SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-KSB
                    ANNUAL REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE FISCAL YEAR ENDED: DECEMBER 31, 2002
                          COMMISSION FILE NO. 0-25658

                        DIGITAL BROADBAND NETWORKS, INC.
                 (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)

          DELAWARE                                       84-1357927
(STATE OR OTHER JURISDICTION                           (IRS EMPLOYER
      OF INCORPORATION)                              IDENTIFICATION NO.)

                     SUITE 11.02, 11TH FLOOR, MENARA MERAIS
                               NO. 1, JALAN 19/3
                              46300 PETALING JAYA
                               SELANGOR, MALAYSIA
              (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

                              011 (603) 7956-7026
                (ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)

         (FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

             SECURITIES REGISTERED UNDER SECTION 12(g) OF THE ACT:

                   COMMON STOCK, $0.00001 PER SHARE PAR VALUE

Indicate by check mark whether the Company (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the Company
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 Company's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB. [ X]

     Issuer's revenues for its most recent fiscal year: $12,540,506

     The aggregate market value of the voting stock of the Company held by
non-affiliates as of March 26, 2003 was approximately $1,747,365.

     The number of shares outstanding of the Company's common stock, as of March
26, 2003, was 97,900,899.

     Documents incorporated by reference: None

<PAGE>

                               TABLE OF CONTENTS

PART I

Item 1    Description of Business

Item 2    Description of Property

Item 3    Legal Proceedings

Item 4    Submission of Matters to a Vote of Security Holders

PART II

Item 5    Market for Common Equity and Related Stockholder Matters

Item 6    Management's Discussion and Analysis

Item 7    Financial Statements

Item 8    Changes In and Disagreements with Accountants on Accounting and
          Financial Disclosure

PART III

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

Item 10   Executive Compensation

Item 11   Security Ownership of Certain Beneficial Owners and Management

Item 12   Certain Relationships and Related Transactions

Item 13   Exhibits and Reports on Form 8-K

Item 14   Controls and procedures


SAFE HARBOR STATEMENT

     This Form 10-KSB and other reports filed by the Company from time to time
with the Securities and Exchange Commission, as well as the Company's press
releases, contain or may contain forward-looking statements, within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, and information that are based upon beliefs of, and
information currently available to, the Company's management, as well as
estimates and assumptions made by the Company's management. Any statements
contained herein that are not statements of historical fact may be deemed to be
forward-looking statements. Forward-looking statements can be identified by the
use of forward-looking terminology such as "believes", "may", "should",
"anticipates", "estimates", expects", "future", "intends", "hopes", "plans" or
the negative thereof. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that could cause actual results of
Digital Broadband Networks, Inc. to vary materially from historical results or
from any future results expressed or implied in such forward-looking statements.

     Such factors include, among others, the following: revocation of the
Company's license, ability to successfully implement its business plans, ability
to obtain services provided by other communications companies, the ability of
the Company to raise capital on a timely basis, the Company's business is
subject to existing and future government regulations, failure to retain
qualified personnel, competitive pressures and potentially adverse tax and cash
flow consequences resulting from operating in multiple countries with different
laws and regulations, ability to maintain profitability in the future and
general economic and business conditions in Malaysia. The Company does not
undertake to update, revise or correct any forward-looking statements.

                                       2

<PAGE>

PART I

ITEM 1. DESCRIPTION OF BUSINESS.

HISTORICAL DEVELOPMENT

     Digital Broadband Networks, Inc. (the "Company") is a Delaware corporation
that provides broadband products and applications to its customers, primarily in
Malaysia. It was formed through a reverse merger in April 1999 with the former
Kalan Gold Corporation. On June 5, 2002, the Company reincorporated under
Delaware law by merging the existing Digital Broadband Networks, Inc., organized
under Colorado law, with and into a wholly owned subsidiary organized under
Delaware law.

     The principal business address of the Company is Suite 11.02, 11th Floor,
Menara Merais, No. 1, Jalan 19/3, 46300 Petaling Jaya, Selangor, Malaysia. The
United States address of the Company is 9 Main Street, Suite 1, Flemington, NJ.

     As of March 26, 2003, the Company had a total of 97,900,899 shares of
common stock issued and outstanding. The Company has not been subject to any
bankruptcy, receivership or similar proceeding.

BUSINESS

     The Company is a system solution provider involved in application
development, broadband network operation, delivery of value added applications
and services; the sale of devices that utilize broadband networks and the sale
of biometric security devices. The Company's principal operations include the
development and operation of a wireless broadband network in Malaysia, the
development of interactive, multimedia content for the Internet and the
development licensing and/or sale of specific products and applications that
utilize the capacities of a broadband network. These include the Eystar
SmartHome Console, broadband modems, biometric systems and Internet-based
cameras.

     The Company conducts operations in the United States and Malaysia, and has
three subsidiaries: Animated Electronic Industries Sdn Bhd ("AEI"), Perwimas
Telecommunications Sdn Bhd ("PTSB") and EyStar Media Inc. ("EMI"). AEI, based in
Malaysia, is involved in the design, development and production of multimedia
content; provision of consulting services for website development, network
engineering and project management in IT related projects. PTSB, a 86%-owned
subsidiary of AEI, provides broadband and application services under licenses
granted by the government of Malaysia. EMI, a wholly owned Delaware corporation,
organized on June 20, 2002, seeks to acquire United States technology companies
and to expand the Company's operations into the United States.

     At December 31, 2002, the Company had 15 employees, all of whom were
employed by the Company's Malaysian subsidiaries. In an effort to reduce its
operating costs, the Company has outsourced its labor intensive content
production work to third parties. However, the Company plans to recruit
additional employees in 2003. At present, EMI does not have any employees.

EyStar SmartHome Console
------------------------

     The multi-protocol EyStar SmartHome Console is a gateway device that
bridges external data networks such as the Internet to internal home networks
like Ethernet, telephone line, power line and the 802.11b wireless LAN,
eliminating the need for any additional wiring in the home. The Console has the
capacity to enable value-added services to be offered to subscribers. These
services include home healthcare in conjunction with hospitals and health
advisors; interconnection and control of appliances produced by different
manufacturers; and security applications that allow subscribers to check on
their homes remotely. This Console is designed to operate on both the narrow and
broadband fixed line/wireless networks and can be linked to the SmileCAM,
another product marketed by the Company.

     The Company has entered into various agreements to expand the marketing of
the SmartHome Console or to provide enhanced features to purchasers of the
console.

                                       3

<PAGE>

     The Company has entered into an agreement with PointRed Technologies Inc.
("PointRed") whereby the Company and PointRed agreed to reciprocal marketing of
each other's products and services. The Company agreed to sell PointRed's
products worldwide, excluding the United States. PointRed in return has agreed
to market and sell the Company's EyStar SmartHome Consoles, value-added
applications and services to its existing and future clients. The Company and
PointRed have further agreed that PointRed will service and install the EyStar
SmartHome Console in North and South America, while the Company will service
PointRed's products in Malaysia.

     In addition, in January 2002, the Company signed a five-year Sales and
Distribution Agreement with Cirronet Incorporated, to bundle Cirronet's wireless
subscriber modem with the Company's EyStar SmartHome/Office Console for
distribution worldwide. Under the terms of the agreement, the Company committed
to purchase approximately $19 million of equipment over five years. The Company
has continued to experience performance problems with the Cirronet equipment,
however, and the Company has returned its initial purchase of non-conforming
equipment. No further purchases are anticipated by the Company until the
problems with equipment performance have been corrected to the Company's
satisfaction.The Company actively markets the SmartHome Console in Malaysia
through AEI. In addition to its agreement with PointRed Technologies covering
North and South America, the Company is pursuing additional strategic partners
to introduce the SmartHome Console in the United States through additional
strategic partners or through direct marketing. The Company did not have any
sales of the SmartHome Console in the United States during 2002.

Interactive Media Development
-----------------------------

     The Company is involved in the design, development and production of
interactive multimedia content, websites, programs and applications, which
include the following activities:

     --   Designing, producing, hosting and distribution of interactive
          multimedia content, websites, programs and applications.

     --   Developing and producing e-commerce programs and Internet-based
          security applications and solutions.

     --   Providing project consulting services on broadband communication and
          networking systems for property development projects.

Broadband Networks
------------------

     The Company, through its subsidiary PTSB, has been granted a license by the
government of Malaysia to develop and operate a countrywide wireless broadband
network, known as VISIONET, with the capacity to provide interactive voice,
video and data services. The Company plans to utilize in the VISIONET network a
combination of the Local Multipoint Distribution Service ("LMDS") and fixed
wireless access technologies in the 24.0 - 29.0 GHz and 2.4 GHz frequency bands
to provide a cost effective and fast deployment of VISIONET. LMDS is a
point-to-multipoint broadband technology utilizing the super-high "millimeter"
portion of the airwaves for integrated communications services. Due to the
relatively large bandwidth of the LMDS signal, LMDS systems have the capacity to
provide interactive voice, video and data services.

     The Company established its first VISIONET cell in December 2001.
Feasibility studies that were conducted following the rollout of VISIONET
indicated that it would be more profitable to deploy VISIONET as a backhaul
service for other telecommunication and broadband service providers. A backhaul
service provides network infrastructure to other service providers who provide
the direct link or "last mile" service to consumers. The Company has therefore
revised its strategy for the development and use of VISIONET to serve primarily
as a backhaul network. Consistent with this strategy, the Company has entered
into agreements to market the network.

     In connection with the build out of VISIONET and its portal, the Company
has entered into a long-term strategic business relationship with Siemens
Malaysia, under which Siemens is to provide preferred payment terms to the
Company for equipment used in the build out of VISIONET and assist the Company
in network design, build out services, maintenance and marketing. The Company
committed to an initial purchase of hardware valued at $250,000 from Siemens for
the limited commercial rollout of VISIONET, conditioned upon completion of a
successful trial of the equipment by the Company. The Company returned the
equipment to Siemens in 2002 after trial results showed that the equipment was
not able to perform to the parameters set by the Company. As of December 31,
2002, Siemens has not proposed to the Company replacement equipment deemed
suitable by the Company.

                                       4

<PAGE>

     In September 2001, the Company entered into a strategic collaboration with
Aptilo Networks, Sweden, to deploy local mobile networks ("LMNs") in Malaysia
and the Asian regional markets. The integration of LMNs with VISIONET will
enable consumers to receive live video streams from their handheld devices and
laptops, and to access the Internet and their corporate intranets at near T1
speeds remotely from public locations in the "travel ribbon" such as hotels,
airports, restaurants, conference centers, shopping malls and coffeehouses. The
first integrated VISIONET-LMN cell was deployed during the fourth quarter of
2001 to connect a number of access points to Bluetooth and wireless LAN 802.11b
standard devices. The mobile network features Aptilo's latest billing solution
that will enable the Company to offer value-added applications and services to
users without the need for any prior registration as a subscriber. Any user can
now pay for instant network access to surf the Internet or purchase value-added
applications on the spot by using their credit card. This flexible method of
payment from Aptilo will not only attract more users to VISIONET, but will also
reduce the Company's capital expenditure and recurring monthly operating costs.
The integrated network will enable the Company to expand its broadband network
from fixed wireless into the mobile broadband market. The Company has committed
to an initial purchase of software and hardware from Aptilo valued at $50,000.

     On December 30, 2002, the Company's subsidiary, AEI executed an Agreement
with Telekom Sales and Services Sdn Bhd ("TM"), a subsidiary of Telekom Malaysia
Berhad, to sell, distribute and promote broadband access over standard copper
telephone lines using Digital Subscriber Line technology. The service, brand
named TMnet Streamyx, was first launched in August 2002. TMnet Streamyx is a
high speed access service providing "always-on" connection to the Internet. This
service currently covers 100 urban locations in Malaysia. The agreement with TM
is for an initial period of one year and maybe extended for a further period to
be agreed by both parties. Under the terms of the agreement, AEI is required to
achieve a minimum sales of $65,789 (RM250,000) for 2003. The agreement with TM
complements the Company's Distribution Agreement with Anova to distribute
Anova's DSL equipment, including modems and routers.

     In September 2002, the Company signed a Distribution Agreement with Anova
Broadband ("Anova") to distribute Anova's Digital Subscriber Line ("DSL")
equipment in Asia, Australia and New Zealand. Sale of the equipment shall
commence after the Company has obtained equipment authorization certification
from relevant regulatory authorities of the respective countries. The Company
has yet to receive authorization certification for Anova's DSL equipment from
the relevant regulatory authorities due to certain technical issues. Anova is
working with the Company to resolve these technical issues. The Company may
suspend the agreement with Anova in the event that Anova is not able to resolve
these technical issues by the third quarter of 2003.

     At year-end 2002, VISIONET was rolled out as a backhaul network in the
Klang Valley linking WiFi hotspots established by third parties to provide
wireless Internet access services. The Company has initiated discussions with TM
on using VISIONET to extend TMNet's Streamyx service coverage to locations
currently not served by TM.

Security and Biometric Products
-------------------------------

     During 2002, the Company entered into agreements in which it obtained the
rights to sell and service certain products that utilize broadband technologies
in the areas of identification and security. In December 2002, the Company's
subsidiary, AEI executed an Agreement with Sintec Corp, South Korea ("Sintec"),
to sell, distribute and promote the SmileCAM remote video surveillance cameras
in Malaysia, Thailand, Singapore, Vietnam and Brunei. The agreement is for an
initial period of two years and will thereafter be automatically renewable for
one-year terms on each anniversary. Under the terms of the agreement, Sintec
will grant the Company exclusive distribution rights for its products in
Malaysia if the Company purchases an agreed minimum value of products from
Sintec during 2003 and 2004. SmileCAM cameras are used for Internet based
security and entertainment applications and can be integrated with the EyStar
SmartHome Console to provide a value-added security solution for corporate and
residential users. SmileCAM cameras include features such as automatic motion
detection and tracking, and sending live streaming video to an Internet browser.
Combined with applications and solutions developed by the Company, the Company
believes that the SmileCAM cameras offer to purchasers useful features such as
the ability to record intrusion, owner notification by ordinary telephone, live
video, remote security options and forwarding of images by use of the Internet.

     The sale of the cameras complemented by customized security applications
commenced in the first quarter of 2003.

                                       5

<PAGE>

     In January 2003, the Company signed a Reseller Agreement with FaceKey
Corporation ("FaceKey") to sell FaceKey's biometric-based products. The
agreement is for an initial period of one year and will thereafter be
automatically renewable for two-year terms on each anniversary. Under the terms
of the agreement, FaceKey will grant the Company exclusive distribution rights
for its products in Malaysia if the Company purchase an agreed minimum value of
products from FaceKey during 2003. FaceKey develops products to control access,
record time and attendance and restrict use of personal computers by using two
biometric technologies, face recognition and fingerprint matching in a manner
that will be highly competitive with magnetic cards, PIN numbers and passwords.
The combination of both face and fingerprint recognition technologies is
believed by the Company to be extremely reliable, providing a security level
equivalent to a DNA test.

     The Company expects to commence generating revenue from FaceKey's products
in the second quarter of 2003.

LICENSES/GOVERNMENT REGULATION

     The Company operates its wireless broadband network under a license the
Company has obtained from the Government of Malaysia. The Company believes that
it has the only such license granted by the Government of Malaysia, however, the
Government may issue additional licenses to the Company's competitors.

     Although the Company is unaware of any reason why its license might be
terminated or limited, the Government of Malaysia has the unilateral right to
revoke the Company's license upon thirty days' notice. The license granted by
the Government of Malaysia is material to the operations of the Company and any
alteration, limitation or revocation of the license would have a material
adverse effect on the Company.

     The business operations of PTSB are regulated by both the Malaysian
Ministry of Energy Communications & Multimedia (MECM) (formerly known as the
Ministry of Energy Telecommunications & Post) and the Malaysian Communications
and Multimedia Commission ("CMC"). PTSB's WVCN license is governed by the
Malaysian Communications & Multimedia Act 1998 ("Act 588") which became
effective on April 1, 1999. This new Act, which has superseded the
Telecommunications Act of 1950 and the Broadcasting Act of 1988, is to provide
for and to regulate the converging communications and multimedia industries in
Malaysia.

     Under Malaysian law, PTSB has the option of registering its existing
wireless broadband license under Act 588 or maintaining the terms of the license
under the repealed Act. The Company believes that it would be more advantageous
to register its license under the new Act, and has on March 3, 2000 registered
with the CMC its intention to migrate to the new Act. The license was granted
for an initial period of 10 years commencing May 28, 1997.

     While the Company believes that Act 588 is the most significant
industry-specific governmental regulations that apply to the Company's business,
the Company is subject to a large number of other laws in different countries
and localities.

     In September 2001, PTSB was awarded an Application Service Provider ("ASP")
license by the CMC. The ASP license will complement PTSB's wireless broadband
license. As an ASP, PTSB could offer enterprises access over the Internet to
applications and related services that would otherwise have to be located in
their computers.

COMPETITION

     The Company operates in a highly competitive marketplace, in which its
competitors are longer established and financially sound. The markets for
security products and applications and broadband network facility services are
particularly competitive.

     The Company's broadband services encounter competition from domestic
Internet Service Providers, often referred to as ISPs. Many of the competing
ISPs have, or can be expected to have greater financial, marketing and other
resources than the Company. In addition, in marketing or reselling broadbard
services provided by third-parties, the Company competes with other similar
providers.

     The devices developed and marketed by the Company that seek to utilize the
capacity of broadband networks typically compete with similar well-known
products. In addition, for security products and applications, the Company
expects competition from companies that offer conventional security products and
solutions like card access system.

                                       6

<PAGE>

     Although the Company remains optimistic that its products will find
acceptance in a competitive marketplace, there can be no assurance that it will
be able to compete successfully with such entities. To date, the Company has
found a limited market for its products and there can be no assurance that sales
will improve or will not weaken.

SIGNIFICANT RISK FACTORS

     The Company faces a significant number of risks and uncertainties
associated with executing its business plan, only some of which the Company can
currently anticipate.

     These risks and uncertainties may impair the Company's progress and
profitability and must be given careful consideration.

     The risks described below are intended to highlight risks that are specific
to the implementation of its business plan, but are not the only risks that the
Company faces. They are not discussed in a particular order and no assumption
should be made that the most significant or likely risks are discussed first. In
addition, other risks and uncertainties, including those generally affecting the
global economy, the political and economic climate in Malaysia and the rest of
Asia, the United States, the relevant industries in which the Company operates,
the public securities market, and risks that the Company currently believes are
immaterial may ultimately impair its business and results of operations.

