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

                                    FORM 10-Q


                                   (Mark One)
     [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
                              Exchange Act of 1934
                  For the quarterly period ended June 30, 2002.
                                       or

     [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
                              Exchange Act of 1934
           For the transition period from ____________to____________.

                        Commission File Number 000-30928

                        PATH 1 NETWORK TECHNOLOGIES INC.
             (Exact name of registrant as specified in its charter)


               DELAWARE                                   13-3989885
       (State or other jurisdiction of                 (I.R.S. Employer
        incorporation or organization)                Identification No.)



           6215 FERRIS SQUARE, SUITE 140, SAN DIEGO, CALIFORNIA 92121
                                 (858) 450-4220
   (Address, including zip code, and telephone number, including area code, of
                          principal executive offices)

            3636 Nobel Drive, Suite 400, San Diego, California 92122
              (Former name, former address and former fiscal year,
                          if changed from last report)

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

The number of shares outstanding of the issuer's Common Stock, US$.001 par value
per share, as of August 7, 2002 was 8,440,275.


<PAGE>


                        PATH 1 NETWORK TECHNOLOGIES INC.
                          Quarterly Report on Form 10-Q
                  For the Quarterly Period Ended June 30, 2002

                                TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION.................................................3
   ITEM 1. FINANCIAL STATEMENTS................................................3
      CONDENSED CONSOLIDATED BALANCE SHEETS....................................3
      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS..........................4
      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS..........................5
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.....................6
  ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
     CONDITION AND RESULTS OF OPERATIONS......................................11
  ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
     MARKET RISK .............................................................30
PART II - OTHER INFORMATION...................................................30
   ITEM 1. LEGAL PROCEEDINGS..................................................30
   ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS..........................30
   ITEM 3. DEFAULTS UPON SENIOR SECURITIES....................................30
   ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................30
   ITEM 5. OTHER INFORMATION..................................................31
   ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...................................31



<PAGE>


PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
                                    PATH 1 NETWORK TECHNOLOGIES INC.
                                  CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (in US$, thousands except share data)
                                                                          June 30,           December 31,
                                                                            2002                 2001
                                                                       -----------------------------------
<S>                                                                                <C>                <C>
ASSETS                                                                   (unaudited)
Current assets:
 Cash and cash equivalents                                                   $   1,367        $    1,181
 Restricted cash                                                                    46                 -
 Marketable securities, available for sale                                           -               552
 Accounts receivable                                                               549               322
 Inventory                                                                          72                78
 Other current assets                                                               29               207
                                                                       -----------------------------------
      Total current assets                                                       2,063             2,340

Property and equipment, net                                                        229               365
Assets of discontinued operations                                                    -               702
Debt issuance costs                                                                800                 -
Other assets                                                                       183                11
                                                                       -----------------------------------
Total assets                                                                 $   3,275        $    3,418
                                                                       ===================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable and accrued liabilities                                     $    380         $     898
 Accrued compensation and benefits                                                 343               469
 Liabilities of discontinued operations                                              -               702
 Current portion of notes payable                                                1,086                 -
 Deferred revenue                                                                   74                 -
                                                                       -----------------------------------
      Total current liabilities                                                  1,883             2,069

Long-term liabilities:
 Notes payable                                                                     436                 -

Commitments and contingencies

Stockholders' equity:
 Preferred stock, $0.001 par value; no shares issued or outstanding                  -                 -
 Common stock, $0.001 par value; 20,000,000 shares authorized,                       8                 8
           8,449,676 and 8,204,801shares issued outstanding at
           June 30, 2002, and Decemeber 31, 2001 respectively
 Common stock issuable                                                             849                 -
 Notes receivable from stockholders                                                  -               (86)
 Additional paid-in capital                                                     28,682            26,801
 Deferred compensation                                                            (126)             (276)
 Accumulated other comprehensive loss                                                -             (616)
 Accumulated deficit                                                           (28,457)          (24,482)
                                                                       -----------------------------------
      Total stockholders' equity                                                   956             1,349
                                                                       -----------------------------------
Total liabilities and stockholders' equity                                   $   3,275        $    3,418
                                                                       ===================================

  See accompanying notes to these condensed consolidated financial statements.
</TABLE>

<PAGE>
<TABLE>

                        PATH 1 NETWORK TECHNOLOGIES INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                  (in US$, thousands, except per share amounts)
                                   (unaudited)

                                                         Three Months Ended                 Six Months Ended
                                                              June 30,                          June 30,
                                                       2002              2001             2002             2001
<S>                                                            <C>               <C>               <C>             <C>
Revenues:
 Contract services                                        $     5          $    300            $   11          $  300
 Product sales                                                536               249               685             249
                                                 ----------------- ---------------------------------------------------
Total revenues                                                541               549               696             549
                                                 ----------------- ---------------------------------------------------
Cost of revenues:
 Cost of contract services                                      1               261                 2             261
 Cost of product sales                                        266                75               367              75
                                                 ----------------- ---------------------------------------------------
Gross profit                                             $    274          $    213            $  327          $  213

Operating expenses:
 Engineering research and development                    $    423          $    627            $  995         $ 1,624
 Sales and marketing                                          132                76               325             258
 General and administrative                                   566               866             1,345           1,673
 Stock-based compensation                                      73            (2,771)              173          (1,457)
                                                 ----------------- ---------------------------------------------------
        Total operating expenses                           (1,194)            1,202            (2,838)         (2,098)


Interest income                                                 -                54                 -             151

Interest expense                                             (557)                -              (557)              -

Loss on sale of securities                                      -                 -              (590)            (49)
                                                 ----------------- ---------------------------------------------------
Net income (loss) from continuing operations               (1,477)            1,469            (3,658)         (1,783)
                                                 ================= ===================================================
Discontinued operations                                       (66)             (607)             (317)           (910)
                                                 ----------------- ---------------------------------------------------
Net income (loss)                                      $   (1,543)         $    862          $ (3,975)       $ (2,693)
                                                 ================= ===================================================
Income (loss) from continuing operations per
common share - basic                                   $    (0.18)         $   0.18         $  (0.43)       $  (0.22)
                                                 ================= ===================================================
Income (loss) from continuing operations per           $    (0.18)         $   0.15         $  (0.43)       $  (0.22)
common share - diluted
                                                 ================= ===================================================
Income (loss) from discontinued operations per
common share - basic                                   $    (0.01)         $  (0.07)        $  (0.04)       $  (0.11)
                                                 ================= ===================================================
Income (loss) from discontinued operations per         $    (0.01)         $  (0.06)        $  (0.04)       $  (0.11)
common share - diluted
                                                 ================= ===================================================
Income (loss) per common share - basic                 $    (0.18)         $   0.11         $  (0.47)       $  (0.33)
                                                 ================= ===================================================
Income (loss) per common share - diluted               $    (0.18)         $   0.09         $  (0.47)       $  (0.33)
                                                 ================= ===================================================
Weighted average common shares outstanding -
basic                                                       8,424             8,202            8,424           8,204
                                                 ================= ===================================================
Weighted average common shares outstanding -
diluted                                                     8,424             9,923            8,424           8,204
                                                 ================= ===================================================

 (*)   The following table shows how the Company's stock-based compensation
       would be allocated to the respective department expense line items:
          Research and development                        $    48        $   (1,256)          $  119         $  (696)
          Sales and marketing                                  22              (467)              45            (256)
          General and administrative                            3            (1,048)               9            (505)
                                                 ----------------- ---------------------------------------------------
                                                          $    73        $   (2,771)          $  173        $ (1,457)
                                                 ================= ===================================================

See accompanying notes to these condensed consolidated financial statements.
</TABLE>


<PAGE>
<TABLE>

                                  PATH 1 NETWORK TECHNOLOGIES INC.
                           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                         (in US$, thousands)
                                             (unaudited)

                                                                             Six Months Ended
                                                                                 June 30,
                                                                           2002            2001
                                                                     ---------------------------------
<S>                                                                                <C>             <C>
Cash flows from operating activities:
 Net loss from continuing operations                                        $  (3,658)     $   (1,783)
 Adjustments to reconcile net loss to net cash
      used in operating activities:
    Depreciation and amortization                                                 165             349
   Interest expense associated with discount on notes issued                      557
   Notes issued for salary reduction                                               33
    Amortization of deferred compensation                                         173          (1,457)
    Loss on investment                                                            596               -
 Changes in assets and liabilities:
    Restricted cash                                                               (46)           (200)
    Other current assets                                                          112             (28)
    Inventory                                                                       6               -
    Other assets                                                                 (219)            (43)
     Accounts payable and accrued liabilities                                      27            (878)
    Accounts receivable                                                          (227)              -
    Accrued compensation and benefits                                            (142)           (197)
    Deferred revenue                                                               74             876
                                                                     ---------------------------------
           Cash provided by (used in) operating activities
                                                                               (2,549)         (3,361)
Cash flows from investing activities:
 Sale of marketable securities                                                    578           1,665
 Purchase of Metar ADC assets                                                       -          (1,000)
 Purchases of property and equipment                                              (90)           (374)
                                                                     ---------------------------------
           Cash provided by (used in) investing activities
                                                                                  488             291
Cash flows from financing activities:
 Issuance of common stock for options exercised, net                               54              38
 Issue convertible notes                                                        2,281               -
 Cash from extinguishment of shareholder notes                                     86             114
                                                                     ---------------------------------
           Cash provided by financing activities                                2,421             152

Cash flows from discontinued operations                                          (174)           (910)

Increase (decrease) in cash and cash equivalents                                  186          (3,828)

Cash and cash equivalents, beginning of period                                  1,181           7,171
                                                                     ---------------------------------
Cash and cash equivalents, end of period                                    $   1,367       $   3,343
                                                                     =================================
Supplemental cash flow disclosures:
 Unrealized gain/(loss) in marketable securities                            $       -       $ ( 1,068)
                                                                     =================================
 Capitalized debt issuance costs in connection with beneficial
  conversion charge and warrants                                            $   1,250               -
                                                                     =================================
 Issuance of common stock in connection with Felber settlement              $     545               -
                                                                     =================================
 Conversion of Notes to common stock issuable                               $       9               -
                                                                     =================================

  See accompanying notes to these condensed consolidated financial statements.

