SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

                                       OR

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

                          COMMISSION FILE NO. 333-3074

                                  NEXLAND, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

               DELAWARE                            37-1356503
               --------                            ----------
     (State or Other Jurisdiction        (I.R.S. Employer Identification Number)
   of Incorporation or Organization)

1101 BRICKELL AVENUE, SUITE 200, NORTH TOWER                 33131
--------------------------------------------                 -----
            MIAMI, FLORIDA
  (Address of Principal Executive Offices)                (Zip Code)

Registrant's telephone number, including                (305) 358-7771
              area code

           Securities registered pursuant to Section 12(g) of the Act:

                    COMMON STOCK, PAR VALUE $0.0001 PER SHARE
                    -----------------------------------------
                                (Title of Class)

      Indicate by check mark whether the  registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the  preceding  12 months,  and (2) has been  subject to such filing
requirements for the past 90 days. Yes X   No__

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

      The   aggregate   market  value  of  the  voting   common  stock  held  by
non-affiliates of the Registrant on March 17, 2003, was $15,322,636 based on the
average bid and asked prices on such date of $0.44.

      The Registrant had  34,824,172  shares of Common Stock,  par value $0.0001
per share, outstanding on March 17, 2003.

<PAGE>

                                     PART I


ITEM 1.  BUSINESS


GENERAL DESCRIPTION OF BUSINESS

      FORWARD-LOOKING  STATEMENTS AND  ASSOCIATED  RISKS.  THIS FILING  CONTAINS
FORWARD-LOOKING STATEMENTS,  INCLUDING STATEMENTS REGARDING, AMONG OTHER THINGS:
(A) OUR  PROJECTED  SALES AND  PROFITABILITY,  (B) OUR  GROWTH  STRATEGIES,  (C)
ANTICIPATED TRENDS IN OUR INDUSTRY,  (D) OUR FUTURE FINANCING PLANS, AND (E) OUR
ANTICIPATED  NEEDS FOR WORKING CAPITAL.  IN ADDITION,  WHEN USED IN THIS FILING,
THE WORDS "BELIEVES," "ANTICIPATES," "INTENDS," "IN ANTICIPATION OF," "EXPECTS,"
AND SIMILAR WORDS ARE INTENDED TO IDENTIFY CERTAIN  FORWARD-LOOKING  STATEMENTS.
THESE  FORWARD-LOOKING  STATEMENTS ARE BASED LARGELY ON OUR EXPECTATIONS AND ARE
SUBJECT  TO A NUMBER OF RISKS AND  UNCERTAINTIES,  MANY OF WHICH ARE  BEYOND OUR
CONTROL.  ACTUAL  RESULTS  COULD DIFFER  MATERIALLY  FROM THESE  FORWARD-LOOKING
STATEMENTS AS A RESULT OF VARIOUS FACTORS,  INCLUDING,  WITHOUT LIMITATION,  THE
RISKS OUTLINED UNDER  "CERTAIN  BUSINESS RISK FACTORS" AND MATTERS  DESCRIBED IN
THIS FILING GENERALLY.  IN LIGHT OF THESE RISKS AND UNCERTAINTIES,  THERE CAN BE
NO ASSURANCE THAT THE FORWARD-LOOKING  STATEMENTS  CONTAINED IN THIS FILING WILL
IN FACT OCCUR.


OUR COMPANY

      We are a Delaware corporation. Our principal executive offices are located
at 1101 Brickell  Avenue,  Suite 200, North Tower,  Miami,  Florida  33131.  Our
telephone   number  is  (305)   358-7771.   The   address  of  our   website  is
www.nexland.com. Information on our website is not part of this filing.


GENERAL

      WindStar  Resources,  Inc., (before the name change to Nexland,  Inc.) was
formed in Arizona on March 22, 1995,  (under the name  Turtleback  Mountain Gold
Co., Inc.) to engage in the business of mineral  exploration,  and if warranted,
development  and  production,  or  the  sale  of  precious  minerals.   WindStar
Resources,  Inc. failed to achieve its goals and business objectives and in 1999
concluded it was no longer  economical to continue as a public gold  exploration
mining company.  Nexland,  Inc. was incorporated in Florida on December 4, 1994,
but was inactive until November 17, 1999 when it was acquired by us. Nexland LP,
a Florida  limited  partnership,  formed on September 25, 1997, was an operating
company until November 15, 1999 when it assigned all of its  partnership  assets
to Nexland, Inc. in exchange for 17,000 of the latter's common shares.

      On November 17, 1999, we acquired Nexland,  Inc. in a reverse  acquisition
transaction  resulting  in the change of our  business  from  mining to computer
security equipment. We changed our name to "Nexland,  Inc." on December 8, 1999.
As WindStar Resources,  Inc., we never owned an operating mine and, prior to the
Nexland, Inc.  acquisition,  had no other  revenue-producing  mining activities.
Since our merger  with  Nexland,  Inc.,  we have  become a supplier  of hardware
routers and  Internet  firewall  devices and have shed all  connection  with the
mining business.

      Our  Internet  Sharing Box product line allows  multiple  users on a local
area  network  to  simultaneously  share  the  same  Internet  connection  while
optimizing each user's access speed, as well as providing firewall security. Our
Internet  Sharing Box product  line is  intended to support  multiple  operating
systems, including Windows, Macintosh, UNIX and Linux. Our products are designed
to be compatible with existing  telephone and data connection  lines, as well as
integrated services digital networks and emerging access  technologies,  such as
digital  subscriber lines and cable modem  connections.  An integrated  services
digital network is an  international  telecommunications  standard for providing
digital service from a customer's  premises to a dial-up  telephone  network.  A
digital  subscriber  line is a type of  technology  that  increases  the digital
capacity of ordinary  telephone lines into a home or office.  Digital subscriber
line speeds are tied to the distance between a customer and a telephone company.
Our   products   enable   multiple   users  to  securely   access  the  Internet
simultaneously through regular telephone lines, slow speed data connections,  or
high-speed  digital  connections.  We  primarily  market  and sell our  products
through North American based Internet service providers,  value-added resellers,
telephone  companies,  as well as  customize  our  products  for resale by other
Internet security  companies and sales to direct end-users.  During fiscal years
2002 and 2001, we made repeat sales to over 250 and 100 customers, respectively.

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<PAGE>


EXPLANATION AND BACKGROUND OF THE INTERNET

      The Internet is a global  collection of  interconnected  computer networks
that transmit any  combination of voice,  video and/or data between  users.  The
Internet allows commercial organizations,  educational institutions,  government
agencies,  and  individuals  to  electronically  communicate,  access  and share
information,  and conduct business. As businesses have begun to use e-mail, file
transfer and area  networks,  commercial  usage has become a major  component of
Internet traffic.

      In the  mid-1990s,  Internet  service  providers  began to  offer  access,
e-mail, customized content, and other specialized services and products aimed at
allowing  both  commercial  and  residential  customers  to obtain and  transmit
information, as well as access other available resources on the Internet.

      The emergence of the Web, which is the graphical,  multimedia  environment
of the Internet,  has resulted in the  development of the Internet as a new mass
communication  medium. The Internet has experienced rapid growth in recent years
as evidenced by the volume of Internet traffic and the increase in the number of
Internet users, Web sites and Internet-based  applications.  In addition,  there
has been a proliferation of Internet-based services, including:

      o     chat rooms;

      o     online magazines;

      o     news feeds;

      o     interactive games;

      o     educational and entertainment information;

      o     development of online communities; and

      o     virtual private networking.

      This rapid growth is expected to continue as businesses  increasingly  use
the Internet to access and share information and to interact with a large number
of geographically  dispersed  consumers and business partners.  Furthermore,  an
Internet-based  economy is emerging as more  businesses use the Internet to sell
products and services, implement electronic commerce initiatives and utilize new
generations of Internet-enabled business applications.

      In our opinion,  participation in this emerging Internet-based economy and
realization of the benefits and efficiencies facilitated by new Internet-enabled
business applications are becoming increasingly important for the small business
office market, as well as the Internet service providers and telephone companies
which  provide  Internet  service  to them.  The small  business  office  market
includes  small  businesses,  home  offices and remote  offices.  We believe the
Internet  allows these  businesses to communicate  more  effectively  with their
suppliers and customers and to access and share  critical  business  information
both  internally  and  externally.  Overall,  we believe  the  Internet  and the
business  applications enabled by the Internet present tremendous  opportunities
for businesses to improve communications,  collaborate with partners,  suppliers
and  customers,   perform  important  processes  online  and  realize  cost  and
operational efficiencies that may position them to compete more effectively with
organizations that have greater resources and market presence.


INTERNET ACCESS TECHNOLOGIES FACILITATE NEW APPLICATIONS

      Analog dial-up  modems,  which utilize  regular  telephone  lines and data
connections,  currently  represent the most widely  utilized method of accessing
the  Internet.  While many markets  worldwide  will  continue to depend on these
slower speed Internet access technologies,  new high-speed and high transmission
capacity  Internet access  technologies,  such as digital  subscriber  lines and
cable modems, have emerged in recent years.


THE BROADBAND MARKET - HIGH-SPEED ACCESS

      Integrated services digital networks are rapidly becoming available in the
United States as a method to transmit more data over existing  telephone  lines.
Integrated services digital networks are, in most markets,  priced comparably to

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<PAGE>


standard  analog  telephone  circuits.  These networks  transmit data at greater
speeds than the analog dial-up modems. However, new emerging access technologies
offer even greater transmission capacity,  provide much faster access speeds and
enable a variety of new data intensive,  multimedia and graphical  applications.
These broadband markets include:

      o    Digital  Subscriber  Line,  which is a method  for  moving  data over
           existing  copper  telephone  lines,  but at a much faster rate than a
           regular telephone connection;

      o    Interactive  Cable,  which  allows  for  communication  across  cable
           infrastructure;

      o    cable modems and cable modem termination centers; and

      o    wireless transmissions, which are movements of packets of information
           over airwaves.

      As these access  technologies become more affordable and widely available,
we believe they will present increasingly attractive alternatives for satisfying
the Internet access requirements of small business offices.

      In  addition,  we  believe  the small  business  office  environment  will
experience  an even  greater  need to access  the  Internet  via these  emerging
technologies  as new  generations  of business  applications  emerge that larger
competitors  will be able to  access  through  relatively  expensive,  dedicated
high-speed  leased  lines.  Furthermore,  the higher cost of digital  subscriber
lines and cable modem access  technologies  compared to analog technologies will
increase the need of small business  offices to utilize shared  Internet  access
solutions that enable costs to be allocated across a greater number of users.


TODAY'S SMALL BUSINESS OFFICE INTERNET ACCESS ENVIRONMENT

      Worldwide,  there is an increasing  demand for broadband  access services.
The  Internet is  becoming  increasingly  popular to  consumers  for  conducting
business  and  personal  pursuits.  Consequently,  these  consumers  are seeking
high-speed, low-cost solutions that enable them to benefit from advances in data
transfer speed.

      o    SHARED  ACCESS.  Many  small  business  offices  have  addressed  the
           Internet  access  problem by installing a single  dedicated  computer
           that is connected to the  Internet via a modem,  an analog  telephone
           line and a single Internet service account shared by all users in the
           office.  This approach is  inefficient  because it requires  users to
           wait in line  until  the  Internet  terminal  becomes  available.  In
           addition,  productivity  is often  reduced  since  many users fail to
           access the Internet  because it is not  conveniently  accessible from
           their individual workplaces.  As an alternative,  some small business
           offices have added additional modems, analog phone lines and Internet
           service  accounts  for  each  employee   requiring  Internet  access.
           However,  maintaining  separate Internet connections for each user is
           costly and difficult to manage. Moreover,  neither of these solutions
           enables shared Internet access among multiple users.

      o    EASE OF  INSTALLATION  AND USE. In our opinion,  most small  business
           offices lack in-house information  technology  personnel,  as well as
           sufficient  resources to hire outside  consultants  to implement  and
           maintain complex Internet access solutions. Therefore, small business
           offices require  Internet access  solutions that are easy to install,
           use, maintain and upgrade.

      o    AFFORDABILITY.  Small business offices are often subject to budgetary
           constraints.  Therefore,  the  networking  solutions  that  have been
           widely adopted by larger  organizations to accommodate  shared access
           often are prohibitively expensive for small business offices.

      o    EXPANDABILITY  AND  COMPATIBILITY.  We believe small business offices
           need  Internet  access  solutions  that  accommodate   their  current
           requirements and that can be expanded to accommodate additional users
           as their  businesses  grow. In addition,  many small business offices
           seek  solutions  that meet  these  needs  without  having to  replace
           existing systems,  invest  significant  capital in upgrades or employ
           in-house  information  technology  personnel.   Many  small  business
           offices  have  already  made  significant   investments  in  computer
           hardware,  modems and software,  and utilize widely  available analog
           access  technologies.  As a  result,  these  small  business  offices
           require  Internet access  solutions that are compatible with existing
           hardware and software and flexible  enough to support  analog  access
           technologies, as well as emerging high-speed access technologies.

                                       4
<PAGE>

      In order to more fully  participate  in the evolving uses of the Internet,
we believe the small business office market will require easy-to-use, affordable
and expandable products that enable shared Internet access by multiple users and
that support a full range of existing and emerging Internet-enabled applications
and services.


THE BENEFITS OUR PRODUCTS ARE DESIGNED TO PROVIDE

      Our  products  are designed to provide a secure,  shared  Internet  access
solution. Our solution allows multiple users in an office,  workplace or home to
simultaneously share the same Internet connection.  Our products are designed to
support multiple operating systems such as Windows,  Macintosh,  UNIX and Linux,
while  providing  network  security  during the delivery and receipt of Internet
data packets.

      Our products are designed to be compatible with traditional  telephone and
data   connections   that  operate  at  slow  speeds,   as  well  as  high-speed
technologies, including integrated services digital networks, digital subscriber
lines and cable modems. In addition,  our products extend the benefits of analog
technology  by enabling  multiple  users to access the  Internet  simultaneously
through  regular  telephone lines and analog modems at up to 30 times the access
speed of a single  analog  connection.  Our  products  offer the  following  key
benefits:

      o    EFFICIENT  SHARED INTERNET  ACCESS.  The Internet Sharing Box product
           line enables an entire office to share  information,  use e-mail, and
           access the Internet  independent of the access  technology  utilized.
           Multiple  users in an office can share a single  Internet  connection
           and Internet service provider account.

      o    EASE OF  INSTALLATION  AND USE. We deliver a shared  Internet  access
           solution.  To facilitate easy installation,  our Internet Sharing Box
           product package contains step-by-step  installation  instructions and
           easy-to-follow  diagrams and  illustrations  for a variety of network
           environments.   Users  can  determine  whether  their  computers  are
           appropriately  configured to connect to our product.  Our  integrated
           firmware, which is a category of memory chips that hold their content
           without  electrical  power  and is  sometimes  referred  to as  "hard
           software",  provides a single  screen  configuration  to connect  the
           entire office to the Internet. Our products work within most existing
           environments and operating systems, such as Windows,  Macintosh, UNIX
           and Linux.

      o    HIGH-SPEED ACCESS. Our Internet Sharing Box product line supports all
           major  Internet  access  technologies  used  by  offices,   including
           traditional  telephone  and  data  connections,  integrated  services
           digital  networks,  digital  subscriber lines, and cable and wireless
           connections.

      o    LOW COST OF  OWNERSHIP.  Our  Internet  Sharing Box  product  line is
           designed to minimize  installation,  maintenance  and Internet access
           expenditures  by  enabling  multiple  users in an  office  to share a
           single Internet  connection and Internet service provider account. In
           addition,  the ease of installation  and use of the Internet  Sharing
           Box product  line  enables  small  business  offices to avoid  hiring
           in-house  information  technology  personnel that might  otherwise be
           required to  implement  and  maintain an  effective  Internet  access
           solution.

      o    EXPANDABILITY  AND  COMPATIBILITY.  Our Internet  Sharing Box product
           line is designed to be compatible  with most  widely-used  computers,
           software, modems, and terminal adapters such as those manufactured by
           3Com,  Cisco and  Alcatel.  This  broad  compatibility  enables  most
           offices to leverage their prior  technology  investments by utilizing
           our  products  with  hardware  and  software  that have  already been
           installed.  In  addition,  our  product  line  provides an office the
           flexibility to expand Internet access as their needs require.

      o    FIREWALL  PROTECTION.  Our  Internet  Sharing  Box  products  provide
           firewall  security  among  shared  users.  A firewall is a method for
           keeping a network  secure.  Our  products  are also  designed to keep
           internal network traffic secure.

      o    VIRTUAL PRIVATE NETWORK.  A virtual private network usually refers to
           a network in which some of the parts are  connected  using the public
           Internet,  but data is transmitted in encrypted form, thus making the
           network "virtually private." Our ISB Pro Series product supports this
           function.

                                   5
<PAGE>


A DESCRIPTION OF OUR PRODUCTS

      We design and sell the Internet  Sharing Box ("ISB") product line. The ISB
products include the ISB SOHO, ISB Pro100,  ISB Pro400,  ISB Pro800,  ISB Pro800
Turbo and ISB Wave Base. The ISB products are hardware routers that allow users,
connected to the Internet, to share their Internet access at the same time using
only one modem, one telephone line or cable connection,  and one Internet access
account.  In addition,  the ISB series of products are a  "firewall,"  providing
network security.  The ISB products are compatible with personal computers,  PC,
Macintosh,  UNIX, NT, Linux  computers and any computer that uses a transmission
control protocol/Internet protocol ("TCP/IP") browser interface.

