SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                ----------------

                                    FORM 10-K

           [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                  For the fiscal year ended September 30, 2001

           [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
             For the transition period from __________to ___________

                         COMMISSION FILE NUMBER 0-21999
                             -----------------------

                            APPIANT TECHNOLOGIES INC.

           (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

              DELAWARE                                   84-1360852
   (State or other jurisdiction of       (I.R.S. Employer Identification No.)
   incorporation or organization)

                                6663 OWENS DRIVE
                          PLEASANTON, CALIFORNIA 94588
                    (Address of principal executive offices)
                                 (925) 251-3200
                           (Registrant's telephone number)
                                ----------------

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


      TITLE OF EACH CLASS           NAME OF EACH EXCHANGE ON WHICH REGISTERED
      -------------------           -----------------------------------------
   Common Stock, $.01 par value                NASDAQ SmallCap Market

        Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Issuer was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. YES [X] NO [ ]

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

As of January 11, 2002, there were 15,983,200 shares of Common Stock
outstanding. The aggregate market value of the Common Stock held by
non-affiliates of the Issuer (based on the closing price for the Common Stock on
the NASDAQ National Market on January 11, 2002) was approximately $30.6 million.


<PAGE>
                       DOCUMENTS  INCORPORATED  BY  REFERENCE

Portions  of  the  following  documents  are  incorporated  by reference in this
report:  Registrant's  Proxy  Statement  for  its  2002  Annual  Meeting  of
Shareholders

This  Form  10-K  was  the  subject  of  a  Form 12b-25, which was timely filed.


                                        2
<PAGE>
<TABLE>
<CAPTION>
                                TABLE OF CONTENTS

<S>                                                                                           <C>
PART I.........................................................................................4
   Item 1.  BUSINESS..........................................................................13
   Item 2.  PROPERTIES........................................................................13
   Item 3.  LEGAL PROCEEDINGS.................................................................14
   Item 4.  SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS..............................14
Part II.......................................................................................14
   Item 5.  MARKET FOR ISSUER'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.................20
   Item 6.  SELECTED FINANCIAL DATA...........................................................21
   Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
            OPERATIONS........................................................................21
   Item 7A  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.........................38
   Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.......................................39
PART III......................................................................................39
   Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE ISSUER....................................39
   Item 11. EXECUTIVE COMPENSATION............................................................41
   Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT....................43
   Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....................................45
PART IV.......................................................................................46
   Item 14. EXHIBITIS, FINANCIAL STATEMENTS AND SCHEDULES, AND REPORTS ON
            FORM 8-K..........................................................................46
</TABLE>


                                        3
<PAGE>
                                     PART I
ITEM 1.  BUSINESS

                                     GENERAL

NEW BUSINESS MODEL

Our new business model and main goal is to become the leading provider of
internet protocol-based (IP-based) unified communications and unified
information applications designed to allow users access to communications and
information in a highly-personalized format as set by the individual user from
private, public and enterprise sources anytime, anywhere from any type of
communications device such as a cell phone, computer, personal digital assistant
("PDA"), etc., in a hosted, service model. We have created an IP-based portal
that we named inUnison-TM- in which we have incorporated or will incorporate
both our proprietary UC/UI applications including, but not limited to, our own
speech recognition technologies, data mining, data analysis, navigation, channel
management, recommendation engines and client relationship management ("CRM")
applications, as well as various third party applications and integrations.

Our inUnison-TM- portal is an open system incorporating or integrating third
party applications and programs.  Our customers offer their subscribers inUnison
applications in a web-based portal that can be custom-branded for each customer.
As a company that has extensive legacy telephony experience, we understand that
many service providers such as wireless service providers (WSPs"), Internet
service providers ("ISPs'), and Competitive Local Exchange Carriers ("CLECs")
have made extensive capital investments over the years in legacy systems, and
that it would be difficult and expensive for these customers to suddenly abandon
these legacy systems. Therefore, as we built our inUnison-TM- portal, we
purposely have allowed for service provider customers to maintain their legacy
systems and legacy interfaces should they desire to do so. Our customers who
have unique interfaces e.g., WSPs who maintain unique dialing commands for their
users to send, receive or save voice mails, can continue to maintain their
interfaces with our portal so that their customers need not learn a new set of
commands to use our applications. We believe that our customers' use of our
applications will be seamless, and that allowing our customers the ability to
maintain legacy interfaces while offering their customers our inUnison-TM-
applications will greatly reduce difficulties in adopting our applications.

Our hosted service-based inUnison-TM- unified communications and unified
information business model was built recognizing that users of information
demand the benefits of non-real time messaging services such as email, fax and
voicemail, calendar, contact database, and corporate or enterprise information,
with real time features such as connectivity, call delivery, and live call
management. Our technology is essentially a disrupter: today the sender of a
communication, e.g., a phone call, email or voicemail, is generally in control
of when the communication is received by the receiver (for example, the time of
day), and how the communication is received (by phone, voicemail, or email). But
by using our applications, the receiver of the communication takes control of
the communication process. The receiver can, for example, determine which phone
calls follow the receiver and will get connected real-time, which ones get sent
to voicemail, or which emails notify the receiver (either over the phone,
computer or PDA), that an email message has been received. And if an email or
voicemail has been received, the receiver can either listen to or read the
e-mail or voicemail with our speech-to-text and text-to-speech technologies.


                                        4
<PAGE>
We are offering our inUnison-TM- UC/UI applications in a hosted, recurring
service-based revenue model to targeted markets and industry segments.  Our goal
is to be the "service provider's service provider", offering our inUnison-TM-
applications in a resale model where we will price our applications separately
and/or in packages to our service provider customers for resale to their
subscribers.  We also enter into revenue sharing arrangements with certain
customers where we will share revenues from our applications and, in some cases,
minutes from outbound calls made from and in-bound calls made to the portal.  In
the future we also plan to license our proprietary technology or portions of it
to third parties.  We intend to develop continuously new applications and to
integrate third party applications into our portal.  Our customers will be able
to offer these applications in a portal that we maintain, but which can be
custom-branded.

We believe that increased competition, shorter time to market trends and the
reduced importance of geographical borders make it imperative that customers
achieve and maintain state-of-the-art communication and information systems that
unify information from any internet-accessible source with communication devices
and communication channels.

     OUR INUNISON-TM- PROPRIETARY TECHNOLOGIES

Our inUnison-TM- portal contains or will contain a number of our proprietary
technologies. Our portal includes or will include a Navigation engine that is
designed to allow for the continuous, simultaneous search of multiple databases,
both public such as the internet, and enterprise, to search for important
information to be brought into the portal that the user has determined is
important and to perform data mining for computing profitability models. Our
Recommendation engine is designed to make intelligent, specific, targeted
recommendations to users based on information brought into the portal. For
example, sales professionals who use our inUnison-TM- applications to track
their customers' order histories will be prompted by the portal (for example, by
phone call, email, etc.) to offer new products or services based on the
customers' needs, previous purchases or new products or services that are likely
to appeal to the customer. Our Notification engine in the portal can notify a
user (by calling the user's cell phone or sending a voicemail or email message)
that his or her scheduled flight has been delayed or cancelled and can query the
user whether alternative flight arrangements should be made. Should the user
desire to book an alternative flight, he or she will be able to do so directly
through the portal without ever hanging up and having to dial directly. Instead,
the user can place the call to the airline through the portal either by dialing
or through voice commands, make alternative flight arrangements, and then return
to the portal. We also will feature a web phone and a web collaboration engine.

Our proprietary speech recognition technologies are exciting, and provide for
distributed interaction with the inUnison-TM- portal that cannot be realized
with existing third party voice recognition products on the market today.  Our
feature extraction technology is expected to reduce by 100 times or more the
amount of data required to travel from a phone to a data center over that of
conventional speech recognition products on the market today, thereby making our
speech recognition faster. We have also developed proprietary filtering
technology to eliminate noise and cross talk that often operate to limit the
effectiveness of voice recognition products. Our speech recognition applications
are speaker and dialect-independent.


                                        5
<PAGE>
     OUR TARGETED MARKETS

We are marketing our inUnison-TM- UC/UI products initially to five target
markets:

     -    Wireless Service Providers (WSPs)
     -    Competitive Local Exchange Carriers ("CLECs")
     -    Internet Service Providers ("ISPs")
     -    Application Service Providers ("ASPs")
     -    Large Enterprises

We believe that there are compelling value propositions to our targeted
customers to sell our inUnison-TM- applications. WSPs, ISPs and ASPs, for
example, are intensely competitive, and are continuously fighting to offer new
applications to their customers to increase "sticky" minutes over their networks
to generate additional revenues and to reduce churn. CLECs, for example, need to
offer new value-added applications to drive new revenues and generate higher
margins. Our applications may result in additional revenue sources for these
targeted customers.  Current financial spending constraints in most of these
market sectors make inUnison-TM- even more attractive, as only minor cash
outlays are required for these service providers to offer our advanced
applications.

Large enterprises with distributed, mobile employees may want to offer our
inUnison-TM- applications to help increase productivity.  The value proposition
to such large enterprises is a more efficient work force that can translate into
additional revenues and reduced cost of operations.

Through our direct sales force, we have developed formal selling tools,
techniques and methods to assist our customers in selling our applications to
their customers.  We also provide cooperative marketing and advertising support
to our customers.

     OUR STRATEGIC PARTNER RELATIONSHIPS

We have built significant, valuable, strategic relationships with a number of
partners including Cisco Systems ("CISCO") and these partnering relationships
are important to our success.  Although, Cisco decided to exit the software
business, which had substantial negative effects to the Company we remain a
CISCO Powered Network member and a New World Ecosystem partner ("Ecosystem
partner").  As a CISCO Ecosystem partner, we are part of a technology community
where we can partner with CISCO and its Ecosystem partners; tap into CISCO's
sales channel, customer base and technical experience; participate in technology
sharing, joint marketing and customer support; enjoy preferential pricing on
products and services; and receive other benefits.  As an Ecosystem partner,
CISCO has committed to introducing customers to us.

We also discontinued our relationship with our major data center hosting partner
and now perform these duties internally within the Company.  As a consequence of
this change our product rollout was delayed.  Subsequent to our fiscal year end,
this partner forgave approximately $4.5 million of debt.  The Company
successfully implemented its own data center during fiscal 2001.


                                        6
<PAGE>
     OUR COMPANY NAME CHANGED TO REFLECT NEW BUSINESS MODEL

Appiant Technologies, Inc., has been trademarked upon receiving shareholder
approval at our last shareholder meeting.

We have filed and received U.S. Trademark applications for the name "inUnison"
that we use for our unified communications and unified information software
applications.

While we have been and to market our new, hosted unified communications and
unified information applications business model, our results for fiscal year
ended September 2001 reflect generally the results of our legacy business in
North America, as well as that of Infotel in Singapore.

Our call center infrastructure business was sold during fiscal 2001 because
CISCO made the decision to delay development of its IP based call center
systems.  Management believes the impact on its financial condition will not be
significant.

LEGACY BUSINESS

We were incorporated in October 1996 to pursue a business combination
opportunity with Nhancement Technologies North America ("APPIANT NA") (then
named Voice Plus). APPIANT NA was then engaged in the business of integrating
voice-processing systems with telecommunications equipment. Appiant Technologies
Inc. acquired APPIANT NA on February 3, 1997, along with a development stage
company whose operations were later merged with those of
APPIANT NA.  On February 4, 1997, we completed an initial public offering of
shares of our Common Stock.

We acquired Infotel on June 22, 1998. Infotel is an integrator of infrastructure
communications equipment products, providing radar system integration, turnkey
project management services and test instrumentation, as well as a portfolio of
communications equipment in Asia. Infotel is headquartered in Singapore.

On February 4, 2000, we completed our acquisition of the assets of SVG Software
Services, Inc., a California corporation ("SVG"), pursuant to the Plan and
Agreement of Reorganization (the "Agreement"), dated February 4, 2000, between
Appiant and SVG.

On February 4, 2000, we acquired all the shares of Nhancement Technologies
(India) Pte. Ltd. ("NHAN India") a company incorporated in Chennai, India that
engages in the business of web design and software products development. NHAN
India conducts substantial software development activities for the inUnison-TM-
portal.  NHAN India was also focusing on call center solutions and outsourcing
for enterprises seeking to establish call centers in India.   NHAN India and is
call center business was sold in fiscal 2001, a number of the members of the
engineering team remained with Appiant.

Both acquisitions were consummated with a view of gaining access to important
technologies and engineering skills critical to developing our software
applications, both of which remain within the Company.


                                        7
<PAGE>
On January 21, 2000, we acquired Trimark, Inc., headquartered in San Diego,
California and doing business as Triad Marketing ("Triad"). The Triad
acquisition provided us with recommendation engine software tools for inclusion
with our inUnison-TM- unified communications and unified information
applications.  The market profile selling services were discontinued in fiscal
2001 and most of the related employees were laid-off.

On February 4, 2000, we acquired all the shares of Appiant Technologies
(India) Pte. Ltd. ("APPIANT India") a company incorporated in Chennai, India
that engages in the business of web design and software products development.

In fiscal year 2001, we sold our Appiant India subsidiary to a related party.
The disposition did not have a significant impact on our financial position or
results of operations.

On May 23, 2001, Appiant Technologies Inc. ("Appiant") acquired all of the
outstanding stock of Quaartz, Inc. ("Quaartz").  Quaartz is a pioneering
Internet affinity marketing company that provides Internet-hosted applications
enabling companies and organizations to deliver event announcements,
communication tools and e-commerce directly to their online communities.  The
acquisition was consummated with a view of gaining access to important
technologies and engineering skills critical to developing our software
applications.

Our remaining legacy systems integration businesses include voice processing,
multimedia messaging, and infrastructure communications equipment products.

     LEGACY PRODUCTS AND SERVICES

     NT-BASED COMMUNICATION SERVERS

Legacy communications have included NT-based communication server solutions from
Enterprise Information Center ("EIC") that are manufactured by Interactive
Intelligence, Inc. ("I3").  These EIC servers allow multiple integrated forms of
communications through a single system. The forms of communications supported by
the EIC system include voice, data, email, facsimile, voicemail interactive
voice response. All are web capable.  The Company discontinued these operations
in fiscal 2001 to focus on our own new inUnison services and applications.

     VOICE PROCESSING AND MULTIMEDIA MESSAGING

Legacy voice messaging, text messaging, LAN messaging and interactive voice
response or self-inquiry systems have been delivered through third party
manufacturers such as NEC and ADC (which acquired Centigram Communications in
2000.  APPIANT NA has historically been a systems integrator and national
distributor of voice processing equipment from several manufacturers whose
equipment enables users to access and interact with a broad range of information
in a variety of formats (including voice, text, data and facsimile) from a
variety of terminals (including touch-tone telephones and personal computers).
We have offered a broad range of products that support a number of enterprise
applications such as telephone answering, automated attendant, voice messaging,
paging, facsimile messaging, interactive voice response, LAN integration and
networking, and technical support.
INFOTEL


                                        8
<PAGE>
     INFRASTRUCTURE COMMUNICATIONS EQUIPMENT

Infotel has offered a wide range of infrastructure communications equipment
products and system integration services that have satisfied the most demanding
communications projects. With over a decade of experience, Infotel has completed
numerous projects, both in complex radio and networking systems.  Infotel
supports products manufactured by Motorola, Ericsson, Raytheon, Newbridge and
Shiva Corp., Rohde & Schwarz Gmbh, and Siemens. Infotel has focused principally
on large projects in the government, institutional and commercial sectors, and
has targeted opportunities for regionalization and Internetworking.

     TURNKEY SYSTEMS PROJECTS

Our customers that have awarded turnkey projects have done so only to vendors or
systems integrators that have had full capabilities in design, installation,
commissioning, project management and documentation. In such projects, our
emphasis and competitive edge lies in the practice of sourcing the best product
that meets the customer's requirements. Emphasis is placed on design and project
management in which we maintain strong technical competency. Other
communications activities include the supply and installation of various voice
and data communications equipment on a tender basis.

     TEST MEASURING SYSTEMS

Infotel also has an established test measuring instrumentation and testing
business that grew out of a communications relationship with German conglomerate
Rohde & Schwarz Gmbh that ultimately evolved into Infotel servicing other Rohde
& Schwarz Gmbh products such as test instruments. Infotel is now the regional
distributor and test and repair center for Rohde & Schwarz Gmbh test
instruments. Infotel has since expanded its repair capability to include Alcatel
mobile telephones.

     SALES AND MARKETING

We have had a marketing and distribution infrastructure for our own software
products and services and for third party voice processing and multimedia
messaging products. We have marketing personnel, technical assistance centers
(including customer service representatives, system engineers and senior level
field technicians) and a network of service/support dealers to provide our
customers with personalized attention, flexibility, responsiveness and
accountability within the United States and Singapore.

We have been marketing our products and services primarily through focused
telemarketing and calls to prospective customers in specific markets,
participation in trade shows, acquisition of databases and inclusion of our
products and services on bidders' lists. We focus on pre-sale analysis of our
customers' needs and the rate-of-return potential of specific sales
opportunities to determine whether we believe they justify the investment of
time and effort of our sales and marketing organization. Typically, we focus on
sales opportunities where we believe the value added from our products and
services provides significant benefits for the customer. We also participate in
competitive bidding for government agency work. In evaluating a prospective
sales situation, we also consider the lead-time to revenue, the complexities of
the customer's requirements and our ability to satisfy the customer and provide
it with the necessary support.


                                        9
<PAGE>
     RESEARCH AND DEVELOPMENT

Our industry is characterized by rapid technological change and product
innovation.  Our early "beta" customers have also requested numerous changes to
our original product release and management expects new customers will also
request product changes and innovations.  We believe that continued timely
development of products for both existing and new markets is necessary to remain
competitive.  Therefore, we devote significant resources to programs directed at
developing new and enhanced products, as well as new applications for existing
products.


     LEGACY CUSTOMERS, BACKLOG

We have serviced approximately 1000 clients.  Revenues from our five largest
customers, Firstring, Inc., EPCOS Pte. Ltd., Voicestream Wireless, Philips
Electronics (S) Pte. Ltd. and Mediacorp T & T, Pte. Ltd., accounted for
approximately 9.4%, 9.3%, 7.0%, 5.5% and 5.2% respectively of total net revenues
during the fiscal year ended September 30, 2001. Backlog at September 30, 2001
was $5.5 million as compared to $9.5 million at September 30, 2000. On a
stand-alone basis, backlog for APPIANT NA is $1.0 million for legacy systems and
$2.2 million for our new inUnison service and $2.3 million for Infotel at
September 30, 2001.

     GOVERNMENTAL REGULATION

The Telecommunications Act of 1996 eliminated government mandated barriers
between local and long distance calling, cable television, broadcasting and
wireless service. As a result, CLECs, traditional long distance carriers and
cable television companies have entered these markets to provide both local
telephone and long distance service as well as television programming.  Such
increased competition likely will change the infrastructure for implementing
communications applications, such as voice and electronic messaging. We
anticipate that this increased competition -particularly by CLECs - will drive
demand for our new, hosted inUnison-TM-applications as CLECs generally
understand these technologies and will be aggressive in offering their customers
unique applications to reduce churn and drive revenues from minutes from their
voice over internet protocol ("VOIP") networks.

     EMPLOYEES

As of September 30, 2001, we employed a total of 140 employees worldwide: 83 in
the United States, 51 in Singapore and employed by Infotel, and 6 in Chennai,
India.  Our employees are not covered by a collective bargaining agreement. We
believe that our relations with our employees worldwide are good.

COMPETITION

     NEW BUSINESS MODEL - UNIFIED COMMUNICATIONS AND UNIFIED INFORMATION

We are executing a new business model to provide unified communications and
unified information applications to our customers in a hosted, carrier-grade,
recurring revenue model that we believe will be both dynamic and competitive.
For a number of years, we have competed in providing non-hosted unified
messaging solutions with a number of companies including legacy voicemail
providers. The unified messaging market, which we see as generally consisting of
bringing together non-real time voice mail, e-mail and fax communications into
one "box", is, in our view, fragmented and filled with many competitors. In the
unified messaging sector, we may generally compete with companies such as
Mobility, Linx Communications, Call Sciences, Webbley, One Red Cube, and Tornado
Development Corporation.


                                       10
<PAGE>
In the unified communications sector, which we generally define to include the
non-real time communications that are brought together with real time
communications such as call delivery and connectivity, we anticipate competing
with much larger competitors such as Lucent Technologies ("Lucent") and Nortel.
We may also face competition from some of our legacy business vendors such as
ADC (which in 2000 acquired Centigram Communications, one of our legacy business
vendors), and Interactive Intelligence. Other competition in the unified
communications space may include AirTrac Chicago, Inc., CentreCom, HotVoice and
uReach.  To compete with these companies, we plan to work closely with our
current and future strategic partners.

At the present time, we are one of the first companies in unified information
which, as we define it, incorporates or will incorporate into our inUnison-TM-
portal all of the unified communications solutions and unifies information from
private, public and enterprise sources and, through our various proprietary
engines, allows individuals to access this information anytime and anywhere in
any format from any communications device.  We anticipate that with our success,
we may indeed begin to face additional competition in this space.

Our proprietary technologies will be key to the success of our new
inUnison-TM-portal and applications.  Our speech recognition technologies are
speaker and dialect-independent, and are expected to augment future versions of
our inUnison-TM- portal working in conjunction with existing third party voice
recognition products.  Our speech recognition vocabulary at present is among the
largest, consisting of approximately 300,000 words. We anticipate increased
competition from other speech recognition vendors such as Speechworks, IBM,
Lernout & Hauspie and Nuance.

LEGACY BUSINESSES

     NORTH AMERICA

     Enterprise Software Services

Some of our legacy software products and services have faced competition that
will increase and we believe that computer software vendors, such as Novell,
Inc., IBM, and Microsoft Corporation, will continue to develop enhanced
messaging and networking software with voice and data information processing
applications that compete with our legacy software products and services. A
substantial majority of competitors in the voice-processing field have better
name recognition in this market, a larger installed base of customers and
greater financial, marketing and technical resources.

We expect that competitors will continue to offer new or enhanced products that
compete with our legacy products. In addition, we believe that computer software
vendors such as Novell, Inc., IBM, and Microsoft Corporation will continue to
develop enhanced messaging and networking software with voice and data
information processing applications.


                                       11
<PAGE>
     Voice Processing Products and Services

The voice processing and customer premises equipment markets are highly
competitive, and we believe that competition within these industries will
continue to intensify with the introduction of new or enhanced products and as
new competitors continue to enter these markets. A substantial majority of
competitors in the legacy voice-processing field have better name recognition in
these markets, a larger installed base of customers and greater financial,
marketing and technical resources.

We have competed with a number of larger integrated companies that provide
competitive voice processing products and services as subsets of larger product
offerings, including the former regional Bell companies and major PBX equipment
manufacturers such as Fujitsu Limited and Lucent. Additionally, in the customer
premises equipment markets, we have competed with two types of equipment
companies: (i) interconnects (PBX providers) including Lucent, Northern Telecom
Limited, Fujitsu Limited and NEC Corporation, and (ii) independent voice
processing manufacturers such as Octel Communications Corporation, Digital Sound
Corporation, Active Voice Corporation, Applied Voice Technology, Inc., Glenayre
Technologies, Inc. and Comverse Technology, Inc. PBX providers sell
voice-processing equipment as an integrated solution with their own PBXs and may
have a competitive advantage with respect to those who purchase a voice
processing system at the same time they purchase a new PBX. Also, Glenayre
Technologies, Inc. and Comverse Technology, Inc., among others, compete with us
in the service provider market.

We expect that our inUnison product offering, as well as our principal existing
competitors and new competitors will offer new or enhanced products.  We believe
that computer software vendors such as Novell, Inc., IBM, and Microsoft
Corporation, will continue to develop enhanced messaging and networking software
with voice and data information processing applications.

We believe that our attention to customer service, as well as to the customer's
technical requirements, has resulted in our success in competing and winning
sales bids. We provide detailed information and support to our customers
beginning at the point of sale and continuing through the implementation period,
as well as ongoing service. Depending on the terms of the maintenance contract
purchased, we provide assistance for our customers up to 24 hours per day, 365
days a year. We provide training for our employees in products, installation,
system design and support to assist customers in selecting the right equipment
and to provide the quality of service that customers demand and deserve.  We
believe that we have a loyal customer base founded on their satisfaction with
our service capabilities and active account management.

     Services Providers

Competitors providing products to various services providers, such as cellular
communications operators, long-distance resellers and local telephone companies,
include several voice processing manufacturers such as Lucent, ADC, Comverse
Technology, Inc., Digital Sound Corp. and Glenayre Technologies, Inc.


                                       12
<PAGE>
     INFOTEL

     Infrastructure Communications Equipment

Through Infotel, we sell infrastructure communications equipment products and
system integration services.  Generally Infotel does not compete for business
with small companies, competing instead with larger system integrators and
distribution companies.

In the data-communications market, our key competitors have been Datacraft Asia
Ltd, Teledata Ltd, National Computer Systems Pte Ltd and ST Computer Systems
Ltd. These competitors distribute products manufactured by Cisco Systems, Ascend
Communications, Marconi Communications and others.

In the radio communications market, which largely serves the Singapore
government, there are fewer competitors, most of which have ties to the
government.  CET Technologies Pte Ltd and Keppel Communications Pte Ltd. are
Infotel's main competitors.  In some instances, Infotel works together with
these competitors in fulfilling government contracts.

In the test instrumentation market, Infotel has only one major competitor, which
is Agilent Technologies, a large electronic test equipment manufacturer.


ITEM 2.  PROPERTIES

FACILITIES

Our corporate offices occupy approximately 15,110 square feet of office space in
premises shared with APPIANT NA.  This facility is leased pursuant to a lease
agreement expiring April 3, 2007.  The lease provides for approximately 3% rent
escalations during each year of the lease. Rental payments average U.S. $21,100
per month over the term of the lease. We are currently negotiating to acquire
additional office space adjacent to or near our existing Pleasanton, California
headquarters office, while the commercial real estate market in and around
Pleasanton, California and the east San Francisco Bay Area is competitive, and
we expect to be able to secure additional real estate to meet our needs.

Quaartz offices occupy approximately 6,600 square feet of office space in
premises in Santa Clara, California.  This facility is leased pursuant to a
lease agreement expiring July 14, 2002.  Rental payments are $21,300 per month
over the remaining term of the lease.  We lease office space at several other
locations in the United States under leases, which expire in various years.
Aggregate space leased at these facilities totals approximately 5,000 square
feet, and total monthly office rental expense for these facilities is
approximately $7,000.  Infotel has recently signed a new office lease, which
expires December 2002, for approximately 9,700 square feet to meet its expansion
plans, and moved into these offices in December 2000.  The monthly rent expense
for Infotel's office space is US $12,000.  We believe that leased office space
at market rates is readily available at all such other locations.

In addition, we maintain small sales and or service offices in various states.

ITEM 3.  LEGAL PROCEEDINGS

In January 2002, a judgment was issued against the Company in favor of an
equipment vendor in the amount of $122,772.83.  Company is in discussions to
establish a mutually agreed upon payment plan and expects to settle this issue.


                                       13
<PAGE>
In October 2001, a software vendor filed suit against the Company for breach of
contract totaling approximately $702,737 plus interest and reasonable attorney's
fees.  On December 28, 2001, Appiant filed an answer denying this general demand
and will vigorously pursue this matter.

A major customer tendered billings for reimbursable costs and expenses arising
from their defense of certain patent infringement claims asserted against them.
They are seeking reimbursement from Company of approximately $52,762.  As the
Company is only a distributor of these systems, any liability suffered by us is
reimbursable by the supplier of these systems.

In January 2002, we received a demand for payment, in the amount of
$1,248,090.50, from Glenn Saito's counsel.  If payment is not received on/before
January 11, 2002, they will file a lawsuit for breach of contract.  The Company
is currently in negotiations to extend the date of this note.

The Company is not subject to any other material litigation nor, to its
knowledge, is other litigation threatened against it.

The costs and other effects (whether civil or criminal), settlements, judgments
and investigations, claims and changes in those matters, and developments or
assertions by or against us relating to intellectual property rights and
intellectual property licenses, could have a material adverse effect on our
business, financial condition, operating results and cash flows.

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

No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended September 30, 2001.

                                     PART II

ITEM 5.  MARKET FOR ISSUER'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Our Common Stock is traded on the NASDAQ SmallCap Market under the symbol
"APPS". As of January 11, 2001, there were 15,983,200 shares of Common Stock
outstanding held by approximately 4,000 beneficial holders of record.  The
following table sets forth, for the periods indicated, the high and low sales
prices for the Common Stock on the NASDAQ SmallCap Market.  These
over-the-counter market quotations reflect inter-dealer prices, without retail
mark-up, markdown or commission and may not represent actual transactions.  The
trading market in our securities may at times be relatively illiquid due to low
trading volume.


                                       14
<PAGE>
                                                        COMMON STOCK
                                                       HIGH       LOW
                                                       ----       ---
           1999
           September...............................    1.922     1.297
           October.................................    1.563     1.063
           November................................    1.781     1.188
           December................................    6.438     1.344
           2000
           January.................................  $ 9.563   $ 4.563
           February................................   14.875     8.313
           March...................................   19.500    11.625
           April...................................   20.750    11.500
           May.....................................   24.750    15.938
           June....................................   18.250    10.000
           July....................................   13.875     6.938
           August..................................   15.500     8.313
           September...............................   17.438    13.313
           October.................................   25.250    15.000
           November................................   24.875   12.8125
           December................................  15.1875     4.000
           2001
           January.................................  $ 6.750   $ 4.880
           February................................    6.250     4.813
           March...................................    5.500     3.109
           April...................................    3.550     2.400
           May.....................................    2.850     1.570
           June....................................    4.900     1.540
           July....................................    2.830     1.800
           August..................................    2.190     1.800
           September...............................    2.180     1.380
           October.................................    2.190     1.520
           November................................    1.660     1.290
           December................................    3.050     1.140

On January 11, 2002, the last reported sales price for the Common Stock as
reported on the NASDAQ Small Cap Market was $2.48.

DIVIDEND POLICY

We have never paid cash dividends on our Common Stock.  Our board of directors
does not anticipate paying cash dividends in the foreseeable future as it
intends to retain future earnings to finance the expansion of our business and
for general corporate purposes.  The payment of future cash dividends will
depend on such factors as our earnings levels, anticipated capital requirements,
operating and financial condition, consent from any lender, if applicable, and
other factors deemed relevant by our board of directors.

