<PAGE>   1
 
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                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D. C. 20549
                            ------------------------
 
                                   FORM 10-K
 
            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
        SECURITIES EXCHANGE ACT OF 1934
 
                 FOR THE FISCAL YEAR ENDED: SEPTEMBER 30, 1997
                         COMMISSION FILE NO. 333-06121
 
                            COMPRESSENT CORPORATION
                       (FORMERLY CABLE-SAT SYSTEMS, INC.)
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
                            ------------------------
 
<TABLE>
<S>                                           <C>
                   FLORIDA                                      65-0581474
           (STATE OF INCORPORATION)                 (IRS EMPLOYER IDENTIFICATION NO.)
 
 2105 HAMILTON AVENUE, SUITE 140 SAN JOSE, CA                     95125
   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                     (ZIP CODE)
</TABLE>
 
                   REGISTRANT'S TELEPHONE NO. (408) 879-6600
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                                      NONE
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
 
                                  COMMON STOCK
                       REDEEMABLE STOCK PURCHASE WARRANTS
 
     Check 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 past 12
months (or such shorter period that the Registrant was required to file such
reports); and, (2) has been subject to such filing requirements for the past 90
days.  Yes [ ]     No[X]
 
     Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.  [X]
 
     The aggregate market value of the voting stock held by non-affiliates of
the Registrant at December 1, 1997 was approximately $33,400,000.
 
     State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date. 5,042,202 shares of common
stock, as of December 1, 1997.
 
                                   DOCUMENTS
                           INCORPORATED BY REFERENCE
 
     REGISTRATION STATEMENT ON FORM S-1, FILE NUMBER 333-06121 ARE INCORPORATED
BY REFERENCE.
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<PAGE>   2
 
     This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act
of 1934. All forward-looking statements involve risks and uncertainties. Actual
results could differ materially from those discussed in the forward-looking
statements as a result of many factors. Readers should pay particular attention
to the risk factors set forth in the section of this report entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Risk Factors."
 
                                     PART I
 
ITEM 1. BUSINESS
 
     Compressent Corporation (the "Company") develops digital image coding and
data compression software products that will enable the facsimile transmission
of color images from computers equipped with the Company's software programs.
 
     Facsimile transmission, better known as "fax", has become a major means of
communication in today's business community. A fax machine can be found in
almost every organization and is a standard office tool.
 
     Facsimile machines convert text or graphics into digital form that can be
electronically transmitted and received across telephone lines. When sending
images, fax machines operate as scanners, converting images into a series of
dots that are then digitally encoded. The digital signal is then converted to a
voiceband ("audio") signal for transmission over the telephone network. When
receiving images, the machines affix images to paper through a variety of means.
The image is converted to a series of dots (either by scanning, in the case of a
fax machine, or electronically, in the case of a computer). Many technologies
employed in facsimile imaging are similar to those used in computer printers and
photocopiers.
 
     Individual personal computers can be utilized as fax machines by the
addition of special circuitry known as a modem with fax capabilities. This
allows the computer to send and receive faxes directly without utilizing a
free-standing fax machine. Using a computer as a fax machine requires that a
telephone line be available during fax transmission and receiving. A fax
received directly by a computer can be immediately viewed on screen or stored
for later viewing. If the computer is connected to a printer, the fax
transmission can be printed.
 
     A communications software program controls the exchange of information
between the computer and the remote computer or facsimile machine at the other
end of the phone line. Current communications software packages do not allow a
computer generated fax to be sent other than in black and white.
 
     The communications software operates in accordance with international
standards adopted by an international telecommunications standard-making
organization. These standards assure that faxes can be sent and received all
over the world regardless of the fax machine manufacturer or publisher of the
fax software.
 
     The Company believes that the demand for color fax capabilities will be
substantial for the following reasons:
 
     1. The price of color printers is declining rapidly. The Company believes
        this will result in color printers becoming the standard for printers
        used with stand alone or single user personal computers rather than a
        high priced luxury.
 
     2. The price of color scanners is declining, making them reasonably
        available to users of personal computers.
 
     3. The Windows 95 operating system has built-in color management
        capabilities, making color easier to use in applications.
 
     4. The latest computers are generally equipped with faster processors and
        larger storage devices. This makes it more practical to work with
        image-intensive applications.
 
     5. Significant growth in the small office/home office sector and personal
        home use.
 
     The Company believes that the above trends will result in demand for color
technology, including faxes.
 
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  The Company's Color Fax Products
 
     CHROMAFAX, is a communications software program designed to allow facsimile
transmission of color images. It incorporates the new international standard for
color faxing established by the International Telecommunications Union (ITU) and
includes the Joint Photographic Experts Group (JPEG) standard for image
compression. It enables users to send and receive color faxes to and from their
personal computer.
 
     To the Company's knowledge, CHROMAFAX is the first commercially available
fax product that is compliant with the international color fax standard
recommended in 1995 by the ITU. The standard ensures compatibility with future
standards-based fax applications and machines, regardless of their manufacturer.
Thus, users can be assured that their fax software package will continue to work
for both color and black and white images.
 
     A color page, when scanned into a color fax program, results in a very
large amount of raw data unless it is compressed. Sizes upwards of 10 megabytes
are not uncommon. To manage this data within a computer's memory and to transmit
it in a reasonable amount of time, images are usually compressed, and
uncompressed by the receiver. The ITU color fax standard specifies how this data
is to be managed, transmitted and decoded. This specification imposes certain
limitations on color fax software and hardware. The standard requires the use of
JPEG compression. This JPEG compression algorithm specified in the standard has
a large inherent overhead, and may result in upwards of 8 minutes to transmit a
single color page using V.17 (14.4 kb/s) transmission protocols. Implementing
this standard assures compatibility with all other standards-based products that
are issued in the future, whether by the Company or other vendors.
 
     To make color faxing even more desirable, CHROMAFAX contains several
transmission modes. In addition to complying with the JPEG standard, CHROMAFAX
incorporates a proprietary compression process. This compression process reduces
the size of large color files resulting in image file sizes that make
transmission and storage more efficient and of higher quality. When
communicating with a remote CHROMAFAX system, the proprietary compression
process and fastest fax transmission protocols are automatically utilized. The
Company's compression process and the communications protocol are more efficient
and will result in faster transmission for a typical high resolution (200 dpi),
24-bit, full-color page.
 
     The CHROMAFAX version will use one of three modes, all transparent to the
user:
 
          (1) ITU Color Standard. This enables operation with any fax color
     machine or software that is compliant with the international standard;
 
          (2) Company Proprietary. For fast color transmission that works with
     only the Company fax software package; or
 
          (3) Black and White. Compliant with the black and white faxes that
     operate under the current international standards for black and white fax
     operation.
 
     CHROMAFAX includes a color scanner and digital camera interface that allows
a variety of color scanners and digital cameras to be used for input. The
software also supports Windows 95-compatible color printers.
 
  Research and Development
 
     The Company is continuously engaged in the development of new products as
well as the development and enhancement of its existing products. Research and
development expenditures were approximately $201,000 in the period from
inception (August 26, 1994) to September 30, 1995, and approximately $903,000
and $1,305,000 in the fiscal years ended September 30, 1996 and 1997,
respectively.
 
  Marketing and Distribution
 
     The Company initially is marketing CHROMAFAX to people working at home or
in small office environment, and to computer hobbyists. The Company's marketing
strategy, as currently formulated, emphasizes the rapid introduction of its
CHROMAFAX software via all practical channels of distribution in
 
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order to maximize public awareness of the product and to encourage usage. The
Company also offers a "light" version of the product, CHROMAFAX LITE that has
limited functionality to manufacturers of color printers, scanners, computers,
modems and other software applications to distribute with their products. The
Company will have a version of the product available for downloading from its
Internet Web site.
 
     In order to establish a large base of users, this initial marketing
strategy includes distribution of software for little or no revenue to the
Company. In other cases, a free trial version of the software, with reduced
functionality, will be bundled with products such as color peripherals from
other suppliers for little or no revenue to the Company. One of the free trial
versions is able to send only a limited number of faxes (e.g. five) before
converting to the receive-only version. If the customer desires to continue to
use the product to send color faxes after the limited usage has expired, a fee
would be paid to the Company. Also, the Company distributes a receive-only
version of its program to ensure the more widespread use of color fax. This
version is provided free of charge and is currently downloadable from the
Internet. The Company will attempt to continually improve the product and
introduce upgrades and other versions of the full and "light" versions of its
software.
 
     The Company distributes its products through the following channels: PC
software distributors, retail PC software stores, PC software mail-order
catalogs, direct to customers via telephone orders, and through OEMs (Original
Equipment Manufacturers).
 
     Distributors. The Company markets CHROMAFAX through independent,
non-exclusive distributor arrangements. The Company entered into distribution
agreements with both Ingram Micro Inc. and Micro Central during October 1997.
CHROMAFAX was initially made available to customers through retail outlets
during October 1997. Retail outlets include CompUSA, Egghead, Computer City,
Electronic Boutique, J&R Music World, and Software City.
 
     End users. The Company promotes CHROMAFAX through several mail-order
catalogs such as Micro Warehouse, PC Zone, and PC Mall. Commencing in October
1997, individuals can purchase CHROMAFAX directly from retail outlets or by
contacting the Company's third party fulfillment house directly.
 
     Original Equipment Manufacturers. Commencing June 1997, the Company markets
CHROMAFAX LITE to certain OEMs under agreements that grant the OEMs the right to
distribute copies of the Company's products with the OEM's equipment, typically
personal computers, modems, printers and scanners.
 
OEM DISTRIBUTION AGREEMENTS
 
     Set 1 Distribution Agreement. In January 1997, based on a preliminary
agreement reached in December 1996, the Company finalized a five-year agreement
with Set 1, to distribute CHROMAFAX LITE software with modems developed and
marketed worldwide by Set 1. The agreement between the companies stipulates that
Compressent will provide technology, support and basic documentation to Set 1.
The agreement provides Set 1 with exclusivity for CHROMAFAX LITE bundled with
modems based upon minimum shipments per year. The agreement further allows Set 1
to non-exclusively market the retail version of the product through its own
channels and distribution partners.
 
     The Media Farm Software Licensing Agreement. In August 1997, the Company
entered into a Software Licensing Agreement with The Media Farm, Inc. (TMF).
Pursuant to this agreement, TMF will solicit manufacturers of personal
computers, hardware and related products to provide various consulting and
marketing services, which may include the bundling of the Company's CHROMAFAX
LITE software with OEM modems from Hayes Microcomputer Products (Hayes). The
agreement between the companies stipulates that Compressent will provide
technology, support and basic documentation to TMF. The initial term of the
agreement shall be for the earlier of six months, or until certain unit shipment
volume has occurred. Since the finalization of this agreement, there have been
substantial changes in ownership and management at Hayes. The Company believes
that these changes may have a negative impact on the Company's ability to bundle
CHROMAFAX LITE software with OEM Modems from Hayes.
 
     The Media Farm Aftermarket and Direct Distribution Agreement. In August
1997, the Company entered into a Distribution Agreement with The Media Farm,
Inc. (TMF). Pursuant to this agreement, TMF
 
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may include the Company's CHROMAFAX software in CD-ROM software solutions
bundled with computer equipment from leading PC vendors and peripheral
manufacturers in North America. TMF will distribute CHROMAFAX via online sites
and will offer the product in electronic catalogs distributed through a variety
of channels. The initial term of the agreement shall be for one year.
 
  Manufacturing
 
     The Company assembles products in the United States. The principal
materials and components used include CDs, user manuals, other printed material
and packaging. The Company outsources all of its manufacturing to third parties,
including CD duplication and product assembly. The Company does not currently
anticipate difficulty in securing the raw material and services required in
connection with its operations.
 
  Product Support
 
     The Company offers technical support for its customers through telephone
support. Technical support for the Company's products is provided free to
customers. Technical support business hours are from 6:00 a.m. to 6:00 p.m.
Pacific Standard Time, Monday through Friday. The Company generally outsources
product support activities to independent, third-party service providers.
 
  Guarantees
 
     The Company provides a 30 day money back guarantee on its products.
 
  Patents; Proprietary Information
 
     The Company has filed U.S. patent and/or copyright applications on certain
aspects of its technology and plans to file corresponding applications in
certain industrial countries worldwide. In addition to general legal protection
for its technologies and products, the Company's strategy is designed to make it
difficult for competitors to assess the specifics of the Company's technology.
The Company also intends to gain additional protection for its technology and
products through the addition of improvement Patents and/or Copyrights.
 
     To the extent the Company determines to keep certain aspects of its
technology as trade secrets rather than as patents, the Company intends to
protect these developments by programming techniques that make it more difficult
to reverse-engineer the Company's software.
 
  Competition
 
     The market that the Company has entered is characterized by intense
competition. Most successful software products are eventually subject to
competing products from other developers. The markets for the technology and
products being developed by the Company are characterized by rapid changes and
evolving industry standards often resulting in product obsolescence or short
product life cycles. As a result, certain companies may be developing
technologies or products of which the Company is unaware which may be
functionally similar, or superior, to some or all of those being developed by
the Company. Such companies may have substantially greater financial, technical,
personnel and other resources than the Company and have established reputations
for success in the development, licensing, sale and service of their products
and technology. Certain of these potential competitors dominate their industries
and have the financial resources necessary to enable them to withstand
substantial price competition or downturns in the market for fax products.
 
     The ability of the Company to compete successfully will depend on its
ability to obtain market acceptance of its initial color fax products and
technology, to continually enhance and improve such products and technology, and
to successfully develop and market new products and technology. There can be no
assurance that the Company will be able to compete successfully, that its
competitors or future competitors will not develop technologies or products that
render the Company's products and technology obsolete or less
 
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marketable or that the Company will be able to successfully enhance its proposed
products or technology or adapt them satisfactorily.
 
     See "Risk Factors" in Management's Discussion and Analysis of Financial
Condition and Results of Operations in Item 7.
 
  Employees
 
     As of September 30, 1997, the Company had twenty full-time employees, seven
of whom are in management and administration, ten in product development and
three in sales and marketing. In addition, the President's services are retained
by the Company through a consulting contract. The Company uses the services of a
variety of contractors as needed to perform various services. None of the
Company's employees are subject to a collective bargaining agreement. The
Company's continued success is dependent in part upon its ability to attract and
retain qualified employees. The Company believes that its relations with its
employees are good.
 
     The executive officers of the Company are as follows:
 
<TABLE>
<CAPTION>
        NAME           AGE                    POSITION
--------------------   ---   -------------------------------------------
<S>                    <C>   <C>
Won-Gil Choe........   65    President and Chief Executive Officer
John McCracken......   34    Vice President -- OEM Sales
</TABLE>
 
     Won-Gil Choe, President and Chief Executive Officer. Mr. Choe was appointed
as President and Chief Executive Officer in December 1997. He has served as
President and Chief Executive Officer of Sofex, Inc., a software outsourcing
company since 1996. From 1993 to 1996 he was the Chairman, President and Chief
Executive Officer of Omni Media Technology, Inc., a multimedia technology
company. He has held senior financial and engineering management positions with
companies such as Memorex, Philips-Signetics, Applied Materials, Mass
Miscrosystems, and Vacu-Blast. Mr. Choe received a BS in Engineering from
Arizona State University and a MS in Industrial Engineering from Stanford
University.
 