      All of the ISB products allow simultaneous and independent Internet access
for all users on a network,  as well as firewall security  protection to prevent
any unwanted access to the local network. All ISB products allow up to 253 users
to share one Internet connection.

      o    ISB SOHO -  Designed  specifically  for  shared  Internet  access and
           Internet  Security for the home or small  office  user.  The ISB SOHO
           features  simple  installation  and  configuration.  It connects to a
           cable or digital subscriber line modem through an ethernet connection
           to accommodate high speed data transmission.  The ISB SOHO has a high
           speed 4 port 10/100 switch and is great for Internet games.

      o    ISB PRO100 - Designed  specifically  for shared  Internet  access and
           Internet  Security.  The ISB Pro100 features simple  installation and
           configuration.  The  ISB  Pro100  connects  to  a  cable  or  digital
           subscriber  line modem through an ethernet  connection to accommodate
           high  speed  data  transmission  and has a high  speed 1 port  10/100
           switch with Duplex, over 8MB of Bi-Directional  throughput to MAX out
           the connection,  Multi Session Ipsec,  Multi Session PPPoE and a CAT5
           Cable included.

      o    ISB PRO400 - Designed  specifically  for shared  Internet  access and
           Internet  Security,  the ISB Pro400 features simple  installation and
           configuration.  The  ISB  Pro400  connects  to  a  cable  or  digital
           subscriber  line modem through an ethernet  connection to accommodate
           high  speed  data  transmission  and has a high  speed 4 port  10/100
           switch with Duplex, over 8MB of Bi-Directional  throughput to MAX out
           the connection,  Multi Session IPsec,  Multi Session PPPoE and a CAT5
           Cable included.

      o    ISB PRO800 - Designed  specifically  for shared  Internet  access and
           Internet  Security,  the ISB Pro800 features simple  installation and
           configuration  and  connects  to a cable or digital  subscriber  line
           modem through an ethernet  connection to accommodate  high speed data
           transmission.  The ISB Pro800 has a high speed 8 port  10/100  switch
           with Duplex,  over 8MB of  Bi-Directional  throughput  to MAX out the
           connection, Multi Session IPsec, Multi Session PPPoE and a CAT5 Cable
           included.

      o    ISB PRO800 TURBO - Designed  specifically  for shared Internet access
           and  Internet   Security  the  ISB  Pro800  Turbo   features   simple
           installation  and  configuration.  The ISB Pro800 Turbo connects to a
           cable or digital subscriber line modem through an ethernet connection
           to accommodate  high speed data  transmission  and has a high speed 8
           port  10/100  switch  with  Duplex,  2 modem  ports,  load  balance 2
           broadband  connections,  double redundant connection backup, over 8MB
           of Bi-Directional throughput to MAX out the connection, Multi Session
           IPsec, Multi Session PPPoE and a CAT5 Cable included. This product is
           built for more demanding users.

      o    ISB WAVE BASE - Designed  specifically for shared Internet access and
           Internet Security the ISB Wave Base features simple  installation and
           configuration and is an 802.11B (11MB) wireless Access Point. The ISB
           Wave Base has a high speed 4 port 10/100 switch with Duplex, over 8MB
           of Bi-Directional throughput to MAX out the connection, Multi Session
           IPsec, Multi Session PPPoE and a CAT5 Cable included. This product is
           designed for notebook users.

      We  produce  the  following  products   exclusively  for  Symantec
      Corporation:

      o    SYMANTEC  FIREWALL  VPN 100  AND  VPN  200.  Designed  as  integrated
           security  and  networking  devices  that  provide  easy,  secure  and
           cost-effective  Internet  connectivity between locations.  With their
           all-in-one  functionality,  small  businesses  and remote offices can
           create a high-speed  local  network that  enables  secure  access and
           interaction via the Internet with remote locations, business partners
           and  corporate  networks.  The  appliance  can be installed  quickly,
           offering  offices  with up to 30  employees  a turnkey  solution  for
           securing  outbound  and  inbound  web,  e-mail and FTP  traffic.  For
           larger, more dispersed organizations, Nexland's Symantec Firewall VPN


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<PAGE>

           products  offer  an  affordable  and  easy  to  manage  solution  for
           extending firewall protection and IPSec gateway-to-gateway VPN access
           to   satellite   offices   and   branch   locations   and  a   remote
           client-to-gateway IPSec VPN for travel users.


RECENT DEVELOPMENTS

      On February 13, 2003, we entered into a non-binding letter of intent to be
acquired by Symantec  Corp., a leader in internet  security,  for $21,700,000 in
cash.  Completion of the proposed transaction is subject to numerous conditions,
including  Symantec's due diligence  investigation,  approval by both companies'
boards of  directors,  negotiation  and  execution of a  definitive  acquisition
agreement,  and approval of the transaction by our  stockholders.  We have had a
joint development  relationship  with Symantec for the past two years.  Symantec
currently licenses our technology for use in the Symantec Firewall/VPN Appliance
series,  that combines  Firewall,  VPN,  networking and other  capabilities in a
single unit to meet the unique needs of remote offices, branch offices and small
businesses.


BUSINESS STRATEGY

      Our mission is to become a  recognized  provider  of Internet  sharing and
firewall security devices. We believe that in order to accomplish our mission we
need to be successful in completing the following tasks:

      o    SATISFY  CUSTOMERS.  We believe  that the Internet  access  solutions
           currently offered by most personal  computing and networking  vendors
           continue to be  technically  complex and generally  unable to satisfy
           the unique requirements of the work-at-home  employee,  telecommuter,
           or home office user.  Therefore,  we believe the opportunity in these
           markets is significant and we intend to continue to focus our product
           development efforts,  distribution strategies and support services to
           satisfy the specific requirements of these market segments.

      o    CONTINUING  TO  INTEGRATE  EMERGING  ACCESS   TECHNOLOGIES  INTO  OUR
           PRODUCTS.  Our products  are designed to support most major  Internet
           access  technologies  used by  consumers.  We believe our strategy of
           developing  products  that are capable of being  expanded will enable
           our current and future  customers to benefit from the  deployment  of
           emerging,  high-speed transmission technologies.  Further, we believe
           emerging,  high-speed  transmission  technologies  will  increase the
           demand in offices for shared Internet access solutions. Therefore, we
           intend  to   support   the   commercialization   of  new   high-speed
           transmission  technologies by pursuing partnering  relationships with
           high-speed  transmission  technology  providers  while  continuing to
           pursue the existing  market for our  traditional  telephone  and data
           connection products.

      o    DEVELOP  STRATEGIC  ALLIANCES.  In order to be  apprised  of industry
           trends,  to  be  compatible  with  emerging  technologies  and  to be
           recognized as a  technologically  savvy  company,  we have  developed
           relationships  with various industry leaders,  including Bell Canada,
           Alaska Phone Company, Symantec and Motorola.


SALES AND MARKETING OVERVIEW

      Because of our limited  financial  resources we have not had the resources
to fully  implement  a  marketing  and sales  force.  In order to  increase  our
revenues,  we will have to develop a marketing  and sales  force with  technical
expertise and marketing  capability.  We anticipate  that our future sales staff
will be  employed  both  on an  independent  contractor  basis  and as  in-house
employees.

      We believe that the principal competitive factors for companies seeking to
use  our  type  of  products  are  product  design,  functionality,   price  and
reliability, as well as customer service.

      We are  developing our customer base through an active sales and marketing
campaign,  primarily  centered on building  relationships  with Internet service
providers and telephone companies.  At present, we are concentrating our efforts
in North America.  Unlike many of our  competitors who target  distributors  and
retailers,  our strategy is to target Internet  service  providers and telephone
companies,  as well as other  Internet  security  companies.  We  believe  these
entities can target our ultimate  consumer,  the small business  office and home
user. We believe that this approach  will be more  efficient and less  expensive
than if we only use direct marketing or market our products through  value-added
resellers and distributors.

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<PAGE>

      o    SALES  STRATEGY.  Currently,  we  primarily  rely on direct  sales to
           generate new  customers and to maintain  relationships  with existing
           customers. We have five sales representatives.

      o    MARKETING  STRATEGY.  We plan  to  utilize  a  variety  of  marketing
           techniques to generate awareness and inquiries.

      o    MAGAZINE/PROFESSIONAL  JOURNAL/NEWSPAPER  ADVERTISEMENT.  We  plan to
           advertise  in  major   telecommunications   and  Internet   magazines
           throughout  the country  using  postcard  inserts  and other  mail-in
           techniques to foster inquiries and to solicit sales.

      o    WEBSITE. We have a website  (www.Nexland.com) where information about
           our Company and our services can be obtained. Users can also e-mail a
           request  for  contact  by  one  of  our  sales   representatives   at
           Sales@Nexland.com.  Interested  parties  can  also  call a  toll-free
           number (888-NEX-5264) and request informational literature.

      o    CATALOG  ADVERTISING.  We currently  utilize catalog  advertising and
           sales, such as TigerDirect, ProVantage and PC Mall.

      o    EXPANSION  STRATEGY:   INTRODUCE  NEW  PRODUCTS  AND  SERVICES.   Our
           objective  is to become a  recognized  provider  of  secured,  shared
           Internet access. We realize that in order to achieve this, we must be
           innovative in our product design and functionality.  In addition,  we
           must continue to establish strategic relationships.


COMPETITION

      We  compete  in  several  different  markets,  each  having its own growth
potential, expectations, customer base, and competitors. Some of our competitors
are affiliated  with major  international  companies and, as a result,  are well
financed and present a formidable  challenge.  We cannot be certain that we will
be able to compete with significant pricing pressure by our competitors.

      Our  current  and  potential  competitors  offer a variety of  competitive
products,  including shared Internet access products offered by Linksys, Netopia
and SMC and networking  equipment  products offered by Cisco,  3Com,  Nortel and
Intel.

      Many of our  competitors  are  substantially  larger  than we are and have
significantly   greater   financial,   sales  and  marketing,   technical,   and
manufacturing  resources,  as well as more  established  distribution  channels.
These  competitors may be able to respond more rapidly to emerging  technologies
and changes in customer requirements, as well as devote greater resources to the
development,  promotion  and sale of their  products.  Furthermore,  some of our
competitors   may  make   strategic   acquisitions   or  establish   cooperative
relationships  among  themselves or with third parties to increase their ability
to gain market share.  Our  competitors may enter our existing or future markets
with  solutions  that may be less  expensive,  provide  higher  performance  and
additional  features or be  introduced  earlier  than our  solutions.  Given the
market opportunity in the shared Internet access market, we also expect that new
competitors may enter our market with better products and  technologies.  If any
technology is more reliable, faster, less expensive or has other advantages over
our  technology,  then the demand for our products could  decrease,  which could
seriously harm our business.

      We expect our  competitors to continue to improve the performance of their
current  products and to introduce  new  products and  technologies  as industry
standards and customer  requirements evolve. These new products and technologies
may supplant or provide lower cost alternatives to our products.  Successful new
product  introductions or enhancements by our competitors could reduce the sales
or market  acceptance  of our products and  services,  perpetuate  intense price
competition or make our products obsolete. To be competitive,  we must invest in
research and development,  sales and marketing,  and customer support. We cannot
be sure that we will have sufficient  resources to make such investments or that
we will be able to make the technological  advances necessary to be competitive.
As a result, we may not be able to compete  effectively against our competitors.
Our failure to maintain and enhance our  competitive  position within the market
may seriously  harm our business.  Increased  competition is likely to result in
price reductions,  reduced gross margins, and shorter sales cycles, any of which
would seriously harm our business.  We cannot be certain that we will be able to
compete  successfully  against current or future competitors or that competitive
pressures will not seriously harm our business.

      On November 17, 1999, we entered into a Mutual  Non-Competition  Agreement
with Nexland, S.A. a French corporation, owned by several principal stockholders
of our Company. The agreement provides for the following:

                                       8
<PAGE>

      o    a ten-year non-competition period;

      o    Nexland France shall have exclusive sales rights to Europe;

      o    we shall  have  exclusive  sales  and  marketing  rights  to North
           America, South America, Central America and the Caribbean;

      o    if either party sells into the other's territory, the sales contracts
           shall be assigned to the other party,  and the assignee shall pay the
           assignor 20% of the gross value of the contract.

      On  September  20, 2000,  Nexland S.A. and we signed a ten-year  licensing
agreement  whereby we were granted the right to use the "Nexland" names,  logos,
marketing techniques, trade secrets and know-how for sale of products to Europe,
Africa  and  the  Middle  East  whether  or  not  patented  or  patent  pending,
trademarks, trade names, logos, marketing techniques, trade secrets and know-how
for sale of products to the rest of the world,  excluding Asia, which is open to
both companies.

      On November 16, 2001,  Nexland S.A. waived certain  provisions in the 2000
licensing  agreement  with respect to a large  customer.  We are  authorized  to
design and manufacture  certain products for purchase,  distribution and sale by
this certain customer anywhere in the world.

      On November 6, 2002, we entered into an Irrevocable  Option Agreement with
Nexland,  S.A., whereby Nexland,  S.A. sold to our company an irrevocable option
to purchase all of the tangible and intangible assets of Nexland,  S.A., as well
as all other  assets  that are owned by  Nexland,  S.A.  and that are  needed or
useful in connection  with the business of Nexland,  S.A. The option cost 25,000
shares of common  stock of  Nexland,  Inc.  Pursuant to the  Irrevocable  Option
Agreement,  we granted  Nexland,  S.A. a limited license to sell any products of
Nexland,  Inc.  in Europe and Asia.  In the event we exercise  our  option,  the
parties agreed that this limited license  immediately  terminates.  In the event
that we elect to exercise our option,  the exercise price is 1,475,000 shares of
our common stock.


INTELLECTUAL PROPERTY

      We rely  and  intend  to  rely  on a  combination  of  patent,  copyright,
trademark  and trade secret laws and  restrictions  on disclosure to protect our
intellectual  property  rights.  We have one U.S.  patent  pending  relating  to
technology  incorporated in our Internet Sharing Box product line, consisting of
an algorithm that allows the virtual private network encrypted  protocol to pass
through our network address translation routers, thus securing the communication
from unintended third parties. In addition,  we design and implement proprietary
coded  "firmware"  which is designed to make the  Internet  Sharing Box products
function.

      We  enter  into   confidentiality   agreements   with  our  employees  and
consultants,  and control access to and  distribution of our  documentation  and
other  proprietary  information.  We  cannot  assure  you that  others  will not
independently  develop similar or competing  technology.  Despite our efforts to
protect  our  proprietary  rights,  unauthorized  parties may attempt to copy or
otherwise  obtain and use our products or technology.  We cannot assure you that
these  precautions  will  prevent   misappropriation   or  infringement  of  our
intellectual property. Monitoring unauthorized use of our products is difficult,
and  we  cannot   assure  you  that  the  steps  we  have  taken  will   prevent
misappropriation of our technology,  particularly in foreign countries where the
laws may not protect our proprietary rights as fully as in the United States.

      Our  industry  is  characterized  by the  existence  of a large  number of
patents and  frequent  claims and  litigation  regarding  such patents and other
intellectual  property  rights.  In  particular,  leading  companies in the data
communication  and networking  markets have  extensive  patent  portfolios  with
respect to modem and networking technology.  From time to time, these companies,
as well as others,  have asserted and may assert  exclusive  patent,  copyright,
trademark and other  intellectual  property rights to  technologies  and related
standards  that are  important  to us. We  expect  that we may  increasingly  be
subject to infringement  claims as the number of products and competitors in the
small business office market for shared Internet access  solutions  increase and
the functionality of products overlaps.  In addition,  we cannot assure you that
third parties will not assert additional claims or initiate  litigation  against
us or our manufacturers,  suppliers or customers alleging  infringement of their
proprietary  rights with  respect to our existing or future  products.  Any such
claims,  with or  without  merit,  could be  time-consuming,  result  in  costly
litigation  and divert the attention of technical and management  personnel,  or
require  us to  develop  non-infringing  technology  or enter  into  royalty  or
licensing agreements. Such royalty or licensing agreements, if required, may not
be available on acceptable  terms, if at all. In the event of a successful claim
of  infringement  and  our  failure  or  inability  to  develop   non-infringing
technology or license the  proprietary  rights on a timely basis,  our business,
operating  results  and  financial  condition  could  be  materially   adversely
affected.

                                       9
<PAGE>

EMPLOYEES

      As of March 18, 2003, we employed twenty-five persons in Miami and five in
Canada,  including  nine in  operations  and  administration,  one in marketing,
eleven in research and development and four in customer support.  We also employ
five commissioned and salaried sales  representatives.  None of our employees is
represented by a labor union and we have  experienced no work stoppages to date.
We believe our employee relations are good.


CERTAIN BUSINESS RISK FACTORS

      We are subject to various risks which may have a material  adverse  effect
on our business,  financial condition and results of operations,  and may result
in a decline in our stock price. Certain risks are discussed below:


WE HAVE BEEN AND  CONTINUE  TO BE SUBJECT TO A WORKING  CAPITAL  DEFICIT
AND ACCUMULATED DEFICIT

      We had a working  capital  deficit of $0.5 million and $1.3 million and at
December 31, 2002 and 2001, respectively.  We had an accumulated deficit of $4.5
million  and $4.9  million at  December  31,  2002 and 2001,  respectively.  Our
ability to obtain additional funding will determine our ability to continue as a
going concern.  Accordingly,  we may experience  significant  liquidity and cash
flow  problems if we are not able to raise  additional  capital as needed and on
acceptable  terms.  No  assurances  can be given that we will be  successful  in
reaching or maintaining profitable operations.


WE  HAVE  BEEN  THE  SUBJECT  OF  A  GOING  CONCERN   OPINION  FROM  OUR
INDEPENDENT AUDITORS

      Our independent auditors have added explanatory  paragraphs to their audit
opinions issued in connection with the 2002 and 2001 financial  statements which
states that our Company is dependent on outside  financing and has had losses in
prior  years that raise  substantial  doubt  about our  ability to continue as a
going  concern.  Our financial  statements do not include any  adjustments  that
might result from the outcome of this uncertainty.


WE HAVE HISTORICALLY LOST MONEY AND LOSSES MAY CONTINUE IN THE FUTURE

      We have  historically  lost  money in  prior  years.  For the  year  ended
December  31,  2002,  we had net  income  of $0.3  million.  For the year  ended
December  31, 2001,  we sustained  losses of $1.67  million.  Future  losses are
likely to occur.  Our  independent  auditors have noted that our Company may not
have  significant cash or other material assets to cover its operating costs and
to allow it to continue  as a going  concern.  Our ability to obtain  additional
funding will determine our ability to continue as a going concern.  Accordingly,
we may  experience  significant  liquidity  and cash flow problems if we are not
able  to  raise  additional  capital  as  needed  and on  acceptable  terms.  No
assurances  can be given that we will be successful  in reaching or  maintaining
profitable operations.


OUR  COMMON  STOCK MAY BE  AFFECTED  BY LIMITED  TRADING  VOLUME AND MAY
FLUCTUATE SIGNIFICANTLY

      There has been a limited  public market for our common stock and there can
be no assurance that an active trading market for our common stock will develop.
As a result,  this could adversely affect our shareholders'  ability to sell our
common  stock in short time  periods,  or possibly at all.  Our common stock has
experienced,  and is likely to experience in the future,  significant  price and
volume fluctuations, which could adversely affect the market price of our common
stock without regard to our operating performance.  In addition, we believe that
factors such as quarterly  fluctuations in our financial results,  announcements
by our  competitors  and changes in the overall  economy or the condition of the
financial  markets  could  cause  the  price of our  common  stock to  fluctuate
substantially.


WE HAVE HAD A HISTORY OF A LIMITED CUSTOMER BASE AND THIS MAY CONTINUE

      At present,  our customer  base  consists  primarily  of Internet  service
providers,  telephone  companies,  and  value-added  resellers.  Our  ability to
operate depends on increasing our customer base and achieving  sufficient  gross
profit  margins.  We  cannot  assure  you that we will be able to  increase  our
customer base or to operate  profitably.  If any of our major  customers stop or
delay their purchases of our products,  our revenue and  profitability  would be
adversely  affected.  We anticipate that sales of our products to relatively few
customers will continue to account for a significant  portion of our revenue. In
2002,  sales to 10 customers  accounted  for 78% of our revenue,  while in 2001,
sales to 10  customers  accounted  for 48% of our  revenue.  If these  customers
cancel or delay their purchase orders,  our revenue may decline and the price of
our common stock may fall. We cannot assure you that our current  customers will
continue  to place  orders  with us,  that  orders by  existing  customers  will
continue  at the  levels of  previous  periods or that we will be able to obtain

                                       10
<PAGE>

orders from new customers.  Although our financial  performance depends on large
orders  from  a few  key  customers  and  resellers,  we  do  not  have  binding
commitments from any of them.


