<PAGE>

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

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

         {X}      QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                For the Quarterly Period Ended December 31, 2001

         { }      TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                    For the Transition Period From ____to____

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

                         Commission File Number 1-14198

                       DIGITAL TRANSMISSION SYSTEMS, INC.
             (Exact name of registrant as specified in its charter)

            DELAWARE                                           58-2037949
(State or other jurisdiction of                              (IRS Employer
 incorporation or organization)                             Identification No.)

                    3400 RIVER GREEN COURT, DULUTH, GA 30096
               (Address of principal executive office) (Zip Code)

                                 (770) 622-1200
                (Issuer's telephone number, including area code)

                                 NOT APPLICABLE
              (Former name, former address and former fiscal year,
                         if changed since last report)

Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.

Yes {X} No { }

The number of shares outstanding of the registrant's common stock as of February
14, 2002 was 16,238,470.

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


<PAGE>

                       DIGITAL TRANSMISSION SYSTEMS, INC.
                                    FORM 10-Q

                     FOR THE QUARTER ENDED DECEMBER 31, 2001

                                      INDEX

<TABLE>
<CAPTION>
                                                                                               PAGE
<S>               <C>                                                                          <C>
PART I.           FINANCIAL INFORMATION

Item 1.           Financial Statements:

                  Condensed Consolidated Balance Sheets at December 31, 2001
                    and June 30, 2001 (Unaudited)                                                3

                  Condensed Consolidated Statements of Operations for the Three
                    Months ended December 31, 2001 and 2000 (Unaudited)                          4

                  Condensed Consolidated Statements of Operations for the Six
                    Months ended December 31, 2001 and 2000 (Unaudited)                          5

                  Condensed Consolidated Statements of Cash Flows for the Six
                    Months Ended December 31, 2001 and 2000 (Unaudited)                          6

                  Notes to Condensed Consolidated  Financial Statements
                    (Unaudited)                                                                  7

Item 2.           Management's Discussion and Analysis of
                    Financial Condition and Results of Operations                               10

Item 3.           Quantitative and Qualitative Disclosure about Market Risk                     19

PART II.          OTHER INFORMATION

Items 1 - 5       Not applicable                                                                20

Item 6.           Exhibits and Reports on Form 8-K                                              20

                  Signatures                                                                    21
</TABLE>


                                     Page 2
<PAGE>

               DIGITAL TRANSMISSION SYSTEMS, INC. AND SUBSIDIARIES
                      Condensed Consolidated Balance Sheets
                                   (unaudited)
                        (in thousands, except share data)

<TABLE>
<CAPTION>
                                                                                                DECEMBER 31,
                                                                                                    2001           JUNE 30, 2001
                                                                                                ------------       -------------
<S>                                                                                             <C>                <C>
                                                               ASSETS
Current assets:
    Cash and cash equivalents                                                                    $      127                146
    Trade accounts receivable, net of allowances for
      returns and doubtful accounts of $224 and $368
      at December 31, 2001 and June 30, 2001, respectively                                              474              1,638
    Accounts receivable from related parties                                                             --                 25
    Inventories                                                                                       1,444              1,446
                                                                                                 ----------           --------
                Total current assets                                                                  2,045              3,255

Property and equipment, net                                                                             205                227
Intangible assets, net                                                                                  344                382
Other assets                                                                                            244                324
                                                                                                 ----------           --------

                Total assets                                                                     $    2,838              4,188
                                                                                                 ==========           ========

                                              LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
    Notes payable to banks                                                                       $      971              1,646
    Accounts payable and accrued liabilities                                                          2,203              1,673
    Accrued payroll and benefits                                                                        363                449
    Notes payable to related parties                                                                  3,000              3,000
    Warranty accrual                                                                                    199                200
    Current portion of ESOP obligation payable                                                           75                 --
    Net liabilities of discontinued operations                                                       10,566             11,001
                                                                                                 ----------           --------
                Total current liabilities                                                            17,377             17,969
                                                                                                 ----------           --------

ESOP obligation payable                                                                                 825                 --
Notes payable to related parties                                                                         --                721

                                                                                                 ----------           --------
                Total liabilities                                                                    18,202             18,690
                                                                                                 ----------           --------
Shareholders' deficit:
    Preferred stock, $0.01 par value, 10,000,000 shares authorized:
      Series A, convertible, liquidation preference of $1.00 per share,
         1,264,333 shares issued and outstanding                                                      1,264              1,264
      Series B, convertible, liquidation preference of $7.125 per share,
         454,737 shares issued and outstanding at June 30, 2001                                          --              3,000
      Series C, convertible, liquidation preference of $2.58 per share,
         2,330,217 shares issued and outstanding at June 30, 2001                                        --              4,810
    Unearned ESOP shares                                                                               (900)                --
    Common stock - $0.01 par value, 50,000,000 shares authorized;
      15,275,831 and 11,814,119 shares issued and outstanding
      at December 31, 2001 and June 30, 2001, respectively                                              153                118
    Common stock subscribed                                                                             504                302
    Additional paid-in capital                                                                       41,863             33,314
    Accumulated deficit                                                                             (58,551)           (57,310)
                                                                                                 ----------           --------
                Total shareholders' deficit                                                         (15,364)           (14,502)
                                                                                                 ----------           --------

                Total liabilities and shareholders' deficit                                      $    2,838              4,188
                                                                                                 ==========           ========
</TABLE>

See accompanying notes to condensed consolidated financial statements.


                                     Page 3
<PAGE>

               DIGITAL TRANSMISSION SYSTEMS, INC. AND SUBSIDIARIES
                 Condensed Consolidated Statements Of Operations
                                   (unaudited)
                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                                 THREE MONTHS ENDED DECEMBER 31,
                                                                                                 -------------------------------
                                                                                                    2001                  2000
                                                                                                 ---------             ---------
<S>                                                                                              <C>                   <C>
Net sales                                                                                        $   1,778             $   2,261
Cost of sales                                                                                        1,305                 1,401
                                                                                                 ---------             ---------
   Gross profit                                                                                        473                   860
                                                                                                 ---------             ---------

Selling, general and administrative                                                                    528                   849
Product development                                                                                    271                   350
Depreciation and amortization                                                                           22                    46

                                                                                                 ---------             ---------
   Total operating expenses                                                                            821                 1,245
                                                                                                 ---------             ---------

   Operating loss                                                                                     (348)                 (385)

Other income                                                                                            --                    10
Interest expense, net                                                                                  (68)                 (115)
                                                                                                 ---------             ---------

     Loss before income taxes                                                                         (416)                 (490)

Income taxes                                                                                            --                    --
                                                                                                 ---------             ---------

     Loss from continuing operations                                                                  (416)                 (490)

Discontinued operations:
     Loss from operations of discontinued subsidiary                                                    --                (2,474)
                                                                                                 ---------             ---------

     Net loss                                                                                         (416)               (2,964)

Series B, preferred stock dividends                                                                    (41)                  (20)
Series C, preferred stock dividends                                                                    (60)                   --
                                                                                                 ---------             ---------

     Net loss attributable to common shareholders                                                $    (517)            $  (2,984)
                                                                                                 ---------             ---------

Net loss per share - basic and diluted:
   Loss from continuing operations                                                               $   (0.04)            $   (0.05)
   Loss from discontinued operations of subsidiary                                                      --             $   (0.22)
                                                                                                 ---------             ---------

   Net loss per share - basic and diluted                                                        $   (0.04)            $   (0.27)
                                                                                                 =========             =========

Weighted average common shares outstanding:
  Basic                                                                                             11,858                10,955
                                                                                                 ---------             ---------
  Diluted (1)                                                                                       11,858                10,955
                                                                                                 ---------             ---------
</TABLE>

(1)      Potentially dilutive securities not included as their effect would be
         anti-dilutive

See accompanying notes to condensed consolidated financial statements.