     John McCracken, Vice President, OEM Sales. Mr. McCracken was appointed as
Vice President, OEM Sales in December 1997. He founded First Step Consulting, an
OEM consulting firm, in December 1996. From August 1995 to November 1996 he was
Chief Executive Officer of WitchDesk Corporation. From June 1992 to July 1995 he
was the Director of New Business Development for AWARD Software.
 
ITEM 2. PROPERTIES
 
     The Company has established its headquarters in San Jose, California.
Pursuant to the lease relating to such facility, the Company is obligated to
make monthly rental payments of approximately $10,000. The lease expires
December 1998. The Company's facility is approximately 5,000 square feet.
 
ITEM 3. LEGAL MATTERS
 
     On February 14, 1997, the Company instituted a lawsuit in Santa Clara
County Superior Court against former consultants and a company they had formed
known as Color Communication Corporation. The lawsuit asserts claims for breach
of contract, breach of confidence, unfair competition and unjust enrichment,
alleging that the former consultants misappropriated the Company's confidential
information. On April 30, 1997, the Superior Court entered a preliminary
injunction, prohibiting the defendants from using the Company's confidential
information in any products, literature or advertising. The Superior Court also
enjoined the defendants from advertising, marketing, selling or otherwise
distributing any facsimile or color imaging software product for a period of
nine months beginning April 21, 1997. On December 10, 1997, the parties entered
into a settlement agreement which continued the prohibitions of the preliminary
injunction through January 15, 1998 and permanently prohibited the defendants
from using the Company's confidential information. The agreement further
prohibits the defendants from communicating with six specific companies through
April 15, 1998. As part of the settlement, the Company dismissed its claims
against the defendants
 
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and received a release of claims from them. A total of approximately $249,000 in
legal expenses has been incurred in connection with this lawsuit through
September 30, 1997.
 
     In December 1997, the Board of Directors replaced several members of
management with a new and smaller management team. On February 18, 1998, the
Company received a letter from one member of the former management alleging
wrongful termination and racial discrimination and seeking unspecified damages.
The Company believes the claims are without merit and intends to contest the
matter vigorously. management does not believe that resolution of the matter
will have a material adverse effect on the Company. However, litigation is
inherently costly and uncertain and there can be no assurance that the matter
will be resolved in the Company's favor or without material cost.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
 
     There were no matters submitted to the Company's security holders during
the fourth quarter ended September 30, 1997.
 
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
 
     Commencing on September 24, 1997 the Company has been trading as a NASDAQ
SmallCap issue under the symbol CSNT. Prior to that, the Company's Common Stock
had been included for quotation on the OTC Bulletin Board under the symbol CSSA
since the Company's initial public offering in September 1996. In connection
with the Company's name change from CableSat Systems, Inc. to Compressent
Corporation, the Company's stock symbol was changed from CSSA to CSNT on March
11, 1997. As of February 4, 1998, the Company has been trading as a NASDAQ
SmallCap issue under the symbol CSNTE as the Company has not met certain NASDAQ
SmallCap listing requirements. However, the Company anticipates that it will be
in full compliance with the NASDAQ listing requirements subsequent to the
Company's filing of its Quarterly Report on Form 10-Q for the period ending
December 31, 1997.
 
     The following table sets forth the high and low sale and bid prices of the
Company's stock:
 
<TABLE>
<CAPTION>
                                                       SALE                       BID
                                                ------------------         ------------------
                  QUARTER ENDED                  HIGH        SALE           HIGH        SALE
    ------------------------------------------  -------     ------         -------     ------
    <S>                                         <C>         <C>            <C>         <C>
    December 31, 1996.........................  $ 6.750     $5.875         $ 6.500     $6.000
    March 31, 1997............................  $18.625     $5.875         $18.625     $6.375
    June 30, 1997.............................  $14.750     $8.000         $13.500     $8.750
    September 30, 1997........................  $14.250     $8.000         $14.125     $8.625
</TABLE>
 
     Only four quarters are presented above, as prior to the initial public
offering in September 1996, there was no established public trading market for
the Company's common stock.
 
     The closing sales stock price of the Company's common stock on September
30, 1997 was $10.25. The Company reported approximately 1,463 stockholders of
record on December 1, 1997.
 
     In the fourth quarter, the Company issued $1,000,000 in convertible
subordinated promissory notes to twenty-six accredited purchasers through Rickel
& Associates, Inc., a placement agent. The Notes were sold in multiples of
$1,000, and the Notes are convertible into such number of shares as the
Company's common stock, $0.001 par value ("Common Stock") as shall be determined
by dividing the purchase price of the Notes by the lesser of $10.00 per share or
the closing price, Common Stock on the day prior to conversion (but in no event
less than $7.00 per share), as adjusted for stock splits, stock dividends, and
similar events. The Notes bear interest at 10% per year, payable semi-annually
on June 15th and December 15th of each year, commencing December 15, 1997. The
principal of the Notes is due in September 2002, but may be redeemed at the
option of the Company if the average trading price for the Notes has been
greater than or equal to $20 per share, as adjusted for stock splits, stock
dividends, and similar events, for thirty (30)
 
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consecutive trading days. The Notes have certain demand registration rights as
defined in the Registration Rights Agreement entered into between the Company
and each holder of the Notes.
 
     The net proceeds to the Company for the first closing of the Offering was
$904,000, which the Company anticipates using for working capital purposes. In
connection with the Offering, the placement agent has received a selling
commission of 8% of all Notes sold, and warrants equal to 10% of the number of
shares issuable upon conversion of the Notes at $10 per share, as adjusted for
stock splits, stock dividends, and similar events. In addition, the Company paid
other Offering expenses incurred by the placement agent in the amount of
$15,000. The Company also indemnified the placement agent against certain
liabilities in connection with the Offering under the Securities Act of 1933
(the "Securities Act"). The Notes have not been registered under the Securities
Act or other securities laws and were sold without any such registration in
reliance upon Section 4(2) of the Securities Act and/or similar available
exemptions under other securities laws. Pursuant to the Registration Rights
Agreement, the Company has agreed to file on or before February 28, 1998, with
the Securities and Exchange Commission and use reasonable efforts to cause to
become effective, registration with respect the resale of the restricted Notes
and the sale of the shares of Common Stock issuable upon conversion thereof, and
to keep such Registration Statement effective for a period of eighteen (18)
months.
 
  Equity-Based Line of Credit
 
     On December 3, 1997, the Company secured a $10,000,000 equity-based line of
credit from Kingsbridge Capital Limited, a company organized and existing under
the laws of the British Virgin Islands ("KCL"). Under the privately-placed
financing, the Company has the right to draw up to $10,000,000 in cash in
exchange for the Company's Common stock. Each draw must be for an amount greater
than $300,000, but no more than $1,000,000. There must be a minimum of 20
business days between each draw. The number of shares to which KCL is entitled
pursuant to a draw shall be determined by dividing the dollar value of the draw
by the purchase price. The purchase price is defined as 88% of the lowest
closing bid price of the Company's Common Stock over the five trading days
beginning two trading days prior to the date of the draw. No more than 1,008,000
shares may be sold pursuant to the equity line. No draws may be made under the
line of credit until the Company registers for resale shares issued pursuant to
the equity line of credit and the shares issuable on exercise of the warrant,
has been declared effective by the Securities and Exchange Commission. No draws
may be made during any 20 trading day period in which the average daily trading
volume of the Company's Common Stock is less than 22,500 shares per day. The
market price of the Company's common stock must equal or exceed $6 per share for
the previous 3 trading days prior to a draw. No draws may be made without KCL's
consent to the extent the draw would cause KCL to hold more than 9.9% of the
Company's Common Stock. The Company's common stock must be qualified for
continued listing on the NASDAQ SmallCap Market, for which the Company must,
among other requirements, maintain net assets in excess of $2,000,000 or have a
total market capitalization greater than $35,000,000. The line of credit will
remain in effect for a period of eighteen months. In connection with the
agreement, the Company issued KCL a warrant to purchase up to 45,000 shares of
the Company's Common Stock at a price of $10.64 per share. The Warrant expires
on December 3, 2000. The common stock has not been registered under the
Securities Act or other securities laws and were sold without any such
registration in reliance upon Section 4(2) of the Securities Act and/or similar
available exemptions under other securities laws. Pursuant to the Registration
Rights Agreement, the Company has agreed to file within forty-five (45) days
following the subscription date, with the Securities and Exchange Commission and
use reasonable efforts to cause to become effective no later than ninety (90)
days after the subscription date, registration with respect to the resale of the
shares of the Registrable Securities, and to keep such Registration Statement
effective for a period of eighteen (18) months.
 
  Warrant Issued to Member of Board of Directors
 
     On December 30, 1997, in connection with assistance to be provided with the
Company's management changes and financing needs, the Company granted a member
of the Board of Directors warrants to purchase 700,000 shares of the Company's
Common Stock. The Warrants have an exercise price of $6.25 per share and
 
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expire three years from the date of grant. The warrants have not been registered
under the Securities Act or other securities laws and were sold without any such
registration in reliance upon Section 4(2) of the Securities Act and/or similar
available exemptions under other securities laws.
 
  Agreement to Acquire Softlink, Inc.
 
     On December 31, 1997, the Company entered into an agreement to acquire all
of the issued and outstanding shares of Softlink, Inc. (Softlink), a California
corporation, pursuant to a Stock Purchase Agreement dated December 31, 1997
between the Company and the shareholders of Softlink. Under the agreement, the
purchase price is 450,000 shares of the Company's $.001 par value common stock.
The closing of the acquisition is subject to a number of contingencies which
have not yet been satisfied. The Stock Purchase Agreement provides that the
Company will register one-third of the shares acquired by the Softlink
shareholders in the Company's next registered offering.
 
  Loan From Shareholder
 
     On January 15, 1998 the Company issued a promissory note to a certain
shareholder for $425,000. The note bears interest at 15% per year and is payable
on demand or within thirty (30) days of issuance. The Company also issued a
warrant to purchase up to 100,000 shares of the Company's common stock at an
exercise price of $6.25 per share. The warrants expire in January 15, 2001. The
warrants have not been registered under the Securities Act or other securities
laws and were sold without any such registration in reliance upon Section 4(2)
of the Securities Act and/or similar available exemptions under other securities
laws.
 
  Sale of Preferred Stock
 
     On February 3, 1998, the Company signed an agreement to sell 56,000 shares
of its redeemable convertible Series A Preferred Stock to Call Now, Inc. (Call
Now), a related party, for $62.50 per share which was paid to the Company on
February 20, 1998 in the form of municipal bonds with a total aggregate face
value of $3,500,000. The bonds are 1997 Series A, Retama Park Racetrack Project,
Special Facilities Revenue Refunding Bonds. The Retama Park Racetrack is a horse
racing facility in Selma, Texas that is managed by Retama Entertainment Group,
an 80 percent owned subsidiary of Call Now. The 1997 Series A Bonds pay interest
at a 7 percent annualized rate and are secured by the racetrack facility. The
bonds are not currently traded in the open market and prior to the transfer of
the bonds to the Company, all such bonds were owned by Call Now. The Company
believes that the fair value of the 1997 Series A Bonds approximates the face
value. The Company may use the 1997 Series A Bonds as loan collateral to provide
operating cash. The Preferred Stock is initially convertible into common stock
on a ten to one basis, subject to future adjustments for stock splits, stock
dividends or other similar events. The holders of the Preferred Stock have no
voting rights, except as required under any applicable state laws. The Preferred
Stock has mandatory cumulative dividends of $7.50 per share per annum. The
Preferred Stock has an aggregate liquidation preference over the common stock of
$62.50 per share plus cumulative unpaid dividends. The Preferred Stock may be
redeemed by the Company any time subsequent to 90 days from the date of issuance
for $100 per share plus unpaid dividends.
 
     In connection with the issuance of the Series A Preferred Stock to Call
Now, Inc., for nominal proceeds of $500, the Company sold a warrant to Call Now,
Inc. to purchase up to 500,000 shares of the Company's common stock with an
exercise price of $6.25 per share. After one year, the exercise price is reduced
to the lower of $6.25 per share or the average bid and ask price of the common
stock for the three days prior to exercise. The warrant expires three years
after the date of grant. The warrants have not been registered under the
Securities Act or other securities laws and were sold without any such
registration in reliance upon Section 4(2) of the Securities Act and/or similar
available exemptions under other securities laws.
 
  Line of Credit
 
     On February 3, 1998, the Company secured a $10,000,000 line of credit to
Call Now, Inc. Under the agreement, the Company has the right to draw up to
$10,000,000 on or before September 30, 1998. Proceeds
 
                                        9
<PAGE>   10
 
paid to the Company upon making draws under the line may be in the form of bonds
similar to the proceeds received on the Sale of Preferred Stock (see above). The
Company will be required to issue a Promissory Note bearing interest at 15% per
year, payable quarterly, for any amounts drawn against the line of credit. The
Company is required to pay Call Now, Inc. a commitment fee of $400,000 within
thirty (30) days after the first draw pursuant to the line of credit.
 
     In connection with the line of credit agreement, the Company issued 500,000
warrants (the "underlying warrants") to Call Now exercisable for $2.00 per
warrant. Each underlying warrant may be exercised by Call Now to purchase the
Company's common stock at an exercise price of $6.25 per share. The underlying
warrants expire three years after the date of grant. The warrants have not been
registered under the Securities Act or other securities laws and were sold
without any such registration in reliance upon Section 4(2) of the Securities
Act and/or similar available exemptions under other securities laws.
 
  Dividend Policy
 
     The Company has never paid cash dividends on its Common Stock. The Company
intends to retain its cash for use in the operation of the Company's business
and does not anticipate paying any dividends in the foreseeable future.
 
ITEM 6. SELECTED FINANCIAL DATA
 
     The following selected financial data for the period from inception (August
26, 1994) to September 30, 1995, the fiscal year ended September 30, 1996, the
fiscal year ended September 30, 1997 and the period from inception (August 26,
1994) to September 30, 1997 are qualified by reference to, and should be read in
conjunction with, the Company's Financial Statements, the Notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained elsewhere herein. The selected financial data have been
derived from Company's audited financial statements.
 
<TABLE>
<CAPTION>
                                                                           PERIOD FROM         PERIOD FROM
                                                                            INCEPTION           INCEPTION
                                         YEAR ENDED      YEAR ENDED     (AUGUST 26, 1994)   (AUGUST 26, 1994)
                                        SEPTEMBER 30,   SEPTEMBER 30,   TO SEPTEMBER 30,    TO SEPTEMBER 30,
                                            1997            1996              1995                1997
                                        -------------   -------------   -----------------   -----------------
<S>                                     <C>             <C>             <C>                 <C>
STATEMENT OF OPERATIONS DATA:
Total operating costs and expenses....   $  5,045,717    $  2,204,249      $   256,554         $ 7,506,520
Loss from operations..................   $ (5,045,717)   $ (2,204,249)     $  (256,554)        $(7,506,520)
Interest income and other, net........   $    195,005    $     11,246      $     1,789         $   208,040
Net loss..............................   $ (4,874,969)   $ (2,193,003)     $  (254,765)        $(7,322,737)
Net loss applicable to common
  shareholders........................   $ (4,874,969)   $ (3,093,003)     $  (254,765)        $(8,222,737)
Net loss per share applicable to
  common shareholders.................   $      (0.97)   $      (0.76)     $     (0.06)
Shares used in computing net loss per
  share applicable to common
  shareholders........................      5,007,446       4,044,708        4,101,833
</TABLE>
 
<TABLE>
<CAPTION>
                                                                             SEPTEMBER 30,
                                                                        -----------------------
                                                                           1997         1996
                                                                        ----------   ----------
<S>                                                                     <C>          <C>
BALANCE SHEET DATA:
Current assets........................................................  $2,070,500   $5,705,106
Working capital.......................................................   1,490,466    4,941,100
Total assets..........................................................   2,865,145    5,959,105
Current liabilities...................................................     580,034      764,006
Shareholders' equity..................................................   1,285,111    5,195,099
</TABLE>
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
 
     The following discussion and analysis should be read in conjunction with
the Financial Statements and notes thereto appearing elsewhere herein.
 