WE MAY BE HARMED BY IMPORT RESTRICTIONS

      Our imported  materials are subject to certain quota restrictions and U.S.
customs  duties,  which are a material part of our cost of goods.  A decrease in
quota  restrictions  or an increase in customs duties could harm our business by
making needed materials scarce or by increasing the cost of such materials.


WE HAVE A  SUBSTANTIAL  AMOUNT OF STOCK THAT WILL BECOME  AVAILABLE  FOR
RESALE  UNDER RULE 144,  WHICH MAY HAVE AN ADVERSE  EFFECT ON THE MARKET
AND OUR ABILITY TO OBTAIN EQUITY FINANCING

      As of March 18, 2003, we have issued and outstanding  34,824,172 shares of
common stock of which 27,548,960 shares are "restricted securities" as that term
is defined under Rule 144 promulgated  under the Securities Act. Future sales of
the restricted shares may be made under Rule 144. Such sales may have an adverse
effect on the then prevailing market price of the common stock, adversely affect
our ability to obtain future financing in the capital markets,  and may create a
potential market overhang.


WE COULD FAIL TO ATTRACT OR RETAIN KEY PERSONNEL

      Our success largely depends on the efforts and abilities of key executives
including  Gregory S. Levine,  our President  and a Director of our Company,  I.
Daniel  Sultan,  CTO and Martin  Dell'Oca,  our Chief  Financial  Officer  and a
Director of our  Company.  The loss of the services of any of these people could
materially  harm our business  because of the cost and time necessary to replace
and train such  personnel.  Such a loss would also divert  management  attention
away from operational  issues.  We have entered into employment  agreements with
Mr.  Levine,  Mr.  Sultan and Mr.  Dell'Oca,  respectively.  We do not  maintain
key-man life insurance policies on any of these people.

                                       11
<PAGE>

ITEM 2.  PROPERTIES

      In June 2000, we entered into a three-year  lease for our offices  located
at  1101  Brickell  Avenue,  2nd  Floor,  North  Tower,  Miami,  Florida  33131,
consisting  of 7,500 square feet of corporate  office space for $7,333 per month
plus tax for the first  year,  $14,808 for the second and $15,452 for the third.
For accounting purposes, rent expense is recorded on a straight-line basis.

      In October 2001, the lease was amended and the rent expense was reduced to
$10,739 per month plus tax for the  remainder of the second year and $11,206 per
month for the third year of the lease.

      In  September  2002,  the  lease  was  amended  and the rent  expense  was
increased by $1,667 for the remainder of the lease.

      In August 2000,  Nexland  Canada,  our Canadian  wholly-owned  subsidiary,
entered into a one-year lease  (renewed for one  additional  year) for an office
located in Victoria, Canada, consisting of 1,000 square feet of corporate office
space for $1,000 per month plus tax. The lease was renewed  again in August 2002
for two additional years with a six month notice option to cancel the lease.

      We  anticipate  the need to reassess  our  facilities  needs at the end of
their leases and evaluate alternative options.


ITEM 3.  LEGAL PROCEEDINGS

      The officers and  directors of our Company  believe  that,  to the best of
their  knowledge,  neither our Company nor any of its officers and directors are
parties to any legal proceeding or litigation.

      On March  14,  2003,  we were  informed  by Allan M.  Lerner,  our  former
securities  counsel,  that he would  proceed  to file a  complaint  against  our
Company for the unpaid balance of $32,182.68 in fees for  professional  services
previously rendered.  We believe that we have meritorious defenses and intend to
vigorously defend this matter if needed.


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

      None

                                       12
<PAGE>
                                     PART II


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

      Our common stock trades on the  Over-the-Counter  Bulletin Board under the
trading symbol "XLND." There has been trading on our common stock since December
23, 1999.

      The following table sets forth, for each of the fiscal periods  indicated,
the  high  and  low  bid  prices  for  our  common  stock,  as  reported  on the
Over-the-Counter Bulletin Board. These per share quotations reflect inter-dealer
prices  in the  over-the-counter  market  without  real  mark-up,  markdown,  or
commissions and may not necessarily represent actual transactions.

                                                            CALENDAR YEAR 2002
                                                        ----------------------
                                                            HIGH BID   LOW BID
                                                        ------------  --------

            First Quarter (January 2002 - March 2002)        $0.3900   $0.2200
            Second Quarter (April 2002 - June 2002)          $0.2900   $0.0700
            Third Quarter (July 2002 - September 2002)       $0.2500   $0.1000
            Fourth Quarter (October 2002 - December 2002)    $0.2400   $0.0500


                                                            CALENDAR YEAR 2001
                                                        ----------------------
                                                            HIGH BID   LOW BID
                                                        ------------  --------

            First Quarter (January 2001 - March 2001)        $1.7812   $0.1900
            Second Quarter (April 2001 - June 2001)          $0.9000   $0.2700
            Third Quarter (July 2001 - September 2001)       $0.5500   $0.2000
            Fourth Quarter (October 2001 - December 2001)    $0.5500   $0.2200


                                                            CALENDAR YEAR 2000
                                                        ----------------------
                                                            HIGH BID   LOW BID
                                                        ------------  --------

            First Quarter (January 2000 - March 2000)        $7.8750   $3.7500
            Second Quarter (April 2000 - June 2000)          $6.2500   $1.2500
            Third Quarter (July 2000 - September 2000)       $2.3125   $0.6250
            Fourth Quarter (October 2000 - December 2000)    $0.7500   $0.1000


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

      On March 18, 2003, the closing trade price of the common stock as reported
on the  Over-the-Counter  Bulletin Board was $0.44. As of such date,  there were
approximately 402 holders of record of our common stock.


DIVIDENDS

      We have not declared or paid  dividends on our common stock during  fiscal
2002 or 2001 and do not plan to declare  or pay  dividends  on our common  stock
during  fiscal  2003.  Our dividend  practices  are  determined  by our Board of
Directors  and may be changed  from time to time.  We will base any  issuance of
dividends upon our earnings (if any), financial condition, capital requirements,
acquisition  strategies,  and other factors considered important by our Board of
Directors.  Delaware law and our Certificate of Incorporation do not require our
Board of Directors to declare dividends on our common stock. We expect to retain
any earnings  generated by our operations for the  development  and expansion of
our business and do not anticipate  paying any dividends to our stockholders for
the foreseeable future.


RECENT SALES OF UNREGISTERED SECURITIES

      On February  23,  1999,  our Company  issued  2,000 shares of common stock
valued at $0.25 per share  pursuant  to the  exercise of Class A Warrants of our
Company. All of these shares were purchased by unrelated parties.

      On October 28, 1999, our Company issued  29,500,000 shares of common stock
pursuant to the acquisition of Windstar Resources, Inc.

      On November 5, 1999, our Company issued 382,173 shares of common stock for
conversion  of debt to equity.  All of these shares were  purchased by unrelated
parties.

                                       13
<PAGE>

      On March 21, 2000, our Company issued 39,213 shares of common stock valued
at $6.31 per share to Erik Nelson and Fred Schmid in  connection  with a penalty
for the late filing of our Company's Form S-1 Registration Statement.

      On March 21,  2000,  our Company  issued  160,000  shares of common  stock
valued at $1.00 per share to Fred Schmid, our former Chief Executive Officer, in
connection  with the exercise of options of our Company  issued  pursuant to the
acquisition of Windstar Resources, Inc.

      On March 21, 2000,  our Company  issued  15,000  shares of common stock to
Fred Schmid, our former Chief Executive Officer and President. Of this issuance,
5,000  shares were valued at $4.00 per share,  5,000 shares were valued at $3.38
per share, and 5,000 shares were valued at $2.00 per share.

      On May 5, 2000,  our Company  issued  1,170,000  shares of common stock to
Enrique Dillon, our former Chief Executive Officer, valued at $3.38 per share in
consideration  of his  employment.  On July 7,  2000,  Mr.  Dillon  subsequently
forfeited  these shares and was issued  500,000 shares of common stock valued at
$2.25 per share pursuant to a severance agreement with our Company.

      On May 5, 2000,  our Company  issued 200,000 shares of common stock valued
at $2.50  per share to  Martin  Dell'Oca,  our  Chief  Financial  Officer  and a
Director, in consideration of his employment.

      In July,  2000,  our Company issued 6,313 shares of common stock valued at
$1.00 per share pursuant to the exercise of Class A Warrants of our Company. All
of these shares were purchased by unrelated parties.

      In August,  2000,  our Company issued 23,600 shares of common stock valued
at $1.00 per share  pursuant to the exercise of Class A Warrants of our Company.
All of these shares were purchased by unrelated parties.

      In  September,  2000,  our Company  issued  19,359  shares of common stock
valued at $1.00 per share  pursuant  to the  exercise of Class A Warrants of our
Company. All of these shares were purchased by unrelated parties.

      On October 26, 2000,  our Company  issued  196,367  shares of common stock
valued at $1.04 per share to Daniel  Sultan,  a  Director  of our  Company,  for
conversion of debt to equity.

      On October 26, 2000,  our Company  issued  500,000  shares of common stock
valued at $0.0001 per share to Andre Chouraqui for conversion of debt to equity.
On December 21, 2001, Mr. Chouraqui  returned the 500,000 shares of common stock
to our Company.

      Between October 26, 2000 and December 20, 2000, our Company issued 254,741
shares of common stock for cash of  $115,327.  These shares of common stock were
sold at prices  ranging from $0.18 to $1.71 per share.  All of these shares were
purchased by unrelated parties.

      Between  November 29, 2000 and December 9, 2000,  our Company issued 3,083
shares of common  stock  valued at $1.00 per share  pursuant to the  exercise of
Class A Warrants of our Company. All of these shares were purchased by unrelated
parties.

      On March 15, 2001,  our Company  issued 7 shares of common stock valued at
$2.50 per share pursuant to the exercise of Class A Warrants of our Company. All
of these shares were purchased by unrelated parties.

      On March 15,  2001,  our Company  issued  126,000  shares of common  stock
valued at $0.70  pursuant  to a  consulting  service  agreement  with  Yorkville
Advisors LLC.

      On March 19,  2001,  our  Company  issued  convertible  debentures  in the
principal  amount of $255,000.  The  debentures  were to bear interest at 6% per
year and were  convertible  into  shares  of the  Company's  common  stock.  The
convertible debentures were purchased by unrelated parties.

      During  2002,  the  convertible  debentures  in the  principal  amount  of
$255,000 were redeemed for $295,760 plus accrued interest of $16,240.

      On November  6, 2002 our  Company  issued  25,000  shares of common  stock
valued at $0.17 pursuant to an Irrevocable  Option Agreement with Nexland,  S.A.
The Company recorded an expense of $4,250 related to the transaction.

      With respect to the sale of unregistered  securities referenced above, all
transactions  were exempt  from  registration  pursuant  to Section  4(2) of the
Securities Act of 1933 (the "1933 ACT"), and Regulation D promulgated  under the
1933 Act. In each instance,  the purchaser had access to sufficient  information
regarding  our  Company  so as to make an  informed  investment  decision.  More
specifically,  our Company had a reasonable basis to believe that each purchaser
was an  "accredited  investor"  as defined in  Regulation  D of the 1933 Act and
otherwise  had  the  requisite  sophistication  to  make  an  investment  in our
Company's common stock.

                                       14
<PAGE>

ITEM 6.  MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF  FINANCIAL  CONDITION
AND RESULTS OF OPERATIONS

      The  following   information  should  be  read  in  conjunction  with  our
consolidated  financial  statements and the notes thereto appearing elsewhere in
this filing.

      Certain  statements  within this Item and throughout this Annual Report on
Form  10-KSB  and  the  documents   incorporated  herein  are   "forward-looking
statements"  as  described  in  the  "safe  harbor"  provision  of  the  Private
Securities  Litigation Reform Act of 1995. These statements  involve a number of
risks and  uncertainties  and actual results could differ  materially from those
projected.

      Financial  Reporting  Release No. 60, which was  recently  released by the
U.S. Securities and Exchange  Commission,  encourages all companies to include a
discussion of critical accounting policies or methods used in the preparation of
financial statements. Our consolidated financial statements include a summary of
the significant  accounting  policies and methods used in the preparation of our
consolidated financial statements.

      Management  believes the following critical accounting policies affect the
significant  judgments and estimates  used in the  preparation  of the financial
statements.


REVENUE RECOGNITION

      Revenues  are  recognized  at the  time  of  shipment  of  the  respective
merchandise. The Company includes shipping and handling fees billed to customers
as revenues.  Costs of sales includes  freight  expenses.  Products are under an
unconditional  money-back guarantee for the first 30 days after purchase. A five
year warranty covering the repair of the unit is provided on all products.


USE OF ESTIMATES

      Management's discussion and analysis of financial condition and results of
operations is based upon our consolidated financial statements,  which have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States of America. The preparation of these financial statements requires
management to make estimates and judgments  that affect the reported  amounts of
assets,   liabilities,   revenues,  and  expenses,  and  related  disclosure  of
contingent  assets and liabilities.  On an ongoing basis,  management  evaluates
these  estimates,  including  those related to allowances for doubtful  accounts
receivable  and  the  carrying  value  of  inventories  and  long-lived  assets.
Management  bases these estimates on historical  experience and on various other
assumptions  that are believed to be  reasonable  under the  circumstances,  the
results of which form the basis of making  judgments about the carrying value of
assets and liabilities that are not readily apparent from other sources.  Actual
results  may  differ  from  these  estimates  under  different   assumptions  or
conditions.


GENERAL

      The following table sets forth for the periods  presented,  the percentage
of net  sales  represented  by  certain  items in our  Company's  statements  of
operations:

                                               PERCENTAGE OF NET SALES
                                             ---------------------------
                                               YEAR ENDED DECEMBER 31,
                                             ---------------------------
                                                  2002        2001
                                             ------------- -------------

Total net sales                                    100.0%        100.0%
                                             -------------   -----------

Total cost of sales                               (52.2)%       (49.5)%
                                             -------------   -----------

Gross profit                                        47.8%         50.5%

Operating expenses                                (38.8)%       (88.7)%
                                             -------------   -----------

Income (loss) from operations                        9.0%       (38.2)%

                                       15
<PAGE>

                                              PERCENTAGE OF NET SALES
                                             ---------------------------
                                               YEAR ENDED DECEMBER 31,
                                             ---------------------------
                                                  2002        2001
                                             ------------- -------------

Interest expense and other                         (3.7)%      (2.7)%
                                             -------------   -----------

Net income (loss) before                             5.4%     (40.9)%
  extraordinary item

Extraordinary item                                 (1.0)%           -

Net Income (loss)                                    4.4%     (40.9)%
                                             =============   ===========

========================================================================

RESULTS OF OPERATIONS

      OVERVIEW.  The following is a discussion of our results of operations  and
our liquidity and capital resources. Our Company sells Internet access "hardware
routers" for small office and home users.  Our products  allow multiple users in
an  office  or  home to  share  one  Internet  connection  simultaneously  while
optimizing each user's access speed and providing a secure firewall (shield from
outside  intrusion).  Our products support existing  telephone lines, as well as
emerging access  technologies such as digital  subscriber lines and cable modems
(faster than phone connections).

      RESULTS OF OPERATIONS.  The discussion of our historical results set forth
below addresses our historical  results of operations for the fiscal years ended
December 31, 2002 and December 31, 2001.


YEARS ENDED DECEMBER 31, 2002 AND 2001

      REVENUES.  We had revenue of  $7,743,630  for the year ended  December 31,
2002 as compared to revenue of $4,080,170  for the year ended December 31, 2001,
an increase of $3,663,460  or 90%. For the year ended  December 31, 2002, we had
sales of  52,045  units of our  Internet  access  "hardware  routers"  for small
offices and home users as  compared to sales of 23,342  units for the year ended
December  31, 2001,  an increase of 28,703 units or 123%.  During the year ended
December 31, 2002, our average  selling price per unit decreased $26 per unit as
compared to the same period in 2001.  This  decrease  resulted  from our Company
reducing   its  selling   price  to  take   advantage   of  large  volume  sales
opportunities. During the third quarter of 2000, our Company opened an office in
Victoria,  B.C. Revenues relating to this office for the year ended December 31,
2002 were  $788,967  as compared to  $1,152,848  for the same period in 2001,  a
decrease $363,881 of 32%.

      COST OF SALES.  Cost of sales for the year  ended  December  31,  2002 was
$4,038,944  as compared to  $2,018,323  for the year ended  December 31, 2001 an
increase of $2,020,621 or 100%.  Cost of sales  consisted  substantially  of the
purchase price and in-bound  freight of  pre-assembled  finished goods inventory
from subcontractors in Taiwan, Republic of China. During the year ended December
31, 2002,  our average  purchase cost per unit decreased $9 per unit as compared
to the same period in 2001.  This decrease  resulted  from a combination  of two
factors,  the first of which is our Company's  success in obtaining lower priced
units from our supplier  and  secondly,  as a result of our Company  effectively
modifying our product  specifications.  Our Company expects the dollar amount of
purchases of  pre-assembled  finished  goods  inventory from  subcontractors  to
increase in the future as our Company increases sales.

      GROSS PROFIT. The gross profit of our Company's products was approximately
48% for the year ended  December 31, 2002 as compared to  approximately  51% for
the year ended December 31, 2001. Our Company expects pricing pressures from our
competition,  but will attempt to lower our cost procurement from subcontractors
through volume purchases.  Our Company may in the future,  reduce selling prices
to take  advantage of large volume  sales  opportunities,  which could lower our
gross margin in the future.

      SELLING,  GENERAL AND ADMINISTRATIVE EXPENSES. We had selling, general and
administrative  expenses of $3,004,931  for the year ended  December 31, 2002 as
compared  to  $3,617,068  for the year ended  December  31,  2001 a decrease  of
$612,137  or 17%.  The  decrease  was  primarily  a result of the  reduction  in
consulting expenses, associated decreases in personnel expenses and increases in
other related costs, which are explained below. In this connection,  our payroll
costs  decreased  by  $194,669,  our  facilities  expenses  and  office  expense
increased by $60,016,  professional fees decreased by $183,341,  consulting fees
decreased by $457,253 and other operating expenses decreased by $245,491.