                                     Page 4
<PAGE>

               DIGITAL TRANSMISSION SYSTEMS, INC. AND SUBSIDIARIES
                 Condensed Consolidated Statements Of Operations
                                   (unaudited)
                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                                 SIX MONTHS ENDED DECEMBER 31,
                                                                                                 -----------------------------
                                                                                                    2001                2000
                                                                                                 ---------           ---------
<S>                                                                                              <C>                 <C>
Net sales                                                                                        $   3,656           $   4,680
Cost of sales                                                                                        2,471               2,680
                                                                                                 ---------           ---------
   Gross profit                                                                                      1,185               2,000
                                                                                                 ---------           ---------

Selling, general and administrative                                                                  1,130               1,713
Product development                                                                                    582                 551
Depreciation and amortization                                                                           55                 103

                                                                                                 ---------           ---------
   Total operating expenses                                                                          1,767               2,367
                                                                                                 ---------           ---------

   Operating loss                                                                                     (582)               (367)

Other income (expense)                                                                                   6                 (60)
Interest expense, net                                                                                 (161)               (234)
                                                                                                 ---------           ---------

     Loss before income taxes                                                                         (737)               (661)

Income taxes                                                                                            --                  --
                                                                                                 ---------           ---------

     Loss from continuing operations                                                                  (737)               (661)

Discontinued operations:
     Loss from operations of discontinued subsidiary                                                    --              (3,515)
                                                                                                 ---------           ---------

     Net loss                                                                                         (737)             (4,176)

Series B, preferred stock dividends                                                                    (82)                (20)
Series C, preferred stock dividends                                                                   (120)                 --
                                                                                                 ---------           ---------

     Net loss attributable to common shareholders                                                $    (939)          $  (4,196)
                                                                                                 ---------           ---------

Net loss per share - basic and diluted:
   Loss from continuing operations                                                               $   (0.08)          $   (0.06)
   Loss from discontinued operations of subsidiary                                                      --           $   (0.32)
                                                                                                 ---------           ---------

   Net loss per share - basic and diluted                                                        $   (0.08)          $   (0.38)
                                                                                                 =========           =========

Weighted average common shares outstanding:
  Basic                                                                                             11,858              10,955
                                                                                                 ---------           ---------
  Diluted (1)                                                                                       11,858              10,955
                                                                                                 ---------           ---------
</TABLE>

(1)      Potentially dilutive securities not included as their effect would be
         anti-dilutive

See accompanying notes to condensed consolidated financial statements.


                                     Page 5
<PAGE>

               DIGITAL TRANSMISSION SYSTEMS, INC. AND SUBSIDIARIES
                 Condensed Consolidated Statements of Cash Flows
                                   (unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                                 SIX MONTHS ENDED DECEMBER 31
                                                                                                 ----------------------------
                                                                                                   2001                2000
                                                                                                 --------           ---------
<S>                                                                                              <C>                <C>
Cash flows from operating activities:
  Net loss                                                                                       $   (737)          $  (4,176)
  Less:  Loss from discontinued operations                                                             --               3,515
                                                                                                 --------           ---------
            Loss from continuing operations                                                          (737)               (661)
  Adjustments to reconcile net loss
   to net cash provided by (used in) operating activities:
     Depreciation and amortization                                                                     55                 103
     Amortization of software development costs                                                        38                  78
  Changes in assets and liabilities:
     Accounts receivable                                                                            1,189                (306)
     Inventories                                                                                        2                (376)
     Prepaid expenses and other assets                                                                 80                 144
     Accounts payable and accrued liabilities                                                         498                 489
     Warranty accrual                                                                                  (1)                 (1)
                                                                                                 --------           ---------
Net cash provided by (used in) continuing operations                                                1,124                (530)
Net cash used in discontinued operations                                                             (435)               (214)
                                                                                                 --------           ---------

Net cash provided by (used in) operating activities                                                   689                (744)
                                                                                                 --------           ---------

Cash flows from investing activities:
  Purchases of property and equipment                                                                 (33)               (126)
  Additions to capitalized software development costs                                                  --                (105)
                                                                                                 --------           ---------
Net cash used in investing activities                                                                 (33)               (231)

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

Cash flows from financing activities:
  Net (payments) proceeds under notes payable to banks                                               (675)                207
                                                                                                 --------           ---------
Net cash (used in) provided by financing activities                                                  (675)                207
                                                                                                 --------           ---------

Net decrease in cash and cash equivalents                                                             (19)               (768)
Cash and cash equivalents at beginning of period                                                      146                 996
                                                                                                 --------           ---------
Cash and cash equivalents at end of period                                                       $    127           $     228
                                                                                                 ========           =========

Supplemental disclosure of cash paid for:
    Interest                                                                                     $     62           $      87
                                                                                                 ========           =========

Supplemental disclosure of non-cash activities:
Conversion of note payable to related party into common stock                                         721                  --
                                                                                                 ========           =========
Conversion of Preferred Stock - Series B into common stock                                          3,000                  --
                                                                                                 ========           =========
Conversion of Preferred Stock - Series C into common stock                                          4,809                  --
                                                                                                 ========           =========
Issuance of common stock in payment of payable to related party                                        54                  --
                                                                                                 ========           =========
</TABLE>

See accompanying notes to condensed consolidated financial statements.


                                     Page 6
<PAGE>

               DIGITAL TRANSMISSION SYSTEMS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                          DECEMBER 31, 2001 (UNAUDITED)

1.       DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
         POLICIES.

Digital Transmission Systems, Inc. ("DTS") and subsidiaries, Asurent Wireless
("AW") and Asurent Technologies ("AT"), (collectively termed the "Company")
designs, manufactures, repairs and markets a broad range of products for the
telecommunications ("telecom") industry. AW's primary customers are
long-distance carriers, domestic and international wireless service providers,
including those offering cellular telephone services and Personal Communication
Services ("PCS"), and domestic and international resellers/integrators who sell
to and service end users with telecom equipment.

AW's products of original design, consisting of proprietary software and
hardware modules, facilitate the control, monitoring, and efficient transmission
of high-speed digital information through public or private telecommunications
networks. AW's network access products enable telecommunications service
providers to give their customers economical, high quality access to public and
private networks and various telecommunications services. These services include
voice and high speed data transmission, access to the Internet and video and
desktop conferencing. Important product requirements in the market segments AW
serves include high feature density, modularity, quality performance and
compactness. AW's products meet these requirements and are suitable for both
wireline and wireless service environments. Major customers of AW include Nextel
Communications, Nextel Partners, Alltel Wireless and Alltel Supply.

