<PAGE>

                               UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                 FORM 10-QSB
(Mark One)

/X/  Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
     of 1934 For the quarterly period ended September 30, 1998.

/ /  Transition report under Section 13 or 15(d) of the Exchange Act
     For the transition period from         to         
                                   ---------   ---------

                      Commission file number: 33-83526

                          SECURFONE AMERICA, INC.
--------------------------------------------------------------------------------
          (Exact Name of Registrant as Specified in its Charter)


               DELAWARE                                 34-1833574
-------------------------------------    ---------------------------------------
     (State of Incorporation)             (I.R.S. Employer Identification No.)


          5850 OBERLIN DRIVE, SUITE 220 SAN DIEGO, CALIFORNIA        92121
--------------------------------------------------------------------------------
                  (Address of Principal Executive Offices)


                                 619-677-5580
     -------------------------------------------------------------
            (Issuer's Telephone Number, Including Area Code)


     Check whether issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

     Yes          No   X
         -----       -----

     State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:

COMMON STOCK, $0.001 PAR VALUE PER SHARE: 6,091,881 (AS OF MARCH 1, 1999)
--------------------------------------------------------------------------------


     Transition Small Business Disclosure Format (check one):

     Yes          No   X
         -----       -----


<PAGE>

                           SECURFONE AMERICA, INC.

                        QUARTERLY REPORT ON FORM 10-QSB
                   FOR THE QUARTER ENDED SEPTEMBER 30, 1998



                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
ITEM                                                                        PAGE
----                                                                        ----
<S>                                                                         <C>
PART I -- FINANCIAL INFORMATION................................................2
   Item 1. Financial Statements................................................2
   Item 2. Management's Discussion and Analysis or Plan of Operation..........16

PART II -- OTHER INFORMATION..................................................26
   Item 1. Legal Proceedings..................................................26
   Item 2. Changes in Securities and Use of Proceeds..........................26
   Item 3. Defaults Upon Senior Securities....................................26
   Item 4. Submission of Matters to a Vote of Security Holders................26
   Item 5. Other Information..................................................26
   Item 6. Exhibits and Reports on Form 8-K...................................26
</TABLE>


                                 -- Page 1 --
<PAGE>

                         PART I -- FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS.

<TABLE>
       <S>                                                                  <C>
       Consolidated Balance Sheets.............................................3

       Consolidated Statements of Operations...................................4

       Consolidated Statements of Stockholders' Equity.........................5

       Consolidated Statements of Cash Flows...................................6

       Notes to Financial Statements........................................7-15
</TABLE>

                                 -- Page 2 --

<PAGE>
                           CONSOLIDATED BALANCE SHEET
                          SEPTEMBER 30, 1998 AND 1997
 
<TABLE>
<CAPTION>
                                  ASSETS
 
                                                       1998         1997
                                                    -----------  ----------
<S>                                                 <C>          <C>
CURRENT ASSETS:
  Cash & cash equivalents                           $     3,093  $    4,099
  Royalties receivable                                       --     300,000
  Accounting receivable, net                             41,372       9,903
  Marketable securities                                 490,000          --
  Inventory                                                  --      20,641
  Prepaid expenses                                       70,000         615
                                                    -----------  ----------

    Total current assets                                604,465     335,258
 
PROPERTY AND EQUIPMENT, -net of
  accumulated depreciation                              200,772     257,099
 
OTHER ASSETS:
  Investments                                                --          --
  Note receivable including accrued interest                 --      87,453
  Intangible assets, net of
    accumulated amortization                            214,655     283,119
  Deposits                                                1,225       1,225
                                                    -----------  ----------
    Total other assets                                  215,880     371,797
                                                    -----------  ----------
    Total assets                                    $ 1,021,117  $  964,154
                                                    -----------  ----------
                                                    -----------  ----------

<CAPTION>
                   LIABILITIES AND STOCKHOLDERS' EQUITY

                                                       1998         1997
                                                    -----------  ----------
<S>                                                 <C>          <C>
CURRENT LIABILITIES:
  Bank overdraft                                    $    19,033  $       --
  Accounts payable & accrued liabilities                415,489     199,007
  Accrued payroll                                        64,163       3,674
  Notes payable                                         315,000          --
  Current portion of long term liabilities               59,236      47,449
                                                    -----------  ----------

    Total current liabilities                           872,921     250,130
                                                    -----------  ----------
 
LONG-TERM LIABILITIES:
  Advances payable                                      140,000          --
  Notes payable--net of current portion                 911,000      50,000
  Obligation under capital leases--net of current        66,473      92,260
    portion                                         
                                                    -----------  ----------

    Total long term liabilities                       1,117,473     142,260
                                                    -----------  ----------

    Total liabilities                                 1,990,394     392,390
                                                    -----------  ----------
 
DEFERRED ROYALTY REVENUE                                     --     300,000
 
STOCKHOLDERS' EQUITY:
  Common stock--SecurFone America, Inc. $.001 par         5,930      41,200
    value, authorized 100,000,000 shares,
    outstanding 6,050,216 shares on September 30,
    1998 and 5,000,000 shares at September 30,
    1997                                              
  Additional paid in capital                          4,330,145   1,054,600
  Additional paid in capital--stock options           2,874,475          --
  Deficit accumulated during the development stage   (5,157,131)   (824,036)
  Retained earnings (deficit)                        (3,022,696)         --
                                                    -----------  ----------

    Total stockholders' equity                         (969,277)    271,764
                                                    -----------  ----------
</TABLE>


See accompanying notes.

                                 -- Page 3 --

<PAGE>

                      CONSOLIDATED STATEMENT OF OPERATIONS
                   FOR THE THREE MONTHS AND NINE MONTHS ENDED
                          SEPTEMBER 30, 1998 AND 1997
 
<TABLE>
<CAPTION>
                                                                      1998                       1997
                                                            -------------------------  -------------------------
                                                            three months  nine months  three months  nine months
                                                            ------------  -----------  ------------  -----------
<S>                                                         <C>           <C>          <C>           <C>
REVENUES                                                     $   52,878    $ 328,350    $   33,698    $  39,382
 
COST OF GOODS SOLD                                              151,522      380,278        26,128       51,362
                                                            ------------  -----------  ------------  -----------
    Gross profit                                                (98,644)     (51,928)        7,570      (11,980)

OPERATING EXPENSES:
  Selling, general and administrative                           492,261    1,743,300       652,899    1,284,805
  Stock-based compensation                                           --    1,620,000            --           --
                                                            ------------  -----------  ------------  -----------
                                                                492,261    3,363,300       652,899    1,284,805

    Income (loss) from operations                              (590,905)  (3,415,228)     (645,329)  (1,296,785)
                                                            ------------  -----------  ------------  -----------

OTHER INCOME (EXPENSE):
  Royalty revenue                                                    --      100,000       550,000      950,000
  Interest income                                                    --           --         7,218        7,218
  Interest expense                                              (88,832)    (194,001)      (22,975)     (50,029)
  Loss on abandonment -- SFNY                                        --           --            --      (48,980)
                                                            ------------  -----------  ------------  -----------

    Total other income (expense)                                (88,832)     (94,001)      534,243      858,209
                                                            ------------  -----------  ------------  -----------

  Provision for income tax                                       (1,818)      (3,467)           --           --
                                                            ------------  -----------  ------------  -----------

      Net income (loss)                                        (681,555)  (3,512,696)     (111,086)    (438,576)
                                                            ------------  -----------  ------------  -----------

OTHER COMPREHENSIVE INCOME (LOSS):
  Unrealized Gains on Securities                               (280,000)     490,000            --           --
                                                            ------------  -----------  ------------  -----------

      Comprehensive Income (Loss)                            $ (961,555)  $(3,022,696)  $ (111,086)   $(438,576)
                                                            ------------  -----------  ------------  -----------
                                                            ------------  -----------  ------------  -----------

Net (loss) per share -- basic                                $    (0.11)   $   (0.60)   $    (0.02)   $   (0.09)
                                                            ------------  -----------  ------------  -----------
                                                            ------------  -----------  ------------  -----------

Net (loss) per share -- fully diluted                        $    (0.11)   $   (0.60)   $    (0.02)   $   (0.09)
                                                            ------------  -----------  ------------  -----------
                                                            ------------  -----------  ------------  -----------
</TABLE>

See accompanying notes.


                                 -- Page 4 --

<PAGE>

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                    MAY 20, 1996 THROUGH SEPTEMBER 30, 1998
 
<TABLE>
<CAPTION>
                                                                    Additional     Deficit
                                                                      paid in    accumulated
                                                       Additional    capital-     during the    Retained
                                            Common       paid in       stock     development    Earnings
                                             Stock       capital      options       stage      (Deficit)     Total
                                          -----------  -----------  -----------  ------------  -----------  ----------
<S>                                       <C>          <C>          <C>          <C>           <C>          <C>
Initial issuance of common
  stock, May 20, 1996                      $       3    $ 975,797    $      --    $       --   $        --  $  975,800
 
Stock split 1,333.33 to 1                     39,970      (39,970)          --            --            --          --
 
Sale of stock                                  1,200      118,800           --            --            --     120,000
 
Acquisition                                  (36,173)      36,173           --            --            --          --
 
Stock options granted                             --           --    1,227,250            --            --   1,227,250
 
Contingent shares issued                         620    3,099,380           --            --            --   3,100,000
 
Stock options exercised                          225           --       22,275            --            --      22,500
 
Stock options granted                             --           --    1,620,000            --            --   1,620,000
 
Stock issued                                      35      139,965           --            --            --     140,000
  
Stock options exercised                           50           --        4,950            --            --       5,000
 
Net loss                                          --           --           --    (5,157,131)   (3,022,696) (8,179,827)
                                          -----------  -----------  -----------  ------------  -----------  ----------
 
Balance September 30, 1998                 $   5,930    $4,330,145   $2,874,475   $(5,157,131) $(3,022,696) $ (969,277)
                                          -----------  -----------  -----------  ------------  -----------  ----------
                                          -----------  -----------  -----------  ------------  -----------  ----------
</TABLE>

See accompanying notes.


