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

                    U. S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-QSB

(MARK ONE)
 [X]     QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934
         For the quarterly period ended December 31, 2000

 [ ]     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934
         For the transition period from __________ to __________


                         Commission File Number 0-28213


                               KANAKARIS WIRELESS
                          -----------------------
        (Exact Name of Small Business Issuer as Specified in Its Charter)


            NEVADA                                               86-0888532
-------------------------------                               ----------------
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)


                        3303 HARBOR BOULEVARD, SUITE F-3
                          COSTA MESA, CALIFORNIA 92626
                         -------------------------------
                    (Address of principal executive offices)


                                 (714) 444-0530
                              -----------------
               (Issuer's Telephone Number, Including Area Code)



                        --------------------------------
               (Former Name, Former Address and Former Fiscal Year,
                        if Changed Since Last Report)

         Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes _X__ No ___

         The number of shares outstanding of the registrant's only class of
common stock, $.001 par value per share, was 49,252,793 on February 12, 2001.

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



<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

         Condensed Consolidated Balance Sheet as of
         December 31, 2000 (unaudited)................................   F-1

         Condensed Consolidated Statements of Operations
         for the three months ended December 31, 2000 and
         1999 (unaudited).............................................   F-3

         Condensed Consolidated Statement of Comprehensive
         Loss for the three months ended December 31, 2000
         (unaudited)..................................................   F-4

         Condensed Consolidated Statements of Cash Flows
         for the three months ended December 31, 2000
         and 1999 (unaudited).........................................   F-5

         Condensed Consolidated Statement of Changes in
         Stockholders' Equity for the three months ended
         December 31, 2000 (unaudited)................................   F-7

         Notes to Condensed Consolidated Financial
         Statements (unaudited).......................................   F-8


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS..........................     3


                                PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS............................................    10

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS....................    12

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES..............................    13

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..........    13

ITEM 5.  OTHER INFORMATION............................................    13

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.............................    13

SIGNATURES............................................................    14

                                        2


<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
               (FORMERLY KNOWN AS KANAKARIS COMMUNICATIONS, INC.)
                      Condensed Consolidated Balance Sheet
                                December 31, 2000
                                   (Unaudited)


ASSETS
------

Current assets:
   Cash and cash equivalents                                         $    5,824
   Accounts receivable                                                  342,469
   Inventories                                                            3,457
   Current maturities of note and loan receivable - net                 102,500
   Current maturities of notes receivable -
      shareholders and related parties                                  234,530
   Interest receivable                                                   22,171
   Prepaid expenses                                                     207,650
   Advances to suppliers                                                    700
                                                                     -----------

           TOTAL CURRENT ASSETS                                         919,301
                                                                     -----------

Property and equipment, net of accumulated
   depreciation and amortization                                         49,957
                                                                     -----------

Other assets:
   Investments (at market value)                                        248,000
   Notes receivable - shareholders and
      related parties - noncurrent                                       36,280
   Note and loan receivable - noncurrent                                 78,500
   Film library - net of amortization                                   453,822
   Goodwill - net of amortization                                       341,405
   Other                                                                    875
                                                                     -----------

           TOTAL OTHER ASSETS                                         1,158,882
                                                                     -----------

           TOTAL ASSETS                                              $2,128,140
                                                                     ===========


     See accompanying notes to condensed consolidated financial statements.

                                       F-1


<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
               (FORMERLY KNOWN AS KANAKARIS COMMUNICATIONS, INC.)
                      Condensed Consolidated Balance Sheet
                                December 31, 2000
                                   (Unaudited)


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current liabilities:
   Accounts payable and accrued expenses                          $    990,687
   Convertible debentures                                            2,389,000
   Due to former shareholder of subsidiary                             101,088
   Deferred revenue                                                    750,000
                                                                  -------------

           TOTAL CURRENT LIABILITIES                                 4,230,775
                                                                  -------------

Stockholders' equity (deficiency):
   Preferred stock, $0.01 par value; 5,000,000 shares
       authorized; 1,000,000 Class A Convertible issued
       and outstanding                                                  10,000
   Common stock, $0.001 par value; 1,000,000,000
       shares authorized; 45,732,512 issued and
       outstanding                                                      45,733
   Additional paid-in capital                                       22,477,160
   Accumulated deficit                                             (23,882,268)
   Less subscription receivable
       (1,260,000 shares, common)                                       (1,260)
   Comprehensive loss                                                 (752,000)
                                                                  -------------

           TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY)                  (2,102,635)
                                                                  -------------

           TOTAL LIABILITIES AND
           STOCKHOLDERS' EQUITY (DEFICIENCY)                      $  2,128,140
                                                                  =============


     See accompanying notes to condensed consolidated financial statements.

                                       F-2


<PAGE>
<TABLE>

                               KANAKARIS WIRELESS AND SUBSIDIARIES
                       (FORMERLY KNOWN AS KANAKARIS COMMUNICATIONS, INC.)
                         Condensed Consolidated Statements of Operations
                                           (Unaudited)

<CAPTION>
                                                           Three Months    Three Months
                                                               Ended           Ended
                                                              Dec 31,         Dec 31,
                                                               2000            1999
                                                          -------------   -------------
<S>                                                       <C>             <C>
Net sales                                                 $    554,313    $     93,588

Cost of sales                                                  256,097          67,830
                                                          -------------   -------------

           GROSS PROFIT                                        298,216          25,758
                                                          -------------   -------------

Operating expenses:
   Executive compensation                                      673,300          98,112
   Salaries                                                    161,194          42,325
   Payroll taxes and employee benefits                           6,954          12,770
   Consulting services                                       1,070,438       1,065,480
   Royalties                                                         -           2,333
   Travel and entertainment                                     68,484          35,249
   Telephone and utilities                                      15,458          12,652
   Marketing, advertising and investor relations               393,164         211,175
   Professional fees                                           176,319         216,713
   Rent                                                          6,473           7,899
   Office and other expenses                                    97,943          17,607
   Equipment rental and expense                                    601             953
   Insurance                                                    17,940           7,539
   Depreciation and amortization                                35,720          10,495
   Taxes - other                                                 2,400           2,400
   Bank charges                                                    277             661
   Website development                                          29,460               -
                                                          -------------   -------------

           TOTAL OPERATING EXPENSES                          2,756,125       1,744,363
                                                          -------------   -------------

       Loss before interest and other income
          (expense)                                         (2,457,909)     (1,718,605)

       Financing and other income (expense), net               (83,513)          2,321
                                                          -------------   -------------

       Net loss                                           $ (2,541,422)   $ (1,716,284)
                                                          =============   =============

       Net loss per common share -
          basic and diluted                               $       (.06)   $       (.06)
                                                          =============   =============

       Weighted average common shares
          outstanding - basic and diluted                   39,579,807      26,811,483
                                                          =============   =============


             See accompanying notes to condensed consolidated financial statements.
</TABLE>
                                               F-3



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
               (FORMERLY KNOWN AS KANAKARIS COMMUNICATIONS, INC.)
                         Statement of Comprehensive Loss
                  For the Three Months Ended December 31, 2000
                                   (Unaudited)


Net Loss                                                    $(2,541,422)

Other comprehensive loss:
   Unrealized loss on securities                               (752,000)
                                                            ------------

Comprehensive loss                                          $(3,293,422)
                                                            ============

     See accompanying notes to condensed consolidated financial statements.

                                       F-4


<PAGE>
<TABLE>
<CAPTION>

                               KANAKARIS WIRELESS AND SUBSIDIARIES
                       (FORMERLY KNOWN AS KANAKARIS COMMUNICATIONS, INC.)
                         Condensed Consolidated Statements of Cash Flows
                      For the Three Months Ended December 31, 2000 and 1999
                                           (Unaudited)

                                                                    2000            1999
                                                                ------------    ------------
<S>                                                             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                     $(2,541,422)    $(1,716,284)
   Adjustments to reconcile net loss
       to net cash used in operating activities:
           Amortization of goodwill                                   7,091           6,563
           Depreciation and amortization                             28,629           4,082
           Deferred advertising income realized                    (250,000)              -
           Compensation, consulting, marketing and
             professional services, incurred in exchange
             for common stock                                     1,683,587       1,029,400
           Consulting services incurred in exchange
             for stock options                                       31,352               -
           Convertible debt-interest cost                           119,942               -
   Changes in assets and liabilities (Increase) decrease in:
             Accounts receivable                                    (40,223)        107,682
             Inventory                                                  998            (250)
             Prepaid expenses                                        51,438          24,336
             Advances to suppliers and security deposits               (175)              -
             Interest receivable                                    (12,102)         (2,403)
       Increase (decrease) in:
             Accounts payable and accrued expenses                  192,695         (24,432)
             Royalties payable                                            -          53,090
             Other current liabilities                                    -          12,837
                                                                ------------    ------------