AW markets its products through a direct sales force employing inside and
outside sales representatives and several reseller channels. Domestically,
wireless service providers, including cellular, Specialized Mobile Radio ("SMR")
and PCS service companies, are targeted as prospective customers directly by the
Company's sales force. AW also utilizes telecommunications equipment resellers
and agents in the United States and other countries to market to private network
customers.

In late fiscal 2001, the Company's Board of Directors approved a plan to divest
of its de-installed telecommunications equipment business (AT - formerly Telcor
Communications). The financial statements have been reclassified to account for
the operating results of AT as discontinued operations. The following discussion
relates only to the Company's continuing operations. The decision for
divestiture was based on a thorough strategic and financial review of the
Company's operations and subsidiaries coupled with the consideration of the
severe macroeconomic conditions in the telecommunications industry. The Company
decided to only retain those segments that will potentially provide
self-generated positive and profitable growth in the near-term as access to
external financing has been difficult to obtain in recent periods. For further
information refer to Note 6 to the condensed consolidated financial statements.

The consolidated financial statements do not include any adjustments relating to
the recoverability and classification of assets and liabilities that might be
necessary should the Company be unable to continue as a going concern. The
Company's continuation as a going concern is dependent upon its ability to
generate sufficient cash flow to meet its obligations on a timely basis, to
comply with the terms of its financing agreements, and to obtain additional
financing or refinancing as may be required. Heretofore, the Company has been
able to satisfy its immediate short-term cash requirements through increasing
equipment sales and accelerating collections coupled with managing vendor
accounts and relationships. The Company is actively pursuing additional equity
financing through discussions with potential investors.

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting


                                     Page 7
<PAGE>

principles for complete financial statements. The financial information included
herein is unaudited; however, the information reflects all adjustments
(consisting solely of normal recurring adjustments) that are, in the opinion of
management, necessary for a fair presentation of the financial position, results
of operations and cash flows for the interim periods. Operating results for the
six months ended December 31, 2001 are not necessarily indicative of the results
that may be expected for the year ended June 30, 2002. For further information,
refer to the financial statements and footnotes thereto included in the
Company's Form 10-K for the year ended June 30, 2001.

There have been no changes to the accounting policies of the Company during the
periods presented. For a description of these policies, see Note 1 of the Notes
to Financial Statements in the Company's Annual Report on Form 10-K.

2.       INCOME (LOSS) PER COMMON SHARE

Basic earnings (loss) per share ("EPS") is calculated as income (loss) available
to common shareholders divided by the weighted-average number of common shares
outstanding during each period. Diluted EPS is calculated as income (loss)
available to common shareholders divided by the weighted-average number of
common shares outstanding during each period plus the effect of any potential
dilutive common shares, such as those attributable to convertible debt,
convertible preferred stock, warrants, or stock options.

A total of 1,653,848 of additional common shares related to the potential
conversion of warrants and shares attributable to convertible securities were
excluded from the computation of diluted net loss per share in the three months
ended December 31, 2001, because the exercise price of these securities was
greater than the average market price of the Company's common stock. In
addition, the Company excluded all remaining convertible preferred stock,
warrants, and outstanding stock options from the calculations of diluted net
loss per share as all such securities are anti-dilutive for the three months
ended December 31, 2001. The total potential number of dilutive equivalent
common shares excluded was 1,963,848 for the three month period ended December
31, 2001.

3.       LEGAL MATTERS

The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's financial position, results of operations, or liquidity.

4.       INVENTORIES

AW's products, consisting of proprietary software and hardware modules,
facilitate the control, monitoring, and efficient transmission of high-speed
digital information through public or private telecommunications networks. AW
purchases new hardware for applications in telecommunications and computer
networking. Cost is determined using average cost which approximates the
first-in, first-out (FIFO) method. AW has established a valuation allowance for
inventories based on a review of the composition, quantity, and expected future
usage or sales of inventories including expected sales prices.

5.       COMPREHENSIVE INCOME (LOSS)

No statements of comprehensive income (loss) have been included in the
accompanying consolidated financial statements since comprehensive loss and net
loss presented in the accompanying consolidated statements of operations would
be the same.

6.       SALE OF DISCONTINUED SUBSIDIARY

The Company's subsidiary - Asurent Technologies ("AT") - completed a transaction
on October 10, 2001 in which it sold to Somera Communications, Inc. ("Somera") a
substantial portion of its assets. All financial results of AT have been
reported as discontinued operations for the year ended June 30, 2001 and for the
three and six months ended December 31, 2001 given the Company's decision in
late fiscal 2001 to divest of AT. The significant terms of the transaction
called for Somera to purchase certain accounts receivable, inventory and
property, plant and equipment of AT at book value as of August 31, 2001 coupled
with the assumption of certain AT liabilities as defined in the agreement.
Somera paid $6,000,000 in cash to AT as consideration for the asset purchase.
The


                                     Page 8
<PAGE>

proceeds from the transaction were used to pay down AT's secured creditors,
including PNC Bank, as of the transaction date. Immediately following the sale,
the Company began liquidating all remaining assets of AT in order to pay down
unsecured trade debt. As of December 31, 2001, net liabilities of discontinued
operations (AT) approximates $10,566,000 and represents outstanding unsecured
trade payables of AT. AT is currently negotiating settlements with all unsecured
creditors of AT that are being funded as the remaining assets at AT are
liquidated. DTS and Asurent Wireless (AW) have not guaranteed the remaining
unsecured AT indebtedness in any way and are not party to the obligations.

7.       FORMATION OF EMPLOYEE STOCK OWNERSHIP PLAN AND PURCHASE OF SHARES FROM
         WI-LAN, INC.

Formation of ESOP - On approval of the DTS Board of Directors, an Employee Stock
Ownership Program ("ESOP") was formed on December 31, 2001 for the benefit of
the employees of DTS and its major subsidiary - Asurent Wireless, Inc. Under the
plan, all full-time employees and part-time employees with at least 20 hrs/week
are eligible to participate in the plan. Participants are permitted to
contribute up to 5% of their annual salary with a 100% match by the Company for
such individual contributions. The Company may also make discretionary
contributions to the plan but cannot exceed 5% of each individual's salary.
Employer contributions will vest over five years on a straight line basis. All
contributions to the ESOP will be used to purchase common stock of the Company
for the ESOP at 10 cents per share.

Each year, on December 31, a third party will provide an independent valuation
of the Company's common stock. This valuation will serve as the basis for
valuing participant accounts for that given period.

Purchase of stock from Wi-LAN, Inc. - In a transaction executed on December 31,
2001, the DTS ESOP entered into a stock purchase agreement with Wi-LAN, Inc.,
then a major shareholder in DTS. The agreement stipulated that the DTS ESOP
would purchase all of Wi-LAN's equity holdings in DTS once converted into common
shares. All preferred securities, convertible debentures including accrued
interest to date and warrants as held by Wi-LAN, Inc. were converted into common
stock of the Company. An initial deposit of $103,000 towards a programmed
installment purchase of the shares was delivered by the ESOP to Wi-LAN on
December 31, 2001. The agreement allowed the ESOP assignment rights in the
purchase of the shares and a rescission date of no later than February 28, 2002.
As a result of the ESOP transaction with Wi-LAN, Inc., the number of common
shares outstanding now approximates 15.8 million shares with approximately 10.3
million shares being held by the DTS ESOP.