     These risks are discussed in more detail in Management's Discussion and
Analysis, below.

SUMMARY OF SIGNIFICANT RISKS

     --   The Company expects to incur net losses in the near future and may
          experience difficulty meeting its needs for working capital, either
          from current operations or from new capital.

     --   The Company's ability to introduce its products to the anticipated
          markets is unproven.

     --   The market for the Company's broadband products and services,
          including the Eystar SmartHome Console, SmileCAM and FaceKey are
          unproven, and demand may be inadequate.

     --   The Company obtains supplies and services from competitors who may be
          unwilling to continue providing these services in the future.

     --   The Company is subject to license requirements and extensive
          government regulation that can be changed at any time.

     --   The Company is subject to particular risks due to its international
          operations.


ENVIRONMENTAL LAWS

     To date, the Company has not incurred any material costs for compliance
with any prevailing environmental laws of Malaysia or the United States.


PATENTS AND TRADEMARKS

     The Company has no patent. The Company's subsidiary, PTSB, has registered
the name "VISIONET" as its service tradename and trademark with the Malaysian
Registry of Trade Marks and Patents. In June 2002, AEI registered the name
"EyStar" as its service tradename and trademark with the Malaysian Registry of
Trade Marks and Patents. No other intellectual property registration is pending.

                                       7

<PAGE>

ITEM 2. DESCRIPTION OF PROPERTIES.

     The Company's principal executive offices are located at Suite 11.02,
Menara Merais, No. 1 Jalan 19/3, 46300 Petaling Jaya, Selangor, Malaysia. This
office space is leased from an unaffiliated party. This lease expires in
February 2004 and provides for a 1-year renewal option. The Company has also
leased another office in Petaling Jaya for content production, engineering and
warehouse space from an unaffiliated party. This lease will expire in August
2004.

     In June 2002, the Company entered into a lease agreement for office space
at University Research Park, One Resource Square, 10925 David Taylor Drive,
Suite 100, Charlotte, NC. This lease is for a period of one year commencing on
June 1, 2002.

     In January 2003, the Company entered into a one year lease agreement for
office space at Nine Main Street, Suite 1, Flemington, NJ. This lease will
expire in January 2004 and provides for a 1-year renewal option.

     The Company believes that its existing and planned facilities are adequate
for its current requirements and that suitable additional space will be
available as needed to accommodate future expansion of its operations.

ITEM 3. LEGAL PROCEEDINGS.

     No legal proceedings of a material nature to which the Company is a party
were pending during the fourth quarter of the fiscal year covered by this
report.

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

     The Company did not submit any matter to a vote of the Company's security
holders during the fourth quarter of the fiscal year covered by this report.

                                       8

<PAGE>

                                    PART II

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

     The Company's common stock trades in the Over-the-Counter ("OTC") market
under the symbol "DBBD" and published quotations are available on the OTC
Bulletin Board. Prior to June 6, 2002, the Company's common stock traded under
the symbol "DBBN."

     The table below sets forth the range of high and low bid quotations of the
Company's common stock as publicly reported by Marketguide during the Company's
2002 and 2001 fiscal years. The following bid price market quotations represent
prices between dealers and do not include retail markup, markdown, or
commissions; hence, they may not represent actual transactions.


Year 2002                  High            Low
                          ------          -----
First Quarter             $0.28           $0.07
Second Quarter            $0.18           $0.07
Third Quarter             $0.12           $0.02
Fourth Quarter            $0.08           $0.03


Year 2001                  High            Low
                          -----           -----
First Quarter             $0.25           $0.05
Second Quarter            $0.35           $0.04
Third Quarter             $0.32           $0.09
Fourth Quarter            $0.28           $0.06

     As of March 26, 2003, 97,900,899 shares of the Company's common stock were
outstanding, 1,050,000 shares of the common stock were held in the treasury and
the number of holders of record of the common stock at that date was
approximately 66. However, the Company estimates that it has a significantly
greater number of shareholders because a substantial number of the Company's
shares are held in "street names" by the Company's market makers. On March 26,
2003, the closing trade price for the Company's common stock was $0.043 per
share.

     Under the Company's Articles of Incorporation, holders of common stock are
entitled to receive such dividends as may be declared by the Company's Board of
Directors. No dividends on the common stock were paid by the Company during the
periods reported herein.

SALES OF UNREGISTERED SECURITIES

     There was no sale of unregistered security during the fourth quarter of
2002. All securities that have been issued or sold by the Company during the
past three years but were not registered under the Securities Act of 1933, as
amended, had been reported in the Company's previous Form 10-QSB.

                                       9

<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS

OVERVIEW

     During 2002, the Company achieved substantial growth in its revenues, of
$12,540,506 compared to $4,958,421 in 2001, and achieved positive annual
earnings for the first time. These revenues were derived from the design,
development and production of interactive multimedia websites and content and
from provisioning of project consulting services.

     Net income for the year ended December 31, 2002 was $98,649, compared to a
net loss of $79,105 for the year ended December 31, 2001. The Company's net
income in 2002 included several non-recurring transactions including recognition
of a deferred gain of $101,238, collection of $232,724 in related party
receivables previously not recognized as revenue due to the uncertainty of
collection, collection of $168,421 in non-related party accounts receivable
previously deemed uncollectible, and extinguishment of $42,548 of accounts
payable recognized as an extraordinary gain. The net loss in 2001 included
reversal of previous year's provision for doubtful receivable of $455,012 and
reversal of accrued legal fees of $150,000. Excluding these, the Company would
have incurred net loss of $446,282 and $684,117, respectively, for 2002 and
2001. The loss per share of common stock, was less than $0.01 for each of the
years ended December 31, 2002 and 2001.

     The independent auditors' report on the Company's consolidated financial
statements as of December 31, 2002, and for each of the years in the two-year
period ended December 31, 2002 includes a "going concern" paragraph that
describes substantial doubt about the Company's ability to continue as a going
concern. (See Note 1 to the consolidated Financial Statements).

     At year end 2002, the Company had total current assets of $1,815,062,
furniture and equipment of $1,443,592 and net tangible assets of $2,025,441. The
Company's shareholders' equity at year end 2002 was $2,496,591.

     In 2002, the Company's revenue was generated primarily from the following
activities:

1.  Designing, producing, hosting and distribution of interactive multimedia
    content, websites, programs and applications.
2.  Developing and producing e-commerce programs and Internet-based security
    applications and solutions.
3.  Providing project consulting services on broadband communications and
    networking systems for property development projects.

     The Company anticipates that these activities will continue to provide the
principal sources of the Company's revenue in 2003. During the year revenue is
also expected to be generated from application development, network operation,
delivery of value-added applications and services; and sales of the EyStar
SmartHome Console. The Company forecasts it will not receive revenue from the
sale of biometric-based security products and solutions before the third quarter
of 2003.

Significant Business Developments and Plan of Operation

     The Company anticipates that it will continue to provide its existing
multimedia development, consulting and broadband services to customers during
2002, and to market the Eystar SmartHome Console. In addition, the Company plans
to introduce and actively market a new line of security and biometric products
capable of integration with the Eystar SmartHome Console and utilizing the
Company's ability to provide applications support. These products are the
SmileCAM and FaceKey devices. The Company believes that these devices, when
linked with the broadband technology that the Company seeks to exploit, will
provide customers with comprehensive security and identification systems for
which it is believed there will be a significant market.

     The Company anticipates that it will continue to seek the rights to new
products and services through contractual arrangements and potentially through
the acquisition of other business entities that provide compatible products or
services. The Company expects to continue to market its products and services
through a sales force and through its Internet websites located at www.dbni.net
and www.eystar.com. As described in more detail below, the Company anticipates
that its primary markets will continue to be in Malaysia and other Asian
countries. However, the Company continues to seek additional markets in North
and South America and has entered into various strategic agreements to improve
the acceptance of its products there.

                                       10

<PAGE>

     The Company has secured several new contracts to provide hardware,
applications or consulting services. The Company believes that it will be able
to begin performance of some of these contracts during 2003 and that it will
recognize revenue from these activities in 2003. Due to uncertainties in
scheduling, however, the Company cannot forecast the specific dates on which it
will begin performance of these contracts. These contracts are described in more
detail below.

     As a result of the Company's experience in rolling out the first VISIONET
cell in December 2001, management has decided that it will be most advantageous
to the Company to revise its strategy for exploiting its broadband license
granted by the Government of Malaysia. The Company believes that the most
effective use of the VISIONET infrastructure is as a point-to-point backhaul
service provider to other broadband and telecommunications providers. This
decision was based on feasibility studies that were conducted after the VISIONET
cell was activated. During 2003, the Company intends to actively market VISIONET
as a backhaul service provider, rather than as a telecommunications company that
provides the "last mile" service. In particular, the Company has decided to use
VISIONET as a backhaul link for local mobile networks that it plans to attempt
to deploy in partnership with Aptilo Networks, Sweden. With this change in
business strategy, VISIONET will no longer provide the last mile link between a
cell based radio station and retail users. The Company will instead construct a
wireless highway or backhaul linking the cell based radio stations established
by existing telecommunication companies and ISPs. The Company expects to
conclude contracts with a number of telcos and ISPs on the use of VISIONET as a
backhaul link during 2003.

     In addition, the Company plans to continue its efforts to exploit the
Application Service Provider (ASP) license granted to its subsidiary PTSB in
September 2001, by the Malaysian Communications and Multimedia Commission. The
ASP license will complement the wireless broadband license granted to the
Company in June 1997. As an ASP, PTSB is permitted to offer enterprise access
over the Internet to applications and related services that would otherwise have
to be located in their computers. The Company anticipates that the ASP service
may will become an attractive alternative to locally based applications both for
small and medium enterprises with lower budgets for information technology, and
also for larger companies as a form of outsourcing.

Significant Contracts

     For the year 2003, the Company hopes to generate additional revenue arising
from the contracts described below. This description is intended to provide the
reader with a description of the principal activities of the Company that are
anticipated in 2003. Although the Company provides estimates of the time in
which the contracts will be performed, revenues that may be generated and/or
sales that are projected, there can be no assurance that the contracts will be
performed as anticipated or that the revenues or sales projected will be
realized by the Company. The contracts may be terminated, limited, breached or
delayed, may be subject to force majeure clauses or the obligations to pay for
services rendered or products received may not be fulfilled.

a)   In August 2001, the Company was awarded a consulting contract, estimated to
     generate revenue of $2.85 million over a three year period, through August
     2004, to carry out the planning, design, project execution (including
     contract and project management) of all broadband communications and
     networking systems/services for Pulau Indah-Marina Village, a water
     oriented luxury resort, residential, hotel and spa project. Up to December
     31, 2002, the Company has generated $109,000 of revenue on this contract.
     The Company expects the contract period to be extended to August 2005 and
     to receive the balance of the $2.85 million contract sum through August
     2005.

b)   In December 2001, the Company entered into a marketing agreement with
     Worldlink Dotcom Sdn. Bhd. (Worldlink) to distribute its service gateway
     for home/office automation in Malaysia, Singapore and Australia. In 2002,
     Worldlink has been promoting the Company's service gateway to potential
     resellers and channel partners in the targeted markets. The Worldlink
     contract was projected by the Company to generate revenues of $4.0 million
     in 2003. Worldlink has, however, indicated that additional time is required
     to promote the Company's service gateway and secure orders from its
     resellers and channel partners and the revenue that will be realized during
     2003 cannot be accurately forecast. The gateway bridges the Internet with
     internal home and office networks while facilitating the delivery of home
     and office applications including, but not limited to, security
     surveillance and video conferencing.

c)   In January 2002, the Company appointed Mutual Base Equity Sdn. Bhd. (MBE)
     as one of its distributors in Malaysia and Singapore for sale of the EyStar
     SmartHome Console. Under the terms of the Distributor Agreement, MBE has
     been appointed for an initial duration of 3 years commencing January 4,
     2002. For fiscal year 2002, MBE has been attempting to secure contracts for
     the supply of the EyStar SmartHome Console to property developers in
     Malaysia and Singapore. The sales target for MBE is $17.5 million over the
     remaining term of the agreement. There can be no assurance, however, that
     MBE will meet its sales target.

                                       11

<PAGE>

d)   The Company will attempt to secure contracts from local mobile networks to
     be jointly deployed with Aptilo Networks in 2003.

e)   In January 2002, the Company's subsidiary, PTSB, was awarded a contract to
     carry out the planning, design, and project execution of all broadband
     communications and networking systems/services for a commercial/housing
     project in Selangor, Malaysia. Under the contract, PTSB will receive a
     total contract sum of $550,000 over the next 36 months. The Company has
     generated $37,000 of revenue on this contract to date and expects to
     receive the balance of the contract sum through January 2005. The project,
     featuring 312 serviced apartments, 62 units of retail shops/offices and 120
     units of housing for a government agency, is expected to be completed by
     December 2004. As a total solution provider, PTSB will also be responsible
     for the supply of its EyStar SmartHome Console as well as providing
     value-added broadband applications such as high speed Internet access,
     security surveillance, multimedia conferencing, home automation and
     video-on-demand.

f)   In September 2002, the Company signed a Channel Partner Agreement with
     PointRed Technologies, Inc., a wireless broadband equipment manufacturer
     and distributor to distribute the EyStar SmartHome Console. Starting with
     its existing client base and expanding into new markets, PointRed will
     sell, install and service the EyStar SmartHome Console, and in doing so,
     may help to accelerate the distribution of the Console in North and South
     America.

g)   In November 2002, the Company was contracted by MY Architect ("MYA"), a
     related party, to provide consulting services relating to home automation,
     home networking, energy cost saving, security surveillance and monitoring
     for MYA's current projects involving two major commercial and housing
     developments in Malaysia. The Company expects to receive $550,000 in
     consulting fees over the next 18 months beginning December 1, 2002. The
     Company has generated $19,737 of revenue on this contract to date and
     expects to receive the balance of the contract sums through November 2004.
     The Company also expects to secure additional contracts sometime in 2005,
     estimated at $4.0 million, from MYA's clients for the supply and
     installation of the EyStar SmartHome Console and its security system in the
     two commercial and housing developments.

Strategic Contractual Relationships

     In its efforts to exploit broadband technology, the Company seeks to enter
strategic agreements, both formal and informal, with other providers of goods or
services that are compatible with the Company's existing businesses. Such
arrangements include license agreements, requirements contracts and service
agreements. The Company may also seek to acquire business enterprises that offer
goods and services that are of benefit to the Company and its shareholders.

     In December 2002, the Company's subsidiary, AEI executed an Agreement with
Sintec Corp, South Korea ("Sintec"), to sell, distribute and promote their
SmileCAM remote video surveillance cameras in Malaysia, Thailand, Singapore,
Vietnam and Brunei. The agreement is for an initial period of two years and will
thereafter be automatically renewable for one-year terms on each anniversary.
Under the terms of the agreement, Sintec will grant the Company exclusive
distribution rights for its products in Malaysia if the Company purchases an
agreed minimum value of products from Sintec during 2003 and 2004. SmileCAM
cameras are used for Internet based security and entertainment applications and
can be integrated with the EyStar SmartHome Console to provide a value added
security solution for corporate and residential users. SmileCAM cameras include
features such as automatic motion detection and tracking, and sending live
streaming video to an Internet browser. Combined with applications and solutions
developed by the Company, the Company believes that SmileCAM cameras offer to
purchasers useful features such as the ability to record intrusion, owner
notification by ordinary telephone, live video, remote security options and
forwarding of images by use of the Internet.

     In December 2002, the Company's subsidiary, AEI executed an Agreement with
Telekom Sales and Services Sdn Bhd ("TM"), a subsidiary of Telekom Malaysia
Berhad, to sell, distribute and promote broadband access over standard copper
telephone lines using Digital Subscriber Line technology. The service, brand
named TMnet Streamyx, was first launched in August 2002. TMnet Streamyx is a
high speed access service providing "always-on" connection to the Internet. This
service currently covers 100 urban locations in Malaysia. The agreement with TM
is for an initial period of one year and maybe extended for a further period to
be agreed by both parties. Under the terms of the agreement, AEI is required to
achieve a minimum sales of $65,789 (RM250,000) for 2003. The agreement with TM
complements the Company's Distribution Agreement with Anova to distribute
Anova's DSL equipment, including modems and routers.

                                       12

<PAGE>

     In January 2003, the Company signed a Reseller Agreement with FaceKey
Corporation ("FaceKey") to sell FaceKey's biometric-based products. The
agreement is for an initial period of one year and will thereafter be
automatically renewable for two-year terms on each anniversary. Under the terms
of the agreement, FaceKey will grant the Company exclusive distribution rights
for its products in Malaysia if the Company purchase an agreed minimum value of
products from FaceKey during 2003. FaceKey develops products to control access,
record time and attendance and restrict use of personal computers by using two
biometric technologies, face recognition and fingerprint matching in a manner
that will be highly competitive with magnetic cards, PIN numbers and passwords.
The combination of both face and fingerprint recognition technologies is
believed by the Company to be extremely reliable, providing a security level
equivalent to a DNA test.

     Beginning in September 2001, the Company entered into a strategic
collaboration with Aptilo Networks, Sweden, to deploy local mobile networks
("LMNs") in Malaysia and the Asian regional markets. The Company anticipates
that the successful integration of LMNs with VISIONET will enable consumers to
receive live video streams from their handheld devices and laptops, and to
access the Internet and their corporate intranets at near T1 speeds remotely
from public locations in the "travel ribbon" such as hotels, airports,
restaurants, conference centers, shopping malls and coffeehouses. The first
integrated VISIONET-LMN cell was deployed during the fourth quarter of 2001 to
connect a number of access points to Bluetooth and wireless LAN 802.11b standard
devices. This mobile network features Aptilo's latest billing solution that
enables the Company to offer value-added applications and services to users
without the need for any prior registration as a subscriber. Any user can now
pay for instant network access to surf the Internet or purchase value-added
applications on the spot by using their credit card. The Company is optimistic
that this method of payment from Aptilo will attract more users to VISIONET and
reduce capital expenditures and monthly operating costs. Furthermore, the
integrated network provides the Company with the ability to expand its broadband
network from fixed wireless into the mobile broadband market. The Company has
committed to an initial purchase of software and hardware from Aptilo valued at
$50,000. The Company believes that this strategic relationship with Aptilo may
broaden VISIONET's user base and generate additional revenue beginning in the
third quarter of 2003 that is expected to contribute positively to the Company's
cash flow.

