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

                                   FORM 10-K/A
            Annual Report for the Fiscal year ended December 31, 2000

                             TTR TECHNOLOGIES, INC.
             (Exact name of registrant as specified in its charter)

Delaware                       0-22055              11-3223672
(State or Other Jurisdiction   Commission File      IRS Employer
of Incorporation)              Number)              Identification No.)

                           2 HaNagar Street, Kfar Saba
                    (Address of Principal Executive Offices)

                               011-972-9-766-2393
              (Registrant's Telephone Number, including Area Code)

[Mark One]

|X|   Annual report under Section 13 or 15(d) of the Securities Exchange Act of
1934 For the fiscal year ended December 31, 2000

|_|   Transition report under Section 13 or 15(d) of the Securities Exchange Act
 of 1934

         Securities registered under Section 12(b) of the Exchange Act:

    Title of each Class:          Name of each exchange on which registered
          None                                     None

         Securities registered under Section 12(g) of the Exchange Act:

                         Common Stock, par value $0.001
                                (Title of Class)

      Check whether the issuer (1) has 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 the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
|X| Yes |_| No

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

      As of March 27, 2001, the Registrant had outstanding 17,356,340 shares of
Common Stock, $0.001 par value per share. The aggregate market value of such
common stock held by non-affiliates of the Registrant at March 27, 2001 was
approximately $84 million. Such market value was calculated by using the
closing price of such common stock as of such date as reported on the NASDAQ
National Market.

      The registrant hereby amends its Annual Report on Form 10-K for the year
ended December 31, 2000 to amend and restate Part III in its entirety to
incorporate by reference therein applicable information from the Proxy Statement
for the 2001 Annual Meeting of the Stockholders.
<PAGE>

Item 1. Business

Introduction

      TTR Technologies, Inc. (hereinafter, the "Company" or "TTR") designs and
develops anti-piracy technologies that provide copy protection for electronic
content distributed on optical media and over the Internet. Optical media store
data which may be retrieved by utilizing a laser and include compact discs which
are commonly referred to as CDs and digital versatile discs which are commonly
referred to as DVDs. The Company's technologies utilize non-standard codewords
on the optical media. As a result of TTR's research and development efforts,
management believes that TTR has become a leader in optical media authentication
and verification. The Company's proprietary anti-piracy technology,
MusicGuard(TM), is a unique media-based technology designed to prevent the
unauthorized copying of audio content distributed on CDs. MusicGuard leverages
know-how that the Company gained during the development of its DiscGuard(TM)
software protection product. The Company's copy protection technologies are
designed to be transparent to the legitimate end-user. Copy protected CDs are
designed to be compatible with and to play on currently existing compact disc
players.

      In November 1999, the Company entered into an agreement with Macrovision
Corporation to jointly design,. develop and market a copy protection product
designed to thwart the illegal copying of audio content on CDs, DVDs and other
optical media. The new product, which is undergoing internal tests by a major
record label, will be marketed under the brand name "SafeAudio" and is based
primarily upon the Company's MusicGuard technology as well as related
Macrovision technology. SafeAudio is co-owned jointly by TTR and Macrovision.
The Company granted to Macrovision an exclusive world-wide royalty bearing
license to market SafeAudio and all other technologies and products designed to
prevent the illicit duplication of audio programs (including the audio portion
of music videos, movies and other video or audio content) distributed on optical
media (not limited to CDs and DVDs) and technologies for Internet digital rights
management for audio applications.

      Commencing April 1, 2001, the Company is entitled to twenty-five percent
(25%) of the net revenues collected by Macrovision or its affiliates from any
products or components incorporating SafeAudio. Previously, the Company was
entitled to thirty percent (30%) of such net revenues. In light of the extended
period of time in which SafeAudio has been undergoing internal testing by record
labels, the Company is negotiating with Macrovision regarding the prospect of
reverting to the previous 30% net revenue allocation. No assurance can however
be given that the Company will be successful in obtaining a reversion to the
greater allocation of net revenues.

      Pursuant to the agreement with Macrovision, the Company granted to
Macrovision an exclusive worldwide license to modify and market DiscGuard, TTR's
software anti-piracy product. Part of the DiscGuard technology license is
royalty free.


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The encryption portion is royalty bearing. Macrovision has its own proprietary
software anti-piracy product known as SafeDisc. Through December 31, 2004, the
Company is entitled to 5% of Macrovision's net revenues, if any, collected by
Macrovision from the licensing of SafeDisc to customers located in the Peoples
Republic of China. Other than for these revenues the Company does not anticipate
that it will receive any significant revenues as a result of its license of
DiscGuard to Macrovision.

      Macrovision is a world leader in the development and marketing of content
copy protection and rights management technologies and products to prevent the
illicit duplication, reception or use of video and audio programs and computer
software. Macrovision provides its products and services primarily to the
consumer multimedia and business software publishers, home video, pay-per-view,
cable, satellite and video security markets. Macrovision has its headquarters in
Sunnyvale, California with subsidiaries in London and Tokyo.

      The Company's immediate goal is to establish SafeAudio as the leading
product in the target market of audio content copy protection for the
high-volume recording industry. Additionally, The Company is actively developing
other technologies and looking to acquire technologies that are synergistic with
TTR's current business and will enable it to leverage its knowledge base and
skill.

      The Company was incorporated under Delaware law in July 1994. The
principal executive offices of the Company are located at 2 HaNagar Street, Kfar
Saba, Israel

Industry Background

      Losses related to the unauthorized reproduction and use of music CDs
present a continuing concern for the recording industry as well as performing
artists. According to the Recording Industry Association of America, a national
trade organization, the recording industry loses currently about $5 billion
annually to global piracy of recorded music. Two recent developments have
exacerbated the problem of piracy, causing it to become one the highest
priorities of the industry.

      First, the cost of producing good quality copies of CDs has been
drastically reduced. Until recently, to produce good quality CDs required a
significant investment. Recent developments in consumer electronics technology
have enabled consumers to purchase a CD burner (recorder) from a local retail
outlet for as little as $180. CD burners now often are bundled with new
computers. Blank recordable discs are widely available for less than $1. With
this technology, even the casual user can easily copy unprotected CDs.

      Second, it is now possible to easily download pirated music via the
Internet because of the acceptance and widespread use of MP3 compression
technology. This technology has made the Internet a feasible vehicle for the
electronic transmission of music. Today there are thousands of websites offering
music in MP3 format. Most of the music being downloaded is effectively being
pirated; i.e., no royalties are being


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<PAGE>

paid to the artists or to the record companies which produced this music. This
form of piracy is rapidly growing.

      Attempts by third parties to circumvent copy protection technologies have
been and are expected to be a persistent problem, even in the face of the United
States Digital Millennium Copyright Act. Effective as of May 2000, the Act
outlaws copy protection circumvention devices and technologies and provides for
both criminal and civil penalties for companies or individuals who import,
produce or distribute devices designed to circumvent copy protection devices and
technologies.

      Since prior laws to combat music piracy have not served as an effective
deterrent and the effect of the new legislation cannot yet be ascertained,
recording studios and artists are seeking more effective methods to prevent the
replication of unauthorized copies of their proprietary products. To combat
music piracy, leaders of the music recording industry have cooperated with
leaders of more than 120 companies and organizations representing a broad
spectrum of information technology and consumer electronics businesses, Internet
service providers and security technology companies to form the Secure Digital
Music Initiative. The Initiative is a forum for these industries to develop the
voluntary, open framework for playing, storing and distributing digital music
necessary to enable a new market to emerge. The Initiative has already produced
a standard, or specification, for portable devices. The longer-term effort of
the Initiative is completion of an overall architecture for delivery of digital
anti-piracy protected music in all forms.

      The standard developed by the Initiative is intended to be applied to the
next generation of portable playback devices. It will not prevent currently
existing playback devices from playing pirated music. Since these devices will
likely be in use for quite some time we believe that there will be a need for
copy protection on the products played on the devices. To the best of
management's knowledge, there are no commercially available technologies or
products providing copy protection for audio content distributed on CDs.

The Solution - SafeAudio

      The Company's management believes that SafeAudio offers recording studios
and artists the most effective solution to protect works distributed on CDs,
while offering convenience and cost effectiveness to the music rights owner and
end-user. We believe that SafeAudio embodies unique know-how designed to prevent
the unauthorized copying of CDs. SafeAudio is based primarily on TTR's
proprietary technology, MusicGuard, as well as related Macrovision technologies.

      Most music is currently offered for sale on CDs. Software-based
technologies available today claim to protect music during electronic
transmission, but we believe that these technologies are easily overcome. For
example, according to an article appearing in the August 18, 1999 edition of
"Wired News", one month after Microsoft released its software-based protection
technology, Windows Media Audio, a program was available on the Internet that
removed the copying protection afforded by the software. SafeAudio protection is
embedded on the CD itself and is introduced as part of the production process.
The production process includes the creation of a glass


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<PAGE>

master from which metal molds, or stampers, used to mass produce, or replicate,
CDs are made.

      During the glass mastering process, a specially modified CD-encoder
introduces selective alternative alterations to the data placed on the glass
master. These alterations do not affect the audio quality of the original CDs in
any manner. SafeAudio protected CDs are designed to play normally in the
currently existing CD and DVD players around the world. SafeAudio is designed so
that music quality is not degraded as compared to the unprotected CD. When one
tries to make a digital copy of a protected CD with any of the many CD-to-CD
copying programs or "track rippers", either the copying process itself will
abort or the quality of the unauthorized copy will be unacceptably inferior to
the original music. SafeAudio is easy to apply and use. Record companies or
recording studios need only inform an authorized glass mastering facility that
it wishes SafeAudio to protect against copying. No special preparation or
changes need to be made to the data that the recording mastering studio supplies
to the glass mastering facility. Since the protection is applied only during the
glass mastering process, once a glass master and stampers have been produced,
protected discs can be mass-produced by any replicator. The Company is working
together with Macrovision and the encoder manufacturers to develop the most
efficient and effective manufacturing solution. The development of the SafeAudio
Toolkit facilitates the automation of the copy protection process, representing,
in management's view, a significant milestone in developing an efficient and
cost effective manufacturing solution.

Development Status of SafeAudio

      In March 2001, a major record label completed an initial beta test of the
SafeAudio Toolkit. The test was conducted by the record label in advance of
initiating a round of internal testing for the beta version of the SafeAudio
technology itself.

      During the course of 2000, SafeAudio technology underwent comprehensive
internal tests in the facilities of the Company's Israeli subsidiary in Israel
as well as in Macrovision's laboratories in Sunnyvale and London. In addition,
the Company completed two consumer field trials. The first involved 850
households in the U.K. The second was a 2,000 household test across the United
States. Macrovision conducted the first test. The second test was conducted by a
leading market research company.

      Through Macrovision, the Company approached most of the major record
labels and certain of the larger independent labels regarding SafeAudio. Some of
those labels are performing internal tests while others are preparing to do
commercial pilot runs of SafeAudio protected CDs. Upon the successful completion
of these internal tests and commercial pilots, the Company anticipates signing
contracts with these music labels to produce SafeAudio protected discs
commercially. However, no assurance can be provided that such record labels will
in fact be interested in protecting their discs with SafeAudio or that the
Company or Macrovision will be successful in negotiating or concluding such
commercial contracts on commercially acceptable terms.


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<PAGE>

Mastering Equipment Manufacturers

      In order to produce SafeAudio protected CDs, modifications to the encoder
portion of the laser optics system in CD mastering equipment are required. Under
the contract with Macrovision, Macrovision is responsible for coordinating with
the companies which produce and sell these encoders. The Company believes that
three companies, Doug Carson & Associates, Media Morphics and Eclipse,
effectively control the market for encoders. The Company is working with
Macrovision and some of these encoder producers to develop the necessary
modifications to produce protected CDs.

      The Company envisions that Macrovision will authorize licensed CD
replicators to replicate protected CDs. Macrovision has licensing arrangements
in place with more than 75 replication facilities worldwide including the
largest multinational replicators such as, Sonopress, MPO, Americ Disc, Nimbus,
Cinram, and JVC. Therefore, management believe that Macrovision is in a good
position to leverage its current business relationships to the benefit of
SafeAudio.

Marketing and Sales

      Under the agreement with Macrovision, Macrovision is responsible, at its
expense, for the marketing of SafeAudio and will determine the staffing and
other resources to be allocated to the commercialization of the technology
consistent with Macrovision's good faith determination of its commercial
potential.

      Commencing April 1, 2001, the Company is entitled to twenty-five percent
(25%) of the net revenues collected by Macrovision or its affiliates from any
products or components incorporating SafeAudio. Previously, the Company was
entitled to thirty percent (30%) of such net revenues. In light of the extended
period of time in which SafeAudio has been undergoing internal testing by record
labels, the Company is negotiating with Macrovision regarding the prospect of
reverting to the previous 30% net revenue allocation. No assurance can however
be given that the Company will be successful in obtaining a reversion to the
such greater allocation of net revenues. Under certain circumstances, the
exclusive license relating to MusicGuard and the jointly developed technology
that the Company granted to Macrovision reverts to a non-exclusive license as of
the second anniversary of the commercial launch. Under the agreement with
Macrovision, commercial launch is deemed to occur when a certain pre-designated
number of protected music CDs are manufactured, with a certain specified number
being manufactured by at least one of certain designated major commercial music
labels.

