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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                            ------------------------

                               AMENDMENT NO. 1 TO
                                  FORM 10-KSB
(Mark One)

|X|    Annual report pursuant to Section 13 or 15(d) of the Securities
       Exchange Act of 1934 for the fiscal year ended SEPTEMBER 30, 2001

| |    Transition report pursuant to Section 13 or 15(d) of the Securities
       Exchange Act of 1934 for the transition period from _________ to
       __________

                         Commission File Number 0-28213
                            ------------------------
                              KANAKARIS WIRELESS
                 (Name Of Small Business Issuer In Its Charter)

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

              2716 OCEAN PARK BLVD., SUITE 2005, SANTA MONICA, CA 90405
                    (Address Of Principal Executive Offices)

                                 (949) 760-5470
              (Registrant's Telephone Number, Including Area Code)

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

    Title Of Each Class                   Name Of Exchange On Which Registered
          NONE                                            NONE

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

                      COMMON STOCK, $.001 PAR VALUE PER SHARE
                                (Title Of Class)
                              ---------------------

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

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. |  |

The registrant's revenues for the twelve months ended September 30, 2001 were
$1,699,817.

As of January 4, 2002, the aggregate market value of the voting stock held by
nonaffiliates of the registrant was approximately $851,145. The number of shares
outstanding of the registrant's only class of common stock, $.001 par value per
share, was 8,511,073 on January 4, 2002.

Effective December 7, 2001, a one-for-twenty reverse stock split of the issued
and outstanding shares of the registrant's common stock was made. All share and
per share amounts in this report have been restated to reflect the reverse
split.



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                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

COMPANY HISTORY

         We are the surviving company in a series of transactions involving
Kanakaris InternetWorks, Inc., a Delaware corporation that was incorporated
on February 25, 1997, Desience Corporation, a California corporation that
was incorporated on April 17, 1984, and Big Tex Enterprises, a Nevada
corporation that was incorporated on November 1, 1991. On October 10, 1997,
Kanakaris InternetWorks, Inc. purchased all of the outstanding shares of
common stock of Desience Corporation in exchange for a royalty payable to the
prior sole stockholder of Desience Corporation based upon a percentage of
Desience Corporation's gross sales. On November 25, 1997, Big Tex Enterprises
purchased all of the outstanding shares of common stock of Kanakaris
InternetWorks, Inc. in exchange for 150,000 shares of our common stock owned
by Nelson Vasquez, the then president of Big Tex Enterprises, 150,000 newly
issued shares of our common stock and 1,000,000 newly issued shares of our
preferred stock. On November 26, 1997, Big Tex Enterprises changed its name to
Kanakaris Communications, Inc. On June 2, 2000, Kanakaris Communications, Inc.
changed its name to Kanakaris Wireless. Consequently, we are a Nevada
corporation that was incorporated on November 1, 1991 and is the sole
stockholder of Kanakaris InternetWorks, Inc., and Kanakaris InternetWorks, Inc.
is the sole stockholder of Desience Corporation. Our common stock trades on
the NASD's OTC Electronic Bulletin Board under the ticker symbol "KKRW."

COMPANY OVERVIEW

         We provide Cyber+Mortar(TM) services. We provide secure Internet-based
encoding and delivery of media-rich content including video and text and also
provide enclosure systems for viewing media-rich content. We are an Internet-
based provider of online delivery of films and books. Our Internet web site,
www.KKRS.Net, is currently the portal to all of the proprietary content and web
sites of Kanakaris Wireless. Our films are accessible to Internet users at
access rates from 56 kilobits per second, or 56 kbps, to broadband at
www.CinemaPop.com. We have over 450 movies of television quality that are
available on-demand with full-screen scalability.

         We introduced in August 2001 www.AK.TV, a global interactive
television-styled web channel that we anticipate will incorporate the content
currently accessible through www.CinemaPop.com and is available for viewing on
a variety of Internet-enabled devices, including Pocket PCs and laptop and
desktop computers and that, through an imbedded video player, shows regularly
scheduled and on-demand programming. We have been an innovator in electronic
book delivery and are in the process of preparing and incorporating our next
generation e-book web site www.WordPop.com and its content into our www.AK.TV
web channel. There are over 100 movies and excerpts of over 300 books available
on-demand through www.AK.TV.

         We plan to market devices that will easily make the content provided
through www.AK.TV viewable through the use of a standard television set by
connecting the set to an Internet-enabled computer. We also plan to offer
various products of the pop culture genre and print-on-demand books through an
area of the www.AK.TV web channel dedicated to shopping. In addition, we plan
to solicit sponsorships from businesses for advertising content to be displayed
with the programming provided through our www.AK.TV web channel. We are also
developing an interactive meeting place, tentatively called My Personal Video,
as a future enhancement to the www.AK.TV web channel through which we plan to
offer various messaging services, including one-on-one video meetings and
on-line chat features.

         Our www.AK.TV initiative represents the culmination of the development
of our Internet content and technology, and we anticipate that the basic
services and content provided through www.AK.TV will be available at no
additional charge for those with Internet connectivity. WWW.AK.TV serves as the
portal to all of the proprietary content and web sites of Kanakaris Wireless.

         In April 2001, we expanded our Internet business through the
introduction of our Kanakaris Wireless Independent Network, or KANWIN(TM). Our
three anchor services of KANWIN(TM) are digital encoding, web hosting and wired
and wireless delivery. Our KANWIN(TM) services enable businesses to deliver
video, audit and text to Internet-enabled devices, including Pocket PCs, laptop
and desktop computers and televisions.

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

         We derive our revenue through both our wireless content delivery and
sales of our data control console systems.  We expect to continue to place
significant emphasis upon the further development and expansion of our wireless
content delivery and e-commerce activities.

         Our currently available and planned wireless content delivery and
e-commerce activities are designed to provide the following key benefits to
individual consumers and businesses:

         ONLINE MOVIES

         o   Wireless delivery of full-length films
         o   Works with any device that has an Internet connection
         o   Compatible with any browser or on any platform
         o   Pay-per-view for individual movies
         o   Monthly access to unlimited viewing of movies
         o   Full-screen viewing of movies
         o   High-quality encoding of movies using proprietary technology
         o   Interactive video advertisements that permit consumers to
             purchase and businesses to sell products

         ONLINE BOOKS

         o   Real-time delivery
         o   Direct delivery through a secured server
         o   Dynamic updates
         o   Wireless delivery to handheld devices, including Pocket PCs
             and Palm(TM) handhelds
         o   Print-on-demand

         CINEMAWEAR(TM)

         o   Video encoding for high-quality video transmission and
             viewing
         o   Direct licensing of CinemaWEAR(TM) proprietary technology
         o   Bundling of CinemaWEAR(TM) proprietary technology with
             hardware and software products

         ONLINE MESSAGING

         o   Interactive one-on-one personal video meetings
         o   Video messaging and quick chat features

         We currently offer or plan to offer the services described above
through www.AK.TV, our global interactive television-styled web channel.

         Our data control console products are designed to provide the following
key benefits to customers:

         o   Maximization of operator efficiency and productivity through
             ergonomics by providing an environment that reduces visual and
             physical stress, enhancing the operator's ability to focus
             attention and facilitating equipment access
         o   Maximization of the number of displays per operator in a compact
             space
         o   Flexibility to accommodate growth and change in both hardware and
             location

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INTERNET INDUSTRY BACKGROUND

         The Internet began in the late 1960s as an experiment in the design of
robust computer networks. The Internet is a collection of computer networks - a
network of networks - that allows anyone to connect with their computer to the
Internet and immediately communicate with other computers and users across the
world. Its users for decades were primarily limited to defense contractors and
academic institutions. With the advent of high-speed modems for digital
communication over common telephone lines, individuals and organizations began
connecting to and taking advantage of the Internet's advanced global
communications ability.

         Although there were several factors responsible for the growth of the
Internet, the factors that are most often attributed to its success are the
advent of HTML, the World Wide Web and Internet browsers. With the expansion in
the number of Internet users and web sites, we believe development of two
phenomena, growth in the amount of commerce that is being transacted over the
Internet and willingness of businesses to spend money to be a part of the
Internet, will continue to grow for the foreseeable future.

         Because the Internet has experienced rapid growth, it has developed
into a significant tool for global communications, commerce and media, enabling
millions of people to share information and transact business electronically.
Internet-based businesses have emerged to offer a variety of products and
services over the Internet. Advances in online security and payment mechanisms
have also prompted more businesses and consumers to engage in electronic
commerce.

DATA CONTROL CONSOLE INDUSTRY BACKGROUND

         The data control console industry focuses on the design, manufacture
and implementation of high-tech furniture systems used to fully integrate
computer systems and communications systems in the workplace. Working with IBM,
we developed the first modular system for enclosing and organizing the equipment
and cabling associated with data and network control centers. The first large
installation occurred in 1985. We were the first manufacturer using a standard,
modular system that could be quickly installed by bolting together without any
site construction and could similarly be added to or reconfigured easily with
additional parts.

OUR STRATEGY

         It is our strategy to deliver interactive content, including movies and
books, directly over the Internet to computer devices available in schools,
offices, homes and cars on a worldwide, around-the-clock basis and to provide
high quality data control console products to businesses and government. Our
objective is to maintain our position as a competitive provider of downloadable
content and data control console products and to become a leading provider of
proprietary encoding technology and Internet business services. To achieve this
objective, we have developed a strategy with the following key elements:

         o        DEVELOP AND DEPLOY WWW.AK.TV. WWW.AK.TV, our television-styled
                  web channel, was officially launched in August 2001 and we
                  plan to make it our new portal to all of our proprietary
                  content, offered products and web sites.

         o        DEVELOP AND DEPLOY CINEMAWEAR(TM). We are pursuing the
                  development and marketing of CinemaWEAR(TM) as a stand-alone
                  consumer product, bundled consumer product and as a business
                  service.

         o        DEVELOP AND DEPLOY KANWIN(TM) SALES FORCE. We have begun the
                  recruitment and hiring process for sales representatives for
                  our KANWIN(TM) services.

         o        CONTINUE DEVELOPMENT OF OUR MOVIE PARTNER PROGRAM. We intend
                  to further develop our movie partner program to allow any
                  mainstream web site in the world to host a virtual theater.
                  Eligible web sites may join our program free of charge and
                  share in our revenues generated through their participation
                  in our program.

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         o        FURTHER DEVELOP DIRECT-OVER-THE-INTERNET DELIVERY OF BOOKS. We
                  have implemented direct-over-the-Internet delivery of books to
                  Pocket PCs and Palm(TM) handhelds. We have introduced an
                  interactive digital books posting program that allows web site
                  visitors to directly post books for online delivery at
                  www.WordPop.com and allows authors to access information on
                  how many of their books have been ordered online. We intend to
                  further develop direct-over-the-Internet delivery of books by,
                  among other things, seeking new relationships with publishers
                  and authors. The services offered at www.WordPop.com have been
                  incorporated into our www.AK.TV web channel.

         o        DEVELOP AND CULTIVATE STRATEGIC ALLIANCES. We intend to
                  cultivate our existing strategic alliances with Microsoft
                  Corporation and others and to develop new strategic alliances
                  that will aid us in building brand awareness for our Internet
                  and e-commerce web sites and enhancing the products and
                  services we provide.

         o        LEVERAGE OUR CUSTOMER BASE AND INTENSIFY OUR MARKETING
                  ACTIVITIES. We have built a database of viewers of movies at
                  www.CinemaPop.com by requesting information from subscribers
                  and plan on carrying over and continuing to build the database
                  once www.CinemaPop.com is incorporated into our www.AK.TV web
                  channel. We are using the database to market our Internet
                  services. We intend to continue to generate new sales
                  materials and aids to enhance our data control console product
                  exposure and to increase our sales force to penetrate deeper
                  into national and international markets.

OUR INTERNET PRODUCTS AND SERVICES

     INTERNET SERVICES FOR BUSINESSES

         In April 2001, we began offering a series of Internet services for
businesses. We collectively call these services KANWIN(TM), or The Kanakaris
Wireless Independent Network. We developed these services using our experience
in creating our own proprietary, media-rich web sites. We designed these
services to enable businesses to enhance the quality of video on their corporate
web sites, to expand the scope of distribution of corporate web sites to all
Internet-enabled devices, and to offer e-commerce-related Internet services. The
three key elements of KANWIN(TM) are encoding, hosting and transport/bandwidth.
Our encoding, hosting, transport/bandwidth and other KANWIN(TM) services, which
are available individually or as customized packages, are described in further
detail below.

         CinemaWEAR(TM) Encoding and Embedded Electronic Commerce(TM)
         ------------------------------------------------------------

         Our proprietary CinemaWEAR(TM) encoding technology is used to prepare
video for delivery to Internet-enabled devices. Our CinemaWEAR(TM) encoding
technology significantly improves the quality of streaming video delivery over
the Internet by capturing the look and feel of real cinema delivery.
CinemaWEAR(TM) encoding facilitates delivery of video to a wide variety of
digital devices at bit rates, such as 56 kbps and 100 kbps, that result in
frames per second that equate to digital video disc, or DVD, quality.
CinemaWEAR(TM) encoding also enables delivery of video over the Internet to
Pocket PCs, personal digital assistants, or PDAs, desktop computers, satellite
systems and systems that can transmit at SuperBroadband(TM) speed.
SuperBroadband(TM) is a Kanakaris Wireless term that refers to a 700 kbps bit
rate, which equates to DVD quality.

         Our proprietary Embedded Electronic Commerce(TM) platform is designed
to work in tandem with our CinemaWEAR(TM) encoding technology. Our Embedded
Electronic Commerce(TM) platform enables businesses to sell products, track
sales and generate leads from within a streaming video and enables viewers to
submit secure orders for advertised products through clickable links appearing
within the streaming video. Embedded Electronic Commerce(TM) technology works
with wired and wireless video delivery to Internet-enabled devices.

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         Hosting
         -------

         Hosting is the storage of files digitally in a format that can be
distributed over the Internet. We provide fully-managed enterprise-class storage
solutions at a co-location facility managed by us or at a client's own data
center. KANWIN(TM) services include 24-hours-a-day, 7-days-a-week remote system
monitoring. KANWIN(TM) services also include storage management, administration
and security through a remote network operations center and data replication
within a local storage system or between remote storage systems.

         NeuralNet(TM) Transport/Bandwidth
         ---------------------------------

         Transport/bandwidth is the delivery over the Internet of encoded and
stored digital material from its originating destination to the end user
destination. Bandwidth is a range of consecutive frequencies. Our NeuralNet(TM)
transport/bandwidth provides optimal delivery across the spectrum of bandwidths
through a fiber optic network. Our delivery services are flexible, scalable and
cost-effective because they are designed to provide the amount of bandwidth
needed at any given time. This scalability avoids unnecessary costs to
businesses who, without scalable services, might otherwise purchase unused
bandwidth in order to avoid inconvenience to users and loss of potential
customers that can result from traffic spikes on inflexible systems. We deliver
content, including text, pictures, order forms, audio and video, and live
webcasts, through our NeuralNet(TM) transport/bandwidth services. These services
can be bundled with CinemaWEAR(TM) encoding services to provide simultaneous
encoding and streaming, or DVOD (downloadable video on demand), and to allow
storage for online archiving.

         Live Video Streaming Preparation
         --------------------------------

         CinemaWEAR(TM) Wireless Delivery is our proprietary encoding technology
that is used to prepare content for what we believe to be the first ever
full-length streaming video delivery to handheld computing devices such as the
Pocket PC. We believe that CinemaWEAR(TM) Wireless Delivery is ideal for wide
area network, or WAN, and local area network, or LAN, users who are working at
transmission rates from 10 kbps for super low streaming video with marginal
signal strength, to 19.2 kbps for streaming video for standard WANs, to 128 kbps
for streaming video for LANs. We anticipate that CinemaWEAR(TM) Wireless
Delivery will produce revenue for our Internet business by enabling us to assist
businesses in enhancing their corporate web sites.

         Managed Services
         ----------------

         Our KANWIN(TM) technology management services include a variety of
customized management services that can be made available on demand.

         Point-To-Point Communications
         -----------------------------

         Peer-to-peer or broad array real-time video conferencing uses
CinemaWEAR(TM) encoding technology to deliver face-to-face communications in
real time at 30 frames per second. In conjunction with a world-leading
telecommunications provider, we intend to offer digital subscriber line, or DSL,
services that offer delivery speeds that are from twelve to 100 times faster
than 56 kbps. In addition, employers can convey corporate messages or training
requirements to remote employee locations through our KANWIN(TM) distance
learning services. Print on demand, using Ricoh technology, is being made
available for text source materials such as training manuals, owners' manuals
and corporate information.

         Mass Media Exposure Sponsorships
         --------------------------------

         We are completing development of a 24-hour Internet television-styled
web channel called www.AK.TV. We anticipate that this channel will include a
variety of entertainment content, including movies and a combination of
prerecorded and live programs relating to entertainment, technology and other
subjects. We intend to allow eligible businesses to sponsor programs on
www.AK.TV that could consist of a combination of recurring video ads, special

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corporate promotions, targeted e-mails to www.AK.TV subscribers and/or
customized promotions.

    ONLINE MOVIES

         We operate an online movie web site at www.CinemaPop.com, which site we
are incorporating into our www.AK.TV web channel and which enables Internet
users to download full-length motion pictures with no download time and no
plug-in required utilizing Microsoft(R) Windows Media(TM) technology. More than
450 movies are currently available for online distribution. We offer
pay-per-view movies as well as advertising-supported free movies. We also sell
advertising to our web site. We charge a monthly access fee for those customers
who desire unlimited viewing access to a larger portion of our web site. We have
implemented a merchant service system that enables us to charge and collect
access fees for our movie web sites.

         We have developed a movie partner program aimed at attracting web sites
to use our innovative technology. Over 1,000 web sites have applied to set up
clickable links to our movie content and to receive a commission for
subscription and pay-per-view fees generated by visitors to their web sites.
Many of these sites are in the process of setting up the clickable links.

         In September 2000, we launched a new online movie web site, the third
generation of "CinemaPop.com." Features include a streamlined subscription
process, the ability for consumers to post movie reviews and the introduction of
CinemaWEAR(TM) content that is accessible to wireless handheld computing
devices.

    ONLINE BOOKS

         In August 2000, we launched our www.WordPop.com, which site was
integrated within our web site www.KKRS.Net and offered approximately 700 books
for click and view delivery. Those books, like our movies, were downloadable in
real-time, which meant there was not a significant delay in the display of text
or images. This allowed consumers to obtain immediate access to the medium of
their choice. We believe that our site was secure to the extent that it
preserved the author's rights to ownership. We also believe that we were the
only online Internet publisher that provided real-time secure fulfillment from
one source file.

         Books and articles were available through high-speed access for use
on desktops, laptops, personal data assistants, Pocket PCs, Palm(TM) handhelds
and other innovative end user hardware. Most importantly, there was no end user
software needed.

         In May 2001, we replaced our WordPop.com web site with a beta test of
new technologies. In conjunction with Ricoh Business Systems, we launched a new
WordPop section of our www.AK.TV web channel. This section initially consists of
excerpts of over 300 book titles, initially available in two different ways.
Each book will be available in whole or in part for electronic download. Each
book is available for print-on-demand delivery. Excerpts of the electronic
versions are free-of-charge, and the print-on-demand versions will be sold at
various prices. The free excerpts of the electronic versions promote exposure
for authors, have hyperlinks to promote the sale of print copies, and may
contain advertising sponsorship.

OUR DATA CONTROL CONSOLE PRODUCTS

         Our primary data control console product is our OPCON Module System, a
proprietary modular system for high-end computer command centers. Our OPCON
Module Systems have been purchased and installed by major governmental agencies
such as NASA, the Federal Bureau of Investigation and the United States Navy and
by large corporations including Bank of America, Mitsubishi, Pacific Bell and
many others.

         Our control center consoles are ergonomically designed to maximize
comfort, function, adaptability and efficiency for the corporate network system.
We assist clients in the planning process by making site visits, taking lists of
requirements, then providing customers with blueprint floor plans of OPCON
Module System layouts, elevated views of suggested equipment layouts and

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perspective presentation drawings. In order to assure complete customer
satisfaction, we oversee both manufacturing and installation of products.

         Kanakaris Wireless, through its wholly-owned subsidiary, Desience
Corporation, has been marketing and selling the OPCON Module System to corporate
and government mainframe computer users since the early 1980s. Historically,
approximately 90% of our sales have been in the United States. During the 1990's
we experienced increased business from South America, including multiple orders
from Venezuela, and also saw increased business from Mexico. We have also sold
and installed the OPCON Module System in Canada, Barbados, Bermuda, St. Lucia,
Kuwait and Guam. Our OPCON Module System is made of heavy steel, has a
proprietary lens to provide better task lighting, provides extremely open
architecture for cable routing and is easy to reconfigure. Based upon these and
other features, many of our existing clients return for new and expanded
systems.

STRATEGIC RELATIONSHIPS

         In order to expand our Internet and e-commerce businesses, we have
developed strategic relationships with various Internet, technology and software
companies and others. The following is a brief description of some of our
strategic relationships.

         MICROSOFT CORPORATION

         In August 1999, we entered into an Internet content partner agreement
with Microsoft Corporation. Under the terms of the agreement, Microsoft promotes
certain portions of our web content and provides assistance in the use of
Microsoft's Windows Media(TM) technology. Microsoft Corporation has agreed to
promote four of our web sites through December 30, 2001. Microsoft is providing
clickable headline links to our CinemaPop.com web site consisting of brief
summaries of the content available via the site link on their WindowsMedia.com
web site. This site link enables Internet users to read about and click on the
descriptions of content available from Kanakaris Wireless and then be directly
connected to our web site.

         In addition, in November 1999 Kanakaris Wireless was selected by
Microsoft to participate in the Microsoft(R) Windows Media(TM) Technologies
Broadband Jumpstart Initiative. On December 7, 1999, we launched 45 movie titles
at 100 kbps and 300 kbps broadband speeds on our CinemaPop.com web site, and
Microsoft is providing links to this content from its WindowsMedia.com web site.
As part of the Broadband Jumpstart Initiative, William Gates, the Chairman of
Microsoft, introduced a new Microsoft Broadband web site at the StreamingMedia
West conference in San Jose, California on December 7, 1999. Kanakaris Wireless
is represented on this web site through a clickable link. On that same day,
InterVu began providing server space and bandwidth for 45 movies. Microsoft
Corporation covered the cost of this service for a period of six months. In
March 2000, we entered into an additional Internet content partner agreement
under which Microsoft Corporation agreed to promote additional portions of our
web content through March 2001 as part of the Broadband Jumpstart Initiative.

         LAIN INTERNATIONAL

         On November 9, 1999, we signed a memorandum of understanding with Lain
International, or Lain. Lain has agreed to make available to us all
Spanish-language, Spanish-dubbed and Spanish-subtitled films to which it has
Internet distribution rights. We have created a web site called
CineManiaNetwork.com, which is devoted exclusively to these titles. We have
agreed to collect web visit statistics and perform accounting functions for the
site and will pay Lain royalties based upon advertising, subscription and
pay-per-view fees less expenses.

         DISTRIBUTION RIGHTS TO "DEAD ANGEL"

         On April 20, 2000, we entered into a distribution agreement with John
Clark for the Internet distribution rights to his book "Dead Angel," which book
pertains to his relationship with entertainer Jerry Garcia. Under the terms of
the agreement, we paid $7,000 to support the completion of the book and $6,000
in expenses for promotional interviews with Cliff Garcia and others as well as a
promotional party, both of which were webcast on our web site and made into a
videotape. Also, under the terms of agreement, John Clark has agreed to pay to
us 50% of the gross sales of the book on the Internet in perpetuity and 50% of

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the royalties generated by the book and the interviews and party videotape for
two years.

SALES AND MARKETING

         Sales and marketing activities with respect to our Internet and
e-commerce businesses currently are limited primarily to headline links provided
by Microsoft Corporation from its web site to our CinemaPop.com web site and
clickable links to others' web sites. Also, on November 14, 2000, we entered
into an advertising contract with eConnect under which we will provide eConnect
with banner advertisements appearing on the home page and other pages of
www.CinemaPop.com and www.WordPop.com, send e-mail messages to eConnect's entire
subscriber and web partner databases, place an advertisement at the beginning of
at least one feature film per month and other services. Also, we are soliciting
monthly subscriptions, pay-per-view sales and advertising sales for our
CinemaPop.com web site.

We are presently consolidating and incorporating our sales and marketing
activities with respect to our Internet and e-commerce businesses into our
www.AK.TV initiative. In January 2002, we conducted an extensive review of our
registered user database for AK.TV and CinemaPop.com. After purging duplicate
and bogus e-mail addresses, we had over 240,000 registered users, and the
ability to send e-mail messages to these users.

         Sales and marketing activities for our data control console business
currently are handled by a limited number of manufacturer's representatives and
the employees of Kanakaris Wireless that are engaged primarily in this portion
of our business. These representatives and employees locate potential customers
and assist them in the planning process by making site visits, taking lists of
requirements, then providing customers with proposed blueprints and drawings
suited to the customers' individual needs. In an effort to increase sales of our
data control consoles, we have hired exclusive sales representatives. We intend
to increase the number of manufacturer's representatives and employees devoted
to these functions as funds and opportunities become available so that we can
continue to enhance Desience Corporation's name as the pioneer and a modern
leader in the data control console business.

         In August 2000, we introduced new sales literature and launched a web
site at www.desience.com for our Desience division. As discussed more fully
below, to capitalize on our business model, we intend to initiate a more
traditional marketing campaign as funds allow. Such a campaign is likely to
initially include targeted print and radio advertising and may also include
hiring marketing staff that would be primarily responsible for communications,
advertising and public relations for our data control console business and our
Internet and e-commerce businesses.

ADVERTISING AND PROMOTION

         We have placed advertisements for the CinemaPop.com web site in
influential trade publications catering to the entertainment industry, such as
the national and international editions of The Hollywood Reporter. Since 1997,
we have created Internet web events in order to drive traffic to our web sites.
We intend to continue to create high profile Internet events as a means to
further promote our business.

         Alex Kanakaris, our Chairman of the Board, President and Chief
Executive Officer, is the author of the book "Signs of Intelligent Life on the
Internet" that highlights the impact of the Internet on our society. From
December 2000 through June 2001, approximately 4,000 copies of the book were
downloaded from www.WordPop.com. Mr. Kanakaris is currently working on his
latest book, with an anticipated release date in March 2002. His latest book
focuses on business in what he describes as the "post-Internet world" and
follows up on his earlier book, "Signs of Intelligent Life on the Internet." We
believe that ongoing exposure of "Signs of Intelligent Life on the Internet" and
future exposure of Mr. Kanakaris' latest book will bring further attention to
our web sites and Kanakaris Wireless.

         As part of our advertising and promotion efforts, we have entered into
a number of agreements, including:

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         INTERNATIONAL VISION LTD.

         In October 2000, we entered into an agreement with International Vision
LTD., or IVL, under which IVL agreed to place a 30-second commercial advertising
the Chinese version of our www.CinemaPop.com web site on the television series
"You Can Start A Business," which series airs in various geographic locations,
including China, Hong Kong and Singapore. The series consists of three blocks of
ten episodes. IVL and Kanakaris Wireless have agreed to meet at the end of each
block of ten episodes to determine whether the advertisement will run on the
next block of episodes. We have agreed to pay IVL half of all profits derived in
the locations in which the advertisement airs, up to $50,000 per airing.

         IFILM

         In May 2000, we entered into an agreement with IFILM under the terms of
which IFILM has agreed to allow visitors to the IFILM web site to view
multimedia content by uniform resource locater, or URL, links to the
CinemaPop.com web site. IFILM has agreed to provide CinemaPop.com with
"Preferred Partner" status on the IFILM site, which means that IFILM will
provide CinemaPop.com with a suite of benefits and services that may include
placement of the CinemaPop.com logo on the IFILM site, listing on the IFILM
Preferred Partners page, placement of a link to the CinemaPop.com home page on
the IFILM home page on a rotating basis with other Preferred Partners, and other
promotional or preferential services that IFILM accords to its Preferred
Partners in the future. In exchange for IFILM's commitments under the agreement,
we have agreed to deliver film information to IFILM by making accessible a
document matching IFILM's formatting standards. We have agreed to keep the film
information current to reflect any changes to the URLs for the multimedia
content. Also, CinemaPop.com has granted to IFILM a non-exclusive, worldwide,
royalty-free license to reproduce, distribute, publicly perform and publicly
display on the IFILM site CinemaPop.com's logo and film information.

COMPETITION

         The Internet and e-commerce businesses are extremely competitive and
can be significantly affected by many factors, including changes in local,
regional or national economic conditions, changes in consumer preferences, brand
name recognition and marketing and the development of new and competing
technologies. We expect that existing businesses that compete with us and which
have greater resources than us will be able to undertake more extensive
marketing campaigns and adopt more aggressive advertising sales policies than
us, thereby generating more traffic to their web sites.

         We believe that we are the only company that currently offers both
Internet business services such as encoding, hosting and transport/bandwidth and
proprietary direct-over-the-Internet delivery of movies. Although other
companies offer some services that are similar to those we offer, we believe
that our combination of services is unique and that we have a competitive edge
in the online movie industry because, among other things:

         o        We have introduced subscription, pay-per-view, advertising and
                  web partner programs to our CinemaPop.com movie site and plan
                  to introduce such programs as well as various products,
                  including print-on-demand books and products of the pop
                  culture genre, and services such as video messaging through
                  our www.AK.TV web channel in order to provide a variety of
                  revenue streams.

         o        We believe that CinemaPop.com currently offers, and that
                  www.AK.TV will offer, the largest number of full-length,
                  mainstream Hollywood movies with Internet access at multiple
                  access speeds.

         o        Most of our full-length movies start to stream and can begin
                  to be viewed in approximately one minute rather than having a
                  downloading process of a few hours before the movie can be
                  viewed, as required on many other web sites.

         o        We currently have over 450 full-length films online, which are
                  viewable in streams from 56 kbps to broadband. Because of the
                  significant time involved in translating film into streaming
                  media technology, we believe that our film library gives us a
                  significant lead over others in the online movie industry.

                                       10



<PAGE>

         o        Our content can be viewed on multiple platforms, including
                  through CinemaWEAR(TM) Wireless Delivery to Pocket PCs and
                  Palm(TM) handhelds.

         o        Our Embedded Electronic Commerce(TM) technology allows us to
                  enable viewers to place secure online orders for products
                  offered by businesses through clickable links within streaming
                  video.

         Although there are numerous book sites on the Internet, we believe that
the WordPop section of our www.AK.TV web channel will be one of the few web
sites that provides real-time secure fulfillment from one source file. In
addition, we believe that the new WordPop section of our www.AK.TV web channel
will, at the time of introduction, be the only web site that will offer
simultaneous paid print-on-demand delivery and free electronic delivery of
excerpts of over 400 book titles.

         With respect to competition with our data control console business, we
believe there are five companies competing in the marketplace for modular system
solutions, including Desience Corporation, Wrightline, Evans Consoles, and
Stacking Systems, which provide metal products, and Infrastructures, which
provides wood-type products. Most of our competitors offer similar services,
such as installation, warranties and customer service. Deciding factors such as
price, service, features and materials vary according to the requirements of the
customer.

         Although we were the pioneers in this industry and are a leader in the
design and production of quality metal data control console products, we believe
that all of our competitors currently have more financial and other resources
than us. Nevertheless, we have remained competitive in the data control console
industry based upon our delivery of quality products and services with
relatively minimal overhead. We intend to maintain and enhance our competitive
position in this industry by committing additional staffing and other resources
to our data control console business as funds become available.

