<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

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

                                    FORM 10-K

                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

(Mark One)

[X]  Annual Report to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Fiscal Year ended December 31, 1999.

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934

For the transition period from _____________to______________

                          Commission File No. 0-23416

                                CYBERSENTRY, INC
                                ----------------
             (Exact name of registrant as specified in its charter)

           DELAWARE                                   22-3626108
           --------                                   ----------
(State or Other Jurisdiction of           (I.R.S. Employer Identification No.)
Incorporation or Organization)

412, EAST MADISON STREET, SUITE 1200 TAMPA, FLORIDA          33602
---------------------------------------------------          -----
(Address of principal executive offices)                    (Zip code)

Registrant's telephone number, including area code:   (813) 228-0688
                                                      --------------

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

TITLE OF EACH CLASS                 NAME OF EACH EXCHANGE ON WHICH REGISTERED
-------------------------------     -----------------------------------------
Not Applicable                                  None

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

                        COMMON STOCK, $.001 PAR VALUE
                               (Title of Class)

                                      1
<PAGE>

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

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of 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. [X]

      The issuer's net sales for the most recent fiscal year were $2,599,522.

      The aggregate market value of the voting stock held by non-affiliates
based upon the last sale price on March 29, 2000 was approximately $42,742,590.

      As of March 29, 2000 there were 20,021,165 shares of Common Stock, par
value $.001 per share, outstanding.

                                      2
<PAGE>

                                    PART I

ITEM 1.  BUSINESS

         CyberSentry, Inc. (the "Company") is a communications software company
providing its clients with numerous ways to access the world and distribute
their products and services, while offering them the means to maintain the
security of their transactions on the Internet. It concentrates on three core
lines of business: Secure Internet Software, Telecommunications, and Advanced
Product Technology and is presently organized into three divisions: Digital
Rights Management Secure Software, Telecommunications Internet Services, and
Advanced Product Technology. The Company intends to leverage its abilities and
expertise in each of these areas to further the development of the others.
Management believes that the combination of the Company's CyberSentry Software,
ATM products, e-commerce capabilities and telecommunications backbone (Internet
as well as conventional) offers an opportunity to succeed in the goal of
providing a secure method for individuals and corporations to safely distribute
information and sell products via the Internet or other electronic channels.


                           DESCRIPTION OF BUSINESS

SECURE SOFTWARE

         The Company holds an exclusive, worldwide, perpetual, fully-paid
license to publish, use, distribute and sub-license a software program that
provides digital rights management technology which the Company calls
CyberSentry Digital Rights Management Software (the "Software"). The Software
provides secure Internet commerce transactions for both the consumer and the
seller by controlling the file extensions, as well as access to consumer credit
information and content that can be downloaded via the Internet, such as games,
CDs, videos, copyrighted information and other transactions. The Software is
designed to provide the secure distribution of copyrighted text, audio, video,
graphics and software in Internet commerce. The Software also restricts for
payment and controls the unauthorized redistribution of material to secondary
recipients, such as passing along copies of protected material. The Company
believes that most content currently downloaded via the Internet can be
protected using the Software.

         The Company acquired its license to the CyberSentry Software from a
shareholder, Templar, a licensee of The Learning Company Properties, Inc.
(presently part of Mattel) for a purchase price of 3,000,000 shares of our
common stock. This exclusive license allows the Company to sell software
packages (licenses, services, maintenance and updates) to a diverse set of
clients via conventional distribution channels, partnerships, joint ventures and
directly over the Internet via its e-commerce web site. Two of the biggest
challenges faced by companies trying to take advantage of e-commerce are
managing the initial distribution of digitally delivered products and preventing
unauthorized "pass along" distribution of proprietary information and/or
services. CyberSentry Software is a digital rights management tool that seeks to
provide a comprehensive solution to these two critical e-commerce issues.

                                      3
<PAGE>

         A company engaged in commerce over the Internet may receive a single
subscription or license fee but subsequently be forced to observe the
unauthorized redistribution or loading of its product; this entails economic
hardship and could involve severe and highly problematical and costly legal
issues. Lost revenues represent but one part of the problem. Under certain
circumstances, illicit distribution of a company's product can cause the company
to lose legal protection for its rights to that product.

         A company that sells software and distributes proprietary information
(such as subscription- based manuals, letters and updates) via e-commerce or
similar channels and that has integrated CyberSentry Software into its product
offerings has greatly increased the security of its sales process, leading to a
far lesser chance that its legal protections will be compromised.

         Although the CyberSentry Software is fully developed for Internet
applications and has been licensed to one customer, VisionNet one of the
Company's shareholders and a wholly owned subsidiary of LibertyOne, an
Australian public company which is the one hundred per cent owner of Comtel, our
licensor for the ATM Technology, we have not yet received any revenues from
these products. We do not yet provide dial-up Internet access and therefore have
not yet received any revenues from this proposed service.

         We are a registered Alternate Local Exchange Carrier ("ALEC") in
Florida, with tariffs filed in 32 states as a long distance service provider. As
such, we intend to provide national Internet dial- up access to customers. We
expect to provide these services in conjunction with major Internet service
providers.

INTERNET SERVICES

         Although the Internet Services group is a separate group from the
Software division, there are synergies between the groups in the development and
distribution of products. Internet Services concentrates on the facilities
necessary to provide local dial-up Internet service and real time billing and
collection services. It is responsible for establishing and maintaining our
ability to provide local dial-up and to contract for a national Internet dial-up
provider to effect a private label national dial- up capability in the Company
name. In addition, we are researching and negotiating joint ventures to be able
to provide voice over Internet origination and termination. We are in the
process of evaluating specific hardware and methodologies of completing
international and domestic calls utilizing the Internet backbone, together with
termination agreements with carriers. While the Software development team is
responsible for the development and implementation of the CyberSentry Digital
Rights Management Software and the ability to bill for digital assets delivered
over the Internet, the same methodology applies to prepaid telephony services.
Internet telephony is in the development stage and has not yet generated any
revenues.

TELECOMMUNICATIONS

         As part of our long-term plan, on March 24, 1999 we acquired
Telecommunications Service Center, Inc. ("TSC") through a merger by funding
TSC's emergence from Chapter 11 bankruptcy

                                      4
<PAGE>

proceedings. TSC now operates as the third division of CyberSentry as a
facilities-based telecommunications carrier. Existing services of TSC include
pre-paid (debit) calling cards, promotional value-added calling plans and
service bureau offerings to various client groups. The assets acquired through
the acquisition of TSC provide us the ability to offer billing to customers in
real time direct as well as billing the customers local exchange carriers where
appropriate. This entity forms the backbone to serve our other divisions. We
plan to expand the Management Information Systems and Technical Services
departments of this group to support all of our technical needs.

         We own and operate a Siemens high-volume gateway switch and an IBM
AS400 billing platform in our TSC division. These systems enable us to provide
all hardware and software for call processing, billing, tracking and prepaid
debiting, as well as call transport, client programming, and national and
international connectivity for TSC's services.

         We no longer focus on being a third party provider to
telecommunications resellers. Instead, the infrastructure acquired by the merger
with TSC will be applied to products and services proprietary to us. As a
result, gross sales have decreased since the acquisition. We believe that this
short-term situation should correct itself over time, thus significantly
increasing the gross margins.

         Although we had hoped to be in a position to resurrect sales programs
in existence prior to TSC's bankruptcy, that has not proven feasible. However,
we attempt to attract previous clients and agents, working with existing agents
on new programs and launching our own set of value-added calling services.
Combined offerings, including Internet Service Providers ("ISP"), Voice-Over
Internet Protocol ("VOIP") and calling card services, are expected to be
marketed over the Internet and added to the product suite.

         Our telecommunications products and services are fully developed and
generate revenues.

ADVANCED PRODUCT TECHNOLOGY

         We have entered into an exclusive licensing arrangement with LibertyOne
Limited, an Australia corporation, for the distribution of our Asynchronous
Transfer Mode technology throughout North America. The purchase price for this
license was 2,000,000 shares of our Class B Preferred Stock. ATM offers
real-time multimedia services to both consumers and commercial enterprises. We
believe ATM will significantly enhance corporate and consumer communications,
including video conferencing, interactive audio, and audio/visual distribution
and retrieval. We believe that focusing on the development and delivery of our
ATM offerings will put us in a position to take advantage of the enormous
opportunity for Voice on Demand, voice, data and Internet services.

         We plan to market and sell two applications of our ATM technology. The
first is a fast packet digital switch designed for small to medium size
businesses. This device should allow a

                                      5
<PAGE>

business to transmit voice, video and data over a local area network using our
existing PABX infrastructure. The second is a set-top box designed for
applications in the home. The device allows for the delivery of voice, video and
data into the home via the existing telephone line, cable or via satellite. We
believe that this product will have applications for games, music,
television-based Internet browsing and video on demand.

         The ATM technology is still in the developmental stage and has not
generated any revenues for us to date. We have reviewed the patents, acquired
the rights to the ATM technology and have performed research thereon. We expect
to launch the technology through a joint venture with a manufacturer of products
incorporating PBX technology by the first quarter of 2001. We cannot assure you,
however, that we will have established such joint venture by then if ever.

         We plan to target specific carriers for partnership and are currently
negotiating agreements to secure ATM access on terms consistent with our
strategies and operational goals. We believe that our approach to marketing our
ATM product is innovative and unique to the industry. The strategy involves the
use by subscribers of either an existing copper line or a coaxial cable to use
an ATM device which can be purchased or leased from us. We believe that this
technology will permit a conventional telephone line to be used to
simultaneously carry voice, fax, Internet and audiovisual data over a single
conventional copper line where the local carrier has installed central office
ATM switches. We believe that by offering these multiple services using only one
line, we should be well positioned as a competitive telecommunications provider
of ATM services.

HISTORY OF BUSINESS

         We were incorporated in Delaware on August 21, 1998 as
Telecommunications Services, Inc., referred to herein as TSI, and subsequently
amended our certificate of incorporation to change our name to CyberSentry, Inc.
TSC was formed on July 15, 1991 and, on May 7, 1998, filed for bankruptcy
protection in Florida. As of March 24, 1999, as contemplated by TSC's Second
Amended Plan of Reorganization which was funded by CyberSentry, TSC merged into
CyberSentry and TSC was dissolved through the process we refer to as the Merger,
with CyberSentry being the sole surviving corporation. The Merger was treated
for accounting purposes as a purchase of TSC by CyberSentry.

                                      6
<PAGE>

ITEM 2.  PROPERTIES

         Real estate leases

         The corporate headquarters and principal executive offices of the
Company are located at 412 East Madison Street, Suite 1200, Tampa, Florida. The
Company's use of this office is pursuant to two lease agreements which expire on
June 30, 2000 and June 30, 2001, respectively (the "Leases").

         The Company believes that its leased property is in good condition, is
well maintained and is adequate for the Company's current and immediately
foreseeable operating needs.

         The Company anticipates that it will be leasing additional office space
and switch facilities, as necessary, including space in New York City.

                                      7
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

         On May 7, 1998, TSC, our predecessor, sought protection from its
creditors and filed for bankruptcy protection pursuant to Chapter 11 of the
Bankruptcy Code in the United States Bankruptcy Court for the Middle District of
Florida. On March 14, 1999, TSC emerged from the Bankruptcy pursuant to the plan
approved by the Bankruptcy Court, and, on March 24, 1999, was merged with and
into us in accordance with the plan and the Merger Agreement.

         On September 16, 1998, TSC entered into an Assurance of Discontinuance
with the Attorney General of the State of Minnesota, pursuant to which TSC
agreed, among other things, (i) to absorb unbilled long-distance fees and
service charges with respect to Minnesota customers whose accounts had been
improperly switched and to make restitution for any such fees or charges
previously collected, (ii) to pay a $10,000 civil penalty to the State of
Minnesota, (iii) not to engage in similar practices in the future and (iv) to
pay an additional civil penalty in the amount of $250,000 if it violates the
Assurance of Discontinuance. We believe that we are in compliance with the
Assurance of Discontinuance.

         In June 1999, also in connection with the Grace Trust transaction, we
entered into a Stipulation and Consent Judgment with the State of Idaho in order
to settle allegations that we engaged in improper telemarketing and other
activities with respect to the marketing of our telecommunications products to
Idaho residents. In the Stipulation, we agreed, among other things, to adhere to
various disclosure requirements in connection with telemarketing and sweepstakes
solicitations, to obtain proper authorizations and verifications from
subscribers, to make restitution to affected Idaho residents and to pay $7,500
to the State of Idaho for its costs of investigation.

         In addition to the foregoing, we are, and TSC as our predecessor was,
involved from time to time in various claims and lawsuits in the ordinary course
of business, none of which is expected, individually or in the aggregate, to
have a materially adverse effect on us.

                                      8
<PAGE>

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

The Company held no Annual or Special Meeting during the last quarter of Fiscal
1999.

                                      9
<PAGE>

                                   PART II

ITEM 5.  MARKET FOR THE COMPANY'S COMMON STOCK

         As of the date hereof, the Company has outstanding 20,021,165 shares of
its Common Stock $.001 par value ("Common Stock"). The Company's Common Stock is
traded on the OTC Bulletin Board under the symbol "CYBY." The following table
sets forth the high and low bid prices for the Common Stock as reported on the
OTC Bulletin Board. The high and low bid prices reflect inter-dealer prices,
without retail mark-up, mark-down or commission, and may not represent actual
transactions.

                                          Common Stock
                                       ------------------
Fiscal 2000                            High           Low
-----------                            ----           ---
1st Quarter (1)                        7.50           4.875

         On March 29, 2000, there were 29 holders of record of the Company's
outstanding shares of Common Stock.

         On March 29, 2000, the last bid price of the Common Stock as reported
on the OTC Bulletin Board was $ 6.00.

                               DIVIDEND POLICY

         The Company has never paid or declared dividends on its Common Stock.
The payment of cash dividends, if any, in the future is within the discretion of
the Board of Directors and will depend upon the Company's earnings, its capital
requirements, financial condition and other relevant factors. The Company
intends, for the foreseeable future, to retain future earnings for use in the
Company's business.

-----------------
    (1) The Company's Common Stock began trading on January 24, 2000.

                                      10
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

The selected financial data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the financial statements and the notes thereto of CyberSentry and
TSC included elsewhere in this Form 10-K. As of March 24, 1999, TSC was acquired
by CyberSentry, with CyberSentry being the surviving corporation. CyberSentry
was a development stage enterprise with minimal operations in 1998. TSC has been
operating since 1991 and is the primary operating entity. The selected
historical financial information of TSC as of and for the year ended December
31, 1995 is derived from unaudited financial statements of TSC not included or
incorporated by reference herein, and, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments necessary for a
fair representation of financial information. The selected financial data set
forth below for TSC as of and for the periods ended March 24, 1999, December 31,
1998, 1997 and 1996 and for CyberSentry as of and for the year ended December
31, 1999 and for the period from August 21, 1998 (inception) through December
31, 1998 are derived from the audited financial statements of TSC and
CyberSentry included elsewhere in this Form 10-K, which have been audited by BDO
Seidman L.L.P., independent accountants. TSC's financial statements following
its emergence from bankruptcy are not comparable to the historical financial
statements contained herein, which do not reflect the plan of reorganization.
TSC's and CyberSentry's historical financial statements may not be indicative of
future performance.
<TABLE>
<CAPTION>

                                     Telecommunications Service Center, Inc. (1)


                                  Period from
                                 January 1, 1999                          Years Ended December 31,
                                 through March 24,  ----------------------------------------------------------------
                                       1999             1998              1997             1996             1995
                                   ------------     -------------     ------------     ------------     ------------
                                                                                                         (Unaudited)
-----------------------------
<S>                                <C>              <C>               <C>              <C>              <C>
INCOME STATEMENT DATA:
Net sales                          $    811,316     $  22,804,240     $  8,341,164     $  2,606,254     $  2,493,409
Operating expenses                    1,130,659        26,042,048       11,024,545        3,663,781        3,266,917
                                   ------------     -------------     ------------     ------------     ------------

Operating (loss)                       (319,343)       (3,237,808)      (2,683,381)      (1,057,527)        (773,508)
Other (expense income                   (56,277          (175,257         (354,959)        (205,932)          46,671
                                   ------------     -------------     ------------     ------------     ------------
Net (loss)                         $   (375,620)    $  (3,413,065)    $ (3,038,340)    $ (1,263,459)    $   (726,837)
                                   ============     =============     ============     ============     ============
Net (loss) per share
   Basic                           $    (187.81)    $   (1,706.53)    $  (1,519.17)    $    (631.73)    $    (726.84)

Weighted average number of
   outstanding shares
     Basic                                2,000             2,000            2,000            2,000            1,000

BALANCE SHEET DATA:
Total assets                       $  1,420,962     $   1,519,559     $  2,493,896     $  1,881,856     $    896,044

Short-term debt including
   current portion of
   long-term debt                            --                --          866,127          561,032          289,586

Liabilities subject to
   Compromise under
   reorganization
   proceedings                        8,133,313         8,097,928               --               --               --

Long-term debt                               --                --        4,409,783        2,399,352          548,675

Capital deficit                      (8,806,232)       (8,430,612)      (5,017,547)      (1,979,207)        (716,748)

-----------------
(1) On May 7, 1998, the Telecommunications Service Center, Inc. filed for relief
under Chapter 11 of the United Stated Bankruptcy Code in the Middle District of
Florida, Tampa Division. On March 4, 1999, the Bankruptcy Court confirmed the
plan of reorganization and on March 14, 1999 the plan of reorganization became
effective (pending the acquisition of TSC by CyberSentry).
</TABLE>

                                       11
<PAGE>

                                CyberSentry, Inc.

                                                              Period from
                                             Year ended     August 21, 1998
                                            December 31,  (inception) through
                                                1999(c)    December 31, 1998
                                            ------------   -----------------
INCOME STATEMENT DATA:
Net sales                                   $  2,599,522      $         --
Operating expenses                             6,884,059           326,485
                                            ------------      ------------

Operating loss                                (4,284,537)         (326,485)
Other expense                                    (83,587)               --
                                            ------------      ------------
Net loss                                    $ (4,368,124)     $   (326,485)
                                            ============      ============
Net loss per share
   Basic                                         ($  .33)          ($  .03)
   Diluted                                       ($  .33)          ($  .03)

Weighted average number of outstanding
   shares
     Basic                                    13,438,603        10,500,000
     Diluted                                  13,438,603        10,500,000

BALANCE SHEET DATA:
Total assets                                $ 16,047,859      $  5,814,896

Short-term debt including current portion
   of long-term debt                           2,180,115            76,181

Long-term debt                                 1,000,284                --

Redeemable convertible preferred stock           801,984                --

Stockholders' equity                          10,845,411         5,726,215

(c) Includes the operations of TSC from March 25, 1999 through December 31,
    1999.

                                       12
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

FORWARD-LOOKING STATEMENTS

         When used in this Form 10-K and in future filings by the Company with
the Securities and Exchange commission, the words or phrases "will likely
result" and "the company expects," "will continue," "is anticipated,"
"estimated," "project," or "outlook" or similar expressions are intended to
identify "forward-looking statements." The Company wishes to caution readers not
to place undue reliance on any such forward-looking statements, each of which
speak only as of the date made. Such statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. The Company
has no obligation to publicly release the result of any revisions which may be
made to any forward-looking statements to reflect anticipated or unanticipated
events or circumstances occurring after the date of such statements.

                                      13
<PAGE>

OVERVIEW

CyberSentry, Inc., a Delaware corporation ("CyberSentry"), is a secure software,
e-commerce and telecommunications company. In addition, the Company acquired
Telecommunications Service Center, Inc. ("TSC") effective March 24, 1999. The
Company presently services and markets its long distance and other
telecommunications services to a wide variety of customers. The Company is
expanding its telecommunications services to include Internet Service Provider
("ISP") access and bundle packaging of services as well as (i) proceeding with
the development and deployment of the CyberSentry Secure Software suite of
products (ii) researching and developing its Asynchronous Transfer Mode
Technology ("ATM" or "ATM Technology") and (iii) refining its e-commerce systems
and capabilities.

Digital Rights Management - Secure Software

The CyberSentry Software protects digital content and other Internet commerce
transactions by controlling access to both consumer credit information and
content that can be downloaded via the Internet, such as games, CD's, videos,
copyrighted information and other transactions. It also restricts the
unauthorized redistribution of material to secondary recipients, such as passing
along copies of protected material. The Company believes that most content
currently downloaded via the Internet can be protected using CyberSentry
Software. CyberSentry has only recently begun to market the CyberSentry Software
and to date has no sales.

ATM Technology - Product Technology

CyberSentry has obtained the right to develop and sell in the United States and
Canada certain ATM Technology which has the potential to deliver real time
multimedia services to both consumer and business users at substantially
increased speeds and lower costs than other technologies. The Company currently
plans to sell two applications of the ATM Technology. The first is a fast packet
digital switch designed for small to medium size businesses. This device allows
a business to transmit voice, video and data over a local area network using the
business' existing PABX infrastructure. The second is a set-top box designed for
applications in the home. This device will allow for the delivery of voice,
video and data into the home via the existing telephone line, cable or via
satellite. The Company believes that this product will have applications for
games, music, television based Internet browsing and video on demand. To date
the Company has no sales of ATM Technology.