      The Company has a limited internal sales and marketing capability. To
maintain its focus on product development and to avoid the expense of
establishing its own global sales and marketing staff, the Company does not
anticipate expanding its


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<PAGE>

marketing capability until it is in a position to commercialize products other
than SafeAudio.

New Products and Technologies

      The Company intends to exploit its existing technologies and expertise to
develop and commercialize products that are similar to and share common
distribution channels with SafeAudio. To this end, the Company is working to
port the MusicGuard technology (which underlies the SafeAudio technology) to
DVD. During 2000, the Company developed a prototype which is currently
undergoing further development. With the price of DVD recorders poised to
decrease, as management believes will occur, DVD copying will become an acute
problem.

      The Company is developing other technologies with applications in the
following areas:

      *     DiscAudit - a system for identifying genuine disc replicas. During
            the mastering process, a special non-reproducible authenticating
            mark is embedded outside the data portion of the disc. The
            authenticating mark is not present in unauthorized replicas. By
            means of a laptop with CD or DVD drive and software supplied by us,
            law enforcement authorities, including customs inspectors, can
            quickly determine the authenticity of a disc. DiscAudit is
            applicable to CD and DVD, including both software and audio discs.
            The product has been tested with fully satisfactory results.

      *     Internet Technologies - technology that facilitates the transmission
            and security of content being streamed over the Internet. To this
            end the Company hired a Vice President of Internet Technologies.

      Under the Company's agreement with Macrovision, the Company granted to
Macrovision an exclusive right of first refusal through December 31, 2009, to
any music copy protection technology that it develops which is not included in
the license to Macrovision, and any Internet digital rights management
technologies developed by the Company which are applicable to music, music
video, video, software or data publishing products or markets. The Company is
required to notify Macrovision of the details of any bona- fide third - party
offers to purchase or license such technologies. If Macrovision notifies the
Company of its interest in purchasing or licensing such technology within 10
business days of Macrovision's receipt of the Company's notification, the
Company is required to negotiate in good faith with them such purchase or
license. Neither of the technologies noted above is, in management's view,
subject such right of first refusal.

      In connection with the design and development of DiscGuard, the Company's
proprietary software anti-piracy product, TTR's Israeli subsidiary has received,
through December 31, 2000, a grant of $210,000 from the Chief Scientist of the
State of Israel. The Company is required to pay royalties to the Chief Scientist
on proceeds from the sale of products derived from the research and development
funded by the grant at the rate of 3% of the sales revenue for the first three
years of such sales, 4% for the following three years, and 5% thereafter, up to
a maximum of 100% of the


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<PAGE>

grant, plus accrued interest. For example, royalties will be payable to the
Chief Scientist based on royalties the Company receives from Macrovision
relating to DiscGuard. The Company does not believe that any royalties are
payable to the Chief Scientist in respect of SafeAudio. The Company's obligation
to pay royalties to the Chief Scientist is limited to the amount of the grant
received and is linked to the exchange rate of the dollar and the New Israeli
Shekel. The Chief Scientist places certain restrictions on companies that
receive funding relating to the transfer of know-how. Management believes that
these restrictions and obligations will not have a material adverse effect on
the Company's operations since the Company does not presently anticipate
transferring ownership of the technology developed by it to third parties. The
restrictions do not apply to the exports from Israel of products developed with
such technologies.

Research & Development

      From the date of inception through December 31, 2000, the Company expended
approximately $4.05 million on research and development activities, including
approximately $1.1 million for the year ended December 31, 2000, and
approximately $346,000 for the year ended December 31, 1999. The amounts
expended in 2000 were used exclusively for MusicGuard (the technology underlying
SafeAudio). We expect to maintain our research and development expense at
approximately the current level for the foreseeable future.

Competition

      The Company is not aware of the existence of any commercially available
anti-piracy technologies in the area of copy protection for audio CDs. However,
there are a number of companies who claim to have an audio CD anti-piracy
technology in some stage of development. These include SunnComm, a U.S. based
company whose securities are traded on over-the-counter market, and MidbarTech a
private Israeli company. To date, none has commercialized such anti-piracy
technology/product. There can be no assurance that these technologies will not
be commercially launched prior to SafeAudio or that other companies will not
enter the market in the future, particularly if SafeAudio is successfully
commercialized. There can be no assurance that the Company will be able to
continue developing products with innovative features and functions, or that
development by others of similar or more effective products will not render the
Company's products or technologies noncompetitive or obsolete.

Proprietary Rights

      The Company currently relies on a combination of trade secret, copyright
and trademark law, as well as non-disclosure agreements and invention-assignment
agreements, to protect the technologies used in the Company's products and other
proprietary information. The Company has filed patent applications in the United
States and Israel and under the Patent Cooperation Treaty with respect to the
technology underlying DiscGuard and in Israel for MusicGuard. As of March 2001,
two patents have been issued. The Company has also applied for and received a
United States trademark registration of MusicGuard. There can be no assurance
that any patent will be issued or that the Company's proprietary


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<PAGE>

technology will remain a secret or that others will not develop similar
technology and use such technology to compete with the Company.

      The Company believes that its software and audio content protection
products and technologies and know-how are proprietary and are protected by
copyright law, non-disclosure and secrecy agreements. However, such methods may
not afford complete protection and there can be no assurance that others will
not independently develop such processes, concepts, ideas and documentation.

      The Company's policy is to require our employees, consultants, and other
advisors to execute confidentiality agreements upon the commencement of
employment, consulting or advisory relationships. These agreements generally
provide that all confidential information developed or made known to the
individual by the Company during the course of the individual's relationship
with it is to be kept confidential and not to be disclosed to third parties
except in specific circumstances. In the case of employees and consultants, the
agreements provide that all inventions conceived by the individual in the course
of their employment or consulting relationship with the Company shall be the
Company's exclusive property. There can be no assurance, however, that these
agreements will provide meaningful protection or adequate remedies for trade
secrets in the event of unauthorized use or disclosure of such information.

Employees

      The Company employs 8 full-time employees, all of whom work in Israel.
None of the Company's employees is covered by a collective bargaining agreement
or is represented by a labor union. The Company has not experienced any
organized work stoppages and considers its relations with employees to be good.

      The Company's future performance depends highly upon the continued service
of members of our senior management and of Dr. Baruch Sollish, our Chief
Technology Officer, in particular.

      The Company believes that its future success will also depend upon our
continuing ability to identify, attract, train and retain other highly skilled
managerial, technical, sales and marketing personnel. Hiring for such personnel
is competitive, and there can be no assurance that the Company will be able to
retain its key employees or attract, assimilate or retain the qualified
personnel necessary for the development of its business.

Minority Subsidiary

      In July 2000, the Company purchased a 50% equity interest in an Israeli
based company named ComSign Ltd. ("ComSign"), which is the exclusive marketer in
Israel and in the territories controlled by the Palestinian Authority of
VeriSign Inc.'s digital authentication certificates and related services. The
remaining 50% equity interest in ComSign is held by a private company based in
Israel. VeriSign, Inc. is a leading provider of Internet based trust services.
The agreement between ComSign and VeriSign provides ComSign with the rights to
market these services in the designated territory for a period of 5 years and a
sharing of revenues derived from


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these activities. Comsign is to receive 50% of net revenues from web
certificates and 40% for Onsite services. ComSign is focusing on marketing the
VeriSign web certificates and Onsite enterprise services. ComSign plans to
exploit the branding and dominant position VeriSign possesses to build a leading
position in the Israeli market for trust and Internet security services and
products.

      Since ComSign's inception, the Company has held (and continues to hold) a
50% equity interest in ComSign in May 2000. Under the provisions of the
shareholders agreement between the Company and its partner, 60% of any dividends
issued by ComSign will first be distributed to the Company until such time as
the Company shall have received an accumulated amount of $2 million. Thereafter,
60% of dividends will first be distributed to its partner until such time as it
shall have received an accumulated amount of $2,000,000. Thereafter, they are to
share equally in all dividend distributions.

      According to the Teleseker/Taylor Nelson Sofres report Israel has the 12th
largest surfing population in the world with approximately 20% of the population
over the age of 13 hooked up to the World Wide Web. There are currently about
20,000 registered domains in Israel and according to the IDC that number should
reach 34,000 by mid 2003. Those domains, which are involved in commerce or
transactions over the Internet, are, in management's view, candidates to license
the web certificate service. Management believes that large corporations,
educational institutions, financial institutions, health services and government
agencies are candidates to purchase the Onsite services.

                              CONDITIONS IN ISRAEL

      The following information discusses certain conditions in Israel that
could affect its Israeli subsidiary, TTR Technologies, Ltd. All figures and
percentages are approximate. A portion of the information with respect to Israel
presented hereunder has been taken from reports of the Bank of Israel and
publications of the Israeli Central Bureau of Statistics.

Political Conditions

      Since the establishment of the State of Israel in 1948, a number of armed
conflicts have taken place between Israel and its Arab neighbors and a state of
hostility, varying from time to time in intensity and degree, has led to
security and economic problems for Israel. Additionally, from time to time since
December 1987, Israel has experienced civil unrest, primarily in the West Bank
and Gaza Strip territories administered by Israel since 1967. A peace agreement
between Israel and Egypt was signed in 1979, a peace agreement between Israel
and Jordan was signed in 1994 and, since 1993, several agreements between Israel
and Palestinian representatives have been signed. In recent months, however,
there has been intense violence, hostility and on-going clashes between the
Palestinians and Israeli Security Forces, primarily in the Gilo neighborhood of
southern Jerusalem, the West Bank and the Gaza Strip. Israel has not entered
into any peace agreement with Syria or Lebanon and is still in a state of war
with these countries. Further, there have been delays in the negotiations and
implementation of the agreements with the Palestinians.. There can


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be no assurance as to whether or how the "peace process" will develop or what
effect it may have upon the Company. Beginning in 1948, nearly all Arab
countries formally adhered to a boycott of Israel and Israeli companies and,
since the early 1950's of non-Israeli companies doing business in Israel or with
such companies. Despite measures to counteract the boycott, including
anti-boycott legislation in the United States, the boycott has had an
indeterminate negative effect upon trade with and foreign investment in Israel.
The Company does not believe that the boycott has had a material adverse effect
on it, but there can be no assurance that restrictive laws, policies or
practices directed toward Israel or Israeli businesses will not have an adverse
impact on the operation or expansion of the Company's business.

      Generally, all male adult citizens and permanent residents of Israel under
the age of 54 are, unless exempt, obligated to perform certain military duty
annually. Additionally, all such residents are subject to being called to active
duty at any time under emergency circumstances. Some of the employees of the
Israeli subsidiary currently are obligated to perform annual reserve duty. While
the Israeli subsidiary has operated effectively under these and similar
requirements in the past, no assessment can be made of the full impact of such
requirements on the Company in the future, particularly if emergency
circumstances occur.

Economic Conditions

      Israel's economy has been subject to numerous destabilizing factors,
including a period of rampant inflation in the early to mid-1980s, low foreign
exchange reserves, fluctuations in world commodity prices, military conflicts,
security incidents and for at least the five years preceding 1997, expansion.
The Israeli government has, for these and other reasons, intervened in the
economy by utilizing, among other means, fiscal and monetary policies, import
duties, foreign currency restrictions and control of wages, prices and exchange
rates. The Israeli government periodically changes its policies in all these
areas.

      During 1997, the monetary policy of the Bank of Israel changed in several
respects. These changes included a decision of the Bank of Israel to reduce its
intervention in the currency markets to allow the NIS to trade more freely. In
addition, the Bank of Israel has adopted and implemented certain measures to
liberalize foreign 86 currency regulations. There are currently no Israeli
currency control restrictions on remittance of dividends or the proceeds from
the sale of the ordinary shares, although legislation remains in effect pursuant
to which currency controls may be imposed by administrative action at any time.
The Israeli government's monetary policy contributed to relative price and
exchange rate stability in recent years, despite fluctuating rates of economic
growth and unemployment. The Israeli inflation rates for the years 1997, 1998
and 1999 were 7.0%, 8.6% and 1.3%, respectively. No assurance can be provided
that the Israeli government will be successful in its attempts to keep prices
and exchange rates stable.

Trade Relations


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      Israel is a member of the United Nations, the International Monetary Fund,
the International Bank for Reconstruction and Development and the International
Finance Corporation. Israel is also a signatory to the General Agreement on
Tariffs and Trade, which provides for reciprocal lowering of trade barriers
among its members. In addition, Israel has been granted preferences under the
Generalized System of Preferences from the United States, Australia, Canada and
Japan. These preferences allow Israel to export the products covered by such
programs either duty-free or at reduced tariffs.

      In recent years, Israel has established commercial and trade relations
with a number of other nations, including Russia, China and nations in Eastern
Europe, with which Israel had not previously had such relations.

Employees

      The Israel subsidiary is subject to various Israeli labor laws and
collective bargaining agreements between Histadrut and the federation of
industrial employers. Such laws and agreements cover a wide range of areas,
including hiring practices, wages, promotions, employment conditions (such as
working hours, overtime payment, vacations, sick leave and severance pay),
benefits programs (such as pension plans and education funds) and special
issues, such as equal pay for equal work, equal opportunity in employment and
employment of women. The collective bargaining agreements also cover the
relations between management and the employees' representatives, including
Histadrut's involvement in certain aspects of hiring and dismissing employees
and procedures for settling labor disputes. Our Israel subsidiary continues to
operate under the terms of Israel's national collective bargaining agreement,
portions of which expired in 1994. Israeli employers and employees are required
to pay predetermined sums to the National Insurance Institute, an organization
similar to the United States Social Security Administration. These contributions
entitle the employees to receive a range of medical services and other benefits.
Certain employees of the Israeli subsidiary are covered by individual employment
agreements.

