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                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-K

        (Mark One)

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

        For the fiscal year ended December 31, 1999, or

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

        For the transition period from ___________ to ___________

        Commission file number 000 26039

                                    ESAT, INC
             (Exact Name of Registrant as Specified in Its Charter)


<TABLE>
<S>                                                      <C>
                 NEVADA                                       95-0344604
     (State or Other Jurisdiction of                         (IRS Employer
     Incorporation or Organization)                      Identification Number

     16520 HARBOR BOULEVARD, BLDG G
       FOUNTAIN VALLEY, CALIFORNIA                               92708
(Address of Principal Executive Offices)                      (Zip code)
</TABLE>


                                  714-418-3200
              (Registrant's Telephone Number, Including Area Code)


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

<TABLE>
<CAPTION>
    Title Of Each Class                           Name Of Each Exchange On Which
    To Be So Registered                           Each Class Is To Be Registered
<S>                                               <C>
           None
</TABLE>

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

                          Common Stock, Par Value $.001



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                                (Title of Class)

        Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
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 (Section 229.405 of this chapter) 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 aggregate market value of the voting and non-voting common equity
        held by non-affiliates of the registrant as of March 28, 2000, is
        $50,150,606.


        The number of shares outstanding of the registrant's common stock, as of
March 28, 2000, is 18,623,725.


                                     PART I

ITEM 1. BUSINESS

        OVERVIEW

        We provide satellite Internet services and we develop satellite
Internet access equipment and services. Our customers are businesses,
educational institutions and governmental agencies. Our product line is based on
our Global Satellite Internet ("GSI(TM)") gateway, Nexstream gateway and
ChannelCasting(TM) services which all provide existing local area networks with
Internet access. A gateway is a specially



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designated computer which contains software that allows local area network
("LAN") users to share an Internet access connection. Nexstream uses very small
aperture terminals, which allows for data transfer to and from remote locations
needing Internet access or a private network. Our ChannelCasting(TM) services
provides the simultaneous broadcast of large video and data files to multiple
destinations through the use of our GSI(TM).

        We plan to be a geographically diverse satellite Internet service
provider through the establishment of joint ventures in various countries. We
expect to finance the expansion either through financing provided by the parties
wishing to provide the service internationally, or through capital generated by
operations and/or issuing additional securities.

        Through December 31, 1999, we have incurred significant losses totaling
approximately $20,900,000. Furthermore, we anticipate incurring additional
losses in the foreseeable future as we grow and complete the development of our
products. We operate in a highly competitive market and our success of the
business will depend on our ability to compete in this marketplace. We have no
assurance of market acceptance of our products, and we have no assurance that
our marketing and distribution methods will be successful.

OUR STRATEGY

        We expect growth in demand for Internet access on a worldwide basis. We
are positioning ourselves to help satisfy this market need for Internet access
through the use of our GSI(TM) and Nexstream products as a method of
communication and the ChannelCasting(TM) service as a means of broadcasting
data. Currently we provide products and services for satellite Internet access
and data delivery to include businesses, educational institutions, and
government agencies. At this time, we do not offer services to home users and we
have no immediate plans to do so. We developed our GSI(TM), and Nexstream
products, along with, ChannelCasting(TM) to help satisfy voids in the Internet
access and data delivery market.

        Our strategy is based on the development and marketing our products and
services in five areas.

        First, we plan to build a worldwide satellite network by installing
three or more network operation centers (NOC) placed in strategic locations
throughout the world. Each of these NOCs will serve as a means of connecting to
each other and each a different satellite supporting a specific region. When
completed, this worldwide satellite network will allow us to provide Internet
access to a much larger market in countries where there is little or no
telecommunications infrastructure. We have already begun to implement this
strategy by entering into a service agreement with Exodus Communications, Inc.
(EXDS). This service agreement allows us to establish a satellite uplink
facility at an Exodus Internet Data Center(TM) in Southern California. This
agreement will provide us



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with sufficient Internet capacity to service our worldwide network business
strategy and corresponding bandwidth requirements. In conjunction with our
present NOC in Raleigh, North Carolina, the completion of the new satellite
uplink facility will provide the security of redundant operation centers. Once
in place, this new facility will have the capability to reach Pacific Rim and
Asia customers via trans-Pacific satellites while our East Coast facility will
service the United States and Europe.

        Second, we plan on marketing our products and services to the business
continuity market worldwide. Our products and services can provide an effective
means of back-up to any business which relies on Internet access or remote
Internet connections for mission critical applications.

        Third, we plan on marketing our products and services to rural and urban
markets on a worldwide basis which currently cannot receive high-speed Internet
and network connectivity due to limited telecommunications infrastructure.

        Additionally we plan on marketing our products and services as a single
source vendor to national and multi-national businesses interested in a uniform
platform for connectivity and Internet access.

        Finally, we plan on utilizing our subsidiaries to identify new uses and
markets based on the company's core technology to support the company business
objectives.

        Our international strategy is to form joint ventures with strategically
positioned partners in Asia, Europe, Latin America, the Middle East and Africa.
At this time, we are in negotiation with a number of these partners but have not
signed any definitive agreements for these joint ventures.

        Our subsidiary i-xposure has entered into several additional marketing
and selling agreements for its products and services.

HISTORICAL SUMMARY OF THE COMPANY

        We were organized under the laws of the State of California on February
22, 1996, as Technology Guardian, Inc. On October 8, 1998, we merged into U.S.
Connect 1995, Inc. and on January 26, 1999, we changed our name to eSat, Inc.


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area networks, and in research and development of the products we currently
offer. We changed our name to "eSAT, Inc." on January 26, 1999.

        Research and development began in late 1996 for the satellite Internet
access products and services. The development of the satellite Internet products
and services continued during 1997 and into the first quarter of 1998. In the
first quarter of 1998, we terminated our sales of network computer related
products and concentrated entirely on the completion of our satellite Internet
access products and services. In the second quarter of 1998, we started beta
sales and installation of our initial (first generation) satellite Internet
access products. Beta sales involves the sales of products and services which
have been developed in a laboratory setting but have not been tested in actual
use. Beta installation means the first installations in a commercial setting,
often at a discount or at no cost in order for us to obtain additional
information for improving and completing the products and services. Through the
end of 1998, we beta tested our first generation satellite Internet product and
services. Beta testing on the first generation of products was terminated in
December 1998, such testing having been completed to our satisfaction.

        In the fourth quarter of 1998, we initiated development of a second
generation satellite Internet product and related satellite Internet service.
Development of the second generation of satellite Internet products and services
and beta testing of them was completed to our satisfaction in January 1999. They
were incorporated into our products known as the GSI(TM), and a number of them
have since been upgraded.

        Finally, in the fourth quarter of 1998, we completed installation of our
equipment at our network operations center ("NOC") in Durham, North Carolina.
The NOC houses our computer equipment and software, and functions as a junction
point for all the Internet related data traffic from our customers and acts as
the uplink to the satellites. We contract with third parties for segments of
satellite time that we then resell to our customers. During the second quarter
of 1999, we launched our ChannelCasting(TM) technology followed by the initial
beta testing of the bi-directional Nexstream product in the third quarter of
1999 which was completed in December 1999.

PRODUCTS AND SERVICES

        GLOBAL SATELLITE INTERNET ("GSI(TM)") INTERNET GATEWAY. Our flagship
products, the Global Satellite Internet ("GSI(TM)") gateway and Nexstream, uses
satellite technology to provide Internet access services at speeds that compete
with the fastest available from any other provider.

        The GSI(TM) gateway system consists of a computer configured with
hardware and software, a satellite dish, and appropriate satellite dish mounting
equipment. We capitalize on the imbalance between the small amount of data sent
to access the Internet and the large amount returned. For example, a person
accessing our web site asks his Internet service



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provider to connect him to "www.esatinc.com." This requires 15 characters and
the click of a mouse. The connection delivers him to our web page which contains
thousands of characters of information plus some pictures. We can couple any
type of computerized information request method for the small amount of request
data with our small satellite dish for sending large amounts of response data
and can provide high-speed Internet access for an entire local area network. The
user is still required to pay the cost of an Internet connection for the request
data. This cost should be factored in when comparing the costs of our products
and services with the cost of competing services. The delivery system for all of
our products, the GSI(TM), connects to an existing local area network to provide
Internet access to each workstation. The GSI(TM) is delivered completely
pre-configured as a plug and play module for local area networks and is
compatible with Microsoft Windows operating systems, Apple's Macintosh operating
systems and UNIX operating systems. The GSI(TM) is designed to incorporate ease
of installation and use with a plug and play format, and quality high-speed
Internet access. "Plug and play format" is a format based on hardware and
software standards designed to allow computers and peripheral computer equipment
to be plugged together with standardized cables and the computer that is
compatible with a variety of networking hardware or software, with little effort
by the user to configure the computer peripheral to operate properly.

        We currently offer a GSI(TM) gateway for local area networks with
contracts of up to a three year duration. The current standard price per month
for this service is $495 per installation. This price may change from time to
time depending on a number of market factors.

        CHANNELCASTING(TM). Our ChannelCasting(TM) service permits the broadcast
of large data and video files to multiple locations simultaneously using our
GSI(TM) products. With standard delivery of data and video files over the
Internet, each destination point requires its own stream of data.
ChannelCasting(TM) uses the broadcast properties of satellite transmission to
send a single stream of files which is received at many locations, a multi-cast.
For example, if a large video file needs to be delivered to many schools, the
file would be transmitted to our ChannelCasting(TM) servers through the Internet
or a private network connection and then, at our NOC in North Carolina, it would
be sent as a single stream to a satellite, and then transmitted to the specified
multiple destinations simultaneously. Presently, we only lease broadcast
capacity on one satellite, but the satellite is capable of broadcasting the data
for reception to numerous locations from one location.

        ChannelCasting(TM) is being designed to permit large corporations,
government agencies and learning centers to broadcast information to multiple
locations at the same time. We provide a conditioned satellite receiver computer
card and additional software installed in the GSI(TM) gateway. The conditioned
satellite computer card processes digital data to be sent over our system.
Customers may use the ChannelCasting(TM) service as a stand-alone feature or use
it as an additional enhancement with the satellite Internet access. We have
developed and tested ChannelCasting(TM) and released its beta



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version on April 30, 1999.

        NEXSTREAM. Nexstream uses specially configured satellite dishes to
permit the user to receive data and transmit data through our satellite system.
The result is intended to be a secure, transportable, cost-effective and
high-speed communications system which provides significant benefits for
organizations with offices and facilities in remote geographic areas. The
technology is effective where privacy and security are a concern, or where
mission-critical applications dictate having a non-ground based system.
Nexstream may also be employed as a back up for ground based communication lines
in case of a potential disaster, or as the primary link to remote areas before
and after a disaster.

        NEW PRODUCT DEVELOPMENTS. In addition to our core business described
above, we are in the process of developing three other complimentary lines of
business through our subsidiaries, Global Media Technologies, Inc. (GMT),
SkyFrame, Inc. (dba SkySP(TM)), and i.xposure, Inc. GMT is focusing on the
development of satellite-based products which take advantage of our high-speed,
high-quality video and data delivery capabilities. We plan to partner with
companies that provide programs and other information in the education,
entertainment and business-to-business markets with the goal of becoming a major
provider of such materials via satellite. GMT has plans to offer a variety of
exciting and innovative products and services to educational, consumer and
business markets using our core satellite technologies.

        SkySP(TM) was formed in July 1999 as a response to the needs expressed
by under-served rural Internet users and especially rural school districts.
SkySP(TM) utilizes our GSI(TM) and Nexstream technology to provide low cost
Internet services to rural Internet service providers and school districts that
otherwise do not have the means to efficiently offer Internet services.
According to Yankee Group, a research firm, it estimates that approximately 40%
of the United States will not be able to get any high-speed service to the
Internet. Using our core technologies, we are able to provide rural and urban
locations with high-speed Internet access with minimal capital investment at the
local level. Users can access the SkySP(TM) network through a local telephone
number which connects the user with our GSI(TM) gateway which in turn connects
them to our satellite uplink center. Information on the Internet is then relayed
back to the GSI(TM) gateway from the satellite and transmit it to the client
over telephone lines.

CORE TECHNOLOGY

        Our technology relies on the monitoring and managing large segments of
satellite bandwidth and the ability to optimize these services for use in
business applications. Our current products and services consist of a
configuration of software and a satellite receiver card for a computer allowing
a user to obtain satellite access to the Internet or other remote locations by
splitting the messages sent out by the user over any conventional method, from
the information received by the user via satellite. This hybrid technology
allows a user access to the Internet or network from local workstations. The



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GSI(TM) connects to the Internet via any conventional method such as modem or
cable lines. High-speed retrieval of information from the Internet is achieved
via satellite and the GSI(TM) connected to a local network, which connects to
the desktop user. One portion of our technology manages the returning data by
directing it to be sent through a satellite uplink facility to an orbiting
satellite, which transmits the returning data from the satellite to the user.
The user receives this data through a small satellite dish which is linked to
the GSI(TM). Nexstream uses specialized satellite dishes to enable
bi-directional data communications from the satellite. However, this
bi-directional feature has not been extensively tested in the marketplace and is
subject to all the uncertainties of untested products.

        Our GSI(TM) and Nexstream gateway systems includes a computer which is
pre-loaded with the software and pre-configured for use, a satellite receiver
card installed in the computer, and the satellite dish. The customer may
contract with a local installer for the installation of the satellite dish, or
we will deliver the GSI(TM) gateway in plug and play condition, requiring only
that the customer change its routing of data flows on the its workstations to
utilize our Internet gateway. Installation of the GSI(TM) and Nexstream gateways
do not require us to provide on-site personnel.

MARKETING AND SALES

        We sell our products and services to: businesses, schools, libraries,
hotels, tract home developers, hospitals, medical facilities and government
agencies through our own sales persons, value-added resellers and other
independent sales organizations. Approximately 60% of our sales are to
businesses and governmental agencies and 40% to schools. Notwithstanding these
efforts, our sales to date have been small. See Item 7, Management's Discussion
and Analysis. There are no consumer/home products or services at this time.

        We employs sales staff of ten people (nine located in the home office
and one located in Washington, D.C.). They focus their sales activity on the
generation of leads, the establishment of contacts, and the closure of sales to
a variety of small, medium and large businesses.

        Additionally, we distribute our products through value-added resellers
("VARs") and independent sales organizations. These organizations allow us to
increase our visibility and sales of products and services by entering into
contracts for these organizations to undertake sales activities for a percentage
commission of any sale realized. Approximately half of our sales to date have
originated and been completed using these organizations. Currently, we have
VAR and independent sales relationships, no single one of which is material to
our operations. Sales through the VAR channel have been modest, with the
majority of our sales having been realized on a direct sale basis. We have
re-focused on enhancing this distribution channel with traditional wide area
network VARs and systems integrators. The result of this effort has been a
significant increase in both quantity and size of contracts under negotiation.
We intend to enter into relationships with between one hundred to two hundred
VARs within the next twelve months. We expect to realize the majority of North
American revenues through this channel.



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        From time to time we employ a telemarketing team to initially identify
institutions that could potentially benefit from the company's products and
services. Telemarketing means unsolicited telephone calls are made to
institutions for purposes of business development. We also use public relations
activities as well as Internet and traditional advertising, including radio,
in-flight advertisements and print media.

GOVERNMENT AGENCY MARKET

        We are actively marketing our products to the Federal Government. The
contracting and sales cycle with government agencies can often require a year to
complete. We have completed an installation with the San Bernardino County,
California, Sheriff's Department and with the U.S. Department of Forestry in
Dubois, Idaho. The performance and reliability of these systems are currently
under evaluation. The sales of units to these agencies depends on their
favorable evaluation. There is no assurance that we will make any significant
sales to government agencies.

THE EDUCATIONAL MARKET

        The Federal Government's "E-RATE" program provides $1.8 billion of
federal funding for schools and libraries to be used exclusively for providing
Internet access to schools. Our marketing efforts are geared toward taking
advantage of the Federal E-RATE Program. The Federal Government allocates E-RATE
funds to the states in block grants, which must use the funds in a "fair and
equitable" format. The requirement means that educational sites throughout a
state must have uniform speeds and pricing. Once states receive funding, the
E-RATE Program has an anticipated duration of 18 months. We believe we meet all
government guidelines for providing Internet access to schools in the manner
required by the E-RATE program. However, at the present time, we have no
significant sales attributable to this E-RATE program.

THE INTERNATIONAL MARKET

        We plan for joint ventures with one or more parties headquartered in
various countries to be our international partners. We expect these joint
ventures to contribute significant revenue in the future. We have identified
major areas of the world capable of receiving transmissions from a
geo-stationary satellite. The planned joint ventures would establish our
satellite service in the international regions as follows: Asia North, Asia
South, Europe, Eastern Europe/Russia, India, Central America, Latin America, the
Middle East, and Africa. The initial funding for a joint venture is expected to
be provided by the partner in the headquartered country. We plan to focus on
Asia first so that we can be in a position to provide products and services to
the rapidly growing markets in the Pacific Rim basin including Hong Kong,
mainland China, Taiwan, Australia, New Zealand, Singapore, Malaysia, Thailand,
Philippines, Indonesia and others. At the present time, we do not have any
existing joint venture in the international market and has not entered into any
written agreement for international satellite service.

DIVERSIFICATION OF BUSINESS



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        We are not dependent on any one customer or group of customers. However,
our business plan calls for significant orders from governmental agencies and
large corporations.

BACKLOG OF ORDERS

        We currently do not have a backlog of orders.

INTELLECTUAL PROPERTY

        We believe that our intellectual property is an important factor in
maintaining our competitive position in our core eSAT businesses, as well as the
businesses of Global Media Technologies and i-xposure. To protect our
proprietary rights, we rely generally on patent, copyright, trademark and trade
secret laws, as well as confidentiality agreements with our employees,
consultants, vendors and corporate business partners. Despite these protections,
a third party could, without authorization, copy or otherwise obtain and use our
products or technology to develop similar technology. Moreover, our agreements
with employees, consultants and others who participate in product and service
development activities may be breached, we may not have adequate remedies for
any breach, and our trade secrets may become known or independently developed by
competitors.

