<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                 FORM 10-KSB/A
                                Amendment No. 2
                                  (Mark One)
          [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended March 31, 2000

                                       OR

          [_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

            For the transition period from __________ to __________

                        Commission File Number 0-24742

                             U.S. Wireless Corporation
                 (Exact name of Company as specified in its charter)

             Delaware                                    13-3704059
   (State or other jurisdiction of          (I.R.S. Employer Identification No.)
    Incorporation or organization)

    2303 Camino Ramon, Suite 200, San Ramon, California             94583
       (Address of principal executive offices)                   (Zip Code)

                                (925) 327-6200
               (Company's telephone number, including area code)

          Securities registered pursuant to Section 12(b) of the Act:
          Title of each class      Name of each exchange on which registered
          -------------------      -----------------------------------------

                                           NONE

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

                         Common Stock, $.01 par value
                               (Title of Class)

Check whether the Issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that Company 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 no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of Company'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 [_].

We had, on a consolidated basis, $249,178 in revenues from operations during the
fiscal year ended March 31, 2000.

The aggregate market value of the voting stock (consisting of Common Stock, par
value $.01 per share) held by non-affiliates on June 26, 2000 was approximately
$362,601,543 based upon the closing bid price for such Common Stock on said date
($21.25), as reported on the NASDAQ National Market System. On such date, there
were 21,122,906 shares of Company's Common Stock outstanding.
<PAGE>

                                    PART I

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


General

U.S. Wireless Corporation is headquartered in San Ramon, California. U.S.
Wireless Corporation was incorporated in the State of Delaware in February 1993.
We develop network-based location systems (known as the RadioCamera system)
designed to enable wireless carriers and others to provide their customers with
value-added, location-based services and applications, including: enhanced 911,
live-navigation assistance, enhanced 411, and asset and vehicle tracking.

Results of Operations

Statements contained herein that are not historical facts may be considered
forward looking information with respect to plans, projections or future
performance as defined under the Private Securities Litigation Reform Act of
1995. These forward-looking statements are subject to risk and uncertainties,
which could cause actual results to differ materially from those projected.

Restatement of amounts previously reported

As described in detail in Note 12 to the consolidated financial statements filed
herewith, in May 2001 the Company announced that it had completed an
investigation that resulted in the termination of the Company's former Chief
Executive Officer and the resignation of the Company's former General Counsel.
As a result of the investigation, the Company determined that the original
accounting treatment for certain transactions was incorrect, and accordingly,
has restated the previously reported amounts. The impact of the restatements on
the Company's statement of operations for the fiscal year ended March 31, 2000,
is as follows:

<TABLE>
<CAPTION>
                            Net Loss                                                              Basic and
                         Attributable to                                        Net Loss           Diluted       Basic and
                             Common          Loss from                       Attributable to      Net Loss        Diluted
                             Shares        unauthorized                          Common           Per Share       Net Loss
                         (as originally        Stock           Other             Shares        (as originally    Per Share
Quarter ended:              reported)        issuances      Adjustments       (as restated)       reported)     (as restated)
--------------              ---------        ---------      -----------       -------------       ---------    -------------
<S>                     <C>               <C>              <C>               <C>             <C>            <C>
June 30, 1999           $   2,727,505     $   690,344       $  53,752        $  3,471,601       $  (0.23)      $  (0.29)
September 30, 1999          2,097,838         534,262         379,073           3,011,173          (0.17)         (0.25)
December 31, 1999           2,438,380       4,106,508         365,073           6,909,961          (0.20)         (0.57)
March 31, 2000              4,200,174               -         139,705           4,339,879            N/A*           N/A*
                       --------------------------------------------------------------------------------------------------
Year ended
March 31, 2000          $  11,463,897     $ 5,331,114       $ 937,603        $ 17,732,614       $  (0.92)      $  (1.42)
                       ==================================================================================================
</TABLE>


*- Per share amounts for fourth quarter results not previously reported in
   financial filings.

                                       2
<PAGE>

Year Ended March 31, 2000 as Compared to the Year Ended March 31, 1999

During the years ended March 31, 2000 and 1999, we recorded revenues of $249,178
and $40,000, respectively. During fiscal 2000, we were awarded two ITS projects,
one from the Maryland Department of Transportation and the other from the
Virginia and U.S. Departments of Transportation, under which we are to provide
transportation data on selected roadways to those states on a trial basis. Total
contract values for the Maryland and Virginia contracts are $461,000 and
$350,000, respectively. During the year ended March 31, 2000 we recognized
$249,178 in revenue on the Maryland contract. Costs incurred to date on this
contract total $265,445. No revenues or costs to date have been recognized on
the Virginia contract. Fiscal 1999 revenue was limited to a sale generated by
our then consolidated subsidiary, Mantra Technologies, Inc., as our core
wireless activities did not report any operating revenues during that period.
Prior to fiscal 2000, and continuing into fiscal 2000, our focus was primarily
research and development, with respect to the development and testing of the
RadioCamera system. We are in the process of expanding our trial in the
Maryland/Washington DC/Virginia metro area into an operational readiness trial
("ORT"). In addition, we are adding to the ORT, a trial system presently being
built in Seattle, Washington. We plan to continue to expand the ORT and focus on
developing relationships with the cellular carriers prior to the October 2000
FCC mandated deadline for carriers to state their intentions on how they plan to
meet the mandate. During fiscal 2001 we expect to be building our network.

Costs and expenses of operations, including research and development and
operating expenses, totaled $8,937,025 for the year ended March 31, 2000 as
compared to total costs and expenses of operations of $7,357,852 for the year
ended March 31, 1999. Increased operating expenses were primarily due to our
increased field trial activities, including the commencement of our ORT in the
Maryland/Washington DC/Virginia Metro area where we continue to build sites to
increase our coverage area and where we have opened our east coast corporate
offices in Reston, Virginia. There were increased costs incurred for engineering
and research and development, related to the continued refinement, testing and
deployment of our RadioCamera(TM) system. During fiscal years 2000 and 1999, we
received $534,000 and $482,000, respectively, for reimbursements for ongoing
research and development expenses incurred by us with respect to the WTI joint
venture. These reimbursements have been recorded as a reduction of research and
development expense. Research and development expense totaled $3,497,435 and
$4,866,292 for fiscal years 2000 and 1999, respectively. During fiscal 1999, we
recorded compensation expense of $1,283,594 and in-process research and
development of $893,558, both included in research and development expense,
related to the vesting of 1,741,721 shares to both employee-shareholders and
investors as a result of achievement of the second Labyrinth vesting milestone.
This is the principal reason why research and development was $1,368,857 higher
in fiscal 1999, than in fiscal 2000.

Additionally, certain employees were granted stock options, resulting in
additional compensation due to the difference between the exercise price and the
market value of the stock at the time of grant. Total compensation expense for
employee stock options for fiscal years 2000 and 1999 was $701,978 and $4,067,
respectively. In fiscal 1997, we recorded unearned compensation for the options
granted that year and amortized the expense over the vesting period. As of March
31, 2000, the options granted to employees were fully amortized. The
amortization of unearned compensation for fiscal years 2000 and 1999 was
$244,958 and $516,480, respectively.

                                       3
<PAGE>

Compensation expense for options granted to consultants for the fiscal years
2000 and 1999 was $593,863 and $48,234, respectively.

Our equity in net losses of WTI aggregated $390,208 and $341,370 during fiscal
years 2000 and 1999, respectively, however, losses totaling approximately
$192,000 have not been applied as of March 31, 2000 since the carrying amount of
the investment has been reduced to zero. For the years ended March 31, 2000 and
1999, we earned interest income of $495,638 and $310,074, respectively,
reflecting increased earnings on cash balances generated from our private sales
of equity securities, as discussed below.

As a result of the above factors, including the loss from unauthorized share
issuances of $5,331,114 and other adjustments totaling $937,603 noted above, we
incurred a net loss of $14,040,766 for the year ended March 31, 2000 as compared
to $7,230,277 for the year ended March 31, 1999. The net loss attributable to
common shares of $17,732,614 for fiscal 2000 also includes $3,560,000 of deemed
dividends with respect to the Series B Preferred Stock issuance and $131,848 of
cumulative dividends on the shares of Series A Preferred Stock. The deemed
dividends on the Series B Preferred Stock are the result of issuing the
preferred stock with a conversion price to acquire shares of our Common Stock at
a discount from the trading price of our Common Stock at the date we sold the
shares of Series B Preferred Stock.

Liquidity and Capital Resources

As of March 31, 2000, we had working capital of $4,256,187 and cash and cash
equivalents of $5,311,209. Such amounts resulted primarily from sales of our
securities in the March 1999 private placement in which we raised net proceeds
of $6,405,000 million. During fiscal 2000, we made cash investments of $437,154
in equipment. In June 2000, we completed the sale of 112,500 shares of the $.01
par value Series C Preferred Stock at a price of $200 per share to American
Tower Corporation ("ATC"). Proceeds of the Series C Preferred Stock net of
offering costs were approximately $21.0 million.

Based on management's estimates, our capital resources are expected to meet cash
requirements through at least March 31, 2001 for the continuation of research,
development, field trials and ORT operations. We will require additional capital
in order to implement our business plan of deploying a nationwide location
network using our RadioCamera system. Management will continue assessing and
evaluating the timing and resource requirements necessary to implement this
plan.

During fiscal 2000, we continued the development and testing of our AMPS, TDMA,
CDMA and iDEN RadioCamera systems. In addition, we commenced the Maryland
Beltway project, in which we installed six sites and are expecting to expand the
project to ten sites within the next quarter. Total expected revenue for this
project is approximately $461,000 from the state of Maryland. We have earned
$249,178 in revenues on this contract in fiscal 2000.

Concurrent with the private placement discussed above, we entered into two
agreements with ATC and its operating entities: a master license agreement and a
services agreement. Under the terms of the three-year master lease agreement,
ATC will provide site licenses and services in connection with our network
build-out and we have committed to license a minimum of 1,000 tower facilities
over the term of the agreement. We have committed to license a minimum of

                                       4
<PAGE>

1,000 tower facilities at preferential rates starting at $450 per month for each
facility, which commitment could increase to 2,500 sites in the event that we
meet certain market milestones and American Tower satisfies certain tower
building or acquisition milestones. If ATC has 10,000 tower facilities available
by December 31, 2000, we agreed to license 150 sites prior to the end of the
first year, an additional 300 sites prior to the end of the second year and an
additional 550 sites prior to the end of the third year. If the conditions of
the master license agreement are met, we are required to pay for the above
licenses whether we use the facilities or not. The term of each site license
will continue for a five-year period and may be extended for additional five-
year periods at our discretion. Under the services agreement, ATC shall have a
preferential right to provide network build-out services, on a market by market
basis, including radio frequency design, radio frequency engineering, site
identification, site acquisition and development, site zoning and permitting,
site construction and installment management, and component purchases.

In accordance with our strategy of building a nationwide network, which will
require additional financing, management expects that we will be required to
purchase significant amounts of equipment and significantly increase our
management, technical, marketing, operations and administrative personnel during
the next twelve months.

If our timetable for developing, marketing, and manufacturing the RadioCamera
exceeds current estimates, we may require additional capital resources. The
primary continuing expenses associated with the testing and development of the
RadioCamera are expected to include officer, key employee and consultant
salaries and fees.

Recently Issued Accounting Standards

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 requires companies to
recognize all derivative contracts as either assets or liabilities in the
balance sheet and to measure them at fair value. If certain conditions are met,
a derivative may be specifically designated as a hedge, the objective of which
is to match the timing of gain or loss recognition of the hedging derivative
with the recognition of (i) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or (ii) the earnings effect
of the hedged forecasted transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized in income in the period of
change. SFAS No. 133 is effective for all fiscal years beginning after June 15,
2000. As of March 31, 2000, we have not entered into derivative contracts either
to hedge existing risks or for speculative purposes, and do not expect adoption
of the new standard to have a significant effect.

In December 1999, the SEC staff released Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 provides
interpretive guidance on the recognition, presentation and disclosure of revenue
in the financial statements. SAB 101 must be applied to the financial statements
no later than the quarter ending March 31, 2001. The Company does not believe
that the adoption of SAB 101 will have a material affect on the Company's
financial results.

In March 2000, the Financial Accounting Standards Board issued Interpretation
NO. 44 ("FIN 44") Accounting for Certain Transactions Involving Stock
Compensation, an Interpretation of

                                       5
<PAGE>

APB Opinion No. 25. FIN 44 clarifies the application of Opinion No. 25 for (a)
the definition of employee for purposes of applying Opinion No. 25, (b) the
criteria for determining whether a plan qualifies as a non-compensatory plan,
(c) the accounting consequences of various modifications to the terms of a
previously fixed stock option or award, and (d) the accounting for an exchange
of stock compensation awards in a business combination. FIN 44 is effective July
2, 2000, but certain conclusions cover specific events that occur after either
December 15, 1998, or January 12, 2000. We believe that the impact of FIN 44
will not have a material effect on the Company's financial position or results
of operations.

Net Operating Loss Carryforwards

As of March 31, 2000, the Company has Federal net operating loss carryforwards
(NOLS) totaling approximately $18,728,000, which expire at various times through
2020. For State purposes, the Company has NOLS totaling approximately
$9,095,000, which expire at various times through 2005. Utilization of a portion
of the NOLS may be limited pursuant to Internal Revenue Code Section 382 due to
ownership changes because they were acquired in connection with the purchase of
Labyrinth. Also, should significant changes to the existing ownership of the
Company occur, the annual amount of NOL carryforwards available for future use
would be further limited. In addition, the Company has approximately $524,000
and $442,000 of Federal and State research and development tax credit
carryforwards. The Federal credits expire at various times through 2020.
Management has chosen to record a 100% valuation allowance against the net
deferred tax assets, principally related to the NOLS, as realization is
evaluated as uncertain at this time.


ITEM 7.   FINANCIAL STATEMENTS

     See attached financial statements.

                                       6
<PAGE>

                                   PART III

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

Executive Officers and Directors

The following sets forth certain information regarding our directors and
executive officers as of May 31, 2000:

<TABLE>
<CAPTION>
Name                                         Age      Position
----                                         ---      --------
<S>                                          <C>      <C>
Dr. Oliver Hilsenrath/(1)(2)/.........       42       Chief Executive Officer and Chairman
Dale Stone............................       52       President, Chief Operating Officer and Director
David Klarman.........................       35       Vice President, Secretary and General Counsel
Jan Klein.............................       49       Vice President, Business and Market Development
Richard Mudge/(3)/....................       54       President, Compass Services
Howard Blank/(3)/.....................       58       Vice President - Technology, Compass Services
Barry West/(2)/.......................       54       Director
Dennis Francis/(1)(2)/................       48       Director
Irwin Gross/(1)(4)/...................       56       Director
Louis Golm............................       58       Director
James Eisenstein/(5)/.................       41       Director
</TABLE>

___________________________________
(1)  Member of Audit Committee of the Board of Directors.
(2)  Member of Compensation Committee of the Board of Directors.
(3)  Compass Services is a division in formation.
(4)  Elected by the holders of Series B Preferred Stock prior to the Series B
     shares being converted in March and April, 2000.
(5)  Elected by the holder of Series C Preferred Stock.


Dr. Oliver Hilsenrath has served as Chief Executive Officer and a director since
July 31, 1996, and was appointed Chairman of the Board in March 2000. Dr.
Hilsenrath also served as the President since our inception in July 1996 until
March 2000. From 1992 until April 1996, Dr. Hilsenrath was the Senior Vice
President of Technology of Geotek Communications, Inc. Prior to 1992, Dr.
Hilsenrath served as Chief Engineer of the secure communications division of
RAFAEL, Israel. Dr. Hilsenrath received his Ph.D. in information theory from
Technion - Polytechnical Institute of Israel and has worked in the wireless
communications industry for 20 years.

Dale Stone has served as President, Chief Operating Officer and a director since
March 15, 2000. From June 1998 until May 1999, Mr. Stone served as Senior Vice
President and General Manager of Qualcomm's Wireless Infrastructure Division and
thereafter continued to serve on the Division's senior leadership team after
Ericsson acquired the unit in May 1999. From 1991 until 1997, Mr. Stone was a
member of the senior management of AT&T Bell Labs, and at the time of his
departure he was Vice President of Services Development. He is a Fellow of both
AT&T and Bell Labs and holds several patents in circuit design and wireless
network services. Mr. Stone received the AT&T Consumer Services Malcolm
Baldridge Award, the highest award given for managerial excellence in the U.S.
Mr. Stone holds a B.S. in Electrical Engineering

                                       7
<PAGE>

from the Massachusetts Institute of Technology and an M.S. in Electrical
Engineering from Stanford University. He also completed the Executive Program at
Darden.