Item 2. Properties

      The Company leases a 2,400 square foot facility used in its research and
development and administrative activities in Kfar Saba, Israel. The lease
provides for a monthly rent of approximately $2,292 and an expiration date of
May 31, 2001. The Company is currently negotiating an extension of the term
lease. Management believes that the Company will be able either to renew our
present lease or obtain suitable replacement facilities. The Company improved
this facility to meet the requirements of its research and development
activities. Management believes that this facility is sufficient to meet its
current and anticipated future requirements.

Item 3. Legal Proceedings

      The Company is not involved in any legal proceedings.


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Item 4. Submission of Matters to a Vote of Security Holders

      Reference is made to Item 4 of the Company's Quarterly Report on Form 10Q
for the period ended September 30, 2000, which is incorporated herein by
reference.

                                     Part II

Item 5. Market for Common Equity and Related Stockholder Matters

      As of February 6, 2001, Company's common stock, par value $0.001 per share
(the "Common Stock") is quoted on the NASDAQ National Market under the symbol
"TTRE". On October 23, 2000 through February 5, 2001, the Company's Common Stock
was quoted on the NASDAQ SmallCap Market. Prior to the NASDAQ SmallCap listing,
the Common Stock was quoted on the OTC Electronic Bulletin Board. The following
table sets forth the range of high and low bid prices for the Common Stock as
reported on the OTC Electronic Bulletin Board by the National Association of
Securities Dealers, Inc., Automated Quotations System for the periods indicated.

                        Common Stock

Quarter Ended           High     Low

    2000
    December 31         $8.75     $3.34
    September 30        $6.47     $3.31
    June 30             $6.69     $3.00
    March 31            $10.50    $4.97

    1999
    March 31            $1.4375   $.75
    June 30             $3.125    $.75
    September 30        $4.80     $2.45
    December 31         $6.00     $2.45

      The foregoing represent inter-dealer prices, without retail mark-up,
mark-down or commission, and may not necessarily represent actual transactions.

      As of March 28, 2001, there were approximately 133 record holders of the
Common Stock of the Company. We believe that there are a significant number of
shares of Common Stock held either in nominee name or street name brokerage
accounts and consequently, we are unable to determine the number of beneficial
owners of the Common Stock.


                                       13
<PAGE>

      The Company has paid no dividends on its Common Stock and does not expect
to pay cash dividends in the foreseeable future. It is the present policy of the
Board of Directors to retain all earnings to provide funds for the growth of the
Company. The declaration and payment of dividends in the future will be
determined by the Board of Directors based upon the Company's earnings,
financial condition, capital requirements and such other factors as the Board of
Directors may deem relevant. The Company is not under any contractual
restriction as to its present or future ability to pay dividends.

Recent Sales of Unregistered Securities During 2000

      Set forth below is a listing of all sales by the Company of unregistered
equity securities during 2000, excluding sales that were previously reported on
a Quarterly Report on Form 10-Q. Unless otherwise indicated such sales were
exempt from registration under the Securities Act of 1933, as amended (the
"Act"), pursuant to Section 4(2) of the Act, as they were transactions not
involving a public offering.

      1. In October 2000, the Company issued to a consultant four (4) year
warrants for 400,000 shares of the Company's common stock, of which warrants for
134,000 shares is at a per share exercise price of $6.50, warrants for 133,000
at a per share price of $7.50 and warrants for 133,000 at a per share exercise
price of $8.50.

Item 6. Selected Consolidated Financial Data

      The following table sets forth our consolidated financial data for the
five years ended December 31, 2000. The selected consolidated financial data for
the years ended December 31, 1997, 1998, 1999 and 2000 are derived from our
consolidated financial statements for such years, which have been audited by
Brightman Almagor & Co., a member of Deloitte Touch Tohmatsu, independent
auditors. The selected consolidated financial data for the year ended December
31, 1996 is derived from our consolidated financial statements for such period
and years, which have been audited by Schneider Ehrlich & Associates LLP
(formerly known as Schneider Ehrlich & Wengrover LLP), independent auditors. The
consolidated financial data set forth below should be read in conjunction with
our Consolidated Financial Statements and related Notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus.

<TABLE>
<CAPTION>
                                                                                                          From
                                                                                                        Inception
                                                                                                     (July 14, 1994)
                                                                                                       to December
Income Statement Data:          1996         1997           1998            1999           2000         31, 2000
                                ----         ----           ----            ----           ----         ---------
<S>                       <C>            <C>            <C>            <C>              <C>            <C>
Revenues                           --             --        $54,922         $68,803          $1,999        $125,724
Total expenses                790,108      3,784,635      5,178,872       7,944,252       5,107,978      23,531,978
Operating loss               (790,108)    (3,784,635)    (5,123,950)     (7,875,449)     (5,105,979)    (23,406,254)
Net loss                  ($1,121,211)   ($4,119,612)   ($5,578,540)   ($13,072,237)    ($4,796,693)   ($29,627,041)

Net loss per share             ($0.62)        ($1.35)        ($1.54)         ($2.07)         ($0.30)
Weighted average shares
outstanding                 1,801,366      3,054,519      3,615,908       6,321,719      16,006,403
</TABLE>


                                       14
<PAGE>

<TABLE>
<CAPTION>
                                                                December 31,
                                       1996           1997          1998           1999           2000
                                   -----------    -----------   -----------    -----------    -----------
Balance Sheet Data:
<S>                                <C>              <C>         <C>              <C>           <C>
   Working  capital (deficiency)   ($2,563,908)      $448,679   ($2,834,448)     ($494,744)    $8,122,456
    Total assets                     1,191,688      1,188,627       490,545        467,867     10,348,713
    Total liabilities                2,785,545        278,898     3,588,712        798,863        351,756
    Total Stockholders' equity
      (deficit)                    ($1,593,857)      $677,229   ($3,098,167)     ($330,996)    $9,996,957
</TABLE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation

      The following discussion should be read in conjunction with our
consolidated financial statements and the notes thereto included elsewhere in
this Report. Certain statements made in this discussion are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements can be identified by terminology such as
"may", "will", "should", "expects", "intends", "anticipates", "believes",
"estimates", "predicts", or "continue" or the negative of these terms or other
comparable terminology and include, without limitation, statements below
regarding: the Company's intended business plans; expectations as to product
performance; intentions to acquire or develop other technologies; and belief as
to the sufficiency of cash reserves. Because forward-looking statements involve
risks and uncertainties, there are important factors that could cause actual
results to differ materially from those expressed or implied by these
forward-looking statements. These factors include, but are not limited to, the
competitive environment generally and in the Company's specific market areas;
changes in technology; failure of the Company's technology to work; lack of
market acceptance for SafeAudio; inability of Macrovision ot successfully market
SafeAudio; the availability of and the terms of financing, inflation, changes in
costs and availability of goods and services, economic conditions in general and
in the Company's specific market areas, demographic changes, changes in federal,
state and /or local government law and regulations; changes in operating
strategy or development plans; the ability to attract and retain qualified
personnel; and changes in the Company's acquisitions and capital expenditure
plans. Although the Company believes that expectations reflected in the
forward-looking statements are reasonable, it cannot guarantee future results,
performance or achievements. Moreover, neither the Company nor any other person
assumes responsibility for the accuracy and completeness of these
forward-looking statements. The Company is under no duty to update any
forward-looking statements after the date of this Report to conform such
statements to actual results.

      TTR designs and develops anti-piracy technologies that provide copy
protection for electronic content distributed on optical media and over the
Internet. Optical media store data which may be retrieved by utilizing a laser
and include compact discs which


                                       15
<PAGE>

are commonly referred to as CDs and digital versatile discs which are commonly
referred to as DVDs. The Company's technologies utilize non-standard codewords
on the optical media. As a result of TTR's research and development efforts,
management believes that TTR has become a leader in optical media authentication
and verification. The Company's proprietary anti-piracy technology,
MusicGuard(TM), is a unique media-based technology designed to prevent the
unauthorized copying of audio content distributed on CDs. MusicGuard leverages
know-how that the Company gained during the development of its DiscGuard(TM)
software protection product. The Company's copy protection technologies are
designed to be transparent to the legitimate end-user. Copy protected CDs are
designed to be compatible with and to play on currently existing compact disc
players.

      In November 1999, the Company entered into an agreement with Macrovision
Corporation to jointly design, develop and market a copy protection product
designed to thwart the illegal copying of audio content on CDs, DVDs and other
optical media. The new product, which is undergoing internal tests by a major
record label, will be marketed under the brand name "SafeAudio" and is based
primarily upon the Company's MusicGuard technology as well as related
Macrovision technology. The Company granted to Macrovision an exclusive
world-wide royalty bearing license to market SafeAudio and all other
technologies and products designed to prevent the illicit duplication of audio
programs (including the audio portion of music videos, movies and other video or
audio content) distributed on optical media (not limited to CDs and DVDs) and
technologies for Internet digital rights management for audio applications.

      Commencing April 1, 2001, the Company is entitled to twenty-five percent
(25%) of the net revenues collected by Macrovision or its affiliates from any
products or components incorporating SafeAudio. Previously, the Company was
entitled to thirty percent (30%) of such net revenues. In light of the extended
period of time in which SafeAudio has been undergoing internal testing by record
labels, the Company is negotiating with Macrovision regarding the prospect of
reverting to the previous 30% net revenue allocation. No assurance can however
be given that the Company will be successful in obtaining a reversion to the
such greater allocation of net revenues. Pursuant to the agreement with
Macrovision, the Company reimbursed Macrovision for $1 million of its costs
incurred in the twelve months ending December 31, 2000 in co-developing
SafeAudio.

      As part of the agreement, the Company granted to Macrovision an exclusive
worldwide license to modify and market DiscGuard, TTR's software anti-piracy
product. Part of the DiscGuard technology license is royalty free. The
encryption portion is royalty bearing. Macrovision has its own proprietary
software anti-piracy product known as SafeDisc. Through December 31, 2004, the
Company is entitled to 5% of Macrovision's net revenues, if any, collected by
Macrovision from the licensing of SafeDisc to customers located in the Peoples
Republic of China. Other than for these revenues the Company does not anticipate
that it will receive any significant revenues as a result of its license of
DiscGuard to Macrovision.


                                       16
<PAGE>

      The Company's immediate goal is to establish SafeAudio as the leading
product in the target market of audio content copy protection for the
high-volume recording industry. Additionally, The Company is actively developing
other technologies and looking to acquire technologies which are synergistic
with TTR's current business and will enable it to leverage its knowledge base
and skill.

      In July 2000, the Company purchased an equity interest in ComSign Ltd., an
Israeli company ("ComSign"), which was established in May 2000 by Comda Ltd.,
another Israeli company ("Comda). ComSign is Verisign's sole principal affiliate
in Israel and the Palestinian Authority, market its digital authentication
certificates and acting as the local certifying authority. ComSign intends to
market these products and services to leading e-commerce sites, banks and other
financial institutions, government organizations and a full range of commercial
entities.

      The Company has not had any significant revenues to date. As of December
31, 2000 the Company had an accumulated deficit of approximately $29.6 million.
The Company's expenses related primarily to expenses related to and expenditures
on research and development, marketing, recruiting and retention of personnel,
costs of raising capital and operating expenses.

Revenue Sources

      The Company expects, for the near-term, that its primary source of revenue
will be royalties under the license agreement with Macrovision and distributions
from the joint venture, ComSign. However, no assurance can be provided that the
SafeAudio technology will be commercially successful or whether any royalties
from the sale thereof will be generated. The Company is currently seeking to
develop or acquire other technologies that will provide other sources of
revenue. However, there can be no assurance that the Company will develop or
acquire other technologies or if it does, that such technologies will generate
any revenue or profits.

Results of Operations

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999.

      Revenues for the year ended 2000 and 1999 were $1,999 and $68,803
respectively and were derived from licensing fees of the Company's DiscGuard
product, which has since been discontinued.


      Pursuant to the agreement with Macrovision, the Company agreed to
reimburse Macrovision for up to $1 million for research and development and
sales and marketing expenses incurred within the first year of the joint
development. In 2000, the Company reimbursed Macrovision the maximum obligation
of $1,000,000.

      Research and development costs for the year ended 2000 were $1,111,189 as
compared to $345,989 for 1999. This increase is a result of the joint
development efforts with Macrovision on the development of SafeAudio.


                                       17
<PAGE>

      Sales and marketing expenses for the year ended 2000 were $579,006 as
compared to $815,586 for 1999. This decrease was primarily due to the agreement
with Macrovision whereby Macrovision assumed most of the sales and marketing
responsibilities.

      General and administrative expenses for the year ended 2000 were
$1,785,434 as compared to $630,090 for 1999. This increase was due was due
primarily to increased general operations. In addition, the Company incurred
additional legal and other professional fees relating to its application to be
listed on Nasdaq's National Market Quotation System.

      Stock-based compensation for the year ended 2000 was $1,631,649 as
compared to $6,152,587 for 1999. Due to the shortage of available funds in 1999,
we compensated employees and other consultants by issuing common stock, warrants
and options.