UNREGISTERED SALES OF SECURITIES

In October 2000, we issued a warrant to purchase up to 75,000 shares of common
stock to Joseph Stevens to raise operating capital for us in a transaction
exempt from registration under Section 4(2). The warrant is immediately
exercisable and may be exercised until October 31, 2001. The exercise price per
share of this warrant is $13.50.

In November 2000, we issued a warrant to purchase up to 30,000 shares of common
stock to Jack J. Zahran to raise operating capital for us in a transaction
exempt from registration under Section 4(2). The warrant is immediately
exercisable and may be exercised until November 28, 2005. The exercise price per
share of this warrant is $8.3438.


                                       15
<PAGE>
In January 2001, we issued a warrant dated as of July 2000 to purchase up to
300,000 shares of common stock to Baldwin Partners, LP to raise operating
capital for us in a transaction exempt from registration under Section 4(2). The
warrant is immediately exercisable may be exercised until December 31, 2002. The
exercise price per share of this warrant is $6.00.

In March 2001, we issued a convertible debenture of $2.5 million and various
warrants to purchase up to 1,481,481 shares of common stock to L. Thomas Baldwin
III to raise operating capital for us in a transaction exempt from registration
under Section 4(2).  The shares to be issued upon the conversion of the note and
the exercise of the warrants equal more than 20% of the Company's outstanding
shares and require a vote of the shareholders.  Once approved by the
shareholders, the warrants are immediately exercisable and may be exercised
until March 2008. The conversion price of the note is $1.50 per share and is due
if not converted on May 31, 2002.  The exercise price per share of these
warrants is $2.70.

In May 2001, we issued a warrant to purchase up to 50,000 of common stock to Jim
Gillespie to raise operating capital for us in a transaction exempt from
registration under Section 4(2). The warrant is immediately exercisable and may
be exercised until May 31, 2006. The exercise price per share of this warrant is
$1.80.

In May 2001, we issued a warrant to purchase up to 30,000 shares of common stock
to Lucien Thomas Baldwin III to raise operating capital for us in a transaction
exempt from registration under Section 4(2). The warrant is immediately
exercisable and may be exercised until May 31, 2006. The exercise price per
share of this warrant is $1.57.

In May 2001, we issued a warrant to purchase up to 50,000 shares of common stock
to Cynthia Manos to raise operating capital for us in a transaction exempt from
registration under Section 4(2). The warrant is immediately exercisable and may
be exercised until May 31, 2006. The exercise price per share of this warrant is
$1.57.

In May 2001, we issued a warrant to purchase up to 20,000 shares of common stock
to Douglas Zorn to raise operating capital for us in a transaction exempt from
registration under Section 4(2). The warrant is immediately exercisable and may
be exercised until May 31, 2006. The exercise price per share of this warrant is
$1.57.

In May 2001, we issued a warrant to purchase up to 20,000 shares of common stock
to Jim Gillespie to raise operating capital for us in a transaction exempt from
registration under Section 4(2). The warrant is immediately exercisable and may
be exercised until May 31, 2006. The exercise price per share of this warrant is
$1.57.

In June 2001, we issued a warrant to purchase up to 175,000 shares of common
stock to ITB Asset Management, Inc. ("ITB") in lieu of cash payment in
consideration for certain services rendered to Appiant in a transaction exempt
from registration under Section 4(2). The warrant is immediately exercisable and
may be exercised until June 8, 2006. The exercise price per share of this
warrant is $2.64.

In June 2001, we issued a warrant to purchase up to 37,879 shares of common
stock to Trust F.B.D. Amos N. Prescott Jr. U/A/D 1/30/76, as set forth in a
Promissory Note and secured by the Infotel assets, to raise operating capital
for us in a transaction exempt from registration under Section 4(2). The warrant
is immediately exercisable and may be exercised until June 8, 2006. The exercise
price per share of this warrant is $2.64.


                                       16
<PAGE>
In June 2001, we issued a warrant to purchase up to 37,879 shares of common
stock to Martin t. Knobloch, as set forth in a Promissory Note and secured by
the Infotel assets, to raise operating capital for us in a transaction exempt
from registration under Section 4(2). The warrant is immediately exercisable and
may be exercised until June 8, 2006. The exercise price per share of this
warrant is $2.64.

In June 2001, we issued a warrant to purchase up to 18,939 shares of common
stock to Traci Marie Passiglia, as set forth in a Promissory Note and secured by
the Infotel assets, to raise operating capital for us in a transaction exempt
from registration under Section 4(2). The warrant is immediately exercisable and
may be exercised until June 8, 2006. The exercise price per share of this
warrant is $2.64.

In June 2001, we issued a warrant to purchase up to 37,879 shares of common
stock to Jocelyn Twist, as set forth in a Promissory Note and secured by the
Infotel assets, to raise operating capital for us in a transaction exempt from
registration under Section 4(2). The warrant is immediately exercisable and may
be exercised until June 8, 2006. The exercise price per share of this warrant is
$2.64.

In June 2001, we issued a warrant to purchase up to 37,879 shares of common
stock to James L. Prescott, Jr., as set forth in a Promissory Note and secured
by the Infotel assets, to raise operating capital for us in a transaction exempt
from registration under Section 4(2). The warrant is immediately exercisable and
may be exercised until June 8, 2006. The exercise price per share of this
warrant is $2.64.

In June 2001, we issued a warrant to purchase up to 18,939 shares of common
stock to Karen McDonnell, as set forth in a Promissory Note and secured by the
Infotel assets, to raise operating capital for us in a transaction exempt from
registration under Section 4(2). The warrant is immediately exercisable and may
be exercised until June 8, 2006. The exercise price per share of this warrant is
$2.64.

In June 2001, we issued a warrant to purchase up to 284,091 shares of common
stock to Cynthia Manos, as set forth in a Promissory Note and secured by the
Infotel assets, to raise operating capital for us in a transaction exempt from
registration under Section 4(2). The warrant is immediately exercisable and may
be exercised until June 8, 2006. The exercise price per share of this warrant is
$2.64.

In June 2001, we issued a warrant to purchase up to 37,879 shares of common
stock to R. Donald Prescott, Jr., as set forth in a Promissory Note and secured
by the Infotel assets, to raise operating capital for us in a transaction exempt
from registration under Section 4(2). The warrant is immediately exercisable and
may be exercised until June 8, 2006. The exercise price per share of this
warrant is $2.64.

In June 2001, we issued a warrant to purchase up to 37,879 shares of common
stock to Amos N. Prescott, Jr. Revocable Trust DTD 5/2/95, as set forth in a
Promissory Note and secured by the Infotel assets, to raise operating capital
for us in a transaction exempt from registration under Section 4(2). The warrant
is immediately exercisable and may be exercised until June 8, 2006. The exercise
price per share of this warrant is $2.64.


                                       17
<PAGE>
In June 2001, we issued a warrant to purchase up to 37,879 shares of common
stock to James & Carol Furlong, as set forth in a Promissory Note and secured by
the Infotel assets, to raise operating capital for us in a transaction exempt
from registration under Section 4(2). The warrant is immediately exercisable and
may be exercised until June 8, 2006. The exercise price per share of this
warrant is $2.64.

In June 2001, we issued a warrant to purchase up to 37,879 shares of common
stock to Albert Belsky, as set forth in a Promissory Note and secured by the
Infotel assets, to raise operating capital for us in a transaction exempt from
registration under Section 4(2). The warrant is immediately exercisable and may
be exercised until June 8, 2006. The exercise price per share of this warrant is
$2.64.

In June 2001, we issued a warrant to purchase up to 18,939 shares of common
stock to Patrick Matre, as set forth in a Promissory Note and secured by the
Infotel assets, to raise operating capital for us in a transaction exempt from
registration under Section 4(2). The warrant is immediately exercisable and may
be exercised until June 8, 2006. The exercise price per share of this warrant is
$2.64.

In June 2001, we issued a warrant to purchase up to 56,818 shares of common
stock to Lucien Thomas Baldwin III, as set forth in a Promissory Note and
secured by the Infotel assets, to raise operating capital for us in a
transaction exempt from registration under Section 4(2). The warrant is
immediately exercisable and may be exercised until June 8, 2006. The exercise
price per share of this warrant is $2.64.

In June 2001, we issued a warrant to purchase up to 113,636 shares of common
stock to Athena P. Smith, as set forth in a Promissory Note and secured by the
Infotel assets, to raise operating capital for us in a transaction exempt from
registration under Section 4(2). The warrant is immediately exercisable and may
be exercised until June 8, 2006. The exercise price per share of this warrant is
$2.64.

In June 2001, we issued a warrant to purchase up to 37,879 shares of common
stock to Kurt W. Kaufman, as set forth in a Promissory Note and secured by the
Infotel assets, to raise operating capital for us in a transaction exempt from
registration under Section 4(2). The warrant is immediately exercisable and may
be exercised until June 8, 2006. The exercise price per share of this warrant is
$2.64.

In June 2001, we issued a warrant to purchase up to 37,879 shares of common
stock to Thomas E. & Kristin Goodalis, as set forth in a Promissory Note and
secured by the Infotel assets, to raise operating capital for us in a
transaction exempt from registration under Section 4(2). The warrant is
immediately exercisable and may be exercised until June 8, 2006. The exercise
price per share of this warrant is $2.64.

In October 2001, we issued a warrant to purchase up to 59,524 shares of common
stock to Lucien Thomas Baldwin III, as set forth in a Promissory Note and
secured by the Company's Voice Plus Accounts Receivables, to raise operating
capital for us in a transaction exempt from registration under Section 4(2). The
warrant is immediately exercisable and may be exercised until October 31, 2006.
The exercise price per share of this warrant is $1.68.


                                       18
<PAGE>
In October 2001, we issued a warrant to purchase up to 59,524 of common stock to
Douglas Zorn, as set forth in a Promissory Note and secured by the Company's
Voice Plus Accounts Receivables, to raise operating capital for us in a
transaction exempt from registration under Section 4(2). The warrant is
immediately exercisable and may be exercised until October 31, 2006. The
exercise price per share of this warrant is $1.68.

In October 2001, we issued a warrant to purchase up to 59,524 shares of common
stock to Jim Gillespie, as set forth in a Promissory Note and secured by the
Company's Voice Plus Accounts Receivables, to raise operating capital for us in
a transaction exempt from registration under Section 4(2). The warrant is
immediately exercisable and may be exercised until October 31, 2006. The
exercise price per share of this warrant is $1.68.


In November 2001, we issued a warrant to purchase up to 150,000 shares of common
stock to Lucien Thomas Baldwin III, as set forth in a Promissory Note and
secured by the VoiceTel and Infotel assets, to raise operating capital for us in
a transaction exempt from registration under Section 4(2). The warrant is
immediately exercisable and may be exercised until November 28, 2006. The
exercise price per share of this warrant is $1.35.

In November 2001, we issued a warrant to purchase up to 77,519 shares of common
stock to Robert J. Schmier, as set forth in a Promissory Note and secured by the
Infotel assets, to raise operating capital for us in a transaction exempt from
registration under Section 4(2). The warrant is immediately exercisable and may
be exercised until November 28, 2006. The exercise price per share of this
warrant is $1.29.

In November 2001, we issued a warrant to purchase up to 143,885 shares of common
stock to Robert Gilman, as set forth in a Promissory Note and secured by the
Infotel assets, to raise operating capital for us in a transaction exempt from
registration under Section 4(2). The warrant is immediately exercisable and may
be exercised until November 29, 2006. The exercise price per share of this
warrant is $1.39.

In December 2001, we issued a warrant to purchase up to 38,462 shares of common
stock to Dr. Gabor Rubanyi, as set forth in a Promissory Note and secured by the
Infotel assets, to raise operating capital for us in a transaction exempt from
registration under Section 4(2). The warrant is immediately exercisable and may
be exercised until November 29, 2006. The exercise price per share of this
warrant is $1.30.

In December 2001, we issued a warrant to purchase up to 19,084 shares of common
stock to Dr. Robert L. Glass, as set forth in a Promissory Note and secured by
the Infotel assets, to raise operating capital for us in a transaction exempt
from registration under Section 4(2). The warrant is immediately exercisable and
may be exercised until December 7, 2006. The exercise price per share of this
warrant is $1.31.

In December 2001, we issued a warrant to purchase up to 33,333 shares of common
stock to Jeremy Judge, as set forth in a Promissory Note and secured by the
Infotel assets, to raise operating capital for us in a transaction exempt from
registration under Section 4(2). The warrant is immediately exercisable and may
be exercised until December 12, 2006. The exercise price per share of this
warrant is $1.20.


                                       19
<PAGE>
In December 2001, we issued a warrant to purchase up to 83,333 shares of common
stock to Wayne Saker, as set forth in a Promissory Note and secured by the
Infotel assets, to raise operating capital for us in a transaction exempt from
registration under Section 4(2). The warrant is immediately exercisable and may
exercised until December 12, 2006. The exercise price per share of this warrant
is $1.20.

In December 2001, we issued a warrant to purchase up to 42,373 shares of common
stock to Dr. Harry Mittelman, as set forth in a Promissory Note and secured by
the Infotel assets, to raise operating capital for us in a transaction exempt
from registration under Section 4(2). The warrant is immediately exercisable and
may be exercised until December 20, 2006. The exercise price per share of this
warrant is $1.77.

In December 2001, we issued a warrant to purchase up to 56,497 of common stock
to Robert Gilman, as set forth in a Promissory Note and secured by the Infotel
assets, to raise operating capital for us in a transaction exempt from
registration under Section 4(2). The warrant is immediately exercisable and may
be exercised until December 20, 2006. The exercise price per share of this
warrant is $1.77.

In December 2001, we issued a warrant to purchase up to 56,497 shares of common
stock to Wayne Saker, as set forth in a Promissory Note and secured by the
Infotel assets, to raise operating capital for us in a transaction exempt from
registration under Section 4(2). The warrant is immediately exercisable and may
be exercised until December 20, 2006. The exercise price per share of this
warrant is $1.77.

In December 2001, we issued a warrant to purchase up to 112,994 warrants to
purchase shares of common stock to Robert Gilman, as set forth in a Promissory
Note and secured by the Infotel assets, to raise operating capital for us in a
transaction exempt from registration under Section 4(2). The warrant is
immediately exercisable and may be exercised until December 20, 2006. The
exercise price per share of this warrant is $1.77.

ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                               YEARS ENDED SEPTEMBER 30, 2001, 2000, 1999
                                               AND 1997 AND THE NINE MONTHS ENDED SEPTEMBER
                                               30, 1998
                                           ---------------------------------------------------
                                            2001      2000       1999       1998        1997
                                           ------    -------    -------    -------    --------
                                                            (IN THOUSANDS)
<S>                                        <C>       <C>        <C>        <C>        <C>

Total net revenues.......................  $21,748    $25,529    $23,340    $ 9,442    $  8,738
Loss from  continuing  operations........  (21,009)   (10,174)     (512)     (1,430)     (4,653)
Net loss from continuing operations......  (29,929)   (12,844)     (717)     (1,523)     (4,594)
Loss from discountinued operations.......        -          -         -        (581)          3
Loss on disposal of discontinued operations      -          -         -        (369)          -
Net loss per share -- basic and
  diluted continuing operations..........  $(2.56)   $ (1.25)   $ (0.23)   $  (0.41)   $  (1.18)
Net loss per share -- basic and
  diluted discontinuing operations.......  $    -    $      -   $     -    $  (0.20)   $      -
Shares used in net loss per
  share -- basic and diluted.............   14,687      10,303      6,249      4,802       3,883
Total assets.............................  $40,366    $ 38,785    $16,021    $12,871    $  6,310
Long-term obligations....................  $   511    $  4,717    $    62    $    68    $    158
</TABLE>


                                       20
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The statements contained in this Report on Form 10-K that are not purely
historical are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, including statements regarding our
expectations, hopes, intentions or strategies regarding the future.

Forward-looking statements include statements regarding: future product or
product development; future research and development spending and our product
development strategies; the levels of international sales; future expansion or
utilization of manufacturing capacity; future expenditures; and statements
regarding current or future acquisitions, and are generally identifiable by he
use of the words "may", "should", "expect", "anticipate", "estimates",
"believe", "intend", or "project" or the negative thereof or other variations
thereon or comparable terminology.

Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause our actual results, performance or achievements or
industry results, performance or achievements) expressed or implied by these
forward-looking statements to be substantially different from those predicted.
The factors that could affect our actual results include, but are not limited
to, the following:

     -    general economic and business conditions, both nationally and in the
          regions in which we operate;

     -    adoption of our new recurring revenue service model;

     -    competition;

     -    changes in business strategy or development plans;

     -    delays in the development or testing of our products;

     -    technological, manufacturing, quality control or other problems that
          could delay the sale of our products;

     -    our inability to obtain appropriate licenses from third parties,
          protect our trade secrets, operate without infringing upon the
          proprietary rights of others, or prevent others from infringing on our
          proprietary rights;

     -    our inability to retain key employees;

     -    our inability to obtain sufficient financing to continue to expand
          operations; and

     -    changes in demand for products by our customers.

Certain of these factors are discussed in more detail elsewhere in this report,
including under the caption "Risk Factors; Factors That May Affect Operating
Results".


                                       21
<PAGE>
We do not undertake any obligation to publicly update or revise any
forward-looking statements contained in this Report or incorporated by
reference, whether as a result of new information, future events or otherwise.
Because of these risks and uncertainties, the forward-looking events and
circumstances discussed in this Report might not transpire.

OVERVIEW

Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") should be read in conjunction with the consolidated
financial statements included herein.  In addition, you are urged to read this
report in conjunction with the risk factors described herein.  The discussion of
financial condition includes changes taking place or believed to be taking place
in connection with: our execution of our new, unified communications and unified
information hosted business model; the software, voice processing, data
processing and communications industry in general and how we expect these
changes to influence future results of operations; and liquidity and capital
resources, including discussions of capital financing activities and
uncertainties that could affect future results.

We are a software applications and services company that is transitioning our
business model to specialize in unified communications and unified information
(UC/UI) solutions.  We are transitioning our business model to provide our
hosted, IP-based unified communications and unified information portal and
applications branded under the name "inUnison-TM-" in an ASP recurring revenue
model.

Our inUnison-TM- portal and applications incorporate or will incorporate both
our proprietary UC/UI applications including, but not limited to, our own speech
recognition technologies, data mining, data analysis, navigation, web
collaboration, recommendation engines, web phone, and client relationship
management ("CRM") applications, as well as various third party applications.
Our inUnison-TM- portal serves as a single means of accessing information from
multiple sources.

Our inUnison-TM- portal is an open system incorporating or integrating third
party applications and programs.  Our customers offer their subscribers inUnison
applications in a web-based portal that can be custom-branded for each customer.

We are offering our inUnison-TM- UC/UI applications in a hosted, recurring
service-based revenue model to targeted markets and industry segments.  Our goal
is to be the "service provider's service provider", offering our inUnison-TM-
applications in a resale model where we will price our applications separately
and/or in packages to our service provider customers for resale to their
subscribers.  We also enter into revenue sharing arrangements with certain
customers where we will share revenues from our applications and, in some cases,
minutes from outbound calls made from and in-bound calls made to the portal.  In
the future we also plan to license our proprietary technology or portions of it
to third parties.  We intend to develop continuously new applications and to
integrate third party applications into our portal.  Our customers will be able
to offer these applications in a portal that we maintain, but which can be
custom-branded.


                                       22
<PAGE>
Our consolidated financial statements include our results as well as the results
of our significant operating subsidiaries: NHancement Technologies North
America, Inc. ("APPIANT NA"), Infotel Technologies (Pte) Ltd ("Infotel"), and
Nhancement Acquisition Corp. (formerly, Trimark Incorporated, "Trimark"). The
legacy business of Trimark were discontinued and Enhancement India call center
business was sold, these businesses are not expected to have a materially
adverse effect on the Company's financial condition. On February 5, 2001,
Appiant acquired certain assets of Quaartz, Inc., the results of the operations
of Quaartz from February 1, 2001 to September 30, 2001 are included in our
consolidated financial statements.

For our legacy operations, the Company derives its revenue primarily from its
APPIANT NA and Infotel. Generally, revenue derived from APPIANT NA relates to
the distribution and integration of voice processing and multimedia messaging
equipment manufactured by others and maintenance services. The revenue derived
from Infotel primarily relates to the distribution and integration of
telecommunications and other electronic products and providing services
primarily for radar system integration, turnkey project management and test
instrumentation. Equipment sales and related integration services revenue is
recognized upon acceptance and delivery if a signed contract exists, the fee is
fixed or determinable, collection of the resulting receivable is reasonably
assured, and product returns are reasonably estimable. Provisions for estimated
warranty costs and returns are made when the related revenue is recognized.
Revenue from maintenance services related to ongoing customer support is
recognized ratably over the period of the maintenance contact. Maintenance
service fees are generally received in advance and are non-refundable. Service
revenue is recognized as the related services are performed. Revenues from
projects undertaken for customers under fixed price contracts are recognized
under the percentage-of-completion method of accounting for which the estimated
revenue is based on the ratio of cost incurred to costs incurred plus estimated
costs to complete. When the Company's current estimates of total contract
revenue and cost indicate a loss, the Company records a provision for estimated
loss on the contract.

While we have been and are in the process of launching our new, hosted unified
communications and unified information applications business model, our results
for fiscal year ended September 30, 2001 reflect generally the results of our
legacy business in North America, as well as that of Infotel. Our revenues for
fiscal year 2001 were derived solely from our legacy businesses. Revenues
related to our offering of the inUnison-TM- UC/UI applications in a hosted,
recurring ASP revenue model are expected to begin in the first fiscal quarter of
2002.  Management believes that future revenues from legacy voicemail systems
will steadily decline due to the introduction of inUnison-TM-.  Due to economic
conditions and as a result of discontinued operations, we have decreased
significantly our headcount in the United States and India (sales, sales
engineering, operations, and engineering).

Currently our new business model for providing unified communications and
unified information in a hosted, recurring revenue service model makes us one of
the first companies in this new market. We anticipate competition in this
relatively new market space to increase significantly. We will continue to
invest heavily in software development and in the operations personnel necessary
to deploy and operate our applications to provide our customers with carrier
grade or "99.95%" reliability.


                                       23
<PAGE>
In fiscal year 2001, we entered into a number of financing transactions designed
to provide us with funding for our new, hosted unified communications and
unified information business model. We successfully closed on a $5.1 million
convertible debenture offering and $0.5 million in non-convertible debentures
with warrants.

We continued to invest heavily in research and development, and acquired various
technologies. We acquired certain assets of Quaartz, Inc. With the Quaartz
acquisition, we acquired the intellectual property related to the calendar
applications that we have incorporated into our inUnison-TM- portal.

RESULTS OF OPERATIONS

Management's discussions address audited financial data for the years ended
September 30, 2001, 2000 and 1999.

The following table shows audited results of operations, as a percentage of net
sales, for the fiscal years ended September 30,  2001, 2000 and 1999:

<TABLE>
<CAPTION>
                   APPIANT TECHNOLOGIES INC. AND SUBSIDIARIES

                                          Years Ended September 30,
     -----------------------------------  -------------------------
                                            2001     2000     1999
     -----------------------------------  --------  -------  ------
<S>                                  <C>       <C>      <C>
     Net Sales                              100.0%   100.0%  100.0%
     Cost of Sales                           80.7%    72.4%   67.7%
     Gross Profit                            19.3%    27.6%   32.3%
     Restructuring, selling, general and
     administrative expenses                 90.0%    64.8%   32.6%
     Impairment loss                         17.0%      --%     --%
     Amortization of goodwill                 9.0%     2.6%    1.9%
     Loss from operations                  (96.7)%  (39.9)%  (2.2)%
     Other expenses                          39.6%     9.4%  (0.7)%
     Income Loss before taxes             (136.3)%  (49.3)%  (2.9%)
     Income tax                               1.3%     1.0%    0.2%
     Net loss                             (137.6)%  (50.3)%  (3.1)%
     -----------------------------------  --------  -------  ------
</TABLE>


Net Revenues

For the fiscal year ended September 30, 2001, our net revenues were $21.7
million as compared to $25.5 million for the same period ending September 30,
2000 and $23.3 million for the same period in 1999, representing a decrease of
$3.8 million or 14.9% compared to fiscal 2000 and $1.6 million or a 6.9%
decrease for the same period in 1999. Our net revenues for fiscal year 2001 were
adversely affected by the transition to our new business model of providing
unified communications and unified information applications in our inUnison-TM-
portal in a hosted service, recurring revenue model. The decline also represents
a decline in our legacy revenues in North America occurring mainly because
customers have delayed additional purchases of legacy systems in anticipation of
the new inUnison product and a decision by management to de-emphasis several
legacy products such as call centers and proprietary voice messaging products.

On a full year basis, APPIANT NA's net revenues were $8.7 million for the fiscal
year ended September 30, 2001 as compared to $13.2 million for the period ending
September 30, 2000 and $13.7 million for the same period in 1999. The 2001
year-to-date decrease in APPIANT NA net revenues came from reduced enterprise
information center products which were discontinued, as well as lower legacy
system sales within our existing customer base.


                                       24
<PAGE>
Net revenues for our Infotel subsidiary were $13.1 million for the fiscal year
ended September 30, 2001 as compared to $11.6 million for our fiscal year ended
September 30, 2000 and $9.7 million for the same period in 1999. The increase in
such net revenues in fiscal year 2001 occurred within the test instruments
segment due to high demand from key customers partially offset by a shortfall in
radio system sales.

Our legacy business backlog decreased to $5.5 million at September 30, 2001 as
compared to $9.5 million as of September 30, 2000 and $7.5 million or 36.4% for
the same period in 1999. APPIANT NA's order backlog increased to $1.0 million
from $2.9 million at September 30, 2000 and from $2.4 million at September 30,
1999.  Infotel's backlog decreased at September 30, 2001 to $2.3 million from
$6.6 million at September 30, 2000 and from $2.1 million at September 30, 1999.
Initial orders for our new inUnison product total approximately $2.2 million as
of September 30, 20001.

Gross Margin

Our gross margin for fiscal year 2001 was $4.2 million or 19.3% of net revenues,
as compared to $7.1 million or 27.6% for fiscal year 2000 and $7.5 million or
32.3% for the same period in 1999. The decrease principally relates to
substantial reductions in our legacy business revenues, coupled with the fixed
nature of operating costs in our APPIANT NA operation associated with the
preparation to deliver inUnison services to begin in the first quarter of fiscal
2002.  APPIANT NA's gross margin on a stand-alone basis for the fiscal year 2001
was $1.0 million or 8.0%, as compared to $3.0 million or 23.0% for the fiscal
year ended September 30, 2000 and $5.1 million or 37.3% for the same period in
1999.  The decrease in gross margin in APPIANT NA was due to reduced revenue
levels and the cost of operations that are part of cost of preparing for the
delivery of inUnison services.  Infotel's gross margin percentage on a
stand-alone basis declined from 27.4% for the fiscal year ended September 30,
2000 to 24.8% for the fiscal year ended September 30, 2001. This decrease in
Infotel's gross margin percentage is due to general slow down in the Singapore
economy especially in the second half of the fiscal year.

Research and Development

Our industry is characterized by rapid technological change and product
innovation. Our early "beta" customers have also requested numerous changes to
our original product release and management expects new customers will also
request product changes and innovations.  We believe that continued timely
development of products for both existing and new markets is necessary to remain
competitive. Therefore, we devote significant resources to programs directed at
developing new and enhanced products, as well as new applications for existing
products. Our capitalized research and development expenditures increased by
$7.6 million in fiscal year 2001, reflecting our continued investment in
research and development. We did not have significant research and development
expenditures in 1998. We have adopted AICPA Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed and Obtained for
Internal Use," ("SOP 98-1") and capitalize our research and development costs
related to software development, and we will begin amortizing these costs when
the capitalized software is substantially complete and ready for its intended
use.


                                       25
<PAGE>
Selling, General and Administrative Expenses

Our selling, general and administrative expenses ("SG&A"), including goodwill
amortization, restructuring charge, impairment loss, and non-cash charges
related to options and warrants, as a percentage of net sales increased to
102.5% of net revenues for the fiscal year ended September 30, 2001, as compared
to 67.5% for fiscal year 2000 and 34.5% for fiscal year 1999. This increase is
due to the addition of the reduction in revenues in APPIANT NA as we accelerated
our transition to our new business model, one-time non-cash expenses including,
$3.7 million of impairment costs, and additional amortization charges of $1.3
million associated with acquisitions. SG&A for APPIANT NA on a stand-alone basis
increased to $14.0 million or 160.9% for fiscal year 2001 from $6.0 million or
23.7% in fiscal year 2000 and $5.5 million or 23.7% in fiscal year 1999.
Appiant NA's SG&A expenses increased as a percentage of revenues mainly because
of the significant decrease in Appiant NA's revenues during fiscal year 2001 and
expenditures in Sales and Marketing related to the new product.  On a
stand-alone basis, Infotel's SG&A as a percentage of revenues decreased to 19.4%
for fiscal year 2001 from 25.7% for fiscal year 2000 and 16.5% in fiscal year
1999. Infotel's SG&A expenses decreased as a percentage of revenues mainly
because of the increase in Infotel's revenues during fiscal year 2001 and cost
controls implemented, which resulted in a decrease in headcount within the
Singapore operation.

In fiscal year 2001, we incurred non-cash compensation benefit of $1.7 million
related to net exercise warrants issued to members of our Board of Directors and
various other parties.

Interest and Other Income, Net

Our net interest expense increased to $8.6 million or 39.4% in fiscal year 2001
from $2.3 million or 9.0% in fiscal year 2000 and from $0.4 million during
fiscal 1999. The increase in net interest expense in fiscal year 2001 results
primarily from non-cash charges related to a beneficial conversion feature
associated with debentures that we issued in fiscal years 2000 and 2001.

Income taxes

We currently have approximately $41.6 million in US federal net operating loss
carry-forwards. The use of approximately 8 million of these net-operating losses
are subject to an annual limitation of $250,000. At September 30, 2001, we
provided a 100% valuation allowance against our deferred tax asset. We believe
that since sufficient uncertainty exists regarding the realization of the
deferred tax asset, a full valuation allowance is required. Income tax of
$280,000 relates to accrued income tax liabilities for Infotel, our subsidiary
in Singapore.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, we have financed our capital requirements through a combination
of sales of equity securities, convertible and other debt offerings, bank
borrowings, asset-based secured financings, structured financing and cash
generated from operations.