     In January 2002, the Company signed a Sales and Distribution Agreement with
Cirronet Incorporated, to bundle Cirronet's wireless subscriber modem with the
Company's EyStar SmartHome/Office Console for distribution worldwide. The
agreement is for an initial period of 5 years and will thereafter be
automatically renewable for one-year terms on each anniversary. Under the terms
of the agreement, the Company has committed to purchase approximately $19
million of equipment over the next five years. These equipment purchases are
subject to inspection and acceptance by the Company depending upon certain
performance standards being satisfactorily met. As of March 31, 2002, the
Company has received approximately $5,000 in equipment from Cirronet, but has
experienced performance issues that have not been rectified. Concurrent with the
Sales and Distribution Agreement, the Company has also entered into a 5-year
Technical Support and Supply of Spares Agreement with Cirronet to insure
uninterrupted supply of Cirronet's product.

     In July 2002, the Company entered into a letter agreement with PointRed
Technologies Inc. ("PointRed") whereby the Company has agreed to market and sell
PointRed's products worldwide. In return, PointRed has agreed to market and sell
the Company's EyStar SmartHome Consoles, value added applications and services
to its existing and future clients. On August 16, 2002, the Company and
PointRed, pursuant to the original letter agreement dated July 2002, signed an
agreement whereby the Company will utilize existing personnel and facilities to
promote PointRed's products and to service existing PointRed customers in
Malaysia. Also pursuant to the original letter agreement, the Company signed a
channel partner agreement with PointRed, whereby PointRed will distribute the
EyStar SmartHome Console. Under the agreement, PointRed will sell, install and
service the EyStar SmartHome Console in North and South America.

                                       13

<PAGE>

     On September 27, 2002, the Company reached an agreement with the
shareholders of Convergent Technologies, Inc. ("CTI"), a privately held company,
to acquire a majority interest in CTI for approximately $5.0 million. CTI, a
Delaware corporation, has investments in a private company providing an
integrated virtual phone and unified communications service. This less expensive
service provides subscribers with IP-based real-time, 2-way call and
notification services combined with voice mail, e-mail and fax in a single
message store. Subscribers will be assigned a personal number and can be
connected to the integrated service through any Web-enabled device capable of
handling voice and data communications. The acquisition is expected to be funded
by a combination of cash and issuance of the Company's Preferred Stock. The
acquisition, which is expected to close in the first half of 2003, is subject to
completion of a due diligence, and execution of a definitive agreement.

     On September 30, 2002, the Company signed a Distribution Agreement with
Anova Broadband ("Anova") to distribute Anova's Digital Subscriber Line ("DSL")
equipment in Asia, Australia and New Zealand. Sale of the equipment shall
commence after the Company has obtained equipment authorization certification
from relevant regulatory authorities of the respective countries. The Company
has yet to receive authorization certification for Anova's DSL equipment from
the relevant regulatory authorities due to certain technical issues. Anova is
working with the Company to resolve these technical issues. The Company may
suspend the agreement with Anova in the event that Anova is not able to resolve
these technical issues by the third quarter of 2003.

     In connection with the development of the Company's products and services,
the Company has from time to time entered into various agreements to acquire or
license new products, to improve the effectiveness of its existing products, to
expand the scope of the goods and services that it offers. In some cases during
2002 the Company has experienced difficulties with such arrangements as a result
of product performance or because such an agreement was determined to be
inconsistent with the Company's present business plan, and as appropriate, the
Company has decided not to pursue the arrangement further.

     In connection with the build out of VISIONET and its portal, the Company
entered into a long-term strategic business relationship with Siemens Malaysia,
under which the Company committed to purchase hardware under preferred terms and
to receive certain design and maintenance services. The purchase was conditional
upon completion of a successful trial of the equipment by the Company. The
Company has not accepted the equipment supplied by Siemens, Malaysia as adequate
to perform to the parameters set by the Company. As of December 31, 2002,
Siemens has not proposed to the Company replacement equipment deemed suitable by
the Company.

     The Company had also developed a business relationship with Computer
Associates International, Inc. ("CA"), in July 2001, to exploit mobile eBusiness
opportunities in Malaysia and the Asian regional markets, as part of which an
affiliate was potentially to acquire a minority stake in PTSB. Following the
Company's decision to change its business model, the Company and CA have ceased
discussion on matters relating to the proposed acquisition.

     In July 2002, the Company's wholly owned subsidiary, EMI, signed a letter
of intent to acquire E-Dreamz Inc. ("E-Dreamz") for $1.4 million in cash and
stock, subject to completion and acceptance of customary due diligence,
negotiation and execution of a definitive agreement. The Company and E-Dreamz
determined not to proceed with the transaction.

     In conjunction with the marketing agreement between the Company and
PointRed Technologies, PointRed also agreed to a purchase option, which allows
the Company to acquire up to 25% of PointRed's equity at a price to be
negotiated and subject to due diligence, the execution of a formal strategic
partnership agreement and stock purchase agreement, and the approval of the
Board of Directors of the respective companies. As of December 31, 2002, both
parties agreed to terminate negotiations as an agreement could not be reached on
a number of stock purchase issues.

CASH REQUIREMENTS AND RISK FACTORS

     The Company faces a significant number of risks and uncertainties
associated with executing its business plan, only some of which the Company can
currently anticipate. Chief among these risk factors are the needs of the
Company for working capital and the likely need to raise additional funds to
satisfy the Company's cash requirements during 2003.

                                       14

<PAGE>

     These risks and uncertainties, discussed in more detail below, may impair
the Company's progress and profitability. The risks described below are intended
to highlight risks that are specific to the implementation of its business plan,
but are not the only risks that the Company faces. Additional risks and
uncertainties, including those generally affecting the global economy, the
political and economic climate in Malaysia and the rest of Asia, the industry in
which the Company operates, the public securities market, and risks that the
Company currently deems immaterial may ultimately impair its business and
results of operations.

IF THE COMPANY'S LICENSE IS ALTERED OR REVOKED, THE COMPANY WOULD BE UNABLE TO
IMPLEMENT ITS BUSINESS PLAN.

     The Company believes that the wireless broadband license the Company has
obtained from the Government of Malaysia is material to the Company's business
as a facilities-based and network service provider. Any material alteration or
revocation of the license would have a material adverse effect on the Company
and would prevent the Company from implementing its business plan. As described
earlier, the Government of Malaysia has the unilateral right to revoke the
Company's license upon thirty days' notice. In addition, while the Company
currently believes that it has the only license granted by the Government of
Malaysia, the Government may issue additional licenses to the Company's
competitors, which could also have a material adverse effect on the Company.

THE COMPANY EXPECTS TO INCUR NET LOSSES IN THE NEAR FUTURE.

     The Company's consolidated financial statements for the year ended December
31, 2002, have been prepared on a going concern basis, which contemplates the
realization of assets and the settlement of liabilities and commitments in the
normal course of business. For the year ended December 31, 2002, the Company
reported net income of $98,649 and has an accumulated deficit of $1,134,324. The
net income of $98,649 included several non-recurring transactions including
recognition of a deferred gain of $101,238, collection of $232,724 in related
party receivables previously not recognized as revenue due to the uncertainty of
collection, collection of $168,421 in non-related party accounts receivable
previously deemed uncollectible, and extinguishment of $42,548 of accounts
payable recognized as an extraordinary gain. Excluding these non-recurring
transactions, the Company would have reported a $446,282 net loss for the year
ended December 31, 2002. The Company suffered losses from operations of $92,585
in 2001, had negative cash flows from operating activities of $302,203 and
$296,297 in 2002 and 2001, respectively. The Company may incur continued cash
outflows, which may result in a working capital deficiency again next year. As a
result, the Company may experience difficulty and uncertainty in meeting its
liquidity needs during the next fiscal year.

     These factors raise doubt about the Company's ability to continue as a
going concern. The consolidated financial statements do not include any
adjustments relating to the recoverability and classification of assets or the
amounts and classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.

     The Company recorded operating losses and negative operating cash flows in
each of the past three years. These losses and negative operating cash flows are
attributable to the start-up costs and expenses incurred in connection with the
commercial rollout of VISIONET. The Company's ability to stem its losses and
achieve profitability is dependent on many factors, including:

     --   the Company's ability to execute its business plans over an extended
          period of time;
     --   the general state of the communications and security markets;
     --   competition in the Company's target markets; and
     --   the general state of the financial markets.

IF THE COMPANY IS UNABLE TO SUCCESSFULLY IMPLEMENT ITS BUSINESS PLAN, THE
COMPANY'S FINANCIAL CONDITION WOULD BE IMPAIRED.

     If the Company is unable to successfully implement its business plan, the
Company's financial condition and performance would be impaired. The Company's
business plan and strategy include numerous elements that may be difficult or
costly to execute, and the Company may not be successful in implementing these
elements and can provide no assurance that it will do so. The Company seeks to
exploit technology that often does not have well-established markets and in
which there is great competition. Thus, even if the Company successfully
implements its business plans, there may be insufficient demand for the
Company's products and services, in which event the Company will not generate
sufficient revenues to offset the Company's planned expenditures, thereby having
an adverse effect on the Company's business operations and financial condition.

                                       15

<PAGE>

THE FAILURE OF THIRD PARTIES WITH WHOM THE COMPANY DOES BUSINESS TO MEET THE
COMPANY'S REQUIREMENTS COULD ADVERSELY AFFECT THE COMPANY'S BUSINESS.

     The Company's business plan and operations rely on the Company's ability to
obtain products and services provided by other third party providers. For
example, the Company relies on a third party provider for Internet connection
and international gateway and procures its products through agreements with
other providers, a number of which are also actual or potential competitors. The
agreements that the Company has entered into may not be exclusive and are
generally terminable according to their terms. The third-party providers also
may not be able to provide products or services in sufficient amounts or of the
necessary quality to meet the needs of the Company. The failure of one or more
of these companies to meet the Company's needs could adversely affect the
Company's business and results of operations. Some of these companies may also
be the Company's competitors and, accordingly, in the future, they may be
unwilling to provide the Company with the products or services it requires.
These companies may also decide to dedicate their resources and networks to
other communications companies or to facilitate their own growth and, as a
result, elect to scale back or terminate the services they provide to the
Company. The failure of any of these third parties to perform could prevent or
delay the implementation of the Company's business plan, limit the types of
services the Company can provide to its customers and potential customers and
adversely impact the Company's relationship with its customers. Any of these
occurrences could have an adverse effect on the Company's business, results of
operations and financial condition.

THE ABILITY TO RAISE CAPITAL IN THE FUTURE ON A TIMELY BASIS MAY ADVERSELY
AFFECT OUR ABILITY TO FUND OUR OPERATIONS.

     The Company will require substantial capital to fund its planned capital
expenditures and operations. The Company does not expect to be able to generate
sufficient cash from operations to provide the necessary capital to execute the
Company's business plan. If the Company is unable to generate sufficient cash
from its operations or raise capital as needed, the Company will be unable to
pursue or execute its current business plan and fund its operations.

THE COMPANY'S BUSINESS AND INDUSTRY ARE SUBJECT TO EXTENSIVE REGULATIONS THAT
COULD CHANGE AT ANY TIME AND RESTRICT THE COMPANY'S ABILITY TO COMPETE WITH ITS
COMPETITORS.

     The Malaysian communications industry (including spectrum allocation and
usage) is highly regulated by the Malaysian government. Regulations that govern
the Company's business in building a wireless network could change at any time,
which could adversely affect the way the Company conducts its VISIONET business.
The Company may incur substantial costs in complying with these regulations, and
failure to comply with applicable rules and regulations could result in the
Company having to pay penalties or its license being revoked by the government.
Except for the deployment of VISIONET, this risk factor does not have a
significant impact on the Company's other businesses.

FAILURE TO HIRE OR RETAIN QUALIFIED PERSONNEL COULD HURT THE COMPANY'S BUSINESS.

     The Company's future success and performance is dependent on its ability to
identify, hire, train and retain experienced technical and marketing personnel.
The Company faces significant competition for employees with the skills required
for its business. There can be no assurance that the Company will succeed in
attracting and retaining the services of qualified and experienced technical and
marketing personnel.

THE MARKETS IN WHICH THE COMPANY OPERATES ARE VERY COMPETITIVE AND INCREASED
COMPETITION COULD ADVERSELY AFFECT THE COMPANY.

     The markets for security products and applications and broadband network
facility services are highly competitive. For broadband services, the Company
expects to encounter competition from domestic Internet Service Providers, often
referred to as ISPs. Many of the competing ISPs have, or can be expected to have
greater financial, marketing and other resources than the Company. However,
following the repositioning of VISIONET as a backhaul service network, this risk
factor no longer has a material impact on the Company's future business and
operation.

     For security products and applications, the Company expects competition
from companies that offer conventional security products and solutions like card
access system. No assurance can be given that we will be able to compete
successfully with these entities.

                                       16

<PAGE>

THE INTERNATIONAL NATURE OF THE COMPANY'S OPERATIONS SUBJECT THE COMPANY TO
SPECIAL RISKS.

     The Company currently intends to operate primarily in Malaysia and perhaps
elsewhere in Asia. The Company therefore faces special risks related to
operating in international markets, which the Company may not be able to
overcome. The following are some of the risks inherent in doing business in
Malaysia and other non-U.S. markets:

     -    unanticipated changes in regulatory requirements, tariffs, customs,
          duties and other trade barriers;
     -    limitations on the Company's flexibility in structuring foreign
          investments imposed by regulatory authorities;
     -    longer payment cycles and problems in collecting accounts receivable;
     -    political and economic risks;
     -    translation and transaction exposure from fluctuations in exchange
          rates of other currencies; and
     -    potentially adverse tax and cash flow consequences resulting from
          operating in multiple countries with different laws and regulations.

REGULATION

     The business operations of PTSB are regulated by both the Malaysian
Ministry of Energy Communications & Multimedia (MECM) (formerly known as the
Ministry of Energy Telecommunications & Post) and the Malaysian Communications
and Multimedia Commission ("CMC"). PTSB's WVCN license is governed by the
Malaysian Communications & Multimedia Act 1998 ("Act 588") which became
effective on April 1, 1999. This new Act, which has superseded the
Telecommunications Act of 1950 and the Broadcasting Act of 1988, is to provide
for and to regulate the converging communications and multimedia industries in
Malaysia.

     Under Malaysian law, PTSB has the option of registering its existing
wireless broadband license under Act 588 or maintaining the terms of the license
under the repealed Act. The Company believes that it would be more advantageous
to register its license under the new Act, and has on March 3, 2000 registered
with the CMC its intention to migrate to the new Act. The license was granted
for an initial period of 10 years commencing May 28, 1997.

     While the Company believes that Act 588 is the most significant
industry-specific governmental regulations that apply to the Company's business,
the Company is subject to a large number of other laws in different countries
and localities.

     In September 2001, PTSB was awarded an Application Service Provider ("ASP")
license by the CMC. The ASP license will complement PTSB's wireless broadband
license. As an ASP, PTSB could offer enterprises access over the Internet to
applications and related services that would otherwise have to be located in
their computers.

RESULTS OF OPERATIONS

     The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with the consolidated
financial statements and notes.

     The following table sets forth certain operating data for Digital Broadband
Networks and subsidiaries for the periods as indicated below.

                                                    Year Ended December 31,
                                                  --------------------------
                                                      2002          2001
                                                  ------------  ------------

Revenues                                        $ 12,540,506    $  4,958,421
Gross profit                                         802,728         259,054
Sales and marketing                                   60,384         130,201
General and administrative                           720,882         221,438
Gain on disposal of assets - related parties         101,238               -
Extraordinary item                                    42,548               -
Net income (loss)                                     98,649        (79,105)

                                       17

<PAGE>

Year ended December 31, 2002 compared to year ended December 31, 2001

     Total revenue increased by $7,582,085, or 153%, to $12,540,506 for the year
ended December 31, 2002, as compared to $4,958,421 for the year ended December
31, 2001. The increase in 2002 was mainly due to an increase in fees earned from
the production of multimedia programs and revenue received for project
consulting services. The increase in revenue from the production of multimedia
programs was a result of increased sub-contract work from the clients of the
Company's two major customers, Worldlink Dotcom and Mutual Base Equity. Revenue
for project consulting services was generated from the three project consulting
contracts that the company secured in 2001 and 2002. Also included in revenue
for 2002 was collection of $232,724 in related party receivables previously not
recognized as revenue due to the uncertainty of collection. In the year ended
December 31, 2002, two customers, respectively, accounted 50% and 46% of total
revenue. In the year ended December 31, 2001, $1,842,105 or 37% of the total
revenue was received from two customers.

Gross Profit

     Gross profit increased to $802,728 for the year ended December 31, 2002,
compared to $259,054 in the year ended December 31, 2001, an increase of
$543,674 or 210%. The increase in gross profit was due to higher revenue in
2002, including $232,724 of related party revenue previously not recognized. As
a result of higher revenue, cost of revenues increased by $7,038,411 or 150%, to
$11,737,778 in 2002 from $4,699,367 in 2001. This increase was a result of the
Company requiring additional external resources in order to fulfill the higher
demand for the Company's services. The outsourcing of content production work
enabled the Company to develop a team of contractors that will assist the
Company in producing multimedia content and applications that are crucial to its
future business operation.

Sales and marketing expenses

     Sales and marketing expenses decreased by $69,817 or 54%, to $60,384 for
the year ended December 31, 2002 from $130,201 for the year ended December 31,
2001. The decrease was primarily due to lower marketing expenses incurred to
promote the Company's business of developing and producing multimedia programs
and provision of design and consulting services for interactive website
development. Advertising and promotion costs, which were approximately $25,906
and $113,391 for the years ended December 31, 2002 and 2001, respectively,
accounted for 43% and 87% of sales and marketing expenses in 2002 and 2001.

