<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 March 31, 2002

              { }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 preceeding
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 May 15,
2002 was approximately 12,732,414.

================================================================================
<PAGE>

                       DIGITAL TRANSMISSION SYSTEMS, INC.
                                    FORM 10-Q

                      FOR THE QUARTER ENDED MARCH 31, 2002

                                      INDEX

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

Item 1.         Financial Statements:

                Condensed Consolidated Balance Sheets at March 31, 2002
                  and June 30, 2001 (Unaudited)                                         3

                Condensed Consolidated Statements of Operations for the Three
                  Months ended March 31, 2002 and 2001 (Unaudited)                      4

                Condensed Consolidated Statements of Operations for the Nine
                  Months ended March 31, 2002 and 2001 (Unaudited)                      5

                Condensed Consolidated Statements of Cash Flows for the Nine
                  Months Ended March 31, 2002 and 2001 (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, 2, 4 & 5          Not applicable                                              20

Item 3a                    Default upon Senior Indebtedness                            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>
                                                                                          MARCH 31,
                                                                                            2002          JUNE 30, 2001
                                                                                          ---------       -------------
<S>                                                                                       <C>             <C>
                                 ASSETS

Current assets:
    Cash and cash equivalents                                                             $     59               146
    Trade accounts receivable, net of allowances for
      returns and doubtful accounts of $224 and $368
      at March 31, 2002 and June 30, 2001, respectively                                        469             1,638
    Accounts receivable from related parties                                                    --                25
    Inventories                                                                              1,576             1,446
                                                                                          --------           -------
                Total current assets                                                         2,104             3,255

Property and equipment, net                                                                    244               227
Intangible assets, net                                                                         314               382
Other assets                                                                                   199               324
                                                                                          --------           -------
                Total assets                                                              $  2,861             4,188
                                                                                          ========           =======

                  LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
    Notes payable to banks                                                                $  1,283             1,646
    Accounts payable and accrued liabilities                                                 2,252             1,673
    Accrued payroll and benefits                                                               358               449
    Notes payable to related parties                                                         3,104             3,000
    Warranty accrual                                                                           199               200
    Net liabilities of discontinued operations                                              10,656            11,001
                                                                                          --------           -------
                Total current liabilities                                                   17,852            17,969
                                                                                          --------           -------

Notes payable to related parties                                                                --               721

                                                                                          --------           -------
                Total liabilities                                                           17,852            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
    Common stock - $0.01 par value, 50,000,000 shares authorized;
      12,732,414 and 11,814,119 shares issued and outstanding with 6,282,314 and
      0 shares held in treasury at March 31, 2002 and
      June 30, 2001, respectively                                                              124               118
    Common stock subscribed                                                                    504               302
    Treasury stock, - $0.01 par value, 6,282,314 shares and 0 shares
    held in treasury at March 31, 2002 and June 30, 2001, respectively                         (63)               --
    Additional paid-in capital                                                              41,852            33,314
    Accumulated deficit                                                                    (58,672)          (57,310)
                                                                                          --------           -------
                Total shareholders' deficit                                                (14,991)          (14,502)
                                                                                          --------           -------
                Total liabilities and shareholders' deficit                               $  2,861             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 March 31,
                                                                   ----------------------------
                                                                      2002               2001
                                                                   ---------           -------
<S>                                                                <C>                 <C>
Net sales                                                           $  1,002           $ 3,122
Cost of sales                                                            634             1,765
                                                                    --------           -------
   Gross profit                                                          368             1,357
                                                                    --------           -------

Selling, general and administrative                                      485               760
Product development                                                      210               459
Depreciation and amortization                                             29                85

                                                                    --------           -------
   Total operating expenses                                              724             1,304
                                                                    --------           -------

   Operating (loss) income                                                53
                                                                                          (356)

Other income                                                              --                 2
Interest expense, net                                                    (67)             (106)
                                                                    --------           -------

     Loss before income taxes                                           (423)              (51)

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

     Loss from continuing operations                                    (423)              (51)

Discontinued operations:
     Loss from operations of discontinued subsidiary                      --            (2,213)
                                                                    --------           -------