                                       16
<PAGE>

      For the year  ended  December  31 2002,  we had  three  transactions  that
resulted  in  non-cash  expenditures:  i) a  company  controlled  by  one of our
principal  shareholders  sold all its  properties,  rights,  interests and other
tangible and intangible assets to the Company for a promissory note of $470,000;
ii) in consideration for signing an Irrevocable Option Agreement to purchase all
of the assets of Nexland,  S.A.  (France),  our Company  issued 25,000 shares of
common  stock and  expensed  $4,249  during the  period;  and iii) we recorded a
charge of $83,340 in  connection  with the issuance of common stock to our Chief
Financial  Officer to amortize his unearned  compensation in accordance with his
employment  agreement.  We recorded an expense of $249,996 in the same period in
2001, a decrease of $166,656.  For the year ended December 31, 2001, we had four
transactions that resulted in non-cash expenditures and a corresponding decrease
of expenses in the comparable period in 2002: i) a company  controlled by one of
our principal shareholders incurred research and development costs on our behalf
for the  further  development  of the  Internet  access  hardware  routers.  (We
recorded a capital  contribution of $183,487 for the same period in 2001,  which
represents the actual costs incurred by the company on our behalf, substantially
consisting of technician salaries for subcontractors  located in Taiwan. We have
no formal  agreement  with this  company);  ii) We issued  126,000 shares of the
common  stock to a consultant  for  services  and recorded a non-cash  charge of
$88,578 period; and iii) we issued 1,266,179 options to consultants, recording a
non-cash charge of $424,854.

      DEPRECIATION  AND  AMORTIZATION.  We  had  depreciation  and  amortization
expense of $53,532 for the year ended  December  31, 2002 as compared to $11,539
for the year ended December 31, 2001, an increase of $41,993 or 364%.

      INTEREST  EXPENSE.  We had interest expense of $282,699 for the year ended
December 31, 2002 as compared to $111,981 for the year ended  December 31, 2001,
an increase of $170,718 or 152%.  The  interest  expense  mainly  related to our
factoring  arrangement  and the Company's  debentures.  The increase in interest
expense  is  due  to  the  increase  in  factored  accounts  receivable  between
respective  periods.  We charged $76,819 for interest expense for the beneficial
conversion of debentures in 2001.

      EXTRAORDINARY  ITEMS. We prepaid holders of privately  placed  convertible
debentures in 2002. The extraordinary  expenses associated with this transaction
are the  prepayment  penalties  of  $40,760  and  write  off of the  unamortized
deferred financing costs of $37,618.

      PROVISION FOR INCOME TAXES. No provision for income taxes was necessary in
2002 and 2001 due to the loss  carry-forward  and loss  reported  for such years
(see Note 8 to the financial statements). Further, given the uncertainties as to
realization, the deferred tax assets have been fully reserved.


LIQUIDITY AND CAPITAL RESOURCES

      CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2002

Our total assets at December 31, 2002 were $1,554,205  compared with $610,553 at
December 31, 2001, an increase of $943,652,  principally  due to finished  goods
inventory held for a customer and the purchase of an intangible  asset (see Note
8 to consolidated  financial statements - Related Party Transactions,  Purchased
Asset  Agreement).  Total assets at December 31, 2002 were  comprised  mainly of
$591,992  of  inventory  and  $311,200 of  intangible  assets.  Total  assets at
December  31, 2001 were  comprised  principally  of $319,482  of  inventory  and
$113,739 of accounts  receivable.  Total current assets at December 31, 2002 and
December 31, 2001 amounted to $1,021,075 and $473,172, respectively, while total
current   liabilities  for  those  same  periods   amounted  to  $1,524,107  and
$1,785,985,  respectively,  creating a working  capital  deficit of $503,032 and
$1,312,863  at each  respective  period end.  This  working  capital  deficit is
principally  attributable to previous  operating  losses.  Total  liabilities at
December  31,  2002 and  December  31,  2001  were  $2,155,202  and  $1,785,985,
respectively, representing an increase of 369,217. Shareholders' equity (capital
deficit)  at  December  31,  2002  and  December  31,  2001 was  ($600,997)  and
($1,175,432),  respectively,  representing an increase of $574,435. The increase
in shareholders' equity is due to current year income.


      Prior to 2002,  our Company had relied  principally  upon the  proceeds of
private equity financings and loans to fund its working capital requirements and
capital  expenditures.  The Company's net cash provided in operating  activities
for the year ended  December  31,  2002 was  $507,878,  compared to cash used in
operating  activities  of  ($190,710)  for the year ended  December 31, 2001, an
increase of $698,588. This increase resulted from increases in the Company's net
income,  which  included  non-cash  charges of (i) $83,340 for  compensation  in
connection  with an  employment  agreement,  (ii) $152,416 for  compensation  to
consultants  with options,  (iii) $82,720 for loan closing cost asset  write-off
(iv) $53,532 for depreciation and amortization expense.

                                       17
<PAGE>

      Our Company's  investing  activities for year ended December 31, 2002 used
cash of $29,924 for the purchase of property and equipment.

      Our  Company's  net cash used by financing  activities  for the year ended
December 31, 2002 was $295,760  compared to $213,058 for the year ended December
31, 2001. This consisted of $295,760 used to extinguish debentures.

      Our  Company  has no assured  available  financial  resources  to meet its
December  31, 2002  working  capital  deficit of $503,032  and future  operating
costs.  Although our Company cannot accurately predict the precise timing of its
future capital  requirements,  we estimate that we will meet our needs from cash
flow from the operations.

      If our  Company is unable to fund its working  capital  deficit and future
operating  costs through  operating  activities,  the Company may be required to
change its proposed  business  plan and decrease its planned  operations,  which
could have a material adverse effect upon its business,  financial condition, or
results of operations.

      Management  of the  Company has taken the  following  steps to improve its
cash flow:

      (a) In 2002, an overall  increase in cash flow from  operating  activities
was achieved through increased sales and reductions in expenses.

      (b) On January 31, 2001, the Company,  entered into a Factoring Agreement.
The Factoring Agreement  automatically renews for successive 1-year terms unless
terminated by either party with proper notice given as defined.  The Company has
assigned  substantially all of its accounts receivable to the factor,  typically
on a recourse basis.  The Company may request advances up to 75% of the eligible
receivables. The factor charges the Company a commission equal to .0667% per day
for each  uncollected  receivable  from the invoice  date to the payment date of
such invoice, plus interest on advanced funds equal to the greater of 10% or the
interest publicly announced by Citibank N. A., plus 2%.

      (c) On March 19, 2001, the Company also entered into a Securities Purchase
Agreement with third-party  investors and a Placement Agent Agreement to provide
up to $250,000,  less certain fees and expenses of the placement  agent,  by the
issuance of convertible debentures.  The debentures bear interest at 6% per year
and convert into the Company's  common stock. In connection with the issuance of
such debentures,  the difference between the conversion price and the fair value
of the common stock to which the debentures are  convertible,  multiplied by the
number of shares into which the debt is  convertible at the issuance date of the
debt are recorded as intrinsic  value of the beneficial  conversion  feature and
charged to  interest  expense in the  Company's  statement  of  operations.  The
Company  recorded $76,819 of interest expense at December 31, 2001. On March 19,
2001,  the Company  issued  debentures  of $255,000  from which it received  net
proceeds of  approximately  $213,040.  The  debenture  holders were  entitled to
convert all or part of the principal amount plus accrued interest into shares of
the  Company's  common  stock equal to either (a) an amount equal to 120% of the
closing bid price of the Company's  common stock as of the date of the debenture
issuance or (b) an amount equal to 80% of the lowest three closing bid prices of
the  Company's  common stock for the 10 days  immediately  preceding the date of
conversion of the debenture. On August 7, 2001, the Company filed a registration
statement  registering  13,000,000  shares of the Company's common stock,  which
included conversion shares of common stock underlying the debentures. On January
28, 2002, the Company withdrew the registration  statement.  The debentures were
subordinate  and  junior in right of  payment  to all  accounts  payable  of the
Company  incurred in the  ordinary  course of  business  and/or bank debt of the
Company  not to  exceed  $250,000.  The  Company  has the right to  require  the
debenture  holders to convert any unpaid  principal and accrued  interest on the
debentures upon the five-year  anniversary of the debenture issuance.  Since the
Company did not register the securities,  the convertible debentures were due on
demand and were presented as a short-term liability. The Company is obligated to
pay 2% of the liquidated  value of approximately  $5,000 as liquidated  damages.
During 2002, the convertible debentures in the principal amount of $255,000 were
redeemed for $295,760 plus accrued interest of $16,240.

      On March 19,  2001,  the  Company  entered  into an Equity  Line of Credit
Agreement.  Pursuant to the equity  line of credit,  an  institutional  investor
agreed,  if  requested  by the  Company,  to  purchase  up to $5  million of the
company's  common stock at 80% of the lowest  closing bid price of the Company's
common stock on the Over-the-Counter  Bulletin Board for the 10 days immediately
following  the notice date.  The timing of each sale and the number of shares of
common  stock  to be sold  was to be at the  Company's  discretion,  subject  to
various conditions. The dollar amount that the Company was to be able to request
under any individual sale was to be subject to the average trading volume of the
Company's common stock for the preceding 40-day trading period. The maximum term
of the equity line of credit was to be two years from the date of the agreement.
The agreement contained various representations, warranties and covenants by the
Company, including limitations on the ability to sell common stock, common stock
equivalents  or  all  assets,  and to  merge  or to  enter  into  certain  other
transactions.  There were no amounts outstanding on the equity line of credit at
December 31, 2001. Effective January 28, 2002, the Company and the institutional
investor  mutually agreed to terminate the equity line of credit. On January 28,

                                       18
<PAGE>


2002,  the Company  withdrew  the  registration  statement,  which  included the
registration of shares of common stock to be sold pursuant to the Equity Line of
Credit.


GOING CONCERN QUALIFICATION

      The  Company's  auditors  stated  in  their  reports  that  the  financial
statements of the Company for the years ended December 31, 2002 and December 31,
2001 that the Company is had losses in previous  periods that raise  substantial
doubt  about our ability to  continue  as a going  concern.  For the years ended
December 31, 2002 and 2001, the Company incurred income (losses) of $338,678 and
($1,667,202),  respectively,  and the  Company  had an  accumulated  deficit  of
$600,997 and $1,175,432,  respectively.  Management believes that resources will
be available from operating  activities in 2003 to continue the marketing of the
Company's Internet sharing devices.  The financial statements do not include any
adjustments  relating  to the  recoverability  and  classification  of  recorded
assets, or the amounts and classification of liabilities that might be necessary
in the event the Company cannot continue in existence.


ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      Our consolidated financial statements appear beginning at page 20.

                                       19
<PAGE>

                         NEXLAND, INC. AND SUBSIDIARY

                      CONSOLIDATED FINANCIAL STATEMENTS

                    YEARS ENDED DECEMBER 31, 2002 AND 2001

                                       20

<PAGE>

                              TABLE OF CONTENTS



Independent Auditor's Report..............................................F - 1


Consolidated Financial Statements:

   Consolidated Balance Sheets at December 31, 2002 and 2001..............F - 2

   Consolidated  Statements  of Operations  for the years ending
   December 31, 2002 and 2001.............................................F - 3

   Consolidated  Statements of Capital  Deficit for the years ending
   December 31, 2002 and 2001.............................................F - 4

   Consolidated  Statements  of Cash Flows for the years  ending
   December 31, 2002 and 2001.............................................F - 5


Notes to Consolidated Financial Statements.................F - 6 through F - 21

                                       21

<PAGE>


MICHAEL I. DASZKAL, CPA, P.A.                     2401 N.W. BOCA RATON BOULEVARD
JEFFREY A. BOLTON, CPA, P.A.    [LOGO]                      BOCA RATON, FL 33431
TIMOTHY R. DEVLIN, CPA, P.A.    DASZKALBOLTON LLP                T: 561.367.1040
MICHAEL S. KRIDEL, CPA, P.A.    CERTIFIED PUBLIC                 F: 561.750.3236
MARJORIE A. HORWIN, CPA, P.A.     ACCOUNTANTS              WWW.DASZKALBOLTON.COM



                          INDEPENDENT AUDITOR'S REPORT
                          ----------------------------


To The Board of Directors and Stockholders
Nexland, Inc. and subsidiary
Miami, Florida

We have audited the accompanying  consolidated  balance sheets of Nexland,  Inc.
and  subsidiary  as of December  31, 2002 and 2001 and the related  consolidated
statements of operations,  changes in  stockholders'  deficit and cash flows for
the years  ended  December  31,  2002 and  2001.  These  consolidated  financial
statements  are the  responsibility  of the  management  of  Nexland,  Inc.  and
subsidiary.  Our  responsibility is to express an opinion on these  consolidated
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 audits 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 Nexland,  Inc. and
subsidiary  as of December  31, 2002 and 2001 and the results of its  operations
and its cash flows for the years  then  ended,  in  conformity  with  accounting
principles generally accepted in the United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
the Company  will  continue as a going  concern.  As discussed in Note 16 to the
financial statements, the Company has working capital deficiencies,  which raise
substantial  doubt about the Company's  ability to continue as a going  concern.
Management's  plans  regarding  those matters are also described in the Note 16.
The consolidated  financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

                             /s/ DASZKAL BOLTON LLP

Boca Raton, Florida
January 31, 2003




MEMBER OF  AMERICAN  INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS - SEC AND PRIVATE
COMPANIES PRACTICE SECTIONS                  MEMBER AFFILIATED OFFICES WORLDWIDE

                                      F-1

<PAGE>

NEXLAND, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2002 AND 2001
--------------------------------------------------------------------------------

                                     ASSETS
                                     ------
                                                        2002          2001
                                                     -----------   -----------
Current assets:
   Cash                                              $  222,095    $   39,901
   Accounts receivable, net                             153,782       113,739
   Inventory, net                                       591,992       319,482
   Prepaid expenses                                      53,206             -
                                                     -----------   -----------
       Total current assets                           1,021,075       473,122
                                                     -----------   -----------
Property and equipment, net                             202,038        62,503

Other assets:
   Deposits                                              19,892        32,968
   Intangible asset, net                                311,200
   Loan closing costs                                         -        41,960
                                                     -----------   -----------
        Total other assets                              331,092        74,928
                                                     -----------   -----------
        Total assets                                 $1,554,205    $  610,553
                                                     ===========   ===========

                         LIABILITIES AND CAPITAL DEFICIT
                         -------------------------------
Current liabilities:
   Accounts payable                                  $  758,487    $  200,018
   Accrued professional fees                            169,422       282,093
   Accrued expenses                                     340,455       285,309
   Notes payable to related party supplier, current     158,387       666,209
    portion
   Convertible debentures                                     -       255,000
   Other liabilities                                     97,356        97,356
                                                     -----------   -----------
       Total current liabilities                      1,524,107     1,785,985
                                                     -----------   -----------
   Notes payable to related party supplier, net of
    current portion                                     631,095             -
                                                     -----------   -----------
        Total liabilities                             2,155,202     1,785,985
                                                     -----------   -----------

Commitments and contingencies

Capital deficit:
    Preferred stock, $0.0001 par value; 10,000,000
    shares authorized; no shares outstanding                  -             -
    Common stock, $0.0001 par value; 50,000,000 shares
     authorized; 34,824,172 and 35,653,385 shares
     issued and outstanding at December 31, 2002
     and 2001, respectively                               3,482         3,566
   Additional paid-in capital                         3,927,919     3,775,418
   Unearned compensation                                              (83,340)
   Accumulated deficit                               (4,532,398)   (4,871,076)
                                                     -----------   -----------
       Total capital deficit                           (600,997)   (1,175,432)
                                                     -----------   -----------
       Total liabilities and capital deficit         $1,554,205    $  610,553
                                                     ===========   ===========


         See accompanying notes to consolidated financial statements.

                                       F-2

<PAGE>

  NEXLAND, INC. AND SUBSIDIARY
  CONSOLIDATED STATEMENTS OF OPERATIONS
  YEARS ENDED DECEMBER 31, 2002 AND 2001
--------------------------------------------------------------------------------

                                                          2002          2001
                                                      ----------     ----------

Sales                                               $  7,743,630   $  4,080,170

Cost of sales                                          4,038,944      2,018,323
                                                      ----------     ----------

Gross profit                                           3,704,686      2,061,847
                                                      ----------     ----------

Operating expenses:
   Selling, general and administrative                 3,004,931      3,617,068
                                                      ----------     ----------

Income (loss) from operations                            699,755     (1,555,221)
                                                      ----------     ----------

Other expense:
   Interest expense                                      282,699        111,981
                                                      ----------     ----------

Net income (loss) before extraordinary item              417,056     (1,667,202)

Extraordinary item:
   Loss on extinguishment of debt                         78,378              -
                                                      ----------     ----------

Net income (loss)                                   $    338,678   $ (1,667,202)
                                                      ==========     ==========


Net income (loss) per common share, basic and
 diluted                                            $       0.01   $      (0.05)
                                                      ==========     ==========

Weighted-average number of common shares, basic       35,290,433     36,113,795
                                                      ==========     ==========

Weighted-average number of common shares, diluted     43,569,202     36,113,795
                                                      ==========     ==========

         See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>
<TABLE>

NEXLAND, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CAPITAL DEFICIT
YEARS ENDED DECEMBER 31, 2002 AND 2001
-----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                         ADDITIONAL
                                                      COMMON STOCK         PAID-IN     UNEARNED      ACCUMULATED
                                                   SHARES     AMOUNT       CAPITAL    COMPENSATION     DEFICIT         TOTAL
                                                 ----------  --------   -----------   ------------  -------------  -------------

<S>                                              <C>         <C>        <C>           <C>           <C>            <C>

Balance, December 31, 2000                       36,027,378  $  3,603   $ 3,001,613   $ (333,336)   $ (3,203,874)  $   (531,994)

Issuance of equity instruments for services         126,000        13       513,431            -               -        513,444

Embedded interest on conversion of debentures             -                  76,819            -               -         76,819

Issuance of common stock in connection with
exercise of warrants                                      7        -             18            -               -             18

Surrender of common stock by stockholder           (500,000)      (50)           50            -               -              -

Contributed research and development services             -         -       183,487            -               -        183,487

Amortization of unearned compensation                     -         -             -      249,996                        249,996

Net loss for the year                                     -         -             -            -      (1,667,202)   (1 ,667,202)
                                                 ----------  --------   -----------   ------------  -------------  -------------
Balance, December 31, 2001                       35,653,385     3,566     3,775,418     (83,340)      (4,871,076)    (1,175,432)

Issuance of equity instruments for services               -         -       148,168            -               -        148,168

Cancellation common stock                          (854,213)      (86)           86            -               -              -

Amortization of unearned compensation                     -         -             -       83,340               -         83,340

Issuance of shares to Nexland, S.A.                  25,000         2         4,247            -                          4,249

Net income for the year                                   -         -             -                      338,678        338,678
                                                 ----------  --------   -----------   ------------  -------------  -------------
Balance, December 31, 2002                       34,824,172  $  3,482   $ 3,927,919   $        -    $ (4,532,398)  $   (600,997)
                                                 ==========  ========   ===========   ============  =============  =============
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       F-4

<PAGE>

NEXLAND, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2002 AND 2001
--------------------------------------------------------------------------------
                                                         2002          2001
                                                     ------------  ------------
Cash flows from operating activities:
  Net income (loss)                                  $  338,678    $(1,667,202)
  Adjustments to reconcile net income (loss) to
   net cash used in operating activities:
    Compensation expenses in connection with:
       Employment agreement                              83,340       249,996
       Stock and stock options issued                   152,416       513,444
    Contributed research and development services             -       183,487
    Beneficial conversion feature                             -        76,819
    Depreciation and amortization expense                53,532        11,539
    Allowance for doubtful accounts                     (19,093)       22,205
    Allowance for slow-moving and obsolete inventory    (68,261)       71,626
    Extraordinary loss on extinguishment of debt         78,378             -
    (Increase) decrease in:
       Accounts receivable                              (20,950)      (16,813)
       Inventory                                       (204,249)     (315,159)
       Deposits and other assets                        (40,130)       (2,968)
    Increase (decrease) in:
       Accounts payable                                 558,469       143,142
       Accrued professional fees                       (112,671)       62,899
       Accrued expenses                                  55,146       211,885
       Due to related party supplier                   (346,727)      264,390
                                                     ----------    ----------
Net cash provided by (used in) operating activities     507,878      (190,710)
                                                     ----------    ----------
Cash flows from investing activities:
   Purchase of property and equipment                   (29,924)      (41,970)
                                                     ----------    ----------
Cash flows from financing activities:
  Proceeds from exercise of warrants and options              -            18
  Proceeds from and payments on extinguishment
   of debentures                                       (295,760)      255,000
  Cost of issuance of debentures                              -       (41,960)
                                                     ----------    ----------
Net cash provided by (used in) financing activities    (295,760)      213,058
                                                     ----------    ----------
 Net increase (decrease) in cash                        182,194       (19,622)
 Cash, beginning of year                                 39,901        59,523
                                                     ----------    ----------
 Cash, end of year                                   $  222,095   $    39,901
                                                     ==========    ==========
Supplemental Cash Flow Information:
-----------------------------------
   Cash paid for interest                            $  183,835   $    25,932
                                                     ==========    ==========
    Cash paid for taxes                              $         -  $         -
                                                     ==========    ==========


          See accompanying notes to consolidated financial statements.