        Patents. The Company currently has filed two pending patent
applications. In addition, we are aggressively pursuing additional patent
applications for devices and processes directly and indirectly related to the
initial two filings. Any patent applications may not be granted, future patents
may be challenged, invalidated or circumvented, and the rights granted under a
patent that may be issued may not provide competitive advantages to us. Many of
our current and potential competitors dedicate substantially greater resources
to protection and enforcement of intellectual property rights, especially
patents. If a blocking patent has been issued or is issued in the future, we
would need either to obtain a license or to design around the patent. We may not
be able to obtain a required license on acceptable terms, if at all, or to
design around the patent.

        Trademarks. We have applied for registration of all of our primary
trademarks in the United States, including "eSAT", "SatBone," "S-Bone,"
"i-Xposure" and "pid". We intend to continue to pursue the registration of these
and certain of our other trademarks in the United States and in other countries;
however, we cannot be sure that we can prevent all third-party use of our
trademarks. We have obtained the Internet domain name "esatinc.com" but we are
aware that an Irish telecom company has the same name ("ESAT") and the Internet
domain name "esat.com." We have not been asked to cease using the name"eSAT."

        Copyrights. We have developed software for our eSAT business, i-xposure
business and Global Media Technology business which is protected by copyright
law. There is no assurance that the steps we take will be adequate to protect
these rights or that



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we will be successful in preventing the illegal duplication, distribution or
other use of our software. Our failure to adequately limit the unauthorized
redistribution of our software could result in litigation or liability, which
could harm our business.

        The laws of some foreign countries do not protect our proprietary rights
to the same extent as do the laws of the United States, and effective patent,
copyright, trademark and trade secret protection may not be available in these
jurisdictions.

        We rely on technology and other proprietary matter that we license from
third parties, including software and images that are integrated with internally
developed software and used in our products and services. Third-party licenses
may not continue to be available to us on commercially reasonable terms. The
loss of any of these rights could harm our business.

        Third parties may assert infringement claims against us. From time to
time we may be subject to claims in the ordinary course of our business,
including claims of alleged infringement of the trademarks, patents and other
intellectual property rights of third parties by us or our users. Any such
claims, or any resultant litigation, should it occur, could subject us to
significant liability for damages and could result in the invalidation of our
proprietary rights. In addition, even if we were to win any such litigation,
such litigation could be time-consuming and expensive to defend, and could
result in the diversion of our time and attention, any of which could materially
and adversely affect our business, results of operations and financial
condition. Any claims or litigation may also result in limitations on our
ability to use such trademarks, patents and other intellectual property unless
we enter into arrangement with such third parties, which may be unavailable on
commercially reasonable terms.

COMPETITION

        We compete in the market for providing Internet access services to the
business, government, school, and nonprofit sectors. Our major competitors are
Loral Inc., Hughes Network Systems, and Spacenet.

        We anticipate competition from Internet service providers which provide
satellite downlink data transmission in the commercial/business, government and
education sectors. Our competitors also include the established Internet service
providers offer a variety of connection features and speeds of access. Some use
telephone lines, some use television cable systems, and others offer satellite
focused services. There are numerous providers of these services and no one
provider dominates the market. Many service providers are affiliated with
telephone or cable television companies which provides capital resources and
customer marketing opportunities unavailable to us. At this time, we believe no
competitor has a dominant position.

        We have not established a competitive position in the market place,
since we have only recently commenced the marketing and sales of our products.
As a result, potential



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customers are unable to evaluate other customer's experiences in using our
products. This lack of track record might dissuade some customers from
purchasing our products until there is a greater customer base and a broader
evaluation of the quality and effectiveness of our products and services.

        We compete principally on price, performance, and availability of
service. The service is available in any location, particularly remote
locations, due to the wide satellite broadcast footprint. We offer an easy to
use format, with each gateway delivered pre-configured for the customer's
geographic location, local connection to the Internet, and connection to a local
area network. Our pricing of products and services is subject to change in
accordance with market changes and competitive conditions.

        The positive factors pertaining to our competitive position include
offering a product for a price of $495 per month, subject to change to meet
competitive circumstances, widespread availability, and an easy to use format.
The negative factors pertaining to our competitive position are lack of product
awareness and of brand recognition among potential customers, lack of widespread
user-base, and lack of customer track record.

RESEARCH AND DEVELOPMENT

        We plan to devote significant resources to continued research and
development of various Internet related products and services.

EMPLOYEES

        We currently have thirty-six employees. Twenty-five employees are
located at the Company's headquarters in Fountain Valley, California, ten are
located at the I-xposure facility in Irvine, California, and one sales
representative is located in Texas.

<PAGE>   13

                                  RISK FACTORS


WE HAVE REPORTED LOSSES FROM OPERATIONS FOR OUR LAST THREE YEARS ENDED DECEMBER
31, 1999, AND, IF WE DO NOT BECOME PROFITABLE, OUR BUSINESS COULD BE ADVERSELY
AFFECTED AND THE VALUE OF YOUR INVESTMENT COULD DECLINE.

        For the year ended December 31, 1999, we incurred a loss of $8,925,896,
including all research and development costs. For the fiscal year ended December
31, 1998, we incurred a loss of $2,957,991 as compared to a loss of $433,853 for
the fiscal year ended December 31, 1997. The losses were primarily due to: (i)
employee compensation which increased because of additional sales and operations
staff hired in 1998 in anticipation of future growth of our operations; (ii)
expenses related to marketing; and (iii) lack of product sales. In addition, we
incurred significant research and development costs associated with new
products. There can be no assurance that we will be able to generate sufficient
revenues to operate profitably in the future or to pay our debts as they become
due. We are dependent upon successful completion of future capital infusions to
continue operations.

WE DEPEND ON SATELLITE TRANSMISSION. SATELLITE FAILURE COULD HAVE A SUBSTANTIAL
NEGATIVE AFFECT ON OUR BUSINESS OPERATIONS.

        We currently use a single satellite to provide satellite Internet
services. There is risk associated with this dependence. There are two types of
possible failures to the satellite: a failure of the individual transponder that
is used and a failure of the entire satellite. If there is a failure of a
transponder, the satellite operator contractually obligated to move us to
another transponder. This would create a minimum interruption to customers,
likely less than 24 hours. If the satellite itself completely fails, we will
have to move our services to another satellite. Our transmissions conform to
industry standards so there are several possible alternative satellites. Our
current satellite provider engages in quarterly reviews of available
like-satellite space and is ready to contract for that space if needed. If the
entire satellite were to fail, a one to five day outage of services might occur
depending on the availability of other satellites. Additionally, a repointing of
the receiving dishes on the ground would likely be required. The repointing of
the receiving dishes on the ground would cost us approximately $300 per
customer. In the event of any service disruption due to satellite failure, our
customers would be credited for the dollar value of the amount of time they are
without the satellite Internet service. Based on a standard contract paying $495
per month for the use of our GSI(TM) equipment and related satellite Internet
service, this would be equal to $16.50 per day per customer. We intend to
install a second U.S. Network Operating Center ("NOC") in the first half of
fiscal 2000. This second NOC will be located in Orange County, California, and
will utilize a different satellite than the existing NOC. This second NOC and
satellite provides certain redundancies in the event of a failure. In the event
of a satellite failure, we could also be subject to loss-of-business claims, due
to the reliance by business customers on the satellite Internet services we
provide. A sustained disruption in satellite service could materially impact our
ability to continue operations.


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WE MIGHT NOT BE SUCCESSFUL IN IMPLEMENTING OUR DOMESTIC AND WORLDWIDE PROPOSED
EXPANSION WHICH WILL RESULT IN OUR BEING A SMALLER AND LESS COMPETITIVE COMPANY.

        Over the next two years, we intend to expand our operations domestically
and internationally, and will seek to expand the range of our services and
penetrate new geographic markets.

        However, we have no experience in effectuating rapid expansion or in
managing operations which are geographically dispersed. There can be no
assurance that our current management, personnel and other corporate
infrastructure will be adequate to manage our growth. Expansion internationally
will require joint venture partners outside the United States which will provide
capital and personnel to fund the operations internationally. As a company, we
have very limited experience in international joint venture transactions. We
have no joint venture partners at this time. There can be no assurance that we
will be able to successfully joint venture with entities in other parts of the
world, or that joint venture partners will be able to raise the capital and
employ the personnel required to successfully implement worldwide operations.
Accordingly, there is significant risk that we will not be able to meet our goal
of substantial domestic and international expansion within the next two years.
Failure to complete our intended expansion will result in our being a smaller
and less competitive company.

WE HAVE A LIMITED OPERATING HISTORY.

        We were incorporated in 1995, but did not commence operations until
1997. Since then, our business has been substantially refocused. Thus, we have a
limited operating history upon which an evaluation of us can be based. Our
prospects are subject to the risks, expenses and uncertainties frequently
encountered by companies in the new and rapidly evolving markets for Internet
and interactive media products and services. In addition, we will be subject to
all of the risks, uncertainties, expenses, delays, problems and difficulties
typically encountered in the growth of an emerging business and the development
and market acceptance of new products and services. There can be no assurance
that unanticipated expenses, problems or technical difficulties will not occur
which would result in material delays in market acceptance of our products and
services or that our efforts will result in such market acceptance.

TIMING OF ORDERS FOR AND CONTINUED DEVELOPMENT OF OUR SERVICES AND PRODUCTS WILL
CAUSE OUR QUARTERLY RESULTS TO FLUCTUATE AND CONSEQUENTLY YOU SHOULD NOT RELY ON
THE RESULTS OF ANY PERIOD AS AN INDICATION OF FUTURE PERFORMANCE.

        We have experienced material period-to-period fluctuations in revenue
and operating results. We anticipate that these periodic fluctuations in revenue
and operating results will occur in the future. We attribute these fluctuations
to a variety of business conditions that include:

        -       the volume and timing of orders we receive from quarter to
                quarter;

        -       the introduction and acceptance of our new services and products
                and product enhancements by us;

<PAGE>   15

        -       purchasing patterns of our customers and distributors; and

        -       market acceptance of services and products sold by our
                distributors.

        As a result, we believe that quarterly revenue and operating results are
likely to vary significantly in the future and that quarter-to-quarter
comparisons of our operating results may not be meaningful. You should therefore
not rely on the results of one quarter as an indication of future performance.

OUR INTELLECTUAL PROPERTY MAY BE CHALLENGED

        As is the case with many technology companies, the rapid pace of change
in technology could cause our intellectual property to be challenged. These
challenges could come from stronger companies who believe that the use of our
technology interferes with their use or that they own all of the technology and
related rights. If any of these challenges were successful, our ability to sell
product based on our technology or intellectual property could be severely
impaired.

WE MUST DO BUSINESS IN A DEVELOPING MARKET AND FACE NEW ENTRANTS. FAILURE TO
MEET THE CHALLENGES OF NEW PRODUCTS AND COMPETITORS WILL REDUCE OUR MARKET SHARE
AND THE VALUE OF YOUR INVESTMENT.

        The market for Internet products and computer software is rapidly
evolving and is characterized by an increasing number of market entrants who
have introduced or developed products and services. The diverse segments of the
Internet market might not provide opportunities for more than one dominant
supplier of products and services similar to ours. If a single supplier other
than us dominates one or more market segments, our revenue is likely to decline
and we will become a less valuable company.

BECAUSE WE LACK THE NAME RECOGNITION, CUSTOMER BASE AND RESOURCES OF OTHER
COMPANIES PROVIDING INTERNET ACCESS AND OTHER INTERNET RELATED PRODUCTS AND
SERVICES MARKET, WE MAY BE UNABLE TO COMPETE SUCCESSFULLY WHICH WOULD REDUCE OUR
REVENUE AND THE VALUE OF YOUR INVESTMENT.

        The markets for our products are intensely competitive and are likely to
become even more competitive. Increased competition could result in:

        -       pricing pressures, resulting in reduced margins;

        -       decreased volume, resulting in reduced revenue; or

        -       the failure of our products to achieve or maintain market
                acceptance.

<PAGE>   16

        Any of these occurrences could have a material adverse effect on our
business, financial condition and operating results. Each of our products faces
intense competition from multiple competing vendors. Our principal competitors
include Loral, Inc., Hughes Network System and Spacenet. Many of our current and
potential competitors have:

        -       longer operating histories,

        -       greater name recognition,

        -       access to larger customer basis, or

        -       substantially greater resources than we have.

        As a result, our principal competitors may respond more quickly than we
can to new or changing opportunities and technologies. For all of the reasons
stated above, we may be unable to compete successfully against our current and
future competitors.

WE MAY HAVE INSUFFICIENT CAPITAL FOR FUTURE OPERATIONS WHICH WOULD DIMINISH THE
VALUE OF YOUR INVESTMENT.

        Based on current proposed plans and assumptions relating to our
operations, we anticipate that current cash reserves, together with projected
cash flow from operations and the sale of additional securities, will be
sufficient to satisfy our contemplated cash requirements through fiscal 2000.
Thereafter, we will require substantial additional financial resources to fund
its operations. The expansion into new product areas will also require
substantial financial funding. The failure to acquire additional funding when
required will have a material adverse effect on our business prospects. Without
the proper financing of customer contracts by a finance company or additional
equity, we are likely to have difficulty in sustaining on-going operations.

OUR FINANCIAL STATEMENTS CONTAIN A "GOING CONCERN" QUALIFICATION.

        The audit report accompanying our Financial Statements for the year
ended December 31, 1999 contains a qualification that certain conditions
indicate that we might not be able to continue as a going concern. The financial
statements do not contain any adjustments that might be necessary in such a
case. Note 2 to the financial statements indicates that substantial operating
losses account for this uncertainty. Many investment bankers and investors
view companies with a "going concern" qualification as less desirable for
investment. Accordingly, we might have a more difficult time raising equity
capital or borrowing capital at all or on favorable terms. Our suppliers might
be less willing to extend credit. Our potential customers might be less willing
to purchase our products and services if they believe that we will not be viable
enough to provide service, support, back-up, and follow-on products when needed.
Furthermore, we might be disadvantaged in recruiting employees who might be
concerned about the stability of

<PAGE>   17

employment with us. Therefore, the "going concern" qualification can have severe
adverse consequences on us.

WE ARE DEPENDENT ON SUCCESSFUL NEW PRODUCTS AND PRODUCT ENHANCEMENT
INTRODUCTIONS AND MAY SUFFER PRODUCT DELAYS.

        Our success in the Internet access business depends on, among other
things, the timely introduction of successful new products or enhancements of
existing products to replace declining revenues from older, less efficient
products. Consumer preferences for software products are difficult to predict,
and few consumer software products achieve sustained market acceptance. If
revenues from new products or enhancements do not replace declining revenues
from existing products, our business, operating results and financial condition
could be materially adversely affected. The process of developing Internet
access products such as ours is extremely complex and is expected to become more
complex. A significant delay in the introduction of one or more new products or
enhancements could have a material adverse effect on the ultimate success of
such products and on our business, operating results and financial condition.

WE HAVE NO ASSURANCE OF MARKET ACCEPTANCE OF OUR PRODUCTS AND SERVICES. IF WE
ARE UNABLE TO RAISE MARKET AWARENESS OF OUR PRODUCTS AND SERVICES, WE MAY
EXPERIENCE DECLINING OPERATING RESULTS WHICH WOULD DIMINISH THE VALUE OF YOUR
INVESTMENT.

        We are at an early stage of development and our earnings growth depends
primarily upon market acceptance of our products and services. There can be no
assurance that our product development efforts will progress further with
respect to any potential new products or that they will be successfully
completed. In addition, there can be no assurance that our potential new
products will be capable of being produced in commercial quantities at
reasonable costs or that they will achieve customer acceptance.

        There can be no assurance that our products and services will be
successfully marketed. In addition to our own direct sales force, we are
dependent on value-added resellers and distributors to market its products.
There is no assurance that any distributor or other reseller will be successful
in marketing our products.

        Our success is dependent in part on our ability to sell our products and
services to governmental agencies, including public school districts, and large
business organizations. Selling to governmental agencies and larger companies
generally requires a long sales process, with multiple layers of review and
approval.

        In sales to governmental agencies, nonbusiness factors often enter into
the purchase decision. Such factors include the residence and origin of the
supplier of the products, the nature of the supplier and the distributor, the
ethnic and gender characteristics of personnel and owners of the company selling
or distributing the products, political and other contacts, and other peculiar
factors. Accordingly, the success of selling to these potential customers is
uncertain.

<PAGE>   18

        We do not have sufficient experience in marketing our products to
determine the optimum distribution methods. It is unclear whether marketing
through distributors or value-added resellers or mass retailers will result in
acceptable sales levels. Accordingly, as we learn more, we might have to revise
our sales, distribution, and marketing strategies and implementation.

WE MIGHT BECOME SUBJECT TO FURTHER GOVERNMENT REGULATION WHICH COULD HARM OUR
PROSPECTS.

        Except for a license from the Federal Communications Commission, we are
not currently subject to direct regulation by any government agency in the
United States, other than regulations applicable to businesses generally, There
are currently few laws or regulations directly applicable to access to or
commerce on the Internet. However, due to the increasing popularity and use of
the Internet, it is possible that laws and regulations may be adopted with
respect to the Internet, covering issues such as user privacy, pricing and
characteristics and quality of products and services. Such laws or regulations
could limit the growth of the Internet, which could in turn decrease the demand
for our proposed products and services or increase our cost of doing business.
Any new legislation or regulation or the application of existing laws and
regulations to the Internet in unexpected ways could have an adverse effect on
the Company's business and prospects.

WE MIGHT FACE LIABILITY FOR INFORMATION OBTAINED OR DISTRIBUTED THROUGH THE
PRODUCTS AND SERVICES WE PROVIDE.