General and administrative expenses

     General and administrative expenses involving non-related parties increased
by $499,444 or 492% to $600,882 for the year ended December 31, 2002, as
compared to $101,438 for the year ended December 31, 2001. The increase was
mainly attributable to higher utility, telecommunication and staff costs and
higher compensation expenses in 2002. General and administrative expenses for
the year ended December 31, 2002 were reduced by a reversal of $168,421 for
prior year's allowance for doubtful receivables due to recovery of accounts
receivable previously deemed uncollectible. For the year ended December 31,
2001, general and administrative expenses were reduced by reversal of $455,012
for prior year's allowance for doubtful receivables due to receipt of overdue
receivables from customers and a reversal of $150,000 for prior year's accrued
legal fees as a result of the creditor not pursuing its claim against the
Company. Excluding the reversal of allowance for doubtful receivables and
accrued legal expenses, general and administrative expenses would have been
$769,303 and $706,450, respectively, for the years ended December 31, 2002 and
2001. For the year ended December 31, 2002, out of the total general and
administrative expenses of $769,303, 33% was for depreciation of tangible assets
and 16% was for employee payroll. Another 12% was for fees for professional and
auditing services, 6% was for investor relation expenses and approximately 33%
was for rent, utilities, general office supplies, communications and corporate
insurance expenses. For the year ended December 31, 2001, out of total general
and administration expenses of $706,450, nearly 35% was for depreciation of
tangible assets. Another 4% was due to legal fees and 17% was for amortization
of goodwill. Approximately 44% was for employees' payroll, rental, utilities,
general office supplies, communications, corporate insurance and fees for
professional and auditing services.

     General and administrative expenses for 2001 included amortization of
goodwill. Beginning January 1, 2002, pursuant to SFAS No. 142, goodwill is no
longer being amortized, but is subject to annual impairment tests in accordance
with the standard. Through December 31, 2002, management performed the required
impairment tests on goodwill. Management does not believe that any impairment
has occurred as of December 31, 2002. Application of the non-amortization
provisions of the standard resulted in reduction of amortization expense of
approximately $118,000 for the year ended December 31, 2002.

                                       18

<PAGE>

     The Company also incurred management fees totaling $120,000 per year, for
years ended December 31, 2002 and 2001, payable to a company in which Mr.
Patrick Lim, the President and Chief Executive Officer of the Company, has a
financial interest. The management fee was charged on the basis of time spent
for the administration and management services provided to the Company.

Gain on disposal of assets - related parties

     For the year ended December 31, 2001, the Company recorded a deferred gain
on disposal of assets of $101,238 related to amounts totaling $142,448 the
Company received on its long-term receivable, related party. The receivable
balance was $770,605 and the total deferred gain was $729,395 as of December 31,
2001. These amounts arose in the year ended December 31, 1998 when the Company
sold assets used in the operations of a subsidiary to a related company. Due to
the uncertainty of collection of the related receivable, a related gain on the
sale of the assets was deferred and is to be recognized only after all costs
have been recovered and to the extent the receivable is collected. During the
year ended December 31, 2002, payments received by the Company exceeded all
remaining costs. As a result the Company's long-term receivable, related party
and deferred gain balances were reduced to $628,157 respectively, as of December
31, 2002.

Extraordinary item

     During 2002, the Company extinguished accounts payable (related to prior
business operations) at less than recorded amounts resulting in an extraordinary
gain of $42,548 pursuant to Accounting Principles Board Opinion No. 30. There
were no income taxes applicable to this extraordinary item due to utilization of
net operating losses carried forward.

Liquidity and Capital Resources

     As of December 31, 2002, the Company had cash of $10,077. Operations were
primarily funded from internally generated funds and working capital advanced
from time to time by the principal shareholder, director and officer of the
Company. These advances bear no interest and have no fixed terms of repayment.

     As of December 31, 2002, the Company owed Mr. Lim, the Chief Executive
Officer, President and a Director of the Company, $225,939 for short-term cash
advances made to subsidiaries of the Company for working capital purposes from
time to time. Additionally, at December 31, 2002, the amount owed to a company
in which Mr. Lim has a financial interest amounted to $170,732. This amount was
for short-term cash advances made to the Company and its subsidiaries for
working capital purposes from time to time and for management fees. These
amounts are unsecured, bear no interest and have no fixed terms of repayment.

     For the years ended December 31, 2002 and 2001, net cash used in operating
activities was $302,203 and $296,297, respectively. Net cash used in operating
activities consists of cost of revenues, sales and marketing expenses and
general and administrative expenses. The primary reason for the difference
between net income of $98,649 and net cash used in operations of $302,203 was
the Company using available cash to pay down payables and accrued expenses,
which decreased $432,412 during 2002.

     Cash used in investing activities of $19,622 in 2002 was attributable to
the purchase of furniture and equipment. Cash used in investing activities of
$43,245 in 2001 was mainly due to acquisition of equipment.

     Cash provided by financing activities of $331,500 in 2002 was primarily
from the issuance of shares of common stock for $204,030, payment to reacquire
shares of common stock for $100,000 and advances of 271,802 from an affiliated
company in which the Company's principal shareholder, CEO and president has a
financial interest.

     Cash provided by financing activities of $335,873 in 2001 primarily
consisted of advances from a director and from an affiliated company.

                                       19

<PAGE>

     The Company believes that sufficient cash will be generated from the
following sources to fund its operations for the next twelve months:

--   Intensification of efforts to collect overdue receivables. The Company
     intends to keep close contact with its debtors to keep updated on their
     liquidity status. Legal action will only be taken as a last resort.

--   Advances from a director/officer who is also a major shareholder as
     required to finance the Company's working capital requirements.

--   Additional revenue provided by: (i) a consulting contract, which is
     estimated to generate approximately $250,000 of revenue in 2003, to carry
     out the planning, design, project execution (including contract and project
     management) of all broadband communications and networking systems/services
     for Pulau Indah-Marina Village, (ii) a contract, which is estimated to
     generate approximately $250,000 of revenue in 2003, to carry out the
     planning, design, project execution of all broadband communications and
     networking systems/services for a commercial/housing project in Selangor,
     Malaysia, (iii) a consulting contract entered into on November 5, 2002 with
     a related party, which is expected to generate approximately $300,000 of
     revenue in 2003, to provide consulting services relating to home
     automation, home networking, energy cost saving, security surveillance and
     monitoring for two major commercial and housing developments in Malaysia.

--   The Company may consider a private placement of its shares.

--   The Company may also seek to obtain equipment financing.

     The Company also hopes that additional cash will be generated from:

--   the marketing agreement with Worldlink Dotcom Sdn. Bhd. to distribute its
     service gateway for home/office automation in Malaysia, Singapore and
     Australia;

--   the distribution agreement with Mutual Base Equity Sdn. Bhd. for sale of
     the EyStar SmartHome Console in Malaysia, Singapore and Cambodia;

--   the Channel Partner Agreement with PointRed Technologies, Inc. to
     distribute the EyStar SmartHome Console;

--   the agreement with Sintec to sell, distribute and promote their remote
     video surveillance cameras;

--   the agreement with Telekom Sales and Services to sell, distribute and
     promote broadband access over standard copper telephone lines using Digital
     Subscriber Line technology in Malaysia; and

--   the reseller agreement with FaceKey Corporation to sell FaceKey's
     biometric-based security products.

     In addition to internally generated funds and financial support from a
director and major shareholder, the Company seeks to raise additional funds from
equity or debt financing for its future working capital requirements. As of
December 31, 2002, the Company has furniture and equipment of approximately $1.4
million for the roll out of its portal, build-out of VISIONET and implementation
of its business plan. As of January 1, 2002, the Company has committed to an
initial purchase of hardware valued at $250,000 for the limited commercial
rollout of VISIONET in 2002. The Company received these equipment in 2002 for
trial but had subsequently returned these to the vendor as the equipment did not
perform to the standard as specified by the Company. The Company estimates that
it would require additional capital expenditures of up to $2.0 million to
implement its business plan to become a total system solution provider involved
in application development, network operation, delivery of value added
applications and services; and sale of its EyStar SmartHome Console. The Company
has also committed to an initial purchase of software and hardware valued at
$50,000 in conjunction with its announced strategic collaboration with Aptilo
Networks, Sweden. There is, however, no assurance that financing will be
available or, if available, that it would be offered to the Company on
acceptable terms. The Company will continuously evaluate its financing
requirements and may decide to consider alternative modes of financing.

                                       20

<PAGE>

     In November 2001, the Company signed an agreement to purchase office space
in Australia for $1.8 million Australian dollars (approximately $1,017,000 USD
at December 31, 2002). The Company intends to lease the space for rental until
it finalizes its plan to relocate its Asian headquarters to Australia. Pursuant
to the terms of the agreement, the Company has paid a sum of $5,200 as deposit
for the above property. The purchase is still pending as the property is subject
to an existing lease. The Company has requested the seller to deliver vacant
possession and negotiations are ongoing between the seller and the lessee for
the existing lease agreement to be terminated.

     In January 2002, the Company signed an agreement to purchase approximately
$19 million of equipment over the next five years. These equipment purchases are
subject to inspection and acceptance by the Company depending upon certain
performance standards being satisfactorily met. As of December 31, 2002, the
Company has suspended the agreement until the vendor has rectified performance
problems discovered by the Company during the trial of this equipment.

     On September 27, 2002, the Company announced that it has reached an
agreement with the shareholders of Convergent Technologies, Inc. ("CTI"), a
privately held company, to acquire a majority interest in CTI for approximately
$5.0 million. The acquisition is expected to be funded by a combination of cash
and issuance of the Company's Preferred Stock. The acquisition is subject to
completion of a due diligence, execution of a definitive agreement and is
expected to close in the first half of 2003.

     On December 4, 2002, the Company announced that its Board of Directors has
approved a stock repurchase program for up to 10 million shares from its present
public float of approximately 42.7 million shares which may be repurchased from
time to time. The Company has until December 2003 to execute this stock
repurchase program. Under the program, the Company can purchase shares of common
stock through open market and/or privately negotiated transactions at prices
deemed appropriate by management. The timing and amount of any repurchase
transaction under this program will depend on market conditions and corporate
and any regulatory consideration. As of December 31, 2002, the Company had not
repurchased its shares under this program. From January 2003 to March 26, 2003,
the Company has repurchased a total of 1,050,000 shares of its common stock, at
an average price of $0.028, for a total cash consideration of $29,348. These
shares were returned to treasury and are available for re-issuance at a future
date.

     No dividends on the common stock were paid by the Company for the two years
reported herein.

Critical Accounting Policies

Financial Reporting Release No. 60, which was released by the Securities
and Exchange Commission, requires all companies to include a discussion of
critical accounting policies or methods used in the preparation of financial
statements. Note 2 to the Consolidated Financial Statements includes a summary
of the significant accounting policies and methods used in the preparation of
the Company's Consolidated Financial Statements. The following is a brief
discussion of the more significant accounting policies and methods used by the
Company.

Revenue Recognition

The Company recognizes revenue from the production of multimedia programs
and from Intranet and management and consulting services. The Company recognizes
revenue from the sales of goods in the period when significant risks and rewards
of ownership have transferred to its customers. The Company recognizes revenue
from the services provided in the period in which the services are performed and
when there is no significant uncertainty regarding the consideration to be
received and the associated costs to be incurred.

Accounts Receivable

The Company continuously monitors collections and payments from its
customers and maintains an allowance for estimated uncollectible accounts based
upon historical experience and specific customer collections issues that have
been identified. Since accounts receivable are concentrated in a relatively few
customers, a significant change in the liquidity or financial position of any
one of these customers could have a material adverse impact on the
collectibility or the Company's accounts receivable and future operating
results.

                                       21

<PAGE>

Stock-Based Compensation

Statement of Financial Accounting Standard ("SFAS") No. 123, Accounting for
Stock Based Compensation, defines a fair-value-based method of accounting for
stock-based employee compensation plans and transactions in which an entity
issues its equity instruments to acquire goods or services from non-employees,
and encourages but does not require companies to record compensation cost for
stock-based employee compensation plans at fair value. The Company has chosen to
account for employee stock-based compensation using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25 (APB No. 25),
Accounting for Stock Issued to Employees, and related interpretations.
Accordingly, employee compensation cost for stock options is measured as the
excess, if any, of the estimated fair value of the Company's stock at the date
of the grant over the amount an employee must pay to acquire the stock.

Impairment of Long-live Assets

The Company evaluates long-lived assets whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. In performing the review of recoverability, we estimate future cash
flows expected to result from the use of the asset and its eventual disposition.
The estimates of future cash flows, based on reasonable and supportable
assumptions and projections, require management's subjective judgments. The time
periods for estimating future cash flows is often lengthy, which increases the
sensitivity to assumptions made. Depending on the assumptions and estimates
used, the estimated future cash flows projected in the evaluation of long-lived
assets can vary within a wide range of outcomes. The Company considers the
likelihood of possible outcomes in determining the best estimate of future cash
flows.

Accounting for Goodwill

Since the adoption of SFAS 142 on January 1, 2002, the Company no longer
amortizes goodwill but instead tests annually for impairment. SFAS 142 requires
that goodwill be tested annually. If the carrying value of goodwill exceeds its
fair value, an impairment loss must be recognized. A present value technique is
often the best available technique with which to estimate the fair value of a
group of assets. The use of a present value technique requires the use of
estimates of future cash flows. These cash flow estimates incorporate
assumptions that marketplace participants would use in their estimates of fair
value as well as the Company's own assumptions. These cash flow estimates are
based on reasonable and supportable assumptions and consider all available
evidence. However, there is inherent uncertainty in estimates of future cash
flow. As such, different assumptions were used in the Company's calculations and
the likelihood of possible outcomes was considered.


ITEM 7. FINANCIAL STATEMENTS

     The audited financial statements of the Company being furnished in response
to this Item are contained in a separate section of this Report following the
signature page.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

     There were no disagreements on accounting and financial disclosures with
the Company's present independent accountants, Horwath Gelfond Hochstadt
Pangburn, P.C., during the reporting period.

                                       22

<PAGE>

                                    PART III

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

     The Directors and Executive Officers of the Company, and their respective
ages and positions held in the Company, as of March 26, 2003 are as follows:-


  NAME                          AGE        POSITION HELD
  ------                       ----        -------------------

  Patrick Soon-Hock Lim         53         Chairman, Chief Executive Officer and
                                           Director

  Valerie Hoi-Fah Looi          44         Secretary and Director

  Wan Abdul Razak bin Muda      66         Director

  Mark Deschaine                39         Director

  Chee-Hong, Leong              37         Chief Financial Officer/Treasurer


______________

(1) The directors of the Company will serve in such capacity until the next
annual meeting of the Company's shareholders or until their successors have been
elected and qualified. The officers serve at the discretion of the Company's
Directors. There are no family relationships among the Company's officers and
directors, nor are there any arrangements or understandings between any of the
directors or officers of the Company or any other person pursuant to which any
officer or director was or is to be selected as an officer or director.

     MR. PATRICK SOON-HOCK LIM, 53, has served as the President, Chief Executive
Officer and director of the Company, positions he has held since April 1999. In
June 2002, Mr. Lim was appointed as Chairman, Chief Executive Officer and
director of the Company. Mr. Lim has been the Managing Director at AEI since
1988 and has been involved in the multimedia industry for the past 12 years. Mr.
Lim earned his Masters of Science from Reading University, United Kingdom in
1973.

     MR. WAN ABDUL RAZAK BIN MUDA, 66, has served as a director of the Company
since April 1999. Mr. Muda previously served as Chairman of the Board of the
Company from April 1999 to June 2002. In addition, Mr. Muda has been the
Chairman of the Board of AEI and PTSB since February 1993. Since 1992, he has
been the Chairman and Director of Tiong Nam Transport Holdings Bhd, a Malaysian
public land cargo transportation and warehousing company. Prior to joining Tiong
Nam Transport Holding Bhd, Mr. Muda had served in the Malaysian Police Force for
34 years. He joined the Malaysian Police Force as a police cadet after
completing senior high school. As part of his training, he attended numerous
courses conducted by the Royal Malaysian Police Training College and rose from
the rank and file to his last position as the Chief Police Officer of the state
of Terengganu, Malaysia.

     MS. VALERIE HOI-FAH LOOI, 44, has served as the Corporate Secretary and
director of the Company since April 1999 and, in such position, she is
responsible for corporate affairs and human resources of the Company. Ms. Looi
has also served as the Senior Vice President, Corporate Affairs at AEI, a
position she has held since joining AEI in 1990. She has over 10 years of
experience in corporate affairs. Ms. Looi received her Diploma in Management
from the Malaysian Institute of Management.

     MR. MARK DESCHAINE, 39, has served as the Company's independent director
and Chairman of the Audit Committee since June 27, 2002. Mr. Deschaine is a
principal member with Educational & Technological Consultants LLC, a Michigan
company, specializing in learning, training, educational and technological
issues. Mr. Deschaine holds teaching credentials, as well as two Masters
Degrees, one from Oakland University and the other from Grand Valley State
University in the area of education.

                                       23

<PAGE>

     MR. CHEE-HONG LEONG, 37, has served as the Chief Financial Officer and
Treasurer of the Company since February 2000. He is a Fellow of Association of
Chartered Certified Accountants, United Kingdom. Mr. Leong is responsible for
the financial and administrative functions of the Company. Prior to joining AEI,
Mr. Leong was the Assistant Accounts Manager at Industrial Concrete Products
from April 1994 to December 1999. Mr. Leong earned his Bachelor of Arts in
Accounting at Ulster University in Northern Ireland in 1989 and qualified as a
Chartered Certified Accountant with the Association of Chartered Certified
Accountants, UK in 1994.

     Except for 25,000 shares of the Company's restricted common stock granted
to Mr. Deschaine on June 26, 2002, as compensation for serving on the Company's
Board of Directors, the Company does not pay fees to members of the board of
directors and presently has no plans to pay directors' fees. Presently, Mr. Muda
and Mr. Deschaine are the only Outside Directors of the Company.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934.

     Section 16(a) of the Securities Exchange Act of 1934, as amended, (the "34
Act"), requires the Company's officers and directors and persons who own
beneficially more than ten percent of the Company's Common Stock to file initial
reports of ownership and changes in ownership with the Securities and Exchange
Commission ("SEC"). Based solely on a review of copies of the Section 16(a)
reports furnished to the Company and written representations by certain
reporting persons, the Company believes that all of the Company's officers and
directors, and all persons owning more than ten percent of the Company's Common
Stock have filed the subject reports, if required, on a timely basis during and
with respect to the fiscal year ended December 31, 2002.