David S. Klarman has served as Vice President, General Counsel and Secretary of
the Company since September 1996. He was elected Vice President in December
1997. In September 1996, Mr. Klarman formed Klarman & Associates, a law firm
specializing in corporate and securities law. From July 1994 to August 1996, Mr.
Klarman was an associate with Lampert & Lampert, a law firm specializing in
corporate and securities law in New York, New York. From February 1991 to July
1994, Mr. Klarman was an associate with Goldstein, Axelrod & DiGioia, a law firm
specializing in corporate and securities law in New York, New York. Mr. Klarman
holds a J.D. from Yeshiva University, Benjamin N. Cardozo School of Law, and a
B.S. in Finance from the University of Maryland.

Jan Klein has served as Vice President, Business and Market Development since
December 1999. Mr. Klein previously provided consulting services to us from May
1999 until December 1999 through DaVinci Solutions, LLC, a company he founded in
January 1999. From March 1996 until March 1998, he served as Vice President of
Geotek Communications, Inc. From March 1994 until March 1996, he served as the
head wireless telecommunications analyst at Dean Witter Reynolds. From August
1984 until March 1994, Mr. Klein was with AT&T, where he held a variety of
management positions in sales, marketing, operations and finance, and he managed
AT&T's commercial business accounts in New York. At the time of his departure
from AT&T, he was Director of Financial Planning - PCS. Mr. Klein also headed
the finance team that executed the 1994 acquisition of McCaw Cellular by AT&T.
Mr. Klein holds a B.S. in Aerospace Engineering from Pennsylvania State
University, an M.B.A. from George Washington University, an Executive MBA from
Cornell University and an Associate Degree in Accounting from the University of
Pittsburgh. He is a Certified Public Accountant in New Jersey, and holds an NASD
Series 7 license.

Dr. Richard Mudge has served as the President of our Compass Services division
since April 2000. He was a co-founder of Apogee Research, Inc., and served as
its Chairman of the Board from 1994 until 1997, when it merged with Hagler
Bailly. Dr. Mudge then served as Senior Vice President and Managing Director of
Hagler Bailly's transportation practice until April 2000. From 1975 to 1986, Dr.
Mudge served in the Congressional Budget Office, where he was Chief of the
Infrastructure Investment Group from 1983, and directed the organization's
advice to Congress on transportation. He is a member of the ITS America
Coordinating Council, and chairs the organization's Committee on Benefits
Evaluation and Costs. He also serves on several technical committees sponsored
by the Transportation Research Board, an arm of the National Academy of
Sciences. Dr. Mudge holds a Ph.D. and an M.A. in Regional Economics from the
University of Pennsylvania, and an undergraduate degree in Geography from
Columbia College.

Dr. Howard Blank has served as Vice President - Technology of our Compass
Services division since April 2000. From 1997 until joining Compass Services,
Dr. Blank worked as an independent telecommunications consultant. From 1995
until 1997, Dr. Blank was a senior partner with the Stanford Research Institute.
From 1983 until 1995, he served as a partner in the Telecommunications Systems
and Business Strategy Practice of Booz Allen & Hamilton. Dr. Blank has also
worked for Computer Sciences Corporation and Bell Telephone Laboratories, and is
a member of the Governing Board and a past General Chairman of INFOCOM, the
joint computer communications conference of the Communications and Computer
Societies of the

                                       8
<PAGE>

IEEE. Dr. Blank holds a Ph.D. in Systems Engineering and Operations Research
from the University of Pennsylvania. He additionally holds an M.S. in
Engineering, a B.S. in Electrical Engineering, and is a graduate of the Bell
Telephone Laboratories Graduate Studies Program.

Barry West has served as a director since May 1998. Since March 1996, Mr. West
has served as Vice President and Chief Technology Officer of Nextel
Communications, Inc. Prior to that, Mr. West served in various senior positions
with British Telecom for more than thirty-five years, most recently as Director
of Value-Added Services and Corporate Marketing at Cellnet, a cellular
communications subsidiary of British Telecom.

Dennis Francis has served as a director since December 1997. Prior to his
election to the board, he was a consultant for us starting in December 1996.
Since May 2000, Mr. Francis has served as Senior Vice President - Network
Operations and Engineering for TeraBeam Networks. From May 1999 until May 2000,
he served as Vice President of New Wireless Technology Support at AT&T Wireless.
From September 1992 through May 1999, Mr. Francis was the Chief Technology
Officer of Vanguard Cellular Services, Inc. prior to its acquisition by AT&T
Wireless. Mr. Francis is the current chairman of the Nortel Technology Officers
Council and had served on the Chief Technology Officer's Council of the Cellular
Telecommunications Industry Association for four years. He graduated from the
University of Texas at Arlington, Texas with a B.S. in Industrial Engineering.

Louis Golm has served as a director since January 2000. Mr. Golm also serves as
a member of the board of Digital Link Corporation as well as Vice Chairman of
the board of Clariti Telecommunications. From 1997 to 1999, Mr. Golm served as
President of AirTouch International, where he was responsible for creating and
initiating a new satellite-based wireless capability in North America,
Globalstar. From June 1994 to February 1997, he served for three years as
President and Chief Executive Officer of AT&T-Japan. Between 1991 and 1994, Mr.
Golm was the Vice President of Business network Sales for AT&T Business
Communications Services, and between 1988 and 1990, he was the Vice President
for the Eastern Sales Region of AT&T Business Sales Division. Mr. Golm graduated
from the University of Denver with a B.S. in Business Administration. He also
has an MBA from the University of Denver as well as an M.S. in Management from
the Massachusetts Institute of Technology.

Irwin Gross has served as a director since April 1999. He was elected by
unanimous written consent of the stockholders of our Series B Preferred Stock.
Mr. Gross has served as Chief Executive Officer and Chairman of the Board of
Directors of Global Technologies, Inc., formerly Interactive Flight
Technologies, Inc., since September 1998. He was the founder and a director of
ICC Technologies, Inc, which designs innovative climate control systems, from
May 1984 until July 1998. In 1998, ICC Technologies merged with Rare Medium
Inc., an Internet services company. In 1998, he also founded Ocean Castle
Partners, LLC, of which he is now a Managing Member. Mr. Gross is currently the
Chairman of the Board of The Network Connection and a member of the Board of
Orbit R/F. In addition, Mr. Gross served as the Chief Executive Officer of ICC
from February 1994 to February 1998. He has a B.S. degree in accounting from
Temple University and a J.D. from Villanova University.

James S. Eisenstein has served as a director since May 31, 2000. He was
appointed by American Tower Corporation in accordance with the terms and
conditions of American Tower Corporation's investment and purchase of the shares
of our Series C Preferred Stock. Mr.

                                       9
<PAGE>

Eisenstein currently serves as the Executive Vice President-Corporate
Development with American Tower Corporation, a position that he has held since
he helped found American Tower Corporation in the summer of 1995. From 1990 to
1995, he was Chief Operating Officer of Amaturo Group Ltd., a broadcast company
operating 11 radio stations and four broadcasting towers. Mr. Eisenstein serves
on the Board of Directors of the Personal Communications Industry Association,
the leading international trade association representing the wireless
communications industry.

Provisions Governing the Board of Directors

Terms of Directors

All directors, with the exception of Mr. Eisenstein and Mr. Gross, who were
appointed in accordance with the terms and conditions of the Series C and Series
B Preferred Shares, respectively, hold office until the next annual meeting of
stockholders or until their successors are duly elected and qualified. Vacancies
on the Board of Directors may be filled by the remaining directors. Officers are
elected annually by, and serve at the discretion of, the Board of Directors.

Limitation of Liability

As permitted under Delaware Corporation Law, our certificate of incorporation
eliminates the personal liability of our directors or any of our shareholders
for damages for breaches of their fiduciary duty as directors. As a result of
the inclusion of such provision, stockholders may be unable to recover damages
against directors for actions taken by them that constitute negligence or gross
negligence or that are in violation of their fiduciary duties. The inclusion of
this provision in our certificate of incorporation may reduce the likelihood of
derivative litigation against directors and other types of shareholder
litigation. In addition, we have executed indemnification agreements with all
officers and directors providing indemnification to the fullest extent of the
law.

Directors' Compensation

Directors do not currently receive any cash compensation for services rendered
to us in their capacities as directors. Pursuant to the terms of their
respective stock option agreements with us, directors elected by our common
shareholders receive options to purchase shares of our common subject to vesting
schedules. See "Principal Stockholders".

Employment Agreements

Dr. Oliver Hilsenrath. In March 2000 the Board of Directors approved the
extension of Dr. Hilsenrath's employment agreement for an additional three
years. The agreement is currently being negotiated, however, the board-approved
terms include an annual salary of $275,000 per annum, the possibility of a
yearly bonus of up to 40% of his yearly salary based upon the Company's meeting
certain board-determined milestones, which are to be determined by the board on
an annual basis and an option to purchase an additional 750,000 shares of common
stock at an exercise price of $29.94 per share, vesting over four years, at a
the rate of 1/4 per year starting on the first anniversary of the execution of
the extension. His current agreement restricts Dr. Hilsenrath from competing
with us for a period of two years after the termination of his employment. The
agreement provides for severance compensation to be paid to Dr. Hilsenrath if

                                       10
<PAGE>

his employment with the Company is terminated or if there is a decrease in his
responsibilities or duties following a change in control of the Company. The
severance compensation shall be made in one payment equal to three times the
aggregate annual compensation paid to Dr. Hilsenrath during the preceding
calendar year. In the event the Company wishes to obtain Key Man life insurance
on the life of Dr. Hilsenrath, he agrees to cooperate with us in completing any
applications necessary to obtain such insurance and in promptly submitting to
such physical examinations and furnishing such information as any proposed
insurance carrier may request. In addition, we shall maintain during the full
term hereof and at our sole cost and expense, a life insurance policy on Dr.
Hilsenrath in the face amount of $1,000,000 payable to his designees. This
policy also includes provisions for the payment of up to 18 months of salary to
Dr. Hilsenrath in the event that he is disabled. Upon the conclusion of this
agreement, all right, title and interest in the policy shall be transferred to
Dr. Hilsenrath, and he shall be responsible for any premiums due after such
transfer.

Dale Stone. In March 2000 Mr. Stone signed a letter offer agreement, the terms
of which were approved by the board, in which Mr. Stone was appointed President
and Chief Operating Officer. A final agreement is currently being negotiated,
however, the agreed upon terms include: the term of the agreement is to be four
years, with an annual salary of $250,000 and the possibility of a yearly bonus
of up to 40% of his annual salary based upon the Company meeting certain
board-determined milestones, which are to be determined on an annual basis by
the board. Mr. Stone was also granted the right to receive 100,000 shares of
common stock, vesting at the rate of 1/4 of the shares per year, with the
initial 1/4 vesting one year from the date of grant, and the balance vesting 1/4
each year thereafter until fully vested. In addition, Mr. Stone is to receive an
option to purchase 400,000 shares of common stock at $29.94 per share, subject
to a four-year vesting period, 1/4 of such shares underlying the option vesting
each year. The option has a clause enabling the acceleration of the vesting of
100,000 shares underlying the option in the event certain milestones, as
determined by the board, are met. Additionally, acceleration shall occur in the
event there is a change in control of the Company and Mr. Stone has the right to
severance compensation upon a change in control or a decrease in his position,
providing for the payment of salary and the immediate vesting of any unvested
options that would have vested.

David Klarman. In October 1999, we extended for a three-year period the
employment agreement of Mr. Klarman. The agreement is currently being
negotiated, however, the board approved terms pursuant to which Mr. Klarman
receives a salary of $140,000 per annum and was granted an option to purchase
75,000 shares of common stock at an exercise price of $2.75 per share, subject
to a three-year vesting schedule under which 1/3 of the shares underlying the
option vest each year. The employment agreement provides that Mr. Klarman will
be Vice President, General Counsel and Secretary. Additionally Mr. Klarman has
the right to an annual bonus commensurate with the bonuses received by senior
management and severance compensation upon a change in control or a decrease in
his position, providing for the payment of salary and the immediate vesting of
all options.

Jan Klein. In December 1999, we entered into an employment agreement with Jan
Klein, who had previously worked with us as a consultant with DaVinci Solutions,
LLC. The agreement has a term of three years, appoints Mr. Klein Vice President
- Business and Market Development, and provides compensation to Mr. Klein of a
$135,000 per year salary and the transfer of the option previously issued to
DaVinci Solutions LLC., to Jan Klein, which option agreement was amended to
reflect (a) the shares exercisable under the option were increased from 100,000

                                       11
<PAGE>

shares to 125,000 shares; (b) the exercise price of the additional 25,000 shares
underlying the option is $11.20 per share, and (c) 25,000 shares being vested in
accordance with the prior consulting agreement and the remaining portion of the
option vesting subject to a three-year vesting schedule under which 1/3 of the
shares underlying the option vest each year. Additionally Mr. Klein has the
right to severance compensation upon a change in control or a decrease in his
position, providing for the payment of salary for the lesser of the remaining
term of his agreement or six months and the immediate vesting of all options.

Dr. Richard Mudge. In April 2000, Dr. Mudge signed a letter offer agreement, the
terms of which were approved by the board. Dr. Mudge was hired to serve as
President of our Compass Services division. The agreement is currently being
negotiated, however, the agreed upon terms include a salary of $150,000 per
annum, provides for the possibility of a yearly bonus of up to 40% of his yearly
salary based upon the Company meeting certain board-determined milestones, which
are to be determined on an annual basis by the board and an option to purchase
150,000 shares of Common Stock, vesting over a three-year period. The option has
a clause enabling the acceleration of the vesting of 50,000 shares underlying
the option in the event certain milestones, as determined by the board, are met.
Additionally, Dr. Mudge has the right to severance compensation upon a change in
control or a decrease in his position, providing for the payment of salary for
the lesser of the remaining term of his agreement or six months and the
immediate vesting of all options.

Howard Blank. In April 2000, Mr. Blank signed a letter offer agreement, the
terms of which were approved by the board. Dr. Blank was hired to serve as Vice
President of our Compass Services division. The agreement is currently being
negotiated, however, the agreed upon terms include a salary of $145,000 per
annum, provides for the possibility of a yearly bonus of up to 40% of his yearly
salary based upon the Company meeting certain board-determined milestones, which
are to be determined on an annual basis by the board and an option to purchase
145,000 shares of Common Stock, vesting over a three-year period. The option has
a clause enabling the acceleration of the vesting of 50,000 shares underlying
the option in the event certain milestones, as determined by the board, are met.
Additionally, Dr. Blank has the right to severance compensation upon a change in
control or a decrease in his position, providing for the payment of salary for
the lesser of the remaining term of his agreement or six months and the
immediate vesting of all options.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission and the Nasdaq Stock Market reports of ownership of
Company securities and changes in reported ownership. Officers, directors and
greater than ten percent shareholders are required by Securities and Exchange
Commission rules to furnish the Company with copies of all Section 16(a) reports
they file.

     Based solely on a review of the copies of such forms furnished to the
Company, or written representations from the reporting persons that no Form 5
was required, the Company believes that during the fiscal year ended March 31,
2000 all Section 16(a) filing requirements

                                       12
<PAGE>

applicable to its officers, directors, and greater than ten percent beneficial
owners were complied with; except that:

     1.   One report on Form 4 covering one transaction was filed late by Dr.
Hilsenrath. In addition, based on the Company's internal investigation (more
fully described in Item 12), the Company believes that Dr. Hilsenrath was the
beneficial owner of a number of entities that acquired and disposed of shares of
the Company's Common Stock at various times during the Company's fiscal year
ended March 31, 2000. Dr. Hilsenrath did not file any reports on Form 4 or Form
5 related to any of such transactions.

     2.   Based on the Company's internal investigation (more fully described in
Item 12), the Company believes that Mr. Klarman was the beneficial owner of a
number of entities that acquired and disposed of shares of the Company's Common
Stock at various times during the Company's fiscal year ended March 31, 2000.
Dr. Klarman did not file any reports on Form 4 or Form 5 related to any of such
transactions.