                                       10
<PAGE>   11
 
  Overview
 
     The Company was incorporated in the state of Florida on August 26, 1994,
but did not commence formal operations until April 1995. The Company's primary
activities since inception have been devoted to developing its initial color
facsimile products and related technologies, preparation for marketing, the
recruitment of key management and technical personnel, including outside
consultants, and raising capital to fund operations. As a result, the financial
statements are presented in accordance with Statement of Financial Accounting
Standards No. 7 (SFAS 7), "Accounting and Reporting by Development Stage
Enterprises."
 
     For the period from inception (August 26, 1994) through September 30, 1997,
the Company incurred a cumulative net loss of approximately $7,323,000 and has
used approximately $6,002,000 in cash for operating activities. The Company
expects to continue to incur losses during the year September 30, 1998 until the
Company is able to attain revenues from sales, licensing or other arrangements
sufficient to support its operations. The Company believes that the sale of
preferred stock and warrants to purchase common stock in exchange for municipal
bonds with an aggregate total face value of $3,500,000 secured in February 1998
from Call Now, Inc. (Call Now), a related party, and the $10,000,000 line of
credit also obtained from Call Now in February 1998, are sufficient to provide
the Company with working capital to support planned operating activities through
September 30, 1998 (see Note 10 --Subsequent Events). Call Now is a publicly
held real estate investment company. Call Now's major asset is ownership of the
Retama Park Racetrack Project Special Facility Revenue Refunding Bonds. The
Retama Park Racetrack is a horseracing facility in Selma, Texas that is managed
by the Retama Entertainment Group, an 80 percent owned subsidiary of Call Now. A
member of the Company's Board of Directors is the Chairman and President of Call
Now and owns over 50 percent of Call Now stock. Another member of the Company's
Board of Directors is also a shareholder of Call Now. In addition, Call Now has
been involved in several sales of equity and debt financings with the Company in
the past and Call Now currently owns common stock of the Company.
 
  Risk Factors
 
     The Company's risk factors include, but are not limited to, the following:
 
     Development Stage Company; Absence of Operating History. The Company has
been engaged primarily in the design and development of CHROMAFAX and CHROMAFAX
LITE and related technology. The Company's first product release commenced in
June 1997. The risks, expenses and difficulties often encountered in a shift
from the research and development of products to the commercialization of new
products based on innovative technology must be considered. The prospects for
the Company's success must be considered in relation to the risks, expenses and
difficulties often encountered in establishing of a new business in a
competitive industry subject to rapid technological and price changes, and
characterized by an increasing number of competitors.
 
     No Revenues; Anticipated Future Losses. From inception (August 26, 1994) to
September 30, 1997, the Company has had no revenue. The Company anticipates
incurring significant costs in connection with the development of its future
products and technologies and there can be no assurance that the Company will
achieve sufficient revenues to offset anticipated operating costs in the future.
 
     Need for Additional Financing. The Company requires additional financing in
the future to acquire technologies that compliment its core products. The
Company believes that additional debt or equity financing, if required, will be
available from existing and future investors. However, there can be no assurance
as to the terms and conditions of any such financing and no certainty that funds
would be available when needed. The inability to obtain additional financing,
when needed, would likely curtail any technology acquisition efforts and may
have a material adverse effect on the Company. To the extent that any future
financing involves the sale of the Company's equity securities, the Company's
then existing shareholders could be substantially diluted.
 
     Dependence on Lines of Credit. On December 3, 1997, the Company secured a
$10,000,000 equity-based line of credit to Kingsbridge Capital Limited, a
company organized and existing under the laws of the British Virgin Islands.
Under the privately-placed financing, the Company has the right to draw up to
$10,000,000 in cash in exchange for the Company's Common Stock, subject to
certain conditions. The line of
 
                                       11
<PAGE>   12
 
credit will remain in effect for a period of eighteen months. The Company's
ability to make draws on the equity line of credit is subject to a number of
conditions which are not currently satisfied. Accordingly, funds may not be
available under the equity line of credit.
 
     On February 3, 1998, the Company secured a $10,000,000 line of credit to
Call Now, Inc., a publicly held real estate investment company. Under the
agreement, the Company has the right to draw up to $10,000,000 on or before
September 30, 1998. The Company will be required to issue a Promissory Note
bearing interest at 15% per year, payable quarterly, for any funds drawn against
the line of credit.
 
     The Company believes that the funds under the above Agreements are
sufficient to finance the Company's planned operating activities during fiscal
1998. However, should the Company be unable to meet the required terms and
conditions, funds under the Agreements may not be available when necessary to
finance the Company's planned activities and the Company's operations may be
adversely impacted.
 
     Limited Sales and Marketing Experience. The Company markets and sells its
products through key manufacturers and distributors. Such companies could
develop competitive products to the Company's. As a result, demand and market
acceptance for the Company's technologies and products are subject to a high
level of uncertainty. The Company relies in part on the manufacturers of
personal computers, fax modems, color printers and scanners for initial
distribution of its Initial Color Fax Products as a software package included
with such hardware purchase. The Company is therefore dependent upon such firms
to distribute its color fax products.
 
     Rapid Technological Change. Research and development efforts are subject to
the risks inherent in the development of new technology and products including,
but not limited to, unanticipated delays, technical problems or difficulties,
and insufficiency of funding to complete development. There can be no assurance
that such development projects will be successfully completed. The markets for
the Company's products are characterized by rapid changes and evolving industry
standards often resulting in product obsolescence or short product life cycles.
The Company's future operating results will depend upon its ability to obtain
market acceptance of its initial color fax products and technology, to
continually enhance and improve such products and technology, to adapt its
proposed products to be compatible with specific products manufactured by
others, and to successfully develop and market new products and technology.
 
     Substantial Competition. Other companies may be developing technologies or
products of which the Company is unaware which may be functionally similar, or
superior, to some or all of those being developed by the Company. These
companies may have substantially greater, technical, personnel and other
resources than the Company and may have established reputations for success in
developing, licensing and sales of their products. There is no assurance that
the Company will be able to compete successfully, that its competitors or future
competitors will not develop technologies or products that render the Company's
products and technology obsolete or less marketable or that the Company will be
able to successfully enhance its proposed products or technology or adapt them
satisfactorily.
 
     Dependence Upon Qualified and Key Personnel. The success of the Company
will be largely dependent on its ability to hire and retain qualified executive,
scientific and marketing personnel. There is no assurance that the Company will
be able to attract or retain such necessary personnel, particularly in light of
the currently high demand for software engineers and other personnel in Silicon
Valley. The loss of key personnel or the failure to recruit additional personnel
could have a material adverse effect on the Company's business.
 
     Protection of Proprietary Information. Competitors in both the United
States and foreign countries, many of which have substantially greater resources
and have made substantial investments in competing technologies, may have
applied for or obtained, or may in the future apply for and obtain, patents that
will prevent, limit or otherwise interfere with the Company's ability to make
and sell its products. The Company has not conducted an independent review of
patents issued to third parties. In addition, because of the developmental stage
of the Company, claims that the Company's products infringe on the proprietary
rights of others are more likely to be asserted after commencement of commercial
sales incorporating the Company's technology. There can be no assurance that
other third parties will not assert infringement claims against the Company or
that such claims will not be successful. The Company has applied for 6 patents
and is in the process of applying for additional patents.
 
     There can also be no assurance that competitors will not infringe the
Company's patents if any such patents are granted to the Company in the future.
Defense and prosecution of patent suits, even if successful,
 
                                       12
<PAGE>   13
 
are both costly and time consuming. An adverse outcome in the defense of a
patent suit could subject the Company to significant liabilities to third
parties, require disputed rights to be licensed from third parties or require
the Company to cease selling its products.
 
     The Company is in the process of applying for copyrights relating to
certain products and is also applying for patent protection. There is no
assurance that any patents will be obtained. If obtained, there is no assurance
that any patents or copyrights will afford the Company commercially significant
protection of its technologies or that the Company will have adequate resources
to enforce its patents and copyrights. The Company also intends to seek foreign
patent and copyright protection. With respect to foreign patents and copyrights,
the laws of other countries may differ significantly from those of the United
States as to the patentabiliity of the Company's products or technology.
Moreover, the degree of protection afforded by foreign patents or copyrights may
be different from that in the United States. Patent applications in the United
States are maintained in secrecy until patents issue, and since publication of
discoveries in the scientific or patent literature tends to lag behind actual
discoveries by several months, the Company cannot be certain that it will be the
first creator of inventions covered by any patent applications it makes or the
first to file patent applications on such inventions. Furthermore, in the
desktop computer application market today, patents and copyrights cannot give
substantial protection against competitors determined to introduce competing
products since it is likely that such competitors will be able to develop
similar technology which does not infringe on the Company's proprietary
technology.
 
     The Company also relies on unpatented proprietary technology, and there can
be no assurance that others may not independently develop the same or similar
technology or otherwise obtain access to the Company's unpatented technology. To
protect its trade secrets and other proprietary information, the Company
requires employees, consultants, advisors and collaborators to enter into
confidentiality agreements. There can be no assurance that these agreements will
provide meaningful protection for the Company's trade secrets, know-how or other
proprietary information in the event of any unauthorized use, misappropriation
or disclosure of such trade secrets, know-how or other proprietary information.
If the Company is unable to maintain the proprietary nature of its technologies,
the Company could be adversely affected.
 
  Results of Operations
 
THE YEAR ENDED SEPTEMBER 30, 1997 COMPARED TO THE YEAR ENDED SEPTEMBER 30, 1996
 
  Research and Development
 
     During the fiscal years ended September 30, 1997 and September 30, 1996, a
substantial part of the Company's activities related to research and
development. The Company's research and development expenses were approximately
$1,305,000 for the fiscal year ended September 30, 1997 compared to
approximately $903,000 for the fiscal year ended September 30, 1996. The
increase is primarily due to increased staffing, including consultants, and
increased supplies and associated costs related to increased development and
testing activities of the software functions and features. The Company believes
that significant investments in research and development will be necessary for
both new products and continuing enhancements to existing products. Therefore,
the Company expects to incur increased research and development expenditures in
the future.
 
     During March 1997, the Company began capitalizing software development
costs pursuant to Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed." The Company capitalizes certain software development cost incurred
after technological feasibility is achieved. These costs are amortized,
beginning when the products are available for general release to customers, over
the estimated economic life of the products, generally 24 months. Amortization
of capitalized software development costs will be included in cost of revenues.
A total of approximately $369,000 and $0 in capitalized software development
costs and amortization, respectively, have been recorded for the year ended
September 30, 1997. No software development costs were capitalized or amortized
for the year ended September 30, 1996.
 
                                       13
<PAGE>   14
 
  Sales and Marketing
 
     Sales and marketing expenses were approximately $1,588,000 for the fiscal
year ended September 30, 1997, compared to approximately $279,000 for sales and
marketing expense for the fiscal year ended September 30, 1996. The increase is
primarily due to costs associated with developing and implementing a marketing
strategy, the costs associated with staffing employees and consultants, and
participation in trade shows and other events.
 
     In addition, in December 1996, the Company granted a stock option to Set 1
Communications, NSW, Australia ("Set 1"), to purchase up to 248,600 shares of
the Company's common stock. The option vested immediately and expires two years
from the date of grant. Pursuant to the provisions of SFAS 123, the fair value
of the option was estimated to be $351,000, which was recorded as sales and
marketing expense during December 1996.
 
     Achieving significant market acceptance and commercialization of the
Company's products requires substantial marketing efforts and expenditures to
establish market share. The Company expects significant sales and marketing
expenses in the future as it attempts to increase its market share.
 
     In January 1997, the Company finalized a five-year agreement with Set 1 to
bundle CHROMAFAX LITE software with modems developed and marketed worldwide by
Set 1. The "light" version is a version of CHROMAFAX with selected
functionality. The agreement between the companies stipulates that the Company
will provide technology, support and basic documentation to Set 1. The agreement
provides Set 1 with exclusivity for CHROMAFAX LITE bundled with modems based
upon minimum shipments per year. The agreement further allows Set 1 to
non-exclusively market the retail version of the product through its own
channels and distribution partners.
 
     In August 1997, the Company entered into a Software Licensing Agreement
with The Media Farm, Inc. (TMF). Pursuant to this agreement, TMF will solicit
manufacturers of personal computers, hardware and related products to provide
various consulting and marketing services, which may include the bundling of the
Company's CHROMAFAX LITE software with OEM modems from Hayes Microcomputer
Products (Hayes). The agreement between the companies stipulates that
Compressent will provide technology, support and basic documentation to TMF.
Since the finalization of this agreement, there have been substantial changes in
ownership and management at Hayes. The Company believes that these changes may
have a negative impact on the Company's ability to bundle CHROMAFAX LITE
software with OEM Modems from Hayes.
 
     In August 1997, the Company entered into a Distribution Agreement with The
Media Farm, Inc. (TMF). Pursuant to this agreement, TMF may include the
Company's CHROMAFAX software in CD-ROM software solutions bundled with computer
equipment from leading PC vendors and peripheral manufacturers in North America.
TMF will distribute CHROMAFAX via online sites and will offer the product in
electronic catalogs distributed through a variety of channels.
 
  General and Administrative
 
     General and administrative expenses were approximately $2,153,000 for the
fiscal year ended September 30, 1997, compared to approximately $1,022,000 for
the fiscal year ended September 30, 1996. The increase in general and
administrative expenses was primarily attributable to increased staffing, fees
for professional services, and legal expenses in connection with the lawsuit
against Color Communications Corporation. Also, in December 1996, the Company's
Board of Directors approved the issuance of stock options to certain outside
service providers to purchase up to 145,000 shares of the Company's common
stock. The options vest one-half in year one and one-half in year two, and
expire three years from the date of grant. Pursuant to the provisions of SFAS
123, the fair value for these options was estimated to be approximately $216,000
and will be recognized as compensation expense over the vesting period.
Compensation expense relating to these options for the year ended September 30,
1997 was approximately $125,000.
 
  Interest Income
 
     Interest income was approximately $195,000 for the fiscal year ended
September 30, 1997, compared to approximately $11,000 for the fiscal year ended
September 30, 1996. The increase in interest income is due to
 
                                       14
<PAGE>   15
 
the investment of the Company's proceeds from its initial public offering of
common stock that closed on October 1, 1996.
 
  Taxes
 
     The Company has had net losses since inception and has not provided for
federal or state taxes to date. The Company had federal and state net operating
loss carryforwards of $6,870,000 for the fiscal year ended September 30, 1997
compared to $2,300,000 for the fiscal year ended September 30, 1996. The net
operating loss carryforwards will expire beginning September 30, 2010 (federal)
and September 30, 2003 (state), if not utilized. Utilization of the net
operating losses may be subject to a substantial annual limitation due to the
ownership change limitations provided by the Internal Revenue Code of 1986 and
similar state provisions. The annual limitation may result in the expiration of
net operating loss carryforwards before utilization.
 