ITEM 10. EXECUTIVE COMPENSATION.

     The following table sets forth certain information concerning the
compensation earned by the Company's Chief Executive Officer and other executive
officers who were serving as executive officers at the end of the last completed
fiscal year and whose salary and bonus aggregated were in excess of $100,000. No
other compensation not covered in the following table was paid or distributed by
the Company to such persons during the period covered. Employee Directors
receive no additional compensation for service on the Board of Directors of the
Company. Outside Directors received no compensation from the Company as such
during this period, except as indicated below.

     In December 2000, the Company granted stock options to directors and
officers of the Company. Mr. Lim, the current Chairman and Chief Executive
Officer, was granted an option for 500,000 common shares at $0.085 exercisable
until December 5, 2005. Mr. Muda, a Director, was granted an option for 100,000
common shares at $0.085 exercisable until December 5, 2005. Miss Looi, the
current Secretary and Director, was granted an option for 120,000 common shares
at $0.085 exercisable until December 5, 2005. Mr. Leong, the current Chief
Financial Officer and Treasurer, was granted an option for 78,000 common shares
at $0.085 exercisable until December 5, 2005. The closing price of the common
stock on December 6, 2000 was $0.075. Mr. Lim, Mr. Muda and Ms. Looi exercised
their options on March 12, 2002 to purchase a total of 720,000 shares of
restricted common stock at $0.085 per share for total cash consideration of
$61,200. Mr. Leong partly exercised his options on March 30, 2002 to purchase
45,000 shares of restricted common stock at $0.085 per share for a cash
consideration of $3,825.

     On June 26, 2002, the Company granted 25,000 shares of restricted common
stock to Mr. Deschaine as compensation for serving on the Company's Board of
Directors.

     The Company has no other retirement, pension, profit sharing, stock option,
insurance or other similar programs. There were no long-term compensation plans,
awards, options or any other compensation offered by the Company.

                           SUMMARY COMPENSATION TABLE

NAME AND PRINCIPAL POSITION                          YEAR          ANNUAL
---------------------------                                     COMPENSATION
                                                              --------------
                                                              SALARY    BONUS
                                                              ------    -----
Patrick Soon-Hock Lim                                2002       -         -
President, Chief Executive                           2001       -         -
Officer and Director                                 2000       -         -

                                       24

<PAGE>

EMPLOYMENT AGREEMENTS

     The Company has no employment agreements with its Chief Executive Officer
and other executive officers. However, its wholly-owned subsidiary, AEI, and
Chee Hong Leong entered into a letter agreement, dated December 8, 1999, with
respect to Mr. Leong's appointment as Corporate Finance Manager of AEI. Under
the letter agreement, Mr. Leong will receive a basic salary of $18,947 per year
and be entitled to unspecified stock option grants to be awarded by Digital
Broadband Networks, Inc. in the future. Either party may terminate the letter
agreement by giving the other party one month's prior written notice.

     AEI and Ms. Valerie Hoi-Fah Looi entered into a letter agreement dated
January 1, 1999 with respect to Ms. Looi's redesignation as Senior Vice
President of Corporate Affairs at AEI. Under the letter agreement, Ms. Looi will
receive a basic salary of $13,578 per year subject to review by the Company from
time to time.

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

     The following sets forth the number of shares of the Company's common stock
beneficially owned by (i) each person who, as of March 26, 2003, was known by
the Company to own beneficially more than five percent (5%) of its common stock;
(ii) each of the Directors and Executive Officers of the Company and (iii) the
Directors and Executive Officers of the Company as a group. As of March 26,
2003, there were 97,900,899 common shares issued and outstanding.


NAME AND ADDRESS                  NUMBER OF SHARES OF             PERCENT OF
OF BENEFICIAL OWNER(1)            BENEFICIAL OWNER (2)               CLASS
--------------------------------------------------------------------------------

Patrick Soon-Hock Lim                 50,995,000 (3)                 52.09

Valerie Hoi-Fah Looi                   4,820,000                      4.92

Mark Deschaine       (5)               1,004,500                      1.03

Wan Abdul Razak bin Muda                 400,000 (4)                    *

Chee-Hong Leong                           45,000                        *

                                     -----------                  -------
All Officers and Directors as
a Group (5 persons)                   57,264,500                    58.04
                                     ===========                  =======

*    Less than 1%.

(1)  Except for Mark Deschaine, the address for each beneficial owner is c/o
     Digital Broadband Networks, Inc., Suite 11.02, Menara Merais, No. 1 Jalan
     19/3, 46300 Petaling Jaya, Selangor, Malaysia.

(2)  The inclusion herein of any shares of common stock as beneficially owned
     does not constitute an admission of beneficial ownership of those shares.
     Unless otherwise indicated, each person listed above has sole investment
     and voting power with respect to the shares listed.

(3)  Includes (a) 8,000,000 shares directly owned by Mr. Lim's wife, (b)
     8,000,000 shares directly owned by Mr. Lim's son and (c) 25,245,000 shares
     owned by LSH Asset Holdings Sdn Bhd, a corporation controlled by Mr. Lim
     and his wife.

(4)  Of such shares (i) 60,000 are beneficially owned by Mr. Muda's spouse and
     (ii) 60,000 are held by each of Mr. Muda's three daughters.

(5)  The address for Mark Deschaine is PO Box 72 Frankenmuth, MI 48734.

                                       25

<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

During the year ended December 31, 2002, the Company had related
transactions with the following parties:

LSH ASSET HOLDINGS SDN BHD ("LSH"):

LSH is a company wholly-owned by the Company's Chief Executive Officer and
his wife. During each of the years ended December 31, 2002 and 2001, LSH billed
the Company $120,000 for management fees. LSH also made short term advances to
the Company from time to time for working capital purposes. These advances
totaled $180,695 and $55,505 in 2002 and 2001, respectively. During the year
ended December 31, 2002, the Company's management directed other related parties
and a customer to pay a total of $402,632 to LSH in lieu of actual cash payment
of receivables. As of December 31, 2002, the amount due to LSH was $170,732.
This amount is unsecured, bears no interest, has no fixed terms of repayment,
and is recorded in the financial statements as "Amount due to an affiliated
company".

VISIONEWS ASIA SDN BHD ("VASB"):

The Company's Chief Executive Officer is a director of VASB and owns a 40%
equity interest in VASB. A director of PTSB is also a director of VASB and owns
a 20% equity interest in VASB. During the year ended December 31, 2002, the
Company recognized revenue from VASB of $7,895, which related to revenue
previously deferred in 1999. In lieu of actual cash payment, the Company's
management directed VASB to pay $7,895 to LSH. The net effect to the Company was
that revenue was recognized and recorded payables were reduced by equal amounts.
As of December 31, 2002, $73,665 of receivables from 1999 was not recognized as
revenue due to the uncertainty of collection. The terms of repayment for the
amount due from VASB is similar to terms accorded to the Company's other
existing customers.

SYNERVEST SDN BHD ("SSB"):

A director of PTSB is a director of SSB and holds a 60% equity interest in
SSB. During the year ended December 31, 2002, the Company recognized revenue
from SSB of $92,105, which related to revenue previously deferred in 1999. In
lieu of actual cash payment, the Company's management directed SSB to pay
$92,105 to LSH. The net effect to the Company was that revenue was recognized
and recorded payables were reduced by equal amounts.

As of December 31, 2002, long-term receivables, related parties, consisted
of an overdue amount of $628,157 from SSB. This amount primarily arose in the
year ended December 31, 1998, when the Company sold to SSB assets used in the
operations of a subsidiary. These assets, comprising analog video hardware and
peripherals and a patent for image display, were sold to SSB for a total sum of
$1,661,175. Due to the uncertainty of collection of the related receivable, the
gain has been deferred and will be recognized only after all costs have been
recovered. The Company received $142,448 and $18,869 of the outstanding
receivable during the years ended December 31, 2002 and 2001, respectively.
During the year ended December 31, 2002, payments received by the Company
exceeded all remaining costs, resulting in a $101,238 realization of gain on
sale of assets, related party. The deferred gain included in the balance sheet
has been reduced accordingly. The deferred gain on sale of assets totaled
$628,157 at December 31, 2002, and will be recognized as a gain as payments on
the long-term receivable balance are received. During 2002, in lieu of actual
cash payment of a portion of the receivable due, the Company's management
directed SSB to pay $101,487 to LSH. The net effect to the Company was that
recorded receivables and payables were reduced equally.

KHIDMAT MAKMUR SDN BHD ("KMSB"):

A director of PTSB is a director of KMSB and holds a 30% equity interest in
KMSB. During the year ended December 31, 2002, the Company recognized revenue
from KMSB of $114,592 which relates to revenue previously deferred in 1999. In
lieu of actual cash payment, the Company's management directed KMSB to pay
$14,592 to LSH. The net effect to the Company was that revenue was recognized
and recorded payables were reduced by equal amounts. As of December 31, 2002,
$40,790 of receivables from 1999 was not recognized as revenue due to the
uncertainty of collection. The terms of repayment for the amount due from KMSB
are similar to terms accorded to the Company's other existing customers.

                                       26

<PAGE>

MY ARCHITECT ("MYA") AND MY DRAUGHTING SERVICES ("MDS"):

A director of PTSB is a principal partner of MYA and MDS. During the year
ended December 31, 2002, the Company received fees of $19,737 from a consulting
contract that it entered into with MDA on November 5, 2002. During the year
ended December 31, 2002, the Company also recognized revenue from MYA and MDS of
$7,895 and $10,237, respectively, which related to revenue previously deferred
in 1999. In lieu of actual cash payment, the Company's management directed MYA
and MDS to pay $7,895 and $10,237, respectively, to LSH. The net effect to the
Company was that revenue was recognized and recorded payables were reduced by
equal amounts. As of December 31, 2002, $131,579 and $94,210 of 1999 receivables
from MYA and MDS, respectively, were not recognized as revenue due to the
uncertainty of collection. The terms of repayment for the amount due from MYA
and MDS are similar to terms accorded to the Company's other existing customers.

CHIEF EXECUTIVE OFFICER:

As of December 31, 2002, the Company owed the Chief Executive Officer of
the Company $225,939 for short-term cash advances made to the Company for
working capital purpose from time to time. The amount owing to the Chief
Executive Officer is unsecured, bears no interest, has no fixed terms of
repayment and is recorded in the financial statements as "Amount due to a
director".

ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K.

(a)  Exhibits.

3.1      Articles of Incorporation (Incorporated by reference to Exhibit 3A to
         the Company's Form 10-SB filed with the SEC on March 6, 1995.)

3.2      Articles of Amendment (Incorporated by reference to Exhibit 3B to the
         Company's Form 10-SB filed with the SEC on March 6, 1995.)

3.3      Bylaws (Incorporated by reference to Exhibit 3C to the Company's Form
         10-SB filed with the SEC on March 6, 1995.)

3.4      Articles Of Amendment to change name from Knight Natural Gas to Kalan
         Gold Corporation. (Incorporated by reference to Exhibit 3.4 to the
         Company's Form 10-KSB filed with the SEC on April 14, 2000.)

3.5      Articles of Amendment to change name from Kalan Gold Corporation to
         Digital Broadband Networks, Inc. (Incorporated by reference to Exhibit
         3.5 to the Company's Form 10-KSB filed with the SEC on March 28, 2002.)

3.6      Amended and Restated Certificate of Incorporation of Digital Broadband
         Networks, Inc.

3.7      State of Delaware Certificate of Merger of Foreign Corporation into a
         Domestic Corporation

10.1     Amended Settlement Memorandum, dated December 14, 1999, as confirmed by
         Judge Jim R. Carrigan of the Judicial Arbiter Group in Denver.
         (Incorporated by reference to Exhibit 10.1 to the Company's Form 10-KSB
         filed with the SEC on April 14, 2000.)

10.2     Agreement and Plan of Reorganization, dated April 20, 1999, between
         Kalan Gold Corporation and Animated Electronic Industries Sdn. Bhd.
         (Incorporated by reference to Exhibit 2.1 to the Company's Current
         Report on Form 8-K/A dated April 20, 1999, as filed with the SEC on
         July 2, 1999.)

10.3     Employment Letter Agreement, dated January 1, 1999, between Valerie
         Looi and Animated Electronic Industries Sdn. Bhd. (Incorporated by
         reference to Exhibit 10.3 to the Company's Form 10-KSB filed with the
         SEC on April 14, 2000.)

10.4     Employment Letter Agreement, dated December 8, 1999, between Leong
         Chee Hong and Animated Electronic Industries Sdn. Bhd. (Incorporated by
         reference to Exhibit 10.4 to the Company's Form 10-KSB filed with the
         SEC on April 14, 2000.)

                                       27

<PAGE>

21.1     List of Subsidiaries

99.1     Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
         to Section 906 of the Sarbanes-Oxley Act of 2002.

99.2     Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
         to Section 906 of the Sarbanes-Oxley Act of 2002.

99.3     Letter from Arthur Andersen & Co. dated April 14, 2000 (Incorporated by
         reference to Exhibit 10.1 to the Company's Form 10-KSB filed with the
         SEC on April 14, 2000).

(b)  Reports on Form 8-K.

         The Company filed a Current Report on Form 8-K for an event specified
         in Item 5 of such report on December 27, 2002.


ITEM 14. CONTROLS AND PROCEDURES

Within the 90 days prior to the date of this report, the Company's
management concluded its evaluation of the effectiveness of the design and
operation of the Company's disclosure controls and procedures. As of the
Evaluation Date, the Company's Executive Chairman and Chief Executive Officer
and its Chief Financial Officer concluded that the Company maintains disclosure
controls and procedures that are effective in providing reasonable assurance
that information required to be disclosed in the Company's reports under the
Securities Act of 1934 (Exchange Act) is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms, and
that such information is accumulated and communicated to the Company's
management, including its President and Chief Executive Officer and its Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure. The Company's management necessarily applied its judgment in
assessing the costs and benefits of such controls and procedures, which, by
their nature, can provide only reasonable assurance regarding management's
control objectives. There have been no significant changes in the Company's
internal controls or in other factors that could significantly affect these
controls subsequent to the date of this evaluation.

It should be noted that any system of controls, however well designed and
operated, can provide only reasonable, and not absolute, assurance that the
objectives of the system are met. In addition, the design of any control system
is based in part upon certain assumptions about the likelihood of future events.
Because of these and other inherent limitations of control systems, there can be
no assurance that any design will succeed in achieving its stated goals under
all potential future conditions, regardless of how remote.

                                       28

<PAGE>

                                   SIGNATURES

     In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                          Digital Broadband Networks, Inc.

Dated: March 28, 2003     By: /s/ Patrick Soon-Hock Lim
                               --------------------------------------
                                Patrick Soon-Hock Lim
                                Executive Chairman and Chief Executive Officer


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


           SIGNATURE                     TITLE                          DATE
           ---------                     -----                          ----

/s/ Patrick Soon-Hock Lim       Chairman, Chief Executive         March 28, 2003
-----------------------------   Officer and Director
Patrick Soon-Hock Lim           (Principal Executive Officer)


/s/ Chee-Hong Leong             Chief Financial Officer           March 28, 2003
-----------------------------   (Financial Officer and
Chee Hong Leong                 Principal Accounting Officer)


/s/ Valerie Hoi-Fah Looi        Secretary and Director            March 28, 2003
-----------------------------
Valerie Hoi-Fah Looi

/s/ Wan Abdul Razak bin Muda    Director                          March 28, 2003
-----------------------------
Wan Abdul Razak bin Muda

/s/ Mark Deschaine              Director                          March 28, 2003
-----------------------------
Mark Deschaine

                                       29

<PAGE>

CERTIFICATION PURSUANT TO RULE 13A-14 OR 15D-14 OF THE SECURITIES EXCHANGE
ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF
2002


I, Patrick Soon-Hock Lim, certify that:

     1. I have reviewed this annual report on Form 10-KSB of Digital Broadband
Networks, Inc.;

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

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

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

     a)   designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us during the period in
          which this annual report is being prepared;

     b)   evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report; and

     c)   presented in this annual report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of that date;

     5. The registrant's other certifying officers and I have disclosed to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent function):

     a)   all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

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

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




Date:  March 28, 2003

                                             /s/  Patrick Soon-Hock Lim
                                             --------------------------
                                             Patrick Soon-Hock Lim
                                             Chief Executive Officer

                                       30

<PAGE>


CERTIFICATION PURSUANT TO RULE 13A-14 OR 15D-14 OF THE SECURITIES EXCHANGE
ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF
2002


I, Chee Hong Leong, certify that:

     1. I have reviewed this annual report on Form 10-KSB of Digital Broadband
Networks, Inc.;

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

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

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

     a)   designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us during the period in
          which this annual report is being prepared;

     b)   evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report; and

     c)   presented in this annual report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of that date;

     5. The registrant's other certifying officers and I have disclosed to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent function):

     a)   all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

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

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




Date:  March 28, 2003

                                                      /s/  Chee Hong Leong
                                                      -----------------------
                                                      Chee Hong Leong
                                                      Chief Financial Officer



                                       31

<PAGE>

               DIGITAL BROADBAND NETWORKS, INC. AND SUBSIDIARIES
                     YEARS ENDED DECEMBER 31, 2002 AND 2001
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Independent auditors' report                                     F1
Consolidated financial statements:
         Balance sheet                                           F2
         Statements of operations                                F3
         Statements of changes in shareholders'
           equity and comprehensive loss                         F4
         Statements of cash flows                                F5
         Notes to consolidated financial statements              F6-F21




<PAGE>

                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------

Board of Directors
Digital Broadband Networks, Inc.

We have audited the accompanying consolidated balance sheet of Digital
Broadband Networks, Inc. and subsidiaries as of December 31, 2002, and the
related consolidated statements of operations, changes in shareholders' equity
and comprehensive loss and cash flows for each of the years in the two-year
period ended December 31, 2002. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Digital
Broadband Networks, Inc. and subsidiaries as of December 31, 2002, and the
results of their operations and their cash flows for each of the years in the
two-year period ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States of America.