     3.   One report on Form 4 covering one transaction was filed late by Mr.
Francis.

     4.   One report on Form 4 covering one transaction was filed late by Mr.
West.

     5.   One report on Form 3 covering one transaction was filed late by Mr.
Golm.

     6.   One report on Form 3 covering two transactions was filed late by Mr.
Stone.

     7.   One report on Form 3 covering one transaction was not filed by Mr.
Klein.

     8.   Two reports on Form 4 covering two transactions were filed late by Mr.
Gross.


ITEM 10.  EXECUTIVE COMPENSATION

Summary of Compensation

The following table shows for the fiscal years ended March 31, 2000, 1999 and
1998 compensation awarded or paid to, or earned by, our chief executive officer
and our most highly compensated officers, referred to as the "Named Executive
Officers":

                                       13
<PAGE>

                          Summary Compensation Table

<TABLE>
<CAPTION>

                                                                                                Long-Term
                                                                                              Compensation
                                                                                                 Awards
                                                                                            ----------------
                                                               Annual Compensation          Shares of Common
                                                            --------------------------      Stock Underlying       All Other
Name and Principal Position                    Year          Salary             Bonus            Options         Compensation
-------------------------------------         -----         --------           -------      ----------------     ------------
<S>                                           <C>           <C>                <C>          <C>                  <C>
Dr. Oliver Hilsenrath/(8)/...........           2000        $198,000               --          750,000/(1)/         $1,620/(2)/
   President and                                1999         130,000               --               --               1,620/(2)/
   Chief Executive Officer                      1998         110,000               --               --               1,620/(2)/

Dale Stone...........................           2000          20,000/(3)/          --          500,000/(4)/             --
   President and Chief Operating
   Officer

David Klarman/(8)/...................           2000     $    83,000               --           75,000/(5)/             --
   Vice President,                              1999          60,000               --               --                  --
   General Counsel and Secretary                1998      70,000,000               --               --                  --

Jan Klein............................           2000          33,750/(3)(7)/   10,000/(6)/     135,000/(5)(6)/          --
   Vice President,
   Market and Business Development

_____________________________
</TABLE>

   (1)   Pursuant to an extension of his employment agreement, Dr. Hilsenrath
         received an option to purchase 750,000 shares of common stock. See
         "Item 9 Employment Agreements."
   (2)   Represents the payment of approximately $1,620 for a life insurance and
         disability policy for the benefit of Dr. Hilsenrath's beneficiaries.
         See "Item 9 Employment Agreements."
   (3)   Reflects portion of the year worked. Messrs. Stone and Klein commenced
         employment with the Company in March 2000 and December 1999,
         respectively.
   (4)   In accordance with his employment agreement, which is still under
         negotiation, Mr. Stone was granted an option to purchase 400,000 shares
         of common stock, vesting over four years, 1/4 each year with the first
         portion vesting on the first anniversary of his agreement. Mr. Stone
         also received a grant of 100,000 shares of common stock, to vest over a
         four-year term, commencing with the initial 25% or 25,000 shares
         vesting on the first anniversary of the date of grant. See "Item 9
         Employment Agreements."
   (5)   Mr. Klarman and Mr. Klein were granted options to purchase 75,000, and
         125,000 shares of common stock, respectively, vesting over the three-
         year term of their agreements. See "Item 9 Employment Agreements."
   (6)   Jan Klein received a bonus in March 2000, which included $10,000 and
         the grant of an option to purchase 10,000 shares of common stock,
         vesting over a three-year period.
   (7)   Mr. Klein was a consultant to the Company from May 1999 until December
         1999, at which time he became an employee.
   (8)   As a result of an investigation undertaken by the Audit Committee of
         the Company's board of directors, the Company now suspects that Messrs.
         Hilsenrath and Klarman were affiliated with several entities to whom
         the Company paid compensation for services without receiving any
         services in return (see Item 12 - Related Parties).

                                       14
<PAGE>

Compensation Pursuant to Plans

The following table contains information concerning the stock option grants made
to each of the Named Executive Officers during the fiscal year ended March 31,
2000:

                        Option Grants in Last Fiscal Year

<TABLE>
<CAPTION>
                                                               Individual Grants
                              -----------------------------------------------------------------------------------
                                Number of             % of Total
                                Shares of               Options
                               Common Stock           Granted to
                                Underlying          Named Executive            Exercise
                                 Options               Officers               Price per              Expiration
          Name                   Granted                In 1999                 Share                   Date
-------------------------     --------------       -----------------         -----------            ------------
<S>                           <C>                  <C>                       <C>                    <C>
Oliver Hilsenrath/(4)/         750,000/(1)/               41%                    29.94                03/01/05
Dale Stone                     400,000/(1)(3)/            22%                    29.94                03/01/05
David S. Klarman/(4)/           75,000/(2)/                4%                     2.75                08/30/04
Jan Klein                      100,000/(2)/              5.5%                     2.75                05/19/02
Jan Klein                       25,000/(2)/              1.3%                    11.20                05/19/02
Jan Klein                       10,000/(2)/              0.6%                    30.94                03/01/05

_________________________
</TABLE>

(1)      Vesting at the rate of 1/4 per year.
(2)      Vesting at the rate of 1/3 per year.
(3)      100,000 shares underlying the option may be accelerated in the event
         that the employee meets certain board-designated performance
         milestones.
(4)      As a result of an investigation undertaken by the Audit Committee of
         the Company's board of directors , the Company now suspects that
         Messrs. Hilsenrath and Klarman were affiliated with several entities to
         whom the Company paid compensation for services without receiving any
         services in return (see Item 12 - Related Parties).


Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values

<TABLE>
<CAPTION>
                                                                 Number of Shares of
                                                                    Common Stock
                                Shares of                      Underlying Unexercised            Value of Unexercised
                               Common Stock                          Options at                In-the-Money Options at
                                 Acquired        Value             Fiscal Year-End               Fiscal Year-Ended(1)
                                                             ---------------------------     -----------------------------
                               on Exercise      Realized     Exercisable   Unexercisable     Exercisable     Unexercisable
                               ------------     --------     -----------   -------------     ------------    -------------
<S>                            <C>              <C>          <C>           <C>               <C>             <C>
Dr. Oliver Hilsenrath/(2)/          -              -           1,500,000       750,000       $43,500,000      $    45,000
Dale Stone                          -              -                   0       400,000                 0          424,000
David Klarman/(2)/                  -              -             250,000        75,000         7,449,785        2,118,750
Jan Klein                           -              -              25,000       110,000           706,250        2,903,750
</TABLE>

_________________________
(1)      Value of unexercised options at fiscal year-end is based on the fair
         market value of our common stock at March 31, 2000 ($31.00) (based on
         the closing sale price reported on the Nasdaq National Market on that
         date) minus the exercise price of the option.

(2)      As a result of an investigation undertaken by the Audit Committee of
         the Company's board of directors, 2001, the Company now suspects that
         Messrs. Hilsenrath and Klarman were affiliated with several entities to
         whom the Company paid compensation for services without receiving any
         services in return (see Item. 12 - Related Parties).

                                       15
<PAGE>

Senior Management Incentive Plan

In December 1997, the Board of Directors and our stockholders adopted the Senior
Management Incentive Plan (the "Management Plan"). The Management Plan provides
for the issuance of up to an aggregate of 500,000 shares of common stock upon
exercise of stock options and other rights to executive officers, key employees,
and consultants.

The adoption of the Management Plan was prompted by the desire to provide the
board with sufficient flexibility regarding the forms of incentive compensation,
which we will have at our disposal in rewarding executive officers, key
employees, and consultants who render significant services to us. Pursuant to
the Management Plan, the Board of Directors intends to offer equity ownership in
U.S. Wireless to such persons through the grant of stock options and other
rights, to enable us to attract and retain qualified personnel without
unnecessarily depleting our cash reserves. The Management Plan is designed to
augment our existing compensation programs and is intended to enable us to offer
a personal interest in our growth and success through awards of either shares of
common stock or rights to acquire shares of common stock.

The Management Plan is intended to attract and retain key executive management
personnel whose performance is expected to have a substantial impact on our
long-term profit and growth potential by encouraging and assisting those persons
to acquire equity in U.S. Wireless. A total of 500,000 shares of our common
stock will be reserved for issuance under the Management Plan. It is anticipated
that awards made under the Management Plan will be subject to three-year vesting
periods, although the vesting periods are subject to the discretion of the
Administrator.

Unless otherwise indicated, the Management Plan is administered by the
compensation committee of the Board of Directors (the board or such committee
shall be referred to in the following description as the "Administrator"). In
accordance therewith, all issuance's under the Management Plan will be approved
by such committee. Subject to the specific provisions of the Management Plan,
the Administrator will have the discretion to determine the recipients of the
awards, the nature of the awards to be granted, the dates such awards will be
granted, the terms and conditions of awards and the interpretation of the
Management Plan, except that any award granted to any of our employees who is
also a director shall also be subject, in the event the persons serving as
members of the Administrator of the Management Plan at the time such award is
proposed to be granted do not satisfy the requirements regarding the
participation of "disinterested persons" set forth in Rule 16b-3 ("Rule 16b-3")
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), to the approval of an auxiliary committee consisting of not less than two
individuals who are considered "disinterested persons" as defined under Rule
16b-3. As of the date hereof, we have not yet determined who will serve on such
auxiliary committee, if one is required. The Management Plan generally provides
that, unless the Administrator determines otherwise, each option or right
granted under the plan shall become exercisable in full upon certain "change of
control" events as described in the Management Plan, or subject to any right or
option granted under the Management Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure, or otherwise), the Administrator will
make appropriate adjustments to such plans and the classes, number of shares and
price per share of stock subject to outstanding rights or options. The
Management Plan may be amended by action of the board of directors, except that
any amendment which would increase the total number of shares subject to such
plan, extend the duration of such plan,

                                       16
<PAGE>

materially increase the benefits accruing to participants under such plan, or
change the category of persons who can be eligible for awards under such plan,
must be approved by the affirmative vote of a majority of stockholders entitled
to vote. The Management Plan permits awards to be made thereunder until November
2004.

Directors who are not otherwise employed by us will not be eligible for
participation in the Management Plan. The Management Plan provides for four
types of awards: stock options, incentive stock rights, stock appreciation
rights (including limited stock appreciation rights) and restricted stock
purchase agreements.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
         AND MANAGEMENT

The following table sets forth, as of May 31, 2000 information regarding the
beneficial ownership of our common stock and common stock equivalents by (i)
each person who we know to be a beneficial owner of 5% or more of our
outstanding common stock; (ii) each of our directors and Named Executive
Officers; and (iii) all of our executive officers and directors as a group.

<TABLE>
<CAPTION>
                                           Shares of Common Stock or Common Stock        Percentage of Beneficial
Beneficial Owner                                     Equivalents/(1)(2)/                       Ownership/(3)/
<S>                                        <C>                                           <C>
Dr. Oliver Hilsenrath/(4)(11)/.......              5,356,304                                                 24%
Dale Stone/(5)/......................                     --                                                   *
David Klarman/(6)(11)/...............                270,000                                                  1%
Jan Klein/(7)/.......................                 59,000                                                   *
Barry West/(8/)......................                 86,667                                                   *
Irwin Gross/(9)/.....................                226,333                                                   *
Dennis Francis/(8)/..................                120,000                                                   *
Louis Golm/(8)/......................                     --                                                   *
James S. Eisenstein/(10)/............                     --                                                   *
Directors and executive officers as a
group (9 persons)/(4) - (10)/                      6,405,816                                                 27%
</TABLE>
-----------------


     *Less then 1%

(1)    This table is based upon information supplied by directors, executive
       officers and principal stockholders and Schedules 13D and 13G filed with
       the Securities and Exchange Commission. Unless otherwise indicated below,
       the persons named in the table have sole voting and investment power with
       respect to all shares beneficially owned by them, subject to community
       property laws where applicable. For purposes of this table, shares held
       by stockholders include any shares held as tenants in common or joint
       tenants with spouses. Percentages are based on a total of shares of
       common stock outstanding on June 30, 2000 and shares of common stock
       outstanding, adjusted in accordance with the rules promulgated by the
       Securities and Exchange Commission. In computing the number of shares
       beneficially owned by a person and the percentage ownership of that
       person, shares of common stock subject to options held by that person
       that are exercisable within 60 days of the date of this table and shares
       of common stock issuable to that person upon conversion of convertible
       preferred stock that is convertible within 60 days of the date of this
       table are also deemed outstanding. These shares, however, are not deemed
       outstanding for the purpose of computing the percentage ownership of any
       other person.

                                       17
<PAGE>

(2)    The percentage ownership is calculated by dividing the number of shares
       beneficially owned by the sum of (i) the total outstanding shares of
       common stock of the Company, and (ii) the number of shares of common
       stock that such person has the right to acquire within 60 days, whether
       by exercise of options or warrants. The percentage ownership does not
       reflect shares beneficially owned by virtue of the right of any person,
       other than the person named and affiliates of the person, to acquire them
       within 60 days, whether by exercise of options or warrants.
(3)    Does not include (i) the shares of common stock issuable upon the
       conversion of 112,500 shares of Series C Preferred stock or the shares of
       Series C Preferred Stock issuable in accordance with the dividend on said
       shares or the shares of common stock into which those dividend shares may
       be convertible, or (ii) any shares of common stock issuable underlying
       any outstanding warrants or options issued by us.
(4)    All shares are held in the name of the Hilsenrath Family trust, of which
       Dr. Hilsenrath is the trustee and his family members are the
       beneficiaries. Includes 1,500,000 shares of common stock, issuable upon
       the exercise of a vested option and 793,152 shares issued in connection
       with the Labyrinth merger which are not vested and subject to a vesting
       schedule. Does not include 750,000 shares issuable upon the exercise of
       an option granted pursuant to Dr. Hilsenrath's amended employment
       agreement in March 2000. See Item 9 "Employment Agreements."
(5)    Does not include an option to purchase 400,000 shares of common stock
       vesting at the rate of 1/4 per year, with the possibility of the
       acceleration of 100,000 shares underlying the option in the event the
       Company achieves board-declared incentives and 100,000 restricted shares
       issuable pursuant to Mr. Stone's employment, whereby Mr. Stone shall
       receive 25,000 shares of common stock on each one-year anniversary of the
       date of grant, until fully issued. See Item 9 "Employment Agreements."
(6)    Includes 250,000 shares issuable upon the exercise of vested options.
       Does not include an option to purchase 75,000 shares of common stock
       vesting at the rate of per year, granted pursuant to his employment
       extension. See Item 9 "Employment Agreements."
(7)    Includes 59,000 shares issuable upon the exercise of vested options that
       were transferred from DaVinci Solutions LLC to Mr. Klein pursuant to the
       terms of his employment agreement. See "Item 9 Employment Agreements."
       Does not include 77,000 shares issuable pursuant to option agreements,
       which are not yet vested.
(8)    Includes shares underlying options granted to members of the board of
       directors, which have vested. Does not include the unvested portions of
       the options. Messrs. Francis, West and Golm were granted options to
       purchase 100,000, 100,000 and 50,000 shares of Common Stock,
       respectively, of which the vested portions are 100,000, 66,667 and 0.
(9)    Includes 33,333 shares issuable upon the exercise of the portion of an
       option currently vested and exercisable, equal to of the total options
       granted and 50,000 shares underlying an option granted to Ocean Castle
       Partners, LLC, of which Mr. Gross is managing member and sole
       shareholder. The options vest at intervals per year. Does not include (i)
       3,000,000 shares owned by Global Technologies, Inc., a company in which
       Mr. Gross is the Chief Executive Officer and Chairman of the Board, and
       which Mr. Gross disclaims beneficial ownership and (ii) 32,000 shares
       held in trust for the benefit of Mr. Gross' children, which Mr. Gross
       disclaims beneficial ownership.
(10)   Does not include the shares of common stock issuable upon the conversion
       of the 112,500 shares of Series C Preferred stock or the shares of Series
       C Preferred Stock issuable in accordance with the dividend on said shares
       or the shares of common stock into which those dividend shares may be
       convertible, owned by American Tower Corporation, in which company Mr.
       Eisenstein is the Executive Vice President-Corporate Development. Mr.
       Eisenstein disclaims beneficial ownership of the shares held by American
       Tower Corporation.
(11)   As a result of an investigation undertaken by the Audit Committee of the
       Company's board of directors, the Company now suspects that Messrs.
       Hilsenrath and Klarman were affiliated with several entities to whom the
       Company paid compensation for services without receiving any services in
       return. As of March 31, 2001, the Company believes that either Oliver
       Hilsenrath, David Klarman or both are the beneficial owners of i) 46,576
       shares held by Silicon Valley Investment Partners, ii) 134,416 shares
       held by MSD Investment Advisors Inc. and iii) 130,520 shares held by IDS
       Telecom Investment Group Inc. (see Item 12 - Related Parties).

                                       18
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Transactions Involving Former Executive Officers

Audit Committee Investigation into Activities of David Klarman and Oliver
-------------------------------------------------------------------------
Hilsenrath. In February 2001 the Audit Committee of the Company's Board of
----------
Directors received information concerning certain alleged irregularities
relating to transactions with entities heretofore believed to be unrelated to
any officers or directors of the Company, for review and appropriate action. The
Audit Committee shortly thereafter retained special outside counsel, Cozen &
O'Connor of Philadelphia, to investigate. Cozen & O'Connor, which had not
previously provided legal representation for the Company, reviewed documents,
requested further information from employees of the Company's legal and
accounting departments, and conducted interviews with certain employees of the
Company. On March 5, 2001 Cozen and O'Connor, the Chairman of the Audit
Committee, the Board of Directors observer and a legal consultant retained by
the Audit Committee, traveled from Philadelphia to the Company's San Ramon,
California headquarters for an unannounced questioning of Vice President and
General Counsel David S. Klarman and Chief Executive Officer, Oliver Hilsenrath.
As a result of the questioning, David Klarman was asked to resign and submitted
his resignation on March 6, 2001.