Telecommunications

During the last five years, TSC was a facilities-based carrier providing long
distance telecommunications services, including commercial and residential
service, long distance service, operator service for pay phones, prepaid phone
cards, calling cards and enhanced services, such as voice mail and fax services.
TSC owns and operates a Siemen's high-volume gateway switch and an IBM AS400
billing platform to accommodate anticipated growth. It is certified as an
"Alternative Local Exchange Carrier" ("ALEC") to provide local telephone
services in the State of Florida and is currently filing for ALEC certification
in thirty (32) additional states.

                                       14
<PAGE>

CyberSentry's telecommunications division currently operates and supports all
hardware and software for call processing, billing, tracking and prepaid
debiting, as well as call transport, client programming, national and
international connectivity, systems maintenance and capital expansion
requirements for both long distance (in all states) and local residential
service in Florida for the Company.

Internet/E-Commerce

Although this group is separate from the software and telecommunications
divisions, there are synergies between them in the development and distribution
of products and services. The Internet/E-Commerce group focuses on the
facilitation and advancement of core business transactions via the Internet. It
is responsible for cohesively establishing and maintaining our e-commerce
presence and overseeing the gateway for the CyberSentry Software product suite.
This group not only offers software sales and distribution processing, but also
ISP services, CyberSentry Billing Network (TM) and the Company's ATM process.
The Company also plans to launch Voice Over Internet services in the future.
This group is in the development stage and has not yet produced any revenues for
the Company.

The Management's Discussion and Analysis of Financial Condition and Results of
Operations set forth below represents CyberSentry's operations and liquidity for
the year ended December 31, 1999 and for the period from August 21, 1998
(inception) through December 31, 1998 and TSC's results of operations, the
predecessor, for the years ended December 31, 1998 and 1997.

RESULTS OF OPERATIONS

The following table sets forth selected financial data of TSC stated as a
percentage of net sales:

                                                      Years ended December 31,
                                                     -------------------------
                                                        1998            1997
                                                     ---------      ----------
Net sales                                              100.0%          100.0%

Telecommunications costs                                97.7            97.3

Selling, general and administrative expenses
(including depreciation and amortization
expense)                                                16.5            34.9

Operating loss                                         (14.2)          (32.2)

Other expense, net                                       (.8)           (4.2)

Net loss                                               (15.0)          (36.4)

                                       15
<PAGE>

The following relates to the operations of TSC.

FISCAL YEAR ENDED 1998 COMPARED TO 1997

Net sales increased by $14,463,076, or 173%, from $8,341,164 for the year ended
December 31, 1997, to $22,804,240 for the year ended December 31, 1998. Of this
increase, $13,510,034 was due to increased volume in the LEC billing programs
with PCI, Accutel and Valutel and a $2,274,605 increase in (1+) long distance
program. Increased costs associated with LEC billing programs and a more
stringent regulatory environment prompted the Company to either discontinue or
cut back certain programs. The Company discontinued the Accutel program during
1998. The increase in revenue from the (1+) long distance program during 1998
was due to increased volume resulting from the Grace Trust Transaction. See Item
7 - "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - Bankruptcy, Merger and
Related Transactions" for a further description of the Grace Trust Transaction.
Although the Company experienced increased volume and revenue from the Grace
Trust Transaction, there was also an increase in bad debts from the poor credit
condition of the customer base. Such increases were offset by a $865,281
decrease in the travel card and (T-1) long distance programs.

Telecommunication costs increased to support the increased revenue by
$14,170,417 or 175%, from $8,112,840 for the year ended December 31, 1997, to
$22,283,257 for the year ended December 31, 1998. As a percentage of net sales,
these amounts represented 97% for 1997 as compared to 98% for 1998. The amounts
as a percentage of net sales are consistent from 1997 to 1998.

TSC's selling, general and administrative expenses increased $786,574, or 31%,
from $2,532,845 for the year ended December 31, 1997 to $3,319,419 for the year
ended December 31, 1998. As a percentage of net sales, these expenses decreased
from 30% for 1997 to 15% for 1998. The overall dollar increase in selling,
general and administrative expenses was primarily attributable to bad debts in
1998. The increase in bad debts in 1998 was attributable to customer accounts
written off in connection with the Grace Trust Transaction and the Accutel
program that ended in 1998. See Item 7 - "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS - Bankruptcy, Merger and Related Transactions" for a further
description of the Grace Trust Transaction. To reduce bad debts during 1999 the
Company discontinued service for the customer accounts relating to the Grace
Trust Transaction, and has increased credit screening for new customers. The
decrease in these expenses as a percentage of net sales was attributable to the
increase in net sales and TSC's ability to increase revenues and maintain an
efficient cost structure in 1998.

Depreciation and amortization expense increased $60,512 or 16%, from $378,860
for the year ended December 31, 1997 to $439,372 for the year ended December 31,
1998. The overall dollar increase was attributable to equipment purchased in
mid-year 1997 that have depreciation for a portion of 1997 and a full year of
depreciation in 1998.

Other expense, net decreased by $179,702, or 51%, from $354,959 for the year
ended December 31, 1997 to $175,257 for the year ended December 31, 1998. Other
expense, net consists of gains from the sale of marketable securities in 1998
amounting to $227,251, offset by an increase of $47,549 in interest expense in
1998.

                                       16
<PAGE>

Principally as a result of the factors described above, the Company incurred a
net loss of $(3,413,065) for the year ended December 31, 1998 as compared to a
net loss of $(3,038,340) for the year ended December 31, 1997.

The following relates to the operations of CyberSentry, Inc., and its
predecessor TSC.

FOR THE YEAR ENDED DECEMBER 31, 1999

NET SALES

Net sales amounted to $2,599,522 for the year ended December 31, 1999. The
Company did not generate any revenues from its secured software and product
technology segments for the year. The net sales for the year resulted from the
Company's telecommunications segment. Since the Company purchased TSC on March
24, 1999, the net sales of $2,599,522 represents TSC's net sales from the period
March 25, 1999 to December 31, 1999, under purchase accounting. Net sales
decreased $20,204,718, or 89% from $22,804,240 for the year ended December 31,
1998 to $2,599,522 for the year ended December 31, 1999. The decrease was due to
decreased volume in the Local Exchange Carrier ("LEC") billing programs with
PCI, Accutel and Valutel, attributing to $17,244,713 of the decrease.
Additionally, $2,683,803 of the decrease was due to decreased volume in the
LD(1+), Call 1-800 and LD (T-1's) long distance service programs. The Company
plans to increase sales by growing its sales and support organizations while
also refining its billing and collection practices. The Company has decreased
its reliance on selling through the master agent and subagent relationships
previously utilized by TSC, in particular because Accutel, PCI and Valutel were
unable to document their on-going compliance with the revised more stringent
regulatory environment, such as independent third party verification. Thus, the
revenues derived from master agents and subagents such as Grace Trust, Valutel
and Accutel will not recur.

Programs such as direct marketed, post paid travel cards and residential local
and long distance sold or administered directly by the Company will continue. At
present, these programs account for all of the sales of the Company.

TELECOMMUNICATIONS COSTS

Telecommunications costs amounted to $2,108,418 for the year ended December 31,
1999. The costs exclusively relate to the Company's telecommunications segment.
Telecommunications costs decreased $20,174,839, or 91% from $22,283,257 for the
year ended December 31, 1998 to $2,108,418 for the year ended December 31, 1999.
Telecommunications costs decreased as a function of lower volume for the period
and the reduced master and subagent base including Accutel, PCI and Valutel. As
a percentage of net sales, these amounts represented 98% for the year ended
December 31, 1998 as compared to 81% for the year ended December 31, 1999. The
decrease as a percentage of net sales was primarily attributable to an increase
in the monthly fee charged each customer in the Valutel program.

SELLING, GENERAL AND ADMINISTRATION

Selling, general and administrative expenses decreased $624,295, or 19% from
$3,319,419 for the year ended December 31, 1998 to $2,695,124 for the year ended
December 31, 1999. The overall dollar decrease was primarily attributable to bad
debts in 1998. As a percentage of net sales, these amounts represented 15% for

                                       17
<PAGE>

1998 as compared to 104% for 1999. The increase as a percentage of net sales was
attributable to the decrease in net sales, and the Company's inability to
maintain an efficient cost structure in 1999.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization amounted to $2,080,517 for the year ended December
31, 1999. The amount of depreciation and amortization in 1999 was significantly
impacted by the intangibles acquired through the acquisition of TSC and the
Company's purchase of the CyberSentry and ATM Technology in the later part of
1998. For the year ended December 31, 1999, the amortization expense relating to
the acquired intangibles amounted to $868,101, and the amortization of the
CyberSentry and ATM Technology amounted to $857,142.

OTHER EXPENSES

Other expenses, net decreased $91,670, or 52% from $175,257 for the year ended
December 31, 1998 to $83,587 for the year ended December 31, 1999. The decrease
was attributable to a decrease in interest expense, net of $281,781 offset by a
decrease in other income of $190,111. Interest expense, net decreased due to
lower average debt balances outstanding during 1999. Other income in 1998
resulted from a gain on the sale of marketable securities; the Company did not
have securities transactions during 1999. Other income in 1999 was attributable
to commission income from pay phones.

NET LOSS

As a result of the factors described above, the Company incurred a net loss of
$(4,368,124) for the year ended December 31, 1999, as compared to a net loss of
$(3,413,065) for the year ended December 31, 1998.

FOR THE PERIOD FROM AUGUST 21, 1998 (INCEPTION) THROUGH DECEMBER 31, 1998

CyberSentry was incorporated in Delaware on August 21, 1998 and has only
recently begun marketing the CyberSentry Software. The ATM Technology is still
in the development stage. There were no sales of either product during 1998.

Operating expenses amounted to $326,485. This amount comprised $250,000 of
amortization of the CyberSentry Software and ATM Technology and $76,485 of
general and administrative expenses. General and administrative expenses
primarily relate to costs incurred in connection with software support and legal
and accounting fees.

As a result of the factors described above, CyberSentry incurred a net loss of
$(326,485) for the period from August 21, 1998 (inception) through December 31,
1998.

LIQUIDITY AND CAPITAL RESOURCES

Our management expects to finance our short-term working capital and capital
expenditure requirements through cash generated by our operations, our existing
line of credit and potentially a private placement of our equity and/or debt
securities. Patriot Advisors, Inc. has agreed to extend the $3 million dollar

                                       18
<PAGE>

line of credit until December 31, 2000 and has agreed to convert principal and
interest payments at the rate of $7.50 per share, if necessary, for the period
ending December 31, 2000 to make additional funds available under the line of
credit. Subsequent to year end, the Company negotiated with Patriot to accept
40,000 shares of common stock in satisfaction of $280,000 of accrued interest
and principal on the line of credit, thereby providing the Company with
additional funds. The amount outstanding on the line of credit may not exceed
50% of our assets and is collateralized by all of the Company assets. The
amounts outstanding at the end of the term are payable on demand. At December
31, 1999 we had approximately $1,080,000 available to borrow.

The Company believes that it has sufficient cash flow from operations and its
existing line of credit to meet the cash flow requirements for the next 12
months. The Company intends to increase that capital by a placement of its
securities, significant cost cutting and possible sale of some of the assets
that do not strategically enhance its business objectives.

The Company will also attempt to negotiate with its option holders to exercise
their stock options that could generate another $750,000 in cash. The Company
will attempt to negotiate with its preferred stockholders to convert to common
stock and save approximately $100,000 per year in funding the redemption pool.

There can be no assurance that the company will be able to finance its operation
from the existing sources of capital or receive additional capital from the sale
of its securities. In the event that our operations are not sufficient and
outside financing is not available on reasonable terms, we may be required to
cut cost significantly or sell assets of the business.

The Company's financial statements are presented on a going concern basis, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. The Company has been unable to increase revenues
in its telecommunications segment and was unable to maintain an efficient cost
structure during 1999. These factors raise substantial doubt about the Company's
ability to continue as a going concern. The Company is in the process of
integrating its secured software with the telecommunications business that would
allow the download of its software to be part of a billing transaction that
would increase revenues. This would present new sales and marketing
opportunities for the Company.

OPERATING

Net cash used in operating activities for the Company amounted to $1,606,374 for
the year ended December 31, 1999. This was primarily attributable to the net
loss of $4,368,124 and the decrease in accounts payable, offset by an adjustment
for depreciation and amortization of $2,080,517, common stock/stock options
granted for services of $353,771, bad debts of $190,347 and interest and
penalties on the capitalized lease of $169,338.

Net cash used in operating activities for TSC amounted to $1,657,417 in 1997 as
compared to $403,704 of net cash provided by operating activities in 1998. The
favorable variance of $2,061,121 was primarily attributable to the increase in
accounts payable of $1,660,732, an increase in bad debts of $1,312,511, offset
by a decrease in accrued expenses of $423,797 and an increase of $374,725 in the
net loss.

                                       19
<PAGE>

Net cash used in operating activities for CyberSentry amounted to $126,181 for
the period from August 21, 1998 (inception) to December 31, 1998. This was
primarily attributable to the net loss of $326,485 and the increase in other
receivables and other assets of $64,896, offset by an adjustment for
amortization of $250,000.

INVESTING

Net cash used in investing activities amounted to $73,739 for the year ended
December 31, 1999. This amount was comprised of $21,406 expended for the
purchases of equipment and $52,333 of capitalized software development costs.

Net cash used in investing activities for TSC decreased from $41,167 in 1997 to
$7,833 in 1998 as a result of TSC purchasing less equipment in 1998.

FINANCING

Net cash provided by financing activities for the Company amounted to $1,769,590
for the year ended December 31, 1999. This was attributable to financing
received from the sale of common stock of $500,000 and from a shareholder of
$1,843,897, offset by repayments of lease obligations of $80,689, net payments
on the line of credit of $282,000 and payments on the bank note payable of
$211,618.

Net cash provided by financing activities for TSC amounted to $1,714,383 in
1997, reflecting $1,838,364 of net proceeds from a note payable to a
stockholder, and $197,589 from the factoring line of credit, offset by $86,592
of payments on the bank line of credit and note payable and $234,618 of payments
on capital lease obligations. This compares to net cash used in financing
activities of $408,087 in 1998, primarily representing repayments on bank debt,
the factoring line of credit and capital leases, offset by a $196,042 increase
in note payable to a stockholder.

Net cash provided by financing activities for CyberSentry amounted to $126,181
for the period from August 21, 1998 (inception) to December 31, 1998. This was
attributable to an increase in due to stockholder of $76,181 and the proceeds
from the sale of common stock of $50,000.

See Note 7 of the CyberSentry "Notes to Financial Statements" for discussion of
the Company's lease obligations.

FUTURE ADOPTION OF NEW ACCOUNTING STATEMENTS

In June 1998, the Financial Accountant Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. The
statement applies to all entities and is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. The Company did not engage in
derivative instruments or hedging activities in any periods presented in the
financial statements and management does not expect this statement to have a
material impact on the Company's financial position, results of operations, or
cash flows.

                                       20
<PAGE>

YEAR 2000 COMPLIANCE

The potential for software failure due to Year 2000 calculations is a known
risk. The Company recognizes the need to ensure that its operations, products
and services are not adversely impacted by the Year 2000 risks. The Company has
been advised by its major vendors that they are Year 2000 compliant. The Company
expended approximately $35,000 in 1999 in Year 2000 related expenses and
continues to monitor the situation for any disruptions due to Year 2000 related
issues. The Company has not had its operations, products or services disrupted
with any Year 2000 issues and does not expect any material disruptions or
significant costs, related to Year 2000 issues, for the year 2000.

                                       21
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS

                                CYBERSENTRY, INC.
                          INDEX TO FINANCIAL STATEMENTS

                                                                       PAGE NO.

CYBERSENTRY, INC.:

   Report of Independent Certified Public Accountants                    23
   Balance Sheets at December 31, 1999 and 1998                          24
   Statements of Operations for the year ended December 31, 1999
     and for the period from August 21, 1998
     (inception) through December 31, 1998                               25
   Statements of Stockholders' Equity for the year ended
     December 31, 1999 and for the period from August 21, 1998
     (inception) through December 31, 1998                               26
   Statements of Cash Flows for the year ended December 31, 1999
     and for the period from August 21, 1998
     (inception) through December 31, 1998                               28
   Notes to Financial Statements                                         30

TELECOMMUNICATIONS SERVICE CENTER, INC.:

   Report of Independent Certified Public Accountants                    55
   Balance Sheets at March 24, 1999 (acquisition date) and
     December 31, 1998                                                   56
   Statements of Operations for the period from January 1, 1999
     through March 24, 1999 (acquisition date) and
     for the years ended December 31, 1998 and 1997                      57
   Statements of Capital Deficit for the period from January 1, 1999
     through March 24, 1999 (acquisition date) and for the
     years ended December 31, 1998 and 1997                              58
   Statements of Cash Flows for the period from January 1, 1999
       through March 24, 1999 (acquisition date)
       and for the years ended December 31, 1998 and 1997                59
   Notes to Financial Statements                                         61

                                       22
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
CyberSentry, Inc.
Tampa, Florida


We have audited the accompanying balance sheets of CyberSentry, Inc. as of
December 31, 1999 and 1998 and the related statements of operations,
stockholders' equity and cash flows for the year ended December 31, 1999 and for
the period from August 21, 1998 (inception) through December 31, 1998. These
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 audits 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
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 financial statements referred to above present fairly, in
all material respects, the financial position of CyberSentry, Inc. as of
December 31, 1999 and 1998 and the results of its operations and its cash flows
for the year ended December 31, 1999 and for the period from August 21, 1998
(inception) through December 31, 1998 in conformity with generally accepted
accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has incurred significant
losses from operations, negative cash flows and a working capital deficiency.
These factors raise substantial doubt about the Company's ability to continue as
a going concern. Management's plans in regards to these matters are described in
note 1. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.


Miami, Florida                                                  BDO Seidman, LLP
March 17, 2000

                                       23
<PAGE>

<TABLE>
<CAPTION>

                                                                                          CYBERSENTRY, INC.

                                                                                             BALANCE SHEETS
===========================================================================================================
                                                                                 December 31,   December 31,
                                                                                     1999           1998
-----------------------------------------------------------------------------------------------------------
<S>                                                                            <C>             <C>
ASSETS (NOTE 6)
CURRENT
   Cash                                                                        $     89,477    $         --
   Accounts receivable, less $68,463 allowance for doubtful accounts in 1999        173,846              --
   Prepaid expenses and other assets                                                 54,798          14,896
   Other receivables                                                                  1,721          50,000
-----------------------------------------------------------------------------------------------------------
Total current assets                                                                319,842          64,896
Excess of cost over fair value of net assets acquired, net of $868,102
   accumulated amortization in 1999 (Note 3)                                     10,039,484              --
ATM Technology License, net of $571,428 and $142,857 accumulated
   amortization in 1999 and 1998, respectively (Notes 1 and 2)                    2,428,572       2,857,143
CyberSentry Software License, net of $535,714 and $107,143 accumulated
   amortization in 1999 and 1998, respectively (Notes 1 and 2)                    2,464,286       2,892,857
Equipment and leasehold improvements, net (Note 4)                                  723,644              --
Capitalized software development costs                                               52,333              --
Other assets                                                                         19,698              --
-----------------------------------------------------------------------------------------------------------
                                                                               $ 16,047,859    $  5,814,896
===========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
   Accounts payable                                                            $    569,562    $         --
   Accrued expenses and other current liabilities                                   650,503          12,500
   Current maturities of capital lease obligations (Note 7)                         260,037              --
   Due to stockholder (Note 6)                                                    1,920,078          76,181
-----------------------------------------------------------------------------------------------------------
Total current liabilities                                                         3,400,180          88,681
Obligations under capital leases, less current maturities (Note 7)                1,000,284              --
-----------------------------------------------------------------------------------------------------------
Total liabilities                                                                 4,400,464          88,681
-----------------------------------------------------------------------------------------------------------
Redeemable convertible preferred stock, $.001 par value, 534,656 shares             801,984              --
issued and outstanding (Note 9)
-----------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Note 10)
-----------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (NOTE 9)
   Class A convertible redeemable participating preferred stock, $.001 par value,
      7,000,000 shares authorized, 3,916,522 shares in 1999 and 0 shares in 1998
      issued and outstanding; aggregate liquidation value of $5,874,783               3,916              --
   Class B convertible redeemable participating preferred stock,
      $.001 par value, 3,000,000 shares authorized, 3,000,000 shares in 1999
      and 2,000,000 in 1998 issued and outstanding; aggregate liquidation value
      of $4,500,000 and $3,000,000, respectively                                      3,000           2,000
   Common stock, $.001 par value, 30,000,000 shares authorized, 13,878,765
      shares in 1999 and 12,000,000 shares in 1998 issued and outstanding            13,879          12,000
   Additional paid-in capital                                                    15,519,225       6,038,700
   Deficit                                                                       (4,694,609)       (326,485)
-----------------------------------------------------------------------------------------------------------
Total stockholders' equity                                                       10,845,411       5,726,215
-----------------------------------------------------------------------------------------------------------
                                                                               $ 16,047,859    $  5,814,896
===========================================================================================================

                                                            See accompanying notes to financial statements.
</TABLE>

                                       24
<PAGE>

                                                               CYBERSENTRY, INC.