As discussed in Note 2 to the consolidated financial statements, effective
January 1, 2002, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
1 to the consolidated financial statements, for the year ended December 31,
2002, the Company reported net income of $98,649, which included several
non-recurring transactions including recognition of a deferred gain of $101,238,
collection of $232,724 in related party receivables previously not recognized as
revenue due to the uncertainty of collection, collection of $168,421 in
non-related party accounts receivable previously deemed uncollectible, and
extinguishment of $42,548 of accounts payable recognized as an extraordinary
gain. Excluding these non-recurring transactions, the Company would have
reported a $446,282 net loss for the year ended December 31, 2002. The Company
suffered a loss from operations of $92,585 in 2001, had negative cash flows from
operating activities of $302,203 and $296,297 in 2002 and 2001, respectively,
and has an accumulated deficit of $1,134,328 at December 31, 2002. These factors
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 1. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.


HORWATH GELFOND HOCHSTADT PANGBURN, P.C.

Denver, Colorado
March 27, 2003


                                      F-1

<PAGE>


<TABLE>
<CAPTION>
                DIGITAL BROADBAND NETWORKS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2002

                                ASSETS
Current assets:

<S>                                                                               <C>
     Cash                                                                         $             10,077
     Accounts receivable, less allowance for doubtful
       accounts of $156,000 (Notes 3, 4 and 9)                                               1,775,263
     Prepaid expenses                                                                           28,474
     Inventories                                                                                 1,248
                                                                                  --------------------
              Total current assets                                                           1,815,062
Furniture and equipment, net (Notes 5 and 6)                                                 1,443,592
Goodwill, net (Note 2)                                                                         471,150
Long-term receivables, related parties (Note 3)                                                628,157
                                                                                  --------------------
                                                                                  $          4,357,961
                                                                                  ====================

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

     Current portion of capital lease obligations (Note 6)                        $             54,236
     Accounts payable (Note 10)                                                                387,086
     Accrued expenses                                                                          125,292
     Amount due to an affiliated company (Note 3)                                              170,732
     Amount due to a director (Note 3)                                                         225,939
                                                                                  --------------------
              Total current liabilities                                                        963,285
                                                                                  --------------------
     Capital lease obligations, net of current portion (Note 6)                                 90,474
     Deferred gain (Note 3)                                                                    628,157
                                                                                  --------------------
              Total liabilities                                                              1,681,916
                                                                                  --------------------
Minority interest                                                                              179,454
                                                                                  --------------------
Commitments and contingencies (Notes 1, 11, 12 and 13)

Shareholders' equity (Notes 7 and 11):
     Preferred stock, $0.10 par value; 1,000,000 shares authorized;
       no shares issued and outstanding
     Common stock, $.00001 par value; 100,000,000 shares authorized;
       98,950,899 shares issued and outstanding                                                    989
     Additional paid-in capital                                                              3,564,241
     Options (Note 7)                                                                           17,620
     Deferred compensation cost (Note 7)                                                       (8,500)
     Accumulated deficit                                                                   (1,134,328)
     Accumulated other comprehensive income                                                     56,569
                                                                                  --------------------
              Total shareholders' equity                                                     2,496,591
                                                                                  --------------------
                                                                                  $          4,357,961
                                                                                  ====================
</TABLE>

                 See notes to consolidated financial statements

                                      F-2

<PAGE>

<TABLE>
<CAPTION>
                DIGITAL BROADBAND NETWORKS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

                                                                           2002                     2001
                                                                          ------                   -------
Revenues:
<S>                        <C>                                      <C>                      <C>
     Related parties (Note 3)                                       $       252,461          $           --
     Others                                                              12,288,045               4,958,421
                                                                    ----------------         ---------------
                                                                         12,540,506               4,958,421
Cost of revenues                                                         11,737,778               4,699,367
                                                                    ----------------         ---------------
Gross profit                                                                802,728                 259,054
                                                                    ----------------         ---------------
Operating expenses:
     Sales and marketing                                                     60,384                 130,201
     General and administrative:
       Related parties (Note 3)                                             120,000                 120,000
       Others (Notes 2 and 4)                                               600,882                 101,438
                                                                    ----------------         ---------------
Total operating expenses                                                    781,266                 351,639
                                                                    ----------------         ---------------
Income (loss) from operations                                                21,462                 (92,585)
                                                                    ----------------         ---------------
Other income (expense):
     Interest expense                                                       (15,618)                (19,143)
     Gain on disposal of assets:
       Related parties (Note 3)                                             101,238                      --
       Others                                                                    --                     526
     Other income                                                               155                     182
                                                                    ----------------         ---------------
                                                                             85,775                 (18,435)
                                                                    ----------------         ---------------
Income (loss) before minority interest and extraordinary item               107,237                (111,020)

Minority interest                                                           (51,136)                 31,915
                                                                    ----------------         ---------------
Income (loss) before extraordinary item                                      56,101                 (79,105)

Extraordinary item (Note 10)                                                 42,548                      --
                                                                    ----------------         ---------------
Net income (loss)                                                   $        98,649          $      (79,105)
                                                                    ================         ===============
Basic and diluted income (loss) per common share:

     Income (loss) before extraordinary item                        $             *          $            *
                                                                    ================         ===============
     Extraordinary item                                             $             *          $            *
                                                                    ================         ===============
     Net income (loss)                                              $             *          $            *
                                                                    ================         ===============
     Basic and diluted weighted average shares outstanding                98,385,183              97,513,944
                                                                    ================         ===============

* Less than $0.01 per share


                 See notes to consolidated financial statements
</TABLE>


                                      F-3

<PAGE>

<TABLE>
<CAPTION>
                DIGITAL BROADBAND NETWORKS, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                             AND COMPREHENSIVE LOSS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001


                                      Common stock
                                    -----------------
                                                                                                      Accumulated
                                                     Additional                 Deferred                 other
                                                Par    paid-in               compensation Accumulated comprehensive
                                      Shares   value   capital      Options      cost       deficit      income      Total
                                    ---------  ------ ---------    -------    ----------  -----------  ----------   ------

Balances,
<S>                                 <C>         <C>   <C>         <C>         <C>         <C>          <C>        <C>
 January 1, 2001                    97,290,999  $973  $3,412,415  $    --     $     --    $(1,153,872) $56,639    $2,316,155

Issuance of
 common shares                         462,500     4      45,308       --           --             --       --        45,312

Issuance of
 stock options to
 a consultant                               --    --          --   20,125      (20,125)            --       --            --

Amortization of
 deferred compensation
 for the year ended
 December 31, 2001                          --    --          --       --        4,563             --       --         4,563

Comprehensive loss:

 Net loss for
  the year ended
  December 31, 2001                         --    --          --       --           --        (79,105)      --       (79,105)

 Foreign currency
  translation
  adjustment                                --    --          --       --           --             --      (70)          (70)

 Comprehensive loss                                                                                                  (79,175)
                                   ----------- -----  ----------  -------     --------    -----------  -------    ----------
Balances,
 December 31, 2001                  97,753,499  $977  $3,457,723  $20,125     $(15,562)   $(1,232,977) $56,569    $2,286,855

Issuance of
 common shares                       1,197,400    12     106,518       --           --             --       --       106,530

Issuance of
 stock options to
 consultants                                --    --          --   17,620      (17,620)            --       --            --

Cancellation of
 stock options issued
 to a consultant                            --    --          --  (20,125)      10,729             --       --        (9,396)

Amortization of
 deferred compensation
 for the year ended
 December 31, 2002                          --    --          --       --       13,953             --       --        13,953

Comprehensive loss:

 Net income for
  the year ended
  December 31, 2002                         --    --          --       --           --         98,649       --        98,649

 Comprehensive loss                                                                                                   98,649
                                   ----------- -----  ----------  -------     --------    -----------  -------    ----------

Balances,
 December 31, 2002                  98,950,899  $989  $3,564,241  $17,620     $ (8,500)   $(1,134,328) $56,569    $2,496,591
                                   =========== =====  ==========  =======     ========    ===========  =======    ==========


                                        See notes to consolidated financial statements

</TABLE>
                                      F-4

<PAGE>

<TABLE>
<CAPTION>
                DIGITAL BROADBAND NETWORKS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001


                                                                                   2002                     2001
                                                                                 --------                 --------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                        <C>                    <C>
     Net income (loss)                                                     $         98,649       $         (79,105)
     Adjustments to reconcile net income (loss) to net cash used
       in operating activities:

     Extraordinary item (Note 10)                                                   (42,548)                     --
     Minority interest                                                               51,136                 (31,915)
     Depreciation and amortization                                                  254,151                 366,211
     Deferred compensation amortization                                              13,953                   4,563
     Other compensation expenses (Note 7)                                             2,500                      --
     Compensation expenses reversed for canceled options                             (9,396)                     --
     Reserve for bad debts                                                         (168,423)               (455,012)
     Gain on disposal of assets                                                    (101,238)                   (526)
     Changes in operating assets and liabilities:
       Decrease (increase) in receivables                                            14,551                (525,067)
       Decrease (increase) in prepaid expenses                                       16,874                 (15,023)
       Increase in inventories                                                           --                  (1,248)
      (Decrease) increase in payables and accrued expenses                         (432,412)                440,825
                                                                           ----------------       ------------------
            Net cash used in operating activities                                  (302,203)               (296,297)
                                                                           ----------------       ------------------
CASH FLOWS FROM INVESTING ACTIVITIES
     Proceeds from sale of furniture and equipment                                       --                     526
     Purchase of furniture and equipment                                            (19,622)                (57,192)
     Proceeds from disposal of investment in subsidiaries                                --                  13,421
                                                                           ----------------       ------------------
            Net cash used in investing activities                                   (19,622)                (43,245)
                                                                           ----------------       ------------------
CASH FLOWS FROM FINANCING ACTIVITIES
     Proceeds from issuance of shares of common stock                               204,030                  45,312
     Payment for reacquisition of shares of common stock                           (100,000)                     --
     Net proceeds from affiliated company                                           271,802                 155,633
     Net (payments to) proceeds from a director                                     (29,410)                134,928
     Payment of obligation under capital leases                                     (14,922)                     --
                                                                           ----------------       ------------------
            Net cash provided by financing activities                               331,500                 335,873
                                                                           ----------------       ------------------

Net increase (decrease) in cash                                                       9,675                  (3,669)
Cash, beginning of year                                                                 402                   4,071
                                                                           ----------------       ------------------
Cash, end of year                                                                    10,077                     402
                                                                           ================       ==================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Cash paid for interest during the period                              $         19,267       $              22
                                                                           ================       ==================

SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:

Payments on accounts receivable made directly by customers to an
     affiliated company for amounts the Company owed it. (Notes 3 and 4)   $        402,632       $              --
                                                                           ================       ==================


                 See notes to consolidated financial statements
</TABLE>

                                       F-5

<PAGE>

               DIGITAL BROADBAND NETWORKS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001


NOTE 1: ORGANIZATION, BASIS OF PRESENTATION, GOING CONCERN AND MANGEMENT'S
PLANS:

ORGANIZATION AND BASIS OF PRESENTATION:

Digital Broadband Networks, Inc. and subsidiaries (the "Company") provides
network facilities and services for synchronous wireless broadband applications
that include distance learning, live news coverage, remote video surveillance,
emergency field services (including tele-medicine) and on site progress
monitoring. The Company's revenues for 2002 and 2001 were primarily derived from
the design, development and production of interactive multimedia websites and
content.

The Company, formerly known as Kalan Gold Corporation, changed its name to
Digital Broadband Networks, Inc., after its shareholders approved the change of
name in a Special Shareholders Meeting on August 17, 2001.

On April 2, 2002, the Company formed Digital Broadband Networks, Inc., a
wholly-owned Delaware corporation ("DBNI Delaware"). At a Special Meeting of the
Company's shareholders held on June 5, 2002, the shareholders adopted and
approved the Merger Agreement between the Company and DBNI Delaware that
resulted in the Company changing its state of incorporation from Colorado to
Delaware. On June 20, 2002, the Company formed EyStar Media Inc., a wholly-owned
Delaware corporation.

The accompanying consolidated financial statements include the accounts of
Digital Broadband Networks, Inc. and its wholly-owned subsidiaries: EyStar Media
Inc. ("EMI"), a Delaware corporation, and Animated Electronic Industries Sdn.
Bhd. ("AEI"), a Malaysian corporation, as well as AEI's 86% owned Malaysian
subsidiary, Perwimas Telecommunications Sdn Bhd ("PTSB").

GOING CONCERN AND MANAGEMENT'S PLANS:

The Company's consolidated financial statements for the year ended December
31, 2002 have been prepared on a going concern basis, which contemplates the
realization of assets and the settlement of liabilities and commitments in the
normal course of business. For the year ended December 31, 2002, the Company
reported net income of $98,649, which included several non-recurring
transactions including recognition of a deferred gain of $101,238 (note 3),
collection of $232,724 in related party receivables previously not recognized as
revenue due to the uncertainty of collection (note 3), collection of $168,421 in
non-related party accounts receivable previously deemed uncollectible (note 4),
and extinguishment of accounts payable recognized as an extraordinary gain (note
10). Excluding these non-recurring transactions, the Company would have reported
a $446,282 net loss for the year ended December 31, 2002. The Company suffered a
loss from operations of $92,585 in 2001, had negative cash flows from operating
activities of $302,199 and $296,297 in 2002 and 2001, respectively, and has an
accumulated deficit of $1,134,328. The Company may incur continued cash
outflows, which may result in a working capital deficiency again next year. As a
result, the Company may experience difficulty and uncertainty in meeting its
liquidity needs during the next fiscal year.

These factors raise substantial doubt about the Company's ability to
continue as a going concern. The consolidated financial statements do not
include any adjustments relating to the recoverability and classification of
assets or the amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern.

The Company is a total system solution provider involved in application
development, network operation, delivery of value-added applications and
services, and sales of its EyStar SmartHome Console. The multi protocol EyStar
SmartHome Console bridges external data networks such as the Internet to
internal home networks like Ethernet, telephone lines, power lines and the
802.11b wireless LAN eliminating the need for any additional wiring in the home.
The Console will enable more value-added services to be offered to subscribers.
These services include home healthcare in conjunction with hospitals and health
advisors; interconnection and control of appliances produced by different
manufacturers; and security applications that allow subscribers to check on
their homes remotely. This Console is designed to operate on both the narrow and
broadband fixed line/wireless networks. The Company is also a facilities-based
and network service provider of wireless broadband applications and services in
Malaysia.

                                      F-6

<PAGE>

               DIGITAL BROADBAND NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

NOTE 1: ORGANIZATION, BASIS OF PRESENTATION, GOING CONCERN AND MANAGEMENT'S
PLANS (CONTINUED):

GOING CONCERN AND MANAGEMENT'S PLANS (CONTINUED):

In 2002, the Company's revenue was primarily generated from the following
activities:

1.  Designing, producing, hosting and distributing interactive multimedia
    content, websites, programs and applications.
2.  Developing and producing e-commerce programs and Internet-based security
    applications and solutions.
3.  Providing project consulting services on broadband communication and
    networking systems for property development projects.

The Company is also licensed to deploy a wireless broadband network,
"VISIONET", in Malaysia. In November 2000, PTSB entered into a strategic
alliance with a Malaysian Internet service provider. In September 2001, PTSB was
awarded an Application Service Provider (ASP) license by the Malaysian
Communications and Multimedia Commission. Management believes the ASP license
will complement the wireless broadband license previously granted to the Company
in 1997. After establishing the first VISIONET cell in December 2001, the
Company had decided to reposition VISIONET as a backhaul service to other
broadband service providers and local mobile networks that it hopes to deploy
with strategic partners. The Company has now revised its business model and
expects to generate revenues from the sale of backhaul services, EyStar
SmartHome consoles, broadband modems and by providing other services that
include:

1.  operating a portal for remote video surveillance and home/office automation
    applications;
2.  construction of owned and operated networks for third parties;
3.  development and operation of local mobile networks that provide mobile
    Internet access through handheld devices;
4.  sale of customized security solutions utilizing the Company's products;
5.  sale of biometric-based security systems; and
6.  production and delivery of training and adult education programs.

As in the establishment of many other new businesses, there are various
risk factors including competition, technology availability and market
acceptance. The Company requires substantial amounts of capital to establish its
business and expects to incur substantial losses over the next few years.

The Company's plan to overcome its financial difficulties and return to
profitability centers on expanding its business in application development, sale
of its EyStar SmartHome Console and the roll out of its portal for remote video
surveillance and home/office automation applications.

The Company believes that sufficient cash will be generated from the
following sources to fund its operations for the next twelve months:

--   Intensification of efforts to collect overdue receivables. The Company
     intends to keep close contact with its debtors to keep updated on their
     liquidity status. Legal action will only be taken as a last resort.

--   Advances from a director/officer who is also a major shareholder as
     required to finance the Company's working capital requirements.

--   Additional revenue provided by: (i) a consulting contract, which is
     estimated to generate approximately $250,000 of revenue in 2003, to carry
     out the planning, design, project execution (including contract and project
     management) of all broadband communications and networking systems/services
     for Pulau Indah-Marina Village, (ii) a contract, which is estimated to
     generate approximately $250,000 of revenue in 2003, to carry out the
     planning, design, project execution of all broadband communications and
     networking systems/services for a commercial/housing project in Selangor,
     Malaysia, (iii) a consulting contract entered into on November 5, 2002 with
     a related party, which is expected to generate approximately $300,000 of
     revenue in 2003, to provide consulting services relating to home
     automation, home networking, energy cost saving, security surveillance and
     monitoring for two major commercial and housing developments in Malaysia.

--   The Company may consider a private placement of its shares.

--   The Company may also seek to obtain equipment financing.


                                      F-7

<PAGE>


               DIGITAL BROADBAND NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2002 AND 2001


NOTE 1: ORGANIZATION, BASIS OF PRESENTATION, GOING CONCERN AND MANAGEMENT'S
PLANS (CONTINUED):

GOING CONCERN AND MANAGEMENT'S PLANS (CONTINUED):

The Company also hopes that additional cash will be generated from:

--   the marketing agreement with Worldlink Dotcom Sdn. Bhd. to distribute its
     service gateway for home/office automation in Malaysia, Singapore and
     Australia;

--   the distribution agreement with Mutual Base Equity Sdn. Bhd. for sale of
     the EyStar SmartHome Console in Malaysia, Singapore and Cambodia;

--   the Channel Partner Agreement with PointRed Technologies;

--   the agreement with Sintec to sell, distribute and promote their remote
     video surveillance cameras;

--   the agreement with Telekom Sales and Services to sell, distribute and
     promote broadband access over standard copper telephone lines using Digital
     Subscriber Line technology in Malaysia; and

--   the reseller agreement with FaceKey Corporation to sell FaceKey's
     biometric-based security products.