On March 15, 2001 Cozen & O'Connor delivered a preliminary report to the Audit
Committee. Based on that report, the Audit Committee authorized Cozen & O'Connor
to engage the services of a leading independent accounting firm to perform
forensic investigation services. The accounting firm delivered its report to the
Audit Committee on April 28, 2001.

From May 1, 2001 through May 25, the Audit Committee and the Executive Committee
of the Board of Directors, which was formed for the purpose of reviewing the
materials related to the purported activities of Hilsenrath and Klarman, and
which included all members of the board of directors with the exception of Dr.
Hilsenrath, reviewed and analyzed the materials developed by the outside
consultants and on several occasions questioned Dr. Hilsenrath regarding
transactions identified as requiring explanation by the Audit Committee.

On May 25, 2001 The Executive Committee met by teleconference and voted to
remove Oliver Hilsenrath as Chairman of the Board of Directors, as Chief
Executive Officer, and from all positions with any subsidiary of the company,
and to terminate his employment agreement for cause effective at noon Saturday,
May 26, 2001 unless he resigned all positions prior to that time. Dr. Hilsenrath
failed to deliver written notice of resignation; accordingly his termination
became effective at noon on May 26, 2001.

General. We believe that Dr. Hilsenrath and/or Mr. Klarman may be affiliated
-------
with a number of off-shore entities to which we (i) made cash payments; (ii)
issued shares of Common Stock and/or (iii) granted options to purchase shares of
Common Stock. All of these entities are foreign companies in which information
concerning ownership and control of such entities is unavailable. We have no
documentation that would provide a bona fide business reason for the Company to
have engaged in these transactions, and we have no record of any consideration
received by us in connection with such transactions other than the forfeiture of
options as part of

                                       19
<PAGE>

the cashless exercises of options. During the entire time period that these
transactions took place the two senior executive officers of the Company were
Dr. Hilsenrath and Mr. Klarman. The aggregate amount of cash payments made by
the Company from August 1997 through January 2000 with respect to these
unexplained transactions is approximately $446,000. The aggregate number of
shares of Common Stock issued (including the exercise of granted options) by the
Company from July 1998 through December 1999 in connection with these
transactions is approximately 628,977 shares [with an aggregate market value
equal to $5,528,610 (each share issuance valued at the closing sale price on the
day prior to the date of issuance in fiscal 2000)]. As of June 4, 2001, an
aggregate of 311,512 shares of Common Stock are held of record by these entities
and no options to purchase shares of Common Stock remain outstanding. The
following is a discussion of the transactions engaged in by the Company during
the previous two fiscal years with entities that the Executive Committee has
concluded, as a result of the special investigation, are likely to be affiliated
with Oliver Hilsenrath and/or David Klarman:

Telecom Associates. From August 1997 through January 2000, the Company made
-------------------
monthly payments, via wire transfer, of $12,000 to Telecom Associates [A British
Virgin Islands corporation]. The total amount distributed to Telecom Associates
was $348,000 ($84,000 in FY 1998; $144,000 in FY 1999; $120,000 in FY 2000). We
believe that Dr. Hilsenrath has a beneficial ownership interest in Telecom
Associates. Dr. Hilsenrath never disclosed any affiliation between himself and
Telecom Associates to the Company's Board of Directors and continues to deny
that any affiliation exists.

Biskara/KS Legal. In July 1999, the Company issued 88,016 shares to Biskara Ltd.
-----------------
[a British Virgin Islands corporation] ("Biskara") pursuant to a "cashless
exercise" in full settlement of an option agreement dated July 31, 1996 to
purchase 150,000 shares of common stock at $2.00 per share. On October 21, 1997,
Biskara changed its name to "KS Legal". The Company further wire transferred
$5,000 monthly payments to KS Legal from June 1997 through January 2000. We
believe that David Klarman has a beneficial ownership interest in Biskara/KS
Legal, which was not disclosed in any reports of beneficial ownership with the
Securities and Exchange Commission. David Klarman never disclosed any
affiliation between himself and Biskara/KS Legal to the Company's Board of
Directors and continues to deny that any affiliation exists.

Silicon Valley Investment Partners, Inc. ("SVIP"). On August 4, 1999, the
--------------------------------------------------
Company issued 43,300 shares to SVIP under the employee private placement of
1999, in contravention of the board of directors' directive limiting sales to
employees and management of the Company. We have no record of the Company having
received any consideration for such share issuance. The market value of these
shares was $343,172 (based upon closing sale price on the day prior to the date
of issuance). We believe that either David Klarman or Dr. Hilsenrath has a
beneficial ownership interest in SVIP and the shares of the Company owned by
SVIP, which was not disclosed in any reports of beneficial ownership with the
Securities and Exchange Commission. Dr. Hilsenrath never disclosed any
affiliation between himself and SVIP to the Company's Board of Directors and
continues to deny that any affiliation exists.

Borazon Ltd. Borazon Ltd. [a British Virgin Islands corporation] also received
------------
shares under the employee private placement of 1999. On August 4, 1999, we
issued 43,300 shares to Borazon. We have no record of the Company having
received any consideration for such share issuance. The market value of these
shares was $345,172 (based upon closing sale price on the day prior to the date
of issuance). We believe that either David Klarman or Dr. Oliver Hilsenrath has
a beneficial ownership interest in
                                       20
<PAGE>

Borazon which was not disclosed in any reports of beneficial ownership with
the Securities and Exchange Commission. David Klarman never disclosed any
affiliation between himself and Borazon to the Company's Board of Directors and
continues to deny that any affiliation exists.

Craiglands/IDS Telecom Investment Group. On May 1, 1999, the Company granted
---------------------------------------
Craiglands Ltd. [a British Virgin Islands corporation] an option to purchase
150,000 shares at $2.50 per share, purportedly as compensation for fundraising
activities during the Company's 1999 private placement (Series B). The fair
market value of these options at grant date, $162,000, was recorded as offering
costs. On December 31, 1999, the entire 150,000 option grant was exercised in
full through a "cashless exercise" transaction, resulting in the issuance by the
Company of 130,520 shares to IDS Telecom Investment Group (fka Craiglands).
According to the Company's transfer agent's records, these shares remain in the
name of IDS Telecom as of the date of this submission.

On May 17, 1999, the Company issued 149,425 shares to Craiglands purportedly as
compensation for fundraising activities during the Company's 1999 private
placement (Series B). The fair market value of these shares at grant date,
$244,000, was recorded as offering costs.

We believe that Dr. Hilsenrath and David Klarman are affiliated with
Craiglands/IDS Telecom and that Craiglands/IDS Telecom's transactions in the
Company's stock were not disclosed in any reports of beneficial ownership with
the Securities and Exchange Commission. Neither Dr. Hilsenrath nor David Klarman
ever disclosed any affiliation between himself and Craiglands and/or IDS Telecom
Investment Group to the Company's Board of Directors and both continue to deny
that any affiliation exists.

Eldoret/MSD Investment Advisors, Inc. On July 1, 1998, the Company granted
-------------------------------------
Eldoret [a British Virgin Islands Corporation] an option to purchase 150,000
shares at $2.00 per share, purportedly as compensation for fundraising
activities during the Company's 1998 private placement. The fair market value of
these options at grant date, $230,966, was recorded as offering costs related to
the Company's 1998 private placement. On December 31, 1999, the entire 150,000
option grant was exercised in full through a "cashless exercise" transaction,
resulting in the issuance by the Company of 134,416 shares to MSD Investment
Advisors, which was formerly named Eldoret. According to the records of the
Company's transfer agent, these shares remain in the name of MSD Investment
Advisors as of the date of this submission.

We believe that Dr. Hilsenrath and David Klarman are affiliated with Eldoret/MSD
Investment Advisors and that Eldoret/MSD Investment Advisors' transactions in
the Company's stock were not disclosed in any reports of beneficial ownership
with the Securities and Exchange Commission. Neither Dr. Hilsenrath nor David
Klarman ever disclosed any affiliation between himself and Eldoret and/or MSD
Investment Advisors, Inc. to the Company's Board of Directors and both continue
to deny that any affiliation exists.

2000 Private Placement

In May 2000, we consummated a private placement offering of our securities, in
which we sold 112,500 shares of our Series C Preferred Stock to American Tower
Corporation ("ATC"). The holders of the Series C Preferred Stock have the right
to elect one member of our board of directors. The Series C Preferred
Stockholders elected Jim Eisenstein as their appointee. At the

                                       21
<PAGE>

same time as we sold Series C Preferred Stock to ATC, we entered into a Master
Lease Agreement ("MLA") and a Services Agreement with ATC.

Under the terms of the three-year master lease agreement, ATC will provide site
licenses and services in connection with our network build-out and we have
committed to license a minimum of 1,000 tower facilities over the term of the
agreement. We have committed to license a minimum of 1,000 tower facilities at
preferential rates, which commitment could increase to 2,500 sites in the event
that we meet certain market milestones and American Tower satisfies certain
tower building or acquisition milestones. If ATC has 10,000 tower facilities
available by December 31, 2000, we agreed to license 150 sites prior to the end
of the first year, an additional 300 sites prior to the end of the second year
and an additional 550 sites prior to the end of the third year. If the
conditions of the master license agreement are met, we are required to pay for
the above licenses whether we use the facilities or not.

Under the terms of the Service Agreement, ATC shall have a right of first
refusal, subject to a competitive bid, to provide to us in each new market all
services relating to radio frequency design and engineering, site
identification, site acquisition and development, site zoning and permitting,
site construction and installation management, component purchases and equipment
installation. ATC shall further supply us with parts and components for the
construction of our RadioCamera sites.

1999 Private Placement

In April 1999, the Company commenced a private placement offering of securities,
in which we sold 60,000 shares of our Series B Preferred Stock, of which 30,000
shares were sold to Interactive Flight Technologies, Inc., a company in which
Irwin Gross, is the Chief Executive Officer and Chairman of the Board. The
holders of the 60,000 shares of the Series B Preferred Stock have the right to
elect one member to our board of directors. The Series B Preferred Stockholders
elected Irwin Gross as their appointee.

In addition, the Company sold an aggregate of 318,400 shares of Common Stock at
$1.00 per share to our officers, directors, employees and two consultants, which
is equal to the conversion price of the shares of Series B Preferred Stock. In
addition, a total of 86,600 shares of common stock were sold to Borazon Ltd, and
Silicon Valley Investment Partners, Inc. as part of this private placement. The
issuance of shares to Borazon and Silicon Valley Investment Partners was
subsequently deemed to be an unauthorized issuance as noted above.

In March and April 2000 all the shares of the Series B Preferred Stock were
converted into shares of Common Stock.

Mantra Technologies, Inc. Restructuring

In February 1999, the board of directors, on behalf of the Company as majority
shareholders of Mantra, approved the recapitalization and restructuring of
Mantra Technologies, Inc., including the issuance of an aggregate of 33% of the
outstanding shares of Mantra to its management team.

Consolidation of Labyrinth

                                       22
<PAGE>

In March 1998, we consummated the merger of our 51% owned subsidiary, Labyrinth
Communication Technologies Group, Inc. ("Labyrinth"), into the Corporation. In
December 1997, the stockholders of the Corporation approved a proposal to
acquire the remaining 49% of Labyrinth in exchange for an aggregate of 4,498,200
shares of the Corporation's Common Stock, subject to a vesting schedule, as
follows: (i) 20% of the shares issued shall vest one year from issuance; (ii) an
additional 40% shall vest upon the successful completion and operation of the
RadioCamera in its first major market; and (iii) the remaining 40% shall vest
when the Corporation reaches sales of $15,000,000. Milestones (i) and (ii) have
been completed. In addition to the above vesting schedule, the management
employees of Labyrinth were subject to an additional vesting schedule, in
accordance with their employment contracts, whereby the shares underlying
(i)-(iii) above vest at the rate of 1/3 each year. During the year ended March
30, 2000, two employees were terminated and an aggregate of 413,103 shares were
returned to treasury. In June 2000 the third employee resigned, whereby an
additional 73,501 shares have been returned to treasury. There remain 1,450,440
shares that have not vested pursuant to the third milestone, of which we are
seeking to rescind the issuance of 367,200 shares to a former consultant. See
"Item 3 - Legal Proceedings."

See "Executive Compensation-Employment and Consulting Agreements" for a
discussion of the compensation arrangements we have with Labyrinth's Executive
Officers and consultants.

                                       23
<PAGE>

                                    PART IV

ITEM 13.

All exhibits to this Form 10-KSB/A, except those designated with an asterisk (*)
which were filed with the original filing of this Form 10-KSB on June 29, 2000,
have previously been filed with the Commission, as referenced, and pursuant to
17 C.F.R. Section 230.411 are incorporated by reference herein.


      3.2.1     Amended and Restated Certificate of Incorporation of we
                (incorporated by reference from our Annual Report on Form 10-KSB
                for the fiscal year ended March 31, 1999 (the "1999 Form 10-
                KSB"))
      3.2.2     Certificate of Amendment of the Certificate of Incorporation of
                we (incorporated by reference from the 1999 Form 10-KSB)
      3.2.3     Certificate of Amendment of the Certificate of Incorporation of
                we (incorporated by reference from the 1999 Form 10-KSB)
     *3.2.4     Certificate of Designation of the Series C Preferred Stock which
                we filed on May 17, 2000.
        3.4     By-Laws of we (incorporated by reference from our Registration
                Statement on Form SB-2 dated March 28, 1994 under File No. 33-
                68306-NY (the "1994 Form SB-2"))
      3.4.1     Amendment to the By-Laws dated November 25, 1997 (incorporated
                by reference from our Annual Report on Form 10-KSB for the
                fiscal year ended March 31, 1998 (the "1998 Form 10-KSB"))
        3.5     Form of Common Stock Certificate (incorporated by reference from
                the 1994 Form SB-2).
     *3.6.2     Form of Series C Preferred Stock Certificate.
      10.74     Form of Employment Agreement with Dr. Oliver Hilsenrath
                (incorporated by reference from our Report on Form 8-K dated
                July 11, 1996).
      10.77     Amended Employment Agreement with Dr. Oliver Hilsenrath 1997
                (incorporated by reference from our Annual Report on Form 10-KSB
                for the fiscal year ended March 31, 1997 (the "1997 Form 10-
                KSB"))
     *10.89     Employment Agreement with Jan Klein dated January 1, 2000.
     *10.90     Master License Agreement with American Tower Corporation dated
                May 31, 2000.
     *10.91     Services Agreement with American Tower Corporation dated May 31,
                2000.
       16.1     Letter on Change in Certifying Accountant (incorporated by
                reference from the Form 8-K dated March 15, 2000)
     *27.01     Financial Data Schedule

                                       24
<PAGE>

                                  SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act, we has duly
caused this report to be signed on its behalf by the undersigned; thereunto duly
authorized this 27/th/ day of June 2000.


                               U.S. WIRELESS CORPORATION


                           By: /s/ Dennis Francis
                               -------------------------
                               Dennis Francis
                               Chief Executive Officer

                                       25
<PAGE>

                        U.S. Wireless Corporation and
                                           Subsidiary



                        Consolidated Financial Statements
               For the Years Ended March 31, 2000 and 1999
<PAGE>

                                        U.S. Wireless Corporation and Subsiduary



                                                               Table of Contents


<TABLE>
<S>                                                            <C>
Reports of Independent Auditors                                     F-2 to F-3

Consolidated Financial Statements
     Consolidated Balance Sheets                                    F-4 to F-5
     Consolidated Statements of Operations                                 F-6
     Consolidated Statements of Stockholders' Equity                F-7 to F-8
     Consolidated Statements of Cash Flows                         F-9 to F-11
     Notes to Consolidated Financial Statements                   F-12 to F-30
</TABLE>

                                                                             F-1
<PAGE>

Report of Independent Certified Public Accountants


To the Board of Directors and Stockholders
U.S. Wireless Corporation and Subsidiary
San Ramon, California


We have audited the accompanying consolidated balance sheet of U.S. Wireless
Corporation and Subsidiary (the "Company") as of March 31, 2000, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of U.S. Wireless
Corporation and Subsidiary at March 31, 2000 and the results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.

As disclosed in Note 12, the financial statements have been restated to give
effect to unauthorized stock issuances and other adjustments.




                                                 BDO SEIDMAN, LLP


San Francisco, California
May 15, 2000, except for Note 11 which is dated.
June 21, 2000 and Note 12 which is dated June 27, 2001.