                                     F-5

<PAGE>


NEXLAND, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 1 - NATURE OF BUSINESS
---------------------------

Nexland, Inc. ("the Company") designs, manufactures and sells broadband routers,
known as Internet  Sharing  Devices.  The Internet  Sharing Devices are hardware
routers that allow users,  connected to the  Internet,  to share their  Internet
access  at the same time  using  only one  modem,  one  telephone  line or cable
connection,  and one Internet access account. In addition,  the Internet Sharing
Devices are a  "firewall,"  providing  network  security.  Nexland  products are
unique in their  capability  to provide both Network  Access  Translation  (NAT)
technology  with the higher level of data security using IPsec security  (patent
pending).

The Company was incorporated  under the laws of the State of Delaware.  In 1999,
the Company merged with Windstar  Resources,  Inc.  through a reverse merger and
the surviving company changed its name to Nexland, Inc. For accounting purposes,
the merger has been treated as a recapitalization of the Company.


NOTE 2 - SUMMARY OF ACCOUNTING POLICIES
---------------------------------------

Principles of Consolidation
---------------------------

The consolidated  financial statements include the accounts of Nexland, Inc. and
its subsidiary.  All material  intercompany  balances and transactions have been
eliminated in consolidation.

Cash and Cash Equivalents
-------------------------

The  Company   considers  all  highly  liquid  debt  instruments  with  original
maturities  of three months or less to be cash  equivalents.  The Company has no
cash equivalents at December 31, 2002 and 2001.

Inventory
---------

Inventories are stated at the lower of cost or market.  Cost is determined on an
average cost basis that  approximates  the first-in,  first-out  (FIFO)  method.
Market is determined based on net realizable value. Appropriate consideration is
given to obsolescence,  excessive  levels,  deterioration,  and other factors in
evaluating net realizable value.

Property and Equipment
----------------------

Property and equipment are stated at cost.  Depreciation  is provided  using the
straight-line method over the estimated useful lives of the assets, ranging from
three to seven years.

Long-lived Assets
-----------------

The Company  reviews the  carrying  values of its  long-lived  and  identifiable
intangible  assets  for  possible  impairment  whenever  events  or  changes  in
circumstances  indicate  that  the  carrying  amount  of the  assets  may not be
recoverable.  The Company  evaluates the  recoverability of long-lived assets by
measuring the carrying  amount of the assets against the estimated  undiscounted
future cash flows  associated  with them. If the  evaluations  indicate that the
future  undiscounted cash flows of the long-lived assets would not be sufficient
to recover the  carrying  value of the assets,  the assets  would be adjusted to
their fair values. Any long-lived assets held for disposal are adjusted to their
fair value. Any long-lived assets held for disposal are reported at the lower of
their carrying amounts or fair value less cost to sell.

                                      F-6

<PAGE>

NEXLAND, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 2 - SUMMARY OF ACCOUNTING POLICIES, continued

New Accounting Pronouncements
-----------------------------

In April 2002,  the FASB issued SFAS 145,  Rescission of FASB  Statements No. 4,
44, and 64,  Amendment of the FASB Statement No. 13, and Technical  Corrections.
SFAS 145  rescinds  the  provisions  of SFAS No. 4 that  requires  companies  to
classify  certain gains and losses from debt  extinguishments  as  extraordinary
items,  eliminates  the  provisions  of SFAS No. 44 regarding  transition to the
Motor  Carrier Act of 1980 and amends the  provisions  of FASB No. 13 to require
that certain lease modifications be treated as sale leaseback transactions.  The
provisions of FASB 145 related to  classification  of debt  extinguishments  are
effective for fiscal years  beginning after May 15, 2002. The provisions of SFAS
145 related to lease modifications is effective for transactions occurring after
May 15, 2002. Earlier  application is encouraged.  The Company believes that the
adoption  of  SFAS  145  will  not  have a  material  impact  on  its  financial
statements.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal Activities.  The standard requires companies to recognize costs
associated  with exit or disposal  activities when they are incurred rather than
at the date of a  commitment  to an exit or  disposal  plan.  Examples  of costs
covered by the standard  include lease  termination  costs and certain  employee
severance  costs  that  are  associated  with  a   restructuring,   discontinued
operation, plant closing, or other exit or disposal activity.

In July 2002, the FASB issued SFAS No. 147,  Acquisitions  of Certain  Financial
Institutions.  The provisions of this Statement institute the application of the
purchase  method of accounting to all  acquisitions  of financial  institutions,
except  transactions  between  two or  more  mutual  enterprises.  Further,  the
provisions  of the  Statement  that relate to the  application  of Statement 144
apply to certain long-term customer-relationship intangible assets recognized in
an  acquisition  of  a  financial  institution,   including  those  acquired  in
transactions between mutual enterprises.

In December  2002,  the FASB issued SFAS No.  148,  Accounting  for  Stock-Based
Compensation - Transition and Disclosure.  This Statement amends  Statements No.
123 to provide three  alternative  methods of transition for Statement No. 123's
fair value  method of  accounting  for  stock-based  employee  compensation  for
companies that elect to adopt the provision of Statement No. 123.  Transition to
the fair  value  accounting  method of  Statement  No.  123 is not  required  by
Statement No. 148. The Company has elected to use the intrinsic  value method of
accounting  for stock  compensation  in  accordance  with APB No. 25 and related
interpretations.  Statement  No. 148 also amends the  disclosure  provisions  of
Statement No. 123 to require disclosure in the summary of significant accounting
policies  of the  effects  of an  entity's  accounting  policy  with  respect to
stock-based compensation on reported net income and earnings per share in annual
and interim financial statements.  The disclosure provision of Statement No. 148
are  required  to  be  adopted  by  all  companies  with  stock-based   employee
compensation, regardless of whether they account for that compensation using the
fair value method of Statement No. 123 or the intrinsic  value method of APB No.
25.

Revenue Recognition
-------------------

Revenue is recognized  when  products are shipped to the  customer.  The Company
includes  shipping  and handling  fees billed to customers as revenue.  Costs of
sales includes freight expenses.  Products are under an unconditional money-back
guarantee for the first 30 days after purchase.  A five-year  warranty  covering
the repair of the unit is  provided  on all  products.  During  the years  ended
December  31,  2002 and 2001,  the Company did not  experience  any  significant
warranty expense.

Advertising
-----------

Advertising  costs are charged to operations in the year incurred;  such amounts
aggregated $159,825 in 2002 and $19,696 in 2001.

                                      F-7
<PAGE>

NEXLAND, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 2 - SUMMARY OF ACCOUNTING POLICIES, continued
--------------------------------------------------

Estimates
---------

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

Net Income (Loss) per Common Share
----------------------------------

Net income  (loss) per common  share is  calculated  according  to  Statement of
Financial  Accounting  Standards No. 128,  "Earnings  Per Share" which  requires
companies to present basic and diluted  earnings per share.  Net loss per common
share -  Basic  is  based  on the  weighted  average  number  of  common  shares
outstanding during the year. Net loss per common share - Diluted is based on the
weighted average number of common shares and dilutive  potentially common shares
outstanding  during the year.  The  potential  common stock  equivalents  during
periods  reflecting  losses were not included in diluted loss per share  because
the effect would have been  anti-dilutive.  Accordingly,  basic and diluted loss
per common share are the same.

Stock Compensation
------------------

The Company has adopted  Statement of  Financial  Accounting  Standards  No. 123
("SFAS 123"), "Accounting for Stock-Based Compensation." SFAS 123 encourages the
use of a  fair-value-based  method of accounting  for  stock-based  awards under
which the fair  value of stock  options is  determined  on the date of grant and
expensed  over the  vesting  period.  Under SFAS 123,  companies  may,  however,
measure  compensation  costs of those  plans  using the  methods  prescribed  by
Accounting Principles Board Opinion No. 25 ("APB No. 25"), "Accounting for Stock
Issued to  Employees."  Companies  that apply APB No. 25 are required to include
pro  forma  disclosures  of  net  earnings  and  earnings  per  share  as if the
fair-value-based  method of  accounting  had been applied.  The Company  elected
reporting for such plans under the provisions of APB No. 25.

Foreign Currency Translation
----------------------------

In accordance with FASB No. 52, "Foreign  Currency  Translation,"  the financial
statements of the Company's  Canadian  subsidiary is re-measured  using the U.S.
dollar as the functional currency.  Monetary assets and liabilities  denominated
in a foreign currency are re-measured into U.S. dollars at the year-end exchange
rates.  Non-monetary assets and liabilities and related income statement amounts
are re-measured at historical exchange rates.

Reclassifications
-----------------

Certain reclassifications have been made to prior year amounts to conform to the
current year presentation.  These  reclassifications had no effect on previously
reported net loss.

                                      F-8

<PAGE>

NEXLAND, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 3 - ACCOUNTS RECEIVABLE
----------------------------

On January  31,  2001,  the Company  entered  into a  factoring  agreement.  The
agreement was renewed on January 31, 2003 for an additional  year. The agreement
may be  terminated  by either  party with proper  notice  given as defined.  The
Company may request advances up to 75% of the eligible  receivables.  The factor
charges the Company a  commission  equal to .0667% per day for each  uncollected
receivable  from the  invoice  date to the  payment  date of the  invoice,  plus
interest on advanced funds equal to the greater of 10% or the interest  publicly
announced  by Citibank,  N.A.,  plus 2% (6.25% at December 31, 2002 and 6.75% at
December 31, 2001).  Obligations due to the factor under the factoring agreement
are  collateralized  by  receivables,  as defined,  and by all of the  Company's
inventory.

Accounts  receivable consist of the following at December 31, 2002 and 2001:

                                                   2002          2001
                                             -----------   ------------

      Receivables assigned to factor         $    18,287   $    317,440
      Due (advanced from factor                   13,933       (205,490)
                                             -----------   ------------
      Amounts due from factor                     32,220        111,950
      Unfactored accounts                        124,562         25,680
      Allowance for returns and discounts         (3,000)       (23,891)
                                             -----------   ------------
                                             $   153,782   $    113,739
                                             ===========   ============

Bad debt  expense was $5,656 and $22,205 for the years ended  December  31, 2002
and 2001, respectively.


NOTE 4 - INVENTORY
------------------

Finished  goods  inventories  at December  31, 2002 and 2001 consist of Internet
sharing  devices held for resale.  At December 31,  2001,  inventory  included a
$109,485 deposit with the supplier in Taiwan.  Allowances for obsolete inventory
at December 31, 2002 and 2001 were $3,365 and $71,626, respectively.


NOTE 5 - PROPERTY AND EQUIPMENT
-------------------------------

Property and equipment consist of the following:

                                                   2002          2001
                                             -----------   ------------

      Furniture and fixtures                 $    42,190   $     54,433
      Office equipment                           156,389         29,182
      Manufacturing equipment                     55,000              -
                                             -----------   ------------
                                                 253,579         83,615
      Less accumulated depreciation              (51,541)       (21,112)
                                             -----------   ------------
                                             $   202,038   $     62,503
                                             ===========   ============

Depreciation  expense was $30,890 and $11,539 for the years ended  December  31,
2002 and 2001, respectively.

                                      F-9

<PAGE>
NEXLAND, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 5 - PROPERTY AND EQUIPMENT, continued
------------------------------------------

In 2002,  the  Company  entered  into an  agreement  to obtain  the  rights to
certain  intellectual  property.  The purchase price paid for the property was
$329,500.   The property is being  amortized  over 3 years.   During 2002, the
company recognized $18,300 in amortization expense.


NOTE 6 - DEBT
-------------

Equity Line of Credit
---------------------

On March 19, 2001,  the Company  entered into a Line of Credit  Agreement (the
"Credit  Line").  Pursuant  to the  Credit  line,  an  institutional  investor
agreed,  if  requested  by the  Company,  to  purchase up to $5 million of the
Company's  common  stock  at  a  20%  discount  from  the  market  value.  The
agreement  was  terminated  on January 28, 2002 and no amounts  were  obtained
under the agreement.

Convertible Debentures
----------------------

The Company sold  $255,000 of 6%  convertible  debentures  in the three months
ended June 30, 2001 through a Securities  Purchase  Agreement under Regulation
D.  The  net  proceeds  after  $41,960  costs  incurred  were  $213,040.   The
intrinsic  value  of the  beneficial  conversion  feature  was  recorded  as a
non-cash charge of $76,819 to interest  expense and a corresponding  credit to
the  additional  paid in capital of the Company.  The  debenture  holders were
entitled to convert all or part of the principal  amount plus accrued interest
into shares of the Company's  common stock equal to either (a) an amount equal
to 120% of the closing bid price of the Company's  common stock as of the date
of the debenture  issuance,  or (b) an amount equal to 80% of the lowest three
closing bid prices of the Company's  common stock for the 10 days  immediately
preceding  the date of  conversion of the  debenture.  On August 7, 2001,  the
Company filed a registration  statement  registering  13,000,000 shares of the
Company's  common  stock,  which  included  conversion  shares of common stock
underlying  the  debentures.  On January 28,  2002,  the Company  withdrew the
registration  statement.  The debentures were  subordinate and junior in right
of payment to all  accounts  payable of the Company  incurred in the  ordinary
course of business  and/or  bank debt of the  Company not to exceed  $250,000.
The  Company  had the right to require  the  debenture  holders to convert any
unpaid  principal and accrued  interest on the  debentures  upon the five-year
anniversary  of the  debenture  issuance.  The  debentures  were to  mature in
2006.

The Company was obligated to use  reasonable  efforts to prepare and file with
the Securities and Exchange  Commission  ("SEC"), a registration  statement on
Form S-1 under the 1933 Act.  This would  register  for resale,  the shares of
the  common   stock  to  be  issued  upon   conversion   of  the   convertible
debentures.   Since  the  Company  did  not  register  the   securities,   the
convertible  debentures were due upon demand and are accordingly  presented as
a  short-term  liability.   The  Company  was  obligated  to  pay  2%  of  the
liquidated value of approximately $5,000 as liquidated damages.

In June 2002,  the  Company  prepaid  the  holders of these  privately  placed
convertible  debentures  in an aggregate  amount of $312,000.  These  payments
were  made out of  available  cash.  Interest  accrued  on  these  convertible
debentures  at 6% was  $16,240.  In  connection  with  this  transaction,  the
Company was required to pay  prepayment  penalties  of $40,760,  and wrote off
the unamortized  deferred financing costs of approximately  $37,618. The total
of  $78,378  has  been  recorded  as a net  extraordinary  loss  in  the  2002
statement of operations.

                                      F-10
<PAGE>
NEXLAND, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 7 - CONCENTRATIONS
-----------------------

Dependency on a Customer
------------------------

In 2002 and 2001,  approximately  61% and 29%  respectively  of the  Company's
revenues were generated by one customer in the technology sector.

Concentrations of Credit Risk
-----------------------------

The Company  manufactures and distributes  Internet sharing boxes to companies
in  diversified  industries.  The Company  routinely  assesses  the  financial
strength of its  customers and as a  consequence  believes its trade  accounts
receivable  credit risk is limited.  The  Company  generally  does not require
collateral.  As of December  31,  2002,  no  individual  customer  balance was
determined to represent a material concentration of credit risk.

Concentrations of Bank Risk
---------------------------

The  Company   maintains  its  cash  in  deposit  accounts  at  two  financial
institutions,  which, at times, may exceed federally insured limits.  Accounts
are  insured  by  the  Federal  Deposit  Insurance  Corporation  (FDIC)  up to
$100,000.  At December  31, 2002 the  Company  had cash  balances  $111,133 in
excess of FDIC  insurance  limits  and the  Company  has not  experienced  any
losses in such accounts.


NOTE 8 - RELATED PARTY TRANSACTIONS
-----------------------------------

On November 6, 2002 multiple  agreements  were signed to  renegotiate  related
party accounts  payable balances to Promissory  Notes,  purchase assets and to
grant to Nexland,  Inc. the option to purchase worldwide  distribution  rights
and all claims of technology development.

Promissory Note Agreements
--------------------------

An agreement and release was signed with  Smerwick,  a related party and major
stockholder,   to  release  an  account   payable   balance  of   $313,016  in
consideration  of a cash payment of $150,000 and the execution of a Promissory
Note in the amount of  $163,016.  The note will  accrue  interest at a rate of
8% per annum  with  principal  and  interest  payments  of $7,500  monthly  in
arrears.  The note matures in November 2004.

An agreement and release was signed with Longfield,  a related party and major
stockholder,   to  release  an  account   payable   balance  of   $306,465  in
consideration  of a cash payment of $150,000 and the execution of a Promissory
Note in the amount of  $156,465.  The note will  accrue  interest at a rate of
8% per annum  with  principal  and  interest  payments  of $7,500  monthly  in
arrears.  The note matures in October 2004.