        Because materials may be downloaded by the Internet services which we
operate or facilitate and may be subsequently distributed to others, there is a
potential that claims will be made against us for defamation, negligence,
copyright or trademark infringement, personal injury or other theories based on
the nature and content of such materials. Sometimes, such claims have been
successful against Internet service providers in the past. Our general liability
insurance might not cover potential claims of this type or might not be adequate
to indemnify us for all liability that may be imposed. Any imposition of
liability or legal defense expenses that are not covered by insurance or in
excess of insurance coverage could have a material adverse effect on our
business, operating results and financial condition.

LOSS OF KEY MEMBERS OF OUR SENIOR MANAGEMENT COULD ADVERSELY AFFECT OUR BUSINESS
AND PROSPECTS.

        Our success will be dependent largely upon the personal efforts of our
Chief Executive Officer, Michael C. Palmer, and our Chairman of the Board,
Chester L. Noblett, Jr., as well as other senior managers. The loss of their
services could have a material adverse effect on our business and prospects. We
have no life insurance on any of our officers. Mr. Palmer's and Mr. Noblett's
services are governed by agreements. Our success is also dependent upon our
ability to hire and retain additional qualified management, marketing,
technical, financial and other personnel. Competition for qualified personnel is
intense and there can be no assurance that we

<PAGE>   19

will be able to hire or retain qualified personnel. Any inability to attract and
retain qualified management and other personnel could have a material adverse
effect on us.

IF OUR COMMON STOCK IS SUBJECT TO PENNY STOCK RULES, YOU MAY HAVE GREATER
DIFFICULTY SELLING YOUR SHARES

        The Securities Enforcement and Penny Stock Reform Act of 1990 applies to
stock characterized as "penny stocks," and requires additional disclosure
relating to the market for penny stocks in connection with trades in any stock
defined as a penny stock. The Securities and Exchange Commission has adopted
regulations that generally define a penny stock to be any equity security that
has a market price of less than $5.00 per share, subject to certain exceptions.
The exceptions include exchange-listed equity securities and any equity security
issued by an issuer that has:

        -       net tangible assets of at least $2,000,000, if the issuer has
                been in continuous operation for at least three years;

        -       net tangible assets of at least $5,000,000, if the issuer has
                been in continuous operation for less than three years; or

        -       average annual revenue of at least $6,000,000 for the last three
                years.

        Unless an exception is available, the regulations require the delivery,
prior to any transaction involving a penny stock, of a disclosure schedule
explaining the penny stock market and the associated risks.

        If our financial condition does not meet the above tests, then trading
in the common stock will be covered by Rules 15g-1 through 15g-6 and 15g-9
promulgated under the Securities Exchange Act. Under those rules, broker-dealers
who recommend such securities to persons other than their established customers
and institutional accredited investors must make a special written suitability
determination for the purchaser and must have received the purchaser's written
agreement to a transaction prior to sale. These regulations would likely limit
the ability of broker-dealers to trade in our common stock and thus would make
it more difficult for purchasers of common stock to sell their securities in the
secondary market. The market liquidity for the common stock could be severely
affected.

YOU COULD SUFFER DILUTION OF YOUR INVESTMENT IF CERTAIN WARRANTS ARE EXERCISED,
PREFERRED STOCK IS CONVERTED INTO COMMON STOCK, OR STOCK OPTIONS ARE EXERCISED

        As of March 28, 2000, we have a total of 18,623,725 shares of common
stock outstanding. We have issued warrants to purchase 5,039,163 shares of
common stock at prices ranging from $0.72 to $14.78 per share, as well as
options to purchase 3,230,887 shares of common stock at prices ranging from
$0.72 to $13.13 per share. Under a subscription agreement, we have sold
$7,000,000 of Series A and Series B Convertible Preferred Stock that, based on a
maximum conversion price of $2 per share, will convert into at least 3,500,000

<PAGE>   20

shares of common stock. We have issued $5,000,000 of Series C Convertible
Preferred Stock that may be converted into shares of common stock based on a
formula tied to market price. Issuance of any of these shares will dilute your
interest in our company.

        In November 1998, we entered into a subscription agreement with a
private investor wherein he was to purchase 2,092,000 shares of common stock for
$1.30 per share which we determined was a reasonable price at that time. He was
not able to raise the funds to purchase the stock and we cancelled the
subscription agreement. He has now sued us to compel us to issue those shares to
him alleging that we breached the agreement. If his lawsuit is successful, we
will be required to issue up to an additional 2,092,000 shares of common stock
at a price substantially below the current market price which would dilute the
interest of our other common stockholders.

ISSUANCE OF OUR AUTHORIZED PREFERRED STOCK COULD DISCOURAGE A CHANGE IN CONTROL,
COULD REDUCE THE MARKET PRICE OF OUR COMMON STOCK AND COULD RESULT IN THE
HOLDERS OF PREFERRED STOCK BEING GRANTED VOTING RIGHTS THAT ARE SUPERIOR TO
THOSE OF THE HOLDERS OF COMMON STOCK

        We have already committed to issue 3,550,000 shares of preferred stock
of which 50,000 shares have been issued. All have voting rights on all matters
decided by shareholders. The other 50,000 shares have the right to cast the
number of votes of common shares that those shares would convert into on all
matters on which stockholders may vote. We are authorized to issue an additional
6,450,000 shares of preferred stock without obtaining the consent or approval of
our stockholders. The issuance of preferred stock could have the effect of
delaying, deferring, or preventing a change in control. We may also grant
superior voting rights to the holders of preferred stock. Any issuance of
preferred stock could materially and adversely affect the market price of the
commons stock and the voting rights of the holders of commons stock. The
issuance of preferred stock may also result in the loss of the voting control of
holders of common stock to the holders of preferred stock.

WE WILL PAY NO DIVIDENDS TO YOU

        We have not paid, and do not expect to pay, any dividends on common
stock in the foreseeable future.

MANY SHARES WILL BECOME ELIGIBLE FOR FUTURE SALE, WHICH MIGHT ADVERSELY AFFECT
THE MARKET PRICE FOR THE SHARES

        As of March 28, 2000, there are 18,623,725 shares of our common stock
outstanding which cannot be sold on the public market. Of these shares,
3,764,286 shares are held by directors, officers, or stockholders who have
beneficial ownership of 10% or more of the outstanding shares, including shares
subject to an option held by them. 14,859,439 shares are held by other
stockholders. These shares will become eligible for trading at various dates
commencing on February 12, 2000. In addition, shares of common stock which may
be acquired pursuant to outstanding convertible preferred stock or warrants will
be eligible for trading at

<PAGE>   21

various dates after they are acquired. We are unable to predict the effect that
sales of such shares may have on the then prevailing market price of the common
stock. Nonetheless, the possibility exists that the sale of these shares may
have a depressive effect on the price of our common stock.

ITEM 2. PROPERTIES.

        We do not own any materially important physical properties. We leases
our headquarters under the terms of a commercial lease for office space. The
lease term expires in October 2003. We could move our headquarters without any
material adverse affect on us. We lease space from Microspace Corporation in
Durham, North Carolina, which houses computer equipment owned by us in
connection with the uplink to the satellite network. We could replace the Durham
NOC without any material adverse effect on us.

ITEM 3. LEGAL PROCEEDINGS.

        The only material legal proceedings involve an action brought in the
United States District Court, Central District of California, on July 23, 1999,
by a private investor who entered into a subscription agreement in November 1998
to purchase 2,092,000 shares of



                                       11
<PAGE>   22
our common stock for $1.30 per share. He did not raise the funds to honor his
subscription and we canceled the subscription agreement. The investor has sued
to compel us to issue those shares to him alleging that we breached the
agreement. We believe his assertion is without merit and are defending the case.

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

        None.

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

        PRICE RANGE OF COMMON STOCK


        Our common stock is traded on the OTC Electronic Bulletin Board under
the trading symbol "ASAT" and on the Deutsche Borse AGXetra(TM) (Frankfurt,
Germany) under the trading symbol "ES8". The following table sets forth the high
and low bid prices for our common stock since the beginning of the fiscal year
1997 on the OTC Bulletin Board only as adjusted for the 1:50 reverse stock
split.. The quotations reflect inter-dealer prices, with no retail mark-up,
mark-down or commissions, and may not represent actual transactions. The
information presented has been derived from National Quotation Bureau, Inc.

<TABLE>
<CAPTION>
1997 FISCAL YEAR                       HIGH BID       LOW BID
----------------                       --------       -------
<S>                                      <C>           <C>
FIRST QUARTER                            25.00          6.25
SECOND QUARTER                           12.50          1.56
THIRD QUARTER                            12.50          1.56
FOURTH QUARTER                           12.50          1.00

1998 FISCAL YEAR

FIRST QUARTER                             1.00           .05
SECOND QUARTER                             .05           .05
THIRD QUARTER                             5.50           .625
FOURTH QUARTER                           16.00          5.00

1999 FISCAL YEAR

FIRST QUARTER                            22.6875       10.50
SECOND QUARTER                           14.251         7.876
THIRD QUARTER                             9.375         4.375
FOURTH QUARTER                            6.0625        1.1875

2000 FISCAL YEAR
</TABLE>



                                       12
<PAGE>   23

First Quarter through 3-28-00             7.375         3.156

On March 28, 2000, the last reported trade for our common stock was $3.375.

        As of March 28, 2000, there were 701 holders of record of our common
stock.

ITEM 6. SELECTED FINANCIAL DATA.


<TABLE>
<CAPTION>
                                                                          Year Ended December 31,
                                                               1999                1998                1997
                                                            -----------        ------------         ----------
<S>                                                         <C>                <C>                  <C>
Net sales                                                   $   423,640        $    341,047         $1,201,044
Income (loss) from continuing operations                    $73,199,403        $(93,724,176)        $ (453,798)
Income (loss) from continuing operations
     per share of common stock
     Basic                                                  $      4.02        $      (5.83)        $    (0.04)
     Diluted                                                $      3.43        $      (5.83)        $    (0.04)
Total assets                                                $ 5,156,463        $  3,261,387         $  453,920
Long-term obligations and redeemable preferred stock        $    59,416        $       0.00         $     0.00
Cash dividends declared per share of common stock           $      0.00        $       0.00         $     0.00
</TABLE>

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

FORWARD-LOOKING STATEMENTS

        This Form 10-K includes forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. This Act provides a
"safe harbor" for forward-looking statements to encourage companies to provide
prospective information about themselves so long as they identify these
statements as forward looking and provide meaningful cautionary statements
identifying important factors that could cause actual results to differ from
the projected results. All statements other than statements of historical fact,
including statements regarding industry prospects and future results of
operations or financial position, made in this Form 10-K are forward looking.
We use words such as "anticipates," "believes," "expects," "future" and
"intends" and similar expressions to identify forward-looking statements.
Forward-looking statements reflect management's current expectations and are
inherently uncertain. Our actual results may differ significantly from
management's expectations. This following discussion includes forward-looking
statements regarding expectations of future profitability of our Company's
business. Actual results could differ significantly for a variety of reasons,
including the rate of growth of the Internet, the amount that the Company
invests in new business opportunities and the timing of those investments, the
mix of products sold to customers, the mix of revenues derived from product
sales as compared to services, risks of inventory management, and risks of
distribution and productivity. These risks and uncertainties, as well as other
risks and uncertainties that could cause our actual results to differ
significantly from management's expectations, are described in greater detail
in the section entitled "Business--Risk Factors," which, along with the
following discussion, describes some, but not all, of the factors that could
cause actual results to differ significantly from management's expectations.

THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND NOTES THERETO
INCLUDED ELSEWHERE IN THIS REPORT

RESULTS OF OPERATIONS

1999 AS COMPARED TO 1998

        During fiscal years 1998 and 1999, we experienced difficulties selling
our products and collecting our accounts receivable. Our first product offering,
the unidirectional GSI(TM) product line, experienced technical difficulties due
to its reliance on outbound telephone lines and other Internet service providers
for its upstream connection to the Internet. During fiscal 1999, we worked on a
solution to this technical problem with the GSI(TM) product line, as well as the
development and market launch of service with our bi-directional Nexstream
product that utilizes a satellite connection for both upstream and downstream
connections to the Internet.

        Revenues totaled $423,640 and $341,047 for the years ended December 31,
1999 and 1998, respectively. The 1999 revenue reflects primarily fourth quarter
shipments of our Nexstream product, whereas our first generation satellite
products are represented in the 1998 balance.

        For the year ended December 31, 1999 and 1998, cost of sales were
$1,432,717 and $685,570, respectively. Cost of sales includes the cost of
hardware and software shipped to customers, satellite access time purchased from
a third party and inventory write-offs.

        For the year ended December 31, 1999 and 1998, operating expenses were
$7,916,819 and $2,613,468, respectively. The increase in operating expenses for
fiscal 1999 is due to higher levels of staffing and compensation, increased
marketing expenditures, increased research and development expenditures and
higher levels of professional fees paid to outside accountants and attorneys.



                                       13
<PAGE>   24

        Other income in 1999 and 1998 reflects primarily a compensation
adjustment recognized under APB 25.


1998 AS COMPARED TO 1997

        In fiscal 1998, revenue decreased by $860,000 or 72%, in comparison to
fiscal 1997. This revenue decline is directly attributable to our shift to
high-speed satellite Internet products and services and away from the sale of
networking and computing product and services. In the first quarter 1998, the
company discontinued selling networking and computing products and services. In
the fourth quarter 1998, the company discontinued selling its initial satellite
Internet products and services altogether, pending the completion of its GSI(TM)
products. During 1998, the company engaged in capital raising efforts and the
development of its GSI(TM) Internet related products and services along with
beta marketing and testing.

LIQUIDITY AND CAPITAL RESOURCES

        Our operations have been financed primarily from the sale of preferred
and common stock in 1999 and 1998. At December 31, 1999, the company had cash
and cash equivalents on hand of $3,458,561 and working capital of $2,572,374,
compared to cash and cash equivalents of $2,567,697 and working capital of
$2,366,879 at December 31, 1998.

        Net cash used in operating activities of $6,729,011 and $2,799,628 for
the years ended December 31, 1999, and 1998, respectively, was primarily
attributable to operating losses as adjusted for compensation expense recognized
under APB 25.

        Net cash used in investing activities was $806,917 and $293,800 for the
years ended December 31, 1999, and 1998, respectively. These expenditures were
primarily for the purchase of fixed assets.

        Net cash provided by financing activities of $8,426,792 and $5,673,132,
for the years ended December 31, 1999, and 1998, respectively, resulted
primarily from the net proceeds of the sale of preferred and common stock.

        To the extent our revenues increase in the coming twelve months, we
anticipate significant increases in operating expenses, working capital and
capital expenditures. The cost to purchase additional fixed assets, primarily
satellite transmission and receiving equipment and to finance working capital
requirements is approximately $20,000,000. We also anticipate the need to
construct our own network of Network Operations Centers (NOCs). A NOC is the
location of the operations equipment, which receives and transmits data from and
to a satellite. The construction of a NOC costs approximately $2,000,000 per
location.



                                       14
<PAGE>   25

In the fourth quarter of 1999, we entered into an agreement with Vantage
Capital, Inc. ("VCI") for the purpose of raising capital. Pursuant to that
agreement, a total of $2,000,000 of Series A 12% Convertible Preferred Stock has
been subscribed to VCI and $5,000,000 of Series C 6% Convertible Preferred Stock
has been issued to a third-party investor. Through December 31,1999, we had
received a total of $1,000,000 on the Series A subscription and the Series C
shares were fully paid. In March 2000, we entered into a private placement
agreement with an investor for the sale of $12,000,000 of restricted common
stock. In addition to the shares purchased, the agreement calls for the issuance
of warrants to purchase 6,000,000 shares of common stock at an exercise price of
$3.32 per share, the cancellation of the existing Form SB-2, the filing of Form
S-1 with respect to such shares and the redemption of the existing preferred
Series A subscription and Series C shares. Proceeds remaining after the
redemption of the Series A and C preferred stock will be used to fund working
capital and business expansion.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.



                                       15
<PAGE>   26

                              ESAT, INC. AND SUBSIDIARIES

                           CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF DECEMBER 31, 1999, 1998, AND 1997
                      TOGETHER WITH INDEPENDENT AUDITOR'S REPORT



                                       16
<PAGE>   27

                    [CARPENTER KUHEN & SPRAYBERRY LETTERHEAD]

                             INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Stockholders
eSat, Inc.
Fountain Valley, California

We have audited the accompanying consolidated balance sheet of eSat, Inc., and
subsidiaries, as of December 31, 1999, and the related consolidated statements
of operations, stockholders' equity, and cash flows for the year then ended.
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 audit.

We conducted our audit 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.

In our opinion, based on our audit, the financial statements referred to above
present fairly, in all material respects, the financial position of eSat, Inc.
as of December 31, 1999 in conformity with generally accepted accounting
principles.

The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern; however, the Company has
experienced losses from operations since inception, except for the reversal in
1999 of employee stock option compensation expense that was recognized in 1998
in accordance with APB 25, and substantial doubt exists as to its continuation
as a going concern. Continuation is dependent upon the success of future
operations. Management's plans in regard to those matters are described in Note
2. The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

Certain errors in applying APB 25 resulted in an understatement of previously
reported compensation expense for the year ended December 31, 1998 and was
discovered during the current year. Accordingly, the 1998 financial statements
have been restated and an adjustment has been made to compensation expense and
retained earnings to correct the error.