THE YEAR ENDED SEPTEMBER 30, 1996 COMPARED TO THE PERIOD FROM INCEPTION (AUGUST
26, 1994) TO SEPTEMBER 30, 1995
 
  Research and Development
 
     From inception through September 30, 1996, a substantial part of the
Company's activities related to research and development. The Company's research
and development expenses were approximately $903,000 and $201,000 for the fiscal
year ended September 30, 1996 and the period from inception (August 26, 1994) to
September 30, 1995, respectively. The increase in expenses in fiscal 1996 as
compared with the period from inception (August 26, 1994) to September 30, 1995,
is primarily related to costs associated with the addition of personnel,
increased use of consultants and temporary help, and increased supplies, all
incurred to support increased development and testing activities.
 
  Marketing
 
     Marketing expenses were approximately $279,000 and $0 for the fiscal year
ended September 30, 1996 and the period from inception (August 26, 1994) to
September 30, 1995, respectively. Marketing expenses incurred during fiscal 1996
are primarily related to costs associated with staffing employees and
consultants to start the Company's marketing efforts and costs associated with
developing a marketing strategy and logo.
 
  General and Administrative
 
     General and administrative expenses were approximately $1,022,000 and
$56,000 for the fiscal year ended September 30, 1996 and the period from
inception (August 26, 1994) to September 30, 1995, respectively. The increase is
due primarily to increased administrative staffing to support growing operations
and increases in business development efforts.
 
  Taxes
 
     The Company has had net losses since inception and has not provided for
federal or state taxes through September 30, 1996. As of September 30, 1996, the
Company had federal and state net operating loss carryforwards of approximately
$2,300,000.
 
  Liquidity and Capital Resources
 
     Since inception, the Company has primarily relied on sales of its equity
securities and borrowings to fund its operations. Between May 1995 and May 1996
the Company received approximately $1,952,000 in cash from sales of its equity
securities. In September 1996, the Company's initial public offering of common
stock and Redeemable Common Stock Purchase Warrants became effective. The
Company received net proceeds of approximately $5,387,614 from this initial
public offering, less $108,000 for advisory services to be provided over three
years by the Underwriter, Barron Chase Securities, Inc. The Company's
outstanding Redeemable Common Stock Purchase Warrants are exercisable at $6.00
per share and could result in the gross receipt of up to an additional
$6,900,000. However, there can be no assurance that such warrants will be
exercised. Through September 30, 1997, redeemable stock purchase warrants to
purchase 64,752 shares of common stock had been exercised for approximately
$389,000.
 
                                       15
<PAGE>   16
 
     During June 1997, the Company borrowed $1,250,000 from a bank payable in 30
days, at an interest rate of 6.6% per annum. The loan was secured by a time
deposit of equal amount. The Company repaid the loan during September 1997.
 
     During September 1997, the Company issued $1,000,000 of convertible
subordinated debentures which bear interest at a rate of 10% per annum, payable
semi-annually, and matures in September 2002. The notes are convertible at the
option of the holder into the Company's Common Stock. The conversion price shall
be determined by dividing the purchase price of the notes by the lesser of
$10.00 per share or the closing price of the Common Stock on the day prior to
conversion, but no lower than $7.00 per share. The notes are redeemable at the
option of the Company at any time on or after the two year anniversary of the
issuance at the original issue price plus accrued interest to the redemption
date, provided that the average trading price of the Common Stock is greater
than or equal to $20 per share, as adjusted for stock splits, stock dividends
and similar events for 30 consecutive trading days prior to the date of the
redemption notice.
 
     Cash used in operating activities has increased from approximately
$1,662,000 in fiscal 1996 to approximately $4,013,000 in fiscal 1997, reflecting
increased net losses. The Company's cash requirements may increase for the
upcoming fiscal year due to expected increases in expenses related to further
research and development of its technologies and increased, manufacturing, sales
and technical support expenses associated with the introduction of it's initial
color fax products.
 
     Management believes that the sale of preferred stock and warrants to
purchase common stock in exchange for municipal bonds with an aggregate total
face value of $3,500,000 secured in February 1998 from Call Now, a related
party, and the $10,000,000 line of credit also obtained from Call Now during
February 1998 (see Note 10 of the Company's audited financial statements), will
be sufficient to provide the Company with working capital support the Company's
planned operating activities through the fiscal year ended September 30, 1998.
As part of its business strategy, the Company has investigated, and will
continue to investigate, potential acquisitions of businesses, products and
technologies. Such potential acquisitions may require substantial capital
resources, which may require the Company to seek additional debt or equity
financing.
 
  Recent Accounting Pronouncements
 
     In February 1997, the Financial Accounting Standards Board issued Statement
No. 128 (SFAS 128), "Earnings per Share," which is required for all financial
statements issued for periods ending after December 15, 1997, including interim
periods. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior periods.
The new requirements will include a calculation of basic earnings per share,
from which the dilutive effect of stock options, warrants and convertible debt
will be excluded. The basic earnings per share calculation will not change the
primary earnings per share previously reported for the years ended September
1997, 1996 and for the period from inception (August 26, 1994) to September 30,
1995. A calculation of diluted earnings per share will also be required;
however, this is not expected to differ materially from the Company's reported
primary earnings per share because the Company had net losses for all prior
periods reported and therefore, the dilutive effect of stock options, warrants,
and convertible debt will be excluded. Accordingly, diluted earnings per share
will be the same as basic earnings per share until the Company has net income.
 
     In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive
Income," which establishes standards for reporting and displaying comprehensive
income and its components in a full set of general-purpose financial statements
and is required to be adopted by the Company beginning in fiscal 1999. The
Company's management is currently evaluating the impact of this statement on
operations.
 
     Additionally, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 (SFAS 131), "Disclosures about Segments
of an Enterprise and Related Information," which established standards for the
way the public business enterprises report information in annual statements and
interim financial reports regarding operating segments, products, and services,
geographic areas and major customers. SFAS 131 will first be reflected in the
Company's annual financial statements beginning in fiscal 1999. The Company's
management is currently evaluating the impact of this statement on operations.
 
                                       16
<PAGE>   17
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
                            COMPRESSENT CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
                            STATEMENT OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                                          PERIOD FROM               PERIOD FROM
                                                                           INCEPTION                 INCEPTION
                              YEAR ENDED            YEAR ENDED        (AUGUST 26,1994) TO       (AUGUST 26,1994) TO
                             SEPTEMBER 30,         SEPTEMBER 30,         SEPTEMBER 30,             SEPTEMBER 30,
                                 1997                  1996                   1995                      1997
                            ---------------       ---------------    ----------------------    ----------------------
<S>                         <C>                   <C>                <C>                       <C>
OPERATING COSTS AND
  EXPENSES:
  Research and
     development..........    $ 1,304,884           $   903,225            $  200,734               $  2,408,843
  Sales and marketing.....      1,588,162               278,690                    --                  1,866,852
  General and
     administrative.......      2,152,671             1,022,334                55,820                  3,230,825
                              -----------           -----------            ----------                -----------
     Total operating costs
       and expenses.......      5,045,717             2,204,249               256,554                  7,506,520
                              -----------           -----------            ----------                -----------
Loss from operations......     (5,045,717)           (2,204,249)             (256,554)                (7,506,520)
  Interest expense........        (24,257)                   --                    --                    (24,257)
  Interest income and
     other, net...........        195,005                11,246                 1,789                    208,040
                              -----------           -----------            ----------                -----------
          Net loss........     (4,874,969)           (2,193,003)             (254,765)                (7,322,737)
Less: Accretion on
  preferred stock.........             --              (900,000)                   --                   (900,000)
                              -----------           -----------            ----------                -----------
Net loss applicable to
  common shareholders.....    $(4,874,969)          $(3,093,003)           $ (254,765)              $ (8,222,737)
                              ===========           ===========            ==========                ===========
Net loss per share
  applicable to common
  shareholders............    $     (0.97)          $     (0.76)           $    (0.06)
                              ===========           ===========            ==========
Shares used in computing
  net loss per share
  applicable to common
  shareholders............      5,007,446             4,044,708             4,101,833
                              ===========           ===========            ==========
</TABLE>
 
                            See accompanying notes.
 
                                       17
<PAGE>   18
 
                            COMPRESSENT CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
                                 BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                                           SEPTEMBER 30,
                                                                    ---------------------------
                                                                       1997            1996
                                                                    -----------     -----------
<S>                                                                 <C>             <C>
                                            ASSETS
Current assets
  Cash and cash equivalents.......................................  $ 1,900,171     $   155,533
  Other receivable from underwriter in connection with the
     Company's initial public offering............................           --       5,549,573
  Inventory.......................................................       55,620              --
  Prepaids and other current assets...............................      114,709              --
                                                                     ----------      ----------
          Total current assets....................................    2,070,500       5,705,106
Property and equipment
  Office furniture and equipment..................................       97,331          17,785
  Computer equipment..............................................      249,009         158,504
                                                                     ----------      ----------
                                                                        346,340         176,289
  Less accumulated depreciation...................................      128,684          40,237
                                                                     ----------      ----------
          Net property and equipment..............................      217,656         136,052
Capitalized software development costs, net.......................      369,324              --
Other assets......................................................      207,665         117,947
                                                                     ----------      ----------
          Total assets............................................  $ 2,865,145     $ 5,959,105
                                                                     ==========      ==========
 
                             LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current liabilities
  Accounts payable................................................  $   474,292     $   168,266
  Accrued registration costs......................................           --          55,052
  Preferred stock redemption payable..............................           --         450,000
  Accrued payroll and related.....................................       40,316          16,068
  Other accrued liabilities.......................................       65,426          74,620
                                                                     ----------      ----------
          Total current liabilities...............................      580,034         764,006
Long-term debt....................................................    1,000,000              --
Commitments and contingencies
Redeemable preferred stock, par value $.001 per share:
  150,000 shares authorized in 1997 and 1996, none issued and
     outstanding..................................................           --              --
Shareholders' equity
  Common stock, par value $.001 per share: authorized 50,000,000
     shares; Issued and outstanding 5,036,752 and 4,972,000 shares
     in 1997 and 1996, respectively...............................        5,037           4,972
  Additional paid in capital......................................    8,650,811       7,781,895
  Deficit accumulated during development stage....................   (7,322,737)     (2,447,768)
  Deferred compensation...........................................      (48,000)       (144,000)
                                                                     ----------      ----------
          Total shareholders' equity..............................    1,285,111       5,195,099
                                                                     ----------      ----------
          Total liabilities and shareholders' equity..............  $ 2,865,145     $ 5,959,105
                                                                     ==========      ==========
</TABLE>
 
                            See accompanying notes.
 
                                       18
<PAGE>   19
 
                            COMPRESSENT CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
                       STATEMENT OF SHAREHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                                                                    DEFICIT
                                                                                  ACCUMULATED
                                                   COMMON STOCK      ADDITIONAL     DURING                        TOTAL
                                                ------------------    PAID IN     DEVELOPMENT     DEFERRED     SHAREHOLDERS'
                                                 SHARES     AMOUNT    CAPITAL        STAGE      COMPENSATION      EQUITY
                                                ---------   ------   ----------   -----------   ------------   ------------
<S>                                             <C>         <C>      <C>          <C>           <C>            <C>
Sale of common stock for cash.................  1,276,000   $1,276   $   (1,116)  $        --    $       --    $       160
  May 1995 -- $0.001/share....................    374,000     374       199,689            --            --        200,063
  May 1995 -- $0.65/share.....................    550,000     550       499,450            --            --        500,000
Net loss from inception (August 26, 1994) to
  September 30, 1995..........................         --      --            --      (254,765)           --       (254,765) 
                                                ---------   ------    ---------   ------------     --------    -----------
Balance -- September 30, 1995.................  2,200,000   2,200       698,023      (254,765)           --        445,458
Sale of common stock for cash
  January 1996 -- $1.00/share.................    120,000     120       119,880            --            --        120,000
  April 1996 -- $0.60/share...................    350,000     350       209,650            --            --        210,000
  May 1996 -- $2.50/share.....................    372,000     372       900,658            --            --        901,030
Common stock issued in exchange for full
  recourse note payable -- March
  1996 -- $0.30/share.........................    300,000     300        89,700            --            --         90,000
Common stock exchanged for services
  December 1995 -- $1.00/share................     60,000      60        59,940            --            --         60,000
  April 1996 -- $0.60/share...................     50,000      50        29,950            --            --         30,000
Exercise of common stock warrant in exchange
  for cash and forgiveness of loans -- March
  1996 -- $0.30/share.........................    320,000     320        95,680            --            --         96,000
Accretion of preferred stock to redemption
  value.......................................         --      --      (900,000)           --            --       (900,000) 
Common stock to be issued in October 1996 upon
  redemption of preferred
  stock -- $6.00/share........................    150,000     150       899,850            --            --        900,000
Sales of common stock in initial public
  offering for receivable from underwriter for
  $6.00/share in September 1996, net of issue
  costs of $1,056,146.........................  1,050,000   1,050     5,242,804            --            --      5,243,854
Redeemable warrants issued in initial public
  offering -- $0.125/warrant..................         --      --       143,760            --            --        143,760
Deferred compensation expense related to stock
  options.....................................         --      --       192,000            --      (192,000)            --
Amortization of deferred compensation.........         --      --            --            --        48,000         48,000
Net loss for the year ended September 30,
  1996........................................         --      --            --    (2,193,003)           --     (2,193,003) 
                                                ---------   ------    ---------   ------------     --------    -----------
Balance -- September 30, 1996.................  4,972,000   4,972     7,781,895    (2,447,768)     (144,000)     5,195,099
Fair value of stock option grant to
  distributor -- December
  1996 -- $6.375/share........................         --      --       351,000            --            --        351,000
Fair value of stock options granted to outside
  service providers
  December 1996 -- $6.375/share...............         --      --       125,000            --            --        125,000
  August 1997 -- $10.125/share................         --      --         4,469            --            --          4,469
Exercise of redeemable stock purchase warrants
  for common stock
  March 1997 -- $6.00/share...................     50,052      50       300,262            --            --        300,312
  April 1997 -- $6.00/share...................      6,700       7        40,193            --            --         40,200
  May 1997 -- $6.00/share.....................      8,000       8        47,992            --            --         48,000
Amortization of deferred compensation.........         --      --            --            --        96,000         96,000
Net loss for the year ended September 30,
  1997........................................         --      --            --    (4,874,969)           --     (4,874,969) 
                                                ---------   ------    ---------   ------------     --------    -----------
Balance -- September 30, 1997.................  5,036,752   $5,037   $8,650,811   $(7,322,737)   $  (48,000)   $ 1,285,111
                                                =========   ======    =========   ============     ========    ===========
</TABLE>
 
                            See accompanying notes.
 