                                                        STATEMENTS OF OPERATIONS
================================================================================
                                                                   Period from
                                                                 August 21, 1998
                                                                   (inception)
                                                     Year Ended      through
                                                    December 31,   December 31,
                                                      1999(A)          1998
--------------------------------------------------------------------------------
NET SALES (Note 1)                                $  2,599,522    $         --
--------------------------------------------------------------------------------
OPERATING EXPENSES:
   Telecommunications costs (excluding
     depreciation and amortization)                  2,108,418              --
   Selling, general and administrative expenses      2,695,124          76,485
   Depreciation and amortization                     2,080,517         250,000
--------------------------------------------------------------------------------
Total operating expenses                             6,884,059         326,485
--------------------------------------------------------------------------------
OTHER (INCOME) EXPENSE:
   Interest expense, net                               120,727              --
   Other income                                        (37,140)             --
--------------------------------------------------------------------------------
Total other expenses, net                               83,587              --
--------------------------------------------------------------------------------
Net loss                                          $ (4,368,124)   $   (326,485)
================================================================================
Net loss per share
   Basic                                          $       (.33)   $       (.03)
   Diluted                                        $       (.33)   $       (.03)

Weighted average number of outstanding shares
   Basic                                            13,438,603      10,500,000
   Diluted                                          13,438,603      10,500,000


(a) Includes the operations of TSC from March 25, 1999 through December 31, 1999


                                 See accompanying notes to financial statements.

                                       25
<PAGE>

<TABLE>
<CAPTION>

                                                                                                          CYBERSENTRY, INC.

                                                                                         STATEMENTS OF STOCKHOLDERS' EQUITY
===========================================================================================================================

                                                Class A Preferred          Class B Preferred               Common
                                               -------------------        -------------------        -------------------
                                               Shares       Amount        Shares       Amount        Shares       Amount
---------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>           <C>           <C>           <C>           <C>         <C>
Issuance of common stock for
   cash in September 1998 at
   $.006/share                                     --     $      --            --     $      --     8,550,000   $     8,550

Issuance of common stock for
   services in September 1998 at
   $.006/share                                     --            --            --            --       450,000           450

Issuance of Class B preferred
   stock for ATM Technology
   acquisition in September 1998
   at $1.50/share                                  --            --     2,000,000         2,000            --            --

Issuance of common stock for
   CyberSentry Software
   acquisition in November 1998
   at $1.00/share                                  --            --            --            --     3,000,000         3,000

Net loss                                           --            --            --            --            --            --
---------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998                       --            --     2,000,000         2,000    12,000,000        12,000

Issuance of common stock for cash in
   January 1999 at $1.00/share                     --            --            --            --       500,000           500

Issuance of common stock for purchase
   of TSC in March 1999 at                         --            --            --            --     1,000,000         1,000

Issuance of Class B preferred stock for
   purchase of TSC in March
   1999 at $1.50/share                             --            --     1,000,000         1,000            --            --

Issuance of Class A preferred stock to
   unsecured creditors of TSC in March
   1999 at $1.50/share                      3,361,232         3,361            --            --            --            --



                                                   Additional
                                                    Paid-in
                                                    Capital        Deficit        Total
----------------------------------------------------------------------------------------
<S>                                               <C>           <C>          <C>
Issuance of common stock for
   cash in September 1998 at
   $.006/share                                    $    41,450   $      --    $    50,000

Issuance of common stock for
   services in September 1998 at
   $.006/share                                          2,250          --          2,700

Issuance of Class B preferred
   stock for ATM Technology
   acquisition in September 1998
   at $1.50/share                                   2,998,000          --      3,000,000

Issuance of common stock for
   CyberSentry Software
   acquisition in November 1998
   at $1.00/share                                   2,997,000          --      3,000,000

Net loss                                                   --    (326,485)      (326,485)
----------------------------------------------------------------------------------------
Balance at December 31, 1998                        6,038,700    (326,485)     5,726,215

Issuance of common stock for cash in
   January 1999 at $1.00/share                        499,500          --        500,000

Issuance of common stock for purchase
   of TSC in March 1999 at                            999,000          --      1,000,000

Issuance of Class B preferred stock for
   purchase of TSC in March
   1999 at $1.50/share                              1,499,000          --      1,500,000

Issuance of Class A preferred stock to
   unsecured creditors of TSC in March
   1999 at $1.50/share                              5,038,488          --      5,041,849
</TABLE>


                                       26
<PAGE>

<TABLE>
<CAPTION>

                                                Class A Preferred            Class B Preferred                  Common
                                              --------------------         --------------------           -------------------
                                              Shares        Amount         Shares        Amount           Shares       Amount
--------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>       <C>               <C>         <C>               <C>          <C>
Issuance of Class A preferred stock to
   Sprint and Westinghouse in
   March 1999 at $1.50/share                  555,290            555             --             --             --             --

Issuance of common stock to
   unsecured creditor in March 1999
   at $1.00/share                                  --             --             --             --        258,765            259

Issuance of stock options for
   50,000 shares of common
   stock in April 1999                             --             --             --             --             --             --

Issuance of stock options for 42,000
   shares of common stock in July,
   August, September, October,
   November and December 1999                      --             --             --             --             --             --

Issuance of common stock to financial
   consultants in December 1999                    --             --             --             --        120,000            120

Net loss                                           --             --             --             --             --             --
--------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999                3,916,522   $      3,916      3,000,000   $      3,000     13,878,765   $     13,879



                                                Additional
                                                 Paid-in
                                                 Capital        Deficit         Total
---------------------------------------------------------------------------------------
<S>                                              <C>         <C>                <C>
Issuance of Class A preferred stock to
   Sprint and Westinghouse in
   March 1999 at $1.50/share                     832,380             --         832,935

Issuance of common stock to
   unsecured creditor in March 1999
   at $1.00/share                                258,506             --         258,765

Issuance of stock options for
   50,000 shares of common
   stock in April 1999                            15,023             --          15,023

Issuance of stock options for 42,000
   shares of common stock in July,
   August, September, October,
   November and December 1999                     38,748             --          38,748

Issuance of common stock to financial
   consultants in December 1999                  299,880             --         300,000

Net loss                                              --     (4,368,124)     (4,368,124)
----------------------------------------------------------------------------------------
Balance at December 31, 1999                $ 15,519,225   $ (4,694,609)   $ 10,845,411
========================================================================================
</TABLE>

                                 See accompanying notes to financial statements.

                                       27
<PAGE>

<TABLE>
<CAPTION>

                                                                                       CYBERSENTRY, INC.

                                                                                STATEMENTS OF CASH FLOWS
========================================================================================================
                                                                                           Period from
                                                                                         August 21, 1998
                                                                           Year Ended    (Inception) to
                                                                          December 31,    December 31,
                                                                             1999             1998
--------------------------------------------------------------------------------------------------------
<S>                                                                      <C>              <C>
OPERATING ACTIVITIES:
   Net loss                                                              $(4,368,124)     $  (326,485)
   Adjustments to reconcile net loss to net cash (used in) provided by
     operating activities:
     Depreciation and amortization                                         2,080,517          250,000
     Common stock/stock options issued for services                          353,771            2,700
     Capital lease interest and penalties included in lease obligation       169,338               --
     Bad debts                                                               190,347               --
     Changes in operating assets and liabilities, net of
       effects of acquisition and noncash transactions:
         Accounts receivable                                                  (8,943)              --
         Prepaid expenses and other assets                                     4,802               --
         Other receivables                                                    55,836          (50,000)
         Other assets                                                         12,251          (14,896)
         Accounts payable                                                   (133,614)          12,500
         Accrued expenses and other current liabilities                       37,445               --
--------------------------------------------------------------------------------------------------------
Total adjustments                                                          2,761,750          200,304
--------------------------------------------------------------------------------------------------------
Net cash used in operating activities                                     (1,606,374)        (126,181)
--------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
   Purchases of equipment                                                    (21,406)              --
   Capitalized software development costs                                    (52,333)              --
--------------------------------------------------------------------------------------------------------
Net cash used in investing activities                                        (73,739)              --
--------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
   Proceeds from issuance of common stock                                    500,000           50,000
   Increase in due to stockholder                                          1,843,897           76,181
   Repayment of line of credit, net                                         (282,000)              --
   Repayments of obligations under capital leases                            (80,689)              --
   Payments on bank note payable                                            (211,618)              --
--------------------------------------------------------------------------------------------------------
Net cash provided by financing activities                                  1,769,590          126,181
--------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents                                     89,477               --
Cash and cash equivalents at beginning of period                                  --               --
--------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                               $    89,477               --
=========================================================================================================
</TABLE>


                                       28
<PAGE>

<TABLE>
<CAPTION>

                                                                                                       Period from
                                                                                                    August 21, 1998
                                                                                Year Ended           (Inception) to
                                                                               December 31,            December 31,
                                                                                   1999                    1998
-------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                       <C>
SUPPLEMENTAL DISCLOSURES:
   Class B preferred stock issued in exchange for ATM Technology License    $            --           $   3,000,000
   Common stock issued in exchange for CyberSentry Software                 $            --           $   3,000,000
   Fair value of assets acquired in acquisition of TSC                      $     1,420,962           $          --
   Liabilities assumed in acquisition of TSC                                $     9,828,548           $          --
   Common stock and Class B preferred stock issued in purchase of TSC       $     2,500,000           $          --
   Class A preferred stock and common stock issued in connection with
     TSC's plan of reorganization                                           $     6,133,549           $          --
</TABLE>

                                 See accompanying notes to financial statements.

                                       29
<PAGE>

                                                               CYBERSENTRY, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

1.    SUMMARY OF        ORGANIZATION AND BUSINESS
      SIGNIFICANT
      ACCOUNTING        CyberSentry, Inc. ("CyberSentry" or the "Company") was
      POLICIES          incorporated in Delaware on August 21, 1998 as
                        Telecommunication Services, Inc. ("TSI"). On November
                        30, 1998, TSI amended its certificate of incorporation
                        to change its name to CyberSentry, Inc. CyberSentry's
                        principal business includes telecommunications services,
                        the marketing and sale of CyberSentry Software and two
                        applications of Asynchronous Transfer Mode ("ATM")
                        Technology.

                        The CyberSentry Software protects Internet commerce
                        transactions by controlling access to both consumer
                        credit information and content that can be downloaded
                        via the Internet, i.e., games, CD's, videos, copyrighted
                        information and other transactions. It also restricts
                        the unauthorized redistribution of material to secondary
                        recipients, such as passing along copies of protected
                        material.

                        The two ATM applications are a fast packet digital
                        switch and a set-top box. The fast packet digital switch
                        is designed for small to medium size businesses. The
                        device will allow a business to transmit voice, video
                        and data over a local area network using the business'
                        existing PABX infrastructure. The set-top box is
                        designed for applications in the home. This device will
                        allow for the delivery of voice, video and data into the
                        home via the existing telephone line or satellite.

                        Effective March 24, 1999, CyberSentry purchased all of
                        the outstanding common stock of Telecommunications
                        Service Center, Inc. ("TSC"), a Florida Corporation,
                        (see Note 3). TSC was operating as a
                        debtor-in-possession under Chapter 11 of the United
                        States Bankruptcy Code in the Middle District of
                        Florida, Tampa Division. The Bankruptcy Court confirmed
                        TSC's plan of reorganization ("the Plan") on March 4,
                        1999 and the Plan became effective March 24, 1999, the
                        date CyberSentry acquired TSC.

                        TSC is a facilities based carrier providing long
                        distance telecommunications services including
                        commercial and residential

                                       30
<PAGE>

                                                               CYBERSENTRY, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                        service, international call back long distance service,
                        operator service for pay phones, prepaid phone cards,
                        and enhanced services, such as voice and fax-mail
                        services. TSC is in a specialized telecommunications
                        service industry.

                        USE OF ESTIMATES

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

                        CASH AND CASH EQUIVALENTS

                        The Company considers all highly liquid investments with
                        an initial maturity of three months or less when
                        purchased to be cash equivalents.

                        EQUIPMENT AND LEASEHOLD IMPROVEMENTS

                        Depreciation and amortization are provided on the
                        straight-line method over the estimated useful lives of
                        the assets. Leasehold improvements are amortized over
                        the term of the respective leases or the service lives
                        of the improvements, whichever is shorter. Upon sale or
                        retirement, the asset cost and related accumulated
                        depreciation and amortization are removed from the
                        accounts and any related gain or loss is reflected in
                        earnings.

                        GOODWILL

                        The excess of the cost over the fair value of net assets
                        acquired is recorded as goodwill and is amortized on a
                        straight-line basis over 10 years.

                                       31
<PAGE>

                                                               CYBERSENTRY, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                        ATM TECHNOLOGY AND CYBERSENTRY SOFTWARE LICENSES

                        The ATM Technology and CyberSentry Software licenses are
                        carried at cost less accumulated amortization.
                        Amortization is computed using the straight-line method
                        over estimated useful lives of seven years.

                        NEW ACCOUNTING PRONOUNCEMENTS

                        In June 1998, the Financial Accounting Standards Board
                        issued Statement of Financial Accounting Standards
                        (SFAS) No. 133, "Accounting for Derivative Instruments
                        and Hedging Activities," which establishes accounting
                        and reporting standards for derivative instruments and
                        for hedging activities. It requires that an entity
                        recognizes all derivatives as either assets or
                        liabilities in the statement of financial position and
                        measures those instruments at fair value. The statement
                        applies to all entities and is effective for all fiscal
                        quarters of fiscal years beginning after June 15, 2000.
                        The Company did not engage in derivative instruments or
                        hedging activities in any periods presented in the
                        financial statements and management does not expect this
                        statement to have a material impact on the Company's
                        financial position, results of operations, or cash
                        flows.

                        REVENUE RECOGNITION

                        There were no revenues for the Company's secured
                        software and product technology business segments during
                        1998 and 1999. The Company will enter into license
                        agreements, typically with major end user customers,
                        which allow for the use of the Company's software and
                        technology products, usually restricted by the number of
                        employees, the number of users, or the license term.
                        Fees from licenses will be recognized as revenue upon
                        contract execution, provided all shipment obligations
                        have been met, fees are fixed or determinable, and
                        collection is probable.

                        All of the Company's telecommunications services are
                        recognized as service is provided. Allowances are
                        provided for estimated uncollectible usage.

                                       32
<PAGE>

                                                               CYBERSENTRY, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                        INCOME TAXES

                        Income taxes are accounted for using the liability
                        approach under the provisions of Statement of Financial
                        Accounting Standards No. 109, "Accounting for Income
                        Taxes." Under this method, deferred taxes are recognized
                        for the tax consequences of temporary differences by
                        applying enacted statutory tax rates applicable for
                        future years to the differences between the financial
                        statement and tax basis of existing assets and
                        liabilities.

                        EARNINGS PER SHARE

                        Basic earnings per share are computed on the basis of
                        the weighted average number of common shares outstanding
                        during each year. Diluted earnings per share are
                        computed on the basis of the weighted average number of
                        common shares and dilutive securities outstanding.
                        Dilutive securities having an anti-dilutive effect on
                        diluted earnings per share are excluded from the
                        calculation.

                        Options to purchase 692,000 shares of common stock
                        (including options granted to non-employees) from $1.00
                        to $2.50 were not included in diluted EPS, as their
                        effect would be anti-dilutive.

                        CAPITALIZED SOFTWARE DEVELOPMENT COSTS

                        Product development costs, including product
                        enhancements, are capitalized after technological
                        feasibility has been established. These costs are
                        reported at the lower of unamortized cost or net
                        realizable value and are being amortized on a
                        straight-line basis over two to five years, the
                        estimated economic life of the products. The Company
                        capitalized approximately $52,000 in 1999 of product
                        development costs relating to its CyberSentry Software
                        product.

                        ASSET IMPAIRMENT

                        The Company periodically reviews the carrying value of
                        its long-lived assets in relation to historical results,
                        current business conditions

                                       33
<PAGE>

                                                               CYBERSENTRY, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                        and trends to identify potential situations in which the
                        carrying value of assets may not be recoverable. If such
                        reviews indicate that the carrying value of such assets
                        may not be recoverable, the Company would estimate the
                        undiscounted sum of the expected future cash flows of
                        such assets to ascertain if a permanent impairment
                        exists. If a permanent impairment exists, the Company
                        would determine the fair value using quoted market
                        prices, if available, for such assets, or if quoted
                        market prices are not available, the Company would
                        discount the expected future cash flows of such assets.
                        The Company reviews the carrying value of its goodwill
                        for impairment using the market value method under
                        Accounting Principles Board No. 17. Under this method
                        the Company compares its historical net book value to
                        the value indicated by the market price of its equity
                        securities (quoted market price for its free trading
                        common stock and fair value for its preferred stock and
                        restricted common stock). If the net book value exceeds
                        market capitalization, the difference would be the
                        impairment loss to recognize on the goodwill. There was
                        no impairment loss recognized by the Company in 1999 and
                        1998.

                        FINANCIAL INSTRUMENTS

                        The fair value of financial instruments is determined by
                        reference to various market data and other valuation
                        techniques, as appropriate, and unless otherwise
                        disclosed, the fair values of financial instruments
                        approximate their recorded values.

                        STOCK BASED COMPENSATION

                        The Company recognizes compensation expense for its
                        stock option incentive plans using the intrinsic value
                        method of accounting. Under the terms of the intrinsic
                        value method, compensation cost is excess, if any of the
                        quoted market price of the stock at the grant date, or
                        other measurement date, over the amount an employee must
                        pay to acquire the stock.

                                       34
<PAGE>

                                                               CYBERSENTRY, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                        GOING CONCERN

                        The Company's financial statements are presented on the
                        going concern basis which contemplates the realization
                        of assets and the satisfaction of liabilities in the
                        normal course of business. During 1998 and up to March
                        24, 1999, CyberSentry was a development stage enterprise
                        and had no revenues. Upon the acquisition of TSC,
                        CyberSentry ceased being a development stage enterprise
                        but to date, has realized no revenues, other than those
                        attributable to TSC. The Company has been unable to
                        increase revenues in its telecommunications segment and
                        was unable to maintain an efficient cost structure
                        during 1999. The Company is in the process of
                        integrating its software with the telecommunications
                        business that would allow the download of its software
                        to be part of a billing transaction that would increase
                        revenues. This would present new sales and marketing
                        opportunities for the Company.

                        The Company has negotiated an agreement with Patriot
                        subsequent to December 31, 1998 to accept 40,000 shares
                        of common stock in satisfaction of $280,000 of accrued
                        interest and principal on the line of credit, thereby
                        providing the Company with additional funds.
                        Additionally, Patriot extended the due date on the line
                        of credit to December 31, 2000 and has the option to
                        accept shares of common stock of the Company in lieu of
                        principal and interest payments through December 31,
                        2000 at a value of $7.50 a share. The Company will also
                        attempt to negotiate with its option holders to exercise
                        their stock options that may potentially generate
                        $750,000 in cash. The Company is also currently
                        negotiating with Class A and B preferred stockholders to
                        convert their shares to common stock on a one for one
                        basis. This would save the Company approximately
                        $100,000 in cash flow by not having to fund the Optional
                        Redemption Pool.

                        The Company's continued existence is dependent upon its
                        ability to resolve its liquidity problems principally by
                        implementing cost reduction strategies, obtaining
                        positive results from increased marketing efforts and
                        accomplishing the aforementioned negotiations with
                        shareholders.

                                       35
<PAGE>

                                                               CYBERSENTRY, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                        The financial statements do not include any adjustments
                        to reflect the possible future effect on the
                        recoverability and classification of assets or the
                        amounts and classification of liabilities that may
                        result from the possible inability of the Company to
                        continue as a going concern. There is no assurance that
                        the Company will be able to achieve its recovery plan as
                        described above.

2.    ACQUIRED          CYBERSENTRY SOFTWARE LICENSE
      TECHNOLOGY
                        On October 2, 1998, Templar Corporation, a Delaware
                        corporation ("Templar"), entered into a license
                        agreement (the "License Agreement") with Learning
                        Company Properties, Inc., a Delaware corporation
                        ("Learning"), pursuant to which Templar obtained an
                        exclusive, worldwide, perpetual, fully-paid right and
                        license to publish, use, distribute and sublicense a
                        software program that provides digital rights management
                        technology (the "CyberSentry Software").

                        In addition, pursuant to the License Agreement, Learning
                        assigned its rights to certain trademarks, and Learning
                        agreed to provide engineering support to Templar through
                        December 31, 1999. Templar agreed to pay Learning
                        $187,500 in consideration for such engineering support.
                        The Company agreed to reimburse Templar for payments
                        made to Learning. The Company paid Templar $187,500
                        during 1999 and recognized software support expense for
                        such amount in the accompanying statement of operations.
                        The Company did not extend the engineering support
                        agreement in 2000.

                        Templar transferred to Learning 2,500,000 fully paid and
                        ordinary shares (the "LibertyOne Shares") in the capital
                        of LibertyOne Ltd., ("LibertyOne") as consideration for
                        the license of the CyberSentry Software. In connection
                        with the LibertyOne Shares, Learning has been issued a
                        right to put the LibertyOne Shares to Templar for an
                        aggregate purchase price of $3,000,000, pursuant to the
                        Put and Top Up Agreement ("Put Agreement"), dated
                        October 22, 1998, by and between Learning and Templar.
                        This put expires on December 31, 2001, unless it
                        terminates

                                       36
<PAGE>

                                                               CYBERSENTRY, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                        earlier due to the occurrence of certain Trigger Events,
                        as defined in the Put Agreement. Templar and Learning
                        valued the transaction at $3,000,000 which was based on
                        the then anticipated initial public offering price of
                        the LibertyOne Shares of $1.20 per share. The initial
                        public offering of the LibertyOne Shares closed on
                        December 10, 1998 at a price of $2.00 per share. Templar
                        informed the Company that Learning has received more
                        than $3,000,000 from the sale of the LibertyOne shares
                        and that the Put Agreement has therefore been cancelled.