During our fiscal year ended September 30, 2001 net cash used in operating
activities was $11.5 million. Although we incurred a loss of $30.0 million for
the fiscal year, $12.2 million of this loss was attributed to various non-cash
charges. Further, our loss was offset by substantial decreases in accounts
receivables and inventory and substantial increases in accounts payable and
other current liabilities. Net cash provided by investing and financing
activities totaled $9.3 million consisting of proceeds from issuance of
convertible debentures, common stock, notes and warrants exercised which were
offset by the repayments of our line of credit, payments on capital lease
obligations and purchases of software, property and equipment.


                                       26
<PAGE>
During our fiscal year ended September 30, 2000 net cash used in operating
activities was $3.5 million. Although we incurred a loss of $12.8 million for
the fiscal year, $7.1 million of this loss was attributed to various non-cash
charges. Further, our loss was offset by a substantial decrease in accounts
receivables. Net cash provided by investing and financing activities totaled
$6.9 million consisting of proceeds from issuance of convertible debentures,
which were offset by the down payment of $2.0 million towards the purchase of
the Cisco software, the repayments of our line of credit, repurchase of our
common stock from former owners of Infotel, and purchases of software, property
and equipment.

Our principal sources of liquidity at September 30, 2001 were as follows:

On June 8, 2001, the Company raised working capital of approximately $2.6
million in a Series B Preferred Stock financing and issued ten warrants to
purchase up to an aggregate of 1,065,152 shares of common stock to ten
investors, including the placement agent, in transactions exempt from
registration under Section 4(2). The warrants are immediately exercisable and
may be exercised until June 8, 2006. The exercise price per share of these
warrants is $2.64.

On December 7, 2001, we have a memorandum of understanding with a large
supplier, who agreed to accept as the forgiveness of approximately $4.5 million
in debt, the payments previously made from Appiant to them as payment in full
and final settlement of any obligations from Appiant.

On March 21, 2001, the Company raised $2.5 million in convertible debentures and
warrants with L. Thomas Baldwin III.  Additionally on various dates the Company
raised an additional $500,000 of non-convertible debentures with warrants from
management and other related parties.

On August 15, 2001, Appiant Technologies, Inc. ("Appiant") executed a Settlement
Agreement and Release, ("Settlement Agreement") effective as of July 27, 2001,
with Cisco Systems, Inc. ("Cisco") and Cisco Systems Capital ("Cisco Capital").
The Settlement Agreement provides that Cisco Capital will convert Appiant's down
payment of Three Million Dollars ($3,000,000) into a software license fee for
"Paid Up" uOne licenses.  In addition, Cisco Capital forgave approximately Seven
Million Dollars ($7,000,000) for the remaining sums owed for the Lease Licenses.
Under the terms of the Settlement Agreement, Appiant may use the Paid Up
licenses and Cisco will maintain its support for nine months (the "Transition
Period") while Appiant evaluates its options of transitioning to the vendor that
purchased the UCSBU or pursuing other opportunities. Cisco also loaned Appiant
Three Million Dollars ($3,000,000) (the "Cisco Loan") for use during the
Transition Period.  On or before the end of the Transition Period, Appiant may
elect to continue using the Paid Up licenses and repay the Cisco Loan, or return
the Paid Up licenses, in which case, the Cisco Loan will be deemed to have been
paid in full and completely discharged.


                                       27
<PAGE>
Despite our substantial negative working capital at September 30, 2001, we
believe that our anticipated cash flows from both operations and available to us
through secured financing are sufficient coupled with substantial debt
forgiveness from vendors and the expected conversion of a significant portion of
current debt will allow us to meet our operating and capital requirements for at
least the next 12 months. Our capital requirements in the next 12 months will
mainly result from hardware and software purchases and professional services
pertaining to our hosted services. We anticipate financing these capital
requirements through structured financing from our vendors and partners, equity
and debt offerings, and cash generated from operations. We could be required, or
could elect, to raise additional funds during that period, and we may need to
raise additional capital in the future. Additional capital may not be available
at all, or may only be available on terms unfavorable to us. Any additional
issuance of equity or equity-related securities will be dilutive to our
stockholders.

RISK FACTORS; FACTORS THAT MAY AFFECT OPERATING RESULTS

The following risk factors may cause actual results to differ materially from
those in any forward-looking statements contained in the MD&A or elsewhere in
this report or made in the future by us or our representatives. Such
forward-looking statements involve known risks, unknown risks and uncertainties
and other factors which may cause the actual results, performance or
achievements expressed or implied by such forward-looking statements to differ
significantly from such forward-looking statements.

WE HAVE CURRENTLY RECORDED A NET LOSS, WE HAVE A HISTORY OF NET LOSSES AND WE
CANNOT BE CERTAIN OF FUTURE PROFITABILITY.

We recorded a net loss of $29.9 million on net revenues of $21.7 million for our
fiscal year ended September 30, 2001. We also sustained significant losses for
the fiscal years ended September 30, 1999 and 2000. Although we anticipate a net
operating profit for our fiscal year ended September 30, 2002, operating losses
in the first quarters could occur.

We anticipate continuing to incur significant sales and marketing, product
development and general and administrative expenses and, as a result, we will
need to generate significantly higher revenue to sustain profitability as we
build our organization for our new inUnison-TM- business model. In addition, we
anticipate beginning amortizing capitalized software and other assets that we
have purchased or developed for our new inUnison-TM- business model in our
fiscal year 2002. We cannot be certain that we will continue to realize
sufficient revenue to return to or sustain profitability.

Our financial condition and results of operations may be adversely affected if
we fail to produce positive operating results. This could also:


     -    adversely affect the future value of our common stock;

     -    adversely affect our ability to obtain debt or equity financing on
          acceptable terms to finance our operations; and

     -    prevent us from engaging in acquisition activity.


                                       28
<PAGE>
OUR EQUITY AND DEBT FUNDING SOURCES MAY BE INADEQUATE TO FINANCE FUTURE
ACQUISITIONS.

The acquisition of complementary businesses, technologies and products has been
and may continue to be key to our business strategy. Our ability to engage in
acquisition activities depends on us obtaining debt or equity financing, neither
of which may be available or, if available, may not be on terms acceptable to
us. Our inability to obtain this financing may prevent us from executing
successfully our acquisition strategy.

Further, both debt and equity financing involve risks. Debt financing may
require us to pay significant amounts of interest and principal payments,
reducing our cash resources we need to expand or transform our existing
businesses. Equity financing may be dilutive to our stockholders' interest in
our assets and earnings.

A NUMBER OF FACTORS COULD CAUSE OUR FINANCIAL RESULTS TO BE WORSE THAN EXPECTED,
RESULTING IN A DECLINE IN OUR STOCK PRICE.

We plan to increase significantly our operating expenses to expand our sales and
marketing activities, broaden our customer support capabilities, develop new
distribution channels, fund increased levels of research and development, and
build our operational infrastructure. We base our operating expenses on
anticipated revenue trends and a high percentage of our expenses are fixed in
the short term. As a result, any delay in generating or recognizing revenue
could cause our quarterly operating results to be below the expectations of
public market analysts or investors, if any, which could cause the price of our
common stock to fall further.

We may experience a delay in generating or recognizing revenue because of a
number of reasons. We may experience delays in completing our production
environment for our new hosted inUnison-TM- unified communications and unified
information business. We are dependent on our business partners and vendors to
supply us with hardware, software, consulting services, hosting, and other
support to launch and operate our new business.

Our quarterly revenue and operating results have varied significantly in the
past and may vary significantly in the future due to a number of factors,
including:

     -    Fluctuations in demand for our products and services;

     -    Unexpected product returns or the cancellation or rescheduling of
          significant orders;

     -    Our ability to develop, introduce, ship and support new products and
          product enhancements, and to project manage orders and installations;

     -    Announcement and new product introductions by our competitors;

     -    Our ability to develop and support customer relationships with service
          providers and other potential large customers;

     -    Our ability to achieve required cost reductions;

     -    Our ability to obtain sufficient supplies of sole or limited sourced
          third party products;


                                       29
<PAGE>
     -    Unfavorable changes in the prices of the products and components we
          purchase;

     -    Our ability to attain and maintain production volumes and quality
          levels for our products;

     -    Our ability to retain key employees;

     -    The mix of products and services sold;

     -    Costs relating to possible acquisitions and integration of
          technologies or businesses; and

     -    The effect of amortization of goodwill and purchased intangibles
          resulting from existing or future acquisitions.

Due to the foregoing factors, we believe that period-to-period comparisons of
our operating results should not be relied upon as an indicator of our future
performance.


OUR NEW PRODUCTS AND STRATEGIC PARTNERING RELATIONSHIPS MAY NOT BE SUCCESSFUL.

We have launched our inUnison-TM- UC/UI product applications that are designed
to provide our customers with hosted unifying communications and unifying
information solutions. While we believe that our inUnison-TM- applications will
provide our customers with scaled, carrier grade IP-based solutions, we cannot
assure you that our customers will accept or adopt them on a large scale. Our
integration efforts with other third party software has and could continue to
result in product delays and cost overruns. We cannot assure you that other
software vendors whose software products we license or incorporate into our
inUnison-TM- portal will continue to support their products. If these vendors
discontinue their support, our business would be adversely affected.

Further, we expect to continue incur substantial expenditures for equipment,
systems, research and development, consultants and personnel to implement this
new business model. As a result, our operating results and cash flows may be
adversely affected. Although we anticipate a net operating profit for our fiscal
year ended September 30, 2002, significant working capital will be needed by the
Company to meet its business plan. Although we believe that this new product
offering will ultimately result in profitable operations, there can be no
assurance that the implementation of our new business model will be successful.

CONTINUED RAPID GROWTH WILL STRAIN OUR OPERATIONS AND REQUIRE US TO INCUR COSTS
TO UPGRADE OUR INFRASTRUCTURE.

With the development and launch of our new hosted inUnison-TM- business model,
we expect to experience periods of rapid growth can place, significant strain on
our resources.  Unless we manage this growth effectively, we may make mistakes
in operating our business such as inaccurate sales forecasting, incorrect
production planning, managing headcount, or inaccurate financial reporting,
either or all of which may result in unanticipated fluctuations in our operating
results and adverse cash flow and financing requirements. We expect our
anticipated growth and expansion to strain our management, operational and
financial resources. Our management team has had limited experience managing
such rapidly growing companies on a public or private basis. To accommodate this
anticipated growth, we will be required among other things to:


                                       30
<PAGE>
     -    Improve existing and implement new operations, information and
          financial systems, procedures and controls;

     -    Recruit, train, manage, and retain additional qualified personnel
          including sales, marketing, research and development personnel;

     -    Manage multiple relationships with our customers, our customers'
          customers, our strategic partners, suppliers and other third parties;
          and

     -    Acquire additional office space and remote offices in numerous
          locations within and without the United States that will require space
          planning and infrastructure to support these additional locations.

We may not be able to install adequate control systems in an efficient and
timely manner, and our current or planned financial, operational and personnel
systems, procedures and controls may not be adequate to support our future
operations. We will need to install various new management information system
tools, processes and procedures, continue to modify and improve our existing
information technology infrastructure, and invest in training our people to meet
the increasing needs associated with our growth. The difficulties associated
with installing and implementing these new systems, procedures and controls may
place a significant burden on our management and our internal resources. In
addition, as we grow internationally, we will have to expand our worldwide
operations and enhance our communications infrastructure. Any delay in the
implementation of such new or enhanced systems, procedures or controls, or any
disruption in the transition to such new or enhanced systems, procedures or
controls, could adversely affect our ability to accurately forecast sales
demand, manage our hosted applications, and record and report financial and
management information on a timely and accurate basis.

THE UC/UI MARKET IS YOUNG AND UNTESTED. WE HAVE NOT COMMENCED PROVIDING UC/UI
SERVICES IN A HOSTED SERVICE MODEL TO OUR CUSTOMERS UNDER OUR NEW BUSINESS
MODEL.

The UC/UI market is in its infancy, and indeed we are one of the first companies
in unified information. Despite very positive and upbeat forecasts by a number
of leading industry analysts of the market potential for unified communications
and unified information applications, we have not yet commenced providing our
applications to our customers in a hosted service model. There is no assurance
that our UC/UI applications will be adopted or, if adopted, that they will be
successful in the marketplace. There is no assurance that our business model of
offering our applications in a hosted, recurring revenue model will be
successful. We are implementing a new business plan, and to the extent that we
fail to execute it successfully, compete with new entrants to this market space,
or otherwise are unable to build the complex network infrastructure necessary to
provide such services to our customers, our results and cash flows will be
negatively impacted and we could face serious needs for additional financing.


                                       31
<PAGE>
WE PRESENTLY RELY UPON LEGACY VOICEMAIL SYSTEMS AND ENTERPRISE INFORMATION
REVENUES.

For our fiscal year ended September 30, 2001, legacy voicemail systems revenues
(which includes customer premises equipment revenues) accounted for
approximately 14.6% of Company's total revenues and 36.6% of our North American
revenues. Revenue from the sales of enterprise information and call center
products accounted for approximately 63.3% of our North America revenue for the
fiscal year ended September 30, 2001. The projected decline in our legacy
business will have an adverse effect on our revenues and financial performance.
Management believes that future revenues from legacy voicemail systems will
steadily decline due to the introduction of inUnison-TM-. The Company
discontinued its enterprise information and call center products during fiscal
year 2001.   Our ability to transition our product sales to our UC/UI hosted,
recurring revenue model will be critical to our future growth.

THE SALES CYCLE FOR OUR NEW HOSTED APPLICATIONS MAY BE LONG, AND WE MAY INCUR
SUBSTANTIAL NON-RECOVERABLE EXPENSES OR DEVOTE SIGNIFICANT RESOURCES TO SALES
THAT DO NOT OCCUR OR OCCUR WHEN ANTICIPATED.

Although, we have several thousand subscribers on our hosted inUnison service,
the timing of significant recurring revenues from our hosted inUnison-TM-
unified communications and unified information applications is difficult to
predict because the unified communications and unified information market is
relatively new. Our success will depend in large measure on market demand and
acceptance of these applications and technologies, our ability to create a brand
for our applications and technologies, our ability to target and sell customers
and to drive demand for our applications to their customers, our ability to
develop pricing models and to set pricing for our applications, and our ability
to build market share. We plan initially to provide our hosted applications to
service providers such as wireless service providers (WSPs), internet service
providers (ISPs), application service providers (ASPs) and competitive local
exchange carriers (CLECs). We will need to create sales tools, service provider
subscriber use models, methodologies and programs to work with our service
provider customers to help devise cooperative advertising and sales campaigns to
market and sell our inUnison-TM- applications to their customer. The sales
process and sale cycle may vary substantially from customer to customer, and our
ability to forecast accurately the sale opportunity for any customer, or to
drive adoption of our inUnison-TM- applications in our customers' subscribers
may be limited. There is no assurance that we will be successful in selling our
applications or achieving targeted subscriber adoption, and our operating and
cash flow requirements will be negatively impacted should we fail to achieve our
targets within the time frames that we forecast.

Our customers may require various testing and test markets of our hosted
applications before they decide to contract with us to provide our hosted
inUnison-TM- applications to their subscribers. We may incur substantial sales
and marketing and operational expenses and expend significant management effort
to carry out these tests. Consequently, if sales forecasted from a specific
customer for a particular quarter are not realized within the time frames that
we have forecasted, we may be unable to compensate for the shortfall, which
could harm our operating and cash flow results.


                                       32
<PAGE>
WE RELY UPON OUR DISTRIBUTOR AND SUPPLIER RELATIONSHIPS.

Our current North American legacy operations depend upon the integration of
hardware, software, and communications and data processing equipment
manufactured by others into systems designed to meet the needs of our customers.
Although we have agreements with a number of equipment manufacturers, a major
portion of our revenues has been generated from the sale of products
manufactured by three companies. We rely significantly on products manufactured
and services provided by ADC Telecommunications, Inc. (formerly Centigram
Communications Corporation), Baypoint Innovations, a division of Mitel, Inc.,
and Interactive Intelligence, Inc. Any disruption in our relationships with
these suppliers would have a significant adverse effect on our business for an
indeterminate period of time until new supplier relationships could be
established.

Some of our current suppliers may currently or, at some point, compete with us
as we roll out our inUnison-TM- UC/UI applications. Any potential competition
from our suppliers could have a material negative impact on our business and
financial performance.

WE ARE DEPENDENT UPON SIGNIFICANT CUSTOMERS.

We have serviced approximately 1,000 customers worldwide. However, the revenues
from our five largest customers accounted for approximately 9.4%, 9.3%, 7.0%,
5.5% and 5.2% of total revenues during our fiscal year ended September 30, 2001.
No other customer accounted for over 5% of total revenues during this period.
This concentration of revenue has resulted in additional risk to our operations,
and any disruption of orders from our largest customers would adversely affect
on our results of operations and financial condition.

Our Singapore subsidiary, Infotel Technologies (Pte) Ltd., offers a wide range
of infrastructure communications equipment products. It has an established
business providing test measuring instrumentation and testing environments, and
is the regional distributor and test and repair center for Rohde & Schwarz test
instruments. Infotel is also a networking service provider, and manages data
networks for various customers. Infotel's financial performance depends in part
on a steady stream of revenues relating to the services performed for Rohde &
Schwarz test instruments. Infotel's revenues constituted approximately 60.4% of
our total revenues for the fiscal year ended September 30, 2001. Any material
change in our relationship with our manufacturers, including but not limited to
Rohde & Schwarz, would materially adversely affect our results of operations and
financial condition.

OUR MARKET IS HIGHLY COMPETITIVE, AND IF WE DO NOT COMPETE EFFECTIVELY, WE MAY
SUFFER PRICE REDUCTIONS, REDUCED GROSS MARGINS AND LOSS OF MARKET SHARE.

The markets for our legacy voice processing and enterprise information software
businesses are highly competitive, and competition in this industry is expected
to further intensify with the introduction of new product enhancements and new
competitors. With such competition may come more aggressive pricing and reduced
margins. We currently compete with a number of larger integrated companies that
provide competitive voice-processing products and services as subsets of larger
product offerings. Our existing and potential competitors include many large
domestic and international companies that have better name and product
recognition in the market for our products and services and related software, a
larger installed base of customers, and substantially greater financial,
marketing and technical resources than ourselves.


                                       33
<PAGE>
With the launch of our inUnison-TM- UC/UI hosted applications, we anticipate a
decline in our legacy business revenues and related gross margins as we focus on
our UC/UI business. Any delays in the anticipated launch of our inUnison-TM-
business plan, coupled with a decline in our legacy business, would have a
significant adverse impact on our financial performance and financing
requirements.

Infotel competes against several large companies in Singapore that are better
capitalized. Although Infotel has in the past managed to compete successfully
against these larger companies on the basis of its engineering, systems and
product management expertise, no assurances can be given that this expertise
will allow Infotel to compete effectively with these larger companies in the
future. Further, various large manufacturers headquartered outside of Singapore
have established their own branch offices in Singapore and also compete with
Infotel.

WE RELY HEAVILY ON OUR STRATEGIC PARTNERS IN OUR NEW BUSINESS MODEL, AND WITHOUT
SUPPORT FROM OUR PARTNERS OUR BUSINESS COULD SUFFER.

We have built significant, valuable strategic partnering relationships with a
number of partners including Cisco Systems, and these partnering relationships
are important to our success. In the case of CISCO, they have committed to
introducing customers to us. Hewlett-Packard also was an important strategic
partner that was to assist us in designing, implementing and operating our
backend solution to provide our UC/UI applications in a hosted, carrier grade
environment. Hewlett-Packard was to provide consulting services in the design,
build out and operation of our backend architecture. We were to host our
applications in their data centers and to provide various levels of customer
support.  The deterioration of our relationships with Hewlett-Packard during
fiscal 2001 had a material adverse affect on our UC/UI business and financial
performance. While we believe that our partnering relationships with CISCO and
other third parties are strong, we cannot assure you that these relationships
will continue or that they will have a positive impact on our success.

OUR REVENUES WILL LIKELY DECLINE IF WE DO NOT DEVELOP AND INTEGRATE THE
COMPANIES WE ACQUIRE.

We have in the past pursued, and may continue to pursue, acquisition
opportunities. Acquisitions involve a number of special risks, including, but
not limited to:

     -    adverse short-term effects on our operating results;

     -    the disruption of our ongoing business;

     -    the risk of reduced management attention to existing operations;

     -    our dependence on the retention, hiring and training of key personnel
          and the potential risk of loss of such personnel;

     -    our potential inability to integrate successfully the personnel,
          operations, technology and products of acquired companies;


                                       34
<PAGE>
     -    unanticipated problems or unknown legal liabilities; and

     -    adverse tax or financial consequences.

Two of our prior acquisitions, namely the acquisition of Voice Plus (now known
as Appiant Technologies North America, Inc.) and Advantis Network & Systems Sdn
Bhd, a Malaysian company, in the past yielded operating results that were
significantly lower than expected. In fact, the poor performance of Advantis led
to its divestiture less than one year after we acquired the company.

The legacy business of Triad Marketing has declined as we have focused the
people and technologies of the Triad business on our new inUnison-TM- UC/UI
business and we discontinued its legacy operations.

Accordingly, no assurances can be given that the future performance of our
subsidiaries will be commensurate with the consideration paid to acquire these
companies. If we fail to establish the needed controls to manage growth
effectively, our operating results, cash flows and overall financial condition
will be adversely affected.

OUR INTERNATIONAL OPERATIONS INVOLVE RISKS THAT MAY ADVERSELY AFFECT OUR
OPERATING RESULTS.

Infotel, our Singapore subsidiary, accounted for approximately 60.4% of our
revenues for the fiscal year ended September 30, 2001, and approximately 45.2%
of our revenues for the fiscal year ended September 30, 2000. There are risks
associated with our international operations, including, but not limited to:

     -    our dependence on members of management of Infotel and the risk of
          loss of customers in the event of the departure of key personnel;

     -    unexpected changes in or impositions of legislative or regulatory
          requirements;

     -    potentially adverse taxes and tax consequences;

     -    the burdens of complying with a variety of foreign laws;

     -    political, social and economic instability;

     -    changes in diplomatic and trade relationships; and

     -    foreign exchange and translation risks.

Any one or more of these factors could negatively affect the performance of
Infotel and result in a material adverse change in our business, results of
operations and financial condition.

We anticipate that the market for our inUnison-TM- UC/UI business is global. We
anticipate that we will be expanding our business operations for our UC/UI
applications outside the United States, and project that we will launch our
UC/UI business in Asia from our existing Singapore operations in the second
quarter of our fiscal year 2002. However, we do not yet have established
operations for our UC/UI applications outside of the United States, and our
business could suffer material adverse results if we cannot build an
international organization to launch our UC/UI applications outside of the
United States in time to meet market demand or alternative solutions or
standards.


                                       35
<PAGE>
OUR STOCK PRICE COULD EXPERIENCE PRICE AND VOLUME FLUCTUATIONS.

The markets for securities such as our common stock historically have
experienced extreme price and volume fluctuations. Factors that may adversely
affect the market price of our common stock include, but are not limited to, the
following:

     -    new product developments and our ability to innovate, develop and
          deliver on schedule our inUnison-TM- UC/UI applications;

     -    technological and other changes in the voice-messaging, unified
          communications, and unified information;

     -    fluctuations in the financial markets;

     -    general economic conditions;

     -    competition; and

     -    quarterly variations in our results of operations.

OUR MANAGEMENT TEAM IS CRUCIAL TO OUR SUCCESS.

Our business depends heavily upon the services of its executives and certain key
personnel, including Douglas S. Zorn, our President and Chief Executive Officer.
Management changes often have a disruptive impact on businesses and can lead to
the loss of key employees because of the uncertainty inherent in change. Within
the last several years, we had significant changes in our key personnel. We
cannot be certain that we will be successful in attracting and retaining key
personnel worldwide - particularly in the Silicon Valley, greater San Francisco
Bay and San Diego areas where we operate - as the employment markets there are
intensely competitive. The loss of the services of any one or more of such key
personnel, if not replaced, or the inability to attract such key personnel,
could harm our business. While hiring efforts are underway to fill the vacancies
created by the departure of other key employees, there is no assurance that
these posts will be filled in the near future. The loss of these or other key
employees could have a material adverse impact on our operations. Furthermore,
the recent changes in management may not be adequate to sustain our
profitability or to meet our future growth targets.

FAILURE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS WILL HARM OUR
ABILITY TO COMPETE.

We have a number patents and copyrights, and while we are in the process of
filing for trademark and patent protection on selected product names,
technologies and processes which we have developed, we currently rely and have
relied on general common law and confidentiality and non-disclosure agreements
with our key employees to protect our trade secrets. We also have recently
applied for trademark protection for the names Appiant Technologies and
inUnison. Our success depends on our ability to protect our intellectual
property rights. Our efforts to protect our intellectual property may not be
sufficient against unauthorized third-party copying or use or the application of
reverse engineering, and existing laws afford only limited protection. In
addition, existing laws may change in a manner that adversely affects our
proprietary rights. Furthermore, policing the unauthorized use of our product is
difficult, and expensive litigation may be necessary in the future to enforce
our intellectual property rights.


                                       36
<PAGE>
OUR PRODUCTS COULD INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS,
RESULTING IN COSTLY LITIGATION AND THE LOSS OF SIGNIFICANT RIGHTS.

We may be subject to legal proceedings and claims for alleged infringement of
proprietary rights of others, particularly as the number of products and
competitors in our industry grow and functionalities of products overlap. This
risk may be higher in a new market in which a large number of patent
applications have been filed but are not yet publicly disclosed. We have limited
ability to determine which patents our products may infringe and to take
measures to avoid infringement. Any litigation could result in substantial costs
and diversion of management's attention and resources. Further, parties making
infringement claims against us may be able to obtain injunctive or other
equitable relief, which could prevent us from selling our products or require us
to enter into royalty or license agreements which are not advantageous to us.

IF WE FAIL TO ADEQUATELY RESPOND TO RAPID TECHNOLOGICAL CHANGES, OUR EXISTING
PRODUCTS WILL BECOME OBSOLETE OR UNMARKETABLE.

Advances in technology could render our products and applications obsolete and
unmarketable. We believe that to succeed we must enhance our existing software
products and underlying technologies, develop new products and technologies on a
timely basis, and satisfy the increasingly sophisticated requirements of our
customers. We may not respond successfully to technological change, evolving
industry standards or customer requirements. If we are unable to respond
adequately to these changes, our revenues could decline. In connection with the
introduction of new products and enhancements, we have in the past experienced
development delays and unfavorable development cost variances that are not
unusual in the software industry. To date, these delays have not had a material
impact on our revenues. If new releases or products are delayed or do not
achieve broad market acceptance, we could experience a delay or loss of revenues
and customer dissatisfaction.

IF OUR SOFTWARE CONTAINS DEFECTS, WE COULD LOSE CUSTOMERS AND REVENUES.

Software applications that are as complex as ours often contain unknown and
undetected errors or performance problems.  Many defects are frequently found
during the period immediately following the introduction of new software or
enhancements to existing software. Furthermore, software which we may license
from third parties for inclusion in our inUnison-TM- portal may also have
undetected errors or may require significant integration, testing or
re-engineering work to operate properly and as represented to our customers.
Although we attempt to resolve all errors that we believe would be considered
serious by our customers, both our software and any third party software that we
license may not be error-free.  Undetected errors or performance problems may be
discovered in the future, and errors that were considered minor by us may be
considered serious by our customers. This could result in lost revenues or
delays in customer acceptance, and would be detrimental to our reputation, which
could harm our business.


                                       37
<PAGE>
FLUCTUATIONS IN OPERATING RESULTS COULD CONTINUE IN THE FUTURE.

Our operating results may vary from period to period as a result of the length
of our sales cycle, purchasing patterns of potential customers, the timing of
the introduction of new products, software applications and product enhancements
by us and our competitors, technological factors, variations in sales by
distribution channels, timing of stocking orders by resellers, competitive
pricing, and generally nonrecurring system sales. For our legacy business, sales
order cycles range generally from one to twelve months, depending on the
customer, the type of solution being sold, and whether we will perform
installation, integration and customization services. The period from the
execution of a purchase order until delivery of system components to us,
assembly, configuration, testing and shipment, may range from approximately one
to several months. These factors may cause significant fluctuations in operating
results in the future. The sales order cycle for our inUnison-TM- UC/UI
applications in a hosted services model can only be projected at this time as we
are presently negotiating our first contracts with prospective customers. To the
extent that we do not sign up customers to our inUnison-TM- UC/UI applications
according to our plan, our financial performance and results from operations
could suffer.

WE NEED SIGNIFICANT CAPITAL TO OPERATE OUR BUSINESS AND MAY REQUIRE ADDITIONAL
FINANCING. IF WE CANNOT OBTAIN SUCH ADDITIONAL FINANCING, WE MAY NOT BE ABLE TO
CONTINUE OUR OPERATIONS.

We need significant capital to design, develop and commercialize our products.
Currently available funds may be insufficient to fund operations. We may be
required to seek additional financing sooner than currently anticipated or may
be required to curtail our activities. Based on our past financial performance,
coupled with our return to incurring operating losses with our transition to our
new business model, our ability to obtain conventional credit has been
substantially limited. Our ability to raise capital may also be limited or, if
available, be very costly and possibly dilutive to our shareholders.

CERTAIN PROVISIONS OF OUR CHARTER AND DELAWARE LAW MAY HAVE ANTI-TAKEOVER
EFFECTS.

The terms of our Certificate of Incorporation, as amended, and our ability to
issue up to 2,000,000 shares of "blank check" preferred stock may have the
effect of discouraging proposals by third parties to acquire a controlling
interest in us, which could deprive stockholders and of the opportunity to
consider an offer to acquire their shares at a premium. In addition, under
certain conditions, Section 203 of the Delaware General Corporate Law would
impose a three-year moratorium on certain business combinations between us and
an "interested stockholder" (in general, a stockholder owning 15% or more of our
outstanding voting stock). The existence of such provisions may have a
depressive effect on the market price of our common stock in certain situations.