                                 -- Page 5 --

<PAGE>

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                   FOR THE THREE MONTHS AND NINE MONTHS ENDED
                          SEPTEMBER 30, 1998 AND 1997
 
<TABLE>
<CAPTION>
                                                                      1998                       1997
                                                            -------------------------  -------------------------
                                                            three months  nine months  three months  nine months
                                                            ------------  -----------  ------------  -----------
<S>                                                         <C>           <C>          <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                          $ (681,555)  ($3,512,696)  $ (111,086)   $(438,570)
                                                            ------------  -----------  ------------  -----------
  Adjustments to reconcile net loss to net
    cash provided by operating activities:
      Depreciation and amortization                              29,623       88,869        26,411       64,940
      Stock options granted and contingent shares issued             --    1,620,000            --           --
      Decrease (increase) in accounts receivable                 22,055       (6,268)       (9,903)      (9,903)
      Decrease (increase) in notes receivable                        --       89,353        68,380      118,380
      Decrease (increase) in royalties receivable                            100,000        50,000      (50,000)
      Decrease (increase) in inventory                               --       22,153       (20,641)     (20,641)
      Decrease (increase) in prepaid expenses                    35,100      (70,000)           --         (615)
      Decrease (increase) in intangibles and other assets            --           --       (39,049)     (76,822)
      (Decrease) increase in accounts payable,
        payroll payable and accrued expenses                     73,922      306,784        (3,124)     149,313
      (Decrease) increase in deferred royalty revenue                --     (100,000)      (50,000)      50,000
                                                            ------------  -----------  ------------  -----------
        NET CASH USED BY
          OPERATING ACTIVITIES                                 (520,855)  (1,461,805)      (89,012)    (213,924)
                                                            ------------  -----------  ------------  -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment                                 --      (12,014)      (11,660)    (146,305)
                                                            ------------  -----------  ------------  -----------
        NET CASH PROVIDED (USED) IN
          INVESTING ACTIVITIES                                       --      (12,014)      (11,660)    (146,305)
                                                            ------------  -----------  ------------  -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Contribution to capital                                         5,000      167,500            --      120,000
  Proceeds from advances payable                                     --      140,000            --           --
  Proceeds from notes payable                                   474,000    1,176,000            --           --
  Repayments on notes payable                                    (3,942)     (11,641)       50,000       50,000
  Proceeds from capital lease                                        --           --            --      159,649
  Repayment under capital lease                                  (6,266)     (21,487)       (8,658)     (19,940)
                                                            ------------  -----------  ------------  -----------
        NET CASH PROVIDED IN
          FINANCING ACTIVITIES                                  468,792    1,450,372        41,342      309,709
                                                            ------------  -----------  ------------  -----------
NET INCREASE(DECREASE) IN CASH
  AND CASH EQUIVALENTS                                          (52,063)     (23,447)      (59,330)     (50,520)
 
BEGINNING BALANCE--CASH AND
  CASH EQUIVALENTS                                               36,123        7,507        63,429       54,619
                                                            ------------  -----------  ------------  -----------
CASH AT SEPTEMBER 30                                         $  (15,940)   $ (15,940)   $    4,099    $   4,099
                                                            ------------  -----------  ------------  -----------
                                                            ------------  -----------  ------------  -----------
 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Cash paid during the period for interest                   $   21,718    $  71,569    $   22,975    $  50,030
                                                            ------------  -----------  ------------  -----------
                                                            ------------  -----------  ------------  -----------
  Cash paid during the period for income taxes               $    1,018    $   3,517    $      900    $     900
                                                            ------------  -----------  ------------  -----------
                                                            ------------  -----------  ------------  -----------
 
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS
  Amortization of prepaid loan fees paid by stock issued     $   35,000    $  70,000    $       --    $      --
                                                            ------------  -----------  ------------  -----------
                                                            ------------  -----------  ------------  -----------
  Increase (decrease) in fair value of marketable
    securities                                               $ (280,000)   $ 490,000    $       --    $      --
                                                            ------------  -----------  ------------  -----------
                                                            ------------  -----------  ------------  -----------
  Conversion of advances payable to notes payable            $  702,000    $      --    $       --    $      --
                                                            ------------  -----------  ------------  -----------
                                                            ------------  -----------  ------------  -----------
  Sale of common stock for note                              $       --    $      --    $    5,000    $   5,000
                                                            ------------  -----------  ------------  -----------
                                                            ------------  -----------  ------------  -----------
</TABLE>

See accompanying notes.

                                 -- Page 6 --

<PAGE>

                      NOTES TO FINANCIAL STATEMENTS
               FOR THE THREE MONTHS AND NINE MONTHS ENDED
                       SEPTEMBER 30, 1998 AND 1997

Note 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         BASIS OF PRESENTATION

         The accompanying consolidated financial statements include the 
            accounts of SecurFone America, Inc. and its wholly owned 
            subsidiary, SecurFone, Inc. (collectively referred to as 
            "SecurFone" or the "Company").  Intercompany transactions and 
            balances have been eliminated in the consolidated financial 
            statements.

          NATURE OF OPERATIONS

          SecurFone is principally engaged in the sale of prepaid cellular 
            phone services.  The Company provides these services in some markets
            and, in other markets, licenses the Company's resources to unrelated
            parties.
            The Company offers three main products:
             - Buy-The-Minute-TM- - a software modified handset for which the
               Company provides underlying national airtime, activation, and 
               administrative services for end users.
             - SFA Local Network Solution - the Company's flagship product that
               telephonically connects directly to the underlying wireless
               service provider to accomplish call routing and completion.
             - Carrier Network Services - the wholesale prepaid wireless
               platform service that the Company sells directly to wireless
               carriers that do not wish to create their own platform.

          On August 1, 1997, SecurFone, Inc. was acquired by Material 
            Technology, Inc. (Formerly Tensiodyne Scientific Corporation) 
            and became a publicly traded corporation.

          CASH AND CASH EQUIVALENTS

          For the purpose of the statement of cash flows, the Company 
            considers all highly liquid investments with an original maturity 
            of three months or less to be cash equivalents.  The Company 
            maintains its cash accounts in two commercial banks.  Accounts 
            are guaranteed by the Federal Deposit Insurance Company (FDIC) up 
            to $100,000.

          CONCENTRATION OF CREDIT RISK

          Financial instruments which potentially subject the Company to credit 
            risk include temporary cash investments and trade receivables.
            Concentration of credit risk with respect to trade receivables is 
            limited due to the Company's large number of customers and wide 
            range of locations served.  The Company occasionally maintains 
            deposits in excess of federally insured limits.  Management believes
            that the risk is limited by maintaining all deposits in high quality
            financial institutions.

          PROPERTY AND EQUIPMENT

          The cost of property and equipment is depreciated over the estimated 
            useful lives of the related assets.  Depreciation is calculated 
            using the accelerated depreciation method for both financial 
            reporting and income tax purposes.  For the quarters ended September
            30, 1998 and 1997 depreciation expense of $14,077 and $571 was 
            charged to operations, respectively.  For the nine months ended 
            September 30, 1998 and 1997 depreciation expense of $42,231 and
            $37,142 was charged to operations, respectively.

                                 -- Page 7 --

<PAGE>

Note 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

          FINANCIAL INSTRUMENTS

          As collateral for performance and advances on long-term contracts, 
            the Company has stand-by letters of credit that it can issue for 
            up to $1,000,000.  Through an agreement with investors, the 
            Company  may obtain letters of credit which are secured by their 
            personal assets through their personal banks.  In connection with 
            the annual renewal of these credit lines investors were granted 
            35,000 shares of common stock on April 1, 1998.  As of September 
            30, 1998, there was an amount of $133,900 available to these 
            investors for stand-by letters of credit. For the quarters ended 
            September 30, 1998 and 1997, interest expense of $57,500 and 
            $19,771 was charged to operations respectively. For the nine 
            months ended September 30, 1998 and 1997, interest expense of 
            $137,500 and $42,271 was charged to operations, respectively.

          REVENUE AND EXPENSE RECOGNITION

          The Company recognizes revenue from sales of cellular airtime, net 
            of an allowance for uncollectible amounts, when substantially all 
            significant services to be provided by the Company have been 
            performed.  Expenses are recognized in the period in which they 
            are incurred.  An allowance equal to 5% of sales has been 
            provided for uncollectible accounts based on management's 
            evaluation of the accounts and their history.

          INTANGIBLE ASSETS

          Intangible assets are comprised of various costs incurred by the 
            Company as part of the start-up phase of operations.  The Company 
            began amortizing these costs over a five year period as of 
            January 1, 1997, using the straight-line method.  For the 
            quarters ended September 30, 1998 and 1997, $15,546 and $571 in 
            amortization expense of organizational costs has been charged to 
            operations, respectively. For the nine months ended September 30, 
            1998 and 1997, $46,638 and $37,142 in amortization expense of 
            organizational costs has been charged to operations, respectively

          USE OF ESTIMATES

          In preparing the Company's financial statements, management is 
            required to make estimates and assumptions that effect the 
            reported amounts of assets and liabilities, the 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. These estimates are based on 
            management's knowledge and experience. Accordingly, actual 
            results could differ from those estimates.

