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DBS Industries Inc – ‘424B2’ on 9/8/00

On: Friday, 9/8/00, at 10:31am ET · Accession #: 1001277-0-258 · File #: 333-41690

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 9/08/00  DBS Industries Inc                424B2                  1:160K                                   Locke Lord Bi… Lidell/FA

Prospectus — Rule 424(b)(2)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B2       Prospectus                                            52    234K

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Business Certain Relationships and Related Transactions Certificate of Incorporation Common Stock Purchase Agreement Description of Capital Stock Dividend Policy Executive Compensation Experts Forward-looking Statements Landing Rights Legal Matters Legal Proceedings Management Management's Discussion and Analysis of Financial Condition and Results of Operations Offering, The Plan of Distribution Price Range of Common Stock Prospectus Summary Risk Factors Selling Stockholders Table of Contents The Offering Use of Proceeds Where You Can Find More Information
1	1st Page - Filing Submission
2	Table of Contents
3	Forward-looking Statements
"	Prospectus Summary
6	Risk Factors
14	The Offering
"	Common Stock Purchase Agreement
15	Use of Proceeds
16	Price Range of Common Stock
"	Dividend Policy
17	Management's Discussion and Analysis of Financial Condition and Results of Operations
22	Business
30	Landing Rights
33	Management
36	Executive Compensation
44	Selling Stockholders
48	Plan of Distribution
50	Certain Relationships and Related Transactions
"	Description of Capital Stock
51	Certificate of Incorporation
52	Legal Proceedings
"	Legal Matters
"	Experts
"	Where You Can Find More Information

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PROSPECTUS

DBS INDUSTRIES, INC.

Common Stock
----------------

This prospectus relates to the resale by the selling stockholders of up
to 18,755,802 shares of common stock. The selling stockholders may sell common
stock from time to time in the principal market on which the stock is traded at
the prevailing market price or in negotiated transactions.

We will not receive any proceeds from the sale of shares by the selling
stockholders. However, we have received proceeds from the sale of shares that
are presently outstanding and we will receive proceeds upon the exercise of any
warrants that may be exercised by the selling stockholders and upon the sale of
shares to Torneaux Ltd.

Our common stock is traded in the over-the-counter market and quoted on
the OTC Bulletin Board under the symbol "DBSS." On August 7, 2000 the average of
the bid and asked price of our common stock was $0.984375 per share, as reported
on the OTC Bulletin Board.

Investing in the common stock involves a high degree of risk. You should
invest in the common stock only if you can afford to lose your entire
investment. See "Risk Factors" beginning on page 8 of this prospectus.

Neither the Securities Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.

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

The date of this prospectus is August 11, 2000.

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Please read this prospectus carefully. You should rely only on the
information contained in this prospectus. We have not authorized anyone to
provide you with different information. You should not assume that the
information provided by the prospectus is accurate as of any date other than the
date on the front of this prospectus.

The following table of contents has been designed to help you find
important information contained in this prospectus. We encourage you to read the
entire prospectus.

TABLE OF CONTENTS

[Enlarge/Download Table]

Forward-looking Statements...................................................................3
Prospectus Summary...........................................................................3
Risk Factors................................................................................ 6
The Offering................................................................................14
Use of Proceeds.............................................................................15
Price Range of Common Stock.................................................................16
Dividend Policy.............................................................................16
Management's Discussion and Analysis of Financial Condition and Results of Operations.......17
Business....................................................................................22
Management..................................................................................33
Selling Stockholders........................................................................42
Plan of Distribution........................................................................48
Certain Relationships and Related Transactions..............................................50
Description of Capital Stock................................................................50
Certificate of Incorporation................................................................51
Legal Proceedings...........................................................................52
Legal Matters...............................................................................52
Experts.....................................................................................52
Where You Can Find More Information.........................................................52

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FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements, as that term is
defined in the Private Securities Litigation Reform Act of 1995. These
statements relate to future events or our future financial performance. In some
cases, you can identify forward-looking statements by terminology such as "may,"
"will," "should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential" or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled "Risk Factors," that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.

As used in this prospectus, the terms "we," "us," "our," and "DBSI" mean
DBS Industries, Inc. and its subsidiaries, unless otherwise indicated.

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and notes thereto appearing
elsewhere in this prospectus. This summary is not complete and does not contain
all of the information you should consider before investing in the common stock.
You should read the entire prospectus carefully, including the "Risk Factors"
section.

The Company

We are a telecommunications company dedicated to providing low-cost
satellite-to-Internet data messaging to and from remote locations. Through our
ownership interest in E-SAT, Inc., we are the only company currently licensed by
the Federal Communications Commission to provide commercial two-way data
messaging using code division multiple access technology and low-earth-orbiting
Little LEO satellites. We expect to begin providing our data messaging services
during 2002.

We have designed our system, which we call the NewStar System, to provide
low cost, two-way data messaging services to customers throughout the world who
need regular, but not real-time, information. In the non-real-time market,
delays between data collection and transmission to the customer are not
critical, for example, periodic data collection from utility maters as compared
to emergency data from residential alarm systems. By focusing solely on the
non-real-time market, we believe we will be able to construct and operate our
system at a lower cost and, therefore, provide our services at a lower cost to
the customer. In addition, by targeting the collection of data that is in remote
or hard-to-access locations, we believe we will be able to reduce our
competition from terrestrial technologies where the infrastructure expense
incurred in providing the service, at each remote location, cannot be justified.

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The two-way communication capabilities of the NewStar System are designed
to substantially reduce customer costs while enabling new customer applications
such as initiating remote diagnostics and remote turn-on and turn-off of
electric meters. Our initial focus is on energy meters in remote locations. One
of our target markets is the United States electric and natural gas utility
industries, particularly their high- cost-to-read metering segment which
historically requires meter reading to be conducted by utility personnel.

We believe that the NewStar System will offer significant advantages over
competing systems and alternative customer solutions, including:

o Global coverage: Using a Little LEO satellite-to-internet system, we
will be able to provide reliable, global, two-way data and messaging
communications services.

o Low cost system: The non-real time nature of the NewStar System allows
us to use fewer satellites and implement a store-and-forward system
that requires fewer ground stations.

o Low-cost ground transceiver: Using CDMA communications technology and
an Application Specific Integrated Circuit, or "ASIC" technology,
should allow us to produce smaller and lower-cost ground transceivers
than competing systems.

Our principal executive offices are located at 100 Shoreline Highway,
Suite 190A, Mill Valley, California, and our phone number is 415-380-8055.

[Enlarge/Download Table]

The Offering Summary

Total shares of common stock outstanding as of
July 31, 2000.................................. 14,883,988

Shares of common stock being offered for
resale by the selling stockholders............. Up to 18,755,802 shares, assuming the sale of all
of the shares registered in connection with the
common stock purchase agreement and exercise of
all warrants by the selling stockholders. Of these
shares, 11,911,921 were previously registered and
are included to allow their resale under this
prospectus.

Offering price................................. Market price or negotiated prices at the time of
resale.

Use of proceeds................................ We will not receive any of the proceeds of the
shares offered by the selling stockholders. Any
proceeds we receive from our sales of common
stock to Torneaux Ltd. and the exercise of warrants
will be used primarily for costs associated with the
construction and launch of our satellite system, for
working capital and other general corporate
purposes.

OTC Bulletin Board Symbol...................... DBSS

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Summary Consolidated Financial Data

This summary of consolidated financial data has been derived from our
annual and interim consolidated financial statements included elsewhere in this
prospectus. You should read this information in conjunction with those financial
statements, and notes thereto, along with the section entitled "Management's
Discussion and Analysis of Financial Condition."

[Enlarge/Download Table]

April 25, 1990
Three months (Inception)
Year Ended December 31, ended March 31, to March 31,
----------------------------- ----------------- -----------------
Consolidated Statement of Operations 1998 1999 2000 2000
Data: ------------ -------------- ----------------- -----------------
(Unaudited) (Unaudited)

Revenue $ - $ - $ - $ 161,420

Loss from operations (2,995,848) (6,028,829) (1,525,040) (19,148,436)

Net Loss (3,293,493) (5,915,493) (1,525,482) (14,573,597)

Loss per Share

Basic (0.47) (0.45) (0.11) --

Diluted (0.47) (0.45) (0.11) --

Working Capital (deficiency) 233,078 (941,527) (1,304,640) --

Total Assets 3,512,511 15,562,586 15,630,040 --

Stockholders' Equity 2,382,740 14,223,675 13,893,490 --

Consolidated Balance Sheet Data: As of March 31, 2000
---------------------
(Unaudited)

Cash and cash equivalents ........................... $ 351,574

Working Capital (deficiency) ........................... (1,304,640)

Total Assets ............................................ 15,630,040

Total Liabilities........................................ 1,736,550

Stockholders' Equity..................................... 13,893,490

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RISK FACTORS

An investment in shares of our common stock is very risky. You should
carefully consider the risks described below in addition to other information in
this prospectus. Our business, operating results and financial condition could
be seriously harmed due to any of the following risks. The trading price of the
shares of our common stock could decline due to any of these risks, and you
could lose all or part of your investment.

We are a development stage company and we do not have any customers.

We are a development stage company and as of July 31, 2000, we had no
customers. Although we previously recorded gains from the sale of interests in
entities which own direct broadcast satellites licenses, we have not earned any
significant operating revenues since our formation. Given our limited operating
history and lack of revenues, we cannot assure you that we will be able to
construct and implement the NewStar System, and, if implemented, to develop a
sufficiently large customer base to be profitable.

We have incurred significant losses and expect to continue to do so. These
circumstances raise substantial doubt about our ability to continue as a going
concern.

We expect our operating expenses to significantly increase as our
satellite system reaches its critical stages of development. We recorded
operating losses of approximately $6,029,000 for 1999 and approximately
$2,996,000 for 1998, and do not anticipate any revenues during the year 2000. We
expect to continue to incur substantial and increasing operating losses and
negative net cash flow until our satellite system is developed, deployed and
operating in a profitable manner. These circumstances raise substantial doubt
about our ability to continue as a going concern as described in the independent
accountant's opinion. Our management is actively pursuing various financing
alternatives to finance our operations.

We will require additional financing.

We currently estimate that we will require approximately $120 million in
capital related to the construction and launch costs associated with our
satellite system. Given the risks in an undertaking of this nature, we cannot
assure you that actual cash requirements will not exceed our estimates. In
particular, additional capital, over and above amounts anticipated, will be
required in the event that we:

o incur unexpected costs in completing the NewStar System design or
encounter any unexpected technical or regulatory difficulties;

o incur delays and additional expenses as the result of a launch or
satellite failure;

o are unable to enter into marketing agreements with third parties or
sell our metering services; or

o incur any other significant unanticipated expenses.

The occurrence of any of these events would adversely affect our ability
to meet our business objectives.

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Future financings will likely include restrictive conditions.

We anticipate that we will depend almost exclusively on long-term debt
and equity financings to pay for our satellite system. Capital may not be
available to us, in sufficient amounts to meet the development costs or on terms
acceptable to us. The issuance of additional equity securities by us will result
in significant dilution to the equity interests of the current stockholders.
Selling debt securities, such as bonds, will increase our liabilities and future
cash commitments. Further it is anticipated that, in the event of a significant
bond placement, bondholders would require that all of our assets, including our
ownership interest in E-SAT, serve as security for the repayment of the bonds.
In the event of a default on such bonds, it would be unlikely that there will be
any assets remaining to be distributed to equity holders. If we are unable to
obtain a sufficient amount of financing necessary to complete our system and on
commercially-acceptable terms, our business and future success will be adversely
affected.

We are subject to development contract commitments.

In order to comply with development milestones required by the FCC
license, we have entered into various development contracts including a
satellite construction contract and a satellite launch contract. Entering into
these and other development and service contracts are critical to the overall
development of the NewStar System. The satellite construction and launch
contracts require progress payments of approximately $60 million over the next
12 months. Failure to maintain these contracts would adversely affect our
ability to construct the NewStar System.

The contract with our prime contractor could be declared void.

We have not made the necessary payments to our prime contractor and, as a
result, that contract could be declared void. The Agreement with our prime
contractor, Alcatel Space Industries, required a payment at the end of 1999 of
approximately $9.1 million in cash and the equivalent of $5 million in common
stock. This payment was necessary for Alcatel to continue work and to trigger an
effective date for our full system development schedule. As of July 31, 2000,
this payment has not been made, and Alcatel therefore has the right to consider
this contract void. Although Alcatel has verbally indicated that it does not
intend to terminate the contract, it has the right to do so. Until the effective
date of contract, or "EDC", we continue to have a direct satellite construction
contract with Surrey Satellite Technology Limited. At EDC, this contract would
be assigned to Alcatel. Any cancellation or termination of these contracts could
cause delay in construction of the system and may result in the loss of the FCC
license.

The technology, design and construction of our satellite system is subject to
numerous risks.

The design and construction of the NewStar System is subject to risks
associated with a space-based communications system. Although we believe that
the NewStar System is based on sound technology, its design will contain certain
technology that has not been used in a commercial application. Although we
intend to engage contractors that are experienced in the satellite and
communications industry, we have no experience in developing, constructing, and
operating a satellite based data communications system. The failure of the
NewStar System to be constructed, function as designed, or the failure of system
components to function with other components or to specification could result in
delays, unanticipated costs, and loss of system performance, thereby rendering
the NewStar System unable to perform at the quality and capacity levels
anticipated.

