Selected Consolidated Financial Data

<TABLE>
<CAPTION>
                                                                                 Year Ended October 31,

                                                 ----------------------------------------------------------------------------------
                                                          1998           1997            1996             1995             1994

                                                                          (in thousands, except per share data)

<S>                                                       <C>             <C>              <C>              <C>              <C>   
Statement of Income Data:
Net Sales:
  Derived Channel Systems                          (pound)8,114    (pound)10,594    (pound)13,258    (pound)14,879    (pound)15,645
  Intrusion alarm, broadband, and network
     management products                                  6,372            7,082            4,934            6,166            5,592
  Wireless products                                         705               --               --               --               --
                                                         ------           ------           ------           ------           ------

Total net sales                                          15,191           17,676           18,192           21,045           21,237
Cost of sales                                            (7,396)          (8,830)          (9,961)          (8,432)          (8,405)
Inventory write-downs                                    (1,325)              --           (1,473)              --               --
                                                         ------           ------           ------           ------           ------

Gross profit                                              6,470            8,846            6,758           12,613           12,832
Selling, general, administrative and other              (12,319)          (7,496)          (7,716)          (5,715)          (3,889)
Special charges                                            (962)              --           (2,721)              --               --
                                                         ------           ------           ------           ------           ------

Operating profit (loss)                                  (6,811)           1,350           (3,679)           6,898            8,943
Net interest and other income (expense)                     647            1,513            1,069              773               71
Equity in net losses of affiliate                          (254)              --               --               --               --
Minority interest                                           443               --               --               --               --
                                                         ------           ------           ------           ------           ------

Income (loss) before income taxes                        (5,975)           2,863           (2,610)           7,671            9,014
Income taxes                                                770              676              995            2,531            3,129
                                                         ------           ------           ------           ------           ------

Net income (loss)                                 (pound)(6,745)    (pound)2,187    (pound)(3,605)    (pound)5,140     (pound)5,885
                                                         ======           ======           ======           ======           ======

Basic and diluted
 earnings (loss) per share                         (pound)(0.62)     (pound)0.20     (pound)(0.31)     (pound)0.48      (pound)0.62
                                                         ======           ======           ======           ======           ======


Weighted average shares outstanding                      10,818           11,077           11,532           10,633            9,449
Working capital                                   (pound)10,719    (pound)20,959    (pound)23,187    (pound)28,252     (pound)7,741
Total assets                                      (pound)32,936    (pound)32,509    (pound)29,982    (pound)37,353    (pound)17,115
Debt                                               (pound)3,627     (pound)2,688        (pound)--        (pound)--        (pound)12
Shareholders' equity                              (pound)19,448    (pound)27,034    (pound)26,300    (pound)32,076    (pound)10,389
</TABLE>

                                       1

<PAGE>


           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations


General

Numerex is a telecommunications company comprised of business entities providing
an array of information transport products and services. The following is a
discussion of the consolidated financial condition and results of operations of
the Company for the fiscal years ended October 31, 1998, 1997, and 1996. This
discussion should be read in conjunction with the Company's consolidated
financial statements, the related notes thereto, and the other financial
information included elsewhere in this report.

Overview

The Company's history began on July 13, 1992 when Bronzebase acquired 90% of the
outstanding stock of Versus Technology UK and certain proprietary intellectual
property rights, including rights to Derived Channel technology and the rights
to market such technology in certain countries, including the United Kingdom.
Bronzebase acquired the remaining Versus Technology UK stock in September 1993.
In February 1994, as a result of a stock exchange, Bronzebase and its
subsidiary, Versus Technology UK, became subsidiaries of Numerex Corp. For
financial reporting purposes, the Company's results of operations prior to the
date of the Stock Exchange are those of Bronzebase and its predecessor, Versus
Technology UK.

      In July 1994, the Company completed the stock for stock acquisition of DA
Systems. Because the shareholders of the Company and DA Systems were
substantially the same prior to the acquisition, the historical financial
statements for the Company have been restated to combine the Company with DA
Systems for all periods subsequent to July 28, 1993, the date on which common
control first existed. DA Systems was subsequently sold in May 1997. In July
1994 and November 1994, the Company acquired the assets comprising its Digilog
and DCX Systems subsidiaries, respectively. These acquisitions were cash
transactions and have been recorded under the purchase accounting method.
 