Note 2.  NOTE RECEIVABLE

          The June 30, 1997 note receivable consists of a note due from 
            Montpilier Holdings, Inc., with interest accrued at 7% annually.  
            This note is secured by publicly traded securities held by an 
            affiliated corporation owned by a principal shareholder of 
            Montpilier Holdings, Inc.  Montpilier Holdings, Inc. is the 
            principal shareholder in the Company, and is owned indirectly by 
            Michael M. Grand, a Director of the Company.


                                 -- Page 8 --

<PAGE>

Note 3.   MARKETABLE SECURITIES AVAILABLE FOR SALE

          Cost and fair value of marketable securities available for sale at 
            September 30, 1998 is as follows:

<TABLE>
<CAPTION>
                                                    Cost           Unrealized Gains           Fair Value
                                                    ----           ----------------           ----------
<S>                                                 <C>            <C>                        <C>
September 30, 1998        - Equities                $  0                  $ 490,000           $  490,000
</TABLE>

          The securities are held in connection with the July 31, 1997 
            reorganization and legal claims asserted against a Company 
            shareholder. The Company also withheld $50,000 as security (see 
            Note 5). The legal claims were subsequently resolved (see Note 
            13).

          The Company has adopted FASB Statement No. 130, Reporting 
            Comprehensive Income.  Statement No. 130 requires the reporting 
            of comprehensive income in addition to net income from 
            operations.  Comprehensive income is a more inclusive financial 
            reporting method that includes disclosure of certain financial 
            information that historically has not been recognized in the 
            calculation of net income.

          At September 30, 1998 the Company held securities which have 
            unrealized gains of $490,000. These securities were pledged as
            collateral for a $50,000 note payable to a shareholder of the
            Company. See Note 5. As described in Note 10, there is 
            no tax expense on realization of this gain.

Note 4.   PROPERTY AND EQUIPMENT

          Property and equipment at September 30, 1998 and 1997 is comprised 
            of the following:

<TABLE>
<CAPTION>
                                                       1998                    1997
                                                       ----                    ----
          <S>                                      <C>                     <C>
          Office Furniture and Equipment           $    35,043             $   11,015
          Computer Software                             88,702                 88,802
          Computer Hardware                            190,373                188,814
                                                   -----------             ----------
                                                       314,118                294,302
          Accumulated Depreciation                    (113,346)               (37,203)
                                                   -----------             ----------
                                                   $   200,772             $  257,099
                                                   -----------             ----------
                                                   -----------             ----------
</TABLE>

Note 5.   SHORT TERM DEBT

          As of September 30 notes payable, other obligations and long term 
            debt consisted of the following:
<TABLE>
<CAPTION>
                                                                                           1998                1997
                                                                                           ----                ----
          <S>                                                                           <C>                 <C>
          Notes payable (formerly treated as an advances payable) to 
            unrelated parties for advances of $35,000 and $130,000 are due 
            February 18, 1999 and January 30, 1999, respectively with 10% 
            interest.  The notes are unsecured.                                         $  165,000                0

          Note payable (formerly treated as an advances payable) to an 
            unrelated party is due November 21, 1998 with 10% interest. Under 
            terms of the note, a $20,000 origination fee is due November 1, 
            1998.  The note is secured with security interest in 50,000 shares 
            of the Company's common stock.                                              $  100,000                0
</TABLE>

                                 -- Page 9 --

<PAGE>

<TABLE>
          <S>                                                                           <C>               <C>
          Note payable to a shareholder in connection with the July 31, 1997 
            reorganization and legal claims asserted against a Company 
            shareholder.                                                                $   50,000              0
                                                                                        ----------
            The demand note has no stated interest rate and is due on 10 days 
            demand after settlement of legal claims made upon the 
            shareholder.  As discussed in Note 13, the claims were released 
            August 18, 1998 and the note was satisfied on October 9, 1998               $  315,000              0
</TABLE>

Note 6.  LONG TERM DEBT

          As of September 30 notes payable, other obligations and long term 
            debt consisted of the following:

<TABLE>
<CAPTION>
                                                                                              1998           1997
                                                                                              ----           ----
          <S>                                                                           <C>               <C>
          Advances payable to unrelated parties and potential investors who 
            have committed the funds on a long term basis. Negotiations with 
            various parties have not characterized the debt and equity nature 
            of the funds or finalized interest rates, maturity dates, repayment
            terms or other features for the advances.                                   $  140,000              0


          Convertible debenture issued August 21, 1998 for advances made to the 
            Company. The debenture has a 12% interest rate payable quarterly.  
            The principal is payable on the earlier of the company's receipt of 
            at least $8 million proceeds from a public offering of Company 
            securities or August 21, 2001.  Nondetachable warrants for 500,000 
            shares exercisable at $2.72 per share were issued in connection 
            with the convertible debenture.  The warrants expire August 21, 
            2003.                                                                       $  911,000              0

          Note payable with a vendor under an agreement dated October, 1997 
            is a two year, unsecured note with an annual interest rate of 6% 
            and monthly payments of  $1,407 including interest.  The balance at 
            September 30, 1998 requires payment within twelve months                    $  16,356               0

          Note payable to a shareholder in connection with the July 31, 1997 
            reorganization and legal claims asserted against a Company 
            shareholder (See Note 5).                                                   $  20,295          50,0000


          CAPITAL LEASE

          In March, 1997, the Company entered into a sale-leaseback 
            arrangement under which computer equipment capitalized at $159,649 
            is being accounted for as a capital lease. Under the agreement, the 
            Company sold certain equipment and leased it back for a period of 
            48 months, at which time the Company will repurchase the equipment 
            from the lessor.                                                              109,353         139,709
                                                                                          -------         -------
                     Total                                                            $ 1,176,709         189,909

               Less: Current Portion, notes and other maturities                           59,236          47,449
                                                                                           ------          ------
                     Total long term liabilities                                      $ 1,117,473       $ 142,460
                                                                                       ----------        --------
                                                                                       ----------        --------
</TABLE>

          Minimum future lease payments under non-cancelable capital leases
            through 2001 are as follows:

<TABLE>
     <S>                                                      <C>
     1998                                                     $ 12,765
     1999                                                       40,599
     2000                                                       44,298
     2001                                                       11,691
                                                              --------
Total minimum future lease payments                           $109,353
                                                              --------
                                                              --------
</TABLE>

                                 -- Page 10 --

<PAGE>

Note 7.  COMMON STOCK

          At December 31, 1996, 30,000 shares of SecurFone America, Inc.'s 
            stock were authorized and 3,000 shares were issued and 
            outstanding.

          On March 5, 1997, an additional 4,700,000 shares were authorized by 
            the Board of Directors.

          On March 6, 1997, the shareholders of SecurFone America, Inc. 
            approved a stock split of 1,333.33 to 1 shares, increasing the 
            3,000 shares issued and outstanding to 4,000,000 shares with a 
            par value of $.01 per share.  The amount of $39,970 was 
            transferred from the paid-in-capital account to common stock 
            account to record the split.

          Prior to the reorganization between SecurFone America, Inc. and 
            Material Technology, Inc., Material Technology, Inc. had as of 
            July 31, 1997 100,000,000 shares authorized and 5,000,000 
            outstanding with a reverse split of 1 for 10 resulting in 500,216 
            shares issued and outstanding. Also, Material Technology issued 
            an additional 4,500,000 shares on July 31, 1997 for a total of 
            5,000,216 shares issued and outstanding. On August 1, 1997, 
            SecurFone America, Inc. completed a reorganization with Material 
            Technology, Inc. whereby 4,000,000 shares issued and outstanding 
            of SecurFone America, Inc. were exchanged for 4,500,000 shares 
            issued of Material Technology, Inc. As a result of the 
            reorganization, there were 5,000,216 shares issued and 
            outstanding and 100,000,000 shares authorized. The account of 
            $36,173 was transferred from the common stock account to the 
            additional paid-in-capital account to reflect the par value 
            change from $.01 to $.001 per share.

          On November 13, 1997 the Company registered with the Securities and 
            Exchange Commission on Form S-8 (the "S-8 filing") 1,000,000 
            shares under the 1997 Stock Option Plan to grant incentive stock 
            options and non-qualified stock options to officers and key 
            employees. At the same time a similar registration for 250,000 
            shares under the 1997 Director Non-qualified Stock Option Plan 
            was made. At various dates the Company granted stock options 
            under the two stock option plans totaling 830,900 shares 
            consisting of 300,000 shares at an option price of $1.00 per 
            share, 130,900 shares at an option price of $2.50 per share and 
            400,000 shares at an option price of $0.10 per share. These 
            options are exercisable during 1997 and 1998. These shares are 
            recorded as $1,227,250 Selling, General & Administrative (SG&A) 
            expense and additional paid in capital - stock options at the 
            grant date in accordance with Statement of Financial Accounting 
            Standards NO. 123 (SFAS 123) "Accounting for Stock-Based 
            Compensation."

          On December 3, 1997, the Company ( SecurFone America, Inc. formerly 
            Material Technology, Inc.) issued 620,000 conditional shares of 
            common stock with a par value of $.001 per share registered with 
            the S-8 filing.  These shares were issued pursuant various 
            employment, retainer, consulting and fee agreements.  As of 
            December 31, 1997 all conditions of these shares have been met 
            and $3,100,000 was recorded as SG&A expense, and common stock and 
            additional paid in capital accounts at the issue date.

          On January  6, 1998 the Company granted stock options under the 
            1997 Stock Option Plan of 400,000 shares at an option price of 
            $.10 per share.  These options are exercisable immediately and 
            are recorded as $1,620,000 Selling, General & Administrative 
            (SG&A) expense and additional paid in capital - stock options at 
            the grant date in accordance with Statement of Financial 
            Accounting Standards NO. 123 (SFAS 123) "Accounting for 
            Stock-Based Compensation."