Total accrued interest on the notes was $3,845 as of December 31, 2002.

Purchased Assets Agreement
--------------------------

An asset  purchase  agreement was signed with Nexland Asia Limited,  a related
party  and major  stockholder,  to  purchase  all of the  properties,  rights,
interests and other tangible and intangible assets of Nexland Asia Limited.

In consideration  of the purchase,  a promissory note was signed in the amount
of $470,000  bearing an interest  rate of 6% per annum.  The entire  principal
amount and all accrued  interest  shall be due and payable upon the earlier of
the tenth  anniversary date of the note or a sale of substantially  all of the
assets of Nexland, Inc.

                                      F-11
<PAGE>
NEXLAND, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 8 - RELATED PARTY TRANSACTIONS, continued
----------------------------------------------

The  principal  amount  shall  become  immediately  due and  payable  upon any
bankruptcy  proceedings  or change of  control.  In  addition,  if the Company
records  at the end of any  fiscal  year  accumulated  shareholder  equity  in
excess of two million  dollars,  the note shall become due and payable 45 days
following the filing of the SEC report.

Total accrued interest on the notes was $4,250 as of December 31, 2002.

Irrevocable Option Agreement
----------------------------

An  irrevocable  option  agreement was signed with  Nexland,  S.A. to purchase
assets of Nexland,  France upon the  election of Nexland,  Inc.  Assets  shall
include  all of the  properties,  rights,  interests  and other  tangible  and
intangible  assets of Nexland,  S.A. The Internet Sharing Device was initially
developed by Nexland S.A. in France.  In 1997,  Nexland,  Inc. began enhancing
the core technology and developed various components.

As consideration  for the option,  Nexland,  Inc.  delivered to Nexland,  S.A.
25,000  newly-issued  shares of Nexland Common Stock.  The company  recognized
$4,249 in expenses relating to the issuance of the common stock.

As  consideration  for the  sale  of  assets  upon  execution  of the  option,
Nexland, Inc. will deliver to Nexland,  S.A. 1,475,000  newly-issued shares of
Nexland Common Stock.

Dependency on a Supplier
------------------------

During the year 2001 and the first quarter of 2002, the Company  purchased all
its Internet  sharing devices from one supplier,  Smerwick,  Ltd. The supplier
is  located in  Taiwan,  and its  principal  shareholders  are also  principal
shareholders of the Company.  Purchases from Smerwick  aggregated $550,361 and
$1,614,144 for 2002 and 2001, respectively.

The Company has entered into  manufacturing  agreements with a U.S. and Taiwan
manufacturers  during 2002. The Company's  present  suppliers will continue to
produce  the  Company's  product  as  needed  and  no  production  delays  are
anticipated.

On October 18, 2000,  the Company  entered into an  agreement  with  Smerwick,
Ltd. to issue 500,000 shares of its common stock to satisfy supplier  payables
of  $486,441.  According  to the  agreement,  the  Company  has the option (as
defined) to repurchase the 500,000  shares.  On December 21, 2001, the 500,000
shares were  returned to the Company and retired.  At December  31, 2001,  the
Company owed Smerwick  $666,209.  During 2002,  all amounts owed these related
parties were converted to Promissory  Notes (see  Promissory  Note  Agreements
section above).

Contributed Research and Development
------------------------------------

Smerwick,  Ltd.,  a company  controlled  by a  principal  shareholder,  incurs
research  and  development  ("R&D")  costs  on the  Company's  behalf  for the
further development of the Internet Sharing Devices.  In this connection,  the
Company  recorded  capital  contributions  of $0 and $183,487 in 2002 and 2001
respectively,  which  represent the actual costs,  incurred by this company on
Nexland's   behalf.   These  services  consist  primarily  of  the  technician
salaries  located in Taiwan.  The  Company  created an internal  research  and
development   department   during   the   fourth   quarter  of  2001  and  all
subcontracted R&D was transferred to the Company in the first quarter of 2002.

                                      F-12
<PAGE>
NEXLAND, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 8 - RELATED PARTY TRANSACTIONS, continued
----------------------------------------------

On September  15, 1999,  Nexland  S.A. and Nexland,  Inc.  signed a technology
sharing   agreement   whereby  Nexland  Inc.  and  Nexland  S.A.  would  share
technology developed by either company.  Additionally,  on September 20, 2000,
Nexland S.A. and Nexland,  Inc. signed a ten-year licensing  agreement whereby
Nexland, Inc. granted names, logos,  marketing  techniques,  trade secrets and
know-how for sale in products to Europe,  Africa and the Middle East.  Nexland
S.A. granted Nexland, Inc. exclusive rights to its technology,  whether or not
patented  or  patent  pending,   trademarks,   trade  names,  logos  marketing
techniques,  trade  secrets and  know-how  for sale in products to the rest of
the world, excluding Asia, which is open to both companies.

In March 2000, the Company entered into a five-year  consulting agreement with
Nexland  S.A.  that  provided  for  compensation  of $175,000 per annum if the
Company was able to obtain at least  $1,000,000 in financing.  This  agreement
may be  terminated  without  cause  after  December  31,  2001,  other than in
connection  with a  change  of  control,  in which  case  Nexland  S.A.  would
received one year of  severance  pay. No payments  were made or accrued  under
this agreement in 2002 or 2001 and the agreement was terminated in 2002.

Commencing  January  1,  2001,  the  Company  agreed  to  pay I.  Dan  Sultan,
principal  stockholder of the Company and of Nexland S.A.,  $150,000 per annum
for consulting  services.  During 2002 and 2001, the Company paid $139,000 and
$52,000,  respectively,  and accrued  the balance of $109,000 at December  31,
2002.

On November  16, 2001,  Nexland S.A.  waived  certain  provisions  in the 2000
licensing  agreement  with  respect to a large  customer.  Nexland,  Inc.  was
authorized  to  design  and   manufacture   certain   products  for  purchase,
distribution and sale by this certain customer.


NOTE 9 - INCOME TAXES
---------------------

Deferred  income taxes  reflect the net tax effects of  temporary  differences
between  the  carrying   amounts  of  assets  and  liabilities  for  financial
reporting  purposes and the amounts of assets and liabilities  used for income
tax  purposes.  At  December  31, 2002 and 2001,  the  Company had  cumulative
federal net operating loss carryforwards  ("NOL") of approximately  $2,600,000
and  $3,000,000,  respectively.  The NOL expires during the years 2019 through
2020.

In the event of a change in ownership of the Company,  the  utilization of the
NOL carry  forward will be subject to limitation  under certain  provisions of
the Internal Revenue Code.

In 2002, the Company  recognized a tax benefit of approximately  $155,000 from
the  utilization  of net  operating  loss  carryforwards  into 2002.  Prior to
2002,  the  Company  had not  recognized  any  benefit of net  operating  loss
carryforwards  in accordance with the provisions of SFAS No. 109,  "Accounting
for Income  Taxes," as the  realization  of this  deferred tax benefit was not
more likely than not. At December  31, 2002, a 100%  valuation  allowance  has
been  recorded to offset the entire  effect of the  Company's net deferred tax
assets, as realization remains not more likely than not.

                                      F-13
<PAGE>
NEXLAND, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 9-INCOME TAXES, CONTINUED
------------------------------

The net  provision  (benefit)  for income taxes  consisted  of the  following at
December 31, 2002 and 2001:
                                                        2002          2001
                                                     ----------    ---------
       Current income taxes                          $        -    $       -
       Deferred income taxes                                  -            -
                                                     ----------    ---------
       Net provision (benefit) for income taxes      $        -    $       -
                                                     ==========    =========

Significant  components of the Company's  deferred tax liabilities and assets at
December 31, 2002 and 2001 are as follows:
                                                           2002           2001
                                                        ----------    ----------

      Deferred tax assets:
        Professional and consulting fees              $  976,854    $   868,142
        Accrued salaries                                  74,507         78,469
        Allowance for inventory                            1,266         26,953
        Allowance for doubtful accounts                      494          8,355
        Accrued interest                                  11,711         86,105
        Net operating loss carry forwards                970,158      1,122,306
        Valuation allowance for deferred tax assets   (2,034,990)    (2,190,330)
                                                      -----------    -----------
      Net deferred tax asset                          $         -    $         -
                                                      ===========    ===========

       A  reconciliation  between  actual  income taxes and amounts  computed by
applying  the  federal  statutory  rate of 34% to pre-tax  loss  before  loss is
summarized as follows:

                                                           2002          2001
                                                        ----------   -----------

       U.S. Federal statutory rate on earnings (loss)
        before income taxes                             $ 115,151    $ (566,849)
       Non-deductible  items                               25,204             -
       State income tax, net of Federal benefit            14,985       (52,511)
       Increase (decrease) in valuation allowance        (155,340)      619,360
                                                        ----------   -----------
       Income tax expense (benefit)                     $        -   $         -
                                                        ==========   ===========



                                      F -14

<PAGE>

NEXLAND, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 10-STOCKHOLDERS' EQUITY
----------------------------

2002
----

The Company  cancelled  854,213  shares of common stock  related to settlement
agreements. See Note 12.

The Company issued 25,000 shares of common stock to Nexland,  S.A. pursuant to
agreements. See Note 8.

2001
----

In  connection  with  entering  into the Equity Line of Credit (see Note 6), the
Company also  entered into  consulting  services  agreement  relating to capital
investment and/or debt financing,  which was subsequently terminated.  Under the
agreement,  the  consultant  was to  receive  a fee  equal to 8.4% of the  gross
proceeds  from each advance  under the Equity Line of Credit.  In  addition,  on
March 16, 2001,  the Company issued 126,000 shares of its common stock valued at
$0.70 per share  pursuant  to the  consulting  services  agreement.  The Company
recorded  compensation  expense of  $88,590.  The Company had granted the Equity
Line of  Credit  investor,  the  consultant  and  the  placement  agent  certain
registration rights, which rights were subsequently terminated.

The Company issued 7 shares of its common stock in connection  with the exercise
of warrants.

On October 18, 2000, the Company  entered into an agreement with Smerwick,  Ltd.
to issue 500,000 shares of its common stock as satisfaction of supplier payables
of $486,441.  During the year ended  December 31,  2001,  Smerwick  returned the
shares to the Company and the agreement was cancelled.
See Note 8.


NOTE 11- OPTIONS AND WARRANTS
-----------------------------

Stock Incentive Plan
--------------------

On September 6, 2000, the Company  adopted a Stock  Incentive Plan (the "Plan"),
which   provides  for  the  granting  of  6,000,000   stock  options  and  stock
appreciation  rights  (SARs) to key  employees.  Options  granted  may be either
"incentive  stock  options,"  within the meaning of Section 422A of the Internal
Revenue Code, or non-qualified options.

During 2002, the Company  granted 741,667  options to certain  consultants.  The
weighted  average  grant-date  fair value was $0.21 for options with an exercise
price equal to the market price on the date of the grant.  The weighted  average
fair value of options  granted is estimated  on the date of the grant,  using an
option-pricing  model for  public  companies.  The fair  value of the grants was
expensed in 2002 with an unamortized asset capitalized for one of the agreements
of $25,186 as of December 31, 2002 for  services to be performed  over the three
remaining years of the agreement.

During 2002,  the Company  cancelled  options to purchase  580,000 shares of the
Company's  common stock to certain  employees of the Company and granted options
to  purchase  145,000  shares of common  stock to these  same  employees  of the
Company.  The Company  accounted for this  cancellation and reissuance of shares
under  Financial  Interpretation  No.  44  recognizing  approximately  $3,000 in
compensation  expense.  During  2002,  the Company  granted  900,000  options to
certain officers and directors.  The weighted average  grant-date fair value was
$0.11 for options with an exercise  price equal or greater than the market price
on the date of the grant.


                                      F -15

<PAGE>

NEXLAND, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 11-OPTIONS AND WARRANTS, CONTINUED
---------------------------------------

During 2002, the Company granted options to purchase  2,086,667 shares of common
stock with the Plan at prices  ranging  from  $0.08 to $0.32 per  share.  During
2001, the Company granted options to purchase  3,329,000  shares of common stock
within the Plan at prices ranging from $0.25 to $0.70 per share.

At  December  31,  2002,  5,146,500  shares of common  stock were  reserved  for
issuance  under  outstanding  options  and 853,500  shares of common  stock were
available under the Plan. At December 31, 2001, 4,887,000 shares of common stock
were  reserved  for  issuance  under  outstanding  options  under  the  Plan and
1,113,000 shares of common stock available options under the Plan.

The Company applies APB Opinion 25 and related interpretations in accounting for
its Plan.  Accordingly,  no compensation  cost has been recognized for its stock
option plan. Had compensation  cost for the Company's  stock-based  compensation
plan been determined  based on the fair value at the grant date for awards under
the Plan  consistent  with the method of FASB  Statement  123,  "Accounting  for
Stock-Based  Compensation," the Company's net loss and loss per share would have
been reduced to the pro forma amounts indicated below:

                                                         2002           2001
                                                      ----------    -----------
       Net income (loss) as reported                  $  338,678    $(1,667,202)
                                                      ==========    ===========
       Pro forma net income (loss)                    $  200,898    $(2,656,552)
                                                      ==========    ===========
       Basic earnings (loss) per share as reported          0.01          (0.05)
                                                      ==========    ===========
       Basic earnings (loss) per share pro forma            0.01          (0.07)
                                                      ==========    ===========

The Company  estimates  the fair value of each stock option at the grant date by
using the Black-Scholes option-pricing model based on the following assumptions:

                                                 2002                 2001
                                            --------------       ---------------

       Risk free interest rate                   6%              5.10% - 6.02%
       Expected life                         5 - 10 years        9.75 - 10 years
       Expected volatility                       1.24                 1.49
       Dividend yield                            0.0                  0.0



STOCK INCENTIVES OUTSIDE THE PLAN

Options  have been  granted  outside of the plan with  approval  of the Board of
Directors for non-employees of the Company providing  consulting  services.  The
Company has  granted  options to purchase  741,667 and  1,766,179  and shares of
common  stock  outside of the Plan during the years ended  December 31, 2002 and
2001, respectively.


                                      F-16
<PAGE>

NEXLAND, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 11- OPTIONS AND WARRANTS, CONTINUED
----------------------------------------

During 2002, the Company  granted  options to consultants to purchase  shares of
common stock as follows:

The Company granted 741,667 options to certain consultants, 100,000 options vest
over a four-year  period and the remaining  641,667 options vested  immediately.
All of the granted options expire in 2012.

For options granted outside of the Plan, the Company  recorded the fair value of
each option at the grant date by using the Black-Scholes  option-pricing  model.
The fair value of these options  amounting to $122,981 was charged to operations
in 2002  and  $25,186  was  capitalized  as an asset  to be  amortized  over the
remaining consulting period.

During 2001, the Company  granted  options to consultants to purchase  shares of
common stock as follows:

Five advisory board members were granted  options to purchase  100,000 shares of
common stock at $0.30 per share.  An individual  advisor was granted  options to
purchase 100,000 shares of common stock at $0.35 per share and 500,000 shares of
common stock at $0.27 per share.  These options vested immediately and expire in
2011. The advisory board was terminated during 2001.

A management consultant was granted options to purchase 100,000 shares of common
stock at $0.45 per share. These options vested immediately and expire in 2011.

A financial  advisor was granted  options to purchase  500,000  shares of common
stock at $0.35 per share. These options vested in July 2002 and expire in 2011.

In return for legal  services,  a lawyer was granted  options to purchase 66,179
shares of common stock at $0.30 per share.  These options vested immediately and
expire in 2011.

For options granted outside of the Plan, the Company  recorded the fair value of
each option at the grant date by using the Black-Scholes  option-pricing  model.
The fair value of these options  amounting to $424,854 was charged to operations
in 2001.

WARRANTS
--------

At December 31, 2000, there were 3,089,203 warrants to purchase shares of common
stock.  These  warrants  expired in 2001.

The Company's predecessor  (WindStar) issued 1,600,000 units in exchange for new
certain  obligations in 1996.  Each unit consisted of one share of common stock,
one "Class A Warrant" and one "Class B Warrant."

In September 2000,  private  investors  exercised "Class A Warrants" to purchase
52,355  shares of the  Company's  common  stock at $1.00 per share.  No "Class B
Warrants" were exercised.

In March 2001,  private  investors  exercised  "Class A Warrants"  to purchase 7
shares of the Company's  common stock at $2.50 per share.  No "Class B Warrants"
were  exercised.  The  remaining  1,547,638  "Class  A  Warrants"  and  "Class B
Warrants" expired in August 2001.

                                      F-17
<PAGE>

NEXLAND, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 11-OPTIONS AND WARRANTS, CONTINUED

The stock  options  are  exercisable  over a period  determined  by the Board of
Directors,  but no  longer  than ten  years  after  the date  they are  granted.
Information with respect to stock options is as follows:

<TABLE>
<CAPTION>
                                                               2002                                2001
                                               ---------------------------------    --------------------------------
YEAR ENDED DECEMBER 31                         PRICE PER SHARE        AMOUNT        PRICE PER SHARE        AMOUNT
--------------------------                     ---------------    --------------    ---------------    -------------
<S>                                             <C>               <C>                <C>               <C>
Options outstanding at January 1                0.12 -0.927          6,653,179       0.12 - 0.927         2,298,000

Options granted                                  .08 - .32           2,086,667       0.25 -0.70           5,095,179

Options exercised/surrendered

Options forfeited                                .25 - .843         (1,085,500)      0.29 - 0.70           (740,000)
                                                                  ------------                          -----------
Options outstanding at December 31                                   7,654,346                            6,653,179

Options available for grant at December 31                             853,500                            1,113,000

Total reserved shares                                                8,507,846                            7,766,179
                                                                  ------------                          -----------
Options exercisable at December 31                                   6,915,096                            4,539,179
                                                                  ============                          ===========
</TABLE>


The following table summarizes  information  about stock options at December 31,
2002:
<TABLE>
<CAPTION>

                                     NUMBER OF        WEIGHTED                        NUMBER OF

                                      OPTIONS          AVERAGE        WEIGHTED        OPTIONS         WEIGHTED

                                    OUTSTANDING       REMAINING        AVERAGE     EXERCISABLE AT     AVERAGE

                                    DECEMBER 31,     CONTRACTUAL      EXERCISE      DECEMBER 31,      EXERCISE

RANGE OF EXERCISE PRICES               2002             LIFE            PRICE           2002           PRICE
----------------------------------  ------------     -----------      --------      ------------      --------

<S>                                  <C>                 <C>           <C>           <C>               <C>
$0.08 -$0.29                         4,218,167           8.84          $0.185        3,974,667         $0.185

$0.30 -$0.45                         2,541,179           8.60          $0.344        2,337,929         $0.346

$0843 - $0927                          895,000           7.69          $0.871          602,500         $0.874
                                  ------------                                    ------------
                                     7,654,346                                       6,915,096
                                  ============                                    ============
</TABLE>



The following table summarizes  information  about stock options at December 31,
2001:

<TABLE>
<CAPTION>

                                     NUMBER OF        WEIGHTED                        NUMBER OF

                                      OPTIONS          AVERAGE        WEIGHTED        OPTIONS         WEIGHTED

                                    OUTSTANDING       REMAINING        AVERAGE     EXERCISABLE AT     AVERAGE

                                    DECEMBER 31,     CONTRACTUAL      EXERCISE      DECEMBER 31,      EXERCISE

RANGE OF EXERCISE PRICES               2002             LIFE            PRICE           2002           PRICE
----------------------------------  ------------     -----------      --------      ------------      --------

<S>                                  <C>                 <C>           <C>           <C>               <C>
$0.12 -$0.29                         2,613,000           9.32          $0.222        2,251,750         $0.216
$0.30 -$0.45                         3,135,179           9.58          $0.344        1,836,179         $0.346
$0.843 - $0.927                        905,000           8.69          $0.871          451,250         $0.878
                                  ------------                                    ------------
                                     6,653,179                                       4,539,179
                                  ============                                    ============
</TABLE>

                                      F-18
<PAGE>
NEXLAND, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 12- COMMITMENTS AND CONTINGENCIES
--------------------------------------

Settlement Agreements
---------------------

During 2000,  the Company  issued  30,000 shares of common stock to Fred Schmid,
former CEO and President of WindStar,  for management  and financial  consulting
services, which were recorded by a charge to operations and credit to equity for
$134,375.  In  addition,  the Company  issued  39,213  shares of common stock to
Schmid and Erik Nelson, both of whom were former stockholders of WindStar,  as a
result of a late  filing  of the  Company's  Form 5-1  (penalty  shares),  which
resulted in a charge to operations and a credit to equity for $247,532.