CARPENTER KUHEN & SPRAYBERRY


Oxnard, California
March 29, 2000


                                       17
<PAGE>   28
                      [LICHTER AND ASSOCIATES LETTERHEAD]


                          INDEPENDENT AUDITOR'S REPORT


To the Board of Directors
eSat, Inc. (Formerly Technology Guardian, Inc.)
Fountain Valley, California

Members of the Board:

We have audited the accompanying balance of eSat, Inc. (Formerly Technology
Guardian, Inc.) ("the Company") as of December 31, 1998 and 1997, and the
related consolidated statements of operations, changes in stockholders' equity,
and cash flows for the years then ended. 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. These 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 eSat, Inc. (Formerly Technology
Guardian, Inc.) as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the years in the period ended
December 31, 1998 and 1997 in conformity with generally accepted accounting
principles.

As discussed in Note Q to the financial statements, the Company has suffered
recurring losses, a decline in revenue and cash shortages. These issues raise
substantial doubt about the ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note Q. The financial
statements do not include any adjustment that might result from the outcome of
this uncertainty.

As discussed in Note P to the financial statements, the Company's 1998
Additional Paid in Capital previously reported as $8,614,398 should have been
$8,051,234. This discovery was made subsequent to the issuance of the financial
statements. The financial statements have been restated to reflect this
correction.

Also, certain errors in applying APB 25 resulted in an understatement of
previously reported compensation expense for the year ended December 31, 1998
and was discovered during the current year. Accordingly, the 1998 financial
statements have been restated and an adjustment has been made to compensation
expense and retained earnings to cover the error.

                                           /s/ LICHTER AND ASSOCIATES
                                           --------------------------

February 23, 1999, except for Note P, as to which the date is June 14, 1999,
  Notes J, K and Q as to which the date is October 22, 1999 and above correction
  as to which the date is March 29, 2000
Los Angeles, California
<PAGE>   29
                           ESAT, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1999 AND 1998


                                     ASSETS

<TABLE>
<CAPTION>
                                                             RESTATED
                                              1999            1998
                                           ----------       ----------
<S>                                        <C>              <C>
CURRENT ASSETS:
    Cash and cash equivalents              $3,458,561       $2,567,697
    Accounts receivable, net                   18,669           48,964
    Inventory                                 135,189          289,260
    Deposits                                  420,747               --
    Other current assets                       23,066               --
                                           ----------       ----------
                Total current assets        4,056,232        2,905,921
                                           ----------       ----------
PROPERTY AND EQUIPMENT, NET                   749,744          293,251
                                           ----------       ----------

OTHER ASSETS:
    Note receivable                           250,000           15,000
    Other assets                              100,493           47,215
                                           ----------       ----------
                                              350,493           62,215
                                           ----------       ----------
                                           $5,156,469       $3,261,387
                                           ==========       ==========
</TABLE>



    The accompanying notes are an integral part of the financial statements.

                                       18
<PAGE>   30

                           ESAT, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1999 AND 1998


                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                                          RESTATED
                                                                                       1999                 1998
                                                                                    ------------        ------------
<S>                                                                                 <C>                 <C>
CURRENT LIABILITIES:
    Accounts payable                                                                $    791,467        $    235,866
    Accrued expenses                                                                     161,713             179,692
    Unearned revenue                                                                      78,161             117,070
    Current portion of obligations under capital lease                                    28,401                  --
    Other current liabilities                                                                 --               6,414
    Commission payable                                                                   160,000                  --
    Note payable related party                                                            90,250                  --
    Severance pay payable                                                                 90,000                  --
    Settlement payable                                                                    83,866                  --
                                                                                    ------------        ------------
                Total current liabilities                                              1,483,858             539,042
                                                                                    ------------        ------------
OBLIGATIONS UNDER CAPITAL LEASE                                                           59,416                  --
                                                                                    ------------        ------------
COMMITMENTS AND CONTINGENCIES                                                                 --                  --
                                                                                    ------------        ------------

STOCKHOLDERS' EQUITY:
    Preferred stock - Series C - cumulative, fully participating convertible,
      $0.01 par value Authorized-50,000 shares Issued and outstanding - 50,000
      shares (Aggregate liquidation preference $4,999,500 in 1999)                           500                  --

    Preferred stock - Series A, cumulative, fully participating, convertible,
      $0.01 par value Authorized - 2,000,000 shares Issued and outstanding -
      1,000,000 shares (Aggregate liquidation preference $1,990,000 in 1999)              10,000                  --
    Common stock - $0.001 par value Authorized-50,000,000
      shares Issued and outstanding - 18,345,214 shares                                   18,345              16,086
    Additional paid-in capital                                                        25,764,947          96,805,249
    Retained deficit                                                                 (20,899,587)        (94,098,990)
                                                                                    ------------        ------------
                                                                                       4,894,205           2,722,345
    Less:  Subscriptions receivable                                                   (1,558,510)                 --
    Minority interest in equity of subsidiary                                            277,500                  --
                                                                                    ------------        ------------
                Total stockholders' equity                                             3,613,195           2,722,345
                                                                                    ------------        ------------
                                                                                    $  5,156,469        $  3,261,387
                                                                                    ============        ============
</TABLE>


    The accompanying notes are an integral part of the financial statements.



                                       19
<PAGE>   31

                           ESAT, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997



<TABLE>
<CAPTION>
                                                                                      RESTATED
                                                                    1999                1998                1997
                                                                ------------        ------------        ------------
<S>                                                             <C>                 <C>                 <C>
SALES                                                           $    423,640        $    341,047        $  1,201,044

COST OF SALES                                                      1,432,717             685,570             345,491
                                                                ------------        ------------        ------------

                Gross margin                                      (1,009,077)           (344,523)            855,553

GENERAL AND ADMINISTRATIVE EXPENSES                                7,916,819           2,613,468           1,289,406
                                                                ------------        ------------        ------------

                Loss from operations                              (8,925,896)         (2,957,991)           (433,853)
                                                                ------------        ------------        ------------
OTHER INCOME (EXPENSE)
    Compensation adjustment recognized under APB 25               81,945,112         (90,754,014)                 --
    Other income                                                     149,684                  --                  --
    Interest income                                                   57,158                  --                  --
    Gain on sale of assets                                               675                  --                  --
    Interest expense                                                 (25,730)            (11,371)            (19,145)
                                                                ------------        ------------        ------------

                                                                  82,126,899         (90,765,385)            (19,145)
                                                                ------------        ------------        ------------
                Income (loss) before income taxes and
                  extraordinary income                            73,201,003         (93,723,376)           (452,998)

PROVISION FOR INCOME TAXES                                             1,600                 800                 800
                                                                ------------        ------------        ------------

                Income (loss) before extraordinary income         73,199,403         (93,724,176)           (453,798)

EXTRAORDINARY INCOME                                                      --             242,990                  --
                                                                ------------        ------------        ------------

                Net income (loss)                               $ 73,199,403        $(93,481,186)       $   (453,798)
                                                                ============        ============        ============

EARNINGS PER COMMON SHARE:
    Income (loss) before extraordinary income                   $       4.02        $      (5.83)       $      (0.04)
                                                                ============        ============        ============

    Net income                                                  $       4.02        $      (5.81)       $      (0.04)
                                                                ============        ============        ============

EARNINGS PER COMMON SHARE--ASSUMING DILUTION:
    Income (loss) before extraordinary income                   $       3.43        $      (5.83)       $      (0.04)
                                                                ============        ============        ============

    Net income                                                  $       3.43        $      (5.81)       $      (0.04)
                                                                ============        ============        ============
</TABLE>


    The accompanying notes are an integral part of the financial statements.



                                       20
<PAGE>   32

                           ESAT, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 1999, AND 1998


<TABLE>
<CAPTION>
                                                     Preferred Series A             Preferred Series C
                                                 -------------------------       -------------------------
                                                  Shares          Amount          Shares           Amount
                                                 ---------       ---------       ---------       ---------
<S>                                              <C>             <C>             <C>             <C>
Balance, December 31, 1997                              --       $      --              --       $      --

Net loss                                                --              --              --              --

Common stock issued in reverse acquisition              --              --              --              --

Sale of common stock                                    --              --              --              --

Compensation adjustment recognized under                --              --              --              --
APB 25
                                                 ---------       ---------       ---------       ---------

Balance, December 31, 1998, as restated                 --              --              --              --

Net income                                              --              --              --              --

Compensation adjustment recognized under                --              --              --              --
APB 25

Sale of common stock                                    --              --              --              --

Issuance of common stock for services                   --              --              --              --

Sale of preferred stock series A                 1,000,000          10,000              --              --

Sale of preferred stock series C                        --              --          50,000             500

Minority interest in equity of subsidiary               --              --              --              --

Cancellation of common stock in settlement              --              --              --              --
                                                 ---------       ---------       ---------       ---------

Balance, December 31, 1999                       1,000,000       $  10,000          50,000       $     500
                                                 =========       =========       =========       =========
</TABLE>



    The accompanying notes are an integral part of the financial statements.



                                       21
<PAGE>   33

                           ESAT, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 1999, AND 1998



<TABLE>
<CAPTION>
                                                           Common Stock                   Additional
                                                 --------------------------------          Paid-In
                                                    Shares              Amount             Capital
                                                 ------------        ------------        ------------
<S>                                              <C>                 <C>                 <C>
Balance, December 31, 1997                         11,407,507        $     11,408        $    278,643

Net loss                                                   --                  --                  --

Common stock issued in reverse acquisition          1,050,400               1,050             103,089

Sale of common stock                                3,628,029               3,628           5,669,503

Compensation adjustment recognized under                   --                  --          90,754,014
APB 25
                                                 ------------        ------------        ------------

Balance, December 31, 1998, as restated            16,085,936              16,086          96,805,249

Net income                                                 --                  --                  --

Compensation adjustment recognized under                   --                  --         (81,945,112)
APB 25

Sale of common stock                                3,848,577               3,848           3,278,365

Issuance of common stock for services                 178,470                 179           1,161,945

Sale of preferred stock series A                           --                  --           1,990,000

Sale of preferred stock series C                           --                  --           4,474,500

Minority interest in equity of subsidiary                  --                  --                  --

Cancellation of common stock in settlement         (1,767,769)             (1,768)                 --
                                                 ------------        ------------        ------------

Balance, December 31, 1999                         18,345,214        $     18,345        $ 25,764,947
                                                 ============        ============        ============
</TABLE>



    The accompanying notes are an integral part of the financial statements.



                                       22
<PAGE>   34

                           ESAT, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 1999, AND 1998


<TABLE>
<CAPTION>
                                                                                          Minority
                                                   Retained          Subscription        Interest in
                                                    Deficit           Receivable          Subsidiary
                                                 ------------        ------------        ------------
<S>                                              <C>                 <C>                 <C>
Balance, December 31, 1997                       $   (617,804)       $         --        $         --

Net loss                                          (93,481,186)                 --                  --

Common stock issued in reverse acquisition                 --                  --                  --

Sale of common stock                                       --                  --                  --

Compensation adjustment recognized under                   --                  --                  --
APB 25
                                                 ------------        ------------        ------------

Balance, December 31, 1998, as restated           (94,098,990)                 --                  --

Net income                                         73,199,403                  --                  --

Compensation adjustment recognized under                   --                  --                  --
APB 25

Sale of common stock                                       --            (558,510)                 --

Issuance of common stock for services                      --                  --                  --

Sale of preferred stock series A                           --          (1,000,000)                 --

Sale of preferred stock series C                           --                  --                  --

Minority interest in equity of subsidiary                  --                  --             277,500

Cancellation of common stock in settlement                 --                  --                  --
                                                 ------------        ------------        ------------

Balance, December 31, 1999                       $(20,899,587)       $ (1,558,510)       $    277,500
                                                 ============        ============        ============
</TABLE>



    The accompanying notes are an integral part of the financial statements.



                                       23
<PAGE>   35

                           ESAT, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 1999, AND 1998


<TABLE>
<CAPTION>
                                                         Total
                                                      Stockholders'
                                                         Equity
                                                      ------------
<S>                                                   <C>
Balance, December 31, 1997                            $   (327,753)

Net loss                                               (93,481,186)

Common stock issued in reverse acquisition                 104,139

Sale of common stock                                     5,673,131

Compensation adjustment recognized under APB 25         90,754,014
                                                      ------------

Balance, December 31, 1998, as restated                  2,722,345

Net income                                              73,199,403

Compensation adjustment recognized under APB 25        (81,945,112)

Sale of common stock                                     2,723,703

Issuance of common stock for services                    1,162,124

Sale of preferred stock series A                         1,000,000

Sale of preferred stock series C                         4,475,000

Minority interest in equity of subsidiary                  277,500

Cancellation of common stock in settlement                  (1,768)
                                                      ------------

Balance, December 31, 1999                            $  3,613,195
                                                      ============
</TABLE>



    The accompanying notes are an integral part of the financial statements.



                                       24
<PAGE>   36

                           ESAT, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


<TABLE>
<CAPTION>
                                                                                      RESTATED
                                                                     1999               1998                 1997
                                                                 ------------        ------------        ------------
<S>                                                              <C>                 <C>                 <C>
CASH  FLOWS  FROM  OPERATING  ACTIVITIES:
 Net income                                                      $ 73,199,403        $(93,481,186)       $   (453,798)
 Adjustments to reconcile net loss to net cash used
  in operating activities-
      Noncash items included in net income:
       Depreciation and amortization                                  251,199              24,659              12,546
       Gain on sale of assets                                            (675)                 --                  --
       Compensation - stock issued for services                     1,162,477                  --                  --
       Compensation adjustment recognized under APB 25            (81,945,112)         90,754,013                  --
       Net change in operating assets and liabilities                 603,697             (97,114)            203,535
                                                                 ------------        ------------        ------------

                 Net cash used in operating activities             (6,729,011)         (2,799,628)           (237,717)
                                                                 ------------        ------------        ------------

CASH  FLOWS  FROM  INVESTING  ACTIVITIES:
      Payments for purchase of fixed assets                          (585,497)           (293,980)             (6,539)
      Proceeds from sale of fixed assets                               13,580                  --                  --
      Increase in notes receivable                                   (235,000)                 --                  --
      Purchase of stock                                                    --                  --             (12,000)
                                                                 ------------        ------------        ------------

                 Net cash used in investing activities               (806,917)           (293,980)            (18,539)
                                                                 ------------        ------------        ------------

CASH  FLOWS  FROM  FINANCING  ACTIVITIES:
      Decrease in notes payable                                       (47,283)                 --                  --
      Proceeds from issuance of preferred stock                     5,475,000                  --                  --
      Proceeds from issuance of common stock                        2,999,075           5,673,132             253,363
                                                                 ------------        ------------        ------------

                 Net cash provided by financing activities          8,426,792           5,673,132             253,363
                                                                 ------------        ------------        ------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                  890,864           2,579,524              (2,893)

CASH AND CASH EQUIVALENTS,  BEGINNING OF YEAR                       2,567,697             (11,827)             (8,934)
                                                                 ------------        ------------        ------------

CASH AND CASH EQUIVALENTS,  END OF YEAR                          $  3,458,561        $  2,567,697        $    (11,827)
                                                                 ============        ============        ============
</TABLE>



    The accompanying notes are an integral part of the financial statements.



                                       25
<PAGE>   37

                           ESAT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


(1)     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        This summary of accounting policies of eSat, Inc., is presented to
        assist in understanding the Company's financial statements. These
        accounting policies conform to generally accepted accounting principles.

        eSat, Inc. ("the Company"), was originally incorporated under the laws
        of the State of California on February 22, 1996 as Technology Guardian,
        Inc. On October 8, 1998, the Company merged with U.S. Connect 1995,
        Inc., and on January 26, 1999, changed its name to eSat, Inc.

        a) Nature of Operations

           The Company's primary line of business is providing high-speed
           satellite Internet access services and products to businesses,
           educational institutions, and government agencies, both domestically
           and internationally. The Company's satellite network enables it to
           provide high-speed data delivery services without geographical
           constraints. The Company is also developing a personal interactive
           desktop organizer, which includes a variety of personal productivity
           programs.

        b) Revenue Recognition

           The Company reports on the accrual basis for both financial statement
           and income tax purposes. Revenue from product sales is recognized as
           products are shipped. Revenue from services is recognized as the
           service is provided using the straight-line method over the life of
           the contract. A related liability is recorded for the unearned
           portion of service revenue received.

        c) 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.

        d) Cash and Cash Equivalents

           The Company considers all investment instruments purchased with a
           maturity of three months or less to be cash equivalents.



                                       26
<PAGE>   38

                           ESAT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

        (1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        e) Concentration of Credit Risk

           The Company maintains its cash balances in various financial
           institutions. The balances are insured by the Federal Deposit
           Insurance Corporation up to $100,000. At various times throughout the
           year ended December 31, 1999, the Company has maintained balances in
           excess of federally insured limits. The Company's uninsured balances
           totaled $3,260,611 and $185,239 at December 31, 1999 and 1998,
           respectively.

           The Company purchases transponder time from one supplier.

        f) Accounts Receivable

           The allowance for doubtful accounts is established through a
           provision for bad debt charged to expense. Receivables are charged
           off against the allowance when management believes that the
           collectibility of the account is unlikely. Recoveries of amounts
           previously charged off are credited to revenues. At December 31, 1999
           and 1998, the allowance for doubtful accounts was $26,804 and $0,
           respectively.

        g) Inventory

           Inventory consists of satellite dishes and related equipment and is
           stated at the lower of cost or market. Cost is determined using the
           weighted average method.

        h) Property, Equipment and Depreciation

           Property and equipment are recorded at cost. Depreciation of property
           and equipment is provided using the straight-line method over the
           following estimated useful lives:


<TABLE>
<CAPTION>
                                                                ESTIMATED
           ASSET CLASSIFICATION                                USEFUL LIFE
           --------------------                                -----------
<S>                                                              <C>
           Machinery and Equipment                               3 Years
           Furniture                                             5 Years
           Leasehold improvements                                3 Years
           Office equipment                                      3 Years
</TABLE>


           Expenditures for maintenance and repairs are charged to expense as
           incurred.