PATENTS AND PROPRIETARY RIGHTS

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

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

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

                                       11



<PAGE>

GOVERNMENT REGULATION

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

EMPLOYEES

         As of January 4, 2002, we employed or contracted a total of six
employees, all of which employees were employed on a full-time basis. Our future
success will depend, in part, on our ability to continue to attract, retain and
motivate highly qualified technical, marketing and management personnel. Our
employees are not represented by any collective bargaining unit. We have never
experienced a work stoppage. We believe our relationship with our employees is
good.

ITEM 2.  DESCRIPTION OF PROPERTY.

         We currently occupy one facility in Costa Mesa, California on a
month-to-month lease. This facility houses our Internet studio headquarters
and our data control console headquarters and includes approximately 1,780
square feet of office space.

ITEM 3.  LEGAL PROCEEDINGS.

         On September 15, 1999, Robert Adams filed a complaint against our
company and our Chairman of the Board, President and Chief Executive Officer,
Alex Kanakaris, individually, in Los Angeles Superior Court (Case No. LC050023)
alleging breach of contract and fraud. Mr. Adams based his fraud claim primarily
on alleged misrepresentations and concealment involving a consulting agreement
between Kanakaris Wireless and Mr. Adams. Mr. Adams alleged that he was entitled
to certain stock options, of which 75% of the option price allegedly was already
deemed paid in exchange for services allegedly rendered by Mr. Adams to our
company. Mr. Adams attempted to exercise the options for the purchase of a
certain number of shares to which he claimed to be entitled under the agreement.
The claims against Mr. Kanakaris individually were dismissed. On November 1,
2000, Mr. Adams and Kanakaris Wireless entered into a Settlement Agreement and
General Release under which we agreed to pay a total of $24,000 to Mr. Adams and
his attorney in three equal installments of $8,000 each on November 1, 2000,
March 1, 2001 and July 1, 2001 in exchange for dismissal with prejudice of the
entire action after the three payments have been made. The final payment was
made in July 2001 and the action was dismissed.

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

                                       12



<PAGE>

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

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

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

         On July 26, 2001, the parties involved entered into a Settlement
Agreement and Mutual Release of Claims. Under that agreement, we agreed to
release all of our claims and to direct the court to execute an assignment of
the stock at issue and deliver the stock to Alpha Tech for reissuance to various
designated parties in exchange for releases of all claims by parties adverse to
us in the case and dismissal of the actions in Illinois and Utah. In August
2001, the courts in Illinois and Utah each entered an order dismissing the
actions.

         Dataview Consoles, Inc., a California corporation dba Swanson
Engineering & Manufacturing Company, commenced an action against Kanakaris
Wireless and our subsidiary, Desience Corporation, in the Los Angeles Superior
Court (Case No. BC245203) on February 14, 2001. The complaint alleged that
Kanakaris and Desience owed Dataview $104,601 under several invoices for
equipment manufactured for Desience by Dataview in 1997. Concurrently with the
filing of the complaint, Dataview filed an application for a right to attach
order against Kanakaris and Desience to secure repayment of the debt alleged in
the complaint. Effective as of April 3, 2001, the parties to the dispute entered
into a settlement agreement under which Kanakaris and Desience paid Dataview
$63,584 and agreed to pay Dataview an additional $42,000 in twelve monthly
installments of $3,500 beginning May 1, 2001. The agreement provides that we
will be entitled to file a request for dismissal after we have made all of the
installment payments in accordance with the agreement. The agreement also
provides that Kanakaris and Desience, on the one hand, and Dataview and Nels
Swanson, on the other hand, shall all retain the unrestricted right to market,
sell, distribute and manufacture or have manufactured under their own respective
names all of the data control console products that Dataview had been
manufacturing for Desience.

         Loudeye Technologies, Inc., or Loudeye, filed a complaint for money due
and owing against us in the Superior Court for the State of Washington (King
County) (Case No. 01-2-07608-6SEA) on March 8, 2001. Loudeye claims we failed to
pay $44,107 owing for encoding services furnished by Loudeye under the parties'
purported contract. The complaint also seeks attorneys' fees, court costs and
late charges. We filed an answer to the Loudeye complaint on October 11, 2001
that includes a general denial of all allegations made by Loudeye.

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

         No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended September 30, 2001.

                                       13



<PAGE>

                                  PART II

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

   Market Price
   ------------

         Our common stock commenced trading on the OTC Bulletin Board under the
symbol "KANA" on November 26, 1997. On August 2, 1999 we changed our symbol to
"KKRS." On December 7, 2001, our symbol changed to "KKRW" in connection with a
1-for-20 reverse split of our common stock.

         The following table shows the high and low closing bid prices of our
common stock for the periods presented, as obtained from Pink Sheets LLC, a
research service that compiles quotation information reported on the National
Association of Securities Dealers composite feed or other qualified interdealer
quotation medium. The quotations shown below reflect interdealer prices, without
retail mark-up, mark-down or commissions, and may not represent actual
transactions. The quotations shown below have been adjusted to reflect the
1-for-20 reverse split of our common stock that occurred on December 7, 2001.

                                                           High        Low
                                                           ----        ---
Year Ended September 30, 2000:
     First Quarter (October 1 - December 31) ..............$ 18.75     $10.40
     Second Quarter (January 1 - March 31)................. 119.375     13.75
     Third Quarter (April 1 - June 30).....................  48.125     14.10
     Fourth Quarter (July 1 - September 30)................  22.20       9.40

Year Ending September 30, 2001:
     First Quarter.........................................$ 14.00     $ 3.90
     Second Quarter........................................   8.60       2.80
     Third Quarter.........................................   5.20       2.00
     Fourth Quarter........................................   2.16        .46

         The closing bid price of a share of our common stock on January 4,
2002 was $.11.

   Stockholders
   ------------

         At January 4, 2002, there were approximately 289 holders of record of
our common stock. Within the holders of record of our common stock are
depositories such as Cede & Co. that hold shares of stock for brokerage firms
which, in turn, hold shares of stock for beneficial owners.

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

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

   Recent Sales of Unregistered Securities
   ---------------------------------------

         In July 2001, we issued an aggregate of 50,000 shares of common stock
valued at $165,000 to one consultant as compensation for services rendered.

         In July 2001, we issued an aggregate of 158,609 shares of common stock
to five accredited investors in connection with regular interest payments and
upon conversion of an aggregate of $100,000 of principal plus related interest
on our convertible debentures.

         In August 2001, we issued an aggregate of 342,007 shares of common
stock to four accredited investors upon conversion of an aggregate of $172,000
of principal plus related interest on our convertible debentures.

                                       14



<PAGE>

         In September 2001, we issued an aggregate of 178,603 shares of common
stock to three accredited investors upon conversion of an aggregate of $34,500
in principal plus related interest on our convertible debentures.

         In September 2001, we issued an aggregate of 244,445 shares of common
stock valued at $185,778 to one consultant as compensation for services
rendered.

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

         For each of the unaccredited investors participating in the
transactions described above, we made available for consideration, prior to the
acquisition of our securities, our most recent Annual Report on Form 10-KSB and
our most recent Quarterly Report on Form 10-QSB.

         For each of the issuances described above and made for consulting or
other services rendered, the per share value of the common stock issued was the
fair market value of the common stock on the grant date, which equaled the
closing price of a share of common stock on the NASD's OTC Electronic Bulletin
Board(R) on that date.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS.

         The following discussion and analysis should be read with our condensed
consolidated financial statements and notes to financial statements included
elsewhere in this document. Except for historical information, the following
discussion contains forward-looking statements that involve risks and
uncertainties, such as statements of our plans, objectives, expectations and
intentions and our current beliefs regarding revenues we might earn if we are
successful in implementing our business strategies. See "Special Note Regarding
Forward-Looking Statements" for further information regarding forward-looking
statements. Our actual results may differ materially from the results discussed
in the forward-looking statements as a result of a number of factors, many of
which are beyond our control, including those factors discussed under "Risk
Factors" and other headings in this document.

OVERVIEW

We provide Cyber+Mortar(TM) secure communication services that enable consumers,
businesses and government/military to send, receive, store, replicate, monitor
and interact with media-rich data, including video, audio, text and real-time
telemetry. We provide online delivery of films and books and offer business
services, including encoding of video for online delivery. In addition, we
design, manufacture and install ergonomic data control console systems for
high-end computer command centers.

         We derive our revenue from both our wireless content delivery and sales
of our data control console systems. We expect to continue to place significant
emphasis upon the further development and expansion of our wireless content
delivery and e-commerce activities. As funds become available, we intend to
increase our marketing efforts substantially in order to develop awareness,
brand loyalty and sales for our www.AK.TV interactive online channel and our
CinemaWEAR(TM) video-to-Internet encoding process. We intend to generate revenue
from advertising sponsorships, subscriptions, pay-per-view and product sales
pertaining to the AK.TV channel. We also intend to derive revenue from both
product sales and service fees pertaining to our CinemaWEAR(TM) encoding. As
funds become available, we intend to continue to invest in the development of
new products and services that enhance AK.TV and CinemaWEAR(TM) encoding and to
further develop our existing wireless products and services.

RESULTS OF OPERATIONS

COMPARISON OF RESULTS OF OPERATIONS FOR FISCAL YEARS ENDED
SEPTEMBER 30, 2001 AND 2000

         NET SALES. Net sales increased by $1,086,000 (176.9%) to $1,700,000 for
the year ended September 30, 2001 from $614,000 for the year ended September 30,
2000. Net sales derived from our e-commerce business increased by $1,164,000
(5,061%) to $1,187,000 for the year ended September 30, 2001 from $23,000 for
the year ended September 30, 2000. Net sales derived from our data control
console business decreased $78,000 (13.2%) to $513,000 for the year ended
September 30, 2001 from $591,000 for the year ended September 30, 2000. This
decrease was primarily due to a decrease in sales of our OPCON Modular System,
which we believe to be a result of customer deferrals of anticipated sales into
our first quarter ended December 31, 2001.

                                       15



<PAGE>

         GROSS PROFIT (LOSS). Gross profit as a percentage of net sales
increased to 59.9% for the year ended September 30, 2001 as compared to 39.2%
for the year ended September 30, 2000. In dollar terms, gross profit increased
$778,000 (323.7%) to a gross profit of $1,018,000 for the year ended September
30, 2001 from a gross profit of $240,000 for the year ended September 30, 2000.
Gross loss for our e-commerce business decreased in dollar terms by $3,762,000
(28.9%) to a gross loss of $9,251,000 for the year ended September 30, 2001 from
a gross loss of $13,013,000 for the year ended September 30, 2000. This decrease
in gross loss for our e-commerce business primarily was due to an increase in
revenues and a decrease in various operating expenses. Gross profit for our data
control console business decreased in dollar terms by $8,940 (24.8%) to a gross
profit of $27,090 for the year ended September 30, 2001 from a gross profit of
$36,030 for the year ended September 30, 2000. This decrease in gross profit for
our data control console business primarily was due to the decrease in sales of
our data control consoles as noted above and an increase in installation costs.

         OPERATING EXPENSES. Total operating expenses decreased by $3,092,000
(33.4%) to $6,159,000 for the year ended September 30, 2001 from $9,250,000 for
the year ended September 30, 2000. This decrease in total operating expenses
primarily was due to decreases in consulting fees, marketing, advertising and
investor relations costs, and other professional fees. Consulting fees decreased
$1,898,000 (51.4%) to $1,793,000 for the year ended September 30, 2001 from
$3,691,000 for the year ended September 30, 2000. Marketing, advertising and
investor relations costs decreased by $1,666,000 (73.2%) to $611,000 for the
year ended September 30, 2001 from $2,277,000 for the year ended September 30,
2000. Professional fees decreased by $725,000 (47.0%) to $818,400 for the year
ended September 30, 2001 from $1,543,000 for the year ended September 30, 2000.
Each of these operating expenses was paid primarily through the issuance of
shares of our common stock to the service provider. Consulting fees, marketing,
advertising and investor relations costs and other professional fees were
reduced through cost constraints dictated by management.

         These decreases in operating expenses were offset by an increase in
executive compensation of $1,020,000 (240.3%) to $1,444,000 for the year ended
September 30, 2001 from $424,000 for the year ended September 30, 2000, which
increase was paid primarily through the issuance of stock, an increase in
salaries of $190,000 (74.8%) to $444,000 for the year ended September 30, 2001
from $254,000 for the year ended September 30, 2000, which increase resulted
primarily from annual base salary adjustments, and an increase in rent of
$70,800 (309%) to $94,000 for the year ended September 30, 2001 from $23,000 for
the year ended September 30, 2000, which increase resulted primarily from our
use of a separate facility for our e-commerce business between March and
September 2001.

         INTEREST AND OTHER EXPENSE. Interest and other expense increased
$117,000 (2.9%) to $4,083,000 for the year ended September 30, 2001 from
$3,967,000 for the year ended September 30, 2000. This increase in other expense
primarily was due to a $980,000 loss on impairment of investment in marketable
securities that were received for services rendered, partially offset by a
$998,000 (23.5%) decrease in the financing cost of issuing stock through
convertible debentures to $3,241,000 for the year ended September 30, 2001 from
$4,239,000 for the year ended September 30, 2000.

         NET LOSS. Net loss decreased $3,753,000 (28.9%) to $9,224,000 for the
year ended September 30, 2001 from $12,977,000 for the year ended September 30,
2000. This decrease in net loss primarily was due to increases in revenues and
decreases in various operating expenses, as described above.

LIQUIDITY AND CAPITAL RESOURCES

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

                                       16



<PAGE>

         In January 2001, we issued $650,000 of 12% convertible debentures due
January 5, 2002 to four accredited investors in the first stage of a two-stage
offering. The debentures were accompanied by warrants to purchase up to an
aggregate of 195,000 shares of common stock. The net proceeds of that offering,
after payment of related expenses, were approximately $631,500. In March 2001,
we issued $650,000 of 12% convertible debentures due March 9, 2002 in the second
stage of the offering. The net proceeds of that offering, after payment of some
related expenses, were approximately $647,500.

         On June 29, 2001, we issued an aggregate of $500,000 of 12% convertible
debentures in a private offering to three accredited investors. The debentures
were accompanied by warrants to purchase up to an aggregate of 75,000 shares of
common stock. The net proceeds of that offering, after payment of related
expenses, were approximately $420,000.

         As of September 30, 2001, we had negative working capital of $3,542,800
and an accumulated deficit of $30,565,000. As of that date, we had $51,000 in
cash, $122,000 in accounts receivable - net, and $111,000 in notes receivable
from stockholders and related parties. We had accounts payable and accrued
expenses of $1,087,000 and outstanding convertible debentures of $2,757,000,
including convertible debentures issued prior to the beginning of fiscal year
2001. To the extent convertible debentures we have issued are converted into
shares of common stock, we will not be obligated to repay the converted amounts.

         Cash used in our operating activities totaled $2,569,000 for the fiscal
year ended September 30, 2001 as compared to $4,238,000 for the prior year. Cash
provided by our investing activities totaled $231,000 for the fiscal year ended
September 30, 2001 as compared to cash used in our investing activities of
$857,000 for the fiscal year ended September 30, 2000.

         Cash provided by our financing activities totaled $1,775,000 for the
fiscal year ended September 30, 2001 as compared to $5,556,000 for the prior
year. We raised $250,000 of the cash provided by financing activities during the
fiscal year ended September 30, 2001 and $1,530,000 of the cash provided by
financing activities during the year ended September 30, 2000 from the issuance
of convertible debentures.

         For the fiscal year ended September 30, 2001, we had net sales of
$1,700,000 and a net loss of $9,224,000, of which loss $6,655,000 (73%)
consisted of non-cash expenses. These non-cash expenses included $2,992,000 of
convertible debt financing costs incurred with respect to the issuance of our
convertible debentures.

         In January 2002, we issued an aggregate of $200,000 of our 12%
Convertible Debentures due January 9, 2003, which were accompanied by warrants
to purchase up to an aggregate of 600,000 shares of common stock. The net
proceeds of that offering, after payment of some related expenses, were
$165,500. The investor may, at its option, purchase an additional $200,000 of
our 12% convertible debentures and warrants to purchase up to 600,000 shares of
common stock within 30 days after the effective date of a registration statement
that we are required to file on behalf of the investor within 30 days after the
issuance of the initial $200,000 of debentures. However, the investor is not
committed to purchase the additional debentures. Our continued operations are
dependent on securing additional sources of liquidity through debt and/or equity
financing.

         We have been, and currently are, working toward identifying and
obtaining new sources of funding. Deteriorating global economic conditions and
the effects of ongoing military actions against terrorists may cause prolonged
declines in investor confidence in and accessibility to capital markets.
Further, our current debenture financing documents contain notice and right of
first refusal provisions and the grant of a security interest in substantially
all of our assets in favor of a debenture investor, all of which provisions will
restrict our ability to obtain debt and/or equity financing.

                                       17



<PAGE>

         Any future financing that we may obtain may cause significant dilution
to existing stockholders. Any debt financing or other financing of securities
senior to common stock that we are able to obtain will likely include financial
and other covenants that will restrict our flexibility. At a minimum, we expect
these covenants to include restrictions on our ability to pay dividends on our
common stock. Any failure to comply with these covenants would have a material
adverse effect on our business, prospects, financial condition, results of
operations and cash flows.

         If adequate funds are not available, we may be required to delay, scale
back or eliminate portions of our operations and product and service development
efforts or to obtain funds through arrangements with strategic partners or
others that may require us to relinquish rights to certain of our technologies
or potential products or other assets. Accordingly, the inability to obtain such
financing could result in a significant loss of ownership and/or control of our
proprietary technology and other important assets and could also adversely
affect our ability to fund our continued operations and our product and service
development efforts that historically have contributed significantly to our
competitiveness.

         In an effort to increase sales related to our wireless business, we are
implementing an enhanced marketing and sales strategy. For example, we are
selling advertising sponsorships to our AK.TV 24-hour streaming Internet
television channel. We also are completing research and development of
additional attributes to our CinemaWEAR(TM) technology with the goal of
launching an interactive personal meeting site within the AK.TV interactive
channel.

         Also, we are enhancing our efforts to obtain online user registration
for movie viewing on AK.TV, soliciting monthly subscriptions to and pay-per-view
sales of movie viewing on AK.TV, introducing revenue-sharing web partner
programs and improving tracking of our market share. We believe that if we are
successful in implementing the above business strategies, we will generate
increased revenues from our wireless content and technology business segment.

         In an effort to increase sales of our data control console products by
increasing our production capacity for our Desience Division OPCON Modular
System, we reached agreement with two established manufacturers to provide for
our original equipment manufacturing production needs. In addition, we launched
a marketing campaign that includes high-impact sales literature and a
cutting-edge web site at www.desience.com. We believe that if we are successful
in implementing our business strategies for our modular consoles segment, we
will generate increased revenues from this segment.

RISK FACTORS

         An investment in our common stock involves a high degree of risk. In
addition to the other information contained in this document, the following
factors should be considered carefully in evaluating our business and prospects.

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

         Our consolidated financial statements have been prepared assuming we
will continue as a viable business. We have not been profitable and we may
continue to lose money for the foreseeable future. Historically, we have
incurred losses and experienced negative cash flow. As of September 30, 2001, we
had an accumulated deficit of approximately $30,565,000. We may continue to
incur losses and may never achieve or sustain profitability. An extended period
of losses and negative cash flow may prevent us from operating and expanding our
business, especially our Internet-based business.

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<PAGE>

WE NEED AND MAY BE UNABLE TO OBTAIN ADDITIONAL FUNDING ON SATISFACTORY TERMS,
WHICH COULD DILUTE OUR STOCKHOLDERS OR IMPOSE BURDENSOME FINANCIAL RESTRICTIONS
ON OUR BUSINESS.

         Historically, we have relied upon cash from financing activities and
revenues generated from operations to fund all of the cash requirements of our
activities. We have not been able to generate any significant cash from our
operating activities in the past and cannot assure you that we will be able to
do so in the future. We require new financing. Deteriorating global economic
conditions and the effects of ongoing military actions against terrorists may
cause prolonged declines in investor confidence in and accessibility to capital
markets. Future financing may not be available on a timely basis, in sufficient
amounts or on terms acceptable to us. This financing may also dilute existing
stockholders' equity. Any debt financing or other financing of securities senior
to common stock will likely include financial and other covenants that will
restrict our flexibility. At a minimum, we expect these covenants to include
restrictions on our ability to pay dividends on our common stock. Any failure to
comply with these covenants would have a material adverse effect on our
business, prospects, financial condition and results of operations because we
could lose any existing sources of funding and impair our ability to secure new
sources of funding.

CONVERSION OF OUR OUTSTANDING CONVERTIBLE SECURITIES COULD SUBSTANTIALLY DILUTE
YOUR INVESTMENT AND CAUSE THE PRICE OF OUR COMMON STOCK TO DECLINE BECAUSE THE
CONVERSION PRICE OF THOSE SECURITIES DEPENDS UPON THE MARKET PRICE OF OUR COMMON
STOCK, AND THERE IS NO CEILING ON THE NUMBER OF SHARES OF OUR COMMON STOCK THAT
ARE ISSUABLE UPON EXERCISE OF THOSE SECURITIES.

         We have issued to several security holders debentures and warrants that
are convertible or exercisable at prices that are equal to the lesser of a fixed
price and a variable price that is based upon a discount on the market price of
our common stock. As of January 9, 2002, we had a total of 8,511,073 shares of
common stock outstanding, the closing price of a share of our common stock on
the OTC Electronic Bulletin Board was $.12, and the debentures and warrants with
the variable conversion and exercise prices were convertible or exercisable into
approximately 55,245,102 shares of common stock. The number of shares that those
debentures and warrants ultimately may be converted into or exercised for could
prove to be greater than this estimate if the market price of our common stock
declines. To the extent the security holders convert those debentures and
exercise those warrants and then sell the underlying shares of common stock into
the market, the price of our common stock may decline due to the additional
shares available in the market. This decline could allow the security holders to
convert their remaining debentures and exercise their remaining warrants into a
greater number of shares of common stock, the sale of which would further
depress the stock price. You could, therefore, experience substantial dilution
and a decline in the value of your investment as a result of the conversion of
the debentures and exercise of the warrants.

IF OUR SECURITY HOLDERS ENGAGE IN SHORT SALES OF OUR COMMON STOCK, INCLUDING
SALES OF SHARES TO BE ISSUED UPON CONVERSION OF CONVERTIBLE SECURITIES, THE
PRICE OF OUR COMMON STOCK MAY DECLINE.

         Selling short is a technique used by a stockholder to take advantage of
an anticipated decline in the price of a security. A significant number of short
sales can create a downward pressure on the price of the security. If our
security holders sell large volumes of our common stock within a relatively
short period of time, the market price of our common stock may decrease. The
decrease in market price would allow holders of our debentures and warrants that
have conversion or exercise prices based upon a discount on the market price of
our common stock to convert their debentures and exercise their warrants into an
increased number of shares of our common stock. Further sales of common stock
issued upon conversion of debentures or exercise of warrants could cause even
greater declines in the price of our common stock. The downward pressure on the
market price caused by conversion of debentures and exercise of warrants, and
the sale of the underlying shares of common stock, could encourage short sales
by our security holders and could further undermine the value of our common
stock.

                                       19



<PAGE>

OUR FAILURE TO MANAGE GROWTH EFFECTIVELY COULD IMPAIR OUR BUSINESS.

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

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

         There is currently an extremely limited trading market for our common
stock. Our common stock trades on the OTC Electronic Bulletin Board under the
symbol "KKRW." There can be no assurance that any regular trading market for our
common stock will develop or, if developed, will be sustained. The trading
prices of our common stock have fluctuated significantly over time. In fact, for
the quarter ended September 30, 2001, taking into account the 1-for-20 reverse
common stock split that subsequently occurred on December 7, 2001, the high and
low closing bid prices for a share of our common stock were $2.16 and $.46,
respectively. The trading prices of our common stock could experience wide
fluctuations in the future in response to:

         o        quarter-to-quarter variations in our operating results;

         o        material announcements of technological innovations;

         o        significant customer orders or establishment of strategic
                  partnerships by us or our competitors or providers of
                  alternative products and services;

         o        general conditions in the Internet, e-commerce and data
                  control console industries; or

         o        other events or factors, many of which are beyond our control.

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

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

         Broker-dealer practices in connection with transactions in "penny
stocks" are regulated by certain penny stock rules adopted by the Securities and
Exchange Commission. Penny stocks, like shares of our common stock, generally
are equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on Nasdaq). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document that provides information about penny stocks and the nature
and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction,
and, if the broker-dealer is the sole market maker, the broker-dealer must
disclose this fact and the broker-dealer's presumed control over the market, and
monthly account statements showing the market value of each penny stock held in

                                       20



<PAGE>

the customer's account. In addition, broker-dealers who sell these securities to
persons other than established customers and "accredited investors" must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written agreement to the transaction.
Consequently, these requirements may have the effect of reducing the level of
trading activity, if any, in the secondary market for a security subject to the
penny stock rules, and investors in our common stock may find it difficult to
sell their shares.

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

         Our success is highly dependent upon the continued services of key
members of our management, including our Chairman of the Board, President and
Chief Executive Officer, Alex Kanakaris. We have not entered into any employment
agreement with Mr. Kanakaris or any other officer of Kanakaris Wireless. The
loss of Mr. Kanakaris could have a material adverse effect on Kanakaris Wireless
because Mr. Kanakaris has experience, skills and vision upon which we draw
heavily in our day-to-day operations and strategic planning and financing
activities. We are the beneficiary of 80% of the proceeds of a term life
insurance policy in the amount of $10,000,000 covering Mr. Kanakaris. However,
we cannot assure you that receipt of these proceeds would be sufficient to
enable us to continue our business without significant temporary or permanent
disruption following the loss of Mr. Kanakaris.

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

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

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

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

         We own, license or have otherwise obtained the right to use
technologies incorporated into our web sites. We may receive infringement claims
from third parties relating to our technologies. In those cases, we intend to
investigate the validity of the claims and, if we believe the claims have merit,
to respond through licensing or other appropriate actions. To the extent claims

                                       21



<PAGE>

relate to technology that we have licensed from third parties for incorporation
into our web sites, we would forward those claims to the appropriate third
party. If we were unable to license or otherwise provide any necessary
technology on a cost-effective basis, we could be prohibited from using that
technology, incur substantial costs in redesigning our web sites that
incorporate that technology, or incur substantial costs defending any legal
action taken against us, all of which could have a material adverse effect on
our business, prospects, financial condition, results of operations and cash
flows.

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

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

         Our movies and general web sites, including AK.TV, our principal
website, are hosted on servers owned and operated by a third party. Although
offsite backup servers are maintained by our host, all of our primary servers
are vulnerable to interruption by damage from fire, flood, power loss,
telecommunications failure, break-ins and other events beyond our control. We
have, from time to time, experienced periodic systems interruptions and
anticipate that these interruptions will occur in the future. We do not maintain
business interruption insurance. If we experience significant system
disruptions, our business, results of operations and financial condition would
be materially adversely affected because we would be unable to deliver our
Internet-related products and services during the disruption and may therefore
lose existing and potential customers.

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

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

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

         Provisions of our articles of incorporation and bylaws may delay or
frustrate the removal of incumbent directors and may prevent or delay a merger,
tender offer or proxy contest involving Kanakaris Wireless that is not approved
by our board of directors, even if those events may be beneficial to the
interest of our stockholders. For example, Alex Kanakaris, our Chairman of the
Board, President and Chief Executive Officer, is the holder of all of the
authorized, issued and outstanding shares of our Class A Convertible Preferred
Stock. Under our articles of incorporation, each share of Class A Preferred
Stock is entitled to 100 non-cumulative votes per share on all matters presented
to our stockholders for action. Consequently, Mr. Kanakaris may have sufficient
voting power to control the outcome of all corporate matters submitted to the
vote of our common stockholders. Those matters could include the election of
directors, changes in the size and composition of the board of directors, and

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<PAGE>

mergers and other business combinations involving Kanakaris Wireless. In
addition, through his control of the board of directors and voting power, he may
be able to control certain decisions, including decisions regarding the
qualification and appointment of officers, dividend policy, access to capital
(including borrowing from third-party lenders and the issuance of additional
equity securities), and the acquisition or disposition of assets by Kanakaris
Wireless. In addition, the concentration of voting power in the hands of Mr.
Kanakaris could have the effect of delaying or preventing a change in control of
Kanakaris Wireless, even if the change in control would benefit our
stockholders, and may adversely affect the market price of our common stock.

WE ARE UNABLE TO PREDICT THE IMPACT THAT THE CONTINUING THREAT OF TERRORISM
AND THE RESPONSES TO THAT THREAT BY MILITARY, GOVERNMENT, BUSINESS AND THE
PUBLIC MAY HAVE ON OUR BUSINESS, PROSPECTS, FINANCIAL CONDITION, RESULTS OF
OPERATIONS AND CASH FLOWS.

         The recent terrorist attacks in the United States, which have brought
devastation to many people and shaken consumer confidence, have disrupted
commerce throughout the world. The continuing threat of terrorism in the United
States and other countries and heightened security measures, as well as current
and any future military action in response to such threat, may cause significant
disruption to the global economy, including widespread recession. To the extent
that such disruptions result in a general decrease in government, business and
consumer spending that could decrease demand for our current and planned
products and services, in our inability to effectively market our products and
services, or in financial or operational difficulties for the service providers,
such as server operators, on which we rely, our business and results of
operations could be materially and adversely affected. We are unable to predict
whether the continuing threat of terrorism or the responses to such threat will
result in any long-term commercial disruptions or whether such terrorist
activities or responses will have a long-term material adverse effect on our
business, prospects, financial condition, results of operations and cash flows.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

         This document contains forward-looking statements, including among
others:

         o        the projected growth in the Internet, e-commerce and data
                  control console industries and the markets for our products
                  within these industries;

         o        our business strategy for expanding our presence in the
                  existing and proposed markets in which our products and
                  services could be used;

         o        anticipated trends in our financial condition and results of
                  operations;

         o        the impact of the continuing threat of terrorism and the
                  responses to such threat by military, government, business and
                  the public; and

         o        our ability to distinguish ourselves from our current and
                  future competitors.

         You can identify forward-looking statements generally by the use of
forward-looking terminology such as "believes," "expects," "may," "will,"
"intends," "plans," "should," "could," "seeks," "pro forma," "anticipates,"
"estimates," "continues," or other variations thereof, including their use in
the negative, or by discussions of strategies, opportunities, plans or
intentions. A number of factors could cause our financial results, including our
net income (loss) or growth in net income (loss) to differ materially from those
anticipated by forward-looking statements, including those factors discussed
under "Risk Factors." We do not undertake to update, revise or correct any
forward-looking statements.

ITEM 7.  FINANCIAL STATEMENTS.

         The consolidated financial statements of our company and its
subsidiaries are submitted as a separate section of this Annual Report on Form
10-KSB beginning at page F-1.

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<PAGE>

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURES.

         None.

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

         The executive officers and directors of Kanakaris Wireless and their
ages and positions as of January 8, 2002 were as follows:

                  Name         Age                   Position
                  ----         ---                   --------

Alex Kanakaris (1)(2).........  45          Chairman of the Board, President,
                                            Chief Executive Officer and Director

Branch Lotspeich (1)..........  54          Vice Chairman of the Board, Vice
                                            President, Secretary and Director

John Robert McKay (1).........  39          Webmaster and Director

Van Holster...................  31          Chief Operating Officer and Director

Patrick McKenna...............  34          Director

Caroline Michaels.............  54          Director

Jeff Hall.....................  49          Director

Rose Forbes (2)...............  52          Director

Charles Moore (2).............  32          Director

David T. Shomaker.............  45          Acting Chief Financial Officer and
                                            Advisor to the Board
---------------
(1) Member of executive committee and 2000 Stock Option Plan committee.
(2) Member of audit committee.