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Future advances in the industry could make our services obsolete.

Future advances in the telecommunications industry could lead to new
technologies, products or services competitive or superior to the products or
services to be provided by us. Such technological advances could also lower the
costs of other products or services that may compete with the NewStar System,
resulting in pricing pressures on our products and services, which could
adversely affect our business and results of operations.

We have not been granted control of E-SAT and without that control our business
objectives are limited.

E-SAT, Inc. has been granted an FCC license to construct, launch and
operate six Little LEO satellites to provide two-way, low-cost data and
messaging services in the United States. Currently, we hold a 20% interest in
E-SAT with EchoStar DBS Corporation, or EchoStar, holding the remaining 80%
interest. On July 30, 1999, we reached an agreement with EchoStar concerning the
transfer of control of E-SAT, including the FCC license from EchoStar to us,
subject to regulatory approval. In May 2000, we filed an application with the
FCC for their approval of the transfer of control of E-SAT. If we were to
receive FCC approval, we would hold an 80.1% interest in E-SAT, and EchoStar
would hold the remaining 19.9%. In addition EchoStar would have a 20% undivided
interest in the satellite transmission capacity associated with the FCC license.
In the event that we are unable to obtain control of the FCC license held by
E-SAT, we may be unable to obtain the financing necessary to fulfill our
business objectives.

Our satellite system may experience unscheduled delays which could harm our
business or lead to the loss of the FCC license.

Delays and related increases in costs in the construction, launch and
implementation of the NewStar System could result from a variety of causes,
including:

o delays encountered in the construction, integration and testing of the
NewStar System;

o launch delays or failures;

o delays caused by design reviews in the event of a launch vehicle
failure or a loss of satellites or other events beyond our control;

o further modification of the design of all or a portion of the NewStar
System in the event of, among other things, technical difficulties or
changes in regulatory requirements;

o our failure to enter into agreements with marketing providers on terms
acceptable to us; and

o the failure to develop or acquire effective applications for use with
the NewStar System.

We cannot assure you that the Little LEO satellites or the data and
messaging services we intend to provide will be available on a timely basis, or
at all. A significant delay in the completion of the NewStar System could erode
our competitive position, could result in cancellation of the FCC license, and
could have a material adverse effect on our financial condition and results of
operations.

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We will face many risks associated with the launching of satellites.

Satellite launches are subject to considerable risks, including the
possible failure of the launch vehicle, which may result in the loss or damage
to the satellite or its deployment into an incorrect or unusable orbit. Each
launch is expected to carry three Little LEO satellites. Consequently, an
unsuccessful launch could adversely affect one-half of our planned satellite
constellation. We intend to obtain a certain amount of insurance to cover some
of our potential losses in this area, but we cannot assure you that the
insurance will cover all incidents or be in a sufficient amount to cover the
losses.

We have entered into a launch services agreement with Eurockot Launch
Services GmbH, Breman, Germany to provide for two payload launches from a launch
site in Plesetzk, Russia during specified periods. Eurockot has limited
experience in launching commercial satellites. Further, it is anticipated that
any launch must be approved by a governmental agency of the Russian Federation.
We do not know whether the launches will be approved by the Russian Federation
or if the launches will take place as planned. The failure of the launches or
the occurrence of any problems generally associated with satellite launches
would have an adverse effect on us.

Our satellites may malfunction or fail prematurely.

A number of factors will affect the useful lives of the NewStar System's
Little LEO satellites, including the quality of construction, the expected
gradual environmental degradation of solar panels, the amount of fuel on board
and the durability of component parts. Random failure of satellite components
could result in damage to or loss of a satellite. In rare cases, satellites
could also be damaged or destroyed by electrostatic storms, high levels of
radiation or collisions with other objects in space. Any premature loss of
satellite performance or capacity could have a material and adverse effect on
the efficiency of the overall system and the operation of the NewStar System.

We will only be able to obtain a limited amount of satellite insurance.

We expect to obtain launch insurance for each of our satellite launches
and have engaged Frank Crystal & Co. and its subsidiary, International Space
Brokers, Inc. to provide risk management counsel in obtaining insurance coverage
for our planned Little LEO satellite constellation. This insurance would, in the
event of a launch failure, provide funds for replacement launch satellites. In
addition, we expect to obtain satellite replacement insurance, which would
provide funds for rebuilding satellites damaged in construction, shipment or
launch. In the event a covered loss occurs, we will need to satisfy the
insurance underwriters that the technological or other problems associated with
the covered loss have been addressed prior to continuing the launch process. The
launch and replacement insurance marketplace is volatile and we do not know
whether launch or replacement insurance, or both, will be available to us, or if
available, will be available on terms acceptable to us. We will continue to
evaluate the insurance marketplace to determine the level of risk we are willing
and able to absorb internally as well as the amount of risk we may be able to
transfer to third parties.

We are subject to governmental regulation which can be difficult to satisfy.

Our business is subject to both United States and international
regulations and licensing. The E- SAT license has several milestones, including:

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o the completion of construction of the first two satellites by March
2002,

o the launch of those satellites by September 2002, and

o the construction and launch of the remaining four satellites by March
2004.

Our ability to meet these milestones is dependent on a number of factors
many of which are outside of our control. The failure to meet the milestones
could result in loss of the FCC license. Furthermore, we will need to secure
"landing rights" in various countries where we hope to do business. Failure to
secure foreign rights would preclude us from offering our full services in such
countries, which would adversely affect our anticipated results of operation. In
addition, if the FCC fails to approve our application for consent to transfer
control of the FCC license or if other technological or financial difficulties
arise, we may be unable to meet our obligations under our construction and
launch agreements. Any cancellation or termination of these contracts could also
result in loss of the FCC license.

The services we intend to provide must be acceptable to the utility industry.

Our success is largely dependent on whether utility and other related
companies will contract for services utilizing the NewStar System. Although we
have other proposed uses for the data messaging services, utility companies,
such as gas, electrical and water utility companies, remain the primary focus of
our marketing and development efforts. We cannot assure you that we will be
successful in completing the development and commercial implementation of our
services using the NewStar System. We must complete a number of technical
developments and continue to expand and upgrade the NewStar System's
capabilities prior to implementing our services on a full commercial basis.
Utility companies typically go through numerous steps before making final
decisions which can take up to several years to complete.

Further, utilizing satellite data messaging services is a relatively new
and evolving business. It is difficult to predict the future growth of the
market or the potential size of the market. Utility companies are testing
products from a number of entities developing various communication
technologies. The use of the NewStar System is only one possible solution for
hard-to-access meter sites. We may not be successful in achieving the adoption
of the NewStar System by the utility industry or to a significant extent. In the
event that utility companies do not adopt our technology, or do so less rapidly
than expected, our future results, including our ability to achieve
profitability, will be materially and adversely affected.

The price of ground transceivers will affect the success of our service.

The development of low-cost ground transceivers to collect and transmit
data from fixed devices such as meters will be important in the development of a
broad utility market for our data messaging services. Ground transceivers must
be manufactured and operated at a low cost in order to make our data messaging
services attractive to commercial users. It is expected that the cost of ground
transceivers will decline as the volume of units produced increases. We must
develop a low-cost ground transceiver which requires less power to operate and
will be attractive to utility and other companies. However, we cannot assure you
that ground transceivers can be developed at a cost and with the capabilities
that will attract a large enough commercial subscriber base for us to receive
significant revenues or achieve profitability.

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We are dependent on third party vendors and consultants.

We have relied on, and will continue to rely on, vendors and consultants
that are not our employees to complete the design, construction and
implementation of the NewStar System, to market our data messaging services and
for representation on regulatory issues. These vendors and consultants must
continue to provide the expertise necessary to complete the design and
construction of the NewStar System, and we cannot assure you that suitable
vendors and consultants will be available in the future, and if available, will
be available on terms deemed acceptable to us.

We are dependent on third party manufacturers.

We rely on, and will continue to rely on, outside parties to manufacture
parts and equipment for the NewStar System such as meters, transceivers,
antennas, and other Little LEO satellite related devices. We cannot assure you
that these manufacturers will be able to meet our needs in a satisfactory and
timely manner or that we will be able to obtain additional manufacturers when
and if necessary. A significant price increase, a quality control problem, an
interruption in supply or other difficulties with third party manufacturers
could have a material and adverse effect on our ability to successfully provide
our proposed services. Further, the failure of third parties to deliver the
products, components, necessary parts or equipment on schedule, or the failure
of third parties to perform at expected levels, could delay our deployment of
the NewStar System. Any such delay or increased costs could significantly harm
our business and operating results.

Our failure to effectively manage our growth would harm our future business
results.

As we proceed with the development of our satellite system, we expect to
experience significant and rapid growth in the scope and complexity of our
business. We will need to add staff to market our services, manage operations,
control the operations of the proposed satellites, handle sales and marketing
efforts and perform finance and accounting functions. We will be required to
hire a broad range of additional personnel before we begin commercial
operations. This growth is likely to place a strain on our management and
operational resources. The failure to develop and implement effective systems,
or to hire and train sufficient personnel for the performance of all of the
functions necessary to effectively service and manage our potential subscriber
base and business, or the failure to manage growth effectively, could have a
material adverse effect on our business and financial condition.

We are dependent on key personnel.

Our success is substantially dependent on the performance of our
executive officers and key personnel and on our ability to retain and motivate
our personnel. The loss of any of our key personnel, particularly Fred W.
Thompson, our president, would harm our ability to manage operations and
development of the NewStar System, and could have a material and adverse effect
on our business, financial condition, and operating results.

Intense competition from existing and new entities could adversely affect our
business.

We will encounter competition from other Little LEO satellite systems, as
well as from competitive terrestrial-based communication companies. The market
for collection and transmission of data from fixed devices such as meters and
the potential market for other applications of data messaging services has led
to substantial and increasing competition. Many of our present and future
competitors using Little LEO satellites have begun to address the collecting and

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transmitting data from fixed devices and at least one of these competitors has
substantially greater

o financial, marketing, technical and manufacturing resources,

o name recognition, and

o experience.

Such competitors may be able to respond more quickly to new or emerging
advancements in the industry and to devote greater resources to the development,
promotion and sale of their products and services. Our technology must be
competitive so that the NewStar System can provide the data transmission service
at a cost lower than most of our competitors' systems. We cannot assure you that
such competitors will not succeed in developing better or more cost-effective
data transmission systems.

We face increased competition as a result of strategic alliances and other
consolidation in the industry.

Our current and potential competitors may make strategic acquisitions or
establish cooperative relationships among themselves or with third parties that
could increase their ability to reach commercial customers or subscribers of
data messaging services. Further, terrestrial-based wireless communication
systems are already providing data messaging services to the utility industry.
Such existing and future competition could affect our ability to form and
maintain agreements with utility companies and other customers. We cannot assure
you that we will be able to compete successfully against our current and future
competitors, and our failure to do so would have a material adverse effect on
our business.

Substantially all of our assets consist of our capitalized satellite
construction costs and acquisition costs relating to the E-SAT license and these
assets may be significantly impaired if we are unable to obtain the necessary
financing or unable to obtain control of E-SAT.

We cannot assure you that we will be able to obtain financing in a
sufficient amount for the construction and deployment of our satellite
constellation or that we will be granted control of E-SAT. Our failure to obtain
sufficient and timely financing will likely result in our conclusion that the
carrying amounts of the capitalized satellite construction costs and the
investment in E-SAT are not recoverable. Under generally accepted accounting
principles relating to the impairment of assets, we would then be required to
write off all or a portion of the capitalized satellite construction costs and
our acquisition costs relating to the E-SAT license which would have a material
and adverse effect on our business, results of operations and financial
position.

Our certificate of incorporation and Delaware law contain certain provisions
which could deter takeovers which may prevent you from receiving a premium for
your shares.

Provisions of our certificate of incorporation and Delaware law could
delay, defer or prevent a change in our control. Our certificate of
incorporation contains a fair price provision that requires a certain threshold
approval by our board of directors in the event of a merger, sale of assets or
other types of business combinations. In addition, our board consists of members
who serve staggered three year terms so that only a portion of our board can be
removed at the annual meeting of stockholders. Further, the board is authorized
to issue preferred stock, the classes and terms of which may be determined by
the board. We are also subject to the anti-takeover provisions of Section 203 of

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the Delaware General Corporation law, which prohibits us from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner,
under Delaware law. These provisions in our certificate of incorporation and
Delaware law could have the effect of delaying, deferring or preventing a change
in control, even if doing so would be beneficial to our stockholders.

We have not paid dividends and are not likely to pay dividends on our common
stock in the future.

We have not declared or paid any dividends on our common stock, and do
not anticipate paying any dividends for the foreseeable future. In addition, the
holders of our shares of series A preferred stock are entitled to receive, out
of any legally available funds, annual cumulative dividends equal to five
percent of the liquidation preference of their shares. All dividends must be
paid on the series A convertible preferred stock before any may be declared or
paid on the common stock. It is also anticipated that if we obtain bond
financing or other financing facilities, we will be restricted in our ability to
declare future dividends on our common stock.

Our stock price is volatile.

Our common stock is quoted on the OTC Bulletin Board and is thinly
traded. In the past, our trading price has fluctuated widely, depending on many
factors that may have little to do with our operations or business prospects. In
addition, the OTC Bulletin Board is not an exchange and, because trading of
securities on the OTC Bulletin Board is often more sporadic than the trading of
securities listed on an exchange of NASDAQ, you may have difficulty reselling
any of the shares that you purchase from the selling stockholders.