                                       27
<PAGE>   39

                           ESAT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        h) Property, Equipment and Depreciation (Continued)

           Property and equipment consist of:

<TABLE>
<CAPTION>
                                                                                   RESTATED
                                                                    1999             1998
                                                                 ---------        ---------
<S>                                                              <C>              <C>
                  Machinery and equipment                        $ 434,131        $ 106,281
                  Office equipment                                 304,942           86,419
                  Furniture                                        113,269           99,173
                  Leasehold improvement                             45,720           24,018
                  Automobiles                                           --           19,325
                                                                 ---------        ---------
                                                                   898,062          335,216

                  Less - Accumulated depreciation                 (246,472)         (41,965)
                                                                 ---------        ---------
                                                                   651,590          293,251

                  Leased property under capital lease, net          98,154               --
                                                                 ---------        ---------
                                                                 $ 749,744        $ 293,251
                                                                 =========        =========
</TABLE>

        i) Principles of Consolidation

           The consolidated financial statements include the accounts of eSat,
           Inc., and its wholly owned subsidiaries. Significant inter-company
           transactions and amounts have been eliminated in consolidation.

        j) Research and Development

           Research and development costs are charged to operations when
           incurred and are included in operating expenses. The amounts charged
           to operations for the year ended December 31, 1999 were $500,134. For
           the years ended December 31, 1998 and 1997 there were no expenditures
           for research and development.

           The Company accounts for the creation of its computer software
           products in accordance with SFAS 86, Accounting for the Costs of
           Computer Software to Be Sold, Leased, or Otherwise Marketed.
           Accordingly, where technological feasibility has been established but
           the software product has not yet been made available for general
           release to customers, production costs incurred have been capitalized
           in the financial statement. The unamortized portion of the
           capitalized costs at December 31, 1999 was $96,451.



                                       28
<PAGE>   40
                           ESAT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

(1)        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        k) Income Taxes

           The Company files a consolidated federal income tax return. The
           subsidiaries pay to or receive from eSat, Inc., the parent company,
           the amount of federal income taxes they would have paid or received
           had the subsidiaries filed separate federal income tax returns.

           Deferred tax assets and liabilities are reflected at currently
           enacted income tax rates applicable to the period in which the
           deferred tax assets or liabilities are expected to be realized or
           settled. As changes in tax laws or rates are enacted, deferred tax
           assets and liabilities are adjusted through the provision for income
           taxes. The Company has a deferred tax asset due to net operating loss
           carryforwards for income tax purposes and the non-tax deductible
           recognition of compensation expense for financial statement purposes.
           The deferred tax asset is $2,754,236 and $808,290 at December 31,
           1999 and 1998, respectively; however, due to the ongoing nature of
           the losses and the potential inability of the Company to ever realize
           the benefit, a valuation allowance has been established for 100% of
           the deferred tax asset. At December 31, 1999 and 1998, the Company's
           available federal net operating loss carry forwards totaled
           $12,233,782 and $3,589,974, respectively, and California net
           operating loss carry forwards totaled $12,232,752 and $3,590,544,
           respectively. The loss carry forwards will expire at various dates
           through the year 2019.

        l) Stock-Based Compensation

           The Company accounts for stock-based employee compensation
           arrangements in accordance with the provisions of APB 25, Accounting
           for Stock Issued to Employees, and complies with the disclosure
           provisions of SFAS 123, Accounting for Stock-Based Compensation.
           Under APB 25, compensation cost is recognized on fixed plans over the
           vesting period based on the difference, if any, on the date of grant
           between the fair value of the Company's stock and the amount an
           employee must pay to acquire the stock. For variable plans, APB 25
           requires recognition of compensation cost over the vesting period
           based on the difference, if any, on the period-end date between the
           fair value of the Company's stock and the amount an employee must pay
           to acquire the stock. Forfeitures of variable plan options result in
           a reversal of previously recognized compensation cost.



                                       29
<PAGE>   41

                           ESAT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

(1)        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        l) Stock-Based Compensation (Continued)

           Due to the large number of variable plan options granted by the
           Company in 1998 and the significant difference between the exercise
           price of those options and the fair value of the Company's stock at
           December 31, 1998, the Company recognized a substantial amount of
           non-cash compensation cost in 1998. Subsequently, a large number of
           forfeitures and the re-pricing to market of those options in 1999
           caused a considerable reversal of the previously recognized non-cash
           compensation cost. The resulting net income for the year ended
           December 31, 1999, should not be construed as profitable operations
           during that year (See Note 2 for Going Concern disclosure).

        m) Net Earnings or Loss Per Share

           The following data show the amounts used in computing earnings per
           share and the effect on income and the weighted average number of
           shares of dilutive potential common stock for the year ended December
           31, 1999:

<TABLE>
<S>                                                              <C>
Income available to common stockholders before adjustments       $ 73,199,403
Adjustments                                                                --
                                                                 ------------

Income available to common stockholders used in basic EPS        $ 73,199,403
                                                                 ============

Weighted average number of common shares used in
   basic EPS                                                       18,206,553
Effect of dilutive securities:
       Common stock dividend on preferred stock Series A                 (479)
       Stock options                                                1,762,798
       Warrants                                                     1,270,949
       Convertible preferred stock Series A                            97,691
       Convertible preferred stock Series C                            11,022
                                                                 ------------

Weighted average number of common shares and dilutive
  potential common stock used in dilutive EPS                      21,348,534
                                                                 ============
</TABLE>

           The following transactions occurred after December 31, 1999, which,
           had they taken place during 1999, would have changed the number of
           shares used in the computations of earnings per share: (1) options to
           purchase 680,000 common shares were issued to employees; (2) warrants
           to purchase 2 million common shares were awarded to non-employees;
           and (3) a third party investor agreed to purchase 6 million common
           shares and warrants to purchase an additional 6 million shares on
           March 16, 2000 (See Note 11).



                                       30
<PAGE>   42

                           ESAT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


(1)     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        m) Net Earnings or Loss Per Share (Continued)

           Basic net loss per share is based on the weighted average number of
           common shares outstanding of 16,085,936 and 11,407,507 for 1998 and
           1997, respectively. The basic and diluted earnings per share
           calculations are the same for 1998 and 1997 because potential
           dilutive securities would have had an antidilutive effect for all
           periods presented. Securities that were not included in the 1998 and
           1997 earnings per share calculation because they were antidilutive
           consist of the convertible preferred stock, warrants and stock
           options.

        n) Advertising

           The Company expenses advertising costs as they are incurred.
           Advertising expenses for the years ended December 31, 1999, 1998, and
           1997 were $479,387, $175,647, and $125,934, respectively.

(2)     GOING CONCERN

        The accompanying consolidated financial statements have been prepared in
        conformity with generally accepted accounting principles, which
        contemplate continuation of the Company as a going concern; however, the
        Company has sustained substantial operating losses in recent years. In
        view of this matter, realization of a major portion of the assets in the
        accompanying balance sheet is dependent upon continued operations of the
        Company, which in turn is dependent upon the Company's ability to meet
        its financing requirements, and the success of its future operations.

        Management believes that actions presently being taken to revise the
        Company's operating and financial requirements provide the opportunity
        for the Company to continue as a going concern. In March 2000, the
        Company entered into a private placement agreement for the sale of
        $12,000,000 of common stock. The Company feels that this and subsequent
        financing arrangements coupled with product and services market
        introductions will provide sufficient cash to meet its operating and
        business expansion requirements in 2000.

(3)     NOTE RECEIVABLE - EMPLOYEE

        Note receivable - employee at December 31, 1999 consists of a note
        receivable from an employee dated June 9, 2000, due in monthly payments
        of $1,580, including interest at 6.5%, secured by personal property of
        the employee, matures June 9, 2030.



                                       31
<PAGE>   43

                           ESAT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


(4)    LEASED PROPERTY UNDER CAPITAL LEASE

        The Company leases office equipment under capital leases. The economic
        substance of these lease agreements is that the Company is financing the
        acquisition of the leased assets through the leases and, accordingly,
        they are recorded in the Company's assets and liabilities. The following
        is an analysis of the leased property under capital lease:

<TABLE>
<CAPTION>
                                                                         RESTATED
                                                       1999               1998
                                                     ---------        -------------
<S>                                                  <C>              <C>
Office equipment                                     $ 137,081        $          --
Less accumulated depreciation                          (38,927)                  --
                                                     ---------        -------------

                                                     $  98,154        $          --
                                                     =========        =============

Net minimum lease payments                           $ 104,653        $          --
Less - amount representing interest                    (16,836)                  --
                                                     ---------        -------------


Present value of net minimum lease payments          $  87,817        $          --
                                                     =========        =============
</TABLE>

        The following is a schedule by years of future minimum lease payments
        required under the leases:

<TABLE>
<S>                                  <C>
Years ending December 31, 2000       $28,401
                          2001        32,183
                          2002        18,674
                          2003         8,559
                                     -------

                                     $87,817
                                     =======
</TABLE>

(5)     COMMITMENTS AND CONTINGENCIES

        a) Non-Cancelable Operating Lease

           The Company leases its office facilities under a non-cancelable
           operating lease. The lease has a five-year term, which expires
           September 30, 2003. At December 31, 1999, base rent under the lease
           was $7,332 per month. The lease requires the Company to provide for
           common area maintenance expenditures. Base rent and CAM charges are
           subject to escalation every year. The Company has the option to renew
           the lease for an additional period of five years. Rent expense under
           the lease for the years ended December 31, 1999, 1998, and 1997 were
           $86,013, $45,500, and $25,900, respectively.



                                       32
<PAGE>   44

                           ESAT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


(5)     COMMITMENTS AND CONTINGENCIES (Continued)

        a) Non-Cancelable Operating Lease (Continued)

           The following is a schedule by years of future minimum lease payments
           required under the lease:

<TABLE>
<S>                                  <C>
Years ending December 31, 2000       $ 88,968
                          2001         92,577
                          2002         95,532
                          2003         73,863
                                     --------

                                     $350,940
                                     ========
</TABLE>

        b) Pending and Threatened Litigation

           On July 23,1999 a case was filed in which the plaintiff alleges the
           Company breached a Subscription Agreement to sell him 2,092,500
           shares of Company stock. Plaintiff requested that the case be
           dismissed without prejudice, but the Company demanded that the case
           be dismissed with prejudice without any compensation to Plaintiff.
           This case has been scheduled for trial and the Company believes it
           will prevail.

           On December 11,1999 a case was filed against the Company and an
           Officer by a Plaintiff who had been terminated for poor work
           performance. In the original action the Plaintiff named eight causes
           of action for unspecified amounts. The Plaintiff subsequently filed
           an amended complaint reducing the causes of action to five and naming
           the Company only. The Company has denied all allegations.

           The Company has received a claim from two individuals that allege
           that the Company and a former Officer defrauded them when they
           purchased Company Stock. They have demanded $160,000 to resolve all
           claims. Although a lawsuit has been threatened, one has not been
           filed. The Company will deny all allegations.



                                       33
<PAGE>   45

                           ESAT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

(5)     COMMITMENTS AND CONTINGENCIES (Continued)

        c) Employment Agreements

           The Company has entered into agreements with certain of its officers.
           The agreements provide for a minimum annual salary and options to
           purchase stock of the Company.

        d) Purchase Obligations

           In order to assure its supply of satellite transmission time when
           needed, the Company has entered into Transponder Lease Agreements
           with suppliers with available transponder capacity. The agreements
           expire at various dates through November, 2002. The Company may
           terminate the agreements only if there is a period of interruption of
           service greater than 14 days or in the event the satellite the
           agreement pertains to is taken out of service. The Company is
           required to make minimum monthly payments as follows, whether or not
           it makes use of the time under the agreements:

<TABLE>
<S>                                  <C>
Years ending December 31, 2000       $  753,960
                          2001          753,960
                          2002           72,000
                                     ----------

                                     $1,579,920
                                     ==========
</TABLE>

           In addition, at the Company's option, for additional monthly fees,
           the Company may upgrade service if additional capacity is needed. The
           Company is responsible for the payment of all taxes, duties, user
           fees, and privilege or excise taxes pertaining to the use of the
           suppliers' equipment. Fees paid under these agreements totaled
           $601,960, $37,230, and $0 for the years ended December 31, 1999,
           1998, and 1997, respectively.

(6)     NOTE PAYABLE - RELATED PARTY

<TABLE>
<CAPTION>
                                                                                              RESTATED
                                                                               1999             1998
                                                                               ----             ----
<S>                                                                           <C>           <C>
Note payable - Vantage Capital, Inc., due on demand, with interest at
 the Applicable Federal Rates, unsecured. Michael Palmer, CEO of eSat,
 Inc., is the 100% shareholder of Vantage Capital, Inc. AFR at December
 31, 1999 was 5.59%                                                           $90,250       $         --
                                                                              =======       ============
</TABLE>



                                       34
<PAGE>   46

                           ESAT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


(7)     STOCK PURCHASE AGREEMENT

        During the one year period beginning December 29, 1999, the purchasers
        of the outstanding Class C Preferred Stock committed to purchase up to
        $20,000,000 of Common Stock at a price equal to 90% of the average of
        the five lowest closing bid prices for the 10 days prior to each notice
        of sale. The agreement requires sales in certain minimum amounts and
        requires warrants of 15% with an exercise price of 125% of the purchase
        price. The Company must register the shares delivered under this
        agreement and the registration must be effective. As of the report date
        the shares were not registered.

(8)     STOCKHOLDERS' EQUITY

        a) Common Stock and Warrants

           At December 31, 1999, the Company has 50 million shares authorized
           and 18,345,214 issued and outstanding. In addition, the Company had
           outstanding at December 31, 1999, 5,039,163 warrants convertible into
           common shares at various prices ranging from $0.72 to $14.70, with
           expiration dates through December, 2004.

           A summary of the warrants outstanding at December 31, 1999 is as
follows:

<TABLE>
<CAPTION>
                                                     WEIGHTED AVERAGE
               EXERCISE                                  REMAINING          WEIGHTED AVERAGE
         EXERCISE PRICE RANGE             NUMBER      CONTRACTUAL LIFE       EXERCISE PRICE
         --------------------             ------      ----------------       --------------
<S>                                     <C>          <C>                    <C>
             $0.72 - $1.37                225,000        50 months              $0.86
             $2.40 - $3.14              3,009,286        49 months              $2.94
             $4.25 - $6.25              1,038,877        58 months              $5.02
                 $8.50                    400,000        58 months              $8.50
            $14.00 - $14.70               366,000        45 months              $14.13
</TABLE>

        b) Common Stock Reserved


           At December 31, 1999, common stock was reserved for the following
reasons:

<TABLE>
<S>                                             <C>
Exercise of common stock warrants               5,039,163
Conversion of preferred stock                     847,037
Common stock dividends on preferred stock           5,129
Exercise of employee stock options              2,704,873
                                                ---------

                                                8,596,202
                                                =========
</TABLE>



                                       35
<PAGE>   47
                           ESAT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

(8)     STOCKHOLDERS' EQUITY (Continued)

        c) Preferred Stock

           Preferred stock consists of the following:

           Series A - $.01 par value, 2 million shares authorized, 1 million
           shares issued and outstanding, pays dividends quarterly in the form
           of common stock at an annual rate of 12%, cumulative and fully
           participating, convertible to common stock at a rate of one share of
           preferred stock for $2 of common stock, rounded to the nearest whole
           common share. The Company is required to maintain a reserve of common
           stock sufficient to effect conversion. Holders of Series A Preferred
           Stock are entitled to one vote per share. In addition, the Company
           must obtain the consent of the holders of not less than 50% of the
           shares of outstanding Series A preferred stock on matters involving
           declaration and payment of dividends on common stock, sale or
           issuance of capital stock of the Company or options to acquire
           capital stock of the Company other than Series A Preferred Stock, or
           changes in the general character of the Company's business. All
           outstanding shares of Series A preferred stock are held by Vantage
           Capital, Inc., a related party.

           Series C - $.001 par value, 50,000 shares authorized, issued and
           outstanding, pays dividends quarterly in the form of cash or common
           stock at an annual rate of 6 percent, cumulative and fully
           participating, redeemable and convertible to common stock. The number
           of common shares to be issued upon conversion is determined by
           multiplying the number of preferred shares to be converted by a
           fraction. The numerator of the fraction is the purchase price of the
           preferred shares. The denominator of the fraction is the conversion
           price, calculated as the lesser of 125 percent of the closing bid
           price of the common stock on the trading day immediately preceding
           the issue date, or 85 percent of the five day average quoted price
           for the five trading days immediately preceding the conversion notice
           date.

        d) Stock Option Agreements

           The Company has granted fixed employee stock-based compensation
           options and variable employee stock-based compensation options. The
           variable option agreements provide for exercise of options into a
           number of shares of Common Stock, which is dependent on the market
           value of the stock at the date of exercise. The fixed and variable
           option agreements typically have a maximum term of 5 years and are
           typically fully vested at the date of grant.