</TABLE>

<PAGE>


NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Basis Of Presentation

The  accompanying  condensed  consolidated  balance sheet at June 30, 2002,  the
condensed  consolidated  statements  of  operations  for the three and six-month
periods ended June 30, 2002 and the  condensed,  consolidated  statement of cash
flows for the six-month period ended June 30, 2002, have been prepared by Path 1
Network  Technologies  Inc.  (the  "Company")  and have not  been  audited.  The
condensed  consolidated  balance  sheet at December  31, 2001 has been  audited.
These quarterly financial statements, in the opinion of management,  include all
adjustments,  consisting only of normal and recurring adjustments,  necessary to
state fairly the financial  information  set forth therein,  in accordance  with
accounting  principles  generally accepted in the United States. These financial
statements should be read in conjunction with the financial statements and notes
thereto for the year ended December 31, 2001 included in the Company's Form 10-K
filed April 15, 2002 and the Company's Form 10-Q filed May 14, 2002. The interim
financial information contained in this filing is not necessarily  indicative of
the results to be  expected  for any other  interim  period or for the full year
ending December 31, 2002.

In the period from  January 30, 1998  (inception)  through  June 30,  2002,  the
Company  incurred losses totaling US$28.5  million.  The accompanying  financial
statements have been prepared assuming that the Company will continue as a going
concern.  This basis of  accounting  contemplates  the recovery of the Company's
assets  and  the  satisfaction  of its  liabilities  in  the  normal  course  of
conducting  business.  Management  does not believe that the Company's  existing
capital resources will enable the Company to fund operations for the next twelve
months.  Management's  plans are to reduce  costs in all areas of its  operating
plan until  sufficient  capital is raised to support growth and more substantial
orders  materialize;  however,  even with its cost  reduction  plan, the Company
needs to raise additional  funding to continue as a going concern.  In the event
the  Company  does not receive  additional  funding,  the  Company  plans to: 1)
further  reduce costs and focus on selling  existing  products and services;  2)
sell the Company's assets through a merger or acquisition; or 3) seek protection
under bankruptcy  statutes.  Without additional  financing,  the Company will be
required to further delay,  reduce the scope of, or eliminate one or more of its
research and development  projects and significantly  reduce its expenditures on
product deployment, and may not be able to continue as a going concern.

Reclassifications

Certain reclassifications have been made to prior period financial statements to
conform to current year presentation.

Recently Issued Accounting Standards

In June 2001, the Financial  Accounting  Standards Board (FASB) issued Statement
of Financial  Accounting  Standards (SFAS) No. 141, "Business  Combinations" and
No. 142, "Goodwill and Other Intangible  Assets." Under the new rules,  goodwill
and indefinite lived intangible  assets are no longer amortized but are reviewed
annually for impairment. Separable intangible assets that are not deemed to have
an indefinite  life will continue to be amortized  over their useful lives.  The
amortization  provisions of SFAS No. 142 apply to goodwill and intangible assets
acquired  after June 30,  2001.  As the Company did not have any goodwill on its
balance  sheet,  the  adoption  of FAS142 did not have a material  impact on the
Company's financial statements.

In October  2001,  the FASB  issued SFAS No. 144 (FAS 144),  Accounting  for the
Impairment or Disposal of Long-Lived  Assets. FAS 144 establishes a single model
to  account  for  impairment  of  assets to be held or  disposed,  incorporating
guidelines for accounting and disclosure of discontinued operations.  FAS 144 is
effective for fiscal years beginning after December 15, 2001 and, generally, its
provisions  are  to  be  applied  prospectively.   Management  re-evaluated  its
investment  in acquired  technology  (i.e.  Sistolic) and recorded an impairment
charge during the year ended December 31, 2001 of US$686,000. In April 2002, the
Company sold its Sistolic  business unit for a loss of  approximately  US$66,000
(see note 5).

Note 2 - Management Estimates And Assumptions

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

Note 3 - Inventory

The Company records inventory, which consists primarily of raw materials used in
the production of video gateways and related  products,  at the lower of cost or
market. Cost is determined principally on the average cost method. Provision for
potentially  obsolete  or  slow-moving  inventory  are made based on analysis of
inventory levels and future sales forecasts.

Note 4 - Revenue Recognition

Product Revenue

Revenue from product sales is recognized when title and risk of loss transfer to
the  customer,  generally at the time the product is delivered to the  customer.
Revenue is deferred  when customer  acceptance is uncertain or when  undelivered
products or services are essential to the  functionality of delivered  products.
The estimated cost of warranties is accrued at the time revenue is recognized.


Service and License Revenues

Revenue from  support or  maintenance  contracts,  including  extended  warranty
programs, is recognized ratably over the contractual period. Amounts invoiced to
customers in excess of revenue  recognized on support or  maintenance  contracts
are recorded as deferred revenue until the revenue recognition criteria are met.
Revenue  on  engineering  design  contracts,  including  technology  development
agreements, is recognized on a  percentage-of-completion  method, based on costs
incurred  to date  compared  to total  estimated  costs,  subject to  acceptance
criteria.  Billings on  uncompleted  contracts  in excess of incurred  costs and
accrued profits are classified as deferred revenue.  License fees are recognized
when delivery  requirements have been met, collection is probable and no further
obligations  exist.  Royalty  revenue is recorded as earned in  accordance  with
specific  terms of each  license  agreement  when  reasonable  estimates of such
amounts can be made.

Note 5 - Reportable Operating Segments

The Company is a network communications technology company enabling simultaneous
delivery of broadcast  quality and  interactive  video  transmissions  and other
real-time data streams over Internet  Protocol (IP) Ethernet  networks.  For the
purpose of applying Statement of Financial  Accounting Standards (SFAS) No. 131,
management  determined  that,  subsequent to the  discontinuance  of the Silicon
Systems business unit ("Sistolic") in April 2002, it has one operating segment.

The  Video  Systems  business  unit is  engaged  in the  development  of  system
solutions that enable broadcast quality video over IP. Utilizing  TrueCircuit(R)
technology and other developed technologies and network traffic techniques,  the
group has been able to  transport  broadcast  quality  video  over an IP network
while  significantly  reducing the amount of latency and jitter  associated with
the high speed transmission of data.

The Company  currently  sells  product to a limited  amount of customers for the
period ended June 30, 2002.  For the period ended June 30, 2002,  56% and 31% of
the product sales were to two customers in the video infrastructure market.

Note 6 - Discontinued Operations

In March 2002, a large semiconductor company, with whom the Company entered into
a non-exclusive  licensing  agreement and an engineering  services  agreement in
December 2001,  informed the Company that it was terminating  their  agreements.
The Company is in a payment  dispute with this  customer  and is  reviewing  its
alternatives.  As a result of this action, the Company decided to dispose of its
Sistolic  business unit. On April 3, 2002, the Company disposed of the assets of
this  business  unit back to Metar SRL in exchange  for the  elimination  of the
remaining obligations by the Company to Metar SRL and its affiliates,  including
the payable of  US$686,000,  the return of all stock options  granted to Michael
Florea and the Romanian  employees,  a confirmation  that  performance  criteria
specified in Michael Florea's  employment  agreement related to a potential US$4
million  bonus with the Company were never met by him. The Company also received
a limited use license to the business unit's  intellectual  property.  Metar SRL
will also receive 35,000 shares of our common stock.  Michael Florea resigned on
March  27,  2002,  as  an  officer  of  the  Company  in  anticipation  of  this
transaction.  The results of  operations  and the loss on disposal for the three
and six-months  ended June 30, 2002 and 2001 have been included in  discontinued
operations.

Note 7- Stock Options

The Company  accounts for  stock-based  compensation  arrangements in accordance
with  the  provisions  of  Accounting   Principles  Board  Opinion  ("APB")  25,
Accounting  for Stock Issued to  Employees,  SFAS No. 28,  Accounting  for Stock
Appreciation Rights and Other Variable Stock Option or Award Plans, and SFAS No.
38, Determining the Measurement Date for Stock Option, Purchase, and Award Plans
involving Junior Stock. The Company also complies with the disclosure provisions
of SFAS No. 123, Accounting for Stock-Based Compensation.

The Company accounts for equity  instruments  issued to non-employees  using the
fair value method in accordance with the provisions of SFAS No. 123 and Emerging
Issues Task Issue No. 96-18,  Accounting for Equity  Instruments that are Issued
to Other than Employees for Acquiring,  or in Conjunction with Selling, Goods or
Services.