Future sales of our common stock pursuant to this prospectus and the exercise of
outstanding options and warrants may adversely affect our stock price and your
percentage of ownership.

Sales of a substantial number of shares of our common stock in the
public market could cause a reduction in the market price of our common stock.
Through this offering, Torneaux Ltd. may be reselling up to 5,000,000 shares of
our common stock. In addition, as of July 31, 2000, there were outstanding
warrants and options to purchase an aggregate of 6,255,992 shares of our common
stock. The majority of the options and warrants have exercise prices at less
than the current trading price of our common stock. As a result of this offering
and future issuances of our common stock pursuant to options or warrants, a
substantial number of shares of our common stock will become available for
resale which could have a material and adverse effect on the market price of our
common stock. Further, this may have a detrimental impact on the terms under
which we may obtain financing through a sale of our common stock in the future
by hindering our ability to raise capital at a higher market price due to the
dilutive effect to new investors. For these reasons, any evaluation of the
favorability of market conditions for a subsequent stock offering must take into
account any outstanding warrants and options.

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THE OFFERING

Common Stock Purchase Agreement

Of the shares of common stock being registered for resale by the selling
stockholders, 5,000,000 shares are being registered in connection with our
common stock purchase agreement with Torneaux Ltd.

On June 2, 2000, we entered into a common stock purchase agreement and
related agreements with Torneaux Ltd., a private equity fund organized under the
laws of The Bahamas. Subject to the fulfillment of certain conditions, the
agreements provide us with a facility through which we may sell shares of our
common stock, at our option, to Torneaux Ltd. periodically over a 24-month
period. Our ability to request a draw down under the common stock purchase
agreement is subject to the continued effectiveness of a resale registration
statement filed with the Securities and Exchange Commission to cover the shares
to be issued. The amount of common stock to be sold at each draw down will not
be less than $100,000 nor more than $2.45 million. We have agreed to sell our
shares to Torneaux Ltd. at a price equal to the then current market price of our
common stock during the draw down period, less a discount of between 7.5% and
13% specifically determined based upon a formula related to the then current
market price of the stock. The number of shares that we may sell to Torneaux
Ltd. varies depending on certain factors, including the market price of the
common stock and the then current ownership interest of our common stock by
Torneaux Ltd. We have also agreed to issue to Torneaux Ltd. warrants to purchase
from 20% to 50% of the number of shares of common stock being purchased at the
time of each draw down. Torneaux Ltd. will either resell its shares of our
common stock in the open market, resell its shares of our common stock to other
investors in negotiated transactions or hold shares of our common stock in its
portfolio. This prospectus covers the resale by Torneaux Ltd. of common stock
purchased by Torneaux Ltd. and issuable upon exercise of the related warrants
either in the open market or to other investors.

In connection with the common stock purchase agreement, we issued a
warrant to purchase an aggregate of 250,000 shares of our common stock as a
finder's fee to a third party not affiliated with us or Torneaux Ltd. The
warrant is exercisable at an exercise price equal to the lesser of $1.5625 per
share or the fair market value of one share of our common stock on the date the
registration statement is declared effective by the Securities and Exchange
Commission. The resale of the shares issuable upon exercise of the warrant are
included in this prospectus.

Series A Convertible Preferred Stock

Of the shares being registered, 629,997 shares of common stock are being
registered for resale upon conversion of our outstanding series A convertible
preferred stock.

From December 1999 to March 2000, we issued an aggregate of 35,897 shares
for our series A convertible preferred stock in a private placement to
accredited investors. The shares of preferred stock have a liquidation
preference of $30.00 per share and are initially convertible, at the option of
the holder, into ten shares of our common stock, or at a rate of $3.00 per
common share. The conversion rate is adjusted if the 5 day average closing price
of our common stock three months after the shares were issued is below $3.00. As
a result of the closing price of our common stock being less than $3.00 per
share for all of the issuances after the three month period, the conversion rate
has been adjusted for each investor. Each share will convert, at the option of
the holder, into more than ten common shares, the precise number of shares being
the liquidation preference, of $30.00 per share, divided by the 5 day average

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closing price immediately prior to the end of the three month period. The
holders of series A convertible preferred stock are also entitled to receive
annual cumulative dividends equal to five percent of the liquidation preference.
We may redeem the preferred stock, in whole or in part, for the purchase price
plus any accrued and unpaid dividends if the closing price of our common stock
is $6.00 per share or greater for twenty consecutive days. Our right to redeem
the preferred stock is subject to the holder's right to convert their shares of
preferred stock into shares of our common stock within thirty days of our notice
to redeem. This prospectus covers the resale of the shares of common stock
underlying the shares of preferred stock.

In connection with the private placement we issued a warrant to the
placement agent to purchase 57,586 shares of our common stock at an exercise
price of $3.00 per share, subject to adjustment. The resale of the common stock
issuable upon conversion of the warrant is included in this prospectus.

Additional Shares We Are Registering

In September 1999 we entered into an agreement with a consultant for
services in connection with obtaining satellite insurance. As part of that
agreement, we issued a warrant to purchase an aggregate of 130,000 shares of our
common stock at an exercise price of $2.75 per share. We also issued two
warrants for consulting services. The first is exercisable into 100,000 shares
at an exercise price of $2.8138 per share and the second warrant is exercisable
into 300,000 shares at an exercise price of $0.6749 per share. The resale of the
common stock issuable upon exercise of the warrants is included in this
prospectus. The resale of an additional 366,298 shares of common stock and
10,000 shares of common stock issuable upon the exercise of a warrant at an
exercise price of $0.75 per share, are also included in this prospectus.

Other Shares Included in This Prospectus

This prospectus also relates to an aggregate of 11,911,921 shares which
were previously registered and are included to allow their resale under this
prospectus.

USE OF PROCEEDS

We will not receive any proceeds from the resale of shares of common
stock by the selling stockholders. We will receive proceeds from any sales of
shares pursuant to the common stock purchase agreement with Torneaux Ltd. and
upon any exercise of warrants issued to Torneaux Ltd. or the third party finder.
We intend to use the proceeds from our sales to Torneaux Ltd. and the exercise
of warrants primarily for the costs associated with the construction and launch
of our satellite system, for working capital and other general corporate
purposes.

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PRICE RANGE OF COMMON STOCK

The following table sets forth the high and low bids quoted for our
common stock during each quarter for the past two fiscal year ends and until the
quarter ended June 30, 2000, as quoted on the OTC Bulletin Board.

Common Stock

Quarter Ended High Low
---------------- ------- -------
June 30, 2000 $3.06 $1.09

March 31, 2000 5.45 1.66

December 31, 1999 2.25 2.16
September 30, 1999 2.56 2.44
June 30, 1999 3.00 2.75
March 31, 1999 4.97 4.06

December 31, 1998 4.25 4.00
September 30, 1998 4.63 1.88
June 30, 1998 2.88 1.50

These quotations reflect inter-dealer prices, without retail markup,
mark-down or commission, and may not represent actual transactions.

As of July 31, 2000, we had 14,883,988 shares of common stock outstanding
and 413 stockholders of record. The number of stockholders does not include
those who hold our securities in street name.

DIVIDEND POLICY

We have not declared or paid any cash dividends since our inception. In
addition, the holders of our shares of series A preferred stock are entitled to
receive, out of any legally available funds, annual cumulative dividends equal
to five percent of the liquidation preference of their shares. All dividends
must be paid on the series A convertible preferred stock before any may be
declared or paid on the common stock. We currently intend to retain any
additional future earnings, for use in the operation and expansion of our
business. We do not intend to pay any cash dividends on our common stock in the
foreseeable future.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

We were formed in Delaware in 1989 and our principal executive offices
are located in Mill Valley, California. We completed a share exchange
reorganization with DBS Network in 1992. Since 1994, our focus has been to
pursue business opportunities in satellite telecommunications. We began this
pursuit originally by purchasing interests in direct broadcast satellite
licensees. During 1997, we sold our last indirect interest in a direct broadcast
satellite licensees.

We formed E-SAT, Inc., a Colorado corporation, in partnership with
EchoStar in November 1994 for purposes of applying for a Little LEO FCC license.
On March 31, 1998, the FCC issued a license to E- SAT to launch and operate a
Little LEO satellite system. Pursuant to the initial formation agreement for E-
SAT, we hold 20% of the capital stock of E-SAT and EchoStar holds the remaining
80%. In July 1999, we entered into an agreement to acquire an additional 60.1%
from EchoStar, to bring our total ownership of E- SAT to 80.1%. This transfer is
subject to the approval of the FCC, which was formally requested by us and
EchoStar on May 2, 2000.

We established a dedicated marketing and sales group in 1999 and plan to
increase our marketing activities during fiscal 2000.

We seek to satisfy our fiscal 2000 cash requirements by raising new
equity and debt capital, as well as by seeking the exercise of previously issued
third-party warrants and stock options. Through July 31, 2000, we issued 35,897
of our preferred stock in exchange for gross proceeds of $1,076,910 in cash.

Results of Operations

Three Months Ended March 31, 2000 Compared To The Three Months Ended March 31,
1999

Revenues

We remain in the development stage and did not generate revenues in
either the quarter ended March 31, 2000 or March 31, 1999.

Operating Expenses

Total operating expenses for the quarter ended March 31, 2000 was
$1,525,040 compared to $1,118,643 for the quarter ended March 31, 1999. These
costs are related to marketing and sales expenses, general and administrative
expenses, and research and development expenses.

Marketing and Sales Expenses

Marketing and sales expenses are primarily the costs of personnel,
including non-cash stock compensation and travel. Marketing and sales expenses
for the quarter ended March 31, 2000 were $362,500, or 23.7% of operating
expenses. We did not incur any marketing and sales expenses for the quarter
ended March 31, 1999. This increase resulted from our establishment of a
dedicated marketing and sales group in June 1999 and included non-cash
compensation of approximately $57,000.

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General and Administrative Expenses

General and administrative expenses include costs associated with debt
financings and our legal, administrative and general management functions.
General and administrative expenses for the quarter ended March 31, 2000, were
$987,833, or 64.8% of operating expenses, compared to $898,042, or 80.3% of
operating expenses, for the quarter ended March 31, 1999. The increase was
primarily due to increased personnel related costs of $117,000, non-cash
compensation of approximately $177,000 and consulting fees of $114,000, offset
by a decrease in the cost of options for services provided by consultants of
approximately $350,000.

Research and Development Expenses

Research and development expenses represent non-capitalized costs
incurred to develop the NewStar System. Research and development expenses for
the quarter ended March 31, 2000 were $174,707, or 11.5% of operating expenses,
compared to $220,601 or 19.7% of operating expenses. The decrease was primarily
due to a decrease in consulting expenses by $103,000 and a decrease in travel
expenses by $35,000, offset by an increase in personnel cost of $74,000 and
non-cash compensation of approximately $13,000.

Non-Cash Stock Compensation

In order to attract and retain personnel, we granted options to purchase
1,913,106 shares of our common stock at exercise prices ranging from $0.39 to
$2.81 to several employees and our service providers. Some of the exercise
prices were below the fair market value of the common stock at the time of
grant, resulting in deferred stock compensation of $2,490,337. This amount is
being amortized over the vesting periods of the granted options. As a result,
$247,279 was recognized as non-cash stock compensation expense in the quarter
ended March 31, 2000 in the relevant expense category as described above. No
similar expenses were incurred in the quarter ended March 31, 1999.

Other Income (Expense)

We experienced a non-operating loss of $442, consisting of net interest
income of $1,279 and a loss on the disposal of equipment of $1,721 for the
quarter ended March 31, 2000, a decrease of $12,811 over net interest earned of
$12,369 for the quarter ended March 31, 1999. The reduction in net interest
income was due to the reduction of our cash and cash equivalents.

Net Loss

Our net loss for the quarter ended March 31, 2000 was $1,525,482 compared
to a net loss for the quarter ended March 31, 1999 of $1,106,274. During the
first quarter of 2000, we incurred $362,500 in marketing and sales expenses
while we did not incur any sales and marketing expenses during the first quarter
of 1999.

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Year Ended December 31, 1999 Compared to December 31, 1998

Revenues

We remain in the development stage and did not generate revenues in the
last two fiscal years ended December 31, 1999 or December 31, 1998.

Operating Expenses

Total operating expenses in 1999 were $6,028,829 and in 1998 were
$2,995,848. These costs are related to marketing and sales expenses, general and
administrative expenses, and research and development expenses. The increase in
our operating expenses were a result of the expansion of our business and our
efforts to develop the NewStar System.

Marketing and Sales Expenses

Marketing and sales expenses consist primarily of the costs of personnel,
including non-cash stock compensation and travel. Marketing and sales expenses
for 1999 were $922,623, or 15.3% of operating expenses. No marketing and sales
expenses were incurred in 1998. This increase was a result of the establishment
of our dedicated marketing and sales group in June 1999.

General and Administrative Expenses

General and administrative expenses for 1999 were $4,060,910, or 67.4% of
operating expenses, compared to $2,198,701, or 73.4% of operating expenses in
1998. The increase was primarily due to increased personnel costs arising from
the expansion of the management team, and from non-cash stock compensation of
approximately $760,000.