                                       38
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We develop products in both the United States and Asia and market our products
in both of these markets. As a result, our financial results could be affected
by changes in foreign currency exchange rates or weak economic conditions in
foreign markets. Substantially all of our Appiant NA revenues are currently
denominated in U.S. dollars. Our Infotel subsidiary also purchases a significant
amount of goods from overseas suppliers. These purchase commitments are often
denominated in foreign currencies. We often use forward exchange contracts to
hedge these unrecognized firm purchase commitments although this also exposes us
to risk as a result of fluctuations in foreign currency exchange rates.  We do
not have any such exposure at September 30, 2001 but may continue to use these
instruments in the future. Our interest expense is sensitive to changes in the
general level of interest rates because some of our borrowings are subject to
interest rates that vary with the prime rate. Due to the nature of our
investments, we believe that there is not a material risk exposure.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The response to this item is included in Item 13 of this Form 10-K.


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE ISSUER

Directors and Executive Officers:

     Name                                 Title                Age
     ---------------------  ---------------------------------  ---
     Douglas S. Zorn        Chairman of the Board, Chief        52
                            Executive Officer and President
     L. Thomas Baldwin III  Director                            46
     Allen F. Jacobsen      Director                            75
     Robert J. Schmier      Director                            53
     N. Bruce Walko         Director                            61
     Ram V. Mani            Chief Technology Officer and        53
                            Director
     Ken G. Murray          Chief Operations Officer            45
     John R. Zavoli         Chief Financial Officer             42
     Richard G. Glover      Chief Marketing Officer             50
     Tom Ku                 Chief Technology & Marketing        41
                            Officer
     Joachim Zippel         Sr. Vice President, Engineering &   46
                            Operations
     Jim Gillespie          Exec. Vice President, Sales         49
     Sandra W. Smith        General Counsel and Corporate       38
                            Secretary


                                       39
<PAGE>
DOUGLAS S. ZORN. Mr. Zorn has been our Chairman of the Board, Chief Executive
Officer and President since May 2000. Mr. Zorn served as Executive Vice
President, Chief Financial Officer, Secretary and a Director of the Company
since our incorporation in October 1996 until May 2000. Mr. Zorn served as
Executive Vice President, Secretary and Treasurer, and Chief Financial and
Operating Officer of BioFactors, Inc. from December 1993 until February 1997 and
as a Director from June 1994 until February 1997.

L. THOMAS BALDWIN III. Mr. Baldwin has been a Director of the Company since
December 2000. Mr. Baldwin is a prominent bond trader and investor. For more
than the past five years, he has been Chairman of Baldwin Group Ltd., a parent
company of various investment and financial services businesses. He has been a
member of the Chicago Board of Trade, serving on its Executive Committee; as
Chairman of the Advisory Subcommittee of the CPO/CTA Committee; and as Chairman
of the Regulatory Compliance Subcommittee for Reg. 320.15 and 320.16 of the
Exchange Relations Group. Mr. Baldwin also served as Vice Chairman of the T-Bond
Pit Committee.

ALLEN F. JACOBSON. Mr. Jacobson has been a Director of our Company since August
2000. Mr. Jacobson is a former Chairman and Chief Executive Officer of 3M
Corporation, where he had a distinguished career that spanned over 40 years. Mr.
Jacobson has also served on the board of directors of Mobil Corporation, Silicon
Graphics, Sara Lee Corporation, Potlatch Corporation, Alliant Techsystems, Inc.,
and US West.

ROBERT J. SCHMIER. Mr. Schmier has been a Director of our Company since January
1999. Mr. Schmier has been the President of Schmier & Feurring Properties, Inc.
since 1981, and the President of Schmier & Feurring Realty, Inc. since 1985.
These companies are involved in real estate development,
leasing and property management of shopping centers and office buildings in Palm
Beach County, Florida.

N. BRUCE WALKO. Mr. Walko has been a Director of our Company since January 1999.
Mr. Walko has been the President of Cyberfast Systems, Inc., a company involved
in international voice over internet protocol, since November 1999. Previously,
Mr. Walko served as Southeast Regional General Manager for NextWave Telecom Inc.
from 1994 until 1997. Mr. Walko was instrumental in the development of new
technology telecommunication for NextWave and also for McCaw Cellular Inc. (now
AT&T Wireless).

RAM V. MANI. Mr. Mani served as our Chief Technology Officer and President of
the NHancement Technologies Software Group during the period June 1999 through
August 2001. Mr. Mani was a Director of our Company during the period February
2000 through April 2001. Prior to joining our Company, Mr. Mani had been an
independent software consultant for more than ten years for such companies as
Voicemail International Inc., Atari Corp., Verbatim Corp., National
Semiconductors Inc. and other high technology companies. From 1983 to 1999, Mr.
Mani was the founder, President and Chief Executive Officer of Eastern Systems
Technology, Inc., a developer of communications software, all of whose assets
were acquired by our Company in August 1999.

KEN MURRAY was employed with the Company from May 2000 through April 2001.  Mr.
Murray was hired as the Executive Vice President of Sales and was promoted to
Chief Operating Officer for the Company.  Prior to joining our Company Mr.
Murray held a variety of management and senior management positions with more
than 20 years of experience with Hewlett Packard.


                                       40
<PAGE>
JOHN ZAVOLI was employed with the Company from May 2000 through February 2001 as
our Chief Financial Officer.  Prior to joining our Company, Mr. Zavoli was a
Partner with Pricewaterhouse Coopers and held Senior Management roles with Madge
Networks and Digital Equipment Corporation.

RICHARD GLOVER was employed with the Company from December 1999 through March
2001 as our Chief Marketing Officer.  Prior to joining the Company, Mr. Glover
served as Chief Executive Officer and President of Triad Marketing from 1991
until it was acquired by our Company in December 1999.

TOM KU was employed as an officer of the Company from May 2001 through December
2001.  As the Chief Technology Officer and Chief Marketing Officer of Appiant
Technologies, Inc. Tom founded Quaartz, Inc., a web based application company,
in 1999 where he served as the Chief Executive Officer. He also led the
professional services division of BEA Systems, Inc., the world leader in
e-commerce transaction server software.

JOACHIM ZIPPEL joined the Company in May 2001 as the Sr. Vice President of
Engineering and Operations of Appiant Technologies, Inc. Prior to joining
Appiant, Joachim was the Executive Vice President of Operations and Services and
co-founder of Quaartz, Inc., a web based application company. Joachim brings to
the Company a wealth of experience in software development and data center
operations from his 12-year tenure at Sun Microsystems.

JAMES GILLESPIE was employed as Senior Vice President of Sales for the Company
from April 2001 through July 2001.  As the founder and President of Voice Plus,
Inc., an Industry leader in voice processing, Gillespie grew the business to a
multi-million dollar company and planted the original seed that developed into
Appiant Technologies today through a series of acquisitions and mergers. Mr.
Gillespie also served as the Director of National Sales for Centigram
Communications, Corp.

SANDRA SMITH joined the Company in February 2001 as the General Counsel and
Corporate Secretary of Appiant Technologies, Inc. Sandra was most recently with
Simpson Grierson Law.  Prior to Simpson Grierson, Sandra was Managing Director
of a Legal Consulting firm based in Singapore, advising on IT transactions
throughout Asia. Sandra was also in-house counsel at EDS and AT&T for several
years, as communications and regulatory counsel.

ITEM 11.  EXECUTIVE COMPENSATION

The following table sets forth certain information concerning compensation paid
during the last three (3) fiscal years to (i) our Chief Executive Officer, (ii)
our other most highly compensated executive officers at September 30, 2001,
whose aggregate cash compensation exceeded $100,000 during the fiscal year ended
September 30, 2001 and (iii) two (2) executive individuals for whom disclosure
would have been provided but for the fact that the individual was not serving as
an executive officer of the company at the end of the last completed fiscal year
(collectively, the "Named Executive Officers").


                                       41
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                                        Annual Compensation                  Long Term compensation
                                                                               Awards
                                                       Other Annual   Restrictd     Securities
Name and principal                                       Compen-        stock      Under-lying
position               Year      Salary     Bonus        sation       awards        options
-----------------------------------------------------------------------------------------------------------
<S>                  <C>        <C>       <C>       <C>             <C>        <C>
Douglas S. Zorn,         2001   $285,750        --  $     2,797(1)                   50,000 (3)
Chairman of the          2000   $172,500  $180,000  $    13,163(2)                  200,000 (4)
Board, Chief             1999   $178,327  $193,883  $    12,600(2)                  325,500 (5)
Executive Officer
and President
Ram V. Mani, Chief       2001   $164,477  $ 75,000  $    2,658 (1)                   10,000 (3)
Technology Officer,      2000   $146,634        --  $    9,311 (7)
                                $ 62,500
Director                 1999(6)                --
Ken G. Murray,           2001(8) $76,598.            $   79,281 (9)                 300,000 (10)
Chief Operations
Officer
John R. Zavoli,          2001(11)$70,170.  $ 30,288  $  88,599 (12)                 175,000 (10)
Chief Financial
Officer
-----------------------------------------------------------------------------------------------------------
<FN>
1.   Automobile Allowance and Life Insurance paid for by the Company.
2.   Automobile Lease paid for by the company for Mr. Zorn.
3.   Options granted on March 16, 2001 with an exercise price of $4.50 per
     share.
4.   Options granted July 27, 2000 with an exercise price of $8.75 per share
5.   Options granted February 2, 1999 with an exercise price of $1.125 per
     share. Mr. Zorn was originally granted options on 325,000 shares and
     voluntarily relinquished options on 16,500 shares in July 2000.
6.   Represents Mr. Mani's compensation from his hiring date of June 1999
     through September 30, 1999.
7.   Automobile lease paid for by the Company in the amount of $8,300 and life
     insurance in the amount of $1,011.
8.   Represents Mr. Murray's compensation from October 1, 2000 through April 30,
     2001.
9.   Automobile allowance of $588, life insurance of $610, commission of $28,083
     and Severance paid of $50,000 to Mr. Murray.
10.  Options granted on July 28, 2000 with an exercise price of $8.75 per share.
11.  Represents Mr. Zavoli's compensation from October 1, 2000 through February
     14, 2001.
12.  Automobile allowance of $678, life insurance of $421 and Severance paid of
     $87,500.
</TABLE>

Option Grants in Last Fiscal Year

The following table sets forth certain information for each of our Named
Officers concerning stock options granted to them during the fiscal year ended
September 30, 2001.


                                       42
<PAGE>
<TABLE>
<CAPTION>
                                            Individual Grants
                                            -----------------
                              Percent of
                                 Total                                   Potential Realizable
                 Number of      Options                                  Value at Assumed Annual
                 Securities   Granted to     Exercise                       Rate of Stock
                 Underlying  Employees in     Price                     Appreciation for Option
                  Options       Fiscal       ($/SHR)    Expiration             Terms (3)
Name              Granted      Year (1)        (2)         Date         5% ($)           10%($)
----------------------------------------------------------------------------------------------------
<S>              <C>         <C>            <C>         <C>         <C>             <C>
Douglas S. Zorn      50,000           2.2%  $    4.50    3/16/2011  $       60,000  $        229,000
Ram V. Mani          10,000           0.4%  $    4.50    3/16/2011  $       12,000  $         45,800
----------------------------------------------------------------------------------------------------
<FN>
1.   Based on 2,323,650 options granted during the fiscal year ended September
     30,2001.
2.   The exercise price was deemed to be equal to be $1.00 over the fair market
     value on the date of the grant date as determined by the closing price as
     reported on the NASDAQ SmallCap Market.
3.   The potential realizable value portion of the foregoing table illustrates
     value that might be realized upon exercise of the options immediately prior
     to the expiration of their terms, assuming the specified compounded rates
     of appreciation on the Company's common stock over the term of the options.
     Actual gains, if any, on stock option exercise are dependent upon a number
     of factors, including the future performance of the common stock, overall
     stock market conditions, and the timing of option exercises, if any. There
     can be no assurances that amounts reflected in this table will be achieved.
</TABLE>

Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

The following table sets forth certain information concerning exercises of stock
options during the fiscal year ended September 30, 2001 by each of our Named
Executive Officers and the number and value of unexercised options held by each
of our Named Executive Officers on September 30, 2001.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
                        Number of Unexercised Securities            Value of Unexercised in-the-money
                 Underlying Options at  September 30,2000 (#)     options at September 30, 2001 (1)($)
Name                  Exercisable            Unexercisable          Exercisable         Unexercisable
---------------------------------------------------------------------------------------------------------
<S>              <C>                     <C>                     <C>                 <C>
Douglas S. Zorn             366,833 (2)             191,667 (3)  $         242,173.                     0
Ram V. Mani                  93,166 (4)             121,834 (5)  $            2,786  $              2,638
---------------------------------------------------------------------------------------------------------
<FN>
1.   Value of "in-the-money" stock options represents the positive spread
     between the exercise price of stock options and the fair market value for
     our common stock on September 30, 2001 based on a closing price on
     September 28, 2001 of $1.91 per share.
2.   Represents 308,500 options at $1.125 per share and 58,333 options at $8.75
     per share.
3.   Represents 141,667 options at $8.75 per share and 50,000 options at $4.50
     per share
4.   Represents 79,625 at $1.875 per share and 13,541 options at $8.75 per
     share.
5.   Represents 75,375 at $1.875 per share, 10,000 options at $4.50 per share
     and 36,459 options at $8.75 per share.
</TABLE>

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options or warrants or issuable upon
conversion of preferred stock held by that person that are currently exercisable
or exercisable (or convertible) within 60 days of January 19, 2001 are deemed
outstanding. Percentage of beneficial ownership of common stock as of January
19, 2001 is based upon 12,837,790 outstanding shares of common stock. Percentage
of beneficial ownership of preferred stock as of January 19, 2001 is based upon
87,620 outstanding shares of preferred stock.

To our knowledge, except as set forth in the footnotes to this table and subject
to applicable community property laws, each person named in the table has sole
voting and investment power with respect to the shares set forth opposite such
person's name.

The Company is not aware of any beneficial owner of more than 5% of the
outstanding common stock other than as set forth in the following table.


                                       43
<PAGE>
<TABLE>
<CAPTION>
                                             NUMBER OF SHARES
                                            BENEFICIALLY OWNED      PERCENT OF CLASS
                                         -----------------------  --------------------
OFFICERS AND DIRECTORS (1)                  COMMON     PREFERRED   COMMON   PREFERRED
---------------------------------------  ------------  ---------  --------  ----------
<S>                                      <C>           <C>        <C>       <C>
Douglas S. Zorn                            748,673(2)         --      4.7%         --%
Chairman of the Board, Chief Executive
Officer and President

L. Thomas Baldwin III                    6,587,676(3)         --     41.2%         --%
Director

James S. Gillespie                         884,468(4)         --      5.5%         --%
Director

Robert J. Schmier                          230,654(5)         --      1.4%         --%
Director

Allen F. Jacobson                          112,725(6)         --      0.7%         --%
Director

N. Bruce Walko                              61,000(7)         --      0.4%         --%
Director

James Han                                         --          --       --%         --%
Managing Director of
Infotel Subsidiary

Ken G. Murray                                     --          --       --%         --%
Chief Operating Officer

John Zavoli                                       --          --       --%         --%
Chief Financial Officer

Ram Mani                                          --          --       --%         --%
Chief Technology Officer

All officers, directors and proposed     9,136,490(8)         --     57.2%         --%
directors as a
group (10 persons) (8)
--------------------------------------------------------------------------------------
<FN>
(1)  Each beneficial owner for whom an address is not listed has an address c/o
     Appiant Technologies Inc., 6663 Owens Drive, Pleasanton, California 94588.

(2)  Represents 151,937 shares of common stock, vested options to purchase
     379,333 shares of common stock, immediately exercisable warrants to
     purchase 179,524 shares of common stock and notes immediately convertible
     into 37,879 shares of common stock.


                                       44
<PAGE>
(3)  Represents 3,191,334 shares of common stock, immediately exercisable
     warrants to purchase 896,342 shares of common stock, notes immediately
     convertible into 2,500,000 shares of Common Stock. Irrevocable trusts for
     Mr. Baldwin's three children have purchased $105,000 each of Series B
     Preferred Stock. Mr. Baldwin disclaims beneficial ownership of these
     securities.

(4)  Represents 517,065 shares of common stock, immediately exercisable warrants
     to purchase 329,524 shares of common stock and notes immediately
     convertible into 37,879 shares of common stock.

(5)  Represents 78,135 shares of common stock, vested options to purchase 25,000
     shares of common stock, immediately exercisable warrants to purchase
     127,519 shares of common stock.

(6)  Represents 62,725 shares of common stock and immediately exercisable
     warrants to purchase 50,000 shares of common stock.

(7)  Represents vested options to purchase 11,000 shares of common stock and
     immediately exercisable warrants to purchase 50,000 shares of common stock.

(8)  Represents 4,275,407 shares of common stock, vested options to purchase
     652,416 shares of common stock, immediately exercisable warrants to
     purchase 1,632,909 shares of common stock notes immediately convertible
     into 2,575,758 shares of common stock.
</TABLE>


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company has an employment agreement with Douglas S. Zorn, as Chairman of the
board of directors, President and Chief Executive Officer of the Company.  By
its terms, the agreement has an Initial Term of three years with a provision
that the Term will be extended for successive one-year periods beginning on the
first day after the final day of the Initial Term, except in the event Mr. Zorn
or the Company provides written notice to the other at least 180 days before the
beginning of such one-year period, of the intention not to extend the Term.  Mr.
Zorn's base salary may be adjusted from time to time by mutual agreement between
Mr. Zorn and the board of directors. Mr. Zorn's base salary for calendar years
2000 and 2001 was $180,000 and $300,000, respectively.  Mr. Zorn's base salary
for calendar year 2002 is $300,000

The employment agreement provides, subject to its terms, for an annual bonus to
be paid to Mr. Zorn pursuant to a written bonus plan to be approved by our board
of directors. The employment agreement provides that Mr. Zorn is entitled to
reasonable expense reimbursements, four weeks paid vacation per year and
participation in any of the Company's benefit and deferred compensation plans.

The employment agreement also provides for payments in the event of termination
prior to the end of the term, as follows: if Mr. Zorn is terminated without
cause, then his base salary will be paid for the greater of two (2) years or the
balance of the term and he will receive a bonus for each such year equal to his
average bonus for the two (2) preceding years. If Mr. Zorn is terminated upon a
change of control, then compensation equal to two (2) times the sum of the base
salary plus average bonus will be paid to him for one (1) year. In the event of
termination (except termination without cause), Mr. Zorn is subject to two-year
non-competition agreements.


                                       45
<PAGE>
On May 23, 2001, pursuant to the Agreement and Plan of Merger, dated as of
February 5, 2001, by and among Appiant Technologies, Inc., a Delaware
corporation formerly known as NHancement Technologies, Inc. (the Registrant"),
Great America Acquisition Corp., a Delaware corporation (the "Merger Sub"),
Quaartz Inc., a Delaware corporation ("Quaartz") and Tom Ku, as Stockholders'
Agent, the Registrant completed the merger of Merger Sub, a wholly-owned
subsidiary of the Registrant, with and into Quaartz, with Quaartz being the
surviving corporation of the merger and becoming a wholly-owned subsidiary of
the Registrant. The transaction was closed on May 23, 2001 and is being
accounted for as a purchase transaction. As consideration for the transaction,
the Registrant issued an aggregate of 1,500,000 shares of the Registrant's
common stock, $0.01 par value, in exchange for the outstanding shares of capital
stock of Quaartz, subject to the withholding of 50% of such shares in escrow in
accordance with the terms of the Agreement.

On June 30, 2001, the Company loaned $100,000 to Doug Zorn.  The loan was repaid
in full on July 1, 2001.

On September 1, 2001, the Company sold Enhancement Technologies India (P) Ltd.,
an Indian corporation ("ETI" and its call center business to Global Customer
Service, Inc. "GCS", pursuant to a Stock Purchase Agreement executed September
24, 2001. The aggregate sales' price consisted of 19.99% of GCS, the newly
formed company that holds only the asset of the India subsidiary, and $500,000
in the form of a Promissory Note from the newly formed company to Appiant. The
Promissory Note is to be paid over three (3) years from five percent (5%) of
revenues of the newly formed Company. The Company has not recorded the
consideration as its recoverability is not probable and accordingly, no gain or
loss on sale has been recorded.

The information contained in the section captioned "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS" of our definitive proxy statement for our 2001 annual
meeting of stockholders is incorporated herein by reference.

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES, AND REPORTS ON FORM 8-K

The following documents are filed as part of the Annual Report on Form 10-K:

          1.   Financial Statements

          2.   Financial Statement Schedule

          3.   Exhibits

     (a)  This is the financial statement index:

                                  EXHIBIT INDEX
-----------------------------------------------------------------------------
     EXHIBIT NUMBER                    DESCRIPTION OF EXHIBIT
-----------------------------------------------------------------------------
            2.3            Plan and Agreement of Reorganization, dated
                           December 10, 1999, by and among Trimark Inc.,
                           d.b.a. Triad Marketing, Greg Darling, Richard
                           Glover and the Company. (17)
-----------------------------------------------------------------------------


                                       46
<PAGE>
            2.4            Agreement of Merger, by and between Nhancement
                           Acquisition Corp. and Trimark, filed with the
                           Secretary of State of the State of California
                           effective January 21, 2000. (17)
-----------------------------------------------------------------------------
            2.5            Plan and Agreement of Reorganization between the
                           Company and SVG Software Services, Inc., a
                           California corporation, dated February 4, 2000.
                           (18)
-----------------------------------------------------------------------------
            2.6            Stock Purchase Agreement between the Company and
                           Vijay and Vinita Gulechha dated February 4, 2000.
                           (18)
-----------------------------------------------------------------------------
            3.1            Amended and Restated Certificate of Incorporation,
                           as filed with the Delaware Secretary of State
                           on January 27, 1997, as amended by Certificate
                           of Designations, as filed with the Delaware
                           Secretary of State on April 9, 1998, as further
                           amended by Amended Certificate of Designations,
                           as filed with the Delaware Secretary of State
                           on April 13, 1998, as further amended by
                           Amended Certificate of Designations, as filed
                           with the Delaware Secretary of State on June
                           11, 1999. (1)
-----------------------------------------------------------------------------
            3.2            Amended and Restated Bylaws. (2)
-----------------------------------------------------------------------------
            4.1            Form of Common Stock Certificate. (3)
-----------------------------------------------------------------------------
            4.2            Form of Underwriter Warrant. (4)
-----------------------------------------------------------------------------
            4.3            Registration Rights Agreement, dated September 1,
                           1996, between BioFactors, Inc. ("BFI") and (i) a
                           majority of the holders of securities pursuant to
                           the Secured Note and Warrant Purchase Agreement
                           dated December 1, 1994, as amended; (ii) a
                           majority of the holders of securities issued
                           pursuant to the Secured Note and Stock Purchase
                           Agreement, dated December 1, 1995, as amended;
                           iii) a majority of the holders of securities
                           issued pursuant to the Unsecured Note and Stock
                           Purchase Agreement, dated February 1, 1996, as
                           amended; (iv) a majority of the holders of
                           securities issued pursuant to the Unit
                           Subscription Agreement, dated May 17, 1996,
                           as amended; (v) the purchasers of securities
                           issued pursuant to the
-----------------------------------------------------------------------------
                           Unit Subscription Agreement dated October 3, 1996;
                           and (vi) the former holders of BFI's Series A
                           Preferred Stock. (4)
-----------------------------------------------------------------------------
            4.4            Registration Rights Agreement, dated October 25,
                           1996, between the Company and James S. Gillespie.
                           (3)
-----------------------------------------------------------------------------


                                       47
<PAGE>
            4.5            Form of Series A Preferred Stock Certificate. (5)
-----------------------------------------------------------------------------
            4.6            Registration Rights Agreement, dated as of April
                           13, 1998, among the Company, The Endeavour Capital
                           Fund S.A. and AMRO International S.A. ("AMRO") (5)
-----------------------------------------------------------------------------
            4.7            Warrant Agreement dated February 2, 1999 between
                           the Company and JWGenesis Capital Markets LLC. (6)
-----------------------------------------------------------------------------
            4.8            Warrant Agreement dated February 2, 1999 between
                           the Company and Kenneth L. Greenberg. (6)
-----------------------------------------------------------------------------
            4.9            Warrant Agreement dated February 2, 1999 between
                           the Company and Mark Goldberg. (6)
-----------------------------------------------------------------------------
            4.10           Form of Warrant dated June 15, 1999 delivered to
                           purchasers of Series A Convertible Preferred
                           Stock. (7)
----------------------------------------------------------------------------
            4.11           Form of Warrant dated June 15, 1999 delivered to
                           purchasers of Series A Convertible Preferred Stock
                           (exercise contingent on redemption of Preferred
                            Stock). (7)
-----------------------------------------------------------------------------
            4.12           Warrant Agreement dated June 7, 1999 between the
                           Company and James S. Gillespie. (7)
-----------------------------------------------------------------------------
            4.13           Warrant Agreement dated June 15, 1999 between the
                           Company and Grady & Hatch and Company, Inc. (7)
-----------------------------------------------------------------------------
            4.14           Warrant, dated January 21, 2000, delivered to
                           Richard Glover. (17)
-----------------------------------------------------------------------------
            4.15           Warrant, dated January 21, 2000, delivered to Greg
                           Darling. (17)
-----------------------------------------------------------------------------
            4.16           Warrant dated December 10, 1999, issued to Douglas
                           S. Zorn. (18)
-----------------------------------------------------------------------------
            4.17           Warrant dated December 10, 1999, issued to James
                           S. Gillespie. (18)
-----------------------------------------------------------------------------
            4.18           Warrant dated December 10, 1999, issued to John M.
                           Black. (18)
-----------------------------------------------------------------------------
            4.19           Warrant dated December 10, 1999, issued to James
                           S. Gillespie. (18)
-----------------------------------------------------------------------------
            4.20           Warrant dated December 10, 1999, issued to N.
                           Bruce Walko. (18)
-----------------------------------------------------------------------------
            4.21           Warrant dated December 10, 1999, issued to Robert
                           J. Schmier. (18)
-----------------------------------------------------------------------------
            4.22           Warrant dated December 10, 1999, issued to Diane
                           Nowak. (18)
-----------------------------------------------------------------------------


                                       48
<PAGE>
            4.23           Warrant dated March 1, 2000, issued to William M.
                           Stephens. (19)
-----------------------------------------------------------------------------
            4.24           Convertible Debenture Purchase Agreement by and
                           between NHancement Technologies Inc. and certain
                           investors, dated May 19, 2000. (20)
-----------------------------------------------------------------------------
            4.25           Common Stock Purchase Agreement by and between
                           NHancement Technologies Inc. and Kedrick
                           Investments Limited Inc. and certain investors,
                           dated June 15, 2000. (20)
-----------------------------------------------------------------------------
            4.26           Amendment to the Convertible Debenture Purchase
                           Agreement by and between NHancement Technologies
                           Inc. and Kedrick Investments Limited, dated June
                           30, 2000. (20)
-----------------------------------------------------------------------------
            4.27           Amendment to the Common Stock Purchase Agreement
                           by and between NHancement Technologies Inc. and
                           Kedrick Investments Limited, dated June 30, 2000.
                           (20)
-----------------------------------------------------------------------------
            4.28           Form of Convertible Debenture. (20)
-----------------------------------------------------------------------------
            4.29           Warrant dated May 1, 2000, issued to Cisco Systems
                           Capital Corporation. (21)
-----------------------------------------------------------------------------
            4.30           Warrant dated May 24, 2000, issued to Kedrick
                           Investments Limited. (21)
-----------------------------------------------------------------------------
            4.31           Certificate of Designation of NHancement
                           Technologies Inc. filed with the Secretary of
                           State of the State of Delaware on October 5, 2000.
                           (22)
-----------------------------------------------------------------------------
            4.32           Warrant dated July 31, 2000 issued to L. Thomas
                           Baldwin III.
-----------------------------------------------------------------------------
            4.33           Warrant dated August 8, 2000 issued to Allen F.
                           Jacobson
-----------------------------------------------------------------------------
            4.34           Warrant dated November 28, 2000 issued to Jack
                              T. Zahran
-----------------------------------------------------------------------------
            4.35*          Warrant dated October 31, 2000 issued to Joseph
                              Stevens & Co.
-----------------------------------------------------------------------------
            4.36*          Warrant dated November 28, 2000 issued to Jack
                              T. Zahran.
-----------------------------------------------------------------------------
            4.37*          Warrant dated January 10, 2001 issued to Baldwin
                              Partners, L.P.
-----------------------------------------------------------------------------
            4.38*          Warrant dated May 31, 2001 issued to various
                              investors as identified in Item 5.
-----------------------------------------------------------------------------
            4.39*          Warrant dated June 2001 issued to various
                              investors as identified in Item 5.