     Net loss                                                           (423)           (2,264)

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

     Net loss attributable to common shareholders                   $   (423)          $(2,284)
                                                                    --------           -------

Net loss per share - basic and diluted:
   Loss from continuing operations                                  $  (0.03)          $ (0.00)
   Loss from discontinued operations of subsidiary                        --           $ (0.19)
                                                                    --------           -------

   Net loss per share - basic and diluted                           $  (0.03)          $ (0.19)
                                                                    ========           =======

Weighted average common shares outstanding:
  Basic                                                               12,136            11,734
                                                                    --------           -------
  Diluted (1)                                                         12,136            11,734
                                                                    --------           -------
</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>
                                                                   Nine months ended March 31,
                                                                   ----------------------------
                                                                      2002               2001
                                                                    --------           -------
<S>                                                                 <C>                <C>
Net sales                                                           $  4,658           $ 7,802
Cost of sales                                                          3,105             4,684
                                                                    --------           -------
   Gross profit                                                        1,553             3,118
                                                                    --------           -------

Selling, general and administrative                                    1,615             2,418
Product development                                                      792             1,009
Depreciation and amortization                                             84               245
                                                                    --------           -------
   Total operating expenses                                            2,491             3,672
                                                                    --------           -------
   Operating loss                                                       (938)             (554)

Other income (expense)                                                     6               (59)
Interest expense, net                                                   (228)             (340)
                                                                    --------           -------

     Loss before income taxes                                         (1,160)             (953)

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

     Loss from continuing operations                                  (1,160)             (953)

Discontinued operations:
     Loss from operations of discontinued subsidiary                      --            (5,487)
                                                                    --------           -------

     Net loss                                                         (1,160)           (6,440)

Series B, preferred stock dividends                                      (82)              (40)
Series C, preferred stock dividends                                     (120)               --
                                                                    --------           -------

     Net loss attributable to common shareholders                   $ (1,362)          $(6,480)
                                                                    --------           -------

Net loss per share - basic and diluted:
   Loss from continuing operations                                  $  (0.11)          $ (0.09)
   Loss from discontinued operations of subsidiary                        --           $ (0.50)
                                                                    --------           -------

   Net loss per share - basic and diluted                           $  (0.11)          $ (0.59)
                                                                    ========           =======

Weighted average common shares outstanding:
  Basic                                                               12,136            10,973
                                                                    --------           -------
  Diluted (1)                                                         12,136            10,973
                                                                    --------           -------
</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>
                                                                             Nine months ended March 31
                                                                             --------------------------
                                                                               2002              2001
                                                                             -------           --------
<S>                                                                          <C>               <C>
Cash flows from operating activities:
  Net loss                                                                   $(1,160)          $(6,440)
  Less:  Loss from discontinued operations                                        --             5,487
                                                                             -------           -------
            Loss from continuing operations                                   (1,160)             (953)
  Adjustments to reconcile net loss
   to net cash provided by (used in) operating activities:
     Depreciation and amortization
                                                                                  84               245
     Amortization of software development costs                                   68
                                                                                                   101
  Changes in assets and liabilities:
     Accounts receivable                                                       1,194              (538)
     Inventories                                                                (130)             (438)
     Prepaid expenses and other assets                                           125               179
     Accounts payable and accrued liabilities                                    542               807
     Warranty accrual                                                             (1)               (1)
                                                                             -------           -------
Net cash provided by (used in) continuing operations                             722              (598)
Net cash (used in) provided by discontinued operations                          (345)              237
                                                                             -------           -------

Net cash provided by (used in) operating activities                              377              (361)
                                                                             -------           -------

Cash flows from investing activities:
  Purchases of property and equipment                                           (101)             (258)
  Additions to capitalized software development costs                             --              (113)
                                                                             -------           -------
Net cash used in investing activities                                           (101)             (371)
                                                                             -------           -------

Cash flows from financing activities:
  Net (payments) proceeds under notes payable to banks                          (363)              309

                                                                             -------           -------
Net cash (used in) provided by financing activities                             (363)             (309)
                                                                             -------           -------