Equity   instruments   issued  to  non-employees   that  are  fully  vested  and
non-forfeitable  are measured at fair value at the issuance date and expensed in
the period over which the benefit is expected to be received. Equity instruments
issued to  non-employees  which are either  unvested or  forfeitable,  for which
counter-party  performance  is required for the equity  instrument to be earned,
are measured  initially at the fair value and subsequently  adjusted for changes
in fair  value  until  the  earlier  of: 1) the date at which a  commitment  for
performance by the  counter-party to earn the equity instrument is reached or 2)
the date on which the counter-party's performance is complete.

During  the  three-month  periods  ended  June 30,  2002 and 2001,  the  Company
recorded a  stock-based  compensation  expense  of  US$73,000  and  US$2,800,000
respectively,  related to the amortization  options outstanding to employees and
consultants.

Note 8 - Notes payable

4% convertible Notes

In April and May 2002,  the Company  received  approximately  $1,031,000  from a
private  placement of convertible  notes to European  investors who were already
Company stockholders. The notes carry a 4% annual coupon, paid quarterly in cash
or stock,  at the  Company's  discretion,  and are  convertible  for a  one-year
conversion term at a price of $1.20 per share. As the conversion price was below
the trading  market price of the stock on the day of the notes were issued,  the
Company recorded a debt discount of $226,430 and will amortize the debt discount
over  the  period  of the  convertible  notes'  convertibility  period  earliest
conversion date. In June 2002 the Company received  notification from 76% of the
note holders of their intent to convert the instruments. As a result the portion
of the  unamortized  debt  issuance  cost related to the debt to be converted of
$172,143 was recorded as interest expense during the three months ended June 30,
2002.  Due to the notice of conversion the Company has recorded 76% of the notes
payable  as common  stock  issuable,  the  remaining  portion  of  approximately
$281,000 is classified as current  portion of notes payable in the  accompanying
balance sheet as of June 30, 2002.

In connection with the issuance of the  convertible  notes in April and May 2002
the Company issued warrants to purchase  664,781 shares of common stock at $1.60
per share.  The warrants  are fully vested and expire in June 2007.  The Company
recorded  deferred  interest  expense on the  warrants of $359,133  based upon a
Black-Scholes  valuation,  and will amortize the deferred interest over the life
of the notes. As a result of receiving  notification  that 76% of the notes will
be converted,  the unamortized  deferred  interest balance on the portion of the
notes for which  notification was received that totaled $273,030 was expensed in
June 2002 when the notes were converted.

12% convertible Notes

In May 2002, the Company issued a 12% convertible  note in the principal  amount
of  $1,250,000.  The note is  convertible  at a price of $1.40  per share and is
payable on a monthly basis over 18 months. As the conversion price was below the
trading  market  price of the stock on the day the note was issued  the  Company
recorded a debt  discount of $543,515 and will  amortize the debt  discount over
the period of the convertible note earliest  conversion date using the effective
interest method.  Through June 30, 2002 $8,400 of the note had been converted by
the  holder.  As a result  of the  note  being  converted,  the  portion  of the
unamortized  debt  issuance  cost  related to the note  converted  of $3,652 was
recorded as interest  expense  during the three months ended June 30, 2002.  The
current portion of the notes payable is approximately $903,000 and is classified
as a short-term liability in the accompanying balance sheet as of June 30, 2002.

In  connection  with the  issuance of the 12%  convertible  note in May 2002 the
Company issued warrants to purchase  125,000 shares of common stock at $1.68 per
share.  The  warrants  are fully  vested and  expire,  in May 2009.  The Company
recorded  deferred  interest  expense on the  warrants  of  $121,162  based on a
Black-Scholes  valuation,  and will amortize the deferred interest over the life
of the notes. As a result of receiving notification that $8,400 of the note will
be converted,  the unamortized  deferred  interest balance on the portion of the
notes for which  notification  was received that totaled  $814,  was expensed in
June 2002 when the notes were converted.


ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Forward Looking Statements

This document may contain forward-looking statements. These statements relate to
future  events or our  future  financial  performance.  In some  cases,  you can
identify  forward-looking  statements  by  terminology  such as  "may,"  "will,"
"should,"  "expect," "plan,"  "anticipate,"  "believe,"  "estimate,"  "predict,"
"potential"  or  "continue,"  the  negative  of such  terms or other  comparable
terminology. These statements are only predictions. Actual events or results may
differ materially.

Although  we believe  that the  expectations  reflected  in the  forward-looking
statements  are  reasonable,  we  cannot  guarantee  future  results,  levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes  responsibility for the accuracy and completeness of the forward-looking
statements.  Except to the extent  required by federal law, we disclaim any duty
to update any of the forward-looking statements after the date of this report to
conform such statements to actual results or to changes in our expectations.

You are also urged to carefully review and consider the various disclosures made
by us which attempt to advise interested parties of the factors which affect our
business, including without limitation the disclosures made in this Item 2 or in
the Company's annual report on Form 10-K and other reports and filings made with
the Securities and Exchange Commission.


OVERVIEW

We design and sell  products,  using  proprietary  technology  that  enables the
real-time  transmission  of audio,  video and voice data over a single  Internet
Protocol  (IP)  network  with  end-to-end  high  quality of service  (QoS).  Our
products   make  it  possible  for   packet-switched   IP  networks  to  provide
high-quality,  real-time  transmissions by coordinating the transport of packets
across  these  networks  in a  way  that  eliminates  or  minimizes  delays  and
unreliable delivery. We believe our products can make available the best of both
worlds  - the  reliability  and  speed  of  circuit-switched  networks,  such as
traditional telephone networks,  along with the data carrying capability and low
cost of IP networks.

At the  core of our  suite  of  products  is our  patented,  patent-pending  and
copyrighted  technology  which is a software  and  hardware-based  solution  for
managing  network  traffic that is, at its essence,  a method (or algorithm) for
the transmission of data on a real-time basis over IP networks and several trade
secrets  and  intellectual  property  in a  variety  of areas  dealing  with the
transport and distribution of data, voice and video over packet-based  networks.
Our  technology  addresses  the  inherent  deficiencies  of packet  switching as
applied to transmission of real-time signals by superimposing a circuit-switched
infrastructure on standard IP networking,  while maintaining full  compatibility
with  existing IP networks.  We believe that our  technology  combined  with our
other proprietary know-how, is capable of supporting the efficient  transmission
of all communications  over a single network,  thus bringing  high-level QoS and
real-time  audio,  video  and  telephony  capabilities  to the  Internet  and to
standard IP networks.

Our customers and prospective  customers include  telecommunications  companies,
cable television operators,  wireless service providers, new competitive service
providers, broadcasters,  government agencies, universities, systems integrators
and semi-conductor companies. We offer long haul video, voice and data products,
video-on-demand  transmission  products,  and design and engineering services to
support these products.

We are  focusing  our  efforts on Internet  Protocol  (IP)-based  offerings  for
broadcasters and the cable industry, Digital Subscriber Line (DSL) offerings for
the  communications  industry and integrated  solutions for systems  integrators
worldwide. Until recently, the resources of our Video Systems business unit were
devoted primarily to research and development.  However, we now have products in
production and deployment.  In the video transport market, for example, our Path
1 Cx1000 IP Video Gateway,  which is a video gateway device  designed to provide
high quality video  transmission  capabilities to diversified  media  companies,
television  broadcasters,  movie  and  broadcasting  studios,  is  currently  in
production and in the early stages of deployment by a small number of customers.
Our second  product in the video  transport  market,  the Path 1 Cx1400 IP Video
Multiplexer,  which is a video-on-demand gateway device designed to provide high
quality video transmission  capability to cable television  operators,  is being
deployed by BarcoNet,  N.V., a  wholly-owned  subsidiary of  Scientific-Atlanta,
Inc.  BarcoNet  is  marketing  a version of the Cx1400 IP Video  Multiplexer  in
Europe under the name "iMux".


Liquidity And Capital Resources

In the period from  January 30,  1998  (inception)  through  June 30,  2002,  we
incurred losses totaling US$28.5 million. The accompanying  financial statements
have been prepared assuming that we will continue as a going concern. This basis
of accounting  contemplates  the recovery of our assets and the  satisfaction of
our liabilities in the normal course of conducting  business.  We do not believe
that our existing  capital  resources will enable us to fund  operations for the
next twelve months.  Our goal is to reduce our current cash burn to US$250,000 -
US$350,000  per  month.  Our  plans  are to  reduce  costs  in all  areas of our
operating  plan until  sufficient  capital is raised to support  growth and more
substantial orders materialize;  however,  even with our cost reduction plan, we
need to raise additional funding to continue as a going concern. In the event we
do not receive additional funding, we plan to: 1) further reduce costs and focus
on selling existing products and services;  2) sell the Company's assets through
a merger  or  acquisition;  or 3) seek  protection  under  bankruptcy  statutes.
Without additional  financing,  we will be required to further delay, reduce the
scope of, or eliminate one or more of our research and development  projects and
significantly reduce our expenditures on product deployment, and may not be able
to continue as a going concern.

Since our  inception  on January  31,  1998,  we have  financed  our  operations
primarily through the sale of common equity and debt securities to investors and
strategic partners.

We anticipate  that our existing  resources will enable us to fund operations at
least  through  the first  quarter of 2003.  In April and May 2002,  we received
approximately  $1,031,000  from a private  placement of  convertible  notes from
European investors who were already Company  stockholders.  The notes carry a 4%
annual  coupon,  paid  quarterly in cash or stock,  at our  discretion,  and are
convertible for a one-year conversion term at a price of $1.20 per share. As the
conversion  price was below the trading  market price of the stock on the day of
the notes were  issued,  we will record a debt  discount  of  $226,430  and will
amortize the debt discount  over the period of the  convertible  notes  earliest
conversion date using the effective  interest  method.  In June 2002 we received
notification  from 76% of the  note  holders  of their  intent  to  convert  the
instruments.