          On March 19, 1998 an additional 345,000 shares issued were the 
            result of the following transactions: 225,000 shares of stock 
            issued pursuant to warrants exercised by the individuals 
            providing credit

                                 -- Page 11 --

<PAGE>

Note 7.  COMMON STOCK (continued)

            accommodations in connection with letters of credit issued by the 
            Company; 120,000 shares were the result of two stock 
            subscriptions in private placements.

          On May 12, 1998  35,000 shares were issued in connection with 
            credit accommodations provided to the Company by investors as 
            discussed in Note 1.

          On August 6, 1998, 50,000 shares were issued on the exercise of 
            vested stock options.

          As of September 30, 1998, a total of 100,000,000 shares were 
            authorized and 6,050,216 shares were issued and outstanding.

Note 8.  LOSS ON SECURFONE NEW YORK

          In August, 1996, the Company entered into a licensing agreement 
            with SecurFone New York, Inc. (SFNY).  As part of the agreement, 
            the Company forwarded monies to SFNY to cover various start up 
            costs.  Shortly, SFNY fell into default under the terms of the 
            licensing agreement and ceased operations.  The monies paid by 
            the Company to SFNY were written off as a one-time charge to 
            income of $48,980.

Note 9. RELATED PARTIES

          A Director of the Company is also a partner in the law firm which 
            represents the Company in its legal matters.

Note 10.  INCOME TAXES

          Income taxes are provided based on earnings reported for financial 
            statement purposes pursuant to the provisions of Statement of 
            Financial Accounting Standards NO. 109 (FASB 109).  The provision 
            for income taxes differs from the amounts currently payable 
            because of timing differences in the recognition of certain 
            income and expense items for financial and tax reporting purposes.

          FASB 109 uses the asset and liability method to account for income 
            taxes which requires the recognition of deferred tax liabilities 
            and assets for the expected future tax consequences of temporary 
            differences between tax basis and financial reporting basis of 
            assets and liabilities.

          At September 30, 1998 and 1997 the Company has net operating loss 
            carryforwards for federal income and state income tax purposes.  
            These carryforwards may provide future tax benefits.  The federal 
            net operating loss will begin to expire in 2011, if not utilized 
            to offset taxable income.  Various state net operating loss 
            carryforwards will begin to expire earlier.  Future changes in 
            ownership, as defined by Section 382 of the Internal Revenue 
            Code, could limit the amount of net operating loss carryforwards 
            used in any one year.

          An allowance has been provided for by the Company which reduced the 
            tax benefits accrued by the Company for its net operating losses 
            to zero.  It cannot be determined when, or if, the tax benefits 
            derived from these losses will materialize.

                                 -- Page 12 --

<PAGE>

Note 11. COMMITMENTS AND CONTINGENCIES

          The accompanying financial statements have been prepared in 
            conformity with generally accepted accounting principles, which 
            contemplates continuation of the Company as a going concern.  
            However, the Company has sustained losses totaling $8,179,827 
            since its inception, of which $5,947,250 represented expenses 
            associated with stock-based compensation plans as noted at Note 7.

          The continuing losses resulting from operations, and not 
            necessarily those costs associated with stock-based compensation 
            plans, are an indication that the Company may not be able to 
            continue to operate without additional cash infusion.  The 
            Company has been and is currently seeking private and public 
            equity and bridge loans in order to finance operations.  The 
            Company has retained business advisory firms to assist the 
            Company in meeting its financing needs.

          In November 1996, the Company entered into an agreement with 
            Associated Barter Services, Inc. ("ABS") under which ABS agreed 
            to arrange for advertising services for the Company.  The Company 
            agreed to issue ABS shares of the Company's common stock in 
            exchange for these services.  A dispute has arisen between the 
            Company and ABS regarding ABS's performance under the agreement.  
            The Company is presently negotiating an amendment to the 
            agreement to settle the dispute.  However, the Company may be 
            unable to arrive at a mutually acceptable resolution to the 
            dispute and there can be no assurances that litigation will not 
            result from the dispute.

          In November, 1997 the Company entered into an annual employment 
            agreement with it's Chief Executive Officer.  The employment 
            agreement automatically renews annually.  The agreement reduced 
            the base salary by $5,833 per month until the earlier of May 1, 
            1998 or a time that the Board determines capital and revenue to 
            be sufficient for payment.  The salary reduction continued and 
            had not been paid as of June 30, 1998. As a result, a total of 
            $64,143 of unpaid salary has been accrued and recorded as of 
            September 30, 1998.

          The employment agreement was subsequently terminated and the unpaid 
            salary settled. See Note 13, Subsequent Events.

Note 12.  QUARTERLY INFORMATION

          Following is computational information for earnings per share 
            information calculated under  Statement of Financial Accounting 
            Standards No. 130, Earnings Per Share (EPS) which is effective 
            for periods beginning after December 15, 1997.

<TABLE>
<CAPTION>
                                    Quarter Ended Sept. 30, 1998          Quarter Ended Sept. 30, 1997
                              -------------------------------------  --------------------------------------
                               Income        Shares      Per Share     Income         Shares      Per Share
                             (Numerator)  (Denominator)    Amount    (Numerator)  (Denominator)     Amount
                             -----------  -------------  ---------   -----------  -------------   ---------
<S>                          <C>          <C>            <C>         <C>          <C>             <C>
BASIC EPS
---------
Income (loss) available
to common
     stockholders             $(681,555)    5,998,549     $ (.11)     $(111,086)     5,000,000      $(.02)

EFFECT OF DILUTIVE SECURITIES
-----------------------------

Stock Options                                       0*                                       0
</TABLE>

                                 -- Page 13 --

<PAGE>

Note 12. QUARTERLY INFORMATION (continued)

<TABLE>
<S>                           <C>           <C>           <C>         <C>            <C>            <C>
DILUTED EPS
-----------
Income available to
common stockholders and
assumed conversions           $(681,555)    5,998,549     $ (.11)     $ (111,086)    5,000,000      $(.02)
</TABLE>

          * SFAS 128 requires the use of weighted averages for stock 
            outstanding during the quarter. Although the exercise prices for 
            stock options issued under Company plans were below the average 
            market price of the common shares, they were not computed in 
            calculating diluted earnings per share because SFAS 128 does not 
            include stock dilutions that would reduce per share losses. 
            Outstanding stock options would have increased outstanding shares 
            by 536,535 if computed.

          At September 30, 1998, 780,900 stock options were issued, 600,000 
            were vested and 50,000 had been exercised.

Note 13. SUBSEQUENT EVENTS

           On June 16, 1998 the Company executed a Letter of Intent with Young
              Management Group for securing new capital, and agreeing to the
              proposed acquisition of SCIES, Inc. ("SCIES"), a privately-held,
              development stage provider of Internet telephony software, systems
              and services that is headquartered in Reston, Virginia. SCIES is a
              provider of both software and gateway hardware for Internet
              Telephone transmission. Negotiations for the purchase of SCIES
              have centered on SCIES' ability to support SecurFone's entry into
              new related voice-over-IP markets (i.e. Internet Telephony), as
              well as reduce the Company's networking costs and provide the
              Company with a platform to ensure lower costs for terminating
              international calls. It is anticipated that the proposed SCIES
              transaction would be made entirely with unregistered common stock
              of the Company. Structure of the final funding provided by Young
              Management Group was contingent upon completion of a definitive
              business agreement between the Company and Young Management Group.

          On August 1, 1998, Young Management Group declined to meet it's 
            funding obligation payable at that date and the funding agreement 
            was terminated.  Total funds provided to the company by Young 
            Management Group during May through July 1998 were $115,000 and 
            were recorded as loans to the Company.  The planned SCIES 
            acquisition has not yet been completed.  SCIES is now co-located 
            with the Company and is operating as a strategic partner of the 
            Company.

          A shareholder who was subject to legal claims arising from the July 
            31, 1997 reorganization was released from those claims and made 
            demand for payment of a $50,000 promissory note from the Company 
            on October 5, 1998.  The marketable securities were held by the 
            Company as collateral on the note.  On October 19, 1998 the 
            marketable securities were exchanged with the shareholder in full 
            satisfaction of the note.

          William P. Stueber, II, Chief Executive Officer and a Director, 
            announced plans to leave the Company and pursue other interests 
            effective November 1, 1998.  The Company executed a settlement 
            agreement with Mr. Stueber on February 8, 1999 to resolve all 
            outstanding Company obligations related to his employment with 
            the Company in exchange for a payment of $50,000 payable not 
            later than April 1, 1999.

                                 -- Page 14 --

<PAGE>


Note 13. SUBSEQUENT EVENTS (continued)

          On September 11, 1998, the Company's Chief Operating Officer and a 
            Director, Derek Davis, resigned to pursue other interests.  Mr. 
            Davis agreed to be available to Company executives for a period 
            of two months, without compensation, in order to ensure a smooth 
            transition of tasks and responsibilities to the new management 
            team.

          Paul B. Silverman executed an employment agreement assuming the role
            of Chief Executive Officer as of November 1, 1998. Mr. Silverman 
            was also granted options to acquire 100,000 shares of the Company's
            stock upon execution of the employment agreement, and qualified 
            incentive stock options to acquire up to 300,000 additional shares 
            of the Company's stock based on achievement of Company goals 
            established by the Board of Directors. Mr. Silverman was 
            subsequently appointed a Director of the Company on December 11, 
            1999. Mr. Silverman was granted options to acquire 50,000 shares of
            the Company's stock consistent with the terms of the Company's 1997
            Director's Option Plan.

          Additional cash advances totaling $479,500 have been obtained from 
            unrelated parties between October 1, 1998 and February 3, 1999.