                        Templar assigned the License Agreement to the Company
                        pursuant to the terms of the Assignment of the Software
                        License Agreement, effective as of November 20, 1998
                        (the "Assignment"). Pursuant to the terms of the
                        Assignment and in consideration thereof, the Company
                        transferred 3,000,000 shares of its Common Stock to
                        Templar which thereby became a significant shareholder
                        in the Company. The Put and Top Up Agreement between
                        Templar and Learning does not transfer to CyberSentry
                        upon Templar's assignment of the License Agreement to
                        CyberSentry. Templar is 100% owned by Mr. Frank Kristan
                        who may therefore be deemed to be the beneficial owner
                        of the shares of Common Stock held by Templar. The
                        shares of common stock issued to Templar have been
                        valued at Templar's carrryover basis in the CyberSentry
                        Software.

                        The Company entered into a Software License Agreement
                        (the "DRI License Agreement"), effective as of January
                        1, 1999, with VisionNet's predecessor Digital Rights
                        International, Inc., a Delaware Corporation ("DRI"), a
                        subsidiary of Liberty One. Pursuant to the agreement,
                        the Company has granted VisionNet a non-transferable,
                        non-exclusive, worldwide right and license to publish
                        and use the CyberSentry Software solely for the
                        protection of celebrity digital rights and content
                        related thereto on websites owned or operated by
                        VisionNet. In conjunction with entering into the DRI
                        License Agreement, VisionNet purchased 500,000 shares of
                        the Company's Common Stock at $1.00 per share for an
                        aggregate purchase price of $500,000. The Company is
                        under no obligation to provide upgrades to the software
                        licensed to VisionNet

                                       37
<PAGE>

                                                               CYBERSENTRY, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                        unless VisionNet elects to pay the Company $150,000 for
                        continuing software engineering support.

                        ATM TECHNOLOGY LICENSE

                        Comtel Telecommunications Pty Ltd. ("Comtel"), a wholly
                        owned subsidiary of LibertyOne, entered into a Patent
                        and Know How License and Commercialization Agreement
                        dated as of February 4, 1998 (the "ATM Agreement") with
                        Telstra Corporation Limited ("Telstra"), pursuant to
                        which LibertyOne was granted a non-exclusive license to
                        certain applications in relation to Telstra's Fast
                        Packet Digital Switch Project ("FPDX"). FPDX represents
                        technology developed by Telstra over 11 years. FPDX
                        utilizes Asynchronous Transfer Mode technology ("ATM or
                        "ATM Technology") which has the potential to deliver
                        "virtual" Internet services to users at substantially
                        increased speeds and lower costs than other
                        technologies. The ATM Agreement grants LibertyOne the
                        license to sell this technology as desk-top and set-top
                        applications.

                        Comtel entered into a Patent and Know How Sub-Contract
                        and Commercialization Agreement (the "Sub-Contract")
                        with the Company, effective as of September 8, 1998,
                        pursuant to which CyberSentry has been granted the right
                        to develop and sell the ATM Technology in the United
                        States and Canada. As consideration for Comtel entering
                        into the Sub-Contract with CyberSentry, CyberSentry
                        issued 2,000,000 shares of Class B Preferred Stock to
                        Comtel's designee, DRI. The shares of Class B Preferred
                        Stock issued to DRI have been valued at $3,000,000 which
                        is the value of the shares issued to TSC creditors
                        pursuant to the plan of reorganization.

                        In addition, pursuant to the Sub-Contract, CyberSentry
                        agreed to pay Comtel a royalty fee of 110% of the
                        royalty rates required pursuant to the ATM Agreement.
                        There were no fees paid or expenses incurred in 1999 and
                        1998 as there were no sales.

                                       38
<PAGE>

                                                               CYBERSENTRY, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

3.    ACQUISITION       Effective March 24, 1999, CyberSentry purchased all of
                        the outstanding common stock of TSC pursuant to the
                        bankruptcy court's confirmation of TSC's plan of
                        reorganization that was confirmed on March 4, 1999 and
                        effective on March 14, 1999 (pending the acquisition by
                        CyberSentry). CyberSentry is the surviving corporation
                        in the purchase and the separate existence of TSC
                        ceased. CyberSentry purchased all of the outstanding
                        shares of TSC for common and preferred stock valued at
                        $2,500,000. The value of the common and preferred has
                        been established based on the Company's purchase of the
                        CyberSentry Technology, and the value ascribed to the
                        Class B shares pursuant to the Plan of Reorganization,
                        (see Note 2). The transaction was accounted for as a
                        purchase and the excess of the purchase price
                        ($2,500,000) over the fair market value of the assets
                        acquired ($1,420,962) and liabilities assumed
                        ($9,828,548), of $10,907,586 was recorded as excess of
                        cost over fair value of net assets acquired and is being
                        amortized on a straight line basis over 10 years.

                        As defined in TSC's plan of reorganization, CyberSentry
                        Class A Preferred Shares were issued to the Class Five
                        Creditors and certain Class One Creditors in accordance
                        with the terms of the Plan. Additional common stock of
                        CyberSentry was issued to certain Class Five Creditors
                        in accordance with the Plan. Each share of CyberSentry
                        common stock that was issued and outstanding immediately
                        prior to the effective purchase date continued to be
                        issued and outstanding. All issued and outstanding TSC
                        common stock was converted into 1,000,000 common shares
                        and 1,000,000 Class B Convertible Redeemable Preferred
                        Stock of CyberSentry. The shares were issued to existing
                        TSC shareholders on a pro rata basis in accordance with
                        the Plan.

                        For financial reporting purposes TSC is the predecessor
                        company to CyberSentry. CyberSentry was a development
                        stage enterprise in 1998 with minimal operations. Upon
                        the acquisition of TSC, CyberSentry ceased to be a
                        development stage enterprise.

                        As discussed, the acquisition was accounted for under
                        the purchase method of accounting and the statement of
                        operations for the year ended December 31, 1999 includes

                                       39
<PAGE>

                                                               CYBERSENTRY, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                        the operations of TSC from March 25, 1999 to December
                        31, 1999.

                        The following summarized unaudited pro forma results of
                        operations have been prepared as if the acquisition of
                        TSC had occurred January 1, 1998, although the Company
                        began August 21, 1998:
<TABLE>
<CAPTION>

                                                                         Year Ended         Year Ended
                                                                       December 31,       December 31,
                                                                               1999               1998
                        --------------------------------------------------------------------------------

                        <S>                                         <C>               <C>
                        Revenues                                    $     3,410,838   $     22,804,240

                        Net loss                                    $    (4,998,630)  $     (4,860,453)

                        Pro forma loss per share - basic and
                        diluted                                     $          (.36)  $           (.41)

                        Weighted average number of common shares
                           outstanding - basic and diluted               13,721,395         11,758,765
</TABLE>


4.    EQUIPMENT AND     Equipment and leasehold improvements are as follows:
      LEASEHOLD
      IMPROVEMENTS
<TABLE>
<CAPTION>
                                                                                 Estimated
                                                               December 31,     Useful Lives
                                                                   1999         (in years)
                        ---------------------------------------------------------------------
                        <S>                                  <C>                     <C>
                        Switch equipment                     $   1,552,075           5
                        Switch software                            341,273           5
                        Computer equipment                         288,190           5
                        Furniture and equipment                     56,480         5-10
                        Leasehold improvements                      14,215           5
                        ---------------------------------------------------------------------
                                                                 2,252,233
                        Less accumulated depreciation and
                        amortization                            (1,528,589)
                        ---------------------------------------------------------------------
                        Total                                $     723,644
                        =====================================================================
</TABLE>

5.    INCOME TAXES      Deferred income taxes reflect the net tax effects of
                        temporary differences between the carrying amounts of
                        assets and liabilities for financial reporting purposes
                        and the amounts used for income tax purposes.
                        Significant components of the Company's deferred income
                        tax assets and deferred income tax liabilities are as
                        follows:

                                       40
<PAGE>

                                                               CYBERSENTRY, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>

                                                                     December 31,   December 31,
                                                                         1999           1998
                        ------------------------------------------------------------------------
                        <S>                                        <C>              <C>
                        Deferred tax assets:
                            Net operating loss carryforward        $    2,809,000   $    66,000
                            Amortization of acquired technologies         201,000        45,000
                            Accrual to cash conversion                  1,103,000            --
                            Bad debt                                       50,000            --
                            Other                                          19,000            --
                        ------------------------------------------------------------------------
                        Total deferred tax assets                       4,182,000       111,000
                        ------------------------------------------------------------------------
                        Deferred tax liabilities:
                            Tax greater than book depreciation           (110,000)           --
                        ------------------------------------------------------------------------
                        Total deferred tax liabilities                   (110,000)           --
                        ------------------------------------------------------------------------
                        Valuation allowance for net deferred
                            tax assets                                 (4,072,000)     (111,000)
                        ------------------------------------------------------------------------
                                                                   $           --    $       --
                        ========================================================================
</TABLE>

                        As of December 31, 1999, the Company had a net operating
                        loss carryforward for Federal income tax purposes of
                        approximately $8,261,000 expiring between the years 2010
                        through 2019.

                        A "valuation allowance" is provided when it is more
                        likely than not that some portion of deferred tax assets
                        will not be realized. The Company has established
                        valuation allowances principally for that portion of the
                        net operating loss carryforward and other net deferred
                        tax assets whose future tax benefit is currently
                        uncertain. Realization of the benefits related to losses
                        may be limited in any one year due to U.S. Internal
                        Revenue Code Section 382, change of ownership rules.

                        The Company recorded a deferred tax asset for net
                        operating loss carryovers associated with the
                        acquisition of TSC in the amount of approximately
                        $3,002,000. The Company has established a valuation
                        allowance associated with the net operating loss
                        carryovers. If the Company utilizes these carryovers,
                        they will be recognized as a reduction of goodwill.

                                       41
<PAGE>

                                                               CYBERSENTRY, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                        The difference between the reported income tax provision
                        (benefit) and the tax provision (benefit) that would
                        result from applying the 34% Federal statutory rate to
                        the loss from operations before income taxes is
                        reconciled as follows:
<TABLE>
<CAPTION>

                                                                                            Period from
                                                                                             August 21,
                                                                                                1998
                                                                                            (inception)
                                                                                              through
                                                                         December 31,      December 31,
                                                                             1999              1998
                        --------------------------------------------------------------------------------
                        <S>                                            <C>                 <C>
                        Income tax (benefit) computed at Federal
                            statutory rate                             $   (1,485,000)     $   (111,000)

                        Amortization of non-deductible goodwill               295,000                --

                        Increase in Federal taxes resulting from:
                            Effect of net operating losses for which
                            no tax carryforward benefit is
                            available                                       1,128,000           111,000

                        Other non-deductible expenses                          62,000                --
                        --------------------------------------------------------------------------------

                                                                       $           --      $         --
                        ================================================================================
</TABLE>

6.    DUE TO            The Company has a $3,000,000 line of credit agreement
      STOCKHOLDER       with Patriot Advisors, Inc. ("Patriot"), a stockholder,
                        that expires after one year. The amount outstanding may
                        not exceed 50% of the Company's assets. The line is
                        collateralized by substantially all of the Company's
                        assets. The Company pays Patriot monthly interest
                        payments at an annual interest rate of two percentage
                        points higher than the highest domestic "Prime Rate"
                        published in the Wall Street Journal on the first day of
                        publication in the previous month (10.5% at December 31,
                        1999). The amounts outstanding on the line at December
                        31, 1999 and 1998 are $1,920,078 and $76,181,
                        respectively. As of December 31, 1999, the Company has
                        approximately $1,080,000 remaining to borrow under the
                        line of credit agreement. In February 2000, Patriot
                        agreed to extend the line of credit until December 31,
                        2000. Additionally, effective February 21, 2000, the
                        Company converted $280,000 of accrued interest and
                        principal relating to the line of credit into 40,000
                        shares of common stock at $7.00 per share, the market
                        value of the common stock on that day. Patriot is a
                        stockholder of the Company and Frank Kristan, the
                        Company's Chairman, President and Chief Executive

                                       42
<PAGE>

                                                               CYBERSENTRY, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                        Officer is the President and Chief Executive Office of
                        Patriot Advisers, Inc.

                        Since the interest rate on the line of credit is at a
                        variable rate, the carrying amount of such debt
                        approximates fair value.

7.    LEASE             The Company leases its office facilities and certain
      OBLIGATIONS       office equipment. Minimum rental payments required under
                        these leases as of December 31, 1999 are as follows:

                              2000                               $     52,840
                              2001                                     22,632
                              2002                                     17,296
                              2003                                      4,324
                          -----------------------------------------------------
                              Total minimum lease payments       $     97,092
                          =====================================================


                        Rent expense aggregated $70,531 and $0 for the year
                        ended December 31, 1999 and for the period from August
                        21, 1998 through December 31, 1998, respectively.

                        The Company also leases certain computer equipment,
                        switch equipment and software under capital lease
                        agreements (through the acquisition of TSC). Total
                        future minimum lease payments under the terms of the
                        agreements at December 31, 1999 are as follows:

                          2000                                    $    395,825
                          2001                                         349,911
                          2002                                         349,911
                          2003                                         349,911
                          2004                                         174,955
                          -----------------------------------------------------
                          Total minimum lease payments               1,620,513
                          Less amount representing interest           (360,192)
                          Less current maturities of capital
                            lease obligations                         (260,037)
                          -----------------------------------------------------
                          Present value of long-term obligations
                            under capital leases                  $  1,000,284
                          =====================================================

                                       43
<PAGE>

                                                               CYBERSENTRY, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

8.    RELATED PARTY     The Company (through its predecessor, TSC), Lake Tel,
      TRANSACTIONS      Inc., a New Jersey corporation ("Lake Tel"), and Capital
                        One Bank, a Virginia banking corporation ("Capital
                        One"), have entered into a Carrier Agreement dated
                        October 1998 to offer secured credit card products to
                        customers of the Company for an initial term of five
                        years. For each account opened by Capital One under the
                        Carrier Agreement, Lake Tel is entitled to receive a fee
                        from Capital One and is obligated to pay a fee to the
                        Company. Gerald Resnick, the Company's former Chairman
                        and President, is a member of the Board of Directors of
                        Lake Tel, a telecommunications marketing company
                        specializing in financial institutions.

                        Gerald Resnick, the Company's former President, and
                        Patriot entered into an Advisory Agreement dated as of
                        July 15, 1998 (the "Resnick Advisory Agreement"). Under
                        the Resnick Advisory Agreement, Mr. Resnick acted as a
                        management and financial advisor to Patriot and provided
                        advice on equity or debt financing. The Resnick Advisory
                        Agreement has expired. In exchange for these services,
                        Patriot paid Mr. Resnick a fee of $250,000.

9.    STOCKHOLDERS'     Transactions in stockholders' equity during 1999 were as
      EQUITY            follows:

                            a)       The Company issued 500,000 shares of common
                                     stock at a fair value of $1.00 per share in
                                     exchange for cash of $500,000.

                            b)       The Company issued 1,258,765 shares of
                                     common stock at a fair value of $1.00 per
                                     share to previous shareholders and
                                     unsecured creditors of TSC, pursuant to the
                                     plan of reorganization and purchase.

                            c)       The Company issued 1,000,000 shares of
                                     Class B convertible redeemable
                                     participating preferred stock at a fair
                                     value of $1.50 per share to previous
                                     shareholders of TSC pursuant to the
                                     purchase.

                                       44
<PAGE>

                                                               CYBERSENTRY, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                            d)       The Company issued 4,451,178 shares of
                                     Class A convertible redeemable
                                     participating preferred stock at a fair
                                     value of $1.50 per share to pre-petition
                                     creditors pursuant to TSC's plan of
                                     reorganization of which 534,656 shares have
                                     been treated as redeemable convertible
                                     preferred stock in the accompanying balance
                                     sheet.

                            e)       The Company issued options to a
                                     non-employee to purchase 50,000 shares of
                                     common stock with an exercise price of
                                     $1.10 per share, in exchange for legal
                                     services. The options were valued at
                                     $15,023 using the Black Scholes Model.

                            f)       The Company issued options to a
                                     non-employee to purchase 42,000 shares of
                                     common stock with an exercise price of
                                     $2.50 per share in exchange for financial
                                     consulting services. The options were
                                     valued at $38,748 using the Black Scholes
                                     Model.

                            g)       The Company issued 120,000 shares of common
                                     stock at a fair value of $2.50 per share to
                                     its financial consultants for financial
                                     consulting services.

                        Transactions in stockholders' equity during 1998 were as
                        follows:

                            a)       The Company issued its promoters 8,550,000
                                     shares of common stock at a fair value of
                                     $0.006 per share in exchange for $50,000.

                            b)       The Company issued 450,000 shares of $0.006
                                     fair value common stock in exchange for
                                     services rendered. The fair market value of
                                     the services was $2,700.

                            c)       The Company issued 2,000,000 of Class B
                                     convertible redeemable participating
                                     preferred stock at a fair value of $1.50
                                     per share in exchange for the acquisition
                                     of the ATM Technology License (see Note 2).

                                       45
<PAGE>

                                                               CYBERSENTRY, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                            d)       The Company issued 3,000,000 shares of
                                     common stock at a fair value of $1.00 per
                                     share in exchange for the acquisition of
                                     the CyberSentry Software License (see Note
                                     2).

                        COMMON STOCK

                        Each holder of common stock has one vote in respect of
                        each share of common stock held by such holder of record
                        on the books of the Company for the election of
                        directors and on all other matters on which stockholders
                        of the Company are entitled to vote. The holders of
                        shares of common stock are entitled to receive, when and
                        if declared by the Board of Directors, out of the assets
                        of the Company which are by law available therefor,
                        dividends payable either in cash, in stock or otherwise.

                        CLASS A CONVERTIBLE REDEEMABLE PARTICIPATING PREFERRED
                        STOCK

                        Each holder of Class A convertible redeemable
                        participating preferred stock ("Class A Preferred
                        Stock") is entitled to one vote per share on all matters
                        requiring shareholder action. The holders of Class A
                        Preferred Stock, voting together as a class, have the
                        right to elect one director of the Company. The holders
                        of shares of Class A Preferred Stock are entitled to
                        receive from the Company, with respect to each share of
                        Class A Preferred Stock held, the same dividend or
                        distribution received by a holder of shares of common
                        stock. Any such dividend or distribution shall be made
                        on the Class A Preferred Stock at the same time such
                        dividend or distribution is made on the common stock.

                        On each March 1 and September 1 of the years 2000, 2001,
                        2002, 2003 and 2004 (each such date, an "Optional
                        Redemption Date,") the Corporation shall set aside for
                        payment an amount equal to five cents ($.05) for each
                        share of Class A Preferred Stock then outstanding. The
                        aggregate amount so set aside for payment shall be
                        referred to herein as the "Redemption Pool." Each record
                        holder of shares of Class A Preferred Stock as of the
                        Optional Redemption Date shall be entitled to require
                        the Corporation to redeem all or any portion of the

                                       46
<PAGE>

                                                               CYBERSENTRY, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                        shares of Class A Preferred Stock then held by such
                        holder, up to a maximum number of shares equal to (x)
                        the number of shares of Class Preferred Stock held by
                        such holder as of the Optional Redemption Date,
                        multiplied by (y) $.05 cents per share of Class A
                        Preferred Stock, divided by (z) the redemption price per
                        share of $1.50 ("Redemption Price") of Class A Preferred
                        Stock as of the Optional Redemption Date (with any
                        fractional shares being rounded up or down to the
                        nearest whole share), by paying therefor in cash out of
                        the Redemption Pool an amount equal to the Redemption
                        Price per share as of the Optional Redemption Date. At
                        December 31, 1999, holders of 1,603,967 shares of Class
                        A preferred stock are entitled to participate in the
                        Redemption Pool. The maximum amount to be funded by the
                        Company in the Redemption Pool based on the
                        participating shares is $801,984 over a five year
                        period, representing 534,656 shares. As such, the
                        $801,984 has been classified as mezzanine equity in the
                        December 31, 1999 balance sheet.

                        In the event of any liquidation or dissolution of the
                        Company, the holders of shares of Class A Preferred
                        Stock are entitled to receive out of the assets of the
                        Company available for distribution to its stockholders,
                        an amount equal to the liquidation preference per share
                        ($1.50 per share) plus all accrued and unpaid dividends.
                        Liquidation distributions shall be made to Class A
                        Preferred Stockholders before common stockholders.

                        Each share of Class A Preferred Stock is convertible
                        during the period March 25, 2001 to March 24, 2004, at
                        the option of the holder, into one share of common
                        stock.

                        CLASS B CONVERTIBLE REDEEMABLE PARTICIPATING PREFERRED
                        STOCK

                        Each holder of the Class B convertible redeemable
                        participating preferred stock ("Class B Preferred
                        Stock") is entitled to the same rights as the Class A
                        Preferred Stock except that they may not participate in
                        the optional Redemption Pool and they do not have the
                        right as a class to elect one director of the Company.