In connection with the issuance of the  convertible  notes in April and May 2002
we issued  warrants  to  purchase  664,871  shares of common  stock at $1.60 per
share. The warrants are fully vested and expire in June 2007.

In May  2002,  we  issued  to Laurus  Master  Fund 12%  convertible  note in the
principal amount of $1,250,000.  The note is convertible at a price of $1.40 per
share and is payable on a monthly basis over 18 months.

In  connection  with the  issuance  of the 12%  convertible  note in May 2002 we
issued  warrants to purchase  125,000 shares of common stock at $1.68 per share.
The warrants are fully vested and expire on May 2009.

Cash,  cash  equivalents,  restricted  cash and  marketable  securities  totaled
US$1,413,000 at June 30, 2002 compared to US$1,181,000 at December 31, 2001. For
the foreseeable future, we expect to incur substantial  additional  expenditures
associated  with  research  and  development  in  addition  to  increased  costs
associated with staffing for management,  manufacturing, sales and marketing and
administration  functions.  Additional  capital is  required  to  implement  our
business   strategies   and  fund  our  plan  for  future  growth  and  business
development.

At June 30,  2002,  we had net  working  capital of  US$180,000  compared to net
working  capital of US$271,000  at December 31, 2001. We are  continuing to seek
other sources of additional capital to fund operations until we are able to fund
operations through internal cash flow.

Operating activities used US$2,500,000 in cash during the six-month period ended
June 30, 2002 and US$3,400,000 for the same period in 2001.

Cash provided by investing activities during the six-month period ended June 30,
2002 was  approximately  US$488,000  compared to  US$291,000  for the  six-month
period ended June 30, 2001. Cash provided by investing  activities was primarily
the result of the sale of marketable securities.  As of June 30, 2002 we have no
marketable securities available for sale.

At June 30,  2002,  we have no  material  commitments  other than our  operating
leases. Our future capital requirements will depend upon many factors, including
the timing of research and product  development  efforts,  the  expansion of our
general and  administrative  functions and sales and  marketing  efforts and the
need to finance the manufacturing of commercial products that we may develop and
launch.  We expect to continue  to expend  significant  amounts on research  and
development staffing,  infrastructure and computer equipment to support on-going
research and development activities.

As noted  above,  we will need  additional  financing  in 2002.  We may pursue a
number of alternatives to raise additional funds,  including  borrowings;  lease
arrangements;   collaborative   research  and  development   arrangements   with
technology  companies;  the  licensing of product  rights to third  parties;  or
additional public and private equity financings.  There can be no assurance that
funds from these sources will be available on favorable  terms, if at all. If we
raise additional funds through the issuance of equity securities, the percentage
ownership  of our  stockholders  will be reduced,  stockholders  may  experience
additional   dilution  or  such  equity   securities  may  provide  for  rights,
preferences or privileges senior to those of the holders of our common stock.

Results Of Operations

Three Months Ended June 30, 2002 vs. Three Months Ended June 30, 2001

In the second quarter of 2002, we recognized revenue of US$541,000,  compared to
US$549,000  revenue during the three-month  period ended June 30, 2001. The 2002
revenue is the result of the initial  shipments of our  commercial  products for
the video over IP transport  market.  We expect these  initial  revenues to come
from the broadcast  transmission  infrastructure  segment of the video transport
market and the video on demand market,  where we have established product (e.g.,
Cx1000  and  Cx1400)  and  technology  capabilities.  In 2001  our  revenue  was
primarily  generated through an engineering  service contract with BarcoNet N.V.
and sales of an engineering proto-type to Leitch Technologies.

In the second quarter of 2002,  cost of goods sold decreased to US$267,000  from
US$336,000  at June 30, 2001.  Cost of goods sold for  products  consists of raw
material costs,  warranty costs and labor associated with building product. Cost
of goods sold for contract  services consists  primarily of engineering  payroll
costs.  The  reduction in costs of goods sold is due to the focus on shipment of
product,  which has a margin on each unit sold versus engineering services where
there is not a fixed and determinable margin.

Engineering  research  and  development   expenses,   excluding  the  effect  of
stock-based  compensation,  have  decreased  when compared to the same period in
2001.  The  decrease of  approximately  US$204,000  is primarily a result of our
focus on reducing our operating expenditures, selling our Sistolic business unit
and  curtailing the use of outside  consultants.  Although we believe that under
our current  operating  plan we possess the correct  complement  of  engineering
staff and consultants to effectively continue the development and rollout of our
products,  we will need to rapidly hire additional staff if our products achieve
a significant level of market acceptance.

General  and  administrative  expenses,  excluding  the  effect  of  stock-based
compensation,  decreased  from  US$866,000 for the second quarter ended June 30,
2001 to US$566,000  for the second  quarter ended June 30, 2002. The decrease of
approximately  US$300,000 is primarily due to reduced operating expenses such as
rent, amortization of intangibles, payroll costs and outside consulting costs.

Stock-based  compensation  expense is a non-cash expense item that is recognized
as a result of stock options having  exercise prices below estimated fair value.
Stock-based  compensation  expense  is  calculated  as  the  difference  between
exercise  prices and  estimated  fair market value on the date of grant.  If the
options are subject to variable accounting  treatment,  additional  compensation
expense,  positive or negative,  is  recognized  each quarter  based on the fair
market value of our common stock in accordance  with the  provisions of variable
stock  option  accounting.  In the second  quarter of 2001 our stock  price fell
resulting  in a large  negative  compensation  "expense".  In October  2001,  we
offered our holders of Class B common stock options an  opportunity  to exchange
their options for Class A common stock options.  Since all of the option holders
of options on Class B common stock elected to exchange their options for options
on Class A common stock, the Company ceased recording this compensation  expense
related to employee  options  after a final  one-time  adjustment  in October of
2001. We will continue to record compensation expense related to the outstanding
options to consultants and some employees for the amount of options that vest in
that  period.  Therefore,  in the quarter  ended June 30, 2002 the Company  only
recognized  the expense  related to  previously  granted  stock  options held by
consultants and employees.

Our interest  income  decreased  from  US$54,000  of income for the  three-month
period ended June 30, 2001 to US$557,000 of expense for the  three-month  period
ended June 30,  2002.  The  decrease  of  approximately  US$611,000  is due to a
non-cash  interest  charge related to the issuance of convertible  debentures at
below market price and issuance of warrants (see note 7).

Six Months Ended June 30, 2002 vs. Six Months Ended June 30, 2001

For the first six months of 2002 we recognized revenue of US$696,000 compared to
US$549,000  during the six-month period ended June 30, 2001. The 2002 revenue is
the result of the initial  shipments  of our  commercial  products for the video
over IP  transport  market.  We expect these  initial  revenues to come from the
broadcast transmission  infrastructure segment of the video transport market and
the video on demand market,  where we have established product (e.g., Cx1000 and
Cx1400) and  technology  capabilities.  For the same period in 2001 our revenues
were primarily a result of contract services  performed for BarcoNet N.V. in the
development of our video  multiplexer for the video on demand market,  now known
as  the  Cx1400  and  the  sale  of  engineering   proto-type  units  to  Leitch
Technologies.

In the first  and  second  quarter  of 2002,  cost of goods  sold  increased  to
US$369,000 from US$336,000 for the six-month period ended June 30, 2001. Cost of
goods sold for products consists of raw material costs, warranty costs and labor
associated  with  building  product.  Cost of goods sold for  contract  services
consists  primarily of engineering  payroll costs. The slight reduction in costs
of goods sold is due to the focus on shipment of product,  which has a margin on
each  unit  sold  versus  engineering  services  where  there is not a fixed and
determinable margin.

Engineering  research  and  development   expenses,   excluding  the  effect  of
stock-based  compensation,  have  decreased  when compared to the same period in
2001.  The  decrease of  approximately  US$629,000  is primarily a result of our
focus on reducing our operating expenditures,  the sale of our Sistolic business
unit and reduced use of outside consultants.  Although we believe that under our
current  operating plan we possess the correct  complement of engineering  staff
and  consultants  to  effectively  continue the  development  and rollout of our
products,  we will need to rapidly hire additional staff if our products achieve
a significant level of market acceptance.

General  and  administrative  expenses,  excluding  the  effect  of  stock-based
compensation,  decreased from  US$1,673,000  for the six-month period ended June
30, 2001 to  US$1,345,000  for the  six-month  period ended June 30,  2002.  The
decrease of  approximately  US$328,000  is  primarily  due to reduced  operating
expenses  such as rent and  payroll  costs and outside  consulting  costs in the
second quarter ended June 30, 2002.