                                       49
<PAGE>
-----------------------------------------------------------------------------
            4.40*          Warrant dated October 2001 issued to various
                              investors as identified in Item 5.
-----------------------------------------------------------------------------
            4.41*          Warrant dated November 2001 issued to various
                              investors as identified in Item 5.
-----------------------------------------------------------------------------
            4.42*          Warrant dated December 2001 issued to various
                           investors as identified in Item 5
-----------------------------------------------------------------------------
            4.43*          Convertible promissory note dated March 21, 2001
                           issued to L. Thomas Baldwin III as identified
                           in item 5
-----------------------------------------------------------------------------
            4.44*          Warrant dated March 21, 2001 issued to L. Thomas
                           Baldwin III as identified in Item 5
-----------------------------------------------------------------------------
            4.45*          Warrant dated March 31, 2001 issued to L. Thomas
                           Baldwin III as identified in Item 5
-----------------------------------------------------------------------------
            4.46*          Warrant dated March 31, 2001 issued to L. Thomas
                           Baldwin III as identified in Item 5
-----------------------------------------------------------------------------
            4.47*          Amendment dated May 31, 2001 to the Convertible
                           Promissory Note dated March 21, 2001 to L. Thomas
                           Baldwin III as identified in Item 5
-----------------------------------------------------------------------------
            10.1           Formation Agreement, dated as of October 15, 1996,
                           between BFI and Voice Plus, Inc. ("Voice Plus").
                           (3)
-----------------------------------------------------------------------------
            10.2           Agreement and Plan of Merger, dated as of October
                           30, 1996, between the Company, BFI Acquisition
                           Corporation and BFI. (4)
-----------------------------------------------------------------------------
            10.3           Agreement and Plan of Merger, dated as of October
                           25, 1996, between the Company, Voice Plus
                           Acquisition Corporation, Voice Plus and James S.
                           Gillespie, together with Forms of Promissory
                           Notes. (8)
-----------------------------------------------------------------------------
            10.4           Agreement of Merger between Voice Plus and BFI
                           dated as of October 10, 1997. (5)
-----------------------------------------------------------------------------
            10.5           License Agreement, dated November 24, 1988, by and
                           between BFI and Systems Technology, Inc., as
                           amended by Addendum to License Agreement, dated
                           May 19, 1994, as amended by Second Addendum to
                           License Agreement, dated November 18, 1996. (4)
-----------------------------------------------------------------------------
            10.7           Secured Note and Warrant Purchase Agreement, dated
                           December 1, 1994, between BFI and the purchasers
                           listed therein, as amended by the First Amendment
                           to Secured Note and Warrant Purchase Agreement,
                           dated July 1995, as amended by Amendment to
                           Secured Note and Warrant Purchase Agreement, dated
                           December 1, 1995, as amended by Third Amendment to
                           Secured Note and Warrant Purchase Agreement, dated
                           March 1, 1996, and as amended by Fourth Amendment to
                           Secured Note and Warrant Purchase Agreement, dated
                           October 1, 1996, together with Amended and Restated
                           Security Agreement and Form of Secured Promissory
                           Note. (4)
-----------------------------------------------------------------------------


                                       50
<PAGE>
            10.8           Secured Note and Stock Purchase Agreement,
                           dated December 1, 1995, between BFI and the
                           purchasers listed therein, as amended by the
                           First Amendment to Secured Note and Stock
                           Purchase Agreement, dated March 1, 1996, as
                           amended by Second Amendment to Secured Note and
                           Stock Purchase Agreement, dated July 1, 1996,
                           and as amended by Third Amendment to Secured
                           Note and Stock Purchase Agreement, dated
                           October 1, 1996, together with Form of Secured
                           Promissory Note. (4)
-----------------------------------------------------------------------------
            10.9           Unsecured Note and Stock Purchase Agreement, dated
                           February 1, 1996, between BFI and the
                           First Amendment to Unsecured Note and Stock
                           Purchase Agreement, dated March 1, 1996, as
                           amended by Second Amendment to Unsecured Note
                           and Stock Purchase Agreement, dated July 1,
                           1996, and as amended by Third Amendment to
                           Unsecured Note and Stock Purchase Agreement,
                           dated October 1, 1996, together with Form of
                           Unsecured Promissory Note. (4)
-----------------------------------------------------------------------------
            10.10          Unit Subscription Agreement, dated May 17, 1996,
                           between BFI and the purchasers listed therein, as
                           amended by First Amendment to Unit Subscription
                           Agreement, dated October 1, 1996, together with
                           Form of Promissory Note. (4)
-----------------------------------------------------------------------------
            10.11          Unit Subscription Agreement, dated October 1,
                           1996, between BFI and the purchasers listed
                           therein, together with Form of Promissory Note and
                           Form of Warrant. (2)
-----------------------------------------------------------------------------
            10.12          Equity Incentive Plan. (2)
-----------------------------------------------------------------------------
            10.13          Employment Agreement, dated as of October 30,
                           1996, between Douglas S. Zorn and the Company. (2)
-----------------------------------------------------------------------------
            10.14          Employment Agreement, dated as of October 25,
                           1996, between James S. Gillespie and the Company.
                           (3)
-----------------------------------------------------------------------------
            10.15          Employment Agreement, dated as of October 30,
                           1996, between Esmond T. Goei and the Company. (3)
-----------------------------------------------------------------------------
            10.16          Form of Factor 1000-Registered Trademark - Service
                              Contract. (3)
-----------------------------------------------------------------------------


                                       51
<PAGE>
            10.17          Office Building Lease, dated April 8, 1996,
                           between BFI and Denver West Office Building No. 21
                           Venture. (4)
-----------------------------------------------------------------------------
            10.18          Authorized U.S. Distributor Agreement, dated April
                           16, 1996, between Centigram Communications
                           Corporation and Voice Plus. (3)
-----------------------------------------------------------------------------
            10.19          Office Lease, dated October 16, 1995, between AJ
                           Partners Limited Partnership and Voice Plus. (4)
-----------------------------------------------------------------------------
            10.20          Agreement, dated October 16, 1995, between BFI,
                           Burton Kanter and Elliot Steinberg, as amended by
                           Amendment dated July 16, 1996, between BFI, Esmond
                           Goei, Douglas Zorn, Burton Kanter and Elliot
                           Steinberg. (4)
-----------------------------------------------------------------------------
            10.21          Stockholder Agreement, dated October 25, 1996,
                           between the Company and James D. Gillespie. (4)
-----------------------------------------------------------------------------
            10.22          1997 Management and Company Performance Bonus
                           Plan. (4)
-----------------------------------------------------------------------------
            10.23          Employment Agreement, dated as of November 1,
                           1996, between Diane E. Nowak and Voice Plus. (2)
-----------------------------------------------------------------------------
            10.24          Employment Agreement, dated as of November 1,
                           1996, between Bradley Eickman and Voice Plus. (2)
-----------------------------------------------------------------------------
            10.25          Promissory Note Payable to the Company by Esmond
                           T. Goei. (5)
-----------------------------------------------------------------------------
            10.26          Agreement for the Sale of Shares in Advantis
                           Network & System Sdn Bhd dated June 20, 1997,
                           between the Company and the shareholders of
                           Advantis, as amended by the Supplemental
                           Agreement to the Agreement dated November 26,
                           1997, and the Second Supplemental Agreement
                           dated November 26, 1997. (9)
-----------------------------------------------------------------------------
            10.27          Building Lease dated June 9, 1997 by and between
                           the Company, as Tenant and El Dorado Holding
                           Company, Inc., as Landlord. (10)
-----------------------------------------------------------------------------
            10.28          Form of Lock Up Agreement between the Company and
                           the former shareholders of Advantis. (11)
-----------------------------------------------------------------------------
            10.29          Securities Purchase Agreement, dated as of April
                           13, 1998, by and among the Company, the Endeavour
                           Capital Fund S.A. and AMRO. (5)
-----------------------------------------------------------------------------
            10.30          Form of Escrow Instructions related to Securities
                           Purchase Agreement, dated as of April 13, 1998.
                           (5)
-----------------------------------------------------------------------------


                                       52
<PAGE>
            10.31          Form of Reseller Agreement between Interactive
                           Intelligence Inc. and the Company dated July 8,
                           1998. (12)
-----------------------------------------------------------------------------
            10.32          Form of Associate Agreement between NEC, Inc. and
                           the Company dated May 26, 1998. (12)
-----------------------------------------------------------------------------
            10.33          Form of Loan and Security Agreement between
                           Aerofund Financial and the Company dated October
                           9, 1998. (12)
----------------------------------------------------------------------------
            10.34          Form of Guaranty from Lee Giam Teik, Man Yiew Ming
                           and Ng Kok Wah dated September 30, 1998. (12)
-----------------------------------------------------------------------------
            10.35          Letter Agreement between Lee Giam Teik, Man Yiew
                           Ming and Ng Kok Wah and the Company dated
                           September 30, 1998. (12)
-----------------------------------------------------------------------------
            10.36          Agreement relating to the sale and purchase of
                           500,000 ordinary shares in the Capital of Infotel
                           Technologies (Pte) Ltd ("Infotel"), dated as of
                           January 19, 1998, by and between the Company and
                           the stockholders of Infotel (the "Sale
                           Agreement"). (13)
-----------------------------------------------------------------------------
            10.37          Letter Agreement amending the Sale Agreement,
                           dated as of April 2, 1998, by and between the
                           Company and the stockholders of Infotel. (13)
-----------------------------------------------------------------------------
            10.38          Form of letter agreement amending the Sale
                           Agreement, as amended by Supplement No. 1, dated
                           as of April 22, 1998, by and between the Company
                           and the stockholders of Infotel. (13)
-----------------------------------------------------------------------------
            10.39          Letter agreement amending the Sale Agreement,
                           dated as of June 22, 1998, by and between the
                           Company and stockholders of Infotel. (14)
-----------------------------------------------------------------------------
            10.40          Promissory Note, dated as of June 15, 1998, in the
                           original principal amount of $375,000, payable by
                           the Company to AMRO. (14)
-----------------------------------------------------------------------------
            10.41          Promissory Note, dated as of June 15, 1998, in the
                           original principal amount of $375,000, payable by
                           the Company to Endeavour Capital Fund S.A.
                           ("Endeavour"). (14)
-----------------------------------------------------------------------------
            10.42          Letter agreement, dated as of June 15, 1998,
                           amending Securities Purchase Agreement, dated as
                           of April 13, 1998, by and among the Company, AMRO
                           and Endeavour. (14)
-----------------------------------------------------------------------------
            10.43          Letter agreement, dated as of June 12, 1998, by
                           and among the Company, Esmond T. Goei, Douglas S.
                           Zorn and James S. Gillespie. (14)
-----------------------------------------------------------------------------
            10.44          Promissory Note, dated as of June 12, 1998, in the
                           original principal amount of $125,000 payable by
                           the Company to Esmond T. Goei. (14)
-----------------------------------------------------------------------------


                                       53
<PAGE>
            10.45          Promissory Note, dated as of June 12, 1998, in the
                           original principal amount of $225,000 payable by
                           the Company to Douglas S. Zorn. (14)
-----------------------------------------------------------------------------
            10.46          Promissory Note, dated as of June 12, 1998, in the
                           original principal amount of $300,000 payable by
                           the Company to James S. Gillespie. (14)
-----------------------------------------------------------------------------
            10.47          Separation Agreement dated January 13, 1999
                           between Esmond T. Goei and the Company. (15)
-----------------------------------------------------------------------------
            10.48          Letter Agreement dated February 2, 1999 between
                           the Company and JWGenesis Capital Markets LLC. (6)
-----------------------------------------------------------------------------
            10.49          Amendment dated June 11, 1999, to Securities
                           Purchase Agreement dated April 13, 1998. (1)
-----------------------------------------------------------------------------
            10.50          Termination, Consulting and Confidentiality
                           Agreement dated June 7, 1999 between James S.
                           Gillespie and the Company. (7)
-----------------------------------------------------------------------------
            10.51          Loan and Security Agreement, dated as of
                           August 31, 1999, by and among Eastern Systems
                           Technology, Inc. ("Eastern"), Ram V. Mani
                           ("Mani"), Front-End Technologies, Srini
                           Ramakrishnan ("Ramakrishnan") and the Company.
                           (16)
-----------------------------------------------------------------------------
            10.52          Secured Promissory Note, dated as of August 31,
                           1999, in the principal amount of $250,000, payable
                           by Eastern to the Company. (16)
-----------------------------------------------------------------------------
            10.53          Employment Agreement, dated as of August 31, 1999,
                           by and between Mani and the Company. (16)
-----------------------------------------------------------------------------
            10.54          Plan and Agreement of Reorganization, dated August
                           31, 1999, among Eastern, Mani and the Company.
                           (16)
-----------------------------------------------------------------------------
            10.55          Form of Ratification Agreement, dated September 10,
                           1999, by the Company, Eastern, Mani and
                           Ramakrishnan. (16)
-----------------------------------------------------------------------------
            10.56          Employment Agreement, dated as of January 21,
                           2000, by and between Richard Glover and the
                           Company. (17)
-----------------------------------------------------------------------------
            10.57          Employment Agreement, dated as of January 21,
                           2000, by and between Greg Darling and the Company.
-----------------------------------------------------------------------------
            10.58          Form of Non-Compete Agreement, dated as of January
                           21, 2000, by and among the Company, Merger Sub and
                           each of Richard Darling and Greg Glover. (17)
-----------------------------------------------------------------------------


                                       54
<PAGE>
            10.59          Letter dated December 10, 1999, terminating the
                           Consultancy Agreement dated June 7, 1999 between
                           the Company and James S. Gillespie. (18)
-----------------------------------------------------------------------------
            10.60          Master Agreement to lease equipment entered into
                           as of April 21, 2000 with Cisco Systems Capital
                           Corporation. (21)
-----------------------------------------------------------------------------
            10.61          Series B Preferred Stock Purchase Agreement dated
                           as of October 31, 2000, by and between NHancement
                           Technologies Inc. and certain investors. (22)
-----------------------------------------------------------------------------
            10.62          Shelf Registration Agreement dated as of October
                           31, 2000, by and between NHancement Technologies
                           Inc. and certain investors. (22)
-----------------------------------------------------------------------------
            10.63*         Master Services agreement dated as of March 22,
                           2001 by and between Appiant Technologies and
                           InPhonic, Inc.
-----------------------------------------------------------------------------
              21*          Subsidiaries
-----------------------------------------------------------------------------
            23.1*          Consent of PricewaterhouseCoopers LLP.
-----------------------------------------------------------------------------
            23.2*          Consent of BDO Seidman, LLP.
-----------------------------------------------------------------------------
            24             Power of Attorney (included on signature page to
                           this Report on Form 10-K).
-----------------------------------------------------------------------------
            27*            Financial Data Schedule [Note: will be for the
                           twelve months ended 9/30/00].
-----------------------------------------------------------------------------
* To be filed herewith

(1)  Incorporated by reference to the document bearing the same exhibit number
     as contained in Issuer's Report on Form 8-K, as filed with the Securities
     and Exchange Commission on June 15, 1999.

(2)  Incorporated by reference to the document bearing the same exhibit number
     as contained in Amendment No. 2 to Issuer's Registration Statement on Form
     SB-2 (Reg. No. 333-15563), as filed with the Securities and Exchange
     Commission on January 13, 1997.

(3)  Incorporated by reference to the document bearing the same exhibit number
     as contained in Issuer's Registration Statement on Form SB-2(Reg. No.
     333-15563), as filed with the Securities and Exchange Commission on
     November 5, 1996.

(4)  Incorporated by reference to the document bearing the same exhibit number
     as contained in Amendment No. 1 to Issuer's Registration Statement on Form
     SB-2 (Reg. No. 333-15563), as filed with the Securities and Exchange
     Commission on December 20, 1996.

(5)  Incorporated by reference to the document bearing the same exhibit number
     as contained in Issuer's Annual Report on Form 10-KSB, as filed with the
     Securities and Exchange Commission on April 15, 1998.


                                       55
<PAGE>
(6)  Incorporated by reference to the document bearing the same exhibit number
     as contained in Issuer's Quarterly Report on Form 10-QSB, as filed with the
     Securities and Exchange Commission on February 16, 1999.

(7)  Incorporated by reference to the document bearing the same exhibit number
     as contained in Registrant's Quarterly Report on Form 10-QSB, as filed with
     the Securities and Exchange Commission on July 28, 1999.

(8)  Incorporated by reference to the document bearing the same exhibit number
     as contained in Amendment No. 3 to Issuer's Registration Statement on Form
     SB-2 (Reg. No. 333-15563), as filed with the Securities and Exchange
     Commission on January 28, 1997.

(9)  Incorporated by reference to Exhibit 2.01 to Issuer's Form 8-K, as filed
     with the Securities and Exchange Commission on December 30, 1997.

(10) Incorporated by reference to the document bearing the same exhibit number
     as contained in Issuer's Quarterly Report on Form 10-QSB, as filed with the
     Securities and Exchange Commission on November 14, 1997.

(11) Incorporated by reference to Exhibit 4.01 to Issuer's Form 8-K, as filed
     with the Securities and Exchange Commission on December 30, 1997.

(12) Incorporated by reference to the document bearing the same exhibit number
     as contained in Issuer's Annual Report, as amended, on Form 10-KSB/A, as
     filed with the Securities and Exchange Commission on January 29, 1999.

(13) Incorporated by reference from Issuer's Registration Statement on Form S-3
     (Reg. No. 333-52709), as initially filed with the Securities and Exchange
     Commission on May 14, 1998.

(14) Incorporated by reference from Issuer's Report on Form 8-K, as filed with
     the Securities and Exchange Commission on July 7, 1998.

(15) Incorporated by reference to the document bearing the same exhibit number
     as contained on Form 8-K, as filed with the Securities and Exchange
     Commission on February 12, 1999.

(16) Incorporated by reference from Issuer's Report on Form 8-K, as filed with
     the Securities and Exchange Commission on September 15, 1999.

(17) Incorporated by reference from Issuer's Report on Form 8-K, as filed with
     Securities and Exchange Commission on February 7, 2000.

(18) Incorporated by reference from Issuer's Quarterly Report on Form 10-QSB, as
     filed with the Securities and Exchange Commission on February 14, 2000.


                                       56
<PAGE>
(19) Incorporated by reference from Issuer's Quarterly Report on Form 10-Q as
     filed with the Securities and Exchange Commission on May 15, 2000.

(20) Incorporated by reference from Issuer's Registration Statement on Form S-3
     (Reg. No. 333-41474), as filed with the Securities and Exchange Commission
     on July 14, 2000.

(21) Incorporated by reference from Issuer's Quarterly Report on Form 10-QSB as
     filed with Securities and Exchange Commission on August 14, 2000.

(22) Incorporated by reference from Issuer's Current Report on Form 8-K as filed
     with the Securities and Exchange Commission on November 13, 2000.

(b)      Reports on Form 8-K

On August 23, 2001, we filed a report on Form 8-K with respect to an agreement
with Cisco. On August 13, 2001, we filed an amendment to a previously filed
report on Form 8-K.  This amendment pertained to our acquisition of Quaartz.



                                   SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
PLEASANTON, STATE OF CALIFORNIA ON THIS 14TH DAY OF JANUARY, 2002.

                                     APPIANT TECHNOLOGIES INC.



                                   By:  /s/  DOUGLAS S. ZORN
                                        -------------------------------------
                                        Douglas S. Zorn
                                        President and Chief Executive Officer


                                       57
<PAGE>
                                POWER OF ATTORNEY

EACH PERSON WHOSE SIGNATURE APPEARS BELOW CONSTITUTES AND APPOINTS DOUGLAS
S.ZORN AS HIS OR HER TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT WITH FULL POWER
OF SUBSTITUTION AND RESUBSTITUTION FOR HIM OR HER AND IN HIS OR HER NAME, PLACE
AND STEAD IN ANY AND ALL CAPACITIES TO EXECUTE IN THE NAME OF EACH SUCH PERSON
WHO IS THEN AN OFFICER OR DIRECTOR OF THE REGISTRANT ANY AND ALL AMENDMENTS TO
THIS REPORT ON FORM 10-K AND TO FILE THE SAME WITH ALL EXHIBITS THERETO AND
OTHER DOCUMENTS IN CONNECTION THEREWITH WITH THE SECURITIES AND EXCHANGE
COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS AND EACH OF THEM
FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUIRED
OR NECESSARY TO BE DONE IN AND ABOUT THE PREMISES AS FULLY AS HE OR SHE MIGHT OR
COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID
ATTORNEYS-IN-FACT AND AGENTS, OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR
SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE THEREOF.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
THIS REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT
AND IN THE CAPACITIES AND ON THE DATE INDICATED BELOW.


<TABLE>
<CAPTION>
    SIGNATURE                         TITLE                               DATE
<S>                        <C>                                      <C>
/s/ Douglas S. Zorn        Chairman of the Board, Chief Executive   January 14, 2002
---------------------      and Financial Officer, President and
Douglas S. Zorn            Director (Principal Executive Officer)

/s/ Robert J. Schmier      Director                                 January 14, 2002
---------------------
Robert J. Schmier

/s/ N. Bruce Walko         Director                                 January 14, 2002
---------------------
N. Bruce Walko

/s/ Allen F. Jacobson      Director                                 January 14, 2002
---------------------
Allen F. Jacobson

/s/ L. Thomas Baldwin III  Director                                 January 14, 2002
----------------------
L. Thomas Baldwin III
</TABLE>


                                       58
<PAGE>
                                INDEX TO EXHIBITS

     EXHIBIT
     NUMBER                        DESCRIPTION OF EXHIBIT
---------------------------------------------------------------------------
     4.35     Warrant dated October 31, 2000 issued to Joseph Stevens & Co.
     4.36     Warrant dated November 28, 2000 issued to Jack T. Zahran
     4.37     Warrant dated January 10, 2001 issued to L. Thomas Baldwin III
     4.38     Form of Warrant dated May 31, 2001 issued to various investors
     4.39     Form of Warrant dated June 8, 2001 issued to various investors
     4.40     Form of Warrant dated October 31, 2001 issued to various
              investors
     4.41     Form of Warrant dated November 2001 issued to various investors
     4.42     Form of Warrant dated December 2001 issued to various investors
     4.43     Convertible Promissory note dated March 21, 2001 issued to
              L. Thomas Baldwin III
     4.44     Warrant dated March 21, 2001 issued to L. Thomas Baldwin III
     4.45     Warrant dated March 31, 2001 issued to L. Thomas Baldwin III
     4.46     Warrant dated March 31, 2001 issued to L. Thomas Baldwin III
     4.47     Amendment to Convertible Promissory Note dated May 31, 2001
              between the Company and L. Thomas Baldwin III
     10.63    Master Service agreement dated March 22, 2001 between the Company
              and InPhonic, Inc.
      21      Subsidiaries
      24      Power of Attorney (included on signature page)

All other exhibits indicated in Item 13 of this Annual Report have been
incorporated by reference herein as indicated in Item 13.


                                       59
<PAGE>
                        Report of Independent Accountants

To: The Board of Directors and Stockholders
of Appiant Technologies Inc.:


In our opinion, the accompanying consolidated balance sheets as of September 30,
2001 and September 30, 2000 and the related consolidated statements of
operations and comprehensive loss, of stockholders' equity and of cash flows,
present fairly, in all material respects, the financial position of Appiant
Technologies Inc. and its subsidiaries at September 30, 2001 and September 30,
2000, and the results of their operations and their cash flows for each of the
years then ended in conformity with accounting principles generally accepted in
the United States of America. In addition, in our opinion, the financial
statement schedule listed in the index appearing under Item 14 for the years
ended September 30, 2001 and September 30, 2000 presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements. These financial statements and
financial statement schedule are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency that raise substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.



/s/ PricewaterhouseCoopers LLP
December 17, 2001



                                       60
<PAGE>





               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and the Stockholders of
Appiant Technologies Inc. (f.k.a. Nhancement Technologies Inc.) and Subsidiaries
Pleasanton, California

We have audited the accompanying consolidated statements of operations and
comprehensive loss, stockholders' equity, and cash flows of Appiant Technologies
Inc. (f.k.a. Nhancement Technologies Inc.) and Subsidiaries for the fiscal year
ended September 30, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Appiant Technologies Inc. (f.k.a. Nhancement Technologies Inc.) and Subsidiaries
for the fiscal year ended September 30, 1999 in conformity with accounting
principles generally accepted in the United States of America.


San Francisco, California
December 14, 1999



                                       61
<PAGE>
<TABLE>
<CAPTION>
                                            APPIANT TECHNOLOGIES INC. AND SUBSIDIARIES

                                                   CONSOLIDATED BALANCE SHEETS


---------------------------------------------------------------------------------------------------------------------------
                                                                                                      September 30,
                                                                                                  2001             2000
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                          <C>              <C>
ASSETS
CURRENT ASSETS:
        Cash and cash equivalents                                                            $  3,379,000     $  5,603,000
        Restricted cash                                                                           117,000          116,000
        Accounts receivable, less allowance for doubtful accounts of $335,000 and $402,000      1,123,000        3,907,000
        Inventory                                                                                 890,000          550,000
        Equipment at customers under integration                                                  206,000        1,708,000
        Prepaid expenses and other                                                                418,000          313,000
---------------------------------------------------------------------------------------------------------------------------
 TOTAL CURRENT ASSETS                                                                           6,133,000       12,197,000
---------------------------------------------------------------------------------------------------------------------------
        Property and equipment, net                                                             5,381,000        3,395,000
        Capitalized software, net                                                              16,664,000       18,366,000
        Goodwill and other intangible assets, net                                              10,255,000        2,443,000
        Other assets                                                                            1,933,000        2,384,000
---------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS                                                                                $  40,366,000     $ 38,785,000
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY                $                 $
CURRENT LIABILITIES:
        Lines of credit                                                                           300,000          343,000
        Accounts payable                                                                        8,834,000        5,269,000
        Accrued liabilities                                                                     3,209,000        2,478,000
        Deferred revenue                                                                        1,041,000        2,919,000
        Income tax payable                                                                        302,000          280,000
        Advances for preferred stock                                                                             3,500,000
        Accrued liability related to warrants                                                   1,818,000                -
        Convertible promissory notes payable                                                    2,700,000                -
        Notes Payable                                                                           5,726,000                -
        Capital lease obligations, current portion                                              4,085,000        3,072,000
---------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES                                                                      28,015,000       17,861,000
        Capital lease obligations, net of current portion                                          93,000        4,717,000
        Long term notes Payable                                                                   379,000                -
        Other                                                                                      39,000                -
TOTAL LIABILITIES                                                                              28,526,000       22,578,000
---------------------------------------------------------------------------------------------------------------------------
REDEEMABLE CONVERTIBLE PREFERRED STOCK: $0.01 par value, 2,000,000 shares authorized,
        1,500 shares issued and outstanding at September 30, 2001                                 253,000               -
---------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
        Common Stock, $0.01 par value, 40,000,000 and 20,000,000 shares authorized
     in 2001 and 2000 respectively, 15,983,200 and 12,349,200 shares issued
     and outstanding in 2001 and 2000 respectively.                                               157,000         123,000
        Additional paid-in capital                                                             80,657,000      49,261,000
        Unearned stock-based compensation                                                        (401,000)     (2,012,000)
        Accumulated deficit                                                                   (68,364,000)    (30,809,000)
        Accumulated other comprehensive loss                                                     (462,000)       (356,000)
---------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY                                                                  $  11,587,000     $ 16,207,000
---------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND  STOCKHOLDERS' EQUITY         $  40,366,000     $ 38,785,000
                                                                                            ==============    =============
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS


<PAGE>
<TABLE>
<CAPTION>
                                           APPIANT TECHNOLOGIES INC. AND SUBSIDIARIES

                                 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS


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

                                                                                        YEARS ENDED SEPTEMBER 30,

                                                                                2001          2000            1999
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>            <C>           <C>
Net revenues:
Products and integration services                                               $ 5,492,000    $11,236,000   $11,807,000
Other services                                                                   16,256,000     14,293,000    11,533,000
-------------------------------------------------------------------------------------------------------------------------
TOTAL NET REVENUES                                                              $21,748,000     25,529,000    23,340,000
-------------------------------------------------------------------------------------------------------------------------
Cost of net revenues:
Products and integration services                                                 5,008,000      9,852,000     8,530,000
Other services                                                                   12,538,000      8,621,000     7,269,000
-------------------------------------------------------------------------------------------------------------------------
TOTAL COST OF NET REVENUES                                                       17,546,000     18,473,000    15,799,000
-------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT NET                                                                  4,202,000      7,056,000     7,541,000
-------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Selling, general and administrative                                              16,678,000     16,365,000     7,421,000
Research and development                                                          2,981,000        189,000             -
Amortization of goodwill and other intangibles                                    1,883,000        676,000       443,000
Impairment of equipment and capitalized software                                  3,669,000              -             -
Restructuring charges                                                                     -              -       189,000
-------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES                                                         25,211,000     17,230,000     8,053,000
-------------------------------------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS                                                            (21,009,000)   (10,174,000)     (512,000)
OTHER INCOME (EXPENSE)
Interest income                                                                     265,000        217,000       108,000
Interest expense                                                                 (8,802,000)    (2,307,000)     (414,000)
Other                                                                              (104,000)      (312,000)      135,000
-------------------------------------------------------------------------------------------------------------------------
Total other expense                                                              (8,641,000)    (2,402,000)     (171,000)
Loss before provision for income taxes                                          (29,650,000)   (12,576,000)     (683,000)
Provision for income taxes                                                          279,000        268,000        34,000
-------------------------------------------------------------------------------------------------------------------------
NET LOSS                                                                        (29,929,000)  ($12,844,000)    ($717,000)
PREFERRED STOCK DIVIDENDS                                                        (7,626,000)       (22,000)     (738,000)
-------------------------------------------------------------------------------------------------------------------------
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS                                      ($37,555,000)  ($12,866,000)  ($1,455,000)
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
BASIC AND DILUTED NET LOSS PER COMMON SHARE                                          ($2.56)        ($1.25)        ($.23)
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
SHARES USED IN PER SHARE CALCULATION-BASIC AND DILUTED                           14,687,363     10,302,900     6,249,000
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
COMPREHENSIVE LOSS
 Net loss                                                                      ($29,929,000)  ($12,844,000)    ($717,000)
Other comprehensive loss:
      Translation loss                                                             (106,000)      (147,000)      (33,000)
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
COMPREHENSIVE LOSS                                                             ($30,035,000)  ($12,991,000)    ($750,000)
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS


                                       2
<PAGE>
<TABLE>
<CAPTION>
                                              APPIANT TECHNOLOGIES INC. AND SUBSIDIARIES

                                           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

--------------------------------------------------------------------------------------------------------------------------------
                                                            Additional     Unearned                    Accumulated
                                            Common Stock      Paid in     Stock-based   Accumulate    Comprehensive
                                        Shares     Amount     Capital     Compensation   Deficit           Loss       Total
--------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>        <C>      <C>           <C>           <C>            <C>         <C>
Balance at September 30, 1998           5,579,200  $55,000  $21,021,000              -  ($16,510,000)  ($176,000)  $4,390,000
Conversion of preferred stock
into common stock                       1,090,700   11,000      715,000              -             -           -      726,000
Additional common stock issued
For Infotel                               177,200    2,000       (2,000)            -             -            -            -
Issuance of warrants in preferred
financing                                       -        -      143,000              -            -            -      143,000
Deemed dividend on preferred
stock convertible at a discount                 -        -      708,000              -     (708,000)           -            -
Cash dividends on preferred stock               -        -            -              -      (30,000)           -      (30,000)
Compensation related to grant
Of stock options to employees                   -        -      105,000              -            -            -      105,000
Dividends on preferred stock paid
In common stock                            21,900        -       16,000              -            -            -       16,000
Infotel debt converted to common stock    559,100    6,000      629,000              -            -            -      635,000
Common stock issued for purchase
Of software assets from Eastern           675,000    7,000    1,022,000              -            -            -    1,029,000
Stockholder debt converted to
common stock                              116,600    1,000      116,000              -            -            -      117,000
Net loss                                        -        -            -              -     (717,000)           -     (717,000)
Cumulative translation loss                     -        -            -              -            -      (33,000)     (33,000)
--------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1999           8,219,700  $82,000  $24,473,000              -  (17,965,000)   ($209,000)  $6,381,000
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                                              Additional     Unearned                    Accumulated
                                            Common Stock       Paid in     Stock-based   Accumulate    Comprehensive
                                        Shares      Amount     Capital     Compensation   Deficit           Loss       Total
--------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>         <C>        <C>           <C>           <C>            <C>         <C>
Balance at September 30, 1999           8,219,700   $ 82,000   $24,473,000             -   ($17,965,000)  ($209,000)   $6,381,000
Conversion of preferred stock
into common stock                       1,056,400     11,000       844,000             -              -           -       855,000
Issuance of common stock
related to:
    Dividends on preferred stock
    paid in common stock                   23,700          -        22,000             -              -           -        22,000
    Exercise of stock options
    and warrants                        1,580,500     15,000     2,381,000             -              -           -     2,396,000
Conversion of convertible
debentures into common stock              685,400      7,000     5,890,000             -              -           -     5,897,000
Repurchase of common stock               (216,500)    (2,000)     (789,000)            -              -           -      (791,000)
Stock based compensation for
the issuance of warrants to:
      Consultants for services                  -          -     2,050,000             -              -           -     2,050,000
      Employees                                 -          -     2,036,000             -              -           -     2,036,000
      Other third parties                       -          -     2,827,000             -              -           -     2,827,000
Common stock and warrants
issued in acquisitions
      Trimark, Inc.                       750,000      7,000     3,453,000             -              -           -     3,460,000
      SVG Software Services, Inc.         250,000      3,000     2,175,000             -              -           -     2,178,000
Unearned stock-based
Compensation                                    -          -     2,073,000    (2,073,000)                                       -
Amortization of stock-based
compensation                                    -          -             -        61,000              -           -        61,000
Deemed interest expense
related to convertible
debentures at a discount                        -          -     1,595,000             -              -           -     1,595,000

