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                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-KSB

(Mark One)
[X]  Annual report under Section 13 or 15(d) of the Securities Exchange Act of
     1934 For the fiscal year ended December 31, 2000.

[ ]  Transition report under Section 13 or 15(d) of the Securities Exchange Act
     of 1934 For the transition period from _________ to _________

Commission File Number: 000-29755

                                   SATX, INC.
                 (Name of Small Business Issuer in Its Charter)

                  NEVADA                                  87-0293479
       (State or Other Jurisdiction            (IRS Employer Identification No.)
     of Incorporation or Organization)

                8351 ROSWELL ROAD, # 374, ATLANTA, GEORGIA 30350
               (Address of Principal Executive Offices, Zip Code)

                                 (813) 290-0911
                (Issuer's Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the Exchange Act:  None

Securities registered under Section 12(g) of the Exchange Act:

                                  COMMON STOCK
                                (Title of Class)

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

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

The issuer's revenues for the fiscal year ended December 31, 2000 were
$34,753.00.

The aggregate market value of the voting and non-voting common equity held by
non-affiliates (approximately 43,713,392 shares), computed by reference to the
average bid and asked prices of such common equity, was approximately
$8,305,544.00 as of April 23, 2001.

As of April 23, 2001, there were approximately 84,323,392 shares outstanding of
the issuer's Common Stock, par value $.001 per share.

Transitional Small Business Disclosure Format (check one):   Yes [ ]  No [X]

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None.


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                     A NOTE ABOUT FORWARD-LOOKING STATEMENTS

         This report (including the sections below entitled "Item 1. Description
of Business" and "Item 6 Management's Discussion and Analysis or Plan of
Operation") contains forward-looking statements that involve risks and
uncertainties. You should exercise extreme caution with respect to all forward
looking statements contained in this report. Specifically, the following
statements are "forward-looking":

         -        statements regarding our overall strategy for deploying our
                  proprietary technology, including without limitation, our
                  intended markets and future products;

         -        statements regarding our research and development efforts;

         -        statements regarding the plans and objectives of our
                  management for future operations, including the research,
                  development and production of products incorporating our
                  technology, and the size and nature of the costs we expect to
                  incur and the people and services we may employ;

         -        statements regarding future opportunities in our targeted
                  industries, our competition or regulations that may affect us;

         -        statements regarding our ability to compete with third
                  parties;

         -        any statements using the words "anticipate", "believe",
                  "estimate", "expect", "intend", and similar words; and

         -        any statements other than historical fact.

         We believe that it is important to communicate our future expectations
to our shareholders. Forward-looking statements reflect the current view of
management with respect to future events and are subject to numerous risks,
uncertainties and assumptions, including without limitation, the factors listed
in "Risks Associated with Our Business." Although we believe that the
expectations reflected in such forward-looking statements are reasonable, we can
give no assurance that such expectations will prove to be correct. Should any
underlying assumptions prove incorrect, actual results are likely to vary
materially from those described in this report. There can be no assurance that
the projected results will occur, that these judgments or assumptions will
prove correct, or that unforeseen developments will not occur.


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                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

HISTORICAL OVERVIEW

         SATX, Inc. ("SATX", the "Company", "we", "our" or "us") was originally
incorporated in June, 1972 as Growth, Inc., a Utah corporation engaged in the
business of corporate development. The Company later changed its name to
Westland Resources, Inc. and began functioning as a shell corporation for
acquisitions. We subsequently reincorporated in Nevada, in September, 1995,
under the name PageStar, Inc. via a reverse merger.

         In September, 1996, we acquired Satellite Control Technologies, Inc., a
privately held Delaware corporation, and its wholly-owned subsidiary, J.F.A.
Tech, Inc., a California corporation. As a part of this acquisition transaction,
J.F.A. Tech assigned to us all of its proprietary technology rights and patents
(including, at the time, a pending patent, now issued). Shortly thereafter, in
April, 1997, we changed our name to Satellite Control Technologies, Inc.

         Following the acquisition of Satellite Control Technologies, we engaged
in the research and development of Global Positioning Satellite ("GPS")-based
tracking, locating and control systems until May, 1998, at which time the
Company ceased operations due to lack of funds. At such time, our only assets
were two (2) patents relating to tracking, locating and control systems. The
Company was reactivated in May, 1999 with the acquisition of DebitFone
International, Inc., a Florida corporation engaged in the prepaid cellular phone
industry. From its incorporation in October, 1996 until May, 1999, DebitFone was
a privately held research and development company with no revenues. As a result
of the acquisition, DebitFone is now a wholly-owned subsidiary of the Company.

         In May of 1999, we changed our name again to SATX, Inc., to align our
name with our existing public stock symbol, and for market identification
enhancement. Since May, 1999 the Company has concentrated its efforts on the
continued development of our GPS-based tracking, locating and control systems
and our prepaid cellular phone software management system.

OUR BUSINESS

         Our current business consists of the design and development of product
lines utilizing either our AlphaTrak tracking, locating and control systems or
our DebitFone software management system. Revenues have been insignificant since
our inception in 1972, and capital is needed to complete the development of our
initial product lines, commence production, conduct a marketing campaign, and
expand our research and technology efforts.

         Although our AlphaTrak and DebitFone systems constitute the Company's
core businesses, we are also looking into several new areas of
telecommunications, to compliment and expand our product lines and to generate
revenue and cash flow. See, "Plan of Operations".


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         OUR ALPHATRAK TRACKING, LOCATING AND CONTROL SYSTEMS

         The Company presently owns two (2) patents related to switching
electrical devices remotely, via pager signals, and communicating the results
back to the source of the original action/signal. These patented devices
underlie our AlphaTrak systems. The following is a description of the products,
plans and objectives of our management for future operations relating to the
research, development and production of products incorporating our AlphaTrak
technology.

           Utilizing our patented one-way paging process, we have developed and
are further developing a low-end market solution that has applications for the
automotive market. The primary function of this product will be to lock and
unlock car doors, and to disable a motor vehicle in the event of theft. To
unlock or lock the car doors the owner or other control person will simply place
a telephone call to a 1-800 number and, upon entering a security and action
code, the AlphaTrak system could unlock or lock the car doors. In the case of
auto theft, the owner will be able to direct the AlphaTrak unit to disable the
motor vehicle through a process of shutting down the vehicle's engine in a safe
manner.

         A second AlphaTrak product line is under development for use primarily
in locating and disabling automobiles that are sold to the "credit challenged"
market. For example, if an owner fails to make a required installment payment, a
signal will be sent to an AlphaTrak unit installed in the vehicle, disabling the
vehicle until the necessary payment is made. A disabled vehicle could then be
located via GPS tracking, and if desired, a tow truck could be dispatched to
recover the vehicle. Management believes that this application of the Company's
AlphaTrak system has the potential to increase sales for car dealerships to
customers who may not meet certain credit standards, due to the ability to
quickly disable, locate and retrieve vehicles in the event a purchaser becomes
delinquent in its payments.

         A third application for our AlphaTrak product line is the tracking and
locating of large containers, trailers and other equipment that can be easily
stolen. By installing an AlphaTrak unit on or in the container or equipment, a
signal will be sent to a central location notifying the person monitoring the
AlphaTrak unit that the container or equipment was being moved and possibly
being stolen. If moved or stolen, the AlphaTrak unit could be used to quickly
locate and recover the container or equipment.

         RELIANCE ON PAGER SERVICES FOR ALPHATRAK PRODUCTS

         The Company is dependent upon pager service companies for the operation
of our AlphaTrak products, since our patented switching devices are based upon
one-way and two-way paging communications. Each AlphaTrak unit that we install
will need to have a pager number to enable the owner to "call" the tracking unit
and electronically signal the unit to perform an activity, such as locking the
doors or turning off the motor, and to signal back to the monitoring center that
the unit performed the activity it was paged to accomplish. We will need to form
an alliance with one or more national paging service companies for the provision
of the paging services necessary to operate our AlphaTrak products. Management
does not anticipate encountering significant difficulty in reaching such
alliances, given the additional business our requirements could provide to an
industry impacted by cellular expansion. We are currently negotiating with
several paging companies and anticipate that we will have a national contract


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within the next ninety (90) days. However, there can be no assurances that the
necessary paging services will be available on terms acceptable to us, or at
all.

         MARKETS FOR ALPHATRAK PRODUCTS

         Target markets for products incorporating our AlphaTrak technology may
include a broad spectrum of potential users in a variety of industries. We
intend to develop technology and products that provide solutions for the
following markets:

                  Automotive. We anticipate that we will initially target the
billion dollar anti-theft automotive industry. The consumer will be able to stop
or start a vehicle, locate a stolen vehicle, and lock or unlock doors. We also
intend to target car dealerships, and automobile and truck finance companies.
Management believes the AlphaTrak systems will be valuable to such markets
because it has the potential to increase vehicle sales to the "credit
challenged" consumer where the vehicle could be rapidly disabled, located and
recovered in those circumstances where the consumer falls behind in making
payments for the vehicle.

                  Containers and Heavy Equipment. Management will also market
AlphaTrak products to those industries utilizing large containers, including the
waste management industry, and those industries using heavy equipment, including
the construction industry. Large containers such as those used for trash at
commercial construction sites, and heavy equipment, such as bulldozers, are
often stolen, or even misplaced. Management believes our AlphaTrak technology
will have valuable application to industries utilizing large containers and
heavy equipment because it has the potential to deter or mitigate the damages
cause by theft or misplacement.

                  Motorcycles. With limited anti-theft recovery products and
services currently available in the motorcycle industry, our management is
optimistic that, with well-placed advertising and promotion, it may be possible
to capture a portion of the motorcycle anti-theft market with a custom, compact
solution utilizing the Company's AlphaTrak technology.

                  Agriculture. In the past farmers had to travel to the fields
to take corrective irrigation measures for changes in weather conditions. With
remote switching devices in place, such activities could be initiated, monitored
and terminated from the farmer's house. With the development of pager-driven
controls to remotely operate irrigation devices, and education and promotion,
management believes that this market segment of the agriculture industry could
be a potential source of revenue opportunity for products developed with our
AlphaTrak technology.

                  Cargo Shipping. Management believes that our AlphaTrak
technology will be applicable to the anti-theft industry for a variety of cargo
shipping markets including boats, trucks, and railways. AlphaTrak Systems could
be used to notify a shipper if critical security functions have been breached,
and provide reports on past and present locations of trucks, railroad cars or
ocean containers. AlphaTrak Systems could also be used to monitor key
performance parameters. In addition to security functions, AlphaTrak devices for
trucks could include convenience accessories such as remote door unlock and


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engine start functions. Convenience accessories could also be developed for use
in support of the rail transport industry and ocean vessel cargo.

         OUR STRATEGY FOR ALPHATRAK

         Our long-term strategy is to build a family of premium products using
our AlphaTrak patented paging devices for security and convenience in support of
our target markets. Although we intend to conduct further testing of our initial
products and evaluate alternative solutions, our management team believes that
the Company's initial line of AlphaTrak products are commercially viable and we
anticipate that we will introduce the third generation of our initial products
into the marketplace within the next ninety (90) days.

          In addition we are planning to complete the development of a state of
the art, new-generation GPS-based tracking, locating and control product line
during the year 2001, at a cost of approximately $100,000.

         OUR DEBITFONE SOFTWARE MANAGEMENT SYSTEM

         The following is a description of the products, plans and objectives of
our management for future operations with respect to the research, development
and production of products incorporating our prepaid cellular phone management
system.

         Our "intelligent" DebitFone software offers a unique method for
providing prepaid cellular phone service and hardware. The Company's management
believes our DebitFone system may be superior in several ways to traditional
cellular practices. Specifically, a "debit" functionality can be built directly
into a cellular phone, and through the incorporation of the Company's unique
proprietary software system written for DebitFone, additional airtime can be
purchased and loaded into the phone through its keypad. The "intelligent"
DebitFone System provides a cellular phone service whereby all calls are prepaid
and billing risks are eliminated.

         Our management team believes that the DebitFone software management
system is commercially viable in its current state and we are seeking an
agreement with a phone manufacturer to have our proprietary software installed
into a cellular phone. Subsequent product evolution will need to be developed,
however, through strategic partnerships, to provide new analog solutions in
addition to a dual mode Analog/TDMA product, an Analog/CDMA product, and a
GSM-derivative product. As an analog product, however, the window of opportunity
for DebitFone products will be similar to that of traditional analog cellular
phones in general. In order to remain competitive and improve the economics to
the Company and the customer, management commenced the development of a
second-generation DebitFone System, employing a digital solution with our
"intelligent" software installed. We have now completed and are in the process
of copyrighting our digital software package.

         In order to be well positioned in the prepaid cellular marketplace, we
will also need to have both a software-based solution and a network-based
solution. Accordingly, management is looking into several


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network-based solutions for the prepaid cellular phone business, which would
compliment and be included in our DebitFone systems.

         ADDING PREPAID AIRTIME USING THE DEBITFONE SYSTEM

         Utilizing the Company's "intelligent" software, DebitFone customers
will be able purchase as much (or as little) cellular airtime as desired. The
following is a summary of the three methods by which a DebitFone customer will
be able to purchase additional airtime using our "intelligent" software
installed in the phone handset.

         Cellular Airtime Cards. A DebitFone cellular customer will be able to
purchase an airtime card, dial an 800-number on the card, and accesses an
Integrated Voice Response System ("IVR"). The customer will then enters his or
her cellular phone number and an authorization code on the card when prompted by
voice commands. The IVR system will verify that the end-user is valid, and that
the authorization code entered is valid. The IVR will then give the customer a
five- digit number to enter into the cellular phone using the phone's keypad,
thus increasing the available minutes for immediate use.

         Personal Credit Card. This method of adding airtime will require the
DebitFone customer to place a credit card number on file with the Company. The
customer will then be able to call an 800-number, twenty-four (24) hours per
day, and add airtime to the phone by following the voice prompts. Our
"intelligent" software takes the request for additional time and processes the
credit card on-line through a clearinghouse. Upon verification of available
funds, the software system issues a five-digit code to the customer to add
airtime to the phone as requested. The Company will receive payment for the
additional airtime at that moment, via processing the credit transaction.

         Customer's Checking Account. The third method for adding airtime allows
the phone subscriber to place a checking account number on file with the
Company. The customer can call an 800-number, twenty-four (24) hours per day,
and add airtime to a phone by following the voice prompts. DebitFone's unique
software takes the request for airtime and processes the transaction. Upon
finishing this process the software issues a five-digit code to the end-user to
add airtime to the phone as requested, and the Company will receive payment from
the end-user's checking account in an overnight transaction that is transparent
to the customer.

         MARKETS FOR DEBITFONE PRODUCTS

         The Company initially intended to market our DebitFone products in
vending machines located in an expansive channel of retail outlets, including
convenience stores, electronics shops, and college bookstores. However,
alternative solutions for future introduction into the marketplace continue to
be investigated and evaluated. The following is a description of the targeted
customers for our prepaid cellular system.

         Cash-Rich, Credit-Impaired. One of the cellular industry's primary
concerns is credit risk regarding cash-rich, credit-impaired customers. Carriers
within the United States are forced to turn away over 30% of all potential
cellular phone customers due to questionable or non-existent credit histories.
The


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Company's prepaid program eliminates this problem, as the end-user is not
required to pass credit-scoring criteria, and does not interface with the
carrier.

         Expense Control. Another segment of potential customers for our
DebitFone products will be of the "typical" cellular phone user who wishes to
control expenses. By "counting down" the amount of remaining airtime, the phone
keeps the end-user mindful of expenses. Focus-group research indicates that
this is a very attractive feature for cellular phone users, no longer fooled by
"free phones" through cellular airtime "bundling" practices. Further research
indicates that corporations feel that a prepaid product may be more advantageous
to their budgetary controls. The DebitFone System would allow corporate
customers to provide their employees with a limited, prepaid quantity of monthly
airtime. Additional airtime could be added at the employee's expense.

         RELIANCE ON ACTIVATION AND SERVICE PROVIDERS

         The Company has entered into a private label reseller agreement with a
national activator of cellular phones ("A&S Provider"), for the purpose of
providing our customers with a mobile identification number ("MINs"), which is
the equivalent of a phone number for the cellular phones sold by the Company.
Following the purchase of a cellular phone, a customer will need to call our A&S
Provider's interactive voice response system ("IVR") and enter the phone's
electronic serial number ("ESN") and the customer's local zip code and area
code, in order to activate the phone. Activation is the process by which a
cellular phone becomes initially operable. Our A&S Provider's IVR system will
operate 24 hours a day, 7 days a week, and electronically interface with our own
IVR system to ensure compatible and controlled data, and to request and extract
time renewal codes for handset input.