     In February 1997, the Company acquired 100% of the outstanding common
stock of Broadband Networks, Inc. The acquisition was accounted for using the
purchase method of accounting. On July 17, 1997, the Company invested
(pound)605,000 ($1,000,000) in return for 19.5% of the common stock of UPLINK
Security, Inc. Due to the Company's inability to exert significant influence
over the operations of UPLINK, the Company accounted for the investment in
UPLINK using the cost method of accounting. Various options contained in the
agreements provided the Company a means of acquiring a controlling interest in
UPLINK. On May 18, 1998, the Company acquired an additional 78,795 shares of
UPLINK Security, Inc. from certain existing shareholders for approximately
(pound)873,000 ($1,444,000) including 89,763 Numerex common stock warrants with
a strike price of $6.00. This stock purchase increased the Company's ownership
interest in UPLINK to 85% and, as a result, UPLINK was consolidated with the
Company effective May 18, 1998.

      As a result of the acquisition of a controlling interest in UPLINK, the
Company was required under generally accepted accounting principles to restate
its investment in UPLINK from the cost method to the equity method for the first
and second quarters of fiscal year ended October 31, 1998. The effect of the
restatement for the fiscal year ended October 31, 1998, was a charge of
(pound)236,000 ($390,000). The financial statement effect of the change in
method on periods prior to fiscal 1998 was not significant.

                                       2

<PAGE>

           Management's Discussion and Analysis of Financial Condition
                      and Results of Operations (continued)

      On May 15, 1998, the Company, BellSouth Wireless, Inc.
("BellSouthWireless") and BellSouth Corporation completed a transaction whereby
Cellemetry LLC ("Cellemetry") a joint venture between Numerex and BellSouth
Wireless, was formed. Cellemetry, a Delaware limited liability company, is owned
60% by Numerex and 40% by BellSouthWireless. The parties have entered into an
operating agreement (the"Operating Agreement") which deals with, among other
things, the conduct of the business of Cellemetry. Pursuant to the Operating
Agreement, the Company will make cash contributions of up to $15.5 million
during the first two years of Cellemetry's operations. According to the
Operating Agreement, at the end of the three years if certain revenue targets
have been met by Cellemetry, no additional contribution from the Company will be
required. However, if, at the end of three years, the revenue targets are not
met, the Company is required to make an additional $3.75 million cash
contribution or contribute certain equity interests it has in Uplink. Also,
according to the Operating Agreement, Cellemetry must achieve certain specific
cumulative revenue and operating goals by the third anniversary of the formation
date. If these performance goals are not met, the Company may, at its sole
option, elect that BellSouth put its ownership interest in Cellemetry to the
Company for $15.33 million, plus interest at a 13% annual compound rate or begin
a process to dissolve Cellemetry which would include a transfer of the initially
contributed intellectual property to BellSouth. In addition, the Operating
Agreement provides certain restrictions as to distributions and the right to
transfer ownership interests in Cellemetry. Cellemetry has elected to be taxed
as a partnership for federal, state and foreign income tax purposes. 

      The Company has recorded the assets contributed by BellSouth to Cellemetry
at fair value on the date of contribution. The results of operations and
financial position of Cellemetry were consolidated with the Company effective
May 15, 1998, since the Company controls the operations of Cellemetry. The fair
value of the patents contributed to Cellemetry was $10,603,000 which is being
amortized over their remaining life of 16 years. In addition, BellSouth
contributed property and equipment to Cellemetry valued at $285,000. At October
31, 1998 Cellemetry's net assets were $13.5 million. In accordance with a
schedule of capital contribution, the Company contributed cash totaling
$5,500,000 to Cellemetry out of a total cash commitment of $15,500,000. The
balance of the Company's capital contribution is required to be funded as
follows: $8.0 million in fiscal 1999 and $2.0 million in fiscal 2000. 

      The Company generates substantially all of its net sales from recurring
service revenues and the sale of various equipment, systems and software
products to its customers. Products are typically shipped soon after order
placement. Therefore, sales order backlog historically has not been a meaningful
indicator for the Company. The Company presently generates a significant amount
of its net sales from product sales to an established customer base, principally
British Telecom, the Company's largest customer, and to an established network
of alarm system distributors and installers.

                                       3

<PAGE>

           Management's Discussion and Analysis of Financial Condition
                      and Results of Operations (continued)

      The Company currently publishes its consolidated financial statements in
British pounds sterling, the functional currency of the country in which a
substantial majority of the Company's net sales have historically been
generated.

Results of Operations

The following table sets forth, for the periods indicated, the percentage of net
sales represented by selected items in the Company's Consolidated Statements of
Operations.