Research and Development Expenses

Research and development expenses represent the costs we have incurred
developing the NewStar System. Research and development expenses for 1999 were
$1,045,296 or 17.3% of total operating expenses, compared to $797,147, or 26.6%
of total operating expenses in 1998. The increase was due to the expansion of
our research and development staff in Toulouse, France, and from non-cash stock
compensation of approximately $50,000.

Non-cash Stock Compensation

In order to attract and retain personnel, we granted options to purchase
1,913,106 shares of common stock at exercise prices ranging from $0.39 to $2.81
to several employees and service providers. Some of the exercise prices were
below the fair market value of the common stock at the time of grant, resulting
in deferred stock compensation of $2,490,337. This amount is being amortized
over the vesting periods of the granted options, and as a result, $957,755 was
recognized as non-cash stock compensation expense during 1999 in the relevant
expense category as described above. No similar expenses were incurred during
1998.

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Other Income and Expenses

We experienced a non-operating gain of $113,336, consisting solely of net
interest income, for the fiscal year ended December 31, 1999, an increase of
$80,915 over net interest earned of $32,421 for the year ended December 31,
1998. This gain was generated from investment income arising from substantial
fundraising activities during the year ended December 31, 1999. We also recorded
no gains or losses on sale of investments in 1999, compared to a loss in 1998 of
$228,323 arising from the sale of our interest in Seimac Ltd.

Net Income (Loss)

Our net loss for the year ended December 31, 1999, was $5,915,493
compared to a net loss for the year ended December 31, 1998 of $3,293,493.

Liquidity and Capital Resources

We have been in the development stage since our inception and have not
recognized any significant revenues. Our monthly expenses averaged approximately
$300,000 per month during the year ended December 31, 1999 and $508,000 per
month during the first quarter of 2000 which included approximately $121,000 per
month for marketing and sales, approximately $329,000 per month for operating,
legal and consulting expenses and approximately $58,000 per month for E-SAT
research & development. However, expenses will continue to increase during
fiscal 2000 with the demands of increased efforts in both systems and business
development. Additional capital will be necessary to expand operations or
continue current operations.

Traditionally, we have relied on equity and debt placements to finance
our operations. We have also received proceeds from the sale of our interest in
entities that held direct broadcast satellite licenses. We no longer have any
interest in direct broadcast satellite licensees.

During 1999 we received proceeds from the sale of common stock totaling
approximately $15 million before stock issuance costs of approximately $154,000
and we received proceeds from the sale of common and preferred stock totaling
approximately $1,022,000 before stock issuance costs of approximately $85,000
for the quarter ended March 31, 2000. These transactions included private
placements of common stock, units consisting of shares of common stock and
warrants to purchase common stock, and shares of preferred stock. We also
received proceeds in the amount of approximately $7.8 million from the exercise
of warrants and approximately $786,000 from the exercise of options in 1999. We
received proceeds in the amount of approximately $134,000 from the exercise of
options and warrants in the quarter ended March 31, 2000. We also received
approximately $900 from the sale of stock to employees pursuant to our stock
purchase plan. These proceeds were used primarily to fund our satellite
construction costs, investing activities and for working capital.

Our cash and cash equivalents were $282,945 as of December 31, 1999 and
$1,291,711 as of December 31, 1998, and $351,574 as of March 31, 2000. We had
negative working capital of $941,527 as of December 31, 1999 and $1,304,640 as
of March 31, 2000, compared to working capital of $233,078 as of December 31,
1998, and $8,727,069 as of March 31, 1999. Until we are able to develop,
construct and operate the NewStar System and begin receiving revenues, we must
continue to raise cash from outside sources for our operations and for the
development of the NewStar System.

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Net cash used in operating activities was $3,681,956 for the year ended
December 31, 1999 and $830,488 for the quarter ended March 31, 2000. The net
cash used in 1999 resulted from a net loss of $5,915,493, offset by non cash
stock compensation of $957,755, the issuance of options and warrants for
services in the amount of $774,298, the issuance of shares of common stock equal
to $324,391 in connection with the settlement of litigation and an increase in
accounts payable of $204,675 as a result of increased marketing and general
administrative activities during the fourth quarter of 1999. The net cash used
in the quarter ended March 31, 2000 resulted from a net loss of $1,525,482
offset primarily by non-cash stock compensation of $247,279, an increase in
accounts payable of $408,389 arising from increased marketing and general
administrative expenses, and a decrease in prepaid and other current assets of
$34,103 due to a reduction in prepaid insurance and employee receivables

Net cash used in operating activities for the year ended December 31,
1999 was $3,293,493 as offset by certain non-cash charges, a loss on the sale of
our investment in Seimac Ltd. and our equity in E-SAT's losses. Net cash used in
operating activities for the quarter ended March 31, 1999, was $1,229,075.

Net cash used in investing activities for the year ended December 31,
1999 was $12,413,265 an increase of $10,928,307 from the year ended December 31,
1998. Approximately $10.8 million of the net cash used in investing activities
was related to satellite construction payments made to our satellite contractors
and approximately $1.5 million paid to a consultant in connection with the
negotiation of the agreement to obtain control of E-SAT. Net cash used in
investing activities was $38,151 for the quarter ended March 31, 2000. This was
a decrease of $1,088,191 over the same period ended March 31, 1999.
Approximately $35,000 of the net cash used in investing activities during the
quarter ended March 31, 2000 was related to satellite construction payments made
to our satellite contractors.

Net cash provided by financing activities for the year ended December 31,
1999 was $15,086,455 compared to $4,554,726 for the year ended December 31,
1998. Net cash provided by financing activities during 1999 was primarily
related to the net proceeds from our sale of units of common stock, the exercise
of warrants and the sale of common stock to two our satellite contractors. Net
cash provided by financing activities for the quarter ended March 31, 2000, was
$937,268 compared to $10,369,980 for the same period ended March 31, 1999. Net
cash provided by financing activities during the quarter ended March 31, 2000,
was related primarily to the net proceeds from the sale of preferred stock and
the exercise of options and warrants.

In 1996, we received milestone payments under the terms of a $1.2 million
purchase order for 10,000 satellite radio units from ABB. Under this agreement,
we were eligible to receive up to $500,000 towards development costs upon
meeting the milestone requirements of the contract. We met the first four
milestones of the contract and received $400,000 in cash. The parties agreed to
suspend all development under this agreement due to the expiration of our
agreement for the use of the Argos System on December 31, 1997, and the
subsequent limits placed on future commercial use of the Argos System.
Therefore, the milestone payments could be subject to refund, in whole or in
part.

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BUSINESS

Overview

We are a telecommunications company dedicated to providing a low-cost
satellite-to-Internet data messaging service to and from remote locations.
Through our ownership interest in E-SAT, Inc., we are the only company currently
licensed by the FCC to provide commercial two-way data messaging services using
the code division multiple access, or CDMA, technology and Little LEO,
low-earth-orbiting satellites, known as the NewStar System. We expect to begin
providing our data messaging services in 2002. Our initial target market is data
collection and communications with energy meters in hard to access locations.

Historically, remote and hard to access energy meters have been expensive
for utility companies to read as a result of the significant time and labor
costs involved in collecting the data. Using low earth orbit satellites, we
believe that we will be able to collect data from those meters at a
significantly lower cost to utility companies and in a more timely manner. This
should also improve the ability of utility companies to manage the distribution
of valuable energy resources. By focusing on the collection of data in remote or
hard to access locations, we believe we can limit the competition from
terrestrial based technologies, like cellular communications, where the
infrastructure costs are generally too high to justify implementation.

We have also identified other significant follow-on markets for our data
messaging services including, the collection of data from propane tanks, oil and
gas wellheads and gas pipelines, checking the inventory and cash status of
vending machines and the monitoring of air and water quality of waste disposal
sites in various geographic regions.

The NewStar System is designed for use with a small constellation of low
earth orbiting satellites. The term "LEO" is shorthand for low-earth-orbit
satellites and the term "Little LEO" is shorthand for low- earth-orbit
satellites operating in a lower frequency band. The system uses a radio terminal
unit which attaches to a customer's meter or other device and transmits data to
Little LEO satellites. From the satellites, the information is then transmitted
to a ground station that sorts the data and transmits it, via the Internet, to
the end user. The two-way features will also allow us to send instructions,
messages and updates to the radio terminal unit. Through use of the CDMA
technology, the NewStar System is designed to require less transmission power
and provide superior noise tolerance. The store and forward design also allows
the Little LEO satellites to store data for later transmission to a ground
station, minimizing the number of necessary ground stations.

Our Strategy

To achieve our business objectives, we have identified the following key
components to our business strategy:

Providing a reliable, worldwide, two-way data communications network based
on existing technologies. We believe that, by incorporating existing and
proven technologies such as CDMA communications technology and a
store-and-forward design into the NewStar System and by using six Little
LEO satellites in polar orbits, we will be able to provide reliable,
global, two-way data and messaging communications services. The
distribution of our satellite constellation in polar orbits is designed to
provide us access to all of the earth's populated land mass approximately

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every hour with each satellite, reducing the potential risks from the loss
or outage of one or more satellites.

Offering a low-cost service. We believe the relatively lower costs involved
in designing, constructing, launching and operating the NewStar System,
together with lower-powered, relatively inexpensive ground transceivers,
will allow us to provide data messaging services to customers in
hard-to-access or remote locations at substantially lower rates than
competing systems. We have designed our system specifically for the two-way
communication of short messages, using fewer satellites than competing
near-real time low earth orbit systems. Our system should utilize less
complex and less expensive components than those required for larger
satellite systems designed to carry voice, video and high-intensity data
traffic. Competing Little LEO systems using the older TDMA communications
technology will require more satellites and more gateway earth stations
than the NewStar System.

Offering a low-cost ground transceiver. We expect to offer a smaller and
lower cost ground transceiver than competing systems by using CDMA
technology and an application specific integrated circuit, or ASIC,
technology. This should provide us with significant competitive advantage
in the marketplace.

Capitalizing on not being the first to market. We have learned a great deal
from earlier commercial satellite operators whose services have not
developed as they may have anticipated. This experience has provided us
with the ability to market what we believe is a superior system using,
among other things, the CDMA technology and lower cost transceivers, to
help differentiate our services from those of our competitors.

Capitalizing on the barriers to entry into our marketplace. The primary
barrier to entry into the Little LEO satellite service market in the United
States is the acquisition of an operating license from the FCC. Before the
FCC issues any additional licenses, it must allocate an additional portion
of the frequency spectrum for use, which we do not expect to happen in the
near future.

Directly marketing to large industrial customers and governmental entities.
We believe that marketing directly to large industrial customers and
governmental entities will ensure greater customer service and support in
each geographic region or targeted market than will value-added resellers,
and will reduce our selling and administrative expenses for bringing the
NewStar System to market. Outside of the United States, it will also aid us
in securing any necessary local regulatory and other approvals.

Capitalizing on the commitment and expertise of our strategic partners. We
have successfully assembled a group of investors who we believe are highly
qualified strategic partners. We negotiated equity investments totaling $10
million. We received a total investment of $5 million from Eurockot Launch
Services, our launch service provider, and Surrey Satellite Technology
Limited, our satellite manufacturer. We have received a commitment for an
additional $5 million investment from Alcatel Space Industries, our
end-to-end system prime contractor, which is contingent on our bringing
into effect the prime contract effective date. Due to delays in financing,
we did not meet the milestone payment necessary to establish the "effective
date of contract" and, as of July 31, 2000, we continue to be overdue on
this payment requirement.

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Development Milestones

The NewStar System is expected to be deployed with a constellation of six
Little LEO satellites in 2002. To date, we have achieved the following
milestones:

Development of the system. We initially conducted research and testing to
develop our NewStar System design and were successful in integrating our
satellite transmitter and antenna completely within a utility meter.

Completed proof-of-concept trials. We conducted proof-of-concept
demonstrations with 36 electric and natural gas utilities demonstrating
Little LEO satellite technology as a viable method to collect data from
hard-to-access locations. We conducted a proof-of-concept trial for Pacific
Gas & Electric Company, in which data from several natural gas wellhead
meters was collected and transmitted by Little LEO satellites to the
customer. This trial was completed in April 1995. Subsequently, a series of
proof-of-concept demonstrations were conducted in conjunction with ABB
Power T&D Company, Inc., commonly referred to as ABB, in which prototype
radio terminal units and electric meters were installed at 34 electric
utilities in the continental United States and two international utility
companies in South America and Canada. Typical trial demonstrations lasted
for a 30-day period, and the demonstrations were completed in late 1997.
These early trials utilized the Argos System, a satellite location and data
collection system operated and controlled by the Centre National d'Etudes
Spatiales (France) and the National Oceanic and Atmospheric Administration,
or NOAA.

Granting of FCC License. On March 31, 1998, E-SAT was issued a license by
the FCC to provide Little LEO satellite services in the United States

Commenced construction of the satellites. On March 31, 1999, we signed a
contract with Surrey Satellite Technology Limited for the construction of
our constellation of six Little LEO satellites. We have assigned this
contract to our prime contractor, Alcatel Space Industries.

Engaged a launch service provider to deliver our satellites into orbit. On
March 31, 1999, we signed a contract with Eurockot Launch Services GmbH,
for two launches. Two launches are currently expected to occur in 2002,
each for a set of three satellites. The total contract price for the two
launches is $30.0 million.