          On November 17, 1998, the Company issued 41,665 shares of the 
            Company's unregistered common stock and cash payment of $2,500 to 
            Strategica Group for investment banking services and bridge 
            funding.

          On January 30, 1999 the Company executed an agreement with Teledata 
            World Services, Inc. ("Teledata"), a publicly traded company, 
            whereby certain prepaid cellular assets would be sold to Teledata 
            for cash and Teledata common stock.  Under the agreement Teledata 
            would acquire all outstanding shares of SecurFone, Inc., a wholly 
            owned operating subsidiary of the Company for $498,000 and 
            600,000 shares of unregistered Teledata common stock.  Subject to 
            securing regulatory approvals, the proposed  transaction is 
            expected to be completed in the second quarter of 1999.  Teledata 
            has advanced $248,000 to the Company as of February 3, 1999 which 
            is included in the cash advances referred to above.

          On February 4, 1999 the Company executed a purchase agreement with 
            All Points Telecom, Inc. ("APT"), a privately held 
            telecommunications firm whereby APT would acquire a controlling 
            interest in the Company through purchase of 4,550,000 shares from 
            Montpilier Holdings, Inc., the principal stockholder of the 
            Company.  Under the agreement, APT would also loan up to $1.8 
            million at closing which would be used to repay existing debt and 
            provide working capital.  The transaction is scheduled to close 
            in the first quarter of 1999 and is contingent upon due diligence 
            now in progress.

                                 -- Page 15 --

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

The following describes certain factors which produced changes in the results 
of operations of SecurFone America, Inc. (the "Company") during the three and 
nine months ended September 30, 1998 and as compared with comparable periods 
in 1997 as indicated in the Company's Consolidated Financial Statements.  The 
following should be read in conjunction with the Consolidated Financial 
Statements and related notes.  Historical results of operations are not 
necessarily indicative of results for any future period.  All material 
intercompany transactions have been eliminated in the results presented in 
this Quarterly Report.

     Certain matters discussed in this Quarterly Report constitute 
forward-looking statements within the meaning of the Private Securities 
Litigation Reform Act of 1995 (the "Reform Act") and  involve risks and 
uncertainties.  These forward-looking statements relate to, among other 
things, expectations of the business environment in which the Company 
operates, projections of future performance, perceived opportunities in the 
market and statements regarding the Company's mission and vision.  The 
Company's actual results, performance or achievements may differ 
significantly from the results, performance, or achievements expressed or 
implied in these forward-looking statements.  See "--Forward-Looking 
Statements."

OVERVIEW

     The Company develops and markets prepaid wireless products and services 
in various markets throughout the United States. The Company has been in its 
development stage since its inception in May 1996. The Company has 
substantially completed development of all major aspects of its prepaid 
wireless network systems and now plans to implement the marketing and sales 
programs necessary to create a sustainable revenue base. The Company also 
plans to develop the necessary back office and administrative support systems 
to support the business. Additional funding will be required to support these 
new activities. The Company has initiated its commercial product launch on a 
limited basis, with broad-scale marketing and distribution efforts starting 
in the first quarter of 1999.

     The products and services that the Company developed during its start-up 
phase were initially introduced to a limited number of U.S. cities to fully 
test the network, administrative, engineering and marketing infrastructure 
prior to full-scale roll-out. The Company invested significant capital and 
effort to develop its network, software, routing and carrier interface 
technology, for the hiring and development of an experienced management team, 
and the initial introduction of services to the roll-out markets. The Company 
may, from time to time, make increasing expenditures to expand its available 
network capacity as demand increases. The ability of the Company to meet its 
business growth objectives will depend on securing substantial new funding 
for advertising and promotion activities, as well as funding for securing new 
distribution channels. To effectively manage the Company's growth and 
maintain quality controls over its services and network, the Company must 
also expand its internal management, technical and accounting systems, all of 
which will require substantial investment.

RECENT EVENTS

MANAGEMENT CHANGES

     William P. Stueber, II, Chief Executive Officer and a Director, left the 
Company to pursue other interests effective November 1, 1998. The Company has 
negotiated a settlement with Mr. Stueber to resolve all outstanding 
obligations related to his prior employment by the Company.

     On September 11, 1998, the Company's Chief Operating Officer and a 
Director, Derek M. Davis, resigned to pursue other interests.  Mr. Davis 
agreed to be available to Company executives for a period of two months, 
without compensation, in order to ensure a smooth transition of tasks and 
responsibilities to his replacement.

     Paul B. Silverman executed an employment agreement assuming the role of 
Chief Executive Officer effective November 1, 1998.

                                 -- Page 16 --

<PAGE>

Mr. Silverman was also granted options to acquire 100,000 shares of the 
Company's stock upon execution of the employment agreement. The agreement 
also provides for the issuance of qualified incentive options to acquire up 
to an additional 300,000 shares of the Company's stock based on achievement 
of Company goals established by the Board of Directors. Mr. Silverman was 
subsequently elected a Director of the Company on December 11, 1998. Mr. 
Silverman was granted options to acquire 50,000 shares of the Company's stock 
under the Company's 1997 Director's Option Plan.

NEW INTERNATIONAL BUSINESS DEVELOPMENTS

     On August 20, 1998, the Company announced a strategic alliance with 
Microwave Designs International, Inc., a wireless system engineering firm 
providing wireless engineering services to telephone companies, competitive 
local exchange carriers and operators worldwide. The Company has appointed a 
local representative in Brazil and is now discussing several wireless and 
prepaid project opportunities in Brazil, including developing a prepaid 
cellular services systems to serve selected rural areas within Brazil. To 
further develop its international business, the Company is discussing plans 
to join an international consortium in Brazil with several partners to pursue 
national wireless and telecommunications system projects. The Company is 
seeking to leverage its core capabilities in the areas of designing and 
provisioning prepaid cellular systems, and capitalize on the capabilities of 
the technical and financial resources provided by the other consortium 
partners. The Company will require additional funding to both secure and 
successfully complete these projects.

NEW FUNDING

     On June 16, 1998, the Company executed a Letter of Intent with Young 
Management Group ("YMG") for securing new capital, and agreeing to the 
planned acquisition of SCIES, Inc. ("SCIES"), a privately-held, development 
stage provider of Internet telephony software, systems and services that is 
headquarted in Reston, Virginia. Structure of the final funding provided by 
YMG was contingent upon completion of a definitive business agreement between 
the Company and YMG.

     On August 1, 1998, YMG declined to meet its funding obligation payable 
at that date and the funding agreement was terminated. Total funds provided 
to the Company by YMG during May through July 1998 were $115,000, and were 
recorded as loans to the Company. The planned acquisition of SCIES has not 
yet been completed. SCIES is now co-located with the Company and is operating 
as a strategic partner of the Company. See "Other Information."

     Recognizing that new funding is essential to meet the Company's core 
business objectives as well as expand into new business areas, the Company 
has pursued several options.

     On November 17, 1998, the Company entered into a relationship with the 
Strategica Group for investment banking services and bridge funding. For 
services rendered, Strategica was issued 41,665 shares of the Company's 
unregistered common stock and received a cash payment of $2,500. Due to 
delays encountered in securing new funding, the Company, on January 11, 1999, 
terminated its business relationship with Strategica and elected to pursue 
other new funding alternatives. To support the Company's new planned 
initiatives in wireless system engineering and Internet telephony, the 
Company pursued the sale of selected assets as described below.

     On February 4, 1999, the Company executed a Purchase Agreement with All 
Points Telecom, Inc. ("APT"), a privately-held telecommunications firm, 
whereby APT would acquire a controlling interest in the Company through the 
purchase of 4.5 million shares of the Company's common stock from Montpilier 
Holdings, Inc. ("Montpilier"). Montpilier is the principal stockholder of the 
Company and is owned indirectly by Michael M. Grand, a Director of the 
Company. Under terms of the Purchase Agreement, APT would also loan up to 
$1.8 million at the time of closing to the Company. The proceeds of this loan 
would be used to repay existing debt and provide additional working capital 
to meet the Company's growth needs. Paul B. Silverman will continue to serve 
as Chief Executive Officer of the Company upon completion of the transaction. 
The proposed transaction is scheduled to close in the first quarter of 1999, 
and is contingent upon due diligence now in progress. There can be no 
assurances that the proposed APT transaction will be completed as expected, 
or at all.

                                 -- Page 17 --

<PAGE>

SALE OF SELECTED ASSETS AND LINES OF BUSINESS

     On January 30, 1999, the Company executed a previously announced 
agreement with Teledata World Services, Inc. ("Teledata") (OTC/BB:TWOS), 
whereby certain prepaid cellular assets would be sold to Teledata for cash 
and Teledata common stock. Under the terms of the agreement, Teledata would 
acquire all outstanding shares of SecurFone, Inc., a wholly owned operating 
subsidiary of the Company, for $498,000 in cash and 600,000 shares of 
unregistered Teledata common stock. SecurFone, Inc. assets include certain 
cellular service resale agreements, the Company's Miami customer service 
center, rights to the Buy-The-Minute-TM- ("BTM") product and selected 
distribution channels. Under terms of the agreement, the Company will 
continue to offer prepaid cellular services and may establish resale and 
joint service arrangements to serve selected markets. The Company is also 
negotiating a Management Services and Support (MSS) contract with Teledata 
whereby the Company would provide management and operational support services 
to Teledata for a minimum period of three months. During the period until 
closing, the Company is supporting the provision of selected prepaid products 
and services by Teledata. To cover costs for these services in the interim 
period prior to closing the transaction, the total funds provided to the 
Company by Teledata through February 1999 were $248,000, and were recorded as 
loans to the Company.