                                                                             F-2
<PAGE>

Report Of Independent Auditors


To the Board of Directors and Stockholders
U.S. Wireless Corporation


We have audited the accompanying consolidated balance sheet of U.S. Wireless
Corporation (the Company") as of March 31, 1999, and the related consolidated
statements of operations, stockholders' equity and cash flows for the year the
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

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

In our opinion, such financial statements present fairly, in all material
respects, the consolidated financial position of the Company as of March 31,
1999, and the consolidated results of their operations and their cash flows for
the year then ended, in conformity with generally accepted accounting
principles.




                                                    HASKELL & WHITE LLP


Irvine, California
May 13, 1999, except for Note 12 which is dated July 10, 2001

                                                                             F-3
<PAGE>

                                        U.S. Wireless Corporation and Subsidiary



                                                     Consolidated Balance Sheets


<TABLE>
<CAPTION>
March 31,                                                         2000            1999
-------------------------------------------------------------------------------------------
                                                            (As restated)
                                                                (Note 12)
-------------------------------------------------------------------------------------------
<S>                                                         <C>                 <C>
Assets

Current Assets

    Cash and cash equivalents                                $ 5,311,209      $ 5,788,288

    Stock subscription (Note 6)                                        -        2,300,000

    Costs and earnings in excess of billings (Note 4)            110,746                -

    Other current assets                                           9,969            2,323
-------------------------------------------------------------------------------------------

Total Current Assets                                           5,431,924        8,090,611
-------------------------------------------------------------------------------------------

Equipment, Improvements And Fixtures                           1,299,193          817,822

Less Accumulated Depreciation                                   (978,210)        (436,205)
-------------------------------------------------------------------------------------------

Equipment, Improvements And Fixtures, net (Note 8)               320,983          381,617
-------------------------------------------------------------------------------------------
                                                                   8,265                -
Investment In And Advances To Mantra (Note 1)

Investment In Joint Venture (Note 3)                                   -           58,630

Other assets                                                     143,035           25,035
-------------------------------------------------------------------------------------------

Total Assets                                                 $ 5,904,207      $ 8,555,893
===========================================================================================
</TABLE>
                    See accompanying notes to consolidated financial statements.

                                                                             F-4
<PAGE>

                                        U.S. Wireless Corporation and Subsidiary


                                                     Consolidated Balance Sheets


<TABLE>
<CAPTION>
March 31,                                                                                 2000                  1999
------------------------------------------------------------------------------------------------------------------------
                                                                                  (As restated)
                                                                                      (Note 12)
------------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>                    <C>
Liabilities And Stockholders' Equity

Current Liabilities
    Accounts payable and accrued expenses                                         $    507,534          $     335,543
    Accrued payroll taxes (Note 12)                                                    530,000                      -
    Dividend payable (Note 6)                                                           50,055                      -
    Accrued vacation                                                                    77,089                      -
    Capital lease obligations, current portion (Note 8)                                 11,059                 34,486
------------------------------------------------------------------------------------------------------------------------

Total Current Liabilities                                                            1,175,737                370,029

Capital Lease Obligations, Less Current Portion (Note 8)                                33,156                  4,632
------------------------------------------------------------------------------------------------------------------------

Total Liabilities                                                                    1,208,893                374,661
------------------------------------------------------------------------------------------------------------------------

Minority Interest In Subsidiary (Note 2)                                                     -                 76,434
------------------------------------------------------------------------------------------------------------------------

Commitments and Contingencies and Subsequent Events
(Notes 8 and 11)

Stockholders' equity (Notes 1, 2, 3, 6, 7, 11 and 12)
    Series A preferred stock, convertible, 6% cumulative, $.01 par value
       (liquidation preference of $400,000 and $1,400,000)                                 200                    700
    Series B preferred stock, convertible, $.01 par value (liquidation
       preference of $3,840,000 and $5,000,000)                                            384                    500
    Common stock, $.01 par value, 40,000,000 shares authorized,
       17,100,658 and 13,556,188 shares issued and outstanding, 1,523,941
       and 1,973,699 of which are subject to vesting                                   171,007                135,563
    Additional paid-in capital                                                      46,446,973             32,504,598
    Unearned compensation                                                                    -               (244,958)
    Common stock subscribed                                                             64,476                      -
    Accumulated deficit                                                            (41,987,726)           (24,291,605)
------------------------------------------------------------------------------------------------------------------------

Total Stockholders' Equity                                                           4,695,314              8,104,798
------------------------------------------------------------------------------------------------------------------------

Total Liabilities And Stockholders' Equity                                        $  5,904,207          $   8,555,893
========================================================================================================================
</TABLE>

         See accompanying notes to consolidated financial statements.
                                                                             F-5
<PAGE>

                                        U.S. Wireless Corporation and Subsidiary

                                            Consolidated Statement of Operations

<TABLE>
<CAPTION>
Years Ended March 31,                                                                     2000                  1999
----------------------------------------------------------------------------------------------------------------------
                                                                                  (As restated)
                                                                                      (Note 12)
----------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                       <C>
Net Revenues (Note 4)                                                      $           249,178       $        40,000
----------------------------------------------------------------------------------------------------------------------
Costs and Expenses:
    Cost of revenues (Note 4)                                                          265,445                     -
    Research and development (Notes 2 and 3)                                         3,497,435             4,866,292
    Operating expenses (Notes 2, 7, 8 and 12)                                        5,174,145             2,491,560
----------------------------------------------------------------------------------------------------------------------
Total Costs and Expenses                                                             8,937,025             7,357,852
----------------------------------------------------------------------------------------------------------------------
Loss Before Other Income and Minority Interest                                      (8,687,847)           (7,317,852)

Other Income (Expense):
    Loss from unauthorized stock issuances (Note 12)                                (5,331,114)                    -
    Interest income                                                                    495,638               310,074
    Equity in loss of joint venture (Note 3)                                          (390,208)             (341,370)
    Equity in loss of Mantra (Note 1)                                                 (127,235)                    -
----------------------------------------------------------------------------------------------------------------------
Loss Before Minority Interest                                                      (14,040,766)           (7,349,148)

Minority Interest In Net Loss (Note 2)                                                       -               118,871
----------------------------------------------------------------------------------------------------------------------
                                                                                   (14,040,766)
Net Loss                                                                                                  (7,230,277)

Series A Cumulative Preferred Dividends (Note 6)                                      (131,848)                    -

Deemed Dividend for Series B Preferred Stock (Note 6)                               (3,560,000)                    -
----------------------------------------------------------------------------------------------------------------------
Net Loss Attributable to Common Shares                                     $       (17,732,614)      $    (7,230,277)
======================================================================================================================


Basic And Diluted Loss Per Common Share (Note 1):
    Net loss per common share                                              $             (1.42)                (0.83)
    Weighted average number of common shares outstanding                            12,445,253             8,762,442
======================================================================================================================
</TABLE>

                    See accompanying notes to consolidated financial statements.

                                                                             F-6
<PAGE>

                                        U.S. Wireless Corporation and Subsidiary


                                 Consolidated Statements of Stockholders' Equity
                                  (As restated) (Notes 1, 2, 3, 6, 7, 11 and 12)

<TABLE>
<CAPTION>
                                                            Series A Preferred     Series B Preferred          Common Stock
                                                                  Stock                   Stock
                                                          ------------------------------------------------------------------------
                                                            Shares      Amount     Shares     Amount       Shares       Amount
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>           <C>        <C>        <C>        <C>          <C>
Balances, March 31, 1998                                            -   $      -         -    $       -  11,823,444   $  118,234
Conversion of debentures to common stock                            -          -         -            -     961,538        9,615
Amortization of unearned compensation                               -          -         -            -           -            -
Issuance of common stock options for compensation                   -          -         -            -           -            -
Issuance of stock in connection with private placements,
 net of offering costs                                         70,000        700    50,000          500     668,206        6,684
Exercise of common stock options                                    -          -         -            -     103,000        1,030
Acquisition of minority interest                                    -          -         -            -           -            -
Net loss                                                            -          -         -            -           -            -
-----------------------------------------------------------------------------------------------------------------------------------

Balances, March 31, 1999                                       70,000        700    50,000          500  13,556,188      135,563
Amortization of unearned compensation                               -          -         -            -           -            -
Common stock subscription                                           -          -         -            -           -            -
Issuance of stock in connection with private placement,
 including compensation expense of $295,100                         -          -     10,000          100    278,400        2,784
Conversion of preferred stock                                 (50,000)      (500)  (21,600)        (216)  2,498,982       24,990
Retirement of non-vested, forfeited shares
 related to minority interest acquisition                           -          -         -            -    (413,103)      (4,131)
Exercise of common stock options                                    -          -         -            -     366,960        3,669
Other common stock sales, including compensation
 expense of $41,791                                                 -          -         -            -     169,254        1,692
Compensation related to stock option grants to
 employees and consultants                                          -          -         -            -      15,000          150
Vesting of shares related to minority interest
 acquisition                                                        -          -         -            -           -            -
Increase in investment in joint venture                             -          -         -            -           -            -
Unauthorized stock issuances (Note 12)                              -          -         -            -     628,977        6,290
Deemed dividend for Series B Preferred Stock                        -          -         -            -           -            -
Series A Preferred dividends                                        -          -         -            -           -            -
Net loss                                                            -          -         -            -           -            -
-----------------------------------------------------------------------------------------------------------------------------------

Balances, March 31, 2000                                       20,000   $    200    38,400    $     384  17,100,658   $  171,007
===================================================================================================================================
</TABLE>

                    See accompanying notes to consolidated financial statements.

                                                                             F-7
<PAGE>

                                        U.S. Wireless Corporation and Subsidiary


                                 Consolidated Statements of Stockholders' Equity
                                     (As restated) (Notes 2, 3, 6, 7, 11 and 12)

<TABLE>
<CAPTION>
                                                        Additional       Unearned    Common Stock    Accumulated
                                                      Paid-in Capital  Compensation   Subscribed       Deficit          Total
---------------------------------------------------------------------  ---------------------------------------------------------
<S>                                                   <C>              <C>           <C>           <C>              <C>
Balances, March 31, 1998                               $  19,912,890   $  (761,438)    $       -    $ (17,061,328)  $  2,208,358
Conversion of debentures to common stock                   2,490,385             -             -                -      2,500,000
Amortization of unearned compensation                              -       516,480             -                -        516,480
Issuance of common stock options for compensation            703,859             -             -                -        703,859
Issuance of stock in connection with private
 placements, net of offering costs                         7,013,842             -             -                -      7,021,726
Exercise of common stock options                             206,470             -             -                -        207,500
Acquisition of minority interest                           2,177,152             -             -                -      2,177,152
Net loss                                                           -             -             -       (7,230,277)    (7,230,277)
--------------------------------------------------------------------   ---------------------------------------------------------
Balances, March 31, 1999                                  32,504,598      (244,958)            -      (24,291,605)     8,104,798
Amortization of unearned compensation                              -       244,958             -                -        244,958
Common stock subscription                                          -             -        64,476                -         64,476
Issuance of stock in connection with private
 placement, including compensation expense of
 $295,100                                                  1,568,826             -             -                -      1,571,710
Conversion of preferred stock                                (24,274)            -             -                -              -
Retirement of non-vested, forfeited shares related to
 minority interest acquisition                                     -             -             -                -         (4,131)
Exercise of common stock options                             847,280             -             -                -        850,949
Other common stock sales, including compensation
 expense of $41,791                                          640,100             -             -                -        641,792
Compensation related to stock option grants to
 employees and consultants                                 1,356,636             -             -                -      1,356,786
Vesting of shares related to minority interest
 acquisition                                                  71,585             -             -                -         71,585
Increase in investment in joint venture                      331,578             -             -                -        331,578
Unauthorized stock issuances (Note 12)                     5,590,644             -             -                -      5,596,934
Deemed dividend for Series B Preferred Stock               3,560,000             -             -       (3,560,000)             -
Series A Preferred dividends                                       -             -             -          (95,355)       (95,355)
Net loss                                                           -             -             -      (14,040,766)   (14,040,766)
--------------------------------------------------------------------   ---------------------------------------------------------

Balances, March 31, 2000                               $  46,446,973   $         -     $  64,476    $ (41,987,726)  $  4,695,314
====================================================================   =========================================================
</TABLE>

                    See accompanying notes to consolidated financial statements.

                                                                             F-8
<PAGE>

                                        U.S. Wireless Corporation and Subsidiary


                                           Consolidated Statements of Cash Flows


<TABLE>
<CAPTION>
Years ended March 31,                                                                         2000                1999
---------------------------------------------------------------------------------------------------------------------------
                                                                                          (As restated)
                                                                                            (Note 12)
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>                   <C>
Cash Flows From Operating Activities

Net loss                                                                                $  (14,040,766)       $ (7,230,277)
Adjustments to reconcile net loss to net cash used for operating activities:
    Loss from unauthorized stock issuances                                                   5,331,114                   -
    Equity in loss of joint venture                                                            390,208             341,370
    Equity in loss of Mantra                                                                   127,235                   -
    Purchased research and development and compensation expense related to
      minority interest acquisition                                                             67,454           2,177,152
    Minority interest in losses of subsidiary                                                        -            (118,871)
    Amortization of unearned compensation                                                      244,958             516,480
    Compensation expense related to stock awards and option grants                           1,827,577              48,234
    Depreciation expense                                                                       542,000             260,000
Increase (decrease) in assets & liabilities:
    Cost and earnings in excess of billings                                                   (110,746)                  -
    Other current assets                                                                        (7,646)             (2,323)
    Other assets                                                                              (118,000)                  -
    Accrued payroll taxes                                                                      530,000                   -
    Accounts payable and accrued expenses                                                      249,082              82,835
--------------------------------------------------------------------------------------------------------------------------

Net Cash Used For Operating Activities                                                      (4,967,530)         (3,925,400)
--------------------------------------------------------------------------------------------------------------------------

Cash Flows From Investing Activities

Purchases of equipment, improvements and fixtures                                             (437,154)           (241,721)
Advances to Mantra                                                                             (69,114)                  -
Investment in joint venture                                                                          -            (400,000)
Other                                                                                         (142,818)                  -
--------------------------------------------------------------------------------------------------------------------------

Net Cash Used For Investing Activities                                                  $     (649,086)       $   (641,721)
--------------------------------------------------------------------------------------------------------------------------
</TABLE>


                    See accompanying notes to consolidated financial statements.

                                                                             F-9
<PAGE>

                                        U.S. Wireless Corporation and Subsidiary


                                           Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended March 31,                                                                             2000                 1999
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>                    <C>
Cash Flows From Financing Activities

Proceeds from issuance of debentures                                                $                -     $      2,500,000
Proceeds from issuance of Series A preferred stock                                                   -            1,400,000
Proceeds from issuance of Series B preferred stock, net of offering costs                    1,000,000            2,700,000
Proceeds from issuance of common stock, net of offering costs                                1,005,001            1,484,851
Proceeds from common stock subscribed                                                           64,476                    -
Proceeds from exercise of common stock options                                                 854,479                    -
Collection of stock subscription                                                             2,300,000                    -
Preferred dividends paid                                                                       (45,300)                   -
Principal repayments on obligations under capital leases                                       (39,119)             (15,192)
------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided By Financing Activities                                                    5,139,537            8,069,659
------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) In Cash and Cash Equivalents                                          (477,079)           3,502,538

Cash And Cash Equivalents, beginning of year                                                 5,788,288            2,285,750
------------------------------------------------------------------------------------------------------------------------------
Cash And Cash Equivalents, end of year                                              $        5,311,209     $      5,788,288
==============================================================================================================================

Supplemental Data
 Income taxes paid                                                                  $           12,160     $              -
==============================================================================================================================
</TABLE>

Schedule of non-cash         During the year ended March 31, 2000, 50,000
investing and financing      shares of Series A Preferred Stock were converted
activities:                  into 338,982 shares of common stock and 21,600
                             shares of Series B Preferred Stock were converted
                             into 2,160,000 shares of common stock.

                             In addition, 352,952 shares of common stock were
                             issued upon the cashless exercise of stock options;
                             however, these issuances were later determined to
                             be unauthorized stock issuances as described in
                             Note 12.

                             During fiscal 2000, the Company entered into
                             capital leases for equipment with a cost totaling
                             $44,215.

                                                                            F-10
<PAGE>

                                        U.S. Wireless Corporation and Subsidiary


                                           Consolidated Statements of Cash Flows


                               In connection with the issuance of the Series B
                               Preferred Stock in fiscal year 2000, the Company
                               recorded a deemed dividend of $3,560,000 as a
                               result of a beneficial conversion feature (see
                               Note 6).

                               In fiscal year 2000, the Company recorded $50,055
                               of Series A Preferred Dividends that were unpaid
                               as of March 31, 2000.

                               As of March 31, 1999, the Company had $2,300,000
                               in stock subscription receivables related to the
                               sale of 23,000 shares of its Series B Preferred
                               Stock. Such receivables were collected in full in
                               April 1999.