           NET CASH USED IN OPERATING ACTIVITIES                   (728,190)       (505,379)
                                                                ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                                (4,676)        (10,306)
   Decrease in notes receivable -
      shareholders and related parties                               74,529          61,694
   Proceeds from notes receivable - other                            24,000               -
   Acquisition of film library                                      (24,940)              -
                                                                ------------    ------------

           NET CASH PROVIDED BY
           INVESTING ACTIVITIES                                      68,913          51,388
                                                                ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from  notes payable                                           -          35,000
   Proceeds from convertible debt                                         -         337,500
   Proceeds from sale of common stock                                50,000             136
   Proceeds from additional paid in capital                               -          67,864
                                                                ------------    ------------

           NET CASH PROVIDED BY FINANCING ACTIVITIES                 50,000         440,500
                                                                ------------    ------------

Net decrease in cash and cash equivalents                          (609,277)        (13,491)

Cash and cash equivalents, beginning of period                      615,101         155,063
                                                                ------------    ------------

Cash and cash equivalents, end of period                        $     5,824     $   141,572
                                                                ============    ============

          See accompanying notes to condensed consolidated financial statements.
</TABLE>
                                               F-5


<PAGE>

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

During the three months ended December 31, 2000, the Company issued 4,942,949
shares of common stock for consulting, marketing and professional services
having a fair value of $1,683,587.

During the three months ended December 31, 2000, the Company issued 500,000
stock options to a consultant for current and future services having a fair
value of $125,407, of which $31,352 has been expensed in the current three month
period and $94,055 has been prepaid as of December 31, 2000.

During the three months ended December 31, 1999, the Company issued 1,426,000
shares of common stock for consulting services having a fair value of
$1,029,400.

     See accompanying notes to condensed consolidated financial statements.

                                       F-6


<PAGE>
<TABLE>
                               KANAKARIS WIRELESS AND SUBSIDIARIES
                       (FORMERLY KNOWN AS KANAKARIS COMMUNICATIONS, INC.)
        Condensed Consolidated Statement of Changes in Stockholders' Equity (Deficiency)
                          For the Three Months Ended December 31, 2000
                                           (Unaudited)

<CAPTION>
                                         Common Stock Issued           Preferred Stock
                                      -------------------------    ------------------------
                                        Shares        Amount         Shares       Amount         APIC
                                      -----------  ------------    ----------  ------------  ------------
<S>                                   <C>          <C>             <C>         <C>           <C>
Balances
September 30, 2000                    34,597,678   $    34,598     1,000,000   $    10,000   $19,178,359

   Stock issued for cash:                 66,667            67             -             -        49,933

   Stock issued for:
     Compensation                      2,275,000         2,275             -             -       609,100
     Consulting services               2,017,949         2,018             -             -       873,194
     Marketing, advertising
       and investor relations            600,000           600             -             -       177,400
     Professional
       services                           50,000            50             -             -        18,950

   Converted debentures                6,125,218         6,125             -             -     1,444,817

   Issuance of 500,000 common
     stock options to a consultant             -             -             -             -       125,407

   Unrealized loss on
     investment                                -             -             -             -             -

   Net (loss)                                  -             -             -             -             -
                                      -----------  ------------    ----------  ------------  ------------
BALANCES
DECEMBER 31, 2000                     45,732,512   $    45,733     1,000,000   $    10,000   $22,477,160
                                      ===========  ============    ==========  ============  ============
</TABLE>
continued below:
<TABLE>
<CAPTION>
                                      Accumulated        Stock       Comprehensive
                                        Deficit      Subscriptions       Loss            Total
                                     -------------   -------------   -------------   -------------
<S>                                  <C>             <C>             <C>             <C>
Balances
September 30, 2000                   $(21,340,846)   $     (1,260)   $          -    $ (2,119,149)

   Stock issued for cash:                       -               -               -          50,000

   Stock issued for:
     Compensation                               -               -               -         611,375
     Consulting services                        -               -               -         875,212
     Marketing, advertising
       and investor relations                   -               -               -         178,000
     Professional
       services                                 -               -               -          19,000

   Converted debentures                         -               -               -       1,450,942

   Issuance of 500,000 common
     stock options to a consultant              -               -               -         125,407

   Unrealized loss on
     investment                                 -               -        (752,000)       (752,000)

   Net (loss)                          (2,541,422)              -               -      (2,541,422)
                                     -------------   -------------   -------------   -------------
BALANCES
DECEMBER 31, 2000                    $(23,882,268)   $     (1,260)   $   (752,000)   $ (2,102,635)
                                     =============   =============   =============   =============

             See accompanying notes to condensed consolidated financial
statements.
</TABLE>
                                               F-7


<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
               (FORMERLY KNOWN AS KANAKARIS COMMUNICATIONS, INC.)
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)

Basis of presentation
---------------------

The condensed consolidated financial statements included herein have been
prepared by Kanakaris Wireless, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. Kanakaris Wireless believes that
the disclosures are adequate to make the information presented not misleading
when read in conjunction with it's financial statements for the year ended
September 30, 2000. The financial information presented reflects all
adjustments, which are, in the opinion of management, necessary for a fair
statement of the results for the interim periods presented. The results of
operations for the three months ended December 31, 2000 are not necessarily
indicative of the results to be expected for the full year ending September 30,
2001, or any other period.

Business Organization and Activity
----------------------------------

Kanakaris Wireless (formerly Big Tex Enterprises, Inc.) (the "Company") was
incorporated in the State of Nevada on November 1, 1991. The Company develops
and supplies internet products for electronic commerce and operates a subsidiary
which designs and installs modular consoles.

Business Combinations
---------------------

On October 10, 1997 (the "Acquisition Date"), Kanakaris Internetworks, Inc.
("KIW") consummated a Stock Purchase Agreement with the shareholder (the
"Seller") of Desience Corporation ("Desience") to purchase 10,000 common shares
representing 100% of its issued and outstanding common stock in exchange for a
4% royalty on the gross sales (after collection) of Desience subsequent to the
acquisition date, to be paid monthly for as long as Desience remains in business
or its products are sold. Pursuant to APB 16, since the Seller has no continuing
affiliation with the Company, the 4% royalty is accounted for as an increase to
goodwill at the date the amount is determinable. KIW will hold harmless the
Seller from any claims, causes of action, costs, expenses, liabilities and prior
shareholder advances. Immediately following the exchange, Desience became a
wholly-owned subsidiary of KIW.

                                       F-8


<PAGE>

On November 25, 1997, KIW and its stockholders (the "Stockholders") consummated
an acquisition agreement with Big Tex Enterprises, Inc. ("Big Tex"), an inactive
public shell with no recent operations at that time, whereby the shareholders
sold all of their preferred and common stock, which represented 100% of KIW's
issued and outstanding capital stock, to Big Tex in exchange for 7,000,000
shares (6,000,000 common, 1,000,000 preferred) of Big Tex's restricted stock,
representing 66.67% of the issued and outstanding common stock and 100% of the
issued and outstanding preferred stock of Big Tex, aggregating 75% of the total
voting rights (the "Exchange"). Big Tex was founded in 1991 for the purpose of
lawful business or enterprise, but had been inactive since 1991. Immediately
following the exchange, the Company changed its name to Kanakaris
Communications, Inc., which was subsequently changed to Kanakaris Wireless on
June 2, 2000.

Principles of Consolidation
---------------------------

The accompanying consolidated financial statements include the accounts of the
Company, and its wholly-owned subsidiaries Kanakaris Internetworks, Inc. and
Desience Corporation. All significant intercompany balances and transactions
have been eliminated in consolidation.

Earnings Per Share
------------------

Earnings per share are computed using the weighted average of common shares
outstanding as defined by Financial Accounting Standards No. 128, "Earnings Per
Share."

COMMITMENTS AND CONTINGENCIES
-----------------------------

Legal Actions
-------------

On September 15, 1999, an individual filed a complaint against the Company and
the executive who is the Chairman of the Board, President and Chief Executive
Officer in Los Angeles Superior Court alleging breach of contract and fraud. The
fraud claim was based primarily on alleged misrepresentation and concealment
involving a consulting agreement between the Company and the individual. The
individual alleged that he is entitled to certain stock options, of which 75% of
the option price allegedly is already deemed paid in exchange for services
allegedly rendered to the Company. The individual is attempting to exercise the
options for the purchase of a certain number of shares to which he claims to be
entitled pursuant to the agreement. The claim against the Company executive was
dismissed. The case was submitted for mediation, and a hearing was held
resulting in the Company and the individual entering into a Settlement Agreement
and General Release on November 1, 2000 whereby the Company agreed to pay
$24,000 to the individual and his attorney in three equal installments of $8,000
in exchange for dismissal with prejudice of the entire action after the three
payments have been made. As of December 31, 2000, the first payment of $8,000
was made leaving a balance of $16,000. Two additional payments of $8,000 each
are due on March 1, 2001 and July 1, 2001. The December 31, 2000 financial
statements include $16,000 of accounts payable attributable to this settlement.