      The Company's fifty percent owned affiliate, ComSign Ltd., commenced
operations in July 2000. The Company's share of the net losses for the period
ended December 31, 2000, was $209,157.

      Amortization of deferred financing costs for the year ended 1999 period
was $4,180,540. A significant portion of the financing costs was a result of the
issuance of 1.3 million warrants in connection with the sale of the Company's
10% Convertible Debentures in 1999. Using the Black-Scholes model for estimating
the fair value of the warrants, the Company recorded $3,845,400 as deferred
financing costs and charged the entire balance to operations when the debentures
were converted.

      Interest income for the year ended 2000 increased to $524,253 as compared
to $3,689 for 1999. The increase is attributable to the higher cash and cash
equivalent balances, primarily resulting from the February 2000 private
placement.

      Interest expense for the year ended 2000 decreased to $5,810 as compared
to $1,019,937 for 1999 Period. The decrease is attributable to the reduction in
debt.

      The Company reported a net loss for the year ended 2000 of $4,796,693 or
$(.30) per share on a basic and diluted basis, as compared to a net loss of
$13,072,237 or $(2.07) per share for 1999. Of the net loss for 2000, $1,000,000
is attributable to the Company's reimbursement commitment to Macrovision.

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998.

      Revenues for the year ended 1999 and 1998 were $68,803 and $54,922,
respectively and were derived from licensing fees of our DiscGuard product.


                                       18
<PAGE>

      Research and development costs for the year ended 1999 were $345,989 as
compared to $1,017,073 for 1998. These decreases are attributable primarily to
reduced staffing effected in the latter part of 1998.

      Sales and marketing expenses for the year ended 1999 were $815,586 as
compared to $1,155,998 for 1998. This decrease was primarily due to reduced
staffing in 1999.

      General and administrative expenses for the year ended 1999 were $630,090
as compared to $1,663,912 for 1998. This decrease was primarily due to reduced
staffing in 1999.

      Stock-based compensation for the year ended 1999 was $6,152,587 as
compared to $1,341,889 for 1998. Due to the shortage of available funds in 1999,
the Company compensated employees and other consultants by issuing common stock,
warrants and options.

      Amortization of deferred financing costs for the year ended 1999 period
was $4,180,540 as compared to $72,288 for the same period in 1998. As previously
mentioned, the Company recognized significant non-cash financing costs as a
result of the issuance of 1.3 million warrants in connection with the sale of
the Company's 10% Convertible Debentures and charged the entire to balance to
operations when the debentures were converted.

      Interest expense for the year ended 1999 increased to $1,019,937 as
compared to $410,715 during 1998. Included in interest expense is non-cash
amortization of note discount in the amount of $272,098 and $214,454 for the
years ended December 31, 1999 and 1998, respectively. Note discounts were
imputed to reflect the equity component of the related financings. Also included
in interest expense for 1999 was $572,505, which represents the value of the
beneficial conversion feature relating to the conversion of outstanding debt
into shares of our Common Stock.

      The Company reported a net loss for the year ended 1999 of $13,072,237 or
$(2.07) per share on a basis and diluted basis, as compared to a net loss of
$5,578,540 or $(1.54) per share for the year ended December 31, 1998.

Liquidity and Capital Resources

      At December 31, 2000, the Company had cash and cash equivalents of
approximately $8.2 million, representing an increase of approximately $8 million
over December 31, 1999. Cash used by operating activities during 2000 was $3.4
million compared to $2.4 million during 1999. In 2000, the Company used $2
million of its cash for its investment in ComSign and it raised approximately
$13.5 million in additional sales of Common Stock. The Company believes, that
cash on-hand is sufficient to meet its requirements for the next 12 months.


                                       19
<PAGE>

NASDAQ Listing

      As of October 23, 2000, the Company's Common Stock was quoted on the
NASDAQ SmallCap Market (stock symbol: ttre) and as of February 6, 2001,
Company's Common Stock was quoted on the NASDAQ National Market (under the same
symbol) . Prior to the Common Stock being quoted on the NASDAQ SmallCap Market,
the Common Stock was quoted on the OTC Electronic Bulletin Board.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

      To date, the Company has not utilized derivative financial instruments or
derivative commodity instruments. The Company invests its cash primarily in
money market funds, which are subject to minimal credit and market risk. The
interest payable on the Company's long-term debt is variable based on the prime
rate and, is therefore, affected by changes in market interest rates. However,
the Company believes the market risks associated with these financial
instruments are immaterial.

Foreign Currency Risk

      The Company is exposed to foreign exchange rate fluctuations as they
relate to operating expenses as the financial results of foreign subsidiaries
are translated into U.S. dollars in consolidation. As exchange rates vary, these
results, when translated, may vary from expectations and adversely impact
overall expected profitability. The effect of foreign exchange rate fluctuations
on the Company in 2000 was not material.

Item 8. Financial Statements

The information called for by this Item 8 is included following the "Index to
Financial Statements" contained in this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure

None

                                    Part III

The information called for by items 10, 11, 12 and 13 will be contained in the
Company's definitive proxy statement which the Company intends to file within
120 days after the end of the Company's fiscal year ended December 31, 2000 and
such information is incorporated herein by reference.


                                       20
<PAGE>

                                     Part IV

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

Exhibits

3.1 Certificate of Incorporation of TTR dated July 14, 1994 and Certificate of
Amendment to the Certificate of Incorporation of TTR dated August 17, 1994(4)
3.2 Certificate of Amendment to the Certificate of Incorporation of TTR, dated
January 30, 1999(5)
3.3 Certificate of Amendment to the Certificate of Incorporation of TTR, dated
December 21, 1999(5)
*3.4 Certificate of Amendment to the Certificate of Incorporation of TTR, dated
July 15, 2000.
3.4 By-Laws of TTR, as amended(4)
4.1 Specimen Common Stock Certificate(1)
4.2.1 Warrant Agreement dated as of December 23, 1997 between TTR and Biscount
Overseas Ltd.(3)
4.2.2 Warrant Agreement dated as of February 26, 1998 between TTR and Biscount
Overseas Ltd.(3)
4.2.3 Warrant dated November 29, 1999 between TTR and Biscount Overseas Ltd.(5)
4.2.4 Warrant dated November 29, 1999 between TTR and Biscount Overseas Ltd.(5)
4.2.5 Form of Class A Warrant between TTR and certain private investors(5)
4.2.6 Warrant dated February 15, 2000 between TTR and Mantle International
Investment, Ltd.(5)
4.2.7 Form of Agent Warrant between TTR and certain entities. (5)
4.2.8 Form of Common Stock Purchase Warrant dated as of June, 2000, between TTR
and Brean Murray & Co., Inc. (6)
4.2.9 Warrant dated October 2, 2000 between TTR and Mantle International
Investment Ltd.*
10.1 Financial Consulting Agreement with Josephthal & Co., Inc. (4)
10.2 1996 Incentive and Non-Qualified Stock Option Plan, as amended (4)
10.3 Non-Executive Directors Stock Option Plan(4)
10.4 Employment Agreement between TTR Technologies Ltd. and Marc D. Tokayer (1)
10.5 Employment Agreement between TTR Technologies Ltd. and Baruch Sollish (1)
10.6 Development and OEM Licensing Agreement dated October 31, 1997 between TTR
and Doug Carson & Associates Inc.(3)



                                       21
<PAGE>

10.7 Development and OEM Licensing Agreement dated October 31, 1997 between TTR,
Doug Carson & Associates Inc. and Nimbus CD International, Inc.(3)
10.8 Stock Purchase Agreement dated December 20, 1997 between TTR and Biscount
Overseas Ltd.(3)
10.9 Consulting Agreement between TTR and Biscount Overseas Ltd. dated October
1, 1998(4)
10.10 Consulting Agreement between TTR and Mordecai Lerer dated January 28,
1999(4)
10.11 Lease between TTR and Peppertree Properties, Inc. dated January 23,
1999(2)
10.12 Employment Agreement dated June 1, 1999 between TTR and Emmanuel
Kronitz(2)
10.13 Alliance Agreement between TTR and Macrovision Corporation effective as of
November 24, 1999(5)
10.14 Stock Purchase Agreement, effective as of January 10, 2000 between TTR and
Macrovision Corporation(5)(6)
10.15 Agreement between TTR and H.C. Wainwright & Co. Inc. dated February 8,
2000(5)
10.16 Form of Subscription Agreement dated February 18, 2000 between TTR and
certain private investors and supplement thereto.(5)
10.17 Form of Registration Rights Agreement between TTR and certain private
investors and supplement thereto(5)
10.18 Agreement dated February 17, 2000 between TTR, TTR Technologies, Ltd., K&D
Equities, Inc., Isaac Winehouse and Wall and Broad Equities, Inc. (5)
10.19 Agreement dated February 15, 2000 between TTR and Mantle International
Investment, Ltd.(5)
10.20 Amendment to Employment Agreement between TTR and Baruch Sollish, dated
July 22, 1998
10.21 Agreement between TTR and Comda (1985) Ltd. and ComSign Ltd. dated as of
June 4, 2000.(6)
10.22 Agreement between TTR and Brean Murray & Co., Inc. dated June 19,2000.(6)
10.23 Agreement between TTR and Bluestone Capital dated August 23, 2000.(6)
10.24 2000 Equity Incentive Plan.(6)
10.25 Restated Employment Agreement between TTR and Emanuel Kronitz, dated
October 1, 2000*
10.26 Restated Employment Agreement between TTR Technologies Ltd and Emanuel
Kronitz, dated as of October 1, 2001.*
10.27 Amendment to Employment Agreement between TTR and Marc Tokayer, dated
February 1, 2001.*
10.28 Amendment to Employment Agreement between TTR and Baruch Sollish, dated
February 1, 2001.*
10.29 Agreement dated, October 2, 2001 between TTR and Mantle International
Investment, Ltd.*
21.1 Subsidiaries of TTR: TTR Technologies, Ltd., an Israeli corporation,
wholly-owned by TTR.
23.1 Consent of Brightman Almagor & Co., a member of Deloitte Touche Tohmatsu,
certified public accountants.*

*     Filed herewith.

(1) Filed as an Exhibit to the Registrant's Registration Statement on Form SB-2,
No. 333-11829, and incorporated herein by reference.

(2) Filed as an Exhibit to TTR's Registration Statement on Form SB-2, No.
333-85085 and incorporated herein by reference.

(3) Filed as an Exhibit to the Registrant's Annual Report on Form 10-KSB filed
for the year ended December 31, 1997 and incorporated herein by reference.

(4) Filed as an Exhibit to the Registrant's Annual Report on Form 10-KSB filed
for the year ended December 31, 1998 and incorporated herein by reference.

(5) Filed as an Exhibit to TTR's Registration Statement on Form S-1, No.
33-32662 and incorporated herein by reference.

(6) Filed on November 14, 2000, as an Exhibit to TTR's Report on Form 10-Q for
the third quarter of 2000.

(b) Reports on Form 8-K


                                       22
<PAGE>

Report on Form 8-K filed for the month January 2000


                                       23
<PAGE>

                                   Signatures

      In accordance with the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned , thereunto duly authorized.

                                        TTR TECHNOLOGIES, INC.


                                        By: /s/ MARC D. TOKAYER

                                        MARC D. TOKAYER,

Date: April 24, 2001

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following person on behalf of the Company
and in the capacities so indicated.

<TABLE>
<CAPTION>
Signature                 Title                                             Date
---------                 -----                                             ----
<S>                       <C>                                               <C>
/s/  Marc D. Tokayer      Chief Executive Officer, Chairman of the Board    April 24, 2001
------------------------  (Principal Executive and Financial Officer)
Marc D. Tokayer

/s/ Emanuel Kronitz       Chief Operating Officer                           April 24, 2001
------------------------
Emanuel Kronitz

/s/ Baruch Sollish        Vice President, Research & Development, Director  April 24, 2001
------------------------
Baruch Sollish

/s/  Christopher Illich   Director                                          April 24, 2001
------------------------
Christopher Illich

/s/  Michael Fine         Director                                          April 24, 2001
------------------------
Michael Fine

/s/ Michael Braunold      Director                                          April 24, 2001
------------------------
Michael Braunold
</TABLE>


                                       24
<PAGE>

                             TTR TECHNOLOGIES, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                        Page
                                                                        ----
Report of Independent Auditors                                           F-1

Consolidated Financial Statements

Balance Sheets as of December 31, 2000 and 1999                          F-2

Statements of Operations for the years ended December 31, 2000, 1999
and 1998 and the period from July 14, 1994 (inception) to December 31,
2000                                                                     F-3

Statements of Comprehensive Loss for the years ended December 31,
2000, 1999 and 1998 and the period from July 14, 1994 (inception) to
December 31, 2000                                                        F-4

Statements of Stockholder's Equity (Deficiency) for the period from
July 14, 1994 (inception) to December 31, 2000                        F-5 - F-7

Statements of Cash Flows for the years ended December 31, 2000,
1999 and 1998 and the period from July 14, 1994 (inception) to
December 31, 2000                                                     F-8 - F-9

Notes to the Consolidated Financial Statements                           F-10


                                       (i)
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

To the Shareholders of
TTR Technologies, Inc.