                               In July 1998, $2,500,000 of convertible
                               debentures were converted into 961,538 shares of
                               the Company's common stock.

                                                                            F-11
<PAGE>

1.  Summary of                 Organization and Business
    Accounting Policies
                               U.S. Wireless Corporation is headquartered in San
                               Ramon, California. U.S. Wireless Corporation was
                               incorporated in the State of Delaware in February
                               1993. The Company develops high-performance,
                               network-based location systems (known as the
                               RadioCamera system) designed to enable wireless
                               carriers and others to provide their customers
                               with value-added, location-based services and
                               applications, including: enhanced 911, live-
                               navigation assistance, enhanced 411, and asset
                               and vehicle tracking.

                               The Company began its current business operations
                               in July 1996 by acquiring 51% of Labyrinth
                               Communications Technologies Group, Inc.
                               ("Labyrinth") and 51% of Mantra Technologies,
                               Inc. ("Mantra"). In January 1998, the Company
                               acquired the remaining 49% minority interest in
                               Labyrinth (Note 2).

                               In July 1999, U.S. Wireless Corporation
                               established its wholly-owned subsidiary, U.S.
                               Wireless International, Inc. (together referred
                               to as "the Company"), which was incorporated in
                               the British Virgin Islands. Its primary asset is
                               an investment in a foreign joint venture,
                               Wireless Technology, Inc. ("WTI"). The Company
                               and Anam Instruments, Inc. ("Anam") entered into
                               a Joint Venture Agreement whereby WTI was formed
                               to develop and manufacture a Code Division
                               Multiple Access interface ("CDMA") for the
                               RadioCamera. WTI has the right to market the
                               RadioCamera throughout Korea, Asia and Australia.

                               Mantra is a U.S. based corporation that develops
                               network-management systems. In February 1999,
                               Mantra's board of directors approved the
                               recapitalization of Mantra, which provided for
                               the issuance of an additional 33% of Mantra's
                               outstanding common stock to its management. Such
                               shares vested one-third upon issuance, and
                               additional vesting is dependent upon the
                               achievement of defined revenue targets. This
                               recapitalization reduced the Company's ownership
                               of Mantra to 44% at the beginning of the year,
                               and further reductions will occur if vesting
                               targets are achieved. Mantra ceased operations in
                               September 1999. At March 31, 2000 the remaining
                               recorded assets of Mantra consists primarily of
                               cash balances totaling approximately $63,000.

                               Principles of consolidation

                               The consolidated financial statements for the
                               year ended March 31, 2000 include the accounts of
                               the Company and its wholly-owned subsidiary U.S.
                               Wireless International, Inc. As a result of the
                               reduction in ownership of Mantra to 44% pursuant
                               to the recapitalization, Mantra has not been
                               consolidated with the Company and has been
                               accounted for under the equity method for the
                               year ended March 31, 2000. The consolidated
                               financial statements for the year ended March 31,
                               1999 include the accounts of the Company and
                               Mantra. All significant intercompany balances and

                                                                            F-12
<PAGE>

                               transactions have been eliminated in
                               consolidation for both years.

                               Cash and cash equivalents

                               The Company considers all highly liquid
                               investments purchased with a maturity of three
                               months or less on the date of acquisition to be
                               cash equivalents. The Company's cash balances at
                               March 31, 2000 and 1999 consist primarily of
                               investments in mutual funds whose underlying
                               investments consist primarily of adjustable rate
                               senior loans.

                               Equipment, improvements, and fixtures

                               Equipment, improvements, and fixtures are
                               recorded at cost. Depreciation is calculated
                               using the straight-line method over the estimated
                               useful lives of the respective assets, generally
                               two to five years. Maintenance and repairs are
                               charged to operations as incurred and
                               improvements are capitalized.

                               Long-Lived Assets

                               Long-lived assets are evaluated for possible
                               impairment whenever events or changes in
                               circumstances indicate that the carrying amounts
                               may not be recoverable, or whenever management
                               has committed to a plan to dispose of the assets.
                               Such assets are carried at the lower of book
                               value or fair value as estimated by management
                               based on appraisals, current market value, and
                               comparable sales value, as appropriate. Assets to
                               be held and used affected by such impairment loss
                               are depreciated or amortized at their new
                               carrying amount over the remaining estimated
                               useful life; assets to be sold or otherwise
                               disposed of are not subject to further
                               depreciation or amortization. In determining
                               whether impairment exists, the Company compares
                               undiscounted future cash flows to the carrying
                               value of the asset.

                               Income taxes

                               The Company uses the liability method of
                               accounting for income taxes in accordance with
                               Statement of Financial Accounting Standards
                               (SFAS) No. 109, "Accounting for Income Taxes".
                               Deferred income tax assets and liabilities are
                               recognized based on the temporary differences
                               between the financial statement and income tax
                               basis of assets, liabilities and carryforwards
                               using enacted tax rates. Valuation allowances are
                               established for deferred tax assets to the extent
                               of the likelihood that the deferred tax assets
                               may not be realized.

                               Stock-based compensation

                               The Company has adopted the provisions of SFAS
                               No. 123, "Accounting for Stock-Based
                               Compensation". Under this standard, companies are
                               encouraged, but not required, to adopt the fair
                               value method of accounting for employee
                               stock-based transactions. Under the fair value
                               method, compensation cost is measured at the
                               grant date based on the fair value of the award
                               and is recognized over the service period, which
                               is usually the vesting

                                                                            F-13
<PAGE>

                               period. Companies are permitted to continue to
                               account for employee stock-based transactions
                               under Accounting Principles Board Opinion (APB)
                               No. 25, "Accounting for Stock Issued to
                               Employees", but are required to disclose pro
                               forma net income (loss) and earnings (loss) per
                               share as if the fair value method had been
                               adopted. The Company has elected to continue to
                               account for employee stock-based compensation
                               under APB No. 25.

                               Research and development costs

                               Research and development costs that do not have
                               alternative future uses are expensed as incurred,
                               in accordance with SFAS No. 2, "Accounting for
                               Research and Development Costs".

                               Net loss per share

                               Basic earnings (loss) per share is computed by
                               dividing net loss attributable to common shares,
                               by the weighted average number of common shares
                               outstanding during each period. The weighted
                               average common shares are exclusive of the
                               contingent unvested shares related to the
                               Labyrinth purchase (Note 2). Diluted earning
                               (loss) per share is similar to basic earnings
                               (loss) per share, except that the weighted
                               average number of common shares outstanding is
                               increased to reflect the dilutive effect of
                               potential common shares, such as those issuable
                               upon the exercise of stock options or warrants,
                               contingent shares and the conversion of preferred
                               stock, as if they had been issued.

                               For the fiscal years 2000 and 1999, there is no
                               difference between basic and diluted loss per
                               common share, as the effects of the exercise of
                               common stock options, the conversion of preferred
                               stock, and the issuance of any contingent shares
                               related to the acquisition of the minority
                               interest of Labyrinth are anti-dilutive, given
                               the net loss recorded in each year presented. For
                               the fiscal years 2000 and 1999, the following
                               were excluded from the computation of diluted
                               earnings per shares since their effect would be
                               antidilutive:

<TABLE>
<CAPTION>
                                                                                          Number of Shares Convertible
                                                                                         ---------------------------------
                                                                                              2000                    1999
                               -------------------------------------------------------------------------------------------
                               <S>                                                  <C>                     <C>
                               Options                                                   6,279,871               4,950,500*
                               Preferred A Stock                                           135,593                 474,576
                               Preferred B Stock                                         3,840,000               5,000,000
                               Contingent Shares Subject to Vesting                      1,523,941               1,973,053
                               -------------------------------------------------------------------------------------------
                                                                                        11,779,405              12,398,129
                               ===========================================================================================
</TABLE>

                               * - Included are 300,000 options exercised in
                               fiscal year 2000 which have been determined to be
                               unauthorized share issuances as described in Note
                               12.

                               Revenue Recognition

                                                                            F-14
<PAGE>

                               The Company accounts for revenue from long-term
                               contracts under the percentage of completion
                               method, measured by comparing total costs
                               incurred to date to estimated total costs at
                               completion.

                               Segment Reporting

                               The Company is organized in a single operating
                               segment for purposes of making operating
                               decisions and assessing performance. The chief
                               executive officer (the chief operating decision
                               maker), evaluates performance, makes operating
                               decisions, and allocates resources based on
                               financial data consistent with the presentation
                               in the accompanying consolidated financial
                               statements.

                               Use of estimates

                               The preparation of financial statements in
                               conformity with generally accepted accounting
                               principles requires management to make estimates
                               and assumptions that affect the reported amounts
                               of assets and liabilities, revenues and expenses,
                               and disclosure of contingent assets and
                               liabilities at the date of the financial
                               statements. Actual amounts could differ from
                               those estimates. Significant estimates made by
                               the Company include estimated costs to complete
                               under the percentage-of-completion method.

                               Recent accounting pronouncements

                               In June 1998, the Financial Accounting Standards
                               Board Issued SFAS No. 133 "Accounting for
                               Derivative Instruments and Hedging Activities".
                               SFAS No. 133 requires companies to recognize all
                               derivative contracts as either assets or
                               liabilities in the balance sheet and to measure
                               them at fair value. If certain conditions are
                               met, a derivative may be specifically designated
                               as a hedge, the objective of which is to match
                               the timing of gain or loss recognition of the
                               hedging derivative with the recognition of (i)
                               the changes in the fair value of the hedged asset
                               or liability that are attributable to the hedged
                               risk or (ii) the earnings effect of the hedged
                               forecasted transaction. For a derivative not
                               designated as a hedging instrument, the gain or
                               loss is recognized in income in the period of
                               change. SFAS No. 133 is effective for all fiscal
                               years beginning after June 15, 2000. As of March
                               31, 2000, the Company has not entered into
                               derivative contracts either to hedge existing
                               risks or for speculative purposes, and does not
                               expect adoption of the new standard to have a
                               significant effect.

                               In December 1999, the SEC staff released Staff
                               Accounting Bulletin ("SAB") No. 101, "Revenue
                               Recognition in Financial Statements". SAB No. 101
                               provides interpretive guidance on the
                               recognition, presentation and disclosure of
                               revenue in the financial statements. SAB No. 101
                               must be applied to the financial statements no
                               later than the quarter ending March 31, 2001. The
                               Company does not believe that the adoption of SAB
                               No. 101 will have a material affect on the
                               Company's financial results.

                               In March 2000, the Financial Accounting Standards
                               Board Interpretation No. 44 ("FIN 44")
                               "Accounting for Certain Transactions Involving
                               Stock

                                                                            F-15
<PAGE>

                               Compensation, an Interpretation of APB Opinion
                               No. 25". FIN 44 clarifies the application of
                               Opinion No. 25 for (a) the definition of employee
                               for purposes of applying Opinion No. 25, (b) the
                               criteria for determining whether a plan qualifies
                               as a non-compensatory plan, (c) the accounting
                               consequences of various modifications to the
                               terms of previously fixed stock option or award,
                               and (d) the accounting for an exchange of stock
                               compensation awards in a business combination.
                               FIN 44 is effective July 2, 2000, but certain
                               conclusions cover specific events that occur
                               after either December 15, 1998, or January 12,
                               2000. Management believes that the impact of FIN
                               44 will not have a material effect on the
                               Company's financial position or results of
                               operations.

                               Reclassifications

                               Certain prior year amounts in the consolidated
                               financial statements have been reclassified to
                               conform to the current year presentation.

2. Acquisition of              In January 1998, the Company submitted Exchange
   Minority Interest           Offer Agreements (the "Exchange Offer") to
                               stockholders representing the 49% minority
                               interest in Labyrinth. Pursuant to the terms of
                               the Exchange Offer, the Company exchanged
                               4,498,200 shares of its common stock for 490,000
                               shares of common stock of Labyrinth. The Exchange
                               Offer provides that the shares of the Company's
                               common stock will vest subject to the following
                               vesting schedule:

                               (i)   20% of shares vest one year from issuance.

                               (ii)  40% of shares shall vest upon successful
                                     completion and operation of the Company's
                                     primary product in a major market.

                               (iii) 40% of the shares shall vest when the
                                     Company achieves cumulative sales of $15
                                     million.

                               As of March 31, 2000 and 1999, an aggregate of
                               2,561,156 shares and 2,561,156 shares,
                               respectively, of the Company's common stock have
                               vested, as defined by the Exchange Offer.

                               In addition, certain Labyrinth employees,
                               primarily engaged in research and development
                               activities, were previously issued stock in
                               Labyrinth in accordance with their employment
                               agreements subject to a restricted share
                               agreement. Such awards were subject to a three-
                               year vesting schedule with one-third vesting each
                               year. Consequently, these employees were subject
                               to vesting both under the terms of their
                               restricted share agreements as well as the
                               Exchange Offer.

                               In accordance with the provisions of APB Opinion
                               No. 16 and the related interpretations, vesting
                               of the first 20% of the shares has been accounted
                               for using the purchase method of accounting. At
                               the time of the Exchange Offer Agreements,
                               Labyrinth was engaged in ongoing research and
                               development activities related to the hardware
                               and software for the

                                                                            F-16
<PAGE>

                               RadioCamera and accordingly, this initial vesting
                               of shares was characterized by the Company as
                               purchase consideration for in-process research
                               and development.

                               With respect to employees, the vesting of the
                               additional 80% of the shares is accounted for as
                               a compensatory arrangement due to the performance
                               criteria for vesting and because continued
                               employment with the Company is necessary for
                               vesting of additional shares to occur.
                               Accordingly, at the date of achievement of the
                               remaining performance milestones, the Company
                               will record compensation expense based upon the
                               number of shares vesting at the trading price of
                               the Company's stock. With respect to vesting of
                               the additional 80% of the shares by non-employee
                               investors, upon the achievement of the vesting
                               milestones the Company will record additional
                               purchase consideration for the number of shares
                               that vest at the trading price of the Company's
                               stock.

                               During fiscal 2000 the Company recorded in-
                               process research and development of $30,294 and
                               compensation expense of $41,291 related to the
                               vesting of 36,353 shares to an employee-
                               shareholder. During fiscal 1999, the Company
                               recorded compensation expense of $1,283,594 and
                               in-process research and development of $893,558
                               related to the vesting of 1,741,721 shares to
                               both employee-shareholders and investors as a
                               result of achievement of the second milestone.
                               During the year ended March 31, 2000, two of the
                               employee shareholders left the Company,
                               forfeiting an aggregate of 413,103 shares (Note
                               8). As of March 31, 2000, there are 1,523,941
                               shares (866,959 held by employees) remaining to
                               vest upon achievement of the third and final
                               milestone.


3. Investment in Joint         In connection with the formation of WTI, pursuant
   Venture                     to the terms and conditions of the Joint Venture
                               Agreement (as amended), in fiscal year 1999, the
                               Company sold 20,000 shares of Series A Preferred
                               Stock to Anam for $400,000 (see Note 6). The cash
                               proceeds from this sale were then contributed by
                               the Company to WTI, while Anam contributed cash
                               of $800,000. Accordingly, the Company had a 33%
                               ownership interest in WTI, and Anam had a 67%
                               ownership interest at March 31, 1999.

                               In July 1999, WTI sold additional shares of stock
                               to outside investors at a significant premium to
                               shares purchased by the Company, decreasing the
                               Company's ownership to approximately 11% as of
                               March 31, 2000. Based on the value reflected by
                               the additional capital investment in WTI, the
                               Company recorded a $331,578 increase in the
                               carrying amount of the investment, which was
                               credited to Additional Paid-in Capital. Due to
                               the Company's representation on the Board of
                               Directors of WTI and its control over the
                               technology being developed with WTI, the Company
                               accounts for this investment using the equity
                               method of accounting.

                               The Company's equity in net losses of WTI
                               aggregated $390,208 and

                                                                            F-17
<PAGE>

                               $341,370 during fiscal years 2000 and 1999,
                               respectively. However, losses totaling
                               approximately $192,000 have not been applied as
                               of March 31, 2000 since the carrying amount of
                               the investment has been reduced to zero.

                               The Company has a Joint Development Agreement
                               with WTI. Under the terms of the contract, WTI
                               will reimburse the Company for ongoing research
                               and development expenses associated with the
                               development of the CDMA interface for the
                               RadioCamera and provide technical support. In
                               addition, pursuant to the Joint Development
                               Agreement, WTI agreed to reimburse the Company
                               for $650,000 of research and development expenses
                               incurred prior to formation of the joint venture,
                               subject to defined financing and performance
                               objectives. No reimbursements have been received
                               to date. The Company has not recorded an accounts
                               receivable for this reimbursement because
                               management believes that while these funds are
                               due and payable to the Company, collection is
                               uncertain. The Company retains sole ownership of
                               the developed technology. WTI, in return,
                               receives the right to manufacture and market the
                               CDMA version of the RadioCamera throughout Korea,
                               Asia and Australia. WTI will be required to pay
                               the Company a royalty for each product sold,
                               exclusive of product sales to the Company, based
                               upon commercially acceptable terms that have yet
                               to be determined. The Company will be required to
                               pay WTI a similar royalty for each product sold
                               by the Company which has not been manufactured by
                               WTI. The Company also agrees to use WTI as its
                               preferred supplier of the CDMA version of the
                               RadioCamera subject to WTI being able to provide
                               the product on competitive terms.