     The proposed sale is consistent with the Company's planned strategy of 
building on core strengths in planning, designing and operating prepaid 
cellular services to pursue wireless system engineering and integrated voice 
over IP service (i.e., Internet telephony) opportunities in the United States 
and overseas. The Company plans to continue to offer prepaid wireless 
services, focusing on higher margin opportunities, primarily through resale. 
Subject to securing appropriate regulatory approvals, the proposed 
transaction is expected to be completed in the second quarter 1999. There can 
be no assurances that the proposed transaction with Teledata will be 
completed as expected, or at all.

MATERIAL TECHNOLOGIES STOCK TRANSFER

     On August 1, 1997, SecurFone, Inc. was acquired by Material Technology, 
Inc. ("Matech I") (formerly Tensiodyne Scientific Corporation) and became a 
publicly-traded corporation. In connection with the transaction, the Company 
retained 560,000 shares of Material Technologies, Inc. ("Matech II") Class A 
Common Stock.

     In July, 1997, Sherman Baker and certain Matech I shareholders 
associated with Mr. Baker (the "Baker Group") disputed the distribution of 
Matech II shares issued to Robert M. Bernstein, the Chief Executive Officer 
and major shareholder of Matech I. As a result of Mr. Baker's claims and 
demand, SecurFone delayed finalizing the July 31, 1997 transaction until all 
disputes between Matech I and its shareholders were resolved.

     On October 22, 1997, the Baker Group filed a claim against Mr. Bernstein 
for breach of contract and for inducing the group to enter into an exchange 
agreement in connection with the SecurFone transaction.. As a result of the 
Baker Group's claims against Mr. Bernstein and in order to close the 
SecurFone transaction, Mr. Bernstein placed 150,000 of his personally-held 
SecurFone shares in escrow subject to a resolution of the Baker Group's 
claims. SecurFone also withheld payment of $50,000 and executed a $50,000 
promissory note ("the Note") with a demand for payment contingent on, among 
other items, the release of all claims from the Baker group toward SecurFone. 
The 560,000 shares of Matech II stock held by SecurFone were pledged as 
collateral on the Note.

     On July 31, 1998, the Baker Group entered into a settlement agreement 
with Mr. Bernstein and Matech II and on August 18, 1998, the Baker Group 
filed a Release of Claims against SecurFone. Pursuant to the original 
transaction, Matech II was entitled to the balance of $50,000 owed by 
SecurFone, and demanded payment, on October 5, 1998. The SecurFone Board of 
Directors reviewed the situation on October 9, 1998, and determined that 
given the illiquidity of the Matech II stock, and the current financial 
obligations of the Company, it was in the Company's best interests to allow 
Matech II to acquire the pledged stock in cancellation of the Note.

     On October 9, 1998, Matech II served notice to SecurFone of its default 
on the Note. On October 19, 1998, SecurFone returned to Matech II the 
560,000 shares of its Common stock which were pledged as collateral on the 
Note and the Note was cancelled.

                                 -- Page 18 --

<PAGE>

PRODUCT LINES

     The Company offers three main products:

-    BUY-THE-MINUTE-TM- ("BTM") -- a software modified handset for which the
     Company provides underlying national airtime, activation, and
     administrative services for end users. Uniden Corp. manufactures the
     handset and U.S./Intelicom Inc. provides the handset software. This product
     is offered for distribution by Brightpoint, Inc., the nation's leading
     wholesaler of wireless handsets, and gives the Company immediate national
     exposure that would otherwise require an extended period of time to
     develop. The Company expects to significantly reduce barriers to market
     entry by achieving a market presence without the need for fixed land line
     telephony because the debiting software resides directly in the handset.
     This market launch solution, although rapid, must be converted to the
     Company's network solution when activation volumes become sufficient to
     justify the expenditure. This transition is made necessary due to the
     limited consumer service applications afforded by the proprietary,
     application-specific, modified handset.

-    SFA NETWORK SOLUTION ("SFN") -- the Company's flagship product that 
     telephonically connects directly to the underlying wireless service 
     provider to accomplish call routing and completion.  The advantages of 
     this method of prepaid service provisioning are numerous, including:

     - Any handset in the market, digital or analog, can be used by consumers to
       access the Company's service platform.

     - The Company originates and terminates each call along its own network
       configuration which generates significant incremental cost savings and 
       increased revenue from inherent service components such as long distance
       termination, voice mail and local call termination.

     - The Company can provide other telephony services, such as local and long
       distance prepaid service, informational services and enhanced calling 
       options within the same platform.

-    CARRIER NETWORK SERVICES ("CNS") -- the wholesale prepaid wireless platform
     service that the Company sells directly to wireless carriers that do not 
     wish to create their own platform.  In many cases, it becomes a 
     cost-justifiable decision for a medium to small domestic wireless carrier
     to out source value-added and hardware/software defined ancillary product
     offerings to an outside vendor.  CNS is a robust, competitive and scalable
     prepaid service platform that enables any carrier to bring a prepaid
     product to market in a significantly shorter period of time than an 
     in-house solution, enabling the carrier to focus on marketing and sales 
     efforts.

RESULTS OF OPERATIONS:

THIRD QUARTER OF 1998 COMPARED TO THIRD QUARTER OF 1997

  REVENUES

     The Company only began full-scale operations in the first quarter of 
1998; accordingly, a detailed comparison of revenues and expenses between the 
third quarter of 1998 and the third quarter of 1997 is not meaningful. 
Prepaid cellular revenues for the third quarter of 1998 increased to $52,878 
from $33,698 in the third quarter of 1997. The increase was a result of the 
Company marketing and selling its switch-based prepaid cellular product in 
the Atlanta, Boston, Baltimore, Cleveland, Chicago, Detroit, Houston, Miami, 
New Jersey, New York, Orlando, Philadelphia, San Diego, San Francisco, and 
Tampa markets. Prepaid cellular revenues for the third quarter of 1998 
decreased to $52,878 from $117,424 in the second quarter of 1998 due to 
increased competition for SFN, and the Company's inability to adequately fund 
major national marketing programs. Assuming adequate funds are available for 
advertising and promotion, the Company expects that SFN and CNS will grow at 
a strong rate on a long-term basis. The Company is seeking new funds to 
promote sales and market strong market launch of the BTM product.

                                 -- Page 19 --

<PAGE>

  COST OF GOODS SOLD

     Total cost of goods sold for the third quarter of 1998 increased to 
$151,522 from $26,128 in the third quarter of 1997 primarily due to the 
Company introducing the sale of its SFN switch-based product in the various 
markets discussed above and due to an increase in fixed telephony charges 
associated with market expansion.

  GROSS PROFIT/MARGIN

     Gross profit for the third quarter of 1998 decreased to a loss of 
$98,644 compared with a profit of $7,570 in the third quarter of 1997.  The 
gross profit margin for the third quarter of 1998 was negative because of the 
increase in the fixed portion of the cost of goods sold caused by continued 
market expansion.  The Company opens certain markets and immediately incurs 
activation and access fees for lines ordered in those markets.  As a result, 
the Company is subject to cost of goods sold charges before any sales have 
been completed in specific markets.

  OPERATING EXPENSES

     Selling, general and administrative expenses decreased to $492,261 in 
the third quarter of 1998 from $652,899 in the third quarter of 1997. 
Marketing-related expenses, including advertising, printing and tradeshows, 
decreased in the third quarter of 1998 to $8,552 from $111,165 in the third 
quarter of 1997. Miscellaneous expenses decreased in the third quarter of 
1998 to $547 from $78,787 in the third quarter of 1997. Due to the hiring of 
an experienced management team, wages and associated taxes increased in the 
third quarter of 1998 to $192,809 from $127,621 in the third quarter of 1997. 
In addition, the continued introduction of services to the roll-out markets 
to develop the Company's network, software, routing and carrier interface 
technology increased network expenses in the third quarter of 1998 to $8,364 
from $0 in the third quarter of 1997. Consulting, legal and professional fees 
increased to $153,297 in the third quarter of 1998 from $125,360 in the third 
quarter of 1997 due to the Company's increased need for assistance in 
technological developments, new product development, accounting regulations 
and Public Utilities Commission, Federal Communications Commission and 
Securities and Exchange Commission requirements. In addition, the Company 
recorded amortization and depreciation expenses of $29,623 in the third 
quarter of 1998 versus $26,411 in the third quarter of 1997.

     Loss from operations in the third quarter of 1998 decreased to $590,905 
from $645,329 in the third quarter of 1997 due to decreased costs associated 
with selling, general and administrative expenses.  Net loss in the third 
quarter of 1998 increased to $681,555 from net loss of $111,086 in the third 
quarter of 1997.  The net loss in the third quarter of 1998 was increased by 
a $280,000 unrealized loss on marketable securities that the Company holds 
which resulted in a comprehensive loss of $961,555 or $0.11 per share in the 
third quarter of 1998.

  ROYALTY REVENUE

     The Company previously licensed, in a limited number of instances, 
certain distribution rights in various markets for a license fee.  Royalty 
revenue from the sale of license rights was $0 in the third quarter of 1998 
compared to $550,000 in the third quarter of 1997. The Company does not 
anticipate any additional 1998 revenues to be derived from the sale of 
licenses. Due to the potential impact of exclusive distribution rights on the 
Company's future marketing options, the Company does not anticipate, at this 
time, offering similar licenses in the future.

  OTHER EXPENSES

     Interest expense increased to $88,832 in the third quarter of 1998 from 
$22,975 in the third quarter of 1997. The increase was primarily due to 
35,000 shares of the Company's stock that was issued as compensation to 
investors who renewed and extended letters of credit to April 1999 on behalf 
of the Company. The issuance of the shares resulted in an additional 
accounting cost entry of $35,000 in the third quarter of 1998. The letters of 
credit are posted with the Company's underlying telephony service providers 
for the purpose of provisioning service to initial roll-out markets. 
Additional interest expense has been incurred as a result of $1,176,000 that 
was loaned to the Company by private investors as of September 30, 1998.