Stock-based  compensation  expense is a non-cash expense item that is recognized
as a result of stock options having  exercise prices below estimated fair value.
Stock-based  compensation  expense  is  calculated  as  the  difference  between
exercise  price and  estimated  fair market  value on the date of grant.  If the
options are subject to variable accounting  treatment,  additional  compensation
expense,  positive or negative,  is  recognized  each quarter  based on the fair
market value of our common stock in accordance  with the  provisions of variable
stock  option  accounting.  In the second  quarter of 2001 our stock  price fell
resulting  in a large  negative  compensation  "expense".  In October  2001,  we
offered our holders of Class B common stock options an  opportunity  to exchange
their options for Class A common stock options.  Since all of the option holders
of options on Class B common stock elected to exchange their options for options
on Class A common stock, the Company ceased recording this compensation  expense
related to employee  options  after a final  one-time  adjustment  in October of
2001. We will continue to record compensation expense related to the outstanding
options to consultants and some employees for the amount of options that vest in
that period.  Therefore, in the six-month period ended June 30, 2002 the Company
only recognized the expense related to previously  granted stock options held by
consultants and employees.

Our interest income decreased from US$151,000 of income for the six-month period
ended June 30, 2001 to US$557,000 of expense for the six-month period ended June
30, 2002. The decrease of approximately US$708,000 is due to a non-cash interest
charge related to the issuance of  convertible  debentures at below market price
and issuance of warrants(see note 7).

Discontinued Operations

We decided to dispose of our Silicon Systems business unit ("Sistolic")  after a
large semiconductor company, with whom we entered into a non-exclusive licensing
agreement  and  an  engineering   services   agreement   related  to  Sistolic's
technology,  informed us that they were  terminating  their  agreements in March
2002. Due to this material and adverse turn of events,  we decided that we could
no longer sustain the negative cash flow from Sistolic.  Therefore,  on April 3,
2002,  we  disposed  of the assets of this  business  unit back to Metar SRL and
Michael Florea in exchange for the  elimination of the remaining  obligations by
us to Metar SRL and its  affiliates,  including the payable of  US$686,000,  the
return  of all  stock  options  granted  to  Michael  Florea  and  the  Romanian
employees,  and a confirmation  that performance  criteria  specified in Michael
Florea's employment  agreement related to a potential US$4 million bonus with us
were never met by him. We also  received a limited  use license to the  business
unit's intellectual property in favor of us. In addition,  the Romanian facility
lease was  transferred to Metar SRL and the Romanian  employment  contracts were
terminated  and Metar SRL was permitted to hire any and all Romanian  employees.
Metar SRL will also receive  35,000 shares of our common stock.  Michael  Florea
resigned on March 27, 2002, as an officer of the Company in anticipation of this
transaction. Sistolic's results of operations for the three and six-months ended
June 30, 2002 and 2001 have been included in discontinued operations.

<PAGE>

Risk Factors That May Affect Future Results

YOU  SHOULD  CAREFULLY  CONSIDER  THE  FOLLOWING  RISK  FACTORS  AND  THE  OTHER
INFORMATION INCLUDED HEREIN AS WELL AS THE INFORMATION INCLUDED IN OUR FORM 10-K
FILED ON APRIL 15, 2002 AND OTHER  REPORTS AND FILINGS MADE WITH THE  SECURITIES
AND  EXCHANGE  COMMISSION.  OUR  BUSINESS  AND  RESULTS OF  OPERATIONS  COULD BE
SERIOUSLY  HARMED BY ANY OF THE FOLLOWING RISKS. THE TRADING PRICE OF OUR COMMON
STOCK COULD DECLINE DUE TO ANY OF THESE RISKS AND  STOCKHOLDERS MAY LOSE PART OR
ALL OF THEIR INVESTMENT.

The  risks  ands  uncertainties  described  below are not the only ones we face.
Additional  risks  and  uncertainties  not  presently  known  to us or  that  we
currently  deem  immaterial  may also impair our  operations.  Our  business and
results of operations  could be seriously harmed by the occurrence of any of the
following risk factors.  The trading price of our common stock could decline due
to  occurrence  of any of  these  risks,  and you may  lose  part or all of your
investment.

We are dependent upon additional funding to meet current  commitments,  continue
development of our business and limit  uncertainty as to our ability to continue
as a going concern; the prospect of obtaining such funding is uncertain.

We need additional funding to meet current commitments and continue  development
of our  business;  if we do not  receive  additional  funding,  our  ability  to
continue as a going concern cannot be assured.

To this end, we have initiated a cost  reduction  program to reduce our negative
cash  burn  from  over  US$600,000  per  month  to  approximately  US$250,000  -
US$350,000  per month.  We are reducing costs in all areas of our operating plan
until sufficient capital is raised to support growth and more substantial orders
materialize.  In the event we do not receive additional  funding, we plan to: 1)
further reduce our costs and focus on selling existing products and services; 2)
sell our assets through a merger or acquisition;  or, 3) seek  protection  under
bankruptcy  statutes.  Even  with  our  cost  reduction  plan,  we need to raise
additional funding to continue as a going concern.

Even  if we  can  continue  operations,  a  lack  of  sufficient  funding  would
significantly  limit our ability to take  advantage of potential  opportunities,
develop or enhance products or otherwise  respond to competitive  pressures.  We
cannot assure you that additional financing will be available on terms favorable
to us, if at all.

If we raise  additional  funds  through the issuance of equity or  equity-linked
securities,  the percentage  ownership of our stockholders would be reduced.  In
addition, these securities may have rights,  preferences or privileges senior to
the rights of the securities held by our current stockholders.


We have incurred losses since inception and may never be profitable.

We have incurred  operating  losses since our inception in January 1998,  and we
expect  to incur  losses  and  negative  cash  flow  for at  least  the next few
quarters. As of June 30, 2002, our accumulated deficit was approximately US$28.5
million.  We expect to  continue to incur  significant  operating  expenses  and
research and  development  expenses  and, as a result,  we will need to generate
significant   revenues  to  achieve   profitability.   Even  if  we  do  achieve
profitability,   we  cannot   assure  you  that  we  can   sustain  or  increase
profitability on a quarterly or annual basis in the future.


The market price of our common stock has fluctuated in the past and is likely to
continue to do so, thereby increasing the risk that you may lose all or part of
your investment.

     The  market  price  for our  common  stock is  susceptible  to a number  of
internal and external factors including:

o    quarterly variations in operating results and overall financial condition;

o    economic and political developments affecting technology spending generally
     and adoption of new technologies and products such as ours;

o    short-selling programs;

o    changes in IT  spending  patterns  and the rate of consumer  acceptance  of
     video-on-demand;

o    product sales progress, both positive and negative;

o    the stock market's perception of the telecommunications  equipment industry
     as a whole;

o    technological innovations by others;

o    the  introduction of new products or changes in product pricing policies by
     us or our competitors;

o    proprietary rights disputes or litigation;

o    changes in earnings estimates by analysts or other factors;

o    additions or departures of key personnel; and

o    sales of  substantial  numbers of shares of our common stock or  securities
     convertible into or exercisable for our common stock.

     These and other factors may make it difficult for our  stockholders to sell
their  shares into the open market if and when  eligible to do so. In  addition,
stock prices for many technology  companies,  especially  early-stage  companies
such as  ourselves,  fluctuate  widely  for  reasons  that may be  unrelated  to
operating results. These fluctuations,  as well as general economic,  market and
political conditions such as interest rate increases,  recessions or military or
political conflicts, may materially and adversely affect the market price of our
common stock, thereby causing you to lose some or all of your investment.

We recently  launched our initial  commercial  products and services,  and these
products  and  services  and our  products  still in  development,  may not gain
customer acceptance.

     We have launched two commercial  products for sale into the video transport
market:  the Path 1 Cx1000  IP  Video  Gateway  targeted  toward  the  broadcast
transmission  infrastructure segment of the video transport market, and the Path
1 Cx1400 IP Video Multiplexer targeted toward the video-on-demand infrastructure
segment of the video transport market. These products are in the early stages of
commercial  deployment and are subject to all the risks attendant to new product
introductions,  including  the  possible  presence  of  undetected  hardware  or
software defects in our products,  manufacturing  and distribution  limitations,
unforeseen delays in product  installation and customer  dissatisfaction.  There
can be no assurance that either of these initial products, or our products still
in development,  will achieve  acceptance by our targeted  markets at all, or in
time to assist in funding cash flow shortfalls.

We have limited product sales  experience and we are relying  primarily on a few
customers.

     We have only a brief history of sales orders for our products and services.
As a result, potential customers may decline to purchase our initial products or
services  due to our lack of an  established  "track  record,"  the level of our
products' technological sophistication,  price, our financial condition or other
factors.  Further reasons why prospective customers may decline to invest in our
products  and  services,  or may decide to purchase  competitors'  products  and
services, include:

o    introduction  of competitive  technologies,  products and services that may
     render our products and services obsolete;

o    development or manufacturing delays that prevent the timely introduction of
     our products to the market;

o    failure  by us to  establish  strong  sales,  marketing,  distribution  and
     customer service capabilities;

o    reluctance to commit capital to new products and services; and

o    general   economic   conditions   affecting   rates  of   adoption  of  new
     technologies,  new technology  purchases and services  associated with such
     new technologies.

     In the event that our products and services are not adopted at the rates we
currently  anticipate,  or do not  receive  a  significant  acceptance  from our
primary  targeted  dominant  customer,  our  operating  plan will be  negatively
affected and our capital  requirements  and cash flow shortfalls will be greater
than currently anticipated.

To date,  there has been only a limited  public  market for our common stock and
there is no assurance  that an active  trading  market for our common stock will
ever exist.