         In addition to activation services, our A&S Provider will also be
responsible for maintaining agreements with national cellular carriers for the
provision of local, long-distance and roaming services. A&S Providers purchase
and resell local, long-distance, and roaming services to us for our cellular
phone customers. Our A&S Provider will be the customer of record with the
national cellular carriers, and the national cellular carriers will invoice our
A&S Provider for such services, not the end-user.

         Management does not anticipate encountering problems with our A&S
Provider, however, there can be no assurance that alternative providers will be
available to the Company on terms acceptable to us, or at all. Accordingly, the
ultimate goal of the Company is to internally activate and carry the traffic for
all of the phones that we sell, thus providing a long-term customer base, and
generating residual income for recurring airtime margin.

         OUR STRATEGY - DEBITFONE PRODUCTS

         The primary marketing objectives for the "intelligent" DebitFone System
include:

         -        to provide a turnkey, prepaid cellular coverage system to
                  retailers and dealers;

         -        to market DebitFone products into expanded distribution
                  channels; and


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         -        to obtain recurring revenues for the Company.

         Achieving these objectives is expected to provide the Company with
customer alliances and establish a continuous revenue stream from incremental
airtime renewal. We can not give any assurance, however, that the Company will
be able to successfully market its DebitFone products or achieve the anticipated
objectives and results.

COMPETITION FOR OUR BUSINESS

         The market for theft-prevention systems for automobiles, trucks,
motorcycles, etc., is highly competitive, and we anticipate that it will become
increasingly competitive in the future. There are numerous theft-prevention
systems currently available. These systems fall into three general classes:
physical locking devices, alarm systems, and systems for locating and shutting
down vehicles. All of these systems are competition to our AlphaTrak products,
in that they compete for the same disposable dollar. Competitive factors include
price, ease of operation, reliability, effectiveness, and optional features. Key
competitors include LoJack, Teletrac, Posse, and Telealarm. Our management
believes that the AlphaTrak technology and product lines may be superior to
similar products of our competitors and we anticipate that the Company will be
able to compete based upon the special features of our products and the lower
cost of our on-going monitoring fees to end-users.

         DebitFone has three (3) primary competitors with comparable technology
and capability in the marketplace today. With the development of our
"intelligent" platform, along with an activation and fulfillment capability,
management believes DebitFone may have certain competitive advantages in the
marketplace. However, these competitive advantages do not eliminate significant
barriers to market entry. Timing is very critical in this niche arena.

         Many of our competitors have greater visibility in the marketplace and
possess significantly greater financial and other resources than the Company.
Therefore, there can be no assurance that we will be successful, even if our
products are superior to those of our competitors. Furthermore, we face
competition from new technologies which could result in new competitors entering
the marketplace with new products which could make our AlphaTrak and/or
DebitFone products obsolete. We cannot predict the competitive impact of new
technologies and competitors.

MANUFACTURING AND SUPPLIERS

         When the Company enters the production phase for our second and third
generations of products, we will contract with third party manufacturers to
produce our products. Manufacturing our products will be a complex process and
there can be no assurance that we will not experience production problems or
delays. Any interruption in the manufacturing process could have a material
adverse effect on our business and operating results.

         We will also rely on third party suppliers to provide the raw materials
necessary for the production of our products. There may be a limited number of
suppliers of some of the components necessary for the manufacture of our
products. The reliance on a limited number of suppliers, particularly if such
suppliers


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are foreign, poses several risks, including a potential inability to obtain an
adequate supply of required components and reduced control over pricing, quality
and timely delivery of components. We cannot provide any assurances that we will
be able to obtain adequate supplies of raw materials.

         Certain key components of our products may involve long lead times, and
in the event of an unanticipated increase in the demand for our products, we
could be unable to manufacture certain products in a quantity sufficient to
satisfy potential demand. If we cannot obtain adequate deliveries of key
components, we may not be able to ship products on a timely basis. Delays in
shipment could damage our relationship with customers and could have a material
adverse effect on our business and operating results.

INTELLECTUAL PROPERTY

         Our success and ability to compete is dependent upon our ability to
develop and maintain the proprietary aspects of our technology, and to operate
without infringing on the proprietary rights of others. It will be necessary for
us to rely on a combination of patent, trademark, trade secrets and copyright
law, and contractual restrictions to protect the proprietary aspects of our
technologies. Presently, we only have patents on our core AlphaTrak technology
in the United States, and we do not have any patents or pending patents on our
DebitFone technology. In the future, we may file for additional patents on
various aspects of our technology in the United States and in certain foreign
countries. There can be no assurance that our means of protecting our
proprietary rights will be adequate or that our competitors will not
independently develop similar technology.

         Legal protections afford only limited protection for our technology,
and the laws of many countries do not protect our proprietary rights to the same
extent as the laws of the United States. Despite our efforts to protect our
proprietary rights, unauthorized parties may attempt to copy aspects of our
products or to obtain and use information that we regard as confidential.
Litigation may be necessary in the future to enforce our intellectual property
rights, to protect our trade secrets, and/or to determine the validity and scope
of the proprietary rights of others. Such litigation could result in substantial
expense and diversion of resources and could have a material adverse effect on
our business, operating results and financial condition.

         To date, we have not been notified that our products infringe the
proprietary rights of third parties, but there can be no assurance that third
parties will not claim infringement with respect to our current or future
products. Any such claims, with or without merit, could be time-consuming to
defend, result in costly litigation, divert management's attention and
resources, cause product shipment delays, or require us to enter into royalty or
licensing agreements. Such royalty or licensing agreements, if required, may not
be available on terms acceptable to us, or at all.

OUR EMPLOYEES

         In March, 2001, we entered into a Separation and Mutual Release from
Employment Agreement (the "Separation Agreement") with two (2) of our former
employees, pursuant to which we agreed to make a one-time lump sum payment to
the employees in the aggregate amount of $35,000, and a note payable to the
employees in the amount of $15,000, as full reimbursement for their collective
expenses. The note


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is payable in installments of $5,000 on the first day of May, June, and July,
2001. We also agreed to issue an aggregate of 300,000 shares of SATX Common
Stock to such former employees and give them customary "piggyback" registration
rights with respect to such shares.

         We currently have 6 full-time employees and 2 part-time employees. We
also have 2 independent contractors. We may, from time to time, supplement our
work force, as necessary, with temporary and contract personnel. None of our
employees are represented by a labor union. We believe we have a good
relationship with our employees.

MATERIAL TRANSACTIONS AND EVENTS

         AGREEMENT WITH LILLY BETER CAPITAL GROUP, LTD. On January 16, 2000, the
Company entered into an agreement with Lilly Beter Capital Group, Ltd. ("LBCG"),
pursuant to which LBCG agreed to provide the following services to the Company:

         -        provide a new President/CEO;
         -        seek out mergers and acquisitions that will enhance the
                  Company;
         -        act as a private investment banker and help us raise capital;
         -        help us create a better market and establish credibility in
                  the marketplace;
         -        select our legal counsel; and
         -        select our auditors.

         As payment for such services to be provided by LBCG, SATX agreed to the
following compensation and other terms:

         -        16,000,000 shares of our common stock;
         -        an option to purchase 5,000,000 shares of Common Stock at
                  $1.00 per share;
         -        standard fee or finders fee for any acquisition that is merged
                  into SATX;
         -        10% commission on all capital raised;
         -        give LBCG the right to select 4 out of 7 members of the Board
                  of Directors;
         -        give LBCG a first right of refusal on any public shell
                  corporations;
         -        terminate the merger agreement with Shared Technologies
                  Cellular, Inc.;
         -        authorize 250,000,000 shares of common stock;
         -        authorize 100,000,000 shares of preferred stock; and
         -        not cause a sale or dissolution of Ora Electronics, Inc.
                  (subsequently waived).

         Since the signing of the agreement, LBCG has been instrumental in the
election of Garry P. McHenry, Lilly O. Beter and Celso B. Suarez to the Board of
Directors and the formation of a Compensation and an Audit Committee of the
Board. LBCG selected our new CEO and President, Terry L. Colbert, our new Vice
President, Garry P. McHenry, and they have identified a candidate who is
expected to become our new Chief Financial Officer within the next forty-five
(45) days.

         As provided in the agreement with LBCG, we authorized the issuance of
15,000,000 shares of SATX Common Stock to LBCG as compensation for their
services to the Company. Our directors, Kosti


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Shirvanian and John Hartunian transferred an additional 1,000,000 of their
personal shares to LBCG. All of such shares were subsequently transferred to
five trusts designated by LBCG. Counsel for the trusts and LBCG has represented
to the Company that the trusts, with one another or with LBCG, are not a group
for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, and that LBCG does not have beneficial ownership of any of the shares
transferred to the trusts.

         SALE OF ORA ELECTRONICS, INC. In May, 2000 we completed the acquisition
of 3,982,600 shares (approximately 56%) of ORA Electronics, Inc., a Delaware
corporation ("ORA" or "ORA Electronics") from Ruth Cooper, as an individual and
as trustee of the Cooper Living Trust. As consideration for the purchase, the
Company paid $150,000 in cash and issued (i) 400,000 shares of SATX common
stock, and (ii) a promissory note in the amount of $23,186. As additional
consideration, (x) we assumed and paid approximately $300,000, to ORA, pursuant
to a promissory note dated due March 31, 1996, as amended, restated and extended
to March 31, 2000; and (ii) also assumed, when due, all liabilities and
obligations arising out of or under a continuing guaranty dated February 1,
1989, given by Ruth Cooper and Gershon Cooper to a third party to guaranty the
repayment of a secured loan to ORA. Subsequently, we purchased an additional
1,000,000 shares of ORA Electronics for $400,000 in cash. ORA is in the cellular
accessory market and management anticipated that ORA's "intelligent" electronic
communications systems would provide significant synergism with our existing
technologies. In addition, management believed ORA's engineering capabilities
would enhance SATX's development efforts.

         The intended benefits of the ORA acquisition were not realized, and in
March, 2001, we sold 3,982,600 shares of ORA common stock back to ORA for
$35,000 and the retention by SATX of certain key ORA engineers. ORA agreed to
use the funds to cure its mortgage payment and property tax defaults. In
addition, the parties agreed to call/put rights for our remaining 1,000,000
shares of ORA common stock at a price of $3.00 per share. ORA's call right can
be exercised at any time, and our put right commences in March 2002.

         TERMINATION OF MERGER WITH SHARED TECHNOLOGIES CELLULAR, INC. In
November, 2000, we entered into a merger agreement with Shared Technologies
Cellular, Inc., a Delaware corporation ("STCL"). The object of the merger with
STCL was to create the first provider capable of producing and delivering
integrated cellular, paging, Internet, local and long distance products with
bundled services. Our DebitFone technology was intended to be used to solidify
the combined companies presence in the prepaid cellular phone industry, and our
AlphaTrak technology would be used to establish a clear migration strategy of
the surviving corporation into the Telematics Industry.

         Pursuant to the plan of merger, our stockholders were to receive one
(1) share of the common stock of STCL for every four (4) four shares of SATX
common stock. Consummation of the merger with STCL was subject to various
conditions including obtaining $30 million of working capital financing for the
surviving corporation, the approval of the stockholders of both companies, and
the receipt of fairness opinions and regulatory approvals. The target date for
consummation of the merger was in February, 2001. However, on February 2, 2001,
the merger was terminated by mutual consent for various reasons including our
decision to retain Lilly Beter Capital Group, Ltd. to act as our private
investment banker, and STCL's decision to pursue independent financing
alternatives.


                                       10
<PAGE>   13

         TERMINATION OF MEMORANDUM OF UNDERSTANDING WITH ASIA PACIFIC GROUP. In
September, 2000, we entered into a non-binding Memorandum of Understanding with
a member company of Asia Pacific Group, a Chinese multi-national company,
relating to the licensing and distribution of our AlphaTrak technology in China.
We announced the cancellation of the Memorandum of Understanding in March, 2001,
and our desire to concentrate our human and capital resources in the United
States markets.

         TERMINATION OF AGREEMENT WITH LIMAGE HOLDINGS (USA), INC. In January,
2000, the Company entered into an agreement with Limage Holdings (USA), Inc.
("Limage"), whereby Limage agreed to lend $3,000,000 to the Company for working
capital purposes. As collateral for the loan, we issued 7,500,000 shares of our
Common Stock to Limage, with the provision that such shares would be held in
escrow with a third party until the loan was repaid in full. Limage also
received a warrant for the purchase of 4,000,000 shares of SATX Common Stock at
$.50 per share. Limage did not fund the loan it agreed to make to the
Company, and in February, 2001, our Board of Directors canceled the warrants and
the shares issued to Limage.

         WRITE-OFF OF INVESTMENT IN DIGITAL TELECOMMUNICATIONS, INC. In May,
1999, the Company invested in Digital Telecommunications, Inc., an Oklahoma
corporation engaged in the telecommunications business in Madagascar. Our
investment, totaling $165,000, was written off in December, 2000.

         8% CONVERTIBLE DEBENTURES AND REGISTRATION RIGHTS AGREEMENT. On
September 14, 2000, we entered into a securities purchase agreement with an
investor (the "Investor") to purchase, initially, from the Company 8%
Convertible Debentures (the "Debentures") in the principal amount of $250,000
out of a total offering of not more than $1,000,000 of such Debentures. The
Debentures mature on September 14, 2001. The Investor is entitled to convert the
Debenture into SATX Common Stock at any time until maturity at a conversion
price per share equal to the lesser of (x) seventy percent (70%) of the Market
Price of the Common Stock on the initial closing date or (y) seventy percent
(70%) of the Market Price of the Common Stock on the conversion date, subject to
a maximum conversion price of $1.00. In addition, the Investor received a
warrant to purchase 100,000 shares of SATX Common Stock (a "Warrant"). The
Warrant can be exercised at a price per share equal to 120% of the Weighted
Average Conversion Price, as that term is defined in the securities purchase
agreement. The Warrant expires in five (5) years.

         During the nine (9) months after the initial purchase of Debentures,
the Investor has the option to purchase from the Company up to $750,000 of
additional Debentures in tranches of $250,000. The Investor is entitled to an
additional Warrant for the purchase of 100,000 shares for each purchase of an
additional Debenture. The Company may cancel Investor's option to purchase
additional Debentures in the event the Company obtains a financing commitment
in an amount exceeding $1,500,000 from a bona fide unaffiliated source at any
time prior to the exercise of Investor's option.

         Further, the Company entered into a registration rights agreement with
the Company. We agreed to prepare and file a registration statement with the
Securities and Exchange Commission, no later than sixty (60) days after initial
purchase of the Debentures, registering for resale by the Investor not less
than 200% of the aggregate number of shares into which (A) the Debentures and
all interest thereon would be convertible and (B) which would be issuable upon
the exercise of all of the Warrants. In the event such registration statement
is not declared effective ninety (90) days after the initial purchase of the
Debentures, the Company is obligated to make payment to the Investor an amount
equal to approximately two percent (2%) of the principal amount of the
Debentures for each thirty (30) day period thereafter during which the
registration statement is not effective. In addition, in the event the
registration statement is not declared effective within 120 days, Investor is
entitled to receive an additional Warrant for the purchase of 200,000 shares.
After 180 days and every sixty days thereafter, Investor is entitled to
additional Warrants for the purchase of 100,000 shares each, so long as the
registration statement is not effective. We are in default under the
registration rights agreement and owe the Investor $50,000 and Warrants to
purchase 300,000 shares of Common Stock, as of April, 2001. Management intends
to re-negotiate the registration rights agreement with the Investor.

         TERMINATION OF MEMORANDUM OF UNDERSTANDING WITH STOVEACT, INC. In
October 1999, the Company entered into a Memorandum of Understanding to acquire,
in a stock-for-stock exchange, all the outstanding shares of Stoveact, Inc., a
privately held California corporation, for the purpose of acquiring its vehicle
location and disabling technology, which we believed would be compatible with
our AlphaTrak Systems. After completing the necessary due diligence the parties
concluded that their respective technologies were not compatible and the
Memorandum of Understanding was mutually terminated in January, 2000.

         SUPPLEMENTAL AGREEMENT WITH PARADIGM MANUFACTURING, INC. In October,
1999, SATX, Inc. entered into a stock purchase agreement with Paradigm
Manufacturing, Inc. ("Paradigm"), which called for SATX to acquire all the
shares of Paradigm. As part of the agreement, we loaned Paradigm $336,491 (the
"Loan"). On March 3, 2000, the parties entered into a supplemental agreement
rescinding the stock purchase agreement, and further agreeing that Paradigm
would complete the development and tooling of a prepaid phone for the Company
and repay the Loan in periodic installments commencing April 1, 2000, with the
final payment due on November 1, 2000. Paradigm has not made any of the above
payments and the Company is considering its alternatives.

ITEM 2.  DESCRIPTION OF PROPERTY.