With the above plans and barring any unforeseen circumstances, Management
believes the Company will be able to continue as a going concern.


NOTE 2: SIGNIFICANT ACCOUNTING POLICIES:

FINANCIAL STATEMENTS:

The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America.

The Company's consolidated financial statements include the results of
operations of the subsidiaries' business from the date of acquisition. Net
assets of the subsidiaries are recorded at their fair value at the date of
acquisition. All significant inter-company accounts and transactions have been
eliminated on consolidation.

COMPREHENSIVE INCOME:

The Company reports comprehensive income in accordance with Statement of
Financial Accounting Standard ("SFAS") No. 130, "Reporting Comprehensive
Income," which establishes standards for the reporting and display of
comprehensive income and defines comprehensive income to include all changes in
equity except those resulting from investments by owners and distributions to
owners. Among other disclosures, SFAS No. 130 requires that all items that are
required to be recognized under current accounting standards as components of
comprehensive income be reported in a financial statement that is presented with
the same prominence as other financial statements. The Company's only current
component of comprehensive income is foreign currency translation adjustments.

The functional currency of the Company's subsidiaries is the Malaysian
Ringgit. The financial statements of these subsidiaries are translated into
United States dollars using year-end rates of exchange for assets and
liabilities, and average rates of exchange for the year for revenues, costs, and
expenses. Translation gains and losses are treated as a component of
shareholders' equity. The reporting currency used in the financial statements is
USD unless otherwise stated.

                                      F-8

<PAGE>

               DIGITAL BROADBAND NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

REVENUE RECOGNITION:

Revenue represents the net invoiced value of goods sold or fees earned from
the production of multimedia programs and Intranet and management and consulting
services. The Company recognizes revenue from the sales of goods in the period
when significant risks and rewards of ownership have transferred to its
customers. The Company recognizes revenue from the services provided in the
period in which the services are performed and when there is no significant
uncertainty regarding the consideration to be received and the associated costs
to be incurred.

NET INCOME (LOSS) PER COMMON SHARE:

Income (loss) per common share is determined in accordance with SFAS No.
128, "Earnings Per Share" (EPS). SFAS No. 128 requires the presentation of two
EPS amounts, basic and diluted. Basic net income (loss) per common share is
calculated by dividing net income (loss) by the weighted average number of
common shares outstanding for the year ended December 31, 2002 and 2001. Diluted
income (loss) per common share reflects additional common shares that would have
been outstanding if dilutive potential common shares had been issued, as well as
any adjustment to income that would result from the assumed issuance. Potential
common shares that may be issued by the Company relate to outstanding stock
options and are determined using the treasury stock method. Basic and diluted
net loss per share and the number of weighted shares outstanding are the same
for the years ended December 31, 2002 and 2001, since the effect of inclusion of
all outstanding options would be anti-dilutive.

INCOME TAXES:

Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the recorded book basis and tax basis
of assets and liabilities for financial and income tax reporting. The deferred
tax assets and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. Deferred taxes are also recognized for
operating losses that are available to offset future taxable income and tax
credits that are available to offset future federal income taxes

FURNITURE, EQUIPMENT AND DEPRECIATION:

Furniture and equipment are stated at cost less depreciation. Depreciation
is calculated on the straight-line method over the expected useful lives of the
assets. The principal annual rates of depreciation are:

  Office Equipment, furniture and fittings, and computer software        20%
  Tools and equipment, video communication hardware and peripherals,
     and office renovation                                               10%

Routine expenses for maintenance and repair are expensed as incurred.
Expenditures that result in enhancement of the value or in extension of the
useful life of fixed assets are capitalized.

GOODWILL:

Goodwill, arising from the purchase of PTSB, represents the purchase price
paid and liabilities assumed in excess of the fair market value of tangible
assets acquired. In June 2001, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill
and Other Intangible Assets. Effective January 1, 2002, SFAS No. 142 no longer
allows the amortization of goodwill and intangible assets with indefinite useful
lives. SFAS No. 142 requires that these assets be reviewed for impairment at
least annually, or whenever there is an indication of impairment. Intangible
assets with finite lives will continue to be amortized over their estimated
useful lives and reviewed for impairment in accordance with SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets.

                                      F-9

<PAGE>

               DIGITAL BROADBAND NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2002 AND 2001


NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

GOODWILL (CONTINUED):

SFAS No. 142 requires companies to allocate goodwill to identifiable
reporting units, which are then tested for impairment using a two-step process
detailed in the statement. The first step requires comparing the fair value of
each reporting unit with its carrying amount, including goodwill. If the fair
value exceeds the carrying amount, goodwill of the reporting unit is considered
not impaired, and the second step of the impairment test is not necessary. If
the fair value of the reporting unit does not exceed the carrying amount, the
second step of the goodwill impairment test must be performed to measure the
amount of impairment loss, if any. This step requires the allocation of the fair
value of the reporting unit to the reporting unit's assets and liabilities
(including any unrecognized intangible assets) as if the reporting unit had been
acquired in a business combination and the fair value of the reporting unit was
the price paid to acquire the reporting unit. The excess of the fair value of
the reporting unit over its re-evaluated net assets would be the new basis for
the reporting unit's goodwill, and any necessary goodwill write down to this new
value would be recognized as an impairment expense.

The Company adopted SFAS No. 142 on January 1, 2002 and completed the first
step of the transitional goodwill impairment test as required under the
statement. It was determined that the Company has one reporting unit. The fair
value of the reporting unit exceeded the carrying value of the reporting unit
and accordingly, as of that date, there was no goodwill impairment. The Company
also performed a goodwill impairment test in the fourth quarter of 2002 and
determined that there was no goodwill impairment as of that test date. A
goodwill impairment test will be performed annually in the fourth quarter or
upon significant changes in the Company's business environment.

As a result of the adoption of SFAS No. 142, there was no goodwill
amortization expense recorded for the year ended December 31, 2002. Goodwill
amortization expense was approximately $118,000 for the year ended December 31,
2001. Excluding the goodwill amortization that was recorded in 2001, the Company
would have reported net income of approximately $39,000 and basic and diluted
net income per share of less than $0.01 in that year.

IMPAIRMENT OF LONG-LIVED ASSETS

In August 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 that Statement. The Company adopted SFAS No. 144 on January 1,
2002 with no material impact to its financial statements.

FAIR VALUE OF FINANCIAL INSTRUMENTS:

The Company's on-balance sheet financial instruments consist of cash,
accounts receivable, capital lease obligations, accounts payable, and other
accrued liabilities. The carrying amounts of such financial instruments
approximate fair value due to their short maturities. The fair values of amounts
due to and from related parties are not practicable to estimate, due to the
related party nature of the underlying transactions. The Company has no material
off-balance sheet financial instruments.

ASSETS UNDER CAPITAL LEASES:

The Company records assets acquired under capital leases as fixed assets
and the corresponding obligation under capital leases as a liability. The
initial recording value of assets under a capital lease is the lesser of the
fair value of the leased assets or the present value of the minimum lease
payments, excluding any portion representing executory costs and profit thereon.
The assets recorded under capital leases are depreciated over the shorter of the
lease term or estimated useful life of the assets.

                                      F-10

<PAGE>

               DIGITAL BROADBAND NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2002 AND 2001


NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

INVENTORIES:

Inventories, which are comprised of peripherals for surveillance and
wireless communication, are stated at the lower of cost or net realizable value.
Cost is determined on a first-in-first-out basis.

ADVERTISING:

Costs related to advertising and promotion of products and services are
charged to sales and marketing expense as incurred. Advertising and promotion
costs were $25,906 and $113,391 in 2002 and 2001, respectively.

OPERATING LEASES:

The Company leases its primary office facility in Malaysia under a
three-year, non-cancelable operating lease, which expires in February 2003. The
Company has reached an agreement to renew the lease for one year, commencing
March 2003 (note 13). The Company also renewed its lease of another office in
Malaysia used for content production, engineering and warehouse space, which
expired in August 2002, for two additional years through August 2004. Following
the re-incorporation of the Company in Delaware, the Company also entered into a
one-year non-cancelable lease agreement for office space in North Carolina
commencing June 1, 2002. In January 2003, the Company entered into a one-year
non-cancelable lease for office space and relocated its US office from
Charlotte, NC to Flemington, NJ (note 13). These leases require the Company to
pay rent of $2,900 in January 2003, $3,400 per month in February through May
2003, $2,500 per month in June 2003 through January 2004, $2,000 in February
2004 and $300 per month thereafter, as well as taxes, maintenance, insurance and
certain other operating costs of the leased properties.

The Company also leased an Internet line and related Internet access
gateway under a one-year, non-cancelable operating lease, which expired in
September 2002. The Company has continued using the leased Internet line and
related access gateway since October 2002 with an option to terminate at anytime
by serving a 30 days notice to the service provider. The lease requires the
Company to pay $2,763 per month.

Future minimum lease payments under the non-cancelable lease agreements
total $34,000 for the year ending December 31, 2003 and $6,300 for the year
ending December 31, 2004. Rent expense was $56,439 and $31,389 for the years
ended December 31, 2002 and 2001, respectively.

SEGMENT REPORTING:

The Company does not include segment reporting in the financial statements
as the Company functioned as a single operating unit in 2002 and 2001. The
Company's revenue is derived primarily from operations in Malaysia and
substantially all of the Company's assets are located in Malaysia.

STOCK-BASED COMPENSATION:

SFAS No. 123, Accounting for Stock Based Compensation, defines a
fair-value-based method of accounting for stock-based employee compensation
plans and transactions in which an entity issues its equity instruments to
acquire goods or services from non-employees, and encourages but does not
require companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has chosen to account for employee
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25 (APB No. 25), Accounting for Stock
Issued to Employees, and related interpretations. Accordingly, employee
compensation cost for stock options is measured as the excess, if any, of the
estimated fair value of the Company's stock at the date of the grant over the
amount an employee must pay to acquire the stock.

                                      F-11

<PAGE>

               DIGITAL BROADBAND NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

BUSINESS RISK:

The Company is subject to risks and uncertainties common to
technology-based companies, including rapid technological change, dependence on
principal products and third-party technology, new product introductions and
other activities of competitors, dependence on key personnel, and limited
operating history.

ESTIMATES:

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

NOTE 3: RELATED PARTY TRANSACTIONS:

During the years ended December 31, 2002 and 2001, the Company had related
party transactions with the following entities:

LSH ASSET HOLDINGS SDN BHD ("LSH"):

LSH is a company wholly-owned by the Company's Chief Executive Officer and
his wife. During each of the years ended December 31, 2002 and 2001, LSH billed
the Company $120,000 for management fees. LSH also made short term advances to
the Company from time to time for working capital purposes. These advances
totaled $180,695 and $55,505 in 2002 and 2001, respectively. During the year
ended December 31, 2002, the Company's management directed other related parties
and a customer to pay a total of $402,632 to LSH in lieu of actual cash payment
of receivables. As of December 31, 2002, the amount due to LSH was $170,732.
This amount is unsecured, bears no interest, has no fixed terms of repayment,
and is recorded in the financial statements as "Amount due to an affiliated
company".

VISIONEWS ASIA SDN BHD ("VASB"):

The Company's Chief Executive Officer is a director of VASB and owns a 40%
equity interest in VASB. A director of PTSB is also a director of VASB and owns
a 20% equity interest in VASB. During the year ended December 31, 2002, the
Company recognized revenue from VASB of $7,895, which related to revenue
previously deferred in 1999. In lieu of actual cash payment, the Company's
management directed VASB to pay $7,895 to LSH. The net effect to the Company was
that revenue was recognized and recorded payables were reduced by equal amounts.
As of December 31, 2002, $73,665 of receivables from 1999 was not recognized as
revenue due to the uncertainty of collection. The terms of repayment for the
amount due from VASB is similar to terms accorded to the Company's other
existing customers.

                                      F-12

<PAGE>

               DIGITAL BROADBAND NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

NOTE 3: RELATED PARTY TRANSACTIONS (CONTINUED):

SYNERVEST SDN BHD ("SSB"):

A director of PTSB is a director of SSB and holds a 60% equity interest in
SSB. During the year ended December 31, 2002, the Company recognized revenue
from SSB of $92,105, which related to revenue previously deferred in 1999. In
lieu of actual cash payment, the Company's management directed SSB to pay
$92,105 to LSH. The net effect to the Company was that revenue was recognized
and recorded payables were reduced by equal amounts.

As of December 31, 2002, long-term receivables, related parties, consisted
of an overdue amount of $628,157 from SSB. This amount primarily arose in the
year ended December 31, 1998, when the Company sold to SSB assets used in the
operations of a subsidiary. These assets, comprising analog video hardware and
peripherals and a patent for image display, were sold to SSB for a total sum of
$1,661,175. Due to the uncertainty of collection of the related receivable, the
gain has been deferred and will be recognized only after all costs have been
recovered. The Company received $142,448 and $18,869 of the outstanding
receivable during the years ended December 31, 2002 and 2001, respectively.
During the year ended December 31, 2002, payments received by the Company
exceeded all remaining costs, resulting in a $101,238 realization of gain on
sale of assets, related party. The deferred gain included in the balance sheet
has been reduced accordingly. The deferred gain on sale of assets totaled
$628,157 at December 31, 2002, and will be recognized as a gain as payments on
the long-term receivable balance are received. During 2002, in lieu of actual
cash payment of a portion of the receivable due, the Company's management
directed SSB to pay $101,487 to LSH. The net effect to the Company was that
recorded receivables and payables were reduced equally.

KHIDMAT MAKMUR SDN BHD ("KMSB"):

A director of PTSB is a director of KMSB and holds a 30% equity interest in
KMSB. During the year ended December 31, 2002, the Company recognized revenue
from KMSB of $114,592 which relates to revenue previously deferred in 1999. In
lieu of actual cash payment, the Company's management directed KMSB to pay
$14,592 to LSH. The net effect to the Company was that revenue was recognized
and recorded payables were reduced by equal amounts. As of December 31, 2002,
$40,790 of receivables from 1999 was not recognized as revenue due to the
uncertainty of collection. The terms of repayment for the amount due from KMSB
are similar to terms accorded to the Company's other existing customers.

MY ARCHITECT ("MYA") AND MY DRAUGHTING SERVICES ("MDS"):

A director of PTSB is a principal partner of MYA and MDS. During the year
ended December 31, 2002, the Company received fees of $19,737 from a consulting
contract that it entered into with MDA on November 5, 2002. During the year
ended December 31, 2002, the Company also recognized revenue from MYA and MDS of
$7,895 and $10,237, respectively, which related to revenue previously deferred
in 1999. In lieu of actual cash payment, the Company's management directed MYA
and MDS to pay $7,895 and $10,237, respectively, to LSH. The net effect to the
Company was that revenue was recognized and recorded payables were reduced by
equal amounts. As of December 31, 2002, $131,579 and $94,210 of 1999 receivables
from MYA and MDS, respectively, were not recognized as revenue due to the
uncertainty of collection. The terms of repayment for the amount due from MYA
and MDS are similar to terms accorded to the Company's other existing customers.


CHIEF EXECUTIVE OFFICER:

As of December 31, 2002, the Company owed the Chief Executive Officer of
the Company $225,939 for short-term cash advances made to the Company for
working capital purpose from time to time. The amount owed to the Chief
Executive Officer is unsecured, bears no interest, has no fixed terms of
repayment and is recorded in the financial statements as "Amount due to a
director".

                                      F-13

<PAGE>

               DIGITAL BROADBAND NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

NOTE 4: GENERAL AND ADMINISTRATIVE EXPENSES - OTHERS:

General and administrative expenses from non-related parties for the year
ended December 31, 2002, included a $168,421 recovery of accounts receivable
previously deemed uncollectible. In connection with certain accounts receivable
overdue since 1999, the Company had previously recorded a bad debt allowance of
$168,421. During the year-ended December 31, 2002, the Company received payment
and reduced the allowance that had been previously recorded. Bad debt expense,
which is included in general and administrative expense, was reduced
accordingly. In 2002, in lieu of actual cash payment of these Company
receivables, the Company's management directed the customers to pay the $168,421
to LSH.

General and administrative expenses from non-related parties for the year
ended December 31, 2001, included a reversal of $455,012 for prior year's
allowance for doubtful receivables due to receipt of overdue receivables from
customers and a reversal of $150,000 for prior year's accrued legal fees as a
result of the creditor not pursuing its claim against the Company. Excluding the
reversal of allowance for doubtful receivables and accrued legal expenses,
general and administrative expenses from non-related parties would have been
$726,755 and $706,450, respectively, for the years ended December 31, 2002 and
2001.


<TABLE>
<CAPTION>
NOTE 5: FURNITURE AND EQUIPMENT:

     Furniture and equipment consists of the following at December 31, 2002:

<S>                                                                             <C>
     Office equipment                                                           $             95,047
     Furniture and fittings                                                                   30,677
     Tools and equipment                                                                     153,908
     Video Communication hardware and peripherals                                          2,202,245
     Computer software                                                                       170,639
     Office renovation                                                                        11,010
                                                                                --------------------
                                                                                           2,663,526
      Less accumulated depreciation                                                       (1,219,934)
                                                                                --------------------
                                                                                $          1,443,592
                                                                                ====================
</TABLE>

Depreciation expense for the years ended December 31, 2002 and 2001 was
$254,151 and $248,423, respectively.


NOTE 6: CAPITAL LEASE OBLIGATIONS:

Certain telecommunications and other assets are leased from a lessor under
various equipment lease financing facilities. Such leases have been accounted
for as capital leases. At the Company's request, the lessor agreed to an
extension on the repayment period in 1998 to enable the Company to secure
additional working capital financing. The rescheduled lease terms for all
capital leases commenced on December 1998 and are payable on a monthly basis
with the final payment due November 2006. The Company will acquire title to all
assets under capital leases, upon payment of the final lease payment in November
2006.