                                       F-9


<PAGE>

On October 14, 1999, an Illinois corporation filed suit against the Company and
the Company's stock transfer agent and registrar in the Circuit Court of Cook
County, Illinois. The case was removed to the United States District Court for
the Northern District of Illinois, Eastern Division. In the complaint, the
Illinois corporation sought damages in excess of $50,000 under breach of
contract and various other state law theories in connection with the Company's
unwillingness to permit them to transfer shares of the Company's common stock
held by the Illinois corporation. The Company believes that the shares were
wrongfully converted by a predecessor to the Illinois corporation. The Company
engaged counsel to analyze the complaint and vigorously defend the Company
against all of the Illinois corporation's claims. The Company has counterclaimed
and commenced a third-party action against affiliates of the Illinois
corporation. A separate action was filed in Utah, but the Utah court stayed that
action in favor of the action currently pending in Illinois.

The stock at issue was in the hands of the Company's transfer agent and a stock
brokerage firm that clears the trades of introducing brokers. Both of these
parties filed actions for interpleader, by which they were prepared to tender to
the court the stock certificates to which the Company and the Illinois
corporation are each laying claim. In July 2000, that tender was effectuated,
and the claims asserted by and against the transfer agent and brokerage firm
were dismissed. The stock, therefore, has been and will remain issued in the
name of the United States District Court until the dispute is resolved.

In the normal course of business, there may be various other legal actions and
proceedings pending which seek damages against the Company. Management believes
that the amounts,if any, that may result from these claims, will not have a
material adverse effect on the financial statements.

Letters of Intent
-----------------

On November 9, 1999, the Company signed a Memorandum of Understanding with Lain
International ("Lain"). Lain will make available to the Company all Spanish
language, Spanish dubbed and Spanish sub-titled films for which it has internet
distribution rights. The Company will create a KKRS web channel devoted
exclusively to these titles. The Company will maintain web visit status,
accounting, and will pay Lain royalties on at least a quarterly basis, in an
amount of 50% of the gross share of advertising, subscription and pay- per-view
fees for the channel devoted to Lain films, minus 50% of encoding, bandwidth and
advertising charges.

License Agreement
-----------------

On February 18, 1999, the Company entered into a License Agreement ("Agreement")
with ION Systems, Inc. ("ION"), a Missouri corporation. The Agreement is through
December 31, 2004, and thereafter will be renewed automatically for additional
renewal terms of five years each, ending on December 31 of each fifth year.
Under the terms of the Agreement, ION grants to the Company a license to use its
products, the E*Web and the X*Maker computer software enabling the secure
downloading and viewing of web sites, for or in connection with the Company's
web sites. The two parties agreed that the software may be used solely for the
publishing, displaying, promoting, marketing, offering and selling for a fee of
certain specified book categories as well as of products or services listed in
the books published. The aforementioned activities are meant to be offered
directly to customers and end users using the facilities of a web site. No
geographic or territorial restrictions apply to the use of the software. The
agreed fee for each book conversion performed by ION will be $100, and the
royalties for each book sale and product sale shall be 12% and 5%, respectively,
of the gross revenue. Furthermore, ION shall have the right to buy 100,000
shares of the Company's common stock at a price of $0.30 per share at any time
between June 1, 1999 and December 31, 2005, 175,000 shares at $.01 until May 1,
2003, and 87,500 shares at $1.295 until May 1, 2003.

                                      F-10


<PAGE>

Advertising Agreement
---------------------

On November 14, 2000, the Company entered into an advertising agreement with
eConnect, a publicly traded corporation. The terms of the agreement grant
eConnect the exclusive ability to place banner advertisements with hyperlinks on
the home pages of CinemaPop.com and WordPop.com, the Company's web sites for
movies and books. The Company will also send one e-mail message per month to
each member of its subscriber and web partner base with a message provided by
eConnect and include information about eConnect's eCash pad product in trade
magazine advertisements. Additionally, the Company plans to provide, through a
hyperlink included on eConnect's web site, access to several video feature films
so that it may demonstrate the eCash pad ordering system.

The term of this agreement is for six months, with one six-month renewal option.
In consideration for the services the Company will render under this agreement,
the Company was paid $1,000,000 in the form of eConnect restricted stock valued
at the closing price of $1.25 per share on November 14, 2000, amounting to
800,000 shares. As of December 31, 2000, the stock was valued at $.31 per share
and the Company recorded an unrealized loss on investment of $752,000. This
amount is shown in the Company's statement of comprehensive loss.

Service Agreements
------------------

The Company signed an agreement with ValueClick in January of 2000 whereby
ValueClick will drive advertisers to the Kanakaris web site. The Company
receives $.20 each time a customer clicks on a ValueClick-served ad. The Company
will also receive $.03 per click whenever a customer clicks on a
Company-referred web site.

In February 2000, the Company entered into an agreement with Wave Systems Corp.,
which provides the transactional capability to enable Kanakaris Wireless to
implement the subscription and pay-per-view revenue collection portion of its
Internet based business plan.

On March 1, 2000, the Company entered into a one-year agreement with Sonar
Network, (a business unit of DoubleClick, Inc. "Doubleclick") to sell media
space on the Company's various web sites for the display of advertising. The
Company will receive 50% of the net revenues generated from the sale of such
advertising.

In June 2000, the Company entered into a one year agreement with the Fortino
Group, Inc. Based upon the terms of the contract, the Fortino Group will provide
media relations services in connection with the marketing and promotion of the
Company's business, products and/or services. The Company will pay approximately
$300,000 for these services. During the year ended September 30, 2000, $100,000
of this amount was paid and charged to operations. Additional services in the
amount of $75,000 were received during the three months ended December 31, 2000.
This amount was charged to operations and included in accounts payable.

                                      F-11


<PAGE>

Internet Data Center Services Agreements
----------------------------------------

Effective August 9, 1999, the Company entered into an agreement with Microsoft
Corporation whereby Microsoft will promote certain of the Company's web sites in
consideration for the Company's promotion of specified Microsoft Windows Media
Technology on the Company's web sites through December 30, 2001. No expense or
income has been recorded by the Company relating to this agreement because under
APB No. 29, Accounting For Non-monetary Transactions, the fair values of such
web site promotions are not determinable within reasonable limits.

On August 23, 1999, the Company entered into a one-year agreement with
ScreamingMedia, Inc. to receive daily customized content updates for the
Company's web site. Under the terms of this agreement, the Company will pay
ScreamingMedia $12,000, of which $3,000 was paid in August 1999. The balance of
$9,000 is payable in twelve monthly installments of $750.

On November 17, 1999, and effective December 7, 1999, the Company entered into
an agreement with Microsoft Corporation ("Microsoft"). Microsoft will assist the
Company with the development of an audio/video-enhanced web site which delivers
timely and relevant audio-visual content using Windows Media technologies in a
broadband network infrastructure.

On March 6, 2000, the Company entered into a one year Jumpstart Program
Agreement with Microsoft whereby Microsoft will assist the Company with the
development of an audio/video-enhanced web site which delivers timely and
relevant audio/visual content. No expense or income has been recorded by the
Company relating to this agreement because under APB No. 29, Accounting For
Non-monetary Transactions, the fair values of such web site promotions are not
determinable within reasonable limits.

On April 20, 2000 the Company entered into a distribution agreement with John
Clark for the Internet distribution rights to his book "Dead Angel" which
pertain to Clark's relationship to Jerry Garcia. Kanakaris will pay $7,000 to
support completion of the book and $6,000 in expenses for promotional interviews
with Cliff Garcia and others as well as a promotional party to be webcast on the
Company's web site and made into a videotape. In consideration of this, Clark
agreed to pay to the Company, in perpetuity, a 50% royalty of the gross sales of
the book over the Internet and for two years to pay to the Company 50% of all
royalties generated by the book, and the interview and party video, as well as
all other ancillary rights.

In May 2000, the Company entered into an agreement with Meiselman-Rede Media
Group (MRMG). Based upon the terms of the agreement, the Company paid MRMG
$100,000 in exchange for the future Internet distribution rights to the first
sixteen (16) two (2) minute duration episodes of a project known as Paris Falls.
The $100,000 payment has been accounted for as a prepaid expense. As of December
31, 2000, $50,000 of the payment was still a prepaid expense and $12,500 was
expensed during the three months ended December 31, 2000.

In June 2000, the Company entered into a six month agreement with Stockcom
International, Inc. whereby the Company will receive various advertisement
services in exchange for $28,000, $4,000 of which was due upon signing and
$4,000 of which was and is due during each of the six months following the
effective date of the agreement.