         In January, 2001, we closed our executive office and warehouse space at
4710 Eisenhower Boulevard, Suite B-2, Tampa, Florida 33634, and we are in the
process of relocating to Atlanta, Georgia. Although our Tampa lease was not
scheduled to expire until June 30, 2003, we have been notified by the landlord
that a new tenant has leased the premises, thereby terminating our lease and
ending our liability for further rental payments on such property.

         Several locations for our new offices are being considered at this
time. In the interim, our temporary mailing address is 8351 Roswell Road, # 374,
Atlanta, Georgia 30350, and shareholders can


                                       11
<PAGE>   14

contact management via our answering service at (813) 290-0911. Until such time
as our new facilities are located, management will remain in close contact with
our answering service.

ITEM 3.  LEGAL PROCEEDINGS.

         NIGRO V. SATELLITE CONTROL TECHNOLOGIES, INC., ET. AL. (May, 1998,
Superior Court, Los Angeles County). This is a class action lawsuit filed by
Nigro on behalf of himself and others who owned SATX Common Stock between
September 26, 1996 and October 7, 1997. Plaintiffs seek to recover in damages
for depreciation of their stock due to alleged intentional and negligent
misrepresentation of certain former officers and directors of the Company. The
alleged misrepresentations are (i) the Company had substantial purchase orders
for its AlphaTrak product line and (ii) the AlphaTrak product line was viable
and would be available on the market in the first or second quarter of 1997. The
case is currently in the late stages of discovery. Based on the documentary
evidence currently in the possession of the Company through various depositions
and interviews with former officers, directors, employees and outside engineers,
we believe that the allegations are incorrect. A summary judgment hearing has
been filed by SATX and the hearing is expected to occur in June, 2001. Based on
the facts presently available to counsel, substantial recovery by plaintiffs
appears unlikely.

         SATX, INC. V. CASTERLINE & AGAJANIAN, LLP, TIM AGAJANIAN, ET. AL.
(September, 2000, Superior Court, Los Angeles County). This lawsuit was filed by
SATX seeking unspecified monetary damages for professional malpractice.
Defendants filed a counterclaim seeking unspecified monetary damages for trade
libel. On February 23, 2001, we entered into a Settlement Agreement and Release
with Defendants pursuant to which we agreed to pay to Casterline & Agajanian,
LLP the sum of $6,000, and to issue 100,000 shares of our Common Stock to Tim
Agajanian. The suit was dismissed on March 22, 2001.

         SUTER V. SATELLITE CONTROL TECHNOLOGY, INC. (June, 1998, Superior
Court, Orange County). This lawsuit was filed by Carl Suter alleging that the
Company failed to repay money due on three separate promissory notes. The
Plaintiff obtained a default judgment on November 2, 1999 in the principal
amount of $185,000. The Company maintains that we were not served with a copy of
the complaint and that we had no knowledge of the action until a judgment was
entered. Counsel for the Company is investigating the matter to determine
whether the judgment can be set aside or whether it is a valid obligation of the
Company.

         HILL & KNOWLTON V. DEBITFONE INTERNATIONAL, INC. (2000, Superior Court,
Hillsborough County ). This case involves a collection claim against DebitFone
for monies allegedly owed for media relations and investor relation services
allegedly performed by the plaintiffs. This case is currently being settled for
$20,000.

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

         Effective April 23, 2001, shareholders holding not less than a majority
of our Common Stock, acting by written consent, approved an amendment to the
Company's Articles of Incorporation to increase in the authorized capital stock
of the Company to 350,000,000 shares, of which 250,000,000 shares shall be
common stock and 100,000,000 shares shall be preferred stock. Articles of
Amendment to the Company's Articles of Incorporation will be filed promptly with
the Secretary of State of the State of Nevada.


                                       12
<PAGE>   15

                                     PART II

ITEM 5.     MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

MARKET PRICE OF COMMON STOCK

         Our Common Stock is currently traded on the Nasdaq Stock Market's
over-the-counter electronic bulletin board (the "OTC Bulletin Board") under the
trading symbol "SATX".

         The following table shows quarterly high and low bid prices and high
and low ask prices for our Common Stock, for the periods indicated below, as
reported on the OTC Bulletin Board. Prior to our fourth quarter, 1999, there was
insignificant and inconsistent trading activity, generally ranging from zero to
a few thousand shares per day. The prices below represent quotations by dealers
without adjustments for retail mark-ups, mark-downs or commissions, and may not
represent actual transactions.

<TABLE>
<CAPTION>
                                                        BID                          ASK
                                               High            Low         High             Low
                                               ----            ---         ----             ---
<S>                                       <C>               <C>          <C>             <C>
JANUARY 2001 THROUGH MARCH 31, 2001
         First Quarter                    $     .19         $  .08       $      .52      $  .41

JANUARY 2000 THROUGH DECEMBER 2000
         First Quarter                         1.00            .45             4.00         .73
         Second Quarter                         .53            .38             1.91         .91
         Third Quarter                          .50            .39              .84         .70
         Fourth Quarter                         .19            .06              .55         .14

OCTOBER 1999 THROUGH DECEMBER 1999
         Fourth Quarter                        1.09            .44             1.34        1.02
</TABLE>

DIVIDENDS

         We have not declared or paid any cash dividends on our capital stock
and do not anticipate paying any cash dividends on our capital stock in the
foreseeable future. Payment of dividends on the common stock is within the
discretion of our Board of Directors. The Board currently intends to retain
future earnings, if any, to finance our business operations and fund the
development and growth of our business. The declaration of dividends in the
future will depend upon our earnings, capital requirements, financial condition,
and other factors deemed relevant by the Board.

HOLDERS OF OUR COMMON STOCK

         As of April 20, 2000, the approximate number of record holders of our
Common Stock was 315. An undetermined number of our record holders represent
more than one individual participant in securities positions with us.


                                       13
<PAGE>   16

RECENT SALES OF SECURITIES

         UNREGISTERED SECURITIES. During the fiscal years ending December 31,
2000 and December 31, 1999 and in the quarterly period ending March 31, 2001, we
sold unregistered securities, and we issued unregistered securities and granted
options in consideration for services rendered and in connection with
acquisitions, repayment of debt, etc., as follows:

         SALES OF STOCK:
         -        we sold an aggregate of 1,646,116 shares of Common Stock to
                  fifteen (15) persons, and realized net proceeds of $702,169 in
                  1999;
         -        we sold an aggregate of 4,184,206 shares of Common Stock to
                  five (5) persons, and realized net proceeds of $1,900,000 in
                  2000;
         -        we sold a convertible debenture and a warrant for the purchase
                  of 100,000 shares of Common Stock to 1 person, and realized
                  net proceeds of approximately $233,000 in 2000;
         -        we sold an aggregate of 8,603,316 shares of Common Stock to
                  fifty-eight (58) persons, and realized net proceeds of
                  $761,740 in the first quarter of 2001;

         ACQUISITIONS:
         -        we issued a total of 2,900,000 shares of Common Stock valued
                  at $116,000 for an acquisition in 1999;
         -        we issued a total of 400,000 shares of Common Stock valued at
                  $400,000 for an acquisition in 2000;

         SERVICES:
         -        we issued a total of 410,000 shares of Common Stock valued at
                  $16,400, for services rendered to the Company by third persons
                  in 1999;
         -        we issued a total of 250,000 shares of Common Stock valued at
                  $75,000 for services rendered to the Company by third persons
                  in 2000;
         -        we issued a total of 15,150,000 shares of Common Stock valued
                  at $1,515,000, for services rendered to the Company by third
                  persons in the first quarter of 2001;
         -        we granted an option for the purchase of 5,000,000 shares at
                  $1.00 per share in connection with services from a third party
                  in the first quarter of 2001;

         AFFILIATED SERVICES:
         -        we issued a total of 2,250,000 shares of Common Stock valued
                  at $90,000, for services rendered to the Company by affiliates
                  in 1999;
         -        we issued a total of 700,000 shares of Common Stock valued at
                  $210,000, for services rendered to the Company by affiliates
                  in 2000;
         -        we issued a total of 1,500,000 shares of Common Stock valued
                  at $150,000, for services rendered to the Company by
                  affiliates in the first quarter of 2001;
         -        we granted options for the purchase of a total of 5,000,000
                  shares at $1.00 per share in connection with services from
                  affiliates in the first quarter of 2001;


                                       14
<PAGE>   17

         REPAYMENT OF DEBT:
         -        we issued a total of 1,052,000 shares of Common Stock valued
                  at $115,780, as repayment of debt owed by us to a third party
                  in the first quarter of 2001;
         -        we issued a total of 1,000,000 shares of Common Stock valued
                  at $110,000, as repayment of debt owed by us to an affiliate
                  in the first quarter of 2001;
         -        we granted options for the purchase of a total of 5,800,000
                  shares at $.05 per share, in connection with a debt owed by us
                  to affiliates in the first quarter of 2001;

         SETTLEMENTS:
         -        we issued a total of 95,000 shares of Common Stock valued at
                  $47,500, in connection with the settlement of pending or
                  threatened litigation in 1999;
         -        we issued a total of 128,900 shares of Common Stock valued at
                  $25,700, in connection with the settlement of pending or
                  threatened litigation in 2000;
         -        we issued a total of 775,000 shares of Common Stock valued at
                  $294,250, in connection with the settlement of pending or
                  threatened litigation in the first quarter of 2001;

         OTHER:
         -        we issued 1,500,000 shares of Common Stock valued at $750,000
                  as a security deposit for the manufacture of DebitFone vending
                  machines in 2000;

         All transactions described above were deemed to be exempt from
registration under the Securities Act of 1933, as amended (the "Act"), (i) in
reliance on Section 4(2) of the Act as transactions by an issuer not involving
any public offering, or (ii) pursuant to the exemption provided by Rule 504 of
Regulation D promulgated under the Act. All of the securities issued in reliance
on Section 4(2) contained a restrictive legend to the effect that they could not
be sold or transferred without registration or an applicable exemption.

         REGISTERED SECURITIES. In the fiscal year ended December 31, 2000 and
in the quarterly period ending March 31, 2001, we registered securities on Form
S-8 and issued such securities as follows:

         SERVICES:
         -        6,450,000 shares of Common Stock valued at $4,054,500, to
                  six (6) persons for consulting and other services in 2000;
         -        warrants for the purchase of 4,000,000 shares of Common Stock,
                  exercisable at $1.38 per share, to two (2) persons for
                  consulting and other services in 2000 (expired);
         -        options for the purchase of 250,000 shares of Common Stock,
                  exercisable at $1.05 per share, to one (1) person for
                  consulting and other services in 2000 (expired);
         -        300,000 shares of Common Stock valued at $90,000, to two (2)
                  persons for consulting and other services in the first quarter
                  of 2001;

         OTHER:
         -        75,000 shares of Common Stock valued at $22,500, to one (1)
                  employee as a bonus.



                                       15
<PAGE>   18
ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

         The following discussion should be read in conjunction with our
Financial Statements appearing on pages F-1 through F-17.

PLAN OF OPERATION

         Although the Company's existence dates back to 1972, the essence of our
current business commenced in September, 1996 with the acquisition of the
one-way and two-way paging patents for remote signaling. Since that time, we
have been in the development stage of operation. However, until our 1999 merger
with DebitFone International, Inc., there was little business activity.
Throughout the year 2000, the Company's primary focus has been the maturation of
products, services and markets for the prepaid cellular market and GPS-based
tracking, locating and control business units.

         In the prepaid cellular phone business unit, the Company's strategic
plan has been, and is, to sell into the expanding prepaid portion of the
cellular industry, initially concentrating on USA requirements. This very large
market niche continues to evolve rapidly as handsets, protocols and
infrastructures change technologically. The Company's intent is to compete
primarily by selling prepaid cellular phones and time-renewal through video
rental stores, convenience stores and other retail stores and via select agent
channels. Locking into specific solutions and maturing the products and services
required in this industry that has taken significantly more time than management
previously estimated. The complexity continued to grow and the competitive
cellular offerings continued to demand additional evaluation and solutions in
Company product and in the delivery of support services. It is now anticipated
that the Company can enter a broad market with competitive, creative solutions
during the year 2001. Some directional changes will have been incorporated, and
development of both applicable handsets and customer service centers will
continue, but the baseline offering will be stabilized. Alternative solutions
for future introduction into the marketplace continue to be investigated and
evaluated. During the fiscal year 2000, the Company funded a development project
for the technical specifications for prepaid software in digital protocols. It
is clear that such offerings will be mandatory in the future in order to
maintain a competitive posture. In fact, a major factor in schedule delays has
been the efforts surrounding digital prepaid unique requirements. The Company
has now completed and is in the process of copyrighting our digital software
package.

         The AlphaTrak tracking, locating and control business unit has extended
its product development cycle at the expense of short term sales, but to benefit
medium and long-term effectiveness and competitiveness in the target markets.
Cost-effective and functionally complete solutions for GPS-based tracking,
locating and control products have been virtually non-existent in the past.
Market research demonstrates a tremendous international market, presently in its
infancy, but the Company realizes it is imperative to enter each of the various
niche markets with the proper product and system-management tools. Additional
time is being taken at the front end of the process to test and evaluate
alternative solutions and also to finish development of a new-generation state
of the art GPS-based tracking, locating and control product line. These new
products should be ready for deployment in the USA markets and possibly in
Europe before year-end 2001. The Company's patents covering paging signals sent
to remotely engage switches and communicate responses clearly involve
applications well beyond vehicle disabling and tracking. Other broader market
applications such as rail car, truck and cargo container tracking and fleet
management are being reviewed for future applications of the AlphaTrak product
line.


                                       16
<PAGE>   19

         Although the AlphaTrak and DebitFone systems are currently the
Company's core businesses, it is paramount that we begin to generate cash flow.
Accordingly, our management team is giving careful consideration to several
niche areas within the telecommunications industry to compliment and expand our
product lines and to generate revenue and cash flow. Presently, we are
evaluating the prospects of the Telemedicine industry, which provides remote
psychiatric and medical care via high speed networks. Our management believes
that Telemedicine is rapidly becoming accepted and encouraged by federal and
state governments as well as within the medical community. We are also
evaluating the opportunities associated with the provision of telecommunication
services to the nation's inmate population. Specifically, inmates generate a
significant volume of collect telephone calls, which may be profitable and have
the potential to generate cash flow for the Company. In addition, the
corrections industry also uses Telemedicine for its inmate population. Our
management will continue to identify and evaluate opportunities that have a
potential to generate solid cash flow for the Company.

         Technology remains the core Company focus in communications
applications. Market opportunities may exist in broad arenas on an international
basis. More effort has been expended in research and development activities and
in systemic solutions than previously estimated, but management believes such
additional efforts will have long-term benefits and paybacks. Equity financing
as well as possible debt financing will continue to be exploited to solve our
short-term development and long-term growth requirements. We can give no
assurance however, that such debt or equity financing will continue to be
available sources for funding.

         Our plan of operation for the 2001 fiscal year will consist of
activities principally aimed at:

         -        Producing next generation field test products for
                  demonstration and trial purposes;

         -        Completing initial product designs and beginning production
                  for sale;

         -        Conducting field tests with national paging companies and
                  forming alliances for the AlphaTrak Systems;

         -        Conducting field trials with potential customers;

         -        Conducting marketing campaigns, including technical
                  publications, branding and identity awareness, and media and
                  public relations campaigns;

         -        Expanding our technology research and development efforts to
                  include, among other things, digital and network-based
                  solutions for our DebitFone Systems, and next generation
                  GPS-based tracking, location and control technology for our
                  AlphaTrak Systems;

         -        Expanding our research and development team and other staff;

         -        Expand into related telecommunication markets, including
                  Telemedicine and the corrections industry, to provide cash
                  flow;


                                       17
<PAGE>   20

         -        Investigating and, if appropriate, pursuing acquisitions
                  believed by the Board of Directors to be consistent with our
                  plan to design, develop, manufacture, license and market
                  products based upon our AlphaTrak and DebitFone technologies.

LIQUIDITY AND GOING CONCERN

         Operations have been financed primarily through private sales of our
Common Stock and loans, resulting in net proceeds of approximately $761,740,
$2,551,000, and $1,575,000 for the quarter ended March 31, 2001, the fiscal year
ended December 31, 2000, and the fiscal year ended December 31, 1999,
respectively. In addition, during these periods, a substantial portion of
expenses were paid by the issuance of stock. See, "Recent Sales of Securities."
Also, during the year ended December 31, 2000, we sustained substantial
operating losses of $9,314,385, and as of that date, we had a working capital
deficiency of $2,909,702 and a net worth deficiency of $2,748,341. These
conditions raise significant doubt as to our ability to continue as a going
concern. Future operating results will depend primarily on our ability to raise
additional working capital, as we do not anticipate significant revenues for the
foreseeable future.