     To date, there has been only a limited public market for our securities and
there can be no assurance  that a broad public  market for our  securities  will
develop in the  future,  or if such a broad  market does  develop,  that it will
last.  Our common  stock is  presently  quoted for  trading on the OTC  Bulletin
Board, a quotation service that displays  real-time quotes and other information
about over-the-counter (OTC) equity securities,  and on the Third Segment of the
Frankfurt  Stock  Exchange.  Trading  activity  in our  common  stock on the OTC
Bulletin  Board is limited  and  trading  activity  in our  common  stock on the
Frankfurt  Stock Exchange is dormant.  In addition,  we may be unable to attract
and maintain  good-quality  market makers.  In the event a liquid market for our
common stock does  develop,  there can be no  assurance  that the market will be
strong  enough  to  absorb  all of  the  common  stock  currently  owned  by our
stockholders  and any common stock that may be issued in the future,  restricted
shares of our common stock that are eligible for resale under Rule 144, combined
with (i) the shares (and warrants to purchase shares) that we anticipate selling
in any private placement offering, (ii) shares that we may issue to Laurus Funds
pursuant to our convertible  note with them,  (iii) shares of common stock owned
by  Leitch   Technology   Corporation  that  Leitch,   pursuant  to  its  demand
registration  rights,  may  require us to  register  for resale  into the public
market,  and (iv) shares issued or issuable  pursuant to our stock option plans,
have the  potential to create a  supply/demand  imbalance  that could  adversely
affect  our  stock  price.  In  addition,  subsequent  issuances  of  equity  or
equity-linked  securities may further  saturate the market for our common stock.
The  resale of  substantial  amounts  of our  common  stock will have an adverse
effect on the market price of our stock.

         We believe our stock has in the past been and may in the future be the
subject of short selling programs. Short sales can severely and negatively
affect the prices of stocks which have little market liquidity.

The  rate of  market  adoption  of our  technology  is  uncertain  and we  could
experience long and  unpredictable  sales cycles,  especially if the slowdown in
the telecommunications industry persists.

     As ours is a new  technology,  it is  extremely  difficult  to predict  the
timing  and rate of  market  adoption  of our  proposed  products  as well as of
related new video  applications,  and thus  difficult  to predict  when we might
begin to realize  revenue from product  sales.  We are  providing new and highly
technical  products and services to enable new applications.  Thus, the duration
of our sales efforts with prospective customers in all market segments is likely
to be  lengthy  as we seek to  educate  them on the  uses  and  benefits  of our
products.  This sales cycle could be lengthened even further by potential delays
related to product implementation as well as delays over which we have little or
no control, including:

o    the length or total dollar  amount of our  prospective  customers'  planned
     purchasing programs in regard to our products;

o    changes in prospective  customers'  capital equipment budgets or purchasing
     priorities;

o    prospective customers' internal acceptance reviews; and

o    the complexity of prospective customers' technical needs.

These   uncertainties,   combined   with   the   worldwide   slowdown   in   the
telecommunications  business, which began in 2001, and the slowdown in corporate
spending  on  technology  generally  as well as new  technologies  such as ours,
substantially  complicate  our  planning and reduce  prospects  for sales of our
products.  If our prospective  customers  curtail or eliminate their  purchasing
programs,  decrease their capital budgets or reduce their  purchasing  priority,
our results of operations could be adversely affected.

Leitch Technology Corporation may not be an active, participating partner for us
in the professional broadcast video studio market.

     In April 2000,  we entered  into a strategic  marketing  relationship  with
Leitch  Technology  Corporation,  a Canadian  public  company and  international
distributor of professional video products that owns approximately  one-third of
our outstanding common stock. As part of this strategic marketing  relationship,
Leitch  invested US$10 million in us and gave us 200,000 shares of Leitch common
stock in consideration of our entering into a Technology  License Agreement with
Leitch, dated April 10, 2000 granting Leitch (i) a non-exclusive license to sell
and  otherwise  use  our  proprietary  TrueCircuit(R)  technology;  and  (ii)  a
worldwide,  exclusive license,  even as to us, to sell and otherwise exploit our
TrueCircuit(R)  technology in connection with commercial  activities directed to
the professional  broadcast video studio market. The non-exclusive license has a
term  of  five  years  (unless  earlier  terminated  by us  or  Leitch)  and  is
automatically   renewable  for  additional  five-year  periods  (unless  earlier
terminated by us or Leitch).  The duration of the exclusive  license with Leitch
is one year and, thereafter,  automatically renews for five consecutive one-year
periods,   provided  we  receive  the   minimum   aggregate   monies  and  other
consideration from Leitch required for that year. The minimum fees to be paid by
Leitch to maintain  its  exclusive  license  for the  five-year  exclusive  term
escalate  annually and total US$32 million,  exclusive of royalties.  After this
initial five-year term,  provided the exclusive license is still in effect,  the
minimum yearly thresholds would be negotiated,  within certain parameters, by us
and Leitch. Leitch is not obligated to pay us royalties until March 2006 for any
of the  TrueCircuit(R)-based  products sold by Leitch or its sub-licensees under
the exclusive license. We are currently discussing with Leitch the renewal terms
and  conditions for this exclusive  license.  We believe that,  according to the
terms of the  Technology  License  Agreement,  Leitch is required to pay us US$2
million in cash or other  consideration in order for Leitch's  exclusive license
to be renewed in April 2003 (Leitch's failure to pay the required  consideration
would  cause  Leitch's   exclusive   license  to  automatically   convert  to  a
non-exclusive  license).  We believe that the  exclusive  license  would then be
terminated in favor of a non-exclusive  license.  There can be no assurance that
we will come to a mutually  acceptable  resolution  with Leitch  regarding  this
potential payment dispute and the status of their license. Furthermore, if it is
found that Leitch is required to pay us US$2 million to maintain  its  exclusive
license for the twelve (12)  month-period  beginning April 2003, we believe that
Leitch will decline to remit such payment.

     Although we entered  into a strategic  marketing  relationship  with Leitch
with the expectation that Leitch, as an established  company in the professional
video products field and an experienced  manufacturer  and  distributor of video
products, would provide us with a significantly enhanced ability to manufacture,
sell  and  distribute  our  initial  products  in this  field,  Leitch  had been
unsuccessful to date in selling  TrueCircuit(R)  technology-based  products into
the  professional  broadcast  video  market or other  markets.  In 2002,  Leitch
wrote-down  their  investment  in us to zero.  On March 28,  2002,  Reginald  J.
Tiessen resigned from our Board of Directors. With the December 2001 resignation
of John A. MacDonald from the Company's  Board of Directors,  this leaves Leitch
without current Path 1 Board representation.  As of the date of this writing, we
do not  believe  that  Leitch  will  be an  active  partner  in  developing  the
professional  broadcast  video studio  market for us. In  addition,  any further
deterioration  in our  relationship  with Leitch could adversely affect Leitch's
motivation to market and sell our TrueCircuit(R)  technology-based products into
the  professional  broadcast video studio market.  This  deterioration  would be
especially  damaging so long as Leitch retains its exclusive license,  as Leitch
might fail to commit the necessary  technical,  financial and other resources to
successfully  market our products into the  professional  broadcast studio video
market, yet still prevent us from doing so.

We recently disposed of the assets of our Silicon Systems group.

     In  October  2000,  we agreed to  purchase  the  assets  of Metar  ADC,  an
application  specific  integrated circuit (ASIC) design and development  company
based in Bucharest,  Romania, from Metar SRL. We organized these assets into our
Silicon Systems business unit, which we named "Sistolic".

     In December 2001, Sistolic entered into a non-exclusive licensing agreement
and an  engineering  services  agreement  with  a  large  semiconductor  company
pursuant  to  which  Sistolic  was to  provide  front-end  design  services.  We
anticipated  that the  maximum  amount of  revenue  we could  realize  from this
arrangement was approximately  US$5.4 million. In March 2002, after considerable
work had been  performed  by us under the  agreements,  the large  semiconductor
company informed us that they were summarily terminating these agreements.

     Due to this material and adverse turn of events, we concluded that we could
no longer sustain the negative cash flow from the Silicon Systems business unit.
On April 3, 2002,  we sold all of the assets of this business unit back to Metar
SRL.  Although  we  retained  a  limited  use  license  to the  business  unit's
intellectual  property,  we have  little  else to show for the time and funds we
invested in Sistolic.

We may be unable to obtain full patent protection for our core technology and
there is a risk of infringement.

     On January 16, 2001, May 8, 2001 and May 31, 2001, we submitted  additional
patent  applications on topics  surrounding our core  technologies to supplement
our existing patent portfolio.  However, there can be no assurance that these or
other patents will be issued to us, or, if additional  patents are issued,  that
they or our three existing  patents will be broad enough to prevent  significant
competition  or that third  parties will not infringe upon or design around such
patents  to develop  competing  products.  In  addition,  we have  filed  patent
applications in several foreign  countries.  There is no assurance that these or
any future patent  applications will be granted,  or if granted,  that they will
not be challenged, invalidated or circumvented.

     In addition to seeking  patent  protection  for our products,  we intend to
rely upon a  combination  of trade  secret,  copyright  and  trademark  laws and
contractual provisions to protect our proprietary rights in our products.  There
can be no assurance that these  protections will be adequate or that competitors
have not or will not independently  develop  technologies that are substantially
equivalent or superior to ours.

     There  has  been a trend  toward  litigation  regarding  patent  and  other
intellectual property rights in the telecommunications  industry. Although there
are currently no lawsuits  pending  against us regarding  possible  infringement
claims, there can be no assurance such claims will not be asserted in the future
or that such  assertions  will not  materially  adversely  affect our  business,
financial conditions and results of operations. Any such suit, whether or not it
has merit, would be costly to us in terms of employee time and defense costs and
could materially adversely affect our business.