                                      F-12


<PAGE>

Internet Content Provider Agreements
------------------------------------

Effective August 1, 1999, the Company entered into an agreement with InXsys
Corporation (InXsys) granting the Company the right to incorporate InXsys's
Aggregated ClassiFIND On-Line Classifieds, and Buy Sell Bid On-Line Personals
co-branded services as revenue-generating and traffic-building content within
the Company's web site by placement of one or more hotlinks and/or banners to
the InXsys sites. Under the terms of this agreement, the Company shall receive a
referral commission equal to a percentage, as defined in the agreement, of the
net user fees collected.

On May 29, 2000, the Company entered into an agreement with Tribune Media
Services, Inc. ("TMS"). Under the agreement TMS will provide movie title and
background information to be viewed in conjunction with the Company's on-line
movies. The agreement is for 600 movies for a fee of $2.50 per movie.

REVOLVING LINE OF CREDIT
------------------------

On February 25, 1999, the Company entered into a Revolving Line of Credit
Agreement ("the Agreement") with Alliance Equities Inc. ("Alliance"), a
Florida-based venture capital firm, which expires December 10, 2001. Under the
terms of the Agreement, Alliance has made available a $7 million revolving line
of credit with interest on the unpaid principal at 10% per annum. The funds from
the line of credit will enable the Company to pursue current Internet
opportunities and commerce development. Under the terms of the Agreement the
Company may draw up to $500,000 per month on the total line of credit upon
written request by the Company to the Lender. Additionally, the parties have
agreed that any portion of the indebtedness may be paid back by the Company
either with cash or by the issuance of common stock. As of December 31, 2000, no
amounts were outstanding under this line of credit. Furthermore, in a separate
memorandum of agreement the two parties agreed that Alliance will provide
ongoing consulting services to the Company including, but not limited to,
strategic growth advice and introductions, marketing advice, and business ideas.
Alliance will be compensated for these services, at the option of the Company,
either in cash, or through the issuance of stock or credit towards the purchase
of stock. As of December 31, 2000, the Company issued to Alliance 1,400,000
shares of the Company's common stock valued at approximately $530,000 for
consulting services.

                                      F-13


<PAGE>

STOCK OPTION PLAN
-----------------

In May 2000, the Company's board of directors and stockholders approved a stock
option plan (the "2000 Plan"). The 2000 Plan is designed to offer an
incentive-based compensation system to employees, officers and directors of the
Company, and to employees of companies which do business with the Company. The
2000 Plan provides for the grant of incentive stock options and non-qualified
stock options. A total of 3,000,000 shares of common stock are authorized for
issuance under the Plan.

On May 4, 2000, the Company granted under the 2000 Plan, 87,500 options to
non-employee consultants. Effective May 25, 2000, the Company's board of
directors approved grants under the 2000 Plan of 1,950,000 options to various
officers, directors and employees. On August 2, 2000, the Company's board of
directors approved the grant under the 2000 Plan of an additional 962,500
options to various officers and employees.

DEBENTURE INVESTORS
-------------------

In order to provide working capital and financing for the Company's expansion,
on various dates during 2000, the Company entered into several agreements with
four accredited investors the ("Purchasers") whereby the Purchasers acquired
aggregates of $1,000,000 and $4,500,000 of the Company's 10% Convertible
Debentures, due February 1, 2001 and May 1, 2001, respectively.

The Purchasers have converted portions of the 2000 debentures and accrued
interest into shares of common stock of the Company at various times at the
initial per share conversion price which was equal to the lesser of $.97 and
66.66% of the average closing bid price during the 20 trading days immediately
preceding the conversion dates.

The debentures contain a contingency provision whereby, if the Company issues
common stock at a price less than both the fixed conversion price and the market
price on the date of issuance, the fixed conversion price shall be adjusted as
stipulated in the agreements governing such debentures.

As of December 31, 2000, the Company was indebted for an aggregate of $2,389,000
on these convertible debentures.

RELATED PARTY TRANSACTIONS
--------------------------

During the three months ended December 31, 2000, the Company issued an aggregate
of 2,500,000 shares of its common stock to officers, directors, and consultants
who subsequently became directors, having an aggregate fair market value of
$692,750.

                                      F-14


<PAGE>

SEGMENT INFORMATION
-------------------
                                          Internet      Modular
                                          Commerce      Consoles       Total
                                        ------------  ------------  ------------

For the three months ended December 31:

1999
----
   Revenues                             $       278   $    93,310   $    93,588
   Segment profit (loss)                 (1,696,803)      (19,481)   (1,716,284)
   Total assets                             666,243       126,340       792,583
   Additions to long-lived assets             9,724           582        10,306
   Depreciation and amortization              9,730           765        10,495

2000
----
   Revenues                             $   261,076   $   293,237   $   554,313
   Segment (loss)                        (2,584,243)       42,821    (2,541,422)
   Total assets                           1,986,574       141,566     2,128,140
   Additions to long-lived assets            29,616             -        29,616
   Depreciation and amortization             35,658            62        35,720

YEAR 2000 COMPLIANCE
--------------------

The Company considered the effects that Year 2000 Issues could have on its
operations. Costs attributed to the purchase of new software and hardware have
been capitalized, and other costs were expensed as incurred. The Company has not
experienced any significant problems as a result of the arrival of the Year
2000. Although no significant problems have materialized to date, the Company
will continue to monitor all relevant systems to the extent the Company believes
is appropriate.

SUBSEQUENT EVENTS
-----------------

In order to provide future working capital and financing for the Company's
expansion, effective as of January 5, 2001, the Company entered into a
securities purchase agreement and related agreements with four accredited
investors (the "Purchasers") for the purchase of the Company's 12% Convertible
Debentures due January 5, 2002.

The Purchasers are making investments in tranches, the first in the aggregate
amount of $650,000, which was received upon signing of the definitive investment
agreements and the second, in the aggregate amount of $650,000, which is
required to be made on or before March 9, 2001.

Upon the issuance of the first $650,000 of convertible debentures, the
Purchasers received five-year term warrants to purchase three shares of the
Company's common stock for each $1.00 invested or required to be invested in the
two $650,000 tranches of convertible debentures. The exercise price of the
warrants is equal to the lesser of (i) $0.125 and (ii) the average of the lowest
three intraday trading prices during the twenty trading days immediately
preceding the exercise date. No additional warrants will be issued by the
Company at the time the second $650,000 of convertible debentures are purchased.
For all debentures issued, interest will be 12% per annum, payable quarterly in
common stock or cash at the option of the investor.

                                      F-15


<PAGE>

The debentures are immediately convertible into shares of the Company's common
stock. The conversion price for the initial $650,000 of debentures is equal to
the lesser of (i) $0.15 and (ii) the average of the lowest three intraday
trading prices during the twenty trading days immediately prior to the
conversion date discounted by 37.5%.

Pursuant to the Rules and Regulations of the Securities and Exchange Commission
regarding beneficial conversion features, the Company will expense as financing
costs any excess of the fair market value of the common stock at the debenture
issuance date over the fixed conversion price. There will be no amortization
period for these financing costs since the debentures will be convertible
immediately upon issuance.

The Company has registered with the Securities and Exchange Commission on Form
SB-2, shares of the Company's common stock underlying the convertible debentures
and the 3,900,000 shares of the Company's common stock underlying the
accompanying warrants.

                                      F-16



<PAGE>

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

         The following discussion and analysis should be read in conjunction
with our consolidated financial statements and notes to financial statements
included elsewhere in this document. This report and our consolidated financial
statements and notes to financial statements contain forward-looking statements
which generally include the plans and objectives of management for future
operations, including plans and objectives relating to our future economic
performance and our current beliefs regarding revenues we might earn if we are
successful in implementing our business strategies.

         We have incurred significant losses since our inception. As of December
31, 2000, we had an accumulated deficit of $23,882,268. We expect to incur
substantial operating losses for the foreseeable future. Our results of
operations have been and may continue to be subject to significant fluctuations.
The results for a particular period may, without limitation, vary due to a
number of factors, many of which are beyond our control, including:


         o        the timing and nature of revenues from our Internet and
                  e-commerce businesses and data control console product sales
                  that are recognized during any particular quarter;
         o        the impact of price competition on our average prices for our
                  products and services;
         o        market acceptance of new product or service introductions by
                  us or our competitors;
         o        the timing of expenditures in anticipation of future sales;
         o        product returns;
         o        the financial health of our customers;
         o        the overall state of the Internet and e-commerce industries
                  and the data control console industry; and
         o        economic conditions generally.

         We do not undertake to update, revise or correct any forward-looking
statements.