                               During fiscal years 2000 and 1999, the Company
                               received $534,000 and $482,000, respectively, for
                               reimbursements for ongoing research and
                               development expenses of the product incurred by
                               the Company unrelated to the reimbursable amount
                               noted above. These reimbursements have been
                               recorded as a reduction of research and
                               development expense.


4. Costs and Earnings          This account represents costs and earnings in
   in Excess of Billings       excess of billings on a contract with a state
                               government agency to provide traffic flow
                               information. The total contract amount is
                               $461,000 and completion is expected during the
                               fiscal year ended March 31, 2001. The contract
                               price is paid on a quarterly basis, with the
                               final 10% due upon completion of the project. The
                               revenues under this contract represented
                               principally all of the revenues earned in fiscal
                               year 2000.


5. Income Taxes                The major components of the deferred tax assets
                               and liabilities are as follows:
<TABLE>
<CAPTION>
                               March 31,                                                              2000             1999
                               --------------------------------------------------------------------------------------------
                               <S>                                                       <C>                <C>
                               Deferred tax assets:
                                 Net operating loss carryforwards                        $       7,171,000  $     3,385,799
                                 Deferred research and development expenses                      1,726,000                -
                                 Research and development tax credit carryforwards                 966,000                -
</TABLE>

                                                                            F-18
<PAGE>

<TABLE>
                             <S>                                                          <C>                   <C>
                              Stock-based compensation                                              660,000          552,646
                              Other                                                                 645,000           58,765
                            ------------------------------------------------------------------------------------------------
                            Gross deferred tax assets                                            11,168,000        3,997,210

                            Deferred tax liabilities:
                              State income taxes                                                   (628,000)        (430,869)
                            ------------------------------------------------------------------------------------------------
                            Net deferred tax assets before valuation allowance                   10,540,000        3,566,341
                            Valuation allowance                                                 (10,540,000)      (3,566,341)
                            ------------------------------------------------------------------------------------------------
                            Net deferred tax assets                                      $                -    $           -
                            ================================================================================================
</TABLE>

                            At March 31, 2000 and 1999, the Company established
                            a 100% valuation allowance for the net deferred tax
                            assets because management could not determine that
                            it was more likely than not that the deferred tax
                            assets could be realized. The change in valuation
                            allowance totaled $6,973,659 and $1,760,824 for
                            fiscal 2000 and 1999, respectively. Approximately
                            $880,000 of the valuation allowance relates to
                            deferred tax assets for which subsequently
                            recognized tax benefits will be allocated directly
                            to additional paid in capital as they relate to
                            stock option transactions.

                            As of March 31, 2000, the Company has Federal net
                            operating loss carryforwards (NOLS) totaling
                            approximately $18,728,000, which expire at various
                            times through 2020. For State purposes, the Company
                            has NOLS totaling approximately $9,095,000, which
                            expire at various times through 2005. Utilization of
                            a portion of the NOLS may be limited pursuant to
                            Internal Revenue Code Section 382 due to ownership
                            changes because they were acquired in connection
                            with the purchase of Labyrinth. Also, should
                            significant changes to the existing ownership of the
                            Company occur, the annual amount of NOL carryforward
                            available for future use would be further limited.

                            In addition, the Company has approximately $524,000
                            and $442,000 of Federal and State research and
                            development tax credit carryforwards. The Federal
                            credits expire at various times through 2020.

                            A reconciliation of income taxes computed at the
                            federal statutory tax rate to income tax expense at
                            the effective income tax rate is as follows:

<TABLE>
<CAPTION>
                            Years Ended March 31,                                                      2000        1999
                            ---------------------------------------------------------------------------------------------
                            <S>                                                                <C>            <C>
                            Federal statutory income tax (benefit) rate                             (34.0)%     (34.0)%
                            Increases (decreases) resulting from:
                            State tax benefit, net of federal liability                              (6.7)%      (3.0)%
                            Permanent differences                                                       - %      11.0 %
                            Research and development tax credit carryforwards                        (3.7)%         - %
                            Net change in valuation allowance                                        43.4 %      26.0 %
                            Other                                                                     1.0 %         - %
                            -------------------------------------------------------------------------------------------
                            Effective income tax (benefit) rate                                        (-)%        (-)%
                            ===========================================================================================
</TABLE>

                                                                            F-19
<PAGE>

6. Stockholders'              Series A Preferred Stock and Common Stock Private
   Equity                     Placement

                              During fiscal year 1999, the Company completed a
                              private offering of its securities, in which the
                              Company raised gross proceeds of $5,123,284
                              through the sale of 668,206 shares of common stock
                              and 70,000 shares of the Company's Series A
                              Preferred Stock (Series A), including 20,000
                              shares sold to Anam in connection with the
                              formation of WTI (Note 3). Concurrent with the
                              private offering was the conversion by debenture
                              holders of the Company of $2,500,000 principal
                              amount of secured debentures in exchange for
                              961,538 shares of common stock. The debentures
                              were originally issued in May 1998.

                              In connection with the offering, the Company paid
                              $150,000 in commissions plus warrants to purchase
                              110,000 shares of common stock at $4.00 per share,
                              and 110,000 shares of common stock at $5.00 per
                              share, exercisable for three and five years,
                              respectively. Additionally, the Company issued
                              options to purchase 150,000 shares of the
                              Company's common stock at $2.00 per share,
                              exercisable for five years commencing one year
                              from issuance. The estimated fair value of these
                              warrants and options was determined in accordance
                              with SFAS No. 123, and aggregated $651,558. Total
                              cash and non-cash offering costs of $801,558 had
                              been netted against gross proceeds received in the
                              private placement. The options granted in
                              conjunction with the offering to purchase 150,000
                              shares of common stock were later determined to
                              have been an unauthorized stock issuance as
                              described in Note 12.

                              The shares of Series A carry a cumulative dividend
                              at the rate of 6% per annum, payable in cash or
                              shares of Series A upon the earlier of redemption
                              or conversion to common shares. Holders of the
                              Series A have the right to convert each share into
                              shares of common stock at a conversion price of
                              $2.95 per share, at any time commencing 90 days
                              from issuance. The shares of Series A have no
                              voting rights and carry a liquidation preference
                              of $20 per share. The Company may redeem the
                              Series A upon the earlier of three years from
                              issuance, or when the closing price for the
                              Company's common stock has been at least $5.90 for
                              any consecutive 30-day period.

                              During fiscal year 2000, 50,000 shares of Series A
                              were converted into 338,982 shares of the
                              Company's common stock. At March 31, 2000 and
                              1999, the Company had 20,000 and 70,000 shares,
                              respectively, of Series Astock issued and
                              outstanding. Total authorized preferred stock is
                              1,000,000 shares with 300,000 shares being
                              designated as Series A and 60,000 shares being
                              designated as Series B.

                              The Company recorded dividends of $95,355 for
                              fiscal year 2000, of which $50,055 was accrued at
                              year end. In addition, dividends in arrears
                              aggregated approximately $36,000 at March 31, 2000
                              and were included in the calculation of net loss
                              attributable to common shares.

                              Series B Preferred Stock and Common Stock Private
                              Placement

                                                                            F-20
<PAGE>

                              During fiscal year 1999, the Company initiated a
                              private placement of up to 50,000 shares of its
                              Series B Preferred Stock (Series B) at $100 per
                              share, which was subsequently increased to 60,000
                              shares during fiscal year 2000, and shares of
                              common stock.

                              Each share of Series B has a liquidation
                              preference of $100 per share and is convertible
                              into 100 shares of the Company's common stock,
                              commencing 90 days after the offering's closing
                              date. However, if conversion was elected within 12
                              months of issuance, each share of Series B
                              Preferred Stock was convertible into only 67
                              shares of the Company's common stock. Further, the
                              Series B shares shall automatically convert into
                              shares of common stock when the closing price for
                              the shares of common stock has been at least $5.00
                              for 30 consecutive days. Holders of the Series B
                              vote as a separate voting group, and are entitled
                              to elect one member to the Company's Board of
                              Directors, until the earlier of such time as: (i)
                              50% of the shares of Series B Preferred Stock have
                              been voluntarily converted into common stock, and
                              (ii) in the event of a mandatory conversion of the
                              Series B Preferred Stock, an aggregate of 50% of
                              the total numbers of shares of common stock issued
                              upon conversion have been resold. Series B holders
                              shall also vote on the issuance of any stock that
                              ranks senior to, or on parity with, the Series B,
                              and on any change in the terms of the Series B.

                              During fiscal year 1999, the Company entered into
                              subscription agreements with three private
                              investors and sold an aggregate of 50,000 shares
                              of Series B Preferred Stock at $100 per share. At
                              March 31, 1999, 27,000 of the Series B shares were
                              issued, and the Company received gross proceeds of
                              $2,700,000. The remaining 23,000 shares of Series
                              B were issued and held in escrow at March 31,
                              1999. The shares were released from escrow upon
                              shareholder approval and receipt of $2,300,000 by
                              the Company in April 1999.

                              During fiscal year 2000 the Company consummated
                              the sale of an additional 10,000 shares of Series
                              B to private investors as well as 318,400 shares
                              of common stock to employees, officers and
                              directors, and consultants. Included in this
                              amount are 40,000 shares which have been
                              recharacterized as unauthorized stock issuances,
                              as described in Note 12. In addition, 86,600
                              shares of common stock were sold to two entities
                              that were included in the Company's investigation
                              as described in Note 12. Accordingly, the issuance
                              of these shares has also been reclassified as
                              unauthorized stock issuances in these financial
                              statements. In connection with the sale of the
                              common stock, the Company recorded compensation
                              expense for the difference between the offering
                              price of $1.00 per share, and the trading price of
                              the Company's stock on the date of sale, totaling
                              $295,100.

                              In fiscal 2000 the Company issued options to
                              purchase 200,000 shares of the Company's common
                              stock to consultants for their services in
                              connection with the Series B offering. These
                              options expire in 2002 and 2004, have an exercise
                              price of $2.50 per share and are exercisable one
                              year from issuance. The fair value of these
                              options totaling approximately $335,000 had been

                                                                            F-21
<PAGE>

                              treated as offering costs. Of these options,
                              150,000 were later determined to have been an
                              unauthorized stock issuance as described in Note
                              12.

                              In addition, the Company awarded 149,425 shares to
                              a private placement agent in connection with the
                              Series B placement. The total value of these
                              shares (based upon the trading price at the date
                              of award) was $243,563 and had been treated as
                              offering costs. This share issuance was later
                              determined to have been an unauthorized stock
                              issuance as described in Note 12.

                              In March 2000, 21,600 shares of Series B Preferred
                              Stock were converted into 2,160,000 shares of the
                              Company's common stock.

                              Of the 60,000 shares of Series B Preferred stock
                              authorized, 38,400 and 50,000 shares were issued
                              and outstanding at March 31, 2000 and 1999,
                              respectively.

                              After March 31, 2000 the remaining 38,400 shares
                              of Series B Preferred Stock were converted into
                              3,840,000 shares of common stock.

                              The conversion price to common stock for the
                              Series B Preferred stock was $1.00/per share,
                              which was at a discount from the trading price of
                              the Company's common stock at the date of
                              investment. Accordingly the Company recorded a
                              deemed dividend for this beneficial conversion
                              feature during fiscal 2000 totaling $3,560,000.

7.   Stock Options            The Company issues non-qualified common stock
     and                      options to its employees, officers and
     Stock Awards             directors, and to various consultants performing
                              services for the Company. Options granted to
                              employees generally vest over three or four years,
                              expire five years from the date of grant or six
                              months following termination of employment, and
                              have exercise prices ranging from $2 to $32.00 per
                              share. Options granted to consultants generally
                              vest immediately upon performance of the services
                              required, or upon completion of a funding
                              transaction (where the options are issued to
                              placement agents), or over three years. The
                              options expire three-to-five years from the date
                              of grant. Current outstanding options granted to
                              consultants have exercise prices ranging from $2
                              to $8 per share.

                              The following table summarizes transactions
                              pursuant to the Company's non-qualified stock
                              option agreements:

<TABLE>
<CAPTION>
                                                                                         Weighted
                                                                                 Average Exercise
                                                                                  Price Per Share             Outstanding
                            ----------------------------------------------------------------------------------------------
                           <S>                                                        <C>                    <C>
                            March 31, 1998                                             $     2.30              4,754,000
                                Granted                                                      2.86                852,500
                                Exercised                                                    2.01               (103,000)
                                Cancelled                                                    3.39               (553,000)
                            ----------------------------------------------------------------------------------------------
                            March 31, 1999                                                   2.28              4,950,500
                                Granted                                                     15.55              2,671,500
</TABLE>

                                                                            F-22
<PAGE>

<TABLE>
                             <S>                                                     <C>                       <C>
                                Exercised                                                    2.29               (719,912)
                                Cancelled                                                    2.66               (622,217)
                            ----------------------------------------------------------------------------------------------
                            March 31, 2000                                             $     7.89              6,279,871
                            ==============================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                                 Weighted Average
                                                                               Exercise Price Per
                                                                                            Share            Outstanding
                            ----------------------------------------------------------------------------------------------
                            <S>                                                <C>                         <C>
                            Options Exercisable at:
                                March 31, 1999                                         $     2.24              3,758,317
                                March 31, 2000                                         $     2.37              4,267,705
                            ==============================================================================================
</TABLE>

                            The preceding summary of options outstanding
                            includes options to purchase 450,000 shares of
                            common stock that were later determined to be
                            unauthorized common share issuances as described in
                            Note 12. Options to purchase 150,000 shares of
                            common stock were issued in each of the fiscal years
                            1997, 1999 and 2000. All of these options were
                            exercised in fiscal year 2000, resulting in the
                            unauthorized issuance of 352,952 shares of common
                            stock as described in Note 12.

                            The Company issued 1,982,500 and 379,500 stock
                            options to employees and officers and directors
                            during the years ended March 31, 2000 and 1999,
                            respectively. The Company applies APB Opinion No.
                            25, "Accounting for Stock issued to Employees," and
                            related Interpretations in accounting for stock
                            options granted to employees and officers and
                            directors. Under APB 25, the difference between the
                            exercise price and the market value of the
                            underlying stock on the date of grant is recorded as
                            compensation and expensed over the related vesting
                            period. Total compensation expense for employee
                            stock options for fiscal years 2000 and 1999 was
                            $701,978 and $4,067, respectively. In 1997, the
                            Company recorded unearned compensation for the
                            options granted that year and amortized the expense
                            over the vesting period. As of March 31, 2000, the
                            options granted to employees were fully amortized.
                            The amortization of unearned compensation for fiscal
                            years 2000 and 1999 was $244,958 and $516,480
                            respectively.

                            The following table summarizes information about the
                            Company's stock options outstanding and exercisable
                            at March 31, 2000:

<TABLE>
<CAPTION>
                                                                 Outstanding                           Exercisable
                                                ---------------------------------------------  ---------------------------
                                                                                  Weighted                     Weighted
                                                                                   Average                      Average
                                 Range Of        Outstanding At    Contractual    Exercise    Exercisable At   Exercise
                              Exercise Prices    March 31, 2000  Period In Years    Price     March 31, 2000     Price
                            ----------------------------------------------------------------------------------------------
                            <S>                  <C>             <C>              <C>         <C>              <C>
                            $    2.00 -  3.00       4,204,955           5          $  2.12       3,690,288       $ 2.08
                                 3.00 -  10.00        748,166           5             4.51         577,417         4.36
                                10.00 -  25.00        164,250           5            15.58               0            0
                                25.00 -  32.00      1,162,500           5            29.94               0            0
                            ==============================================================================================
</TABLE>

                                                                            F-23
<PAGE>

                            During fiscal year 2000, the Company awarded 15,000
                            shares of stock to a public relations firm pursuant
                            to a consulting agreement. In connection with this
                            issuance, the Company recorded $60,945 of marketing
                            expense, which is included in operating expenses.

                            In December 1997, the Company adopted the Senior
                            Management Incentive Plan (the "Plan"). The Plan
                            provides for the issuance of up to an aggregate of
                            500,000 shares of the Company's common stock upon
                            exercise of stock options and other rights to
                            officers, key employees, and consultants. Awards
                            made pursuant to the Plan will generally vest over
                            three-year periods. As of March 31, 2000, no stock
                            options, or other rights, have been issued under the
                            Plan.