Acquired controlling interest, subject to FCC approval, of the FCC license.
On July 31, 1999, we signed a contract with EchoStar to increase our
ownership in E-SAT to 80.1%. EchoStar will have the right to use 20% of the
NewStar System's communications capacity. The transfer of control is
subject to FCC approval, which was officially requested on May 2, 2000.

Entered into an agreement with an end-to-end prime contractor for the
NewStar System. On October 8, 1999, we signed a contract with Alcatel Space
Industries for the final design, construction and delivery to the launch
site of six Little LEO satellites. This agreement also includes the final
design, construction and delivery of the ground infrastructure, including
the gateway earth station, mission center, satellite control center, ground
communications network and ground-based transceivers to be installed into
devices, like utility meters. Alcatel is also responsible for providing
in-orbit testing of the NewStar System. The total contract price for the
end-to-end system is $88.5 million. Either party has the right to terminate
this agreement under certain circumstances. We have paid $2 million in

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construction payments to Alcatel and have not yet made the milestone
payment necessary to establish the "effective date of contract."

Negotiated equity investments in us by all of our strategic partners. We
negotiated equity investments totaling $10 million by Eurockot Launch
Services and Surrey Satellite Technology Limited and a potential investment
by Alcatel, subject to making the milestone payments necessary to establish
the effective date of contract.

Organized our risk management through insurance. On July 14, 1999, we
engaged Frank Crystal and Co. and its subsidiary, International Space
Brokers as our exclusive risk management advisors and insurance brokers for
both space and ground segments.

Targeted Markets

We have designed the NewStar System to provide low cost, two-way data
messaging services to industrial customers throughout the world who need
regular, but not real-time, information. By focusing on the non-real-time
market, where data collection is not triggered by a real-time event such as an
emergency condition, and where delay between data collection and transmission to
the customer has insignificant business consequence, we are able to
substantially lower the costs of our system, and therefore lower the price to
the customer. By focusing on collecting data that is in remote or hard-to-access
locations, we reduce our competition from terrestrial technologies, such as
cellular communications, who cannot justify the infrastructure expense in each
remote location, and we increase the value offered to the customer as a result
of their higher costs in those areas.

Energy Meters

Our initial focus is on energy meters in remote locations. One of the our
target markets is the United States electric and natural gas utility industries,
particularly their high-cost-to-read metering segment which historically
required such "meter reading" to be conducted by utility personnel. This labor
intensive activity presents logistical issues such as significant travel time to
a meter site, rugged terrain, physical risk, restricted sites, environmental
issues, and mis-reads requiring additional site visits, all of which can
contribute to higher costs for utilities.

Our messaging services can provide a reduction in the cost to gather data
from hard-to-access meters. We expect to charge significantly less than the
costs utility companies normally incur in sending meter reading personnel out to
each of those difficult to reach locations. This provides several advantages
including:

o Planning and decision-making is improved through greater and more
timely availability of their consumers' energy-related information.

o Estimated billing is eliminated.

o Service connects and disconnects can be scheduled and performed
automatically.

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o Value added features are available such as meter diagnostics, tamper
detection, outage reporting, and power quality information.

o Two-way communication capabilities can substantially reduce customer
costs while enabling new customer applications such as initiating
remote diagnostics and remote turn-on/turn-off of electric meters.

In the United States, the emergence of automatic meter reading as an
accepted technology and the deregulation of the utility industry in a number of
states, which has forced utility companies to focus on all aspects of their
costs and, in some cases, to compete to retain the meter reading activity, has
provided a foundation for us to market our services.

There is also a significant potential market for our services in
countries who do not broadly monitor energy consumption. For those countries,
implementing or expanding coverage of metering is of significant strategic and
economic benefit both as a source of revenue and as a critical component of
implementing their energy infrastructure. By working with these countries as
they develop their services and providing them with a low-cost alternative to
traditional meter reading methods, we believe we can succeed in becoming an
integral part of their utility infrastructure.

Other Markets

We believe other significant markets for our data messaging services
include:

Propane tanks. Currently, most propane tanks are not metered and customers
can be invoiced only on fuel delivery. Automated meter reading enables
monthly billing based on actual consumption, which improves the
distributor's cash flow and, even more important, creates an opportunity
for fuel arbitrage. Since the consumer would not need to pay for fuel upon
delivery, the distributor can fill customer tanks in the summer or other
times, when fuel prices are lower. The consumer also avoids the
inconvenience of running out of fuel and enjoys a reduction in the safety
issues associated with re-lighting the pilots on their appliances.

Oil and gas wellheads. In the energy sector, data from particularly remote
and hard-to-access oil and gas wellheads can be collected electronically,
providing material savings in costs per read. Some of these wellheads are
located in areas that are not only extremely remote, but are also high-risk
and the physical safety of the meter reader is a real concern. In addition
to eliminating the personal safety risk this also will create an
opportunity to aggregate data internationally, if the service provider has
global coverage.

Gas pipelines. Monitoring for cathodic protection, flow control and leakage
from gas pipelines is another market appropriate for the periodic data
transmission from sensors located in isolated areas. Most of the cathodic,
flow control and leakage sensors around the world are read manually, which
is a tedious process, frequently using helicopters for typical pipeline
terrain. Given the cost of product flowing through the pipeline and the
ecological impact of a pipeline failure, energy companies are motivated to
quickly identify any failures as well as the sources of the problem.

Vending machines. Vending machines can use our proposed data messaging
service for inventory and cash control. By collecting data from each
machine on a timely basis, distributors can deliver the right product to
the right machine at the right time, thereby improving sales, the
productivity of their route personnel, and greatly simplifying the cash
reconciliation process. While most vending machines are not located in

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hard-to-access places, a system that offers both ease-of-use and complete
geographic coverage offers significant benefits to the distributor.

Environmental and Agriculture. The waste disposal industry, faced with
increased public awareness of pollution problems, is required by federal,
state, and local governments to closely monitor air and water quality at
all waste disposal sites. Collecting data from these locations and
reporting it to both operating and regulatory agencies is well suited to
our proposed services. In addition, we believe that existing irrigation
systems can become more efficient through timely monitoring of usage data.

The NewStar System

The NewStar System is designed to minimize infrastructure investment and
maximize efficiency by utilizing a small constellation of Little LEO satellites
with the ability to reach markets not readily accessible by terrestrial
technologies. We expect that the aggregate cost to construct and launch the
NewStar System into commercial service will be approximately $120 million, of
which approximately $12 million had been spent through 1999.

The NewStar System's radio terminal units will attach to a customer's
meter or other device and transmit data to the satellites using CDMA technology.
From these Little LEO satellites, the data is transmitted to ground stations,
which sort the data and transmit the information to our customers via the
Internet. The two-way service also allows our customers to send instructions,
messages, and updates to their remote meters or other devices. The following
illustrates the data collection and dissemination process:

[GRAPHIC OMITTED]

Space Segment

The initial constellation to be launched will consist of six satellites.
We plan to initially launch three satellites on a single launch vehicle in a
circular, near polar orbit at an altitude of approximately 550 miles and a 99
degree inclination angle. At this altitude, there will be fourteen revolutions
per satellite per day, taking about 100 minutes per orbit. After the initial
three satellites are deployed and become operational, and the system is
established, an additional three satellites will be deployed in a second near-
polar orbital plane within FCC guidelines. These Little LEO satellites, which
will weigh about 110 kg each, will be almost constantly illuminated by the sun,
thereby significantly reducing battery usage. Supplemental battery power will be

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required only for power load leveling, occasional brief eclipse periods and
contingencies. Based on the current design, we estimate that each satellite will
operate for a period of five years.

The satellites will consist of two functional segments, the platform and
the payload. Put simply, the platform is the structure part of the satellite.
The payload is the radio frequency equipment on board the satellite that allows
it to communicate with earth-based transceivers. The platform provides the
payload with power and thermal control, allowing it to operate and perform the
mission. The platform provides the altitude control in order to keep the payload
antenna pointing towards the earth. Orbit determination and control is performed
by the platform in order to maintain the proper constellation configuration.

The FCC license will allow us to operate from earth to the satellites in
the 148.0000 - 148.905 MHz band and from the satellites to the earth in the
137.0725 to137.9275 MHz band. The communications plan for our system will
utilize direct sequence spread spectrum multiple access transmission for service
links, from meter to satellite, and feeder links, from ground station to
satellite. This modulation technique is designed to allow the communications to
distinguish between messages and the background noise emanating into space.

Due to the continuing growth of electrical and electronic equipment, such
as personal paging systems that incorporate wireless communication technology,
the radio frequency spectrum has become crowded or "noisy." Commercial
applications demand reliable communication systems. This objective is harder to
achieve with conventional solutions because of numerous wireless systems
creating more noise in the frequency bands of operation. CDMA is designed to
enable our system to provide high functionality in a noisy radio frequency
environment and achieve those particular data transmission objectives.

With most conventional modulation techniques, energy concentration is
maximized for a narrowband transmission channel. While narrowband solutions opt
for a single carrier channel, the transmitted signal must be strong enough to be
recognized over the background noise. Therefore, terminals operating in a
narrowband technique must have relatively high power capability. CDMA spreads
the data signal over the entire band of operations reducing the power required
by a terminal unit to transmit data to a satellite. Through E-SAT, we are
presently the only commercial Little LEO system operator licensed in the United
States to implement CDMA in its communications protocol.

Ground Segment

Rather than using traditional technology which transmits the data to a
ground station as soon as it is received, the non-real-time nature of our
markets allows us to use a store-and-forward design. Our satellites are designed
to receive the information from terminals on the ground, store it in memory and
hold all of the data until they pass over a ground station. This allows us to
use fewer ground stations, reducing costs and radio frequency licensing and
coordination requirements. We currently intend to locate our initial ground
station on Svalbard Island in Spitzbergen, Norway, and are evaluating certain
sites in other countries for additional service.

The mission control center will manage the collection and retrieval of
data. It will interface with ground stations and a satellite control center. The
satellite control center will communicate directly with and provide overall
operational control of the satellites. The mission center location is currently
in review and the satellite control center is currently planned to be located in
the United Kingdom.

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Secure Internet communication with customers is a crucial part of the
NewStar System. Data collected or delivered will utilize the Internet as a
global, cost-effective vehicle to disseminate data and maximally automate the
customer servicing system. Data will lack meaningful descriptors or customer
identification and so should have no meaning if intercepted, but may also be
encrypted.

Terminals

The system is also comprised of remote terminal units which will connect
to a device such as an electric utility meter and allow that device to send and
receive signals to and from the system. The terminal will provide the
communication link between the meter and our satellites. A relatively low-cost
terminal is a key success factor for this business plan and, for that reason, we
intend to strictly control the development and manufacturing of the terminals.

The complete terminal unit will consist of two parts, the core engine and
the fixed asset interface module. The core engine will include a programmable
controller unit and will incorporate the cost-saving benefits of the ASIC
technology. This will allow us to manufacture the terminals at a lower cost. The
fixed asset interface module will be optimized for the specific application,
such as an electric meter, vending machine or propane tank, and will contain all
the application specific functions required to interface the device with the
core engine. The interface will also contain any necessary power conditioning
components to allow reliable communication between the terminal and the
satellites.

During 1998, we worked with SAIT Radio Holland SA to perform studies on
antennas for the proposed terminal units and to develop and test prototypes. The
development of terminal units was also included as an item under our agreement
with Alcatel. We have not yet identified a main subcontractor for the
engineering, development and provision of hardware and software for terminal
units, or for the manufacture of terminals.

Regulatory Environment

United States

All commercial non-voice, non-geostationary mobile-satellite services,
such as Little LEO satellites, in the United States are subject to the
regulatory authority of the FCC. Little LEO operators must obtain authorization
from the FCC to launch and operate their satellites and to provide permitted
services in assigned spectrum segments.

In November 1994, E-SAT filed an application with the FCC for a license
to develop a commercial Little LEO satellite system for data collection and
transmission. E-SAT was one of five applicants requesting approval for
essentially the same frequency band but proposing a different use. The five
applicants mutually agreed upon a spectrum sharing plan which requires the
applicants to share an uplink and downlink frequency band with other satellite
systems. In October 1997, the FCC released a report and order which concluded
that with use of appropriate transmission techniques, proper system
coordination, the time-sharing of frequencies and the adoption of the spectrum
sharing plan, there was sufficient spectrum to license all five applicants.
Thereafter, E-SAT filed an amendment conforming its application to the
guidelines adopted by the FCC report and order.

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On March 31, 1998, the FCC approved E-SAT's application for a Little LEO
satellite license. Under the license, E-SAT is authorized to launch and operate
six Little LEO satellites to provide a two-way, low-cost messaging service in
the United States in the 148 to 148.905 MHz for service and feeder uplinks, and
the 137.0725 to 137.9725 MHz frequency band for service and feeder downlinks.
For its uplink, E-SAT is licensed to utilize 500 kHz of contiguous spectrum in
the 148 to 148.855 MHz band that is not shared with the other United States
licensees. Some of this spectrum may be required to be operated co-frequency
with the French S-80 system, based on inter-governmental agreements between the
United States and France. In December 1998, we completed our coordination with
France on this shared use. E- SAT is licensed to utilize 148.855 to 148.905 MHz
for feeder uplinks. E-SAT will operate in the other 355 kHz of the 148 to
148.905 MHz band on a co-frequency basis with three other companies, Leo One USA
Corporation, Final Analysis Communication Services and Orbcomm Corp. In the
downlink direction, E-SAT will operate in the band 137.0725 to 137.9275 MHz
co-frequency with NOAA satellites, Orbcomm and Final Analysis. E-SAT is
obligated to coordinate with the other Little LEO licensees and NOAA, coordinate
internationally and engage in consultations as required by Article 14 of the
INTELSAT Agreement and Article 8 of the Inmarsat Convention.