         The information contained in this document is not a complete
description of our business or the risks associated with an investment in our
common stock. Before deciding to buy or maintain a position in our common stock,
you should carefully review and consider the various disclosures we made in this
document, and in our other materials filed with the Securities and Exchange
Commission that discuss our business in greater detail and that disclose various
risks, uncertainties and other factors that may affect our business, results of
operations or financial condition.

         Any of the factors described above or in the "Risk Factors" section of
this document could cause our operating results, including our net income (loss)
or growth in net income (loss) to differ materially from prior results. As a
result, we believe that period-to-period comparisons of our results of
operations are not necessarily meaningful and should not be relied upon as any
indication of future performance. Fluctuations in our operating results could,
among other things, cause the price of our common stock to fluctuate
substantially.

         Assumptions relating to the forward-looking statements involve
judgments with respect to, among other things, future economic, competitive and
market conditions, all of which are difficult or impossible to predict
accurately, and many of which are beyond our control. In addition, our business
and operations are subject to significant risks which increase the uncertainty
inherent in the forward-looking statements. In light of this, the inclusion of
forward-looking information should not be regarded as a representation or
guarantee by us or any other person that our objectives or plans will be
achieved.

OVERVIEW

         We are an Internet-based provider of online delivery of films and
books. Our Internet web site, www.KKRS.Net, is the portal to all of the
proprietary content and web sites of our company, including www.CinemaPop.com
and www.WordPop.com. Our films are accessible by Internet users at access rates
from 56 kbps to broadband and are viewable on Pocket PCs. We have over 450
on-demand movies available with full-screen scalability and television quality.
We have approximately 700 books available online. The books feature re-sizable
type, the ability to turn pages without scrolling and the ability to search by
word or phrase. In August 2000, we introduced a unique system whereby authors
and publishers may interactively post books online for secure Internet
distribution. Books may also be delivered from our web site to wireless handheld
devices such as Pocket PCs and Palm(TM) handhelds.

         In addition to our Internet and e-commerce businesses, we design,
manufacture and install ergonomic data control console systems for high-end
computer command centers used by governmental agencies and Fortune 500 and other
companies. Our customers have included NASA, the Federal Bureau of
Investigation, the United States Navy, Bank of America, Mitsubishi and many
others.

         Our company is a Nevada corporation that was incorporated on November
1, 1991 and is the sole stockholder of Kanakaris InternetWorks, Inc. Kanakaris
InternetWorks, Inc. is the sole stockholder of Desience Corporation. Our common
stock is currently traded on the OTC Bulletin Board under the ticker symbol
"KKRS."

         To date, substantially all of our revenues have been derived through

                                        3


<PAGE>

sales of our data control console systems. However, we have implemented a number
of means through which we anticipate deriving a significant portion of our
revenues from our Internet and e-commerce businesses. In fact, during the
quarter ended December 31, 2000, approximately 47% of our revenues were from our
Internet business. Our current business strategy includes expansion of our data
control console business and a significant emphasis upon developing and
expanding our Internet and e-commerce businesses. In that regard, we anticipate
deriving revenue from, among other sources:

         o        advertising fees;
         o        sales of online, downloaded and print books and other written
                  materials;
         o        movie subscription and pay-per-view fees;
         o        encoding services; and
         o        webcasting services.

         We expect to continue to place significant emphasis upon the further
development and expansion of our Internet and e-commerce businesses. We intend
to increase our marketing efforts substantially in order to develop awareness
and brand loyalty for our Internet-based products and services and to generate
revenues from those who visit our Internet sites. These marketing efforts will
require a considerable effort on our part.

         We also intend to continue to invest in the development of new products
and services, complete the development of our products and services currently
under development and expand our network.

COMPARISON OF RESULTS OF OPERATIONS FOR QUARTERS ENDED DECEMBER 31, 2000 AND
1999

         NET SALES. Net sales increased $460,725 (492%) from $93,588 for the
quarter ended December 31, 1999 to $554,313 for the quarter ended December 31,
2000. Net sales derived from our e-commerce business increased $260,798 from
$278 for the quarter ended December 31, 1999 to $261,076 for the quarter ended
December 31, 2000. This increase was primarily due to an increase in advertising
revenue generated from our web sites. Net sales derived from our data control
console business increased $199,927 (214%) from $93,310 for the quarter ended
December 31, 1999 to $293,237 for the quarter ended December 31, 2000. This
increase was primarily due to an increase in sales of our OPCON Modular System.

         GROSS PROFIT. Gross profit increased $272,458 (1,058%) from a gross
profit of $25,758 for the quarter ended December 31, 1999 to a gross profit of
$298,216 for the quarter ended December 31, 2000. This increase in gross profit
was due primarily to the increase in total sales noted above.

         OPERATING EXPENSES. Total operating expenses increased $1,011,762 (58%)
from $1,744,363 for the quarter ended December 31, 1999 to $2,756,125 for the
quarter ended December 31, 2000. This increase in total operating expenses was
due primarily to an increase in marketing, advertising and investor relations
costs, executive compensation, salaries, and office and other expenses.
Marketing, advertising and investor relations costs increased $181,989 (86%)
from $211,175 for the quarter ended December 31, 1999 to $393,164 for the
quarter ended December 31, 2000, primarily due to our increased consumer and
trade advertising and marketing. Executive compensation increased $575,188
(586%) from $98,112 for the quarter ended December 31, 1999 to $673,300 for the
quarter ended December 31, 2000, primarily due to the issuance of common stock
to executives. Salaries increased $118,869 (281%) from $42,325 for the quarter
ended December 31, 1999 to $161,194 for the quarter ended December 31, 2000, due
to both increases in staff and increases in salaries of existing staff. Office
and other expenses increased $80,336 (456%) from $17,607 for the quarter ended
December 31, 1999 to $97,943 for the quarter ended December 31, 2000.
Professional fees, however, decreased $40,394 (19%) from $216,713 for the
quarter ended December 31, 1999 to $176,319 for the quarter ended December 31,
2000. Some of these operating expenses were paid through the issuance of shares
of our common stock to the service provider.

         INTEREST AND OTHER EXPENSE. Interest and other expense increased
$85,834, from $2,321 of income for the quarter ended December 31, 1999 to
$83,513 of expense for the quarter ended December 31, 2000. This increase in
other expense was due to the financing cost of issuing stock as payment of
interest accrued and payable on, and upon conversion of portions of the
principal balances of our convertible debentures.

         NET LOSS. Net loss increased $825,138 (48%) from $1,716,284 for the
quarter ended December 31, 1999 to $2,541,422 for the quarter ended December 31,
2000. This increase in net loss was due to increased operating expenses, as
discussed above.

COMPARISON OF RESULTS OF OPERATIONS FOR FISCAL YEARS ENDED SEPTEMBER 30, 2000
AND 1999

         NET SALES. Net sales decreased $354,920 (37%) from $968,758 for the

                                        4


<PAGE>

year ended September 30, 1999 to $613,838 for the year ended September 30, 2000.
Net sales derived from our e-commerce business decreased $8,568 (27%) from
$31,162 for the year ended September 30, 1999 to $22,594 for the year ended
September 30, 2000. Net sales derived from our data control console business
decreased $346,352 (37%) from $937,596 for the year ended September 30, 1999 to
$591,244 for the year ended September 30, 2000. This decrease was primarily due
to a decrease in sales of our OPCON Modular System, which we believe to be a
result of fluctuations in the timing of orders for our data control console
products caused by budget constraints and delayed receipt of expected funding by
some prospective clients.

         GROSS PROFIT. Gross profit decreased $66,700 (22%) from a gross profit
of $307,051 for the year ended September 30, 1999 to a gross profit of $240,351
for the year ended September 30, 2000. This decrease in gross profit was due
primarily to the decrease in total sales noted above and increased expenditures
in developing the foundation of our e-commerce business.

         OPERATING EXPENSES. Total operating expenses increased $5,577,225
(152%) from $3,673,250 for the year ended September 30, 1999 to $9,250,475 for
the year ended September 30, 2000. This increase in total operating expenses was
due primarily to an increase in consulting fees, marketing, advertising and
investor relations costs, and other professional fees. Consulting fees increased
$2,351,740 (176%) from $1,339,287 for the year ended September 30, 1999 to
$3,691,027 for the year ended September 30, 2000. Marketing, advertising and
investor relations costs increased $1,454,784 (177%) from $822,306 for the year
ended September 30, 1999 to $2,277,090 for the year ended September 30, 2000,
primarily due to our increased consumer and trade advertising and marketing.
Professional fees increased $926,693 (150%) from $616,282 for the year ended
September 30, 1999 to $1,542,975 for the year ended September 30, 2000. Each of
These operating expenses were paid with cash and/or through the issuance of
shares of our common stock to the service provider.