Stock based compensation
related to benefit associated
with accelerated vesting of
options                                         -          -       231,000             -              -           -       231,000

Net loss                                        -          -             -             -    (12,844,000)          -   (12,844,000)
Cumulative translation loss                     -          -             -             -              -    (147,000)     (147,000)
---------------------------------------------------- ----------------------------------------------------------------------------
Balance at September 30, 2000          12,349,200   $123,000   $49,261,000   ($2,012,000)  ($30,809,000)  ($356,000)  $16,207,000
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS


                                       3
<PAGE>
<TABLE>
<CAPTION>
                                           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

---------------------------------------------------------------------------------------------------------------------------
                                                          Additional                               Accumulated
                                      Common Stock         Paid in    Stock-based   Accumulated   Comprehensive
                                   Shares       Amount     Capital    Compensation    Deficit         Loss        Total
---------------------------------------------------------------------------------------------------------------------------
<S>                               <C>         <C>       <C>           <C>           <C>            <C>         <C>
Balance at September 30, 2000     12,349,200  $123,000  $49,261,000   ($2,012,000)  ($30,809,000)  ($356,000)  $16,207,000
Issuance of warrants in
 in conjunction with
 Series B preferred stock                  -         -    1,107,000             -              -           -     1,107,000
Beneficial conversion feature
 related to issuance of
 convertible promissory
 notes payable                             -         -    2,548,000             -              -           -     2,548,000
Dividend related to beneficial
 conversion feature of
 preferred stock                           -         -    7,626,000             -     (7,626,000)          -             -
Conversion of Series B
 Preferred Stock to
 Common Stock                        831,000     8,000    4,670,000             -              -           -     4,678,000
Issuance of common stock
related to:
    Exercise of stock options        219,000     2,000      319,000             -              -           -       321,000
    Exercise of warrants             602,000     5,000    1,492,000             -              -           -     1,497,000
    Equity Line Agreement            332,000     3,000       (3,000)            -              -           -             -
Stock based compensation for
issuance of warrants to:
   consultants for services                -         -      436,000             -              -           -       436,000
   Warrants issued in
   conjunction with convertible
   promissory notes payable                -         -    4,883,000             -              -           -     4,883,000
Common stock issued for:
    Services                          25,000         -            -             -              -           -             -
    Quaartz acquisition            1,500,000     15,000   8,295,000             -              -           -     8,310,000
    Convertible notes financing      100,000      1,000     545,000             -              -           -       546,000
    Preferred stock consultants       25,000          -     568,000             -              -           -       568,000
Stock options granted in
Quaartz acquisition                        -          -     430,000             -              -           -       430,000
Reversal of unearned stock-based
 compensation related to
 employee terminations                     -          -  (1,520,000)    1,520,000              -           -             -
Amortization of stock-based
compensation                               -          -           -        91,000              -           -        91,000
Net loss                                   -          -           -                  (29,929,000)          -   (29,929,000)
Cumulative translation loss                -          -           -             -              -    (106,000)     (106,000)
---------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 2001     15,983,200  $ 157,000 $80,657,000   $  (401,000)  $(68,364,000)  $(462,000)  $11,587,000
---------------------------------------------------------------------------------------------------------------------------
</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS


                                       4
<PAGE>
<TABLE>
<CAPTION>
                                       APPIANT TECHNOLOGIES INC. AND SUBSIDIARIES

                                          CONSOLIDATED STATEMENTS OF CASH FLOW

--------------------------------------------------------------------------------------------------------------------
                                                                                           YEARS ENDED
                                                                                           SEPTEMBER 30
                                                                                2001           2000          1999
--------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
        Net loss                                                           ($29,929,000)  ($12,844,000)   ($717,000)
        Adjustments to reconcile net loss to net cash (used in)
        provided by operating activities:
        Provision for (reduction in) doubtful accounts                          622,000        411,000            -
        Depreciation and amortization                                           566,000      1,071,000      405,000
        Amortization of goodwill and intangibles                              1,987,000        676,000      443,000
        Amortization of stock based compensation                                 91,000         61,000            -
        Provision for excess and obsolete inventory                             397,000              -            -
        Interest expense related to issuance of warrants to related party     3,799,000              -            -
        Impairment of equipment and capitalized software                      3,913,000              -            -
        Stock-based compensation                                             (1,369,000)     4,317,000      104,000
        Amortization of discount on convertible notes payable                 2,842,000      1,595,000            -
        Other                                                                         -              -      (41,000)
        Changes in operating assets and liabilities, net of acquisitions:
             Accounts receivable                                              2,178,000      1,403,000   (1,146,000)
             Inventory                                                         (737,000)             -
             Inventory and equipment at customers under integration           1,502,000       (664,000)     (48,000)
             Prepaid expenses and other                                         (55,000)       (36,000)     131,000
             Other assets                                                      (365,000)      (190,000)     235,000
             Income tax payable                                                                201,000     (253,000)
             Accounts payable and other current liabilities                   4,969,000       (799,000)   2,008,000
        Deferred Revenue                                                     (1,878,000)     1,311,000            -
--------------------------------------------------------------------------------------------------------------------
CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES                             (11,467,000)    (3,486,000)   1,121,000
--------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
        Restricted cash                                                          (1,000)        74,000      179,000
        Proceeds from (payments on)note payable to related party                      -        574,000     (238,000)
        Proceeds on sale of property and equipment                                    -         17,000      159,000
        Cash acquired in connection with acquisition                             22,000         45,000            -
        Purchases of software                                                (2,292,000)             -       82,000
        Capitalization of software development costs                         (2,064,000)      (618,000)           -
        Purchase of property and equipment                                     (940,000)    (1,206,000)    (340,000)
--------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES                                        (5,275,000)    (1,114,000)    (158,000)
--------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
        Share repurchase                                                                      (791,000)
        Repayments under lines of credit                                       (343,000)      (197,000)     309,000
        Advance payment on future lease obligation                                    -     (2,000,000)
        Proceeds from issuance of note payable to software vendor             3,000,000              -
        Proceeds from issuance of common stock                                1,745,000              -
        Proceeds from issuance of convertible notes and warrants              5,032,000      5,397,000
        Advanced payments for preferred stock                                                3,559,000
        Proceeds from warrants and options exercised for common stock         1,818,000      2,396,000
        Proceeds from issuance of preferred stock, net of issuance
         costs                                                                4,932,000              -    1,472,000
        Principal payments on capital lease obligations                      (1,560,000)      (344,000)     (93,000)
        Principal payment on notes payable to stockholders                            -              -   (1,990,000)
--------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                          14,624,000      8,020,000     (302,000)
--------------------------------------------------------------------------------------------------------------------
           Effect of exchange rate changes on cash                             (106,000)      (146,000)      (9,000)
--------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                         (2,224,000)     3,274,000      652,000
--------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                5,603,000      2,329,000    1,677,000

CASH AND CASH EQUIVALENTS, END OF PERIOD                                     $3,379,000     $5,603,000   $2,329,000
--------------------------------------------------------------------------------------------------------------------
</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS


                                       5
<PAGE>
<TABLE>
<CAPTION>
                                     SUPPLEMENTAL CASH FLOW INFORMATION:

------------------------------------------------------------------------------------------------------
                                                                                 YEARS ENDED
                                                                                 SEPTEMBER 30
                                                                         2001       2000       1999
------------------------------------------------------------------------------------------------------
<S>                                                                   <C>        <C>        <C>
CASH TRANSACTIONS:
       Income taxes                                                   $  53,000  $    6,000  $ 315,000
       Interest paid                                                    725,000     440,000    414,000

NON-CASH TRANSACTIONS:
       Issuance of Common Stock and options in acquisitions           8,740,000   5,638,000  1,029,000
       Renegotiation of lease terms resulting in return of equipment  1,504,000           -          -
       Deemed dividends related to beneficial conversion feature of
        Preferred Stock                                               7,626,000           -    708,000
       Beneficial conversion feature on promissory notes payable      2,548,000           -          -
       Cancellation of software lease                                 7,193,000           -          -
       Estimated value of warrants issued to customer                   449,000           -          -
       Estimated value of warrants issued to underwriters             2,226,000           -          -
       Conversion of Preferred Stock into Common Stock                4,678,000     855,000    726,200
       Property and equipment acquired under capital lease            5,092,000   1,481,000    125,200
       Conversion of convertible debentures to common stock                   -   5,897,000          -
       Dividends on preferred stock paid in common stock                      -      22,000     16,000
       Unearned stock-based compensation                                      -   2,073,000          -
       Conversion of advanced payment to preferred stock              3,559,000           -          -
       Issuance of Common Stock for conversion of Stockholder debt            -           -    117,000
       Conversion of Infotel debt to common stock                             -           -    635,000
</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS


                                       6
<PAGE>
                   APPIANT TECHNOLOGIES INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  OVERVIEW

BACKGROUND AND BUSINESS

We formally changed our name to Appiant Technologies, Inc. from Nhancement
Technologies, Inc. upon receiving shareholder approval.  We have also filed
trademark application for the name change.  Appiant Technologies Inc.,
("Appiant" or the "Company") is a Delaware corporation headquartered in
Pleasanton, California and was incorporated in October 1996 as a holding
company. The Company's businesses have been conducted through its operating
subsidiaries, Appiant Technologies North America, Inc. ("APPIANT NA"), a
California corporation headquartered in Pleasanton, California, and Infotel
Technologies (Pte), Ltd., based in Singapore. APPIANT NA has historically been a
systems distributor and integrator of voice processing and multimedia messaging
equipment and software and in fiscal 2000, began the development and purchase of
software for its hosted internet protocol based unified communication and
unified information portal services under the name inUnison(TM) . Infotel is a
distributor of telecommunications and other electronic products and provides
consulting and a range of other services for the telecommunications and
information technology market. Infotel also provides radar system integration,
turnkey project management, and electronic test instrumentation services.

APPIANT NA revenues were 40%, 55% and 59% of consolidated net revenues in fiscal
years 2001 and 2000. Infotel revenues were 60%, 45% and 41% of consolidated net
revenues for fiscal years 2001, 2000 and 1999.

During fiscal year 1999, the Company acquired the assets of Eastern Systems
Technology, Inc. ("Eastern"), which primarily consisted of a software search
engine capable of accessing information contained in multiple corporate
databases. The Eastern acquisition provided the Company with a search engine for
inclusion in the Company's inUnison(TM) portal services applications.

During fiscal year 2000, the Company acquired the assets of SVG Software
Services, Inc., a California corporation ("SVG"), which primarily consisted of
customer relationship management software, and Appiant Technologies (India) Pte.
Ltd. ("APPIANT India") a company incorporated in Chennai, India. APPIANT India
had conducted software development activities for the inUnison(TM) portal and
also focuses on call center solutions and outsourcing for enterprises seeking to
establish call centers in India. During the fiscal year 2001 the Company sold
Appiant India operations to rationalize costs and to focus on its core
competencies.

During fiscal year 2000, the Company acquired Trimark, Inc., headquartered in
San Diego, California and doing business as Triad Marketing ("Triad"). Triad
designs, manufactures and markets profile selling software products to corporate
and credit union clients. During 2001 the legacy Triad operations were
substantially terminated.


                                        7
<PAGE>
The Triad and SVG acquisitions provided the Company with recommendation engine
software tools and customer relationship management software, respectively, for
inclusion in the Company's inUnison(TM) portal service applications.

During fiscal year 2001, the Company acquired Quaartz, an application and
service provider primarily involved in software development projects for the
Company. Acquisition of Quaartz provided the Company with calendar software
tools for inclusion in the Company's inUnison(TM) portal service applications.
Quaartz is a pioneering Internet affinity marketing company that provides
Internet-hosted applications enabling companies and organizations to deliver
event announcements, communication tools and e-commerce directly to their online
communities.

The Company restructured its operations, closing a number of remote divisions
and implementing a 20% work force reduction for the year ended September 30,
2001.  Restructuring charges consisted principally of severance payments to
former officers and Executives and operational and administrative employees of
APPIANT NA. A total of 63 employees were terminated for the year ended September
30, 2001 and a total of $363,000 was expensed and included in selling, general
and administrative expenses.

The Company's acquisitions and the disposal of Appiant India are described
further in Note 3 to the consolidated financial statements.

The Company also has a Canadian subsidiary, which facilitates the sale of
APPIANT NA's voice processing and multimedia messaging equipment and integration
services.

LIQUIDITY

The consolidated financial statements of the Company and its subsidiaries
contemplate the realization of assets and satisfaction of liabilities in the
normal course of business. The Company recorded a net loss of $29,929,000 on net
revenues of $21,748,000 for fiscal year 2001 and also sustained significant
losses for the fiscal years ended 2000 and 1999. At September 30, 2001, the
Company had an accumulative deficit of $68.4 million. As a result, the Company
will need to generate significantly higher revenue to reach profitability as the
organization of the new inUnison(TM) portal business is built. In addition, the
amortization of capitalized software and other assets that the Company has
purchased or developed for the new inUnison(TM) portal will commence or continue
in fiscal 2002.

Management's plans to reverse the recent trend of losses are to increase
revenues and gross margins while controlling costs, primarily based on expected
revenues for the Company's inUnison(TM) portal services applications. At
September 30, 2001, the Company had an accumulated deficit of $68,364,000.
Continued existence of the Company is dependent on the Company's ability to
obtain adequate funding and eventually establish profitable operations. The
Company intends to obtain additional equity and/or debt financing in order to
further finance the development and market introduction of its inUnison(TM)
portal services and to meet working capital requirements. There remains
significant uncertainly, however, about the Company's ability to continue as
going concern. The accompanying financial statements do not include any
adjustments that might result from the outcome of this uncertainty.


                                        8
<PAGE>
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION AND FOREIGN CURRENCY TRANSLATION

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. Inter-company accounts and transactions have been
eliminated. Assets and liabilities of Infotel, which operates in a local
currency environment, are translated into U.S. dollars at exchange rates in
effect at the balance sheet date and income and expense accounts are translated
at average exchange rates during the fiscal year. Resulting translation
adjustments are recorded in other comprehensive loss.

USE OF ESTIMATES

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

FINANCIAL INSTRUMENTS

The Company classifies highly liquid investments with an original or remaining
maturity of three months or less at date of purchase as cash equivalents. The
carrying amounts reported for cash and cash equivalents are considered to
approximate fair values based upon the short maturities of those financial
instruments and comprise cash deposits at September 30, 2001 and 2000.

The carrying amounts of certain of the Company's other financial instruments
including accounts receivable, accounts payable, lines of credit, notes payable
and certain promissory notes payable approximate fair value due to their short
maturities. The June 8, 2001 notes payable approximate fair value based upon
interest rate at which the Company believes similar borrowings are available.
The accrual for warrant liability is described in Note 6.

The Company's Infotel subsidiary maintains fixed deposits to secure bankers'
guarantees of its performance on radar system integration projects. The
restrictions on these funds are released when the projects are completed. The
Company expects guaranteed work collateralized by these deposits to be completed
within one year.

The Company has significant international sales transactions generated by it's
Singapore subsidiary, Infotel.  The Company used forward exchange contracts to
hedge unrecognized firm purchase commitments that expose the Company to risk
as a result of fluctuations in foreign currency exchange rates. Unrealized gains
and losses of forward exchange contracts that are designated as hedges of firm
purchase commitments are recorded in other current liabilities or assets and
are included in the measurement of the underlying transaction. Hedge accounting
was only applied if the derivative reduced the risk of the underlying hedged
item and was designated at inception as a hedge. Derivatives were measured for
effectiveness both at inception and on an ongoing basis. There were no foreign
exchange forward contracts outstanding at September 30, 2001.


                                        9
<PAGE>
On October 1, 2000, the Company adopted Statement of Financial Accounting
Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and
Hedging Activities." SFAS 133 establishes new standards of accounting and
reporting for derivative instruments and hedging activities. SFAS 133 requires
that all derivatives be recognized at fair value in the statement of financial
position, and that the corresponding gains or losses be reported either in the
statement of operations or as a component of comprehensive income, depending on
the type of hedging relationship that exists. In July, 1999, the Financial
Accounting Standard Boards issued SFAS No. 137, ("SFAS 137"), "Accounting for
Derivative Instruments and Hedging Activities -- Deferral of the Effective Date
of SFAS No. 133." SFAS 137 deferred the effective date of SFAS 133 until the
first fiscal quarter beginning after June 15, 2000. The implementation of the
statements SFAS No. 133 and SFAS No. 137 did not have a significant impact on
the Company's financial position and results of operations.

CERTAIN RISKS AND UNCERTAINTIES

Financial Instruments

Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of cash and cash equivalents and accounts
receivable. The Company maintains substantially all of its cash and cash
equivalent balances with one financial institution domiciled in the United
States and another domiciled in Singapore. The Company performs ongoing credit
evaluations of its customers, generally does not require collateral of its
customers and maintains allowances for potential credit losses. At September 30,
2001, no customers constituted more than 10% of accounts receivable. At
September 30, 2000, two customers constituted 18% and 12% of accounts
receivable.

Suppliers

The Company's Enterprise operations of APPIANT NA depends upon the integration
of hardware, software, and communications and data processing equipment
manufactured by others into systems designed to meet the needs of  customers.
Although the Company has agreements with a number of equipment manufacturers, a
major portion of the Company's revenues has been generated from the sale of
products manufactured by three companies. The Company relies  significantly on
products manufactured and services provided by three major suppliers.  Any
disruption in the Company's relationships with the suppliers would have a
significant adverse effect on the Company's business for an indeterminate period
of time until new supplier relationships could be established. Any interruption
in the delivery of products by key suppliers would materially adversely affect
the Company's results of operations and financial conditions.

Some of the Company's current suppliers may currently or, at some point, compete
with the Company as it rolls out its inUnison(TM) UC/UI applications. Any
potential competition from the Company's suppliers could have a material
negative impact on its business and financial performance.

The Company's inUnison(TM) UC/UI product applications that are designed to
provide the Company's customers with hosted unifying communications and unifying
information solutions. The Company's inUnison applications utilize a unified
communications platform, Unified Open Network Exchange ("Uone").


                                       10
<PAGE>
While the Company believes that the Company's inUnison-(TM)- applications will
provide the Company's customers with scaled, carrier grade IP-based solutions,
the Company cannot assure that the Company's customers will accept or adopt them
on a large scale. The Company's integration efforts with other third party
software has and could continue to result in product delays and cost overruns.
The Company cannot assure that other software vendors whose software products
the Company licenses or incorporates into the inUnison-(TM)- portal will
continue to support their products. If these vendors discontinue their support,
the Company's business would be adversely affected.

Infotel, the Company's Singapore subsidiary, offers a wide range of
infrastructure communications equipment products. It has an established business
providing test measuring instrumentation and testing environments, and is the
regional distributor and test and repair center for Rohde & Schwarz test
instruments. Infotel is also a networking service provider, and manages data
networks for various customers. Infotel's financial performance depends in part
on a steady stream of revenues relating to the services performed for Rohde &
Schwarz test instruments. Any material change in our relationship with our
manufacturers, including but not limited to Rohde & Schwarz, would materially
adversely affect our results of operations and financial condition.

Revenue

Customer revenues from the Company's two largest customers accounted for
approximately 16% and 10%, 29% and 5%, and 25% and 5% of total revenues during
fiscal years 2001, 2000, and 1999 respectively. This concentration of revenue
has resulted in additional risk to the Company's operations and any disruption
of orders from our largest customers would adversely affect the Company's
results of operations and financial condition.

INVENTORY

Inventory consists of systems and system components and is valued at the lower
of cost (first-in, first-out method) or market.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the respective assets,
generally three to seven years. Depreciation for leasehold improvements is
recorded using the straight-line method over the shorter of the lease term or
their estimated useful lives. Upon sale or retirement of assets, cost and
related accumulated depreciation are removed from the balance sheet and the
resulting gain or loss is reflected in operations. Maintenance and repairs are
expensed as incurred and improvements are capitalized and depreciated.

The Company reviews property and equipment for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable, or whenever management has committed a plan to dispose of the
assets. Recoverability of an asset is measured by comparison of its carrying
amount to future net cash flows that the asset is expected to generate. If such
assets are considered to be impaired, the impairment recognized is measured by
the amount by which the carrying amount of the assets exceeds the projected
discounted future cash flows arising from the assets.


                                       11
<PAGE>
GOODWILL AND OTHER INTANGIBLES

Goodwill, which is the excess of cost over net assets acquired, relates to the
Company's acquisitions of APPIANT NA, Infotel, Triad and Quaartz and is
amortized over periods of three to ten years using the straight-line method.
Other intangible assets relate to acquired assembled workforce and are amortized
over a period of two years using the straight-line method.

Whenever events or circumstances indicate the carrying value of goodwill and
other intangible assets might not be recoverable, and periodically the Company
assesses the recoverability of intangible assets by determining whether the
amortization of the asset balance over its remaining life can be recovered
through undiscounted future operating cash flows of the acquired operations. The
amount of impairment, if any, is recognized to the extent that the carrying
value exceeds the projected discounted future operating cash flows and is
recognized as a write down of the intangible assets.

At September 30, 2001, the company had substantially terminated operations for
its Triad subsidiary including termination of employees of Triad and sales
activities.  Consequently, the Company expects to generate no future cash flows
from this operation.  The company determined that the goodwill and workforce
acquired had no remaining value and as a result, recorded an impairment charge
of $204,000.  The Company has retained the acquired customer relationship
management software for integration into its inUnison(TM) portal.

SOFTWARE DEVELOPMENT COSTS

The Company has adopted SOP 98-1 "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" as it intends to offer its software
applications in a hosted service model. Software development costs, including
costs incurred to purchase third party software, are capitalized beginning when
the Company has determined factors are present, including among others, that
technology exists to achieve the performance requirements, buy versus internal
development decisions have been made and the Company's management has authorized
the funding for the project. Capitalization of software costs ceases when the
software is substantially complete and is ready for its intended use and is
amortized over its estimated useful life of three years using the straight-line
method. No software projects have been substantially completed as of September
30, 2001. To the extent that the Company were to license software, any revenues
net of any direct incremental costs such as marketing, commissions, software
reproduction costs, warranty, and service obligations, would be applied against
the capitalized cost of software, and no profit would be recognized from such
transactions unless and until net proceeds from licenses and amortization have
reduced the capitalized carrying amount of the software to zero.  Subsequent
proceeds from licensing the software would be recognized as revenue.

When events or circumstances indicate the carrying value of internal use
software might not be recoverable, the Company will assess the recoverability of
these assets by determining whether the amortization of the asset balance over
its remaining life can be recovered through undiscounted future operating cash
flows. The amount of impairment, if any, is recognized to the extent that the


                                       12
<PAGE>
carrying value exceeds the projected discounted future operating cash flows and
is recognized as a write down of the asset. In addition, when it is no longer
probable that computer software being developed will be placed in service, the
asset will be recorded at the lower of its carrying value or fair value, if any,
less direct selling costs.

The Company had capitalized $1.2 million of purchased software related to
software obtained for billing and provisioning.  In June 2001, the Company
concluded that the software would not be placed in service and recorded a charge
of $1.2 million in fiscal year 2001.  The Company is in discussions with the
vendor regarding settlement of the related account payable.

REVENUE RECOGNITION

The Company derives its revenue from APPIANT NA and Infotel. Generally, revenue
derived from APPIANT NA relates to the distribution and integration of voice
processing and multimedia messaging equipment manufactured by others and
maintenance services. The revenue derived from Infotel primarily relates to the
distribution and integration of telecommunications and other electronic products
and providing services primarily for radar system integration, turnkey project
management and test instrumentation. Equipment sales and related integration
services revenue is recognized upon acceptance and delivery if a signed contract
exists, the fee is fixed or determinable, and collection of the resulting
receivable is reasonably assured. Equipment at customer sites and related costs
of integration are included in "Equipment at customers under integration" in the
accompanying Consolidated Balance Sheet.

Revenue from maintenance services related to ongoing customer support is
recognized ratably over the period of the maintenance contact. Maintenance
service fees are generally received in advance and are non-refundable. Service
revenue is recognized as the related services are performed.

Revenues from projects undertaken for customers under fixed price contracts are
recognized under the percentage-of-completion method of accounting for which the
estimated revenue is based on the ratio of cost incurred to costs incurred plus
estimated costs to complete. When the Company's current estimates of total
contract revenue and cost indicate a loss, the Company records a provision for
estimated loss on the contract.

Deferred revenue includes advance payments received for maintenance services for
ongoing customer support, other prepaid services and revenues received or due
under the terms of the contracts for which customer acceptance had not been
received.

At September 30, 2001, the Company has not recognized any revenues or recorded
any deferred revenues from its inUnison(TM) portal services.

INCOME TAXES

Deferred tax assets and liabilities are determined based on differences between
the financial statement and tax bases of assets and liabilities using enacted
tax rates in effect for the country and the period in which the differences are
expected to affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.


                                       13
<PAGE>
STOCK-BASED COMPENSATION

The Company uses the intrinsic value method to record stock-based compensation
for employees provided the stock options terms meet the requirements for fixed
accounting. The intrinsic value method requires that deferred stock compensation
is recorded for the difference between the exercise price and fair value of the
underlying common stock on the grant date of the stock option. Pro forma net
loss disclosures are presented in Note 10, assuming all employee options were
valued using the Black-Scholes model and the resulting stock-based compensation
is amortized over the term of the option becomes exercisable, using the
straight-line method. Stock-based compensation to non-employees is based on the
fair value of the option estimated using the Black-Scholes model on the date of
grant and re-measured until vested. Compensation expense resulting from
non-employee options is amortized to expense using an accelerated method
described in Financial Accounting Standards Board ("FASB") Interpretation No.28.

The Company has granted warrants to purchase its common stock to non-employees
and certain companies for services or software. Stock-based compensation is
estimated using the Black-Scholes model on the date of grant if vested and if
not vested, re-measured until vested.

NET LOSS PER SHARE

Basic net loss per share is computed based on the weighted average number of
shares outstanding during the period. Diluted net loss per share is also
computed based on the weighted average number of shares outstanding during the
period. Diluted net loss per share does not include the weighted average effect
of dilutive potential common shares including convertible preferred stock and
debt, options and warrants to purchase common stock and common stock subject to
repurchase in any period presented because the effect is anti-dilutive. The
following table presents information necessary to reconcile basic and diluted
net loss per common and common equivalent share:

<TABLE>
<CAPTION>
                                                                   FISCAL YEARS
                                                    -----------------------------------------
                                                        2001           2000          1999
                                                    -------------  -------------  -----------
<S>                                                 <C>            <C>            <C>
Net loss                                            $(29,929,000)  $(12,844,000)    (717,700)
Preferred stock dividends                             (7,626,000)       (22,000)    (738,000)
                                                    -------------  -------------  -----------
Net loss attributable to common stockholders        $(37,555,000)  $(12,866,000)  (1,455,000)
                                                    =============  =============  ===========
Weighted average shares used in net loss per          14,687,363     10,302,900    6,249,000
                                                    =============  =============  ===========
Anti-dilutive securities:
  Convertible preferred stock                            253,000              -      846,000
  Options and warrants to purchase common stock        7,418,000      4,888,500    3,123,600
   Additional shares issuable as
   consideration in connection with
   acquisitions                                          250,000        250,000      177,200

   Convertible promissory note payable                 1,605,000              -            -
                                                    -------------  -------------  -----------
Anti-dilutive securities not included in
Net loss per share calculation                         9,526,000      5,138,500    4,146,800
                                                    =============  =============  ===========
</TABLE>


RECLASSIFICATION

Certain amounts in prior years consolidated financial statements have been
reclassified to conform to the current year presentation.


                                       14
<PAGE>
COMPREHENSIVE LOSS

Comprehensive loss is defined as the change in equity of a business enterprise
during a period from transactions and other events and circumstances from
non-owner sources. Comprehensive loss includes cumulative translation
adjustments, the impact of which has been excluded from net loss and reflected
instead in equity. The company has reported the components of comprehensive loss
on its consolidated statement of stockholders' equity.


RECENT ACCOUNTING PRONOUNCEMENTS

In December 1999, the SEC issued Staff Accounting Bulletin No. 101 ("SAB 101"),
Revenue Recognition in Financial Statements." SAB 101 summarizes certain of the
SEC's views in applying generally accepted accounting principles to revenue
recognition in financial statements. The Company adopted SAB 101 in the first
quarter of fiscal 2001. The adoption of SAB 101 did not have a material effect
on the Company's financial position or results of operations.