<TABLE>
<CAPTION>

                                                                                     Year Ended October 31,
                                                                          -----------------------------------------
                                                                           1998              1997             1996
                                                                          ------            ------           ------
<S>                                                                       <C>               <C>               <C>   
Net Sales:
Derived Channel Systems                                                    53.4%             59.9%            72.9%
Intrusion alarm, broadband and network
     management products1                                                  41.9              40.1             27.1
Wireless products                                                           4.7                --               --
                                                                          -----             -----            -----

          Total net sales                                                 100.0             100.0            100.0
Cost of sales                                                              48.7              50.0             54.8
Inventory write-downs                                                       8.7                                8.1
                                                                          -----             -----            -----

Gross profit                                                               42.6              50.0             37.1
Selling, general, administrative and other                                 81.1              42.4             42.4
Special charges                                                             6.3                               14.9
                                                                          -----             -----            -----

Operating income (loss)                                                   (44.8)              7.6            (20.2)
                                                                          =====             =====            =====

Net income (loss)                                                         (44.4%)            12.4%           (19.8%)
                                                                          =====             =====            =====
</TABLE>



(1) The Company acquired BNI in March 1997 and sold DA in May 1997. The above
table includes sales of broadband products only for the years ended October 31,
1998 and 1997, and intrusion alarm products for all periods through April 30,
1997.

Forward-Looking Statements

The information contained in this Annual Report to Shareholders contains
forward-looking statements (as such term is defined in the Securities Exchange
Act of 1934 and the regulations thereunder), including without limitation,
statements as to trends or management's beliefs, expectations or opinions, which
are based upon a number of assumptions concerning future conditions that
ultimately may prove to be inaccurate.

      Such forward-looking statements are subject to risks and uncertainties and
may be affected by various factors which may cause actual results to differ
materially from those in the forward-looking statements. Certain of these risks,
uncertainties and other factors, are discussed in the Company's Annual Report on
Form 10-K for the year ended October 31, 1998. 


                                       4

<PAGE>


           Management's Discussion and Analysis Of Financial Condition
                      And Results of Operations (continued)


Fiscal Years Ended
October 31, 1998 and 1997

Net sales decreased 14.1% to (pound)15.2 million for fiscal year ended October
31, 1998 as compared to (pound)17.7 million in fiscal 1997. The principal reason
for the decline was a lack of significant Derived Channel sales to the Canadian
and Latin American markets and a reduction in network equipment sales in the
United Kingdom. The Company believes that the network equipment coverage in the
United Kingdom (greater than 90%) may limit the potential for significant growth
in the United Kingdom for network equipment. Intrusion alarm, broadband and
network management product sales decreased by (pound)0.7 million in fiscal 1998
as compared to fiscal 1997. The principal reasons for the decrease was the
elimination of sales of intrusion alarm products due to the sale of DA Systems
Ltd., effective May, 1997, which was partially offset by increases in sales of
broadband and network management products. Wireless product sales were
(pound)0.7 million resulting from the acquisition of a controlling interest in
UPLINK Security and the formation of Cellemetry LLC in May, 1998.

      Cost of sales decreased moderately by 1.2% to (pound)8.7 million for
fiscal year 1998 as compared to (pound)8.8 million for fiscal 1997. There was a
decrease in product cost due to a decline in net sales which was offset by the
inclusion of inventory write-downs of (pound)1.3 million which were the result
of two non-performing contracts and the decision to abandon specific sales
initiatives for certain Derived Channel markets. Gross profit, as a percentage
of net sales, decreased to 42.6% for fiscal 1998 as compared to 50.0% for fiscal
1997. The decrease in gross profit margin was primarily due to the inclusion of
an inventory obsolescence charge in fiscal 1998 which was somewhat offset by a
shift in sales mix to higher margin products principally due to the elimination
of the intrusion alarm product line.