                                       47
<PAGE>

                                                               CYBERSENTRY, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                        In March 2000, the Company offered the Class A and B
                        stockholders the right to convert all of their shares to
                        common stock on a one for one basis. The offer expires
                        March 31, 2000.

10.   COMMITMENTS AND   The Company entered into a five year employment
      CONTINGENCIES     agreement with its former President and Chief Executive
                        Officer, Gerald Resnick, effective January 1, 1999.
                        Under the agreement, Mr. Resnick is entitled to receive
                        a base salary of $180,000, subject to annual increases
                        of not less than 10% per year, and a bonus in the
                        discretion of the Board of Directors but in no event
                        less than three quarters of one percent of the Company's
                        gross sales in excess of $30,000,000 annually, which sum
                        may be paid, at Mr. Resnick's option, in cash or stock
                        (valued at the market price on date of approval). During
                        the term of his employment agreement and for a period of
                        one year thereafter, Mr. Resnick will have the right to
                        purchase up to 500,000 shares of Common Stock at $1.00
                        per share. Effective March 6, 2000, Frank Kristan was
                        voted to be the Chairman of the Board of Directors,
                        Chief Executive Officer and President of the Company.
                        Under an amendment to Gerald Resnick's employment
                        agreement dated March 6, 2000, Resnick will receive an
                        annual severance allowance of $200,000 payable in
                        monthly installments beginning March 1, 2000 until
                        December 31, 2008. All provisions of his employment
                        agreement will remain in effect, including but not
                        limited to Resnick's stock options and stock ownership,
                        except that Resnick will no longer be defined as any
                        "executive" or an employee of the Company as defined by
                        the agreement, but will serve as an "Advisor for
                        Strategic Alliance" which position will entitle him to
                        all the benefits and protections set forth in the
                        agreement.

                        The Company also entered into a three-year employment
                        agreement with its Senior Vice President, Hal Shankland,
                        which commenced upon the effective date of the purchase
                        of TSC. Under the agreement, Mr. Shankland is entitled
                        to receive a base salary of $120,000, subject to such
                        annual increases as determined by the Board of
                        Directors. In addition, at the end of each year during
                        the period of his employment, Mr. Shankland will have
                        the right to purchase up to 100,000 shares of Common

                                       48
<PAGE>

                                                               CYBERSENTRY, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                        Stock at $1 per share for the first year and at fair
                        market value for subsequent years.

                        The Company is, and TSC as its predecessor was, involved
                        from time to time in various claims and lawsuits in the
                        ordinary course of business, none of which is expected,
                        individually or in the aggregate, to have a material
                        adverse effect on the Company's financial position,
                        results of operations or cash flows.

11.   STOCK OPTIONS     During 1999, the Company granted stock options to
                        certain executive employees. The Company applies
                        Accounting Principles Board ("APB") Opinion 25,
                        Accounting for Stock Issued to Employees, and related
                        interpretations in accounting for options granted to
                        employees. Under APB Opinion 25, if the exercise price
                        of the Company's employee stock options equals the
                        market price of the underlying stock on the date of
                        grant, no compensation cost is recognized. For options
                        granted during 1999, the exercise price of each option
                        equals the fair value of the Company's stock on the date
                        of grant.

                        FASB Statement 123, Accounting for Stock-Based
                        Compensation, requires the Company to provide pro forma
                        information regarding net income and earnings per share
                        as if compensation cost for the Company's stock options
                        has been determined in accordance with the fair value
                        based method prescribed in FASB Statement 123. The
                        Company estimates the fair value of each stock option at
                        the grant date by using the Black-Scholes option-pricing
                        model with the following weighted-average assumptions
                        used for grants in 1999; no dividend yield for all
                        years; expected volatility of 30 percent; risk-free
                        interest rate of 4.6 percent, and an expected life of
                        5.1 years. No options were granted prior to 1999.

                        Under the accounting provisions of FASB Statement 123,
                        the Company's net (loss) and net (loss) per common share
                        would have been as follows:

                                       49
<PAGE>

                                                               CYBERSENTRY, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>

                                                                                              Year ended
                                                                                             December 31,
                                                                                                 1999
                                                                                            -------------

                        <S>                                      <C>                         <C>
                        Net (loss)                               As reported                 $(4,368,124)
                                                                 Proforma                    $(4,490,044)

                        Net (loss) per common share- basic       As reported                 $      (.33)
                             and diluted                         Proforma                    $      (.33)
</TABLE>

                        A summary of the status of the Company's options as of
                        December 31, 1999 and changes during the period ending
                        on that date is presented below:
<TABLE>
<CAPTION>

                                                                                           Weighted-Average
                                                                             Shares         Exercise Price
                                                                        --------------      --------------
                        <S>                                                 <C>             <C>
                        Outstanding at beginning of year                         --         $          --
                        Granted                                             600,000         $        1.00
                        Forfeited                                                --         $          --
                                                                        --------------
                        Outstanding at end of year                          600,000         $        1.00
                                                                        --------------
                        Options exercisable at year-end                     600,000         $        1.00

                        Weighted-average fair value of
                           options granted during the year              $       .21
                                                                        ==============
</TABLE>

                        The following table summarizes information about fixed
                        stock options outstanding at December 31, 1999.
<TABLE>
<CAPTION>

                                         Options Outstanding                                   Options Exercisable
                     --------------------------------------------------------      -------------------------------------
                           Number       Weighted-Average                                 Number
                       Outstanding at      Remaining         Weighted-Average        Exercisable at     Weighted-Average
Exercise Price       December 31, 1999  Contractual Life      Exercise Price       December 31, 1999     Exercise Price
--------------       -----------------  ----------------      --------------       -----------------     --------------
<S>                       <C>                 <C>               <C>                     <C>                <C>
   $1.00                  600,000             1.95              $    1.00               600,000            $    1.00
</TABLE>


                                       50
<PAGE>

                                                               CYBERSENTRY, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

12.   SEGMENT           The Company's reportable segments are strategic
      INFORMATION       businesses that offer different products and services.
                        They are managed separately because each business
                        requires different technology and marketing strategies.
                        The Company primarily evaluates the operating
                        performance of its segments based on the categories
                        noted in the table below. During 1999, the Company had
                        no intersegment sales.

                        CyberSentry secured software and product technology
                        segments are in their development stage and, as such,
                        there currently is no internal reporting associated with
                        these segments. Therefore, the department managers are
                        continuously assessing their areas of responsibility and
                        corresponding needs on a go-forward basis through weekly
                        meetings with the chief executive officer ("CEO") and
                        the Company's licensors. The internal financial
                        reporting associated with the telecommunications segment
                        consists of normal monthly analysis of the results of
                        operations. The CEO and department managers meet weekly
                        to assess and update the following:

                        a.    Telecommunications - The Company is assessing
                              potential new carrier relationships to reduce the
                              cost of services, together with the evaluation of
                              potential hardware and software required to
                              integrate potentially new services with such new
                              carriers. Included in the telecommunications
                              segment is a new department the Company is
                              developing - Internet. In this area, the
                              telecommunications sales and marketing staff is
                              investigating and meeting with potential providers
                              of broadband technology and Internet backbone
                              service providers to identify and define a product
                              line and marketing program for small businesses
                              and consumers which will integrate the CyberSentry
                              software and telecommunications billing platform;

                        b.    Secured Software - CyberSentry is currently
                              focused on creating job descriptions and functions
                              for system engineers, sales and marketing and
                              other appropriate personnel. This segment is in a

                                       51
<PAGE>

                                                               CYBERSENTRY, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                              final development stage with its licensor, The
                              Learning Company. Once job descriptions have been
                              fully defined, a budget, time frame and
                              implementation schedule will be completed; and

                        c.    Product Technology - The Company's director of
                              management information systems ("MIS") conducts
                              various meetings with the Company's licensor,
                              VisionNet to assess the current status of this
                              technology as it applies to the development of a
                              potential new product line. This segment is in its
                              development stage, preliminary to budgeting for
                              prototype development and the evolution of a sales
                              and marketing plan.

                        There were no business segments during 1998 and
                        financial information for the Company's business
                        segments as of and for the year ended December 31, 1999
                        is as follows:

                        REVENUES
                        Telecommunications                     $     2,599,522
                        Secured software                                     -
                        Product technology                                   -
                                                               ---------------

                        Total revenues                         $     2,599,522
                                                               ===============

                        NET LOSS
                        Telecommunications                     $    (3,323,482)
                        Secured software                              (616,071)
                        Product technology                            (428,571)
                                                               ---------------

                        Total net loss                         $    (4,368,124)
                                                               ===============

                        DEPRECIATION AND AMORTIZATION
                        Telecommunications                     $     1,223,375
                        Secured software                               428,571
                        Product technology                             428,571
                                                               ---------------

                        Total depreciation and amortization    $     2,080,517
                                                               ===============

                                       52
<PAGE>

                                                               CYBERSENTRY, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                        INTEREST EXPENSE, NET
                        Telecommunications                     $       120,727
                        Secured software                                    --
                        Product technology                                  --
                                                               ---------------

                        Total interest expense, net            $       120,727
                                                               ===============

                        TOTAL ASSETS
                        Telecommunications                     $    11,102,668
                        Secured software                             2,516,619
                        Product technology                           2,428,572
                                                               ---------------

                        Total assets                           $    16,047,859
                                                               ===============

                        CAPITAL EXPENDITURES
                        Telecommunications                     $        21,406
                        Secured software                                52,333
                        Product technology                                  --
                                                               ---------------

                        Total capital expenditures             $        73,739
                                                               ===============


13.   VALUATION AND     The additions charged to costs and expenses, and the
      QUALIFYING        deductions relating to the Company's valuation
      ACCOUNTS          allowances for the year ended December 31, 1999, and for
                        the period from August 21, 1998 to December 31, 1998 are
                        as follows:
<TABLE>
<CAPTION>

                                                            Balance       Additions
                                                               at        charged to                     Balance
                                                           beginning      costs and                     at end
                 Description                                of Year       Expenses       Deductions     of year
                 -------------------------------------------------------------------------------------------------
                 <S>                                      <C>           <C>            <C>            <C>
                 Year ended December 31, 1999
                    Accounts receivable valuation
                    allowance                             $        --   $    112,250   $     43,787   $   68,463

                 For the period from August 21, 1998
                 (inception) through December 31, 1998
                    Accounts receivable valuation
                    allowance                             $        --   $         --   $         --   $       --

                 Year ended December 31, 1999
                    Other assets valuation allowance      $        --   $     78,097   $         --   $   78,097
</TABLE>

                                       53
<PAGE>

                                                               CYBERSENTRY, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================


14.   SUBSEQUENT EVENT  In March 2000, the Company issued Fianna Partners, LP
                        ("Fianna"), six million shares of its common stock in
                        exchange for 420 of Fianna's limited partnership
                        interests, each of the latter valued at $100,000. The
                        Company and Fianna plan to enter into a joint venture
                        for additional E-Commerce services.


                                       54
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
Telecommunications Service Center, Inc.
Tampa, Florida


We have audited the accompanying balance sheets of Telecommunications Service
Center, Inc. as of March 24, 1999 and December 31, 1998, and the related
statements of operations, capital deficit and cash flows for the period from
January 1, 1999 to March 24, 1999 and for the years ended December 31, 1998 and
1997. These 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
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 financial statements referred to above present fairly in all
material respects, the financial position of Telecommunications Service Center,
Inc. as of March 24, 1999 and December 31, 1998, and the results of its
operations and its cash flows for the years ended December 31, 1998 and 1997, in
conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has incurred significant
losses from operations, negative cash flows, and had a working capital
deficiency. These factors raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regards to these matters are
described in Note 1. The financial statements do not include any adjustments
that might result from the outcome of these uncertainties.


Miami, Florida
March 17, 2000                                                  BDO Seidman, LLP

                                       55
<PAGE>

<TABLE>
<CAPTION>

                                                                      TELECOMMUNICATIONS SERVICE CENTER, INC.

                                                                                               BALANCE SHEETS
=============================================================================================================

                                                                           March 24, 1999   December 31, 1998
-------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>               <C>
ASSETS
CURRENT

     Cash                                                                   $     24,388      $     33,970
     Accounts receivable, less $56,609 and $81,307 allowance for doubtful
         accounts in 1999 and 1998, respectively (Note 8)                        176,757           144,435
     Prepaid expenses and other current assets                                    44,704            69,003
     Other receivables                                                             7,557             5,298
-------------------------------------------------------------------------------------------------------------
Total Current Assets                                                             253,406           252,706
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net (Note 4)                             1,057,510         1,156,807
OTHER ASSETS                                                                     110,046           110,046
-------------------------------------------------------------------------------------------------------------
                                                                            $  1,420,962      $  1,519,559
=============================================================================================================

LIABILITIES AND CAPITAL DEFICIT (NOTE 2)

CURRENT LIABILITIES
     Factoring line of credit (Note 8)                                      $         --      $         --
     Cash overdraft                                                               75,393                --
     Accounts payable                                                          1,405,430         1,405,320
     Accrued expenses and other current liabilities                              613,058           446,923
     Current maturities of capital lease obligations (Note 10)                        --                --
     Line of credit (Note 6)                                                          --                --
     Current maturities of bank note payable (Note 9)                                 --                --
     Liabilities subject to compromise under reorganization
         proceedings (Note 3)                                                  8,133,313         8,097,928
-------------------------------------------------------------------------------------------------------------
Total Current Liabilities                                                     10,227,194         9,950,171
Note payable - stockholder (Note 7)                                                   --                --
Obligations under capital leases, less current maturities (Note 10)                   --                --
Bank note payable (Note 9)                                                            --                --
-------------------------------------------------------------------------------------------------------------
Total liabilities                                                             10,227,194         9,950,171
-------------------------------------------------------------------------------------------------------------
COMMITMENTS, CONTINGENCIES AND SUBSEQUENT EVENTS
     (Notes 8, 12 and 14)
CAPITAL DEFICIT
     Common stock - $1 par, 100,000 shares authorized,
         2,000 shares issued and outstanding                                       2,000             2,000
     Accumulated deficit                                                      (8,808,232)       (8,432,612)
-------------------------------------------------------------------------------------------------------------
Total Capital Deficit                                                         (8,806,232)       (8,430,612)
-------------------------------------------------------------------------------------------------------------
                                                                            $  1,420,962      $  1,519,559
=============================================================================================================

                                                               See accompanying notes to financial statements
</TABLE>

                                       56
<PAGE>

<TABLE>
<CAPTION>

                                                                     TELECOMMUNICATIONS SERVICE CENTER, INC.

                                                                                    STATEMENTS OF OPERATIONS
============================================================================================================

                                                   For the period from
                                                     January 1, 1999             Years Ended December 31,
                                                          through          ---------------------------------
                                                     March 24, 1999 (A)        1998                1997
------------------------------------------------------------------------------------------------------------
<S>                                                   <C>                  <C>                  <C>
NET SALES (NOTE 1)                                    $    811,316         $ 22,804,240         $  8,341,164
------------------------------------------------------------------------------------------------------------

OPERATING EXPENSES:
   Telecommunications costs (excluding depreciation
     and amortization, shown separately below)             643,853           22,283,257            8,112,840
   Selling, general and administrative expenses            384,403            3,319,419            2,532,845
   Depreciation and amortization                           102,403              439,372              378,860
------------------------------------------------------------------------------------------------------------

Total operating expenses                                 1,130,659           26,042,048           11,024,545
------------------------------------------------------------------------------------------------------------

OTHER (INCOME) EXPENSE:
   Loss on sale of assets                                       --                   --                   --
   Interest expense                                         77,592              402,508              354,959
   Other income                                            (21,315)            (227,251)                  --
------------------------------------------------------------------------------------------------------------

Total other expense                                         56,277              175,257              354,959
------------------------------------------------------------------------------------------------------------

Net loss                                              $   (375,620)        $ (3,413,065)        $ (3,038,340)
============================================================================================================

Net loss per share
   Basic                                              $    (187.81)        $  (1,706.53)        $  (1,519.17)
------------------------------------------------------------------------------------------------------------

Weighted average number of outstanding shares
   Basic                                                     2,000                2,000                2,000
============================================================================================================

(a)      Acquisition date by CyberSentry

                                                              See accompanying notes to financial statements
</TABLE>

                                       57
<PAGE>

<TABLE>
<CAPTION>

                                               TELECOMMUNICATIONS SERVICE CENTER, INC.

                                                         STATEMENTS OF CAPITAL DEFICIT
======================================================================================

                                         Common Stock
                                     --------------------
                                     Shares        Amount    (Deficit)        Total
--------------------------------------------------------------------------------------
<S>                                  <C>           <C>      <C>            <C>
Balance at January 1, 1997           2,000         2,000    (1,981,207)    (1,979,207)

Net loss                                --            --    (3,038,340)    (3,038,340)
--------------------------------------------------------------------------------------

Balance at December 31, 1997         2,000         2,000    (5,019,547)    (5,017,547)

Net loss                                --            --    (3,413,065)    (3,413,065)
--------------------------------------------------------------------------------------

Balance at December 31, 1998         2,000         2,000    (8,432,612)    (8,430,612)

Net loss                                --            --      (375,620)      (375,620)
--------------------------------------------------------------------------------------

BALANCE AT MARCH 24, 1999            2,000   $     2,000   $(8,808,232)   $(8,806,232)
======================================================================================

                                        See accompanying notes to financial statements
</TABLE>

                                       58
<PAGE>

<TABLE>
<CAPTION>

                                                                                      TELECOMMUNICATIONS SERVICE CENTER, INC.

                                                                                                     STATEMENTS OF CASH FLOWS
                                                                                                                    (NOTE 11)
=============================================================================================================================

                                                                         For the period from
                                                                           January 1, 1999        Years ended December 31,
                                                                               through          ----------------------------
                                                                          March 24, 1999 (a)        1998              1999
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                  <C>              <C>
OPERATING ACTIVITIES:
     Net loss                                                              $  (375,620)         $(3,413,065)     $(3,038,340)
     Adjustments to reconcile net loss to net cash (used in) provided by
         operating activities:
              Depreciation and amortization                                    102,403              439,372          378,860
              Interest expense accrued to note payable - stockholder                --              275,024          162,473
              Loss on sale of assets                                                --                   --               --
              Bad debts                                                             --            1,452,911          140,400
              Recovery of bad debts                                            (18,576)                  --               --
              Inventory write down                                              26,157                   --               --
              Changes in assets and liabilities:
                  Accounts receivable                                           (7,624)            (895,923)        (692,880)
                  Prepaid expenses and other                                    24,299)              44,343          (48,141)
                  Other receivables                                             (2,259)              (2,398)          79,561)
                  Other assets                                                      --              (68,350)          25,795)
                  Accounts payable                                                 110            2,673,982        1,013,250
                  Accrued expenses and other current liabilities               166,135             (102,192)         321,605
-----------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by operating activities                            (84,975)             403,704       (1,657,417)
-----------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
     Purchases of equipment                                                         --               (7,833)         (41,167)
     Proceeds from dispositions of property, plant and equipment                    --                   --               --
-----------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities                                 --               (7,833)         (41,167)
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a)    Acquisition date by CyberSentry

                                       59
<PAGE>

<TABLE>
<CAPTION>

                                                                                      TELECOMMUNICATIONS SERVICE CENTER, INC.

                                                                                                     STATEMENTS OF CASH FLOWS
                                                                                                                    (NOTE 11)
=============================================================================================================================

                                                                         For the period from
                                                                           January 1, 1999        Years ended December 31,
                                                                               through          ----------------------------
                                                                          March 24, 1999 (a)        1998              1999
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                  <C>              <C>
FINANCING ACTIVITIES:
     Proceeds from factoring line of credit, net                           $        --          $  (136,861)     $   197,589
     (Repayments) proceeds - line of credit, net                                    --              (69,519)         (17,174)
     Proceeds from bank note payable                                                --                   --               --
     Repayments on bank note payable                                                --                   --          (69,778)
     Proceeds from note payable-stockholder                                         --              196,042        1,926,614
     Repayments on note payable-stockholder                                         --                   --          (88,250)
     Repayments of obligations under capital leases                                 --             (397,749)        (234,618)
     Repayments on other debt                                                       --                   --               --
     Cash overdraft                                                             75,393                   --               --
-----------------------------------------------------------------------------------------------------------------------------

Net cash provided by (used in) financing activities                             75,393             (408,087)       1,714,383
-----------------------------------------------------------------------------------------------------------------------------

Net (decrease) increase in cash                                                 (9,582)             (12,216)          15,799
Cash at beginning of period                                                     33,970               46,186           30,387
-----------------------------------------------------------------------------------------------------------------------------

Cash at end of period                                                      $    24,388          $    33,970      $    46,186
=============================================================================================================================

                                                                               See accompanying notes to financial statements
</TABLE>

                                       60
<PAGE>

                                         TELECOMMUNICATIONS SERVICE CENTER, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

1.    SUMMARY OF        BUSINESS
      SIGNIFICANT
      ACCOUNTING        Telecommunications Service Center, Inc. ("The Company"
      POLICIES          or "TSC") is a facilities based carrier providing long
                        distance telecommunications services including
                        commercial and residential service, international call
                        back long distance service, operator service for pay
                        phones, prepaid phone cards, and enhanced services, such
                        as voice and fax-mail services. The Company is in a
                        specialized telecommunications service industry. This
                        industry segment is subject to certain competitive
                        pressures.