In September 2001, the Emerging Issues Task Force  "EITF" issued EITF 00-19
"Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settled in, a Company's Own Stock". The Task Force discussed the accounting for
freestanding contracts that are indexed to, and potentially settled in, a
company's own stock (including options, warrants) and reached several
consensuses. The consensuses are to be applied to all freestanding derivative
financial instruments that are indexed to, and potentially settled in, a
company's own stock. The company has adopted the EITF in fiscal year 2001 and
recorded warrants with the June 8, 2001 Convertible Notes Payable as a liability
(see Note 6).

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations."
SFAS 141 requires the purchase method of accounting for business combinations
initiated after June 30, 2001 and eliminates the pooling-of-interests method.
The Company believes that the adoption of SFAS 141 will not have a significant
impact on its financial statements. In July 2001, the FASB issued Statement of
Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other
Intangible Assets," which is effective for fiscal years beginning after March
15, 2001.  SFAS 142 requires, among other things, the discontinuance of goodwill
amortization.  In addition, the Standard includes provisions upon adoption for
the reclassification of certain existing recognized intangibles as goodwill,
reassessment of the useful lives of existing recognized intangibles,
reclassification of certain intangibles out of previously reported goodwill and
the testing for impairment of existing goodwill and other intangibles.  The
Company is currently assessing but has not yet determined the impact of SFAS 142
on its financial position and results of operations.

In October 2001, the FASB issued SFAS 144  Accounting for the Impairment or
Disposal of Long-Lived Assets , which is required to be applied in fiscal years
beginning after December 15, 2001. SFAS 144 requires, among other things, the
application of one accounting model for long-lived assets that are impaired or
to be disposed of by sale. The Company believes that the adoption of SFAS 144
will not have a significant impact on its financial position or results of
operations.


                                       15
<PAGE>
3.  BUSINESS AND ASSET ACQUISITIONS AND DISPOSITIONS

INFOTEL

On June 22, 1998, the Company acquired all of the outstanding shares of the
common stock of Infotel. The consideration paid to Infotel shareholders in
connection with the acquisition consisted of cash of $2,356,000 and
approximately 433,000 shares of Common Stock of the Company (the "Acquisition
Shares"). Infotel shareholders had the opportunity to receive $1,884,000 in
additional payments if Infotel exceeded certain minimum profit levels during the
years ending June 30, 1999 and 1998. Infotel exceeded these minimum profit
levels, and on April 29, 1999, the Company negotiated a settlement agreement
with the former Infotel shareholders to accept $635,000 of the performance
payment in exchange for 559,100 shares of the Company's Common Stock and
$1,250,000 in cash. In August 1999, the Company paid the $1,250,000 million plus
accrued interest. The Company had no further cash payment obligations under the
terms of the acquisition agreement. The acquisition agreement provided that if
the price of the Company's Common Stock is less than $5.00 on the first
anniversary of the Infotel acquisition, 50% of the initial shares issued to the
Infotel shareholders are subject to adjustment and likewise 50% are subject to
adjustment on the second anniversary date if the per share price is less than
$5.00. Should the Company's Common Stock price be below $5.00 per share on
either of these two dates, the Infotel shareholders would be entitled to receive
that number of shares equal to the lesser of (i) one-half of the initial shares
valued at $5.00 per share divided by the fair market value per share minus
one-half the initial shares valued, or (ii) one-half the initial shares valued
at $5.00 per share divided by $2.75 (subject to adjustment for stock splits
and the like). On the first anniversary of the Closing, the Company's Common
Stock was less than $5.00, and the Company issued approximately 177,000
additional shares of the Company's Common Stock to the former Infotel
shareholders.

The acquisition was accounted for as a purchase, which means that the purchase
price was allocated to the assets acquired and liabilities assumed based on
estimated fair values at the date of acquisition. The results of operations of
Infotel have been included with the Company's results of operations since June
22, 1998, the date of purchase.

On June 6, 2000, the Company exercised its right under the terms of the Infotel
Purchase and Sale Agreement to repurchase 216,500 shares of its common stock at
a price of approximately $3.65 per share from the former Infotel stockholders.
The reacquired shares were originally issued to the Infotel stockholders in
connection with the Company's acquisition of Infotel in June 1998.

EASTERN SYSTEMS TECHNOLOGY, INC.

On August 31, 1999, the Company acquired software from Eastern, a software
development company, in exchange for 675,000 shares of the Company's Common
Stock with an estimated value of $1,029,000, calculated based on the average of
the share price two days before and after the date of announcement of the
acquisition on August 31, 1999, which was restricted stock for period of one
year, cash of $150,000 and extinguishment of a debt of $250,000 loaned to
Eastern, resulting in a total purchase price of $1,429,000 for the software. The
software was acquired for internal use for the Company's inUnison(TM) portal
service applications and was capitalized. Amortization of the software will
commence when the inUnison(TM) portal is substantially complete and is ready for
its intended use.


                                       16
<PAGE>
SVG SOFTWARE SERVICES, INC. AND APPIANT TECHNOLOGIES (INDIA) PTE. LTD.

On February 4, 2000, the Company completed its acquisition of certain assets of
SVG pursuant to the Plan and Agreement of Reorganization between Appiant and
SVG. The transaction was structured as a tax-free reorganization. Under terms of
the Agreement, The Company acquired all rights to SVG's intellectual property,
primarily software, and the right to use its corporate name in exchange for
250,000 shares of the Company's Common Stock valued at $2,178,000, calculated
based on the average of the share price two days before and after the
announcement date on February 4, 2000. The purchase allocation price was
allocated to software and goodwill of $2,129,000 and $49,000, respectively. The
software was acquired for internal use for the Company's hosted internet
inUnison(TM) portal service applications and was capitalized. Amortization of
the software will commence when the hosted internet portal is substantially
complete and ready for its intended use.

In February, 2000, the Company also entered into an agreement with certain
parties affiliated with SVG to acquire all of the outstanding shares of the
common stock of APPIANT India. The acquisition price of $50,000 and assets and
liabilities acquired were not material to the Company financial position or
results of operations. The results of operations of APPIANT India have been
included with the Company's result of operations since April 4, 2000, the date
of acquisition.

In fiscal year 2001 the Company sold its Appiant India subsidiary to a related
party. The disposition did not have a significant impact on Company's financial
position or results of operations as the net assets of the India subsidiary were
not significant.

TRIMARK, INC.

On January 21, 2000, the Company completed its acquisition of all of the
outstanding shares of common stock of Triad in exchange for approximately
750,000 shares of Common Stock of the Company, and warrants to purchase 250,000
shares of the Company's Common Stock at an exercise price of $1.53 per share.
The transaction was structured as a tax free reorganization. The purchase
agreement provides that in the event that the average closing price of Appiant
Common Stock for the five consecutive trading days ending on the trading day
immediately prior to the first anniversary and second anniversary of the
transaction's closing (the "Valuation Formula") falls below $4.00, the Triad
shareholders are entitled to additional consideration either in cash or Appiant
Common Stock, at the Company's option. On the first anniversary date, Triad
shareholders are entitled to additional consideration equal to one-half of the
unregistered shares of the Company's Common Stock that they still own plus all
of the registered shares of the Company's Common Stock that they still own,
multiplied by the lesser of (i) $4.00 minus the Valuation Formula, or (ii)
$2.50. At the second anniversary date, the Triad shareholders are entitled to
additional consideration of equal to 250,000 unregistered shares owned by the
Triad shareholders multiplied by the lesser of (i) $4.00 minus the Valuation
Formula, or (ii) $2.50. As the guaranteed price of $4.00 per share was in excess
of the fair value of the Company's common stock two days before and after the
announcement of the acquisition on December 10, 1999, the common stock issued
was valued at $4.00 per share or $3,000.000. The estimated value of the warrants
issued to purchase the Company's common stock of $460,000 was estimated using
the Black-Scholes option pricing model using the following assumptions: expected
volatility of 90%, weighted-average risk free interest rate of 6%, term of 3


                                       17
<PAGE>
years and no expected dividends. The acquisition has been accounted for as a
purchase, which means the purchase price was allocated to the assets acquired
and liabilities assumed based on estimated fair values at the date of the
acquisition. The results of operations of Triad have been included with the
Company's results of operations since January 21, 2000, the date of acquisition.
The total purchase price of $3,460,000 was allocated based on establish
valuation techniques used in the software industry as follows:


               Tangible assets, primarily
               Cash, accounts receivable and
               Property and equipment                  $   11,000

               Purchased software                       3,325,000

               Assembled work force                       206,000

               Goodwill                                   250,000

               Liabilities assumed                       (332,000)
                                                       ----------

                                                       $3,460,000
                                                       ==========

QUAARTZ

Effective May 23, 2001, Appiant Technologies, Inc. ("Appiant") acquired all of
the outstanding stock of Quaartz, Inc. ("Quaartz"). The total purchase price was
$9.1 million and consisted of the following:

     a)   1,500,000 shares of Appiant's common stock with an estimated value of
          $8,310,000, calculated by multiplying the number of shares issued by
          Appiant by $5.54, which represents the average price of Appiant's
          common stock for the period two days preceding through two days
          following Appiant's announcement of the Merger, which occurred on
          February 8, 2001,
     b)   An estimated $342,000 of acquisition expenses, and
     c)
an estimated fair value of $430,000 relating to 92,387 stock options issued by
Appiant in relation to the cancellation of all of the stock options held by
Quaartz employees. The stock options, which were fully exercisable, were valued
using the Black-Scholes option pricing model with the following assumptions:
fair market value of Appiant's common stock of $5.54, exercise price of $4.50,
estimated life of the options of 4 years, volatility of 147%, dividend rate of
0%, and risk-free interest rate of 4.375%.

The acquisition has been accounted for using the purchase method of accounting
and accordingly the purchase price has been allocated to the tangible and
intangible assets acquired and liabilities assumed on the basis of their
respective fair values on the acquisition date. The results of operations of
Quaartz have been included with those of the Company since the date of
acquisition, May 23, 2001.

The total purchase price of $9.1 million was allocated based on established
valuation techniques used in the software industry as follows:


                                       18
<PAGE>
Tangible assets, primarily
property and equipment                  $   393,000

Workforce                                 1,223,000

Technology                                2,790,000

Liabilities assumed:
     fair value of notes
     payable to related party
     (principle amount (3,000,000)       (2,729,000)

     Other liabilities                   (1,271,000)

Goodwill                                  8,675,000
                                        -----------

                                        $ 9,081,000
                                        ===========


The following unaudited pro forma financial information for fiscal year 2000
assumes the Triad acquisition occurred as of the beginning of fiscal 2000 and
the Quaartz acquisition occurred as of the beginning of each of the respective
periods, after giving effect to certain adjustments, including amortization of
intangible assets.  The pro forma results have been prepared for comparative
purposes only and are not necessarily indicative of the results of operations
that may occur in the future or that would have occurred had the acquisition of
Quaartz and Triad been affected on the dates indicated.

<TABLE>
<CAPTION>
                                      Year Ended       Year Ended
                                     September 30,    September 30,
                                         2001             2000
                                    ---------------  ---------------
<S>                                 <C>              <C>
Net Revenues                        $   25,127,000   $   27,485,000
Net loss                               (55,732,000)     (28,649,000)

Net loss per common share           $        (3.72)  $        (2.43)
Weighted average common and common
equivalent shares
 Outstanding                            14,980,000       11,803,000
</TABLE>


                                       18
<PAGE>
4.  BALANCE SHEET ACCOUNTS


PROPERTY AND EQUIPMENT, NET

<TABLE>
<CAPTION>
                                                                         SEPTEMBER 30,
                                                                   --------------------------
                                             USEFUL LIVES YEARS        2001          2000
                                           ----------------------  ------------  ------------
<S>                                        <C>                     <C>           <C>
            Office equipment                               3 to 5  $   680,000   $ 1,856,000
            Computers and software                         3 to 5    6,422,000     2,677,000
            Automobiles                                    3 to 5      100,000       296,000
            Furniture and fixtures                         3 to 7      432,000       756,000
            Leasehold Improvements                            7        483,000
                                                                   ------------  ------------
                                                                     8,117,000     5,585,000
            Less accumulated depreciation                           (2,736,000)   (2,190,000)
                                                                   ------------  ------------

                                                                   $ 5,381,000   $ 3,395,000
                                                                   ============  ============
</TABLE>

Depreciation expense was $546,000, $650,000 and $405,000 for fiscal years 2001,
2000 and 1999 respectively.

CAPITALIZED SOFTWARE, GOODWILL AND OTHER INTANGIBLE ASSETS

                                                     SEPTEMBER 30,
                                            -------------------------------
                                               2001                2000
                                            -------------      ------------
       Capitalized software:
           Purchased for internal use       $ 12,857,000      $ 17,677,000
           Developed for internal use          3,807,000           689,000
                                            -------------      ------------
                                            $ 16,664,000      $ 18,366,000
                                            =============      ============

        Goodwill                            $ 12,303,000      $  3,473,000
        Other intangible assets                1,223,000           206,000
                                            -------------      ------------
                                            $ 13,526,000      $  3,678,000

        Less accumulated amortization         (3,271,000)       (1,235,000)
                                            -------------      ------------

                                            $ 10,255,000      $  2,443,000
                                            =============     =============

During the fiscal year 2001 and 2000, the Company capitalized $1,690,000 and
$617,000 of internally developed software, respectively, and $5,358,000 and
$16,237,000 of purchased software (see Note 2).

Amortization expense related to goodwill and other intangibles was $2,292,000
and $745,000 for fiscal years 2001 and 2000.


                                       19
<PAGE>
<TABLE>
<CAPTION>
OTHER ASSETS

                                               SEPTEMBER 30,
                                          ----------------------
                                             2001        2000
                                          ----------  ----------
<S>                                       <C>         <C>
Deferred finance charges for equity line  $  399,000  $2,144,000
Convertible promissory notes
  payable issuance costs                     462,000           -
Prepaid license                              948,000           -
Other                                        124,000     240,000
                                          ----------  ----------
                                          $1,933,000  $2,384,000
                                          ==========  ==========
</TABLE>


<TABLE>
<CAPTION>
ACCRUED LIABILITIES

                                               SEPTEMBER 30,
                                          ----------------------
                                             2001        2000
                                          ----------  ----------
<S>                                       <C>         <C>
Accrued payroll                           $1,145,000  $1,325,000
Accrued expenses                             951,000     790,000
Accrued interest                             496,000           -
Other                                        617,000     363,000
                                          ----------  ----------
                                          $3,209,000  $2,478,000
                                          ==========  ==========
</TABLE>


5.  LINE OF CREDIT AGREEMENTS

The line of credit provides for unsecured borrowings of up to $300,000, and was
due on June 30, 2001 and bears interest at a rate equal to the Wall Street
Journal prime rate (9.5% at September 30, 2000). Under this line of credit, the
Company is not required to maintain any financial covenants. As at September 30,
2001, $300,000 was outstanding under the line of credit, all of which was past
due.

The Company's subsidiary Infotel has two different short-term banking facilities
and a long term foreign exchange line. The short-term banking facilities include
an overdraft facility and a letter of credit facility with  maximum limits of
$118,000 and $765,000 respectively. The long term foreign exchange line (valid
for 3 years) has a maximum draw limit of $588,000. As of September 30, 2001
Infotel had no amounts outstanding under any these facilities. The facilities
are guaranteed by the company


                                       21
<PAGE>
6.  CONVERTIBLE PROMISORY NOTES PAYABLE

At September 30, 2001, convertible promissory notes payable are as follows:

March 21, 2001 Convertibles
    Notes Payable:
      Face amount                    $ 2,500,000
      Discount                                 -
                                     -----------
                                       2,500,000
May 31, 2001 Convertible
    Notes Payable
      Face amount                    $   600,000
      Discount                          (400,000)
                                     -----------
                                         200,000
June 8, 2001 Convertible
    Notes Payable
      Face amount                   $  2,400,000
      Discount                        (2,021,000)
                                    ------------
                                         379,000

                                    $  3,079,000
                                    ============

less current portion                 (2,700,000)
                                    -----------
                                    $   379,000
                                    ===========


May 19, 2000 Convertible Notes Payable

On May 19, 2000, the Company entered into a convertible debentures purchase
agreement with certain investors in the aggregate principal amount of $5,850,000
(the "May 19, 2000 Debentures"). The May 19, 2000 Debentures accrued interest at
8% per annum from the date such convertible debentures were issued until the
earlier of conversion into shares of our common stock or May 30, 2001, and was
payable quarterly in arrears. The May 19, 2000 Debentures were convertible by
the holder into shares of our common stock at any time prior to the close of
business on May 30, 2001. The conversion price, as amended, is equal to the
lesser of $13.00 per share or 91% of the average of the three lowest bid prices
during the ten trading days immediately preceding the date on which the holder
of the debenture gives us notice of the intent to convert the debenture,
provided that the conversion price shall not be less than $8.00 per share. This
beneficial conversion feature resulted in a non-cash deemed interest charge of
$1,595,000 during the fiscal year 2000. In August 2000, all convertible
debentures were converted into 685,400 shares of the Company's Common Stock.

March 21, 2001 Convertible Notes Payable

On March 21, 2001, the Company entered into Convertible Promissory Notes Payable
with a member of the Board of Directors and Shareholders in the principal amount
of $2,500,000 (the "$2,500,000 Note"). The $2,500,000 Note accrues interest at
10% per annum and became fully due and payable on May 31, 2001 (the "Maturity
Date"). Upon approval by the Company's shareholders, the principal and accrued
interest under the $2,500,000 Note converts into shares of the Company's common
stock at any time on or after the Maturity Date. The conversion price is equal
to 80% of the average of the five days lowest closing market price of the
Company's common stock during the period beginning on March 16, 2001 and ending


                                       22
<PAGE>
on the Maturity Date. If the principal and accrued interest on the $2,500,000
Note is not paid in full or converted into Common Stock for any reason other
than awaiting shareholder approval, and otherwise in accordance with the terms
on or before the Maturity Date, then the conversion price shall be reduced 20%
for each full week that this note is not paid or converted, provided that the
conversion price shall not in any event be reduced to less than $1.00. If the
shareholders fail to approve the issuance of equity, the related party may
receive cash in the amount of $250,000 in addition to the repayment of the
principal and unpaid accrued interest at 25% per annum. The $2,500,000 Note is
past due and was not converted to common stock as of September 30, 2001 as it
has not been approved by the Company's shareholders.

In conjunction with the $2,500,000 Note, the Company issued a warrant to
purchase 462,963 shares of its common stock at an exercise price of $2.70 per
share with a term of 7 years. The estimated value of the warrants was determined
using the Black-Scholes option pricing model (see Note 10) and the following
assumptions: contractual term of seven years, a risk free interest rate of
5.80%, a dividend yield of 0% and volatility of 141%. The allocation of note
proceeds to the warrant of $950,000 was recorded as additional paid in capital
and a discount on the $2,500,000 Note and accreted over the note maturity period
as non-cash interest expense in the fiscal year 2001. In addition, as a result
of the beneficial conversion feature described above for the $2,500,000 Note,
the Company recorded $1,274,000 as additional paid in capital, which was
recorded as a discount on $2,500,000 Notes and was accreted over its maturity
period as non-cash interest expense in the fiscal year 2001.

In addition, the Company issued 1,500,000 additional warrants to the same
related party to purchase shares of the Company's common stock at an exercise
price of $2.70 per share due to the failure of the Company's completion of an
equity investment of at least $6 million on or before May 31, 2001 (See Note
10). The estimated value of the warrants of $3,799,000 was determined using the
Black-Scholes option pricing model and the following assumptions: contractual
term of 7 years, a risk free interest rate of 4.775%, a dividend yield of 0% and
volatility of 147%. The $3,799,000 was recorded as non-cash interest expense in
fiscal year 2001.

May 31, 2001 Convertible Notes Payable

On May 31, 2001, the Company entered into Convertible Promissory Notes Payable
with two related parties, the Company's Chief Executive Officer and the Vice
President of Sales, in the principal amount of $100,000 each (the $200,000
Notes"). The $200,000 Notes accrue interest at 14% per annum and became fully
due and payable on June 21, 2001 ("maturity date"). The $200,000 Notes were also
convertible on the maturity date into shares of the Company's common stock at
90% of the conversion price applicable to any security received in any interim
financing subsequent to the date of the notes. If no interim financing was
obtained on or before the maturity date, the $200,000 Notes were convertible
into shares of the Company's common stock at 90% of the closing price on the
trading day immediately preceding the maturity date.

In addition, the Company issued warrants to the same related parties to purchase
40,000 shares of the Company's common stock at an exercise price of $1.57 per
share (See Note 10). The estimated of value of the warrants of $144,000 was
determined using the Black-Scholes option pricing model and the following
assumptions: contractual term of 5 years, a risk free interest rate of 4.625%, a
dividend yield of 0% and volatility of 147%. The allocation of the $200,000 Note


                                       23
<PAGE>
proceeds to the fair value of the warrants of $144,000 was recorded as a
discount on the $200,000 Notes and accreted over the note maturity period as
interest expense in fiscal year 2001.

In addition, as a result of the beneficial conversion feature described above
for the $200,000 Notes, the Company recorded additional paid-in capital of
$67,000, which was recorded as a discount on the notes payable and amortized
over the maturity period as interest expense in fiscal year 2001. The Chief
Executive Officer's note was repaid in full on June 21, 2001. The Vice President
of Sales' note has not been converted into common stock and remains outstanding
at September 30, 2001.

On May 31, 2001, the Company also entered into Convertible Promissory Notes
Payable with the same terms as the $200,000 Notes, with a shareholder in the
principal amount of $150,000 and a non-related party in the principal amount of
$250,000 (the "$400,000 Notes"). These $400,000 Notes were rolled into the June
8, 2001 convertible notes payable.

In addition, the Company issued warrants to purchase 80,000 shares of the
Company's common stock at an exercise price of $1.57 per share (See Note 10).
The estimated value of the warrants of $88,000 was determined using the
Black-Scholes option pricing model and the following assumptions: contractual
term of 5 years, risk free interest rate of 4.625%, a dividend yield of 0% and
volatility of 147%. The allocation of the $400,000 Note proceeds to the fair
value of the warrants of $88,000 was recorded as additional paid in capital and
a discount on the notes payable and fully accreted as interest expense in the
fiscal year 2001.

In addition, as a result of the beneficial conversion feature described above,
the Company recorded additional paid-in capital and a discount of $133,000 on
the $400,000 Notes, which was accreted to the note extinguishment date and as a
result $51,000 was recorded as non-cash interest expense for fiscal year 2001.
On the extinguishment date, the Company calculated the intrinsic value of the
beneficial conversion feature of $44,000, reversed the beneficial conversion
charge previously recorded and recorded additional non-cash interest expense.

June 8, 2001 Convertible Notes Payable

On June 8, 2001, the Company entered into a Convertible Notes purchase agreement
with certain investors in the aggregate principal amount of $2,400,000 (the
"June 8, 2001 Notes"). The June 8, 2001 Notes accrue interest at 8% per annum,
payable in common stock at the time of conversion are collateralized by the
assets of Infotel, and matures on June 8, 2003. The conversion price is equal to
lower of 110% of the average of any three closing bid prices selected by the
investor during the 15 trading days prior to conversion or $2.44.

In connection with the June 8, 2001 Notes, the Company issued warrants to
purchase 1,081,000 shares of the Company's common stock at an exercise price of
$2.89 per share (See Note 10).  The estimated value of the warrants of
$1,282,000 was determined using the Black-Scholes option pricing model and the
following assumptions: contractual term of 5 years, a risk free interest rate of
4.625%, a dividend yield of 0% and volatility of 147%. The allocation of the
June 8, 2001 Notes proceeds to the fair value of the warrants of $1,282,000 was
recorded as a discount on the June 8 2001 Notes and  as a warrant liability due
to the Company's requirement to register the common stock. The common stock
issuable pursuant to the conversion and exercise of the June 8, 2001 Notes and


                                       24
<PAGE>
warrant respectively must be registered within 30 days after the closing date of
the next round of financing. The discount on the June 8, 2001 Notes is amortized
over the note maturity period and, as a result, $200,178 was recorded as
non-cash interest expense for fiscal year 2001. In addition, due to the
registration requirement the warrants are remeasured to their estimated value
each reporting period until they are registered. The warrants were remeasured at
September 30, 2001 using the Black-Scholes option pricing model and the
following assumptions: contractual term of 5 years, a risk-free interest rate of
3.92%, a dividend yield of 0% and volatility of 144%. The liability related to
the warrants was $1,817,000 at September 30, 2001 and the Company has recorded
an additional $496,000 of interest expense in fiscal year 2001.

In addition, as a result of the beneficial conversion feature described above
for the June 8, 2001 Notes, the Company recorded $1,118,000 additional paid-in
capital, and a discount on the notes payable which is amortized over the note
maturity period to interest expense.  As a result, $174,000 was recorded as
interest expense for fiscal year 2001.

At any time until August 30, 2001, if the Company raises at least $25 million,
the Company shall have the right to redeem all outstanding June 8, 2001 Notes at
a price equal to 115% of par plus accrued dividends. If the June 8, 2001 Notes
are redeemed, the investor shall retain 60% of all issued warrants to purchase
the Company's common stocks.  As of September 30, 2001 none of the notes were
redeemed by the Company.

The Company committed to issue warrants to purchase 293,750 shares of the
Company's common stock to its strategic partner for services rendered in
connection with the June 8, 2001 Notes at an exercise price of $1.60 per share.
The estimated value of the warrants of $546,000 was determined using the
Black-Scholes option pricing model and the following assumptions: contractual
term of 5 years, a risk free interest rate of 4.63%, a dividend yield of 0% and
volatility of 147%. The estimated value of $546,000 was accounted for as a
convertible debentures issuance costs and recorded as a deferred charge in
fiscal year 2001. In September 2001, the Company issued 100,000 shares of common
stock instead of warrants. The fair value of common stock approximated the fair
value of warrants. The issuance cost is amortized over the note maturity period
and, as a result, $85,000 was recorded as a non-cash interest expense in fiscal
year 2001.

May 19, 2000 Convertible Notes Payable

On May 19, 2000, the Company entered into a convertible debentures purchase
agreement with certain investors in the aggregate principal amount of $5,850,000
(the "May 19, 2000 Debentures"). The May 19, 2000 Debentures accrued interest at
8% per annum from the date such convertible debentures were issued until the
earlier of conversion into shares of our common stock or May 30, 2001, and was
payable quarterly in arrears. The May 19, 2000 Debentures were convertible by
the holder into shares of our common stock at any time prior to the close of
business on May 30, 2001. The conversion price, as amended, is equal to the
lesser of $13.00 per share or 91% of the average of the three lowest bid prices
during the ten trading days immediately preceding the date on which the holder
of the debenture gives us notice of the intent to convert the debenture,
provided that the conversion price shall not be less than $8.00 per share. This
beneficial conversion feature resulted in a non-cash deemed interest charge of
$1,595,000 during the fiscal year 2000. In August 2000, all convertible
debentures were converted into 685,400 shares of the Company's Common Stock.


                                       25
<PAGE>
7.  NOTES PAYABLE

At September 30, 2001, notes payable are as follows:

Notes Payable to a software vendor
     Face amount                         $3,000,000
     Discount                               (73,000)
                                         ----------
                                          2,927,000

Notes payable from Quaartz acquisition
     Face amount                         $3,000,000
     Discount                              (201,000)
                                         ----------
                                          2,799,000

Total carrying amount of notes payable   $5,726,000
                                         ==========

Note payable to a software vendor

May 19, 2000 Convertible Notes Payable

On May 19, 2000, the Company entered into a convertible debentures purchase
agreement with certain investors in the aggregate principal amount of $5,850,000
(the "May 19, 2000 Debentures"). The May 19, 2000 Debentures accrued interest at
8% per annum from the date such convertible debentures were issued until the
earlier of conversion into shares of our common stock or May 30, 2001, and was
payable quarterly in arrears. The May 19, 2000 Debentures were convertible by
the holder into shares of our common stock at any time prior to the close of
business on May 30, 2001. The conversion price, as amended, is equal to the
lesser of $13.00 per share or 91% of the average of the three lowest bid prices
during the ten trading days immediately preceding the date on which the holder
of the debenture gives us notice of the intent to convert the debenture,
provided that the conversion price shall not be less than $8.00 per share. This
beneficial conversion feature resulted in a non-cash deemed interest charge of
$1,595,000 during the fiscal year 2000. In August 2000, all convertible
debentures were converted into 685,400 shares of the Company's Common Stock.

8.  COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases its principal office facilities pursuant to non-cancelable
operating leases in Pleasanton, California, which expires in 2007.  Quaartz
leases office space in Santa Clara, California pursuant to non-cancelable
leases, which expire in 2002 and 2007. Infotel leases office space in Singapore
with the lease expiring in December 2002.

Future minimum rental payments under operating leases as of September 30, 2001
are as follows (in thousands):


                                       26
<PAGE>
FISCAL YEAR

     2002           $  879,000
     2003              376,000
     2004              270,000
     2005              267,000
     2006              267,000
     Thereafter        361,000
                    ----------
                    $2,153,000
                    ==========

Rent expense was $1,098,000, $470,000 and $445,000 for fiscal years 2001, 2000,
and 1999 respectively.

Capital Leases

During the year, the Company entered into lease financing arrangements with a
hardware vendor, under which approximately $2.1 million related to hardware and
related product costs and $2.5 million related to consulting services acquired
for its first data center in Atlanta, Georgia. The Company relocated its data
center to Sunnyvale, California in June 2001 and relocated the hardware of
$500,000 to this location in September 2001.  The remaining $2.5 million of
consulting services were charged to operating expenses, which  related to the
installation of the hardware in the Atlanta data center, as such costs had no
future value following the relocation. The Company is in discussions with the
hardware vendor regarding the balance due under the lease, including revised
payment terms and possible forgiveness of a part or all of the lease payments.
On June 29, 2001, the Company returned $1.6 million of computer and related
equipment at the Atlanta data center to the vendor.  The vendor reduced the
lease payments due by $1.6 million and as a result the Company reduced equipment
and the related capital lease obligations by an equal amount.

At September 30, 2001, the company has $3,677,000 of obligations under capital
leases with this vendor that are currently in dispute of which $230,000 of this
relates to amounts originally scheduled to be repaid after fiscal 2002.  This
amount has been reclassified to current as the leases are technically in
default.  Once the discussions are resolved, the company will reclassify the
appropriate amounts.

The Company also leases computer equipment and other software under capital
leases. These leases extend for varying periods through 2004.  On July 27, 2001,
the Company entered into a settlement and release agreement with a software
vendor which the Company has a leasing arrangement for the non-exclusive license
of certain software (See Note 7).