         In January, 2001, we entered into an agreement with a private
investment banker, Lilly Beter Capital Group, Ltd. ("LBCG") to, among other
things, assist us in raising capital, and to seek out mergers and acquisitions
for the Company. See "Description of Business - Recent Events and Transactions."
LBCG has identified several potential merger and acquisition candidates that may
bring revenues and cash flow to SATX.

         In March, 2001, we divested our holdings in ORA Electronics, which had
over $9,000,000 in debt and approximately $100,000 per month in cash flow
requirements. In April, 2001, we restructured our balance sheet by converting
over $250,000 in various delinquent debts to equity, and by converting
delinquent short-term loans to long-term notes in the aggregate amount of just
over $1,000,000.

         Management believes that LBCG will be able to accomplish additional
equity funding, and that such financing, together with the divestiture of ORA
Electronics and the restructuring of our balance sheet, as described above,
provides us with an opportunity to continue as a going concern. There can be no
assurance that we will be able to raise the necessary capital to continue as a
going concern. If we are unsuccessful in generating significant revenues,
obtaining additional financing, revising our operating and financial
requirements, and/or effecting a merger or sale of the Company, we may be forced
to terminate operations.

RISKS ASSOCIATED WITH OUR BUSINESS

         WE HAVE NO OPERATING HISTORY.

         We have not begun to conduct business, and have been principally
engaged in completing the development and testing of several generations of
products utilizing our proprietary AlphaTrak and DebitFone technologies, and
developing our plan of operation. As a result, we have a no operating history


                                       18
<PAGE>   21

that you can use to evaluate our prospects. Our prospects must therefore be
considered in light of the risks, uncertainties, expenses, delays and
difficulties generally associated with a start up business.

         WE HAVE A HISTORY OF LOSSES AND AN ACCUMULATED DEFICIT;
         DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.

         Since inception, we have incurred significant operating losses. We
incurred operating losses of $9,314,385 and $1,294,122 for the years ending
December 31, 2000 and 1999, respectively. As of December 31, 2000, we have an
accumulated deficit of $12,978,470. We cannot assure you that we will achieve
or sustain profitability or that our operating losses will not increase in the
future. If we do achieve profitability, we cannot be certain that we can sustain
or increase profitability on a quarterly or annual basis in the future. We
expect to expend substantial financial resources on research and development,
engineering, manufacturing, marketing, sales and administration as we continue
to develop and begin to deploy our products. These expenditures will necessarily
precede the realization of substantial revenues from sales of our product, which
may result in future operating losses. These conditions raise significant doubt
as to our ability to continue as a going concern. Future operating results will
depend primarily on our ability to raise additional working capital, as we do
not anticipate significant revenues for the foreseeable future. There can be no
assurance that we will be able to raise the necessary capital to continue as a
going concern. If we are unsuccessful in generating significant revenues,
obtaining additional financing, revising our operating and financial
requirements, and/or effecting a merger or sale of the Company, we may be forced
to terminate operations.

         WE WILL NEED ADDITIONAL CAPITAL FINANCING IN THE FUTURE.

         We anticipate that our available sources of equity financing will be
sufficient to fund our current level of operations and capital requirements for
at least the next twelve (12) months. Thereafter, implementation of our business
plan, or acceleration of such implementation, is likely to require funds not
currently available to us. We also may be required to seek additional financing
in the future to respond to increased expenses or shortfalls in anticipated
revenues, accelerated product development and deployment, respond to competitive
pressures, develop new or enhanced products, or take advantage of unanticipated
acquisition opportunities. We cannot be certain we will be able to find such
additional financing on reasonable terms, or at all. If we are unable to obtain
additional financing when needed, we could be required to modify our business
plan in accordance with the extent of available financing. We also may not be
able to accelerate the development and deployment of our products, respond to
competitive pressures, develop or enhance our products or take advantage of
unanticipated acquisition opportunities.

         WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS OR MAY BE
         SUED BY THIRD PARTIES FOR INFRINGEMENT OF THEIR PROPRIETARY RIGHTS.

         Our success depends significantly on our ability to obtain and maintain
patent, trademark and copyright protection for our intellectual property, to
preserve our trade secrets and to operate without infringing the proprietary
rights of third parties. If we are not adequately protected, our competitors
could use the intellectual property that we have developed to enhance their
products and services, which could harm our business.


                                       19
<PAGE>   22

         We rely on patent protection, as well as a combination of copyright and
trademark laws, trade secrets, confidentiality provisions and other contractual
provisions, to protect our proprietary rights, but these legal means afford only
limited protection. Despite any measures taken to protect our intellectual
property, unauthorized parties may attempt to copy aspects of our products or to
obtain and use information that we regard as proprietary. In addition, the laws
of some foreign countries may not protect our proprietary rights as fully as do
the laws of the United States. If we litigated to enforce our rights, it would
be expensive, divert management resources and may not be adequate to protect our
intellectual property rights.

         The telecommunications industry is characterized by the existence of a
large number of patents and frequent litigation based on allegations of trade
secret, copyright or patent infringement. We may inadvertently infringe a patent
of which we are unaware. In addition, because patent applications can take many
years to issue, there may be a patent application now pending of which we are
unaware that will cause us to be infringing when it is issued in the future.
Although we are not currently involved in any intellectual property litigation,
we may be a party to litigation in the future to protect our intellectual
property or as a result of our alleged infringement of another's intellectual
property, forcing us to do one or more of the following:

         -        Cease selling, incorporating or using products or services
                  that incorporate the challenged intellectual property;

         -        Obtain from the holder of the infringed intellectual property
                  right a license to sell or use the relevant technology, which
                  license may not be available on reasonable terms; or

         -        Redesign those products or services that incorporate such
                  technology.

         A successful claim of infringement against us, and our failure to
license the same or similar technology, could adversely affect our business,
asset value or stock value. Infringement claims, with or without merit, would be
expensive to litigate or settle, and would divert management resources.

         OUR MARKET IS HIGHLY COMPETITIVE AND OUR PRODUCTS, TECHNOLOGY AND
         BUSINESS MAY NOT BE ABLE TO COMPETE EFFECTIVELY WITH OTHER PRODUCTS OR
         TECHNOLOGIES.

         The market for telecommunications products is highly competitive, and
we expect that it will become increasingly competitive in the future. Our
competitors possess substantially greater name recognition, financial, sales and
marketing, manufacturing, technical, personnel, and other resources than we
have. We will compete with numerous companies with well-established reputations.
Although we believe we will be able to compete based on the special features of
our products, our products incorporate new concepts and may not be successful
even if they are superior to those of our competitors.

         THE TELECOMMUNICATIONS INDUSTRY IS UNDERGOING RAPID TECHNOLOGICAL
         CHANGES.

         The telecommunications industry is subject to rapid and significant
technological change. The industry is marked by frequent new product
introductions and technology enhancements, uncertain product life cycles,
changes in client demands and evolving industry standards. As a consequence, our
success will depend on our ability to anticipate or adapt to new technology on a
timely basis. If we fail to adapt


                                       20
<PAGE>   23

successfully to technological changes or obsolescence or fail to obtain access
to important new technologies, our business, prospects, financial condition and
results of operations could be materially adversely affected.

         OUR EXECUTIVE OFFICERS AND KEY PERSONNEL ARE CRITICAL TO OUR BUSINESS
         AND THESE OFFICERS AND PERSONNEL MAY NOT REMAIN WITH US IN THE FUTURE.

         We depend upon the continuing contributions of our key management and
product development personnel. The loss of such personnel could seriously harm
us. We have entered into an employment agreement with Terry L. Colbert, our
President and Chief Executive Officer, however, we cannot be sure that we can
retain his services or those of any other key personnel. In addition, we have
not obtained key-man life insurance on any of our executive officers or key
employees. Because our technology is specialized and complex, we need to recruit
and retain qualified technical personnel. However, there are many employers
competing to hire qualified technical personnel and we have had difficulty
attracting and retaining such personnel. We expect to continue to have
difficulty hiring and retaining qualified personnel.

         WE WILL DEPEND ON OUTSIDE MANUFACTURING SOURCES AND SUPPLIERS.

         We may contract with third party manufacturers to produce our products
and we will depend on third party suppliers to obtain the raw materials
necessary for the production of our products. We do not know what type of
contracts we will have with such third party manufacturers and suppliers. In the
event we outsource the manufacture of our products, we will have limited control
over the actual productions process. Moreover, difficulties encountered by any
one of our third party manufacturers, which result in product defects, delayed
or reduced products shipments, cost overruns or our inability to fill orders on
a timely basis, could have an adverse impact on our business. Even a short-term
disruption in our relationship with third party manufacturers or suppliers could
have a material adverse effect on our operations. We do not intend to maintain
an inventory of sufficient size to protect ourselves for any significant period
of time against supply interruptions, particularly if we are required to obtain
alternative sources of supply.

         OUR STOCK PRICE MAY BE VOLATILE.

         The market price of our common stock will likely fluctuate
significantly in response to the following factors, some of which are beyond our
control:

         -        Variations in our quarterly operating results;

         -        Changes in financial estimates of our revenues and operating
                  results by securities analysts;

         -        Changes in market valuations of telecommunications companies;

         -        Announcements by us of significant contracts, acquisitions,
                  strategic partnerships, joint

         -        Ventures or capital commitments;

         -        Additions or departures of key personnel;

         -        Future sales of our common stock;

         -        Stock market price and volume fluctuations attributable to
                  inconsistent trading volume levels of our stock;

         -        Commencement of or involvement in litigation; and


                                       21
<PAGE>   24

         -        Announcements by us or our competitors of technological
                  innovations or new products.

         In addition, the equity markets have experienced volatility that has
particularly effected the market prices of equity securities issued by high
technology companies and that often has been unrelated or disproportionate to
the operating results of those companies. These broad market fluctuations may
adversely affect the market price of our common stock.

         WE DO NOT ANTICIPATE PAYING ANY DIVIDENDS ON OUR COMMON STOCK.

         We have not paid any dividends on our Common Stock since our inception
and do not anticipate paying any dividends on our Common Stock in the
foreseeable future. Instead, we intend to retain any future earnings for use in
the operation and expansion of our business.

         IF WE ARE SUBJECT TO SEC REGULATIONS RELATING TO LOW-PRICED STOCKS, THE
         MARKET FOR OUR COMMON STOCK COULD BE ADVERSELY EFFECTED.

         The Securities and Exchange Commission has adopted regulations
concerning low-priced (or "penny") stocks. The regulations generally define
"penny stock" to be any equity security that has a market price less than $5.00
per share, subject to certain exceptions. If our shares are offered at a market
price less than $5.00 per share, and do not qualify for any exemption from the
penny stock regulations, our shares may become subject to these additional
regulations relating to low-priced stocks.

         The penny stock regulations require that broker-dealers who recommend
penny stocks to persons other than institutional accredited investors make a
special suitability determination for the purchaser, receive the purchaser's
written agreement to the transaction prior to the sale and provide the purchaser
with risk disclosure documents that identify risks associated with investing in
penny stocks. Furthermore, the broker-dealer must obtain a signed and dated
acknowledgment from the purchaser demonstrating that the purchaser has actually
received the required risk disclosure document before effecting a transaction in
penny stock. These requirements have historically resulted in reducing the level
of trading activity in securities that become subject to the penny stock rules.

         The additional burdens imposed upon broker-dealers by these penny stock
requirements may discourage broker-dealers from effecting transactions in the
common stock, which could severely limit the market liquidity of our common
stock and our shareholders' ability to sell our common stock in the secondary
market.

ITEM 7.  FINANCIAL STATEMENTS.

         Our audited Consolidated Financial Statements as of and for the years
ended December 31, 2000 and 1999 are included on pages F-1 through F-17 of this
Annual Report on Form 10-KSB.



                                       22
<PAGE>   25

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

         Robert L. White Associates was previously engaged as the principal
accountant to audit our financial statements. In November, 2000, Robert L. White
Associates resigned as our principal accountant to audit our financial
statements. In March, 2001, the Board of Director's approved the engagement of
the firm of Lazar Levine & Felix LLP, 350 Fifth Avenue, Suite 6820, New York,
New York 10118, to replace Robert L. White Associates as the principal
accountant to audit our financial statements.

         In connection with the audits of the two fiscal years ended December
31, 1999 and December 31, 1998, and the interim periods preceding Robert L.
White Associates' resignation, there were no disagreements with Robert L. White
Associates on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures, which disagreement(s),
if not resolved to the satisfaction of our former accountant, would have caused
them to make reference to the subject matter of the disagreement(s) in
connection with their reports, and said firm has not advised the registrant of
any reportable events. In addition, the accountants' report of Robert L. White
Associates on the consolidated financial statements of the Company as of and
for the years ended December 31, 1999 and 1998 did not contain any adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope, or accounting principles.

         During the Company's two most recent fiscal years and the interim
periods prior to engaging Lazar Levine & Felix LLP, neither the Company, nor any
person on our behalf, consulted Lazar Levine & Felix LLP regarding (i) the
application of accounting principles to a specified transaction, (ii) the type
of audit opinion that might be rendered on the Company's financial statements,
(iii) any matter that was the subject of a disagreement (as defined in
Instruction 4 to Item 304 of Regulation S-K), or (iv) any matter that was the
subject of a reportable event. Neither were there any such disagreements,
transactions or reportable events which were accounted for or disclosed in a
manner different from that which the former accountants apparently would have
concluded was required.


                                       23
<PAGE>   26


                                    PART III

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

         The following table sets forth the names and ages of the directors and
executive officers of the Company (each, a "Director" and/or "Officer"), the
positions and offices that each Director and Officer held with the Company, and
the period during which each served in such positions and offices. Each Director
serves for a term of one year, until his successor is duly elected and
qualified. Officers shall be appointed annually by the Board of Directors, at
its annual meeting, to hold such office until an officer's successor shall have
been duly appointed and qualified, unless an officer sooner dies, resigns or is
removed by the Board, except that Terry L. Colbert, in his capacities as
President and Chief Executive Officer, serves for a term of three (3) years
pursuant to his employment agreement.

                    TABLE OF DIRECTORS AND EXECUTIVE OFFICERS

<TABLE>
<CAPTION>
          NAME                AGE                           POSITIONS/OFFICES  PERIOD SERVED IN OFFICE/POSITION
          ----                ---                           -----------------  --------------------------------
<S>                           <C>          <C>                                 <C>
Terry L. Colbert              47           President, Chief Executive Officer  February, 2001 to present
                                                    and Chairman of the Board
Garry P. McHenry              43                         Vice President, COO,  February, 2001 to present
                                                       Treasurer and Director
                                             Vice President Sales & Marketing  May, 1999 to April, 2000
Celso B. Suarez, Jr.          44                         Secretary & Director  February, 2001 to present
Kosti Shirvanian              70                                     Director  January, 2001 to present
John Hartunian                77                                     Director  January, 2001 to present
Khoren Shaginian              38                                     Director  February, 2001 to present
                                         CFO, Secretary, Treasurer & Director  May, 1999 to February, 2000
Lilly O. Beter                67                                     Director  February, 2001 to present
</TABLE>

         Set forth below is the business experience and other biographical
information regarding our directors and executive officers.

         TERRY L. COLBERT currently serves as President, CEO and Chairman of the
Board of SATX. Mr. Colbert is also the president of our wholly-owned subsidiary,
DebitFone, Inc. Mr. Colbert has twenty-five years of experience in the
telecommunications industry. He most recently served, from June, 1999 to
December, 2000, for the Profit Recovery Group International, Inc.,
Telecommunications Division, in Atlanta, Georgia where he ran the Sales and
Marketing department as Senior Vice President of the Communications Division for
the entire country. From April, 1995 to June, 1999 he was the President of Elite
Communications, Inc. in Atlanta, Georgia. The company provided financial
services to medium and small businesses. Prior to Elite Communications, Mr.
Colbert served as Chairman, CEO and President of Communications Central, Inc.
("CCI"), a publicly traded company headquartered in Atlanta, Georgia. CCI was
the second largest provider of pay telephones and inmate phones in the United
States. During


                                       24
<PAGE>   27


his tenure at CCI, Mr. Colbert was responsible for the acquisition of over
thirty companies and several financings, including CCI's initial public
offering. Mr. Colbert has served as Chairman of the American Public
Communications Association, an industry trade association created to develop and
enhance the pay telephone industry and headquartered in Washington, D.C.