Additional disclosures regarding the DTS ESOP can be found on page 15 of this
report.

8.       CHANGES IN EXECUTIVE LEADERSHIP AND BOARD OF DIRECTOR MEMBERSHIP

In compliance with the agreement between Wi-LAN and the DTS ESOP, Hatim Zaghloul
and Robert Schulz, DTS Board members, tendered their resignations from the
Company's Board of Directors effective December 31, 2001. Both individuals are
members of the Wi-LAN, Inc. Board of Directors and had served on the Company's
Board of Directors during the time that Wi-LAN held a majority of the Company's
common stock. On January 9, 2002, the DTS Board of Directors appointed Soren
Pihlman, President and COO of Asurent Wireless, DTS' major subsidiary, to the
DTS Board. Simultaneously, Andy Salazar was appointed Chairman of the Board. Mr.
Salazar announced his retirement as a full-time DTS employee effective February
1, 2002. However, Mr. Salazar will be available to consult with DTS, Asurent
Wireless or Asurent Technologies on an as-needed basis under consulting
agreements which compensate him at his previous salary level on a pro-rata
basis.


                                     Page 9
<PAGE>

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

GENERAL

Digital Transmission Systems, Inc. ("DTS") and subsidiaries, Asurent Wireless
("AW") and Asurent Technologies ("AT"), (collectively termed the "Company")
designs, manufactures, repairs and markets a broad range of products for the
telecommunications ("telecom") industry. AW's primary customers are
long-distance carriers, domestic and international wireless service providers,
including those offering cellular telephone services and Personal Communication
Services ("PCS"), and domestic and international resellers/integrators who sell
to and service end users with telecom equipment.

AW's products of original design, consisting of proprietary software and
hardware modules, facilitate the control, monitoring, and efficient transmission
of high-speed digital information through public or private telecommunications
networks. AW's network access products enable telecommunications service
providers to give their customers economical, high quality access to public and
private networks and various telecommunications services. These services include
voice and high speed data transmission, access to the Internet and video and
desktop conferencing. Important product requirements in the market segments AW
serves include high feature density, modularity, quality performance and
compactness. AW's products meet these requirements and are suitable for both
wireline and wireless service environments. Major customers of AW include Nextel
Communications, Nextel Partners, Alltel Wireless and Alltel Supply.

AW markets its products through a direct sales force employing inside and
outside sales representatives and several reseller channels. Domestically,
wireless service providers, including cellular, Specialized Mobile Radio ("SMR")
and PCS service companies, are targeted as prospective customers directly by the
Company's sales force. AW also utilizes telecommunications equipment resellers
and agents in the United States and other countries to market to private network
customers.

RESULTS OF OPERATIONS

THREE MONTHS ENDED DECEMBER 31, 2001 AND DECEMBER 31, 2000

The following table sets forth certain financial data derived from the Company's
statements of operations for the three months ended December 31, 2001 and
December 31, 2000 (dollars in thousands).

<TABLE>
<CAPTION>
                                                                       THREE MONTHS ENDED             THREE MONTHS ENDED
                                                                        DECEMBER 31, 2001              DECEMBER 31, 2000
                                                                    ------------------------        -----------------------
                                                                      $           % OF SALES          $          % OF SALES
                                                                    -----         ----------        -----        ----------
<S>                                                                 <C>           <C>               <C>          <C>
Net sales                                                           1,778            100            2,261            100
Gross profit                                                          473             27              860             38
Selling, general and administrative                                   528             30              849             38
Depreciation and amortization                                          22              1               46              2
Product development                                                   271             15              350             15
Loss from continuing operations                                      (416)           (23)            (490)           (22)
</TABLE>


                                    Page 10
<PAGE>

NET SALES. Net sales decreased by 21%, to $1,778,000 for the three months ended
December 31, 2001 from $2,261,000 for the three months ended December 31, 2000.
The sales mix, and the corresponding percentage of total sales of AW products,
is set forth in the chart below (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                                          PERCENTAGE OF
                                                                                                              TOTAL
                                                                      THREE MONTHS ENDED                THREE MONTHS ENDED
                                                                          DECEMBER 31,                     DECEMBER 31,
                                                                   --------------------------          -------------------
                                                                     2001              2000            2001           2000
                                                                   --------          --------          ----           ----
<S>   <C>                                                          <C>               <C>               <C>            <C>
Flex T1/E1                                                         $  1,778          $  2,261           100%           100%
                                                                   --------          --------          ----           ----

Totals                                                             $  1,778          $  2,261           100%           100%
                                                                   ========          ========          ====           ====
</TABLE>

For the three months ended December 31, 2001, revenues from the Company's
FlexT1/E1 product line decreased 21% from $2,261,000 for the three months ended
December 31, 2000 to $1,778,000 for the three months ended December 31, 2001.
The decrease is primarily due to a shift to more conservative capital spending
in the wireless carrier market during recent months. Further, network
infrastructure investments of AW's primary customers were delayed due to
expectations of reduced subscriber growth as a result of current economic
conditions in the marketplace. The Company expects capital spending by its
customers to gradually increase and return to more normal and historical levels
in future periods as the overall condition of the U.S. economy and the
telecommunications marketplace improves.

GROSS PROFIT. Cost of sales consists of component costs, compensation costs and
the overhead costs related to the production and shipping of AW's products,
along with the support and warranty expense associated with such products. Gross
profit decreased 45% from $860,000 for the three month period ended December 31,
2000, to $473,000 for the three month period ended December 31, 2001 due to the
accompanying decrease in sales noted for the same period. As a percentage of
sales, gross profit decreased from 38% to 27% of sales for the three month
period ended December 31, 2001 as compared to the same period ended December 31,
2000. The decrease is due to a lower margin product mix, primarily OEM products,
for sales recorded during the three months ended December 31, 2001.

PRODUCT DEVELOPMENT. Product development expense consists of personnel costs,
consulting, supplies and prototyping expenses. Product development expenses
decreased 23%, to $271,000 for the three months ended December 31, 2001 from
$350,000 for the three months ended December 31, 2000. The decrease in product
development expense for the three month period ended December 31, 2001 is
primarily due to decreased spending on new development projects and reduced
engineering headcount as compared to the three months ended December 31, 2000.
Further, no product development costs related to new projects were capitalized
for the three month period ended December 31, 2001 as compared to $34,000 for
the three month period ended December 31, 2000. As a percentage of sales,
product development costs were 15% for both the three months ended December 31,
2001 and 2000.

SELLING, GENERAL AND ADMINISTRATIVE. Selling expense consists primarily of
compensation costs for sales and marketing personnel, travel, consulting, trade
show and advertising expenses. General and administrative expense consists
primarily of occupancy costs and compensation expenses for administrative and
finance personnel, as well as accounting, legal and consulting fees. Selling,
general and administrative expense decreased by 38%, to $528,000 for the three
months ended December 31, 2001 from $849,000 for the three months ended December
31, 2000. The decrease is primarily attributable to reduced headcount during the
quarter ended December 31, 2001 as compared to December 31, 2000. Total selling,
general and administrative costs were 30% of sales for the three months ended
December 31, 2001 as compared to 38% of sales for the three months ended
December 31, 2000.