Net decrease in cash and cash equivalents                                        (87)             (423)
Cash and cash equivalents at beginning of period                                 146               996
                                                                             -------           -------
                                                                             $    59           $   573
                                                                             =======           =======

Supplemental disclosure of cash paid for:
  Interest                                                                   $   105           $   180
                                                                             =======           =======

Supplemental disclosure of non-cash activities:
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
                           MARCH 31, 2002 (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 7 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. Under the forbearance
agreement recently entered into with Silicon Valley Bank, the Company is
 expected to close on an equity and debt financing transaction by May 31, 2002.
If equity financing is not realized or a continuance of the forbearance
agreement is not achieved, the Company may not have the liquidity to continue
operations. Further discussion of the forbearance agreement can be found in
Note 6.

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 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 nine months ended March 31, 2002 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.


                                     Page 7
<PAGE>

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 March 31, 2002, 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 March 31, 2002.
The total potential number of dilutive equivalent common shares excluded was
1,963,848 for the three month period ended March 31, 2002.

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.       DEFAULT UPON SENIOR INDEBTEDNESS

As of March 31, 2002, the Company was not in compliance with certain financial
and net tangible worth covenants as imposed under its line of credit facility
with its primary lender, Silicon Valley Bank (hereafter "SVB"). The facility is
secured by all assets of the Company. The Company executed a forbearance
agreement with SVB on May 13, 2002 whereby SVB agreed not to exercise any of its
rights and remedies under the existing events of default until May 31, 2002. The
forbearance agreement requires the Company to obtain additional external
financing no later than May 31, 2002. In the event the Company is unable to
secure additional financing by May 31, 2002 or extend the forbearance agreement
with SVB, there can be no assurances that sufficient capital will be available
to sustain operations.

7.       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 nine months ended March 31, 2002 given the Company's decision in late
fiscal 2001 to divest of AT. The significant terms of the


                                     Page 8
<PAGE>

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 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 March 31, 2002, net liabilities of
discontinued operations (AT) approximates $10,656,000 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.

8.       FORMATION AND RESCISSION 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. would be converted into
common stock of the Company. An initial deposit of $104,000 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.

Rescission of DTS ESOP - On February 28, 2002, the DTS ESOP stock purchase was
rescinded by mutual agreement of the parties and all equity holdings were
returned to Wi-LAN. The rescission was in accordance with the rescission rights
under the stock purchase agreement. Immediately following the rescission, Wi-LAN
and the Company executed a revised transaction whereby the Company agreed to
purchase $721,102 of outstanding convertible debentures, as held by Wi-LAN, for
$54,000 in cash and a $50,000 non-interest bearing promissory note. The note is
payable to Wi-LAN in 5 monthly installments of $10,000, commencing April 30,
2002. As additional consideration for the payment, Wi-LAN agreed to return the
balance of their equity holdings back to the Company, with the sole exception of
250,000 shares of DTS common stock. Equity holdings returned to the Company were
454,737 shares of Series B Convertible Preferred Stock, 2,330,217 shares of
Series C Preferred Stock, 6,282,314 shares of common stock and 702,615 warrants
to purchase common stock of the Company. The Company has currently retained the
6,282,314 common shares received as treasury stock for potential re-issuance in
the future. All other returned holdings were cancelled and retired by the
Company.

9.       CHANGES IN EXECUTIVE LEADERSHIP AND BOARD OF DIRECTOR MEMBERSHIP

In compliance with the agreements between Wi-LAN and DTS, 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.

During the three months ended March 31, 2002, the Company downsized its
operations due to the sharp decline in revenue experienced. As of May 15, 2002,
the Company has approximately 11 full-time and 4 part-time employees.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2002 AND MARCH 31, 2001

The following table sets forth certain financial data derived from the Company's
statements of operations for the three months ended March 31, 2002 and March 31,
2001 (dollars in thousands).