         GARRY P. MCHENRY is currently serving SATX as Vice President, Chief
Operating Officer and Treasurer. From April, 2000 to December, 2000 he was the
President of 3eee, Inc., a Delaware corporation located in Wilmington, Delaware,
involved with E-commerce, e-business, and Telephony. He was also involved with
mergers and acquisitions pertaining to all aspects of the business. From May,
1999 to April, 2000 he was Vice President of Sales and Marketing for SATX for
both Alpha Track and DebitFone products in Tampa, Florida. From November, 1998
to May, 1999 he worked for Qwest Communications in San Antonio, Texas as the
Eastern Regional Sales Manager, Selling Operator and Direct Dial Long Distance
Calls. From October, 1997 to November, 1998 he worked for Navitel, Inc. of
Lakeland, Florida as the Sales Manager for the marketing of payphones and
services to independent payphone providers. From August, 1995 to October, 1997
he was Vice President of Sales for Bright Technologies of Norcross, Georgia,
which marketed and designed fixed wireless payphones.

         CELSO B. SUAREZ, JR. has been a practicing attorney in Houston, Texas
since May, 1985. From March, 1999 to September, 1999, Mr. Suarez was Assistant
General Counsel of OCS, Inc., a manufacturer of waste processing plants. From
January, 1997 to March, 1999, Mr. Suarez served as Assistant General Counsel and
as a director of ZEROS USA, Inc., which licenses technology used for
energy-efficient waste processing systems. Mr. Suarez earned his B.A. in
Cultural Anthropology from the University of Houston and a J.D. from Drake
University College of Law. Mr. Suarez also sits on the Board of Directors for
New Visual Entertainment, Inc. and 3eee, Inc. Mr. Suarez is a member of the
Audit Committee and the Compensation Committee.

         KOSTI SHIRVANIAN is and has been a major shareholder in SATX. Mr.
Shirvanian served as Chairman of the Board, President and Chief Executive
Officer of Western Waste Industries from 1964 to May of 1996 when the company
merged with USA Waste Services (now Waste Management, Inc.) in Houston. Western
Waste was a leading waste management company, which provided collection
services, landfill, transfer station and recycling operations in seven states.
Mr. Shirvanian immigrated to the United States in 1950 and bought a small trash
hauling company in 1955. Concentrating initially in Southern California, the
company grew steadily through acquisitions, municipal contracts and by adding
new customers. On April 1, 1991, Western Waste began trading on the New York
Stock Exchange. Prior to its merger with USA Waste Services, Western Waste
exceeded $270 million in annual revenue with over 1,800 employees. Mr.
Shirvanian is now the Managing Member of Komar Investments, LLC, a multi-million
dollar holding company engaged in a wide variety of investments.

         JOHN HARTUNIAN was President and Owner of Universal Trucking, a waste
management company, from 1954 to 1982, after which he retired. During his tenure
at Universal Trucking, Mr. Hartunian was also the president of Bonanza
Enterprises, a land development company. Mr. Hartunian eventually sold Bonanza
to John Bonadelle Enterprises. After his tenure at Bonanza Enterprises, Mr.
Hartunian became President of Chemwell Industries, a manufacturer of chemicals
and adhesives for the military and aircraft


                                       25
<PAGE>   28


industries. He eventually sold that company to Capital Star Petroleum. Mr.
Hartunian is and has been a major shareholder in SATX.


         KHOREN SHAGINIAN, has over 15 years experience in finance and project
development. He is a CPA with a Bachelor of Science in Accounting from the
California State University, Los Angeles and has a broad range of experience in
various industries including real estate, environmental and waste management.
Mr. Shaginian started his career at Coopers and Lybrand in the mid-1980's and
has been involved in the development and growth of numerous businesses. Since
1997, Mr. Shaginian has been the Chief Financial Officer and Executive Vice
President of Komar Investments, LLC, a multi-million dollar holding company
engaged in a wide variety of investments. Mr. Shaginian is also widely
experienced in corporate and international taxation and is fluent in several
languages. Mr. Shaginian is a member of the Audit Committee and the
Compensation Committee.

         LILLY O. BETER, a newly appointed Director and member of the Board is
former president of Lilly Beter Capital Group, Ltd., which has offices in
Washington, D.C., Minneapolis, Minnesota, Boca Raton, Florida and Century City,
California. She co-founded the firm thirty years ago with her late husband,
providing government representation to clients. Mrs. Beter represented companies
doing business in the Pacific Rim, South America, Europe and the Caribbean. Mrs.
Beter is a Director of New Visual Entertainment Inc., and is simultaneously
serving on the Board of Directors for U.S.I.P., which are both publicly held
companies. She is a member of the American League of Lobbyists and the American
Arbitration Association. Mrs. Beter is a member of the Audit Committee and the
Compensation Committee.

OPERATION OF BOARD OF DIRECTORS AND COMMITTEES

         There were 32 meetings of the Board of Directors during 2000. All of
the directors attended 75% or more of the total number of meetings of the Board.
In 2000, the Board did not have any standing committees. At a Special Meeting of
the Board of Directors on February 27, 2001, the Board of Directors established
a Compensation Committee and an Audit Committee, the principal duties of which
are described below. There have not been any meetings of the new committees as
of the date of this Annual Report.

         COMPENSATION COMMITTEE. The Compensation Committee was established by
the Board of Directors on February 27, 2001, and accordingly, the Committee did
not meet during 2000. The initial members of the Compensation Committee are Mr.
Shaginian, Mr. Suarez and Mrs. Beter. The Compensation Committee will be
responsible for developing and making recommendations to the Board of Directors
with respect to the Company's executive compensation policies and administering
executive compensation plans. In addition, the Compensation Committee will
recommend to the Board of Directors the annual compensation to be paid to the
Chief Executive Officer and each of the other executive officers of the
Corporation, as well as to other key employees. The Committee shall be comprised
of not less than two (2) independent, non-employee directors. The objectives of
the Company's executive compensation program will be to:

         -        Support the achievement of desired Company performance;

         -        Provide compensation that will attract and retain superior
                  talent and reward performance;

                                       26
<PAGE>   29

         -        Ensure that there is appropriate linkage between executive
                  compensation and the enhancement of shareholder value; and

         -        Evaluate the effectiveness of the Corporation's incentives for
                  key executives.

An executive compensation program will be designed to provide an overall level
of compensation opportunity that is competitive with companies of comparable
size, capitalization and complexity. Actual compensation levels, however, may be
greater or less than average competitive levels based upon annual and long-term
Company performance, as well as individual performance. The Compensation
Committee will use its discretion to recommend executive compensation at levels
warranted in its judgment by corporate and individual performance.

         AUDIT COMMITTEE. The Audit Committee was established by the Board of
Directors on February 27, 2001, and accordingly, the Committee did not hold any
meetings in fiscal 2000. The newly appointed members of the Audit Committee are
Messrs. Shaginian and Suarez, and Mrs. Beter. At the next meeting of the Board
of Directors, the full Board will adopt a formal Charter of the Audit Committee
of the Board of Directors of SATX, Inc. setting forth the requirements for the
composition of the Audit Committee, the qualifications of its members, the
frequency of meetings, and the responsibilities of the Audit Committee. In
accordance with the regulations of the Securities and Exchange Commission (the
"SEC"), the Audit Committee will issue annual reports, commencing with the
fiscal year ending December 31, 2001. Management will have the responsibility
for the consolidated financial statements and the financial reporting process,
including the systems of internal accounting and financial controls. The
independent accountants will be responsible for performing an audit of the
Company's consolidated financial statements in accordance with generally
accepted auditing standards and for expressing an opinion on those consolidated
financial statements based on their audit. The Audit Committee will monitor the
Company's financial reporting process and systems of internal controls, the
independence and the performance of the independent accountants, and the
performance of the accountants performing the internal audit function. The Audit
Committee will review and discuss the consolidated financial statements with the
Company's management, our principal independent accountants, and any accountants
which perform the internal audit function for the Company, the adequacy and
effectiveness of the Company's internal accounting and financial controls. In
addition, the Audit Committee will discuss and review with the Company's
principal independent accountants all communications required by generally
accepted auditing standards, including those described in Statement on Auditing
Standards No. 61, Communication with Audit Committees, as amended, and, with and
without management present, discuss and review the results of the independent
accountants' examination of the consolidated financial statements. The Audit
Committee will also discuss the results of any internal audit findings with any
accountants which perform internal audit function. The Audit Committee will
require from our independent auditors a written disclosure and a letter
describing all relationships between the independent accountants and the Company
that might bear on their independence consistent with Independence Standards
Board Standard No. 1, Independence Discussions with Audit Committees. The Audit
Committee will discuss with our independent accountants any relationships or
services that may impact their objectivity and independence. Based on the
reviews and discussions referred to above, the Audit Committee will then
determine whether it can recommended to the Board of Directors that the
Company's audited consolidated financial statements be included in the Company's
Annual Report on Form 10-KSB for the applicable fiscal year to be filed with the
SEC.


                                       27


<PAGE>   30

COMPENSATION OF DIRECTORS

         Presently, our directors do not receive any compensation for their
services to the Company as a director. However, it is currently anticipated that
the Board of Directors will approve compensation for our non-employee directors
for each meeting of the Board of Directors that they attend, plus reimbursement
of their reasonable out-of-pocket expenses incurred in connection with such
meetings, and an additional fee for each Committee meeting that he or she
attends. It is also anticipated that our directors will be eligible to receive
stock options under an Incentive and Non- Statutory Stock Option Plan that the
Board of Directors anticipates approving in the near future.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

         Under Section 16(a) of the Exchange Act, all executive officers,
directors, and each person who is the beneficial owner of more than 10% of the
common stock of a company that files reports pursuant to Section 12 of the
Exchange Act, are required to report the ownership of such common stock,
options, and stock appreciation rights (other than certain cash-only rights) and
any changes in that ownership with the Securities and Exchange Commission (the
"SEC"). Specific due dates for these reports have been established, and the
Company is required to report, in this Form 10-KSB, any failure to comply
therewith during the fiscal year ended December 31, 2000. The Company believes
that all of these filing requirements were satisfied by its executive officers,
directors, except for Merritt Jesson and Robert Ellis's inadvertent late filing
of Form 3 (Initial Statement of Beneficial Ownership of Securities) upon
becoming a director or officer of the Company, and their inadvertent late filing
of Form 4's (Statement of Changes of Beneficial Ownership of Securities). In
making this statement, the Company has relied on copies of the reporting forms
received by it, and upon the written representations from certain reporting
persons that no Form 5 (Annual Statement of Changes in Beneficial Ownership)
were required to be filed under applicable rules of the SEC.

ITEM 10.  EXECUTIVE COMPENSATION.

         The following summary compensation table sets forth all cash and/or
non-cash compensation paid to or accrued for the past three (3) fiscal years for
the Company's Chief Executive Officer and other highly compensated officers.
Except as listed below, there are no officers or other individuals whose
compensation from the Company exceeded $100,000 in any of the past three (3)
fiscal years.

                           SUMMARY COMPENSATION TABLE


<TABLE>
<CAPTION>
                                                 ANNUAL COMPENSATION      LONG-TERM COMPENSATION/AWARDS
  NAME AND PRINCIPAL POSITION     FISCAL YEAR          SALARY             SECURITIES UNDERLYING OPTIONS
<S>                               <C>            <C>                      <C>
Merritt W. Jesson, CEO (1)           1999            $ 57,577                           0
                                     2000            $104,000                           0
</TABLE>

--------------
(1)   Mr. Jesson served as the Company's CEO from May, 1999 to January, 2001.


                                       28


<PAGE>   31

                      OPTION/SAR GRANTS IN LAST FISCAL YEAR
                               (Individual Grants)

<TABLE>
<CAPTION>
                                  NUMBER OF SECURITIES
                                   UNDERLYING OPTIONS        PERCENT OF TOTAL
             NAME                        GRANTED           OPTIONS/SARS GRANTED    EXERCISE PRICE (1)  EXPIRATION DATE
             ----                        -------           --------------------    --------------      ---------------
<S>                               <C>                      <C>                     <C>                 <C>
Garry P. McHenry, VP Sales                85,000                  100%                   $.50                2005
</TABLE>

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

(1)      Exercise price adjusts after the first year, calculable as a percentage
         of market value.

EMPLOYMENT AGREEMENT

      Terry L. Colbert. In February, 2001, we entered into an employment
agreement with Mr. Colbert. Pursuant to his agreement, Mr. Colbert serves as the
Company's Chairman, Chief Executive Officer and President. The initial term of
the agreement is three (3) years. If mutually agreed by both parties, the
expiration date (2/27/04) shall be extended for one (1) additional year
beginning on the first anniversary of employment or until otherwise terminated.
Mr. Colbert's agreement provides for a minimum base salary of $175,000, with
automatic increases of $25,000 annually until his salary is $250,000.
Thereafter, annual increases will be at the discretion of the Compensation
Committee of the Board of Directors with such annual increases being, at least,
equivalent to what other executives are receiving and not less than the consumer
price index, as published by the United States Department of Labor. Mr.
Colbert's agreement also provides for an annual cash bonus equal to 50% of his
base salary. In addition, he may receive annual or quarterly performance bonuses
as determined by the Compensation Committee of the Board of Directors. The
agreement also provides that the Company obtain not less than $150,000
disability insurance, $1,500 auto expense per month, and health and dental
insurance. Under the agreement, Mr. Colbert's employment may only be terminated
for cause. Upon the termination of the executive's employment by Mr. Colbert, he
will continue to receive his salary and benefits for one year after the
termination date. If the executive's employment is terminated by the Company for
cause, or by reason of the executive's death, the Company will pay the executive
any base salary and other compensation earned but not yet paid under his
employment agreement. Under the agreement, Mr. Colbert agrees not to compete
with the Company or solicit its employees or customers. As an inducement to
accept employment, Mr. Colbert received 500,000 shares of SATX Common Stock, and
an option for the purchase of 2,000,000 shares of SATX Common Stock at an
exercise price of $.3094 per share. The option is immediately exercisable with
respect to 200,000 shares. Of the remaining 1,800,000 underlying shares, one
third become vested each year, and the option expires upon the termination of
Mr. Colbert's employment.

STOCK OPTION PLAN

      In the near future, the Board of Directors anticipates approving a stock
option plan to provide for the granting of incentive stock options (as defined
in Section 422 of the Internal Revenue Code) and non-statutory stock options to
our employees and non-employee directors. We have reserved ten million
(10,000,000) shares of SATX Common Stock for issuance under such a plan.


                                       29

<PAGE>   32

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

      The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of April 23, 2001 by (i)
each person known to own beneficially more than 5% of the Company's Common
Stock, (ii) each Director and Officer of the Company, and (iii) all Directors
and Officers as a group. As of April 23, 2001 there were approximately
84,323,392 shares of Common Stock issued and outstanding.


                                       30

<PAGE>   33



<TABLE>
<CAPTION>
      NAME AND ADDRESS                                                  AMOUNT AND NATURE            PERCENTAGE
     OF BENEFICIAL OWNER                                             OF BENEFICIAL OWNER (1)         OF  CLASS
     -------------------                                            ------------------------      -----------------
<S>                                                                 <C>                           <C>
Lilly Beter Capital Group, Ltd (2)................................          5,000,000                   5.5%
3925 Excelsior Blvd.
Minneapolis, MN 55416

Kosti Shirvanian (3)..............................................         22,200,000                  24.2%

John Hartunian (4)................................................         11,720,000                  13.3%

Terry L. Colbert (5) .............................................            700,000                     *

Khoren Shaginian  ................................................            650,000                     *

Garry P. McHenry (6) .............................................            240,000                     *

Celso B. Suarez, Jr.  ............................................            100,000                     *

Lilly O. Beter  ..................................................                  0                    --

All Directors and Executive Officers as a group (4 persons) ......         40,610,000                  40.5%
</TABLE>

-------------------
* Less than 1%.

(1)  Beneficial ownership is determined in accordance with the rules of the
     Securities and Exchange Commission. To our knowledge, the persons named in
     this table have sole voting and investment power with respect to all shares
     of Common Stock shown as owned by them, subject to community property laws
     where applicable and except as indicated in the other footnotes to this
     table. In calculating beneficial ownership, for a given individual or
     group, the number of shares of SATX Common Stock outstanding includes
     shares subject to options, warrants, rights or conversion privileges
     exercisable within sixty (60) days held by such individual or group, but
     are not deemed outstanding by any other person or group. The business
     address of each of the Company's directors and officers named above is: c/o
     SATX, Inc. 8351 Roswell Road, #374, Atlanta, Georgia 30350.

(2)  Represents an option for the purchase of 5,000,000 shares of Common Stock.

(3)  Represents (i) 14,700,000 shares held of record by the Shirvanian Family
     Investment Trust, of which Mr. Shirvanian is the trustee (Mr. Shirvanian
     shares voting and dispositive power of the trust shares with Marian
     Shirvanian, his spouse and co-trustee), and (ii) options to purchase
     7,500,000 shares of Common Stock.

(4)  Represents (i) 8,420,000 shares held of record by the Hartunian Family
     Trust, of which Mr. Hartunian is the trustee (Mr. Hartunian shares voting
     and dispositive power of the trust shares with Marge Hartunian, his spouse
     and co- trustee), and (ii) options to purchase 3,300,000 shares of Common
     Stock.

