,  compared  to  $1,268,552  or 40% of  satellite
transmission  technology revenues in the prior six month period. The decrease in
gross  margin of 9% to 51% from 60% in the prior  year  relates  primarily  to a
license  termination  fee of $1 million  recorded in the second  quarter of 2001
which did not have  associated  costs of good sold and  increased  costs of long
term system integration projects in the six months ended June 30, 2002.

Selling,  general and  administrative  expenses were $7,391,889 or 106% of total
revenues for the six months ended June 30, 2002,  an increase of  $2,238,785  or
43%,  compared to  $5,153,104 or 67% of total  revenues in the prior  comparable
period. The increase was partially due to a $500,000 payment made to Qualcomm in
the six months  ended June 30, 2002 to settle  distribution  exclusivity  issues
(see  Note  1).  In  addition,  salary  expense  increased  to  $2,731,223  from
$1,738,461  due to normal  annual  salary  increases,  a head count  increase in
engineering and technical staff positions at the video compression segment and a
severance  agreement  for a prior  executive.  Accounting  expense  increased by
$134,935 or 128% due to costs associated with a change in auditors and financial
statement  restatements.  Bad debt  expense  increased  by $172,720 to $200,015,
reflecting   management's   estimate  of  the  level  of  reserve  necessary  to
accommodate  business  conditions at the balance sheet date.  Other  significant
increases  to  selling,   general  and  administrative   expenses  included  the
recognition of costs associated with the modification of the terms of previously
issued  options  and  warrants  and   consulting   fees   associated   with  the
Recapitalization  Arrangement (Note 1). These increases to selling,  general and
administrative expenses were partially offset by decreases in legal expenses and
marketing expenses.  Amortization  expense decreased by $299,868 to $749,032 due
to the implementation SFAS No. 141, which no longer requires the amortization of
goodwill.

Research and development  expenses were $435,720 or 6% of total revenues for the
six months  ended June 30,  2002,  a decrease  of  $336,211  or 43%  compared to
research and  development  expenses of $771,931 or 10% of total  revenues in the
prior comparable  period.  Research and development  expenses for the six months
ended  June 30,  2001 have been  restated  (Note 1).  Research  and  development
expenses for the six months ended June 30, 2002 includes  $150,400 of previously
capitalized  patent and software  development  costs.  Of this  amount,  $81,928
relates to a software project that attained  technological  feasibility in 1999,
but abandoned in the quarter ended June 30 2002. The remaining  $68,471  relates
to projects where the Company  determined that the net realizable value was less
than the amount capitalized.

Interest expense,  net was $285,177 for the six month period ended June 30, 2002
and  $374,950  for the six month  period  ending  June 30,  2001,  a decrease of
$89,773 or 24% due primarily to the repayment of the Company's  term note with a
bank in the second quarter of 2001.

The income tax  benefit  for the  quarter  ended  June 30,  2002 was  $3,886,602
compared to an income tax benefit of $350,178 the prior comparable  period.  The
income tax benefit for the quarter  ended June 30, 2002 included tax benefit for
asset impairment write-offs.

Liquidity and Capital Resources

The  Company's  cash  balance at June 30,  2002 was  $1,026,195,  an increase of
$757,464 compared to the December 31, 2001 cash balance of $268,731. At June 30,
2002, working capital was negative $1,180,390 an increase of $5,125,249 from the
negative  working capital of $6,305,639 at December 31, 2001. Cash of $1,778,913
was  used in  operating  activities,  cash of  $344,866  was  used in  investing
activities  and cash of $2,881,243  was provided by financing  activities in the
first six months of 2002.

To date,  the Company has financed its working  capital  needs  through  private
loans,  bank debt, the issuance of common and preferred stock and cash generated
from operations. On May 31, 2002, the Company sold shares of its preferred stock
for gross  proceeds of  $4,000,000  and extended the maturity  dates of its debt
agreements with its bank and the two former owners of Enerdyne.