                                      F-14

<PAGE>

               DIGITAL BROADBAND NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

NOTE 6: CAPITAL LEASE OBLIGATIONS (CONTINUED):

As of December 31, 2002 the future minimum lease payments on capital leases
are as follows:

            Year ending
            December 31:
            ------------
            2003                                                $       66,348
            2004                                                        36,284
            2005                                                        36,284
            2006                                                        33,233
                                                                --------------
            Total payments                                             172,149
            Less:  Amount representing interest                        (27,439)
                                                                --------------
            Present value of minimum capital lease payments            144,710
            Less:  Current maturities of capital lease
              obligations                                              (54,236)
                                                                --------------
                                                                $       90,474
                                                                ==============

Assets under these capital leases, which are included in property and
equipment at December 31, 2002, are as follows:


         Video communication hardware and peripherals           $      408,896
         Less accumulated depreciation                                (279,181)
                                                                --------------
                                                                $      129,715
                                                                ==============

The Company has not made regular principal and interest payments due under
these capital lease agreements since July 2000. During the year ended December
31, 2002, the Company made payments to the lessor totaling $34,189. The total
overdue amount as of December 31, 2002 is $61,623, which includes unpaid
principal of $30,064 and unpaid interest of $31,559. Unpaid principal is
included in current portion of capital lease obligations on the balance sheet.
Unpaid interest is included in accrued expenses on the balance sheet. The
Company's Chief Executive Officer (CEO), who is also a shareholder, has
personally guaranteed payment under these capital lease agreements. Pursuant to
the terms of the guarantee agreement dated December 3, 1998, the CEO has
guaranteed to pay all amounts which become due under the terms of the capital
lease agreements. Subsequent to December 31, 2002 and through the date of this
report, the Company has made payments to the lessor totaling $6,047.


NOTE 7: SHAREHOLDERS' EQUITY:

PREFERRED STOCK:

The Company is authorized to issue one million shares of preferred stock,
par value $0.10 per share, which may be issued in series with such designations,
preferences, stated values, rights, qualifications or limitations as determined
by the Board of Directors. As of December 31, 2002, no preferred stock has been
issued.

                                      F-15

<PAGE>

               DIGITAL BROADBAND NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

NOTE 7: SHAREHOLDERS' EQUITY (CONTINUED):

PREFERRED STOCK (CONTINUED):

On December 20, 2001, the Company signed two separate definitive agreements
with two unrelated parties for the right to purchase convertible preferred stock
with attached warrants. Under the agreements, the preferred stockholders would
receive non-cumulative dividends at the rate of $0.08 per share per annum when
and if declared by the Company's Board of Directors. The Company authorized the
sale and issuance of 500,000 shares of its Series A Preferred Stock at a
purchase price of $5.00 per share. Each preferred stockholder would be entitled
to convert the preferred stock into common stock at a ratio of 1 share of
preferred stock to 2 shares of common stock. This right could be exercised by
the preferred stockholders at any time. The purchase was expected to be
completed on or before February 28, 2002. On March 12, 2002, the Company and the
purchasers mutually agreed to extend the closing date for the purchase to June
30, 2002. On March 25, 2002, the Company and the purchasers executed an addendum
to the definitive agreements to: (i) cancel the warrants attached to the
preferred stock and (ii) amend the conversion ratio to 1 share of preferred
stock to 1.6 shares of common stock. The amended agreement expired on June 30,
2002, without either investor exercising his right to purchase the preferred
stock.

COMMON STOCK:

On March 12, 2002, three officers and directors of the Company exercised
options to purchase 720,000 shares of the Company's restricted common stock at
an exercise price of $0.085 per share, for a total cash consideration of
$61,200.

On March 14, 2002, the Company sold 250,000 shares of restricted common
stock at $0.085 per share to a shareholder in a private placement for cash
consideration of $21,250.

On March 30, 2002, an officer and an employee of the Company exercised
options to purchase 77,400 shares of the Company's restricted common stock at an
exercise price of $0.085 per share, for a total cash consideration of $6,579.

On June 26, 2002, the Company granted 25,000 shares of restricted common
stock to an independent director as compensation for serving on the Company's
Board of Directors. The fair value of these shares on the date of grant was
estimated by management to be $0.10 per share, resulting in recognition of
compensation expense of $2,500 for the year ended December 31, 2002.

On June 28, 2002, the Company repurchased 1,000,000 shares of its common
stock from a shareholder at $0.10 per share, for a total consideration of
$100,000. The repurchased shares were recorded as treasury stock and were
available for re-issuance at a future date. On September 30, 2002, the Company
reissued the 1,000,000 shares of treasury stock to a shareholder at $0.10 per
share for a total consideration of $100,000. The shares were sold in reliance
upon the exemption provided by Regulation S under the Securities Act of 1933, as
amended.

STOCK OPTIONS:

In December 2000, the Company granted certain officers and employees of the
Company options to purchase up to 912,000 shares of the Company's common stock
at $0.085 per share (which was greater than the market price of the Company's
common stock at the date of grant). The options are exercisable through December
2005, contingent upon continuous service by the officers/employees through
specified dates. 31,200 and 50,400 options were cancelled during 2002 and 2001,
respectively, due to termination of services of employees. 797,400 options were
exercised in 2002, and 33,000 options were exercisable as of December 31, 2002.

                                      F-16

<PAGE>

               DIGITAL BROADBAND NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

NOTE 7: SHAREHOLDERS' EQUITY (CONTINUED):

STOCK OPTIONS (CONTINUED):

If the Company had accounted for the options issued to employees and
officers in accordance with FASB statement No. 123, the Company's net income
(loss) and net income (loss) per share would approximate the pro forma
disclosure below:

<TABLE>
<CAPTION>
                                                    Year ended December 31, 2002             Year ended December 31, 2001
                                                   As reported          Pro forma           As reported          Pro forma
                                                 --------------       -------------       ---------------     ---------------
<S>                                                  <C>                 <C>                 <C>                 <C>
     Net income (loss)                               98,649              98,649              (79,105)            (84,950)
     Basic and diluted income (loss) per share          *                   *                    *                   *

     * Less than $0.01 per share
</TABLE>

The value of the exercisable options during the year ended December 31,
2001 is calculated using the Black-Scholes methodology as prescribed by SFAS No.
123. The Company utilized an expected dividend yield of 0, expected stock price
volatility of 104%, a risk free interest rate of 6%, and an expected life of the
option of 3 years. All options issued to employees and officers were fully
vested in 2001, so there is no pro forma impact for 2002.

In June 2001, the Company granted options to purchase 750,000 shares of the
Company's common stock at $0.085 per share to a consultant for services to be
provided to the Company. On September 30, 2001, the option agreement between the
Company and the consultant was terminated. Under the terms of the agreement,
62,500 options were exercisable by the Consultant through December 31, 2001. The
remaining balance of 687,500 options was canceled following termination of the
agreement. These options were valued at $0.057 per share based upon the
Black-Scholes option pricing model, resulting in recognition of compensation
expense of $3,563 during the year ended December 31, 2001. On December 20, 2001,
the consultant exercised 62,500 options pursuant to the terms of the agreement.

On November 1, 2001, the Company granted options to purchase 250,000 shares
of the Company's common stock at $0.12 per share to a consultant for services to
be provided to the Company. These options were originally exercisable through
October 2006, contingent upon continuous service by the consultant through
specified dates. On May 31, 2002, the Option Agreement between the Company and
the consultant was terminated. The consultant exercised 125,000 of the options,
which vested April 30, 2002, on August 28, 2002, for a total cash consideration
of $15,000. These options were valued at $0.06 per share based upon the
Black-Scholes option-pricing model, resulting in recognition of compensation
expense of $4,833 during the year ended December 31, 2002. The remaining 125,000
options, which were scheduled to vest October 31, 2002, were canceled following
termination of the agreement.

On February 16, 2002, the Company granted options to purchase 60,000 shares
of the Company's common stock at $0.12 per share to a consultant for services to
be provided to the Company. These options were originally exercisable in August
2002 through February 2007, contingent upon continuous service by the consultant
through specified dates. Following the termination of the consultant's service
in December 2002, these options, which vested August 16, 2002, are exercisable
through March 2003. The options were valued at $0.05 per share, based upon the
Black-Scholes option-pricing model, resulting in recognition of compensation
expense of $2,820 during the year ended December 31, 2002.

On September 16, 2002, the Company granted options to purchase 300,000
shares of the Company's common stock at $0.12 per share to a consultant for
services to be provided to the Company. These options are exercisable through
September 2007, contingent upon continuous service by the consultant through
specified dates. 100,000 of the options, which vest March 15, 2003, were valued
at $0.044 per share, 100,000 of the options, which vest May 15, 2003, were
valued at $0.048 per share, and the remaining 100,000 options, which vest
September 15, 2003, were valued at $0.056 per share, based upon the
Black-Scholes option-pricing model, resulting in recognition of compensation
expense of $6,300 during the year ended December 31, 2002.

                                      F-17

<PAGE>

               DIGITAL BROADBAND NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2002 AND 2001


NOTE 7: SHAREHOLDERS' EQUITY (CONTINUED):

STOCK OPTIONS (CONTINUED):

A summary of the status of the Company's stock options as of December 31,
2002 and 2001, and changes during 2002 and 2001, is presented below:

<TABLE>
<CAPTION>
        Options Outstanding                     2002                          2001
        -------------------           -----------------------------------------------------------
                                       Shares     Exercise Price     Shares      Exercise Price
                                      --------   ----------------   --------    ----------------
For officers and employees:
<S>                                      <C>              <C>           <C>               <C>
Beginning of the year                    861,600          $0.085        912,000           $0.085
Granted                                        -               -              -                -
Exercised                               (797,400)         $0.085              -                -
Forfeited                                (31,200)         $0.085        (50,400)               -
                                      -----------                    -----------
End of the year                           33,000          $0.085        861,600           $0.085
                                         ========                       ========
Options exercisable at year end           33,000          $0.085        861,600           $0.085

For consultants:
Beginning of the year                    250,000          $0.120              -                -
Granted
  In February 2002/June 2001              60,000          $0.120        750,000           $0.085
  In September 2002/November 2001        300,000          $0.120        250,000           $0.120
Exercised                               (125,000)         $0.120        (62,500)          $0.085
Forfeited                               (125,000)         $0.120       (687,500)          $0.085
                                      -----------                    -----------
End of the year                          360,000          $0.120        250,000           $0.120
                                      ===========                    ===========
Options exercisable at year end           60,000          $0.120              -                -
</TABLE>

The following table summarizes information about options outstanding at
December 31, 2002 and 2001.

<TABLE>
<CAPTION>
                                                         Options Outstanding
                                         ----------------------------------------------------
                                            Number      Weighted Average   Weighted Average
                                           Outstanding      Remaining           Exercise
                                                         Contractual Life        Price
                                         ---------------------------------  -----------------
As of December 31, 2002:
<S>                                             <C>                  <C>              <C>
 For officers and employees                     33,000               2.93             $0.085
 For consultants                               360,000               3.97             $0.120
                                         --------------

Total                                          393,000               3.88             $0.093
                                         ==============


As of December 31, 2001:
 For officers and employees                    861,600               3.90             $0.085
 For consultants                               250,000               4.80             $0.120
                                         --------------

                                             1,111,600               4.10             $0.093
                                         ==============

</TABLE>

                                      F-18

<PAGE>

               DIGITAL BROADBAND NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2002 AND 2001


NOTE 8: INCOME TAXES:

Temporary differences and carry forwards that give rise to deferred tax
assets and liabilities as of December 31, 2002 are as follows:

DEFERRED TAX ASSETS
       Net operating loss carry forward                 $            914,798
       Unutilized tax allowable depreciation                         140,789
                                                        --------------------
                                                                   1,055,587
       Less: Valuation allowance                                  (1,045,061)
                                                        --------------------
       Deferred tax asset net of allowance                            10,526
DEFERRED TAX LIABILITIES
       Depreciation                                                  (10,526)
                                                        --------------------
NET DEFERRED TAX LIABILITY                                                --
                                                        ====================

For 2002 and 2001, all income/(loss) of the Company was derived from its
activities in Malaysia and the United States. There was no provision for income
taxes for the year ended December 31, 2002, as the net income was offset by net
operating losses carried forward. The Company had no current provision for
income taxes for 2001 due to the Company's net operating losses incurred in
2001. Based on statutory rates, the Company's expected tax expense (benefit)
arising from the 2002 net income and 2001 net loss would be approximately
$33,500 and $(27,000), respectively. The difference between the expected tax
expense (benefit) and non-recognition of tax expense (benefit) in 2002 and 2001,
respectively, is the result of utilization of net operating losses carried
forward in 2002 and application of a valuation allowance to deferred tax assets
in excess of deferred tax liabilities in 2001.

The valuation allowance offsets the net deferred tax assets for which there
is no assurance of recovery. The valuation allowance is evaluated considering
positive and negative evidence about whether the deferred tax assets will be
realized. At that time of evaluation, the allowance is either increased or
reduced; reduction could result in the complete elimination of the allowance if
positive evidence indicates that the value of the deferred tax assets is no
longer impaired and the allowance is no longer required. The Company's total net
operating loss carry forward is approximately $2,807,000 of which $1,606,000
relates to the Company's activities in Malaysia and $1,201,000 relates to the
Company's activities in the United States. The net operating loss carry forward
that relates to activities in Malaysia can be carried forward indefinitely while
the net operating loss carry forward that relates to the Company's activities in
the United States expires through the year 2023. The United States net operating
loss carry forward may be subject to annual limitations based on ownership
changes in the Company's common stock as provided by in section 382 of the
Internal Revenue Code.


NOTE 9: SIGNIFICANT CONCENTRATIONS OF CREDIT RISK:

The Company grants credit, generally without collateral, to its customers.
Two customers accounted for substantially all revenue earned during the year
ended December 31, 2002. In 2002, one customer accounted for approximately
$5,797,000 of revenue, and another customer accounted for approximately
$5,817,000 of revenue. During the year ended December 31, 2001, one customer
accounted for approximately $926,000 of revenue, and another customer accounted
for approximately $955,000 of revenue. Allowance for doubtful accounts
receivable was $155,744 and $324,167 at December 31, 2002 and 2001,
respectively. The Company will continue to pursue vigorously the collection of
all its outstanding accounts receivable.

One supplier accounted for substantially all cost of revenue during the
year ended December 31, 2002. During the year ended December 31, 2001, one
supplier accounted for approximately 39% of cost of revenue for the year and
substantially all cost of revenue during the last three months of 2001. The
Company is not dependent upon one supplier to provide the services that it
requires. During the fourth quarter of 2001, the Company made a strategic
decision to engage the services of one sole supplier after taking into
consideration the quality of service and competitive pricing being offered.
Should the need arise, the Company could utilize alternative suppliers for the
services that it requires.

                                      F-19

<PAGE>

               DIGITAL BROADBAND NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

NOTE 10: EXTRAORDINARY ITEM

During 2002, the Company extinguished accounts payable (related to prior
business operations) at less than recorded amounts resulting in an extraordinary
gain of $42,548 pursuant to Accounting Principles Board Opinion No. 30. There
were no income taxes applicable to this extraordinary item due to utilization of
net operating losses carried forward.

NOTE 11:  COMMITMENTS AND CONTINGENCIES:

As of December 31, 2002, the Company has committed to purchase equipment
valued at $300,000 for the commercial rollout of VISIONET. The purchase is
conditional upon completion of successful trial of the equipment by the Company.
The Company has returned this equipment to the vendor in 2002 after trial
results showed that the equipment is not able to perform to the standard
expected by the Company. As of December 31, 2002, the vendor has not proposed to
the Company any type of replacement equipment.

On November 28, 2001, the Company signed an agreement to purchase office
space in Australia for $1.8 million Australian dollars (approximately $1,017,000
USD at December 31, 2002). The Company intends to lease the space for rental
until it finalizes its plan to relocate its Asian headquarters to Australia.
Pursuant to the terms of the agreement, the Company has paid a sum of $5,200 as
deposit for the above property. The purchase is still pending as the property is
subject to an existing lease. The Company has requested the seller to deliver
vacant possession, and negotiations are ongoing between the seller and the
lessee for the existing lease agreement to be terminated.

In January 2002, the Company signed an agreement to purchase approximately
$19 million of equipment over the next five years. These equipment purchases are
subject to inspection and acceptance by the Company depending upon certain
performance standards being satisfactorily met. As of December 31, 2002, the
Company has suspended the agreement until the vendor has rectified performance
problems discovered by the Company during the trial of this equipment.

On September 27, 2002, the Company entered into a letter agreement with the
shareholders of Convergent Technologies, Inc. ("CTI"), a privately held company,
to acquire a majority interest in CTI for approximately $5.0 million. The
acquisition is expected to be funded by a combination of cash and issuance of
the Company's preferred stock. The acquisition is subject to completion of due
diligence and execution of a definitive agreement and is expected to close in
the first half of 2003.

On December 4, 2002, the Company announced that its Board of Directors has
approved a stock repurchase program for up to 10 million shares from the present
public float of approximately 42.7 million shares which may be repurchased from
time to time. The Company has until December 2003 to execute this stock
repurchase program. Under the program, the Company can purchase shares of common
stock through open market and/or privately negotiated transactions at prices
deemed appropriate by management. The timing and amount of any repurchase
transaction under this program will depend on market conditions and corporate
and regulatory considerations. As of December 31, 2002, the Company had not
repurchased any of its shares under this program. From January 2003 to March 26,
2003, the Company repurchased a total of 1,050,000 shares of its common stock,
at an average price of $0.028, for a total cash consideration of $29,348. These
shares were returned to treasury and are available for re-issuance at a future
date.

                                      F-20

<PAGE>

               DIGITAL BROADBAND NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

NOTE 12: PENDING LITIGATION:

No legal proceedings of a material nature to which the Company is a party
are pending as of December 31, 2002, and the Company knows of no legal
proceedings of a material nature pending or threatened or judgments entered
against any director or officer of the Company in his/her capacity as such.


NOTE 13: SUBSEQUENT EVENTS:

On January 21, 2003, the Company executed a Reseller Agreement to sell
biometric-based products. The agreement is for an initial period of one year and
will thereafter automatically renewable for a two-year term on each anniversary
date. Under the terms of the agreement, the Company is required to purchase a
minimum of $100,000 of products during 2003.

On January 29, 2003, the Company entered into a one-year non-cancelable
lease agreement for office space in Flemington, New Jersey. The lease requires
the Company to pay rent of $500 per month. This lease will expire in January
2004 and provides for a one-year renewal option.

On January 30, 2003, the Company renewed its lease agreement for office
space in Malaysia. The lease renewal is effective March 2003 and will expire in
February 2004 with a one-year renewal option.

                                      F-21