                        During 1999, 1998 and 1997, a significant amount of the
                        Company's business was acquired through independent
                        marketing agents. Under these agreements independent
                        marketing agents provide the Company with customers for
                        the Company to provide telecommunications services to.
                        The independent marketing agents charge the Company a
                        commission. The resulting revenue and related costs are
                        recognized as service is provided. For the period ended
                        March 24, 1999 and for the years ending December 31,
                        1998 and 1997, the agreements contributed revenues of
                        $313,115, $18,659,810 and $5,359,652 and related
                        telecommunication costs of $261,332, $17,160,483 and
                        $4,326,573, respectively.

                        In 1997, the Company purchased high-volume,
                        state-of-the-art Digital Switching equipment to
                        accommodate anticipated growth and targeted new markets.
                        The Company is certified to do business in forty eight
                        (48) states and is tariffed in forty two (42) states. It
                        is certified as an "Alternative Local Exchange Carrier"
                        (ALEC) to provide "Local Telephone Services" in thirty
                        two (32) states.

                        BASIS OF PRESENTATION

                        On May 7, 1998, the Company filed a voluntary petition
                        (the "Petition") for relief under Chapter 11 of the
                        United States Bankruptcy Code in the Middle District of
                        Florida, Tampa Division. The Company thereafter operated
                        its business in the ordinary course as
                        debtors-in-possession subject to the jurisdiction of the
                        Bankruptcy Court. The Bankruptcy Court confirmed the
                        plan of reorganization ("the Plan") on March 4, 1999 and

                                       61
<PAGE>

                                         TELECOMMUNICATIONS SERVICE CENTER, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                        the Plan became effective March 24, 1999, the date
                        CyberSentry, Inc. acquired the Company.

                        The accompanying financial statements have been prepared
                        on a going concern basis which assumes continuity of
                        operations and realization of assets and liquidation of
                        liabilities in the ordinary course of business. The
                        Company has incurred significant losses from operations,
                        negative cash flows and a working capital deficiency.
                        These factors raise substantial doubt about the
                        Company's ability to continue as a going concern.

                        Effective March 24, 1999, the Company was purchased by
                        CyberSentry, Inc. ("CyberSentry"). As part of the plan
                        of reorganization, prepetition creditors of TSC were
                        paid through the issuance of Preferred A and B stock and
                        common stock of CyberSentry and cash. The management of
                        CyberSentry plans to integrate TSC's telecommunications
                        business into its product technology and secured
                        software business segments to increase revenues.

                        The financial statements do not include any adjustments
                        that might be necessary as a result of the outcome of
                        the uncertainties discussed herein.

                        USE OF ESTIMATES

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

                        RECOGNITION OF REVENUE

                        All of the Company's telecommunications services
                        described in note 1 are recognized as service is
                        provided. Allowances are provided for estimated
                        uncollectible usage.

                                       62
<PAGE>

                                         TELECOMMUNICATIONS SERVICE CENTER, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                        ASSET IMPAIRMENT

                        The Company periodically reviews the carrying value of
                        certain of its assets in relation to historical results,
                        current business conditions and trends to identify
                        potential situations in which the carrying value of
                        assets may not be recoverable. If such reviews indicate
                        that the carrying value of such assets may not be
                        recoverable, the Company would estimate the undiscounted
                        sum of the expected future cash flows of such assets to
                        ascertain if a permanent impairment exists. If a
                        permanent impairment exists, the Company would determine
                        the fair value by using quoted market prices, if
                        available, for such assets, or if quoted market prices
                        are not available, the Company would discount the
                        expected future cash flows of such assets.

                        FINANCIAL INSTRUMENTS

                        The fair value of financial instruments is determined by
                        reference to various market data and other valuation
                        techniques, as appropriate, and unless otherwise
                        disclosed, the fair values of financial instruments
                        approximate their recorded values.

                        EQUIPMENT AND LEASEHOLD IMPROVEMENTS

                        Depreciation and amortization are provided on the
                        straight-line method over the estimated useful lives of
                        the assets. Leasehold improvements are amortized over
                        the term of the respective leases or the service lives
                        of the improvements, whichever is shorter. Upon sale or
                        retirement, the asset cost and related accumulated
                        depreciation and amortization are removed from the
                        accounts and any related gain or loss is reflected in
                        earnings.

                        INCOME TAXES

                        Income taxes are accounted for using the liability
                        approach under the provisions of Statement of Financial
                        Accounting Standards No. 109, "Accounting for Income
                        Taxes." Under this method, deferred taxes are recognized
                        for the tax consequences of temporary differences by
                        applying enacted statutory tax rates applicable for
                        future years to the differences between the financial
                        statement and tax basis of existing assets and
                        liabilities.

                                       63
<PAGE>

                                         TELECOMMUNICATIONS SERVICE CENTER, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                        EARNINGS PER SHARE

                        During 1998, the Company adopted Statement of Financial
                        Accounting Standards ("SFAS") No. 128 "Earnings Per
                        Share" ("SFAS No. 128"). SFAS No. 128 replaced the
                        existing methodology for calculating and presenting
                        earnings per share. Under SFAS No. 128, primary earnings
                        per share has been replaced with a presentation of basic
                        earnings per share and fully diluted earnings per share
                        has been replaced with diluted earnings per share. Basic
                        earnings per share excludes dilution and is computed by
                        dividing income available to common shares outstanding
                        for the period by the weighted average of common shares
                        outstanding. Diluted earnings per share is computed
                        similarly to fully diluted earnings per share in
                        accordance with the Accounting Principles Board ("APB")
                        Opinion No. 15.

                        NEW ACCOUNTING PRONOUNCEMENTS

                        In March 1998, the American Institute of Certified
                        Public Accountants ("AICPA") issued Statement of
                        Position 98-1, Accounting for the Costs of Computer
                        Software Developed or Obtained for Internal Use ("SOP
                        98-1"). SOP 98-1 requires computer software costs
                        associated with internal use software to be expensed as
                        incurred until certain capitalization criteria are met.
                        The Company adopted SOP on January 1, 1999. Adoption of
                        this statement had no material impact on the Company's
                        financial position, results of operations, or cash
                        flows.

                        In April 1998, the AICPA issued Statement of Position
                        (SOP) 98-5, "Reporting on the Costs of Start-Up
                        Activities," which provides guidance on the financial
                        reporting of start-up costs and organization costs. It
                        requires costs of start-up activities and organization
                        costs to be expensed as incurred. The SOP is effective
                        for financial statements for fiscal years beginning
                        after December 15, 1998. Adoption of this SOP had no
                        material impact on the Company's financial position,
                        results of operations, or cash flows.

                                       64
<PAGE>

                                         TELECOMMUNICATIONS SERVICE CENTER, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                        In June 1998, the Financial Accounting Standards Board
                        issued Statement of Financial Accounting Standards
                        (SFAS) No. 133, "Accounting for Derivative Instruments
                        and Hedging Activities," which establishes accounting
                        and reporting standards for derivative instruments and
                        for hedging activities. It requires that an entity
                        recognize all derivatives as either assets or
                        liabilities in the statement of financial position and
                        measure those instruments at fair value. The statement
                        applies to all entities and is effective for all fiscal
                        quarters of fiscal years beginning after June 15, 2000.
                        The Company did not engage in derivative instruments or
                        hedging activities in any periods presented in the
                        financial statements and management does not expect this
                        statement to have a material impact on the Company's
                        financial position, results of operations or cash flows.

2.    REORGANIZATION    On May 7, 1998, the Company filed a voluntary petition
                        (the "Petition") for relief under Chapter 11 of the
                        United States Bankruptcy Code in the Middle District of
                        Florida, Tampa Division. The Company thereafter operated
                        its business in the ordinary course as
                        debtors-in-possession subject to the jurisdiction of the
                        Bankruptcy Court. The Bankruptcy Court confirmed the
                        plan of reorganization on March 4, 1999 and the Plan
                        became effective ("Effective Date") March 24, 1999, the
                        date that CyberSentry purchased TSC.

                        The Plan provided for the division of creditors and
                        equity holders into nine classes and for the treatment
                        of each class as follows:

                        The Class One Creditors (as defined in the Plan)
                        consisted of administrative claims that were paid in
                        full. The aggregate payment made to the Class One
                        Creditors was approximately $20,000 (excluding
                        Westinghouse Communications and Sprint Communications
                        Company, L.P.). Included in accounts payable at December
                        31, 1998 in the balance sheet are post petition
                        administrative claims of $895,692 from Westinghouse
                        Communications ("Westinghouse") and Sprint
                        Communications Company L.P. ("Sprint"). The
                        administrative amounts were allowed in full and
                        pre-petition claims amounting to $1,355,544 were allowed
                        in full as unsecured claims (see Class Five Creditors).

                        With respect to the allowed administrative claims of
                        Westinghouse and Sprint, the companies received $.07 in

                                       65
<PAGE>

                                         TELECOMMUNICATIONS SERVICE CENTER, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                        cash and the value of $.93 in a share of Class A
                        Preferred Stock ($1.50 stated value) in CyberSentry,
                        Inc., for every $1.00 of unsecured claim. Westinghouse
                        and Sprint also entered into an agreement with Patriot
                        Advisors, Inc. ("Patriot") to sell the preferred stock
                        of CyberSentry, Inc. to Patriot Advisors, Inc. at $1.50
                        per share at certain time intervals up to 455 days after
                        the confirmation date of the plan of reorganization.

                        The Class Two Creditors (as defined in the Plan)
                        consisted of a relatively small amount of claims of
                        governmental units for past due taxes which were paid in
                        full.

                        The Class Three Creditors (as defined in the Plan)
                        consisted of the secured claims of Southtrust Bank
                        ("Southtrust") and Receivable Funding Corporation
                        ("Receivable Funding"). Southtrust was owed
                        approximately $477,000 at December 31, 1998 pursuant to
                        a Note and Mortgage on all assets, such debt being
                        incurred by the Company in connection with a line of
                        credit. Southtrust was paid in accordance with the terms
                        of the Note and Mortgage. Receivable Funding was owed
                        approximately $10,000 pursuant to a factoring agreement.
                        Receivable Funding was paid in accordance with the terms
                        of the agreement.

                        The Class Four Creditors (as defined in the Plan)
                        consisted of the equipment lease claims of IBM ("IBM"),
                        and Telecom Finance Group ("Telecom Finance"). IBM's
                        claim was pursuant to a lease agreement for a computer
                        system by and between TSC and IBM (the "IBM Lease"). IBM
                        was owed approximately $24,000 at December 31, 1998,
                        which is being paid pursuant to the terms of the IBM
                        Lease. Telecom Finance's claim was pursuant to a lease
                        agreement by and between TSC and Telecom Finance
                        regarding the lease of Siemen's switch equipment (the
                        "Siemens Lease"). Telecom Finance was owed approximately
                        $1,300,000 at December 31, 1998. Within ten days of the
                        entry of the confirmation order, TSC paid $100,000 to
                        Telecom Finance to be applied to amounts owed under the
                        lease. Effective July 1, 1999, Telecom Finance and TSC
                        entered into an amended lease wherein the past due
                        pre-petition and post-petition arrearage including
                        costs, fees, charges and interest, were added to the
                        existing lease obligations and restructured under an
                        amended lease with such restructured obligation to be
                        paid out over a five-year period.

                                       66
<PAGE>

                                         TELECOMMUNICATIONS SERVICE CENTER, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                        The Class Five Creditors (as defined in the Plan)
                        consisted of unsecured creditors who received $.07 in
                        cash and the value of $.93 in a share of Class A
                        Preferred Stock ($1.50 stated value) of CyberSentry,
                        Inc. for every $1.00 of unsecured claim.

                        The Class Five Creditors also received the right to
                        purchase Common Stock for $1.00 per share upon
                        confirmation of the Plan for each one share of preferred
                        stock received by the Class Five Creditor pursuant to
                        the Plan (the "Right's Offering"). The Rights Offering
                        was only available to the Class Five Creditors.

                        The Class Nine Creditors (as defined in the Plan)
                        consisted of the pre-Bankruptcy shareholders of TSC (the
                        "TSC Shareholders") whose interest in TSC was terminated
                        pursuant to the Plan by cancellation of all outstanding
                        shares of capital stock of TSC. Pursuant to the Plan and
                        the acquisition (see Note 14), the TSC Shareholders were
                        issued 1,000,000 shares of Common Stock and 1,000,000
                        shares of Class B Preferred Stock in CyberSentry, Inc.
                        on a pro rata basis.

3.    LIABILITIES       Substantially all of the Company's liabilities as of the
      SUBJECT TO        Petition Date are subject to settlement under a plan of
      COMPROMISE        reorganization.
      UNDER
      REORGANIZATION    Liabilities subject to comprise under reorganization
      PROCEEDINGS       proceedings consisted of:

<TABLE>
<CAPTION>

                                                                         March 24,       December 31,
                                                                           1999               1998
                                                                      --------------   ---------------
                        <S>                                           <C>              <C>
                        Priority claims                               $       20,000   $        20,000
                        Secured debt
                            Principal                                      1,405,544         1,415,819
                        General Unsecured Claims                           3,047,341         3,001,681
                        Unsecured Debt, Principal and Interest             3,660,428         3,660,428
                        ------------------------------------------------------------------------------
                                                                      $    8,133,313   $     8,097,928
                        ==============================================================================
</TABLE>


                        Priority claims, the repayment of which the Company is
                        required to prioritize under bankruptcy law are
                        comprised principally of administrative claims.
                        Unsecured debt includes amounts which may ultimately be

                                       67
<PAGE>

                                         TELECOMMUNICATIONS SERVICE CENTER, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                        deemed secured. It is not practicable to estimate the
                        fair value of the Company's liabilities subject to
                        compromise under reorganization proceedings.

4.    EQUIPMENT AND     Equipment and leasehold improvements are as follows:
      LEASEHOLD
      IMPROVEMENTS
<TABLE>
<CAPTION>

                                                                                                  Estimated
                                                                                                   Useful
                                                                  March 24,     December 31,        Lives
                                                                    1999           1998           (in years)
                        ------------------------------------------------------------------------------------

                        <S>                                   <C>            <C>                     <C>
                            Switch equipment                  $   1,552,075  $     1,552,075         5
                            Switch software                         336,336          335,228         5
                            Computer equipment                      271,721          269,722         5
                            Furniture and equipment                  56,480           56,480        5-10
                            Leasehold improvements                   14,215           14,215         5
                        ------------------------------------------------------------------------------------
                                                                  2,230,827        2,227,720
                        Less accumulated depreciation and
                        amortization                             (1,173,317)      (1,070,913)
                        ------------------------------------------------------------------------------------

                                                              $   1,057,510  $     1,156,807
                        ====================================================================================
</TABLE>


                        Substantially all of the Company's equipment is under
                        capital lease.

5.    INCOME TAXES      Deferred income taxes reflect the net tax effects of
                        temporary differences between the carrying amounts of
                        assets and liabilities for financial reporting purposes
                        and the amounts used for income tax purposes.
                        Significant components of the Company's deferred income
                        tax assets and deferred income tax liabilities are as
                        follows:
<TABLE>
<CAPTION>

                                                                      March 24,     December 31,
                                                                        1999            1998
                        ------------------------------------------------------------------------
                        <S>                                      <C>              <C>
                        Deferred tax assets:
                           Net operating loss carryforwards      $    3,002,000   $    2,816,000
                           Bad debt                                      21,000               --
                           Accrual to cash conversion                   474,000          503,000
                        ------------------------------------------------------------------------
                        Total deferred tax assets                     3,497,000        3,319,000
                        ------------------------------------------------------------------------
                        Deferred tax liabilities:
                           Tax greater than book depreciation
                             and amortization                           220,000          211,000
                        ------------------------------------------------------------------------
                        Total deferred tax liabilities                  220,000          211,000
                        ------------------------------------------------------------------------
                        Valuation allowance for net deferred
                           tax assets                                (3,277,000)      (3,108,000)
                        ------------------------------------------------------------------------
                                                                 $           --   $           --
                        ========================================================================
</TABLE>


                                       68
<PAGE>

                                         TELECOMMUNICATIONS SERVICE CENTER, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                        As of March 24, 1999, the Company had Federal and
                        Florida net operating loss carryforwards of
                        approximately $7,977,000 that expire from 2010 through
                        2018.

                        A "valuation allowance" is provided when it is more
                        likely than not that some portion of deferred tax assets
                        will not be realized. The Company has established
                        valuation allowances principally for that portion of the
                        net operating loss carryforward and other net deferred
                        tax assets whose future tax benefit is currently
                        uncertain. Realization of the benefits related to losses
                        may be limited in any one year due to U.S. Internal
                        Revenue Code Section 382, change of ownership rules.

                        The difference between the reported income tax (benefit)
                        and the tax (benefit) that would result from applying
                        the 34% Federal statutory rate to the (loss) from
                        operations before income taxes is reconciled as follows:
<TABLE>
<CAPTION>

                                                                                         December 31,
                                                                 March 24,       ----------------------------
                                                                   1999              1998             1997
                        -------------------------------------------------------------------------------------
                        <S>                                   <C>                <C>             <C>
                        Income tax (benefit) computed
                            at Federal statutory rate         $    (127,711)     $ (1,160,442)   $ (1,033,036)

                        Increase (decrease) in Federal taxes
                        resulting from:
                            Effect of net operating
                                 losses for which no tax
                                 carryback benefit is
                                 available                          124,990         1,154,922       1,030,678

                        Other non-deductible expenses                 2,721             5,520           2,358
                        -------------------------------------------------------------------------------------
                                                              $          --      $         --
                        =====================================================================================
</TABLE>

6.    LINE OF CREDIT    The Company has a revolving line of credit
                        collateralized by all business assets, including but not
                        limited to accounts receivable, property and equipment,
                        contract rights and general intangibles, now owned or
                        hereafter acquired, providing for borrowings up to

                                       69
<PAGE>

                                         TELECOMMUNICATIONS SERVICE CENTER, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                        $300,000. The principal balance is due on demand and
                        interest is payable monthly at the financial
                        institution's base rate plus 1.5% (10.0% at March 24,
                        1999 and December 31, 1998). The balance outstanding at
                        March 24, 1999 and December 31, 1998 amounted to
                        $282,000 and $255,000, respectively and is included in
                        liabilities subject to compromise under reorganization
                        proceedings in the balance sheets.

7.    NOTE PAYABLE-     The note payable-stockholder is unsecured and due on
      STOCKHOLDER       December 31, 2000. The note bears interest at the prime
                        rate plus 1% (9.5% at March 24, 1999 and December 31,
                        1998). Interest expense on the note amounted to $275,024
                        and $162,473 for the years ended December 31, 1998 and
                        1997, respectively. Pursuant to TSC's plan of
                        reorganization, there was no interest expense on the
                        note in 1999. The loan is subordinated to the line of
                        credit and bank note payable. Accrued interest in the
                        amount of $544,918 and $544,918 was included in the note
                        balance at March 24, 1999 and December 31, 1998,
                        respectively. The balance outstanding, including accrued
                        interest at March 24, 1999 and December 31, 1998
                        amounted to $3,660,428, and $3,660,428, respectively.
                        The balance outstanding at March 24, 1999 and December
                        31, 1998 is included in liabilities subject to
                        compromise under reorganization proceedings in the
                        balance sheets.

8.    FACTORING         On July 9, 1997, the Company entered into a factoring
      AGREEMENT         agreement providing a line of credit for up to
                        $1,000,000, based upon 90% of the eligible accounts
                        receivable. The agreement provided for the line to be
                        increased to $1,500,000. The fee charged by the factor
                        was 16.5% per annum of amounts advanced and outstanding.
                        The advances were collateralized by accounts receivable.
                        The term of the agreement was for one year with an
                        option to extend for one year thereafter. The Company
                        did not exercise its option to extend the factoring
                        agreement in 1998. Factoring fees amounted to $758,683
                        for the year ended December 31, 1997.

9.    BANK NOTE         The Company had a note payable with a bank that was
      PAYABLE           collateralized by all business assets, including but not
                        limited to accounts receivable, property and equipment,
                        contract rights and general intangibles, now owned or
                        hereafter. The note bears interest at 8.75% with
                        principal and interest due monthly in the amount at

                                       70
<PAGE>

                                         TELECOMMUNICATIONS SERVICE CENTER, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                        $8,254 through May 2001. On May 7, 1998 the Company
                        filed a voluntary petition for relief under Chapter 11
                        (see Notes 1 and 2). As a result of the bankruptcy
                        filing, the Company was not in compliance with certain
                        covenants relating to the bank note agreement and
                        therefore classified the balance of the bank note
                        payable as a current liability. The balance outstanding
                        at March 24, 1999 and December 31, 1998 amounted to
                        $224,098 and $222,292, respectively. The balances
                        outstanding at March 24, 1999 and December 31, 1998 are
                        included in liabilities subject to compromise under
                        reorganization proceedings in the balance sheets.