         INTEREST AND OTHER EXPENSE. Interest and other expense increased
$3,790,921, from $175,661 for the year ended September 30, 1999 to $3,966,582
for the year ended September 30, 2000. This increase in other expense was due to
the financing cost of issuing stock as payment of interest accrued and payable
on, and upon conversion of portions of the principal balances of our convertible
debentures.

         NET LOSS. Net loss increased $9,434,846 (266%) from $3,541,860 for the
year ended September 30, 1999 to $12,976,706 for the year ended September 30,
2000. This increase in net loss was due to a combination of decreased sales,
decreased gross profit, increased operating expenses, and increased interest and
other expense, as discussed above.

LIQUIDITY AND CAPITAL RESOURCES

         We currently finance our operations primarily through private
placements of securities and revenue generated from our operations. We also have
available to us a $7,000,000 revolving line of credit from Alliance Equities
which can be drawn upon by us for up to $500,000 per month, with interest to
accrue at the rate of 10% per annum. However, during the fiscal year ended
September 30, 2000 and through February 12, 2001, no amounts were outstanding
under the line of credit.

         In January 2000, our convertible debentures that were outstanding as of
December 31, 1999 were converted into an aggregate of 1,783,334 shares of our
common stock, which shares were registered by us for resale by the purchasers.

         In February 2000, we issued $1,000,000 of our 10% Convertible
Debentures due February 1, 2001, which were accompanied by warrants to purchase
up to 300,000 shares of common stock. The net proceeds of that offering, after
the payment of some related expenses, were $870,000. In March and April 2000,
$750,000 of the principal amount plus interest was converted into shares of
common stock. In June 2000, the remaining $250,000 of the principal amount plus
interest was converted into shares of common stock. The shares of common stock
issued upon conversion were registered by us for resale by the purchasers.

         In April and August 2000, we issued an aggregate of $4,500,000 of our
10% Convertible Debentures due May 1, 2001, which were accompanied by warrants
to purchase up to an aggregate of 1,350,000 shares of common stock. The net
proceeds of that offering, after payment of some related expenses, were
$3,905,000. The shares of common stock underlying the debentures and warrants
were registered by us for resale by the purchasers. As of February 12, 2001,
$2,601,500 of the principal amount plus certain interest payments had been
converted into shares of common stock.

                                       5

<PAGE>

         In January 2001, we issued $650,000 of 12% convertible debentures due
January 5, 2002 to four accredited investors. The debentures were accompanied by
warrants to purchase up to 3,900,000 shares of common stock. The net proceeds of
that offering, after payment of related expenses, were approximately $631,500.
We have registered for resale by the investors the shares of common stock
underlying the debentures and warrants. Under the terms of the debenture
purchase documents, the investors are obligated to purchase, and we are
obligated to issue, additional debentures in the aggregate principal amount of
$650,000 on or before March 9, 2001. To the extent debentures issued by us are
converted into shares of common stock, we will not be obligated to repay the
converted amounts.

         During the quarter ended December 31, 2000, we incurred a negative cash
flow from operating activities of $780,190. As of December 31, 2000, we had a
negative working capital of $3,311,474 and an accumulated deficit of
$23,882,268. As of that date, we had $5,824 in cash and cash equivalents,
$342,469 in accounts receivable, $102,500 in notes receivable from
non-stockholders, a net value for our film library of $453,822 and accounts
payable and accrued expenses of $990,687.

         Cash used in our operating activities totaled $728,190 for the quarter
ended December 31, 2000, as compared to $505,379 for the quarter ended December
31, 1999. Cash provided by our investing activities totaled $68,913 for the
quarter ended December 31, 2000. Cash provided by our investing activities
totaled $51,388 for the quarter ended December 31, 1999.

         Cash provided by our financing activities totaled $50,000 for the
quarter ended December 31, 2000 and $440,500 for the quarter ended December 31,
1999. We raised none of the cash provided by financing activities during the
quarter ended December 31, 2000 and $337,500 of the cash provided by financing
activities during the quarter ended December 31, 1999 from the issuance of our
convertible debentures.

         For the quarter ended December 31, 2000, we had net sales of $554,313
and a net loss of $2,541,422, of which loss $1,870,601 (74%) consisted of
non-cash expenses. These non-cash expenses included the issuance of common stock
and options to purchase common stock that we issued to various individuals and
entities as compensation for services rendered.

         In an effort to increase sales related to our Internet business, we are
implementing a variety of strategies, including posting online advertisements
directed at executive management of other public companies. Other business
strategies that we intend to implement include requiring online user
registration for all movie viewing on our web sites, soliciting monthly
subscriptions to and pay-per-view sales of movie viewing on our web sites,
introducing revenue- sharing web partner programs and improving tracking of our
market share. We believe that if we are successful in implementing these
business strategies, we will generate increased revenues from our Internet
business segment. Additionally, in order to reduce the cost of generating movie
revenues, we plan to bring the encoding process for films in-house in
conjunction with the development of our proprietary software.

         In an effort to increase sales of our data control console products, in
2000 we hired two exclusive sales representatives. In addition, we increased our
original equipment manufacturing capacity by adding additional manufacturing
representation and launched a new marketing campaign that included high-impact
sales literature and a cutting-edge web site at www.desience.com. We believe
that if we are successful in implementing our business strategies for our module
consoles segment, we will generate increased revenues from this segment.

         We believe that current and future available capital resources,
revenues generated from operations, and other existing sources of liquidity,
including our revolving line of credit with Alliance Equities, will be adequate
to meet our anticipated working capital and capital expenditure requirements for
at least the next twelve months. If, however, our capital requirements or cash
flow vary materially from our current projections or if unforeseen circumstances
occur, we may require additional financing sooner than we anticipate. Failure to
raise necessary capital could restrict our growth, limit our development of new
products and services or hinder our ability to compete.

                                        6


<PAGE>

IMPACT OF YEAR 2000

            We have not experienced any significant problems as a result of the
arrival of the Year 2000. Although no significant problems have materialized to
date, we will continue to monitor our information technology and other systems
to the extent we believe such monitoring is necessary.

                                  RISK FACTORS

         An investment in our common stock involves a high degree of risk. You
should consider, among other things, the following factors carefully before
deciding to purchase any shares of our common stock.

WE HAVE INCURRED OPERATING LOSSES, EXPECT CONTINUED LOSSES AND MAY NOT ACHIEVE
PROFITABILITY. IF WE CONTINUE TO LOSE MONEY, WE MAY HAVE TO CURTAIL OUR
OPERATIONS

         Our consolidated financial statements have been prepared assuming we
will continue as a going concern. We have not been profitable and we may
continue to lose money for the foreseeable future. Historically, we have
incurred losses and experienced negative cash flow. As of December 31, 2000, we
had an accumulated deficit of $23,882,268. We may continue to incur losses and
may never achieve or sustain profitability. An extended period of losses and
negative cash flow may prevent us from operating and expanding our business,
especially our Internet-based business.

OUR COMMON STOCK IS SUBJECT TO SUBSTANTIAL DILUTION, AND WE MAY NEED AND BE
UNABLE TO OBTAIN ADDITIONAL FUNDING ON SATISFACTORY TERMS, WHICH COULD FURTHER
DILUTE OUR STOCKHOLDERS OR IMPOSE BURDENSOME FINANCIAL RESTRICTIONS ON OUR
BUSINESS

         Historically, we have relied upon cash from financing activities and
revenues generated from operations to fund all of the cash requirements of our
company's activities. We have not been able to generate any significant cash
from our operating activities in the past and cannot assure you that we will be
able to do so in the future. As a result, we have issued securities that are
convertible into or exercisable for a substantial number of shares of our common
stock. We may also require new financing in addition to our line of credit with
Alliance Equities. This may not be available on a timely basis, in sufficient
amounts or on terms acceptable to us. This financing may also further dilute
existing stockholders' equity. Any debt financing or other financing of
securities senior to common stock will likely include financial and other
covenants that will restrict our flexibility. At a minimum, we expect these
covenants to include restrictions on our ability to pay dividends on our common
stock. Any failure to comply with these covenants would have a material adverse
effect on our business, prospects, financial condition and results of
operations.

OUR FAILURE TO MANAGE GROWTH EFFECTIVELY COULD IMPAIR OUR BUSINESS

         Our strategy envisions a period of rapid growth that may put a strain
on our administrative and operational resources. While we believe that we have
established an infrastructure to support growth, our ability to effectively
manage growth will require us to continue to expand the capabilities of our
operational and management systems and to attract, train, manage and retain
qualified engineers, technicians, salespersons and other personnel. There can be
no assurance that we will be able to do so. If we are unable to successfully
manage our growth, our business, prospects, financial condition and results of
operations could be adversely affected.