BUSINESS EXPERIENCE

   DIRECTORS

         Alex F. Kanakaris has served as a director and as our Chairman of the
Board, President and Chief Executive Officer since November 1997. Mr. Kanakaris
served as the President of Kanakaris InternetWorks, Inc. from 1994 until it was
acquired by Kanakaris Wireless in November 1997. Mr. Kanakaris created what is
believed to be the first real-time online delivery of motion pictures, the first
online book web site that allows type resizing, page turning without scrolling,
searching by word or phrase and has security attributes, and the first
entertainment web site for wireless personal digital assistants. Mr. Kanakaris
makes frequent appearances as an Internet expert at trade shows, digital economy
conferences, on radio and television and in print. He is author of the book
"Signs of Intelligent Life on the Internet" published by Dace/Brentwood Media
Group, November 1999, and currently is working on a business motivational book
for the digital age.

         On August 2, 1999, the Securities and Exchange Commission filed suit in
the United States District Court in the District of Nevada against Kanakaris
Wireless, Mr. Kanakaris, David Valenti, a stockholder of Kanakaris Wireless, and
another individual seeking permanent injunctions and civil penalties based on
alleged violations of Sections 5(a), 5(c) and 17(a)(1)-(3) of the Securities Act
of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5
thereunder in connection with the sale of approximately 300,000 shares of
Kanakaris Wireless common stock in 1996 and 1997 to the former stockholders of
Kanakaris InternetWorks, Inc., a subsidiary of Kanakaris Wireless. On August 9,
1999, a final judgment of permanent injunction and other relief was entered in
connection with the execution by each defendant of a consent to entry of
injunction and the payment by each of Mr. Kanakaris and Mr. Valenti of a $25,000
civil penalty. Without admitting or denying any guilt involving the violations

                                       24



<PAGE>

cited in the decrees, Mr. Kanakaris, Mr. Valenti and Kanakaris Wireless each
agreed under the consents to entry of injunction not to take actions that would
violate federal securities laws in connection with the offer, purchase or sale
of securities.

         Branch Lotspeich has served as President of Desience Corporation since
June 1997. He has served as our Vice Chairman of the Board and Secretary and as
a director since November 1997. Mr. Lotspeich was appointed Vice President of
Kanakaris Wlreless in May 2000. Prior to that, he served as Vice President of
Desience Corporation from March 1992 through June 1997. Prior to that, Mr.
Lotspeich worked as an independent consultant in telecommunications. Mr.
Lotspeich is a Summa Cum Laude graduate of the University of Cincinnati with a
Bachelor of Fine Arts degree in Television Broadcasting.

         John Robert McKay has served as a director and as our webmaster since
August 1999. Mr. McKay served as our Vice President-Internet Division from May
1997 through July 1998. Mr. McKay has been a webmaster since 1995 and has worked
both full-time and as a consultant to our Chairman of the Board, President and
Chief Executive Officer, Alex Kanakaris, since 1994. Mr. McKay was a web site
administrator for NNA Services, a non-profit educational organization, from 1993
to 1994. Prior to that, he served as Sales Promotion Manager for ORA
Electronics/Alliance Corporation, an international consumer electronics company,
from 1991 to 1992. From 1987 to 1991, Mr. McKay served as the advertising
manager for Kelly-Moore Paint Co. Mr. McKay is a graduate of San Francisco State
University with a Bachelor of Science degree in Marketing.

         Van Holster has served as a director and as our Chief Operating Officer
since August 2001. During the past five years, Mr. Holster served as Product
Manager of our Desience Division from May 1996 to August 2001, where his
responsibilities included duties relating to order initiation, product
fulfillment and installation and customer support. Prior to his employment with
our Desience Division, Mr. Holster was a student at Pasadena City College, where
he earned an Associate in Arts Degree in Liberal Arts and an Associate in
Science Degree in Marketing.

         Patrick McKenna has served as a director since March 2000. During the
past five years, Mr. McKenna has held various positions in Seattle, Washington.
Mr. McKenna has served as Director of Strategy for iBEAM Broadcasting
Corporation, an Internet broadcasting company, since March 2000. Mr. McKenna
served as a business development manager for Kiket.com, a software company, from
July 1998 to February 1999, and for Microsoft Corporation's Digital Media
Division from February 1999 to March 2000. Prior to that time, Mr. McKenna
served as a communications specialist for SJI, a telecommunications hardware
company, from December 1996 to June 1998, and as president of Global
Communications Network, an Internet telecommunications company, from December
1995 to June 1997. Mr. McKenna has a Bachelor of Arts degree in English from
Washington State University.

         Caroline Michaels has served as a director since November 2001. Ms.
Michaels has been associated with Kanakaris Wireless since September 1988 in her
capacity as a consultant and independent sales representative of our Desience
Division. Prior to that time, Ms. Michaels was General Manager of Little Bear
Organic Foods from February 1986 through December 1987. Ms. Michaels was born in
London, England, where she started her career at The Sunday Times of London. Ms.
Michaels moved to New York in 1969 and became a partner and co-owner of a music
publishing, management and production company, where she worked directly with
various artists.

         Jeff Hall has served as a director since November 2000 and was an
advisor to our board of directors since November 1997. Mr. Hall serves part-time
as an associate to our Chief Executive Officer in the role of a strategist and
as a hands-on business implementer. Mr. Hall has been the President and owner of
the Brentwood Media Group since 1991. Prior to that time, Mr. Hall joined the
Los Angeles Times as Vice President of Marketing Services, was promoted to
become the first President of the San Fernando Valley edition of the Los Angeles
Times and launched the Ventura County edition of the Los Angeles Times. Mr. Hall
started his professional newspaper career as a general assignment reporter for
the Kansas City Star, a Capital Cities/ABC newspaper, where he attained the
position of Vice President of Marketing. Mr. Hall has a Master of Business
Administration degree from Harvard Business School and is a graduate of Stanford
University with a Bachelor of Arts degree in Communications.

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<PAGE>

         Rose Forbes has served as a director since November 2000 and was an
advisor to our board of directors since November 1997. Ms. Forbes' background
includes work at Sony Pictures Entertainment, MCEG/Virgin Home Entertainment and
Paramount Pictures. Ms. Forbes has been Manager of Music Clearance at Sony
Pictures Entertainment since December 1995 and has been with Sony since July
1990.

         Charles Moore has served as a director since January 2001. Mr. Moore is
founder and President of the New York Internet Chamber of Commerce, a not-for-
profit agency that provides a forum for political and business leaders in the
State of New York. Mr. Moore was Director of Sales for Plenar Corporation from
November 1999 to July 2000. Mr. Moore was also President of Blue Nile
Consulting, Inc., a technology consulting firm based in New York City, from June
1996 until November 1999. Mr. Moore holds a Bachelor of Science degree in
Computer Science from Drexel University.

         All directors hold office until the next annual stockholders' meeting
or until their respective successors are elected or until their earlier death,
resignation or removal. Each officer serves at the discretion of the board of
directors.

   ADVISORS TO OUR BOARD OF DIRECTORS

         David T. Shomaker has served as our acting Chief Financial Officer and
as an advisor to our board of directors since May 1999. He has been a partner of
Haynie & Company, Certified Public Accountants, based in Orange County,
California and Salt Lake City, Utah since 1990. Mr. Shomaker is a Certified
Public Accountant in the States of California and Utah and is a Certified Fraud
Examiner and a Certified Valuation Analyst. Mr. Shomaker holds a Bachelor of
Science degree in Accounting from Brigham Young University, Provo, Utah.

         Frank Ake has served as an advisor to our board of directors since
November 1997. He has acted as a consultant in connection with over $1 billion
of real estate acquisition, development and redevelopment projects worldwide,
some of which projects have used state-of-the-art Internet technology. Mr. Ake's
experience includes a position with Skidmore Owings & Merrill as Chicago Intern
Architect with the world's largest architecture firm at their headquarters
office from 1976-1979. Mr. Ake participated in the design of over $7 billion of
airports, hotels, and office towers worldwide from 1979-2000. Mr. Ake has an
architectural degree from The Illinois Institute of Technology in Chicago.

         George Atkinson has served as an advisor to our board of directors
since November 1997. He was a pioneer of home video and was the President of the
600+ Video Station network, which preceded major chains such as Blockbuster
Video. He was named by the Video Software Dealers Association as Video Retailer
of the Year and Video Man of the Year in 1979, and was a central character in
the New York Times best-selling book "Fast Forward: Hollywood, the Japanese and
the VCR Wars" by James Lardner.

         Dr. Steven A. Newman has served as an advisor to our board of directors
since September 2000 and served as a director of Kanakaris Wireless from March
2000 to September 2000. Dr. Newman has held, during the last five years, various
positions at Xybernaut Corporation, the leading provider of mobile, wearable
computing hardware, software and services, bringing wireless communications and
full-function Pentium computing power in a hands-free design to people when and
where required. Dr. Newman has been a director of Xybernaut Corporation since
January 1995, Vice Chairman of the Board of Xybernaut Corporation since August
1997, and a consultant to Xybernaut Corporation since January 1996. Prior to
that time, Dr. Newman was the Executive Vice President and Secretary of
Xybernaut Corporation. Currently, Dr. Newman provides business, management and
administrative and consulting services to various medical and business groups.
Dr. Newman is a graduate of Brooklyn College with a Bachelor of Arts degree and
the University of Rochester with a Doctorate degree in Medicine.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our executive officers and directors, and persons who beneficially own
more than 10% of a registered class of our common stock, to file initial reports
of ownership and reports of changes in ownership with the Securities and
Exchange Commission. Such officers, directors and stockholders are required by
Securities and Exchange Commission regulations to furnish Kanakaris Wireless
with copies of all reports that they file.

                                       26



<PAGE>

         Based solely upon a review of copies of reports furnished to us during
and after the fiscal year ended September 30, 2001, or any written
representations received by Kanakaris Wireless from a director, officer or
beneficial owner of more than 10% of our common stock that no other reports were
required, we believe that, for the fiscal year ended September 30, 2001, all
Section 16(a) filing requirements applicable to our reporting persons were
complied with except that Alex Kanakaris failed to file on a timely basis three
Statements of Changes in Beneficial Ownership on Form 4 covering a total of 60
transactions, Branch Lotspeich failed to file on a timely basis three Statements
of Changes in Beneficial Ownership on Form 4 covering a total of four
transactions, and each of John McKay, David Shomaker and Lisa Lawrence failed to
file on a timely basis one Statement of Changes in Beneficial Ownership on Form
4 covering a total of two transactions. Each of the transactions that were not
reported on a timely basis subsequently were reported.

COMPENSATION OF DIRECTORS

         Our directors receive no compensation for attending meetings of the
board of directors.

BOARD COMMITTEES; COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         We do not have nominating or compensation committees of the board of
directors and, except as described below, no committee of the board of directors
performs similar functions.

         Our board of directors has appointed an executive committee consisting
of directors Alex Kanakaris, Branch Lotspeich and John McKay. Subject to any
actions that may be taken by our full board of directors, the executive
committee has the authority to:

         o        Appoint officers and agents of Kanakaris Wireless and
                  determine their salaries;
         o        Borrow money, and issue bonds, notes or other obligations and
                  evidences of indebtedness;
         o        Authorize the corporate seal to be affixed to documents of our
                  company;
         o        Determine questions of general policy with regard to the
                  business of Kanakaris Wireless;
         o        Make recommendations as to declaration of dividends;
         o        Issue equity securities for cash, property or services
                  rendered, at prices no less than 40% of the last bid price on
                  the NASD's OTC Electronic Bulletin Board on the day prior to
                  approval of issuance; and
         o        Make loans from time to time to officers and employees of our
                  company and determine the amount, interest rate and due date
                  for the loans and whether the loans will be collateralized,
                  provided that no loan may result in an outstanding loan
                  balance of more than $300,000 at any one time (notwithstanding
                  any loans made prior to May 17, 2000) and provided further
                  that no funds received from any debenture agreement entered
                  into by Kanakaris Wireless during 1999 and 2000 may be used
                  to fund any such loans.

         In February 2001, our board of directors appointed an audit committee
consisting of three directors: Alex Kanakaris, Rose Forbes and Charles Moore.
The audit committee members were appointed to serve for a term of one year or
until their successors are appointed. The audit committee shall perform the
following functions:

         o        review the scope and effectiveness of audits by our
                  independent public accountants and internal auditors;

         o        select and recommend to the board of directors the employment
                  of independent public accountants;

         o        review the audit plans of our independent public accountants
                  and internal auditors;

                                       27



<PAGE>

         o        review and approve the fees charged by the independent public
                  accountants;

         o        review our quarterly and annual financial statements before
                  their release;

         o        review the adequacy of our system of internal controls and
                  recommendations of the independent public accountants with
                  respect thereto; and

         o        review and act on comments and suggestions by the independent
                  public accountants and by the internal auditors with respect
                  to their audit activities.

         While the audit committee has the responsibilities and powers described
above, it is not the duty of the audit committee to plan or conduct audits or to
determine that our financial statements are complete and accurate and are in
accordance with generally accepted accounting principles. Those duties are the
responsibility of management and the independent auditors. Nor is it the duty of
the audit committee to conduct investigations, to resolve disagreements, if any,
between management and the independent auditors or to assure compliance with
laws and regulations.

         No executive officer of Kanakaris Wireless has served as a director or
member of the compensation committee of any other entity whose executive
officers served as a director of Kanakaris Wireless.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

         Our Articles of Incorporation and Bylaws provide that we shall, to the
fullest extent permitted by Nevada Revised Statutes section 78.751, indemnify
all persons that we have power to indemnify under that section against all
expenses, liabilities or other matters covered by that section, and that this
indemnification is not exclusive of any other indemnification rights to which
those persons may be entitled. Indemnification under this provision is as to
action both in an official capacity and in another capacity while holding
office. Indemnification continues as to a person who has ceased to be a
director, officer, employee or agent and extends to the benefit of the heirs,
executors and administrators of such a person. Section 78.751 of the Nevada
Revised Statutes provides that the expenses of our officers and directors
incurred in defending a civil or criminal action, suit or proceeding must be
paid by us as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
the director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to indemnification.

         Our Articles of Incorporation also provide that a director of Kanakaris
Wireless shall not be liable to us or our stockholders for monetary damages for
breach of fiduciary duty as a director, except to the extent exemption from
limitation or liability is not permitted under the Nevada Revised Statutes. Any
amendment, modification or repeal of this provision by our stockholders would
not adversely affect any right or protection of a director of Kanakaris Wireless
in respect of any act or omission occurring prior to the time of such amendment,
modification or repeal. Our Articles of Incorporation do not, however, eliminate
or limit a director's liability for any act or omission involving intentional
misconduct, fraud or a knowing violation of law, or the payment of unlawful
distributions to stockholders. Furthermore, they do not limit liability for
claims against a director arising out of his or her role as an officer or in any
other capacity, nor would it affect the director's responsibilities under the
federal securities laws or any other law. However, we have purchased directors
and officers liability insurance to protect our directors and executive officers
against liability under circumstances specified in the policy.

                                       28



<PAGE>

         Section 2115 of the California General Corporation Law, or the
California Code, provides that corporations such as Kanakaris Wireless that are
incorporated in jurisdictions other than California and that meet various tests
are subject to several provisions of the California Code, to the exclusion of
the law of the jurisdiction in which the corporation is incorporated. We believe
that as of September 30, 2001, we met the tests contained in Section 2115.
Consequently, we are subject to, among other provisions of the California Code,
Section 317 which governs indemnification of directors, officers and others.
Section 317 generally eliminates the personal liability of a director for
monetary damages in an action brought by or in the right of Kanakaris Wireless
for breach of a director's duties to Kanakaris Wireless or our stockholders
except for liability:

         o        for acts or omissions that involve intentional misconduct or a
                  knowing and culpable violation of law;

         o        for acts or omissions that a director believes to be contrary
                  to the best interests of Kanakaris Wireless or our
                  stockholders or that involve the absence of good faith on the
                  part of the director;

         o        for any transaction for which a director derived an improper
                  personal benefit;

         o        for acts or omissions that show a reckless disregard for the
                  director's duty to Kanakaris Wireless or our stockholders in
                  circumstances in which the director was aware, or should have
                  been aware, in the ordinary course of performing a director's
                  duties, of a risk of serious injury to Kanakaris Wireless or
                  our stockholders;

         o        for acts or omissions that constitute an unexcused pattern of
                  inattention that amounts to an abdication of the director's
                  duty to Kanakaris Wireless or our stockholders; and

         o        for engaging in transactions described in the California Code
                  or California case law which result in liability, or approving
                  the same kinds of transactions.

         To the extent indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of Kanakaris Wireless under the foregoing provisions, or otherwise, we
have been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.

ITEM 10.  EXECUTIVE COMPENSATION.

         The following table sets forth summary information concerning
compensation earned for all services rendered to our company in all capacities
during the last three fiscal years for our Chief Executive Officer and for
our three other executive officers whose total compensation exceeded $100,000
(collectively, the "Named Officers").

                                   29



<PAGE>
<TABLE>

                       SUMMARY COMPENSATION TABLE
<CAPTION>
                                                                                 LONG-TERM
                                                                                COMPENSATION
                                               ANNUAL COMPENSATION                  AWARDS
                                      -------------------------------------    ---------------
                           AS OF
                           YEAR                                   OTHER           SECURITIES
          NAME AND         ENDED                                  ANNUAL          UNDERLYING
     PRINCIPAL POSITION   SEPT. 30    SALARY        BONUS     COMPENSATION(1)   STOCK OPTIONS
     ------------------    ------     ------        -----      ------------    ---------------
<S>                         <C>      <C>        <C>                <C>           <C>
Alex Kanakaris              2001     $167,708   $1,849,725(2)      --                --
  Chairman of the Board,    2000     $175,000   $   42,760(3)      --            188,125(4)
  President and Chief       1999     $105,000   $   97,098(5)      --                --
  Executive Officer

Branch Lotspeich            2001     $ 60,375   $   67,069(6)      --                --
  Vice Chairman of the      2000     $125,000   $    4,829(3)      --             76,250(7)
  Board and President of    1999     $105,000   $   25,134(8)      --                --
  Desience Corporation

John Robert McKay           2001     $105,000   $   16,760(9)      --                --
  Webmaster and Director    2000     $105,000   $   12,145(10)     --             24,750(11)
                            1999     $ 14,998   $    9,513(3)      --                --

Lisa Lawrence               2001     $ 49,583   $  110,000(12)     --                --
  Former Vice President-    2000     $ 61,083   $   34,900(13)     --             33,750(14)
  Internet Division,        1999     $ 14,750   $    6,875(13)     --                --
  Former Director of
  Internet Business Affairs
  and Former Director
</TABLE>

------------------------
(1)      Aggregate amounts do not exceed the lesser of $50,000 or 10% of the
         total annual salary and bonus reported in this table.
(2)      Represents $227,225 of debt forgiveness and $1,622,500 of common stock
         granted.
(3)      Represents debt forgiveness.
(4)      Of this total, options to purchase an aggregate of 83,125 shares
         were cancelled on March 14, 2001.
(5)      Represents $73,378 of cash and $23,720 of debt forgiveness.
(6)      Represents $4,569 of debt forgiveness and $62,500 of common stock
         granted.
(7)      Of this total, options to purchase an aggregate of 16,250 shares
         were cancelled on March 14, 2001.
(8)      Represents $18,838 of cash and $6,296 of debt forgiveness.
(9)      Represents $6,760 of debt forgiveness and $10,000 of common stock
         granted.
(10)     Represents $5,000 of cash and $7,145 of debt forgiveness.
(11)     Of this total, options to purchase an aggregate of 7,500 shares
         were cancelled on March 14, 2001.
(12)     Ms. Lawrence resigned as our Vice President-Internet Division and as
         Director of Internet Business Affairs in May 2001 and resigned as a
         member of our board of directors in December 2001. Amount represents
         common stock granted.
(13)     Amount represents common stock granted.
(14)     Of this total, options to purchase an aggregate of 20,000 shares
         were cancelled on March 14, 2001.

                        OPTION GRANTS IN LAST FISCAL YEAR

         We did not grant any options or stock appreciation rights to the Named
Officers during the year ended September 30, 2001.

                                       30



<PAGE>

                   OPTION EXERCISES AND FISCAL YEAR-END VALUES

         There were no exercises of options by the Named Officers during the
fiscal year ended September 30, 2001. The following table sets forth the number
of exercisable and unexercisable in-the-money stock options and their values at
September 30, 2001 for the Named Officers. An option is "in-the-money" if the
fair market value for the underlying securities exceeds the exercise price of
the option.

                              NUMBER OF
                        SECURITIES UNDERLYING       VALUE ($) OF UNEXERCISED
                       UNEXERCISED OPTIONS AT        IN-THE-MONEY OPTIONS AT
                         SEPTEMBER 30, 2001           SEPTEMBER 30, 2001(1)
                     ---------------------------   ---------------------------
      NAME           EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
      ----           -----------   -------------   -----------   -------------

Alex F. Kanakaris...    105,000         --              --            --

Branch Lotspeich....     60,000         --              --            --

John Robert McKay...     17,250         --              --            --

Lisa Lawrence.......     13,750         --              --            --

---------------
(1)      The closing price of our common stock on September 28, 2001, as
         adjusted for the 1-for-20 reverse split of our common stock that
         occurred on December 7, 2001, was $.60, which price did not exceed
         the exercise price of the options.

                             2000 STOCK OPTION PLAN

         Our board of directors and stockholders adopted our 2000 Stock Option
Plan, or the 2000 Plan. The 2000 Plan is designed to enable us to offer
an incentive-based compensation system to employees, officers and directors of
Kanakaris Wireless and to employees of companies who do business with us. The
2000 Plan provides for the grant of incentive stock options, or ISOs, and
nonqualified stock options, or NQOs. ISOs and NQOs are collectively referred to
below as options.

         A total of 150,000 shares of our common stock are authorized for
issuance under the 2000 Plan. As of January 4, 2002, we had twelve employees,
officers and directors eligible to receive options under the 2000 Plan, and
options to purchase up to 23,125 shares of our common stock were outstanding
under the 2000 Plan. Any shares of common stock that are subject to an award
but are not used because the terms and conditions of the award are not met,
or any shares which are used by participants to pay all or part of the purchase
price of any option, may again be used for awards under the 2000 Plan.

         The 2000 Plan is to be administered by a committee of not less than two
nor more than five persons appointed by the board of directors, each of whom
must be a director of Kanakaris Wireless. Notwithstanding the foregoing, the
board of directors may act as the committee under the 2000 Plan. It is the
intent of the 2000 Plan that it be administered in a manner such that option
grants and exercises would be exempt under Rule 16b-3 of the Securities Exchange
Act of 1934, as amended. Since the adoption of the 2000 Plan in May 2000, the
committee for the 2000 Plan has been comprised of Alex Kanakaris, Branch
Lotspeich and John McKay.

         The committee is empowered:

         o   to select those eligible persons to whom options shall be granted
             under the 2000 Plan;
         o   to determine the time or times at which each option shall be
             granted, whether options will be ISOs or NQOs, and the number of
             shares to be subject to each option; and
         o   to fix the time and manner in which each such option may be
             exercised, including the exercise price and option period, and
             other terms and conditions of such options, all subject to the
             terms and conditions of the 2000 Plan.

                                       31



<PAGE>

         The committee has sole discretion to interpret and administer the 2000
Plan, and its decisions regarding the 2000 Plan are final.

         ISOs granted under the 2000 Plan must have an exercise price of not
less than 100% of the fair market value of the common stock on the date the ISO
is granted and must be exercised, if at all, within ten years from the date of
grant. In the case of an ISO granted to an optionee who owns more than 10% of
the total voting securities of Kanakaris Wireless on the date of grant, such
exercise price shall be not less than 110% of fair market value on the date of
grant, and the option period may not exceed five years. NQOs granted under the
2000 Plan must have an exercise price of not less than 85% of the fair market
value of the common stock on the date the NQO is granted.

         Options may be exercised during a period of time fixed by the
committee, except that no option may be exercised more than ten years after the
date of grant. In the discretion of the committee, payment of the purchase price
for the shares of stock acquired through the exercise of an option may be made
in cash, shares of our common stock or a combination of cash and shares of our
company's common stock.

         The 2000 Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time and from time to time by the board of
directors. The board of directors may not materially impair any outstanding
options without the express consent of the optionee or materially increase the
number of shares subject to the 2000 Plan, materially increase the benefits to
optionees under the 2000 Plan, materially modify the requirements as to
eligibility to participate in the 2000 Plan or alter the method of determining
the option exercise price without stockholder approval. No option may be granted
under the 2000 Plan after May 24, 2010.

         Although not intended as an anti-takeover measure by the board of
directors, one of the possible effects of the 2000 Plan could be to place
additional shares, and to increase the percentage of the total number of shares
outstanding, in the hands of the directors and officers of Kanakaris Wireless.
Such persons may be viewed as part of, or friendly to, incumbent management and
may, therefore, under certain circumstances be expected to make investment and
voting decisions in response to a hostile takeover attempt that may serve to
discourage or render more difficult the accomplishment of such attempt.

         In addition, options may, in the discretion of the committee, contain a
provision providing for the acceleration of the exercisability of outstanding,
but unexercisable, installments upon the first public announcement of a tender
offer, merger, consolidation, sale of all or substantially all of the assets of
Kanakaris Wireless, or other attempted changes in the control of Kanakaris
Wireless. In the opinion of the board of directors, such an acceleration
provision merely ensures that optionees under the 2000 Plan will be able to
exercise their options as intended by the board of directors and stockholders of
Kanakaris Wireless prior to any such extraordinary corporate transaction that
might serve to limit or restrict such right. The board of directors is, however,
presently unaware of any threat of hostile takeover involving shares of
Kanakaris Wireless.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The following table sets forth information regarding the beneficial
ownership of our common stock as of January 9, 2002 by:

         o   Each person known by us to own beneficially 5% or more of our
             outstanding common stock;
         o   Each of our directors;
         o   Each of our executive officers named in the summary compensation
             table below; and
         o   All of our directors and executive officers as a group.

                                       32



<PAGE>

         The following calculations of the percent of outstanding shares are
based on 8,511,073 shares of our common stock and 1,000,000 shares of our
Class A Convertible Preferred Stock issued and outstanding as of the date of the
table. Share ownership in each case includes shares issuable upon exercise of
outstanding options and warrants, conversion of outstanding shares of Class A
Convertible Preferred Stock and conversion of outstanding convertible debentures
that are exercisable or convertible, as the case may be, within sixty days of
the date of the table, as more particularly described in the footnotes below.
Except as described below, beneficial ownership and, accordingly, percent of
class ownership, are calculated according to Securities and Exchange Commission
Rule 13d-3.

         Amounts shown in the table as beneficially owned by Bristol Investment
Fund, Ltd., AJW Partners, LLC, New Millennium Capital Partners, LLC, Bank
Insinger de Beaufort, Equilibrium Equity, LLC, and Alliance Equities, Inc., or
the debenture investors, are determined in part based upon the terms of
convertible debentures and related warrants held by these six debenture
investors as of the date of the table.

         For purposes of the table, we have disregarded provisions contained in
the debentures and warrants that prohibit conversion of the debentures or
exercise of the warrants to the extent that conversion of the debentures would
result in the debenture investor, together with its affiliates, beneficially
owning in excess of 4.999% or 9.999% of our outstanding shares of common stock,
and to the extent that exercise of the warrants would result in the debenture
investor, together with its affiliates, beneficially owning in excess of 4.9% of
our outstanding shares of common stock. These limitations may be waived by a
debenture investor upon prior written notice to us. Further, these limitations
do not preclude a debenture investor from converting or exercising and selling
shares underlying the debentures and warrants in stages over time where each
stage does not cause the debenture investor to beneficially own in excess of the
limitation amounts.

         In light of the above discussion regarding the terms of the debentures
and warrants, the number of shares shown in the table as beneficially owned by
each debenture investor represents a good faith estimate of the number of shares
of common stock issuable upon conversion of the debentures and upon exercise of
the warrants as of the date of the table and has not been calculated in strict
compliance with Rule 13d-3.

                                       33



<PAGE>
<TABLE>
<CAPTION>

                                                      AMOUNT AND NATURE
     NAME AND ADDRESS OF                TITLE OF        OF BENEFICIAL            PERCENT
     BENEFICIAL OWNER(1)                 CLASS            OWNERSHIP              OF CLASS
      -----------------                 ---------   --------------------         --------
<S>                                      <C>           <C>                        <C>
AJW Partners, LLC
155 First Street, Suite B
Mineola, New York 11501................. Common        16,762,631 (2)             66.33%

New Millennium Capital Partners II, LLC
155 First Street, Suite B
Mineola, New York 11501................. Common        16,762,631 (2)             66.33%

Bristol Investment Fund, Ltd.
c/o Olympia Capital (Cayman) Limited
Williams House
20 Reid Street
Hamilton HM 11, Bermuda................. Common         8,691,537 (3)             51.25%

Bank Insinger de Beaufort
Heregracht 551
1017 BW Amsterdam
Netherlands............................. Common         5,703,001 (4)             40.14%

Equilibrium Equity, LLC
155 First Street, Suite B
Mineola, New York 11501................. Common         5,628,297 (5)             39.81%

Alliance Equities
12147 N.W. 9th Dr.
Coral Springs, Florida 33021............ Common         1,948,181 (6)             18.63%

Alex F. Kanakaris....................... Common           683,478 (7)              7.89%

                                         Class A
                                         Convertible
                 ....................... Preferred      1,000,000                100.00%

Branch Lotspeich........................ Common           199,880 (8)              2.33%

John Robert McKay....................... Common            56,275 (9)                 *

Van Holster............................. Common            17,760 (10)                *

Patrick McKenna......................... Common            15,000 (11)                *

Caroline Michaels....................... Common            12,250 (12)                *

Rose Forbes............................. Common             5,000                     *

Jeff Hall............................... Common             4,000 (13)                *

David T. Shomaker....................... Common               750                     *

Charles Moore........................... Common                --                    --

All director nominees and
  executive officers as a
  group (10 persons).................... Common         1,035,393 (14)            11.80%
                                         Class A
                                         Convertible
                    .................... Preferred      1,000,000                100.00%
---------------
</TABLE>

* Less than 1%.

(1)      Unless otherwise indicated, the address of each person in this table is
         c/o Kanakaris Wireless, 3303 Harbor Boulevard, Suite F-3, Costa Mesa,
         California 92626. Mr. Kanakaris, Mr. Lotspeich and Mr. McKay are
         directors and executive officers of our company. Ms. Michaels, Mr.
         McKenna, Ms. Forbes, Mr. Holster, Mr. Moore and Mr. Hall are directors
         of our company. Mr. Shomaker is Acting Chief Financial Officer of our
         company and an advisor to our board of directors.

                                       34



<PAGE>

(2)      Consists of 341 shares of common stock issued and outstanding,
         130,903 shares of common stock issuable upon exercise of warrants and
         16,631,387 shares of common stock issuable upon conversion of
         debentures.

(3)      Consists of 244,190 shares of common stock issued and outstanding,
         138,760 shares of common stock issuable upon exercise of warrants and
         8,308,587 shares of common stock issuable upon conversion of
         debentures.