We have audited the accompanying consolidated balance sheets of TTR
Technologies, Inc. ("the Company") (a development-stage company) as of December
31, 2000 and 1999, and the related consolidated statements of operations,
comprehensive loss, stockholders' equity (deficit) and cash flows for the three
years ended December 31, 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the aforementioned consolidated financial statements present
fairly, in all material respects, the consolidated financial position of the
Company as of December 31, 2000 and 1999, and the consolidated results of
operations, comprehensive loss, stockholders' equity (deficit) and its cash
flows for the three years ended December 31, 2000, in conformity with generally
accepted accounting principles.


/s/ Brightman Almagor & Co.
Certified Public Accountants (Israel)
A member of Deloitte & Touche

Tel-Aviv, Israel
March 14, 2001


                                      F-1
<PAGE>

                    TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                     December 31,
                                                                 2000            1999
                                                             ------------    ------------
<S>                                                          <C>             <C>
ASSETS
Current assets
     Cash and cash equivalents                               $  8,234,686    $    209,580
     Accounts receivable                                            1,019          10,103
     Prepaid expenses and other current assets                    101,208          38,630
                                                             ------------    ------------

     Total current assets                                       8,336,913         258,313

Property and equipment - net                                      220,957         205,854

Investment in ComSign, Ltd.                                     1,790,843              --
Other assets                                                                        3,700
                                                             ------------    ------------

     Total assets                                            $ 10,348,713    $    467,867
                                                             ============    ============

LIABILITIES AND STOCKHOLDERS' DEFICIT

LIABILITIES
Current liabilities
     Current portion of long-term debt                       $         --    $      7,764
     Accounts payable                                              46,726         409,521
     Accrued expenses                                             167,731         335,772
                                                             ------------    ------------

     Total current liabilities                                    214,457         753,057

Long-term debt, less current portion                                   --           8,219
Accrued severance pay                                             137,299          37,587
                                                             ------------    ------------

     Total liabilities                                            351,756         798,863

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY DEFICIT
Preferred Stock, $.001 par value;
  5,000,000 shares authorized; none issued and outstanding             --              --
Common stock, $.001 par value;
  50,000,000 shares authorized; 17,356,340 and 10,653,560
   issued and outstanding, respectively                            17,357          10,654
Additional paid-in capital                                     40,340,966      24,710,602
Other accumulated comprehensive income                             46,246          56,971
Deficit accumulated during the development stage              (29,627,041)    (24,830,348)
  Less: deferred compensation                                    (780,571)       (278,875)
                                                             ------------    ------------

     Total stockholders' equity (deficit)                       9,996,957        (330,996)
                                                             ------------    ------------

     Total liabilities and stockholders' equity (deficit)    $ 10,348,713    $    467,867
                                                             ============    ============
</TABLE>

                 See Notes to Consolidated Financial Statements.


                                      F-2
<PAGE>

                    TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                         From
                                                                                       Inception
                                                                                       (July 14,
                                                  Year ended December 31,               1994) to
                                      --------------------------------------------    December 31,
                                           2000            1999            1998            2000
                                      ------------    ------------    ------------    ------------
<S>                                   <C>             <C>             <C>             <C>
Revenue                               $      1,999    $     68,803    $     54,922    $    125,724

Expenses
     Research and development (1)        1,111,889         345,989       1,017,073       4,052,736
     Sales and marketing (1)               579,006         815,586       1,155,998       3,898,448
     General and administrative (1)      1,785,434         630,090       1,663,912       5,126,204
     Stock based compensation            1,631,649       6,152,587       1,341,889      10,454,590
                                      ------------    ------------    ------------    ------------
     Total expenses                      5,107,978       7,944,252       5,178,872      23,531,978
                                      ------------    ------------    ------------    ------------
Operating loss                          (5,105,979)     (7,875,449)     (5,123,950)    (23,406,254)

Other (income) expense
     Legal settlement                           --              --              --         232,500
     Loss on investment                         --              --              --          17,000
     Other income                               --              --         (25,000)        (75,000)
     Net losses of affiliate               209,157              --              --         209,157
     Amortization of deferred
       financing costs                          --       4,180,540          72,288       4,516,775
     Interest income                      (524,253)         (3,689)         (3,413)       (586,248)
     Interest expense                        5,810       1,019,937         410,715       1,906,603
                                      ------------    ------------    ------------    ------------
Total other (income) expenses             (309,286)      5,196,788         454,590       6,220,787
                                      ------------    ------------    ------------    ------------
Net loss                              $ (4,796,693)   $(13,072,237)   $ (5,578,540)   $(29,627,041)
                                      ============    ============    ============    ============

Per share data:

      Basic and diluted               $      (0.30)   $      (2.07)   $      (1.54)
                                      ============    ============    ============

Weighted average number
  of common shares used in
  basic and diluted loss per share      16,006,403       6,321,719       3,615,908
                                      ============    ============    ============

(1) Excludes non-cash, stock based compensation expense as follows:

     Research and development         $    230,258    $    200,878    $     15,180    $    456,239
     Sales and marketing                    78,732       3,776,407         681,933       5,044,508
     General and administrative          1,322,659       2,175,302         644,776       4,953,843
                                      ------------    ------------    ------------    ------------
                                      $  1,631,649    $  6,152,587    $  1,341,889    $ 10,454,590
                                      ============    ============    ============    ============
</TABLE>

                 See Notes to Consolidated Financial Statements.


                                       F-3
<PAGE>

                    TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                  CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

<TABLE>
<CAPTION>
                                                                                                      From
                                                                                                   Inception
                                                                                                   (July 14,
                                                               Year ended December 31,              1994) to
                                                    ------------------------------------------    December 31,
                                                        2000            1999           1998           2000
                                                    -----------    ------------    -----------    ------------
<S>                                                 <C>            <C>             <C>            <C>
Net loss                                            $(4,796,693)   $(13,072,237)   $(5,578,540)   $(29,627,041)

Other comprehensive income (loss)
         Foreign currency translation adjustments       (10,725)        (22,444)        41,386          46,246
                                                    -----------    ------------    -----------    ------------
         Comprehensive loss                         $(4,807,418)   $(13,094,681)   $(5,537,154)   $(29,580,795)
                                                    ===========    ============    ===========    ============
</TABLE>

                 See Notes to Consolidated Financial Statements


                                      F-4
<PAGE>

                    TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
                                                                                       Common Stock
                                                           Common Stock                  Subscribed           Additional
                                                           ------------                  ----------             Paid-in
                                                       Shares        Amount         Shares       Amount         Capital
                                                       ------        ------         ------       ------         -------
<S>                                                  <C>          <C>            <C>           <C>               <C>
Balances at July 14, 1994 (date of inception)                --    $        --    $     --     $     --          $    --
Issuances of common stock, par value $.001
     Services rendered                                1,200,000          1,200
     Cash                                             1,200,000          1,200                                    23,800
Net loss
                                                    -----------    -----------    --------     --------     ------------
Balances at December 31, 1994                         2,400,000          2,400          --           --           23,800
Common stock contributed                               (561,453)          (561)                                      561
Issuances of common stock, par value $.001
     Services rendered                                  361,453            361                                    17,712
Stock options and warrants granted                                                                                   600
Foreign currency translation adjustment
Net loss
                                                    -----------    -----------    --------     --------     ------------
Balances at December 31, 1995                         2,200,000          2,200          --           --           42,673
Issuances of common stock, par value $.001
     Cash, net of offering costs of $11,467             850,000            850                                   362,683
Foreign currency translation adjustment
Net loss
                                                    -----------    -----------    --------     --------     ------------
Balances at December 31, 1996                         3,050,000    $     3,050          --     $     --     $    405,356
Common stock contributed                               (135,000)          (135)                                      135
Issuances of common stock, par value $.001
     Cash, net of offering costs of $832,551            908,000            908                                 5,000,440
     Services rendered                                   74,000             74                                   832,551
     Exercise of options                                374,548            375                                     3,370
Common stock subscriptions                                                          16,000      100,000
Sale of Underwriters warrants                                                                                         80
Stock options and warrants granted                                                                             1,875,343
Amortization of deferred compensation
Foreign currency translation adjustment
Net loss
                                                    -----------    -----------    --------     --------     ------------
Balances at December 31, 1997                         4,271,548          4,272      16,000      100,000        8,117,275

<CAPTION>
                                                                         Deficit
                                                       Foreign         Accumulated
                                                       Currency          During
                                                     Translation      Development          Deferred
                                                      Adjustment         Stage            Compensation        Total
                                                      ----------         -----            ------------        -----
<S>                                                  <C>               <C>                <C>              <C>
Balances at July 14, 1994 (date of inception)        $        --       $         --      $         --      $         --
Issuances of common stock, par value $.001
     Services rendered                                                                                            1,200
     Cash                                                                                                        25,000
Net loss                                                                    (42,085)                            (42,085)
                                                     ------------      ------------      ------------      ------------
Balances at December 31, 1994                                  --           (42,085)               --           (15,885)
Common stock contributed
Issuances of common stock, par value $.001
     Services rendered                                                                                           18,073
Stock options and warrants granted                                                                                  600
Foreign currency translation adjustment                    22,652                                                22,652
Net loss                                                                   (896,663)                           (896,663)
                                                     ------------      ------------      ------------      ------------
Balances at December 31, 1995                              22,652          (938,748)               --          (871,223)
Issuances of common stock, par value $.001
     Cash, net of offering costs of $11,467                                                                     363,533
Foreign currency translation adjustment                    35,044                                                35,044
Net loss                                                                 (1,121,211)                         (1,121,211)
                                                     ------------      ------------      ------------      ------------
Balances at December 31, 1996                              57,696        (2,059,959)               --        (1,593,857)
Common stock contributed                                                                                             --
Issuances of common stock, par value $.001
     Cash, net of offering costs of $832,551                                                                  5,001,348
     Services rendered                                                                       (500,000)          332,625
     Exercise of options                                                                                          3,745
Common stock subscriptions                                                                                      100,000
Sale of Underwriters warrants                                                                                        80
Stock options and warrants granted                                                         (1,875,343)               --
Amortization of deferred compensation                                                         972,567           972,567
Foreign currency translation adjustment                   (19,667)                                              (19,667)
Net loss                                                                 (4,119,612)                         (4,119,612)
                                                     ------------      ------------      ------------      ------------
Balances at December 31, 1997                              38,029        (6,179,571)       (1,402,776)          677,229
</TABLE>

                 See Notes to Consolidated Financial Statements.


                                       F-5
<PAGE>

                    TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
                                                                                       Common Stock
                                                           Common Stock                  Subscribed           Additional
                                                           ------------                  ----------             Paid-in
                                                       Shares        Amount         Shares       Amount         Capital
                                                       ------        ------         ------       ------         -------
<S>                                                  <C>            <C>            <C>         <C>           <C>
Common stock subscriptions                               16,000             16     (16,000)    (100,000)          99,984
Common Stock forfeited                               (1,000,000)        (1,000)                                     1000
Transfer of temporary equity to permanent capital        15,000             15                                    77,141
Issuances of common stock, par value $.001
     Cash                                                41,667             42                                    24,958
     Services rendered                                  244,000            244                                   620,344
Stock options and warrants granted (cancelled)                                                                  (255,992)
Discount relating to shares and warrants issued         156,111            156                                   486,307
Amortization of deferred compensation
Warrant exchange                                        432,000            432                                      (432)
Foreign currency translation adjustment
Net loss
                                                    -----------    -----------    --------     --------     ------------
Balances at December 31, 1998                         4,176,326          4,177                                 9,170,585
Issuances of common stock, par value $.001
     Cash                                               314,774            315                                   225,140
     Services rendered                                1,227,000          1,227                                 1,669,548
     Exercise of option                               1,714,952          1,715                                 1,401,660
Stock options granted  (cancelled)                                                                             4,449,015
Conversion of debt into common stock                  3,220,508          3,221                                 3,376,748
Fair value of warrants associated with finacing
  agreement                                                                                                    3,845,400
Amortization of deferred compensation
Value assigned to beneficial conversion feature
     of convertible notes                                                                                        572,505
Foreign currency translation adjustment
Net loss
                                                    -----------    -----------    --------     --------     ------------
Balances at December 31, 1999                        10,653,560         10,654                                24,710,602

<CAPTION>
                                                                         Deficit
                                                       Foreign         Accumulated
                                                       Currency          During
                                                     Translation      Development          Deferred
                                                      Adjustment         Stage            Compensation        Total
                                                      ----------         -----            ------------        -----
<S>                                                  <C>               <C>                <C>              <C>
Common stock subscriptions                                                                                           --
Common Stock forfeited                                                                                               --
Transfer of temporary equity to permanent capital                                                                77,156
Issuances of common stock, par value $.001
     Cash                                                                                                        25,000
     Services rendered                                                                       (620,588)               --
Stock options and warrants granted (cancelled)                                                255,992                --
Discount relating to shares and warrants issued                                                                 486,463
Amortization of deferred compensation                                                       1,173,139         1,173,139
Warrant exchange                                                                                                     --
Foreign currency translation adjustment                    41,386                                                41,386
Net loss                                                                 (5,578,540)                         (5,578,540)
                                                     ------------      ------------      ------------      ------------
Balances at December 31, 1998                              79,415       (11,758,111)         (594,233)       (3,098,167)
Issuances of common stock, par value $.001
     Cash                                                                                                       225,455
     Services rendered                                                                       (445,725)        1,225,050
     Exercise of option                                                                                       1,403,375
Stock options granted  (cancelled)                                                           (613,435)        3,835,580
Conversion of debt into common stock                                                                          3,379,969
Fair value of warrants associated with finacing
  agreement                                                                                                   3,845,400
Amortization of deferred compensation                                                       1,374,518         1,374,518
Value assigned to beneficial conversion feature
     of convertible notes                                                                                       572,505
Foreign currency translation adjustment                   (22,444)                                              (22,444)
Net loss                                                                (13,072,237)                        (13,072,237)
                                                     ------------      ------------      ------------      ------------
Balances at December 31, 1999                              56,971       (24,830,348)         (278,875)         (330,996)
</TABLE>

                 See Notes to Consolidated Financial Statements.