The report of independent  auditors on the Company's December 31, 2001 financial
statements  includes an explanatory  paragraph  indicating  there is substantial
doubt about the Company's  ability to continue as a going concern.  Although the
Company has entered into a recapitalization arrangement (see Note 1) under which
it received additional financing and restructured its current debt arrangements,
the Company does not have  sufficient  cash available to fund operations for the
next twelve months.  In order to continue as a going  concern,  the Company must
raise additional funds and significantly reduce operating expenses. There can be
no assurance that additional funds will be available on acceptable  terms, if at
all,  or, in the absence of external  funding,  that the Company will be able to
reduce operating expenses to the point where internal cash flow is sufficient to
fund  operations.  If unable to achieve its  fund-raising  or operating  expense
reduction  goals,  the  Company's  ability  to  conduct  its  business  would be
materially adversely affected.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary  objective of our  investment  activities  is to preserve  principal
while at the same time  maximizing  the income we receive from our invested cash
without significantly increasing risk of loss. Our financial instruments include
cash, accounts  receivable,  accounts payable,  accrued liabilities and debt. On
June 30, 2002,  the carrying  value of our  financial  instruments  approximated
their  fair  values.  Our  policy  is not to  enter  into  derivative  financial
instruments.  In addition, we do not enter into any futures or forward contracts
and therefore,  we do not have significant  market risk exposure with respect to
commodity  prices.  Our interest  expense is sensitive to changes in the general
level of interest  rates as our credit  facility has  interest  rates based upon
market prime  rates,  as  discussed  in the note to the  Consolidated  Financial
Statements. To-date, we have not experienced significant losses due to increases
in market prime rates. Although we transact our business in U.S. dollars, future
fluctuations   in  the  value  of  the  U.S.   dollar   may   affect  the  price
competitiveness  of our products.  However,  we do not believe that we currently
have any  significant  direct foreign  currency  exchange rate risk and have not
hedged  exposures  denominated  in foreign  currencies  or any other  derivative
financial instruments.


PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

The Company has been notified by a financial  advisor (the  "Advisor")  that the
Advisor  believes  the  Company  is  obligated  to pay it a fee in excess of the
amount already paid by the Company. The fee purportedly due to the Advisor is in
connection  with the  Recapitalization  Arrangement  (Item 1). The  Company  had
engaged the Advisor to assist it in exploring various capital  restructuring and
strategic  alternatives  with third  parties.  The final  outcome of this matter
cannot be predicted,  but the Company believes the ultimate  disposition of this
matter will not have a material  adverse  effect on its  consolidated  financial
statements.

The Company is not aware of any other  current or pending legal  proceedings  to
which  the  Company  is a party  and  which  may have an  adverse  effect on the
Company.

ITEM 2. CHANGES IN SECURITIES

See Note 1, "Basis of Presentation."

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

As of December 31, 2001 the Company was in default under its existing  revolving
credit facility and subordinated  notes due to failure to meet certain financial
ratio covenants and as such,  balances were classified as current.  In May 2002,
we entered  into an amendment to our credit  facility  and  subordinated  notes,
which, among other provisions,  waived the defaults that existed at December 31,
2001 and reset all  covenants  for 2002 and  subsequent  years and as such,  the
balances were reclassified as long-term and current. For further information see
Note 4 to the condensed consolidated financial statements.

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

None

ITEM 5. OTHER INFORMATION

On June 27, 2002 the Company filed with the Securities and Exchange Commission a
Tender Offer  offering to each holder of Series B Preferred  Stock  ("Series B")
the  opportunity  to  exchange  shares of Series B for  shares of the  Company's
Series C-3 Preferred Stock ("Series  C-3"). In addition,  the Company offered to
the holders of Series B, who  exchanged  all of their shares for Series C-3, the
opportunity to purchase  shares of C-1 Preferred  Stock and Series C-2 Preferred
Stock at a purchase price of $500 and $300 per share,  respectively.  The series
C-3  preferred  stock is  convertible  into shares of common  stock at $3.00 per
share and may be adjusted for certain recapitalization events.

Subsequent to June 30, 2002 the Tender Offer was closed. Of the 351.25 shares of
Series B outstanding,  a total of 320 shares converted to 1,059 shares of Series
C-3 and 31.25 shares of Series B remain.  None of the  shareholders  of Series B
who did convert to Series C-3  purchased  shares of Series C-1 and C-2 Preferred
Stock.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

In March 2002,  the Company filed Form 8-K advising the  Securities and Exchange
Commission of a change in the Registrant's  Certifying  Accountants.  Amendments
No. 1, 2 and 3 to the 8-K were filed on April 19, 2002,  May 22, 2002,  and June
11, 2002, respectively.


<PAGE>



                                   SIGNATURES


In accordance with the requirements of the Securities  Exchange Act of 1934, the
registrant  caused  this  report to be signed on its behalf by the  Undersigned,
thereunto duly authorized.



                                   ADVANCED REMOTE COMMUNICATION SOLUTIONS, Inc.
                                   Registrant

August 19, 2002                              /s/ BRANDON L. NIXON
Date                                         BRANDON L. NIXON
                                             CHIEF EXECUTIVE OFFICER
                                             CHAIRMAN

August 19, 2002                              /s/ PAUL WICKMAN
Date                                         CHIEF FINANCIAL OFFICER