(4)      Consists of 4,614 shares of common stock issued and outstanding,
         661,426 shares of common stock issuable upon exercise of warrants and
         5,036,961 shares of common stock issuable upon conversion of
         debentures.

(5)      Consists of 35,656 shares of common stock issuable upon exercise of
         warrants and 5,592,641 shares of common stock issuable upon conversion
         of debentures.

(6)      Consists of 1,690 shares of common stock issued and outstanding,
         18,321 shares of common stock issuable upon exercise of warrants and
         1,928,170 shares of common stock issuable upon conversion of
         debentures.

(7)      Consists of 528,478 shares of common stock issued and outstanding,
         50,000 shares of common stock issuable upon conversion of Class A
         Convertible Preferred Stock and 105,000 shares of common stock
         issuable upon exercise of options.

(8)      Consists of 139,880 shares of common stock issued and outstanding,
         and 60,000 shares of common stock issuable upon exercise of options.

(9)      Consists of 39,025 shares of common stock issued and outstanding,
         and 17,250 shares of common stock issuable upon exercise of options.

(10)     Consists of 16,760 shares of common stock issued and outstanding,
         and 1,000 shares of common stock issuable upon exercise of options.

(11)     Consists of 2,500 shares of common stock issued and outstanding,
         and 12,500 shares of common stock issuable upon exercise of options.

(12)     Consists of 11,250 shares of common stock issued and outstanding,
         and 1,000 shares of common stock issuable upon exercise of options.

(13)     Consists of 2,500 shares of common stock issued and outstanding,
         and 1,500 shares of common stock issuable upon exercise of options.

(14)     Consists of 773,393 shares of common stock issued and outstanding,
         212,000 shares of common stock issuable upon exercise of options and
         50,000 shares of common stock issuable upon conversion of Class A
         Convertible Preferred Stock.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         In connection with the acquisition by Kanakaris InternetWorks, Inc. of
Desience Corporation in October 1997, Mr. Lotspeich, our Vice Chairman of the
Board and Secretary, became entitled to receive 2.5% of the gross sales of
Desience Corporation. Effective as of January 1, 2000, Mr. Lotspeich voluntarily
relinquished his rights to receive a percentage of gross sales for periods after
December 31, 1999. As of September 30, 2001, $16,526 was due and payable to
Mr. Lotspeich under this arrangement.

         Effective as of February 26, 1997, Alex Kanakaris, who is our Chairman
of the Board, President and Chief Executive Officer and who was then a director
and the President of Kanakaris InternetWorks, Inc., executed an unsecured
promissory note in favor of Kanakaris InternetWorks, Inc. in the principal
amount of the smaller of $50,000 or the sum of the drawn amounts between
February 26, 1997 and September 30, 1997, with interest at an annual rate of
6.625%. Interest payments under the note are due annually commencing June 30,
1998, with a final interest payment due at maturity of the note on February 26,
2002. Principal payments are due in five equal annual installments commencing
December 31, 1998, with a final principal payment due at maturity of the note.
Amounts due under this note through December 31, 2000 have been forgiven by our
company as part of compensation for services rendered. As of September 30, 2001,
the outstanding principal balance of this note was $19,840.

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<PAGE>

         Effective as of April 7, 1997, John McKay, who is a director and the
webmaster of Kanakaris Wireless and who was then a director and the webmaster of
Kanakaris InternetWorks, Inc., executed an unsecured promissory note in favor of
Kanakaris InternetWorks, Inc. in the principal amount of the smaller of $18,000
or the sum of the drawn amounts between April 7, 1997 and September 30, 1997,
with interest at an annual rate of 6.625%. Interest payments under the note are
due annually commencing June 30, 1998, with a final interest payment due at
maturity of the note on April 7, 2002. Principal payments are due in five equal
annual installments commencing December 31, 1998, with a final principal payment
due at maturity of the note. Amounts due under this note through December 31,
2000 have been forgiven by Kanakaris Wireless as part of compensation for
services rendered. As of September 30, 2001, the outstanding principal balance
of this note was $6,800.

         Effective as of May 19, 1997, Branch Lotspeich, who is a director and
executive officer of Kanakaris Wireless and who was then a director of Kanakaris
InternetWorks, Inc. and the President of Desience Corporation, executed an
unsecured promissory note in favor of Kanakaris InternetWorks, Inc. in the
principal amount of the smaller of $10,000 or the sum of the drawn amounts
between May 19, 1997 and September 30, 1997, with interest at an annual rate of
6.625%. Interest payments under the note are due annually commencing June 30,
1998, with a final interest payment due at maturity of the note on May 19, 2002.
Principal payments are due in five equal annual installments commencing
December 31, 1998, with a final principal payment due at maturity of the note.
Amounts due under this note through December 31, 2000 have been forgiven by
Kanakaris Wireless as part of compensation for services rendered. As of
September 30, 2001, the outstanding principal balance of this note was $3,840.

         Effective as of September 30, 1997, Alex Kanakaris executed an
unsecured promissory note in favor of Kanakaris InternetWorks, Inc. in the
principal amount of $153,000, with interest at an annual rate of 8.0%. Principal
and interest payments under the note are due in annual installments of $38,250
commencing September 30, 1998 and continuing until September 30, 2002, at which
time the remaining unpaid principal and interest shall be due in full. Amounts
due under this note through December 31, 2000 have been forgiven by Kanakaris
Wireless as part of compensation for services rendered. As of September 30,
2001, the outstanding principal balance of this note was $38,250.

         Effective as of December 31, 1997, John McKay executed an unsecured
promissory note in favor of Kanakaris InternetWorks, Inc. in the principal
amount of the smaller of $50,000 or the sum of the drawn amounts between January
1, 1998 and December 31, 1998, with interest at an annual rate of 6.625%.
Interest payments under the note are due annually commencing June 30, 1999, with
a final interest payment due at maturity of the note on January 1, 2003.
Principal payments are due in five equal annual installments commencing December
31, 1999, with a final principal payment due at maturity of the note. Amounts
due under this note through December 31, 2000 have been forgiven by Kanakaris
Wireless as part of compensation for services rendered. As of September 30,
2001, the outstanding principal balance of this note was $4,800.

         Effective as of December 31, 1997, Alex Kanakaris executed an unsecured
promissory note in favor of Kanakaris InternetWorks, Inc. in the principal
amount of the smaller of $85,000 or the sum of the drawn amounts between January
1, 1998 and December 31, 1998, with interest at an annual rate of 6.625%.
Interest payments under the note are due annually commencing June 30, 1999, with
a final interest payment due at maturity of the note on January 1, 2003.
Principal payments are due in five equal annual installments commencing December
31, 1998, with a final principal payment due at maturity of the note. Amounts
due under this note through December 31, 2000 have been forgiven by Kanakaris
Wireless as part of compensation for services rendered. As of September 30,
2001, the outstanding principal balance of this note was $8,320.

         Effective as of December 31, 1997, Branch Lotspeich executed an
unsecured promissory note in favor of Kanakaris InternetWorks, Inc. in the
principal amount of the smaller of $30,000 or the sum of the drawn amounts
between January 1, 1998 and December 31, 1998, with interest at an annual rate
of 6.625%. Interest payments under the note are due annually commencing June 30,
1999, with a final interest payment due at maturity of the note on January 1,
2003. Principal payments are due in five equal annual installments commencing
December 31, 1998, with a final principal payment due at maturity of the note.
Amounts due under this note through December 31, 2000 have been forgiven by our
company as part of compensation for services rendered. As of September 30, 2001,
the outstanding principal balance of this note was $4,000.

                                       36



<PAGE>

         David Shomaker, our acting Chief Financial Officer, is a partner
of Haynie & Co., a certified public accounting firm. Kanakaris Wireless
engaged Haynie & Co. to provide us with accounting assistance, tax
preparation services and acting Chief Financial Officer services commencing
in May 1999. Through April 30, 2001, we issued 28,750 shares of common stock
to Haynie & Co. in connection with this arrangement. Also in connection with
this arrangement, Kanakaris Wireless paid to Haynie & Co. a fee of $1,000 per
month during each month from May 1999 through October 1999, $2,000 per month
from November 1999 through January 2000, and $4,000 per month from February 2000
through April 2001. Since May 2001, we have agreed to make cash payments based
upon Haynie & Co.'s regular per diem rates.

         On February 25, 1999, we entered into a memorandum of agreement with
Alliance Equities, Inc. that provided that Alliance would provide ongoing
consulting services to us that include, without limitation, strategic growth
advice and introductions, marketing advice, and business ideas. Alliance would
be compensated for these services, at our option, in cash, through the issuance
of our common stock or as credit towards the purchase of our common stock. Since
August 1999 and as of September 30, 2001, we had issued to Alliance an aggregate
of 150,000 shares of our common stock valued at approximately $2,290,400
for consulting services rendered under the agreement. These shares were issued
for consulting services which included introductions to executives of companies
in industries related to ours, introductions to potential merger and acquisition
candidates, assistance with business plan concepts, introduction to media
personnel for company exposure, and introduction to financial analysts.

         On December 10, 1999, we entered into a Revolving Line of Credit
Agreement with Alliance Equities, Inc. Under the terms of the agreement,
Alliance made available a $7 million revolving line of credit with interest on
the unpaid principal at 10% per annum. Under the terms of the agreement, we may
draw up to $500,000 per month on the total line of credit upon our written
request. Additionally, we have agreed that any portion of the indebtedness may
be paid back either with cash or by the issuance of our common stock. As of
January 14, 2002, no amounts were outstanding under this line of credit.

         On December 27, 1999, we executed an unsecured promissory note in favor
of Branch Lotspeich in the principal amount of $35,000, with interest at an
annual rate of 5%. Payment of principal and accrued interest is due on or before
January 10, 2002, with monthly payments of at least 5% of the outstanding
balance to be made beginning in February 2000. This note was repaid in full.

         On December 31, 1999, we granted options to purchase up to 105,000
shares of common stock to Alex Kanakaris, options to purchase up to 60,000
shares of common stock to Branch Lotspeich, options to purchase up to 17,250
shares of common stock to John McKay and options to purchase up to 13,750
shares of common stock to Lisa Lawrence, each with an exercise price of $10.40
per share, which was the fair market value of a share of common stock on the
date of grant.

         In January 2000, we issued an aggregate of 45,834 shares of common
stock of which 12,500 shares were issued to Bank Insinger de Beaufort, 20,834
shares were issued to AJW Partners, LLC, and 12,501 shares were issued to New
Millennium Capital Partners II, LLC upon conversion of an aggregate of $550,000
in principal amount plus interest on the debentures purchased by each of the
Bank, AJW Partners and New Millennium in the September 1999 offering, of which
$250,000 was converted by AJW Partners, $150,000 was converted by New Millennium
and $150,000 was converted by the Bank.

         In January 2000, we also issued an aggregate of 43,334 shares of
common stock to Alliance Equities, Inc. upon conversion of an aggregate of
$520,000 in principal amount of the debentures purchased by it in our August
1999 debenture offering.

         On January 7, 2000, our Desience Division executed an unsecured
promissory note in favor of Alex Kanakaris in the principal amount of $35,000,
with interest at an annual rate of 5%. Payment of principal and accrued interest
was due on or before May 10, 2000. This note was repaid in full.

         On January 12, 2000, our board of directors authorized us to obtain a
term life insurance policy in the amount of $10,000,000 covering Alex Kanakaris
which, in the event of the death of Mr. Kanakaris, shall result in 80% of the
proceeds of the policy being paid to us and 20% of the proceeds of the policy
being paid to the heirs of Mr. Kanakaris, who include, among others, directors
Rose Forbes, Lisa Lawrence and Branch Lotspeich.

                                       37



<PAGE>

         On January 13, 2000, we granted options to purchase up to 1,500 shares
of common stock to Jeff Hall at an exercise price of $26.20 per share, which was
approximately, but not in excess of, the fair market value of a share of common
stock on the date of grant.

         In February 2000, we issued an aggregate of $1,000,000 of 10%
convertible debentures due February 1, 2001 and accompanying warrants to
purchase up to 15,000 shares of common stock in a private offering. Bank
Insinger de Beaufort purchased $500,000 of the debentures and New Millennium
Capital Partners II, LLC and AJW Partners, LLC each purchased $250,000 of the
debentures. The debentures initially were convertible into shares of common
stock at the lesser of $19.40 per share or 66.66% of the average closing bid
price of a share of common stock during the 20 trading days immediately
preceding conversion, and the warrants were exercisable into shares of
common stock at an initial exercise price of $38.00 per share.

         In March 2000, we issued an aggregate of 26,142 shares of common
stock, of which 13,071 shares were issued to each of AJW Partners, LLC and New
Millennium Capital Partners II, LLC upon conversion by each of them of $250,000
in principal amount plus interest on the debentures purchased by each of them in
the February 2000 offering.

         In April 2000, we issued an aggregate of 395 shares of common stock
to Bank Insinger de Beaufort as payment of interest owed on the debentures
purchased by the Bank in the February 2000 offering. In addition, we issued
12,901 shares of common stock to Bank Insinger de Beaufort upon conversion of
$250,000 in principal amount plus interest on the debentures purchased by the
Bank in the February 2000 offering.

         In April 2000, we issued an aggregate of $3,000,000 of 10% convertible
debentures and accompanying warrants to purchase up to 45,000 shares of common
stock in a private offering to four accredited investors. The debentures
initially were convertible into shares of common stock at the lesser of $19.40
per share and 66.66% of the average closing bid price of a share of common stock
during the 20 trading days immediately preceding conversion, and the warrants
were exercisable into shares of common stock at an initial exercise price of
$38.00 per share. Bank Insinger de Beaufort purchased $1,500,000 of these
debentures and received a proportionate number of the accompanying warrants.
Each of AJW Partners, LLC and New Millennium Capital Partners II, LLC purchased
$625,000 of these debentures and received a proportionate number of the
accompanying warrants. Equilibrium Equity, LLC purchased $250,000 of these
debentures and received a proportionate number of the accompanying warrants.

         On May 11, 2000 we issued 500 shares of common stock to Lisa Lawrence
as compensation for consulting services rendered. Ms. Lawrence's consulting
services involved a special project aimed at retaining interns to provide
services to Kanakaris Wireless.

         On May 17, 2000, Alex Kanakaris executed a promissory note in favor of
Kanakaris Wireless in the principal amount of $160,000, with interest on the
unpaid principal balance at an annual rate of 7%. Principal and all accrued
interest were due on or before May 16, 2001. The note was collateralized by
7,112 shares of common stock of Kanakaris Wireless owned by Mr. Kanakaris.
Amounts due under this note were forgiven as part of compensation for services
rendered.

On May 25, 2000, we granted non-qualified stock options to purchase shares of
common stock at $14.10 per share, which was the closing sale price of a share of
common stock on the trading day immediately preceding that date, under our 2000
Stock Option Plan to certain officers and directors as follows: Alex Kanakaris
received an option to purchase 45,000 shares, Branch Lotspeich received an
option to purchase up to 16,250 shares, John McKay received an option to
purchase up to 5,000 shares, Patrick McKenna received an option to purchase up
to 12,500 shares, Caroline Michaels, who subsequently became a director,
received an option to purchase up to 1,000 shares, and Lisa Lawrence received an
option to purchase up to 12,500 shares. On March 14, 2001, the 78,750 options
held by Messrs. Kanakaris, Lotspeich and McKay and by Ms. Lawrence were
cancelled.

         In June 2000, we issued an aggregate of 39,405 shares of common stock
to Bank Insinger de Beaufort upon conversion of $250,000 in principal amount
plus interest on the debenture purchased by the Bank in the April 2000 offering
and $250,000 in principal amount plus interest on a debenture purchased by the
Bank in our February 2000 offering.

                                       38



<PAGE>

         Effective as of June 12, 2000, David Shomaker executed an unsecured
promissory note in favor of Kanakaris Wireless in the principal amount of
$15,000, with interest on the unpaid principal balance at an annual rate of 10%.
As of September 30, 2000, we cancelled the outstanding balance due in lieu of
payment of compensation for services rendered.

         In July 2000, we issued an aggregate of 1,050 shares of common stock
to Bank Insinger de Beaufort, of which 411 shares were issued as back-payment
of accrued and unpaid interest owed on certain previously fully converted
debentures purchased by the Bank in September 1999 and 639 shares were issued
as payment of interest owed on the debentures purchased by the Bank in the April
2000 offering. In addition, we issued an aggregate of 10,660 shares of common
stock, of which 4,442 shares were issued to each of AJW Partners, LLC and New
Millennium Capital Partners II, LLC upon conversion by each of them of $50,000
in principal amount plus interest on the debentures purchased by each of them in
the April 2000 offering, and of which 1,776 shares were issued to Equilibrium
Equity, LLC upon conversion of $20,000 in principal amount plus interest on the
debenture purchased by it in the April 2000 offering.

         In August 2000, we issued an aggregate of $1,500,000 of 10% convertible
debentures and accompanying warrants to purchase up to 22,500 shares of common
stock in a private offering to three accredited investors. The debentures
initially were convertible into shares of common stock at the lesser of $19.40
per share and 66.66% of the average closing bid price of a share of common stock
during the 20 trading days immediately preceding conversion, and the warrants
were exercisable into shares of common stock at an initial exercise price of
$38.00 per share. Each of AJW Partners, LLC and New Millennium Capital Partners
II, LLC purchased $625,000 of these debentures and received a proportionate
number of the accompanying warrants. Equilibrium Equity, LLC purchased $250,000
of these debentures and received a proportionate number of the accompanying
warrants.

         In August 2000, we issued an aggregate of 2,634 shares of common
stock, of which 1,098 shares were issued to each of AJW Partners, LLC and New
Millennium Capital Partners II, LLC, and of which 438 were issued to
Equilibrium Equity, LLC as payment of interest owed on the debentures purchased
by them in the April 2000 offering. Additionally, we issued an aggregate of
32,271 shares of common stock of which 13,446 shares were issued to each of
AJW Partners and New Millennium upon conversion by each of them of $150,000 in
principal amount plus interest on the debentures purchased by each of them in
the April 2000 offering and of which 5,379 shares were issued to Equilibrium
Equity, LLC upon conversion of $60,000 in principal amount plus interest on the
debenture purchased by it in the April 2000 offering.

         In August 2000, we issued 1,500 shares of common stock valued at
$22,500 to Lisa Lawrence as compensation for services rendered. These shares
were issued as a bonus for obtaining content for our website.

         In August 2000, we granted non-qualified stock options to purchase
shares of common stock at $15.00 per share, which was the closing sale price of
a share of common stock on the trading day immediately preceding that date,
under our 2000 Stock Option Plan to certain officers and directors as follows:
Alex Kanakaris received an option to purchase 38,125 shares, John McKay received
an option to purchase up to 2,500 shares and Lisa Lawrence received an option to
purchase up to 7,500 shares. On March 14, 2001, these options were cancelled.

         In September 2000, we issued an aggregate of 5,073 shares of common
stock, of which 2,156 shares were issued to each of AJW Partners and New
Millennium upon conversion by each of them of $21,250 in principal amount plus
interest on the debentures purchased by each of them in the April 2000 offering
and of which 761 shares were issued to Equilibrium Equity, LLC upon conversion
of $7,500 in principal amount plus interest on the debenture it purchased
in the April 2000 offering.

                                       39



<PAGE>

         In October 2000, we issued an aggregate of 9,585 shares of common
stock, of which 5,778 shares were issued to Bank Insinger de Beaufort, 1,584
shares were issued to each of AJW Partners, LLC and New Millennium Capital
Partners II, LLC, and 639 shares were issued to Equilibrium Equity, LLC as
payment of interest owed on the debentures purchased by the Bank, AJW Partners,
New Millennium and Equilibrium Equity in the April 2000 offering. Also, we
issued 7,762 shares of common stock to the Bank upon conversion of $50,000 in
principal amount plus interest on the debentures purchased by the Bank in the
April 2000 offering. Finally, we issued an aggregate of 9,535 shares of common
stock, of which 4,052 shares were issued to each of AJW Partners, LLC and New
Millennium Capital Partners II, LLC upon conversion by each of them of $23,375
in principal amount plus interest on the debentures each of them purchased in
the April 2000 offering and of which 1,431 shares were issued to Equilibrium
Equity, LLC upon conversion of $8,250 in principal amount plus interest on the
debenture it purchased in the April 2000 offering.

         In November 2000, we issued an aggregate of 1,361 shares of common
stock, of which 568 shares were issued to each of AJW Partners, LLC and New
Millennium Capital Partners II, LLC and of which 225 shares of common stock
were issued to Equilibrium Equity, LLC as payment of interest owed on the
debentures purchased by each of them in the April offering. Also, we issued
78,766 shares of common stock to Bank Insinger de Beaufort upon conversion of
$400,000 in principal amount plus interest on the debentures purchased by the
Bank in the April offering. Finally, we issued an aggregate of 54,696 shares
of common stock, of which 23,246 shares were issued to each of AJW Partners and
New Millennium upon conversion by each of them of $116,875 in principal amount
plus interest on the debentures each of them purchased in the April offering
and of which 8,204 shares were issued to Equilibrium Equity, LLC upon
conversion of $41,250 in principal amount plus interest on the debenture it
purchased in the April offering.

         On November 6, 2000, we issued 2,500 shares of common stock valued at
$19,000 to Jeff Hall as compensation for consulting services rendered. These
shares were issued as compensation for advice given by Mr. Hall, who was the
President of the Brentwood Media Group at the time of issuance, relating to the
publishing business.

         On November 6, 2000, we issued 5,000 shares of common stock valued at
$38,000 to Rose Forbes as compensation for consulting services rendered. The
shares granted to Ms. Forbes, who was employed by a movie studio at the time of
issuance, were granted as compensation for Ms. Forbes' advice relating to movie
industry issues pertaining to online film distribution.

         On November 6, 2000, we issued 12,500 shares of common stock valued at
$95,000 to Lisa Lawrence as compensation for extraordinary services rendered.
These shares were issued to Ms. Lawrence as compensation for her success in
organizing and managing the participation of Kanakaris Wireless in several
Internet industry events.

         On November 6, 2000, we issued 2,500 shares of common stock valued at
$19,000 to Pat McKenna as compensation for consulting services rendered. These
shares were issued to Mr. McKenna, who was employed in the Internet industry
at the time of issuance, for business consultation he rendered as a member of
our board of directors.

         In December 2000, we issued 101,201 shares of common stock to Bank
Insinger de Beaufort upon conversion of $380,000 in principal amount plus
interest on the debentures the Bank purchased in the April 2000 offering.
Also, we issued an aggregate of 43,358 shares of common stock, of which 18,427
shares were issued to each of AJW Partners and New Millennium upon conversion by
each of them of $72,675 in principal amount plus interest on the debentures
each of them purchased in the April 2000 offering and of which 6,504 shares
were issued to Equilibrium Equity, LLC upon conversion of $25,650 in principal
amount plus interest on the debenture it purchased in the April 2000
offering.

         On December 11, 2000, we issued 100,000 shares of common stock valued
at $510,000 to Alex Kanakaris as a stock bonus for extraordinary services
rendered. These shares were issued as bonus compensation for Mr. Kanakaris'
successful implementation of an online movie delivery program.

                                       40



<PAGE>

         On January 5, 2001, we issued an aggregate of $650,000 of 12%
convertible debentures and accompanying warrants to purchase up to 195,000
shares of common stock in a private offering to four accredited investors. Each
of the investors, if certain conversion limitations are disregarded, are
beneficial owners of 5% or more of our outstanding shares of common stock. The
debentures initially were convertible into shares of common stock at the lesser
of $3.00 per share and 62.5% of the average of the lowest three intraday trading
prices of a share of common stock during the 20 trading days immediately
preceding conversion, and the warrants are exercisable into shares of common
stock at the lesser of $2.50 per share and the average of the lowest three
intraday trading prices of a share of common stock during the 20 trading days
immediately preceding exercise. Bristol Investment Fund, Ltd. purchased $400,000
of these debentures and received a proportionate number of the accompanying
warrants. Each of AJW Partners, LLC and New Millennium Capital Partners II, LLC
purchased $104,125 of these debentures and received a proportionate number of
the accompanying warrants. Equilibrium Equity, LLC purchased $41,750 of these
debentures and received a proportionate number of the accompanying warrants.

         On January 17, 2001, we entered into a Charter Membership Agreement
with the New York Internet Chamber of Commerce, or NYICC, of which Charles Moore
is founder and President, which resulted in our payment to NYICC of $5,000 for
various promotional services to be provided by NYICC to Kanakaris Wireless.

         In January 2001, we issued an aggregate of 18,040 shares of common
stock, of which 3,172 shares were issued to Bank Insinger de Beaufort, 6,160
shares were issued to each of AJW Partners, LLC and New Millennium Capital
Partners II, LLC, and 2,548 shares were issued to Equilibrium Equity, LLC as
payment of interest owed on the debentures purchased by the Bank, AJW Partners,
New Millennium and Equilibrium Equity in the April 2000 offering. Also, we
issued 67,112 shares of common stock to the Bank upon conversion of $200,000
in principal amount plus interest on the debentures purchased by the Bank in the
April 2000 offering. Finally, we issued an aggregate of 90,864 shares of
common stock, of which 38,617 shares were issued to each of AJW Partners and
New Millennium upon conversion by each of them of $123,462 in principal amount
plus interest on the debentures each of them purchased in the April 2000
offering and of which 13,630 shares were issued to Equilibrium Equity upon
conversion of $43,575 in principal amount plus interest on the debenture it
purchased in the April 2000 offering.

         In February 2001, we issued an aggregate of 25,706 shares of common
stock, of which 10,925 shares were issued to each of AJW Partners, LLC and New
Millennium Capital Partners II, LLC upon conversion by each of them of $31,875
in principal amount plus interest on the debentures each of them purchased in
the January 2001 offering and of which 3,856 shares were issued to Equilibrium
Equity, LLC upon conversion of $11,250 in principal amount plus interest on the
debenture it purchased in the January 2001 offering.

         On March 9, 2001, we issued an aggregate of $650,000 of 12% convertible
debentures in a private offering to four accredited investors. The debentures
initially are convertible into shares of common stock at the lesser of $3.00 per
share and 62.5% of the average of the lowest three intraday trading prices of a
share of common stock during the 20 trading days immediately preceding
conversion. Bristol Investment Fund, Ltd. purchased $400,000 of these
debentures. Each of AJW Partners, LLC and New Millennium Capital Partners II,
LLC purchased $104,125 of these debentures, and Equilibrium Equity, LLC
purchased $41,750 of these debentures.

         In March 2001, we issued an aggregate of 93,963 shares of common
stock, of which 55,478 shares were issued to Bristol Investment Fund, Ltd.
upon conversion of $100,000 in principal amount plus interest on the debentures
it purchased in the January 2001 offering, of which 16,356 shares were issued
to each of AJW Partners, LLC and New Millennium Capital Partners II, LLC upon
conversion by each of them of $31,875 in principal amount plus interest on the
debentures each of them purchased in the January 2001 offering, and of which
5,773 shares were issued to Equilibrium Equity, LLC upon conversion of $11,250
in principal amount plus interest on the debenture it purchased in the January
2001 offering.

         On April 6, 2001, we issued 12,500 shares of common stock valued at
$31,250 to Branch Lotspeich as compensation for services rendered. These shares
were issued in lieu of cash compensation payable to Mr. Lotspeich for services
as an employee of Kanakaris Wireless.

                                       41



<PAGE>

         On April 18, 2001, we issued 50,000 shares of common stock valued at
$100,000 to Alex Kanakaris as compensation for services rendered. These shares
were issued as non-cash bonus compensation in connection with periodic stock
bonuses to our employees in recognition of continued employment and dedication
to Kanakaris Wireless.

         On April 18, 2001, we issued 5,000 shares of common stock valued at
$10,000 to John McKay as compensation for services rendered. These shares were
issued as non-cash bonus compensation in connection with periodic stock bonuses
to our employees in recognition of continued employment and dedication to
Kanakaris Wireless.

         On April 18, 2001, we issued 7,500 shares of common stock valued at
$15,000 to Lisa Lawrence as compensation for services rendered. These shares
were issued as non-cash bonus compensation in connection with periodic stock
bonuses to our employees in recognition of continued employment and dedication
to Kanakaris Wireless.

         On April 18, 2001, we issued 1,250 shares of common stock valued at
$2,500 to Caroline Michaels as compensation for services rendered. These shares
were issued as non-cash bonus compensation in connection with periodic stock
bonuses to our employees in recognition of continued employment and dedication
to Kanakaris Wireless.

         On April 18, 2001, we issued 1,250 shares of common stock valued at
$2,500 to Van Holster as compensation for services rendered. These shares were
issued as non-cash bonus compensation in connection with periodic stock bonuses
to our employees in recognition of continued employment and dedication to
Kanakaris Wireless.

         These shares were issued as non-cash bonus compensation in connection
with periodic stock bonuses to our employees in recognition of continued
employment and dedication to Kanakaris Wireless. These shares were issued as
non-cash bonus compensation in connection with periodic stock bonuses to our
employees in recognition of continued employment and dedication to Kanakaris
Wireless.

         In April 2001, we issued an aggregate of 23,160 shares of common
stock, of which 2,684 shares were issued to Bank Insinger de Beaufort, 8,446
shares were issued to each of AJW Partners, LLC and New Millennium Capital
Partners II, LLC, and 3,584 shares were issued to Equilibrium Equity, LLC
as payment of interest owed on the debentures purchased by the Bank,
AJW Partners, New Millennium and Equilibrium Equity in the April 2000 offering.
Also, we issued an aggregate of 6,464 shares of common stock, of which
4,847 shares were issued to Bristol Investment Fund, Ltd., 653 shares
were issued to each of AJW Partners, LLC and New Millennium Capital Partners
II, LLC, and 311 shares were issued to Equilibrium Equity, LLC as payment
of interest owed on the debentures purchased by Bristol Investment Fund,
AJW Partners, New Millennium and Equilibrium Equity in the January 2001
offering. Additionally, we issued an aggregate of 2,810 shares of common
stock, of which 1,729 shares were issued to Bristol Investment Fund, Ltd.,
450 shares were issued to each of AJW Partners, LLC and New Millennium Capital
Partners II, LLC, and 181 shares were issued to Equilibrium Equity, LLC as
payment of interest owed on the debentures purchased by Bristol Investment Fund,
AJW Partners, New Millennium and Equilibrium Equity in the March 2001 offering.
Also, we issued an aggregate of 85,381 shares of common stock, of which
34,766 shares were issued to Bristol Investment Fund, Ltd. upon conversion by
it of $50,000 in principal amount plus interest on the debentures purchased by
it in the January 2001 offering, and of which 21,511 shares were issued to each
of AJW Partners and New Millennium upon conversion by each of them of $29,750 in
principal amount plus interest on the debentures each of them purchased in the
January 2001 offering, and of which 7,593 shares were issued to Equilibrium
Equity upon conversion of $10,500 in principal amount plus interest on the
debenture it purchased in the January 2001 offering. Finally, we issued 35,353
shares of common stock to Bank Insinger de Beaufort upon conversion by it of
$50,000 in principal amount plus interest on the debentures it purchased
in the April 2000 offering.

         On May 1, 2001, we issued 14,881 shares of common stock valued at
$31,250 to Branch Lotspeich as compensation for services rendered. These shares
were issued as non-cash bonus compensation in connection with periodic stock
bonuses to our employees in recognition of continued employment and dedication
to Kanakaris Wireless.

         As of May 15, 2001, we issued 375,000 shares of common stock valued
at $1,012,500 to Alex Kanakaris as compensation for services rendered and to be
rendered. These shares were issued as bonus compensation in connection with
Mr. Kanakaris' efforts to enhance our prospects of negotiating potential mergers
and acquisitions and potential growth opportunities.