<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED             THREE MONTHS ENDED
                                                   MARCH 31, 2002                 MARCH 31, 2001
                                                 ------------------             ------------------

                                                $         % OF SALES            $        % OF SALES
                                              -----------------------------------------------------
<S>                                           <C>              <C>            <C>           <C>
Net sales                                     1,002            100            3,122         100
Gross profit                                    368             37            1,357          43
Selling, general and administrative             485             48              760          24
Depreciation and amortization                    29              3               85           3
Product development                             210             21              459          15
Loss from continuing operations                (423)           (42)             (51)         (2)
</TABLE>


                                    Page 10
<PAGE>

NET SALES. Net sales decreased by 68%, to $1,002,000 for the three months ended
March 31, 2002 from $3,122,000 for the three months ended March 31, 2001. 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
                                  MARCH 31,                   MARCH 31,
                             ------------------          --------------------
                             2002            2001        2002            2001
                           --------------------------------------------------
<S>                         <C>            <C>           <C>             <C>
Flex T1/E1                  $1,002         $ 3,122       100%            100%
                           --------------------------------------------------
Totals                      $1,002          $3,122       100%            100%
                           ==================================================
</TABLE>

For the three months ended March 31, 2002, revenues from the Company's FlexT1/E1
product line decreased 68% from $3,122,000 for the three months ended March 31,
2001 to $1,002,000 for the three months ended March 31, 2002. The dramatic
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 73% from $1,357,000 for the three month period ended March 31,
2001, to $368,000 for the three month period ended March 31, 2002 due to the
accompanying decrease in sales noted for the same period. As a percentage of
sales, gross profit decreased from 43% to 37% of sales for the three month
period ended March 31, 2002 as compared to the same period ended March 31, 2001.
The decrease is due to a lower margin product mix, as well as continued pricing
pressure noted in the marketplace, for sales recorded during the three months
ended March 31, 2002.

PRODUCT DEVELOPMENT. Product development expense consists of personnel costs,
consulting, supplies and prototyping expenses. Product development expenses
decreased 54%, to $210,000 for the three months ended March 31, 2002 from
$459,000 for the three months ended March 31, 2001. The decrease in product
development expense for the three month period ended March 31, 2002 is primarily
due to decreased spending on new development projects and reduced engineering
headcount as compared to the three months ended March 31, 2001. As a percentage
of sales, product development costs were 21% of sales for the three months ended
March 31, 2002 as compared to 15% of sales for the same period ended March 31,
2001. The Company currently only has two part-time engineers.

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 36%, to $485,000 for the three
months ended March 31, 2002 from $760,000 for the three months ended March 31,
2001. The decrease is primarily attributable to a significantly reduced
headcount during the quarter ended March 31, 2002 as compared to March 31, 2001.
As of May 15, 2002, only 11 full-time and 4 part-time employees remain at the
Company.

LOSS FROM CONTINUING OPERATIONS. For the three month period ended March 31,
2002 the Company recorded a loss from continuing operations of $423,000 as
compared to a loss from continuing operations of $51,000 reported for the three
month period ended March 31, 2001. The increase in the loss from continuing
operations is primarily a


                                    Page 11
<PAGE>

result of the decline in sales and gross profit experienced during the three
months ended March 31, 2002 offset by a reduction in overall operating expenses.

NINE MONTHS ENDED MARCH 31, 2002 AND MARCH 31, 2001

The following table sets forth certain financial data derived from the Company's
statements of operations for the nine months ended March 31, 2002 and March 31,
2001 (dollars in thousands).

<TABLE>
<CAPTION>
                                              NINE MONTHS ENDED          NINE MONTHS ENDED
                                                MARCH 31, 2002             MARCH 31, 2001
                                              -----------------          -----------------

                                                 $      % OF SALES       $       % OF SALES
                                             ----------------------------------------------
<S>                                            <C>          <C>        <C>       <C>
Net sales                                      4,658        100        7,802        100
Gross profit                                   1,553         33        3,118         40
Selling, general and administrative            1,615         35        2,418         31
Depreciation and amortization                     84          1          245          1
Product development                              792         17        1,009         13
Loss from continuing operations               (1,160)       (25)        (953)       (12)
</TABLE>