LOSS FROM CONTINUING OPERATIONS.. For the three month period ended December 31,
2001 the Company recorded a loss from continuing operations of $416,000 as
compared to a loss from continuing operations of $490,000


                                    Page 11
<PAGE>

reported for the three month period ended December 31, 2000. The decrease in the
loss from continuing operations is primarily a result of reduced general and
administrative expenses incurred during the quarter ended December 31, 2001 as
compared to the quarter ended December 31, 2000.

SIX MONTHS ENDED DECEMBER 31, 2001 AND DECEMBER 31, 2000

The following table sets forth certain financial data derived from the Company's
statements of operations for the six months ended December 31, 2001 and December
31, 2000 (dollars in thousands).

<TABLE>
<CAPTION>
                                                                         SIX MONTHS ENDED               SIX MONTHS ENDED
                                                                        DECEMBER 31, 2001              DECEMBER 31, 2000
                                                                    ------------------------        -----------------------
                                                                      $           % OF SALES          $          % OF SALES
                                                                    -----         ----------        -----        ----------
<S>                                                                 <C>           <C>               <C>          <C>
Net sales                                                           3,656            100            4,680            100
Gross profit                                                        1,185             32            2,000             43
Selling, general and administrative                                 1,130             31            1,713             37
Depreciation and amortization                                          55              1              103              2
Product development                                                   582             16              551             12
Loss from continuing operations                                      (737)           (20)            (661)           (14)
</TABLE>

NET SALES. Net sales decreased 22%, to $3,656,000 for the six months ended
December 31, 2001 from $4,680,000 for the six months ended December 31, 2000.
The sales mix, and the corresponding percentage of total sales of the Company's
products, is set forth in the chart below (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                                         PERCENTAGE OF
                                                                                                             TOTAL
                                                                       SIX MONTHS ENDED                 SIX MONTHS ENDED
                                                                          DECEMBER 31,                     DECEMBER 31,
                                                                   --------------------------          -------------------
                                                                     2001              2000            2001           2000
                                                                   --------          --------          ----           ----
<S>                                                                <C>               <C>               <C>            <C>
Flex T1/E1                                                         $  3,656          $  4,493           100%            96%
Microflex                                                                --               187            --              4
                                                                   --------          --------          ----           ----

Totals                                                             $  3,656          $  4,680           100%           100%
                                                                   ========          ========          ====           ====
</TABLE>

For the six months ended December 31, 2001, revenues from the Company's
FlexT1/E1 product line decreased 19% from $4,493,000 for the six months ended
December 31, 2000 to $3,656,000 for the six months ended December 31, 2001. The
decrease is primarily due to a shift to more conservative capital spending in
the wireless carrier market during recent months. Further, network
infrastructure investments of AW's primary customers were delayed due to
expectations of reduced subscriber growth as a result of current economic
conditions in the marketplace. The Company expects capital spending by its
customers to gradually increase and return to more normal and historical levels
in future periods as the overall condition of the U.S. economy and the
telecommunications marketplace improves.

GROSS PROFIT. Cost of sales consists of component costs, compensation costs and
the overhead costs related to the production and shipping of the Company's
products, along with the support and warranty expense associated with such
products. Gross profit decreased 41% from $2,000,000 for the six month period
ended December 31, 2000 to $1,185,000 for the six month period ended December
31, 2001. As a percentage of sales, gross profit decreased


                                    Page 12
<PAGE>

from 43% for the six month period ended December 31, 2000 to 32% for the six
month period ended December 31, 2001. The decrease is due to a lower margin
product mix, primarily OEM products, for sales recorded during the six months
ended December 31, 2001.

PRODUCT DEVELOPMENT. Product development expense consists of personnel costs,
consulting, supplies and prototyping expenses. Product development expenses
increased 6%, to $582,000 for the six months ended December 31, 2001 from
$551,000 for the six months ended December 31, 2000. The increase in product
development expense for the six month period ended December 31, 2001 is
primarily due to increased engineering headcount during the July 2001 through
September 2001 timeframe. Further, no development costs related to new projects
were capitalized for the six month period ended December 31, 2001 as compared to
$105,000 for the six month period ended December 31, 2000. As a percentage of
sales, product development costs were 16% for the six months ended December 31,
2001 and 12% for the six months ended December 31, 2000.

SELLING, GENERAL AND ADMINISTRATIVE. Selling expense consists primarily of
compensation costs for sales and marketing personnel, travel, consulting, trade
show and advertising expenses. General and administrative expense consists
primarily of occupancy costs and compensation expenses for administrative and
finance personnel, as well as accounting, legal and consulting fees. Selling,
general and administrative expense decreased 34%, to $1,130,000 for the six
months ended December 31, 2001 from $1,713,000 for the six months ended December
31, 2000. The decrease is primarily attributable to reduced headcount during the
six months ended December 31, 2001 coupled with conscious cost-cutting efforts
and initiatives instituted by Company management during July 2001. Total
selling, general and administrative costs were 31% of sales for the six months
ended December 31, 2001 as compared to 37% of sales for the six months ended
December 31, 2000.

LOSS FROM CONTINUING OPERATIONS. For the six month period ended December 31,
2001 the Company recorded a loss from continuing operations of $737,000 as
compared to a loss from continuing operations of $661,000 reported for the six
month period ended December 31, 2000. The increase in the loss from continuing
operations is primarily a result of the reduction in gross product margin
realized for the six months ended December 31, 2001.

LIQUIDITY AND CAPITAL RESOURCES

OVERVIEW. The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. As shown in the financial
statements during the six months ended December 31, 2001 and 2000, the Company's
continuing operations incurred losses of $737,000 and $661,000, respectively.
The Company continues to require additional capital to properly service its debt
and fund future product development. Additional equity may be required during
fiscal year 2002 and the Company is actively pursuing various financing
alternatives. The Company attempted to raise capital throughout fiscal 2001 and
was unable to secure adequate financing to assure the long term growth and
profitability of the entire organization given the severity of the current
downturn in the telecommunications industry. As such, the Board of Directors of
the Company decided to approve a plan to divest of Asurent Technologies
(formerly Telcor Communications). The Company is now focusing on the continued
growth and profitability of its network access product division (Asurent
Wireless or "AW") and will continue to explore financing alternatives for
working capital and product development initiatives throughout fiscal 2002.

The financial statements do not include any adjustments relating to the
recoverability and classification of assets and liabilities that might be
necessary should the Company be unable to continue as a going concern. The
Company's continuation as a going concern is dependent upon its ability to
generate sufficient cash flow to meet its obligations on a timely basis, to
comply with the terms of its financing agreements, to obtain additional
financing or refinancing as may be required, and ultimately to attain
profitability. The Company is actively pursuing additional equity or debt
financing through discussions with potential lenders and investors.

Potential additional sources of cash for use in future periods may include, but
are not limited to, private or public placements of the Company's securities and
securing additional financing from certain financial institutions. In the event
the Company is able to raise additional capital, the Company intends on using
such proceeds to accelerate product development initiatives, add additional
personnel as may be required and to pay down existing and any additional
indebtedness.


                                    Page 13
<PAGE>

EQUITY. On October 14, 1998, NASDAQ delisted the Company because the Company did
not meet the listing requirement of minimum net assets. The Company's securities
are currently traded on the OTC Bulletin Board. The delisting action has
hampered the Company's efforts to raise capital through a private placement of
its stock with qualified investors.