On November 22, 2000, the Company  entered into a settlement  agreement in which
it agreed to dismiss a threatened  lawsuit  against  Fred  Schmid,  Fred Schmid,
Inc., Dale Runyon, a former principal  shareholder of WindStar,  and Erik Nelson
(WindStar  parties),  and to terminate Schmid's  consulting  agreement.  In this
connection,  Schmid and Nelson  agreed to escrow the  consulting  shares and the
penalty  shares with an Escrow  Agent and Dale Runyon  agreed to return  800,000
transfer  shares of common  stock that were issued to him in a prior  year.  The
settlement  agreement  provides  that the escrow agent hold the  above-mentioned
shares until such time as a Form S-i is declared  effective by the SEC.  After a
Form S-i is declared  effective,  the shares will be given to the Company.  Upon
completion of the stock  transfer and a Form S-i being declared  effective,  the
agreement  will be deemed to be fully  performed and the Company will record the
return of these shares. On January 28, 2002 the S-i was withdrawn.

During 2002,  the Company  cancelled the 800,000  transfer  shares,  35,463 Fred
Schmid and 18,750 Erik  Nelson  consulting  shares  totaling  854,213  shares of
common stock.

Legal Matters
-------------

The Company from time to time is a party to various  legal  proceedings.  In the
opinion of management,  none of the  proceedings are expected to have a material
impact on its financial position or results of operations.

Other Liabilities
-----------------

In  connection  with the reverse  merger in 1999,  the Company  assumed  various
current  liabilities.  As of  December  31,  2002  and  2001,  such  liabilities
aggregated $97,356, respectively.

Lease Commitments
-----------------

The  Company  leases  commercial  office  space in Florida and Canada and office
equipment  under lease  agreements,  which expire at various dates through 2003.
The leases  generally  contain  renewal options and require that the Company pay
for utilities, insurance, property taxes, rental expense and maintenance. Rental
expense  for 2002 and  2001  aggregated  approximately  $201,643  and  $141,000,
respectively.

Minimum rental obligations under all non-cancelable  operating leases with terms
of one year or more as of December 31 are as follows:

                        YEARS ENDING DECEMBER 31,       AMOUNT
                     ------------------------------  -----------
                              2003                   $    67,236
                              2004                             -
                              2005                             -
                                                     -----------
                                                     $    67,236
                                                     ===========


                                      F-19
<PAGE>

NEXLAND, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 13- OPERATIONS IN GEOGRAPHIC AREAS
---------------------------------------

Identifiable  assets are those  assets of the Company that are  identified  with
operations in each geographic area.


<TABLE>
<CAPTION>
                                                                                  ADJUSTMENTS
                                                                                      AND          CONSOLIDATED
      Year Ended December 31, 2002:             UNITED STATES       CANADA        ELIMINATIONS        TOTAL
--------------------------------------------   ---------------  --------------   --------------   --------------
<S>                                             <C>              <C>              <C>              <C>
Sales to unaffiliated customers                 $ 6,954,663      $    788,967     $          -     $  7,743,630
Transfers between geographic areas                  333,238                 -         (333,238)               -
                                               ---------------  --------------   --------------   --------------
Total sales                                     $ 7,287,901      $    788,967     $   (333,238)    $  7,743,630
                                               ===============  ==============   ==============   ==============

Operating profit (loss)                         $   715,665      $    (15,910)    $          -     $    699,755
                                               ===============  ==============   ==============   ==============

Identifiable assets as of December 31, 2002     $ 1,586,053      $     64,230     $    (96,078)    $  1,554,205
                                               ===============  ==============   ==============   ==============



      Year Ended December 31, 2001:             UNITED STATES       CANADA        ELIMINATIONS        TOTAL
--------------------------------------------   ---------------  --------------   --------------   --------------

Sales to unaffiliated customers                 $  2,927,322     $  1,152,848     $          -     $  4,080,170

Transfers between geographic areas                   679,584               -          (679,584)               -
                                               ---------------  --------------   --------------   --------------

Total sales                                     $ 3,606,906      $  1,152,848     $   (679,584)    $  4,080,170
                                               ===============  ==============   ==============   ==============

Operating loss                                  $(1,507,747)     $    (47,474)    $          -     $ (1,555,221)
                                               ===============  ==============   ==============   ==============

Identifiable assets as of December 31, 2001     $   516,244      $    127,348     $    (33,039)    $    610,553
                                               ===============  ==============   ==============   ==============


</TABLE>



NOTE 14- FAIR VALUE OF FINANCIAL INSTRUMENTS
--------------------------------------------

The carrying amount of cash, accounts receivables,  deposits,  accounts payable,
other  payables and  debentures  approximates  fair value because of their short
maturities.


NOTE 15- GOING CONCERN
----------------------

During the years ended  December  31, 2002 and 2001,  the Company  incurred  net
income (losses) of $338,678 and ($1,667,202),  has a working capital  deficiency
of $503,032 and  $1,312,863 and has $222,095 and $39,901 of cash at December 31,
2002 and 2001,  respectively,  all of which raises  substantial  doubt about the
Company's ability to continue as a going concern.

                                      F-20
<PAGE>
NEXLAND, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 15- GOING CONCERN, CONTINUED
---------------------------------

The accompanying  consolidated  financial statements were prepared assuming that
the  Company  will  continue  as a  going  concern.  This  basis  of  accounting
contemplates  the recovery of the Company's  assets and the  satisfaction of its
liabilities in the normal course of operations. Since inception, the Company has
been involved in the development of its Internet sharing devices  organizational
infrastructure,  and the  performance  of preliminary  marketing and sales.  The
Company's  ultimate  ability to attain  profitable  operations is dependent upon
obtaining  additional  financing  and to  achieve a level of sales  adequate  to
support its cost structure.

Management plans to undertake a comprehensive  review of its ongoing business to
substantially  increase  sales  through  current  channels and develop new sales
opportunities.

Accordingly,  there are no  assurances  that the Company will be  successful  in
achieving the above plans, or that such plans,  if consummated,  will enable the
Company to obtain profitable operations or continue as a going concern.


NOTE 16- SUBSEQUENT EVENTS
--------------------------

The Company has signed a non-binding letter of intent to be acquired by Symantec
Corporation  for  $21,700,000 in cash.  The Company has had a joint  development
relationship  with  Symantec  for two years.  Symantec  currently  licenses  the
Company's technology for use in the Symantec  FirewallNPN  Appliance series that
combines  firewall,  VPN,  networking and other capabilities in a single unit to
meet the unique needs of remote offices, branch offices and small businesses.

Completion  of the  proposed  transaction  is  subject to  numerous  conditions,
including  Symantec's due diligence  investigation,  approval by both companies'
boards of  directors  negotiation  and  execution  of a  definitive  acquisition
agreement and approval of the Company's stockholders, among other conditions.

                                      F-21

<PAGE>

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

      None

                                       22

<PAGE>
                                    PART III


ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      Our directors and executive  officers and their ages as of March 18, 2003,
are as follows:

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

Gregory S.  Levine           36      President, Chairman of the Board
                                     of Directors

Martin E.  Dell'Oca          40      Chief Financial Officer, Secretary
                                     and Director

I. Daniel Sultan             52      Director


TERM OF OFFICE

      The terms of  office  of the  current  directors  continue  until the next
annual meeting of shareholders, which the bylaws of our Company provide shall be
held on the third  Friday of November of each year;  officers are elected at the
annual meeting of the Board of Directors,  which immediately  follows the annual
meeting of shareholders.

      The following is a brief  description  of the  background of the directors
and executive officers of our Company.

      GREGORY  SCOTT  LEVINE,  President and Chairman of our Board of Directors,
received  his  Bachelor  of Arts  Degree in Speech,  Communication  and  English
Writing from the  University of Florida in 1989. In 1991, Mr. Levine entered the
computer  industry  as  Purchasing  Manager  with All  Exim,  located  in Miami,
Florida,  where he was employed until 1995. From 1995 to 1997, Mr. Levine worked
as a  self-employed  consultant.  In 1997,  Mr. Levine was hired as the Business
Unit  Manager  for Mass  Storage and  Components  for  Computer  2000/AmeriQuest
Technologies  where he supervised the business unit and was associated  with the
development of the OEM Memory Broker Desk. In 1998, when C2000 sold  AmeriQuest,
Mr. Levine opened his own consulting  firm, the HG America  Group,  Inc.,  which
served major  industry  telephone  companies  (AT&T,  GTE, Bell  Atlantic)  with
Internet  sharing and firewall  products.  Mr. Levine operated HG America Group,
Inc. until he joined our Company in December,  1998.  None of Mr. Levine's prior
employers are affiliated with our Company.

      MARTIN E.  DELL'OCA,  became Chief  Financial  Officer and a member of the
Board of Directors of our Company in May 2000.  During March and April 2000, Mr.
Dell'Oca  was a  self-employed  consultant  to our  Company.  From  May  1998 to
December 1999, Mr.  Dell'Oca  served as Chief  Financial  Officer of CHS Dinexim
after Dinexim was sold to CHS. From 1995 to May 1998, Mr. Dell'Oca was the Chief
Financial Officer of Dinexim.  Mr. Dell'Oca received his undergraduate degree in
Marine  Science and Economics from the University of Miami in 1985 and a Masters
Degree in International Business from Florida International University in 1989.

      ISRAEL DANIEL  SULTAN,  is the founder of Nexland,  Inc, and member of the
Board of  Directors.  Mr.  Sultan began his career as a Nuclear  Physics  System
Programmer at the College de France  Laboratory of Nuclear Physics.  In 1973, he
started a software  training center in France,  which is still in business today
under the direction of his wife. In 1990,  Mr. Sultan ran IPC France,  a startup
PC  manufacturer,  which grew to obtain 5% of the French  market in three years,
prior to being sold in 1993. In 1994,  Mr.  Sultan  founded  Nexland,  LP and is
currently  Technical  Director of Nexland France and a principal  shareholder of
our Company.  Mr.  Sultan  assisted our Company in becoming the first company to
offer a digital  subscriber  line and cable modem sharing  device based upon the
Internet protocol of PPPoE (point-to-point over ethernet). Mr. Sultan earned his
Ph.D. in computing from the University of Paris, Jussieu, in 1986.

      Mr.  Sultan  became  Chief  Technology  Officer  in  January,   2003  with
responsibility of all research and development of the Company.


EXECUTIVE COMPENSATION

      The following table shows all the cash  compensation  paid by our Company,
as well as certain other  compensation paid or accrued,  during the fiscal years
ended  December 31, 2002 and 2001 to our  Company's  two highest paid  executive

                                       23
<PAGE>

officers. No restricted stock awards,  long-term incentive plan payouts or other
types of  compensation,  other  than the  compensation  identified  in the chart
below, were paid to these executive officers during these fiscal years. No other
executive  officer earned a total annual salary and bonus for any of these years
in excess of $100,000.


ITEM 10.  EXECUTIVE COMPENSATION

      The  following  table sets forth  compensation  for the fiscal  year ended
December 31, 2001 for our current executive officers:

<TABLE>

                       SUMMARY COMPENSATION TABLE

<CAPTION>

                        ANNUAL COMPENSATION                                   LONG-TERM COMPENSATION
                  -----------------------------     ----------------------------------------------------------------------
                                                       AWARDS                                PAYOUTS
                                                      ----------            ----------------------------------------------
(A)                (B)      (C)      (D)             (E)                 (F)           (G)         (H)             (I)
                                                                     RESTRICTED    SECURITIES
NAME & PRINCIPAL                                 OTHER ANNUAL           STOCK      UNDERLYING      LTIP         ALL OTHER
COMPENSATION       YEAR   SALARY($)   BONUS($)   COMPENSATION($)       AWARDS        OPTIONS     PAYOUTS      COMPENSATION
----------------  ------ ------------ --------  ----------------     ----------   -----------    -------      ------------
<S>                <C>       <C>          <C>            <C>                <C>   <C>                <C>       <C>

Greg Levine        2002      $150,000     -0-                -0-            -0-    300,000(1)        -0-        $46,500(2)
   President and   2001      $150,000     -0-                -0-            -0-    400,000(3)        -0-       $126,500(4)
   Chairman of     2000      $100,000     -0-            $10,000            -0-    700,000(5)        -0-              -0-
   the Board

Martin Dell'Oca    2002      $150,000     -0-                -0-            -0-    300,000(6)        -0-        $46,500(7)
  Chief            2001      $150,000     -0-                -0-            -0-    400,000(8)        -0-        $84,500(9)
  Financial        2000   $92,667(10)     -0-                -0-   $500,000(11)   400,000(12)        -0-               -0-
  Officer and
  Secretary
</TABLE>

(1)   Mr. Levine received 300,000 vested options in 2002.

(2)   Represents   the  value,   at  fiscal  year  end,  of  unexercised
      in-the-money options granted in 2002.

(3)   Mr. Levine received 400,000 vested options in 2001.

(4)   Represents   the  value,   at  fiscal  year  end,  of  unexercised
      in-the-money options granted in 2001.

(5)   Mr. Levine received  700,000 options in 2000, of which 587,500 are
      currently  vested  and,  commencing   September  6,  2001,  37,500
      options vest each year for a 4-year period.

(6)   Mr. Dell'Oca received 300,000 vested options in 2002.

(7)   Represents   the  value,   at  fiscal  year  end,  of  unexercised
      in-the-money options granted in 2002.

(8)   Mr. Dell'Oca received 400,000 vested options in 2001.

(9)   Represents   the  value,   at  fiscal  year  end,  of  unexercised
      in-the-money options granted in 2001.

(10)  Mr.   Dell'Oca   received   $76,000  as  salary  and  $16,667  for
      consulting  services rendered to our Company from March 1 to April
      30, 2000, prior to his position as Chief Financial Officer.

(11)  Mr.  Dell'Oca  received  200,000  shares  of  common  stock of our
      Company on May 1, 2000.

(12)  Mr.  Dell'Oca  received  400,000 options in 2000, of which 287,500
      are currently  vested and,  commencing  September 6, 2001,  37,500
      options vest each year for a 4-year period.

EMPLOYMENT AGREEMENTS

      On May 1, 2000, our Company entered into a five-year  employment agreement
with Mr.  Levine.  Pursuant  to this  agreement,  Mr.  Levine is employed as the
President of our Company.  Mr. Levine has an annual base salary of $150,000.  In
addition, Mr. Levine is entitled to incentive bonus compensation in an amount to
be  determined  by our  Board of  Directors.  In the  event  that  Mr.  Levine's
employment  is  terminated  by  our  Company  without  "cause,"  other  than  in
connection with a change of control,  he is entitled to receive his salary for a
period of 12 months from the date of  termination.  The agreement  provides that
Mr. Levine will not compete with our Company  during his  employment and for one
year thereafter.

      On May 1, 2000, our Company entered into a two-year  employment  agreement
with Mr. Dell'Oca with automatic  annual  renewals.  Pursuant to this agreement,
Mr.  Dell'Oca is employed as the Chief  Financial  Officer of our  Company.  Mr.

                                       24
<PAGE>

Dell'Oca  has an annual base  salary of  $150,000.  In  addition,  Mr.  Dell'Oca
received  200,000  shares of  common  stock of our  Company.  Mr.  Dell'Oca  has
piggy-back  registration rights with respect to his stock in our Company. In the
event that Mr.  Dell'Oca's  employment  is terminated by our Company on or after
May 1, 2001 without  "cause," other than in connection with a change of control,
he is  entitled to receive his salary for a period of 12 months from the date of
termination.  The agreement provides that Mr. Dell'Oca will not compete with our
Company during his employment and for one year thereafter.

      The following table contains  information  regarding  options exercised in
the year  ended  December  31,  2002 and the  number of  shares of common  stock
underlying  options  held as of  December  31, 2002 by our  Company's  executive
officers.

<TABLE>

                    AGGREGATED OPTIONS/SAR EXERCISES

                        IN LAST FISCAL YEAR AND
                 FISCAL YEAR END OPTIONS/SAR VALUES(1)
<CAPTION>

                                                 NUMBER OF SECURITIES       VALUE OF UNEXERCISED
                       SHARES                   UNDERLYING UNEXERCISED          IN-THE-MONEY
                     ACQUIRED ON    VALUE           OPTIONS/SAR'S              OPTIONS/SARS'S
NAME                  EXERCISE     REALIZED($)   AT FISCAL YEAR END(1)       AT FISCAL YEAR END(2)
<S>                      <C>         <C>      <C>                                <C>

Gregory S. Levine        -0-         -0-      Exercisable   1,325,000            $91,500
                         -0-         -0-      Unexercisable    75,000                 --

Martin Dell'Oca          -0-         -0-      Exercisable   1,025,000            $70,500
                         -0-         -0-      Unexercisable    75,000                 --
</TABLE>


---------------------------------
(1)   These  grants  represent  options to  purchase  common  stock.  No
      SAR's have been granted.


(2)   The value of the unexercised  in-the-money options were calculated
      by  determining  the  difference  between the fair market value of
      the common stock  underlying the options and the exercise price of
      the options as of December 31, 2002.


      The following table contains information regarding grants of stock options
made  during  the  year  ended  December  31,  2002 to our  Company's  executive
officers.