         In May 2001, we issued an aggregate of 36,663 shares of common stock
to Bank Insinger de Beaufort upon conversion by it of $50,000 in principal
amount plus interest on the debentures it purchased in the April 2000
offering.




         In June 2001, we issued an aggregate of 24,930 shares of common stock
to Bank Insinger de Beaufort upon conversion by it of $50,000 in principal
amount plus interest on the debentures it purchased in the April 2000
offering. Also, we issued an aggregate of 31,468 shares of common stock to
Bristol Investment Fund, Ltd. upon conversion by it of $50,000 in principal
amount plus interest on the debentures it purchased in the January 2001
offering. Finally, we issued an aggregate of 25,134 shares of common stock, of
which 10,682 shares were issued to each of AJW Partners and New Millennium upon
conversion by each of them of $17,000 in principal amount plus interest on the
debentures each of them purchased in the March 2001 offering, and of which
3,770 shares were issued to Equilibrium Equity upon conversion of $6,000 in
principal amount plus interest on the debenture it purchased in the March 2001
offering.

        On June 29, 2001, we issued an aggregate of $500,000 of 12% convertible
debentures due June 29, 2002 in a private offering. AJW Partners, LLC, New
Millennium Capital Partners II, LLC each purchased $200,000 of the debentures
and Alliance Equities, Inc. purchased $100,000 of the debentures. The debentures
initially were convertible into shares of common stock at the lesser of $2.00
per share and 50% of the average of the lowest three intraday trading prices of
a share of common stock during the 20 trading days immediately preceding
conversion. The debentures were accompanied by warrants to purchase up to an
aggregate of 75,000 shares of common stock. The net proceeds of that offering,
after payment of related expenses, were approximately $420,000.

                                       42



<PAGE>

         As of June 29, 2001, we entered into a letter agreement with some of
our debenture holders. The agreement provided various anti-dilution adjustments
to the debentures and warrants issued in April and August 2000 and in January
and March 2001. These adjustments were made partly in lieu of other adjustments
that would have been imposed under the terms of the debenture offering
documents. As a result of these adjustments, the conversion prices for the
debentures issued to these holders in April and August 2000 and in January 2001
and March 2001 were reduced to the lesser of $2.00 per share and 50% of the
average of the three lowest intraday trading prices of a share of our common
stock for the 20 trading days immediately preceding the conversion of the
debentures. In addition, the exercise prices of the warrants issued to the
holders in connection with the offering of the debentures in April and August
2000 and in January and March 2001 were reduced to the lesser of $1.168 per
share and the average of the three lowest intraday trading prices of a share of
our common stock for the 20 trading days immediately preceding the exercise of
the warrants.

         In July 2001, we issued an aggregate of 26,818 shares of common stock,
of which 1,074 shares were issued to Bank Insinger de Beaufort, 10,619 shares
were issued to each of AJW Partners, LLC and New Millennium Capital Partners II,
LLC, and 4,506 shares were issued to Equilibrium Equity, LLC as payment of
interest owed on the debentures purchased by the Bank, AJW Partners, New
Millennium and Equilibrium Equity in the April 2000 offering. Also, we issued an
aggregate of 5,679 shares of common stock, of which 4,787 shares were issued
to Bristol Investment Fund, Ltd., 341 shares were issued to each of AJW
Partners, LLC and New Millennium Capital Partners II, LLC, and 210 shares were
issued to Equilibrium Equity, LLC as payment of interest owed on the debentures
purchased by Bristol Investment Fund, AJW Partners, New Millennium and
Equilibrium Equity in the January 2001 offering. Additionally, we issued an
aggregate of 14,430 shares of common stock, of which 9,574 shares were issued
to Bristol Investment Fund, Ltd., 2,000 shares were issued to each of AJW
Partners, LLC and New Millennium Capital Partners II, LLC, and 856 shares
were issued to Equilibrium Equity, LLC as payment of interest owed on the
debentures purchased by Bristol Investment Fund, AJW Partners, New Millennium
and Equilibrium Equity in the March 2001 offering. Also, we issued an aggregate
of 111,688 shares of common stock, of which 55,866 shares were issued to
Bristol Investment Fund, Ltd. upon conversion by it of $50,000 in principal
amount plus interest on the debentures purchased by it in the March 2001
offering, and of which 23,724 shares were issued to each of AJW Partners and
New Millennium upon conversion by each of them of $21,250 in principal amount
plus interest on the debentures each of them purchased in the March 2001
offering, and of which 8,374 shares were issued to Equilibrium Equity upon
conversion of $7,500 in principal amount plus interest on the debenture it
purchased in the March 2001 offering.

         In August 2001, we issued an aggregate of 342,008 shares of common
stock, of which 156,866 shares were issued to Bristol Investment Fund, Ltd.
upon conversion by it of $64,000 in principal amount plus interest on the
debenture it purchased in the March 2001 offering and $18,000 in principal
amount plus interest on the debenture it purchased in the January 2001 offering,
and of which 78,685 shares were issued to each of AJW Partners and New
Millennium upon conversion by each of them of $38,250 in principal amount plus
interest on the debentures each of them purchased in the April 2000 offering,
and of which 27,772 shares were issued to Equilibrium Equity upon conversion of
$13,500 in principal amount plus interest on the debenture it purchased in the
April 2000 offering.

         In September 2001, we issued an aggregate of 178,605 shares of common
stock, of which 75,907 shares were issued to each of AJW Partners and New
Millennium upon conversion by each of them of $25,500 in principal amount plus
interest on the debentures each of them purchased in the April 2000 offering,
and of which 26,791 shares were issued to Equilibrium Equity upon conversion of
$9,000 in principal amount plus interest on the debenture it purchased in the
April 2000 offering.

         On October 17, 2001, we issued to Branch Lotspeich 50,000 shares of
common stock valued at $21,000 as compensation for services rendered. These
shares were issued as non-cash bonus compensation in connection with periodic
stock bonuses to our employees in recognition of continued employment and
dedication to Kanakaris Wireless.

         On October 17, 2001, we issued to Caroline Michaels 10,000 shares of
common stock valued at $4,200 as compensation for services rendered. These
shares were issued as non-cash bonus compensation in connection with periodic
stock bonuses to our employees in recognition of continued employment and
dedication to Kanakaris Wireless.

         On October 17, 2001, we issued to Van Holster 5,000 shares of common
stock valued at $2,100 as compensation for services rendered. These shares were
issued as non-cash bonus compensation in connection with periodic stock bonuses
to our employees in recognition of continued employment and dedication to
Kanakaris Wireless.

                                       43



<PAGE>

         On October 17, 2001, we issued to John McKay 5,000 shares of common
stock valued at $2,100 as compensation for services rendered. These shares were
issued as non-cash bonus compensation in connection with periodic stock bonuses
to our employees in recognition of continued employment and dedication to
Kanakaris Wireless.

         On October 17, 2001, we issued to Lisa Lawrence 5,000 shares of
common stock valued at $2,100 as compensation for services rendered. These
shares were issued as non-cash bonus compensation in connection with periodic
stock bonuses to our employees in recognition of continued employment and
dedication to Kanakaris Wireless.

         In October 2001, we issued an aggregate of 179,737 shares of common
stock, of which 4,614 shares were issued to Bank Insinger de Beaufort,
72,021 shares were issued to each of AJW Partners, LLC and New Millennium
Capital Partners II, LLC, and 31,081 shares were issued to Equilibrium Equity,
LLC as payment of interest owed on the debentures purchased by the Bank, AJW
Partners, New Millennium and Equilibrium Equity in the April 2000 offering.
Also, we issued an aggregate of 25,982 shares of common stock, of which 25,023
shares were issued to Bristol Investment Fund, Ltd. and 959 shares were
issued to Equilibrium Equity as payment of interest owed on the debentures
purchased by Bristol Investment Fund and Equilibrium Equity in the January 2001
offering. Additionally, we issued an aggregate of 57,201 shares of common
stock, of which 39,321 shares were issued to Bristol Investment Fund, Ltd.,
6,998 shares were issued to each of AJW Partners, LLC and New Millennium
Capital Partners II, LLC, and 3,884 shares were issued to Equilibrium Equity,
LLC as payment of interest owed on the debentures purchased by Bristol
Investment Fund, AJW Partners, New Millennium and Equilibrium Equity in the
March 2001 offering. Also, we issued an aggregate of 484,266 shares of common
stock, of which 182,868 shares were issued to Bristol Investment Fund upon
conversion by it of $34,000 in principal amount plus interest on the debentures
purchased by it in the January 2001 offering, and of which 128,094 shares were
issued to each of AJW Partners and New Millennium upon conversion by each of
them of $25,500 in principal amount plus interest on the debentures each of them
purchased in the April 2000 offering, and of which 45,210 shares were issued to
Equilibrium Equity upon conversion of $9,000 in principal amount plus interest
on the debenture it purchased in the April 2000 offering.

         In November 2001, we issued an aggregate of 150,808 shares of
common stock, of which 56,553 shares were issued to each of AJW Partners
and New Millennium upon conversion by each of them of $7,500 in principal amount
plus interest on the debentures each of them purchased in the April 2000
offering, and of which 37,702 shares were issued to Equilibrium Equity upon
conversion of $5,000 in principal amount plus interest on the debenture it
purchased in the April 2000 offering.

         As of April 30, 2001, $1,848,500 of the original $4,500,000 principal
balance of 10% Convertible Debentures due May 1, 2001 remained outstanding. As
of April 30, 2001, we entered into an agreement with the holders of these
debentures to extend the due date of these debentures to May 1, 2002. In
consideration for the extension, we granted to New Millennium Capital Partners
II, LLC, AJW Partners, LLC, Bank Insinger de Beaufort and Equilibrium Equity,
LLC warrants to purchase up to an aggregate of 67,500 shares of common stock
at an exercise price equal to the lesser of the average of the lowest three
intraday trading prices during the 20 trading days immediately preceding the
grant of the warrants, discounted by 37.5%, and the average of the lowest three
intraday trading prices of a share of common stock during the 20 trading days
immediately preceding exercise of the warrants. As of January 9, 2001,
$1,518,500 of the original $4,500,000 principal balance of these debentures
remained outstanding.

         In January 2002, we issued to Bank Insinger de Beaufort Safe Custody NV
an aggregate of $200,000 of our 12% Convertible Debentures due January 9, 2003,
which were accompanied by warrants to purchase up to an aggregate of 600,000
shares of common stock. Bank Insinger may, at its option, purchase an additional
$200,000 of our 12% convertible debentures and warrants to purchase up to
600,000 shares of common stock within 30 days after the effective date of a
registration statement that we are required to file on behalf of Bank Insinger
within 30 days after the issuance of the initial $200,000 of debentures. The
debentures and warrants are immediately convertible into or exercisable for
shares of common stock at an initial per share price equal to the lesser of
$.055 and the average of the lowest three intraday trading prices during the 20
trading days immediately preceding a conversion or exercise.

                                       44



<PAGE>

         In January 2002, we entered into an agreement with Bank Insinger de
Beaufort, Bristol Investment Fund, Ltd., Bristol Capital, LLC, and Paul Kessler,
who is a principal of Bristol Capital, LLC. Under the agreement, the conversion
price of the 10% Convertible Debenture due May 1, 2002 that Bank Insinger
purchased in the April 2000 offering was amended to be the lesser of $.055 and
the average of the lowest three intraday trading prices during the 20 trading
days immediately preceding a conversion. In addition, the exercise prices of the
warrants issued to Bank Insinger in the February 2000, April 2000 and May 2001
offerings, the warrants issued to Bristol Investment Fund in the January 2001
offering, the warrants issued to Bank Insinger in the April 2000 offering that
were transferred to Bristol Capital, and the option issued to Paul Kessler
pursuant to a consulting agreement dated as of September 26, 2000 were amended
so that the exercise prices are equal to the lowest three intraday trading
prices during the 20 trading days immediately preceding an exercise. The
expiration dates of each of the warrants and options described in the preceding
sentence were extended so that each is exercisable until the seventh anniversary
of its issuance.

         On January 11, 2002 we loaned Alex Kanakaris $36,000 at an annual
percentage rate of 5%. The loan plus all accrued and unpaid interest is payable
five years from the date of the loan. As of January 14, 2002, the outstanding
principal balance of this loan was $36,000.

         For each of the issuances described above and made for consulting or
other services rendered, the per share value of the common stock issued was the
fair market value of the common stock on the grant date, which equaled the
closing price of a share of common stock on the NASD's OTC Electronic Bulletin
Board(R) on that date.

ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K.

(a)   Exhibits

<TABLE>
<CAPTION>
         EXHIBIT NO.                                 DESCRIPTION
         -----------                                 -----------
         <S>                                <C>
         2.1................................Stock Purchase Agreement dated as of October 10, 1997 by
                                            and between Christel H. Uttenbogaart and Kanakaris
                                            InternetWorks, Inc.(1)

         2.2................................Acquisition Agreement dated as of November 25, 1997 between
                                            Big Tex Enterprises, Inc. and Kanakaris InternetWorks, Inc.(1)

         3.1................................Amended and Restated Articles of Incorporation of the
                                            Registrant (4)

         3.2................................Amended and Restated Bylaws of the Registrant (4)

         3.3................................Amendment to Article III of the Amended and Restated Bylaws
                                            adopted by the Registrant's Board of Directors on January 23,
                                            2001 (6)

         3.4................................Amendment to Article IX of the Amended and Restated Bylaws
                                            adopted by the Registrant's Board of Directors on January 23,
                                            2001 (6)

         3.5................................Amendments to Articles II, III and IX of the Amended and Restated
                                            Bylaws adopted by the Registrant's Board of Directors on February 5,
                                            2001 (7)

         3.6................................Amendment to Article III of the Amended and Restated Bylaws
                                            adopted by the Registrant's Board of Directors on June 21,
                                            2001 (9)

         3.7................................Amendment to Restated Articles of Incorporation of the Registrant (8)

         10.1...............................Kanakaris Communications, Inc. 2000 Stock Option Plan (4)(#)

         10.2...............................encoding.com Terms and Conditions and related purchase
                                            orders (2)

         10.3...............................Windows Media(TM) Technology Promotion Agreement dated
                                            February 18, 1999 between Microsoft Corporation and the
                                            Registrant (1)

         10.4...............................Memorandum of Understanding dated November 9, 1999 by and
                                            between Lain International and the Registrant (5)

         10.5...............................Sublease Agreement dated as of October 8, 1999 by and between
                                            Belfiore-Fitzgerald and the Registrant (1)

                                       45



<PAGE>

         10.6...............................License Agreement dated as of February 18, 1999 between the
                                            Registrant and ION Systems, Inc. (1)

         10.7...............................First Amendment to License Agreement dated effective as of
                                            March 22, 1999 by and between the Registrant and ION
                                            Systems, Inc. (1)

         10.8...............................Second Amendment to License Agreement dated as of May 4,
                                            2000 by and between the Registrant and ION Systems, Inc. (4)

         10.9...............................Memorandum of Understanding dated November 1, 1999 by and
                                            between SyCoNet.com Inc. and the Registrant (1)

         10.10..............................Promissory Note dated May 17, 2000 made by Alex Kanakaris
                                            in favor of the Registrant (#)(4)

         10.11..............................Agreement for Payment of Royalties dated as of April 20, 2000
                                            between the Registrant and John Clark (4)

         10.12..............................Memorandum of Understanding dated February 25, 1999 between
                                            the Registrant and Alliance Equities (1)

         10.13..............................Memorandum of Understanding dated April 7, 1999 between the
                                            Registrant and Alliance Equities (1)

         10.14..............................Revolving Line of Credit Agreement dated as of December 10, 1999
                                            by and between the Registrant and Alliance Equities (2)

         10.15..............................Memorandum dated December 28, 2000 from Alliance Equities to
                                            the Registrant extending Revolving Line of Credit Agreement (5)

         10.16..............................Promissory Note dated May 19, 1997 made by Branch Lotspeich
                                            in favor of Kanakaris InternetWorks, Inc.(#)(1)

         10.17..............................Promissory Note dated February 26, 1997 made by Alex Kanakaris
                                            in favor of Kanakaris InternetWorks, Inc.(#)(1)

         10.18..............................Promissory Note dated September 30, 1997 made by Alex
                                            Kanakaris in favor of Kanakaris InternetWorks, Inc.(#)(1)

         10.19..............................Promissory Note dated April 7, 1997 made by John McKay in favor
                                            of Kanakaris InternetWorks, Inc.(#)(1)

         10.20..............................Promissory Note dated January 8, 1998 made by John McKay
                                            in favor of Kanakaris InternetWorks, Inc.(#)(1)

         10.21..............................Promissory Note dated January 8, 1998 made by Alex Kanakaris in
                                            favor of Kanakaris InternetWorks, Inc.(#)(1)

         10.22..............................Promissory Note dated January 8, 1998 made by Branch Lotspeich
                                            in favor of Kanakaris InternetWorks, Inc.(#)(1)

         10.23..............................Promissory Note dated January 7, 2000 made by the Registrant
                                            in favor of Alex F. Kanakaris (#)(3)

         10.24..............................Promissory Note dated December 27, 1999 made by the Registrant
                                            in favor of Branch Lotspeich (#)(3)

         10.25..............................Non-Qualified Stock Option Agreement dated December 31,
                                            1999 between the Registrant and Alex F. Kanakaris (#)(3)

         10.26..............................Non-Qualified Stock Option Agreement dated December 31,
                                            1999 between the Registrant and Branch Lotspeich (#)(3)

         10.27..............................Non-Qualified Stock Option Agreement dated December 31,
                                            1999 between the Registrant and John R. McKay (#)(3)

         10.28..............................Agreement dated October 21, 1999 between eConnect and the
                                            Registrant (1)

         10.29..............................Windows Media(TM) ICP Broadband Jumpstart Program Agreement
                                            dated as of March 6, 2000 between the Registrant and
                                            Microsoft Corporation (4)

                                       46



<PAGE>

         10.30..............................Windows Media(TM) ICP Broadband Jumpstart Program Agreement
                                            dated effective as of December 7, 1999 between the Registrant
                                            and Microsoft Corporation (1)

         10.31..............................Convertible Debenture Purchase Agreement dated as of
                                            February 4, 2000 between the investors named therein
                                            and the Registrant (3)

         10.32..............................10% Convertible Debenture due February 1, 2001 made
                                            by the Registrant in favor of New Millennium Capital
                                            Partners II, LLC (3)

         10.33..............................10% Convertible Debenture due February 1, 2001 made
                                            by the Registrant in favor of AJW Partners, LLC (3)

         10.34..............................10% Convertible Debenture due February 1, 2001 made
                                            by the Registrant in favor of Bank Insinger de
                                            Beaufort (3)

         10.35..............................Stock Purchase Warrant dated as of February 4, 2000
                                            issued by the Registrant to New Millennium Capital
                                            Partners II, LLC (3)

         10.36..............................Stock Purchase Warrant dated as of February 4, 2000
                                            issued by the Registrant to AJW Partners, LLC (3)

         10.37..............................Stock Purchase Warrant dated as of February 4, 2000
                                            issued by the Registrant to Bank Insinger de
                                            Beaufort (3)

         10.38..............................Stock Escrow and Security Agreement dated as of February 4,
                                            2000 between the Registrant, Owen Naccarato and the investors
                                            named therein (3)

         10.39..............................Registration Rights Agreement dated as of February 4, 2000
                                            by and between the Registrant and the investors named
                                            therein (3)

         10.40..............................Convertible Debenture Purchase Agreement dated as of
                                            April 13, 2000 between the investors named therein
                                            and the Registrant (4)

         10.41..............................10% Convertible Debenture due May 1, 2001 made
                                            by the Registrant in favor of New Millennium Capital
                                            Partners II, LLC (4)

         10.42..............................10% Convertible Debenture due May 1, 2001 made
                                            by the Registrant in favor of AJW Partners, LLC (4)

         10.43..............................10% Convertible Debenture due May 1, 2001 made
                                            by the Registrant in favor of Bank Insinger de
                                            Beaufort (4)

         10.44..............................10% Convertible Debenture due May 1, 2001 made
                                            by the Registrant in favor of Equilibrium Equity, LLC (4)

         10.45..............................Stock Purchase Warrant dated as of April 13, 2000
                                            issued by the Registrant to New Millennium Capital
                                            Partners II, LLC (4)

         10.46..............................Stock Purchase Warrant dated as of April 13, 2000
                                            issued by the Registrant to AJW Partners, LLC (4)

         10.47..............................Stock Purchase Warrant dated as of April 13, 2000
                                            issued by the Registrant to Bank Insinger de
                                            Beaufort (4)

         10.48..............................Stock Purchase Warrant dated as of April 13, 2000
                                            issued by the Registrant to Equilibrium Equity, LLC (4)

         10.49..............................Registration Rights Agreement dated as of April 13, 2000
                                            by and between the Registrant and the investors named
                                            therein (4)

                                       47



<PAGE>

         10.50..............................Stock Escrow and Security Agreement dated as of April 13,
                                            2000 between the Registrant, Owen Naccarato and the investors
                                            named therein (4)

         10.51..............................Debenture Purchase Agreement dated as of August 5, 1999
                                            between the Registrant and Alliance Equities (1)

         10.52..............................Kanakaris Communications, Inc. 10% Convertible Subordinated
                                            Debenture due August 4, 2000 made by the Registrant in
                                            favor of Alliance Equities (1)

         10.53..............................Registration Rights Agreement dated as of August 5, 1999
                                            between the Registrant and Alliance Equities (1)

         10.54..............................Kanakaris Communications, Inc. 10% Convertible Subordinated
                                            Debenture due September 29, 2000 made by the Registrant
                                            in favor of the Payee named therein (1)

         10.55..............................Stock Escrow and Security Agreement dated as of November 1,
                                            1999 between the Registrant, Owen Naccarato and the Holder
                                            named therein (1)

         10.56..............................Registration Rights Agreement dated as of September 29, 1999
                                            by and between the Registrant and the Purchaser named therein (1)

         10.57..............................Form of 10% Convertible Debenture due May 1, 2001 made in August
                                            2000 by the Registrant in favor of AJW Partners, LLC, New
                                            Millennium Capital Partners II, LLC and Equilibrium Equity, LLC (5)

         10.58..............................Form of Stock Purchase Warrant dated as of August 2000
                                            issued by the Registrant to AJW Partners, LLC, New Millennium
                                            Capital Partners II, LLC and Equilibrium Equity, LLC (5)

         10.59..............................Securities Purchase Agreement dated as of January 5, 2001 by
                                            and among the investors named therein and the Registrant (5)

         10.60..............................Form of Convertible Debenture due January 5, 2002 made by
                                            the Registrant in favor of AJW Partners, LLC, New Millennium
                                            Capital Partners II, LLC, Equilibrium Equity, LLC and Bristol
                                            Investment Fund, Ltd. (5)

         10.61..............................Registration Rights Agreement dated as of January 5, 2001
                                            by and between the Registrant and the investors named
                                            therein (5)

         10.62..............................Form of Stock Purchase Warrant dated as of January 5, 2001
                                            issued by the Registrant to AJW Partners, LLC, New Millennium
                                            Capital Partners II, LLC, Equilibrium Equity, LLC and Bristol
                                            Investment Fund, Ltd. (5)

         10.63..............................The New York Internet Chamber of Commerce Charter
                                            Membership Agreement dated January 17, 2001 by and
                                            between The New York Internet Chamber of Commerce and
                                            the Registrant (6)

         10.64..............................Letter agreement dated as of April 30, 2001 by and among the
                                            Registrant and AJW Partners, LLC, New Millennium
                                            Capital Partners II, LLC, Equilibrium Equity, LLC, Bristol
                                            Investment Fund, Ltd. and Bank Insinger de Beaufort (8)

         10.65..............................Letter agreement dated December 29, 2000 between Haynie &
                                            Company, CPAs and the Registrant (#) (8)

         10.66..............................Form of Convertible Debenture due March 9, 2002 made by
                                            the Registrant in favor of AJW Partners, LLC, New Millennium
                                            Capital Partners II, LLC, Equilibrium Equity, LLC and Bristol
                                            Investment Fund, Ltd. (9)

         10.67..............................Securities Purchase Agreement dated as of June 29, 2001 between
                                            the Registrant and AJW Partners, LLC, New Millennium Capital
                                            Partners II, LLC and Alliance Equities, Inc. (9)

                                       48



<PAGE>

         10.68..............................Form of 12% Convertible Debenture due June 29, 2002 made by the
                                            Registrant in favor of each of AJW Partners, LLC, New Millennium
                                            Capital Partners II, LLC and Alliance Equities, Inc. (9)

         10.69..............................Form of Stock Purchase Warrant dated June 29, 2001 issued by
                                            the Registrant to each of AJW Partners, LLC, New Millennium
                                            Capital Partners II, LLC and Alliance Equities, Inc. (9)

         10.70..............................Registration Rights Agreement dated as of June 29, 2001 by and
                                            between the Registrant and AJW Partners, LLC, New Millennium
                                            Capital Partners II, LLC and Alliance Equities, Inc. (9)

         10.71..............................Letter Agreement dated as of June 29, 2001 by and among the
                                            Registrant and AJW Partners, LLC, New Millennium Capital Partners
                                            II, LLC and Equilibrium  Equity, LLC (9)

         10.72..............................Consulting Agreement dated as of October 26, 2001 by and between
                                            the Registrant and Kevin Welch (10)

         10.73..............................Common Stock Purchase Warrant dated as of October 26, 2001
                                            by and between the Registrant and Kevin Welch (10)

         10.74..............................Common Stock Purchase Warrant dated as of November 29, 2001
                                            made by the Registrant in favor of Kevin Welch (11)

         10.75..............................Consulting Agreement Extension dated as of November 29, 2001
                                            by and between the Registrant and Kevin Welch (11)

         10.76..............................Letter dated December 13, 2001 from Alliance Equities, Inc.
                                            to the Registrant regarding Extension of Line of Credit (12)

         10.77..............................Securities Purchase Agreement dated as of January 9, 2002 by
                                            and between Bank Insinger de Beaufort Safe Custody NV and
                                            the Registrant (12)

         10.78..............................Convertible Debenture due January 9, 2003 made by the
                                            Registrant in favor of Bank Insinger de Beaufort Safe
                                            Custody NV (12)

         10.79..............................Registration Rights Agreement dated as of January 9, 2002
                                            by and between the Registrant and Bank Insinger de Beaufort
                                            Safe Custody NV (12)

         10.80..............................Stock Purchase Warrant dated as of January 9, 2002 issued by
                                            the Registrant to Bank Insinger de Beaufort Safe
                                            Custody NV (12)

         10.81..............................Security Agreement dated as of January 9, 2002 by and between
                                            the Registrant and Bank Insinger de Beaufort Safe
                                            Custody NV (12)

         10.82..............................Letter Agreement dated January 9, 2002 by and between the
                                            Registrant and Bank Insinger de Beaufort Safe Custody NV,
                                            Bristol Investment Fund, Ltd., Bristol Capital, LLC and
                                            Paul Kessler (12)

         21.1...............................Subsidiaries of the Registrant (1)

         23.1...............................Consent of Weinberg & Company, P.A., independent
                                            certified public accountants (12)
</TABLE>
---------------
#        Management contract or compensatory plan, contract or arrangement
         required to be filed as an exhibit.
(1)      Filed as an exhibit to the Registrant's Amendment No. 1 to Form SB-2
         filed with the Securities and Exchange Commission on November 19, 1999
         (Registration No. 333-84909) and incorporated herein by reference
(2)      Filed as an exhibit to the Registrant's Amendment No. 3 to Form SB-2
         filed with the Securities and Exchange Commission on December 21, 1999
         (Registration No. 333-84909) and incorporated herein by reference.
(3)      Filed as an exhibit to the Registrant's Form SB-2 filed with the
         Securities and Exchange Commission on March 3, 2000 (Registration No.
         333-31748) and incorporated herein by reference.

                                       49



<PAGE>

(4)      Filed as an exhibit to the Registrant's Form SB-2 filed with the
         Securities and Exchange Commission on June 12, 2000 (Registration No.
         333-39102) and incorporated herein by reference.
(5)      Filed as an exhibit to the Registrant's Amendment No. 1 to
         Form 10-KSB filed with the Securities and Exchange Commission on
         January 25, 2001 (File No. 0-28213) and incorporated herein by
         reference.
(6)      Filed as an exhibit to the Registrant's Form SB-2 filed with the
         Securities and Exchange Commission on January 29, 2001 (Registration
         No. 333-54514) and incorporated herein by reference.
(7)      Filed as an exhibit to the Registrant's Amendment No. 1 to Form SB-2
         filed with the Securities and Exchange Commission on February 6, 2001
         (Registration No. 333-54514) and incorporated herein by reference.
(8)      Filed as an exhibit to the Registrant's Post-Effective Amendment No. 1
         to Form SB-2 filed with the Securities and Exchange Commission on
         May 7, 2001 (Registration No. 333-54514) and incorporated herein
         by reference.
(9)      Filed as an exhibit to the Registrant's Form 10-QSB for the quarter
         ended June 30, 2001 filed with the Securities and Exchange Commission
         on August 16, 2001 (File No. 0-28213) and incorporated herein by
         reference.
(10)     Filed as an exhibit to the Registrant's Form S-8 filed with the
         Securities and Exchange Commission on September 17, 2001
         (Registration No. 333-72618) and incorporated herein by reference.
(11)     Filed as an exhibit to the Registrant's Form S-8 filed with the
         Securities and Exchange Commission on November 30, 2001
         (Registration No. 333-74238) and incorporated herein by reference.
(12)     Filed as an exhibit to the Registrant's Form 10-KSB filed with the
         Securities and Exchange Commission on January 15, 2002 (File No.
         0-28213) and incorporated herein by reference.

(b)   Reports on Form 8-K

         None.

                                       50



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES

                         INDEX TO FINANCIAL STATEMENTS

                                                                           Page
                                                                           ----

Independent Auditors' Report................................................F-1

Consolidated Balance Sheets as of September 30, 2001 and 2000...............F-2

Consolidated Statements of Operations for the Years Ended
  September 30, 2001 and 2000...............................................F-4

Consolidated Statements of Comprehensive Loss for the Years Ended
  September 30, 2001 and 2000...............................................F-5

Consolidated Statements of Changes in Stockholders' Deficiency
  For the Years Ended September 30, 2001 and 2000...........................F-6

Consolidated Statements of Cash Flows for the Years Ended
  September 30, 2001 and 2000...............................................F-8

Notes to Consolidated Financial Statements..................................F-10



<PAGE>

                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------

To the Board of Directors of:
Kanakaris Wireless

We have audited the accompanying consolidated balance sheets of Kanakaris
Wireless and Subsidiaries as of September 30, 2001 and 2000 and the related
consolidated statements of operations, comprehensive loss, changes in
stockholders' deficiency and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Kanakaris Wireless
and Subsidiaries as of September 30, 2001 and 2000 and the results of their
operations and their cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.

WEINBERG & COMPANY, P.A.