NET SALES. Net sales decreased 40%, to $4,658,000 for the nine months ended
March 31, 2002 from $7,802,000 for the nine months ended March 31, 2001. 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
                                              Nine months ended         Nine months ended
                                                  March 31,                 March 31,
                                              -----------------         ----------------
                                               2002         2001        2002       2001
                                              -----------------------------------------
<S>                                           <C>          <C>          <C>        <C>
Flex T1/E1                                    $4,658       $7,615        100%        98%
Microflex                                         --        187           --          2
                                              -----------------------------------------

Totals                                        $4,658       $7,802        100%       100%
                                              =========================================
</TABLE>

For the nine months ended March 31, 2002, revenues from the Company's FlexT1/E1
product line decreased 39% from $7,615,000 for the nine months ended March 31,
2001 to $4,658,000 for the nine months ended March 31, 2002. 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 50% from $3,118,000 for the nine month period
ended March 31, 2001 to $1,553,000 for the nine month period ended March 31,
2002. As a percentage of sales, gross profit decreased from 40% for the nine
month period ended March 31, 2001 to 33% for the nine month period ended March
31, 2002. The


                                    Page 12
<PAGE>

decrease is due to a lower margin product mix, primarily OEM products, for sales
recorded during the nine months ended March 31, 2002.

PRODUCT DEVELOPMENT. Product development expense consists of personnel costs,
consulting, supplies and prototyping expenses. Product development expenses
decreased 21%, to $792,000 for the nine months ended March 31, 2002 from
$1,009,000 for the nine months ended March 31, 2001. The decrease in product
development expense for the nine month period ended March 31, 2002 is primarily
due to decreased engineering headcount during the August 2001 through March
2002 timeframe. Further, no development costs related to new projects were
capitalized for the nine month period ended March 31, 2002 as compared to
$113,000 for the nine month period ended March 31, 2001. As a percentage of
sales, product development costs were 17% for the nine months ended March 31,
2002 and 13% for the nine months ended March 31, 2001.

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 33%, to $1,615,000 for the nine
months ended March 31, 2002 from $2,418,000 for the nine months ended March 31,
2001. The decrease is primarily attributable to reduced headcount during the
nine months ended March 31, 2002 coupled with conscious cost-cutting efforts and
initiatives instituted by Company management during July 2001. Total selling,
general and administrative costs were 35% of sales for the nine months ended
March 31, 2002 as compared to 31% of sales for the nine months ended March 31,
2001.

LOSS FROM CONTINUING OPERATIONS. For the nine month period ended March 31, 2002
the Company recorded a loss from continuing operations of $1,160,000 as compared
to a loss from continuing operations of $953,000 reported for the nine month
period ended March 31, 2001. The increase in the loss from continuing operations
is primarily a result of the reduction in gross profit as a result of lower
sales and changes in product mix realized for the nine months ended March 31,
2002.

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 nine months ended March 31, 2002 and 2001, the Company's
continuing operations incurred losses of $1,160,000 and $953,000, 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.

As of March 31, 2002, the Company was not in compliance with certain financial
and net tangible worth covenants as imposed under its line of credit facility
with its primary lender, Silicon Valley Bank (hereafter "SVB"). The facility is
secured by all assets of the Company. The Company executed a forbearance
agreement with SVB on May 13, 2002 whereby SVB agreed not to exercise any of its
rights and remedies under the existing events of default until May 31, 2002. The
forbearance agreement requires the Company to obtain additional external
financing no later than May 31, 2002. In the event the Company is unable to
secure additional financing by May 31, 2002 or extend the forbearance
agreement with SVB, there can be no assurances that sufficient capital will be
available to sustain operations.

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 and debt
financing through discussions with potential lenders and investors.


                                    Page 13
<PAGE>
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.

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


                                       15

<PAGE>
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 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 and Subsequent Stock Purchase 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. would be 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.