                                        7


<PAGE>

OUR STOCK PRICE IS SUBJECT TO SIGNIFICANT VOLATILITY, WHICH COULD RESULT IN
LITIGATION AGAINST US

         There is currently an extremely limited trading market for our common
stock. Our common stock trades on the OTC Bulletin Board under the symbol
"KKRS." There can be no assurance that any regular trading market for our common
stock will develop or, if developed, will be sustained. The trading prices of
our common stock could be subject to wide fluctuations in response to:

         o        quarter-to-quarter variations in our operating results;
         o        material announcements of technological innovations;
         o        price reductions;
         o        significant customer orders or establishment of strategic
                  partnerships by us or our competitors or providers of
                  alternative products and services;
         o        general conditions in the Internet, e-commerce and data
                  control console industries; or
         o        other events or factors, many of which are beyond our control.

         In addition, the stock market as a whole and individual stocks have
experienced extreme price and volume fluctuations, which have often been
unrelated to the performance of the related corporations. Our operating results
in future quarters may be below the expectations of market makers, securities
analysts and investors. In any such event, the price of our common stock will
likely decline, perhaps substantially. In the past, following periods of
volatility in the market price of a company's securities, securities class
action litigation has occurred against the issuing company. There can be no
assurance that such litigation will not occur in the future with respect to our
company. Such litigation could result in substantial costs and a diversion of
management's attention and resources, which could have a material adverse effect
on our business, prospects, financial condition and results of operations. Any
adverse determination in such litigation could also subject us to substantial
liabilities.

BECAUSE WE ARE SUBJECT TO THE "PENNY STOCK" RULES, THE LEVEL OF TRADING ACTIVITY
IN OUR STOCK MAY BE REDUCED

         Broker-dealer practices in connection with transactions in "penny
stocks" are regulated by certain penny stock rules adopted by the Securities and
Exchange Commission. Penny stocks, like shares of our common stock, generally
are equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on Nasdaq). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document that provides information about penny stocks and the nature
and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction,
and, if the broker-dealer is the sole market maker, the broker-dealer must
disclose this fact and the broker-dealer's presumed control over the market, and
monthly account statements showing the market value of each penny stock held in
the customer's account. In addition, broker-dealers who sell these securities to
persons other than established customers and "accredited investors" must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written agreement to the transaction.
Consequently, these requirements may have the effect of reducing the level of
trading activity, if any, in the secondary market for a security subject to the
penny stock rules, and investors in our common stock may find it difficult to
sell their shares.

WE RELY HEAVILY ON OUR KEY EMPLOYEES, AND THE LOSS OF THEIR SERVICES COULD
MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS

         Our success is highly dependent upon the continued services of key
members of our management, including our Chairman of the Board, President and
Chief Executive Officer, Alex Kanakaris. The loss of Mr. Kanakaris could have a
material adverse effect on our company. We are the beneficiary of a term life
insurance policy in the amount of $8,000,000 covering Mr. Kanakaris. We have not
entered into any employment agreement with Mr. Kanakaris or any other officer of
our company.

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<PAGE>

ALTHOUGH INTERNET COMMERCE HAS YET TO ATTRACT SIGNIFICANT REGULATION, GOVERNMENT
REGULATION MAY RESULT IN FINES, PENALTIES, TAXES OR OTHER COSTS OR CONSEQUENCES
THAT MAY REDUCE OUR FUTURE EARNINGS

         The United States Congress has recently passed or is considering
legislation regulating certain aspects of the Internet, including online
content, copyright infringement, user privacy, taxation, access charges, digital
signatures and liability for third-party activities. The European Union also has
enacted several directives relating to the Internet, including directives that
address the use of personal data, e-commerce activities, security, commercial
piracy, consumer protection and taxation of e-commerce transactions. Various
states have adopted and are considering Internet-related legislation and
regulations. Governmental authorities in the United States and abroad are
considering other legislative and regulatory proposals to further regulate the
Internet. Areas of potential regulation include libel, pricing, quality of
products and services and intellectual property ownership. We cannot predict
what new laws will be enacted, or how courts will interpret existing and new
laws, and therefore are uncertain as to how new laws or the application of
existing laws will affect our business. In addition, our business may be
indirectly affected by legislation that affects the ability of our customers to
engage in e-commerce activities. Increased regulation of the Internet may
decrease the growth in the use of the Internet, which could decrease the demand
for our products and services, increase our cost of doing business or otherwise
harm our business, results of operations and financial condition.

BECAUSE WE BELIEVE THAT PROPRIETARY RIGHTS ARE MATERIAL TO OUR SUCCESS,
MISAPPROPRIATION OF THESE RIGHTS OR CLAIMS OF INFRINGEMENT OR LEGAL ACTIONS
RELATED TO INTELLECTUAL PROPERTY COULD ADVERSELY IMPACT OUR FINANCIAL CONDITION

         We currently rely on a combination of contractual rights, copyrights,
trademarks and trade secrets to protect our proprietary technology and
intellectual property rights. We do not hold any patents. However, we believe
that some of our proprietary technologies, including our CinemaWEAR(TM) Encoding
technology, our CinemaWEAR(TM) Wireless Delivery technology and our Embedded
Electronic Commerce(TM) technology, could benefit from patent protection.
Accordingly, we intend to file patent applications for those technologies with
the United States Patent and Trademark Office. There can be no assurance that
our means of protecting our proprietary rights will be adequate or that our
competitors will not independently develop comparable or superior technologies
or obtain unauthorized access to our proprietary technologies.

         We own, license or have otherwise obtained the right to use certain
technologies incorporated into our web sites. We may receive infringement claims
from third parties relating to our technologies. In such event, we intend to
investigate the validity of any such claims and, if we believe the claims have
merit, we intend to respond through licensing or other appropriate actions.
Certain of these claims may relate to technology that we have licensed from
third parties for incorporation into our web sites. In such event, we would
forward these claims to the appropriate third party. If we were unable to
license or otherwise provide any necessary technology on a cost-effective basis,
we could be prohibited from using that technology, incur substantial costs in
redesigning our web sites that incorporate that technology, or incur substantial
costs defending any legal action taken against us, all of which could have a
material adverse effect on our business, prospects, financial condition, results
of operations and cash flows.

         We hold the Internet domain names "KKRS.Net," "WordPop.com,"
"NetBooks.com," "CinemaPop.com" and many others. Under current domain name
registration practices, no one else can obtain an identical domain name, but
someone might obtain a similar name, or the identical name with a different
suffix, such as ".org", or with a country designation. The regulation of domain
names in the United States and in foreign countries is subject to change, and we
could be unable to prevent third-parties from acquiring domain names that
infringe or otherwise decrease the value of our domain names.

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<PAGE>

IF COMMUNICATIONS TO OUR PRIMARY SERVERS ARE INTERRUPTED, OUR OPERATIONS COULD
BE NEGATIVELY IMPACTED

         Our movies and general KKRS.Net web site are hosted on servers owned
and operated by LMKI in Rancho Santa Margarita, California and by iBEAM
Broadcasting Corporation in Sunnyvale, California. Our WordPop.com web site
presently is hosted on a server owned and operated by Earthlink but may in the
future be hosted on the third-party server in Rancho Santa Margarita,
California. Although offsite backup servers are maintained by our hosts, all of
our primary servers are vulnerable to interruption by damage from fire, flood,
power loss, telecommunications failure, break-ins and other events beyond our
control. We have, from time to time, experienced periodic systems interruptions
and anticipate that these interruptions will occur in the future. If we
experience significant system disruptions, our business, results of operations
and financial condition would be materially adversely affected. We do not
maintain business interruption insurance.

OUR COMPUTER INFRASTRUCTURE MAY SUFFER SECURITY BREACHES. ANY SUCH BREACHES
COULD JEOPARDIZE CONFIDENTIAL INFORMATION TRANSMITTED OVER THE INTERNET, CAUSE
INTERRUPTIONS IN OUR OPERATIONS OR CAUSE US TO HAVE LIABILITY TO THIRD PARTIES

         We rely on technology that is designed to facilitate the secure
transmission of confidential information. Our computer infrastructure is
potentially vulnerable to physical or electronic computer break-ins, viruses and
similar disruptive problems. A party who is able to circumvent our security
measures could misappropriate proprietary information, jeopardize the
confidential nature of information transmitted over the Internet or cause
interruptions in our operations. Concerns over the security of Internet
transactions and the privacy of users could also inhibit the growth of the
Internet in general, particularly as a means of conducting commercial
transactions. To the extent that our activities involve the storage and
transmission of proprietary information, including personal financial
information, security breaches could expose us to a risk of financial loss,
litigation and other liabilities. Our insurance does not currently protect us
against these losses. Any security breach would have a material adverse effect
on our business, results of operations and financial condition.