      Selling, general, administrative and other expenses increased 77.2% to
(pound)13.3 million for fiscal 1998 as compared to (pound)7.5 million for fiscal
1997. The principal reason for the increases were the inclusion of the operating
expenses from the wireless product line (Cellemetry LLC and UPLINK, acquired in
May, 1998) as well as the Company's continuing investment in product development
and sales and marketing programs. In addition, the Company recorded a pre-tax
special charge of (pound)1.0 million. Charges of (pound)0.7 million relate to
the write-off of intangible assets, principally developed software costs and
territorial rights which have been rendered obsolete as a result of the
Company's decision to abandon certain specific Derived Channel sales and
marketing initiatives for which future direct revenues are no longer expected.
Charges of (pound)0.3 million result from severance and termination benefit
costs for five employees with principally corporate responsibilities relating to
the relocation of the Company's headquarters to Atlanta. There were also
additional charges to selling, general and administrative expenses amounting to
(pound)1.3 million for the write-off of certain uncollectable receivables
resulting from two non-performing contractual relationships and (pound)0.6
million related to consulting fees and other charges.

      The combined impact of all fourth quarter charges in fiscal 1998 was
approximately (pound)4.2 million. The charges, which are classified in both cost
of sales and selling, general, administrative and other, related to inventory
write-downs, uncollectable receivables, special charges and consulting fees as
discussed above.

      Interest and other income (net) decreased 57.2% to (pound)0.6 million for
the fiscal year ended October 31, 1998 as compared to (pound)1.5 million in
fiscal 1997. The decrease was principally related to a decrease in interest
income generated by temporary cash investments and the inclusion of interest
expense on the Revolving Credit Facility, which was used in conjunction with the
BNI acquisition and for general working capital purposes. In addition, there was
a gain recognized on the sale of DA for fiscal 1997.

                                       5


<PAGE>

           Management's Discussion and Analysis Of Financial Condition
                      And Results of Operations (continued)

      The Company acquired a controlling interest in UPLINK in May 1998, and as
a result of the Company's 19.5% investment in UPLINK from July, 1997 to May,
1998, there was a charge of (pound)0.3 million for fiscal 1998 that represented
the Company's equity in the net losses of UPLINK. Additionally, the Company
recorded minority interest in the losses of Cellemetry LLC for the same period
of (pound)0.4 million.

      The Company recorded a tax provision of (pound)0.8 million for fiscal 1998
despite the pre-tax losses. Certain losses arising from United States operations
were not deductible during fiscal 1998, while earnings from United Kingdom
operations were fully taxable. The effective income tax rate for fiscal 1997 was
23.6%. The income taxes recorded by the Company differ from the amounts computed
by applying statutory U.S. federal income tax rates principally due to the tax
benefits resulting from the distribution of U.K. earnings during fiscal 1997
which was partially offset by unrecognized deferred tax benefits arising from
certain U.S. losses.

      The decrease in net sales, increase in selling, general and administrative
expenses and the inclusion of the inventory write-down and special charges
resulted in a net loss of (pound)6.7 million for fiscal 1998 as compared to net
income of (pound)2.2 million for fiscal 1997.

      As a result of the Company's stock buyback program, weighted average
shares and potential shares outstanding on a diluted basis declined to 10.8
million in fiscal 1998 as compared to 11.1 million in fiscal 1997.


Fiscal Years Ended
October 31, 1997 and 1996

      Net sales decreased 2.8% to (pound)17.7 million for the
fiscal year ended October 31,1997 as compared to (pound)18.2 million in fiscal
1996. Derived Channel product sales declined by (pound)2.7 million in fiscal
1997 as compared to fiscal 1996. The principal reasons for the decline were a
reduction in network equipment sales in the United Kingdom and a decrease in
sales in the United Kingdom and a decrease in sales of Subscriber Terminal Units
(STUs) as a result of the sale of DA, which was partially offset by the
inclusion of royalty revenue for the right to manufacture certain intrusion
alarm products through a license agreement with the acquirer of DA. The Company
believes that the network equipment coverage in the United Kingdom (greater than
90%) may limit the potential for significant growth in the United Kingdom for
network equipment, although STU sales in the United Kingdom remained level
throughout fiscal 1997 and 1996. Intrusion alarm, broadband and network
management product sales increased by (pound)2.1 million in fiscal 1997 as
compared to fiscal 1996. The principal reasons for the increase were the
inclusion of sales of broadband products and services (from BNI which was
acquired in February 1997) and a modest improvement in sales of network
management products. These increases in sales were partially offset by the
reduction in sales of intrusion alarm products due to the sale of DA, effective
May, 1997.