                                       36
<PAGE>   48

                           ESAT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


(8)     STOCKHOLDERS' EQUITY (Continued)

        d) Stock Option Agreements (Continued)

           The fair value of each option granted is estimated on the grant date
           using the Black-Scholes Model. The following assumptions were made in
           estimating fair value:


<TABLE>
<CAPTION>
                                                     FIXED                VARIABLE
                                                    OPTIONS               OPTIONS
                                                  -------------        --------------
<S>                                               <C>                  <C>
Dividend yield                                      0.00  %                0.00 %
Risk-free interest rate                             6.55  %                6.55 %
Expected life                                       2.50  years            2.50 years
Expected volatility                                62.32  %               62.32 %
</TABLE>


           Had compensation cost been determined on the basis of fair value
           pursuant to FASB Statement No. 123, net income and earnings per share
           for the year ended December 31, 1999 would have been reduced as
           follows:



                                       37
<PAGE>   49

                           ESAT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

(8)     STOCKHOLDERS' EQUITY (Continued)

<TABLE>
<S>                               <C>
Net income:
       As reported                $   73,199,403
                                  ==============

       Pro forma                  $  (11,953,659)
                                  ==============

Basic earnings per share:
       As reported                $         4.02
                                  ==============

       Pro forma                  $        (0.66)
                                  ==============

Diluted earnings per share:
       As reported                $         3.43
                                  ==============

       Pro forma                  $        (0.56)
                                  ==============
</TABLE>



                                       38
<PAGE>   50

                           ESAT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


(8)     STOCKHOLDERS' EQUITY (Continued)

        d) Stock Option Agreements (Continued)

           The following is a schedule of the weighted average exercise price
           and weighted average fair value in accordance with SFAS 123:

<TABLE>
<CAPTION>
                                         WEIGHTED          WEIGHTED
                                         AVERAGE           AVERAGE
                                      EXERCISE PRICE      FAIR VALUE
                                      --------------      ----------
<S>                                   <C>                 <C>
Exercise price:
       Equals market price               $   10.25         $   0.60
       Exceeds market price              $    3.26         $   1.25
       Less than market price            $    6.23         $   1.03
</TABLE>

           The Company applies APB Opinion 25 in accounting for its fixed and
           variable stock compensation plans. Compensation cost charged to
           operations in 1999 was $2,522,340 and $(84,467,452) for the fixed and
           variable plans, respectively. Compensation cost charged to operations
           in 1998 was $0 and $90,754,014 for the fixed and variable plans,
           respectively.

           Following is a summary of the status of the variable plan during
1999:

<TABLE>
<CAPTION>
                                                     NUMBER OF          WEIGHTED AVG.
                                                      SHARES           EXERCISE PRICE
                                                      ------           --------------
<S>                                                 <C>                <C>
Outstanding at January 1, 1999                       6,752,236             $1.98

Granted                                                     --                --
Exercised                                             (598,941)             0.95
Forfeited                                           (4,564,422)             1.92
                                                    ----------

Outstanding at December 31, 1999                     1,588,873              2.56
                                                    ==========

Options exercisable at December 31, 1999             1,588,873              2.56
                                                    ==========
</TABLE>



                                       39
<PAGE>   51

                           ESAT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


(8)     STOCKHOLDERS' EQUITY (Continued)

        d) Stock Option Plan (Continued)

           Following is a summary of the status of the variable plan during
1998:

<TABLE>
<CAPTION>
                                                    NUMBER OF      WEIGHTED AVG.
                                                     SHARES       EXERCISE PRICE
                                                     ------       --------------
<S>                                                 <C>          <C>
Outstanding at January 1, 1998                             --    $          --

Granted                                             6,752,236             1.98
Exercised                                                  --               --
Forfeited                                                  --               --
                                                    ---------

Outstanding at December 31, 1998                    6,752,236             1.98
                                                    =========

Options exercisable at December 31, 1999            6,752,236             1.98
                                                    =========
</TABLE>

           Following is a summary of the status of the fixed plan during 1999:


<TABLE>
<CAPTION>
                                                    NUMBER OF        WEIGHTED AVG.
                                                     SHARES         EXERCISE PRICE
                                                     ------         --------------
<S>                                                 <C>             <C>
Outstanding at January 1, 1999                             --           $   --

Granted                                             1,366,000             7.32
Exercised                                                  --               --
Forfeited                                                  --               --
                                                    ---------

Outstanding at December 31, 1999                    1,366,000             7.32
                                                    =========

Options exercisable at December 31, 1999            1,116,000             8.15
                                                    =========
</TABLE>



                                       40
<PAGE>   52

                           ESAT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


(8)     STOCKHOLDERS' EQUITY (Continued)

        d) Stock Option Plan (Continued)

           Following is a summary of the status of variable options outstanding
           at December 31, 1999:

<TABLE>
<CAPTION>
                                            WEIGHTED AVERAGE
                                                REMAINING          WEIGHTED AVERAGE
EXERCISE PRICE RANGE             NUMBER     CONTRACTUAL LIFE       EXERCISE PRICE
--------------------             ------     ----------------       --------------
<S>                              <C>        <C>                    <C>
        $0.72                    580,873        45 months              $0.72
        $3.00                    908,000        45 months              $3.00
        $9.25                    100,000        48 months              $9.25
</TABLE>


           Following is a summary of the status of fixed options outstanding at
           December 31, 1999:


<TABLE>
<CAPTION>
                                            WEIGHTED AVERAGE
                                               REMAINING          WEIGHTED AVERAGE
EXERCISE PRICE RANGE              NUMBER    CONTRACTUAL LIFE       EXERCISE PRICE
--------------------              ------    ----------------       --------------
<S>                              <C>        <C>                   <C>
    $3.00 - $3.50                335,000        60 months              $3.45
        $4.00                    460,000        55 months              $4.00
        $5.50                     60,000        58 months              $5.50
       $10.25                     11,000        54 months              $10.25
       $13.13                    500,000        53 months              $13.13
</TABLE>


        e) Common Stock Issuance Settlement

           During the years ended December 31, 1998 and 1999, Corporate
           Financial Enterprises (CFE) was engaged to complete a private
           placement of approximately 2 million shares. This private placement
           was to yield proceeds of $1.5 million to the Company. A former
           officer of the Company authorized the issuance of over 3.3 million
           shares under this agreement. The Company received $1.5 million, but
           received no consideration for the excess shares issued.



                                       41
<PAGE>   53

                           ESAT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


(8)     STOCKHOLDERS' EQUITY (Continued)

        e) Common Stock Issuance Settlement (Continued)

           In settlement of the discrepancy, the Company entered into a Stock
           Reconciliation Settlement Agreement with CFE effective December 31,
           1999. Under the terms of the agreement the Company received $558,310
           in cash as settlement for the unpaid stock, net of unpaid fees owed
           CFE. The CFE agreement for future fees will be canceled. Also, the
           Company will keep a $1 million deposit made by CFE in anticipation of
           purchasing certain preferred shares. CFE waives all rights to receive
           any preferred shares. Additionally, approximately 1.8 million shares
           owned by the former officer were forfeited and canceled under a
           resignation agreement.

(9)     BUSINESS COMBINATION

        In October, 1998, the Company completed a reverse acquisition with U.S.
        Connect 1995, Inc. A total of 11,407,507 common shares were exchanged in
        a 1:1 ratio. The transaction was a merger of a private operating company
        into a non-operating public shell corporation with nominal assets.

(10)    RELATED PARTY TRANSACTIONS

        On September 17, 1999, the Company entered into a consulting agreement
        (the "Agreement") with Vantage Capital, Inc., which is wholly owned by
        Michael Palmer, Chief Executive Officer of eSat, Inc. The Agreement
        states that the duties of the consultant include: (1) identifying,
        analyzing, structuring, negotiating and financing business sales and/or
        acquisitions, including without limitation, merger agreements, stock
        purchase agreements, and any agreements relating to financing and/or the
        placement of debt or equity securities of the Company; (2) assist the
        Company in its corporate strategies; and (3) assist the Company in the
        implementation of its business plan, in each case as requested by the
        Company. The Agreement provides for compensation in the form of a
        monthly retainer of $5,000 in cash or stock, the issuance of 1.2 million
        in warrants exercisable at prices ranging from $4.25 to $8.50, a fee of
        10% of the total aggregate consideration paid for any acquisition or
        sale by the Company of any business, corporation, or division, a fee
        equal to 10% of any private or public placement of debt or equity
        securities of the Company, and a share in any fees or commissions
        payable by third parties on any transaction contemplated by the
        Agreement. In accordance with this agreement, a $160,000 liability was
        accrued at December 31, 1999.

        During the year ended December 31, 1999, the Company paid $575,526 to
        Parks, Palmer, Turner and Yemenidjian, LLP, a public accounting firm in
        which Michael Palmer, the Company's current CEO, was previously the
        managing partner. The payments were compensation for the services of
        Michael Palmer and associates of the firm.



                                       42
<PAGE>   54
                          eSAT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the Years Ended December 31, 1999, 1998 and 1997


(11)    STATEMENTS OF CASH FLOWS

        The net changes in operating assets and liabilities shown on the
        statements of cash flows consist of the following:

<TABLE>
<CAPTION>
                                                                RESTATED
                                           1999                  1998                  1997
                                         ---------             ---------             ---------
<S>                                      <C>                   <C>                   <C>
(Increase) Decrease:
   Accounts receivable, net              $  30,295             $ 208,022             $(241,405)
   Inventory                               154,071               (92,820)             (139,651)
   Other current assets                   (443,813)                   --                    --
   Other assets                            (53,272)              (37,688)               52,500
Increase (Decrease):
   Accounts payable                        385,639              (105,906)              127,989
   Accrued expenses                        (17,979)              (32,345)              138,146
   Unearned revenue                        (38,909)              117,070                    --
   Other liabilities                       587,665              (153,447)              265,956
                                         ---------             ---------             ---------

                                         $ 603,697             $ (97,114)            $ 203,535
                                         =========             =========             =========

Operating activities reflect:

   Interest paid                         $  25,730             $  11,371             $  19,145
                                         =========             =========             =========

   Income taxes paid                     $     800             $     800             $     800
                                         =========             =========             =========
</TABLE>

        Non-cash financing transactions consisted of subscription receivables
        for stock issuance in the amount of $1,558,510, $0, and $0, and
        financing of capitalized leases of $135,100, $0, and $0 at December 31,
        1999, 1998, and 1997 respectively.



                                       43
<PAGE>   55

                           ESAT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


(12)    SUBSEQUENT EVENTS

        January 1, 2000, I-xposure, a subsidiary of eSat, Inc., acquired the
        assets of Blackhawk Graphics in exchange for 200,000 I-xposure shares.
        The assets consisted primarily of intellectual property rights and will
        be accounted for as a purchase by the subsidiary resulting in
        approximately $400,000 of goodwill which will be amortized over seven
        years. In addition, the owner of Blackhawk was hired under an employment
        agreement that provides for the issuance of 350,000 I-xposure stock
        options after certain milestones are met.

        On March 16, 2000, the Company entered into an agreement with a third
        party investor to sell 6 million shares of common stock and 6 million
        warrants convertible into common stock within 3 years at $3.3125 per
        share for a total consideration of $12 million. The proceeds will be
        used to retire preferred stock and for acquisitions and general
        corporate purposes.

        On March 29, 2000, the Company notified the holder of Preferred Stock
        Series C of the intent to redeem all 50,000 outstanding shares for
        $5,311,824 plus accrued dividends of $60,822.

        The Company has signed a letter of intent to acquire InterWireless,
        Inc., a wireless Internet service provider, and PacificNet Technologies,
        Inc., an Internet service provider.

(13)    PRIOR PERIOD ADJUSTMENT

        The accompanying financial statements for 1998 have been restated to
        correct an error in the application of APB 25, Accounting for Stock
        Issued to Employees, made in 1998. The effect of the restatement was to
        decrease net income for 1998 by $90,754,014 ($4.98 per share), net of
        income tax.

(14)    EXTRAORDINARY INCOME

        During the year ended December 31, 1998, the Company was released from a
        liability to a factoring company. In accordance with SFAS 4 the Company
        recorded extraordinary income in the amount of $242,990.



                                       44
<PAGE>   56



                           ESAT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


(14)    EXTRAORDINARY INCOME (Continued)

        The agreement with the factoring organization called for factor to
        purchase receivables at a price equal to 80% of the face value of
        acceptable accounts from the Company. The Company therefore would
        appropriately record the transaction as a sale of receivables with
        proceeds of the sale reduced by the fair value of the recourse
        obligation. Under the terms of the Agreement, factor earned a fee equal
        to 14% of the face amount of the accounts purchased and such fee shall
        be taken at the time of collection of an invoice. Factor shall reserve
        and hold 2.5% of the face value of purchased accounts for bad debts.
        Factor shall be entitled to immediate and full recourse against the
        Company to demand payment with respect to a purchase account in the
        event that the purchase account is not paid in full within 75 days.
        During the course of the relationship with the factor, the Company's
        largest client filed a Chapter 7 bankruptcy liquidation resulting in
        more than $100,000 in purchased accounts going unpaid. In accordance
        with the terms of the Agreement factor made demand upon the Company for
        immediate payment plus accrued unpaid fees and interest through the date
        of Company's payment.

        The Company was released from its liability to the factoring
        organization because during the year 1998 it was unable to make payment
        under the terms of the agreement, which had been entered into. Upon
        breach of the agreement, the liability was transferred to the individual
        who had provided a personal guarantee, Mr. David Coulter. This
        individual subsequently settled all outstanding obligations with the
        factoring organization through the transfer of 25,000 shares of
        restricted Rule 144 stock from his name into the name of the factoring
        organization and the payment of $89,000 out of his personal account.


                                   SCHEDULE 2


                           ESAT, INC. AND SUBSIDIARIES
                        Valuation and Qualifying Accounts
                 Years Ended December 31, 1999, 1998, and 1997


<TABLE>
<CAPTION>
                                                             ADDITIONS
                                                      -------------------------
                                          BALANCE     CHARGED TO     CHARGED TO                 BALANCE
                                        AT BEGINNING   COSTS AND       OTHER                     AT END
                                           OF YEAR     EXPENSE        ACCOUNTS     DEDUCTIONS    OF YEAR
                                        ------------  ----------     ----------    ----------   --------
<S>                                     <C>           <C>            <C>           <C>          <C>
Description

Year ended December 31, 1997

Allowance for doubtful accounts
(deducted from accounts receivable)         $ -0-         $ -0-         $ -0-         $ -0-         $ -0-

Allowance for obsolescence
(deducted from inventory)                   $ -0-         $ -0-         $ -0-         $ -0-         $ -0-

Year ended December 31, 1998

Allowance for doubtful accounts
(deducted from accounts receivable)         $ -0-         $ -0-         $ -0-         $ -0-         $ -0-

Allowance for obsolescence
(deducted from inventory)                   $ -0-         $ -0-         $ -0-         $ -0-         $ -0-

Year ended December 31, 1999

Allowance for doubtful accounts             $ -0-      $ 17,290         $ -0-         $ -0-      $ 17,290
(deducted from accounts receivable)

Allowance for obsolescence                  $ -0-      $ 56,025         $ -0-         $ -0-      $ 56,025
(deducted from inventory)
</TABLE>


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

        We are incorporating by reference the disclosure set forth in our Form
8-K/A filed on December 17, 1999.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

        The following table sets forth the names and positions of our directors
and executive officers and key employees:

<TABLE>
<CAPTION>
OFFICER
NAME                             AGE   POSITION                               SINCE
----                             ---   --------                               -----
<S>                              <C>   <C>                                    <C>
Michael C. Palmer                 50   CEO, President, Secretary and           1999
                                       Director

Chester (Chet) L. Noblett, Jr.    55   Treasurer and Director                  1997

Mark Basile                       38   Chief Financial Officer                 2000

Salvatore A. Piraino              72   Director                                1997

William C. Sarpalius              50   Director                                1997

Gary Pan                          53   Director                                1998

Jeffrey Hecht                     47   Vice President of Operations            1998
</TABLE>






                                       45
<PAGE>   57

   The directors are elected to hold office until the next annual meeting of
shareholders and until their respective successors have been elected and
qualified. Our officers are elected annually by the Board of Directors and hold
office until their successors are elected and qualified.

   The following sets forth biographical information concerning our directors
and executive officers for at least the past five years.

   MICHAEL C. PALMER has been the Chief Executive Officer and a director since
April 1999. Mr. Palmer has held the position of Chief Financial Officer from
November 1998, to March 1999 and has been affiliated with us since December
1997. Since 1978, Mr. Palmer has been a partner of Parks, Palmer, Turner and
Yemenedjian, a firm of Certified Public Accountants. Mr. Palmer served as a
director of Western Waste Industries (NYSE: WW) from July 1995 to May 1996.. He
received a B.S. degree in Business Administration in 1972 and a M.S. degree in
Business Taxation in 1975 from the University of Southern California.

   CHESTER (CHET) L. NOBLETT, JR. is Chairman of the Board since 1999 and a
Director since June 1997. He was Chief Operating Officer from June 1997 until
December 1999. He served briefly as interim Chief Financial Officer in January
2000. From 1990 to 1996, Mr. Noblett was employed as the chief executive officer
for Tradom International, a subsidiary of an Asahi Shouian, Inc., an
international food brokerage company. Mr. Noblett is also president and a
director of Cyber Village Network, a computer software company. Mr. Noblett
received a B.S. degree in Business Administration from the University of
Southern California in 1971.

   SALVATORE A. PIRAINO has been a director since December 1997. From September
1992 to the present, Mr. Piraino has operated Management and Technical Services,
a management consultant firm providing management, engineering and manufacturing
expertise to a number of small companies. From 1974 to 1992, Mr. Piraino was
employed as a director, program manager, product line manager and assistant
division manager for Hughes Aircraft Company. Mr. Piraino received a B.E. degree
in Engineering from Loyola University in 1950.

   WILLIAM C. SARPALIUS has been a director since December 1997. From 1995 to
present, Mr. Sarpalius has served as president and chief executive officer of
Advantage Associates, Inc., a lobbying firm located in Washington, D.C.
Previously, Mr. Sarpalius served as a U. S. Congressman from the State of Texas
from 1989 to 1995. In 1995, Mr. Sarpalius received a presidential appointment to
the United States Department of Agriculture as Western Regional Director. Mr.
Sarpalius received a bachelors degree in Agriculture Science from Texas Tech
University in 1972 and a masters degree in Agriculture Science from West Texas
State in 1978.

   GARY (GUO AN) PAN has been a director since September 1998. From 1997 to



                                       46
<PAGE>   58

present, Mr. Pan has served as the managing director for United Asia Capital
Partners, an investment management and financial services firm. From 1993 to
1997, Mr. Pan served as president of Sunridge International, Inc., and from 1992
to 1993, as senior vice president of the Great Wall Group. Mr. Pan received a
B.S. degree in Electrical Engineering from National Taiwan University, a M.S.
degree in Electrical Engineering from University of Waterloo, and his Ph.D. in
Management from the University of California at Los Angeles.