Rescission of DTS ESOP - On February 28, 2002, the DTS ESOP stock purchase was
rescinded by mutual agreement of the parties and all equity holdings were
returned to Wi-LAN. The rescission was in accordance with the rescission rights
under the stock purchase agreement. Immediately following the rescission, Wi-LAN
and the Company executed a revised transaction whereby the Company agreed to
purchase $721,102 of outstanding convertible debentures, as held by Wi-LAN, for
$54,000 in cash and a $50,000 non-interest bearing promissory note. The note is
payable to Wi-LAN in 5 monthly installments of $10,000, commencing April 30,
2002. As additional consideration for the payment, Wi-LAN agreed to return the
balance of their equity holdings back to the Company, with the sole exception of
250,000 shares of DTS common stock. Equity holdings returned to the Company were
454,737 shares of Series B Convertible Preferred Stock, 2,330,217 shares of
Series C Preferred Stock, 6,282,314 shares of common stock and 702,615 warrants
to purchase common stock of the Company. The Company has currently retained the
6,282,314 common shares received as treasury stock for potential re-issuance in
the future. All other returned holdings were cancelled and retired by the
Company.

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.


                                       16

<PAGE>


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 March 31, 2002).
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 not in
compliance with the revised covenants as of March 31, 2002.

Following the April 10, 2002 expiration, the line of credit agreement with
Silicon Valley Bank was temporarily extended to May 31, 2002 and a forbearance
agreement was executed. A long-term renewal of the line of credit agreement with
Silicon Valley Bank has not yet been established due to the Company's lack of
compliance with the covenants imposed by the agreement. The Company executed a
forbearance agreement with SVB on May 13, 2002 whereby SVB agreed not to
exercise any of its rights and remedies under the existing events of default
until May 31, 2002. The forbearance agreement requires the Company to obtain
additional external financing no later than May 31, 2002. In the event the
Company is unable to secure additional financing by May 31, 2002 or extend the
forbearance agreement with SVB, there can be no assurances that sufficient
capital will be available to sustain operations.

CASH. For the nine months ended March 31, 2002, cash of $722,000 was provided by
continuing operating activities as compared to cash used in continuing
operations of $598,000 for the nine months ended March 31, 2001. The loss from
continuing operations for the nine months ended March 31, 2002 of $1,160,000
includes non-cash charges relating to depreciation and amortization of $84,000
and interest expense of $228,000. During the nine months ended March 31, 2002
cash was provided by continuing operating activities primarily through a
decrease in accounts receivable of $1,194,000.

The Company's cash requirements necessary for operations and 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
and potentially cease all operations.

The Company purchased $101,000 and $258,000 of property, plant and equipment
during the nine months ended March 31, 2002 and 2001, respectively. In addition,
the Company capitalized certain software development costs paid to outside
contractors. During the nine months ended March 31, 2002, the Company
capitalized $0 of such costs as compared to capitalized costs of $113,000 for
the nine months ended March 31, 2001.

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.


                                       17

<PAGE>


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.

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


                                       18

<PAGE>


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, 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 March 31, 2002, the Company's total
variable rate debt obligations was $1,283,000. 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 $13,000.


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<PAGE>


                           Part II. OTHER INFORMATION


Part II. OTHER INFORMATION
--------------------------------------------------------------------------------


ITEMS 1, 2, 4 & 5 are not applicable.

ITEM 3(A) - DEFAULT UPON SENIOR INDEBTEDNESS

As of March 31, 2002, the Company was not in compliance with certain financial
and net tangible worth covenants as imposed under its line of credit facility
with its primary lender, Silicon Valley Bank (hereafter "SVB"). The facility is
secured by all assets of the Company. The Company executed a forbearance
agreement with SVB on May 13, 2002 whereby SVB agreed not to exercise any of its
rights and remedies under the existing events of default until May 31, 2002. The
forbearance agreement requires the Company to obtain additional external
financing no later than May 31, 2002. In the event the Company is unable to
secure additional financing by May 31, 2002 or extend the forbearance
agreement with SVB, there can be no assurances that sufficient capital will be
available to sustain operations.

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 nine
months ended March 31, 2002.

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


                                    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: May 15, 2002        By:   /s/ Soren Pihlman
                             ---------------------------------------------------
                                      Soren Pihlman,
                                      Director
                                      President and COO - Asurent Wireless, Inc.


Date: May 15, 2002        By: /s/  Clive N. W. Marsh
                             ---------------------------------------------------
                                  Clive N. W. Marsh
                                    V.P. Corporate Finance


                                       21