(5)  Includes an option to acquire 200,000 shares of Common Stock.

(6)  Includes 55,000 shares held of record by Garry McHenry's wife Michelle
     McHenry, and an option for the purchase of 85,000 shares of Common Stock.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         KOSTI SHIRVANIAN

         Notes Payable and Related Options- As of December 31, 2000, the Company
was indebted to Mr. Shirvanian and an affiliate, on an unsecured basis, in the
amount of $918,499.00, including interest. The notes bear interest at rates
varying between 8% and 12% and were due and payable in 2000. The funds were
advanced to the Company to meet our working capital and other needs. In
consideration of his agreement to extend the notes to March 31, 2003, the
Company granted Mr. Shirvanian an option to


                                       31


<PAGE>   34


purchase up to 5,000,000 shares of SATX Common Stock at $.05 per share. The
option expires on May 15, 2001. The bid and ask prices of the Common Stock on
the date of grant were $.20 and $.21 respectively.

         Lilly Beter Agreement and Related Options - In consideration for his
assistance in convincing Lilly Beter Capital Group, Ltd. to become the Company's
private investment banker, on February 27, 2001, the Board of Directors granted
Mr. Shirvanian a five-year option to purchase up to 2,500,000 shares of Common
Stock at an exercise price of $1.00 per share. In addition, Mr. Shirvanian, on
behalf of the Company, gave Lilly Beter Capital Group, Ltd. 500,000 of his
personal shares of SATX Common Stock. The bid and ask prices of the Common Stock
on the date of grant were $.31 and $.36 respectively.

         Bridge Loan and Related Shares - In November, 2000, Mr. Shirvanian gave
the Company a bridge loan in the amount of $250,000 in contemplation of the
Company's merger with Shared Technologies Cellular, Inc. ("STCL"), for which he
received a commitment fee of $5,000. on February 2, 2001, the merger with STCL
was terminated by mutual consent for various reasons including our decision to
retain Lilly Beter Capital Group, Ltd. to act as our private investment banker,
and STCL's decision to pursue independent financing alternatives. Pursuant to
the terms of the bridge note, the entire balance of the principal and interest
was converted into 1,000,000 shares of SATX Common Stock.

         JOHN HARTUNIAN

         Notes Payable and Related Options - As of December 31, 2000, the
Company was indebted to Mr. Hartunian, on an unsecured basis, in the amount of
$142,499.00, including interest. The notes bear interest at rates varying
between 8% and 12% and were due and payable in 2000. The funds were advanced to
the Company to meet our working capital and other needs. In consideration of his
agreement to extend the notes to March 31, 2003, the Company granted Mr.
Hartunian an option to purchase up to 800,000 shares of SATX Common Stock at
$.05 per share. The option expires on May 15, 2001. The bid and ask prices of
the Common Stock on the date of grant were $.20 and $.21 respectively.

         Lilly Beter Agreement and Related Options - In consideration for his
assistance in convincing Lilly Beter Capital Group, Ltd. to become the Company's
private investment banker, on February 27, 2001, the Board of Directors granted
Mr. Hartunian a five-year option to purchase up to 2,500,000 shares of Common
Stock at an exercise price of $1.00 per share. In addition, Mr. Hartunian, on
behalf of the Company, gave Lilly Beter Capital Group, Ltd. 500,000 of his
personal shares of SATX Common Stock. The bid and ask prices of the Common Stock
on the date of grant were $.31 and $.36 respectively.

         MERRITT JESSON

         Loan Payable - Mr. Jesson, the Company's former Chief Executive Officer
and President, periodically advanced funds to the Company for operating capital,
after the Company was unable to obtain a loan with an unaffiliated third party.
As of December 31, 2000, we were indebted to Mr. Jesson in the


                                       32
<PAGE>   35


amount of $63,670. The loan is due and payable on demand and Mr. Jesson waived
all interest due on the loan.

         Utilization of Personal Shares-Mr. Jesson, with Board approval,
utilized 1,505,000 shares of his personal shares of SATX common stock to pay for
consulting services and for working capital for the Company. The Board of
Directors has agreed to issue shares of common stock to replace all personal
shares utilized by Mr. Jesson for the benefit of the Company.

POLICY REGARDING LOANS AND OTHER AFFILIATED TRANSACTIONS

         The Company currently intends to elect and maintain at least two (2)
independent directors on the Board of Directors. It is the policy of the Company
that all future material affiliated transactions, loans and loan guarantees with
its officers, directors, 5% shareholders, or their respective affiliates, will
be on terms that are as favorable to the Company as those generally available
from unaffiliated third parties; and all such transactions and loans, and any
forgiveness of such loans, shall be approved or ratified by a majority of the
independent directors who do not have an interest in the transactions and who
will have access, at the Company's expense to its or independent legal counsel.
Further, the Company does not intend to make any loans to or guarantee loans on
behalf of its officers, directors and employees, other than: (i) advances for
travel, business expense, and similar ordinary operating expenditures; (ii)
loans or loan guarantees made for the purchase of the Company's securities, and
(iii) loans for relocation.

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

(A) EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT NO.       DESCRIPTION OF EXHIBIT
-----------       ----------------------

<S>               <C>
   3.1            Articles of Incorporation, as amended *
   3.2            By-laws *
   4.1            See Exhibits 3.1 and 3.2 for provisions of the Articles of Incorporation and Bylaws
                  of the Company defining right of holders of the Company's Common Stock
   4.2            Specimen of Stock Certificate*
   4.3            8% Convertible Debenture due September 14, 2001
   4.4            Form of Common Stock Purchase Warrant
   10.1           Securities Purchase Agreement dated September 14, 2000, by and between SATX,
                  Inc. and NASIMIA, Ltd.
   10.2           Registration Rights Agreement dated September 14, 2000, by and between SATX,
                  Inc. and NASIMIA, Ltd.
   10.3           Employment Agreement dated February 27, 2001, by and between SATX, Inc. and
                  Terry L. Colbert
   10.4           Private Label Reseller Agreement dated April 17, 2000, by and between SATX, Inc.
                  and Shared Technologies Cellular, Inc.
   10.5           Agreement January 16, 2001, by and between Lilly Beter Capital Group, Ltd. and
                  SATX, Inc. **
   10.6           Termination Agreement and Release dated February 2, 2001, by and between SATX,
                  Inc. and Shared Technologies Cellular, Inc. **
   10.7           Agreement of Purchase and Sale of Securities dated March 12, 2001, by and among
                  SATX, Inc., Iqbal Ashraf, and ORA Electronics, Inc. **
   10.8           Loan Extension Agreement dated April 1, 2001, by and between John Hartunian and
                  SATX, Inc.
   10.9           Promissory Note dated April 1, 2001 by and between John Hartunian and SATX, Inc.
   10.10          Loan Extension Agreement dated April 1, 2001, by and between Kosti Shirvanian,
                  Komar Investments, LLC and SATX, Inc.
   10.11          Promissory Note dated April 1, 2001 in the amount of $484,000, by and between
                  Kosti Shirvanian, Komar Investments, LLC and SATX, Inc.
   10.12          Promissory Note dated April 1, 2001 in the amount of $434,499, by and between
                  Kosti Shirvanian, Komar Investments, LLC and SATX, Inc.
   10.13          Supplemental Agreement by and between SATX, Inc. and Paradigm Manufacturing,
                  Inc., dated March 3, 2000 ***
   16.1           Letter of Robert L. White Associates on change in auditors.**
   21.1           Subsidiaries of SATX, Inc.
</TABLE>

---------

*        Incorporated by reference to the Company's Registration Statement on
         Form 10-SB, File No. 000-29755, as filed with the Securities and
         Exchange Commission on March 1, 2000.
**       Incorporated by reference to the Company's Current Report on Form
         8-K/A, as filed with the Securities and Exchange Commission on April
         25, 2001.
***      Incorporated by reference to the Company's Quarterly Report on Form
         10-QSB for the period ended March 31, 2000, as filed with the
         Securities and Exchange Commission on May 15, 2000.

(B) REPORTS ON FORM 8-K.

         None filed during the last quarter of the fiscal year ended
December 31, 2000.


                                       33

<PAGE>   36



                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized on this 24th day of April, 2001.

                                         SATX, INC.
                                         (Registrant)


                                     By: /s/ Terry L. Colbert
                                         -------------------------------------
                                         Terry L. Colbert
                                         Chairman of the Board of Directors,
                                         Chief Executive Officer and President


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

<TABLE>
<CAPTION>
     SIGNATURE                                       TITLE                                     DATE
     ---------                                       -----                                     ----
<S>                                   <C>                                                 <C>
/s/ Terry L. Colbert                  Chairman of the Board of Directors                  April 24, 2001
-----------------------------               Chief Executive Officer
Terry L. Colbert                                   President


/s/ Garry P. McHenry                            Vice President                            April 24, 2001
-----------------------------               Chief Operating Officer
Garry P. McHenry                                   Treasurer
                                                   Director

/s/ Celso B. Suarez, Jr.                                                                  April 24, 2001
-----------------------------                      Secretary
Celso B. Suarez, Jr.                               Director


/s/ Kosti Shirvanian                                                                      April 24, 2001
-----------------------------                      Director
Kosti Shirvanian


/s/ John Hartunian                                 Director                               April 24, 2001
-----------------------------
John Hartunian
</TABLE>


<PAGE>   37


<TABLE>
<S>                                                <C>                                    <C>
/s/ Khoren Shaginian                               Director                               April 24, 2001
-----------------------------
Khoren Shaginian


                                                   Director                               April 24, 2001
-----------------------------
Lilly O. Beter
</TABLE>

<PAGE>   38

                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
EXHIBIT NO.       DESCRIPTION OF EXHIBIT
-----------       ----------------------

<S>               <C>
    3.1           Articles of Incorporation, as amended *
    3.2           By-laws *
    4.1           See Exhibits 3.1 and 3.2 for provisions of the Articles of Incorporation and
                  Bylaws of the Company defining right of holders of the Company's Common
                  Stock
    4.2           Specimen of Stock Certificate*
    4.3           8% Convertible Debenture due September 14, 2001
    4.4           Form of Common Stock Purchase Warrant
    10.1          Securities Purchase Agreement dated September 14, 2000, by and between SATX,
                  Inc. and NASIMIA, Ltd.
    10.2          Registration Rights Agreement dated September 14, 2000, by and between SATX,
                  Inc. and NASIMIA, Ltd.
    10.3          Employment Agreement dated February 27, 2001, by and between SATX, Inc.
                  and Terry L. Colbert
    10.4          Private Label Reseller Agreement dated April 17, 2000, by and between SATX, Inc.
                  and Shared Technologies Cellular, Inc.
    10.5          Agreement January 16, 2001, by and between Lilly Beter Capital Group, Ltd. and
                  SATX, Inc. **
    10.6          Termination Agreement and Release dated February 2, 2001, by and between
                  SATX, Inc. and Shared Technologies Cellular, Inc. **
    10.7          Agreement of Purchase and Sale of Securities dated March 12, 2001, by and
                  among SATX, Inc., Iqbal Ashraf, and ORA Electronics, Inc. **
    10.8          Loan Extension Agreement dated April 1, 2001, by and between John Hartunian
                  and SATX, Inc.
    10.9          Promissory Note dated April 1, 2001 by and between John Hartunian and SATX, Inc.
    10.10         Loan Extension Agreement dated April 1, 2001, by and between Kosti Shirvanian, Komar
                  Investments, LLC and SATX, Inc.
    10.11         Promissory Note dated April 1, 2001 in the amount of $484,000, by and between Kosti
                  Shirvanian, Komar Investments, LLC and SATX, Inc.
    10.12         Promissory Note dated April 1, 2001 in the amount of $434,499, by and between Kosti
                  Shirvanian, Komar Investments, LLC and SATX, Inc.
    10.13         Supplemental Agreement by and between SATX, Inc. and Paradigm Manufacturing, Inc.,
                  dated March 3, 2000 ***
    16.1          Letter of Robert L. White Associates on change in auditors.**
    21.1          Subsidiaries of SATX, Inc.
</TABLE>

---------

*        Incorporated by reference to the Company's Registration Statement on
         Form 10-SB, File No. 000-29755, as filed with the Securities and
         Exchange Commission on March 1, 2000.
**       Incorporated by reference to the Company's Current Report on Form
         8-K/A, as filed with the Securities and Exchange Commission on April
         25, 2001.
***      Incorporated by reference to the Company's Quarterly Report on Form
         10-QSB for the period ended March 31, 2000, as filed with the
         Securities and Exchange Commission on May 15, 2000.
<PAGE>   39
                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                                                                                                                  PAGE(S)
                                                                                                                  -------

<S>                                                                                                                <C>
Independent Auditors' Report - Successor Auditor                                                                   F-2

Independent Auditors' Report - Predecessor Auditor                                                                 F-3

Balance Sheets as of December 31, 2000 and 1999                                                                    F-4

Statements of Operations for the Years Ended December 31, 2000, and 1999 and Cumulative
    During the Development Stage Period (June 28, 1972 to December 31, 2000)                                       F-5

Statement of Shareholders' Deficit for the Development Stage Period (June 28, 1972
    to December 31, 2000)                                                                                          F-6

Statements of Cash Flows for the Years Ended December 31, 2000 and 1999 and Cumulative
      During the Development Stage Period (June 28, 1972 to December 31, 2000)                                     F-7

Notes to Financial Statements                                                                                      F-8

</TABLE>



                                      F-1
<PAGE>   40


                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders
SATX, Inc. and Subsidiaries
Atlanta, Georgia

We have audited the accompanying consolidated balance sheet of SATX, Inc. and
Subsidiaries (a Development Stage Company) as of December 31, 2000 and the
related consolidated statements of operations, shareholders' deficit, and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SATX, Inc. and Subsidiaries as
of December 31, 2000, and the results of its operations and its cash flows for
the year then ended in conformity with accounting principles generally accepted
in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company incurred a net loss of $9,314,385 during the year ended December 31,
2000, and, as of that date, had a working capital deficiency of $2,909,702 and a
net worth deficiency of $2,748,341. The Company is also in default on certain
notes payable to shareholders. Realization of a major portion of the assets is
dependent upon the Company's ability to meet its future financing requirements
and the success of future operations. These conditions raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in regard to these matters are described in Note 2. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.

                                                        LAZAR LEVINE & FELIX LLP

New York, New York
April 6, 2001



                                      F-2
<PAGE>   41



                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders
SATX, Inc. and Subsidiaries
Atlanta, Georgia

We have audited the accompanying consolidated balance sheet of SATX, Inc. and
Subsidiaries (a Development Stage Company) as of December 31, 1999 and the
related consolidated statements of operations, shareholders' deficit, and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SATX, Inc. and Subsidiaries as
of December 31, 1999, and the results of its operations and its cash flows for
the year then ended in conformity with accounting principles generally accepted
in the United States of America.

Robert L. White, CPA


March 20, 2000



                                      F-3
<PAGE>   42







                           SATX, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2000 AND 1999
<TABLE>
<CAPTION>


                                                                                                  2000               1999
                                                                                              ------------       ------------
<S>                                                                                           <C>                <C>
                                                   - ASSETS -
CURRENT ASSETS:
     Cash                                                                                     $         --       $     98,826
     Accounts receivable - net                                                                          --             19,420
     Notes receivable (Note 6)                                                                      40,000            256,491
     Inventory                                                                                      40,315            406,393
     Prepaid expenses                                                                                   --             44,261
                                                                                              ------------       ------------
TOTAL CURRENT ASSETS                                                                                80,315            825,391
                                                                                              ------------       ------------
FIXED ASSETS:

     Furniture and fixtures                                                                         14,448             28,246
     Computer equipment                                                                             14,794             15,443
     Leasehold improvements                                                                             --              9,550
                                                                                              ------------       ------------
                                                                                                    29,242             53,239
     Less:  accumulated depreciation and amortization                                               11,669             10,184
                                                                                              ------------       ------------
                                                                                                    17,573             43,055
                                                                                              ------------       ------------
OTHER ASSETS:
     Investments (Note 5)                                                                           43,788            165,000
     Deposits (Note 6)                                                                             100,000                 --
                                                                                              ------------       ------------
                                                                                                   143,788            165,000
                                                                                              ------------       ------------
                                                                                              $    241,676       $  1,033,446
                                                                                              ============       ============

                                          - LIABILITIES AND SHAREHOLDERS' DEFICIT -
CURRENT LIABILITIES:
     Bank overdraft                                                                           $     49,133       $         --
     Accounts payable                                                                              516,180            438,816
     Accrued expenses                                                                              450,034            153,478
     Notes payable (Note 7a)                                                                     1,661,000            300,000
     Loan payable -officer (Note 7b)                                                                63,670            213,318
     Convertible debenture (Note 7c)                                                               250,000                 --
                                                                                              ------------       ------------
TOTAL CURRENT LIABILITIES                                                                        2,990,017          1,105,612
                                                                                              ------------       ------------
LONG-TERM LIABILITIES (NOTE 7A)                                                                         --            560,000
                                                                                              ------------       ------------

COMMITMENTS AND CONTINGENCIES (NOTE 10)

SHAREHOLDERS' DEFICIT (NOTE 8):
     Preferred stock, $.001 par value, 20,000,000 shares authorized, none issued                        --                 --
     Common stock, $.001 par value, 100,000,000 shares authorized  65,871,392zz
       and 52,008,286 issued and outstanding in 2000 and 1999, respectively                         65,871             52,008
     Additional paid-in capital                                                                 10,164,258          2,979,911
     Deficit accumulated during the development stage                                          (12,978,470)        (3,664,085)
                                                                                              ------------       ------------
                                                                                                (2,748,341)          (632,166)
                                                                                              ------------       ------------
                                                                                              $    241,676       $  1,033,446
                                                                                              ============       ============

</TABLE>

                             See accompanying notes.