                        Maturities of the bank note payable at March 24, 1999
                        are as follows:

                           1999                             $          92,614
                           2000                                        91,112
                           2001                                        40,372
                        -------------------------------------------------------
                                                            $         224,098
                        =======================================================


10.   LEASE             Telecommunications Service Center, Inc. leases its
      OBLIGATIONS       office facilities and certain office equipment. Minimum
                        rental payments required under these leases as of March
                        24, 1999 are as follows:

                           1999                             $          77,754
                           2000                                        52,881
                           2001                                        22,672
                           2002                                        19,336
                           2003                                         4,334
                        -------------------------------------------------------
                           Total minimum lease payments     $         176,977
                        =======================================================

                        Rent expense aggregated $14,136, $72,461 and $63,088 for
                        the period ended March 24, 1999 and for the years ended
                        December 31, 1998 and 1997, respectively.

                                       71
<PAGE>

                                         TELECOMMUNICATIONS SERVICE CENTER, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================

                        The Company also leases certain computer equipment,
                        switch equipment and software under capital lease
                        agreements. Total future minimum lease payments under
                        the original terms of the agreements at March 24, 1999
                        are as follows:
<TABLE>
<CAPTION>

                        <S>                                                     <C>
                        1999                                                    $      596,717
                        2000                                                           416,813
                        2001                                                           312,610
                        -----------------------------------------------------------------------
                        Total minimum lease payments                                 1,326,140
                        Less amount representing interest                             (387,614)
                        Less current maturities of capital lease obligations          (259,845)
                        -----------------------------------------------------------------------
                        Present value of long-term obligations under
                            capital leases                                      $      678,681
                        =======================================================================
</TABLE>


                        On May 7, 1998, the Company filed a voluntary petition
                        for relief under Chapter 11 (See Notes 1 and 2). As a
                        result of the bankruptcy filing, the Company was not in
                        compliance with certain covenants relating to the
                        capital lease agreements and has therefore classified
                        the balance of the lease obligations as a current
                        liability included in liabilities subject to compromise
                        under reorganization proceedings in the balance sheet at
                        March 24, 1999 and December 31, 1998.

11.   STATEMENT OF      Supplemental disclosures of cash flow information:
      CASH FLOWS
<TABLE>
<CAPTION>

                        Years ended December 31,                                1998          1997
                        --------------------------------------------------------------------------------
                        <S>                                               <C>           <C>
                        Cash paid for interest                            $    127,726  $    192,941

                        Non cash transactions:
                           Purchase of equipment by capital leases                  --       438,669

                           Repayment of note payable - stockholder
                             through issuance of common stock                       --            --

                           Interest accrued to balance of note
                            payable - stockholder                              275,024       162,473
</TABLE>

                                       72
<PAGE>

                                         TELECOMMUNICATIONS SERVICE CENTER, INC.

                                                   NOTES TO FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
                        <S>                                               <C>           <C>
                           Services received in settlement of
                            accounts receivable                                     --            --
                        Transfer of the following to liabilities
                           subject to compromise under
                           reorganization proceedings:
                           Pre-petition accounts payable                     3,021,681            --
                           Bank line of credit                                 255,000            --
                           Capital leases                                      938,526            --
                           Bank note payable                                   222,293            --
                           Note payable-stockholder                          3,660,428            --
                                                                          ------------

                        Total transferred                                 $  8,097,928
                                                                          ------------
</TABLE>

                        There were no supplemental disclosures of cash flow
                        information arising for the period ended March 24, 1999.

12.   LITIGATION        In December 1997, the Company received notice of a claim
                        aggregating approximately $696,000 filed against the
                        Company pertaining to breach of certain trade
                        agreements. The Company is vigorously defending this
                        claim. Management believes the Company's maximum
                        exposure is $696,000 which it has recorded as of March
                        24, 1999 and December 31, 1998 and is included in
                        liabilities subject to compromise under reorganization
                        proceedings in the balance sheets.

                        Additionally, the Company is subject to various legal
                        proceedings, claims and liabilities which arise in the
                        ordinary course of its business. In the opinion of
                        management, the amount of ultimate liability with
                        respect to these matters will not materially affect the
                        financial statements of the Company.

13.   RELATED PARTY     The Company, Lake Tel, Inc., a New Jersey corporation
      TRANSACTION       ("Lake Tel"), and Capital One Bank, a Virginia banking
                        corporation "Capital One"), have entered into a Carrier
                        Agreement dated October 1998 (the "Carrier Agreement")
                        pursuant to which the Company has agreed to allow
                        Capital One to offer secured credit card products to
                        customers of the Company for an initial term of five
                        years. For each account booked by Capital One under the
                        Carrier Agreement, Lake Tel is entitled to receive a fee
                        from Capital One and is obligated to pay a fee to the
                        Company. The Chairman and President of CyberSentry, Inc.
                        (see Note 14) sits on the Board of Directors of Lake
                        Tel, a telecommunications marketing company specializing
                        in financial institutions.

                                       73
<PAGE>

14.   SUBSEQUENT        Effective March 24, 1999, CyberSentry purchased all of
      EVENTS            the outstanding common stock of TSC for 1 million shares
                        of CyberSentry common stock and 1 million shares of
                        Class B preferred stock ($1.50 stated value) valued at
                        $2,500,000. Additionally, CyberSentry provided a working
                        capital line of credit in the amount of $3,000,000.
                        CyberSentry was incorporated in Delaware on August 21,
                        1998 as Telecommunications Services, Inc. ("TSI"). On
                        November 30, 1998, TSI amended its certificate of
                        incorporation to change the corporation's name to
                        CyberSentry, Inc. CyberSentry's principal business
                        includes the marketing and sale of CyberSentry software
                        and to sell two applications of Asynchronous Transfer
                        Mode Technology.

15.   VALUATION AND     The additions charged to costs and expenses, and the
      QUALIFYING        deductions relating to the Company's valuation
      ACCOUNTS          allowances for the period from January 1, 1999 through
                        March 24, 1999, and for the years ended December 31,
                        1998 and 1997 are as follows:
<TABLE>
<CAPTION>

                                                             Balance       Additions
                                                                at        charged to                     Balance
                                                            beginning      costs and                      at end
                  Description                                of Year       Expenses      Deductions      of year
                  --------------------------------------------------------------------------------------------------
                  <S>                                      <C>           <C>            <C>             <C>
                  For the period from January 1, 1999
                  through March 24, 1999
                     Valuation allowance                   $    81,307   $         --   $     24,698    $  56,609

                  Year ended December 31, 1998
                     Valuation allowance                   $   137,878   $  1,452,911   $  1,509,482    $  81,307

                  Year ended December 31, 1997
                     Valuation allowance                   $   160,090   $    140,400   $    162,612    $ 137,878
</TABLE>

                                       74
<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         We have had no changes in or disagreements with our Accountants.



                                       75
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSON
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

The Officers and Directors of the Company, and further information concerning
them, are as follows:
<TABLE>
<CAPTION>

NAME                    AGE      CLASS                                     POSITION(S)
----                    ---      -----                                     -----------
<S>                     <C>       <C>    <C>
Frank Kristan           41         I          Chairman of the Board, CEO and President
Frank Conklin           42        III                                         Director
Hal Shankland           55        III    Director, Senior Vice President and Secretary
Edward Dowling, Jr      36         I                                          Director
Gilbert Raker           56        II                                          Director
James DeVore            49        ---                          Chief Financial Officer
Aamir Qazi              28        ---                  Director of Information Systems
Robert Haberhorn        58        ---                   Director of Technical Services
</TABLE>


         Frank Kristan, the Company's Chairman and CEO effective March 6, 2000,
is the President and CEO of Patriot Advisers, Inc., a provider of investment
advisory services to investment funds, corporations and individuals. From 1994
to 1997, Patriot managed funds on behalf of Templar Corporation. When Mr.
Kristan concluded his involvement in managing third party assets, total assets
under management exceeded $50 million. Patriot Advisors has been involved in
development-stage financing of Inktomi Corporation and LibertyOne, Ltd. and the
Company. Prior to forming Patriot Advisors, Mr. Kristan was the Principal and
CEO of Kristan Associates, a financial consulting firm that provided various
financial advisory services for the telecommunications and financial services
industries. He began his career at Affiliated Computer Systems where he provided
computer and operational advisory services to banking and financial services
institutions involved in merger and acquisition transactions. Mr. Kristan earned
his BS in Mathematics from the University of Western Australia.

         Hal Shankland, Senior Vice President for Advanced Product Technology,
served as President of TSC from July 1991 until the Merger and has held his
current position with us since the Merger. Mr. Shankland has served as one of
the Company's directors since April 20, 1999. He is an entrepreneur with over 25
years of experience in the computer and telecommunications industries. Mr.
Shankland has worked with Litton Industries, Dyna Com and has served as
President of Hal & Associates, Inc. of Tampa, Florida. Mr. Shankland has been a
computer consultant to numerous corporate clients, including Southern
Management, Inc. As the Company's Senior Vice President, Mr. Shankland is
responsible for operational management of the telecommunications systems and the
integration of new technologies. While serving in the U.S. Air Force, Mr.
Shankland attended Florida State University and the University of Maryland from
1963 until 1967. Mr. Shankland has entered into a three year employment
agreement with the Company.

                                       76
<PAGE>

         Frank Conklin, a Director since March 2000, is the President and
Founder of Sinclair Ventures, LLC. Sinclair Ventures is the Managing Partner of
Fianna Partners, L.P. Sinclair Ventures, LLC, has developed a new strategy for
integrated benefits development. Mr. Conklin has twenty years of experience in
the commercial insurance, specialty financial-insurance and healthcare services
industries. He has served as an Officer in the Financial Services Division of
Alexander & Alexander, where he specialized in political and export-credit risk
insurance and financial guarantees; he was a co-founder of Credit Enhancement
Services Corp., a specialty insurance broker, and was a Senior Marketing
Representative with the FCIA-US Export/Import Bank. In 1988, Mr. Conklin entered
the retained executive search industry with engagements focused on the
insurance, managed care, and financial services industries. In addition thereto,
Mr. Conklin has served as a financial and investment advisory consultant over
the last few years. He is an investor in another e-business venture, CyberSoft,
Inc, a company engaged in technology farming in the secure electronic data
transmission industry. Mr. Conklin received his BA from Bradley University and
its Institute of International Studies in 1980 and completed graduate coursework
in finance at Baruch College.

         Edward R. Dowling, Jr, a Director since March 2000, has served as a
Director of ours since the beginning of March of this year. He is the President
of the Edward R. Dowling Agency, Inc., a full-service insurance agency, and has
held this position since 1996. Mr. Dowling has a great deal of experience in
analyzing the market value of financial services companies, particularly their
corporate strategies and strategic relationships. Mr. Dowling has also been the
Edward R. Dowling Agency's Branch Manger since 1990. Mr. Dowling is the founder,
Chairman and CEO of CARBONEK Financial Services, Inc., a company that provides
vendor-neutral insurance services online. Mr. Dowling has served on numerous
boards of inter-industry associations in the financial services industry, and on
several insurance review boards in New Jersey. He was educated at Wagner
College, where he concentrated on business and economics until 1983.

         Gilbert Raker, a Director since March 2000, is the Chairman, President
and Chief Executive Officer of the SEMX Corporation, a manufacturer of specialty
materials and provider of special services to the microelectronics and
semiconductor industries, which he has led since 1988. Prior thereto, Mr. Raker
served as a Managing Director and Partner of Ditri Associates, Inc. (1987-1990)
and Executive Vice President and CFO of Kenmare Capital Corporation (1984-1987),
both of which were private investment companies. He had previously held
executive positions with three companies listed on the NYSE; Combustion
Equipment Associates, Inc.(1979-1984), Barber Oil Corporation (1976-1979) and IU
International Corporation (1972-1976). Mr. Raker completed his Ph.D. course work
in Finance and received an MBA in Production Management from Syracuse University
in 1969, and received a BA from Eastern College in 1965. Mr. Raker is not only
an alum but also a Trustee of Eastern College.

         James DeVore, the Company's Chief Financial Officer, has served as
Controller since November 1999 and is a career corporate consultant with a broad
range of experience over a period of 27 years in diverse industries such as oil
and lubricant manufacturing and distribution, city government, software
development and telecommunications. Prior to his employment with the Company, Mr
DeVore was from 1998 to 1999 the CFO of Global Paycom, Inc., a small
Florida-based inter-exchange carrier, and from 1997 to 1998 he was the CFO of
Fiserv, Inc., where he served in the network integration division. Mr. DeVore
was the CFO for the John H. Harland company,a developer of data-base marketing
software for the financial industry between 1991 and 1996. Mr. DeVore graduated
from Auburn University with a degree in accounting in 1973 and received his CPA
certification in Oklahoma City in 1978.

         Aamir Qazi, the Company's Director of Management Information Systems,
served in this capacity with TSC from August 1998 until the Merger and has held
his current position with the

                                      77
<PAGE>

Company since the Merger. Mr. Qazi has five years of experience in the research
and development of engineering, network and software solutions. Prior to joining
TSC in 1998, Mr. Qazi was an Assistant Professor at the Tampa Institute where he
taught systems and design. From December 1996 through January 1998, he worked
for Apollo International of Delaware, Inc. as a Digital Design Engineer working
with algorithm development for Data Acquisition Systems. In 1996, Mr. Qazi
worked in the development division of Lasergate Systems, Inc. From January 1995
through May 1996, he worked for the University of South Florida, College of
Public Health, as a Graduate Research Assistant. Mr. Qazi graduated from the
University of South Florida in 1995 with a M.S.E.E. degree, and he received a
B.S.E.E. degree in 1992 from the University of Engineering and Technology,
Peshawar, Pakistan.

         Robert Haberhorn, the Director Technical Services (Telecommunications),
has amassed over forty years in the computer and telecommunications industries.
Having worked 32 years with Burroughs Corp. (now UNISYS Corp.) in many
technical, training, and management positions he was able to establish a
computer business providing multi-user UNIX solutions on PCs at a time when the
term DOS held no meaning for most people. Mr. Haberhorn was involved in the
initial development of document imaging and Internet data sharing and has worked
in several management positions with both interconnect and long distance
companies, building regional networks from the southeast to New York and London.
Mr. Haberhorn currently resides in Tampa, Florida with his wife and son.

         Under the Company's Restated Certificate of Incorporation and Bylaws,
its directors will be divided into three classes and designated as Class I,
Class II and Class III. Class I directors will initially be elected for a term
expiring at the first annual meeting of stockholders, Class II directors will
initially be elected for a term expiring at the second annual meeting of
stockholders, and Class III directors will initially be elected for a term
expiring at the third annual meeting of stockholders. Members of each class will
hold office until their successors are elected and qualified. At each succeeding
annual meeting of the stockholders of the Corporation, the successors of the
class of directors whose term expires at that meeting will be elected to hold
office for a term expiring at the annual meeting of stockholders held in the
third year following the year of their election, and until their successors are
elected and qualified. At present, Messrs. Conklin and Shankland have been
designated as Class III, Mr. Raker as Class II and Messrs. Kristan and Dowling
as Class I.

         There is no family relationship between any of the above named officers
or directors.

         The directors' term of office is one year for Class I directors, two
years for Class II directors and three years for Class III directors.

         Under the securities laws of the United States, the Company's
directors, its executive (and certain other) officers, and any persons holding
ten percent or more of the Company's Common stock must report on their ownership
of the Company's Common Stock and any changes in that ownership to the
Securities and Exchange Commission and to the National Association of Securities
Dealers, Inc. The Company believes, based upon a review of copies of forms
pertaining to Section 16 (a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") furnished it, and written representations from its
executive officers and directors, that all persons subject to the requirements
of the Exchange Act are in compliance therewith.

                                      78
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth certain information regarding compensation paid
by the Company during each of the last three fiscal years to the Company's Chief
Executive Officer and to each of the Company's executive officers who earned in
excess of $100,000.
<TABLE>
<CAPTION>

                                         SUMMARY COMPENSATION TABLE

                                Annual Compensation ($)                Long Term Compensation
                             -----------------------------   -----------------------------------------------
                                                                      Awards                  Payouts
                                                             -----------------------  ----------------------
                                                                          Securities
                                                             Restricted   Underlying
Name and                                       Other Annual     Stock      Options/    LTIP       All Other
Principal Position    Year   Salary   Bonus    Compensation     Awards      SARs(#)   Payouts   Compensation
------------------    ----   ------   -----    ------------  ----------   ----------  -------   ------------
<S>                   <C>    <C>                 <C>                       <C>
GERALD RESNICK        1999   127,000             21,800 (3)                500,000
Chairman, CEO and     1998
President (1)         1997

HAL SHANKLAND         1999   115,371              3,500 (4)                100,000
Senior VP, Secretary  1998
and Director (2)      1997
</TABLE>



(1) Effective March 6, 2000, Gerald Resnick is no longer an employee or director
of the Company. The Company has agreed to reimburse Mr. Resnick for the
difference between the $127,000 actually disbursed and his salary, as provided
by the Amendment to the Employment Agreement.

(2) Hal Shankland joined the Company on February 16, 1999. His employment
agreement stipulates that he will be paid $120,000 annually. For 1999, Mr.
Shankland's salary was paid by TSC until May 24, 1999 and by CyberSentry
thereafter. Mr. Shankland received $54,231 from TSC and $61,500 from the
Company.

(3) $12,000 was earned from service as Director and $9,800 was provided as car
allowance.

(4) CyberSentry pays Mr. Shankland $500.00 per month in car allowance, and has
done so since the May 24, 1999.


                                      79
<PAGE>

                        OPTION GRANTS IN LAST FISCAL YEAR

         The following table sets forth information concerning stock options
granted to each of the executives named in the Summary Compensation Table for
the fiscal year ending December 31,1999:
<TABLE>
<CAPTION>

                                       INDIVIDUAL GRANTS
                                                                                  Potential
                                                                                  Realizable
                                                                                   Value At
                                                                                Assumed Annual
                                                                                Rates of Stock
                                                                                    Price
                                                                               Appreciation for
                                                                                 Option Term

                    Number of
                     Shares      Percentage of Total
                   Underlying    of Options Granted     Exercise
                     Options       to Employees          Price       Expiration
Name                 Granted     During Fiscal Year     per Share       Date        5% ($)
----                 -------     -------------------    ---------    ----------     ------
<S>                  <C>              <C>               <C>          <C>          <C>
GERALD RESNICK (1)   500,000          83%               $ 1.00       03-06-01     2,775,000

HAL SHANKLAND        100,000          17%               $ 1.00       12-31-05      902,543
</TABLE>

(1) Effective March 6, 2000, Mr. Resnick is no longer with the Company. The
terms provided herewith are stipulated in an Amendment to Mr. Resnick's
Employment Agreement.

                                      80
<PAGE>

                          FISCAL YEAR-END OPTION VALUES


                         Number of Shares                     Value of
                       Subject to Unexercised          In-the-Money Options At
                     Options At Fiscal Year-end           Fiscal Year End(1)

Name                 Exercisable    Unexercisable    Exercisable  Unexercisable
----                 -----------    -------------    -----------  -------------
GERALD RESNICK         500,000                         750,000
HAL SHANKLAND          100,000                         150,000
-------------
(1)   Based on the fair value of the Company's Common Stock at 12-31-99 ($2.50).


                                      81
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information as of March 29, 2000
with respect to each beneficial owner of five percent (5%) or more of the
outstanding shares of Common Stock of the Company, each officer and director of
the Company and all officers and directors as a group. The table does not
include securities exercisable into common stock that have not yet vested or are
not exercisable within 60 days of the date hereof. Unless otherwise indicated,
the address of each such person or entity is 412 East Madison Street, Suite
1200, Tampa, Florida, 33602.
<TABLE>
<CAPTION>

                                  COMMON STOCK

                                          Number of Shares of     Percentage of Total Shares of
                                       Outstanding Common Stock     Outstanding Common Stock
Name and Address of Beneficial Owner     Beneficially Owned (1)       Beneficially Owned
------------------------------------     -------------------          ------------------
<S>                                              <C>                         <C>
Chinon Investments                               2,000,000                   9.9%
   Suite 23, 19 Broad Court
   Covent Garden
   London, WC2b 5QN Great Britain
Templar Corporation                                775,000                   3.9%
   43 Deshon Avenue
   Bronxville, NY 10708
Patriot Advisors, Inc. (3)                          62,400                  0.31%
   43 Deshon Avenue
   Bronxville, NY  10708
Phrygia Financial Group, Inc. (4)                  500,000                   2.5%
   97 Church Road
   Easton, CT 06612
Gerald Resnick and Helene Resnick (5)            5,000,000                  24.4%
   429 East 64th Street, E.PHE
   New York, NY 10021
Frank Kristan (6)                                   50,000                  0.25%
Hal Shankland (2) (6) (7)                          900,000                   4.5%
Frank Conklin (6)                                   50,000                  0.25%
Edward Dowling, Jr (6)                              50,000                  0.25%
Gilbert Raker (6)                                   50,000                  0.25%
Fianna Partners, L.P. (8)                        6,000,000                  29.9%
   97 Church Road
   Easton, CT 06612
Sinclair Advisors, Ltd. (9)                        185,000                  0.92%
   97 Church Road
   Easton, CT 06612
Carbonek Financial Services, Inc. (10)             125,000                  0.62%
   1126 Broadway
   W Long Branch, NJ 07764
James DeVore                                           --                    --
Aamir Qazi                                             --                    --
Robert Haberhorn                                       --                    --
All Directors and Executive Officers             8,747,400                    42%
  as a Group
(11 Entities Listed) (11) (12)
</TABLE>

(1) Pursuant to the rules and regulations of the Securities and Exchange
Commission, shares of Common Stock that an individual or group has a right to
acquire within 60 days pursuant to the exercise of options or warrants are
deemed to be outstanding for the purposes of computing the percentage ownership
of such individual or group, but are not deemed to be outstanding for the
purposes of computing the percentage ownership of any other person shown in the
table.