                                      F-6
<PAGE>

                    TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
                                                                                       Common Stock
                                                           Common Stock                  Subscribed           Additional
                                                           ------------                  ----------             Paid-in
                                                       Shares        Amount         Shares       Amount         Capital
                                                       ------        ------         ------       ------         -------
<S>                                                  <C>           <C>             <C>         <C>          <C>
Issuances of common stock, par value $.001
     Cash, net of offering costs of $730,000          3,680,937          3,681                                13,266,319
     Services rendered                                   16,269             16                                   114,609
     Exercise of options and warrants                 3,005,574          3,006                                   220,716
Stock options granted                                                                                          2,028,720
Amortization of deferred compensation
Foreign currency translation adjustment
Net loss
                                                    -----------    -----------    --------     --------     ------------
Balances at December 31, 2000                        17,356,340    $    17,357          --     $     --     $ 40,340,966
                                                    ===========    ===========    ========     ========     ============

<CAPTION>
                                                                         Deficit
                                                       Foreign         Accumulated
                                                       Currency          During
                                                     Translation      Development          Deferred
                                                      Adjustment         Stage            Compensation        Total
                                                      ----------         -----            ------------        -----
<S>                                                  <C>               <C>                <C>              <C>
Issuances of common stock, par value $.001
     Cash, net of offering costs of $730,000                                                                 13,270,000
     Services rendered                                                                                          114,625
     Exercise of options and warrants                                                                           223,722
Stock options granted                                                                      (2,028,720)               --
Amortization of deferred compensation                                                       1,527,024         1,527,024
Foreign currency translation adjustment                   (10,725)                                              (10,725)
Net loss                                                                 (4,796,693)                         (4,796,693)
                                                     ------------      ------------      ------------      ------------
Balances at December 31, 2000                        $     46,246      $(29,627,041)     $   (780,571)     $  9,996,957
                                                     ============      ============      ============      ============
</TABLE>

                 See Notes to Consolidated Financial Statements.


                                      F-7
<PAGE>

                    TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                                 From
                                                                                                              Inception
                                                                                  Year                        (July 14,
                                                                                  Ended                        1994) to
                                                                               December 31,                   December 31,
                                                                   2000            1999           1998            2000
                                                              ------------    ------------    -----------    ------------
<S>                                                           <C>             <C>             <C>            <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES
     Net loss                                                 $ (4,796,693)   $(13,072,237)   $(5,578,540)   $(29,627,041)
     Adjustments to reconcile net loss
      to net cash used by operating activities:
          Depreciation and amortization                             58,066          94,016        187,298         779,711
          Amortization of note discount and finance costs                        4,394,216        272,009       4,666,225
          Translation adjustment                                        --              --             --          (1,528)
          Beneficial conversion feature of convertible debt                        572,505             --         572,505
          Stock, warrants and options issued for services
            and legal settlement                                 1,631,649       6,266,398      1,173,139      10,627,551
          Payment of common stock issued with guaranteed
            selling price                                               --              --       (155,344)       (155,344)
          Net losses of affiliate                                  209,157              --             --         209,157
          Increase (decrease) in cash attributable
           to changes in assets and liabilities
               Accounts receivable                                   9,297          (2,305)        (8,480)         (1,325)
               Other current assets                                (62,030)         (4,081)        99,113         (92,916)
               Other assets                                          3,700              --         69,000              --
               Accounts payable                                   (355,881)       (694,469)       624,547        (151,285)
               Accrued expenses                                   (171,181)       (109,220)       958,098         632,733
               Accrued severance                                    97,962         (19,332)        33,009         156,200
               Interest payable                                         --         160,099         90,920         251,019
                                                              ------------    ------------    -----------    ------------
        Net cash used by operating activities                   (3,375,954)     (2,414,410)    (2,235,231)    (12,134,338)
                                                              ------------    ------------    -----------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES
     Proceeds from sales of fixed assets                            28,637           6,098             --          34,735
     Purchases of property and equipment                          (105,354)         (6,822)       (64,363)       (787,939)
     Investment in ComSign, Ltd.                                (2,000,000)             --             --      (2,000,000)
     Increase in organization costs                                     --              --             --          (7,680)
                                                              ------------    ------------    -----------    ------------
        Net cash provided (used) by investing
          activities                                            (2,076,717)           (724)       (64,363)     (2,760,884)
                                                              ------------    ------------    -----------    ------------
</TABLE>

                 See Notes to Consolidated Financial Statements.


                                      F-8
<PAGE>

                    TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
               CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)

<TABLE>
<CAPTION>
                                                                                                                 From
                                                                                                              Inception
                                                                                  Year                        (July 14,
                                                                                  Ended                        1994) to
                                                                               December 31,                   December 31,
                                                                   2000            1999           1998            2000
                                                              ------------    ------------    -----------    ------------
<S>                                                           <C>             <C>             <C>            <C>
CASH FLOWS FROM FINANCING ACTIVITIES
     Proceeds from issuance of common stock                     13,493,722       1,628,830        125,000      21,158,122
     Proceeds from officer loan                                         --              --         16,000              --
     Stock offering costs                                               --              --             --        (475,664)
     Deferred financing costs                                           --        (276,901)      (143,000)       (682,312)
     Proceeds from short-term borrowings                                --              --        206,553       1,356,155
     Proceeds from long-term debt                                       --              --      1,737,688       2,751,825
     Proceeds from convertible debentures                               --       2,000,000             --       2,000,000
     Repayment of short-term borrowings                                 --        (307,480)            --      (1,357,082)
     Repayments of long-term debt                                  (16,308)       (494,207)       (15,839)     (1,615,825)
                                                              ------------    ------------    -----------    ------------
       Net cash provided by financing activities                13,477,414       2,550,242      1,926,402      23,135,219
                                                              ------------    ------------    -----------    ------------
Effect of exchange rate changes on cash                                363              27         (2,403)         (5,311)
                                                              ------------    ------------    -----------    ------------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                 8,025,106         135,135       (375,595)      8,234,686

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                   209,580          74,445        450,040              --
                                                              ------------    ------------    -----------    ------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                    $  8,234,686    $    209,580    $    74,445    $  8,234,686
                                                              ============    ============    ===========    ============

SUPPLEMENTAL DISCLOSURES OF
 CASH FLOW INFORMATION
  Cash paid during the period for:
          Interest                                            $        869    $     50,046    $    42,609    $    473,026
                                                              ============    ============    ===========    ============

   Transfer of common stock issued with
       guaranteed selling price to permanent
       capital                                                                                     77,156
                                                                                             ============

Non cash financing activity
     Conversion of debt and accrued interest
       to common stock                                                        $  3,379,696
                                                                              ============
</TABLE>

                 See Notes to Consolidated Financial Statements.


                                       F-9
<PAGE>

                    TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note  1 - Description Of Business

            TTR Inc. (the "Company") was incorporated on July 14, 1994 under the
            laws of the State of Delaware. In December 1998 the Company amended
            its certificate of incorporation to change its name to TTR
            Technologies, Inc.

            TTR Technologies Ltd., ("TTR Ltd") was formed under the laws of the
            State of Israel on December 5, 1994 as a wholly owned research and
            development subsidiary of the Company.

            The Company is engaged in the design, development and
            commercialization of proprietary software security products.

            The Company is considered to be in the development stage and has
            earned limited revenues to date. Business activities to date have
            focused on product and marketing research, product development, and
            raising capital.

            In November 1999, the Company signed an agreement with Macrovision
            Corporation to jointly develop and market music copy protection
            technology for optical based media. In connection with the agreement
            the Company granted to Macrovision an exclusive world-wide,
            royalty-bearing license to use the Company's proprietary technology
            through December 31, 2009. The Company will be entitled to a 30%
            royalty, which will be adjusted to 25% effective April 1, 2001. Also
            under certain conditions, the exclusive license may revert to a
            non-exclusive license as of the second anniversary of the Commercial
            Launch, as defined. Under the agreement, the Company was required to
            reimburse Macrovision $1 million of research and development and
            sales and marketing expenses incurred in 2000 relating to the joint
            development.

Note 2 - Summary Of Significant Accounting Policies

            Principles of Consolidation

            The consolidated financial statements include the accounts of the
            Company and its wholly owned subsidiary, TTR Ltd. All significant
            intercompany accounts and transactions have been eliminated in
            consolidation. Certain consolidated amounts have been reclassified
            for consistent presentation.

            Reclassifications

            Certain prior year amounts have been reclassified to conform to the
            current years presentation.

            Use of Estimates

            Management uses estimates and assumptions in preparing these
            financial statements in accordance with generally accepted
            accounting principles. Those estimates and assumptions affect the
            reported amounts of assets and liabilities, the disclosure of
            contingent assets and liabilities and the reported revenues and
            expenses. Actual results could vary from the estimates that were
            used.


                                      F-10
<PAGE>

                    TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            Cash Equivalents

            Cash equivalents consist of short-term, highly liquid debt
            investments that are readily convertible into cash with original
            maturities when purchased of three months or less.

            Fair Value of Financial Instruments

            Substantially all of the Company's financial instruments, consisting
            primarily of cash equivalents, current receivables, accounts payable
            and accrued expenses, are carried at, or approximate, fair value
            because of their short-term nature or because they carry market
            rates of interest.

            Revenue recognition

            Revenues are generated from licensing software The company
            recognizes the revenue in accordance with Statement of Position
            97-2, "Software Revenue Recognition", and related interpretations,
            when delivery has occurred, the fee for the software is fixed or
            determinable, collectability is reasonably assured and a written
            software license agreement has been signed by the Company and the
            customer.

            Stock Based Compensation

            The Company accounts for stock-based compensation in accordance with
            APB Opinion No. 25, "Accounting for Stock Issued to Employees" and
            FASB Interpretation 44, "Accounting for Certain Transactions
            Involving Stock Compensation.". Pursuant to these accounting
            standards, the Company records deferred compensation for share
            options granted to employees at the date of grant based on the
            difference between the exercise price of the options and the market
            value of the underlying shares at that date. Deferred compensation
            is amortized to compensation expense over the vesting period of the
            underlying options. No compensation expense is recorded for fixed
            stock options that are granted to employees and directors at an
            exercise price equal to the fair market value of the common stock at
            the time of the grant

            See Note 9 for pro forma disclosures required in accordance with
            SFAS No. 123, "Accounting for Stock-Based Compensation".

            Stock options and warrants granted to non-employees are recorded at
            their fair value, as determined in accordance with SFAS No. 123 and
            Emerging Issues Task Force Consensus No. 96-18, and recognized over
            the related service period. Deferred charges for options granted to
            non-employees are periodically re-measured as the options vest.

            Foreign Currency Translations

            The financial statements of TTR Ltd. have been translated into U.S.
            dollars in accordance with Statement No. 52 of the Financial
            Accounting Standards Board (FASB). Assets and liabilities have been
            translated at year-end (period-end) exchange rates and statement of
            operations have been translated at average rates prevailing during
            the year. The translation adjustments have been recorded as a
            separate component of stockholders' deficit (cumulative translation
            adjustment).


                                      F-11
<PAGE>

                    TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            Net loss per share

            Basic earnings (loss) per share EPS is computed by dividing net
            income (loss) applicable to common shares by the weighted-average of
            common shares outstanding during the period. Diluted earnings (loss)
            per share adjusts basic earnings (loss) per share for the effects of
            convertible securities, stock options and other potentially dilutive
            instruments, only in the periods in which such effect is dilutive.
            The shares issuable upon exercise of stock options and warrants are
            excluded from the calculation of net loss per share, as their effect
            would be antidilituve

            Depreciation and Amortization

            Furniture, equipment and vehicles are recorded at cost and
            depreciated using the straight-line method over the estimated useful
            lives of the assets, which range from three to fourteen years. For
            leasehold improvements, amortization is provided over the shorter of
            the estimated useful lives of the assets or the lease term.

            Research and Development Costs

            Research and development expenditures are charged to operations as
            incurred. Software development costs are required to be capitalized
            when a product's technological feasibility has been established by
            completion of a working model of the product and ending when a
            product is available for general release to customers. To date,
            completion of a working model of the Company's products and general
            release have substantially coincided. As a result, the Company has
            not capitalized any software development costs since such costs have
            not been significant.

            Income Taxes

            The Company uses the liability method to determine its income tax
            expense as required under the FASB Standards No. 109, (SFAS 109).
            SFAS 109 requires the establishment of a deferred tax asset or
            liability for the recognition of future deductible or taxable
            amounts and operating loss carryforwards. Deferred tax expense or
            benefit is recognized as a result of the changes in the assets and
            liabilities during the year. Valuation allowances are established
            when necessary, to reduce deferred tax assets, if it is more likely
            than not that all or a portion of it will not be realized.

            Concentrations

            Cash and cash equivalents are, for the most part, maintained with
            major financial institutions. Deposits held with these banks exceed
            the amount of insurance provided on such deposits. Generally these
            deposits may be redeemed upon demand and therefore, bear minimal
            risk.