                                       19
<PAGE>   20
 
                            COMPRESSENT CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
                            STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                                        PERIOD FROM            PERIOD FROM
                                                                                         INCEPTION              INCEPTION
                                                     YEAR ENDED      YEAR ENDED     (AUGUST 26, 1994) TO   (AUGUST 26, 1994) TO
                                                    SEPTEMBER 30,   SEPTEMBER 30,      SEPTEMBER 30,          SEPTEMBER 30,
                                                        1997            1996                1995                   1997
                                                    -------------   -------------   --------------------   --------------------
<S>                                                 <C>             <C>             <C>                    <C>
Cash flows from operating activities
  Net loss........................................   $(4,874,969)    $(2,193,003)        $ (254,765)           $ (7,322,737)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
    Depreciation..................................        88,447          40,352              2,815                 131,614
    Amortization of other assets..................        36,000              --                 --                  36,000
    Amortization of deferred compensation.........        96,000          48,000                 --                 144,000
    Write-off of property and equipment...........            --          29,126                 --                  29,126
    Common stock exchanged for services...........            --          90,000                 --                  90,000
    Fair value of stock options granted...........       480,469              --                 --                 480,469
  Changes in operating assets and liabilities
    (increase) decrease:
    Note receivable...............................            --         109,000           (109,000)                     --
    Inventory.....................................       (55,620)             --                 --                 (55,620)
    Other current assets..........................      (114,709)             --                 --                (114,709)
    Other assets..................................         9,947          (1,455)            (8,607)                   (115)
    Payables and other liabilities................       321,080         216,018             42,936                 580,034
                                                     -----------     -----------          ---------             -----------
      Net cash used in operating activities.......    (4,013,355)     (1,661,962)          (326,621)             (6,001,938)
Cash flows from investing activities
  Maturities of available-for-sale investments....     4,868,029              --                 --               4,868,029
  Purchases of available-for-sale investments.....    (4,868,029)             --                 --              (4,868,029)
  Purchases of property and equipment.............      (170,051)       (148,707)           (59,524)               (378,282)
  Capitalized software development costs..........      (369,324)             --                 --                (369,324)
                                                     -----------     -----------          ---------             -----------
      Net cash used in investing activities.......      (539,375)       (148,707)           (59,524)               (747,606)
Cash flows from financing activities
  Sale of common stock............................            --       1,252,040            700,223               1,952,263
  Receipt of proceeds from underwriter............     5,549,573              --                 --               5,549,573
  Initial public offering registration costs
    paid..........................................       (55,052)       (214,916)                --                (269,968)
  Loans from shareholder..........................            --          75,000                 --                  75,000
  Repayment of full recourse note payable.........            --          90,000                 --                  90,000
  Sale of redeemable preferred stock..............            --         450,000                 --                 450,000
  Redemption of preferred stock...................      (450,000)             --                 --                (450,000)
  Exercise of redeemable stock purchase warrants
    for common stock..............................       388,512              --                 --                 388,512
  Proceeds from issuance of notes payable.........     1,250,000              --                 --               1,250,000
  Principal payment of notes payable..............    (1,250,000)             --                 --              (1,250,000)
  Debt offering registration costs paid...........      (135,665)             --                 --                (135,665)
  Proceeds from issuance of subordinated long-term
    debt..........................................     1,000,000              --                 --               1,000,000
                                                     -----------     -----------          ---------             -----------
      Net cash provided by financing activities...     6,297,368       1,652,124            700,223               8,649,715
                                                     -----------     -----------          ---------             -----------
      Net increase (decrease) in cash and cash
         equivalents..............................     1,744,638        (158,545)           314,078               1,900,171
Cash and cash equivalents at beginning of
  period..........................................       155,533         314,078                 --                      --
Cash and cash equivalents at end of period........   $ 1,900,171     $   155,533         $  314,078            $  1,900,171
                                                     ===========     ===========          =========             ===========
Supplemental schedule of noncash investing and
  financing activities
Common stock to be issued in redemption of
  preferred stock.................................   $        --     $   900,000         $       --            $    900,000
Conversion of loan from related party to common
  stock...........................................            --          75,000                 --                  75,000
Common stock and warrants issued in initial public
  offering........................................            --       5,387,614                 --               5,387,614
Issuance of common stock in exchange for full
  recourse note payable...........................            --          90,000                 --                  90,000
Supplemental schedule of cash flow information
Cash paid for interest............................   $    20,090     $        --         $       --            $     20,090
</TABLE>
 
                            See accompanying notes.
 
                                       20
<PAGE>   21
 
                            COMPRESSENT CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
                         NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1997
 
 1. BUSINESS ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Business Activities
 
     Compressent Corporation (the "Company"), formerly Cable-Sat Systems, Inc.,
was incorporated in the state of Florida on August 26, 1994, but did not
commence formal operations until April 1995. The Company develops digital image
coding and data compression products that will enable the facsimile transmission
of color images from computers equipped with the Company's software programs.
 
  Development Stage Company and Financing
 
     The Company's primary activities since inception have been devoted to
developing its initial color facsimile products and related technologies,
preparation for marketing, the recruitment of key management and technical
personnel, including outside consultants, and raising capital to fund
operations. The Company has no revenue from the sale of its products through
September 30, 1997. As a result, the financial statements are presented in
accordance with Statement of Financial Accounting Standards No. 7 (SFAS 7),
"Accounting and Reporting by Development Stage Enterprises."
 
     For the period from inception (August 26, 1994) through September 30, 1997,
the Company had a deficit accumulated during the development stage of
approximately $7,323,000 and had used approximately $6,002,000 in cash for
operating activities. The Company expects to continue to incur losses during the
year ended September 30, 1998, until the Company is able to attain revenues from
sales, licensing or other arrangements sufficient to support its operations. The
Company believes that the sale of preferred stock and warrants to purchase
common stock in exchange for municipal bonds with an aggregate total face value
of $3,500,000 and the $10,000,000 line of credit obtained from Call Now, Inc.
("Call Now"), a related party, are sufficient to provide the Company with
working capital to support planned operating activities through September 30,
1998 (see Note 10 -- Subsequent Events). Call Now is a publicly held real estate
investment company. Call Now's major asset is ownership of the Retama Park
Racetrack Project, Special Facilities Revenue Refunding Bonds. The Retama Park
Racetrack is a horse racing facility in Selma, Texas that is managed by the
Retama Entertainment Group, an 80 percent owned subsidiary of Call Now. A member
of the Company's Board of Directors is the Chairman and President of Call Now
and owns over 50 percent of Call Now stock. Another member of the Company's
Board of Directors is also a shareholder of Call Now. In addition, Call Now has
been involved in several sales of equity and debt financings with the Company in
the past and Call Now currently owns common stock of the Company.
 
  Use of Estimates
 
     The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
 
  Cash and Cash Equivalents
 
     Cash equivalents consist of short-term financial instruments that are
readily convertible into cash with original maturities of less than ninety days
from the date of acquisition. The carrying amount reported in the balance sheet
for cash and cash equivalents approximates fair value.
 
  Inventory
 
     Inventory is stated at the lower of cost (first-in, first-out method) or
market and consists primarily of raw materials, such as packaging materials and
software manuals.
 
                                       21
<PAGE>   22
 
                            COMPRESSENT CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                               SEPTEMBER 30, 1997
 
  Property and Equipment
 
     Property and equipment is recorded at cost. Depreciation and amortization
is provided on a straight-line basis over estimated useful lives or over the
life of the lease for equipment under capitalized leases, if shorter. Leasehold
improvements are amortized over the term of the lease or their estimated useful
life, whichever is shorter. The useful lives of property and equipment for
purposes of depreciation are:
 
<TABLE>
            <S>                                                           <C>
            Office Furniture and Equipment..............................  5 years
            Computers...................................................  3 years
</TABLE>
 
  Capitalized Software Development Costs
 
     The Company capitalizes software development costs upon achievement of
technological feasibility, subject to net realizable value consideration in
accordance with Statement of Financial Accounting Standards No. 86 (SFAS 86),
"Accounting for costs of Computer Software to be Sold, Leased or otherwise
Marketed." Based on the Company's development process, technological feasibility
is achieved upon completion of a working model. Accordingly, all expenses
incurred prior to completion of a working model are expensed. Capitalized costs
are amortized upon product release on a straightline basis over the estimated
useful life of two years or the ratio of current revenue to the total current
and anticipated future revenues, whichever results in the greater amortization.
During March 1997, the Company completed a working model of its facsimile
software and began capitalizing software development costs pursuant to SFAS 86.
A total of approximately $369,000 in software development costs were capitalized
at September 30, 1997. Amortization expense for the year ended September 30,
1997 was $0.
 
  Other Assets
 
     In connection with the Company's initial public offering that went
effective on September 25, 1996, the Company paid Barron-Chase Securities, Inc.
(the underwriter) a $108,000 fee for certain financial advisory services to be
provided over the three years following the effective date of the offering. The
original fee of $108,000 is amortized on a straight-line basis over the
three-year term of the agreement, and is included in other non-current assets.
For the year ended September 30, 1997, the Company amortized $36,000 of the fee.
 
     In connection with the Company's issuance of 10% Convertible Subordinated
Promissory Notes (see Note 2) during September 1997, the Company incurred
certain debt offering cost which have been capitalized and will be amortized
over the five year term of the debt, which matures in September 30, 2002. As of
September 30, 1997, approximately $136,000 of offering costs have been
capitalized and included in non-current other assets. Amortization expense for
the year ended September 30, 1997 was not material.
 
  Stock Based Compensation
 
     In October 1995, the Financial Accounting Standards Board released
Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for
Stock-Based Compensation." SFAS 123 provides an alternative to APB Opinion 25
(APBO 25), "Accounting for Stock Issued to Employees" by requiring additional
disclosure, and is effective for the Company's fiscal year beginning October 1,
1996. The Company plans to continue to account for its employee stock plans in
accordance with the provisions of APBO 25 and provide the additional disclosures
required by SFAS 123. Accordingly, SFAS is not expected to have a material
impact on the Company's financial position, or results of operations. See Note
4.
 
                                       22
<PAGE>   23
 
                            COMPRESSENT CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                               SEPTEMBER 30, 1997
 
  Advertising and Promotion Costs
 
     The Company's policy is to expense advertising and promotion costs as
incurred. The Company's advertising and promotion expenses were approximately
$193,000 for the year ended September 30, 1997. Advertising and promotion
expenses were not significant for the year ended September 30, 1996, and for the
period from inception (August 25, 1994) to September 30, 1995.
 
  Income Taxes
 
     The Company accounts for income taxes in accordance with the provisions of
the Statement of Financial Accounting Standards Statement No. 109 (SFAS 109),
"Accounting for Income Taxes." Under SFAS 109, the liability method is used for
accounting in income taxes.
 
  Net Loss Per Share Attributable to Common Shareholders
 
     Net loss applicable to common shareholders is computed using the weighted
average number of shares of common stock outstanding. Pursuant to the Securities
and Exchange Commission Staff Accounting Bulletins, common and common equivalent
shares issued at prices below the assumed public offering price during the
twelve months prior to the initial filing of the registration statement have
been included in the calculation as if they were outstanding for all periods
prior to the quarter in which the Company's initial public offering became
effective (using the treasury stock method and an initial public offering price
of $6.00 per common share). Redeemable preferred stock is not deemed to be a
common stock equivalent for purposes of calculating the net loss applicable to
common shareholders. Fully diluted net loss per share is not presented because
it is antidilutive.
 
  Impact of Recently Issued Accounting Standards
 
     In February 1997, the Financial Accounting Standards Board issued Statement
No. 128 (SFAS 128), "Earnings per Share," which is required for all financial
statements issued for periods ending after December 15, 1997, including interim
periods. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior periods.
The new requirements will include a calculation of basic earnings per share,
from which the dilutive effect of stock options, warrants and convertible debt
will be excluded. The basic earnings per share calculation will not change the
primary earnings per share previously reported for the years ended September
1997, 1996 and for the period from inception (August 26, 1994) to September 30,
1995. A calculation of diluted earnings per share will also be required;
however, this is not expected to differ materially from the Company's reported
primary earnings per share because the Company had net losses for all prior
periods reported, and therefore the dilutive effect of stock options, warrants,
and convertible debt will be excluded. Accordingly, diluted earnings per share
will be the same as basic earnings per share until the company has net income.
 
     In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive
Income," which establishes standards for reporting and displaying comprehensive
income and its components in a full set of general-purpose financial statements
and is required to be adopted by the Company beginning in fiscal 1999. The
Company's management is currently evaluating the impact of this statement on
operations.
 
     Additionally, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 (SFAS 131), "Disclosures about Segments
of an Enterprise and Related Information," which established standards for the
way the public business enterprises report information in annual statements and
interim financial reports regarding operating segments, products, and services,
geographic
 
                                       23
<PAGE>   24
 
                            COMPRESSENT CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                               SEPTEMBER 30, 1997
 
areas and major customers. SFAS 131 will first be reflected in the Company's
annual financial statements beginning in fiscal 1999. The Company's management
is currently evaluating the impact of this statement on operations.
 
 2. SUBORDINATED LONG-TERM DEBT
 
     In the fourth quarter, the Company issued $1,000,000 in convertible
subordinated promissory notes (each a "Note") to twenty-six accredited
purchasers through Rickel & Associates, Inc., a placement agent. The Notes were
sold in multiples of $1,000, and the Notes are convertible into such number of
shares as the Company's common stock, $0.001 par value ("Common Stock") as shall
be determined by dividing the purchase price of the Notes by the lesser of
$10.00 per share or the closing price, Common Stock on the day prior to
conversion (but in no event less than $7.00 per share), as adjusted for stock
splits, stock dividends, and similar events. The Notes bear interest at 10% per
year, payable semi-annually on June 15th and December 15th of each year,
commencing December 15, 1997. The principal of the Notes is due in September
2002, but may be redeemed at the option of the Company if the average trading
price for the Notes has been greater than or equal to $20 per share, as adjusted
for stock splits, stock dividends, and similar events, for thirty (30)
consecutive trading days. The Notes have certain demand registration rights as
defined in the Registration Rights Agreement entered into between the Company
and each holder of the Notes.
 
 3. REDEEMABLE PREFERRED STOCK
 
     During 1996, the Company had authorized 150,000 shares of redeemable Series
A Preferred Stock. The Series A Preferred Stock was entitled to receive a
cumulative cash dividend of $0.21 per share on each anniversary from the date of
issuance.
 
     The Company was required to redeem all preferred shares outstanding out of
the net proceeds from any underwritten public offering or private placement of
the Company's common stock. The redemption price was $3.00 per share plus one
share of the Company's common stock per share of preferred stock. The Company's
initial public offering of common stock purchase warrants went effective
September 25, 1996, and the Company became irrevocably committed to redeem its
then outstanding preferred stock. The preferred stock was held by Call Now, a
related party. The initial public offering closed on October 1, 1996, and the
Company redeemed the preferred stock from Call Now. For purposes of presentation
in the accompanying financial statements, the cash redemption amount of the
preferred stock of $450,000 is classified as "Preferred stock redemption
payable" at September 30, 1996, and is included in current liabilities. In
addition, the 150,000 shares of common stock issuable upon redemption of the
preferred stock are included as outstanding common stock at September 30, 1996,
in the accompanying financial statements. In February 1998, the Company reissued
its Series A preferred stock. (See Note 10 -- Subsequent Events, Sale of
Preferred Stock).
 
 4. SHAREHOLDERS' EQUITY
 
  Public Offering
 
     During September 1996, the Company completed a public offering of 1,050,000
shares of common stock at $6.00 per share and 1,150,000 redeemable common stock
purchase warrants for $0.125 per warrant. The Company received net proceeds of
$5,387,614. In addition, as part of the initial public offering, the Company's
150,000 shares of Preferred Stock were redeemed at $3.00 per share plus one
share of the Company's common stock per share of preferred stock (see Note
3 -- Redeemable Preferred Stock).
 