   JEFFREY HECHT was appointed as Vice President of Operations in March 1998.
From March 1997 to March 1998, Mr. Hecht was vice president of operations for
ACOM Computer Inc., a software development company in Long Beach, California.
From December 1993 to February 1997, Mr. Hecht served as the vice president and
chief information officer for Strategic Mortgage Services, a financial services
company. Mr. Hecht received a B.S. in Business Administration from Arizona State
University in 1976.


        MARK BASILE was appointed as the Company's Chief Financial Officer in
March, 2000. From March 1999 to March 2000, Mr. Basile was chief financial
officer of Superior Galleries, Inc., an auction services firm in Beverly Hills,
California. From 1996 through March 1999, Mr. Basile served as director of
management accounting and controller of the Hawaii division of Young's Market
Company. From 1989 to 1996, Mr. Basile was director of internal audit at K2
Inc., a manufacturer o f sporting goods and recreational products. Prior to
that, Mr. Basile was a certified public accountant at Ernst & Young, LLP, an
international auditing and consulting firm. Mr. Basile received a B.S. in
Accounting from the University of Florida in 1983.


ITEM 11. EXECUTIVE COMPENSATION.

EXECUTIVE COMPENSATION

<TABLE>
<CAPTION>
                                                Annual Compensation                              Long Term Compensation
                                --------------------------------------------------   --------------------------------------------
                                                                                              Awards
                                                                                     ------------------------
                                                                                     Restricted    Securities
Name and                                                              Other Annual     Stock        Underlying         All Other
Principal Position              Year        Salary        Bonus       Compensation     Awards        Options         Compensation
------------------              ----        ------        -----       ------------   ----------    -----------       ------------
<S>                             <C>        <C>            <C>         <C>            <C>           <C>               <C>
Michael C. Palmer(1)            1999       $455,913       $              $87,500                    1,625,000
  President, Chief              1998         10,780                                                   100,000
  Executive                     1997
  Officer and Secretary

Chester L. Noblett, Jr.(2)      1999        178,936
  Chief Operating Officer       1998        114,750                       48,750                    1,095,802
                                1997

Mark McMillan(3)                1999         87,500                                                   500,000
                                1998
                                1997

James Mack(4)                   1999        120,625
                                1998         18,750        35,000                                     300,000
                                1997

David Coulter(5)                1999         51,854                     50,000                      1,500,000
  Former President              1998        166,407                     56,250                      3,535,890
                                1997
</TABLE>


*       Please see Certain transactions, below, and Note [K] to the Financial
        Statements regarding the cancellation of Mr. Coulter's options in March,
        1999.

(1)     Mr. Palmer was an employee of Parks Palmer Turner & Yemenidjian, a firm
        of certified public accountants. Effective November 1999, the company
        pays VCI $25,000 per month for Mr. Palmer's services. Mr. Palmer is an
        owner of VCI. In addition to the compensation reflected in the table,
        VCI is paid a monthly consulting fee of $2,500 for assistance in finding
        and negotiating acquisitions and financing opportunities for the
        company. Pursuant to that consulting arrangement, VCI was paid $80,000
        in connection with the issuance of the Series

                                       47

<PAGE>   59
        C Preferred Stock and $100,000 in connection with arranging for
        the issuance of the Series A and Series B Preferred Stock. In addition,
        VCI received warrants to purchase 600,000 shares of common stock as part
        of the consulting arrangement. Those warrants are not exercisable until
        after December 31, 2000. See "Certain transactions" for additional
        information.

(2)     Includes back pay of $55,417 earned in 1999 and paid in January 2000.

(3)     Mr. McMillan joined us in May 1999. He earns a base salary of $150,000
        per year. Additionally, he received a 30 year mortgage loan of $250,000
        from the company, bearing interest at 6.5% per annum.

(4)     Mr. Mack joined us in September 1998 and has subsequently left the
        Company.

(5)     Mr. Coulter left the company in May 1999. After leaving the company he
        was paid $50,000. See "Certain transactions."

        The company has entered into an employment agreement with Mr. Noblett
for a period of five years commencing September 25, 1997. Under the agreement,
Mr. Noblett receives a salary of $130,000 per year plus health insurance
benefits of $200 per month. The employment agreement includes a cost-of-living
increase, plus any other increase which may be determined from time to time in
the discretion of the company's board of directors. In addition, Mr. Noblett is
provided with a car on such lease terms to be determined by the company,
provided that the monthly operating costs (including lease payments) to be paid
by the company will not exceed $750.

OPTION GRANTS IN FISCAL YEAR 1999


<TABLE>
<CAPTION>
                                             Individual
                                               Grants
                                             Percent of
                                                Total
                                               Options                                                  Potential Realizable Value
                            Number of        Granted to      Market                                 at Assumed Annual Rates of Stock
                             Shares           Employees    Exercise of    Price on                          Price Appreciation
                           Underlying        in Fiscal     Base Price      Date of    Expiration              for Option Term
Name                         Options            Year         ($/Sh)         Grant         Date       -------------------------------
----                       ----------        -----------   -----------    --------    ----------       5%($)              10%($)
                                                                                                    ---------         --------------
<S>                        <C>               <C>           <C>            <C>         <C>           <C>               <C>
Michael C. Palmer             25,000              1.0%        $4.00         $4.00         2/9/04     $ 27,750         $   61,000
Michael C. Palmer          1,000,000             40.9          3.00          3.00       10/30/04      830,000          1,800,000
Chester L. Noblett, Jr.      300,000             12.3          3.00          3.00         2/9/04      249,000            540,000
</TABLE>



OPTIONS EXERCISED IN FISCAL YEAR 1999

<TABLE>
<CAPTION>
                                                                   Number of Shares                  Dollar Value
                                 Shares         Value         -------------------------      --------------------------
                                Acquired      Realized        Exercisable        Unex        Exercisable         Unex
                                --------      --------        -----------        ------      -----------         ------
<S>                             <C>          <C>              <C>             <C>            <C>             <C>
Michael C. Palmer                    --              --         725,000       1,000,000      $  137,500      $2,000,000
Chester L. Noblett, Jr          159,547      $  757,848       1,245,802              --       3,301,634              --
Jeffrey Hecht                        --              --         252,912              --         569,553              --
Mark McMillan                        --              --              --         500,000              --              --
</TABLE>


                                       48
<PAGE>   60
DIRECTOR COMPENSATION

        Each non-employee director receives a payment of $500 for each board
meeting attended and an annual option grant to purchase 20,000 shares at market
value. All directors are entitled to reimbursement for expenses of traveling to
and from board meetings, and any other out-of-pocket expenses incurred on behalf
of the company.

        Mr. Piraino, who serves as the audit committee, receives a payment of
$500 per month for his services. This compensation commenced in September, 1998.

        Prior to the merger with Technology Guardian, Inc. ("TGI"), Mr. Piraino
was granted 25,000 shares of common stock as compensation for serving on the
board of directors.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

COMMON STOCK

        The following table sets forth, as of March 28, 2000, the ownership of
the company's common stock by

        - each director and named executive officer of the company,

        - all executive officers and directors of the Company as a group, and

        - all persons known by the company to beneficially own more than 5% of
the company's common stock.

<TABLE>
<CAPTION>
                                                              Amount and
                                                               Nature of             Percent of
                                                              Beneficial           Class of Total
        Name and Address of Beneficial Owner                  Ownership(1)       Shares and Options
        ------------------------------------                  ------------      ---------------------
<S>                                                           <C>               <C>
        David B. Coulter(2)                                     2,850,000               14.16%
        15555 Huntington Village Lane, #239
        Building 9
        Huntington Beach, CA 92647

        Chester (Chet) L. Noblett Jr.(3)                        3,187,047               16.04%
        16520 Harbor Boulevard, Bldg. G
        Fountain Valley, California 92708

        Salvator Piraino(4)                                       161,103                    *
        16520 Harbor Boulevard, Bldg. G
        Fountain Valley, California 92708
</TABLE>

                                       49
<PAGE>   61
<TABLE>
<S>                                                           <C>               <C>

        William Sarpalius(5)                                      226,838                1.24%
        908 Pennsylvania Avenue, S.E.
        Washington, D.C. 20003

        Jeffrey Hecht(6)                                          382,912                2.07%
        16520 Harbor Boulevard, Bldg. G
        Fountain Valley, California 92708

        Gary Pan(7)                                                45,000                    *
        16520 Harbor Boulevard, Bldg. G
        Fountain Valley, California 92708

        Michael C. Palmer(8)                                    1,735,000                8.53%
        16520 Harbor Boulevard, Bldg. G
        Fountain Valley, California 92708

        Mark Basile(9)                                            150,000                    *
        16520 Harbor Boulevard, Bldg. G
        Fountain Valley, California 92708

        Directors and Executive Officers as a group             5,562,900               25.07%
</TABLE>


*       Less than one percent.

(1)     Unless otherwise stated below, each such person has sole voting and
        investment power with respect to all such shares. Under Rule 13d-3(d),
        shares not outstanding which are subject to options, warrants, rights or
        conversion privileges exercisable within 60 days are deemed outstanding
        for the purpose of calculating the number and percentage owned by such
        person, but are not deemed outstanding for the purpose of calculating
        the percentage owned by each other person listed.

(2)     Includes options to purchase: (i) 1,500,000 shares of the company's
        common stock at $3.00 per share for a period of five years from August
        22, 1998.

(3)     Includes options to purchase (i) 350,000 shares of the Company's common
        stock at $2.40 per share for a period of five years from the date of
        grant (June 9, 1998); (ii) 262,802 shares of the Company's common stock
        at $0.7168 per share for a period of five years from the date of grant
        (August 8, 1998); and (iii) 633,000 shares of the company's common
        stock at $3.00 per share for a period of five years from date of grant
        (October 7, 1998).

(4)     Includes options to purchase (i) 16,103 shares of the company's common
        stock at $0.7168 per share for a period of five years from date of grant
        (August 31, 1998); and, (ii) 20,000 shares of the company's common stock
        at $5.50 per share for a period of five years from date of grant
        (September 30, 1999); and (iii) 25,000 shares of the company's common
        stock at $4.00 per share for a period of five years from date of grant
        (February 9, 1999).

                                       50
<PAGE>   62
(5)     Includes 30,000 shares owned by Carol Sarpalius, who is an employee of
        the company and the wife of Mr. Sarpalius. Also includes options to
        purchase: (i) 26,838 shares of the company's common stock at $0.7168 per
        share for a period of five years from date of grant (August 31, 1999);
        and, (ii) 20,000 shares of the Company's common stock at $5.50 per share
        for a period of five years from date of grant (September 30, 1999); and,
        (iii) 25,000 shares of the Company's common stock at $4.00 per share for
        a period of five years from date of grant (September 15, 1998)

(6)     Includes options to purchase: (i) 27,912 shares of the company's common
        stock at $0.7168 per share for a period of five years from date of grant
        (August 31, 1998); and, (ii) 225,000 shares of the company's common
        stock at $3.00 per share for a period of five years from date of grant
        (September 15, 1998).

(7)     Includes options to purchase (i) 20,000 shares of the company's common
        stock at $17.41 per share for a period of five years from date of grant
        (September 30, 1999), and (ii) 25,000 shares of the company's common
        stock at $4.00 per share for a period of five years from the date of
        grant (February 9, 1999).

(8)     Includes options to purchase: 1,000,000 shares of the company's common
        stock at $3.00 per share for a period of five years from date of grant
        (November 1, 1999); (ii) 100,000 shares of the company's common stock at
        $9.25 per share for a period of five years from date of grant (November
        28, 1998); and (iii) 25,000 shares of the company's common stock at
        $4.00 per share for a period of five years from date of grant (February
        9, 1999). Also included are warrants to purchase: (i) 150,000 shares of
        the company's common stock at $4.25 per share for a period of five years
        from date of grant (November 1, 1999); (ii) 150,000 shares of the
        company's common stock at $5.25 per share for a period of five years
        from the date of grant (November 1, 1999); (iii) 100,000 shares of the
        company's common stock at $6.25 per shares for a period of five years
        from the date of grant (November 1,1999); and (iv) 200,000 shares of the
        company's common stock at $8.25 per shares for a period of five years
        from date of grant (November 1, 1999).

(9)     Includes options to purchase 150,000 shares of the Company's common
        stock at $4.18 per share for a period of five years from date of grant
        (March 15, 2000).

PREFERRED STOCK

        The following table sets forth information regarding the beneficial
ownership of our voting preferred stock as of March 28, 2000:


                                       51
<PAGE>   63

<TABLE>
<CAPTION>
                                   Name and Address                      Number of Shares        Percent
        Class                      of Beneficial Owner                  Beneficially Owned       of Class
        -----                      -------------------                  ------------------       --------
<S>                                <C>                                <C>                        <C>
        Series A                   Vantage Capital, Inc.              1,000,000                    100%
        12% Convertible            1990 Bundy Drive, Suite 600
        Preferred(1)               Los Angeles, California 90025

        Series B                   Corporate Financial                2,500,000                    100%
        12% Convertible            Enterprises, Inc.
        Preferred(1)               2224 Main Street
                                   Santa Monica, California 90405

        Series C                   Wentworth, LLC                        50,000                    100%
        6% Convertible             Corporate Center
        Preferred(1)(2)            West Bay Road
                                   Grand Cayman
</TABLE>

(1)     All of the above preferred stock is convertible into common stock
        immediately. See "Description of securities" for details on the
        conversion prices.

(2)     The Company gave notice of redemption to Wentworth LLC on March 29,
        2000. The redemption is scheduled to be completed within seven days from
        the date of notice.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

        In April 1997, in exchange for the issuance of 849,750 shares of TGI
common stock which were converted into company shares in the merger, TGI entered
into a settlement agreement among TGI, Cyber Village Network, Inc. ("CVN") and
Mr. Noblett in which CVN and Mr. Noblett agreed to release TGI from all
potential claims arising from: (i) an Option Agreement, dated August 6, 1997;
and, (ii) an agreement entered into among TGI, David Coulter, as TGI's then
President, CVN and Mr. Noblett as agent for CVN ("Commission Agreement").

        The Option Agreement granted options to CVN to purchase shares equal to
10% of TGI's issued and outstanding shares in exchange for forgiveness of a
$100,000 promissory note held by CVN, as well as the option to purchase shares
equal to 30% of TGI's issued and outstanding shares in exchange for $1,200,000.
Further, the Option Agreement provided that David Coulter, TGI's former
president, had the right to repurchase shares from CVN equal to 15% of TGI's
common stock following the exercise of the option by CVN in exchange for
$1,200,000. Mr. Coulter offset his obligation to pay CVN $1,200,000 by the
$1,200,000 payable to TGI by CVN pursuant to its exercise of options. The
Commission Agreement provided that TGI and Mr. Coulter, TGI's then


                                       52
<PAGE>   64

President, would pay Mr. Noblett, as agent for CVN, an amount equal to 6% of the
gross proceeds received by TGI from any underwriting arranged by Andrew Glashow
and Joe Py, including bridge financing, and subsequently, Mr. Noblett would
rebate one-third of aforementioned fees to Mr. Coulter. The Option Agreement was
subsequently canceled and the parties released each other from all claims.

        Prior to the issuance of the 1,030,000 shares of TGI's stock as a result
of the exercise of the Option Agreement by CVN and the 849,750 shares received
in consideration for the Settlement Agreement, for a total of 1,879,750 Shares,
Mr. Noblett, as agent for CVN, assigned 1,060,000 shares to certain persons as
consideration for loans made to CVN.

        In March 1998 TGI completed payment to Mr. Noblett of a fee in the
amount of $100,000 for certain services provided in assisting TGI with obtaining
additional capital.

        In May, 1998 Mr. Coulter transferred 379,250 shares of his stock to CVN.
Mr. Coulter then canceled 5,414,172 shares of common stock of TGI in connection
with the pending private placement of shares of TGI. Of these shares canceled,
TGI reissued 125,619 to him in August 1998, prior to completion of the merger
with U.S. Connect 1995.

        The cancellation of the Option Agreement was part of the over-all
consideration given in settling the disputes between Mr. Noblett and Mr.
Coulter. A dispute arose between Messrs. Noblett and Coulter with regard to Mr.
Noblett's right to purchase 30% of the outstanding stock of TGI. Due to what Mr.
Coulter perceived to be the increasing potential of TGI, he did not want TGI to
honor TGI's prior commitment to Mr. Noblett. The transactions had no impact on
the operations of the company. These transactions only resolved disputed issues
between Mr. Noblett and Mr. Coulter. At that point in time, there were fewer
than ten stockholders of the company, all of whom were closely associated with
the company. Accordingly, there were no public stockholders affected in any way
by these transactions.

        In connection with the merger with U.S. Connect 1995, we assumed the
obligations of TGI to issue options to purchase 2,000,000 shares of TGI common
stock on a pro rata basis to all TGI stockholders as of August 30, 1998, at an
exercise price of $0.7168 per share, exercisable for five years from date of
grant. In addition, we assumed the obligations of TGI for options to purchase
1,500,000 shares of TGI common stock to Mr. Coulter, then-President of TGI, and
500,000 shares of TGI common stock to Mr. Noblett, the Vice President and Chief
Operating Officer of TGI, at an exercise price of $.7168 per share, exercisable
for five years from date of grant. In October 1998 the board of directors
authorized the issuance of additional options to purchase 1,000,000 shares of
common stock to Mr. Coulter, and 333,333 shares of common stock to Mr. Noblett,
at an exercise price of $3.00 per share, exercisable for five years from date of
grant subject to the company achieving $30,000,000 in sales in 1999. We did not
achieve this level of sales in 1999, and therefore the options of Mr. Coulter
and Mr. Noblett lapsed.