                            Under SFAS 123, "Accounting for Stock Based
                            Compensation", compensation associated with stock
                            options issued to consultants is measured based on
                            the estimated fair value of services received by the
                            Company, or the fair value of the options issued by
                            the Company, whichever is more reliably measurable.
                            The Company estimates the fair value of each stock
                            option at the grant date by using the Black-Scholes
                            model with the following assumptions used for grants
                            in 2000 and 1999: no dividend yield for any year;
                            expected volatility ranging from 90% to 113% and
                            108% to 132%, generally; risk-free interest rates of
                            approximately 6.5% and 6.0%; and expected lives of 3
                            to 5 years, generally.

                            The Company issued 689,000 and 103,000 options to
                            consultants and recorded $593,863 and $48,234 in
                            related compensation expense for fiscal years 2000
                            and 1999, respectively. Included in the 689,000
                            options issued in fiscal 2000 are 150,000 options
                            which have been re-characterized as unauthorized
                            share issuances as described in Note 12.

                            If the Company had accounted for all options under
                            the fair value provisions of SFAS 123, the Company's
                            net loss would have increased to the proforma
                            amounts indicated below:

<TABLE>
<CAPTION>
                            Year Ended May 31,                                                2000                1999
                            ---------------------------------------------------------------------------------------------

                            <S>                                            <C>                      <C>
                            Net Loss Attributable to Common Shares
                              As reported                                          $   (17,732,614)     $   (7,230,277)
                              Proforma                                                 (19,050,793)         (9,513,947)
                              Per share as reported                                          (1.42)              (0.83)
                              Per share pro forma                                            (1.53)              (1.08)
                            =============================================================================================
</TABLE>

8.   Commitments            Operating leases
     and
     Contingencies          The Company leases office facilities in California
                            and Virginia under non-cancelable operating leases.
                            Minimum monthly rental payments are $23,879 and
                            $19,710, and the leases expire in December 2003 and
                            March 2002, respectively. The Virginia lease
                            contains a one-year renewal provision and provides
                            for a security deposit in the form of a $100,000
                            letter of credit, which was delivered to the
                            landlord subsequent to March 31, 2000. Both leases
                            also

                                                                            F-24
<PAGE>

                            contain base rent escalation provisions. The
                            Company also leases 13 rooftop-testing facilities
                            under one-year terms with monthly payments starting
                            at $400. Subsequent to March 31, 2000, the Company
                            entered into an additional nine rooftop-testing
                            leases, with similar terms.


                            At March 31, 2000, aggregate future minimum lease
                            payments due under non-cancelable operating leases
                            with terms greater than one year, are as follows:

<TABLE>
<CAPTION>
                            Year ending March 31,                                                                Amount
                            ---------------------------------------------------------------------------------------------
                            <S>                                                            <C>
                            2001                                                            $                   520,000
                            2002                                                                                517,500
                            2003                                                                                239,900
                            ---------------------------------------------------------------------------------------------
                            Total minimum lease payments                                    $                 1,277,400
                            =============================================================================================
</TABLE>
                            Rent expense was $314,190 and $273,964 for fiscal
                            years 2000 and 1999, respectively.

                            Capital leases

                            The Company leases equipment under non-cancelable
                            capital leases. The minimum monthly rental payment
                            on capital leases is $1,464, and the related leases
                            expire in March 2003. At March 31, 2000, aggregate
                            future minimum lease payments due under capital
                            leases are as follows:

<TABLE>
<CAPTION>
                            Year ending March 31,                                                              Amount
                            ---------------------------------------------------------------------------------------------
                            <S>                                                                        <C>
                            2001                                                                        $      17,600
                            2002                                                                               17,600
                            2003                                                                               17,600
                            ---------------------------------------------------------------------------------------------
                                                                                                               52,800
                            Less amounts representing interest                                                 (8,585)
                            ---------------------------------------------------------------------------------------------
                            Total future minimum lease payments, net                                           44,215
                            Less current portion due within one year                                          (11,059)
                            ---------------------------------------------------------------------------------------------
                            Long-term portion of obligation under capital leases                        $      33,156
                            =============================================================================================
</TABLE>

                            Equipment, improvements, and fixtures include
                            equipment under capital leases of $125,250 and
                            $81,035, and accumulated amortization of $78,443 and
                            $51,431 as of March 31, 2000 and 1999, respectively.

                            401(k) Plan

                            The Company sponsors a 401(k) Plan (the "Plan")
                            covering eligible employees of the Company.
                            Employees are eligible to participate in the Plan
                            after completing one month of service. The Company's
                            contributions to the Plan are discretionary, and are
                            determined on a plan year-end basis which is
                            December 31. The Company did not make contributions
                            to the Plan during

                                                                            F-25
<PAGE>

                         fiscal 2000 or 1999.

                         Employment agreements

                         The Board of Directors have approved the terms of
                         employment agreements for officers and key employees as
                         follows, however, certain terms of the agreements are
                         still under negotiation with the Company at March 31,
                         2000:

                         Chairman of the Board and Chief Executive Officer - The
                         current five-year employment agreement was extended for
                         a period of three years, terminating July 2004. Annual
                         salary set at $275,000 with an annual bonus of up to
                         40% of base salary subject to meeting certain board
                         determined milestones. In addition 750,000 stock
                         options were granted at an exercise price of $29.94 per
                         share with vesting over four years, one-fourth per year
                         at each anniversary date of the agreement. The
                         agreement contains provisions providing for a two-year
                         non-compete period upon termination of employment and
                         severance compensation in the amount of three times the
                         aggregate annual compensation paid during the preceding
                         calendar year prior to termination or in the event of a
                         change in control or decrease in his position, as well
                         as a $1,000,000 life insurance policy, payable to his
                         designees.

                         As described in Note 12, this individual was terminated
                         as a result of the Company's investigation.

                         President and Chief Operating Officer - The term of the
                         agreement is for a period of four years commencing from
                         the date of employment. Annual salary is set at
                         $250,000 per year with a yearly bonus of up to 40% of
                         base salary subject to the Company meeting certain
                         Board determined milestones. Under the agreement,
                         400,000 options are granted at an exercise price of
                         $29.94 per share with vesting over the term of the
                         agreement at a rate of one-fourth per year at each
                         anniversary date. In the event certain Board determined
                         milestones are met or if there is a change in control
                         of the Company, the option vesting period for 100,000
                         of the options would be accelerated. In addition, the
                         Company granted 100,000 shares of common stock in April
                         2000 vesting at a rate of 25,000 shares per year on the
                         anniversary date of the grant. The agreement also
                         provides for severance compensation equal to the lesser
                         of six months salary or salary for the remaining term
                         of the agreement, in the event of a change in control
                         of the Company or decrease in his position, as well as
                         immediate vesting of unvested options that would have
                         vested within the following six months.

                         General Counsel, Vice President - Business and Market
                         Development, President - Compass Services Division,
                         Vice President - Compass Services Division and certain
                         other key employees. These agreements, generally with
                         three year terms, provide for individual annual
                         salaries ranging from $100,000 to $150,000 and provide
                         for individual option grants ranging from 75,000 shares
                         to 150,000 shares, which generally vest over the term
                         of the employment agreement on each anniversary date
                         with acceleration in the event certain board determined
                         milestones are met. In addition, the agreements contain
                         severance provision providing salary for the lesser of
                         six months or

                                                                            F-26
<PAGE>

                         the remaining term of the agreements and immediate
                         vesting of all unvested options, in the event of a
                         change in control or decrease in responsibilities with
                         the Company.

                         As described in Note 12, the Company's former General
                         Counsel resigned from the Company as a result of the
                         Company's investigation.

                         Legal Matters

                         During the year ended March 31, 2000 two former
                         employees filed suit against the Company seeking lost
                         wages, stock options and unvested common stock as a
                         result of their terminations. These former employees
                         were also Labyrinth employee-shareholders (Note 2).
                         Company management has estimated the possible claims,
                         including money damages and stock awards sought, at
                         approximately $1,000,000 to $2,000,000 (based upon
                         current stock prices). The Company denies all claims
                         and allegations and intends to vigorously defend these
                         actions, and has filed counterclaims seeking
                         unspecified damages. These matters have been submitted
                         to binding arbitration. Company management believes,
                         after consultation with legal counsel, that they have
                         meritorious defenses and will prevail in this matter.
                         Management does not believe that ultimate resolution of
                         these suits will have a material effect on the
                         Company's financial condition, operations or cash
                         flows.

9.   Concentration       As of March 31, 2000 and 1999, the Company had amounts
     Of Credit Risk      on deposit that exceeded federally insured limits by
                         $5,311,209 and $5,114,463, respectively. Furthermore,
                         87% of the cash on hand is located in one cash account.

10.  Related Party       One Board member is the  managing  director of Ocean
     Transactions        Castle Investors, LLC a consultancy firm which the
                         Company has used for investor relations services. As
                         payment for those services the Company issued 50,000
                         options to Ocean Castle Investors during fiscal 2000.
                         These options have an exercise price of $2.00 per share
                         and expire during 2002. The fair value of these options
                         totaling $41,207 has been included in operating
                         expenses.

                         This Board member is also the Chief Executive Officer
                         and Chairman of the Board of Global Technologies, Inc.
                         which purchased 30,000 shares of the Series B Preferred
                         Stock during fiscal year 1999, which was subsequently
                         converted to 3,000,000 shares of common stock during
                         fiscal year 2000.

                         As described in Note 12, the Company determined that
                         various transactions had occurred involving entities
                         which are believed to have been related to the
                         Company's former Chief Executive Officer and former
                         General Counsel.

11.  Subsequent          In May 2000, the Company authorized 150,000 shares of
Events                   Series C Preferred Stock with a $.01 par value. This
                         issue has a stated liquidation preference of $200 per
                         share plus unpaid and accrued dividends, and is senior
                         to all

                                                                            F-27
<PAGE>

                         common stock. It is redeemable by the Company at a
                         redemption price of $200 plus unpaid and accrued
                         dividends at any time upon the earlier of June 1, 2004
                         or the date after the closing price for the Company's
                         Common Stock has been at least $45 for a consecutive
                         thirty-day period. Dividends are cumulative and payable
                         semi-annually beginning June 1, 2000 at an annual rate
                         of 6.5% per share. Each share of Series C Preferred
                         Stock will convert into the number of shares of common
                         stock equal to the liquidation value of $200 divided by
                         the initial conversion price of $19.03 at any time at
                         the holder's option. The Series C Preferred
                         Shareholders have the right to vote on all matters
                         voted on by the stockholders except the election the
                         Board of Directors. However, they are allowed to elect
                         one member of the Board of Directors until at least 50%
                         of the shares of Series C Preferred Stock have been
                         converted into shares of Common Stock. The Series C
                         Preferred Stockholders are entitled to that number of
                         votes equal to the number of shares of Common Stock
                         that such holder is entitled to receive upon conversion
                         of such of Series C Preferred Stock.

                         In June 2000, the Company completed the sale of 112,500
                         shares of the $.01 par value Series C Preferred Stock
                         at a price of $200 per share to American Tower
                         Corporation (ATC). Proceeds of the Series C Preferred
                         Stock net of offering costs were approximately $21
                         million.

                         Concurrent with this private placement the Company
                         entered into two agreements with ATC and its operating
                         entities: a master license agreement and services
                         agreement. Under the terms of the agreements, ATC will
                         provide site licenses and services in connection with
                         the Company's network build-out. Under the term of the
                         agreements, the Company will license a minimum of 1,000
                         tower facilities at rates starting at $450 per month
                         for each facility. The license fee will be increased a
                         rate of 5% per year, beginning in the third year. If
                         ATC has 10,000 tower facilities available by December
                         31, 2000, the Company will license 150 sites prior to
                         the end of the first year, an additional 300 sites
                         prior to the end of the second year and an additional
                         550 sites prior to the end of the third year. This
                         commitment will increase in the event that the Company
                         meets certain market milestones and ATC satisfies
                         certain tower building or acquisition milestones. The
                         term of the agreement will be effective for three
                         years. The term of each site license will continue for
                         a five-year period and will be extended for additional
                         five-year periods unless notified by the Company. Under
                         the services agreement, ATC will provide network build-
                         out services, including, radio frequency design, radio
                         frequency engineering, site identification, site
                         acquisition and development, site zoning and
                         permitting, site construction and installment
                         management, and component purchases.

                         Subsequent to March 31, 2000, the Company also entered
                         into agreements with two manufacturers to build
                         RadioCameras and other component parts. Total
                         commitments under these agreements total approximately
                         $1,100,000.

                         As described in Note 12, in May 2001 the Company
                         announced that it had

                                                                            F-28
<PAGE>

                         completed an investigation that resulted in the
                         termination of the Company's former Chief Executive
                         Officer and the resignation of the Company's former
                         General Counsel.

12.  Restatement of
amounts previously       In May 2001, the Company announced that it had
reported                 completed an investigation  that resulted in the
                         termination of the Company's former Chief Executive
                         Officer and the resignation of the Company's former
                         General Counsel. The investigation revealed several
                         transactions in which stock or options to purchase
                         common stock had been issued to various entities
                         without evidence of Board of Directors approval of the
                         transactions, or evidence that the Company had received
                         consideration for the issuance of the stock and
                         options. In addition, the Company concluded that based
                         on the evidence obtained, it was likely that the
                         Company's former Chief Executive Officer and former
                         General Counsel had beneficial interests in many, and
                         possibly all of, the entities in question.

                         As a result of the investigation, the Company
                         determined that certain transactions had been
                         improperly recorded in the Company's historical
                         financial statements either as compensation expense or
                         as offering costs related to financing activities,
                         based upon representations by the Company's former
                         Chief Executive Officer and former General Counsel. In
                         addition, the Company determined that these
                         transactions had not been properly disclosed as related
                         party transactions.

                         The transactions in question involved the issuance of
                         212,725 shares of common stock during fiscal year 2000
                         and options to purchase 450,000 shares of common stock
                         during fiscal years 1997, 1999 and 2000 (150,000
                         options were issued in each fiscal year). The Company
                         issued an additional 63,300 shares in fiscal year 2000
                         for which payment was received but for which the
                         issuance was unauthorized. The options were all
                         subsequently exercised in fiscal year 2000, resulting
                         in the issuance of 352,952 shares of common stock.

                         Upon further analysis of the transactions described
                         above, the issuances of stock and stock options that
                         were the subject of the investigation were determined
                         to have been unauthorized stock issuances. Accordingly,
                         the Company has recorded a non-cash loss from
                         unauthorized stock issuances during the year ended
                         March 31, 2000, measured based on the fair market value
                         of the net shares of common stock issued as of the date
                         of issuance in fiscal 2000. In addition, the Company
                         has also recorded non-cash stock compensation of
                         $407,603 and certain payroll tax liabilities of
                         $530,000 in the year ended March 31, 2000 for other
                         transactions that were reevaluated by management in
                         connection with the investigation. The Company has
                         determined that these transactions do not have a
                         material impact on fiscal years ended March 31, 1997,
                         1998 or 1999, and accordingly has not restated the
                         financial statements for those fiscal years. The impact
                         of the restatements on the Company's statement of
                         operations for the fiscal year ended March 31, 2000, is
                         as follows:

                                                                            F-29
<PAGE>

<TABLE>
<CAPTION>
                          Net Loss                                                     Basic and
                      Attributable to                                   Net Loss        Diluted       Basic and
                           Common        Loss from                   Attributable to    Net Loss       Diluted
                           Shares       Unauthorized                     Common        Per Share       Net Loss
                       (as originally      Stock           Other         Shares      (as originally   Per Share
 Quarter ended:          reported)       Issuances      Adjustments   (as restated)    reported)    (as restated)
 -------------           ---------       ---------      -----------   -------------    ---------    -------------
 <S>                     <C>             <C>            <C>           <C>             <C>           <C>
 June 30, 1999          $   2,727,505  $   690,344      $    53,752   $   3,471,601   $     (0.23)   $      (0.29)
 September 30, 1999         2,097,838      534,262          379,073       3,011,173         (0.17)          (0.25)
 December 31, 1999          2,438,380    4,106,508          365,073       6,909,961         (0.20)          (0.57)
 March 31, 2000             4,200,174            -          139,705       4,339,879           N/A*            N/A*
                       -------------------------------------------------------------------------------------------

 Year ended
 March 31, 2000         $  11,463,897  $ 5,331,114      $   937,603   $  17,732,614   $     (0.92)   $      (1.42)
                        ===========================================================================================
</TABLE>

* - Per share amounts for fourth quarter results not previously reported in
financial filings.

The impact on the Company's balance sheet as of March 31, 2000, as compared to
the previously reported amounts, is as follows:

 .  Accrued liabilities are increased by $530,000.
 .  Paid in capital is increased by $5,738,717.
 .  Accumulated deficit is increased by $6,268,717.

                                                                            F-30