            Long-lived assets

            In accordance with SFAS No. 121, "Accounting for the Impairment of
            Long-Lived Assets and for Long-Lived Assets to be Disposed of", the
            Company records impairment losses on long-lived assets used in
            operations when events and circumstances indicate that the assets
            might be


                                      F-12
<PAGE>

                    TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            impaired and the undiscounted cash flows estimated to be generated
            by those assets are less than the carrying amounts of those assets.

            Comprehensive Income (loss)

            In January 1998, the Company adopted SFAS 130, "Reporting
            Comprehensive Income," which establishes standards for reporting the
            components of comprehensive income. The foreign currency translation
            adjustment is the Company's only component of comprehensive income.

            Recently Issued Accounting Pronouncements

            In June 1998, FASB Statement No. 133 (SFAS 133), "Accounting for
            Derivative Instruments and Hedging Activities," was issued which
            establishes accounting and reporting standards for all derivative
            instruments. SFAS No. 133, as amended by SFAS No, 137 and 138, is
            effective for fiscal years beginning after June 15, 2000. The
            Company believes that the adoption of SFAS No. 133 on January 1,
            2001 will not have a significant effect on its financial statements.

Note 3 - Property And Equipment

            Property and equipment consist of the following:

                                                             December 31,
                                                         2000             1999
                                                       --------         --------

Computer equipment                                     $220,640         $186,690
Leasehold improvements                                  118,114          114,928
Office equipment                                        131,936          140,242
Vehicles                                                146,824           93,585
                                                       --------         --------
                                                        617,514          535,445
Less:  Accumulated depreciation                         396,557          329,591
                                                       --------         --------
                                                       $220,957         $205,854
                                                       ========         ========

            Depreciation expense was $94,393, $107,010 and $113,858 for the
            years ended December 31, 2000, 1999 and 1998.

Note 4 - Investment In Comsign, Ltd.

            In July 2000, the Company invested $2 million for a 50% equity
            interest in ComSign Ltd. ("ComSign") a newly established subsidiary
            of Comda Ltd. ("Comda"). ComSign is engaged in the distribution and
            delivery of digital authentication certificates of VeriSign, Inc.
            ("VeriSign"). In June 2000, ComSign entered into an agreement with
            VeriSign to act as VeriSign's sole principal affiliate in Israel and
            the territories administered by the Palestinian Authority. Under the
            provisions of the agreement with Comda 60% of any dividends up to an
            accumulated amount of $2,000,000 will first be distributed to TTR
            and 40% to Comda.


                                      F-13
<PAGE>

                    TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            Thereafter, 60% of dividends up to an accumulated amount of
            $2,000,000 will first be distributed to Comda and 40% to TTR.
            Thereafter, all distributions will be 50% to each.

            The Company applies the equity method of accounting for this
            investment. At the time of the investment the carrying value of the
            investment exceeded the Company's share of the underlying net assets
            of ComSign. The excess is considered to be goodwill and is being
            amortized on a straight-line basis over five years. Amortization
            expense is included in net losses of affiliate in the accompanying
            Consolidated Statements of Operations.

            The investment breakdown at December 31, 2000 is a follows:

            Share in net assets of ComSign                            $  830,724
            Goodwill, net                                                960,119
                                                                      ----------
                     Total investment in affiliate                    $1,790,843
                                                                      ==========

Condensed summarized financial data for ComSign, Ltd. as of and for the seven
months ended December 31, 2000, is as follows:

Condensed balance sheet data
   Current assets                                                   $ 1,491,527
   Noncurrent assets                                                  2,267,515
   Current liabilities                                                1,224,173
   Noncurrent liabilities                                               873,420

Condensed statement of operations data
   Revenue                                                              176,912
   Net loss                                                         $  (237,013)

Note 5 - Accrued Expenses

            Accrued expenses consist of the following:

                                                               December 31,
                                                           2000           1999
                                                           ----           ----
Accrued payroll and related amounts                      $135,144       $ 66,868
Taxes                                                          --          4,738
Settlement                                                     --        125,000
Other                                                      32,587        139,166
                                                         --------       --------
                                                         $167,731       $335,772
                                                         ========       ========

Note 6- Accrued Severance Pay

            Under Israeli law, TTR Ltd. is required to make severance payments
            to dismissed employees (including officers) and to employees leaving
            employment under certain other circumstances. This liability is
            calculated based on the years of employment for each employee, in
            accordance with the "severance pay laws." Funding into severance pay
            funds and the purchase of insurance policies covers the Company's
            liabilities for required severance payments.

Note 7- Debt Financings

            o     In September 1998, the Company issued a short-term
                  non-interest bearing $100,000 promissory note to a private
                  investor. In connection with the loan, the company also sold
                  to the investor 111,111 shares of Common Stock at par. For
                  financial reporting purposes, the Company recorded a note
                  discount totaling $87,500, to reflect the value of the stock.
                  The discount was amortized on a straight-line basis over the
                  term of the note.

            o     In 1998, the Company realized gross proceeds of $1,462,500
                  from a private offering of 29.25 Units, each Unit consisting
                  of a $50,000 10% Promissory Note and Warrants to


                                      F-14
<PAGE>

                    TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  purchase 11,500 shares of Common Stock at $1.50 per share. For
                  financial reporting purposes, the Company recorded a discount
                  of $357,450, to reflect the value of the Warrants. The
                  discount was amortized on a straight-line basis over the terms
                  of the respective notes.

                  In December 1999, the Company offered any remaining note
                  holders an option to convert their outstanding principal and
                  accrued interest to shares of common stock. The conversion
                  rate was based on 85% of the average closing bid price of the
                  common shares for the 30 trading days preceding the date of
                  conversion. In accordance with applicable accounting rules,
                  the Company recorded a charge to interest expense in the
                  amount of $572,505 to reflect this beneficial conversion
                  feature. A total of $1,329,202 of note principal and accrued
                  interest was converted to common stock.

            o     In December 1998, the Company realized gross proceeds of
                  $150,000 from a private offering of 5 Units, each Unit
                  consisting of a $30,000 8% Promissory Note, 9,000 shares of
                  Common Stock and Warrants to purchase an additional 3,000
                  shares at $6.00 per share. For financial reporting purposes,
                  the Company recorded a note discount of $41,513, to reflect
                  the value of the Stock and Warrants. The discount was being
                  amortized on a straight-line basis over the term of the notes.
                  In November 1999, the entire principal balance plus accrued
                  interest on these notes was repaid.

            o     In 1999 the Company issued $2,000,000 of its 10% Convertible
                  Debentures to private investors. The Debentures were
                  convertible into shares of the Company's Common Stock at the
                  rate of $.77 per share based on the closing trading prices of
                  the Common Stock during certain specified periods. In
                  addition, upon conversion, warrants were issued to purchase
                  additional shares of Common Stock equal to one-half of the
                  shares of Common Stock issued. The warrants were exercisable
                  at a $.92 per share.

                  In October and November 1999, the investors converted all of
                  the outstanding debentures and were issued 2,681,934 shares of
                  common stock and 1,340,967 warrants exercisable at $.92 per
                  share. In November 1999, the investors exercised of all the
                  outstanding conversion warrants.

                  In connection with the sale of Debentures, the Company also
                  issued warrants to purchase up to 1.3 million shares of Common
                  Stock at a nominal price per share, to an independent
                  consultant. These warrants were exercised in 2000. Using the
                  Black-Scholes model for estimating the fair value of the
                  warrants, the Company recorded $3,845,400 as deferred
                  financing costs, which was charged to operations in the period
                  the debentures were converted.

Note 8- Income Taxes

            At December 31, 2000, the Company had available $15.7 million of net
            operating loss carryforwards for U.S. federal income tax purposes
            which expire in the years 2014 through 2020, and $8.1 million of
            foreign net operating loss carryforwards with no expiration date.
            Due to the uncertainty of their realization, no income tax benefit
            has been recorded by the Company for these net operating loss
            carryforwards as valuation allowances have been established for any
            such benefits. The use of the U.S. federal net operating loss
            carryforwards is subject to


                                      F-15
<PAGE>

                    TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            limitations under section 382 of the Internal Revenue code
            pertaining to changes in stock ownership.

            Significant components of the Company's deferred tax assets for U.S.
            federal and Israel income taxes are as follows:

                                                          December 31,
                                                          ------------
                                                   2000                 1999
                                                   ----                 -----

Net operating loss carryforwards               $ 7,626,174          $ 4,398,088
Stock based compensation                           438,280            2,313,232
Other                                              229,747              153,758
                                               -----------          -----------
      Total deferred tax assets                  8,294,201            6,865,078
      Valuation allowance                       (8,294,201)          (6,865,078)
                                               -----------          -----------

      Net deferred tax assets                  $        --          $        --
                                               ===========          ===========

Note 9- Stockholders' Equity

            Stock option plans

            In July 1996, the Board of Directors adopted the Company's Incentive
            and Non-qualified Stock Option Plan (the " Plan") and has reserved
            up to 450,000 shares of Common Stock for issuance thereunder. In
            December 1999, the Plan was amended to increase the total number of
            shares available for grant to 1.5 million. There are currently a
            total of 1,318,225 options outstanding under the 1996 Plan and
            future grants have been discontinued.

            In July 1998, the Board of Directors adopted the Non-Executive
            Directors Stock Option Plan ("the Directors' Plan") and has reserved
            up to 25,000 shares of common stock for issuance thereunder. The
            plan provides for the grant of options to directors who are not
            otherwise employed by the Company. As of December 31, 2000, 18,000
            options had been granted under the Directors' Plan.

            In July 2000, the Company adopted the 2000 Equity Incentive Plan
            (the "2000 Incentive Plan"). A total of 1.5 million shares of common
            stock have been reserved for issuance under the 2000 Incentive Plan.
            The 2000 Incentive Plan provides for the grant of incentive stock
            options, nonqualified stock options, stock appreciation rights,
            restricted stock, bonus stock, awards in lieu of cash obligations,
            other stock-based awards and performance units. The 2000 Incentive
            Plan also permits cash payments under certain conditions.

            The Compensation Committee of the Board of Directors is responsible
            for determining the type of award, when and to whom awards are
            granted, the number of shares and the terms of the awards and
            exercise prices. The options are exercisable for a period not to
            exceed ten years from the date of grant. Vesting periods range from
            immediately to four years.


                                      F-16
<PAGE>

                    TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
                          (A Development Stage Company)
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

            Other Option Grants

            In addition to the options granted under the Stock Option Plans, the
            Company has issued options outside of the plans, pursuant to various
            agreements.

            Option activity for 1998, 1999 and 2000 is summarized as follows:

<TABLE>
<CAPTION>
                                                                                                        Weighted
                                                                                                        Average
                                                                       Options                          Exercise
                                                       Plan           Non-plan            Total           Price
                                                       ----           --------            -----         --------

<S>                                                 <C>              <C>                <C>              <C>
Options outstanding, January 1, 1998                  161,100          177,200            338,300         $3.58
Granted                                               291,600               --            291,600          3.35
Forfeited                                            (294,950)         (48,328)          (343,278)         3.31
                                                   ----------         --------         ----------         -----

Options outstanding, December 31, 1998                157,750          128,872            286,622          3.67
Granted                                               736,500          196,000            932,500          0.39
Exercised                                                  --         (128,872)          (128,872)         0.01
Forfeited                                            (144,850)              --           (144,850)         6.73
                                                   ----------         --------         ----------         -----

Options outstanding, December 31, 1999                749,400          196,000            945,400          0.47
Granted                                             2,238,500               --          2,238,500          3.86
Exercised                                            (200,000)        (146,000)          (346,000)         0.23
Forfeited                                              (2,275)              --             (2,275)         5.19
                                                   ----------         --------         ----------         -----

Options outstanding, December 31, 2000              2,785,625           50,000          2,835,625         $3.18
                                                   ==========         ========         ==========         =====

Shares of common stock available for future
  grant under the plan                                    600
                                                   ==========
</TABLE>


                                      F-17
<PAGE>

                    TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes information about stock options outstanding at
December 31, 2000:

<TABLE>
<CAPTION>
                                                Weighted Average             Options Exercisable
                                           Remaining                           Weighted Average
                             Number       Contractual      Exercise         Number        Exercise
Ranges of price           Outstanding        Life            Price        Exercisable      Price
---------------           -----------        ----            -----        -----------      -----
<S>                       <C>                <C>             <C>          <C>             <C>
$0.01                       524,000          8.64            $0.01          504,000        $0.01
$0.35                        50,000          9.92             0.35           50,000         0.35
$2.56-3.56                  400,600          9.32             3.31          320,600         3.50
$3.91-5.72                1,851,025          9.51             4.10        1,138,581         4.20
$6.84-7.00                   10,000          7.12             6.94            9,000         6.94
                          ---------          ----            -----        ---------        -----

$.01-$7.00                2,835,625          9.33            $3.18        2,022,181        $2.96
                          =========          ====            =====        =========        =====
</TABLE>

Weighted-average grant date fair value of options granted in 2000 ,1999 and
1998, under the Black-Scholes option pricing model, was $2.10, $2.20 and $1.14
per option, respectively.