     The initial public offering, a firm underwriting commitment, went effective
September 25, 1996. However, the proceeds from this offering were received by
the Company from the Underwriter on October 1,
 
                                       24
<PAGE>   25
 
                            COMPRESSENT CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                               SEPTEMBER 30, 1997
 
1996, upon the closing. Therefore, at September 30, 1996, proceeds from the sale
of common stock and redeemable common stock purchase warrants are classified as
"Other receivable from underwriter in connection with the Company's initial
public offering," the cash redemption amount of the Preferred Stock is
classified as "Preferred stock redemption payable" and the common stock issued
to redeem the preferred stock is included as outstanding common stock in the
accompanying financial statements (see Note 3 -- Redeemable Preferred Stock).
 
  Shares Issued in Exchange for Cash and Loan
 
     In August 1995, in connection with the sale of 550,000 shares of common
stock to Call Now, the Company also sold a warrant to Call Now to purchase
320,000 shares of common stock at an exercise price of the then current fair
value of the common stock of $0.92 per share. In January 1996 and February 1996,
the Company received $75,000 in loans from Call Now. In March 1996, the Company
adjusted the warrant exercise price on the 320,000 shares from $0.92 per share
to the then current fair market value of $0.30 per share of Common Stock. The
option was then exercised by Call Now in exchange for forgiveness of the $75,000
in loans plus $21,000 in cash.
 
  Shares Issued for Services
 
     In December 1995, the Company issued 60,000 shares of common stock valued
at $60,000 in exchange for past services rendered to the Company. In addition,
in April 1996, the Company issued 50,000 shares of common stock valued at
$30,000 in exchange for past services rendered to the Company. The value
assigned to the shares was based on the Company's best estimate of fair market
value of the common stock at the time of issuance.
 
  Common Stock Purchase Warrants
 
     On September 25, 1996, in connection with the Company's initial public
offering, the Company issued 1,150,000 redeemable common stock purchase warrants
for $0.125 per share. The warrants are exercisable to purchase common stock
during the three year period from the effective date of the offering (September
25, 1996), at an exercise price of $6.00 per share. The Company may redeem the
warrants at a price of $0.25 per warrant by giving 30 days written notice to the
holders if the Company's common stock price equals or exceeds $12.00 per share
for 30 consecutive trading days. For the year ended September 30, 1997,
redeemable stock purchase warrants to purchase 64,752 shares of common stock
were exercised for $388,512. As of September 30, 1997, 1,085,248 warrants were
outstanding.
 
  Underwriter's Warrant and Underlying Warrant
 
     At the closing of the initial public offering on October 1, 1996, for
nominal consideration, the Company issued to the Underwriter, 100,000 Common
Stock Underwriter Warrants ("Underwriter's Warrants") and 100,000 Warrant
Underwriter Warrants ("Underlying Warrants"). The Underwriter's Warrants are
exercisable for a five year period and allow the holder to purchase one share of
common stock at a price of $9.00 per share. The exercise price of the Underlying
Warrants is $0.1875 per warrant. Each Underlying Warrant is exercisable for a
three year period to purchase one share of common stock at a price of $9.00 per
share. The Underwriter's Warrant and the Underlying Warrants are subject to
adjustment for certain events including mergers, stock dividends, stock splits,
and other events. The Underwriter's Warrants contains net issuance provisions
permitting the holders to elect to exercise the Underwriter's Warrants in whole
or in part and instruct the Company to withhold from the securities issuable
upon exercise, the number of securities, valued at the current fair market value
on the date of exercise, to pay the exercise price.
 
                                       25
<PAGE>   26
 
                            COMPRESSENT CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                               SEPTEMBER 30, 1997
 
  Placement Agent's Warrant
 
     On September 12, 1997, in connection with the Company's issuance of its
long-term debt, the Company granted common stock purchase warrants to the
placement agent. The warrants allow the holders to purchase up to 8,791 fully
paid and non-assessable shares of the Company's common stock at $10.00 per
share. The warrants are exercisable at any time before the close of business on
September 12, 2002. The fair value of these warrants was not material.
 
  Stock Options
 
     Employee and Consultant Stock Options
 
     In February 1996, the Company's Board of Directors adopted an incentive
stock option plan. The plan allows for incentive stock options to be granted to
key employees. In addition, from time to time the Board of Directors may grant
options to consultants that are in addition to the options approved for key
employees under the incentive stock option plan. All options expire no more than
five years from the date of grant. The exercise price for all options shall not
be less than 100% of the fair market value of the stock subject to the option on
the date of grant as determined by the Board of Directors. All options generally
vest in increments over a period of three years from the date of grant, with the
first increment vesting after one year. Options may be granted with different
vesting terms from time to time. The Board of Directors has approved options to
purchase up to 1,140,000 shares of common stock to be granted to key employees
under the incentive stock option plan and to consultants of the Company.
 
     A summary of the Company's stock option activity, and related information
for the years ended September 30, 1996 and 1997, follows:
 
<TABLE>
<CAPTION>
                                                                       OPTIONS OUTSTANDING
                                                 SHARES     ------------------------------------------
                                                AVAILABLE   NUMBER OF    AGGREGATE    WEIGHTED AVERAGE
                                                FOR GRANT    SHARES        PRICE       EXERCISE PRICE
                                                ---------   ---------   -----------   ----------------
<S>                                             <C>         <C>         <C>           <C>
Balance at September 30, 1995.................         --          --   $        --        $   --
  Shares Authorized...........................    780,000          --            --            --
  Options Granted.............................   (818,500)    818,500     3,308,000          4.04
  Options Canceled............................    250,000    (250,000)   (1,500,000)         6.00
                                                 --------    --------   -----------         -----
Balance at September 30, 1996.................    211,500     568,500     1,808,000          3.18
  Shares Authorized...........................    360,000          --            --            --
  Options Granted.............................   (415,000)    415,000     4,122,750          9.93
  Options Canceled............................     42,333     (42,333)     (243,708)         5.76
                                                 --------    --------   -----------         -----
Balance at September 30, 1997.................    198,833     941,167   $ 5,687,042        $ 6.04
                                                 ========    ========   ===========         =====
</TABLE>
 
<TABLE>
<CAPTION>
                                     OPTIONS OUTSTANDING
                    -----------------------------------------------------
                                    WEIGHTED AVERAGE                                OPTIONS EXERCISABLE
                                       REMAINING                              --------------------------------
    RANGE OF          NUMBER          CONTRACTUAL        WEIGHTED AVERAGE       NUMBER        WEIGHTED AVERAGE
EXERCISE PRICES     OUTSTANDING       LIFE (YEARS)        EXERCISE PRICE      EXERCISABLE      EXERCISE PRICE
----------------    -----------     ----------------     ----------------     -----------     ----------------
<S>                 <C>             <C>                  <C>                  <C>             <C>
     $2.50            441,667             3.60                $ 2.50            401,667            $ 2.50
 $6.00 - $10.00       268,500             4.15                  6.46             99,167              6.00
$10.00 - $14.38       231,000             4.54                 12.33                 --                --
                      -------             ----                ------            -------             -----
                      941,167             3.99                $ 6.04            500,834            $ 3.19
                      =======                                                   =======
</TABLE>
 
                                       26
<PAGE>   27
 
                            COMPRESSENT CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                               SEPTEMBER 30, 1997
 
     The weighted-average grant-date fair value of options granted during the
fiscal year ended September 30, 1997 and 1996 was $4.28 and $0.92, respectively.
 
     In December 1996, the Company's Board of Directors approved the issuance of
stock options to certain outside service providers to purchase up to 145,000
shares of the Company's common stock at an exercise price of $7.013 per share.
The exercise price was calculated at 110% of the fair market value on the date
of grant of $6.375 per share. The options vest one-half in year one and one-half
in year two, and expire three years from the date of grant. Pursuant to the
provisions of SFAS 123 the fair value for these options was estimated at the
date of grant using a Black-Scholes option pricing model with the following
assumptions: risk free interest rate of approximately 6%; no dividend yield;
volatility factor of .5; and a weighted-average expected life of the options of
approximately 1.5 years. The fair market value of these options was estimated to
be approximately $216,000 and will be recognized as compensation expense over
the vesting period. Compensation expense relating to these options for the year
ended September 30, 1997 was approximately $125,000 and recorded as general and
administrative expense.
 
     In December 1996, in connection with a preliminary agreement between the
Company and a distributor, Set 1 Communications, NSW, Australia ("Set 1"), the
Company granted Set 1 a stock option to purchase up to 248,600 shares of the
Company's common stock at the then fair market value of $6.375 per share. The
option vested immediately and expires two years from the date of grant. Pursuant
to the provisions of SFAS 123, the fair value for this option was estimated at
the date of grant using a Black-Scholes option pricing model with the following
assumptions: risk free interest rate of approximately 6%; no dividend yield;
volatility factor of .5; and a weighted-average expected life of the option of 1
year. The Company recorded the entire estimated fair value of this option of
approximately $351,000 as sales and marketing expense in December 1996.
 
     During April 1997, the Company granted to the acting President an option to
purchase up to 200,000 shares of the Company's common stock at the then fair
market value of $10.625 per share. These options vest in increments over a
period of two years from the date of grant, with the first increment vesting
after one year and expire five years from the date of grant.
 
     SFAS 123 requires the disclosure of pro forma net income and earnings per
share information computed as if the Company had accounted for its stock options
granted subsequent to September 30, 1995, under the fair value method set forth
in SFAS 123. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions for 1997 and 1996: a risk-free interest rate of 6.0%, a dividend
yield of 0%, a volatility factor of .5 for options granted prior to December
1996 and .7 for options granted during December 1996 through September 30, 1997,
an expected life ranging from 1.5 to 3.5 years, and a contractual term of 5
years.
 
     For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information is as follows:
 
<TABLE>
<CAPTION>
                                                                   YEAR ENDED SEPTEMBER
                                                                ---------------------------
                                                                   1997            1996
                                                                -----------     -----------
    <S>                                                         <C>             <C>
    Actual net loss applicable to common shareholders.........  $(4,874,969)    $(3,093,003)
                                                                ===========     ===========
    Pro forma net loss applicable to common shareholders......  $(5,802,331)    $(3,261,192)
                                                                ===========     ===========
    Actual net loss per share applicable to common
      shareholders............................................  $     (0.97)    $     (0.76)
                                                                ===========     ===========
    Pro forma net loss per share applicable to common.........  $     (1.16)    $     (0.81)
                                                                ===========     ===========
</TABLE>
 
                                       27
<PAGE>   28
 
                            COMPRESSENT CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                               SEPTEMBER 30, 1997
 
  Other Stock Options
 
     In February 1996, the Company's Board of Directors also approved the
issuance of stock options to purchase up to 150,000 shares of common stock at
$0.30 per share for key employees and consultants. These options are in addition
to the options that may be granted under the incentive stock option plan and to
consultants described above, and expire five years from the date of grant. As of
September 30, 1997, none of these options had been exercised. As of September
30, 1996, the Board of Directors had granted options to purchase 80,000 shares
of common stock at $0.10 Based on the difference between the option exercise
price and the fair value of the common stock on the date of grant, the Company
has recorded $192,000 of deferred compensation relating to these options and is
amortizing compensation expense over the two-year vesting period. 40,000 of
these options were exercisable at September 30, 1997. As of September 30, 1997,
none of these options had been exercised.
 
  Common stock reserved for future issuance
 
     Shares of common stock of the Company reserved for future issuance,
including shares reserved pertaining to the Underwriter's over-allotment and
Underwriter's Warrant and Underlying Warrant are as follows:
 
<TABLE>
<CAPTION>
                                                                          SEPTEMBER 30,
                                                                              1997
                                                                          -------------
        <S>                                                               <C>
        Redeemable common stock purchase warrants.......................    1,085,248
        Long-term debt conversion.......................................      428,571
        Placement agent warrants........................................       26,373
        Employee, consultant, and other stock options...................    1,290,000
        Underwriter's Warrants and Underlying Warrants..................      200,000
                                                                            ---------
                                                                            3,030,192
                                                                            =========
</TABLE>
 
 5. INCOME TAXES
 
     Due to operating losses, there is no provision for income taxes for fiscal
years 1995, 1996 or 1997. The statutory tax rate of 34% is directly offset by
the inability to recognize an income tax benefit from the net operating losses.
 
     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 used for income tax purposes. Significant components of
the Company's deferred tax assets for federal and state income taxes are as
follows:
 
<TABLE>
<CAPTION>
                                                                   SEPTEMBER 30,
                                                             -------------------------
                                                                1997           1996
                                                             -----------     ---------
        <S>                                                  <C>             <C>
        Deferred Tax assets:
          Net operating loss carryforwards.................  $ 2,730,000     $ 800,000
          Other -- net.....................................       90,000        60,000
                                                             -----------     ---------
                  Total deferred tax assets................    2,820,000       860,000
          Valuation allowance..............................   (2,820,000)     (860,000)
                                                             -----------     ---------
                  Net deferred tax assets..................  $        --     $      --
                                                             ===========     =========
</TABLE>
 
     The realization of deferred tax assets is dependent on future earnings, the
timing and amount of which are uncertain. Accordingly, a valuation allowance,
equal to the net deferred tax asset at September 30, 1997 and
 
                                       28
<PAGE>   29
 
                            COMPRESSENT CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                               SEPTEMBER 30, 1997
 
1996, has been established to reflect these uncertainties. The change in the
valuation allowance was a net increase of $1,960,000, $770,000, and $90,000 for
fiscal 1997, 1996 and the period from inception (August 26, 1994) to September
30, 1995, respectively.
 
     As of September 30, 1997, the Company had net operating loss carryforwards
of approximately $6,870,000 for federal and State tax purposes, which will
expire from 2003 through 2012. Utilization of net operating loss and tax credit
carryforwards may be subject to a substantial limitation due to the ownership
change limitations provided by the Internal Revenue Code of 1986, as amended,
and similar provisions. The annual limitation may result in the expiration of
net operating loss and tax credit carryforwards before full utilization.
 
 6. RELATED PARTY TRANSACTIONS
 
     In connection with the September issuance of long-term debt (see Note 2), a
son, a licensed broker-dealer, of a Director of the Company was paid
approximately $60,000 in commissions.
 
     During May 1996, the Company forgave a loan for $89,000 to the Company's
former president. The total amount of forgiveness was recognized as compensation
expense by the Company.
 
     During March 1996, the Company sold 300,000 shares of common stock at the
then current fair value of $0.30 per share to the Company's former Chairman and
Chief Executive Officer in exchange for a full recourse interest bearing note
payable amounting to $90,000. The loan was repaid in May 1996.
 
     In January 1996 and February 1996, the Company received $75,000 in loans
from Call Now. In March 1996, Call Now exercised a repriced warrant to purchase
320,000 shares at $0.30 per share by forgiving the $75,000 in loans plus paying
$21,000 in cash (see Note 4 -- Shareholders' Equity and Note 10 -- Subsequent
Events).
 