     If an  infringement  or  misappropriation  claim is  successfully  asserted
against  us,  we may need to  obtain a  license  from  the  claimant  to use the
intellectual property rights. There can be no assurance that such a license will
be available on reasonable terms if at all.

We face  competition from  established and developing  companies,  many of which
have significantly  greater resources than us, and we expect such competition to
grow.

     The markets for our  products,  proposed  products  and  services  are very
competitive.   We  face  direct  and  indirect  competition  from  a  number  of
established companies and development stage companies, and we anticipate that we
shall face increased  competition in the future as existing  competitors seek to
enhance  their  product  offerings  and  new  competitors  emerge.  Many  of our
competitors have greater  resources,  higher name recognition,  more established
reputations within the industry and stronger manufacturing,  distribution, sales
and customer service capabilities than we do.

     The technologies that our competitors and we offer are expensive to design,
develop,  manufacture and distribute.  Competitive technologies may be owned and
distributed  by  established   companies  that  possess   substantially  greater
financial, technical and other resources than we do.

     Competitive  technologies  that offer a similar  or  superior  capacity  to
converge and transmit audio, video and telephonic data on a real-time basis over
existing  networks may  currently  exist or may be  developed in the future.  We
cannot assure you that any  technology  currently  being  developed by us is not
being developed by others or that our technology development efforts will result
in  products  that are  competitive  in terms of price and  performance.  If our
competitors  develop  products  or  services  that  offer  significant  price or
performance  advantages  as compared to our current and  proposed  products  and
services,  or if we are unable to improve our  technology  or develop or acquire
more competitive technology, our business could be adversely affected.

We may not be able to profit from growth if we are unable to effectively  manage
the growth.

     Assuming we receive  adequate  funding to conduct our business as presently
proposed  to be  conducted,  we  anticipate  that we could  grow  rapidly in the
future.  This anticipated growth will place strain on our managerial,  financial
and personnel resources.  The pace of our anticipated  expansion,  together with
the  complexity  of the  technology  involved in our  products  and the level of
expertise and  technological  sophistication  incorporated into the provision of
our design, engineering, implementation and support services, demands an unusual
amount of focus on the operational needs of our future customers for quality and
reliability,   as  well   as   timely   delivery   and   post-installation   and
post-consultation   field  and  remote  support.  In  addition,  new  customers,
especially  customers  that  purchase  novel and  technologically  sophisticated
products  such as  ours,  generally  require  significant  engineering  support.
Therefore,  adoption of our platforms and products by customers  would  increase
the strain on our resources.  To reach our goals,  we will need to hire rapidly,
while, at the same time investing in our infrastructure.  We expect that we will
also have to expand our facilities. In addition, we will need to:

o    successfully train, motivate and manage new employees;

o    expand our sales and support organization;

o    integrate new management and employees into our overall operations; and

o    establish improved financial and accounting systems.

     We may not succeed in anticipating  all of the changing demands that growth
would impose on our systems, procedures and structure. If we fail to effectively
manage our expansion, our business may suffer.

We may not be able to hire and assimilate key employees.

     Our future  success  will  depend,  in part,  on our ability to attract and
retain  highly  skilled  employees,  including  management,  technical and sales
personnel.  Significant  competition exists for employees in our industry and in
our geographic region. We may be unable to identify and attract highly qualified
employees  in the  future.  In  addition,  we may not be  able  to  successfully
assimilate these employees or hire qualified personnel to replace them.

We are dependent on our key employees for our future success.

     Our success depends on the efforts and abilities of our senior  management,
specifically Frederick A. Cary, Ronald D. Fellman,  David A. Carnevale,  Bernard
J. Tyler, Yendo Hu and other senior managers and certain other key personnel. If
any of these key employees leaves or is seriously injured and unable to work and
we are  unable  to find a  qualified  replacement,  then our  business  could be
harmed.

Unanticipated  delays or  problems  in  introducing  our  intended  products  or
improvements  to our intended  products may cause  customer  dissatisfaction  or
deprive us of the "first to market" advantage.

     Delays in the development of products and the launch of commercial products
are not uncommon in high tech industries such as ours. If we experience problems
related to the  introduction  or  modification  of our intended  products or the
reliability and quality of such products,  which problems delay the introduction
of our intended  products or product  improvements by more than a few months, we
could  experience  reduced product sales and adverse  publicity.  We believe the
company first to market with viable  products will gain a significant  advantage
with  customers;  delays could prevent us from being the company that gains this
advantage.

The  issuance  of common  stock to DTKA  Holdings  under our equity  line and to
purchasers  of  units  in  our  2002  private  placement  offering  would  cause
significant dilution to our stockholders,  and the resale of such shares by DTKA
and the purchasers in the private  placement may depress the price of our common
stock.

     In January 2002,  we entered into a common stock  purchase  agreement  with
DTKA Holdings  Limited,  a British  Virgin  Islands  company,  for the potential
future  issuance  and sale of up to US$10  million  of  common  stock,  which is
required to be registered.  Under this arrangement,  we, at our sole discretion,
may,  from  time to time,  draw  down on this  facility  (otherwise  known as an
"equity  line"),  requiring DTKA Holdings to purchase shares of our common stock
at prices  calculated  on the basis of discounts  ranging from 6.5% to 8.5% from
the daily volume  weighted  average  price of our common stock on the  principal
exchange or trading  market on which our common  stock is trading on the date of
the draw  down.  We may not draw  down on this  facility  until we have  filed a
registration  statement with the Securities and Exchange  Commission to register
enough shares of common stock to cover the shares to be issued  pursuant to such
draw down, and until this registration statement has been declared effective. As
of June 30, 2002 we have not begun the  registration  process.  The  issuance of
shares of common  stock to DTKA  Holdings  pursuant  to this  equity  line could
result in significant dilution to our stockholders. However, we do not currently
intend to draw down on any funds under this facility.

The issuance of common stock to Laurus Funds in connection  with our convertible
note to them would  cause  significant  dilution  to our  stockholders,  and the
resale of such shares by Laurus may depress the price of our common stock.

In May  2002,  we  issued a 12%  convertible  note in the  principal  amount  of
$1,250,000. The note is convertible at a price of $1.40 per share and is payable
on a monthly  basis over 18 months.  For the three  months  ended June 30,  2002
$8,400 of the note had been converted by the holder.  However as a result of the
note being converted,  the portion of the unamortized debt issuance cost related
to the note  converted  of $3,652 was  recorded as interest  expense  during the
three months ended June 30, 2002.

We offer stock options to our employees, non-employee directors, consultants and
advisors, which could result in ongoing dilution to all stockholders.

     We maintain two equity  compensation plans: (i) the 2000 Stock Option/Stock
Issuance  Plan (the "2000  Plan"),  pursuant  to which we may issue  options and
common stock to employees,  officers,  directors,  consultants and advisors, and
(ii) the 2001 Employee Stock Purchase Plan (the  "Purchase  Plan"),  approved by
our stockholders in February 2002,  pursuant to which our employees are provided
the opportunity to purchase our stock through payroll deductions. As of June 30,
2002,  there were options  outstanding  to purchase  3,859,621  shares of common
stock under our 2000 Plan;  380,897 shares of common stock remain  available for
issuance  under the 2000 Plan. A maximum of 250,000  shares of common stock have
been authorized for issuance under the Purchase Plan.

     We plan to continue to provide our employees  opportunities  to participate
in the Purchase Plan. We also wish to issue options,  either under the 2000 Plan
or otherwise,  to purchase  sizable numbers of shares of common stock to new and
existing  employees,   officers,  directors,   advisors,  consultants  or  other
individuals  as we deem  appropriate  and in our best  interests.  These ongoing
purchases  of our  common  stock  (as well as  future  option  grants  by us and
subsequent  exercises of options)  could result in  substantial  dilution to all
stockholders and increased control by management.

     The  number of shares of common  stock  subject  to  currently  outstanding
options  under the 2000  Plan,  as well as shares of  common  stock  subject  to
options granted other than under the 2000 Plan,  exceeds 30% of the total number
of shares of our currently  outstanding common stock. The California  Department
of Corporations has issued  regulations for companies  seeking  qualification of
stock option plans,  which  regulations  require that the total number of shares
issuable upon  exercise of all options  shall not exceed 30% of such  companies'
outstanding shares,  unless a percentage higher than 30% is approved by at least
two-thirds of the outstanding shares entitled to vote. We unsuccessfully  sought
to  obtain  this  two-thirds  supermajority  vote  of  the  outstanding  shares.
Therefore  the issuance of further  stock options and shares under the 2000 Plan
to persons  other than  officers,  directors  and  previous  optionees  requires
qualification,   which  under  current  conditions  we  cannot  obtain,  of  the
securities  under  the  "blue  sky"  securities  provisions  of  the  California
Corporations  Code.  This may limit our ability to grant  options and stock as a
means of attracting and retaining employees.

We are subject to local, state and federal  regulation,  as well as the rules of
any stock exchanges on which our securities might trade.

     Legislation  affecting  us (or the  markets  in  which  we  compete)  could
adversely  impact our ability to implement our business plan on a  going-forward
basis.  The   telecommunications   industry  is  heavily   regulated  and  these
regulations  are subject to frequent  change.  Future  changes in local,  state,
federal   or   foreign   regulations   and   legislation   pertaining   to   the
telecommunications   field  may  adversely  affect  prospective   purchasers  of
telecommunications equipment, which in turn would adversely affect our business.