                                       53
<PAGE>   65

        On March 22, 1999, Mr. Coulter resigned as a director and officer.
Pursuant to a resignation agreement, Mr. Coulter agreed to cancel 1,767,769
shares of common stock, reducing the number of shares he holds to 3,000,000
shares of common stock. By contract, the 3,000,000 shares retained by Mr.
Coulter are nonvoting. In addition, Mr. Coulter agreed to cancel all options
held by him to purchase 3,410,885 shares of common stock. The canceled options
included options on 1,400,000 shares exercisable at $3.00 per share and options
on 2,010,885 shares at $0.7168 per share. Mr. Coulter agreed to accept in lieu
thereof options to purchase 1,500,000 shares of common stock, with an exercise
price of $3.00 per share, for five years from August 22, 1999. Mr. Coulter
agreed to the termination of his employment agreement. We agreed to pay Mr.
Coulter a severance payment of $150,000, payable at the rate of $30,000 per
month from the time of resignation, and to pay Mr. Coulter for consulting with
us at the rate of $10,000 per month for a total of 36 months, commencing upon
his resignation. We entered into a general mutual release of claims with Mr.
Coulter. As a result of an alleged breach of the resignation agreement by Mr.
Coulter, we suspended the payment of $10,000 per month to Mr. Coulter. On
February 23, 2000, we entered into a settlement agreement and general release
with Mr. Coulter, pursuant to which Mr. Coulter released all claims for
compensation under the Resignation Agreement of March 22, 1999, and agreed to
transfer certain domain names to us. In return, we agreed to pay Mr. Coulter
$90,000 and to grant him piggy back registration rights with respect to shares
acquired by Mr. Coulter in the exercise of his stock options.

        CFE and VCI (the "Consultant") agreed to work together as equal joint
venture partners pursuant to an exclusive Consulting Agreement which we entered
into with the Consultant dated September 15, 1999, which will terminate no
earlier than September 15, 2002. Mr. Palmer, our CEO, is also the owner and
President of the Consultant.

        The Consulting Agreement states that the duties of the Consultant
include: (1) identifying, analyzing, structuring, negotiating and financing
business sales and/or acquisitions, including without limitation, merger
agreements, stock purchase agreements, and any agreements relating to financing
and/or the placement of our debt or equity securities; (2) assisting in our
corporate strategies; and (3) assisting us in the implementation of our business
plan, in each case as we request.

        The Consultant shall receive as compensation as follows: (1) A
non-refundable monthly retainer of $5,000, payable in cash or restricted common
stock (at the company's option) at a price of $2.00 per share; (2) warrants to
purchase 1,200,000 shares of common stock (the "warrants"), with exercise prices
equal to (a) as to 300,000 warrants, $4.25, (b) as to 300,000 warrants, $5.25,
(c) as to 200,000 warrants, $6.25, and (d) as to 400,000 warrants, $8.50; (3)
fees equal to ten percent of the total aggregate consideration paid for any
acquisition or sale by us of any business, corporation or division (a "Target"),
or the sale, transfer or license of technology (collectively, a "Transaction"),
which fee shall be due upon closing of the Transaction; (4) a financing fee
equal to ten percent of any private or public placement of debt or equity
securities of or owned by the company; and (5) to the extent possible, a share
of any fees or commissions payable by third parties



                                       54
<PAGE>   66

on any Transaction contemplated by the Consulting Agreement. All compensation to
be received by Consultant under the Consulting Agreement was to be paid half to
Corporate CFE and half to VCI.

        We, at our option, may pay fees due under clause (3) and (4) of the
prior paragraph by issuance of restricted common stock or freely tradable,
registered common stock. Restricted common stock shall be issued at a rate equal
to the lesser of (i) 50% of the average bid price for the five trading days
prior to the closing date of a Transaction which entitles the Consultant to
receive such fees, or (ii) $5.00. Freely tradable, registered common stock,
pursuant to an effective and current registration statement, shall be issued at
the rate equal to the lesser of (i) 70% of the average bid price for the five
trading days prior to the closing date of a Transaction which entitles the
Consultant to receive such fees, or (ii) $7.50.

        In the event of a conflict of interest which would prevent the
Consultant from acting due to Mr. Palmer's position with us or if for any reason
Consultant is unable to continue performing the services as per the terms of the
Consulting Agreement, CFE was to act in Consultant's stead. CFE has no
relationship with the company except as an investor. To date, on our behalf, the
board has waived any conflict of interest that may arise from a relationship
between Mr. Palmer and any entity with which Consultant is affiliated.

        We have agreed to issue 1,000,000 shares of Series A 12% Convertible
Preferred Stock to VCI for $2.00 per shares. The purchase price was payable in
monthly installments of $500,000. This series of the Preferred Stock had a
liquidation preference of $2.00 per share, bears cumulative 12% dividends, and
may be converted immediately into common stock at the lower of $2.00 per share
or 70% of the bid price of the common stock on the date of a notice to convert
as reported by the exchange or the market on which the shares of common stock
are traded. At a closing bid price of $3,375 on March 28, 2000, VCI would be
entitled to convert the 1,000,000 shares of preferred stock into 1,000,000
shares of common stock.

        On March 28, 2000, we entered into an agreement with CFE pursuant to
which CFE agreed to cancel the consulting agreement with us entered into
September 17, 1998, and all rights to receive future fees and preferred shares
from us. In addition, we agreed with CFE to settle a dispute about the number of
shares issued to CFE and its clients and the amount we received in payment for
those shares. CFE paid us $558,510 and we entered into a mutual release with CFE
for all claims. CFE agreed to put the shares of common stock which CFE would
receive upon conversion of its warrants into a voting trust if requested by
NASDAQ in order to facilitate a listing on NASDAQ.

                                     PART IV

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

     (a)  LIST OF DOCUMENTS FILED AS PART OF THIS REPORT

          1.   Financial Statements for the year ended December 31, 1999, 1998,
               and 1997.

          2.   Index to Financial Statement Schedules:

               A. Financial Data Schedule

          3.   Index to Exhibits:

<TABLE>
<CAPTION>
               Number       Description
<S>                         <C>
                2.1         Agreement and Plan of Merger between Technology
                            Guardian, Inc. and U.S. Connect 1995, Inc., dated
                            September 15, 1998, filed September 15, 1998 with
                            the Nevada Secretary of State(1)

                2.2         Articles of Merger of Technology Guardian, Inc. and
                            Technology Guardian, Inc. (formerly U.S. Connect
                            1995, Inc.), filed October 8, 1998 with the Nevada
                            Secretary of State(1)

                3.1         Certificate of Amended and Restated Articles of
                            Incorporation of Technology Guardian, Inc., filed
                            September 28, 1995 with the Nevada Secretary of
                            State(1)

                3.2         Certificate of Amendment to Articles of
                            Incorporation of Technology Guardian, Inc., filed
                            February 4, 1999 with the Nevada Secretary of
                            State(1)

                3.3         Bylaws of US Connect 1995, Inc.(1)

                3.4         Certificate of Designations of Series A 12%
                            Convertible Preferred Stock of Registrant, filed
                            January __, 2000 with the Nevada Secretary of
                            State(4)

                3.5         Certificate of Designations of Series B 12%
                            Convertible Preferred Stock of Registrant, filed
                            January __, 2000 with the Nevada Secretary of
                            State(4)

                3.6         Certificate of Designations of Series C 6%
                            Convertible Preferred Stock of Registrant, filed
                            December 29, 1999 with the Nevada Secretary of
                            State(4)

                10.1        Stock Option Agreement between Registrant and
                            William Sarpalius, dated September 1, 1999(1)

                10.2        Stock Option Agreements between Registrant and Lori
                            Walker, dated September 1, 1999(1)

                10.3        Stock Option Agreements between Registrant and Carol
                            Sarpalius, dated September 1, 1999(1)

                10.4        Employment Agreement between Registrant and Chester
                            Noblett, Jr., dated June 15, 1998(1)

                10.5        Stock Option Agreement between Registrant and Chet
                            Noblett, dated September 15, 1999(1)

                10.6        Warrant Agreement between Registrant and Corporate
                            Financial Enterprises, Inc., dated as of September
                            17, 1999(4)

                10.7        Warrant Agreement between Registrant and Vantage
                            Capital, Inc., dated as of September 17, 1999(4)

                10.8        Common Stock Purchase Warrant by and between
                            Registrant and Wentworth LLC, dated as of December
                            29, 1999(4)

                10.9        Registration Rights Agreement by and among
                            Registrant, Vantage Capital, Inc., Corporate
                            Financial Enterprises, Inc., and American Equities,
                            LLC, dated as of November 22, 1999(4)

                10.10       Stock Purchase Agreement by and among Registrant and
                            Vantage Capital, Inc., dated as of November 22,
                            1999(4)

                10.11       Stock Purchase Agreement by and among Registrant and
                            Corporate Financial Enterprises, Inc. and American
                            Equities, LLC, dated as of November 22, 1999(4)

                10.12       Securities Purchase Agreement by and between
                            Registrant and Wentworth LLC, dated December 29,
                            1999(4)

                10.13       Registration Rights Agreement by and between
                            Registrant and Wentworth LLC, dated December 29,
                            1999(4)

                10.14       Side Letter Agreement, dated December 29, 1999,
                            between Registrant and Wentworth LLC(4)

                10.15       Resignation Agreement between Registrant and David
                            Coulter, dated March 22, 1999(4)

                10.16       Master Services Agreement between Registrant and
                            Exodus Communications, Inc., dated December 30,
                            1999(4)

                10.17       Letter Agreement between Registrant and Parks,
                            Palmer, Turner and Yemenidjian, LLP for the services
                            of Michael Palmer, dated November 10, 1998(4)

                10.18       Settlement Agreement and Mutual Release by and
                            between Cyber Village Network, Inc., Chet Noblett,
                            and Technology Guardian, Inc. and David Coulter,
                            dated October 17, 1997(4)

                10.19       Consulting Agreement between Registrant and Vantage
                            Capital, Inc., dated September 17, 1999(2)

                10.20       Loan Out Agreement between Registrant and Vantage
                            Capital Corp. for the services of Michael Palmer,
                            dated November 1, 1999(4)

                10.21       Employment Agreement between Global Media
                            Technology, Inc. and Barry B. Sandrew, dated October
                            7, 1999(4)

                10.22       Co-Employment Agreement between Registrant and
                            Employers Resource Management Company, Inc., for the
                            services of executive officers, dated September 29,
                            1998(4)

                10.23       Settlement Agreement and General Release between
                            Registrant and David Coulter, dated February 23,
                            2000.

                10.24       Stock Reconciliation Agreement between Registrant
                            and Corporate Financial Enterprises, Inc., date
                            March 28, 2000.

                10.25       Master License Agreement between Registrant and
                            DEVNET L.L.C. dated February 18, 2000.

                10.26       Unit Investment Agreement among Registrant,
                            Ballsbridge Finance, Limited and The Watley Group
                            LLC dated March 20, 2000.

                21          List of Subsidiaries(4)

                24          Power of Attorney (see signature page of Form 10-K)

                27          Financial Data Schedule

                99          Federal Communications Commission Radio Station
                            Authorization, dated August 25, 1999
</TABLE>

(1)     Filed as part of Registrant's Form 10 dated March 16, 1999, and
        incorporated herein by reference.

(2)     Filed as part of Registrant's Form 10 dated November 8, 1999, and
        incorporated herein by reference.

(3)     Filed as a part of Registrant's Form 10 dated May 11, 1999, and
        incorporated herein by reference.

(4)     Filed as a part of Registrant's Form SB-2 dated January 26, 2000, and
        incorporated herein by reference.


                                       55
<PAGE>   67

                                   SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                   ESAT, INC.
                                  (Registrant)

                                   By  /s/ Michael C. Palmer
                                     ---------------------------------
                                      Michael C. Palmer, President

                                      March 30, 2000

        Pursuant to the requirements of the Securities Exchange Act or 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

        /s/ Michael C. Palmer
        ------------------------------------
        Michael C. Palmer, President and Director

        /s/ Chester L. Noblett, Jr.
        ------------------------------------
        Chester L. Noblett, Jr., Chairman of the Board of Directors

        /s/ Salvator A. Piraino
        ------------------------------------
        Salvator A. Piraino, Director

        /s/ Mark Basile
        ------------------------------------
        Mark Basile, Chief Financial Officer



                                       56
<PAGE>   68
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
               Number       Description
<S>                         <C>
                2.1         Agreement and Plan of Merger between Technology
                            Guardian, Inc. and U.S. Connect 1995, Inc., dated
                            September 15, 1998, filed September 15, 1998 with
                            the Nevada Secretary of State(1)

                2.2         Articles of Merger of Technology Guardian, Inc. and
                            Technology Guardian, Inc. (formerly U.S. Connect
                            1995, Inc.), filed October 8, 1998 with the Nevada
                            Secretary of State(1)

                3.1         Certificate of Amended and Restated Articles of
                            Incorporation of Technology Guardian, Inc., filed
                            September 28, 1995 with the Nevada Secretary of
                            State(1)

                3.2         Certificate of Amendment to Articles of
                            Incorporation of Technology Guardian, Inc., filed
                            February 4, 1999 with the Nevada Secretary of
                            State(1)

                3.3         Bylaws of US Connect 1995, Inc.(1)

                3.4         Certificate of Designations of Series A 12%
                            Convertible Preferred Stock of Registrant, filed
                            January __, 2000 with the Nevada Secretary of
                            State(4)

                3.5         Certificate of Designations of Series B 12%
                            Convertible Preferred Stock of Registrant, filed
                            January __, 2000 with the Nevada Secretary of
                            State(4)

                3.6         Certificate of Designations of Series C 6%
                            Convertible Preferred Stock of Registrant, filed
                            December 29, 1999 with the Nevada Secretary of
                            State(4)

                10.1        Stock Option Agreement between Registrant and
                            William Sarpalius, dated September 1, 1999(1)

                10.2        Stock Option Agreements between Registrant and Lori
                            Walker, dated September 1, 1999(1)

                10.3        Stock Option Agreements between Registrant and Carol
                            Sarpalius, dated September 1, 1999(1)
</TABLE>


<PAGE>   69
<TABLE>
<S>                         <C>
                10.4        Employment Agreement between Registrant and Chester
                            Noblett, Jr., dated June 15, 1998(1)

                10.5        Stock Option Agreement between Registrant and Chet
                            Noblett, dated September 15, 1999(1)

                10.6        Warrant Agreement between Registrant and Corporate
                            Financial Enterprises, Inc., dated as of September
                            17, 1999(4)

                10.7        Warrant Agreement between Registrant and Vantage
                            Capital, Inc., dated as of September 17, 1999(4)

                10.8        Common Stock Purchase Warrant by and between
                            Registrant and Wentworth LLC, dated as of December
                            29, 1999(4)

                10.9        Registration Rights Agreement by and among
                            Registrant, Vantage Capital, Inc., Corporate
                            Financial Enterprises, Inc., and American Equities,
                            LLC, dated as of November 22, 1999(4)

                10.10       Stock Purchase Agreement by and among Registrant and
                            Vantage Capital, Inc., dated as of November 22,
                            1999(4)

                10.11       Stock Purchase Agreement by and among Registrant and
                            Corporate Financial Enterprises, Inc. and American
                            Equities, LLC, dated as of November 22, 1999(4)

                10.12       Securities Purchase Agreement by and between
                            Registrant and Wentworth LLC, dated December 29,
                            1999(4)

                10.13       Registration Rights Agreement by and between
                            Registrant and Wentworth LLC, dated December 29,
                            1999(4)

                10.14       Side Letter Agreement, dated December 29, 1999,
                            between Registrant and Wentworth LLC(4)

                10.15       Resignation Agreement between Registrant and David
                            Coulter, dated March 22, 1999(4)

                10.16       Master Services Agreement between Registrant and
                            Exodus Communications, Inc., dated December 30,
                            1999(4)

                10.17       Letter Agreement between Registrant and Parks,
                            Palmer, Turner and Yemenidjian, LLP for the services
                            of Michael Palmer, dated November 10, 1998(4)
</TABLE>


<PAGE>   70
<TABLE>
<S>                         <C>
                10.18       Settlement Agreement and Mutual Release by and
                            between Cyber Village Network, Inc., Chet Noblett,
                            and Technology Guardian, Inc. and David Coulter,
                            dated October 17, 1997(4)

                10.19       Consulting Agreement between Registrant and Vantage
                            Capital, Inc., dated September 17, 1999(2)

                10.20       Loan Out Agreement between Registrant and Vantage
                            Capital Corp. for the services of Michael Palmer,
                            dated November 1, 1999(4)

                10.21       Employment Agreement between Global Media
                            Technology, Inc. and Barry B. Sandrew, dated October
                            7, 1999(4)

                10.22       Co-Employment Agreement between Registrant and
                            Employers Resource Management Company, Inc., for the
                            services of executive officers, dated September 29,
                            1998(4)

                10.23       Settlement Agreement and General Release between
                            Registrant and David Coulter, dated February 23,
                            2000.

                10.24       Stock Reconciliation Agreement between Registrant
                            and Corporate Financial Enterprises, Inc., date
                            March 28, 2000.

                10.25       Master License Agreement between Registrant and
                            DEVNET L.L.C. dated February 18, 2000.

                10.26       Unit Investment Agreement among Registrant,
                            Ballsbridge Finance, Limited and The Watley Group
                            LLC dated March 20, 2000.

                21          List of Subsidiaries(4)

                24          Power of Attorney (see signature page of Form 10-K)

                27          Financial Data Schedule

                99          Federal Communications Commission Radio Station
                            Authorization, dated August 25, 1999(4)
</TABLE>

(1)     Filed as part of Registrant's Form 10 dated March 16, 1999, and
        incorporated herein by reference.

(2)     Filed as part of Registrant's Form 10 dated November 8, 1999, and
        incorporated herein by reference.

(3)     Filed as a part of Registrant's Form 10 dated May 11, 1999, and
        incorporated herein by reference.

(4)     Filed as a part of Registrant's Form SB-2 dated January 26, 2000, and
        incorporated herein by reference.