On December 29, 1999, the Company entered into an agreement with Wi-LAN Inc.
("Wi-LAN"), a leading provider of wireless data communications technology and
products, to sell Wi-LAN $1.5 million in convertible debentures (the "1999
debentures"). The debentures, convertible into the Company's common stock at any
time by the holder, have a four-year term with a 10% interest rate with
principal and interest due at maturity. The Company has no buy-back provision,
and the conversion rate is one share per $1 in debentures, which approximated
the fair value of the Company's common stock on the date the Company entered
into the agreement. On January 7, 2000, a closing on the Wi-LAN debentures was
held whereby the Company received the proceeds from the first tranche of the
debentures of $400,000. The remaining $1,100,000 in proceeds from the issuance
of debentures was received prior to March 31, 2000. In connection with various
transactions subsequent to the sale of the $1.5 million in debentures and
through June 30, 2001, Wi-LAN has converted $1,278,900 of the 1999 debentures
into 1,278,900 shares of the Company's common stock. In connection with the
agreement, Wi-LAN also received an option to purchase additional debentures of
$1.5 million with similar terms but at a conversion rate to be determined by the
market price of the Company's common stock at the time the option is exercised.
The expiration on the option to purchase additional debentures of $1.5 million
was January 7, 2002.

Apart from the transactions described above, in January 2000, Wi-LAN purchased
1,738,159 shares of the Company's common stock from MicroTel, another DTS
shareholder, and the outstanding $2 million in debentures (the "1997
debentures") with outstanding warrants from Finova Mezzanine Capital, a DTS
lender. By converting $1,310,000 of the 1997 debentures, Wi-LAN received
1,310,000 shares of the Company's common stock and gained over 50% of the
outstanding common stock of the Company. Through the transaction with Finova,
Wi-LAN also received outstanding warrants for 702,615 shares of common stock at
an exercise price of $1 per share which expire in March 2004.

Additionally, Wi-LAN converted another $190,000 of the 1997 debentures into
190,000 shares of the Company's common stock during January 2000.

On March 31, 2000, Wi-LAN purchased 454,737 shares of the Company's Series B
preferred stock for $3 million in cash. The Company's Series B Preferred Stock
is convertible into common shares at $7.125 per share, the market closing price
of the Company's common stock on March 30, 2000.

In June 2000, the Company announced that Wi-LAN Inc. entered into a purchase and
assignment agreement with the two former shareholders of Telcor to acquire the
right to receive approximately 31% of the merger consideration still due to the
former Telcor shareholders. According to the agreement, Wi-LAN acquired
$6,100,000 of the original $20 million acquisition payable for $500,000 in cash
and $5,600,000 by issuing the former Telcor shareholders a right to receive
$5,600,000 of Wi-LAN common shares based on the market value of Wi-LAN shares on
July 17, 2000, subject to a specified maximum number of shares. Wi-LAN may
redeem all or part of the right for cash. In addition, Wi-LAN granted the former
Telcor shareholders an option exercisable by August 31, 2000, to sell between
$2,000,000 and $4,000,000 of additional merger consideration to Wi-LAN for the
issuance of a right to receive Wi-LAN shares of equivalent value, based on the
market value of Wi-LAN shares at October 30, 2000, subject to a specified
maximum number of shares. On August 31, 2000, the former shareholders of Telcor
exercised the aforementioned option and sold $4,000,000 of merger consideration
to Wi-LAN in exchange for Wi-LAN shares as discussed above.

On November 30, 2000, the Company paid down the entire remaining acquisition
payable balance of $7,655,400, which was payable in either cash or stock at a
value of $2.064 per share under the terms of the merger agreement, through the
issuance of common and Preferred stock. The Company issued 638,273 shares of its
common stock valued at $2.064 per share and remitted a cash payment of $117,605
to the former shareholders of Telcor as final consideration owed to the former
Telcor shareholders under the amended merger agreement. The value of $2.064 per
share represents the share value calculated by the parties pursuant to the terms
of the merger agreement as executed on March 31, 2000. Further, the Company
issued 683,543 common shares valued at $2.064 per share and 2,330,217 shares of
Series C Preferred Stock convertible into the Company's common stock at $2.064
per share to Wi-LAN, Inc. also reflecting final payment of all remaining merger
consideration then payable. The total


                                    Page 14
<PAGE>

consideration paid under the above transactions was $7,655,400 and represented
the final payments for all amounts owed under the merger agreement, as amended,
to the former shareholders of Telcor and to Wi-LAN, Inc.

ESOP Transaction with Wi-LAN, Inc.

Formation of ESOP - On approval of the DTS Board of Directors, an Employee Stock
Ownership Program ("ESOP") was formed on December 31, 2001 for the benefit of
the employees of DTS and its major subsidiary - Asurent Wireless, Inc. Under the
plan, all full-time employees and part-time employees with at least 20 hrs/week
are eligible to participate in the plan. Participants are permitted to
contribute up to 5% of their annual salary with a 100% match by the Company for
such individual contributions. The Company may also make discretionary
contributions to the plan but cannot exceed 5% of each individual's salary.
Employer contributions will vest over five years on a straight line basis. All
contributions to the ESOP will be used to purchase common stock of the Company
for the ESOP at 10 cents per share.

Each year, on December 31, a third party will provide an independent valuation
of the Company's common stock. This valuation will serve as the basis for
valuing participant accounts for that given period.

Purchase of stock from Wi-LAN, Inc. - In a transaction executed on December 31,
2001, the DTS ESOP entered into a stock purchase agreement with Wi-LAN, Inc.,
then a major shareholder in DTS. The agreement stipulated that the DTS ESOP
would purchase all of Wi-LAN's equity holdings in DTS once converted into common
shares. All preferred securities, convertible debentures including accrued
interest to date and warrants as held by Wi-LAN, Inc. were converted into common
stock of the Company. An initial deposit of $103,000 towards a programmed
installment purchase of the shares was delivered by the ESOP to Wi-LAN on
December 31, 2001. The agreement allowed the ESOP assignment rights in the
purchase of the shares and a rescission date of no later than February 28, 2002.
As a result of the ESOP transaction with Wi-LAN, Inc., the number of common
shares outstanding now approximates 15.8 million shares with approximately 10.3
million shares being held by the DTS ESOP.

Payment of the ESOP obligation - In accordance with the terms of the ESOP
agreement, DTS is obligated to pay Wi-LAN, Inc. the amount of $9,992 per month
commencing January 31, 2002 through December 31, 2011 for their conversion and
release of all DTS common stock as referenced above. Aggregate principal
payments under the note will total $900,000 and the note accrues interest at a
6% annual rate. Cash to fund the ESOP obligation will be generated primarily
through our existing cash balances, revenue generated from operations, and
through our line of credit with Silicon Valley Bank. In the event existing cash
balances are not adequate to cover the future ESOP obligations, an event of
default will occur which will cause the ESOP note to be due and payable
immediately at the option of Wi-LAN.