Los Angeles, California
December 7, 2001

                                       F-1



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                           Consolidated Balance Sheets
                        As of September 30, 2001 and 2000

                                                            2001         2000
                                                        -----------  -----------
ASSETS
------

Current assets:
   Cash and cash equivalents                            $   51,473   $  615,101
   Accounts receivable - net                               122,093      302,246
   Inventories                                               1,960        4,455
   Investments in marketable securities                     64,000            -
   Current maturities of note and loan receivable - net          -      102,500
   Current maturities of notes receivable -
      shareholders and related parties                     110,810      249,529
   Interest receivable                                      35,305       10,069
   Prepaid expenses                                         20,063      165,033
                                                        -----------  -----------

           TOTAL CURRENT ASSETS                            405,704    1,448,933
                                                        -----------  -----------

Property and equipment, net of accumulated
   depreciation and amortization                            48,683       49,876
                                                        -----------  -----------

Other assets:
   Notes receivable - shareholders and
      related parties - noncurrent                               -      102,500
   Note and loan receivable - noncurrent                         -       95,810
   Film library - net of accumulated amortization          384,936      452,916
   Goodwill - net of accumulated amortization              328,565      336,766
   Other                                                     2,836        1,400
                                                        -----------  -----------

           TOTAL OTHER ASSETS                              716,337      989,392
                                                        -----------  -----------

           TOTAL ASSETS                                 $1,170,724   $2,488,201
                                                        ===========  ===========

          See accompanying notes to consolidated financial statements.

                                       F-2



<PAGE>

<TABLE>
                          KANAKARIS WIRELESS AND SUBSIDIARIES
                              Consolidated Balance Sheets
                           As of September 30, 2001 and 2000
<CAPTION>

                                                               2001            2000
                                                          -------------   -------------
<S>                                                       <C>             <C>
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------

Current liabilities:
   Accounts payable and accrued expenses                  $  1,087,331    $    797,992
   Due to former shareholder of subsidiary                     104,695          89,358
   Convertible debentures                                    2,756,500       3,720,000
                                                          -------------   -------------

           TOTAL CURRENT LIABILITIES                         3,948,526       4,607,350
                                                          -------------   -------------

Stockholders' deficiency:
   Preferred stock, $0.01 par value; 5,000,000 shares
       authorized; 1,000,000 Class A Convertible issued
       and outstanding                                          10,000          10,000
   Common stock, $0.001 par value; 250,000,000 and
       100,000,000 shares authorized; 4,514,704 and
       1,729,884 in 2001 and 2000 respectively, issued
       and outstanding                                           4,514           1,730
   Additional paid-in capital                               28,928,690      19,211,227
   Accumulated deficit                                     (30,564,905)    (21,340,846)
   Deferred expenses                                        (1,108,101)              -
   Less subscription receivable
       (63,000 shares, common)                                       -          (1,260)
   Comprehensive loss                                          (48,000)              -
                                                          -------------   -------------

           TOTAL STOCKHOLDERS' DEFICIENCY                   (2,777,802)     (2,119,149)
                                                          -------------   -------------

           TOTAL LIABILITIES AND
           STOCKHOLDERS' DEFICIENCY                       $  1,170,724    $  2,488,201
                                                          =============   =============

              See accompanying notes to consolidated financial statements.

                                          F-3
</TABLE>



<PAGE>

<TABLE>
                         KANAKARIS WIRELESS AND SUBSIDIARIES
                        Consolidated Statements of Operations
                   For the Years Ended September 30, 2001 and 2000
<CAPTION>

                                                            2001            2000
                                                       -------------   -------------
<S>                                                    <C>             <C>
Net sales                                              $  1,699,817    $    613,838
Cost of sales                                               681,489         373,487
                                                       -------------   -------------

           GROSS PROFIT                                   1,018,328         240,351
                                                       -------------   -------------

Operating expenses:
   Executive compensation                                 1,443,982         424,380
   Salaries                                                 443,741         253,900
   Payroll taxes                                             38,023          43,319
   Employee benefits                                          3,393          15,517
   Consulting services                                    1,793,110       3,691,027
   Royalties                                                    119           2,333
   Travel and entertainment                                 192,177         206,507
   Telephone and utilities                                   51,015          62,630
   Marketing, advertising and investor relations            611,278       2,277,090
   Professional fees                                        818,429       1,542,975
   Rent                                                      94,263          23,420
   Office and other expenses                                209,293         199,689
   Equipment rental and expense                               2,529           3,485
   Insurance                                                 79,283          59,553
   Auto expense                                                   -             234
   Depreciation and amortization                            146,931          66,091
   Bad debt provision                                       173,928         313,000
   Taxes - other                                              4,253           9,286
   Bank charges                                               2,230           3,082
   Website development                                       50,932               -
   Outside labor                                                  -          52,957
                                                       -------------   -------------

           TOTAL OPERATING EXPENSES                       6,158,909       9,250,475
                                                       -------------   -------------

       Loss from operations before interest
         and other income (expense)                      (5,140,581)     (9,010,124)
                                                       -------------   -------------

Interest and other income (expense):
   Interest income                                           43,847          16,526
   Dividend income                                              474           5,563
   Interest and financing expense                        (3,240,584)     (4,238,671)
   Other income                                              92,785               -
   Settlement agreement - attorney                                -         250,000
   Loss on impairment of investment
     in marketable securities                              (980,000)              -
                                                       -------------   -------------

           TOTAL INTEREST AND OTHER INCOME (EXPENSE)     (4,083,478)     (3,966,582)
                                                       -------------   -------------

       Net loss                                        $ (9,224,059)   $(12,976,706)
                                                       =============   =============

       Net loss per common share - basic and diluted   $      (3.27)   $      (8.69)
                                                       =============   =============

       Weighted average common shares
          outstanding - basic and diluted                 2,820,250       1,492,921
                                                       =============   =============

            See accompanying notes to consolidated financial statements.

                                        F-4
</TABLE>



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                  Consolidated Statements of Comprehensive Loss
                 For the Years Ended September 30, 2001 and 2000

                                                        2001            2000
                                                   -------------   -------------

Net loss                                           $ (9,224,059)   $(12,976,706)
Other comprehensive loss:

   Unrealized loss on marketable securities             (48,000)              -
                                                   -------------   -------------

Comprehensive loss                                 $ (9,272,059)   $(12,976,706)
                                                   =============   =============

          See accompanying notes to consolidated financial statements.

                                      F-5



<PAGE>

<TABLE>
                                              KANAKARIS WIRELESS AND SUBSIDIARIES
                                 Consolidated Statement of Changes in Stockholders' Deficiency
                                        For the Years Ended September 30, 2001 and 2000
<CAPTION>

                                             Preferred Stock               Common Stock
                                      ----------------------------  ----------------------------                   Accumulated
                                          Shares         Amount         Shares         Amount         APIC           Deficit
                                      -------------  -------------  -------------  -------------  -------------   -------------
<S>                                      <C>         <C>               <C>         <C>            <C>             <C>
Balances
September 30, 1999                       1,000,000   $     10,000      1,297,902   $      1,298   $  7,932,406    $ (8,364,140)

   Stock issued for cash:                        -              -         32,300             32        325,468               -

   Stock issued for:
     Accounts payable                            -              -          3,676              3         53,007               -
     Compensation                                -              -          2,000              2       (135,022)              -
     Consulting services                         -              -        101,050            101      2,042,422               -
     Marketing, advertising
       and investor relations                    -              -         54,512             55      1,278,161               -
     Professional
       services                                  -              -         18,750             19        887,981               -

   Converted debentures                          -              -        219,694            220      2,808,682               -

   Convertible debt
    financing costs                              -              -              -              -      3,257,500               -

   Issuance of 48,375 common
     stock options to a consultant-              -              -              -              -        760,622               -

   Net (loss)                                    -              -              -              -              -     (12,976,706)
                                      -------------  -------------  -------------  -------------  -------------   -------------

Balances
September 30, 2000                       1,000,000   $     10,000      1,729,884   $      1,730   $ 19,211,227    $(21,340,846)
</TABLE>

(CONTINUED BELOW)

<TABLE>
<CAPTION>
                                        Treasury          Stock
                                         Stock        Subscriptions
                                         Amount         Receivable        Total
                                      -------------   -------------   -------------
<S>                                   <C>             <C>             <C>
Balances
September 30, 1999                    $   (201,920)   $     (1,260)   $   (623,616)

   Stock issued for cash:                        -               -         325,500

   Stock issued for:
     Accounts payable                            -               -          53,010
     Compensation                          201,920               -          66,900
     Consulting services                         -               -       2,042,523
     Marketing, advertising
       and investor relations                    -               -       1,278,216
     Professional
       services                                  -               -         888,000

   Converted debentures                          -               -       2,808,902

   Convertible debt
    financing costs                              -               -       3,257,500

   Issuance of 48,375 common
     stock options to a consultant-              -               -         760,622

   Net (loss)                                    -               -     (12,976,706)
                                      -------------   -------------   -------------

Balances
September 30, 2000                    $          -    $     (1,260)   $ (2,119,149)

                                  See accompanying notes to consolidated financial statements.

                                                              F-6
</TABLE>



<PAGE>

<TABLE>
                                              KANAKARIS WIRELESS AND SUBSIDIARIES
                                 Consolidated Statement of Changes in Stockholders' Deficiency
                                        For the Years Ended September 30, 2001 and 2000
<CAPTION>

                                              Preferred Stock                Common Stock
                                       ----------------------------  ----------------------------                  Accumulated
                                           Shares         Amount         Shares         Amount         APIC          Deficit
                                       -------------  -------------  -------------  -------------  -------------  -------------

<S>                                       <C>         <C>               <C>         <C>            <C>            <C>
   Stock issued for cash:                         -   $          -        178,833   $        178   $    249,822   $          -

   Stock issued for:
     Compensation                                 -              -        587,381            587      1,828,288              -

     Consulting services                          -              -        420,342            420      1,293,470              -

     Marketing, advertising
       and investor relations                     -              -         30,000             30        177,970              -
     Professional
       services                                   -              -         15,000             15         43,985              -

     Settlement of
       Netbooks.com dispute                       -              -          1,250              1          3,749              -

   Converted debentures                           -              -      1,552,514          1,553      3,089,119              -

   Convertible debt
    financing costs                               -              -              -              -      2,665,002              -

   Issuance of 125,000 common
     stock warrants to a consultant-              -              -              -              -        366,058              -

   Cancellation of stock
     subscriptions                                -              -              -              -              -              -

   Unrealized loss on
      marketable securities                       -              -              -              -              -              -

   Net (loss)                                     -              -              -              -              -     (9,224,059)
                                       -------------  -------------  -------------  -------------  -------------  -------------

BALANCES
SEPTEMBER 30, 2001                        1,000,000   $     10,000      4,514,704   $      4,514   $ 28,928,690   $(30,564,905)
                                       =============  =============  =============  =============  =============  =============
</TABLE>

(CONTINUED BELOW)




<TABLE>
<CAPTION>
                                                                       Treasury         Stock
                                         Deferred         Stock       Subscriptions  Comprehensive
                                         Expenses         Amount       Receivable        Loss            Total
                                       -------------   -------------  -------------  -------------   -------------

<S>                                    <C>             <C>            <C>            <C>             <C>
   Stock issued for cash:              $          -    $          -   $          -   $          -    $    250,000

   Stock issued for:
     Compensation                          (822,656)              -              -              -       1,006,219

     Consulting services                   (285,445)              -              -              -       1,008,445

     Marketing, advertising
       and investor relations                     -               -              -              -         178,000
     Professional
       services                                   -               -              -              -          44,000

     Settlement of
       Netbooks.com dispute                       -               -              -              -           3,750

   Converted debentures                           -               -              -              -       3,090,672

   Convertible debt
    financing costs                               -               -              -              -       2,665,002

   Issuance of 125,000 common
     stock warrants to a consultant-              -               -              -              -         366,058

   Cancellation of stock
     subscriptions                                -               -          1,260              -           1,260

   Unrealized loss on
      marketable securities                       -               -              -        (48,000)        (48,000)

   Net (loss)                                     -               -              -              -      (9,224,059)
                                       -------------   -------------  -------------  -------------   -------------

BALANCES
SEPTEMBER 30, 2001                     $ (1,108,101)   $          -   $          -   $    (48,000)   $ (2,777,802)
                                       =============   =============  =============  =============   =============

                                  See accompanying notes to consolidated financial statements.

                                                              F-7
</TABLE>



<PAGE>

<TABLE>
                             KANAKARIS WIRELESS AND SUBSIDIARIES
                            Consolidated Statements of Cash Flows
                       For the Years Ended September 30, 2001 and 2000
<CAPTION>

                                                                    2001            2000
                                                               -------------   -------------
<S>                                                            <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                    $ (9,224,059)   $(12,976,706)
   Adjustments to reconcile net loss
       to net cash used in operating activities:
           Amortization of goodwill                                  28,538          27,580
           Depreciation and amortization                            118,393          38,511
           Write off of organizational costs                              -           1,450
           Stock issued for Netbooks.com legal settlement             3,750               -
           Income from settlement agreement                               -        (250,000)
           Income realized from stock received for services      (1,092,000)              -
           Loss on impairment of investment in
             marketable securities                                  980,000               -
           Provision for bad debts                                  159,260         313,000
           Stock issued for compensation, consulting,
             marketing and professional services                  2,236,664       4,275,639
           Stock options issued for consulting services             366,058         760,622
           Convertible debt - marketing cost                        270,100         715,000
           Convertible debt - financing cost                      2,992,175       3,257,500
   Changes in assets and liabilities
       (Increase) decrease in:
              Accounts receivable                                   180,153        (161,136)
              Inventory                                               2,495          (4,455)
              Prepaid expenses                                      144,970        (104,220)
              Interest receivable                                   (25,236)         (7,665)
       Increase (decrease) in:
              Accounts payable and accrued expenses                 289,339        (123,306)
                                                               -------------   -------------

           NET CASH USED IN OPERATING ACTIVITIES                 (2,569,400)     (4,238,186)
                                                               -------------   -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                               (17,824)        (31,631)
   Decrease (increase) in notes receivable -
      shareholders and related parties                              234,529         (98,306)
   Increase in security deposits                                     (1,436)              -
   Increase in notes receivable - other                                   -        (300,000)
   Note receivable repayments                                        47,000          45,000
   Acquisition of film library                                      (31,397)       (472,339)
                                                               -------------   -------------

           NET CASH PROVIDED BY
           (USED IN) INVESTING ACTIVITIES                           230,872        (857,276)
                                                               -------------   -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Payment to former shareholder of subsidiary                       (5,000)         (5,000)
   Proceeds from convertible debt                                 1,529,900       5,235,000
   Proceeds from sale of common stock                               250,000         325,500
                                                               -------------   -------------

           NET CASH PROVIDED BY FINANCING ACTIVITIES              1,774,900       5,555,500
                                                               -------------   -------------

Net (decrease) increase in cash and cash equivalents               (563,628)        460,038

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

Cash and cash equivalents, end of year                         $     51,473    $    615,101
                                                               =============   =============

                 See accompanying notes to consolidated financial statements

                                            F-8
</TABLE>



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                 For the Years Ended September 30, 2001 and 2000

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

During the years ended September 30, 2001 and 2000, the Company issued 465,342
and 174,312 respectively, of shares of common stock for consulting, marketing,
advertising, investor relations and professional services having a fair value of
$1,515,890 and $4,208,739, respectively. Of the 174,312 shares issued during the
year ended September 30, 2000, 18,750 shares were issued for legal consulting
services, and 155,562 shares were issued to a variety of business consultants
including 5,000 shares to one member of the Company's board of directors and
150,562 shares to fourteen other consultants. Of the 465,342 shares issued
during the year ended September 30, 2001, 2,500 shares were issued for legal
consulting services, 12,500 shares were issued for accounting services, and
450,342 shares were issued to a variety of business consultants including 12,500
shares to four members of the Company's board of directors and 437,842 shares to
nine other consultants.

During the year ended September 30, 2001, the Company issued 587,381 of shares
of common stock in lieu of compensation of $1,006,219. Of the 587,381 shares
issued during the year ended September 30, 2001, 525,000 shares were issued
to the Company's Chairman of the Board, Chief Executive Officer and President,
59,881 shares were issued to six employees of the Company who were also
members of the Company's board of directors and 2,500 shares were issued to two
non-director employees of the Company.

During the year ended September 30, 2001, the Company issued 1,250 shares of
common stock in settlement of the Netbooks.com dispute.

During the year ended September 30, 2000, the Company distributed 4,951 of
shares of treasury stock and issued 2,000 shares of common stock in lieu of
compensation of $32,000 and $66,900, respectively, to an employee and director.

During the year ended September 30, 2000, the Company issued 3,676 shares of
common stock in exchange for the satisfaction of certain accounts payable having
a value of $53,010. These shares were issued to two unrelated third-parties.

During the year ended September 30, 2000, the Company recorded a note receivable
in the amount of $250,000, which represented a legal settlement. As of September
30, 2001, $158,000 was still outstanding, which was deemed to be uncollectable
and the Company recorded an allowance for the entire balance.

The Company has a liability in the total amount of $104,695 in 2001 and $89,358
in 2000 which represents the amount due to a former sole shareholder of the
Company's subsidiary pursuant to the agreement regarding the acquisition of the
subsidiary.

During the years ended September 30, 2001 and 2000, the Company issued 125,000
and 48,375 common stock warrants and options respectively, to consultants for
services having a fair value as computed under SFAS No. 123 using the
Black-Scholes Model of $366,058 and $760,622, respectively.

          See accompanying notes to consolidated financial statements.

                                      F-9



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-------------------------------------------------

        (A) BUSINESS ORGANIZATION AND ACTIVITY
        --------------------------------------

        Kanakaris Wireless, which on June 2, 2000 changed its name from
        Kanakaris Communications, Inc. (formerly Big Tex Enterprises, Inc.) (the
        "Company"), was incorporated in the State of Nevada on November 1, 1991.
        The Company develops and supplies Internet products for electronic
        commerce, an on-line on-demand movie network and operates a subsidiary
        which designs and installs modular data control consoles. The Company
        has introduced a website called AK.TV, an interactive TV channel
        viewable in devices including Pocket PCs, laptop and desktop computers
        and TV's.

        (B) BUSINESS COMBINATIONS
        -------------------------

        On October 10, 1997 (the "Acquisition Date"), Kanakaris Internetworks,
        Inc. ("KIW") consummated a Stock Purchase Agreement with the shareholder
        (the "Seller") of Desience Corporation ("Desience") to purchase 10,000
        common shares representing 100% of its issued and outstanding common
        stock in exchange for a 4% royalty on the gross sales (after collection)
        of Desience subsequent to the Acquisition Date, to be paid monthly for
        as long as Desience remains in business or its products are sold.
        Pursuant to APB 16, since the Seller had no continuing affiliation with
        KIW, the 4% royalty is accounted for as an increase to goodwill at the
        date the amount is determinable. In addition, the Seller shall receive
        5% of funds which are to be allocated to Desience arising from KIW's
        next securities offering as a non-refundable advance on the royalty. As
        of September 30, 2001, no advances have been given. KIW will hold
        harmless the Seller from any claims, causes of action, costs, expenses,
        liabilities, and prior shareholder advances. Immediately following the
        exchange, Desience became a wholly owned subsidiary of KIW. The fair
        value of the assets and liabilities acquired pursuant to the acquisition
        of Desience was $148,776 and $468,120, respectively, which resulted in
        goodwill of $319,344 at the Acquisition Date since no trademarks,
        copyrights, existing or identified long-term requirement contracts or
        other intangibles existed at that date. Additions to goodwill resulting
        from the royalty for the years ended September 30, 2001 and 2000 were
        $20,337 and $23,649, respectively (See Note 1(J)).

        Desience is not a high technology company, but designs and installs
        specialized business furniture for a variety of industries utilizing
        base designs developed in 1985. No changes have been made or are
        contemplated to be made to the basic furniture design, with the
        exception of minor additions or accouterments. Because of the relative
        stability of the design of the furniture, management considered the
        goodwill attributable to the acquisition to be greater than 10 years.
        However, because of the potential for changes to the basic design in the
        future, management decided that a life of twenty years was not
        appropriate. Consequently a 15-year life was adopted.

                                       F-10



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

        On November 25, 1997, KIW and its stockholders (the "Stockholders")
        consummated an acquisition agreement with Big Tex Enterprises, Inc.
        ("Big Tex"), an inactive public shell with no recent operations at that
        time, whereby the shareholders sold all of their preferred and common
        stock, which represented 100% of KIW's issued and outstanding capital
        stock, to Big Tex in exchange for 1,300,000 shares (300,000 common,
        1,000,000 preferred) of Big Tex's restricted stock, representing 66.67%
        of the issued and outstanding common stock and 100% of the issued and
        outstanding preferred stock of Big Tex, aggregating 75% of the total
        voting rights (the "Exchange") (See Note 6). Big Tex was founded in 1991
        for the purpose of lawful business or enterprise, but had been inactive
        since 1991. Immediately following the exchange, Big Tex changed its name
        to Kanakaris Communications, Inc., which was subsequently changed to
        Kanakaris Wireless.

        Generally accepted accounting principles require that the company whose
        stockholders retain the majority interest in a combined business be
        treated as the acquirer for accounting purposes. Accordingly, the Big
        Tex acquisition was accounted for as an acquisition of Big Tex by KIW
        and a recapitalization of KIW.

        (C) PRINCIPLES OF CONSOLIDATION
        -------------------------------

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

        (D) USE OF ESTIMATES
        --------------------

        The accompanying financial statements have been prepared in accordance
        with generally accepted accounting principles in the United States of
        America. The preparation of financial statements in accordance with
        generally accepted accounting principles requires management to make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities and disclosure of contingent assets and liabilities at the
        date of the financial statements and the reported amounts of revenue and
        expenses during the reporting period. Actual results could differ from
        those estimates.

        (E) CASH AND CASH EQUIVALENTS
        -----------------------------

        For purposes of the statements of cash flows, the Company considers all
        highly liquid debt instruments purchased with an original maturity of
        three months or less to be cash equivalents.

        (F) PROPERTY AND EQUIPMENT
        --------------------------

        Property and equipment are stated at cost and depreciated using the
        straight line method over the estimated economic useful life of 5 to 7

                                       F-11



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

        years. Maintenance and repairs are charged to expense as incurred.
        Major improvements are capitalized. Depreciation expense for the years
        ended September 30, 2001 and 2000 was $19,016 and $10,806,
        respectively.

        (G) INVENTORIES
        ---------------

        Inventories at September 30, 2001 and 2000 consisted of parts and
        finished goods and were recorded at the lower of cost or market, cost
        being determined using the first-in, first-out method.

        (H) INVESTMENTS IN MARKETABLE SECURITIES
        ----------------------------------------

        The Company classifies marketable debt securities as "held to maturity"
        if it has the positive intent and ability to hold the securities to
        maturity. All other marketable securities are classified as "available
        for sale." Securities classified as "available for sale" are carried on
        the financial statements at fair market value. Realized gains and losses
        are included in earnings; unrealized holding gains and losses are
        reported as a separate component of stockholder's equity. Securities
        classified as held to maturity are carried at amortized cost.

        At September 30, 2001, investments in marketable securities consisted of
        available-for-sale securities of $64,000. For the year ended September
        30, 2001, the Company had an unrealized loss from marketable securities
        of $48,000 due to a temporary decline in fair market value and a
        realized loss from marketable securities of $980,000 due to a decline in
        fair value, that in accordance with FASB 115 the Company determined was
        other than temporary and accordingly is included in the statement of
        operations (See Notes 5(F) and 5(I)).

        (I) FILM LIBRARY
        ----------------

        The cost to acquire and encode the Company's film library, which at
        September 30, 2001 aggregated $503,736, is being amortized on a
        straight-line basis over a 5-year period. Amortization expense for the
        years ended September 30, 2001 and 2000 amounted to $99,377 and $19,423,
        respectively.

        (J) SOFTWARE DEVELOPMENT COSTS
        ------------------------------

        In accordance with EITF Issue No. 00-2, the Company accounts for its web
        site development costs in accordance with Statement of Position No. 98-1
        "Accounting for the Costs of Computer Software Developed or Obtained for
        Internal Use" ("SOP 98-1").

        SOP 98-1 requires the expensing of all costs of the preliminary project
        stage and the training and application maintenance stage and the
        capitalization and amortization of all internal or external direct costs
        incurred during the application development stage.

                                       F-12



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

        (K) GOODWILL
        ------------

        Goodwill arising from the acquisition of Desience, as discussed in Note
        1 (B) - Business Combinations, is being amortized on a straight-line
        basis over 15 years. Amortization expense for the years ended September
        30, 2001 and 2000 was $28,538 and $27,580, respectively.

        (L) REVENUE RECOGNITION
        -----------------------

        Kanakaris Wireless produces revenues from the sale of monthly
        non-refundable subscriptions to its website for movies and books and
        from advertising on the Company's website. Revenues from the sales of
        subscriptions are recognized as amounts are received and revenues from
        advertising are recognized over the term of the advertising contract.

        Desience, a wholly-owned subsidiary of the Company, produces revenues
        from product sales of business furniture and modular consoles and
        incidental revenues for installation and freight. Product sale revenues
        and freight revenues are recognized when the product is shipped.
        Installation revenues are recognized as work is completed.

        (M) EARNINGS PER SHARE
        ----------------------

        Earnings (loss) per share is computed using the weighted average of
        common shares outstanding as defined by Financial Accounting Standards
        No. 128, "Earnings Per Share." The assumed exercise of outstanding
        common share equivalents was not utilized in 2001 since the effect was
        anti-dilutive.

        (N) INCOME TAXES
        ----------------

        The Company accounts for income taxes under Statement of Financial
        Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
        109"). SFAS No. 109 is an asset and liability approach that requires the
        recognition of deferred tax assets and liabilities for the expected
        future tax consequences of events that have been recognized in the
        Company's financial statements or tax returns. In estimating future tax
        consequences, SFAS No. 109 generally considers all expected future
        events other than enactments of changes in the tax law or rates. Any
        available deferred tax assets arising from net operating loss
        carryforwards have been offset by a deferred tax valuation allowance on
        the entire amount (See Note 13).

        (O) CONCENTRATION OF CREDIT RISK
        --------------------------------

        The Company maintains its cash in bank deposit accounts which, at
        times, may exceed federally insured limits. The Company has not
        experienced any losses in such accounts and believes it is not exposed
        to any significant credit risk for cash and cash equivalents.

                                       F-13



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

        (P) NEW ACCOUNTING PRONOUNCEMENTS
        ---------------------------------

        The Financial Accounting Standards Board has recently issued several new
        Statements of Financial Accounting Standards. Statement No. 141,
        "Business Combinations" ("SFAS No. 141") supersedes APB Opinion 16 and
        various related pronouncements. Pursuant to the new guidance in SFAS No.
        141, all business combinations must be accounted for under the purchase
        method of accounting; the pooling-of-interests method is no longer
        permitted. SFAS No. 141 also establishes new rules concerning the
        recognition of goodwill and other intangible assets arising in a
        purchase business combination and requires disclosure of more
        information concerning a business combination in the period in which it
        is completed. This statement is generally effective for business
        combinations initiated on or after July 1, 2001.

        Statement No. 142, "Goodwill and Other Intangible Assets" ("SFAS No.
        142") supersedes APB Opinion 17 and related interpretations. SFAS No.
        142 establishes new rules on accounting for the acquisition of
        intangible assets not acquired in a business combination and the manner
        in which goodwill and all other intangibles should be accounted for
        subsequent to their initial recognition in a business combination
        accounted for under SFAS No. 141. Under SFAS No. 142, intangible assets
        should be recorded at fair value. Intangible assets with finite useful
        lives should be amortized over such period and those with indefinite
        lives should not be amortized. All intangible assets being amortized as
        well as those that are not, are both subject to review for potential
        impairment under SFAS No. 121, "Accounting for the Impairment of
        Long-Lived Assets and for Long-Lived Assets to be Disposed of." SFAS No.
        142 also requires that goodwill arising in a business combination should
        not be amortized but is subject to impairment testing at the reporting
        unit level to which the goodwill was assigned at the date of the
        business combination.

        SFAS No. 142 is effective for fiscal years beginning after December 15,
        2001 and must be applied as of the beginning of such year to all
        goodwill and other intangible assets that have already been recorded in
        the balance sheet as of the first day in which SFAS No. 142 is initially
        applied, regardless of when such assets were acquired. Goodwill acquired
        in a business combination whose acquisition date is on or after July 1,
        2001, should not be amortized, but should be reviewed for impairment
        pursuant to SFAS No. 121, even though SFAS No. 142 has not been adopted.
        However, previously acquired goodwill should continue to be amortized
        until SFAS No. 142 is first adopted.

        Statement No. 143 "Accounting for Asset Retirement Obligations" ("SFAS
        No. 143") establishes standards for the initial measurement and
        subsequent accounting for obligations associated with the sale,
        abandonment, or other type of disposal of long-lived tangible assets
        arising from the acquisition, construction, or development and/or normal
        operation of such assets. SFAS No. 143 is effective for fiscal years
        beginning after June 15, 2002, with earlier application encouraged.

                                       F-14



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

        The adoption of these pronouncements will not have a material effect on
        the Company's financial position or results of operations.

        (Q) FAIR VALUE OF FINANCIAL INSTRUMENTS
        ---------------------------------------

        Statement of Financial Accounting Standards No. 107, "Disclosures about
        Fair Value of Financial Instruments," requires disclosures of
        information about the fair value of certain financial instruments for
        which it is practicable to estimate the value. For purposes of this
        disclosure, the fair value of a financial instrument is the amount at
        which the instrument could be exchanged in a current transaction between
        willing parties other than in a forced sale or liquidation.

        The carrying amount of the Company's financial instruments, including
        accounts receivable, notes and loans receivable, accounts payable,
        accrued liabilities, convertible debentures and amount due to the former
        Desience stockholder, approximates fair value due to the relatively
        short period to maturity for these instruments.

        (R) ADVERTISING COSTS
        ---------------------

        In accordance with the Accounting Standards Executive Committee
        Statement of Position 93-7, costs incurred for producing and
        communicating advertising of the Company are charged to operations.

        (S) STOCK OPTIONS
        -----------------

        In accordance with Statement of Financial Accounting Standards No. 123
        "Accounting for Stock Based Compensation" ("SFAS No. 123"), the Company
        has elected to account for stock options issued to employees under
        Accounting Principles Board Opinion No. 25 ("APB Opinion No. 25") and
        related interpretations (See Note 8). The Company accounts for stock
        options issued to consultants and for other services in accordance with
        SFAS No. 123 (See Note 9).

        (T) COMPREHENSIVE INCOME (LOSS)
        -------------------------------

        Statement of Financial Accounting Standards No. 130, "Reporting
        Comprehensive Income(Loss)," requires that total comprehensive
        income(loss) be reported in the financial statements. Total
        comprehensive income(loss) is presented on the consolidated statement
        of comprehensive income(loss).

                                       F-15



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

NOTE 2 ACCOUNTS RECEIVABLE AND CONCENTRATIONS
---------------------------------------------

        Accounts receivable at September 30, 2001 and 2000 were $122,093 and
        $302,246, respectively, and are deemed fully collectable.

        At September 30, 2001 and 2000, approximately 79% and 27%, respectively,
        of accounts receivable were due from one customer.