 7. LEGAL MATTERS
 
     On February 14, 1997, the Company instituted a lawsuit in Santa Clara
County Superior Court against former consultants and a company they had formed
known as Color Communication Corporation. The lawsuit asserts claims for breach
of contract, breach of confidence, unfair competition and unjust enrichment,
alleging that the former consultants misappropriated the Company's confidential
information. On April 30, 1997, the Superior Court entered a preliminary
injunction, prohibiting the defendants from using the Company's confidential
information in any products, literature or advertising. The Superior Court also
enjoined the defendants from advertising, marketing, selling or otherwise
distributing any facsimile or color imaging software product for a period of
nine months beginning April 21, 1997. The defendants have twice sought emergency
appellate relief to set aside the injunction and were twice denied it. Trial on
the Company's claims against the former consultants and Color Communication
Corporation is scheduled to begin on December 15, 1997. The defendants have
filed a formal appeal of the injunction which will not be heard until after the
trial has concluded. A total of approximately $249,000 in legal expenses has
been incurred in connection with this lawsuit through September 30, 1997. The
Company believes the ultimate resolution of this matter will not have a material
adverse impact on its financial position, results of operations, or cash flow.
However, in the near term the Company may incur substantial legal expenses in
connection with the prosecution of this matter (see Note 10 -- Subsequent
Events, Legal Matters).
 
 8. COMMITMENTS
 
     The Company leases office space and office equipment. Rent expense was
approximately $115,169, $65,152 and $13,360 for the years ended September 30,
1997 and 1996, and the period from inception
 
                                       29
<PAGE>   30
 
                            COMPRESSENT CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                               SEPTEMBER 30, 1997
 
(August 26, 1994) to September 30, 1995, respectively, and $193,681 for the
period from inception (August 26, 1994) to September 30, 1997.
 
     Future payments for operating leases at September 30, 1997 are as follows:
 
<TABLE>
<CAPTION>
                                    YEAR ENDED
        ------------------------------------------------------------------
        <S>                                                                 <C>
        September 30, 1998................................................  $144,000
        September 30, 1999................................................    18,000
        September 30, 2000................................................      7000
                                                                            --------
                                                                            $169,000
                                                                            ========
</TABLE>
 
     The Company is committed under an employment agreement with an officer to
make the following future payments:
 
<TABLE>
<CAPTION>
                                    YEAR ENDED
        ------------------------------------------------------------------
        <S>                                                                 <C>
        September 30, 1998................................................  $100,000
                                                                            ========
</TABLE>
 
 9. CONCENTRATIONS OF OTHER RISKS
 
  Suppliers
 
     The Company currently uses one subcontractor to manufacture and distribute
all of its products. If this contractor were to experience supply constraints or
financial difficulties, the Company could experience difficulty in satisfying
customer demand.
 
10. SUBSEQUENT EVENTS
 
  Sale of Preferred Stock
 
     On February 3, 1998, the Company signed an agreement to sell 56,000 shares
of its redeemable convertible Series A Preferred Stock to Call Now, a related
party, for $62.50 per share for an aggregate total proceeds of $3,500,000. As
payment for the preferred stock, on February 20, 1998, Call Now transferred to
the Company 1997 Series A, Retama Park Racetrack Project, Special Facilities
Revenue Refunding Bonds with a face value of $3,500,000. The Retama Park
Racetrack is a horseracing facility in Selma, Texas that is managed by Retama
Entertainment Group, an 80 percent owned subsidiary of Call Now. The 1997 Series
A Bonds pay interest at 7 percent per annum and are secured by the racetrack
facility. The bonds are not currently traded in the open market and prior to the
transfer of the bonds to the Company, all such bonds were owned by Call Now. The
Company believes that the fair value of the 1997 Series A bonds approximates the
face value. The Company may use the 1997 Series A Bonds as loan collateral to
provide operating cash.
 
     The Preferred Stock sold to Call Now, is initially convertible into common
stock on a ten to one basis, subject to future adjustments for stock splits,
stock dividends or other similar events. The holders of the Preferred Stock have
no voting rights, except as required under any applicable state laws. The
Preferred Stock has mandatory cumulative dividends of $7.50 per share per annum.
The Preferred Stock has an aggregate liquidation preference over the common
stock of $62.50 per share plus cumulative unpaid dividends. The Preferred Stock
may be redeemed by the Company any time subsequent to 90 days from the date of
issuance for $100 per share plus unpaid dividends.
 
     In connection with the issuance of the Series A Preferred Stock to Call
Now, for nominal proceeds of $500, the Company sold a warrant to Call Now to
purchase up to 500,000 shares of the Company's common stock with an exercise
price of $6.25 per share or the average bid and ask price of the common stock
for the
 
                                       30
<PAGE>   31
 
                            COMPRESSENT CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                               SEPTEMBER 30, 1997
 
three days prior to exercise. The warrant expires three years after the date of
grant. The fair value of the warrant was estimated at the date of the grant
using a Black-Scholes option pricing model with the following assumptions, risk
free interest rate of approximately 6%; no dividend yield; volatility factor of
 .7; and a weighted average expected life of 3 years. The fair market value of
the warrant is estimated to be $1,260,000.
 
  Line of Credit
 
     On February 3, 1998, the Company secured a $10,000,000 line of credit from
Call Now. Under the agreement, the Company has the right to draw up to
$10,000,000 on or before September 30, 1998. Proceeds paid to the Company upon
making draws under the line may be in the form of Retama Park Racetrack Bonds
similar to the proceeds received on the sale of Preferred Stock (see above).
Borrowings must be approved through resolution of the Company's Board of
Directors and must be used for working capital or acquisitions due within ten
days of the adoption of the resolution. The Company will be required to issue a
Promissory Note bearing interest at 15% per year, payable quarterly, for any
funds drawn against the line of credit. The Company is required to pay Call Now
a commitment fee of $400,000 within thirty (30) days after the first draw
pursuant to the line of credit.
 
     In connection with the line of credit agreement, the Company issued 500,000
warrants (the "underlying warrants") to Call Now exercisable for $2.00 per
warrant. Each underlying warrant may be exercised by Call Now to purchase the
Company's common stock at an exercise price of $6.25 per share. The underlying
warrants expire three years after the date of grant. The fair value of the
underlying warrants was determined at the date of the grant using a
Black-Scholes option pricing model with the following assumptions, risk free
interest rate of approximately 6%; no dividend yield; volatility factor of .7;
and a weighted average expected life of 3 years. The fair market value of the
underlying warrants is estimated to be $80,000 will be recorded as a component
of interest expense in the quarter ended March 31, 1998.
 
  Loan From Shareholder
 
     On January 15, 1998, the Company issued a promissory note to a certain
shareholder for $425,000. The note bears interest at 15% per year and is payable
on demand or within thirty (30) days of issuance. The Company also issued a
warrant to purchase up to 100,000 shares of the Company's common stock at an
exercise price of $6.25 per share. The warrants expire on January 15, 2001. The
fair value of the warrant determined at the date of the grant using a
Black-Scholes option pricing model with the following assumptions, risk free
interest rate of approximately 6%; no dividend yield; volatility factor of .7;
and a weighted average expected life of 3 years. The estimated fair value of the
warrants of $195,000 will be recorded as a component of interest expense in the
quarter ended March 31, 1998.
 
  Equity-Based Line of Credit
 
     On December 3, 1997, the Company secured a $10,000,000 equity-based line of
credit from Kingsbridge Capital Limited, a company organized and existing under
the laws of the British Virgin Islands ("KCL"). Under the privately-placed
financing, the Company has the right to draw up to $10,000,000 in cash in
exchange for the Company's Common Stock. Each draw must be for an amount greater
than $300,000, but no more than $1,000,000. There must be a minimum of 20
business days between each draw. The number of shares to which KCL is entitled
pursuant to a draw shall be determined by dividing the dollar value of the draw
by the purchase price. The purchase price is defined as 88% of the lowest
closing bid price of the Company's Common Stock over the five trading days
beginning two trading days prior to the date of the draw. No more than 1,008,000
shares may be sold pursuant to the equity line. No draws may be made under the
line of credit until the Company registers for resale the shares issued pursuant
to the equity line of credit and the shares issuable on exercise of the warrant,
has been declared effective by the Securities and Exchange
 
                                       31
<PAGE>   32
 
                            COMPRESSENT CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                               SEPTEMBER 30, 1997
 
Commission. No draws may be made during any 20 trading day period in which the
average daily trading volume of the Company's Common Stock is less than 22,500
shares per day. The market price of the Company's common stock must equal or
exceed $6 per share for the previous 3 trading days prior to a draw. No draws
may be made without KCL's consent to the extent the draw would cause KCL to hold
more than 9.9% of the Company's Common Stock. The Company's common stock must be
qualified for continued listing on the NASDAQ SmallCap Market, for which the
Company must, among other requirements, maintain net assets in excess of
$2,000,000 or have a total market capitalization greater than $35,000,000. The
line of credit will remain in effect for a period of eighteen months. In
connection with the agreement, the Company issued KCL a warrant to purchase up
to 45,000 shares of the Company's Common Stock at a price of $10.64 per share.
The Warrant expires on December 3, 2000. The fair value of the warrant was
estimated at the date of grant using a Black-Scholes options pricing model with
the following assumptions, risk free interest rate of approximately 6%; no
dividend yield; volatility factor of .7; and a weighted average expected life of
3 years. The estimated fair value of the warrants is $108,000 and will be
amortized over 18 months.
 
     As of February 20, 1998, no funds were available under the equity-based
line of credit and the Company has not filed a registration statement to the
register shares that may be sold pursuant to the line. Should the Company not
make any draws under the equity-based line of credit during the term of the
agreement, the Company will be required to pay $120,000 to KCL.
 
  Warrant Issued to Member of Board of Directors
 
     On December 30, 1997, in connection with assistance to be provided with the
Company's management changes and financing needs, the Company granted a member
of the Board of Directors warrants to purchase 700,000 shares of the Company's
Common Stock. The Warrants have an exercise price of $6.25 per share and expire
three years from the date of grant. The fair value of the warrant was determined
at the date of the grant using a Black-Scholes option pricing model with the
following assumptions, risk free interest rate of approximately 6%; no dividend
yield; volatility factor of .7; and a weighted average expected life of 3 years.
The estimated fair value of the warrants of $1,610,000 will be recorded as a
charge against general and administrative expenses in the quarter ended December
31, 1997.
 
  Legal Matters
 
     On December 10, 1997, the Company and Color Communications Corporation
entered into a settlement agreement which continued the prohibitions of the
preliminary injunction through January 15, 1998 and permanently prohibited the
defendants from using the Company's confidential information. The agreement
further prohibits the defendants from communicating with six specific companies
through April 15, 1998. As part of the settlement, the Company dismissed its
claims against the defendants and received a release of claims from them.
 
     In December 1997, the Board of Directors replaced several members of
management with a new and smaller management team. On February 18, 1998, the
Company received a letter from one member of the former management alleging
wrongful termination and racial discrimination and seeking unspecified damages.
The Company believes the claims are without merit and intends to contest the
matter vigorously. Management does not believe that resolution of the matter
will have a material effect on the Company. However, litigation is inherently
costly and uncertain and there can be no assurance that the matter will be
resolved in the Company's favor or without material cost.
 
                                       32
<PAGE>   33
 
                            COMPRESSENT CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                               SEPTEMBER 30, 1997
 
  Agreement to Acquire Softlink, Inc.
 
     On December 31, 1997, the Company entered into an agreement to acquire all
of the issued and outstanding shares of Softlink, Inc. (Softlink), a California
corporation, pursuant to a Stock Purchase Agreement dated December 31, 1997
between the Company and the shareholders of Softlink. The final agreement is
subject to certain conditions and the approval by Softlink's shareholders.
Softlink designs, manufactures, and distributes e-mail enhancement products for
sales under the "Voice" and "BravoMail" brand names. "Voice" is software and
hardware that allows for the addition of the voice dimension of communication to
e-mail. "BravoMail" is software that allows for e-mail presentations complete
with audio, graphics, and real time sequenced annotation and animation. As of
December 31, 1997, Softlink did not have significant operating revenues and the
book value of its total assets was not material to the Company.
 
     The closing of the acquisition is subject to a number of contingencies. If
the agreement is consummated on the terms currently anticipated, the Company
will acquire all of the capital stock of Softlink's shareholders, amounting to
4,059,449 shares of no par value common stock, for a negotiated purchase price
of 450,000 shares of the Company's $.001 par value common stock with a fair
value of $2,109,000 based on the average of the closing bid and ask prices for
the Company's common stock on December 31, 1997. The acquisition will be
accounted for using the purchase method of accounting and, accordingly, the
purchase price will be allocated to the assets purchased and the liabilities
assumed based on their fair values as of the date of the acquisition. The excess
of the purchase price over the fair values of the net liabilities acquired of
approximately $2,148,000 will be recorded as developed technology, and will be
amortized over the estimated useful life of 2 years using the greater of the
straight-line method or the ratio of current revenue to the total of current and
anticipated revenues.
 
  Changes in Board of Directors and Management
 
     In December 1997, the Board of Directors replaced several members of
Company management and the Company's Chairman and Chief Executive Officer and
the President resigned from the Board of Directors. In addition, on December 30,
1997, two other members of the Company's Board of Directors resigned and the
Company appointed a new Chief Executive Officer, Chief Financial Officer, and
Vice President of OEM Sales. The new Chief Executive Officer was also named to
the Company's Board of Directors. The Chief Financial Officer resigned in
February 1998. The Company's Board of Directors currently consists of four
members.
 
                                       33
<PAGE>   34
 
               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
 
The Board of Directors and Shareholders
Compressent Corporation
 
     We have audited the accompanying balance sheets of Compressent Corporation
(a development stage company) as of September 30, 1997 and 1996, and the related
statements of operations, shareholders' equity, and cash flows for the years
then ended, and for the period from inception (August 26, 1994) to September 30,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. The financial statements for the period from
inception (August 26, 1994) to September 30, 1995, were audited by other
auditors whose report dated December 1, 1995, expressed an unqualified opinion
on those statements. The financial statements for the period from inception
(August 26, 1994) to September 30, 1995, include a net loss of $254,765. Our
opinion on the statements of operations, shareholders' equity, and cash flows
for the period from inception (August 26, 1994) to September 30, 1997, insofar
as it relates to amounts for prior periods through September 30, 1995, is based
solely on the report of other auditors.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
 
     In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Compressent Corporation at September 30, 1997 and
1996, and the results of its operations and its cash flows for the years then
ended and for the period from inception (August 26, 1994) to September 30, 1997,
in conformity with generally accepted accounting principles.
 
                                            Ernst & Young LLP
 
San Jose, California
October 28, 1997, except for
Note 10 as for which the
date is February 24, 1998
 
                                       34
<PAGE>   35
 
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
 
Board of Directors
Compressent Corporation (formerly Cable-Sat Systems, Inc.)
 
     We have audited the accompanying statement of operations, shareholders'
equity and cash flows of Compressent Corporation (formerly Cable-Sat Systems,
Inc.), (a development stage company), for the period from inception (August 26,
1994) to September 30, 1995. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
 
     We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of
Compressent Corporation (formerly Cable-Sat Systems, Inc.), (a development stage
company), for the period from inception (August 26, 1994) to September 30, 1995
in conformity with generally accepted accounting principles.
 
                                          GRANT SCHWARTZ ASSOCIATES, CPA'S
 
Boca Raton, Florida
December 1, 1995
 
                                       35
<PAGE>   36
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
 
     There were no changes in and disagreements with accountants on accounting
and financial disclosures during the years ended September 30, 1996 and
September 30, 1997.
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
     See Item 1 included herein for information concerning executive officers.
 