Right of Recision - DTS has the right to rescind the transaction in the event
that it is unable to obtain an independent opinion of an appraiser that the
price paid for the common shares is no more than fair market value and that the
transaction is fair to DTS from a financial point of view (the "Appraisal").
Within 30 days of receipt of the Appraisal which states that the price paid
exceeds the fair market value, or if DTS is unable to obtain an Appraisal, but
in no event later than February 28, 2002, DTS must in writing notify Wi-LAN that
the transaction is rescinded. In the event such notice is given, the parties
shall have the following options: (a) The parties can adjust the terms of the
transaction and the balance due on the Note so that DTS has paid no more than
fair market value for the common shares; (b) DTS shall have the ability to keep
$103,837 of the common shares at such price as determined by the Appraisal and
to return the balance of the shares pledged as collateral for the note to Wi-LAN
in return for cancellation of the note; or (c) The parties shall have the right
to reverse the transaction and return all cash paid to DTS and return all shares
received by DTS to Wi-LAN combined with the cancellation of all obligations
under the ESOP.

Refinancing of ESOP Obligation - DTS shall notify Wi-LAN by November 30, 2002 of
its intent to refinance the ESOP note or of its inability to refinance the note.
If DTS is unable to refinance the note by December 31, 2002 with a financial
institution, Wi-LAN shall have the right to terminate the Loan as follows: (a)
If the fair market


                                    Page 15
<PAGE>

value of the shares serving as collateral as of the date of the loan
termination, as determined by the valuation and fairness opinion obtained by
DTS, exceeds the outstanding principal amount on the note, then Wi-LAN shall
receive a number of common shares which would equal in value such outstanding
principal amount due on the note; or (b) If the fair market value of the shares
serving as collateral, as determined by the valuation and fairness opinion
obtained by DTS, does not exceed the outstanding principal amount on the note,
then Wi-LAN shall receive the collateralized shares and the note and all of
DTS's obligations under said note and the ESOP agreement shall be cancelled. If
the note is refinanced, then DTS shall cause the entire amount of the note then
outstanding to be prepaid in accordance with the terms of the ESOP agreement, on
or before December 31, 2002.

LINE OF CREDIT ARRANGEMENTS. On April 10, 1997, DTS established a bank line of
credit agreement with Silicon Valley Bank which makes available $2,500,000 in
borrowings with availability based on DTS's accounts receivable. The loan was
amended on March 18, 1998 to increase the maximum eligible borrowing to the
lesser of $4,000,000 or 80% of eligible receivables plus 30% of eligible
inventory, as defined. The loan is secured by DTS's assets and bears interest at
the rate of prime plus 2.25%. A net worth covenant was amended on March 16,
1998, requiring DTS to maintain a net worth of $1,000,000. In September 1998,
DTS agreed to a UCC filing whereby all assets of DTS became collateral under the
Agreement. The loan requires a monthly monitoring fee of $1,000 and a commitment
fee of 0.125% due monthly on the unused portion of the facility. The agreement
term is two years with an automatic renewal each year unless written notice of
termination is given by one of the parties. DTS issued 60,000 two year warrants
to Silicon Valley Bank at a strike price of $5.25 each as consideration for the
amended agreement. On February 25, 1999, DTS signed an amendment to the loan
agreement with Silicon Valley Bank which modified previous loan covenants and
revised the maximum borrowing amount to $1,500,000. The revised covenants are
primarily based upon minimum monthly and quarterly revenue levels. As
consideration for the amended agreement, DTS issued 250,000 two year warrants
for common stock of the Company at $0.119 per share which represents the market
price of the Company's common stock at the close of business on December 2, 1998
when the new agreement was reached.

On February 24, 2000, DTS signed an additional amendment to the loan agreement
with Silicon Valley Bank which modified previous terms. Under the modified
terms, the revised loan agreement had a maturity date of April 10, 2001.
Additionally, the revised and amended agreement increased the maximum borrowing
to $2,500,000 with interest at prime plus 2.25% (7.00% at December 31, 2001).
Covenants under the agreement were further revised to require certain minimum
quarterly revenue and monthly income requirements.

On February 16, 2001, DTS signed an additional amendment to the loan agreement
with Silicon Valley Bank which modified previous terms. Under the modified
terms, covenants imposed by the agreement were revised. All revenue and income
covenants previously enforced were removed and replaced with a single covenant
requiring a minimum level of consolidated net tangible equity on a monthly
basis. On April 10, 2001, DTS signed an additional amendment to the loan
agreement with Silicon Valley Bank that extended the maturity date of the loan
agreement to April 10, 2002. No other terms of the agreement were changed.

On November 29, 2001, DTS signed an additional amendment to the loan agreement
with Silicon Valley Bank which modified previous terms. Under the modified
terms, covenants imposed by the agreement were revised. All consolidated net
tangible equity covenants previously enforced were removed and replaced with a
revised equity covenant that calls for a minimum level of tangible equity to be
maintained by Asurent Wireless on a monthly basis. The Company was in full
compliance with the revised covenants as of December 31, 2001.

CASH. For the six months ended December 31, 2001, cash of $1,124,000 was
provided by continuing operating activities as compared to cash used in
continuing operations of $530,000 for the six months ended December 31, 2000.
The loss from continuing operations for the six months ended December 31, 2001
of $737,000 includes non-cash charges relating to depreciation and amortization
of $55,000 and interest expense of $161,000. During the six months ended
December 31, 2001 cash was provided by continuing operating activities primarily
through a decrease in accounts receivable of $1,189,000.

The Company's current cash burn rate approximates $250,000 per month and
represents payments required to fund certain fixed costs of the Company such as
occupancy costs and personnel compensation. The Company intends to fund
potential future operating losses and capital expenditures required to pursue
its current business plan out of its existing cash balance, revenue generated
from operations and borrowings under its line of credit with Silicon Valley
Bank.


                                    Page 16
<PAGE>

The Company's additional cash requirements necessary for debt service will need
to be funded through debt facilities and equity financings not yet arranged. The
Company is actively seeking external investment to ensure existing and future
debt is adequately serviced thereby preventing any interruption in operations.
However, there can be no assurance that sufficient financing will be available
on terms acceptable to the Company. If such financing is not available, the
Company will have to curtail or alter its current business plan.

The Company purchased $33,000 and $126,000 of property, plant and equipment
during the six months ended December 31, 2001 and 2000, respectively. In
addition, the Company capitalized certain software development costs paid to
outside contractors. During the six months ended December 31, 2001, the Company
capitalized $0 of such costs as compared to capitalized costs of $105,000 for
the six months ended December 31, 2000.

SEASONALITY

The Company's sales have been subject to quarterly fluctuations mainly due to
the purchasing cycle of the Company's major customers. Other fluctuations occur
due to increased build-out of the telecommunications infrastructure during
certain months of the year. The Company's business plan is to continue the
diversification of its product offerings, further develop its distribution
channels and further expand its customer base. The Company believes that the
implementation of this plan will decrease the seasonality of its sales. The
Company operates with a moderate level of backlog for each product line due to
advance purchase commitments and production lead times.

LEGAL PROCEEDINGS

The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's financial position, results of operations, or liquidity.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 ("SAB 101"), Revenue Recognition in Financial Statements. SAB
101 summarizes existing guidance on revenue recognition. The implementation date
of SAB 101 for the Company was for the quarter ended June 30, 2001. The
implementation of SAB 101 did not have a material impact on the Company's
financial statements.