NOTE 3 NOTES RECEIVABLE - SHAREHOLDERS AND RELATED PARTIES
----------------------------------------------------------

        The following is a summary of notes receivable at September 30, 2001 and
        2000:

<TABLE>
<CAPTION>
                                                                                            2001                 2000
                                                                                       ---------------     --------------
<S>                                                                                    <C>                 <C>
         Notes receivable - Shareholder, unsecured. Interest at 6.625% is
         payable beginning June 30, 1998 when all accrued interest will be due,
         then annually on each subsequent June 30. Principal payments are due
         beginning December 31, 1998 when one-fifth of the outstanding amount is
         due. Subsequent payments are due one-fifth each December 31 until
         February 26, 2002 when all outstanding principal and interest is due.         $       28,160      $      42,240

         Notes receivable - Shareholder, unsecured. Interest at 6.625% is
         payable beginning June 30, 1998 when all accrued interest will be due,
         then annually on each subsequent June 30. Principal payments are due
         beginning December 31, 1998 when one-fifth of the outstanding amount is
         due. Subsequent payments are due one-fifth each December 31 until
         February 26, 2002 when all outstanding principal and interest is due.                 24,960             37,440

         Notes receivable - Shareholder, unsecured. Interest at 6.625% is
         payable beginning June 30, 1998 when all accrued interest will be due,
         then annually on each subsequent June 30. Principal payments are due
         beginning December 31, 1998 when one-fifth of the outstanding amount is
         due. Subsequent payments are due one-fifth each December 31 until
         February 26, 2002 when all outstanding principal and interest is due.                 11,600             17,399

         Notes receivable - Shareholder, unsecured. Interest at 6.625% is
         payable beginning June 30, 1998 when all accrued interest will be due,
         then annually on each subsequent June 30. Principal payments are due
         beginning December 31, 1998 when one-fifth of the outstanding amount is
         due. Subsequent payments are due one-fifth each December 31 until
         February 26, 2002 when all outstanding principal and interest is due.                  7,840             11,760
</TABLE>

                                       F-16



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

<TABLE>
<CAPTION>
<S>                                                                                    <C>                 <C>
         Note receivable - Shareholder, unsecured. Interest at 8%, principal and
         interest is payable in five annual installments of $38,250 beginning
         September 30, 1998.                                                           $       38,250      $      76,500

         Note receivable - Shareholder, secured by 7,112 shares of the
         Company's common stock held by the shareholder. Interest at 7% was
         payable in full in May 2001 when all accrued and outstanding interest
         was due. Principal payment was due in full in May 2001.                                    -            160,000
                                                                                       ---------------     --------------
         Total Notes Receivable                                                               110,810            345,339
         Less:  Current maturities                                                            110,810            249,529
                                                                                       ---------------     --------------

         TOTAL NOTES RECEIVABLE -
         ------------------------
         LESS CURRENT MATURITIES                                                       $            -      $      95,810
         -----------------------                                                       ===============     ==============
</TABLE>

NOTE 4 NOTE AND LOAN RECEIVABLE
-------------------------------

        As a result of certain actions by its former securities attorney, which
        led, among other things, to the Company's recognition of a bad debt in
        the year ended September 30, 1998 of $300,000, the Company entered into
        a settlement agreement with the former attorney and received a $250,000
        non-interest bearing promissory note dated February 3, 1999. The note
        was payable in monthly installments of $20,833 commencing February 15,
        1999. The note was in default and the Company had recorded a bad debt
        allowance on the entire amount of the note as of September 30, 1999.

        During the year ended September 30, 2000, the Company received $45,000
        in payments from the former securities attorney and believed that the
        balance of the note, in the amount of $205,000, would be fully
        collectible under a new repayment agreement by March 2003. Therefore,
        the Company reinstated the note in the amount of $250,000 during the
        year ended September 30, 2000. The new monthly payments were originally
        scheduled to begin in January 2000 in the amount of $5,694.44 per month.
        This repayment schedule was subsequently revised on December 1, 2000,
        calling for payments in the amount of $6,000 per week. As of September
        30, 2001 the Company had received payments aggregating $47,000 under the
        revised repayment schedule. At September 30, 2001, the Company's
        management deemed the balance due of $158,000 uncollectible and reserved
        the entire amount.

                                       F-17



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

        On August 3, 2000, the Company executed a non-binding letter of intent
        relating to the acquisition of all of the outstanding shares of stock of
        PCS Link, Inc., a California Corporation dba Greenwood & Hall. The
        letter of intent provided, among other things, that the Company would
        issue 150,000 shares of restricted common stock to the sellers at the
        closing and would be obligated to issue an additional 100,000 shares
        of restricted common stock approximately one year later if certain
        performance criteria were met. In addition, the letter of intent
        provided that the Company would be required to provide Greenwood & Hall
        with working capital of $1,200,000 over the next twelve months, of which
        $300,000 had already been advanced.

        As of October 2000 the letter of intent effectively was cancelled and
        the Company was due $300,000 for the funds previously advanced. A
        dispute exists between the parties with regard to the period of time
        over which the loan may be repaid. The Company wants the loan to be
        repaid within one year, but Greenwood & Hall wants to repay the loan
        over a two year period. The Company and Greenwood & Hall have been in
        negotiations to resolve this dispute. As of September 30, 2001 and 2000,
        the Company accounted for such advances as a demand loan. The loan is
        collateralized by 25% of the outstanding common stock of Greenwood &
        Hall. The ability of the Company to recover these advances and the value
        of the loan's collateral is in doubt; therefore, a bad debt allowance
        for the entire amount of the loan $300,000 was recorded at September 30,
        2001. If the dispute is not resolved in a timely manner, management
        intends to bring legal action against Greenwood & Hall.

NOTE 5 COMMITMENTS AND CONTINGENCIES
------------------------------------

        (A) LEASES
        ----------

        On October 8, 1998 the Company, as subtenant, entered into a sublease
        agreement with the then existing tenant of the Company's headquarters
        space commencing on October 15, 1998. The term of the sublease was
        through and including the end of the original term of the tenant's lease
        of the premises, which was August 20, 2000. The monthly rent on this
        sublease was $1,512 through August 20, 1999 at which time it increased
        to $1,579 a month until August 20, 2001. As of September 30, 2001, the
        Company occupies the same facilities under a month-to- month rental
        agreement at $1,579 per month. In addition, in April of 2001, the
        Company rented a second office in Aliso Viejo, California. The office
        was leased on a month-to-month basis through September 30, 2001. The
        monthly rent on this lease was approximately $8,500 per month. Rent
        expense for both offices for the years ended September 30, 2001 and 2000
        was $94,263 and $23,420, respectively.

        (B) LEGAL ACTIONS
        -----------------

        On September 15, 1999, an individual filed a complaint against the
        Company and the executive who is the Chairman of the Board, President,
        and Chief Executive Officer of the Company in Los Angeles Superior Court

                                       F-18



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

        alleging breach of contract and fraud. The fraud claim was based
        primarily on alleged misrepresentation and concealment involving a
        consulting agreement between the Company and the individual. The
        individual alleged that he was entitled to certain stock options, of
        which 75% of the option price allegedly was already deemed paid in
        exchange for services allegedly rendered to the Company. The individual
        attempted to exercise the options for the purchase of a certain number
        of shares to which he claimed to be entitled pursuant to the agreement.
        The claims against the Company executive were dismissed. The case was
        submitted for mediation, and a hearing was held resulting in the Company
        and the individual entering into a Settlement Agreement and General
        Release on November 1, 2000 whereby the Company agreed to pay $24,000 to
        the individual and his attorney in three equal installments of $8,000.
        As of September 30, 2001, all payments had been made and the Company was
        awaiting an order from the court dismissing the case.

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

        The Company counterclaimed and commenced a third-party action against
        affiliates of the Illinois corporation. The Illinois corporation and its
        affiliates filed a separate action in Utah, but the Utah court stayed
        that action in favor of the action pending in Illinois.

        The Illinois corporation and its affiliates countered by attempting to
        assert claims against the Company in a separate action in Utah. In the
        Utah action, the parties were challenging the Company's right to block
        their transfer of the stock at issue and attempting to recover for
        damage they claim to have suffered in the interim. The Utah action,
        however, was promptly stayed by that court in favor of the action
        pending in Illinois.

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

                                       F-19



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

        On July 26, 2001, the parties involved entered into a Settlement
        Agreement and Mutual Release of Claims. Under that agreement, the
        Company agreed to release all of its claims and to direct the court to
        execute an assignment of the stock at issue and deliver the stock to
        Alpha Tech for reissuance to various designated parties in exchange for
        releases of all claims by parties adverse to the Company in the case and
        dismissal of the actions in Illinois and Utah. The disputed shares have
        been distributed pursuant to the agreement of the parties. On August 1,
        2001, and August 22, 2001, the referenced action was dismissed by the
        courts in Illinois and Utah, respectively.

        Dataview Consoles, Inc., a California corporation dba Swanson
        Engineering & Manufacturing Company, commenced an action against the
        Company and the Company's subsidiary, Desience Corporation, in the Los
        Angeles Superior Court on February 14, 2001. The complaint alleged that
        the Company and Desience owed Dataview $104,601 under several invoices
        for equipment manufactured for Desience by Dataview in 1997.
        Concurrently with the filing of the complaint, Dataview filed an
        application for a right to attach order against the Company and Desience
        to secure repayment of the debt alleged in the complaint. Effective as
        of April 3, 2001, the parties to the dispute entered into a settlement
        agreement under which the Company and Desience paid Dataview $63,584 and
        agreed to pay Dataview an additional $42,000 in twelve monthly
        installments of $3,500 beginning May 1, 2001. The settlement agreement
        also provides that the Company will be entitled to file a request for
        dismissal after the Company has made all of the installments payments in
        accordance with the settlement agreement. The settlement agreement also
        provides that the Company and Desience, on the one hand, and Dataview
        and its related party, on the other hand, shall all retain the
        unrestricted right to market, sell, distribute and manufacture or have
        manufactured under their own respective names all of the data control
        consoled products that Dataview had been manufacturing for Desience. As
        of September 30, 2001, the Company has made $17,500 in payments.

                                       F-20



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

        On March 8, 2001, Loudeye Technologies, Inc., commenced an action
        against the Company. The complaint alleged breach of contract for
        $44,107. The Company has certain defenses to this claim and intends to
        seek an out-of-court settlement of these claims. A formal answer has
        been filed to the Complaint.

        The Company is subject to certain legal proceedings, claims and
        litigation arising in the ordinary course of business. While the amounts
        claimed may be substantial, the ultimate liability cannot presently be
        determined because of considerable uncertainties that exist. Therefore,
        it is possible the outcome of such legal proceedings, claims and
        litigation could have a material effect on quarterly or annual operating
        results or cash flows when resolved in a future period. However, based
        on facts currently available, management believes such matters will not
        have a material adverse effect on the Company's financial position,
        results of operations or cash flows.

        (C) LETTERS OF INTENT
        ---------------------

        On November 9, 1999, the Company signed a Memorandum of Understanding
        with Lain International ("Lain"). Lain will make available to the
        Company all Spanish language, Spanish dubbed and Spanish sub-titled
        films for which it has Internet distribution rights. The Company will
        create a KKRS web channel devoted exclusively to these titles. The
        Company will maintain web visit status, accounting, and will pay Lain
        royalties on at least a quarterly basis, in an amount of 50% of the
        gross share of advertising, subscription and pay-per-view fees for the
        channel devoted to Lain films, minus 50% of encoding, bandwidth and
        advertising charges. As of September 30, 2001 and 2000, both parties
        were meeting their obligations under this memorandum of understanding.
        For the year ended September 30, 2001 and 2000, approximately $1,100 and
        $10,000, respectively, was paid and charged to operations under this
        agreement.

                                       F-21



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

        (D) LICENSE AGREEMENT
        ---------------------

        On February 18, 1999, the Company entered into a License Agreement
        ("Agreement") with ION Systems, Inc. ("ION"), a Missouri corporation.
        The Agreement is through December 31, 2004, and thereafter will be
        renewable automatically for additional renewal terms of five years each,
        ending on December 31 of each fifth year. Under the terms of the
        Agreement, as amended to date, ION grants to the Company a license to
        use its products, the E*Web (R) and the X*Maker (R) computer software
        enabling the secure downloading and viewing of websites, for or in
        connection with the Company's websites. The two parties agreed that the
        software may be used solely for the publishing, displaying, promoting,
        marketing, offering and selling for a fee of certain specified book
        categories as well as of products or services listed in the books
        published. The aforementioned activities are meant to be offered
        directly to customers and end users using the facilities of a website.
        No geographic or territorial restrictions apply to the use of the
        software. The agreed fee for each book conversion performed by ION will
        be $100, and the royalties for each book sale and product sale shall be
        12% and 5% respectively, of the gross revenue. Furthermore, ION shall
        have the right to buy 5,000 shares of the Company's common stock at a
        price of $6.00 per share at any time between June 1, 1999 and December
        31, 2005, 8,750 shares at $.20 until May 1, 2003, and 4,375 shares at
        $25.90 until May 1, 2003.

        In addition, on May 23, 2000, the Company agreed to pay ION $55,000 for
        software which will provide for the sale of electronic books on line. As
        of June 30, 2000, the required payment under this agreement was paid and
        charged to cost of sales account. As of September 30, 2001, the Company
        has completed its dealings with ION.

        (E) SERVICE AGREEMENTS
        ----------------------

        In June 2000, the Company entered into a one-year agreement with the
        Fortino Group, Inc. Based upon the terms of the contract, the Fortino
        Group agreed to provide media relations services in connection with the
        marketing and promotion of the Company's business, products and/or
        services. The Company agreed to pay approximately $300,000 for these
        services. As of September 30, 2000, $108,706 of this amount had been
        paid and charged to operations. During the year ended September 30,
        2001, the Company received $75,000 of invoices for these services.
        However, the Company has disputed them due to a lack of performance and
        has not recorded the liability for such invoices at September 30, 2001.

                                       F-22



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

        On May 3, 2001, the Company entered into a service agreement with
        Collectible Concepts, a publicly traded corporation. The Company
        performed various technological services in exchange for $92,000 in the
        form of Collectible Concepts restricted stock valued at the closing
        price of $.023 per share on May 3, 2001, amounting to 4,000,000 shares.
        As of September 30, 2001 the stock was valued at $.011 per share and
        the Company recorded an unrealized loss on investment of $48,000. This
        amount is included in the Company's statement of comprehensive loss.

        (F) INTERNET DATA CENTER SERVICES AGREEMENTS
        --------------------------------------------

        Effective August 9, 1999, the Company entered into an agreement with
        Microsoft Corporation whereby Microsoft agreed to promote certain of the
        Company's web sites in consideration for the Company's promotion of
        specified Microsoft (R) Windows Media Technology (TM) on the Company's
        web sites through December 30, 2001. No expense or income has been
        recorded by the Company for the years ended September 30, 2001 and 2000
        relating to this agreement because under APB No. 29, "Accounting For
        Non-monetary Transactions," the fair values of such web site promotions
        are not determinable within reasonable limits.

        On November 17, 1999, and effective December 7, 1999, the Company
        entered into an agreement with Microsoft Corporation. Microsoft is
        assisting the Company with the development of an audio/video enhanced
        website which delivers timely and relevant audiovisual content using
        Windows Media Technologies in a broadband network infrastructure.

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

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

                                       F-23



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

        In May 2000, the Company entered into an agreement with Meiselman-Rede
        Media Group ("MRMG"). Based upon the terms of the agreement, the Company
        paid MRMG $100,000 in exchange for the future Internet distribution
        rights to the first sixteen two-minute duration episodes of a project
        known as "Paris Falls." Through September 30, 2001 the Company received
        eight of the episodes. Meiselman-Rede filed for bankruptcy and
        therefore, the Company does not expect to receive the remaining eight
        episodes. As of September 30, 2001, the Company wrote off the remaining
        prepaid amount of $50,000 to cost of sales.

        Under the terms of a second agreement with MRMG, the Company paid
        $100,000 in May 2000 for the exclusive Internet distribution rights to a
        film known as "LA River Story" and the right to receive 50% of the sums
        actually received by MRMG from the exploitation of this film in all
        types of media. Through September 30, 2001, the Company and MRMG were
        still in the process of editing this film. However, because of MRMG's
        filing of bankruptcy, the Company does not expect this project to
        materialize. All amounts paid were charged to operations.

        On May 1, 2001, the Company signed a Memorandum of Understanding with
        Ricoh Business Systems whereby Ricoh will provide its technology
        commonly described as "print on demand" services to the Company for
        purposes of delivering printed copies of books via the Company's
        WordPop.com web site. Based upon the terms of the agreement, the Company
        will pay a certain percentage of the sales price of the books as
        compensation to Ricoh.

        (G) INVESTOR RELATIONS
        ----------------------

        On September 20, 2000, the Company entered into an investor relations
        program with WallStreetWebcast.Com. The program is designed to introduce
        the Company's concept to investment professionals. As of September 30,
        2001 and 2000, $30,000 and $12,500 had been paid and charged to
        operations, respectively.

        (H) CONSULTING
        --------------

         (i)     On September 26, 2000, the Company entered into a consulting
                 agreement with an individual to provide financial advisory
                 services. The consultant will be used for general business
                 matters with a goal to furthering the Company's business
                 strategies. The term of the agreement is for twelve months
                 from the effective date of the agreement.

                 In consideration for services to be rendered, the Company
                 issued 25,000 non-qualified stock options which vested
                 immediately upon the execution of the consulting agreement. The
                 options were to expire 5 years from the effective date of the
                 option agreement. The initial exercise price of the option was
                 equal to the lesser of (i) $14.60 and (ii) the average of the
                 lowest three trading prices during the twenty trading days
                 immediately prior to the exercise of the options, discounted by
                 35% (See Notes 10 and 16(F)).

                                       F-24



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

         (ii)     On June 7, 2001, the Company entered into a one year
                  consulting agreement. Based upon the terms of the agreement,
                  the Company granted 50,000 shares of the Company's common
                  stock valued at $165,000 plus warrants to purchase 100,000
                  shares of the Company's common stock a an exercise price of
                  $2.00 per share. The exercise price was subsequently decreased
                  to $1.00 per share. As of September 30, 2001, the consultant
                  had exercised all warrants. The first 25,000 shares were
                  purchased at an exercise price of $2.00 per share. The
                  remaining 75,000 shares were purchased at an exercise price
                  of $1.00 per share.

         (iii)    On September 4, 2001, the Company entered into a one year
                  consulting agreement with an individual who is affiliated with
                  Alliance Equities, Inc. (See Note 6). Based upon the terms of
                  the agreement, the Company will receive consulting services
                  relating to management, strategic planning and marketing in
                  connection with its business in exchange for 244,445 shares
                  of the Company's common stock plus warrants to purchase
                  200,000 shares of the Company's common stock with an exercise
                  price at $1.00 per share that expire on September 30, 2001. At
                  September 30, 2001, 75,000 warrants were exercised and the
                  Company received $68,500 and $6,500 was recorded as a
                  consulting expense. The remaining 125,000 warrants expired
                  and were no exercised. There was no charge to operations for
                  the year ended September 30, 2001 to reflect the fair value of
                  the warrants as computed under SFAS No. 12 using the
                  Black-Scholes Model because the amount was determined to be
                  immaterial.

(I) ADVERTISING AGREEMENT
-------------------------

On November 14, 2000, the Company entered into an advertising agreement with
eConnect, a publicly traded corporation. The terms of the agreement granted
eConnect the exclusive ability to place banner advertisements with hyperlinks o
the home pages of CinemaPop.com and WordPop.com, the Company's web sites for
movies and books. The Company also sent one e-mail message per month to its
subscriber and web partner base with a message provided by eConnect which
included information about eCash pads in trade magazine advertisements.
Additionally, the Company provided the eConnect website with access to several
video feature films so that it would demonstrate the eCash pad ordering system
with a link.

The term of this agreement was for six months, with one six-month renewal option
which was not exercised. In consideration for the services the Company rendered
under this agreement, the Company was paid $1,000,000 (which was included in net
sales) in the form of eConnect restricted stock valued at the closing price of
$1.25 per share on November 14, 2000, amounting to 800,000 shares. As of
September 30, 2001, the stock was valued at $.025 per share and the Company
recorded a realized loss on impairment of investments in marketable securities
of $980,000. This amount is included in the Company's statement of operations.

                                       F-25



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

NOTE 6 REVOLVING LINE OF CREDIT
-------------------------------

        On February 25, 1999, the Company entered into a Revolving Line of
        Credit Agreement ("the Agreement") with Alliance Equities, Inc.
        ("Alliance"), a Florida-based venture capital firm. Under the terms of
        the Agreement, as amended to date, Alliance will make available through
        December 30, 2003, a $7,000,000 revolving line of credit with interest
        on the unpaid principal at 10% per annum. Under the terms of the
        Agreement, the Company may draw up to $500,000 per month on the total
        line of credit upon written request by the Company to the Lender.
        Additionally the parties have agreed that any portion of the
        indebtedness may be paid back by the Company either with cash or by the
        issuance of common stock. Furthermore, in a separate Memorandum of
        Agreement the two parties agreed that Alliance will provide ongoing
        consulting services to the Company including, but not limited to,
        strategic growth advice and introductions, marketing advice, and
        business ideas. Alliance will be compensated for these services at the
        option of the Company either in cash, or through the issuance of stock
        or credit towards the purchase of stock. See Note 12(A) for issuance of
        convertible debt to Alliance. As of September 30, 2001, no amounts were
        outstanding under this line of credit and the Company had issued to
        Alliance 80,000 shares of the Company's common stock valued at
        approximately $554,400 for consulting services.

NOTE 7 COMMON STOCK AND PREFERRED STOCK
---------------------------------------

        The Company's Articles of Incorporation authorize the issuance of
        5,000,000 shares of preferred stock. The 1,000,000 shares of preferred
        stock issued in connection with the Big Tex business combination
        discussed in Note 1 (B) are convertible to common stock at an initial
        conversion rate of one share of common stock per share of Class A
        convertible preferred stock. Initially, each share of preferred stock
        was entitled to, among other things, three non-cumulative votes per
        share on all matters presented to the Company's stockholders for action.

        At a special meeting of the Company's stockholders held on May 24, 2000,
        the holders of the Company's preferred stock and common stock agreed to
        amend the Company's Articles of Incorporation so that the voting rights
        of the preferred stock were increased from 3 votes per share to twenty
        votes per share. As a result of this increase in voting rights, the
        Chairman of the Board, who is President and Chief Executive Officer,
        became entitled to exercise voting control over the Company.

        At a special meeting of the Company's stockholders held on March 14,
        2001, the holders of preferred stock and common stock agreed to amend
        the Company's articles of incorporation so that the voting rights of
        the preferred stock were increased from twenty non-cumulative votes per
        share, voting together with the common stock on all matters on which
        the holders of common stock are entitled to vote, to 100 non-cumulative
        votes per share on such matters. This amendment was filed on May 2,
        2001.

                                       F-26



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

        with the Nevada Secretary of State. As a result of this increase in
        voting rights, the Chairman of the Board, who is President and Chief
        Executive Officer, became entitled to exercise voting control over the
        Company.

        On May 2, 2001, the Company filed an amendment to its articles of
        incorporation that increased the number of shares of common stock
        authorized from 100,000,000 shares to 250,000,000 shares.

        See Note 16(A) for subsequent common stock disclosure.

NOTE 8 PRIVATE PLACEMENTS
-------------------------

        During the years ended September 30, 2001 and 2000, the Company
        completed private placements wherein it sold to investors an aggregate
        of 140,834 and 30,800 common shares for cash of $243,500 and $303,251,
        respectively. Additionally, during 2001 and 2000 the Company issued
        common stock in lieu of compensation and for outside services as
        described in the following paragraphs.

        During 2001, the Company issued 587,381 shares of common stock to
        officers and stockholders, for compensation having a fair value of
        $1,006,219, 420,342 shares of common stock for consulting services
        having a fair value of $1,008,445, 30,000 shares of common stock for
        marketing, advertising and investor relations having a fair value of
        $178,000 and 15,000 shares of common stock for professional services
        having a fair value of $44,000.

        During 2000, the Company issued 2,000 shares of common stock and 4,951
        shares of treasury stock to officers and stockholders for compensation
        having a fair value of $66,900, 101,050 shares of common stock for
        consulting services having a fair value of $2,042,523, 54,512 shares of
        common stock for marketing, advertising and investor relations having a
        fair value of $1,278,216 and 18,750 shares of common stock for
        professional services having a fair value of $888,000.

        The common shares issued in lieu of compensation and outside services
        were valued for financial accounting purposes at the fair market value
        of the common stock on the grant date.

                                       F-27



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

NOTE 9 STOCK INCENTIVE PLANS AND EMPLOYEE STOCK OPTIONS
-------------------------------------------------------

        During the year ended September 30, 2000, the Board of Directors
        terminated the Company's 1999 stock incentive plan which had been
        adopted on July 9, 1999. In connection with this termination, the
        117,500 options granted under this plan were cancelled.

        Effective as of May 24, 2000, the Company's Board of Directors and
        stockholders adopted a new stock option plan, entitled the 2000 Stock
        Option Plan (the "Plan"). The Plan was developed to provide a means
        whereby designated officers, employees and non-employee directors of the
        Company and its subsidiaries and employees of companies who do business
        with the Company may be granted incentive or non-qualified stock options
        to purchase common stock of the Company.

        The Plan authorizes the issuance of options to purchase up to an
        aggregate of 150,000 shares of the Company's common stock. Incentive
        stock options granted under the Plan must have an exercise price of not
        less than 100% of the fair market value of the common stock on the date
        the option is granted and must be exercised, if at all, within ten years
        from the date of grant. In the case of an incentive stock option granted
        to an optionee who owns more than 10% of the total voting securities of
        the Company on the date of grant, such exercise price shall not be less
        than 110% of fair market value on the date of grant, and the option
        period may not exceed five years. Non-qualified stock options granted
        under the Plan must have an exercise price of not less than 85% of fair
        market value of the common stock on the date the option is granted.
        Options may be exercised during a period of time fixed by the committee
        that administers the Plan, except that no option may be exercised more
        than 10 years after the date of grant.

        Effective March 14, 2001, the Company's board of directors approved a
        motion to cancel 126,875 options previously granted to various officers,
        directors and employees, with the consent of those officers, directors
        and employees.

        For financial statement disclosure purposes, the fair market value of
        each stock option granted during the year ended September 30, 2000 was
        estimated on the date of grant using the Black-Scholes Model in
        accordance with FASB No. 123 using the following weighted-average
        assumptions: expected dividend yield 0%, risk-free interest rate of
        5.75%, volatility of 87% and expected term of three years. There were no
        options granted or exercised under this Plan during the year ended
        September 30, 2001.

                                       F-28



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

        The Company applies APB Opinion No. 25 and related interpretations in
        accounting for its stock-based compensation plans. Accordingly, no
        compensation cost has been recognized for options issued to employees,
        officers and directors under the plans for the years ended September 30,
        2001 and 2000. Had compensation cost for the Company's stock-based
        compensation plans been determined on the fair value basis at the grant
        dates for awards under the plans, consistent with Statement of
        Accounting Standards No. 123, "Accounting for Stock Based Compensation"
        ("SFAS No. 123"), the Company's net loss for the years ended September
        30, 2001 and 2000 would have been increased to the pro-forma amounts
        indicated below.

                                                  2001                 2000
                                            ----------------     ---------------

Net loss                As reported         $    (9,224,059)     $  (12,976,706)

                         Pro forma          $    (9,224,059)     $  (15,725,139)
Net loss per
share (basic and
diluted)                As reported         $         (3.27)     $        (8.69)
                         Pro forma          $         (3.27)     $       (10.53)

        The effect of applying SFAS No. 123 is not likely to be representative
        of the effects on reported net loss for future years due to, among other
        things, the effects of vesting.

        A summary of options held by employees, officers and directors under the
        Company's stock option plan as of September 30, 2001 and changes during
        the year ended September 30, 2001, is presented below:

                                                                    Weighted
                                                                    Average
                                             Number of              Exercise
                                              Options                Price
                                           -------------         -------------
Stock Options
-------------
  Balance at beginning of period                145,625          $      14.60
  Cancelled                                    (126,875)         $      14.40
  Granted                                             -                     -
  Exercised                                           -                     -
  Forfeited                                           -                     -
                                           -------------         -------------
  Balance at end of period                       18,750          $      14.20
                                           =============         =============
Options exercisable at end of period             18,750          $      14.20
                                           =============         =============
Weighted average fair value of options
 granted during the period                                       $          -
                                                                 =============

                                       F-29



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

The following table summarizes information about stock options issued under the
Company's stock option plan to employees, officers and directors and outstanding
at September 30, 2001:

<TABLE>
<CAPTION>
                              Options Outstanding                                               Options Exercisable
     ------------------------------------------------------------------------------   ---------------------------------------
                              Number              Weighted                                  Number
                            Outstanding            Average             Weighted           Exercisable             Weighted
        Range of                at                Remaining             Average               at                  Average
        Exercise             September           Contractual           Exercise            September              Exercise
          Price              30, 2001              l Life                Price             30, 2001                Price
     ---------------    -------------------   -----------------     ---------------   -------------------      --------------
     <S>                          <C>             <C>               <C>                           <C>          <C>
     $        14.20               18,750          9 Years           $        14.20                18,750       $       14.20
     ===============    ===================                         ===============   ===================      ==============
</TABLE>

NOTE 10 COMMON STOCK OPTIONS ISSUED FOR CONSULTING AND OTHER SERVICES
---------------------------------------------------------------------

        The Company issued 15,000 common stock options on December 31, 1999, at
        an exercise price of $10.40 per share as consideration for consulting
        services. The fair market value of the options, aggregating $91,351, was
        estimated on the grant date using the Black-Scholes option pricing
        method as required under SFAS No. 123 with the following weighted
        average assumptions: expected dividend yield 0%, volatility 87%,
        risk-free interest rate 5.75%, expected option life 3 years. The $91,351
        was charged to consulting expense at the grant date (See Note 8).

        The Company issued 12,500 common stock options on January 12, 2000, at
        an exercise price of $5.00 per share as consideration for consulting
        services. The fair market value of the options, aggregating $322,268,
        was estimated on the grant date using the Black-Scholes option pricing
        method as required under SFAS No. 123 with the following weighted
        average assumptions: expected dividend yield 0%, volatility 87%,
        risk-free interest rate 5.75%, expected option life 3 years. The
        $322,268 was charged to consulting expense at the grant date (See Note
        8).

        The Company issued 16,500 common stock options on January 13, 2000, at
        an exercise price of $26.20 per share as consideration for consulting
        services. The fair market value of the options, aggregating $287,294,
        was estimated on the grant date using the Black-Scholes option pricing
        method as required under SFAS No. 123 with the following weighted
        average assumptions: expected dividend yield 0%, volatility 87%,
        risk-free interest rate 5.75%, expected option life 3 years. The
        $287,294 was charged to consulting expense at the grant date (See Note
        8).

                                       F-30



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

        The Company issued 4,375 common stock options on May 4, 2000, at an
        exercise price of $25.90 per share as consideration for consulting
        services. The fair market value of the options, aggregating $59,709, was
        estimated on the grant date using the Black-Scholes option pricing
        method as required under SFAS No. 123 with the following weighted
        average assumptions: expected dividend yield 0%, volatility 87%,
        risk-free interest rate 5.75%, expected option life 3 years. The $59,709
        was charged to consulting expense at the grant date. This stock option
        was granted under the 2000 stock option plan and is included in the
        calculations in Note 9. The Company issued 25,000 common stock warrants
        on September 26, 2000, at an exercise price of $14.60 per share as
        consideration for consulting services. The fair market value of the
        options aggregating $125,407, was estimated on the grant date using the
        Black-Scholes option pricing method as required under SFAS No. 123 with
        the following weighted average assumptions: expected dividend yield 0%,
        volatility 87%, risk-free interest rate 6.00%, expected option life 3
        year. The $125,407 was recorded as a prepaid expense at the grant date
        (See Note 5(H(i)).