In order to maintain the validity of the FCC license, E-SAT must comply
at all times with the terms of the FCC license, unless specifically waived or
modified by the FCC. The terms include, among other things, system construction
milestones. In order to comply with the milestone requirements of the FCC
license, E-SAT was required to commence construction of the first two satellites
by March 1999 and the remaining four satellites by March 2001. On March 31,
1999, we, on E-SAT's behalf, entered into an agreement with Surrey Satellite for
the construction of the Little LEO satellites, and we notified the FCC on April
8, 1999, that we had met the first milestone of the license, commencement of
satellite construction by March 1999. The FCC has neither confirmed nor denied
our assertion. Because of the competitive nature of the Little LEO market, the
other licensees may challenge in the future our timeliness or our ability to
meet the conditions of the license. The terms of the FCC license also require
that construction, launch and operation of the NewStar System be accomplished in
accordance with the technical specifications set forth in the FCC application
and consistent with the FCC's rules, unless specifically waived. During the
process of constructing the NewStar System, there may be certain modifications
to the design set forth in the FCC application that may necessitate regulatory
approval.

Assuming continued compliance, the FCC license will remain effective for
ten years from the date on which we certify to the FCC that the initial
satellites have been successfully placed into orbit and that the operations of
the satellites conform to the terms and conditions of the FCC license.

In addition, the FCC must approve the integration of NewStar System's
ground transceivers with the fixed devices. If received, the approval would
apply to all transceivers to be operated in the United States.

International Regulations

Landing Rights. In addition to the FCC license for operation of the
NewStar System in the United States, we will be required to seek certain
"landing rights" in each country in which our ground transceivers will be
located. We intend to utilize international clients, partners or affiliates in
each country we intend to operate in to obtain such authority. In the event we
are unsuccessful in obtaining a foreign license in a particular country, we will
be able to offer only one-way, broadcasting from the satellite, data and
messaging services in that country.

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International Telecommunications Union Coordination. The E-SAT System
operates in frequencies that are allocated on an international basis under the
authority of the International Telecommunications Union, or ITU. The United
States, on behalf of various Little LEO service providers, pursued international
allocations of additional frequencies for use by Little LEO systems. In addition
to cooperation through the FCC, E-SAT will be required to engage in
international coordination with respect to other satellite systems, and in some
cases, with terrestrial communication systems. The purpose of this coordination
is to ensure, to the maximum extent feasible, that communication systems will be
able to operate without unacceptable radio frequency interference from other
communication systems. This process, called "satellite coordination," takes
place under the auspices of the ITU and is essentially a first come, first
served process. That is, earlier filings generally establish some priority over
later filings although the ITU encourages applicants to cooperate to enable as
many satellite systems as possible to be implemented.

Ownership Interest in E-SAT

E-SAT was incorporated in 1994 in partnership with EchoStar. In
connection with the formation agreement, we hold 20% of the outstanding shares
of E-SAT and EchoStar holds the remaining 80%. E- SAT was formed for the purpose
of acquiring an FCC license to develop, construct and operate a Little LEO
satellite system. In March 1998 the FCC issued the license to E-SAT. In July
1999, we entered into an agreement to acquire an additional 60.1% from EchoStar,
to bring our total ownership of E-SAT to 80.1%. Under the terms of the
agreement, EchoStar will also have a 20% undivided interest in the satellite
transmission capacity associated with the FCC E-SAT license. The agreement and
transfer of control of E-SAT is subject to FCC approval, which was formally
requested on May 2, 2000.

Competition

Competition in the communications industry is intense, fueled by rapid
and continuous technological advances and alliances between industry
participants seeking to use such advances on an international scale to capture
significant market share. At this time, Orbcomm has a Little LEO in operation
using time division multiple access, or TDMA or narrow band, communication
protocols using thirty-eight satellites and numerous ground stations for its
real-time system. In the future, we expect that potential competitors will
include other Little LEO systems, certain geosynchronous or geostationary orbit,
or GEO, based systems, terrestrial based communications systems, LEO satellite
systems operating above 1GHz, often called Big LEO systems, and various medium
earth orbit, or MEO, systems.

In addition to E-SAT, four other entities have been licensed by the FCC
to provide Little LEO satellite services in the United States although no other
entity has been issued a license to use CDMA communication protocols. In 1998,
the FCC's international bureau granted licenses to Leo One, Final Analysis and
an additional license to Orbcomm. Further in 1998, the FCC granted a license to
Volunteers in Technical Assistance to transmit health, research and scientific
data on a delayed basis between developing countries and the United States.

Other than Orbcomm's existing TDMA based system, we do not believe that
any of the other proposed Little LEO systems will be commercially operational in
the near term. We believe that we hold an advantage over these potential
competitors by having obtained an FCC license for the only CDMA based
store-and-forward Little LEO system in the United States and by achieving
international coordination of our designated frequencies through the ITU. Over

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the course of the next several years, we expect to obtain further advantages
over these potential competitors by demonstrating that a CDMA store-and-forward
system can offer service at lower cost than those offered by the competition.

Plans for Little LEO systems have also been announced in Australia,
Brazil, France, Russia, South Korea, Tonga and Uganda, although we believe that,
without additional allocations of spectrum in the United States, these systems
will be unable to offer services in the United States and they will have to
reach coordination agreements with all countries who have prior ITU filings for
the same spectrum.

In addition, we believe that we will compete in certain of our market
segments with existing operators and users of certain GEO-based systems such as
American Mobile and Qualcomm, and companies providing services using the
Inmarsat system. American Mobile offers data services, both satellite only and
dual-mode, satellite and terrestrial, through a public data network that can
reach both densely populated urban areas and sparsely populated rural areas. In
1998, American Mobile acquired Motorola's ARDIS two-way terrestrial-based
wireless messaging network, which complements American Mobile's existing
satellite-based voice and data communications services. This allows American
Mobile to offer a hybrid solution that has the ability, among other things, to
serve urban areas and to penetrate buildings. Qualcomm designs, manufactures,
distributes and operates a satellite-based, two-way mobile communications and
tracking system that provides messaging, position reporting and other services
for transportation companies and other mobile and fixed site customers using GEO
satellites. In addition, various companies using the Inmarsat system are
providing fishing vessel and other marine tracking applications. We believe that
the NewStar System will have certain advantages over these other systems
including worldwide coverage and lower equipment costs.

While we do not intend to compete in general with existing and planned
terrestrial-based communications systems, in certain of our market segments we
believe that we may compete with certain of these systems. SkyTel provides
messaging services in cities in the United States and is using its messaging
network to provide fixed location services, specifically utility meter reading
in urban areas. Because of the inherent coverage limitations of a
terrestrial-based communications system, we believe that the NewStar System will
also complement these systems, providing cost-effective services primarily in
metropolitan areas where subscriber densities justify construction of radio
towers. Such systems generally do not have sufficient coverage outside
metropolitan areas, making them less attractive to certain market segments such
as the hard-to-access and remote locations that we target. We believe that the
NewStar System will present an attractive complement to tower-based services
because it can provide geographic gap-filler service at affordable costs without
the need for an additional infrastructure investment.

The Big LEO and MEO systems are expected to provide real time,
uninterrupted service. These systems are designed primarily to provide two-way
voice services that require larger, more complex satellites than our satellites
and larger constellations to provide coverage. As a result, the cost of the Big
LEO and MEO systems is significantly greater than those of the NewStar System.
However, the marginal cost on a per-message basis of providing services similar
to those we will offer could be relatively low for a Big LEO or MEO system that
is unable to sell its capacity for voice services. For example, the satellite
system operated by Globalstar, L.P. is expected to utilize a multi-billion
dollar constellation of 48 satellites, as compared with our planned system of 6
satellites with an expected cost of approximately $120 million.

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Employees

As of December 31, 1999, we had fourteen full-time employees. We consider
our relationship with our employees to be good.

Properties

We have leased 4,566 square feet at a monthly rate of $14,845, for our
principal offices at 100 Shoreline Highway, Suite 190A, Mill Valley, California,
on a three-year lease which expires on July 31, 2003. We also have short term
leases for our offices in Paris and Toulouse, France.

MANAGEMENT

Our directors and executive officers, their ages, positions held, and
duration as such, are as follows:

[Enlarge/Download Table]

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

Fred W. Thompson Chairman of the Board, President, 57 December 1992 - present
Chief Executive Officer

Michael T. Schieber Director 60 December 1992 - present

H. Tate Holt Director 48 February 1996 - present
President, NewStar Ltd. June 1999 - present

Jerome W. Carlson Director 63 May 1997 - present

Jessie J. Knight, Jr. Director 49 February 1999 - present

Roy T. Grant Director 42 August 1999 - present

Gregory T. Leger Executive Vice President 44 March 1998 - present
Engineering

Frederick R. Skillman, Jr. Vice President, Operations 38 August 1995 - present
Stanton C. Lawson
Director, Senior Vice President of 42 October 1999 - present
Finance, Chief Financial Officer

Randy Stratt Senior Vice President, General 43 November 1999 - present
Counsel and Secretary

Business Experience

The following is a brief account of the education and business experience
during at least the past five years of each director, executive officer, and key
employee, indicating the principal occupation and employment during that period,
and the name and principal business of the organization in which such occupation
and employment were carried out.

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Fred W. Thompson has served as our chairman of the board, president and
chief executive officer since 1992. Up until October 1999, Mr. Thompson also
served as our chief financial officer. Mr. Thompson has over 30 years of senior
management experience in the telecommunications industry, including more than 20
years with AT&T Bell Labs, Western Electric Co. and the Long Lines Dept. As
founder and chief executive officer of Inter Exchange Consultants, Inc., Mr.
Thompson provided management, design and engineering services for cellular
telephone operations in major world markets, including New York, San Francisco,
London and Tokyo. Mr. Thompson received his bachelor of science degree in
electrical engineering from California Polytechnic.

H. Tate Holt has served as a director since February 1996 and as
president of NewStar, Ltd. since 1999. Mr. Holt has been president of Holt &
Associates, a growth management consulting firm. From 1987 to 1990, Mr. Holt was
a senior vice president at Automatic Data Processing, Inc. (ADP). Mr. Holt is
also a director of Onsite Energy and AremisSoft Corporation, and various private
companies. Prior to 1987, Mr. Holt held various senior sales, marketing and
general management positions with IBM, Triad Systems and ADP. Mr. Holt received
his bachelor of arts degree from Indiana University.

Michael T. Schieber has served as a director since December 1992. From
1987 to December 1992, Mr. Schieber was the managing partner of Amador
Telecommunications and since 1990 has been a partner in Columbia Communications,
both investors in nationwide paging licenses. From 1984 to 1993, Mr. Schieber
was a civil engineer for the Department of Fisheries in the State of Washington.
He is a retired Air Force Major and Command Pilot. Mr. Schieber received his
master of arts degree in international relations and government from the
University of Notre Dame, his bachelor of science degree in engineering from the
Air Force Academy, and his bachelor of arts in business from The Evergreen State
College.

Jerome W. Carlson has served as a director since May 1997. He is
currently president of Raljer, Inc., a management consulting firm. From 1984 to
1995, Mr. Carlson was the chief financial officer, vice president of finance and
corporate secretary for Triad Systems Corporation. Mr. Carlson also has over
twenty years experience in both finance and general management positions with
Hewlett Packard. Mr. Carlson is a director of Valley Community Bank and
Tri-Valley Business Council, as well as a director and advisor for several
private companies. He holds a bachelor of science degree from the University of
California at Davis and a masters in business administration from the Stanford
University.

Jessie J. Knight, Jr. has served as a director since February 1999. He
also is president and chief executive officer of the San Diego Regional Chamber
of Commerce. From 1993 to 1998 he was a commissioner of the California Public
Utilities Commission. Mr. Knight is also a director of Blue Shield of California
and serves on the board of Avista, Inc. Mr. Knight holds a bachelor of arts
degree from St. Louis University and an masters in business of administration
from the University of Wisconsin.

Roy T. Grant has served as a director since August 1999. Mr. Grant is
also a director and chief financial officer of Wayport, Inc., a high speed
internet access and service company for hotels, airports and conference centers.
From 1996 to 1999, Mr. Grant was employed by Iridium, LLC as vice president and
chief financial officer. Subsequent to Mr. Grant's departure, Iridium, LLC filed
for protection under the bankruptcy laws in 1999. From 1992 to 1996, Mr. Grant
served as finance director for Edison Mission Energy, a large independent power
developer. Mr. Grant is also a director of Megacode Technologies, Inc., e-tel
Corporation and E-Trend Networks. Mr. Grant holds a bachelor of science degree
in administration and management science, mathematics and economics from
Carnegie Mellon University and a masters in business administration from the
University of Chicago.

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Stanton C. Lawson has served as a director since December 1999. He has
also served as senior vice president of finance since October 1999. From 1997 to
1999, Mr. Lawson worked as finance manager for the worldwide information systems
division of Autodesk, Inc. From 1994 to 1997, Mr. Lawson was president of
Lawsons' Resort, a family owned beach resort located in Marin County,
California. From 1992 to 1994, he served as director of finance for Francesco
Cinzano. From 1990 to 1992 he was the financial director for Jackson Publication
Group in Milan, Italy. From 1981 to 1990, he held internal auditor, controller
and finance director positions in Olivetti's Italian and United States
divisions. Mr. Lawson holds a bachelor of arts degree in business economics and
Italian literature from University of California at Santa Barbara.