In March 2000, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 44 (FIN 44), Accounting for Certain Transactions involving
Stock Compensation - an Interpretation of APB Opinion No. 25. FIN 44 provides
guidance for certain issues that arose in applying APB Opinion No. 25. The
provisions of FIN 44 were effective for the Company on July 1, 2000. Adoption of
FIN 44 did not materially affect the Company's financial results.

In June 2001, the FASB issued Statement No. 141, Business Combinations, and
Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001, as well as all purchase method business
combinations completed after June 30, 2001. Statement 141 also provides that
intangible assets acquired in a purchase method business combination must meet
certain specified criteria in order to be recognized and reported apart from
goodwill, noting that any purchase price allocable to an assembled workforce may
not be accounted for separately.

Statement 142 will require that goodwill and intangible assets with indefinite
useful lives no longer be amortized, but instead tested for impairment at least
annually in accordance with the provisions of Statement 142. Statement 142 will
also require that intangible assets with estimable useful lives be amortized
over their respective estimated useful lives to their estimated residual values,
and reviewed for impairment in accordance with FASB Statement No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of.


                                    Page 17
<PAGE>

The Company is required to adopt the provisions of Statement 141 immediately,
and Statement 142 effective July 1, 2002. Furthermore, goodwill and intangible
assets determined to have an indefinite useful life acquired in a purchase
business combination completed after June 30, 2001, but before Statement 142 is
adopted in full will not be amortized, but will continue to be evaluated for
impairment in accordance with the appropriate pre-Statement 142 accounting
literature. The Company does not expect Statement 141 or 142 to have a
significant impact on its financial statements.

Also, in June 2001, the FASB issued Statement No. 143, Accounting for Asset
Retirement Obligations. Statement 143 requires entities to record the fair value
of a liability for an asset retirement obligation in the period in which it is
incurred. When the liability is initially recorded, the entity capitalizes a
cost by increasing the carrying amount of the related long-lived asset. Over
time, the liability is accreted to its present value each period, and the
capitalized cost is depreciated over the useful life of the related asset. Upon
settlement of the liability, an entity either settles the obligation for its
recorded amount or incurs a gain or loss upon settlement. Statement 143 is
effective for the Company beginning July 1, 2002. The Company does not expect
Statement 143 to have a significant impact on its financial statements.

In August 2001, the FASB issued Statement No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets (Statement 144), which supersedes both FASB
Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of (Statement 121) and the accounting and
reporting provisions of APB Opinion No. 30, Reporting the Results of
Operations--Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions
(Opinion 30), for the disposal of a segment of a business (as previously defined
in that Opinion). Statement 144 retains the fundamental provisions in Statement
121 for recognizing and measuring impairment losses on long-lived assets held
for use and long-lived assets to be disposed of by sale, while also resolving
significant implementation issues associated with Statement 121. For example,
Statement 144 provides guidance on how a long-lived asset that is used as part
of a group should be evaluated for impairment, establishes criteria for when a
long-lived asset is held for sale, and prescribes the accounting for a
long-lived asset that will be disposed of other than by sale. Statement 144
retains the basic provisions of Opinion 30 on how to present discontinued
operations in the income statement but broadens that presentation to include a
component of an entity (rather than a segment of a business). Unlike Statement
121, an impairment assessment under Statement 144 will never result in a
write-down of goodwill. Rather, goodwill is evaluated for impairment under
Statement No. 142, Goodwill and Other Intangible Assets.

The Company is required to adopt Statement 144 no later than July 1, 2002.
Management does not expect the adoption of Statement 144 for long-lived assets
held for use to have a material impact on the Company's financial statements
because the impairment assessment under Statement 144 is largely unchanged from
Statement 121. The provisions of Statement 144 for assets held for sale or other
disposal generally are required to be applied prospectively after the adoption
date to newly initiated disposal activities. Therefore, management cannot
determine the potential effects that adoption of Statement 144 will have on the
Company's financial statements.

IMPORTANT CONSIDERATIONS RELATED TO FORWARD-LOOKING STATEMENTS

Certain statements contained in this filing which are not statements of
historical fact constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act (the Act). In addition, certain
statements in future filings by the Company with the Securities and Exchange
Commission, in press releases, and in oral and written statements made by or
with the approval of the Company which are not statements of historical fact
constitute forward-looking statements within the meaning of the Act. Examples of
forward-looking statements include, but are not limited to: (i) projections of
revenue, income or loss, earnings or loss per share, the payment or nonpayment
of dividends, capital structure and other financial items; (ii) statements of
plans and objectives of the Company's management or Board of Directors,
including those relating to products or services; (iii) statements of future
economic performance; and (iv) statements of assumptions underlying such
statements. Words such as "believes," "anticipates," "expects," "intends,"
"targeted," and similar expressions are intended to identify forward-looking
statements but are not the exclusive means of identifying such statements.

Forward-looking statements involve risks and uncertainties which may cause
actual results to differ materially from those in such statements. Factors that
could cause actual results to differ from those discussed in the forward-looking
statements include, but are not limited to: (i) the strength of the U.S. economy
in general and relevant foreign economies; (ii) the Company's performance under
current and future contracts; (iii) inflation and interest rate fluctuations;
(iv) timely and successful implementation of processing systems to provide new
products,


                                    Page 18
<PAGE>

improved functionality and increased efficiencies; (v) technological changes;
(vi) acquisitions; (vii) the ability to increase market share and control
expenses; (viii) changes in laws or regulations or other industry standards
affecting the Company's business which require significant product redevelopment
efforts; (ix) the effect of changes in accounting policies and practices as may
be adopted by the Financial Accounting Standards Board; (x) changes in the
Company's organization, compensation and benefit plans; (xi) the costs and
effects of litigation and of unexpected or adverse outcomes in such litigation
and (xii) the success of the Company at managing the risks involved in the
foregoing.

Such forward-looking statements speak only as of the date on which statements
are made, and the Company undertakes no obligation to update any forward-looking
statement to reflect events or circumstances after the date on which such
statement is made to reflect the occurrence of unanticipated events.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company is exposed to market risk from changes in interest rates on variable
rate indebtedness. The Company's primary interest rate risk relates to its
variable rate bank credit facilities. At December 31, 2001, the Company's total
variable rate debt obligations was $971,000. A hypothetical 1% increase in the
Company's variable interest rate for a duration of one year would result in
additional interest expense of approximately $10,000.


                                    Page 19
<PAGE>

                           PART II. OTHER INFORMATION

PART II. OTHER INFORMATION

ITEMS 1 - 5 ARE NOT APPLICABLE.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(A)      EXHIBITS

         None.

(B)      REPORTS ON FORM 8-K

         The registrant did not file any reports on Form 8-K during the six
months ended December 31, 2001.


                                    Page 20
<PAGE>

                                   SIGNATURES

Pursuant to the requirements 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.

                                        Digital Transmission Systems, Inc.



Date: February 14, 2002                 By:  /s/ Soren Pihlman
                                            -----------------------------------
                                            Soren Pihlman,
                                            Director
                                            President and COO - Asurent
                                            Wireless, Inc.



Date: February 14, 2002                 By:  /s/  Clive N. W. Marsh
                                            -----------------------------------
                                            Clive N. W. Marsh
                                            V.P. Corporate Finance


                                    Page 21