        The Company issued 75,000 common stock warrants on June 7, 2001, at an
        initial exercise price of $2.00 per share as consideration under a
        consulting agreement. The exercise price was subsequently adjusted to
        $1.00 per share. The fair market value of the options aggregating
        $189,502 was estimated on the grant date using the Black-Scholes option
        pricing method as required under SFAS No. 123 with the following
        weighted average assumptions: expected dividend yield 0%, volatility
        130%, risk-free interest rate 4.25%, expected option life 1 year. The
        $189,502 was charged to consulting expense at the grant date (See Note
        5(H(ii)).

        In addition, the Company issued 25,000 common stock warrants on June 7,
        2001, at an exercise price of $2.00 per share as additional
        consideration under the same consulting agreement. The fair market value
        of the options aggregating $51,149 was estimated on the grant date using
        the Black-Scholes option pricing method as required under SFAS No. 123
        with the following weighted average assumptions: expected dividend yield
        0%, volatility 130%, risk-free interest rate 4.25%, expected option life
        1 year. The $51,149 was charged to consulting expense at the grant date
        (See Note 5(H(ii)).

NOTE 11 COMMON STOCK RESALE REGISTRATIONS
-----------------------------------------

        In January 2000, the Securities and Exchange Commission declared
        effective a registration statement on Form SB-2 whereby 89,167 shares of
        the Company's common stock underlying convertible debentures described
        in Note 12 were registered for resale by various investors.

        In March 2000, the Securities and Exchange Commission declared effective
        a registration statement on Form SB-2 whereby 128,403 shares of the
        Company's common stock underlying convertible debentures and warrants
        issued in 1999 and described in Note 12(B) were registered for resale by
        the holders of the debentures and warrants.

                                       F-31



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

        In July 2000, the Securities and Exchange Commission declared effective
        a registration statement on Form SB-2 whereby 761,595 shares of the
        Company's common stock underlying portions of the convertible debentures
        and warrants issued in 2000 and described in Notes 12(B) and (C) and
        were registered for resale by the holders of the debentures and
        warrants. In addition, the 43,334 shares registered in January 2000 and
        64,661 of the shares registered in March 2000 were covered by the
        prospectus included in this registration statement.

        In a series of SB-2 registration statements, the Company registered
        underlying common stock required to be issued upon the conversion of the
        related convertible debentures and warrants. (See Note 12).

        As described in Note 16(B), the Company is obligated to register for
        resale shares of common stock that are issuable in connection with its
        2002 debenture offering.

NOTE 12 CONVERTIBLE DEBT
------------------------

        (A) ALLIANCE EQUITIES
        ---------------------

        In order to provide working capital and financing for the Company's
        expansion, on August 5, 1999 the Company entered into an agreement with
        Alliance Equities ("the Purchaser") whereby the Purchaser acquired
        $520,000 of the Company's 10% Convertible Subordinated Debentures, due
        August 4, 2000.

        The Purchaser converted the debenture and accrued interest to common
        stock during the year ended September 30, 2000 at a conversion price of
        $12.00 per share.

        The debenture contained a contingency provision whereby, if the Company
        issues common stock at a price less than both the fixed conversion price
        and the then market price on the date of issuance, the fixed conversion
        price would be adjusted as stipulated in the agreement. Pursuant to the
        Rules and Regulations of the Securities and Exchange Commission
        regarding beneficial conversion features, the Company has expensed as
        financing costs any excess of the fair market value of the common stock
        at the debenture issuance date over the fixed conversion price, which
        amounted to $130,000 in 1999. There was no amortization period for these
        financing costs since the debentures were convertible immediately upon
        issuance (See Note 11).

                                       F-32



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

        (B) ADDITIONAL DEBENTURE INVESTORS
        ----------------------------------

        In order to provide working capital and financing for the Company's
        expansion, on various dates during 1999 and 2000 the Company entered
        into several agreements with four accredited investors the ("Purchaser")
        whereby the Purchaser acquired $550,000, $1,000,000 and $4,500,000 of
        the Company's 10% Convertible Debentures, due September 29, 2000,
        February 1, 2001 and May 1, 2001, respectively.

        Relating to the $1,000,000 of debentures due February 1, 2001, the
        Company issued 15,000 common stock warrants on February 1, 2001, at an
        exercise price of $38 per share as consideration for debt financing. The
        fair market value of the warrants were deemed immaterial as estimated on
        the grant date using the Black-Scholes option pricing method as required
        under SFAS 123 with the following weighted average assumptions: expected
        dividend yield 0%, volatility 87%, risk-free interest rate 6.22%,
        expected option life 3 years. As of the date of this report no warrants
        have been exercised.

        Relating to the $3,000,000 of debentures due February 1, 2001, the
        Company issued 45,000 common stock warrants on April 1, 2001, at an
        exercise price of $38 per share as consideration for debt financing. The
        fair market value of the warrants were deemed immaterial as estimated on
        the grant date using the Black-Scholes option pricing method as required
        under SFAS 123 with the following weighted average assumptions: expected
        dividend yield 0%, volatility 87%, risk-free interest rate 6.15%,
        expected option life 3 years. As of the date of this report no warrants
        have been exercised.

        Pursuant to the Rules and Regulations of the Securities and Exchange
        Commission regarding beneficial conversion features, the Company has
        expensed as financing costs any excess of the fair market value of the
        common stock at the debenture issuance date over the fixed conversion
        price which for fiscal year 2000 amounted to $292,500 for debentures due
        September 29, 2000, $925,000 for debentures due February 1, 2001 and
        $1,760,000 for debentures due May 1, 2001.

        The Purchaser converted portions of the 2000 debentures and accrued
        interest at various times. The initial conversion price was equal to the
        lesser of $19.40 and 66.66% of the average closing bid price during the
        twenty trading days immediately preceding the conversion dates.

        In order to provide working capital and financing for the Company's
        expansion during 2001, effective as of January 5, 2001, the Company
        entered into a securities purchase agreement and related agreements with
        four accredited investors (the "Purchasers") for the purchase of the
        Company's 12% Convertible Debentures due January 5, 2002 and March 9,
        2002.

        The debentures are immediately convertible into shares of the Company's
        common stock. The initial conversion price for the January and March
        2001 debentures was equal to the lesser of (i) $3.00 and (ii) the
        average of the lowest three intraday trading prices during the twenty
        trading days immediately prior to the conversion date, discounted by
        37.5%.

        The Purchasers made investments in tranches, the first in the aggregate
        amount of $650,000, which was received upon signing of the definitive
        investment agreements and the second, in the aggregate amount of
        $650,000, which was received in March 2001.

        Pursuant to the Rules and Regulations of the Securities and Exchange
        Commission regarding beneficial conversion features, the Company has
        expensed as financing costs any excess of the fair market value of the
        common stock at the debenture issuance date over the fixed conversion
        price which for fiscal year 2001 amounted to $533,500 for the debentures
        due January 5, 2002, and $412,500 for the debentures due March 9, 2002.

                                       F-33



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

        Upon the issuance of the first $650,000 of convertible debentures, the
        Purchasers received five-year term warrants to purchase 0.15 shares of
        the Company's common stock for each $1.00 invested or which may have
        been invested in the two $650,000 tranches of convertible debentures.
        The initial exercise price of the warrants was equal to the lesser of
        (i) $2.50 and (ii) the average of the lowest three intraday trading
        prices during the twenty trading days immediately preceding the exercise
        date. For all debentures issued in January and March 2001, interest is
        12% per annum, payable quarterly in common stock or cash at the option
        of the Purchasers.

        In connection with the 2001 issuance of the convertible debentures due
        due January 5, 2002, the Company has issued warrants to acquire
        additional shares of the Company's common stock as follows:

        The Company issued 20,000 common stock warrants on January 5, 2001, at
        an exercise price of $50 per share as consideration for debt financing.
        The fair market value of the warrants were deemed immaterial as
        estimated on the grant date using the Black-Scholes option pricing
        method as required under SFAS 123 with the following weighted average
        assumptions: expected dividend yield 0%, volatility 101%, risk-free
        interest rate 4.81%, expected option life 3 years. As of the date of
        this report no warrants have been exercised.

        The Company issued 3,750 common stock warrants on February 15, 2001, at
        an exercise price of $50 per share as consideration for debt financing.
        The fair market value of the warrants were deemed immaterial as
        estimated on the grant date using the Black-Scholes option pricing
        method as required under SFAS 123 with the following weighted average
        assumptions: expected dividend yield 0%, volatility 101%, risk-free
        interest rate 4.68%, expected option life 3 years. As of the date of
        this report no warrants have been exercised.

        The Company issued 8,750 common stock warrants on March 9, 2001, at an
        exercise price of $50 per share as consideration for debt financing. The
        fair market value of the warrants were deemed immaterial as estimated on
        the grant date using the Black-Scholes option pricing method as required
        under SFAS 123 with the following weighted average assumptions: expected
        dividend yield 0%, volatility 101%, risk-free interest rate 4.30%,
        expected option life 3 years. As of the date of this report no warrants
        have been exercised.

        In connection with the 2001 issuance of the convertible debentures due
        March 9, 2002, the Company issued 32,500 common stock warrants on March
        5, 2001, at an exercise price of $50 per share as consideration for debt
        financing. The fair market value of the warrants were deemed immaterial
        as estimated on the grant date using the Black-Scholes option pricing
        method as required under SFAS 123 with the following weighted average
        assumptions: expected dividend yield 0%, volatility 101%, risk-free
        interest rate 4.30%, expected option life 3 years. As of the date of
        this report no warrants have been exercised.

                                       F-34



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

        As of April 30, 2001, $1,848,500 of the original $4,500,000 principal
        balance of 10% Convertible Debentures due May 1, 2001 remained
        outstanding. As of April 30, 2001, the Company entered into an agreement
        with the holders of these debentures to extend the due date of these
        debentures to May 1, 2002. In consideration for the extension, the
        Company granted to the holders warrants to purchase up to an aggregate
        of 67,500 shares of common stock at an initial exercise price equal to
        the lesser of the average of the lowest three intraday trading prices
        during the twenty trading days immediately preceding the grant of the
        warrants, discounted by 33.34%, and the average of the lowest three
        intraday trading prices of a share of common stock during the twenty
        trading days immediately preceding exercise of the warrants.

        The 67,500 warrants had an exercise price of $1.17 per share as
        consideration for extending the due date related to debt financing. The
        fair market value of the warrants, aggregating $97,108 was estimated on
        the grant date using the Black-Scholes option pricing method as required
        under SFAS 123 with the following weighted average assumptions: expected
        dividend yield 0%, volatility 132%, risk-free interest rate 4.25%,
        expected option life 3 years. The $97,108 was charged to interest and
        financial costs at the grant date. As of the date of this report no
        warrants have been exercised.

        In order to provide working capital and financing for the Company's
        expansion, as of June 29, 2001, the Company entered into a securities
        purchase agreement and related agreements with three accredited
        investors (the "Purchasers") for the purchase of $500,000 of the
        Company's 12% Convertible Debentures due June 29, 2002. The debentures
        bear interest at a rate of 12% per annum, payable quarterly in common
        stock or cash at the option of the Purchasers.

        The debentures initially were convertible into shares of common stock at
        the lesser of $2.00 per share and 50% of the average of the lowest three
        intraday trading prices of a share of common stock during the twenty
        trading days immediately preceding conversion.

        Pursuant to the Rules and Regulations of the Securities and Exchange
        Commission regarding beneficial conversion features, the Company has
        expensed as financing costs any excess of the fair market value of the
        common stock at the debenture issuance date over the fixed conversion
        price which for fiscal year 2001 amounted to $50,000 for debentures due
        June 29, 2002.

        Upon the issuance of the June 2001 debentures, the Purchasers received
        five-year term warrants to purchase 0.15 shares of the Company's common
        stock for each $1.00 invested. The initial exercise price of the
        warrants was equal to the lesser of $1.17 and the average of the lowest
        three intraday trading prices of a share of common stock during the
        twenty trading days immediately preceding exercise.

        The Company issued 75,000 common stock warrants on June 29, 2001, at an
        exercise price of $1.17 per share as consideration for debt financing.
        The fair market value of the warrants were deemed immaterial as
        estimated on the grant date using the Black-Scholes option pricing
        method as required under SFAS 123 with the following weighted average
        assumptions: expected dividend yield 0%, volatility 101%, risk-free
        interest rate 3.58%, expected option life 3 years. As of the date of
        this report no warrants have been exercised.

                                       F-35



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

        Pursuant to the rules and regulations of the SEC regarding beneficial
        conversion features, the Company expensed as financing costs any excess
        of the fair market value of the common stock at the debenture issuance
        date over the fixed conversion price which amounts aggregated
        approximately $996,000 and $2,977,500 in 2001 and 2000, respectively.
        There was no amortization period for these financing costs since the
        debentures were convertible immediately upon issuance.

        The Company's convertible debentures and related warrants contain
        anti-dilution provisions whereby, if the Company issues common stock or
        securities convertible into or exercisable for common stock at a price
        less than the conversion or exercise prices of the debentures or
        warrants, the conversion and exercise prices of the debentures or
        warrants shall be adjusted as stipulated in the agreements governing
        such debentures and warrants.

        As of June 29, 2001, the Company entered into a letter agreement with
        certain of its debenture investors, which letter agreement which
        provided various anti-dilution adjustments to the debentures and
        warrants issued in the April 2000, January 2001 and March 2001 debenture
        offerings. These adjustments were made partly in lieu of other
        adjustments that would have been imposed under the terms of the April
        2000, January 2001 and March 2001 debenture offering documents. As a
        result of these adjustments, the conversion prices for the debentures
        held by these entities and issued in the April 2000, January 2001 and
        March 2001 offerings were reduced to the lesser of (i) $2.00 per share,
        and (ii) 50% of the average of the three lowest intraday trading prices
        of a share of our common stock for the twenty trading days immediately
        preceding the conversion of the debentures. In addition, the exercise
        prices of the warrants issued in connection with the April 2000, January
        2001 and March 2001 offerings were reduced to the lesser of (i) $1.17
        per share, and (ii) the average of the three lowest intraday trading
        prices of a share of our common stock for the twenty trading days
        immediately preceding the exercise of the warrants.

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

                                       F-36



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

        During the year ended September 30, 2001, the Company issued an
        aggregate of 1,552,514 shares of common stock to five accredited
        investors in connection with regular interest payments and upon
        conversion of an aggregate of $3,090,672 of principal plus related
        interest on the Company's convertible debentures. No gain or loss was
        recognized upon the conversion of debt to equity (See Note 11).

        As of September 30, 2001, the Company was indebted for an aggregate of
        $2,756,500 on these convertible debentures. To the extent debentures
        issued by the Company are converted into shares of common stock, the
        Company will not be obligated to repay the converted amounts.

        As of September 30, 2001 and 2000, the Company was indebted for
        $2,218,500 and $2,470,000 respectively, on these convertible debentures
        (See Notes 16(B) and 16(F)).

        (C) BANK INSINGER DE BEAUFORT
        -----------------------------

        In order to provide working capital and financing for the Company's
        expansion, on February 4, 2000 and April 14, 2000 the Company entered
        into agreements with Bank Insinger De Beaufort ("the Purchaser") whereby
        the Purchaser acquired $500,000 and $1,500,000 of the Company's 10%
        Convertible Debentures, due February 1, 2001 and May 1, 2001,
        respectively.

        The Purchaser has converted portions of the 2001 and 2000 debentures and
        accrued interest at various times. The initial conversion price was
        equal to the lesser of $19.40 and 66.66% of the average closing bid
        price during the twenty trading days immediately preceding the
        conversion dates (see note 11).

        The debenture contains a contingency provision whereby, if the Company
        issues common stock at a price less than both the fixed conversion price
        and the then market price on the date of issuance, the fixed conversion
        price shall be adjusted as stipulated in the agreement. Pursuant to the
        Rules and Regulations of the Securities and Exchange Commission
        regarding beneficial conversion features, the Company has expensed as
        financing costs any excess of the fair market value of the common stock
        at the debenture issuance date over the fixed conversion price, which
        amounted to $280,000 for the year ended 2000. There is no amortization
        period for these financing costs since the debentures are convertible
        immediately upon issuance.

        As of September 30, 2001 and 2000, the Company was indebted for $70,000
        and $1,250,000 respectively, on these convertible debentures to Bank
        Insinger.

                                       F-37



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

NOTE 13 INCOME TAXES
--------------------

        The Company's tax expense differs from the "expected" tax expense
        (benefit) for the years ended September 30, 2001 and 2000 (computed by
        applying the Federal corporate tax rate of 34 percent to loss before
        taxes) as follows:
                                                  2001                2000
                                             ---------------    ---------------
        Computed "expected" tax (benefit)    $   (1,966,000)    $   (2,824,000)
        Change in valuation allowance             1,966,000          2,824,000
                                             ---------------    ---------------
                                             $            -     $            -
                                             ===============    ===============

        As discussed in Note 1(M), the tax effects of temporary differences that
        give rise to significant portions of deferred tax assets and liabilities
        at September 30, 2001 and 2000 are as follows:

                                                   2001               2000
                                             ---------------    ---------------
        Deferred tax assets:

        Net operating loss carryforward      $    5,665,000     $    3,699,000
                                             ---------------    ---------------
        Total gross deferred tax assets           5,665,000          3,699,000
        Less valuation allowance                 (5,665,000)        (3,699,000)
                                             ---------------    ---------------
                                             $            -     $            -
                                             ===============    ===============

        At October 1, 2000, the valuation allowance was approximately
        $3,699,000. The net change in the valuation allowance during the year
        ended September 30, 2001 was an increase of approximately $1,966,000. As
        of September 30, 2001, the Company has net operating loss carryforwards
        in the aggregate of approximately $16,501,000 which expire in various
        years through 2021.

NOTE 14 SEGMENT INFORMATION
---------------------------

        As discussed in Note 1(A), the Company's operations are classified into
        two reportable business segments: Kanakaris Wireless which supplies
        Internet products for electronic commerce and Desience Corporation which
        designs and installs modular consoles primarily for various business and
        government agencies. Both of the Company's business segments have their
        headquarters and major operating facilities located in the United
        States. The principal markets for the Company's products are in the
        United States. There were no intersegment sales or purchases. Financial
        information by business segment is summarized as follows:

                                       F-38



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

                                   Internet       Modular
            2001                   Commerce       Consoles        Total
------------------------------   -------------   ------------  -------------

Revenues                         $  1,186,681    $   513,136   $  1,699,817
Segment profit (loss)              (9,251,149)        27,090     (9,224,059)
Total assets                        1,135,953         34,771      1,170,724
Additions to long-lived assets         49,221              -         49,221
Depreciation and amortization         146,682            249        146,931

                                   Internet       Modular
            2000                   Commerce       Consoles        Total
------------------------------   -------------   ------------  -------------

Revenues                         $     22,594    $   591,244   $    613,838
Segment profit (loss)             (13,012,736)        36,030    (12,976,706)
Total assets                        2,384,966        103,235      2,488,201
Additions to long-lived assets        503,636          1,254        504,890
Depreciation and amortization          63,004          3,087         66,091

NOTE 15 RELATED PARTY TRANSACTIONS
----------------------------------

        During the year ended September 30, 2001, the Company issued 611,130
        shares of its common stock to officers, directors, accountants and
        related party consultants, having an aggregate fair market value of
        $1,935,250.

NOTE 16 SUBSEQUENT EVENTS
-------------------------

        (A) REVERSE STOCK SPLIT
        -----------------------

        On November 8, 2001, the Board of Directors and a majority of the voting
        power of the Company's stockholders approved an amendment to the
        Restated Articles of Incorporation to reflect a one-for-twenty reverse
        split of the issued and outstanding shares of common stock which has
        been retroactively reflected in the accompanying financial statements.
        All shares and per shares amounts have been restated to reflect the
        one-for-twenty reverse split. The Amendment became effective upon its
        filing with the Nevada Secretary of State on December 7, 2001.

        (B) CONVERTIBLE DEBENTURES
        --------------------------

        In January 2002, the Company issued to Bank Insinger de Beaufort Safe
        Custody NV an aggregate of $200,000 of the Company's 12% Convertible
        Debentures due January 9, 2003, which were accompanied by warrants to
        purchase up to an aggregate of 600,000 shares of common stock. The net
        proceeds of the offering, after payment of some related expenses, were
        $165,500.

                                       F-39



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

        Bank Insinger may, at its option, purchase an additional $200,000 of the
        Company's 12% convertible debentures and warrants to purchase up to
        600,000 shares of common stock within thirty days after the effective
        date of a registration statement that the Company is required to file on
        behalf of Bank Insinger within thirty days after the issuance of the
        initial $200,000 of debentures. The debentures and warrants are
        immediately convertible into or exercisable for shares of common stock
        at an initial per share price equal to the lesser of $.055 and the
        average of the lowest three intraday trading prices during the twenty
        trading days immediately preceding a conversion or exercise.

        (C) LETTERS OF INTENT
        ---------------------

        (i) Aircraft Systems Engineering & Certification, Inc.
        ------------------------------------------------------

        On November 5, 2001, the Company entered into a letter of intent with
        Aircraft Systems Engineering & Certification, Inc. ("Seller") to
        purchase all of the common stock of the Seller on a closing date which
        has yet to be determined.

        Under the terms of the letter, the Company will acquire these shares
        with cash, issuance of unsecured promissory notes and the issuance of
        the Company's common stock. Furthermore, upon the eighteen-month
        anniversary of the closing, the Seller shall receive common stock
        warrants to purchase additional Company shares.

        When a closing date has been established, the Company shall make a
        contribution of capital for a mutually agreed upon use of proceeds.
        Also, on the six-month anniversary of the closing date, the Company will
        make a second contribution of capital for a mutually agreed upon use of
        proceeds.

        At the closing, the Company shall assume certain indebtedness of the
        Seller to the extent specifically identified in the definitive
        agreement.

        Following the acquisition, the seller shall be entitled to designate up
        to two seats on the Board of Directors of the Company and the Company
        shall be entitled to designate one seat on the Board of Directors of the
        Seller.

        As of the date of this report, the transaction has not closed.

        (ii) Stovact, Inc.
        ------------------

        On November 5, 2001, the Company entered into a letter of intent with
        Stovact, Inc. ("Seller") to purchase all of the assets of the Seller on
        a closing date which has yet to be determined.

                                       F-40



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

        Under the terms of the letter, the Company will acquire these assets
        with cash when a closing date is established. The Company shall advance
        an additional cash payment at the six-month anniversary from the closing
        date.

        At the closing, the Company shall permit the business (post-acquisition)
        to assume certain trade indebtedness previously incurred by the Seller
        and mutually agreed upon between the parties. Furthermore, upon the
        eighteen-month anniversary of the closing, the Seller shall receive
        common stock warrants to purchase Company shares, based upon a formula
        mutually acceptable to both parties as specifically identified in the
        definitive agreement.

        Following the acquisition, the Seller shall be entitled to designate up
        to two seats on the Board of Directors of the Company and the Company
        shall be entitled to designate one seat on the Board of Directors of the
        Seller.

        As of the date of this report, the transaction has not closed.

        (D) SERVICE AGREEMENT
        ---------------------

        On October 9, 2001, the Company entered into a service agreement with
        Mind Pointe, Inc. Based upon the terms of the contract, Mind Pointe,
        Inc. will provide web hosting, development services, and programming and
        design assistance for the Company's website. The Company will pay
        approximately $17,000 each month for these services.

        On November 5, 2001, the Company entered into a consulting agreement to
        obtain assistance in entering and developing international markets. The
        cost is $185,000 for three months from December 1, 2001 through March 1,
        2002.

        (E) STOCK ISSUANCES
        -------------------

        During October 2001 and November 2001, the Company issued an aggregate
        of 897,966 shares of common stock having a fair value of $173,955 to
        various debenture investors representing the conversion of principal and
        interest.

        On October 2, 2001, the Company issued 125,000 shares of common stock to
        a consultant upon the exercise of a common stock purchase warrant issued
        in connection with a consulting agreement. The Company received
        approximately $35,000 as consideration. This amount reflects a repricing
        adjustment of the exercise price for the warrants.

        On October 17, 2001, the Company issued 180,000 shares of common stock
        having a fair value of $136,800 to Company personnel for services
        provided between October 1, 2001 and December 31, 2001.

                                       F-41



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

        On October 26, 2001, and November 29, 2001, the Company entered into
        separate consulting agreements to obtain assistance in strategic
        planning and acquisitions. The terms of the agreements are for six
        months and twelve months, respectively. Based upon the terms of the
        agreements the Company issued 1,583,442 shares of the its common stock
        having a fair value of $447,001 for consulting services. In addition,
        the Company provided the consultant the option to purchase 156,250
        shares of common stock at an exercise price of $.80 per share, and
        425,000 shares at an exercise price of $.40 per share, respectively. As
        of the date of this report, all of the shares were issued to the
        consultant and the Company received approximately $221,000 upon the
        exercise of the warrants. This amount reflects a repricing adjustment of
        the exercise price for the warrants.

        On November 28, 2001, pursuant to a consulting agreement, the Company
        issued 303,572 shares of common stock to a consultant having a fair
        value of approximately $85,000.

        On December 3, 2001, the Company entered into a settlement agreement
        with a former officer in satisfaction of certain claims, whereby 125,000
        shares of common stock, 62,500 of which shares have registration rights,
        were issued having a fair value of $37,500.

        (F) ADJUSTMENTS TO OUTSTANDING SECURITIES
        -----------------------------------------

        In January 2002, the Company entered into an agreement with Bank
        Insinger de Beaufort Safe Custody NV, Bristol Investment Fund, Ltd.,
        Bristol Capital, LLC, and Paul Kessler, who is a principal of Bristol
        Capital, LLC. Under the agreement, the conversion price of the 10%
        Convertible Debenture due May 1, 2002 that Bank Insinger purchased in
        the Company's April 2000 offering was amended to be the lesser of $.055
        and the average of the lowest three intraday trading prices during the
        twenty trading days immediately preceding a conversion. In addition, the
        exercise prices of the warrants issued to Bank Insinger in the February
        2000, April 2000 and May 2001 offerings, the warrants issued to Bristol
        Investment Fund in the January 2001 offering, the warrants issued to
        Bank Insinger in the April 2000 offering that were transferred to
        Bristol Capital, and the option issued to Paul Kessler pursuant to a
        consulting agreement dated as of September 26, 2000 were amended so that
        the exercise prices are equal to the lowest three intraday trading
        prices during the twenty trading days immediately preceding an exercise.
        The expiration dates of each of the warrants and options described in
        the preceding sentence were extended so that each is exercisable until
        the seventh anniversary of its issuance.

NOTE 17 LIQUIDITY
-----------------

        During the year ended September 30, 2001 the Company incurred a negative
        cash flow from operating activities of $2,569,400 and at September 30,
        2001 had a working capital deficiency of $3,542,822 and an accumulated
        deficit of $30,565,000. As of that date, the Company had $51,000 in
        cash, $122,000 in accounts receivable - net, and $111,000 in notes
        receivable from stockholders and related parties. The Company had
        accounts payable and accrued expenses of $1,087,000 and outstanding
        convertible debentures of $2,757,000, including convertible debentures
        issued prior to the beginning of fiscal year 2001. To the extent
        convertible debentures the Company has issued are converted into shares
        of common stock, the Company will not be obligated to repay the
        converted amounts.

                                       F-42



<PAGE>

                       KANAKARIS WIRELESS AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF SEPTEMBER 30, 2001 AND 2000
                        ---------------------------------

        The Company has a $7,000,000 revolving line of credit from Alliance
        Equities which can be drawn upon by the Company for up to $500,000 per
        month (See Note 6). In January 2002, the Company issued an aggregate of
        $200,000 of the Company's 12% Convertible Debentures due January 9, 2003
        (See Note 16(B)). The investor may, at its option, purchase an
        additional $200,000 of the Company's 12% convertible debentures within
        thirty days after the effective date of a registration statement that
        the Company is required to file on behalf of the investor within thirty
        days after the issuance of the initial $200,000 of debentures. However,
        the investor is not committed to purchase the additional debentures, and
        the Company believes that its continued operations could be dependent on
        securing additional sources of liquidity through debt and/or equity
        financing.

        The Company has been working toward identifying and obtaining new
        sources of funding. Deteriorating global economic conditions and the
        effects of ongoing military actions against terrorists may cause
        prolonged declines in investor confidence in and accessibility to
        capital markets. Further, the Company's current debenture financing
        documents contain notice and right of first refusal provisions and the
        grant of a security interest in substantially all of the Company's
        assets in favor of a debenture investor, all of which provisions will
        restrict the Company's ability to obtain debt and/or equity financing.

        If adequate funds are not available, the Company may be required to
        delay, scale back or eliminate portions of its operations and product
        and service development efforts or to obtain funds through arrangements
        with strategic partners or others that may require the Company to
        relinquish rights to certain of its technologies or potential products
        or other assets. Accordingly, the inability to obtain such financing
        could result in a significant loss of ownership and/or control of the
        Company's proprietary technology and other important assets and could
        also adversely affect the Company's ability to fund its continued
        operations and its product and service development efforts that
        historically have contributed significantly to its competitiveness.

        In an effort to increase sales related to the Company's wireless
        business, the Company is implementing an enhanced marketing and sales
        strategy. For example, the Company is selling advertising sponsorships
        to its AK.TV 24-hour streaming Internet television channel. The Company
        also is completing research and development of additional attributes to
        its CinemaWEAR(TM) technology with the goal of launching an interactive
        personal meeting site within the AK.TV interactive channel.

        Also, the Company is enhancing its efforts to obtain online user
        registration for movie viewing on AK.TV, soliciting monthly
        subscriptions to and pay-per-view sales of movie viewing on AK.TV,
        introducing revenue-sharing web partner programs and improving tracking
        of the Company's market share. The Company believes that if it is
        successful in implementing the above business strategies, the Company
        will generate increased revenues from its wireless content and
        technology business segment.

        In an effort to increase sales of the Company's data control console
        products by increasing the Company's production capacity for its
        Desience Division OPCON Modular System, the Company reached agreement
        with two established manufacturers to provide for the Company's original
        equipment manufacturing production needs. In addition, the Company
        launched a marketing campaign that includes high-impact sales literature
        and a cutting-edge web site at www.desience.com. The Company believes
        that if it successful in implementing its business strategies for its
        modular consoles segment, the Company will generate increased revenues
        from this segment.

                                       F-43



<PAGE>

                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

Dated: June 26, 2002                   KANAKARIS WIRELESS

                                       By: /S/ ALEX F. KANAKARIS
                                          --------------------------------------
                                          Alex F. Kanakaris, Chairman of the
                                          Board, President and Chief Executive
                                          Officer

         In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>

        SIGNATURE                          TITLE                           DATE
        ---------                          -----                           ----
<S>                                <C>                               <C>
/S/ ALEX F. KANAKARIS              Chairman of the Board,            June 26, 2002
----------------------------       President, Chief Executive
Alex F. Kanakaris                  Officer, and Director
                                   (Principal Executive
                                   Officer)

/S/ DAVID THOMAS SHOMAKER          Acting Chief Financial            June 26, 2002
----------------------------       Officer (Principal Financial
David Thomas Shomaker              and Accounting Officer)

/S/ JOHN ROBERT MCKAY              Webmaster and Director            June 26, 2002
----------------------------
John Robert McKay

/S/ LISA LAWRENCE                  Director                          June 26, 2002
----------------------------
Lisa Lawrence

/S/ VAN HOLSTER                    Director                          June 26, 2002
----------------------------
Van Holster

/S/ ROSE FORBES                    Director                          June 26, 2002
----------------------------
Rose Forbes

                                   Director                          June 26, 2002
----------------------------
Caroline Michaels

                                   Director                          June 26, 2002
----------------------------
Charles Moore

</TABLE>