                                      F-4
<PAGE>   43


                           SATX, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                                         CUMULATIVE DURING THE
                                                 FOR THE YEAR ENDED DECEMBER 31,          DEVELOPMENT STAGE
                                                 ---------------------------------         (JUNE 28, 1972 TO
                                                    2000                   1999           DECEMBER 31, 2000)
                                                 ------------          ------------      ----------------------
<S>                                              <C>                   <C>                   <C>
REVENUES                                         $     34,753          $     22,208          $     56,961
                                                 ------------          ------------          ------------

COSTS AND EXPENSES:
     Costs of sales                                   149,829                15,944               165,773
     Selling, general and administrative            7,438,338             1,300,386            11,108,687
     Interest expense                                 126,153                    --               126,153
     Inventory write-down (Note 3e)                   342,420                    --               342,420
     Write-down of investment (Note 4)              1,292,398                    --             1,292,398
                                                 ------------          ------------          ------------
                                                    9,349,138             1,316,330            13,035,431
                                                 ------------          ------------          ------------
NET LOSS (NOTE 9)                                $ (9,314,385)         $ (1,294,122)         $(12,978,470)
                                                 ============          ============          ============
BASIC/DILUTED LOSS PER
     COMMON SHARE                                $      (0.17)         $       (.03)         $       (.26)
                                                 ============          ============          ============

WEIGHTED AVERAGE COMMON
     SHARES OUTSTANDING                            55,765,687            43,355,643            50,477,567
                                                 ============          ============          ============

</TABLE>


                             See accompanying notes.

                                      F-5
<PAGE>   44


                           SATX, INC. AND SUBSIDIARIES

       STATEMENT OF SHAREHOLDERS' DEFICIT FOR THE DEVELOPMENT STAGE PERIOD
                       JUNE 28, 1972 TO DECEMBER 31, 2000


<TABLE>
<CAPTION>

                                                                                                                      TOTAL
                                                           COMMON STOCK              ADDITIONAL    ACCUMULATED      SHAREHOLDERS'
                                                   -----------------------------      PAID-IN        EARNINGS           EQUITY
                                                      SHARES          AMOUNT          CAPITAL       (DEFICIT)         (DEFICIT)
                                                   ------------    ------------    ------------    ------------     ------------
<S>                                                 <C>            <C>             <C>             <C>              <C>
Balance at June 28, 1972                                     --    $         --    $         --    $         --     $         --
Issuance of common stock                             14,737,170          14,737       2,069,213              --        2,083,950
Net loss from inception to December 31, 1997                 --              --              --      (2,366,162)      (2,366,162)
                                                   ------------    ------------    ------------    ------------     ------------
Balance at December 31, 1997                         14,737,170          14,737       2,069,213      (2,366,162)        (282,212)
Stock issued for cash                                30,000,000          30,000              --              --           30,000
Net (loss) for the year ended December 31, 1998              --              --              --          (3,801)          (3,801)
                                                   ------------    ------------    ------------    ------------     ------------
Balance at December 31, 1998                         44,737,170          44,737       2,069,213      (2,369,963)        (256,013)
Stock issued for cash                                 1,876,116           1,876         700,293              --          702,169
Stock issued for services                             2,495,000           2,495          97,305              --           99,800
Stock issued for acquisition                          2,900,000           2,900         113,100              --          116,000
Net (loss) for the year ended December 31, 1999              --              --              --      (1,294,122)      (1,294,122)
                                                   ------------    ------------    ------------    ------------     ------------
BALANCE AT DECEMBER 31, 1999                         52,008,286          52,008       2,979,911      (3,664,085)        (632,166)
SHARES ISSUED FOR CASH                                4,184,206           4,184       1,645,816              --        1,650,000
SHARES ISSUED IN CONNECTION WITH INVESTMENT             400,000             400         399,600              --          400,000
IMPUTED INTEREST                                             --              --          10,580              --           10,580
COMPENSATORY SHARES                                   9,278,900           9,279       5,128,351              --        5,137,630
NET LOSS FOR THE YEAR ENDED DECEMBER 31, 2000                --              --              --      (9,314,385)      (9,314,385)
                                                   ------------    ------------    ------------    ------------     ------------
BALANCE AT DECEMBER 31, 2000                         65,871,392    $     65,871    $ 10,164,258    $(12,978,470)    $ (2,748,341)
                                                   ============    ============    ============    ============     ============
</TABLE>

                             See accompanying notes.

                                      F-6
<PAGE>   45


                           SATX, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                                                    CUMULATIVE
                                                                                                                     DURING THE
                                                                               FOR THE YEAR ENDED DECEMBER 31,   DEVELOPMENT STAGE
                                                                              ---------------------------------  (JUNE 28, 1972 TO
                                                                                     2000           1999         DECEMBER 31, 2000)
                                                                              ---------------  ----------------  ----------------

<S>                                                                              <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                                     $(9,314,385)    $(1,294,122)    $(12,978,470)
    Adjustments  to  reconcile  net loss to net  cash  flows  from  operating
     activities:
       Depreciation and amortization                                                  28,007           2,763          155,974
       Compensatory shares                                                         5,137,630          99,800        5,237,430
       Imputed interest                                                               10,580              --           10,580
       Write-down of investments                                                   1,292,398              --        1,292,398
       Write-down of inventory                                                       342,420              --          342,420
       Accounts and notes receivable written off                                     275,911              --          275,911
       Stock issued for acquisition                                                       --         116,000          116,000
    Changes in assets and liabilities:
       Accounts receivable                                                                --         (19,420)         (19,420)
       Inventories                                                                    23,658        (446,693)        (423,035)
       Prepaid expenses                                                               44,261          (3,961)          40,300
       Bank overdraft                                                                 49,133              --           49,133
       Account payable and accrued expenses                                          373,920         537,289          966,214
                                                                                 -----------     -----------     ------------
CASH FLOWS USED BY OPERATING ACTIVITIES                                           (1,736,467)     (1,008,344)      (4,934,565)
                                                                                 -----------     -----------     ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Capital expenditures                                                              (2,525)        (47,734)        (173,547)
    Note receivable                                                                  (40,000)       (256,491)        (296,491)
    Deposits                                                                        (100,000)             --         (100,000)
    Investments in common stock                                                     (771,186)       (165,000)        (936,186)
                                                                                 -----------     -----------     ------------
CASH FLOWS USED BY INVESTING ACTIVITIES                                             (913,711)       (469,225)      (1,506,224)
                                                                                 -----------     -----------     ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from sale of common stock and warrant exercise                        1,650,000         702,069        4,466,119
    Loans from shareholders/officers                                                 901,352         873,318        1,974,670
                                                                                 -----------     -----------     ------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES                                        2,551,352       1,575,387        6,440,789
                                                                                 -----------     -----------     ------------
NET (DECREASE) INCREASE IN CASH                                                      (98,826)         97,818               --
CASH, BEGINNING                                                                       98,826           1,008               --
                                                                                 -----------     -----------     ------------
CASH, ENDING                                                                     $        --     $    98,826     $         --
                                                                                 ===========     ===========     ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    Interest paid                                                                $        --     $        --     $         --
    Taxes paid                                                                   $        --     $        --     $         --

</TABLE>

                             See accompanying notes.

                                      F-7
<PAGE>   46


                           SATX, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999


NOTE   1   -     DESCRIPTION OF COMPANY:

                 SATX, Inc., (the Company) was originally incorporated in June,
                 1972 as Growth, Inc., a Utah corporation engaged in the
                 business of corporate development. The Company later changed
                 its name to Westland Resources, Inc. and began functioning as a
                 shell corporation looking for acquisitions. Westland
                 subsequently reincorporated in Nevada, in September, 1995, as
                 PageStar, Inc. via a reverse merger. In September, 1996,
                 PageStar acquired Satellite Control Technologies, Inc., a
                 privately held Delaware corporation, and its wholly owned
                 subsidiary, J.F.A. Tech, Inc., (JFA), a California corporation.
                 As a part of this acquisition transaction, JFA assigned to
                 PageStar all of its proprietary technology rights and patents
                 (including, at the time, a pending patent, now issued). As a
                 result of these acquisitions, the Company presently owns two
                 patents related to switching electrical devices remotely via
                 pager signals, and communicating the result back to the source
                 of the original action/signal. These patented devices underlie
                 the Company's AlphaTrak System, a GPS (Global Positioning
                 Satellite) tracking, locating and control device that can be
                 used to track and control automobiles, railcars and other
                 transportation vehicles and that can ultimately be used for
                 fleet management. In April, 1997, PageStar changed its name to
                 Satellite Control Technologies, Inc.

                 The Company was engaged in the research and development of its
                 tracking systems until May, 1998, at which time it ceased
                 operations due to lack of funds. At such time, the Company's
                 only assets consisted of the two patents relating to its
                 tracking systems. The Company was re-activated in May, 1999
                 with the acquisition of DebitFone International, Inc., (see
                 Note 4) a Florida corporation engaged in the prepaid cellular
                 phone industry. From its incorporation in October, 1996 until
                 May, 1999, DebitFone was a privately held research and
                 development company with no revenues. As a result of the
                 acquisition, DebitFone is now a wholly owned subsidiary of the
                 Company.

                 In May, 1999, the Company changed its name to SATX, Inc. In
                 addition to the continuation of DebitFone's pre-paid cellular
                 operations, new management made the decision to re-pursue
                 products and markets related to the Company's patents. Since
                 May 1999 the Company has concentrated its efforts on the
                 continued development of the GPS-based tracking, locating and
                 control systems and the DebitFone prepaid software management
                 system. The Company recently developed a prototype of an
                 updated tracking system, has other pager-based solutions under
                 development, and in December, 1999, initiated the sale of
                 DebitFone products.

                 The Company has been in the development stage in accordance
                 with Statement of Financial Accounting Standards No. 7 from the
                 time of its inception, since, even though the Company has
                 attempted to commence operations, no significant revenues have
                 been generated to date.

NOTE   2   -     GOING CONCERN UNCERTAINTY:

                 The accompanying financial statements have been prepared in
                 conformity with accounting principles generally accepted in the
                 United States of America, which contemplates continuation of
                 the Company as a going concern. However, the Company has
                 sustained a substantial operating loss during the year ended
                 December 31, 2000 of $9,314,385, and, as of that date, had a
                 working capital deficiency of $2,909,702 and a net worth
                 deficiency of $2,748,341. The Company is also in default on
                 certain notes payable to shareholders These conditions raise
                 substantial doubt about the Company's ability to continue as a
                 going concern.



                                      F-8
<PAGE>   47

                           SATX, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999


NOTE   2   -     GOING CONCERN UNCERTAINTY (CONTINUED):

                 In view of these matters, realization of a major portion of the
                 assets in the accompanying balance sheet is dependent upon
                 continued operations of the Company, which in turn is dependent
                 upon the Company's ability to meet its financing requirements,
                 and the success of its future operations.

                 In January 2001, the Company entered into an agreement with an
                 investment banking and consulting firm to provide the Company
                 with financial, management and marketing assistance and
                 guidance. This firm has agreed to, among other undertakings,
                 act as a private investment banker and help raise the necessary
                 capital to make the Company and its subsidiaries a success.
                 Through April 6, 2001, this firm's efforts have resulted in the
                 sale of the Company's securities for net proceeds of $760,000.
                 As payment for these services, the Company will issue an
                 aggregate of 16,000,000 of its common shares as well as options
                 to acquire an additional 5,000,000 shares at an exercise price
                 of $1.00 per share. Management also agreed to pay this firm its
                 standard fee for any acquisition that is merged into the
                 Company or its subsidiaries as well as a commission of 10% on
                 the sale of the Company's equity securities.

                 Management believes that this firm will be able to accomplish
                 additional equity funding which will provide for the continued
                 development of the AlphaTrak product line as well as the
                 continued development of certain prepaid cellular products. The
                 Company will also investigate other merger and acquisition
                 opportunities in order to provide revenues and operating cash
                 flows during the ongoing development of its products. The
                 Company believes that these actions presently being taken to
                 revise the Company's operating and financial requirements
                 provide the opportunity for the Company to continue as a going
                 concern.

NOTE   3   -     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

                 The Company's accounting policies are in accordance with
                 accounting principles generally accepted in the United States
                 of America. Outlined below are those policies which are
                 considered particularly significant.

        (a)      PRINCIPLES OF CONSOLIDATION:

                 The consolidated financial statements include the accounts of
                 SATX, Inc., and its wholly owned subsidiaries DebitFone
                 International, Inc and J.F.A. Tech Inc. an entity that is
                 currently inactive. All significant intercompany balances and
                 transactions have been eliminated in consolidation.




                                      F-9
<PAGE>   48

                           SATX, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999



NOTE   3   -     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

        (b)      USE OF ESTIMATES:

                 In preparing financial statements in accordance with accounting
                 principles generally accepted in the United States of America
                 (GAAP), management makes certain estimates and assumptions,
                 where applicable, that affect the reported amounts of assets
                 and liabilities and disclosures of contingent assets and
                 liabilities at the date of the financial statements, as well as
                 the reported amounts of revenues and expenses during the
                 reporting period. While actual results could differ from those
                 estimates, management does not expect such variances, if any,
                 to have a material effect on the financial statements.

        (c)      STATEMENTS OF CASH FLOWS:

                 For purposes of the statements of cash flows, the Company
                 considers all highly liquid investments purchased with a
                 remaining maturity of three months or less to be cash
                 equivalents.

        (d)      FAIR VALUE:

                 The carrying amounts of receivables, accounts payable and debt
                 obligations approximate fair value, as of December 31, 2000 and
                 1999.

        (e)      INVENTORY:

                 Inventory, which consists of phones and vending machines, is
                 valued at the lower of cost (FIFO) or market. At December 31,
                 2000, the Company determined that the market value of its
                 inventory was substantially lower than the original cost and,
                 accordingly, recorded a write-down of $342,420 to reflect this
                 situation.

        (f)      FIXED ASSETS:

                 Fixed assets are recorded at cost. Depreciation and
                 amortization are provided on a straight-line basis as follows:

                          Computer software and equipment             3 years
                          Furniture and fixtures                      5 years

                 Maintenance and repairs are expensed as incurred; renewals and
                 betterments are capitalized.

        (g)      LONG-LIVED ASSETS:

                 Long-lived assets are periodically reviewed to assess
                 recoverability from future operations using undiscounted cash
                 flows in accordance with SFAS No. 121 "ACCOUNTING FOR THE
                 IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE
                 DISPOSED OF". To the extent carrying values exceed fair values,
                 an impairment loss is recognized in operating results.



                                      F-10
<PAGE>   49

                           SATX, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999



NOTE   3   -     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

        (h)      ADVERTISING AND PROMOTION COSTS:

                 Advertising and promotion costs are expensed as incurred in
                 accordance with SOP No. 93-7 "REPORTING ON ADVERTISING COSTS".
                 For the years ended December 31, 2000 and 1999, such costs
                 aggregated $86,996 and $64,676, respectively.

        (i)      INCOME TAXES:

                 The asset and liability method is used in accounting for income
                 taxes. Under this method, deferred tax assets and liabilities
                 are recognized for operating loss and tax credit carry forwards
                 and for the future tax consequences attributable to differences
                 between the financial statement carrying amounts of existing
                 assets and liabilities and their respective tax bases. Deferred
                 tax assets and liabilities are measured using enacted tax rates
                 expected to apply to taxable income in the years in which those
                 temporary differences are expected to be recovered or settled.
                 The effect on deferred tax assets and liabilities of a change
                 in tax rates is recognized in the results of operations in the
                 period that includes the enactment date. A valuation allowance
                 is recorded to reduce the carrying amounts of deferred tax
                 assets unless it is more likely than not, that such assets will
                 be realized.