Randy Stratt has served as our senior vice president and general counsel
since November 1999. Prior to this, he was director of strategic development and
communications of Dresdner RCM Global Investors, a global asset management firm,
since 1996. From 1993 to 1996, Mr. Stratt co-founded and served as counsel for
Health Action Network, Inc., a non-profit organization, and also served as
outside counsel to a number of organizations. From 1987 to 1993, Mr. Stratt was
senior vice president and general counsel of Spear Financial Services, Inc., a
California-based financial services firm with traditional and on-line
broker-dealer operations. From 1980 to 1987, Mr. Stratt was general counsel and
on the management team of Source Telecomputing Corporation, an on-line consumer
services company. Mr. Stratt is a licensed attorney in four states, including
California. He holds a bachelor of arts degree from Cornell University and a
juris doctor degree from George Washington University Law School as well as a
masters of science degree in information systems from George Washington
University Business School.

Gregory T. Leger has served as our executive vice president of
engineering since March 1998. Mr. Leger has over 20 years experience in system
management and engineering. From 1989 to 1998, Mr. Leger worked for Seimac
Limited as its product development manager, responsible for solutions
encompassing electronics data telemetry, software and packaging. Mr. Leger holds
a bachelor of science degree in physics and a masters of science degree in
oceanography from Dalhousie University, and a degree in master space systems
engineering from Technical University of Delft, Netherlands.

Frederick R. Skillman, Jr. has been with us since August 1995 and
currently serves as our vice president of operations. Mr. Skillman has over 15
years of experience working in the utility and the communication industries.
Prior to joining us, Mr. Skillman was a senior electrical engineer with Pacific
Gas & Electric Company, where he worked from 1985 to 1995. Mr. Skillman holds a
bachelor of science degree in electrical engineering from California Polytechnic
State University and a masters of business administration degree from the
University of San Francisco.

The members of our Board serve staggered terms. Mr. Schieber and Mr.
Holt will serve until our 2001 annual meeting of stockholders, Mr. Thompson and
Mr. Knight will serve until the 2002 annual meeting and Mr. Carlson, Mr. Grant
and Mr. Lawson will serve until the 2003 annual meeting.

Section 145 of the General Corporation Law of Delaware provides for the
indemnification of officers and directors under certain circumstances against
expenses incurred successfully defending against a claim and authorizes Delaware
corporations to indemnify their officers and directors under certain
circumstances against expenses and liabilities incurred in legal proceedings
involving such persons because of their being or having been an officer or
director. Our certificate of incorporation and bylaws provide for
indemnification of our officers and directors to the fullest extent authorized
by law.

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

Committees of the Board

The Board has an audit committee consisting of Mr. Carlson, Mr. Schieber
and Mr. Grant, a nominating committee consisting of Mr. Knight, Mr. Holt, Mr.
Carlson and Mr. Thompson, and a compensation committee consisting of Mr.
Schieber, Mr. Carlson, Mr. Knight and Mr. Grant.

The primary functions of the audit committee are to review the scope and
results of audits by our independent accountants, our internal accounting
controls, non-audit services performed by the independent accountants and the
cost of accounting services.

The nominating committee assists in the process of officer and director
nominations.

The compensation committee administers our various stock option and stock
purchase plans and approves compensation, remuneration and incentive
arrangements for our officers.

Executive Compensation

The following summarizes all compensation earned by or paid to our chief
executive officer and each of our highest paid executive officers whose total
salary and bonuses for 1999 exceeded $100,000.

SUMMARY COMPENSATION TABLE

[Enlarge/Download Table]

Annual
Compensation Long-Term Compensation
---------------------------------------------------------------------------- -------------------------------
Other Securities
Name and Annual Underlying All Other
Principal Position Year Salary Bonus Compensation(1) Options Compensation(2)
------------------------- ------ ----------- --------- ----------------- ----------- ------------------
Fred W. Thompson 1999 $215,000 $45,000 $ 8,051 1,000,000 $ 6,789
President, CEO 1998 $180,000 $20,000 $ 8,005 - 0 - $ 235,691(3)
1997 $180,000(4) - 0 - $ 6,705 185,000 -0-
------------------------- ------ ----------- --------- ----------------- ----------- ------------------
H. Tate Holt 1999 $100,000 $50,000 $ 780 200,000 -0-
President, NewStar Ltd.
------------------------- ------ ----------- --------- ----------------- ----------- ------------------
Gregory T. Leger 1999 $126,000 $20,000 $13,560 125,000 $ 56,259(5)
Executive VP Engineering 1998 $ 93,230 $20,000 $ 1,914 125,000 -0-
------------------------- ------ ----------- --------- ----------------- ----------- ------------------
Frederick R. Skillman, Jr.1999 $120,415 $54,500 $ 2,782 150,000 $ 4,667
Vice President, 1998 $110,000 - 0 - $ 2,512 - 0 - -0-
Operations
------------------------- ------ ----------- --------- ----------------- ----------- ------------------
E.A. James Peretti (6) 1999 $ 90,417 $38,800 $ 2,125 - 0 - $ 261,929(7)
Former Chief 1998 $155,000 - 0 - $ 2,576 - 0 -
Operating Officer 1997 $155,000 - 0 - $ 3,732 150,000
------------------------- ------ ----------- --------- ----------------- ----------- ------------------

(1) Consists entirely of payment of insurance premiums.

(2) Except where noted, consists entirely of payment of contribution to IRA
Retirement Plan.

(3) Represents $27,691 of pay in lieu of vacation and $208,000 of compensation
deferred in 1996 and 1997.

(4) $80,000 paid in cash, $100,000 deferred pursuant to his employment
agreement.

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(5) Includes $51,000 housing/car allowance for overseas living assistance and
payment of $5,259 for French Pension.

(6) Mr. Peretti resigned in July 1999.

(7) In July 1999, we agreed to a severance package with Mr. Peretti including
compensation of $219,583 and vacation payout of $35,770. This amount also
includes a contribution of $6,576 to Mr. Peretti's IRA Retirement Plan.

Employment Agreements

We entered into an employment agreement with Mr. Thompson on April 18,
1996, effective as of January 1, 1996. His annual salary under the agreement was
$180,000, and included non-qualified stock options to purchase 312,500 shares of
our common stock. In October 1998, we paid Mr. Thompson the amount of $208,000
deferred compensation through December 31, 1997. Effective July 1, 1999, Mr.
Thompson's agreement was extended to July 1, 2004. In connection with the
extension, Mr. Thompson's annual salary was increased to $250,000, and he was
granted non-qualified stock options to purchase 1,000,000 shares of our common
stock at an exercise price of $1.3496 based on a formula. Options to purchase
250,000 shares vest annually immediately and the remaining 750,000 shares vest
annually in 250,000 increments beginning January 1, 2000. If Mr. Thompson is
terminated without cause during the term of his employment agreement, his salary
continues for 12 months following termination so long as he does not compete
with us. Upon termination, or in the event of a change of control, all options
granted to Mr. Thompson in connection with his employment agreement vest
immediately. We also maintain a key person insurance policy on Mr. Thompson's
life in the face amount of $2,000,000. We are the sole beneficiary of that
policy.

Effective March 1, 1998, we entered into a three-year employment
agreement with Mr. Gregory T. Leger to serve as our executive vice president of
engineering. Under the agreement, Mr. Leger's annual salary was $120,000. He
also received $20,000 when he signed the agreement and received an additional
$20,000 in March 1999, as a bonus. Mr. Leger also received a non-qualified stock
option to purchase 125,000 shares of our common stock, subject to vesting.
Effective July 1, 1999, Mr. Leger's employment agreement was extended to July 1,
2002. In connection with the extension, Mr. Leger's annual salary was increased
to $132,000 and he was granted non-qualified stock options to purchase 125,000
shares of our common stock, subject to vesting, at an exercise price of $1.3496
based on a formula. If Mr. Leger is terminated without cause during the term of
his employment agreement, his salary continues for 12 months following
termination so long as he does not compete with us. Upon termination, all
options granted to Mr.
Leger in connection with his employment agreement vest immediately.

Effective July 28, 1999, we entered into a one-year employment agreement
with Mr. Frederick R. Skillman, Jr., to serve as our vice president of
operations. Under the agreement, Mr. Skillman's annual salary is $135,000. He
also received $13,500 when he signed the agreement and an additional $13,500 in
November, 1999, as a bonus. Mr. Skillman also received a non-qualified stock
option to purchase 150,000 shares of our common stock, subject to vesting, at an
exercise price of $.7573 per share based upon a formula. Effective August 1,
2000, Mr. Skillman's employment agreement was extended through July 31, 2001. If
Mr. Skillman is terminated without cause during the term of his employment
agreement, he will receive a lump sum cash payment of 12 months' salary so long
as he does not compete with us. Upon termination, all options granted to Mr.
Skillman in connection with his employment agreement vest immediately.

Effective June 1, 1999, we entered into a one-year employment agreement
with Mr. H. Tate Holt to serve as president and chief executive officer of
NewStar, Ltd. After June 1, 2000, the agreement continues on a month to month
basis. Under the agreement, Mr. Holt's annual salary is $200,000. He received

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$50,000 when he signed the agreement. Mr. Holt also received a non-qualified
stock option to purchase 200,000 shares of our common stock, subject to vesting,
at an exercise price of $1.1019 per share based upon a formula. Upon
termination, or in the event of a change of control, all options granted to Mr.
Holt in connection with his employment agreement vest immediately.

Effective October 18, 1999, we entered into a three-year employment
agreement with Mr. Stanton C. Lawson to serve as our senior vice president of
finance. Under the employment agreement, Mr. Lawson's annual salary is $180,000.
Mr. Lawson also received a non-qualified stock option to purchase 180,000 shares
of our common stock at an exercise price of $1.0952 per share based upon a
formula. If Mr. Lawson is terminated without cause during the term of his
employment agreement, his salary continues for 12 months following termination
so long as he does not compete with us. Upon termination, all options granted to
Mr. Lawson in connection with his employment agreement vest immediately.

Effective November 18, 1999, we entered into a three-year employment
agreement with Mr. Randy Stratt to serve as our senior vice president and
general counsel. Under the employment agreement, Mr. Stratt's annual salary is
$165,000. Mr. Stratt also received a non-qualified stock option to purchase
160,000 shares of our common stock at an exercise price of $1.0797 per share
based upon a formula. If Mr. Stratt is terminated without cause during the term
of his employment agreement, his salary continues for 12 months following
termination so long as he does not compete with us. Upon termination, all
options granted to Mr. Stratt in connection with his employment agreement vest
immediately.

Stock Purchase Plan

We established the 1999 Employee Stock Purchase Plan, or the 1999 Plan,
which was approved by the stockholders in June 1999 to serve as a vehicle to
attract and retain the services of key employees and to help such key employees
realize a direct proprietary interest in us. Under the 1999 Plan, employees,
including officers, who do not beneficially own stock and/or options totaling 5%
or more of the voting power, are eligible to participate. However, no
participant may be granted rights to purchase more than $25,000 worth of our
common stock (valued at the time the purchase right is granted) for each
calendar year in which such purchase rights are outstanding under any other
stock purchase plans. An aggregate of 50,000 shares of our common stock was
reserved for issuance under the 1999 Plan. Employees electing to participate in
the 1999 Plan are allowed to deduct from 1% to 10% of their compensation to
purchase shares of common stock. Twice a year, the employees' accumulated
payroll deductions will be used to purchase shares of common stock at a price
equal to 85% of the closing price of our common stock on either the first
business day or last business day of the offering period, whichever is lower.
The 1999 Plan is administered by the board of directors and its compensation
committee. The 1999 Plan may be amended, suspended, or terminated by the board,
but may not increase the maximum number of shares issuable, increase the
benefits accruing to participants, or modify the eligibility requirement under
the 1999 Plan without stockholder approval. As of July 31, 2000, 7,451 shares
have been issued under the 1999 Plan.

Stock Option Plans

We established the 2000 Stock Option Plan, or the 2000 Plan to serve as a
vehicle to attract and retain the services of key employees and to help them
realize a direct proprietary interest in us. The 2000 Plan provides for the
grant of up to 1,750,000 non-qualified or incentive stock options. Under the
2000 Plan, officers, directors, consultants and employees are eligible to

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participate. The exercise price of any incentive stock option granted under the
2000 Plan may not be less than 100% of the fair market value of our common stock
on the date of grant. The aggregate fair market value (determined as of the
grant date) of the shares for which incentive stock options may first become
exercisable by an optionee during any calendar year, together with shares
subject to incentive stock options first exercisable by the optionee under any
of our other plans, cannot exceed $100,000. Shares subject to options under the
2000 Plan may be purchased for cash. Unless otherwise provided by the board, an
option granted under the 2000 Plan is exercisable for a term of ten years (or
for a shorter period up to ten years). The 2000 Plan is administered by the
board and its compensation committee, which has discretion to determine
optionees, the number of shares to be covered by each option, the exercise
schedule, and other terms of the options. The 2000 Plan may be amended,
suspended or terminated by the Board, but no action may impair rights under a
previously granted option. No option is transferable by the optionee other than
by will or the laws of descent and distribution. As of July 31, 2000, 56,109
options to acquire shares of common stock were issued under the 2000 Plan.