Equipment and software under capital leases included in property and equipment
and capitalized software are as follows:

                                  September 30,         September 30,
                                      2001                   2000
                                  ------------          ------------
Equipment                         $  2,119,776          $  1,047,000
Capitalized software                         -            10,010,000
                                  ------------          ------------
                                     2,119,776            11,057,000
Less:  accumulated amortization       (613,672)            (144,000)
                                  ------------          ------------
                                  $  1,506,104          $ 10,913,000
                                  ============          ============


                                       27
<PAGE>
Future capital lease payments are as follows:

FISCAL YEAR
                                                  September 30,
                                                       2001
                                                  -------------
              2002                                $  4,250,000
              2003                                     316,000
              2004                                      27,000
                                                  -------------
                                                     4,593,000
                                                  -------------
              Less amount representing interest       (415,000)
                                                  -------------
              Present value of minimum future
               payments                              4,178,000
              Less current portion                   4,085,000
                                                  -------------

                                                  $     93,000
                                                  =============

Contingencies

In January 2002, a judgment was issued against the Company in favor of an
equipment vendor in the amount of $123,000.  The Company is in discussions to
establish a mutually agreed upon payment plan and expects to settle this issue.

In October 2001, a software vendor filed suit against the Company for breach of
contract totaling approximately $703,000 plus interest and reasonable attorney's
fees.  On December 28, 2001, Appiant filed an answer denying this general demand
and are vigorously pursuing this matter. No amount has been accrued in respect
of this matter.

A major customer tendered billings for reimbursable costs and expenses arising
from their defense of certain patent infringement claims asserted against them.
The customer is seeking reimbursement from the Company of approximately $53,000.
As the Company is only a distributor of these systems, any liability suffered by
the Company is reimbursable by the supplier of these systems. No amount has been
accrued in respect of this matter.

In January 2002, the Company received a demand for payment, in the amount of
$1,248,000, for a resource not payable. If payment is not received on/before
January 11, 2002, the noteholder will file a lawsuit for breach of contract. The
Company is currently in negotiations to extend the date of this note.


                                       28
<PAGE>
From time to time, the company is involved in other legal actions arising in the
ordinary course of business.

While management intends to defend these matters vigorously, there can be no
assurance that any of these complaints or other third party assertions will be
resolved without costly litigation, or in a manner that is not adverse to our
financial position, results of operations or cash flow. No estimate can be made
of the possible loss or possible range of loss associated with the resolution of
these matters in excess of amounts accrued.

9.  REDEEMABLE CONVERTIBLE PREFERRED STOCK

In October 2000, the Company sold 87,620 shares of Series B Preferred Stock to
domestic "accredited investors" for aggregate gross proceeds of $8,762,000,
including $3.5 million received in advance. In connection with this issuance,
the Company also issued to its investment bankers a fully exercisable warrant
to acquire 75,000 shares of its Common Stock at an exercise price of $13.50 per
share and paid a placement fee of 10% of the proceeds, 35% in cash and 65% paid
in common stock issued in the second quarter of 2001. Holders of the Series B
Preferred Stock are entitled to a non-cumulative 5% per annum dividend, payable
quarterly in arrears, when, if and as declared by the Company's Board of
Directors, which may be paid in cash or shares of the Company's Common Stock, in
the Company's sole discretion. Each share of Series B Preferred Stock is
immediately convertible into shares of our Common Stock at the lesser of (i)
$13.50 per share or (ii) 90% of the average closing bid prices for the 10
trading days immediately preceding the date of conversion, provided, that such
conversion price shall not be less than $10.00. At any time after the third
anniversary of the Closing, the Company may require the holders of the Series B
Preferred Stock to convert.

Upon voluntary or involuntary liquidation, dissolution or winding up of the
Company, the investors will be entitled to receive, on a pari passu basis with
holders of other shares of Preferred Stock, if any, an amount equal to such
investors investment in the Offering and any declared but unpaid dividends. As
a result, the net proceeds from the sale of the Series B Preferred Stock has
been classified outside of stockholders' equity. As a result of the beneficial
conversion feature described above, the Company recorded a deemed dividend of
$7,626,000 during the three months ended December 31, 2000. In addition, the
Company estimated the value of the warrant at $1,107,000 issued to its
investment bankers using the Black-Scholes option pricing model with the
assumptions that follow: expected volatility of 135%, weighted average risk free
interest rate of 5.8%, term of 1 year, and no expected dividend. The Company
recorded this warrant as a cost of financing.

As of September 30, 2001, 86,120 preferred shares have been converted into
4,678,000 shares of the Company's common stock and 1,500 preferred shares remain
outstanding.


                                       29
<PAGE>
10.  STOCKHOLDERS' EQUITY

PREFFERED STOCK

In fiscal 1999, the Company issued 17,500 shares of preferred stock for
$1,472,000 net of issuance costs of $278,000. All of these preferred shares had
been converted to common stock by September 30, 2000.

STOCK PURCHASE AGREEMENT

In fiscal year 2000 the Company entered into a common stock purchase agreement
(the "Equity Line Agreement"), dated May 24, 2000 and amended as of June 30,
2000 with an investment corporation under which the Company may require the
investment corporation to purchase up to $50 million of its common stock.
Under the terms of the Equity Line Agreement, the Company is under no obligation
to sell its common stock to the investment corporation. However, the Company
may make up to a maximum of twelve requests for the purchase of its common stock
with no single purchase exceeding $4 million unless otherwise agreed to by the
investment corporation. In addition, the Equity Line Agreement does not
require the investment corporation to purchase the Company's common stock if
it would result in the investment corporation owning more than 9.9% of the
Company's outstanding common stock. The purchase price of the common stock is
92% of the volume weighted average price per share of the Company's common stock
over the eighteen-day period prior to the date the Company requests the
investment corporation to purchase its common stock. In addition, the
investment corporation will receive a 2% placement fee and an escrow agent fee
from the proceeds due to the Company. In conjunction with the Equity Line
Agreement, the Company issued a warrant to purchase 120,000 shares of its common
stock. The warrant exercise price was subsequently adjusted to $13.50 per share
on November 15, 2000 in exchange for a waiver from the investment corporation
allowing the Company to issue Series B preferred stock to other investors, as
well as engage in other financing transactions (see "Warrants" above). The
Black-Scholes option pricing model was used to value the warrants and the
following assumptions: contractual term of 3 years, a risk free interest rate of
5,8%, a dividend yield of 0% and a volatility of 135%. The estimated value of
$2,144,000 was accounted for as a non-current asset. As and when stock is
purchased under the equity line agreement, the costs will be reclassified from
"Other assets" to "Additional paid in capital", on a dollar for dollar basis
with the amount of proceeds received from the sale of common stock.

During the second quarter, the Company requested that the investment
corporation purchase $1.745 million of the Company's common stock under the
equity line agreement. Accordingly, the Company received net proceeds of $1.745
million under the equity line and reclassified $1.745 million from "Other
Non-Current Assets" to "Additional paid-in capital" upon receipt of the proceeds
and issuance of the stock. If at termination of the agreement the proceeds
received from the sale of common stock are less than the costs associated with
this agreement, then the residual costs remaining in "Other Assets" will be
charged to expense.

The Company intends to sell its common stock to the investment corporation
under the Equity Line Agreement until its expiration in January 2002.

STOCK OPTIONS AND WARRANTS

STOCK OPTION PLAN

The Equity Incentive Plan (the "Plan") is administered by the Company's Board of
Directors and the Company's Management. The Company has reserved 4,000,000
shares of common stock for issuance under the Plan. Options granted under the


                                       30
<PAGE>
Plan may be either incentive stock options ("ISOs"), or non-qualified stock
options ("NSOs"). ISOs generally must have an exercise price of not less than
fair market value of the Common Stock on the date of grant (or, for a person
holding more than 10% of the voting power of the Company, a price equal to 110%
of the fair market value, and be exercisable only for a period of five
years).The aggregate fair market value of the Common Stock subject to options
granted to an optionee that are exercisable for the first time by an optionee
during any calendar year may not exceed $100,000. Options generally expire three
months following termination of employment. Historically, the Company's ISO's
have become exercisable over periods of two to seven years and ranged from
one-third becoming exercisable immediately and the remainder equally over the
next two years, to seven year cliff exercisability. In fiscal year 2001, ISOs
have generally become exercisable 25% after one year and the remainder ratably
over 36 months. ISOs generally have a ten-year life. Exercisability of NSOs has
generally been determined on a grant-by-grant basis.

During the year, the Company created a new stock option plan (the "Broad Based
Plan").  The Company intends to use the plan to give each officer, and
non-officer of the company who received a qualified stock option grant under the
Plan with a strike price of more than $ 4.50 the opportunity to be eligible to
receive the benefit of an additional options that allow for a strike price of $
4.50 per share, for which the vesting schedules for such options shall be the
same as the vesting schedule of the related option.  The Primary purpose of the
Broad Based Plan is to retain and provide additional incentives to employees and
to promote business success for the Company.  The exercise price shall be not
less than 85% of the fair market value of the Company's common stock on the date
of grant unless otherwise determined by the administrator and in the case of
other awards, such price to be determined by the Board of Directors. The maximum
aggregate number of shares issuable under the Broad Based Plan is 500,000
shares.  Under the Broad Based Plan, the grants were made on March 16, 2001 for
options to purchase 381,000 shares of the Company's common stock of exercise
price of $4.50.  At September 30, 2001, 273,000 options outstanding and 227,000
shares were available for award.


                                       31
<PAGE>
The following table summarizes transactions pursuant to the Company's Plans:

<TABLE>
<CAPTION>
                                    Weighted Average
                                    Option Price Per
Outstanding                               Share
          --------------------------------------------  -------------
<S>                                <C>                  <C>
          December 31, 1997        $              3.16     1,133,400
          -----------------------------------------------------------
          Granted                                 2.05       258,000
          Canceled                                2.69      (186,900)
          -----------------------------------------------------------
          SEPTEMBER 30, 1998       $              3.00     1,204,500
          Granted                                 1.33     1,402,700
          Canceled                                2.91    (1,151,400)
          -----------------------------------------------------------
          SEPTEMBER 30, 1999       $              1.51     1,455,800
          Granted                                 9.14     2,265,000
          Exercised                               1.40      (390,500)
          Canceled                                1.89      (201,900)
          -----------------------------------------------------------
          SEPTEMBER 30, 2000       $              7.03     3,128,300
          Granted                                 6.91     2,323,700
          Exercised                               1.47       218,900
          Canceled                                9.74     2,044,100
          SEPTEMBER 30, 2001                      5.58     3,189,000
          -----------------------------------------------------------
          OPTIONS EXERCISABLE AT:
          September 30, 2001       $              6.18       856,240
          September 30, 2000       $              1.86       256,600
          September 30, 1999       $              2.02       149,000
          -----------------------------------------------------------
</TABLE>

At September 30, 2001, 2000, and 1999, 226,750, 871,700, and 2,544,200 shares of
common stock, respectively, were available for grant under the Plans.

The following table summarizes information about stock options outstanding and
exercisable at September 30, 2001:

<TABLE>
<CAPTION>
                                                            OPTIONS CURRENTLY
               OPTIONS OUTSTANDING                              EXERCISABLE
                                   WEIGHTED
                                   AVERAGE
                                  REMAINING    WEIGHTED                 WEIGHTED
                   NUMBER OF     CONTRACTUAL    AVERAGE                 AVERAGE
   EXERCISE         SHARES         LIFE IN     EXERCISE     NUMBER      EXERCISE
    PRICE         OUTSTANDING       YEARS        PRICE    EXERCISABLE    PRICE
---------------  -------------  -------------  ---------  -----------  ----------
<S>              <C>            <C>            <C>        <C>          <C>

0.00 - $2.20         573,600         6.4         $1.30      195,000        $1.57
2.20  - $4.40        354,000         7.0         $3.16       41,300        $3.63
4.40  - $6.60      1,281,600         6.7         $4.64      213,500        $4.58
6.60  - $8.80        722,300         7.0         $8.74      354,100        $8.74
8.80  - $11.00        63,000         9.1         $9.59        8,100        $9.72
11.00 - $13.20          -             -            -            -             -
13.20 - $15.40        75,000         1.5         $14.75      22,500       $14.70
15.40 - $17.60       117,000         8.9         $16.35      21,800       $16.12
17.60 - $19.80          -             -            -            -             -
19.80 - $22.00         2,500         9.1         $22.00         -             -

                 -----------                              ---------
                   3,189,000                                856,300
                 ===========                              =========
</TABLE>


                                       32
<PAGE>
At September 30, 2000 and 1999 options to purchase 256,000 and 149,000 shares,
respectively, of the Company's common stock were exercisable.

Had compensation cost for the Company's stock-based compensation plan been
determined based on the fair value at the grant dates for the awards, the
Company's net loss attributable to common stockholders would have been increased
to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                               Years Ended
                                                                              September 30,
                                                               ----------------------------------------
                                                                    2001          2000          1999
                                                               -------------  -------------  ----------
<S>                                                            <C>            <C>            <C>
   Net loss attributable to common
    stockholders:

     As reported . . . . . . . . . . . . . . . . . . . . . .   $(37,555,000)  $(12,844,000)  (717,000)
     Pro forma . . . . . . . . . . . . . . . . . . . . . . .   $(39,138,000)  $(15,703,000)  (855,000)
   Net loss per share attributable to common
    stockholders--basic and diluted:
     As reported . . . . . . . . . . . . . . . . . . . . . .   $      (2.56)         (1.25)     (0.23)
     Pro forma . . . . . . . . . . . . . . . . . . . . . . .   $      (2.66)         (1.52)     (2.26)
</TABLE>


The weighted average fair value of options granted in fiscal year 2001,  2000
and 1999 was $4.07 $8.56 and $1.09 per share under option, respectively.

The Company estimated the fair value of each stock option at the date of grant
using the assumptions that follow:


                                               Fiscal Year

                                      2001         2000          1999
                                 ------------  ------------  ------------

Dividend yield                              -             -             -
Volatility                               144%          135%           80%
Risk-free interest rate                  5.0%          5.5%         6.60%
Estimated lives                  3 to 8 years  3 to 8 years  3 to 8 years


These pro forma amounts may not be representative of the effects on reported net
loss for future years as options vest over several years and additional awards
are generally made each year.

WARRANTS

In December 1999, the Company issued warrants to purchase 375,000 shares of its
Common Stock to its outside advisors, all for services rendered, with an
exercise price of $3.43 per share. During fiscal years 2000 and 2001, all
options were exercised and as a result, no options to purchase the Company's
common stock remained outstanding as of September 30, 2001.  The Company valued
these warrants using the Black-Scholes option pricing model and the following
assumptions: contractual term of one to two years, a risk free interest rate of
5.15%, a dividend yield of 0% and volatility of 142%. The estimated value of
$138,000 was expensed during fiscal year 2000.

In December, 1999 the Company issued warrants to the President and Chief
Executive Officer to purchase 100,000 shares of its Common Stock and warrants to
the Company's Board members to purchase 50,000 shares of Common Stock at $3.43


                                       33
<PAGE>
per share, all of which were fully exercisable. The term of the warrants was one
year and in fiscal 2001 they were extended one more year. Under the terms of the
warrant agreements, upon exercise of the warrant, the warrant holders can pay
the exercise price by having the Company issue the number of shares under the
warrant less the number of shares having a fair value on the date exercised
equal to the exercise price. As a result, the Company has used variable
accounting to account for these awards and has recorded $2,036,000 of
stock-based compensation related to the warrants during fiscal year 2000 which
was reversed in fiscal year 2001 because of the decline in the fair market value
of the Company's common stock. At September 30, 2001, all these warrants to
purchase the Company's Common Stock have expired.

On January 21, 2000 the Company issued warrant to purchase 250,000 of Company's
common stock at $1.53 to former owners of Trimark, Inc. (see Note 3). The
warrants are fully exercisable and expire in 3 years.  In December 2000, 150,000
of these warrants were exercised.

In July 2000, the Company issued warrants to purchase 300,000 shares of its
Common Stock with an exercise price of $6.00 per share to an external financial
advisor and shareholder for past services. The warrants were valued using the
Black-Scholes option pricing model and the following assumptions: contractual
term of one year, a risk free interest rate of 5.49%, a dividend yield of 0% and
volatility of 133%. The estimated value of $1,912,000 was expensed during fiscal
year 2000.

In connection with a software purchase agreement, the Company on May 1, 2000
issued to the supplier a warrant to purchase 45,600 shares of its Common Stock
at an exercise price of $15.50 per share. The Black-Scholes option pricing model
was used to value the warrants with the following assumptions: contractual term
of five years, a risk free interest rate of 5.8%, a dividend yield of 0% and
volatility of 135%. The estimated value of approximately $684,000 was accounted
for as purchased capitalized software.

In October 2000 the Company issued a warrant to purchase 75,000 shares of common
stock at $13.50 to its investment bankers for its Series B Preferred Stock
(see Note 8)  The warrants were valued using Black-Sholes option pricing model
with the following assumptions: expected volatility of 135%, weighted average
risk free interest rate of 5.80%, term of 1 year, and no expected dividend. The
estimated value of the warrants of $1,107,000 was accounted as stock issuance
costs in fiscal 2001.

In November 2000, the Company issued a fully exercisable warrant to purchase
30,000 shares to a professional services firm in consideration for certain
services rendered to us at an exercise price of $8.34 per share. The warrants
were valued using the Black-Scholes option pricing model and the following
assumptions: contractual term of five years, a risk free interest rate of 5.08%,
a dividend yield of 0% and volatility of 135%. The estimated fair value of the
warrants of $413,000 was expensed during the fiscal year 2001.

In April 2001, the Company issued a warrant to purchase 200,000 shares of its
common stock with an exercise price of $2.00 to a customer in connection with a
Master Service Agreement. The warrant is immediately exercisable and expires in
5 years. The warrants were valued using the Black-Scholes option pricing model
and the following assumptions: contractual term of 5 years, a risk free interest
rate of 4.625%, a dividend yield of 0% and volatility of 147%. The estimated


                                       34
<PAGE>
value of $449,000 was accounted for as a deferred cost of sales and recorded as
an "Other asset." The deferred cost of sales will be amortized over the Master
Service Agreement term and after the InUnison product is launched.

On August 21, 2001 the company issued warrants to purchase 10,000 shares of its
common stock to a consultant with an exercise price of $1.95 per share.  The
warrants were valued using the Black-Scholes option pricing model and the
following assumptions: contractual term of 5 years, a risk free interest rate of
4.51%, a dividend yield of 0% and a volatility of 144%.  The estimated value of
$18,000 was expensed during fiscal year 2001.

At September 30, 2001, the following warrants to purchase the Company's common
stock were outstanding, all of which were exercisable:

                                SHARES
                                UNDER
EXPIRATION DATE                WARRANTS             EXERCISE PRICE
---------------              -----------            --------------
December, 2001                   150,000            $         3.43
October, 2002                     75,000                     13.50
January, 2003                    100,000                      1.53
May, 2003                        120,000                     13.50
May, 2005                         45,600                     15.50
November, 2005                    30,000                      8.34
April, 2006                      200,000                      2.00
May, 2006                        120,000                      1.57
June, 2006                     1,065,152                      2.64
August, 2006                      10,000                      1.95
March, 2008                    1,962,963                      2.70
December, 2002                   300,000                      6.00
May, 2006                         50,000                      1.80
                             -----------
Total                          4,228,715
                             ===========

STOCK-BASED COMPENSATION

In connection with stock option grants to employees to purchase 527,000 shares
of the Company's Common Stock during fiscal year 2000, the Company recognized
$2,073,000 of unearned stock-based compensation for the excess of the fair
market value of the shares of common stock subject to such options over the
exercise price of the options at the date of grant. Such amounts are included in
stockholders' equity and are being amortized over the vesting period of
generally four years. The Company recorded stock-based compensation expense of
$91,000, $61,000, and $0 for fiscal year 2001, 2000, and 1999 respectively.

11.  EMPLOYEE COMPENSATION AND BENEFITS

The Company's APPIANT NA subsidiary maintains a Sec. 401(k) profit sharing plan
in which all qualifying employees with a minimum of 1,000 hours of service at
year end are eligible to participate. Matching contributions are made at the
discretion of the Company's Board of Directors. The Company pays all fees to
administer the plan. The Company did not make any matching contributions the
fiscal years 2001, 2000 and 1999, respectively.


                                       35
<PAGE>
<TABLE>
<CAPTION>
12.  INCOME TAXES


Income taxes are summarized below:
                                                                FISCAL YEARS,

                                                      2001           2000         1999
                                               ---------------  -------------  ----------
<S>                                            <C>              <C>            <C>
     Current:
          U.S. federal                         $                $              $
          Foreign                                     279,000        250,000      32,000
          State                                             -         17,000       2,000
                                               ---------------  -------------  ----------
                Total Current                         279,000        268,000      34,000
                                               ---------------  -------------  ----------

     Deferred:                                              -              -           -
          U.S. federal                                      -              -           -
          Foreign                                           -              -           -
          State                                             -              -           -
                                               ---------------  -------------  ----------
                Total deferred                              0              0           0
                                               ---------------  -------------  ----------
     Total provision for income taxes          $      279,000   $    268,000   $  34,000
                                               ---------------  -------------  ----------


The Company's net loss is taxable as follows:
                                                                FISCAL YEARS,
                                                     2001           2000          1999
                                               ---------------  -------------  ----------
     Continuing operations:
          United States                        $  (30,723,000)  $(13,645,000)  $(863,000)
          Foreign                                   1,073,000      1,069,000     180,000
                                               ---------------  -------------  ----------
                Total Current                  $  (29,650,000)  $(12,576,000)  $(683,000)
                                               ===============  =============  ==========
</TABLE>


Tax effects of temporary differences that give rise to significant portions of
deferred tax assets are as follows:

<TABLE>
<CAPTION>
                                               2001          2000
                                           ------------  ------------
<S>                                        <C>           <C>
Net operating loss carryforward            $10,784,000   $ 4,073,000
Reserve and accrued liabilities              1,700,000     1,598,000
Tax Credits                                    105,000       105,000
Accumulated depreciation and amortization      327,000             -
                                           ------------  ------------
                                            12,916,000      5,776000

Capitalized Software                        (3,853,000)   (2,798,000)
Accumulated Depreciation and amortization            -      (108,000)
                                           ------------  ------------
                                            (3,853,000)   (2,906,000)

Net total deferred assets/liabilities         9,063,000     2,870,000

Valuation allowance                         (9,063,000)   (2,870,000)
                                           ------------  ------------
                                           $         -   $         -
                                           ============  ============
</TABLE>


Due to uncertainty surrounding the realization of the favorable tax attributes
in future tax returns, the Company has placed a 100% valuation allowance against
its deferred tax assets. At such time it is determined that it is more likely
than not that the deferred tax assets are realizable, the valuation allowance
will be reduced.

As of September 30, 2001 the Company's net operating losses for federal income
tax purposes were approximately $41.6 million, and will expire between the years
2008 and 2020. For state income tax purposes, as of September 30, 2001, the
Company had net operating loss carry forwards of approximately $16.8 million,
which begins to expire in 2003. The use of federal net operating loss carry
forwards is subject to an annual limit of approximately $250,000 as the Company
has incurred an 'ownership change'.


                                       36
<PAGE>
The principal items accounting for the difference between income tax benefit at
the U.S. statutory rate and total income taxes reflected in the statement of
operations are as follows.

<TABLE>
<CAPTION>
                                                                2001           2000         1999
                                                          --------------  -------------  -----------
<S>                                                       <C>             <C>            <C>
     Federal tax                                           ($10,446,000)   ($4,276,000)   ($258,000)
     State tax                                                        -         12,000      (45,000)
     Foreign taxes                                              279,000        250,000       32,000
     Goodwill amortization                                      624,000         98,000      300,000
     Stock-based compensation Charges                            31,000      1,379,000            0
     Changes in valuation allowance                           7,190,000      3,294,000      (51,000)
     Impairment charges                                       1,247,000              -            -
     Interest charges on warrant                              1,292,000              -            -
     Other                                                       61,000       (490,000)      56,000
                                                          --------------  -------------  -----------
                                                          $     279,000   $    267,000   $   34,000
                                                          ==============  =============  ===========
</TABLE>


13.   SEGMENT REPORTING

The Company defines operating segments as components of an enterprise about
which separate financial information is available that is evaluated regularly by
the chief operating decision maker, or decision making group, in deciding how to
allocate resources and in assessing performance. The operating segments
disclosed are managed separately, and each represents a strategic business unit
that offers different products and serves different markets.

The Company's reportable operating segments include Appiant Technologies Inc.
(Appiant NA)and Infotel. This represents a change in the Company's internal
organization. Accordingly, segment information for the years ending September
30, 2000 and 1999 have been reclassed to conform to the current year
presentation. Appiant NA includes the Company's enterprise operations in the US.
Appiant NA enterprise operations include systems integration and distribution of
voice processing and multimedia messaging equipment, technical support, ongoing
maintenance and product development. The Company acquired Quaartz on May 23,
2001, an application and service provider primarily involved in software
development. The results of Quaartz have been included with those of Appiant NA
since the date of acquisition. The periods ended September 30, 2000 have been
reclassified to conform to the current fiscal year presentation. The following
table presents APPIANT NA's net revenue by country and is attributed to
countries based on location of the customer:

                                     For the fiscal year ended
                                            September 30,
                              ---------------------------------------
                                  2001          2000         1999
                              ------------  -----------  ------------
              United States     18,710,000   25,529,000    13,660,000
              Asia               3,038,000            -             -
                              ------------  -----------  ------------
                                21,748,000   25,529,000    13,660,000
                              ============  ===========  ============


Infotel is a distributor and integrator of telecommunications and other
electronics products operating in Singapore and provides radar system
integration, turnkey project management, networking and test instrumentation
services. Infotel derives substantially all of its revenue from sales from
Singapore to Asia.  There are no intersegment revenues.

The revenues from our five largest customers for approximately 9.4%, 9.3%, 7.0%,
5.5% and 5.2% of total revenues during our fiscal year ended September 30, 2001.

The accounting policies of the operating segments are the same as those
described in the summary of significant accounting policies.


                                       37
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR 2001 AND AT SEPTEMBER 30, 2001
(in thousands)                                      APPIANT NA       INFOTEL       OTHER (2)          TOTAL
<S>                                              <C>              <C>            <C>              <C>

Net sales to external customers                    8,291,000      13,085,000         372,000       21,748,000

Net income (loss)                                (15,757,000)        712,000      (5,964,000)      21,009,000
Interest income(2)                                   129,000         136,000                          265,000
Interest expense                                  (8,732,000)                        (70,000)      (8,802,000)
Tax expense                                            -             (29,000)                         (29,000)
Total assets                                      23,673,000       9,939,000       6,754,000       40,366,000
Property and equipment, net                        4,690,000         398,000         293,000        5,381,000
Depreciation and Amortization                       (646,000)       (380,000)     (1,493,000)      (2,519,000)


FISCAL YEAR 2000 AND AT SEPTEMBER 30, 2000
(in thousands)                                    APPIANT NA         INFOTEL        OTHER (2)        TOTAL

Net sales to external customers                  $13,979,000     $11,550,000     $         -      $25,529,000

Net income (loss)                                 (5,700,000)        432,000      (7,576,000)     (12,844,000)
Interest income(2)                                    20,000         153,000          44,000          217,000
Interest expense                                    (441,000)              -      (1,866,000)      (2,307,000)
Tax expense                                          (18,000)              -               -         (268,000)
Total assets                                      15,801,000        (332,000)     15,548,000       38,785,000
Property and equipment, net                        2,336,000          78,000         308,000        3,395,000
Depreciation and Amortization                       (732,000)        (12,000)       (166,000)      (1,395,000)


FISCAL YEAR 1999 AND AT SEPTEMBER 30, 1999
(in thousands)                                APPIANT NA            INFOTEL        OTHER (2)         TOTAL

Net sales to external customers                  $13,660,000      $9,680,000      $        -      $23,340,000

Net income (loss)                                  1,312,000         840,000      (2,869,000)         717,000
Interest income(2)                                    14,000          64,000          30,000          108,000
Interest expense                                    (327,000)            -           (86,000)        (413,000)
Tax expense                                            1,000          32,000           1,000           34,000
Total assets                                       6,630,000       6,298,000       3,093,000       16,021,000
Property and equipment, net                          639,000         179,000         337,000        1,155,000
Depreciation and Amortization                        446,000         333,000          69,000          848,000
</TABLE>

(1)     Other includes corporate expenses.  Additionally, management reports
include goodwill for Infotel in total assets.

(2)     Intercompany interest is eliminated.

Subsequent Events

In October, November and December of fiscal year 2002, the Company issued
promissory notes totaling $1,290,000 bearing interest at 8% and maturing within
60 to 180 days. In conjunction with these promissory notes, the Company issued
warrants to purchase 963,977 shares of the Company's Common Stock.


                                       38
<PAGE>
                                   SCHEDULE II


                            Appiant Technologies Inc.


                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                        FISCAL YEARS 1999, 2000 AND 2001


   Column A                    Column B     Column C     Column D    Column E
   --------                  -----------  -----------  ----------  -----------
                                            Additions
                                           Charged to
                                 Balance     Revenues  Write-offs   Balance at
                               Beginning    and Costs         and       End of
  Description                  of Period  and Expense  Deductions       Period
  -----------                -----------  -----------  -----------  -----------

1999
--------------
Allowance for Doubtful
  Accounts                   $   246,000  $  (88,000)  $            $  158,000


Valuation Allowance on
  Deferred Tax Assets        $ 3,626,000  $        -   $   50,000   $3,576,000

Provision for excess and
  Obsolete inventory         $    84,000  $   98,000   $  (63,000)  $  119,000

2000
--------------
Allowance for Doubtful
  Accounts                   $   158,000  $  411,000   $ (167,000)  $  402,000


Valuation Allowance on
  Deferred Tax Assets        $ 3,576,000  $        -   $ 706,000    $2,870,000

Provision for excess and
  Obsolete inventory         $   119,000  $   44,000   $ (62,000)   $  101,000


2001
--------------
Allowance for Doubtful
  Accounts                   $   402,000  $  622,000   $(689,000)   $  335,000


Valuation Allowance on
  Deferred Tax Assets        $ 2,870,000  $6,193,000   $       -    $9,063,000

Provision for excess and
  Obsolete inventory         $   101,000  $  397,000   $(357,000)   $  141,000


                                       39
<PAGE>