                                 -- Page 20 --

<PAGE>

FIRST NINE MONTHS OF 1998 COMPARED TO THE FIRST NINE MONTHS OF 1997

REVENUES

     Prepaid cellular revenues for the first nine months of 1998 increased to 
$328,350 from $39,382 in the first nine months of 1997.  The increase was as 
a result of the Company marketing and selling its switch-based prepaid 
cellular product in the Atlanta, Boston, Baltimore, Cleveland, Chicago, 
Detroit, Houston, Miami, New Jersey, New York, Orlando, Philadelphia, San 
Diego, San Francisco, and Tampa markets.

COST OF GOODS SOLD

     Total cost of goods sold for the first nine months of 1998 increased to 
$380,278 from $51,362 in the first nine months of 1997 primarily due to the 
Company introducing the sale of its SFN switch-based product in the various 
markets discussed above and due to an increase in fixed telephony charges 
associated with market expansion.

GROSS PROFIT/MARGIN

     Gross loss for the first nine months of 1998 was $51,928 compared with a 
loss of $11,980 in the first nine months of 1997.  The gross profit margin 
for the first nine months of 1998 was a negative 15.8% as compared with a 
negative 30.4% in the first nine months of 1997.  The increase in profit 
margin was due to the increased utilization of the fixed portion of the cost 
of goods sold caused by continued market expansion.  The Company opens 
certain markets and immediately incurs activation and access fees for lines 
ordered in those markets.  As a result, the Company is subject to cost of 
goods sold charges before any sales have been completed in specific markets. 
Once significant market expansion is completed, however, the fixed portion of 
cost of goods sold should decrease as a percent of total cost of goods sold 
which, the Company believes, should positively impact the overall gross 
profit.

OPERATING EXPENSES

     Selling, general and administrative expenses increased to $1,743,300 in 
the first nine months of 1998 from $1,284,805 in the first nine months of 
1997. The increase in selling, general and administrative expenses was 
primarily due to the hiring and development of an experienced management 
team. The wages and associated taxes increased in the first nine months of 
1998 to $602,132 from $203,889 in the first nine months of 1997. In addition, 
the continued introduction of services to the roll-out markets to develop the 
Company's network, software, routing and carrier interface technology 
increased network expenses in the first nine months of 1998 to $31,624 from 
$0 in the first nine months of 1997. Marketing-related expenses, including 
advertising, printing and tradeshows, decreased in the first nine months of 
1998 to $75,724 from $160,833 in the first nine months of 1997.Consulting, 
legal and professional fees increased to $360,876 in the first nine months of 
1998 from $223,282 in the first nine months of 1997 due to the Company's 
increased need for assistance in technological developments, new product 
development, accounting regulations and Public Utilities Commission, Federal 
Communications Commission and Securities and Exchange Commission 
requirements. In addition, the Company recorded amortization and depreciation 
expenses of $88,869 in the first nine months of 1998 versus $64,940 in the 
first nine months of 1997.

     Loss from operations in the first nine months of 1998 increased to 
$3,415,228 from $1,296,785 in the first nine months of 1997 due to increased 
costs associated with the launch of the Company's products and related 
expenses.  Net loss in the first nine months of 1998 increased to $ 3,512,696 
from a net loss of $438,576 in the first nine months of 1997.  A large 
portion of the net loss in the first nine months of 1998 was due to an 
accounting cost entry of $1,620,000 associated with the issuance of stock 
options to the Company's President William Stueber. The net loss for the 
first nine months of 1998 was, however, reduced by a $490,000 unrealized gain 
on marketable securities that the Company holds which resulted in a 
comprehensive loss of $3,022,696 or $0.60 per share as compared to $438,576 
or $0.09 per share for the first nine months of 1997.

                                 -- Page 21 --

<PAGE>

ROYALTY REVENUE

     The Company previously licensed, in a limited number of instances, 
certain distribution rights in various markets for a license fee.  Royalty 
revenue from the sale of license rights was $100,000 in the first nine months 
of 1998 compared to $950,000 in the first nine months of 1997. The Company 
does not anticipate any additional 1998 revenues to be derived from the sale 
of licenses.

OTHER EXPENSES

     Interest expense increased to $194,001 in the first nine months of 1998 
from $50,029 in the first nine months of 1997.  The increase was primarily 
due to 35,000 shares of the Company's stock that was issued as compensation 
to investors who renewed and extended letters of credit to April 1999 on 
behalf of the Company.  The issuance of the shares resulted in an additional 
accounting cost entry totaling $70,000 in the second and third quarters of 
1998.  The letters of credit are posted with the Company's underlying 
telephony service providers for the purpose of provisioning service to 
initial roll-out markets.  Additional interest expense has been incurred as a 
result of $1,176,000 that was loaned to the Company by private investors as 
of September 30, 1998.


LIQUIDITY AND CAPITAL RESOURCES

     The Company has incurred significant operating and net losses as a 
result of the development and operation of its service platform and 
supporting networks.  The Company expects that such losses will continue to 
increase as the Company focuses on the development, construction and 
expansion of its service platform and underlying networks and expands its 
customer base.  Cash provided by operations will not be sufficient to fund 
the expansion of the product offerings and resultant subscriber base.  The  
Company is continually reviewing various sources of additional financing to 
fund its growth.  As of September 30, 1998, the Company had received advances 
in the amount of $1,316,000 from private investors.

     The Company is required by underlying wireless carriers to post 
irrevocable letters of credit to secure the purchase of airtime. As the 
Company's activation and sales volume increase, it is likely that these 
underlying carriers will seek additional security in the form of increased 
letter of credit guarantees. Prompt payment history, as well as overall 
financial condition will also effect each carrier's decision to stabilize, 
increase or eliminate these financial guarantees. The Company has an 
agreement with two investors that may obtain letters of credit of up to $1.0 
million that are secured by their personal assets (the "LC Agreement"). These 
investors have renewed the LC Agreement through April 1, 1999. As 
compensation for their initial agreement to provide letters of credit, the 
Company issued warrants to these investors to purchase a total of 225,000 
shares of Common Stock (the "LC Warrants"). In connection with the renewal of 
the LC Agreement, the Company issued a total of 35,000 additional shares of 
Common Stock to these investors. An amount of $35,000 was recorded as 
interest expense in the third quarter of 1998 for the issuance of the shares. 
An additional $35,000 interest expense will be recorded in each of the next 
two quarterly periods to fully reflect the cost of the issuance of the 35,000 
shares.

     At September 30, 1998, the Company had cash and cash equivalents of 
$3,093. In addition, the Company had accounts receivable totaling $41,372 
from the sale of the Company's switch-based debit cellular product. Net cash 
used by operating activities was $1,461,805 in the first three quarters of 
1998 compared to $213,924 in the first three quarters of 1997. Net cash used 
in investing activities in the first three quarters of 1998 was $12,014 used 
to purchase equipment as compared with $146,305 in the first three quarters 
of 1997. Net cash provided by financing activities in the first three 
quarters of 1998 totaled $1,450,372 which consisted primarily of $1,176,000 
in proceeds from notes payable forwarded to the Company from private 
investors as compared with $309,709 in the first three quarters of 1997 which 
consisted primarily of capital contributions of $120,000.

     In order to continue at its current rate of network development and 
expansion, the Company will require additional, non-revenue related financing 
of approximately $1.25 million for 1999 to fund operating losses and to 
purchase additional computer hardware and software which will allow the 
Company to increase its call capacity and 

                                 -- Page 22 --

<PAGE>

efficiency. The Company will also require an additional letter of credit 
facility of $2.0 million to secure the necessary air time from underlying 
carriers in order to support the proposed market roll-out and expansion. The 
Company is continuing negotiations to secure this additional funding from all 
possible sources. See "-Recent Events - New Funding." Possible plans call for 
raising of funds through the sale of private and/or public equity and 
continued debt financing. If the Company fails to obtain the above short-term 
financing within 90 days it will not be able to continue operations. 
Long-term liquidity will depend on the Company's ability to obtain long-term 
financing and attain profitable operations.

     To meet the Company's funding needs,  the Company retained American 
Express Tax and Business Services to provide investment banking services for 
the Company. American Express is continuing to assist the Company in 
exploring funding options with various funding sources.

SEASONALITY

     Sales of the Company's products and services are generally not seasonal, 
with the exception of December, which typically provides a modest increase in 
volume due to holiday purchases.  Local wireless carrier credit policies, 
penetration rates and promotional efforts primarily dictate sales levels.     

TAXES AND ADOPTION OF NEW ACCOUNTING STANDARDS

     Income taxes are provided for based on earnings reported for financial 
statement purposes pursuant to the provisions of Statement of Financial 
Accounting Standards ("SFAS") No. 109. The provision for income taxes differs 
from the amounts currently payable because of timing differences in the 
recognition of certain income and expense items for financial and tax 
reporting purposes. SFAS 109 uses the asset and liability method to account 
for income taxes which requires the recognition of deferred tax liabilities 
and assets for the expected future tax consequences of temporary differences 
between tax basis and financial reporting basis of assets and liabilities. An 
allowance has been provided for by the Company which reduced the tax benefits 
accrued by the Company for its net operating losses to zero, as it cannot be 
determined when, or if, the tax benefits derived from these operating losses 
will materialize.

     In February 1997 the Financial Accounting Standards Board issued SFAS 
No. 128, "Earnings per Share."  This statement establishes a different method 
of computing net income per share than was required under the provisions of 
Accounting Principles Board Opinion No. 15.  Under SFAS 128, the Company is 
required to present both basic net income per share and diluted net income 
per share. The Company adopted SFAS 128 in the first quarter of 1998 and all 
historical net income per share data presented is restated to conform to the 
provisions of SFAS 128. 