     The directors of the Company are as follows:
 
<TABLE>
<CAPTION>
                       NAME                  AGE                POSITION
        -----------------------------------  ---   -----------------------------------
        <S>                                  <C>   <C>
                                                   President and Chief Executive
        Won-Gil Choe.......................  65    Officer
        William M. Allen...................  68    Director
        E. T. Kalinoski....................  42    Director and Chairman
        Stanley A. Young...................  70    Director
</TABLE>
 
     Won-Gil Choe, was appointed as President and Chief Executive Officer in
December 1997. He has served as President and Chief Executive Officer of Sofex,
Inc., a software outsourcing company since 1996. From 1993 to 1996 he was the
Chairman, President and Chief Executive Officer of Omni Media Technology, Inc.,
a multimedia technology company. He has held senior financial and engineering
management positions with companies such as Memorex, Philips-Signetics, Applied
Materials, Mass Miscrosystems, and Vacu-Blast.
 
     William M. Allen has been a director since 1995. He has been President and
director of Call Now, Inc. since June 1992.
 
     E. T. Kalinoski has been a director since 1995 and has served as Chairman
since January 1998. He had served as President of the Company until September
1995. He has been a financial consultant with MSH Capital, a consulting firm,
since 1991.
 
     Stanley A. Young has been a director since October 1996. He has been active
as a consultant and venture capital investor of the past five years. He is
President and Chairman of Young Management Group, Inc., consultants. He also
serves on the Board of Directors of JetForm, Inc. Andyne Computer, Inc. and
SEEC.
 
                                       36
<PAGE>   37
 
ITEM 11. EXECUTIVE COMPENSATION
 
                           SUMMARY COMPENSATION TABLE
 
     The following table sets forth the total compensation paid to the Company's
chief executive officer for the last three completed fiscal years and each of
the other executive officers of the Company who received compensation of
$100,000 or more during any such year.
 
<TABLE>
<CAPTION>
                                                               TOTAL ANNUAL CASH COMPENSATION
                                                            -------------------------------------
                                           YEAR ENDED                                OTHER ANNUAL
             NAME AND POSITION            SEPTEMBER 30,      SALARY       BONUS      COMPENSATION
    ------------------------------------  -------------     --------     -------     ------------
    <S>                                   <C>               <C>          <C>         <C>
    Wil Zarecor.........................       1995         $ 36,000     $    --        $   --
      President                                1996          144,000          --            --
                                               1997          132,000          --            --
    Abe Ostrovsky.......................       1996          120,000      90,000         4,176
      Chairman and Chief Executive
         Officer                               1997          240,000          --            --
    Shelley Harrison....................       1997          159,000          --            --
      Vice President, Marketing, Sales
         and Operations
    Lisa D'Alencon......................       1997          159,000          --            --
      Chief Financial Officer
</TABLE>
 
  Employment and Consulting Agreements
 
     Abe Ostrovsky's employment with the Company through December 1997 was
pursuant to an Employment Agreement dated March 1, 1996 with Ostrovsky
Consulting, Inc., a corporation organized to market the services of Mr.
Ostrovsky. Pursuant to the agreement, Mr. Ostrovsky would serve as Chairman and
Chief Executive Officer through February 28, 1998. The agreement provided for an
initial salary of $240,000 per year and an annual bonus as determined by the
Company's Board of Directors. Pursuant to the agreement, Mr. Ostrovsky purchased
300,000 shares of the Company's common stock at $0.30 per share. Mr. Ostrovsky
was later granted an Incentive Stock Option for 180,000 shares at $2.50 per
share. Pursuant to the agreement, Mr. Ostrovsky was appointed as a director of
the corporation.
 
     Wil F. Zarecor served as President pursuant to a two-year employment
agreement that terminated on August 30, 1997. Such agreement provides for a base
salary of $144,000 per year.
 
     In April 1997, the Company contracted with Peter Whealton, one of the
Company's Directors, to act as the Company's President. A consulting fee of
$15,000 per month through December 1997 was paid for his services.
 
  Information Concerning Stock Options
 
     The following table sets forth grants of stock options to the executive
officers named in the Summary Compensation Table during the fiscal year ended
September 30, 1997.
 
          STOCK OPTION GRANTS IN FISCAL YEAR ENDED SEPTEMBER 30, 1997
 
<TABLE>
<CAPTION>
                                              PERCENT OF
                                            TOTAL OPTIONS
                                              GRANTED TO
                                   NO. OF   ALL EMPLOYEES    EXERCISE   EXPIRATION
              NAME                 SHARES   IN FISCAL YEAR    PRICE        DATE        5%(1)     10%(1)
---------------------------------  ------   --------------   -------  --------------  --------  --------
                                                               ($)                      ($)       ($)
<S>                                <C>      <C>              <C>      <C>             <C>       <C>
Shelley Harrison.................  35,000         8.4%        14.375   February 2002   139,004   307,163
                                   25,000         6.0%         13.00      April 2002    89,792   198,416
Lisa D'Alencon...................  25,000         6.0%         13.00      April 2002    89,792   198,416
</TABLE>
 
                                       37
<PAGE>   38
 
---------------
 
(1) Potential realizable value is based on an assumption that the market price
    of the stock appreciates at the stated rate, compounded annually, from the
    date of grant until the end of the 5-year term of the option. These values
    are calculated based on requirements promulgated by the Securities and
    Exchange Commission and do not reflect the Company's estimate or projection
    of future stock price. Actual gains, if any, on stock option exercises will
    be dependent on the future performance of the Common Stock.
 
     The following table sets forth the number of stock options held by the
executive officers named in the Summary Compensation Table as of September 30,
1997 as well as fiscal year end value of unexercised "in-the-money" options held
which represents the positive difference between the exercise price and the
market price at fiscal year end. No such executive exercised any options during
the fiscal year.
 
<TABLE>
<CAPTION>
                                                    NUMBER OF                  VALUE OF
                                                   UNEXERCISED                UNEXERCISED
                                                     OPTIONS              IN-THE-MONEY OPTION
                                                AT FISCAL YEAR END        AT FISCAL YEAR END
                                               --------------------     -----------------------
                      NAME                      VESTED     UNVESTED       VESTED       UNVESTED
    -----------------------------------------  --------    --------     ----------     --------
    <S>                                        <C>         <C>          <C>            <C>
    Abe Ostrovsky............................   180,000          --     $1,395,000     $     --
    Wil Zarecor..............................     6,667          --     $   51,667     $     --
    Shelley Harrison.........................   100,000      80,000     $  823,000     $203,000
    Lisa D'Alencon...........................    45,000      25,000     $  191,250     $     --
</TABLE>
 
  Director Compensation
 
     Non-employee directors receive no compensation for attending Board or
Committee meetings. The Company pays the expenses directors incurred in
attending Board and Committee meetings. On December 4, 1996 each of the
following directors received an option to purchase 20,000 shares of the
Company's common stock at the then fair market value of $6.375 per share:
William M. Allen, E. T. Kalinoski, Wil Zarecor, Fred Chanowski, Stanley A.
Young, Peter A. Whealton and Jeffrey Waxman. These options vest in increments
over a period of three years from the date of grant, with the first increment
vesting after one year and expire five years from the date of grant.
 
     During April 1997, the Company granted to the acting President, who was
also a Director, an option to purchases up to 200,000 shares of the Company's
common stock at the then fair market value of $10.625 per share. These options
vest in increments over a period of two years from the date of grant, with the
first increment vesting after one year and expire five years from the date of
grant.
 
                                       38
<PAGE>   39
 
  Stock Performance Chart
 
     The graph below compares the cumulative total stockholder return on the
Company's Common Stock with the cumulative total return on the NASDAQ Stock
Market Index and the NASDAQ Computer & Data Processing Index for the period
September 30, 1996 through September 30, 1997, assuming an investment of $100
and the reinvestment of any dividends.
 
     The comparisons in the graph are based upon historical data and are not
indicative of, nor intended to forecast, future performance of the Company's
Common Stock.
 
<TABLE>
<CAPTION>
        Measurement Period              Compressent                           Computer & Data
      (Fiscal Year Covered)             Corporation           NASDAQ         Processing Index
<S>                                  <C>                 <C>                 <C>
9/30/96                                    100                 100                 100
9/30/97                                    158                 137                 135
</TABLE>
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     The following table sets forth, as of December 1, 1997, the beneficial
ownership of the Company's Common Stock by (i) the only persons who own of
record or are known to own, beneficially, more than 5% of the Company's Common
Stock; (ii) each director and each executive officer of the Company named in the
Summary Compensation Table; and (iii) all directors and officers as a group.
 
<TABLE>
<CAPTION>
                                                                    NUMBER OF   PERCENT
                             NAME AND ADDRESS                        SHARES     OF CLASS
        ----------------------------------------------------------  ---------   --------
                                                                                  (1)
        <S>                                                         <C>         <C>
        Call Now, Inc.(2)
          P.O. Box 531399
          Miami Shores, FL 33153..................................    204,897      4.1%
        Abe Ostrovsky(3)..........................................    457,000      9.1%
        William M. Allen(2),(4)...................................    459,272      9.1%
        Fred Chanowski(4).........................................     20,100        *
        Lisa D'Alencon(5).........................................     70,000      1.4%
        Shelley Harrison(6).......................................    180,000      3.6%
        E. T. Kalinoski(4)........................................    128,500      2.5%
        Jeff Waxman(4)............................................     20,000        *
        Peter Whealton(7).........................................    223,000      4.4%
        Stanley A. Young(4),(8)...................................    123,600      2.5%
        Wil Zarecor(9)............................................    186,667      3.7%
        Directors.................................................  1,431,472     28.4%
</TABLE>
 
                                       39
<PAGE>   40
 
---------------
 
 (1) Based on 5,042,202 shares outstanding.
 
 (2) Represents 204,897 shares owned by Call Now, Inc. of which Mr. Allen is an
     affiliate and 254,375 shares owned directly and owned by his spouse.
 
 (3) Includes 140,000 shares which may be acquired pursuant to outstanding stock
     options.
 
 (4) Includes 20,000 shares which may be acquired pursuant to outstanding stock
     options.
 
 (5) Includes 70,000 shares which may be acquired pursuant to outstanding stock
     options.
 
 (6) Includes 180,000 shares which may be acquired pursuant to outstanding stock
     options.
 
 (7) Includes 220,000 shares which may be acquired pursuant to outstanding stock
     options.
 
 (8) Includes 79,412 shares owned by a Limited Partnership of which Mr. Young is
     a General Partner.
 
 (9) Includes 6,667 shares which may be acquired pursuant to outstanding stock
     options.
 
  *  Less than 1%
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     In April 1997, the Company contracted with Peter Wealton, then one of the
Company's Directors, to act as the Company's President. A consulting fee of
$15,000 per month was paid for his services.
 
     In connection with the September 1997 issuance of long-term debt a son, a
licensed broker-dealer, of a Director of the Company was paid approximately
$60,000 in commissions.
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 
(a) The following documents are filed as part of this Report.
 
        (1) Financial Statements
 
          The following financial statements of the Registrant and Reports of
     Ernst & Young LLP, Independent Auditors and Grant-Scwartz Associates,
     CPA's, Independent Auditors are included herewith:
 
             (i) Statements of Operations for the year ended September 30, 1997,
        the year ended September 30, 1996, the period from inception (August 26,
        1994) to September 30, 1995, and the period from inception (August 26,
        1994) to September 30, 1997.
 
             (ii) Balance Sheets as of September 30, 1997 and 1996.
 
             (iii) Statements of Shareholder's Equity for the year ended
        September 30, 1997, the year ended September 30, 1996, and the period
        from inception (August 26, 1994) to September 30, 1995.
 
             (iv) Statements of Cash Flows for the year ended September 30,
        1997, the year ended September 30, 1996, the period from inception
        (August 26, 1994) to September 30, 1995, and the period from inception
        (August 26, 1994) to September 30, 1997.
 
             (v) Notes to Financial Statements.
 
             (vi) Report of Ernst & Young LLP, Independent Auditors.
 
             (vii) Report of Grant-Schwartz Associates, CPA's, Independent
        Auditors.
 
          (2) Financial Statement Schedules -- None.
 
        (3) Exhibits
 
                                       40
<PAGE>   41
 
     The following exhibits are incorporated by this reference to Registrant's
Registration Statement on Form S-1, File No. 333-06121:
 
<TABLE>
<CAPTION>
 EXHIBIT
   NO.                                        DESCRIPTION
---------  ----------------------------------------------------------------------------------
<S>        <C>
1(a)       Underwriting Agreement
3(a)       Amended and Restated Articles of Incorporation of the Registrant
3(b)       Bylaws of the Registrant
 4.1       Form Warrant Certificate
 4.2       Form of Common Stock Certificate
10.1       Financial Advisory Agreement
10.2       Merger and Acquisition Agreement
10.3       Warrant Agreement
10.4       Underwriter's Warrant Agreement
10.5       Incentive Stock Option Plan
10.5(a)    Employment Agreement -- Ostrovsky Consulting, Inc.
10.5(b)    Employment Agreement -- Wil F. Zarecor
10.5(c)    Employment Agreement -- John L. Douglas
10.5(d)    Employment Agreement -- Glenn Crepps
</TABLE>
 
     The following exhibits are filed herewith:
 
<TABLE>
<S>        <C>
10.7(a)    10% Convertible Subordinated Promissory Note
10.7(b)    Common Stock Purchase Warrant
10.7(c)    Private Equity Line of Credit Agreement
10.7(d)    Registration Rights Agreement
10.7(e)    Promissory Note
10.7(f)    Loan Agreement
10.7(g)    Stock Purchase Warrant
10.7(h)    Preferred Stock and Warrant Purchase Agreement
10.7(i)    Certificate of Designation of Series A Convertible Preferred Stock of Compressent
           Corporation
10.7(j)    Stock Purchase Warrant
10.7(k)    Reorganization Agreement of Purchase and Sale of Stock
10.7(l)    Stock Purchase Warrant
11.1       Computation of net loss per share
27         Financial Data Schedule
</TABLE>
 
     (b) Reports on Form 8-K -- The Company filed reports on Form 8-K on May 5,
1997 to disclose the change of the Company's name from Cable-Sat Systems, Inc.,
to Compressent Corporation and on January 20, 1998 and February 24, 1998 to
disclose changes made to the Company's Board of Directors and Management.
 
                                       41
<PAGE>   42
 
                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
                                          COMPRESSENT CORPORATION
 
                                          By: /s/     WON-GIL CHOE
                                            ------------------------------------
                                            Won-Gil Choe,
                                               President, Chief Executive
                                          Officer,
                                               and Director (Principal Executive
                                          Officer)
February 24, 1998
 
     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 date indicated.
 
<TABLE>
<CAPTION>
                   SIGNATURE                                TITLE                    DATE
-----------------------------------------------  ---------------------------  ------------------
<C>                                              <S>                          <C>
               /s/ WON-GIL CHOE                  President, Chief Executive   February 24, 1998
-----------------------------------------------  Officer, and Director
                 Won-Gil Choe                    (Principal Executive
                                                 Officer and Financial
                                                 Officer)
 
             /s/ WILLIAM M. ALLEN                Director                     February 24, 1998
-----------------------------------------------
               William M. Allen
 
              /s/ E.T. KALINOSKI                 Director, Chairman           February 24, 1998
-----------------------------------------------
                E.T. Kalinoski
 
             /s/ STANLEY A. YOUNG                Director                     February 24, 1998
-----------------------------------------------
               Stanley A. Young
</TABLE>
 
                                       42