                                      82
<PAGE>

(2) Does not include shares of Preferred Stock owned by such individual. For a
list of the holders of Preferred Stock see the following preferred stock charts.
Each share of Preferred Stock is entitled to one vote on all matters requiring a
stockholder vote or other stockholder action.

(3) Patriot entered into Stock Purchase Agreements with each of Sprint
Communications Company L.P. (The "Sprint Agreement") and RSL Com U.S.A., Inc.
(The "RSL Agreement") pursuant to which Patriot agreed to purchase, at specified
times and specified amounts, shares of Class A Preferred Stock owned by RSL (the
"RSL shares") and Sprint (the "Sprint Shares"), respectively. These purchases
have been made.

(4) Phrygia is co-owned by Sinclair Advisors, Ltd. and Patriot Advisors, Inc.,
who own 61% and 39%, respectively. Phrygia was issued its 500,000 shares of
Common Stock by Patriot Advisors.

(5) The Company has issued to Mr. Resnick an option to purchase 500,000 shares
of Common Stock exercisable at $1.00 Per share during the term of his employment
with the Company and for one year thereafter. The table includes the shares of
Common Stock subject to that option. Mr. Resnick is no longer employed by the
Company, nor is he one of its Directors, but the Company anticipates executing a
consulting agreement forming part of an amicable resolution to Mr. Resnick's
resignation incorporating the appropriate terms of his employment agreement. The
Company also anticipates executing a mutual release and indemnification
agreement with Mr. Resnick, such indemnification to be subject to the terms of
Mr. Resnick's employment agreement.

(6) While Messrs. Kristan, Conklin, Dowling and Raker own no shares of the
Company's Common Stock in their own name, the Company has, pursuant to certain
resolutions adopted by its Board of Directors, granted options on 50,000 shares
thereof in return for service on such Board for the first year of service
thereon. Hal Shankland has also been granted options therefor, which options
were issued pursuant to the same terms as apply to the above.

(7) The Company has issued to Mr. Shankland an option to purchase 100,000 shares
of Common Stock exercisable at $1.00 Per share (for the first year) and at fair
market value (after the first year) during the term of his employment with the
Company. The table includes the shares of Common Stock subject to that option.

(8) On March 6, 2000, the Company issued 6,000,000 of its shares of Common Stock
to Fianna Partners, L.P., In exchange for 420 Limited Partnership Interests, at
$100,000 each, of Fianna Partners. Frank Conklin is the President and Founder of
Sinclair Ventures, LLC, the Managing Partner of Fianna Partners, L.P.

(9) Frank Conklin is the sole shareholder of Sinclair Advisors, Ltd.

(10) Carbonek is co-owned by Mr. Dowling and Sinclair Advisors, Ltd., each of
whom hold a 49.5% stake therein.

(11) Includes the shares of Common Stock held by Messrs. Kristan through Patriot
Advisors, Inc., Phrygia and Templar Corporation, Conklin through Fianna
Partners, LP, Phrygia and Sinclair Advisors and Shankland.

                                      83
<PAGE>

(12) FIGURES may not add up due to rounding in the calculation of individual
     percentages.



                                      84
<PAGE>

<TABLE>
<CAPTION>

                                  CLASS A PREFERRED STOCK (1)

                                          Number of Shares of     Percentage of Total Shares of
                                       Outstanding Common Stock     Outstanding Common Stock
Name and Address of Beneficial Owner     Beneficially Owned (1)       Beneficially Owned
------------------------------------     -------------------          ------------------
<S>                                              <C>                         <C>
Raoul Bouille                                         11,526                 0.26%
   Marina Office, Suite 5
   Sandy Bay Road
   Clontral SW 2093 Australia
RLS Comm. U.S.A., Inc. (3)                           127,959                  2.9%
   c/o Westinghouse Communications
   1001 Brinton Road
   Pittsburgh, PA 15221-4533
RSL Comm.USA Inc. (3)                                722,103                 16.2%
   c/o John H. Mueller
   Smith, Clark, Delesie, Bierley, Mueller & Kadyk
   P.O. Box 2939
   Tampa, FL 33601
Qwest Communications                                 123,184                  2.8%
   555 17th Street
   Denver, CO 80202
Sprint Communications Company L.P. (3)               545,705                 12.3%
   8140 Ward Parkway
   Kansas City, MO 64114-2006
Worldcom .                                           399,859                  8.9%
   P.O. Box 730426
   Dallas, TX 75373-0426
David Veltman                                      2,291,921                 51.5%
   3130 Tiffany Drive
   Bellair Beach, Florida 34635
</TABLE>

-----------
(1) Each share of Class A Preferred Stock may be converted, at the option of the
holder, into one share of common stock (subject to adjustment in certain events)
at any time from and after March 25, 2001 and through March 24, 2004. The
holders of shares of Class A Preferred Stock are entitled to elect one director
as a class and, in addition, are entitled to cast one vote (subject to similar
adjustment) per share of Class A Preferred Stock on all other matters requiring
a stockholder vote or other stockholder action by the holders of common stock.
The Company has recently offered its stockholders of Preferred Stock the
opportunity to convert such Preferred Stock into shares of Common Stock on a
one-for-one basis. The offer will expire March 31, 2000. The Company anticipates
that the great majority of its Preferred stockholders will elect to accept its
offer.

(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Subject to community property laws, where
applicable, the persons named above have sole voting and investment power with
respect to all shares of Class A Preferred Stock shown that they beneficially
own.

(3)  See note 4 above under the Common Stock table.

                                      85
<PAGE>

<TABLE>
<CAPTION>

                                  CLASS B PREFERRED STOCK (1)

                                          Number of Shares of     Percentage of Total Shares of
                                       Outstanding Common Stock     Outstanding Common Stock
Name and Address of Beneficial Owner     Beneficially Owned (1)       Beneficially Owned
------------------------------------     -------------------          ------------------
<S>                                              <C>                         <C>
VisionNet, Inc.                                  2,000,000                   66.7%
   c/o LibertyOne Limited
   80 McLachlan Avenue
   Rushcutters Bay
   Sydney NSW 2011 Australia

Lewco Securities Corp.                             250,000                    8.3%
   P.O. Box 2023
   Jersey City, NJ 07303
Hal Shankland                                      750,000                     25%
All directors and executive officers               750,000                     25%
</TABLE>
   as a group (last 1 person listed)


(1) Each share of Class B Preferred Stock may be converted at the option of the
holder into one share of Common Stock (subject to adjustment in certain events)
at any time from and after March 25, 2001 and through March 24, 2004. The
holders of shares of Class B Preferred Stock entitled to cast one vote (subject
to similar adjustment) per share of Class B Preferred Stock on all other matters
requiring a stockholder vote or other stockholder action by the holders of
Common Stock.

The Company has recently offered its shareholders of Preferred Stock the
opportunity to convert such Preferred Stock into shares of common stock on a
one-for-one basis. The offer will expire March 31, 2000. The Company does not
know, as of March 29, 2000, how many of its Preferred shareholders will elect to
accept its offer, but anticipates that the great majority thereof will do so.

   Beneficially ownership is determined in accordance with the Rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Subject to community property laws, where
applicable, the persons named above have sole voting and investment power with
respect to all shares of Preferred Stock shown as beneficially owned by them.

                                      86
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         BANKRUPTCY, MERGER AND RELATED TRANSACTIONS

         Grace Trust Transaction

         Until December 1997, our predecessor, Telecommunications Services, Inc.
("TSC"), which owned and operated our telecommunications services business, was
solvent and was funding its operations with cash flow. In December 1997, TSC
entered into an agreement with Grace Trust pursuant to which Grace Trust was to
provide sales and marketing services for TSC by undertaking telemarketing
efforts to increase TSC's long-distance customer base. Grace Trust assured TSC
that the file of customers submitted by Grace Trust did not contain any large
blocks of sequential telephone numbers and that valid customer authorization had
been obtained for every order to substitute TSC for the customer's existing
long-distance service provider, as required by the FCC. After the file was
processed and customers' long distance service changed, however, TSC received
notifications from a number of these customers disputing the change in service
providers. TSC later confirmed through its research that - contrary to Grace
Trust's assurances - Grace Trust had not obtained proper customer authorization
for all of the business submitted. Although TSC immediately implemented a plan
to minimize the damage caused by Grace Trust's actions, TSC remained liable
under federal law to provide telephone service free of charge for at least 90
days to all customers whose authorization had not been obtained properly, as
well as to other very large potential contingent liabilities to those customers.
These liabilities have been discharged as a result of TSC's bankruptcy
proceedings. TSC also became subject to regulatory proceedings by authorities in
the states where these violations had occurred.

         Bankruptcy

         As a result of these actions on the part of Grace Trust, TSC elected to
file for bankruptcy protection and, on May 8, 1998, filed a voluntary petition
with the United States Bankruptcy Court for the Middle District of Florida (the
"Bankruptcy Court") seeking reorganization under Chapter 11 of the United States
Bankruptcy Code (the "Code"). On March 4, 1999 (the "Confirmation Date"), the
Bankruptcy Court entered an order (the "Order") pursuant to Section 1129 of the
Code confirming the Second Amended Plan of Reorganization (the "Plan"). The Plan
became effective on March 14, 1999 pending the acquisition of TSC by
CyberSentry, which occurred on March 24, 1999.

         Acquisition of TSC

         Pursuant to the Plan, we acquired TSC through a merger on March 24,
1999, after which we were the surviving corporation. Prior to the Merger, TSC
conducted our current telecommunications services business. The Merger was
accomplished in accordance with the terms of an Agreement and Plan of Merger,
dated January 22, 1999, between TSC and CyberSentry (the "Merger Agreement"). By
operation of law all assets, property, rights, liabilities and obligations of
TSC have been transferred to and assumed by CyberSentry as the surviving
corporation of the Merger. Substantially all of TSC's debt was converted into
shares of our common and preferred stock.

                                       87
<PAGE>

TRANSACTIONS BETWEEN MANAGEMENT AND OTHERS

         Lake Tel Transaction

         We have entered, through our predecessor, TSC, into a Carrier Agreement
dated October 1998 with Lake Tel, Inc., a New Jersey corporation, and Capital
One Bank, a Virginia banking corporation. Pursuant to this agreement, we have
agreed to allow Capital One to offer secured credit card products to our
customers for an initial term of five years. For each account booked by Capital
One under the Carrier Agreement, Lake Tel is entitled to receive a fee from
Capital One and is obligated to pay a fee to us. Gerald Resnick, our former
Chairman and President, sits on the Board of Directors of Lake Tel, a
telecommunications marketing company specializing in financial institutions.

         Transactions with Patriot, Templar and Liberty One

         Patriot Advisors, Inc. and Templar Corporation are 100% owned by Mr.
Frank Kristan, our current Chairman, CEO and President. Mr. Kristan beneficially
owns approximately 4% of the ordinary shares of LibertyOne Ltd., which (through
its subsidiary, VisionNet, Inc.) beneficially owns approximately 66.7% of the
Company's Preferred Class B Preferred Stock.

         The Company has entered into a Credit Agreement with Patriot dated
February 22, 1999 (the "Credit Agreement") pursuant to which Patriot has agreed
to extend a $3 million line of credit to the Company, with amounts outstanding
not to exceed 50% of our assets. The line of credit is secured by all of our
assets and will be available to the Company until December 31, 2000, after which
time all outstanding amounts must be repaid, subject to various events of
default which can accelerate the maturity of the loan. Interest on amounts
outstanding is due monthly at the rate per annum equal to two percentage points
above the highest domestic "Prime Rate" published in the Wall Street Journal on
the first day of publication in the previous month.

         The Company paid principal and interest of $280,000 due Patriot on the
Company's line of credit with forty thousand shares of its Common Stock rather
than in cash.

         Mr. Resnick, our former Chairman and President, and Patriot entered
into an Advisory Agreement dated as of July 15, 1998 (the "Resnick Advisory
Agreement"). Under the Resnick Advisory Agreement, Mr. Resnick acted as a
management and financial advisor to Patriot and provided advice on equity or
debt financing. The Resnick Advisory Agreement has expired. In exchange for
these services, Patriot paid Mr. Resnick a fee of $250,000.

                                       88
<PAGE>

         CyberSentry Software Acquisition

         On October 2, 1998, Templar entered into a license agreement (the
"Learning License Agreement") with Learning Company Properties Inc., a Delaware
corporation ("Learning"), pursuant to which Templar obtained an exclusive,
worldwide, perpetual, fully-paid right and license to publish, use, distribute
and sublicense a software program that provides digital rights management
technology (the "CyberSentry Software"). In addition, pursuant to the Learning
License Agreement, as supplemented, Learning assigned its rights to certain
trademarks and agreed to provide engineering support to Templar through December
31, 1999. Templar has paid Learning $187,500 in consideration for such
engineering support.

         Pursuant to the Learning License Agreement, Templar transferred to
Learning 2,500,000 ordinary shares of LibertyOne (the "LibertyOne Shares"),
previously held by Templar and, in connection with this transfer, agreed to
grant to Learning the right to sell the LibertyOne Shares to Templar for an
aggregate purchase price of $3,000,000, pursuant to a Put and Top Up Agreement
("Put Agreement"), dated October 22, 1998, by and between Learning and Templar.
This put expires on December 31, 2001, unless terminated earlier due to the
occurrence of certain Trigger Events (as defined in the Put Agreement). Templar
and Learning valued the transaction at $3,000,000, which was based on the then
anticipated initial public offering price of the LibertyOne Shares of $1.20 per
share. The initial public offering of the LibertyOne Shares closed on December
10, 1998 at a price of $2.00 per share. The closing sales price of the
LibertyOne Shares as of March 17, 1999 was $4.72 per share. Templar has informed
us that Learning has received more than $3,000,000 from the sale of the
LibertyOne Shares and that the Put Agreement has therefore been cancelled.

         Templar assigned the Learning License Agreement and all of Templar's
rights to the CyberSentry Software thereunder to us pursuant to an Assignment of
Software License Agreement, effective as of November 20, 1998 (the
"Assignment"). Our rights to the CyberSentry Software under the Assignment are
subject to the risk of default by Templar under the Learning License Agreement.
Pursuant to the terms of the Assignment and in consideration therefor, we issued
3,000,000 shares of our common stock to Templar, which thereby became one of our
significant stockholders. As described above, Templar transferred 2,300,000 of
these shares to SPLP.

         We have entered into a Software Sub-License Agreement (the "DRI License
Agreement"), effective as of January 1, 1999, with VisionNet's predecessor DRI,
a subsidiary of LibertyOne. Pursuant to the DRI License Agreement, we have
granted VisionNet a non-transferable, non- exclusive, worldwide, right and
license to publish and use the CyberSentry Software solely for the protection of
celebrity digital rights and content related thereto on the websites owned or
operated by VisionNet, subject to the terms and conditions of the Learning
License Agreement. We are under no obligation to provide upgrades to the
software licensed to VisionNet unless VisionNet elects to pay us $150,000 for
continuing software engineering support. The term of the DRI License Agreement
is indefinite, subject to early termination by either party for cause, as
described in the agreement. In conjunction with entering into the DRI License
Agreement, VisionNet purchased 500,000 shares of the Company's Common Stock at
$1.00 per share for an aggregate purchase price of $500,000. VisionNet is a
subsidiary of LibertyOne.

                                       89
<PAGE>

         ATM Technology Acquisition

         Comtel Telecommunications Pty Ltd., a wholly owned subsidiary of
LibertyOne, entered into a Patent and Know How License and Commercialization
Agreement dated as of February 4, 1998 (the "ATM License Agreement") with
Telstra Corporation Limited , pursuant to which LibertyOne was granted a
non-exclusive license in relation to Telstra's Fast Packet Digital Switch
Project ("FPDX"). FPDX represents technology developed by Telstra over 11 years,
and utilizes ATM technology, which has the potential to deliver "virtual"
Internet services to users at substantially increased speeds and at lower costs
than other technologies.

         Comtel entered into a Patent and Know How Sub-Contract and
Commercialization Agreement (the "Sub-Contract") with us, effective as of
December 30, 1998, pursuant to which we have been granted the non-exclusive
right to market and sell the ATM Technology in the United States and Canada,
subject to the terms of the ATM License Agreement. Our rights to the ATM
Technology under the Sub-Contract are subject to the risk of default by Comtel
under the ATM License Agreement with Telstra. Pursuant to the Sub-Contract, we
agreed to pay Comtel a royalty fee of 110% of the royalty rates required
pursuant to the ATM License Agreement.

         As consideration for Comtel entering into the Sub-Contract with us, we
agreed to issue 2,000,000 shares of our preferred stock to Comtel's designee,
VisionNet, a subsidiary of LibertyOne. Pursuant to the Merger Agreement, these
shares were converted on a one for one basis into 2,000,000 shares of our Class
B Preferred Stock.

         RECENT EVENTS

         The Company and its former Chairman, CEO and President Gerald A.
Resnick signed an amendment (the "Amendment") to Mr. Resnick's employment
agreement (the "Employment Agreement") on March 6, 2000. The Amendment
stipulates the conditions under which Mr. Resnick's employment with the Company
was to terminate, which termination has at present been effected. The Amendment
provides that: (i) the Company will pay a Severance Allowance of $200,000 per
year through December 31, 2008; (ii) the Company will pay Mr. Resnick $ 80,000,
such amount to cover accrued expenses and back pay; (iii) the Company will
provide Mr. Resnick with a $ 2,000,000 life insurance policy, disability
insurance and maintain health coverage for Mr. Resnick and his family; (iv) the
Company will indemnify and hold harmless Mr. Resnick from any and all acts
arising from his actions in his capacity as a director and officer thereof and
list him in the Employment Practices Liability Insurance Policy and the
Directors, Officers and Corporate Liability policy "D&D Gold" as an additional
insured; (v) Mr. Resnick waive the effect of any provision in the Employment
Agreement as such provision may relate to a change of control of the Company,
and (vi) all other provisions in the Employment Agreement remain in full force
and effect with the exceptions that: (a) Mr. Resnick will no longer be defined
as an executive or employee as such terms are used in the Employment Agreement,
and; (b) the Competition provision therein is null and void.

         The Company held a Shareholders' Meeting on March 6, 2000 at 10:30,
during which Hal Shankland was nominated and elected as Director. During a
Directors' Meeting later that day, Mr. Shankland, pursuant to Section 3.3 of the
Company's By-laws, appointed Mr. Frank Kristan

                                      90
<PAGE>

Chairman and Frank Conklin as Director. The newly constituted Board then
nominated and elected Edward Dowling, Jr as Director. The Board then appointed
Mr. Kristan CEO and President and confirmed Mr. Shankland as Vice President and
Secretary.

         The Directors' Meeting of March 16, 2000, delineated with greater
specificity the quality in which Directors serve on the Company's Board,
pursuant to its Certificate of Incorporation and By- laws, which state that
Directors of the Company shall be elected by class. The Company's Directors
resolved that its Directors be elected accordingly, which elections are to be
confirmed at the Company's Special Shareholders' Meeting on March 31, 2000.

         The Special Shareholders' Meeting will vote on three proposals: the
nomination of Directors, the retention of BDO Seidman, LLP, as the Company's
auditors, and the resolution adopted by the Directors during their Meeting of
March 17, 2000, to authorize an additional twenty million (20,000,000) of its
Common Stock.

         . The Company issued Fianna Partners, LP ("Fianna"), six million shares
of its Common Stock in exchange for 420 of Fianna's Limited Partnership
Interests, each of the latter valued at one hundred thousand US dollars
($100,000). The Company and Fianna plan to enter into a joint venture agreement.

         The Company intends to file a registration statement on Form S-1,
whereby it would register all its shares of Common Stock under the Securities
Act of 1933, as amended, as soon as reasonably practicable.

                                      91
<PAGE>

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

(a) Exhibits
       27       Financial Data Schedule

                                      92
<PAGE>

                                  SIGNATURES

         In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized.

                              CYBERSENTRY, INC.

                              By: /s/ FRANK KRISTAN
                                  -----------------------------
                               Frank Kristan, CEO, President and
                               Chairman of the Board

         In accordance with the Exchange Act, this report has been signed below
by the following persons and in the capacities and on the dates indicated.

       SIGNATURE              TITLE                         DATE

/s/ FRANK KRISTAN             President and Chairman        March 29, 2000
-----------------------       of the Board
Frank Kristan


/s/ HAL SHANKLAND             Senior Vice President,        March 29, 2000
-----------------------       Secretary and Director
Hal Shankland


/s/ JIM DEVORE                Chief Financial Officer       March 29, 2000
-----------------------
Jim DeVore


/s/ FRANK CONKLIN             Director                      March 29, 2000
-----------------------
Frank Conklin


/s/ EDWARD DOWLING, JR        Director                      March 29, 2000
-----------------------
Edward Dowling, Jr

/s/ GILBERT BAKER             Director                      March 29, 2000
-----------------------
Gilbert Raker

                                       93