YEAR 2000

     The Company utilizes two different computer systems. The network 
telephony system used in call routing and rating consists of three 
components, presently the Bull Mini Computer, Apex interactive voice response 
("IVR") unit which is Intel based, and accounting and debit software. 
According to the vendor, the Bull and Apex IVR are presently Year 2000 
compliant. The Company recently upgraded the accounting and debit software to 
INFORMIX, which is Year 2000 compliant, in late 1998. The Company's 
administrative computer network utilizes accounting, database, and 
computational software that are all Year 2000 compliant according to 
management's recent discussions with its vendors. As a result, management 
does not anticipate any material adverse effect to the operations of the 
Company with respect to the Year 2000 problem.

     While the Year 2000 considerations are not expected to materially impact 
the Company's internal operations, they may have an effect on some of the 
Company's customers and suppliers, and thus indirectly affect the Company. 
Generally, the Company requires its key vendors and suppliers to certify they 
are Year 2000 compliant. With respect to other vendors and suppliers with 
which the Company's systems interface and exchange data, the Company expects 
to initiate communication on an ongoing basis to discuss their Year 2000 
compliance. The Company has not determined the exact costs and expenses it 
expects to incur relating to preparation of its systems for the Year 2000. 

                                 -- Page 23 --

<PAGE>

Based on current assessments and compliance plans in process, the Company 
does not expect that the Year 2000 issue, including the cost of making its 
critical systems and applications compliant, will have a material effect on 
its business operations, or its financial position or results of operations. 
However, if appropriate modifications are required by the Company's key 
suppliers and vendors, and if those modifications are not made on a timely 
basis, the Company's actual costs or timing for Year 2000 compliance may 
differ materially from current estimates. There can be no assurance that the 
systems of other parties upon which the Company relies will be converted on a 
timely basis. It is not possible to quantify the aggregate cost to the 
Company with respect to customers and suppliers with Year 2000 problems, 
although the Company does not anticipate it will have a material adverse 
impact on its business.

FORWARD-LOOKING STATEMENTS

     Statements that are not historical facts, including statements about the 
Company's confidence in its prospects and strategies and its expectations 
about expansion into new markets, growth in existing markets, and the 
Company's ability to attract new sources of financing, are forward-looking 
statements that involve risks and uncertainties. These risks and 
uncertainties include, but are not limited to:

-    NEW BUSINESS VENTURE.  The Company has limited prior operating history.
     The likelihood of the success of the Company must be considered in light
     of the expenses, complications and delays frequently encountered in 
     connection with the establishment and expansion of new businesses, and the
     competitive environment in which the Company operates. Therefore, there can
     be no assurances that future revenues from sales of the Company's product
     will occur or be significant or that the Company will be able to sell its
     products at a profit.  Future revenues and profits, if any, will depend on
     various factors, including, but not limited to, the successful
     commercialization of the Company's products and successfully implementing
     its planned marketing strategies.

-    INSUFFICIENT CAPITAL TO CONTINUE OPERATIONS.  As the Company continues 
     to implement its business plan and market roll-out schedule, present 
     sources of financing will not be adequate to support the Company's 
     increased cash needs.  In addition, present and planned sources for 
     financial guarantees to provide the Company's underlying wireless and 
     land line service providers with increased face value amounts of 
     irrevocable letters of credit for the purpose of securing wholesale 
     wireless and land line air time may not be adequate. If the Company 
     fails to obtain necessary short-term financing, it will not be able to 
     continue operations. Long-term liquidity will depend on the Company's 
     ability to obtain long-term financing and attain profitable operations.

-    FAILURE OF PLANNED TRANSACTIONS.  The Company is presently involved in 
     several proposed transactions, including the sale of a significant 
     portion of the Company's assets to Teledata, the proposed acquisition of 
     SCIES, and a loan from All Points Telecomm. See "Management's Discussion 
     and Analysis or Plan of Operation - Recent Events." There can be no 
     assurances that these transactions will be completed as planned, or at 
     all. The failure of any of these transactions could materially and 
     negatively impact the Company and its business.

-    POSSIBLE DELISTING.  Because of recent changes in the Nasdaq listing 
     rules, the Company's common stock could be delisted from trading on the 
     Nasdaq Over-the-Counter Bulletin Board Service, unless the Company makes 
     required filings with the Securities and Exchange Commission. See "Other 
     Information." If the Company's stock were to be delisted, there would be 
     no public market for the stock and stockholders would be unable to 
     liquidate their investment. Although the Company intends to make the 
     required filings with the Securities and Exchange Commission and retain 
     its stock listing on the Nasdaq Bulletin Board, there can be no 
     assurances that it will be able to do so.

-    DEPENDENCE ON NEW PRODUCT INTRODUCTION AND COMMERCIALIZATION.  The 
     concept of and the technology to manufacture, operate and market prepaid 
     cellular services have only been recently developed.  Although the 
     Company believes that there is a large market for its product, there can 
     be no assurance that the Company will be successful in the introduction 
     of its new product.  Broad commercialization of debit cellular services 
     may require the Company to overcome significant technological, 
     manufacturing and marketing hurdles which may 

                                 -- Page 24 --

<PAGE>

     not be currently foreseen.  Since the Company's product is new, there is 
     little direct operating history on which to base assumptions as to 
     practicality, market acceptability, sales volume and profitability.

-    COMPETITION.  The prepaid cellular industry has become increasingly 
     competitive due to the entry of large, well financed wireless carriers 
     into the prepaid market.  Other potential competitors include companies 
     with substantially greater financial and marketing resources than those 
     of the Company.  Although the Company believes that its products are 
     unique, no assurance can be given that competitors possessing greater 
     financial resources than the Company will not be able to develop a 
     product which is more appealing or offer similar products at lower 
     prices than those of the Company.  The Company may not be able to 
     operate successfully in this competitive environment.

-    DEPENDENCE ON UNDERLYING CELLULAR AND LONG DISTANCE CARRIERS.  The 
     Company is currently dependent on a limited number of domestic wireless 
     and long distance carriers to provide access for its services.  Although 
     the Company believes that it currently has sufficient access to 
     transmission facilities and long distance networks on favorable terms, 
     and believes that its relationships with carriers is satisfactory, an 
     increase in the rates charged by carriers would have a material adverse 
     effect on the Company's operating margins.  Failure to obtain continuing 
     access to such facilities and networks on favorable terms, would also 
     have a material adverse effect on the Company, including the possibility 
     that the Company may need to significantly curtail or cease its 
     operations or to develop its own capabilities at a cost in excess of the 
     Company's ability to fund such undertakings.

-    REGULATORY ENVIRONMENT, UNFORESEEN COSTS AND REGULATION.  Currently, 
     both land line and wireless telephony are undergoing rapid and drastic 
     regulatory changes.  The Company's products have components that are 
     regulated by both state and federal regulatory agencies.  There can be 
     no assurances that one or more services currently offered by the Company 
     will not be negatively impacted by newly-created or interpreted 
     regulation.

These and other risks described in this Quarterly Report must be considered by
any investor or potential investor in the Company.

                                 -- Page 25 --

<PAGE>

                         PART II -- OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS.

     From time to time, the Company is involved in legal matters which are 
incidental to its operations.  In the opinion of management, the ultimate 
resolution of these matters has not had a material adverse effect on the 
Company's financial condition or results of operations.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

     Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

     No defaults upon senior securities occurred during the third quarter of 
1998.  In the fourth quarter of 1998, the Company defaulted in the payment of 
a $50,000 note payable to Matech I.  The Note was subsequently satisfied and 
cancelled.   See "Management's Discussion and Analysis or Plan of Operation  
-- Recent Events -- Material Technologies Stock Transfer."

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

     No matters were submitted to a vote of the Company's security holders
during the third quarter of 1998.

ITEM 5. OTHER INFORMATION.

     On June 16, 1998, the Company executed a Letter of Intent with YMG for 
securing new capital, and agreeing to the planned acquisition of SCIES, a 
privately-held, development stage provider of Internet telephony software, 
systems and services that is headquarted in Reston, Virginia. The structure 
of the final funding was contingent upon completion of a definitive business 
agreement between the Company and YMG. On August 1, 1998, YMG declined to 
meet its funding obligation payable at that date and the funding agreement 
was terminated. The planned acquisition of SCIES has not yet been completed 
due to lack of funding. SCIES is now co-located with the Company and is 
operating as a strategic partner of the Company. See "Management's Discussion 
and Analysis or Plan of Operation - Recent Events - New Funding."

     The Company believes that the acquisition of SCIES may allow it to 
pursue new related voice-over-IP opportunities (i.e., Internet telephony), 
and lower existing networking costs as well as costs for terminating 
international calls.  The proposed acquisition calls for the Company to issue 
shares of its unregistered Common Stock to purchase SCIES.  If the 
acquisition is consummated, SCIES will operate as a wholly-owned subsidiary 
of the Company. The acquisition is subject to final due diligence, contract 
preparation, regulatory approval and new funding consistent with the Letter 
of Intent. There can be no assurance that the acquisition of SCIES will be 
consummated on the proposed terms, or at all.

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

   (a) There are no exhibits being filed with this Quarterly Report.

   (b) The Company did not file any reports on Form 8-K during the third
quarter of 1998.

                                 -- Page 26 --

<PAGE>

                               SIGNATURES


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

                                 SecurFone America, Inc.


Date: March 15, 1999             /s/ Paul B. Silverman
                                 ----------------------------------------------
                                 By Paul B. Silverman,  Chief Executive Officer





                                 -- Page 27 --