The Company has adopted the pro forma disclosure provisions of SFAS No. 123. Had
compensation cost for all of the Company's stock-based compensation grants been
determined in a manner consistent with the fair value approach described in SFAS
No. 123, the Company's net loss and net loss per share as reported would have
been increased to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                     Year ended
                                                                    December 31,
                                                        2000              1999              1998
                                                        ----              ----              ----
<S>                                                  <C>              <C>                <C>
      Net loss
          As reported                                ($4,796,693)     ($13,072,327)      ($5,578,540)
          Proforma                                   ($8,118,242)     ($13,123,185)      ($5,635,574)

      Loss per share
          As reported                                     ($0.30)           ($2.07)           ($1.54)
          Proforma                                        ($0.51)           ($2.08)           ($1.56)
</TABLE>

The fair value of each option granted in 2000, 1999 and 1998 is estimated on the
date of grant using the Black-Scholes option-pricing model with the following
weighted average assumptions:

<TABLE>
<CAPTION>
                                                           2000            1999            1998
                                                           ----            ----            ----

<S>                                                        <C>             <C>             <C>
      Risk free interest rates                             6.32%           5.52%           5.51%
      Expected option lives                                2.46            2.50            2.50
      Expected volatilities                               70.00           46.50           46.50
      Expected dividend yields                             None            None            None
</TABLE>


                                      F-18
<PAGE>

                    TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
                         (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Authorized shares

      In July 2000, the Company's stockholders approved a resolution of the
Board of Directors adopted to increase the authorized common stock to 50 million
shares

Warrants

      o     From April through August 1998, in connection with a private
            placement, the Company issued warrants to purchase an additional
            336,375 shares of Common Stock. The warrants are exercisable for a
            period of four years at exercise prices ranging from $3.41 to $6.47
            per share. In consideration of extending the term of the related
            notes, the Company has reduced the exercise price to $1.50 per
            share.

      o     In June 1998, the Company issued warrants to purchase 25,000 shares
            of Common Stock to a consultant pursuant to a one-year consulting
            agreements. The warrants are exercisable for a period of four years
            at an exercise price of $5.75. In April 1999, the exercise price was
            reduced to $1.50 per share.

      o     In December 1998, in connection with a private placement, the
            Company issued warrants to purchase an additional 15,000 shares of
            Common Stock. The warrants are exercisable for a period of five
            years at an exercise price of $6.00.

      o     In May 1999, in connection with the sale of convertible debentures
            (see Note 7) the Company issued 1.3 million warrants exercisable at
            a nominal price per share. These warrants were exercised in 2000.

      o     In July 1999, the Company issued 200,000 warrants exercisable at
            $2.75 to a consultant pursuant to a three-month consulting
            agreement.

      o     In August 1999 a consultant was issued warrants to purchase up to 1
            million shares of common stock at a nominal price per share. The
            warrants are exercisable only upon the Company entering into an
            agreement with a strategic investor through the efforts of the
            consultant. In November 1999, upon the signing of an agreement with
            a strategic investor, the warrants became exercisable. Using the
            Black-Scholes model for estimating the fair value of the warrants,
            the Company recorded a charge to operations of $2,741,000 in
            connection with the warrants. These warrants were exercised in 2000.

      o     In November 1999, in connection with a legal settlement, the Company
            issued a total of 50,000 warrants with exercise prices ranging from
            $2.50 to $3.50.

      o     In November 1999, the Company issued 25,000 warrants exercisable at
            a nominal price per share to a consultant.

      o     In May 2000, the Company granted 250,000, three-year warrants to a
            consultant pursuant to a one-year consulting agreement. The
            agreement was subsequently amended to reduce the number of warrants
            to 175,000. The first 100,000 warrants vest immediately then each of
            the next 25,000 will vest when the closing bid price of the
            Company's Common Stock


                                      F-19
<PAGE>

                    TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            exceeds $8, $12, and $16, respectively, for fifteen trading days out
            of any twenty. The exercise prices of the warrants are $4.13 per
            share. Using the Black-Scholes model for estimating the fair value
            of the warrants, the Company recorded a charge to operations of
            $123,175 in connection with the immediately vesting portion of the
            warrant.

            In June 2000, the Company granted 350,000 five-year warrants to
            another consultant pursuant to a one-year consulting agreement. The
            warrants become exercisable when the average weighted bid price of
            the Company's Common Stock exceeds $10 per share for twenty
            consecutive trading days. The exercise prices of the warrants are
            $6.50, $7.50 and $8.50 for 125,000, 125,000 and 100,000
            respectively.

            These warrants are accounted for in accordance with the provisions
            of EITF 96-18, Accounting for Equity Instruments that are Issued to
            Other than Employees for Acquiring or in Conjunction with Selling,
            Goods or Services. Due to the uncertainty of reaching the
            performance measures stipulated, the Company has not recorded any
            expense relating to the issuance of the unvested warrants. Upon
            determination that the achievement of the vesting thresholds is
            probable ("measurement date"), the Company will value the warrant
            and expense it over the remaining period until the performance
            criteria is met.

      o     In August 2000, the Company granted 200,000 five-year warrants to a
            consultant pursuant to a one-year consulting agreement. The first
            100,000 warrants, vest immediately and the next 100,000 vest ratable
            over seven months. The warrants are not exercisable during the first
            two years from the date of grant unless the Company's Common Stock
            has traded at or above $10 per share for fifteen consecutive trading
            days. The exercise prices of the warrants are $7.50 per share. Using
            the Black-Scholes model for estimating the fair value of the
            warrants, the Company recorded a charge to deferred compensation of
            $596,653 and is amortizing this amount over the service period.

      o     In October 2000, the Company granted 400,000 four-year warrants to a
            consultant pursuant to a one-year consulting agreement. The warrants
            vest immediately but are not exercisable until one year from date of
            grant, unless there is a sale or merger involving a majority of the
            assets of the Company. The exercise prices of the warrants are
            $6.50, $7.50 and $8.50 for 134,000, 133,000 and 133,000,
            respectively. Using the Black-Scholes model for estimating the fair
            value of the warrants, the Company recorded a charge to deferred
            compensation of $483,772 and is amortizing this amount over the
            service period.

Stock Issuances

      During the year ended December 31, 1998, the Company completed the
following common stock transactions:

      o     An aggregate of 250,000 shares of the Company's Common Stock, owned
            beneficially by its President, and designated as escrow shares were
            forfeited and returned to the Company. In June 1998, the Company's
            President waived his rights to the remaining 750,000 escrowed
            shares.

      o     The Company issued a total of 244,000 shares of Common Stock and
            25,000 warrants to various consultants for services rendered. The
            value of the services totaling $642,700 is being amortized over the
            one-year contract terms.


                                      F-20
<PAGE>

                    TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      o     In December 1998, the Company entered into an agreement with a
            private investor for the sale of an additional 150,758 shares of
            Common Stock. The total purchase price was $90,455, of which $25,000
            was received in 1998.

      During the year ended December 31, 1999, the Company completed the
      following common stock transactions:

      o     In January and February 1999 the Company issued 627,000 shares of
            Common Stock and 10,000 warrants exercisable at $1.75 to various
            consultants pursuant to one-year consulting agreements. The value of
            the services totaling $445,725 is being amortized over the one-year
            contract terms.

      o     In January 1999, the Company issued 250,000 shares of Common Stock
            as payment of an outstanding liability in the amount of $168,750.

      o     In February and April 1999, the Company received $160,000 from the
            issuance of an additional 205,682 shares of its Common Stock.

      o     In July 1999, the Company issued 150,000 shares of Common Stock in
            exchange for previously issued options in connection with the
            termination of, and settlement of certain claims by an ex-employee.

      o     In October 1999, the Company issued 200,000 shares of Common Stock
            to a consultant pursuant to a consulting agreement.

      o     In October 1999, the Company issued 2,681,934 shares of Common Stock
            as a result of the conversion of all the outstanding 10% convertible
            debentures plus accrued interest thereon.

      o     In December 1999, the Company 538,574 shares as a result of the
            conversion of long-term debt.

      o     In 1999, the Company issued 1,714,952 shares of Common Stock from
            the exercise of various outstanding warrants.

      During the year ended December 31, 2000, the Company completed the
      following common stock transactions

      o     In January 2000, pursuant to its licensing and investment agreement
            with Macrovision, the Company issued 1,880,937 shares of its common
            for an aggregate purchase price of $4 million.

      o     In February 2000, the Company completed a private placement of
            1,800,000 shares of Common Stock and 900,000 Class A Warrants for an
            aggregate purchase price of $ 10,000,000. The Class A Warrants are
            exercisable for a period of 60 months at an exercise price per share
            of $8.84. The Company may redeem the Class A Warrants for $ 0.10 per
            warrant if the common shares have traded at or above 200% of the
            exercise price


                                      F-21
<PAGE>

                    TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      for a period of twenty consecutive trading days. Upon exercise of the
      Class A Warrants, the Company will issue Class B Warrants for an
      additional 450,000 shares. The Class B Warrants are exercisable for a
      period of 36 months from the date of issuance at an exercise price per
      share of $21.22. The Class B Warrants may be redeemed by the Company if
      the common shares have trade at $ 26 or above for a period of twenty
      consecutive trading days. The Company paid a placement agent a fee of
      $500,000 and issued 180,000 warrants exercisable at $5.56 per share,
      90,000 Class A Warrants exercisable at $8.84 and upon exercise an
      additional 45,000 Class B Warrants exercisable at $21.22. Also in
      connection with the private placement, the Company paid $200,000 and
      issued 200,000 warrants, exercisable at $2.75, as a finder fee.

      o     In January 2000, the Company issued 15,000 shares of Common Stock to
            a consultant. The value of the services totaling $104,625 was
            charged to operations.

      o     In January 2000, the Company issued 1,269 shares of Common Stock as
            payment of an outstanding liability in the amount of $10,000.

      o     In 2000, the Company issued 3,005,574 shares of Common Stock from
            the exercise of various outstanding stock options and warrants.

Note 10 - Commitments And Contingencies

      Royalties

      TTR Ltd. is committed to pay royalties to the Office of the Chief
      Scientist of the Government of Israel (OCS) on proceeds from sales of
      products of which the OCS has participated by way of grants. The royalties
      are payable at the rate of 3% for the first three years of product sales,
      4% for the following three years, and 5% thereafter up to a maximum of
      100% of the grant plus accrued interest. The total amount of grants
      received as of December 31, 2000 was $210,000.

      The research and development grants are presented in the statement of
      operations as a reduction of research and development expenses.

      The refund of the grant is contingent on future sales and the Company has
      no obligation to refund these grants if the sales are not sufficient.

      Consulting Agreement

      In June 1999, the Company entered into a consulting agreement, which will
      terminate in January 2003. The agreement provides for quarterly fees of
      $15,000.

      Employment Agreements

      The Company entered into, and amended various employment agreements in
      October 2000 and February 2001 with certain of its officers and an
      employee. The Company's aggregate commitments under these employment
      agreements are approximately $858,000, $608,000 and $375,000 during 2001,
      2002 and 2003, respectively. In addition each of the agreements provides
      for a termination payment, under certain circumstances, equal to 12 months
      salary. If a change in control (as defined) occurs the termination
      payments will be the greater of 12


                                      F-22
<PAGE>

                    TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
                         (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      months salary or the balance of the salary then due under the agreement
      through the scheduled expiration date.

Note 11 - Geographic Data

<TABLE>
<CAPTION>
                             U.S.        % of Total      Israel      % of Total
<S>                      <C>                <C>      <C>               <C>
For the year ended
December 31, 2000
   Revenue               $        --        0.00%    $     1,999       100.00%
   Operating loss         (3,027,245)      59.29%     (2,078,734)       40.71%
   Identifiable assets     8,297,774       80.18%      2,050,939        19.82%

For the year ended
December 31, 1999
   Revenue               $     5,550        8.07%    $    63,253        91.93%
   Operating loss         (6,371,600)      80.90%     (1,503,849)       19.10%
   Identifiable assets       239,995       51.30%        227,872        48.70%

For the year ended
December 31, 1998
   Revenue               $        --          --     $    54,922       100.00%
   Operating loss         (2,090,049)      40.79%     (3,033,901)       59.21%
   Identifiable assets       171,678       35.00%        318,867        65.00%
</TABLE>

Note 12 - Quarterly Results of Operations (UNAUDITED)

<TABLE>
<CAPTION>
2000                                       1st Qtr.      2nd Qtr.      3rd Qtr.      4th Qtr.
<S>                                      <C>           <C>           <C>             <C>
   Revenues                                   1,999            --           --             --
   Net loss                              (1,563,727)   (1,025,946)   (1,213,842)     (993,178)
   Net loss per share - basic and diluted     (0.12)        (0.06)        (0.07)        (0.06)

1999                                       1st Qtr.      2nd Qtr.      3rd Qtr.      4th Qtr.

   Revenues                                  26,984        13,509        26,848         1,462
   Net loss                              (1,158,346)   (1,806,511)   (1,470,314)   (9,357,066)
   Net loss per share - basic and diluted     (0.23)        (0.20)        (0.26)        (1.02)
</TABLE>

In the fourth quarter of 1999, the Company recorded (a) $3.2 million as
amortization of deferred financing costs upon the conversion of convertible
debt; (b) $572,000 as additional interest from the conversion of debt that
included a beneficial conversion festure; (c) a $2.7 million charge as a result
of warrants issued to a consultant that became exercisable upon the Company
entering into an agreement with a strategic investor; (d) a $1.5 million charge
as a result of the issuance of additional stock and warrants to consultants and
employees of the Company.


                                      F-23