      Cost of sales decreased 22.8% to (pound)8.8 million for fiscal year 1997
as compared to (pound)11.4 million for fiscal 1996. This primarily resulted from
a shift in sales mix to higher margin products principally due to the
elimination of DA Systems, Ltd. and its intrusion alarm produce line and the
inclusion of broadband products and services. There were no inventory
write-downs in fiscal 1997, whereas inventory write-downs of (pound)1.5 million
recorded in fiscal 1996 were the result of determining certain inventory items
to be obsolete due to market conditions. Gross profit, as a percentage of net
sales, increased to 50.0% for fiscal 1997 as compared to 37.7% for fiscal 1996.
The increase in gross profit margin was primarily due to the absence of an
inventory obsolescence charge in fiscal 1997 as compared to fiscal 1996 and a
shift in sales mix to higher margin products.

                                       6

<PAGE>

           Management's Discussion and Analysis Of Financial Condition
                      And Results of Operations (continued)

      Selling, general, administrative and other expenses decreased 2.9% to
(pound)7.5 million for fiscal 1997 as compared to (pound)7.7 million for fiscal
1996. The decrease was principally related to the elimination of underperforming
product lines and a decrease in legal and other expenses. In addition, one-time
special charges of (pound)2.7 million were recorded in fiscal 1996. These
special charges related principally to fixed and intangible asset impairment
provisions for certain obsolete products and settlement of litigation. There
were no special charges in fiscal 1997.

      Other income and expense increased 41.5% to (pound)1.5 million for the
fiscal year ended October 31, 1997 as compared to (pound)1.1 million in fiscal
1996. The increase was principally related to a credit on the sale of DA, which
was partially offset by a decrease in interest income generated by temporary
cash investments and the inclusion of interest expense on the Company's
revolving credit facility, which was used in conjunction with the BNI
acquisition.

      The Company recorded a tax provision of (pound)0.7 million for fiscal
1997. The effective income tax rate for fiscal 1997 was 23.6%. The income taxes
recorded by the Company differ from the amounts computed by applying statutory
U.S. federal income tax rates principally due to the tax benefits resulting from
the distribution of U.K. earnings during fiscal 1997, which was partially offset
by unrecognized deferred tax benefits arising from certain U.S. losses.

      The absence of inventory obsolescence and special charges, the increase in
gross profit margins, the increase in other income and expenses and a decrease
in the effective tax rate in fiscal 1997, resulted in a net income of (pound)2.2
million as compared to a net loss of (pound)3.6 million in fiscal 1996.

      As a result of the Company's stock buyback program, weighted average
shares outstanding declined to 11.1 million in fiscal 1997 as compared to 11.5
million in fiscal 1996.


Selected Quarterly Financial
Data; Seasonality

The following table shows certain unaudited financial data of the Company for
each quarter of the last two fiscal years. This information has been prepared
from the books and records of the Company in accordance with generally accepted
accounting principles for interim financial information. In the opinion of
management, all adjustments (including only normal, recurring adjustments)
considered necessary for a fair presentation have been included. Interim results
for any quarter are not necessarily indicative of the results that may be
expected for any future period.

                                       7

<PAGE>


Selected Quarterly Financial Data (Unaudited)


<TABLE>
<CAPTION>


                                                                                Three Months Ended
                                                     ------------------------------------------------------------------
                                                       January 31,       April 30,        July 31,       October 31,
                                                          1998              1998            1998           1998(1)
                                                     ------------------------------------------------------------------
                                                                                  (in thousands)
Net sales:
<S>                                                         <C>               <C>              <C>             <C>  
   Derived Channel Systems                           (pound)2,775      (pound)1,933     (pound)2,132    (pound)1,274
   Intrusion alarm and network
     management products                                    1,333             1,481            1,950           1,608
   Wireless products                                           --                --              301             404
                                                            -----             -----            -----           -----
            Total net sales                                 4,108             3,414            4,383           3,286
   Gross profit                                             2,035             1,881            2,410             144
   Operating profit (loss)                                    105              (385)            (505)         (6,026)
   Net income (loss)                                           86              (453)            (495)         (5,883)

<CAPTION>
                                                                                Three Months Ended
                                                     ------------------------------------------------------------------
                                                       January 31,       April 30,        July 31,       October 31,
                                                          1997              1997            1997            1997
                                                     ------------------------------------------------------------------
                                                                                  (in thousands)
Net sales:
   Derived Channel Systems                           (pound)2,656      (pound)2,753     (pound)2,494    (pound)2,691
   Intrusion alarm and network
     management products                                    1,487             2,392            1,581           1,622
                                                            -----             -----            -----           -----
            Total net sales                                 4,143             5,145            4,075           4,313
   Gross profit                                             1,942             2,510            2,256           2,138
   Operating profit (loss)                                    142               530              610              68
   Net income (loss)                                          241               455              857             634
</TABLE>

(1) Net income for the fourth quarter includes pre-tax charges of (pound)4.2
million, primarily related to inventory write-downs, write-off of uncollectible
receivables, special charges and consulting fees.