CERTAIN PROVISIONS OF OUR ARTICLES OF INCORPORATION AND BYLAWS ALLOW
CONCENTRATION OF VOTING POWER IN ONE INDIVIDUAL, WHICH MAY, AMONG OTHER THINGS,
DELAY OR FRUSTRATE THE REMOVAL OF INCUMBENT DIRECTORS OR A TAKEOVER ATTEMPT,
EVEN IF SUCH EVENTS MAY BE BENEFICIAL TO OUR STOCKHOLDERS

         Certain provisions of our Articles of Incorporation and Bylaws may
delay or frustrate the removal of incumbent directors and may prevent or delay a
merger, tender offer or proxy contest involving our company that is not approved
by our board of directors, even if such events may be beneficial to the interest
of our stockholders. For example, Alex Kanakaris, our Chairman of the Board,
President and Chief Executive Officer, is the holder of all of the authorized,
issued and outstanding shares of our Class A Convertible Preferred Stock. Under
our Articles of Incorporation, as amended and restated, each share of Class A
Preferred Stock is entitled to, among other things, twenty non-cumulative votes
per share on all matters presented to our stockholders for action. Consequently,
Mr. Kanakaris may have sufficient voting power to control the outcome of all
corporate matters submitted to the vote of our stockholders. Those matters could
include the election of directors, changes in the size and composition of the
board of directors (and, thereby, the qualification and appointment of officers
of our company), and mergers and other business combinations involving our
company. In addition, through his control of the board of directors and voting
power, he may be able to control certain decisions, including decisions with
respect to our company's dividend policy, access to capital (including borrowing
from third-party lenders and the issuance of additional equity securities), and
the acquisition or disposition of assets by our company. In addition, the
concentration of voting power in the hands of Mr. Kanakaris could have the
effect of delaying or preventing a change in control of our company and may
affect the market price of our common stock.

                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

         On September 15, 1999, Robert Adams filed a complaint against our
company and our Chairman of the Board, President and Chief Executive Officer,
Alex Kanakaris, individually, in Los Angeles Superior Court (Case No. LC050023)
alleging breach of contract and fraud. Mr. Adams based his fraud claim primarily
on alleged misrepresentations and concealment involving a consulting agreement
between our company and Mr. Adams. Mr. Adams alleged that he was entitled to

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<PAGE>

certain stock options, of which 75% of the option price allegedly was already
deemed paid in exchange for services allegedly rendered by Mr. Adams to our
company. Mr. Adams attempted to exercise the options for the purchase of a
certain number of shares to which he claimed to be entitled pursuant to the
agreement. The claims against Mr. Kanakaris individually were dismissed. On
November 1, 2000, Mr. Adams and our company entered into a Settlement Agreement
and General Release pursuant to which we agreed to pay a total of $24,000 to Mr.
Adams and his attorney in three equal installments of $8,000 each on November 1,
2000, March 1, 2001 and July 1, 2001 in exchange for dismissal with prejudice of
the entire action after the three payments have been made.

         On October 14, 1999, Institutional Management, Inc., an Illinois
corporation, filed suit against our company and Alpha Tech Stock Transfer &
Trust Company, our stock transfer agent and registrar, in the Circuit Court of
Cook County, Illinois (Case No. 99L 011509). The case was removed to the United
States District Court for the Northern District of Illinois, Eastern Division
(Case No. 99C 7100). In the complaint, Institutional Management sought damages
in excess of $50,000 under breach of contract and various other state law
theories in connection with our unwillingness to permit them to transfer shares
of our company's common stock held by Institutional Management. We believe that
the shares were wrongfully converted by a predecessor to Institutional
Management. We have engaged counsel to vigorously defend us against all of
Institutional Management's claims.

         We have also counterclaimed against Institutional Management and
commenced a third-party action against the Institutional Management affiliates,
namely Power Media Group, Pinnacle Management, Inc., and Frank Custable. In our
counterclaim and cross-claims, we have sought injunctive relief to block any
further transfer of the converted shares held by any of the aforementioned
parties, and damages for, among other things, breach of a consulting agreement,
for fraud, conversion and for unjust enrichment. We intend to vigorously pursue
all available remedies against the aforementioned parties.

         Institutional Management, Pinnacle and Power Media countered by
attempting to assert claims against us in a separate action in Utah. In the Utah
action, the parties were challenging our right to block their transfer of the
stock at issue and attempting to recover for damage they claim to have suffered
in the interim. The Utah action, however, was promptly stayed by that court in
favor of the action currently pending in Illinois.

         In January 2001, the counsel for Institutional Management and its
affiliates withdrew from representing the aforementioned companies in the
litigation. Institutional Management and its affiliates have yet to retain new
counsel, but must do so before the next status hearing scheduled to occur in
March 2001.

         The stock at issue was in the hands of Alpha Tech and Miller, Johnson &
Kuehn, Inc., a stock brokerage firm that clears the trades of introducing
brokers. Both Alpha Tech and MJ&K filed actions for interpleader, by which they
were prepared to tender to the court the stock certificates to which our
company, Institutional Management and Pinnacle Management are each laying claim.
In July 2000, that tender was effectuated, and the claims asserted by and
against Alpha Tech and MJ&K were dismissed. The stock, therefore, has been and
will remain issued in the name of the United States District Court until the
dispute is resolved.


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<PAGE>

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

         Sales of Unregistered Securities During Quarter Ended December 31, 2000
         -----------------------------------------------------------------------

         In October 2000, we issued an aggregate of 537,622 shares of common
stock to four investors in connection with regular interest payments and upon
conversion of an aggregate of $105,000 of principal plus related interest on our
convertible debentures.

         In November 2000, we issued an aggregate of 2,696,442 shares of common
stock to four investors in connection with regular interest payments and upon
conversion of an aggregate of $675,000 of principal plus related interest on our
convertible debentures.

         In November 2000, we issued 50,000 shares of common stock valued at
$19,000 to a consultant who subsequently became a director of our company as
compensation for services rendered.

         In November 2000, we issued 100,000 shares of common stock valued at
$38,000 to a consultant who subsequently became a director of our company as
compensation for services rendered.

         In November 2000, we issued 50,000 shares of common stock valued at
$19,000 to a consultant who was also a director of our company as compensation
for services rendered.

         In November 2000, we issued 50,000 shares of common stock valued at
$19,000 to a consultant as compensation for consulting services rendered.

         In November 2000, we issued 1,400,000 shares of common stock valued at
$532,000 to a consulting company as compensation for consulting services
rendered.

         In November 2000, we issued 250,000 shares of common stock valued at
$95,000 to an employee who was also a director of our company as compensation
for services rendered.

         In November 2000, we issued 50,000 shares of common stock valued at
$17,000 to a consultant as compensation for consulting services rendered.

         In December 2000, we issued 50,000 shares of common stock valued at
$11,750 to a consultant who was also a director of our company as compensation
for consulting services rendered.

         In December 2000, we issued an aggregate of 384,616 shares of common
stock to one individual upon exercise of options with an exercise price of $.75
per share.

         In December 2000, we issued an aggregate of 2,891,154 shares of common
stock to four investors upon conversion of an aggregate of $551,000 of principal
plus related interest on our convertible debentures.

         In December 2000, we issued 2,000,000 shares of common stock valued at
$510,000 to an executive employee who was also a director of our company as a
stock bonus for services rendered.

         In December 2000, we issued an aggregate of 425,000 shares of common
stock valued at $108,375 to two consultants as compensation for consulting
services rendered.

         Exemption from the registration provisions of the Securities Act of
1933 for the transactions described above is claimed under Section 4(2) of the
Securities Act of 1933, among others, on the basis that such transactions did
not involve any public offering and the purchasers were sophisticated with
access to the kind of information registration would provide.

         Dividend Policy
         ---------------

         We have never paid any dividends on our common stock and do not
anticipate declaring or paying cash dividends in the foreseeable future. We
intend to retain future earnings, if any, to reinvest in our business. We expect
that covenants in our future financing agreements will prohibit or limit our
ability to declare or pay cash dividends.

                                       12


<PAGE>

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

         None.

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

         None.

ITEM 5.  OTHER INFORMATION.

         None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         (a)      Exhibits.

     Exhibit No.         Description
     -----------         -----------

         10.1     Memorandum dated December 28, 2000 from Alliance Equities to
                  the Registrant extending Revolving Line of Credit Agreement*

         ---------------
         *  Filed as an exhibit to the registrant's Amendment No. 1 to
            Form 10-KSB filed with the Securities and Exchange Commission on
            January 25, 2001 (File No. 0-28213) and incorporated herein by
            reference.

         (b)      Reports on Form 8-K.

                  None.

                                       13


<PAGE>

                                   SIGNATURES

     In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                    KANAKARIS WIRELESS


Dated: February 13, 2001         By: /S/ DAVID SHOMAKER
                                    --------------------------------------------
                                    David Shomaker
                                    Acting Chief Financial Officer
                                    (principal financial and accounting officer)





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