<TABLE>

OPTION/SAR GRANTS TABLE
<CAPTION>


                                                    % TOTAL
                     NO. OF SECURITIES            OPTIONS/SAR'S
                         UNDERLYING                GRANTED TO
                    OPTIONS/SARS'S GRANTED      EMPLOYEES IN FISCAL    EXERCISE OR BASE PRICE
       NAME                  (#)                    YEAR(%)             ($ PER SHARE)            EXPIRATION DATE
------------------  ----------------------      -------------------   ------------------------  -----------------
<S>                        <C>                       <C>                      <C>               <C>

Gregory S. Levine          150,000                   5.8%                     $0.130            May 5, 2012
                           150,000                   5.8%                     $0.080            November 1, 2012

Martin Dell'Oca            150,000                   5.8%                     $0.130            May 5, 2012
                           150,000                   5.8%                     $0.080            November 1, 2012
</TABLE>


COMPENSATION OF DIRECTORS

      The shareholders elect all directors for a two-year term. No directors are
paid for their services on the Board, except that non-employee directors will be
granted  options to purchase  shares of our Company's  common stock on an annual
basis.  These  options have an exercise  price equal to the fair market value of
such stock on the date of grant,  are  immediately  exercisable and have up to a
ten-year term.


STOCK INCENTIVE PLAN

      On September 6, 2000, our Company adopted a Stock  Incentive  Plan,  which
provides  for the  granting of 6,000,000  stock  options and stock  appreciation
rights  to key  employees.  Options  granted  may  be  either  "incentive  stock
options,"  within the meaning of Section 422A of the Internal  Revenue  Code, or
non-qualified options.

                                       25
<PAGE>


COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES ACT OF 1934

      Section  16(a)  of the  Securities  Exchange  Act  of  1934  requires  our
directors  and  executive  officers,  and  persons  who own  more  than 10% of a
registered  class of our  equity  securities  to file  with the  Securities  and
Exchange  commission  initial  reports of  ownership  and  reports of changes in
ownership  of  Common  Stock  and  other  of our  equity  securities.  Officers,
directors and greater than 10%  shareholders  are required by SEC regulations to
furnish us copies of all Section 16(a) forms they file.

      To our  knowledge,  based solely on a review of the copies of such reports
furnished to us and written  representations that no other reports were required
during the fiscal year ended  December  31,  2002,  [ALL  SECTION  16(A)  FILING
REQUIREMENTS  APPLICABLE  TO  OUR  OFFICERS,  DIRECTORS  AND  GREATER  THAN  10%
BENEFICIAL OWNERS WERE COMPLIED WITH.]

                                       26
<PAGE>


ITEM  11.   SECURITY   OWNERSHIP  OF  CERTAIN   BENEFICIAL   OWNERS  AND
MANAGEMENT

      The  following  table  sets  forth  certain  information  with  respect to
beneficial  ownership of our common  stock as of March 18, 2003,  as to (i) each
person (or group of affiliated  persons)  known by us to own  beneficially  more
than 5% of our outstanding common stock, (ii) each of our directors,  (iii) each
of our executive officers,  and (iv) all directors and executive officers of our
Company as a group.

      For the purpose of this  table,  beneficial  ownership  is  determined  in
accordance with the rules of the Securities and Exchange Commission.  The number
of shares beneficially owned by a person includes shares of common stock subject
to options held by that person that are  currently  exercisable  or  exercisable
within 60 days of March 18, 2003.  Shares issuable  pursuant to such options are
deemed outstanding for computing the percentage  ownership of the person holding
such options,  but are not deemed  outstanding for the purposes of computing the
percentage ownership of each other person.

                                                        COMMON STOCK
                                                      BENEFICIALLY OWNED
               NAME AND ADDRESS               ----------------------------------
               OF BENEFICIAL OWNER               NUMBER            PERCENTAGE(1)
               -------------------               ------            -------------
               I.  Daniel Sultan                13,711,251(2)             39.37%
               P.O. Box 3783
               Hallandale, Florida 33008

               Andre Chouraqui                   5,044,500                14.49%
               Barker Road #2, House #9
               The Peak, Hong Kong

               Laurent Solomon(4)                5,044,500                14.49%
               P.O.  Box 9096
               Daytona Beach, Florida  32120

               Greg Levine                       3,622,250(5)(6)          10.40%
               P.O.  Box 693267
               Miami, Florida 33169

               Yves Many(7)                      2,522,250                 7.24%
               P.O.  Box 693267
               Miami, Florida 33169

               Martin Dell'Oca                   1,000,000(8)              2.87%
               385 Hampton Lane
               Key Biscayne, FL 33149

               All directors and executive      18,333,501                52.65%
               officers as a gorup (3 persons)

(1)   Applicable percentage of ownership is based on 34,824,172 shares of common
      stock outstanding as of March 17, 2003,  together with applicable  options
      for each  shareholder.  Beneficial  ownership is  determined in accordance
      with  the  rules  of the  Commission  and  generally  includes  voting  an
      investment  power  with  respect  to  securities.  Shares of common  stock
      subject to options that are currently exercisable or exercisable within 60
      days of March 18, 2003 are deemed to be  beneficially  owned by the person
      holding  such  options  for the purpose of  computing  the  percentage  of
      ownership  of such  person,  but are not  treated as  outstanding  for the
      purpose of computing the  percentage  ownership of any other  person.  The
      common stock is the only  outstanding  class of equity  securities  of our
      Company.

(2)   Includes  12,414,884  shares that are held of record by BH Investor Group,
      LLC. This entity is controlled by Israel Daniel Sultan.

(3)   Includes  options owned by Mr. Sultan to acquire  1,100,000  shares of our
      Company's common stock.

(4)   These shares are held of record by Fast-Access  Group, LLC. This entity is
      controlled by Laurent Solomon.

(5)   Includes  2,522,250  shares that are held of record by Broadband  Investor
      Group, LLC. This entity is controlled by Greg Levine, our President.

(6)   Includes  options owned by Mr. Levine to acquire  1,100,000  shares of our
      Company's common stock..

(7)   These shares are held of record by High-Speed Venture, LLC. This entity is
      controlled by Yves Many.

                                       27
<PAGE>

(8)   Includes 200,000 shares of our Company's common stock that were granted to
      Mr. Dell'Oca pursuant to his employment  agreement.  Also includes options
      to acquire 800,000 share of our Company's common stock.

      To the knowledge of our management,  there are no present  arrangements or
pledges of securities of our Company, which may result in a change in control of
our Company other than the possible sale of the Company to Symantec mentioned in
Item 4.

                                       28
<PAGE>

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      We believe that all prior  related  party  transactions  have been entered
into upon terms no less  favorable to us than those that could be obtained  from
unaffiliated  third parties.  Our reasonable  belief of fair value is based upon
proximate  similar  transactions  with third  parties or  attempts to obtain the
consideration from third parties.  All ongoing and future transactions with such
persons,  including any loans or compensation to such persons,  will be approved
by a majority of disinterested members of the Board of Directors.

      Our Company has not engaged in any transactions  with management or others
in which the amount involved exceeds $60,000 other than the following:

      On  November  6, 2002  multiple  agreements,  as  described  below in more
detail,  were signed to renegotiate  related party accounts  payable balances to
Promissory  Notes,  purchase assets and to grant to Nexland,  Inc. the option to
purchase worldwide distribution rights and all claims of technology development.


PROMISSORY NOTE AGREEMENTS

      An Agreement and Release was signed with  Smerwick,  Ltd., a related party
and major  stockholder,  to release an account  payable  balance of  $313,016 in
consideration  of a cash payment of $150,000  and the  execution of a Promissory
Note in the amount of $163,016.  The Promissory Note accrues  interest at a rate
of 8% per annum  with  principal  and  interest  payments  of $7,500  monthly in
arrears.

      An Agreement and Release was signed with Longfield,  Ltd., a related party
and major  stockholder,  to release an account  payable  balance of  $306,465 in
consideration  of a cash payment of $150,000  and the  execution of a Promissory
Note in the amount of $156,465.  The Promissory Note accrues  interest at a rate
of 8% per annum  with  principal  and  interest  payments  of $7,500  monthly in
arrears.

PURCHASED ASSETS AGREEMENT

      An Asset  Purchase  Agreement  was signed with  Nexland  Asia  Limited,  a
related party and major stockholder, to purchase all of the properties,  rights,
interests and other tangible and intangible assets of Nexland Asia Limited.

      In  consideration  of the purchase,  a Promissory Note was executed by our
Company in the amount of $470,000  bearing an interest rate of 6% per annum. The
entire  principal  amount and all accrued  interest is due and payable  upon the
earlier  of (i)  the  tenth  anniversary  date  of the  note  or  (ii) a sale of
substantially  all of the assets of Nexland,  Inc.  The  principal  amount shall
become immediately due and payable upon any bankruptcy  proceedings or change of
control.  In addition,  if our Company  records,  at the end of any fiscal year,
accumulated  shareholder equity in excess of two million dollars, the note shall
become due and payable 45 days following the filing of the corresponding  report
with the Securities and Exchange Commission.

IRREVOCABLE OPTION AGREEMENT

      An Irrevocable Option Agreement was signed with Nexland,  S.A. to purchase
all of the assets of Nexland,  S.A.  upon the election of Nexland,  Inc.  Assets
shall include all of the  properties,  rights,  interests and other tangible and
intangible  assets of Nexland,  S.A. Our Company's  Internet  Sharing Device was
initially  developed by Nexland S.A. in France.  In 1997,  Nexland,  Inc.  began
enhancing the core technology and developed various components.

      As consideration for the option,  Nexland, Inc. delivered to Nexland, S.A.
25,000 newly-issued shares of our Company's common stock. The Company recognized
$4,249 in expenses relating to the issuance of the common stock.

      In the event our Company elects to exercise its option, Nexland, Inc. will
deliver to Nexland,  S.A. 1,475,000  newly-issued shares of our Company's common
stock as consideration for such exercise.

                                       29

<PAGE>

      During 2002, our Company issued the following  options to purchase  shares
of common stock:

<TABLE>
<CAPTION>

DATE OF ISSUANCE         RECIPIENT        NUMBER OF OPTIONS   EXERCISE PRICE    EXPIRATION DATE
----------------         ---------        -----------------   --------------    ---------------
<S>                     <C>                    <C>               <C>            <C>

May 5, 2002             I. Daniel Sultan       150,000           $0.143         May 5, 2012
May 5, 2002             Gregory Levine         150,000           $0.130         May 5, 2012
May 5, 2002             Martin Dell'Oca        150,000           $0.130         May 5, 2012

November 1, 2002        I. Daniel Sultan       150,000           $0.090         November 1, 2012
November 1, 2002        Gregory Levine         150,000           $0.080         November 1, 2012
November 1, 2002        Martin Dell'Oca        150,000           $0.080         November 1, 2012
</TABLE>

      In January 2001,  our Company  agreed to pay  consulting  fees of $150,000
annually to I. Daniel  Sultan,  of which our  Company  paid  $52,000 in cash and
accrued $98,000 of these consulting fees. During 2002, the Company paid $139,000
in cash and accrued $11,000 of these consulting fees (total accrual is $109,000)

                                       30

<PAGE>

ITEM 13.  EXHIBITS AND  FINANCIAL  STATEMENT  SCHEDULES,  AND REPORTS ON
FORM 8-K

      (a)(1)(2)  FINANCIAL  STATEMENTS.  See  index  to  consolidated  financial
statements and supporting schedules.

      (a)(3)    EXHIBITS.

      The following exhibits are filed as part of this registration statement:

      The exhibits listed below are required by Item 601 of Regulation S-B. Each
management contract or compensatory plan or arrangement  required to be filed as
an exhibit to this Form 10-KSB has been identified.

      The following  documents  are  incorporated  herein by reference  from the
Registrant's  Form S-1  Registration  Statement  filed with the  Securities  and
Exchange  Commission (the  "COMMISSION"),  Commission file #333-3074 on April 1,
1996 and declared effective by the Commission August 16, 1996:

NUMBER      DOCUMENT
---------   --------------------------------------------------------------------
3.1         Articles of Incorporation.

3.2         Amended Articles of Incorporation.

3.3         Bylaws of the Company.

4.1         Specimen certificate for Common Stock.

4.2         Specimen certificate for Class A Redeemable Warrants.

4.3         Specimen certificate for Class B Redeemable Warrants.

      The following  documents  are  incorporated  herein by reference  from the
Registrant's Form 10-K Annual Report for the period ended December 31, 1997:

99.1        Stock Purchase Agreement.

99.2        Employment Agreement with Fred Schmid.

      The following  documents  are  incorporated  herein by reference  from the
Registrant's Form 10-K Annual Report for the period ended December 31, 1998:

3.3         Amended Articles of Incorporation dated December 31, 1997.

3.4         Amended Articles of Incorporation dated April 15, 1998.

      The following  documents  are  incorporated  herein by reference  from the
Registrant's Post Effective Amendment 1 to Form S-1 Registration Statement filed
with the  Commission,  Commission  file  #333-3074  on June 17,1998 and declared
effective by the Commission June 19,1998:

3.3         Amended Articles of Incorporation dated December 31, 1997.

3.4         Amended Articles of Incorporation dated April 15, 1998.

            The following  documents are  incorporated  herein by reference from
            the Registrant's Form 8-K Report filed on December 3, 1999:

2.          Acquisition Agreement and Exhibits attached thereto.

      The  following   documents  are   incorporated   by  reference   from  the
Registrant's Post-Effective Amendment 2 to Form S-1 Registration Statement filed
with the Commission, Commission file #333-3074 on April 3, 2000.

10.1        March 14, 2000,  Consulting  Agreement  between Nexland S.A. and the
            Company.

10.2        November 17, 1999, Mutual Non-Competition Agreement between Nexland,
            S.A. and the Company.

                                       31

<PAGE>

10.3        November 17, 1999 Co-Operation Agreement between Smerwick,  Ltd. and
            the Company.

            The  following  documents  are  incorporated  by reference  from the
            Registrant's  Form 8K filed  with the  Commission,  Commission  file
            #333-3074 on May 12, 2000.

10.4        Employment Contract of Enrique Dillon.

10.5        Employment Contract of Martin Dell'Oca.

      The  following   documents  are   incorporated   by  reference   from  the
Registrant's Form 10-K filed with the Commission on May 14, 2001:

4.4         2000 Stock Incentive Plan.

10.6        Promissory  Note dated  August 1, 2000,  by the  Company  payable to
            Israel D. Sultan.

10.7        Conversion  Agreement  dated  October 26,  2000,  between  Israel D.
            Sultan and the Company.

10.8        Line of Credit  Agreement  dated  March 19,  2001,  between  Cornell
            Capital Partners, L.P. and the Company.

10.9        Registration  Rights Agreement dated March 19, 2001, between Cornell
            Capital Partners, L.P. and the Company.

10.10       Escrow  Agreement  dated March 19,  2001,  between  Cornell  Capital
            Partners,  L.P.,  the Company,  Butler  Gonzalez LLP and First Union
            National Bank.

10.11       Form of Convertible Debenture.

10.12       Consulting   Services   Agreement  dated  March  19,  2001,  between
            Yorkville Advisors Management, L.L.C. and the Company.

10.13       Securities  Purchase  Agreement  dated March 19,  2001,  between the
            investors on Schedule I attached  thereto (the  "Investors") and the
            Company.

10.14       Registration  Rights  Agreement  dated March 19,  2001,  between the
            Investors and the Company.

10.15       Placement Agent  Agreement  dated March 19, 2001,  between May Davis
            Group, Inc. ("MAY DAVIS") and the Company.

10.16       Escrow  Agreement  dated  March 19,  2001,  between  May Davis,  the
            Company and First Union National Bank.


      (b)  REPORTS ON FORM 8-K.

      None

                                       32

<PAGE>

                                   SIGNATURES

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

Date: April 3, 2003                NEXLAND, INC.


                                     By: /s/ Gregory S. Levine
                                         ---------------------------
                                         Gregory S. Levine
                                         President


      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
registrant and in the capacities and on the dates indicated.

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

/s/ Gregory S. Levine       President and Director        April 3, 2003
-----------------------
Gregory S. Levine


/s/ Martin E. Dell'Oca      Chief Financial Officer       April 3, 2003
-----------------------     and Director
Martin E. Dell'Oca

/s/ Daniel Sultan           Director                      April 3, 2003
-----------------------
I. Daniel Sultan

                                       33

<PAGE>

                                  CERTIFICATION
                             PURSUANT TO SECTION 302


I, Gregory S. Levine, certify that:

1. I have reviewed this Annual Report on Form 10-KSB of Nexland, Inc.;

2. Based on my  knowledge,  this  quarterly  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 quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  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 quarterly 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 by others  within  those
      entities, particularly during the period in which this quarterly 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
      quarterly report (the "Evaluation Date"); and

      c)  presented  in  this  quarterly   report  our  conclusions   about  the
      effectiveness  of the  disclosure  controls  and  procedures  based on our
      evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  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
quarterly  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:  April 1, 2003                     By: /s/ Gregory S. Levine
                                             ---------------------
                                             President
                                       34

<PAGE>

                                  CERTIFICATION
                             PURSUANT TO SECTION 302


I, Martin E. Dell'Oca, certify that:

1. I have reviewed this Annual Report on Form 10-KSB of Nexland, Inc.;

2. Based on my  knowledge,  this  quarterly  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 quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  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 quarterly 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 by others  within  those
      entities, particularly during the period in which this quarterly 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
      quarterly report (the "Evaluation Date"); and

      c)  presented  in  this  quarterly   report  our  conclusions   about  the
      effectiveness  of the  disclosure  controls  and  procedures  based on our
      evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  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
quarterly  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:  April 1, 2003                     By: /s/ Martin E. Dell'Oca
                                             ----------------------
                                             Chief Financial Officer

                                       35

<PAGE>

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection  with the Annual Report of Nexland,  Inc. (the  "Company") on Form
10-KSB for the period ended  December 31, 2002 as filed with the  Securities and
Exchange Commission on the date hereof (the "Report"),  each of the undersigned,
in the capacities and on the dates indicated below, hereby certifies pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that to his knowledge:

1. The Report fully complies with the  requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and

2. The  information  contained in the Report  fairly  presents,  in all material
respects, the financial condition and results of operation of the Company.



/s/ Gregory S. Levine
---------------------
Gregory S. Levine
President

                                       36

<PAGE>

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection  with the Annual Report of Nexland,  Inc. (the  "Company") on Form
10-KSB for the period ended  December 31, 2002 as filed with the  Securities and
Exchange Commission on the date hereof (the "Report"),  each of the undersigned,
in the capacities and on the dates indicated below, hereby certifies pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that to his knowledge:

1. The Report fully complies with the  requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and

2. The  information  contained in the Report  fairly  presents,  in all material
respects, the financial condition and results of operation of the Company.



/s/ Martin E. Dell'Oca
----------------------
Martin E. Dell'Oca
Chief Financial Officer

                                       37