        (j)      EARNINGS (LOSS) PER SHARE:

                 Basic earnings (loss) per share has been computed on the basis
                 of the weighted average number of common shares outstanding
                 during each period presented according to the standards of SFAS
                 No. 128 "EARNINGS PER SHARE". Diluted earnings (loss) per share
                 have not been presented as the effect of any common stock
                 purchase warrants/options outstanding, on such calculation,
                 would have been antidilutive. Such securities could potentially
                 dilute basic earnings per share in the future.

        (k)      COMPREHENSIVE INCOME:

                 SFAS 130 "REPORTING COMPREHENSIVE INCOME" was effective for
                 years beginning after December 15, 1997. This statement
                 prescribes standards for reporting other comprehensive income
                 and its components. Since the Company currently does not have
                 any items of other comprehensive income, a statement of
                 comprehensive income is not required.

        (l)      RECLASSIFICATIONS:

                 Certain items in the prior periods financial statements have
                 been reclassified to conform to the presentation utilized in
                 the current year.



                                      F-11
<PAGE>   50
                           SATX, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999


NOTE   3   -     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

        (m)      NEW ACCOUNTING PRONOUNCEMENTS:

                 In December 1999, the Securities and Exchange Commission (SEC)
                 issued Staff Accounting Bulletin (SAB) No. 101, "REVENUE
                 RECOGNITION IN FINANCIAL STATEMENTS." (SAB No. 101). SAB No.
                 101 expresses the views of the SEC staff in applying generally
                 accepted accounting principles to certain revenue recognition
                 issues. Subsequently, SAB Nos. 101A and 101B were issued
                 delaying the implementation of SAB No. 101 to the fourth
                 quarter of 2001. The SAB requires companies to report any
                 changes in revenue recognition as a cumulative change in
                 accounting principle at the time of implementation in
                 accordance with Accounting Principles Board ("APB") Opinion 20,
                 "ACCOUNTING CHANGES". The Company does not believe that the
                 adoption of SAB No. 101 will have a material impact on the
                 Company's financial position or results of operations.

                 In March 2000, the Financial Accounting Standards Board (FASB)
                 issued Interpretation No. 44 (FIN 44), "ACCOUNTING FOR CERTAIN
                 TRANSACTIONS INVOLVING STOCK COMPENSATION, AN INTERPRETATION OF
                 APB OPINION NO. 25." FIN 44 clarifies the application of APB
                 No. 25 for certain issues, including the definition of an
                 employee, the treatment of the acceleration of stock options
                 and the accounting treatment for options assumed in business
                 combinations. FIN 44 became effective on July 1, 2000, but is
                 applicable for certain transactions dating back to December
                 1998. The adoption of FIN 44 did not have a material impact on
                 the Company's financial position or results of operations.

                 The Company does not believe that any other new accounting
                 pronouncements are applicable at this time


NOTE   4   -     ACQUISITIONS:

                 In May 1999, the Company completed the acquisition of all of
                 the outstanding common stock of DebitFone International, Inc.
                 (DebitFone) in exchange for 2,900,000 shares of Company common
                 stock with a fair market value of $.04 per share. The Company
                 recorded this acquisition using the purchase method of
                 accounting as follows:

                       Assets acquired                          $    116,000
                       Liabilities assumed                                --
                                                                ------------
                       Acquisition price of assets              $    116,000
                                                                ============

                 The assets acquired included $92,353 of software development
                 costs, which were subsequently expensed during 1999.



                                      F-12
<PAGE>   51
                           SATX, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999


NOTE   4   -     ACQUISITIONS (CONTINUED):

                 In October, 1999, the Company entered into a stock purchase
                 agreement with Paradigm Manufacturing, Inc., pursuant to which
                 the Company would acquire all the shares of Paradigm. Although
                 this agreement was signed by both parties, there were still
                 conditions to be met before becoming final. Subsequently, in
                 2000, the parties mutually agreed to rescind the stock purchase
                 agreement and consider it null and void. The agreement also
                 outlined the parties' concurrence whereby Paradigm would
                 complete the development and tooling of a prepaid phone for the
                 Company. In addition, as part of the original agreement the
                 Company loaned Paradigm $338,491. The supplemental agreement
                 included a promissory note, personally guaranteed by the
                 principals of Paradigm, requiring periodic payments of this
                 loan, beginning April 1, 2000, with the final payment by
                 November 1, 2000 with interest payable at 10% per annum. The
                 gross principal amount of this note was reduced by $82,000,
                 which represented the value of remaining work to be performed
                 by Paradigm for the Company, thereby reducing the outstanding
                 principal balance to $256,491. To date, Paradigm has not made
                 any of the above payments. The Company has determined that this
                 note, plus additional monies advanced to Paradigm in the amount
                 of $27,490, is uncollectible and has recorded a write-off in
                 the amount of $283,981. However, management is still actively
                 pursuing the collection of this amount.

                 In October, 1999, the Company entered into a Memorandum of
                 Understanding with Stoveact, Inc., (Stoveact) whereby the
                 Company would acquire all of the outstanding shares of
                 Stoveact. This Memorandum was terminated in January, 2000,
                 prior to consummation.

                 On May 23, 2000, the Company completed an acquisition of
                 3,982,600 shares (the "ORA Shares") or approximately fifty-six
                 percent (56%) of the common stock of ORA Electronics, Inc., a
                 Delaware corporation ("ORA"), from Ruth Cooper as an individual
                 and trustee of the Cooper Living Trust (the "Trust"). ORA is an
                 electronics company engaged in the business of developing and
                 marketing a wide range of cellular accessories and related
                 communication products. Prior to this acquisition, the Trust
                 was the holder of 4,982,600 shares of common stock of ORA.

                 As consideration for the purchase of the 3,982,600 ORA Shares,
                 the Company paid $150,000 in cash and issued (i) 400,000 shares
                 of Company common stock and (ii) a promissory note in the
                 amount of $23,186. As additional consideration, the Company
                 assumed and paid (i) approximately $300,000, to ORA, pursuant
                 to a promissory note dated March 31, 1996, as amended, restated
                 and extended to March 31, 2000; and (ii) also assumed, when
                 due, all liabilities and obligations arising out of or under a
                 continuing guaranty dated February 1, 1989, given by Ruth
                 Cooper and Gershon Cooper to a third party to guaranty the
                 repayment of a secured loan to ORA.

                 The Company subsequently acquired the remaining 1,000,000
                 shares held by the Trust for cash payments of $400,000.

                 In March 2001, subsequent to the balance sheet date, the
                 Company sold 3,982,600 shares for cash proceeds of $35,000.
                 Accordingly, as of December 31, 2000, the Company has reflected
                 a write down of the value of the total shares (4,982,600) to
                 $43,788, based on the fair value at the subsequent date of
                 sale. In addition, the Company and the purchaser of these
                 shares have agreed to call/put rights for the remaining
                 1,000,000 shares of ORA common stock at a price of $3.00 per
                 share. The purchaser's call right can be exercised at any time
                 and the Company's put right commences in March 2002.



                                      F-13
<PAGE>   52
                           SATX, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999


NOTE   4   -     ACQUISITIONS (CONTINUED):

                 This acquisition was originally recorded utilizing the purchase
                 method of accounting and the operations of ORA were
                 consolidated with those of the Company. As a result of the
                 above sale, this investment was given retroactive treatment and
                 at December 31, 2000, is reflected utilizing the equity method
                 of accounting.

                 In November, 2000, the Company entered into an agreement with
                 Shared Technologies Cellular, Inc., wherein both the Company
                 and Shared Technologies would merge into a single entity with
                 the Company contributing 4 shares of its stock for each share
                 of Shared Technologies Cellular, Inc. stock. The completion of
                 the transaction required raising $30,000,000 in funding for the
                 ongoing operations and approval of both boards of directors.
                 This agreement was terminated in February, 2001, subsequent to
                 the balance sheet date.

NOTE   5   -     INVESTMENTS:

                 Investments consisted of the following at December 31, 2000 and
                 1999:
<TABLE>
<CAPTION>

                                                                                           2000        1999
                                                                                         --------    --------
<S>                                                                                        <C>           <C>
                 Investment in Digital Telecommunications, Inc. - an Oklahoma
                    corporation doing business in Madagascar.  Investment written-off
                    in 2000                                                              $     --    $165,000
                 Investment in ORA Electronics Inc. at fair value - see Note 4             43,788          --
                                                                                         --------    --------
                                                                                         $ 43,788    $165,000
                                                                                         ========    ========
</TABLE>


NOTE   6   -     DEPOSITS:

                 During 2000, the Company made a deposit of $100,000 with an
                 unrelated entity, in order that DebitFone could commence
                 operations. This deposit was made to secure telephone lines so
                 that phones sold from DebitFone's vending machines would be
                 equipped for use. The Company also advanced funds to this
                 entity in the amount of $150,000 of which $110,000 was repaid.
                 The remaining balance of $40,000 is reflected as note
                 receivable in the accompanying balance sheet.



                                      F-14
<PAGE>   53
                           SATX, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999


NOTE   7   -     NOTES PAYABLE:

        (a)      NOTES PAYABLE - SHAREHOLDERS:

                 As of December 31, 2000 and 1999, the Company was indebted to
                 certain of its shareholders as follows:
<TABLE>
<CAPTION>

                                                                                    2000        1999
                                                                                 ----------    --------
<S>                                                                              <C>           <C>
                 Unsecured notes payable, annual interest between 8% and 10%     $1,061,000    $860,000
                 Unsecured notes payable, annual interest between 8% and 12%,
                    convertible at the option of the holder                         600,000          --
                                                                                 ----------    --------
                                                                                 $1,661,000    $860,000
                                                                                 ==========    ========
</TABLE>

                 Interest accrued at December 31, 2000 and 1999, aggregated
                 $172,787 and $81,242, respectively. The Company has not paid
                 any interest on these notes and is currently in default with
                 regard to its repayment obligations.

        (b)      LOANS PAYABLE - OFFICERS:

                 As of December 31, 2000 and 1999, the Company was indebted to
                 its officers in the amount of $63,670 and $213,318,
                 respectively. These loans are payable on demand and are
                 non-interest bearing. However, interest is being imputed at an
                 annual rate of 8% and is being recorded as additional paid-in
                 capital.

        (c)      CONVERTIBLE DEBENTURE:

                 In August, 2000, the Company issued an 8% convertible debenture
                 in the amount of $250,000. This 1-year debenture is convertible
                 at a 30% discount at the option of the holder, with a maximum
                 conversion price of $1.00. The holder also has the right to
                 purchase up to 100,000 shares of common stock for each $250,000
                 invested for the next 5 years.

                 Interest accrued at December 31, 2000, aggregated $5,863. To
                 date, the Company has not paid any interest on this note.

NOTE   8   -     SHAREHOLDERS' EQUITY:

                 The Company's authorized capital consists of (i) 100,000,000
                 shares of common stock, par value $.001 per share and (ii)
                 20,000,000 shares of preferred stock, par value $.001.
                 Presently, there are no issued and outstanding shares of
                 preferred stock. In April 2001, subsequent to the balance sheet
                 date, a majority of the Company's shareholders approved an
                 amendment to the Company's articles of incorporation,
                 increasing its authorized capital to 250,000,000 shares of
                 common stock and 100,000,000 shares of preferred stock. There
                 was no change in the par values.




                                      F-15
<PAGE>   54

                           SATX, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999



NOTE   8   -     SHAREHOLDERS' EQUITY (CONTINUED):

                 In June 1999, the Company issued 2,495,000 shares of common
                 stock to various individuals in lieu of payment for consulting
                 services in the amount of $99,800. During 1999, the Company
                 also sold 1,876,116 shares of its common stock and realized net
                 proceeds of $702,169. In addition, 2,900,000 shares were issued
                 pursuant to the acquisition of DebitFone (see Note 4).

                 During 2000, the Company issued 9,278,900 shares of common
                 stock to various individuals, including employees, in lieu of
                 payment for services in the amount of $5,137,630. The shares
                 were recorded based on the trading prices at the date of
                 issuances.

                 During 2000, the Company also sold 4,184,206 shares of its
                 common stock, realizing net proceeds of $1,650,000, and issued
                 400,000 shares in exchange for the ORA shares (see Note 4)
                 acquired.

                 The Company plans to adopt a stock option plan in the near
                 future. During 2000, the Company granted 85,000 options to an
                 employee without a formal plan in place. The Company deemed the
                 value of these options to be immaterial.

NOTE   9   -     INCOME TAXES:

                 No provision for Federal and state income taxes has been
                 recorded since the Company has incurred losses for 2000 and
                 during the development stage period. Deferred tax assets at
                 December 31, 2000 and 1999 consist primarily of the tax effect
                 of the net operating losses which expire in years beginning in
                 2018 and which amounts to approximately $13,000,000. The
                 Company has provided a 100% valuation allowance on the deferred
                 tax assets at December 31, 2000 and 1999 to reduce such asset
                 to zero, since there is no assurance that the Company will
                 generate future taxable income to utilize such asset.
                 Management will review this valuation allowance requirement
                 periodically and make adjustments as warranted.

NOTE  10   -     COMMITMENTS AND CONTINGENCIES:

        (a)      LEASES:

                 Effective June 2000, the Company entered into a lease for
                 office space under a non-cancelable lease expiring on June 30,
                 2003. The base rent of $44,100 per annum was subject to annual
                 escalations. In February, 2001, the Company terminated this
                 lease at no cost and the landlord is expected to return the
                 unused portion of the security deposit. The Company is
                 presently utilizing space provided by a shareholder at no cost.

        (b)      EMPLOYMENT AGREEMENTS:

                 During 1999, the Company entered into employment agreements
                 with six key employees. As of the date of this report, these
                 employees have either resigned or been terminated. As of
                 December 31, 2000, the Company has accrued $35,000 in estimated
                 severance pay as well as a note payable in the amount of
                 $15,000 as reimbursement for expenses. This note is payable in
                 monthly installments of $5,000 through July 2001.


                                      F-16
<PAGE>   55

                           SATX, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999


NOTE  10   -     COMMITMENTS AND CONTINGENCIES(CONTINUED):

                 In 2001, the Company signed an employment agreement with its
                 new President and CEO. The three year agreement provides for a
                 base salary of $175,000 per annum and annual increases of
                 $25,000. In addition, this executive is entitled to board
                 approved discretionary bonuses, other fringe benefits and was
                 also issued 500,000 shares of Company common stock and granted
                 2,000,000 stock options.

      (c)        LEGAL PROCEEDINGS:

                 The Company is a defendant in a lawsuit styled NIGRO V.
                 SATELLITE CONTROL TECHNOLOGIES, INC.,ET AL., which is now
                 pending in the Los Angeles County Superior Court. This is a
                 class action lawsuit filed by Nigro on behalf of himself and
                 others who owned SATX stock between September 26, 1996 and
                 October 7, 1997. Plaintiffs seek to recover damages for
                 depreciation of their stock due to alleged intentional and
                 negligent misrepresentation of certain former officers and
                 directors of the Company. The alleged misrepresentations are
                 that (i) the Company had substantial purchase orders for its
                 AlphaTrak product line and (ii) the AlphaTrak product line was
                 viable and would be available on the market in the first or
                 second quarter of 1997. Based on the documentary evidence
                 currently in the possession of the Company and interviews with
                 former officers, directors, employees, and outside engineers,
                 it appears that the allegations are incorrect. Based on the
                 facts presently available to counsel, substantial recovery by
                 plaintiffs appears unlikely.

                 The Company is also involved in the following litigious
                 matters:

                         HILL & KNOWLTON V. DEBITFONE INTERNATIONAL, INC. This
                         case involves a collection claim against DebitFone for
                         monies allegedly owed for media relations and investor
                         relation services allegedly performed by the
                         Plaintiffs. This case in currently being settled for
                         $20,000

                         SUTER V. SATELLITE CONTROL TECHNOLOGY, INC.. This
                         lawsuit was filed by Carl Suter alleging that the
                         Company failed to repay monies due on three separate
                         promissory notes. A default judgment was obtained in
                         the state of California, by the Plaintiff, in the
                         amount of $173,630, which amount includes interest
                         calculated through August 12, 1999. Thereafter, daily
                         interest charges of $48 are assessed until the judgment
                         is satisfied.

                         SATX, INC. V. CASTERLINE & AGAJANIAN ET AL. On February
                         23, 2001, the Company entered into a settlement
                         agreement regarding a lawsuit commenced by the Company
                         whereby the defendants filed a counterclaim. Pursuant
                         to the settlement, the Company agreed to pay the
                         defendant $6,000 and was required to issue 100,000
                         shares of common stock to the principal of the
                         defendant.


                 The Company believes that it is adequately reserved for the
                 above matters.



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