     Our executive  officers,  directors and 5% stockholders  currently maintain
substantial voting control over us and possess certain rights of first offer and
first refusal in regard to offers and sales of our securities.

     As of June 30, 2002, a small number of our  executive  officers,  directors
and 5% stockholders,  beneficially  own, in the aggregate,  approximately 48% of
our  outstanding   common  stock;   these  stockholders  are  Leitch  Technology
Corporation,  Ronald D.  Fellman  and  Douglas  A.  Palmer.  As a result,  these
stockholders  (or  subgroups  of them) retain  substantial  control over matters
requiring  approval by our  stockholders,  such as the election of directors and
approval  of  significant  corporate  transactions.  Pursuant  to the terms of a
stockholders' agreement with Leitch, dated April 10, 2000, Ronald D. Fellman and
Douglas A. Palmer, who together hold approximately 15% of our outstanding common
stock,  have  agreed to vote all  securities  of Path 1 held by them in favor of
designees of Leitch for two  positions on our  seven-person  Board of Directors,
for as long as Leitch continues to hold at least 20% of our capital stock (on an
as-converted,  as-exercised,  fully-diluted  basis). As of June 30, 2002, Leitch
held  approximately  one-third  of our  outstanding  common  stock.  Leitch  has
declined,  for the time  being,  to  exercise  its right to  designate  director
nominees.

     Under this Stockholders' Agreement,  Leitch Technology Corporation also has
rights of first  refusal  to  purchase  (i) any equity  securities  offered in a
private sale by Dr. Fellman,  Dr. Michael  Elliott and Dr. Palmer,  and (ii) its
pro rata share of any capital stock, or rights, options, warrants or to purchase
capital  stock issued by us, on the same terms and at the same price  offered by
us to the third party or parties.  These rights of first  refusal and the voting
agreement give Leitch the potential to maintain or expand its substantial equity
position  in us and  exert  significant  influence  over  matters  of  corporate
governance.  The right of first refusal with respect to securities  offerings by
us could, in certain  circumstances,  serve as a deterrent to future  acquirors,
especially if Leitch does not approve of a proposed merger or  acquisition,  and
could give Leitch the  leverage to  condition  its consent to  offerings  of our
securities on our adoption of policies  favored by Leitch.  In addition,  Leitch
maintains  demand  registration  rights  pursuant  to which it can require us to
register  its  shares of our  common  stock  with the  Securities  and  Exchange
Commission for resale into the public market. Such registration and resale could
adversely affect the price of our common stock.

     Our equity  compensation plans give wide latitude to the plan administrator
(our Board of  Directors or  committee  thereof) to make option  grants or stock
issuances to our officers and directors and to grant broad  auxiliary  rights in
connection  with such option  grants or stock  issuances  (e.g.  full or partial
acceleration  of vesting  upon change of control or upon  attainment  of certain
performance  milestones).  In January 2002, our executive officers and employees
were granted stock options  under our 2000 Stock  Option/Stock  Issuance Plan in
return for their agreement to voluntarily  reduce their salaries for a period of
90-days.  Additional  option grants to our officers and directors would serve to
increase  their equity  ownership of the company and would allow these  officers
and directors,  should they choose to exercise their options, to exert increased
control over us.

Our charter documents contain provisions that could discourage a takeover.

     Our  Certificate of  Incorporation  and Bylaws contain  provisions that may
have the effect of making  more  difficult  or  delaying  attempts  by others to
obtain  control of us, even when these  attempts may be in the best interests of
the  stockholders.  Our  Certificate  of  Incorporation  authorizes our Board of
Directors,  without further stockholder approval, to issue one or more series of
preferred stock. Any such series of preferred stock could have rights, including
voting  rights,  superior  to that of our  common  stock,  and  rights  to elect
directors as a class.  Grant of such rights could  provide the  preferred  stock
holders with significant control over matters of corporate governance.

     In addition, our Bylaws state that special meetings of the stockholders may
only be called by 20% or more of the outstanding  stock entitled to vote at such
meeting,  and also require that all  significant  transactions,  even those that
would not otherwise  require a vote of the Board of  Directors,  be reviewed and
approved  by the  Board.  These  Bylaws  provisions  may defer the  calling of a
meeting at which a change of control  might be  effected  and may serve to deter
potential acquirers.

We do not intend to pay cash dividends.

We have never paid cash  dividends  on our capital  stock and do not  anticipate
paying any cash dividends in the foreseeable future

<PAGE>


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We would be exposed to changes in interest  rates  primarily from our marketable
securities and investments in certain available-for-sale  securities.  Under our
current policies,  we do not use interest rate derivative  instruments to manage
exposure  to  interest  rate  changes.  At June  30,  2002,  we did not have any
marketable securities or investments in available-for-sale securities.


PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

Not applicable.


ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

On June 18, 2002 we completed  the  registration  of 2,285,714  shares of common
stock pursuant to a securities  purchase  agreement between us and Laurus Funds,
Ltd.

On August 7, 2002 we filed  Form  SB-2 to  register  1,767,676  shares of common
stock pursuant to a private placement completed in May 2002.

These were  private  placements,  exempt from the  Securities  Act  registration
requirement by virtue of Securities Act Section 4(2).

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

Not applicable.


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

On June 14, 2002 the Annual  Meeting of  Stockholders  was held.  The  following
directors  were  re-elected to serve on the Board of Directors  until their term
expires at the next annual meeting of  stockholders  in 2003:  Ronald D. Fellman
(6,188,473  for;  0   abstain/withheld),   James  A.  Bixby  (6,188,473  for;  0
abstain/withheld),  Frederick A. Cary (6,188,473 for; 0 abstain/against), Robert
B. Clasen (6,188,473 for; 0 abstain/against), Robert L. Packer (6,188,473 for; 0
abstain/against), In addition, the stockholders approved the following proposal:

Proposal #2. Ratification of the selection of Ernst & Young LLP as the Company's
independent  auditors for the fiscal year ending  December 31, 2002.  There were
6,188,473 votes for and no votes against.

Proposal #3. To approve and adopt an amendment to the 2000 Stock Option/Issuance
Plan  increasing  the  authorized  number  of shares to  4,260,000.  There  were
4,411,324 votes for, 167,750 votes against and 589,669 abstained, with 1,019,730
broker non-votes.

Proposal #4. To approve,  under our 2000 Stock Option  Stock/Issuance Plan total
option and share grants equal to up to 65% of the Company's  outstanding  stock.
There were  4,403,124  votes for,  169,750 votes against and 595,869  abstained,
with 1,019,730 broker non-votes.

Proposal #2 and proposal #3 were adopted.  Proposal #4 required a  supermajority
of 2/3rds of the total shares  outstanding.  Since there were insufficient votes
to constitute a supermajority, proposal #4 failed.

ITEM 5.  OTHER INFORMATION

On July 12, 2002,  Richard B. Slansky resigned as Chief Financial Officer of the
Company.

On July 12, 2002 Douglas A. Palmer resigned from the Company.

In May 2002,  Dr. Ronald  Fellman  commenced a qualified  selling plan under SEC
10B5-1.  The plan runs for sixty trading days starting July 29, 2002 and sells a
maximum of 500 shares per day.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

No reports on Form 8-K were filed during the  three-month  period ended June 30,
2002.


<PAGE>


Exhibits. The following exhibits are included as part of this report. References
to "us" in this Exhibit List mean Path 1 Network  Technologies  inc., a Delaware
corporation.

Exhibit
Number   Description

10.18    Separation and General Release between us and Richard B. Slansky dated
         July  8, 2002. *
10.19    Letter of Resignation from Douglas A. Palmer dated May 24, 2002. *
10.20    Consulting Agreement between us and Douglas A. Palmer dated May 24,
         2002. *
10.22    Securities Purchase Agreement between us and our current European
         Shareholders. (1)
10.23    Convertible promissory note issued to various European Shareholders.
         (1)
99.1     Certification under Section 906 of the Sarbanes-Oxley Act of 2002. *



(1) This exhibit was previously filed as part of, and is hereby incorporated by
reference to, our Registration Statement on Form SB-2, filed with the commission
on August 7, 2002.


* Filed Herewith


SIGNATURES

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


Path 1 Network Technologies Inc.


By: /s/ Frederick A. Cary
-------------------------
Frederick A. Cary
President and Chief Executive Officer


By: /s/ Donald W. Raymond
------------------------
Donald W. Raymond
(Principal Financial and Accounting Officer)

Date: August 14, 2002



Exhibits. The following exhibits are included as part of this report. References
to "us" in this Exhibit List mean Path 1 Network  Technologies  inc., a Delaware
corporation.

Exhibit
Number   Description

10.18    Separation and General Release between us and Richard B. Slansky dated
         July  8, 2002. *
10.19    Letter of Resignation from Douglas A. Palmer dated May 24, 2002. *
10.20    Consulting Agreement between us and Douglas A. Palmer dated May 24,
         2002. *
10.22    Securities Purchase Agreement between us and our current European
         Shareholders. (1)
10.23    Convertible promissory note issued to various European Shareholders.
         (1)
99.1     Certification under Section 906 of the Sarbanes-Oxley Act of 2002. *



(1) This exhibit was previously filed as part of, and is hereby incorporated by
reference to, our Registration Statement on Form SB-2, filed with the commission
on August 7, 2002.


* Filed Herewith