                                       8

<PAGE>


           Management's Discussion and Analysis Of Financial Condition
                      And Results of Operations (continued)


The Company's financial results may fluctuate from quarter to quarter as a
result of factors, including the timing of product shipments and new product
introductions as well as certain major network equipment software sales to
telephone companies that historically have been of a non-recurring nature.


Liquidity and Capital Resources

The Company has been able to fund its operations and working capital
requirements principally from the proceeds from a public offering completed in
April 1995. Net cash used by operating activities was (pound)2.1 million for the
fiscal year ended October 31, 1998 as compared to net cash provided of
(pound)0.3 million in fiscal 1997. The decrease from 1997 was primarily due to
net losses.

      Net cash used in investing activities decreased to (pound)2.3 million for
the fiscal year ended October 31, 1998 as compared to (pound)4.0 million in
fiscal 1997. The Company acquired BNI during 1997 and made investments in UPLINK
during 1998. The Company also had reduced expenditures for capitalized software
during 1998.

      Net cash provided by financing activities decreased to (pound)0.1 million
for the fiscal year ended October 31, 1998 as compared to (pound)1.2 million in
fiscal 1997. The decrease was principally due to the net effect of a decline in
the borrowings under the Company's revolving credit facility and a decrease in
the purchase of treasury stock.

      The Company had working capital balances of (pound)10.7 million and
(pound)21.0 million as of October 31, 1998 and 1997, respectively. 

      The Company's business has not been capital intensive and, accordingly,
capital expenditures have not been material. To date, the Company has funded all
capital expenditures from working capital, proceeds from the public offering and
funds available under its revolving credit facility. Presently, the Company is
obligated to fund the operations of Cellemetry LLC (which will require $8.0
million in fiscal 1999 and $2.0 million in fiscal 2000). Expansion of the
Company's Derived Channel Systems business in the UK and certain other
international markets and the potential expansion of the Company's broadband
product line may require greater capital investments than it has in the past.

      In January 1999, the Company terminated its revolving credit facility and
repaid amounts due including interest. In order to meet the Company's expected
1999 funding requirements, additional financing will be necessary. Management
believes that the Company will be successful in meeting its 1999 funding needs.

      The Company believes that its available cash and funds from potential
lending sources, will be sufficient to finance its operating and capital
requirements at least through the fiscal year ending October 31, 1999. The
Company will have funding obligations for Cellemetry LLC and UPLINK as both
entities are expected to be cash flow negative for the balance of fiscal year
1999. Cash requirements for future expansion of the Company's operations will be
evaluated on an as-needed basis and may involve the use of external financing.

Effect of Inflation

Inflation has not been a material factor affecting the Company's business. In
recent years, the cost of electronic components has remained relatively stable
due to competitive pressures within the industry, which has enabled the Company
to contain its production costs. The Company's general operating expenses, such
as salaries, employee benefits, and facilities costs, are subject to normal
inflationary pressures.

                                       9

<PAGE>

           Management's Discussion and Analysis Of Financial Condition
                      And Results of Operations (continued)

Foreign Currency

Currently, the Company's functional and reporting currency is British pound
sterling because a substantial majority of the Company's net sales have
historically been generated in the United Kingdom. Fluctuations in foreign
currency exchange rates are not expected to have a material impact on the
Company's results of operations or liquidity.

      It is anticipated that in 1999 the Company's reporting currency will
become the U.S. dollar.

Year 2000 Matters

The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.

      The Company has initiated formal communications with its significant
vendors to determine the extent to which the Company is exposed to such issues.
Based on responses to date and the Company's own evaluation of the Year 2000
Issue, management has determined that the Year 2000 issue will not pose
significant operational or financial problems to the Company. However, there can
be no assurances that the information technology and non-information technology
systems of other companies on which the Company's systems rely will be converted
on a timely basis and would not have an adverse effect on the Company's systems.
To date, the Company has not incurred significant costs related to the Year 2000
issue. It is management's belief that any potential costs associated with the
Year 2000 Issue will not be material to the Company's results of operations in
any given year. The foregoing is a Year 2000 readiness disclosure made pursuant
to the terms and protections of the Year 2000 Information and Readiness
Disclosure Act.

                                       10