We established the 1998 Stock Option Plan, or 1998 Plan, which was
approved by the stockholders in May 1998 to serve as a vehicle to attract and
retain the services of key employees and to help them realize a direct
proprietary interest. The 1998 Plan provides for the grant of up to 500,000
non-qualified and incentive stock options. Our officers, directors, consultants
and employees are eligible to participate under the 1998 Plan. The exercise
price of any incentive stock option granted under the 1998 Plan may not be less
than 100% of the fair market value of our common stock on the date of grant. The
aggregate fair market value (determined as of the grant date) of the shares for
which incentive stock options may first become exercisable by an optionee during
any calendar year, together with shares subject to incentive stock options first
exercisable by the optionee under any of our other plans, cannot exceed
$100,000. Shares subject to options under the 1998 Plan may be purchased for
cash. Unless otherwise provided by the board, an option granted under the 1998
Plan is exercisable for a term of ten years (or for a shorter period up to ten
years). The 1998 Plan is administered by the board and its compensation
committee, which has discretion to determine optionees, the number of shares to
be covered by each option, the exercise schedule, and other terms of the
options. The 1998 Plan may be amended, suspended, or terminated by the board,
but no action may impair rights under a previously granted option. No option is
transferable by the optionee other than by will or the laws of descent and
distribution. As of July 31, 2000, options to acquire 203,011 shares of common
stock outstanding under the 1998 Plan.

We previously established a 1996 Stock Option Plan, or 1996 Plan. The
1996 Plan provided for the grant of up to 1,650,000 non-qualified and incentive
stock options of which 1,062,528 were issued. As of July 31, 2000, options to
purchase 648,486 shares were outstanding. The terms and administration of the
1996 Plan are substantially the same as those of the 1998 Plan and 2000 Plan.

We also previously developed three stock option plans to award certain
employees, directors, and consultants with the opportunity to purchase our
common stock. Under our 1993 Incentive Stock Option Plan, or 1993 ISO Plan,
options to purchase up to 69,644 shares of common stock were issued to eligible
employees. Under the Non-Qualified Stock Option Plan for Non-Employee Directors
options to purchase up to 48,750 shares of our common stock were granted to
non-employee directors. Under the Non-Qualified Stock Option Plan for
Consultants options to purchase up to 14,625 shares of our common stock were
granted to certain consultants. As of July 31, 2000, an aggregate of 82,000
shares of common stock were outstanding under the Plans.

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On August 25, 1999, our board approved the reservation of 500,000 shares
of our common stock for issuance to our new employees and new employees of our
subsidiaries in the form of non-qualified stock options. On December 9, 1999,
the board increased the reservation to 540,000 shares. The per share exercise
price was calculated based upon a formula taking into consideration the current
price of a share of common stock, term of the option, anticipated growth rate
and the risk free rate. As of June 1, 2000, options to purchase all 540,000
shares of common stock were granted.

The following table shows for the fiscal year ended December 31, 1999,
certain information regarding options granted during the fiscal year to our
executive officers named in the Summary Compensation Table under "Executive
Compensation".

Option Grants In The Fiscal Year Ended December 31, 1999

[Enlarge/Download Table]

Number of
Securities
Underlying % of Total Options
Options Granted to Employees in Exercise or Base Expiration
Name Granted 1999 Fiscal Year 1999 Price ($/SHARE) Date
--------------------------- -------------- ------------------------ ------------------ -----------

Fred Thompson 1,000,000 49.6% $1.3496 9/1/2009
President, CEO
--------------------------- -------------- ------------------------ ------------------ -----------
H. Tate Holt 200,000 9.9% $1.1019 9/1/2009
President, NewStar, Ltd.
--------------------------- -------------- ------------------------ ------------------ -----------
Gregory T. Leger, 125,000 6.2% $1.3496 9/1/2009
Executive Vice President
--------------------------- -------------- ------------------------ ------------------ -----------
Frederick R. Skillman, Jr. 150,000 7.4% $0.7573 9/1/2009
Vice President
--------------------------- -------------- ------------------------ ------------------ -----------

The following table shows for the fiscal year ended December 31,
1999, certain information regarding options exercised by and held at year-end by
our executive officers named in the Summary Compensation Table under "Executive
Compensation".

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Aggregated Option/SAR Exercises in Last FY
And FY-End Individual Values

[Enlarge/Download Table]

Number of Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Option/SARs at
FY-End FY-End(1)
Shares # $
Acquired on Exercisable/ Exercisable/
Name Exercise (#) Value Realized ($) Unexercisable Unexercisable
----------------------- -------------- ------------------ --------------------- ----------------------

Fred W. Thompson, 12,625 $ 56,541 941,332/563,043 $1,113,725/$502,416
President, CEO
----------------------- -------------- ------------------ --------------------- ----------------------
H. Tate Holt 16,667 $ 69,168 191,141/150,000 $144,649/$158,145
President, NewStar Ltd.
----------------------- -------------- ------------------ --------------------- ----------------------
Gregory T. Leger, 30,000 $163,164 126,250/93,750 $179,695/$75,619
Executive Vice
President
----------------------- -------------- ------------------ --------------------- ----------------------
Frederick R. Skillman, - 0 - - 0 - 162,500/137,500 $247,122/$206,492
Jr., Vice President
----------------------- -------------- ------------------ --------------------- ----------------------
E.A. James Peretti 150,000 $356,288 375,000/-0- $609,450/-0-
Former Chief Operating
Officer

---------------
(1) The value of unexercised in-the-money stock options is based on a per share
price of $2.1562 as quoted on the OTC Bulletin Board on December 31, 1999.

Compensation of Directors

On September 1, 1999, our board adopted a directors' compensation plan.
Under the compensation plan, each non-employee director receives an annual
retainer of $12,000 plus a fee of $1,000 and reasonable travel expenses for
attendance at each board meeting. Each committee chairman receives $2,500
annually for each year of service as committee chairman, and each committee
member receives $500 for attendance at each committee meeting. In lieu of cash
compensation, non-employee directors may elect to receive either shares of our
common stock or stock options to purchase common stock, the value of which under
either election, shall not exceed $20,000 annually. The price per share or
exercise price is determined using the average closing price for the five
trading days of the common stock at the beginning of a six-month period ending
either June 30 or December 31. Further, with respect to stock options elected as
compensation, the cash equivalent number of stock options will be determined
based upon a number of factors, including but not limited to, vesting periods,
estimated growth rates and risk-free rates.

In addition, each non-employee director receives an annual grant of
non-qualified options to purchase 10,000 shares of common stock in accordance
with the 2000 Plan. The exercise price is determined by the closing price of the
common stock for the five trading days up to and including the date of the
annual stockholders meeting, subject to discounting pursuant to a formula
adopted by the board. These options vest one year from the date of grant.

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Further, upon either the first-time appointment or election to the board, a new
non-employee director receives options to acquire 10,000 shares of common stock,
the exercise price of which is determined by a formula adopted by the board.
These options vest immediately.

In 1999, Mr. Michael T. Schieber was awarded options to purchase 10,000
shares of common stock at $0.7235 per share and options to purchase 4,391 at
$2.8625 per share. Mr. Jerome W. Carlson was awarded options to purchase 10,000
shares of common stock at $0.7235 per share and options to purchase 4,391 at
$2.8625 per share. Mr. Jessie J. Knight, Jr. was awarded options to purchase
37,500 shares of common stock at $5.50 per share, options to purchase 12,500
shares of common stock at $2.8125 per share, options to purchase 10,000 shares
of common stock at $0.7235 per share, and options to purchase 4,160 shares of
common stock at $2.8625 per share. Mr. Roy T. Grant was awarded options to
purchase 8,333 shares of common stock at $0.7235 per share, options to purchase
10,000 shares of common stock at $0.3897 per share, and options to purchase
3,236 shares of common stock at $2.8625 per share.

The directors' compensation plan was prepared following a report by an
independent compensation firm. It was recommended by the compensation committee
and adopted by the board.

Principal Stockholders

The following table sets forth certain information as of July 31, 2000,
with respect to the beneficial ownership of our common stock for each director,
all directors and officers as a group, and each person known to us to own
beneficially five percent (5%) or more of the outstanding shares of our common
stock.

[Download Table]

Name and Address of Beneficially and
Beneficial Owner Record Owned (1) Percent of Class
---------------------------------------- -------------------- -----------------

Fred W. Thompson 1,400,608 (2) 8.9%
100 Shoreline Highway, Suite 190A
Mill Valley, CA 94941
---------------------------------------- -------------------- -----------------
Stanton C. Lawson 70,304 (3) *
100 Shoreline Highway, Suite 190A
Mill Valley, CA 94941
---------------------------------------- -------------------- -----------------
Michael T. Schieber 366,005 (4) 2.4%
100 Shoreline Highway, Suite 190A
Mill Valley, CA 94941
---------------------------------------- -------------------- -----------------
H. Tate Holt 290,251 (5) 1.9%
100 Shoreline Highway, Suite 190A
Mill Valley, CA 94941
---------------------------------------- -------------------- -----------------
Jerome W. Carlson 133,028 (6) *
100 Shoreline Highway, Suite 190A
Mill Valley, CA 94941
---------------------------------------- -------------------- -----------------

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Name and Address of Beneficially and
Beneficial Owner Record Owned (1) Percent of Class
---------------------------------------- -------------------- -----------------

Jessie J. Knight, Jr. 68,507 (7) *
100 Shoreline Highway, Suite 190A
Mill Valley, CA 94941
---------------------------------------- -------------------- -----------------
Roy T. Grant 29,928 (8) *
100 Shoreline Highway, Suite 190A
Mill Valley, CA 94941
---------------------------------------- -------------------- -----------------
Officers and Directors as a Group 2,834,464 16.8%
(10 Persons)
---------------------------------------- -------------------- -----------------
Astoria Capital Partners, L.P. 1,480,000 9.9%
6600 Southwest 92nd St., Suite 370
Portland, Oregon 97223
---------------------------------------- -------------------- -----------------
Eurockot Launch Services GMBH 1,333,334 9.0%
Hunefeldstrasse 1-5
D-28199 Bremen, Germany

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

(1) The persons named in the table have sole voting or investment power with
respect to all of the common stock shown as beneficially owned by them,
subject to community property laws where applicable and the information
contained in the footnotes to this table.

(2) Includes 30,218 shares of common stock held by Mr. Thompson, 434,558 shares
held in Thompson 1996 Revocable Trust, and options to purchase 312,500
shares at $0.531 per share expiring on January 1, 2006, options to purchase
123,332 shares of common stock exercisable at $0.584 per share and expiring
on December 31, 2002, and options to purchase 500,000 shares at $1.3496 per
share expiring on September 1, 2009.

(3) Includes 10,304 shares of common stock and options to purchase 60,000
shares at $1.0952 per share expiring on October 7, 2009.

(4) Includes 220,625 shares of common stock held jointly with spouse, Arlene
Schieber, 7,505 shares held solely by Mr. Schieber, 4,075 shares held
solely by Ms. Schieber, of which Mr. Schieber disclaims beneficial
ownership, and options to purchase 13,750, 12,534 and 37,500 shares at an
exercise price of $1.4375 per share expiring on February 15, 2005, February
15, 2006 and April 30, 2006, respectively. Also includes options to
purchase 27,500 shares at $0.60 per share expiring on May 13, 2007, options
to purchase 22,500 shares at $2.1875 expiring on May 12, 2008, options to
purchase 10,000 shares at $0.7235 per share expiring on September 1, 2009,
options to purchase 4,391 shares at $2.8625 per share expiring on December
31, 2009, and options to purchase 5,625 shares at $2.5875 per share
expiring June 30, 2010.

(5) Includes 24,110 shares of common stock held solely by Mr. Holt, and options
to purchase 7,808 and 75,000 shares at $1.4375 per share and expiring
December 15, 2006 and April 30, 2006, respectively, options to purchase
20,833 shares at $0.60 per share expiring on May 13, 2007, options to
purchase 37,500 shares at $2.1875 per share expiring on May 12, 2008, and
options to purchase 125,000 shares at $1.1019 expiring September 1, 2009.

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(6) Includes 84,000 shares of common stock held by Mr. Carlson, and options to
purchase 37,500 shares at $2.1875 per share expiring on May 12, 2008,
options to purchase 1 ,000 shares at $0.7235 per share expiring on
September 1, 2009, options to purchase 4,391 shares at $2.8625 per share
expiring on December 31, 2009, and options to purchase 6,137 shares at
$2.5875 per share expiring on June 30, 2010.

(7) Includes options to purchase 37,500 shares of common stock exercisable at
$5.50 per share expiring on February 19, 2009, options to purchase 12,500
shares at $2.8125 per share expiring on August 25, 2009, options to
purchase 10,000 shares of common stock at $0.7235 per share expiring on
September 1, 2009, options to purchase 4,160 shares at $2.8625 expiring on
December 31, 2009, and options to purchase 4,347 shares at $2.5875 per
share expiring on June 30, 2010.

(8) Includes 8,359 shares of common stock held by Mr. Grant, and options to
purchase 10,000 shares at $.7235 per share expiring on September 1, 2009,
options to purchase 8,333 shares at $0.7235 expiring on September 1, 2009
and options to purchase 3,236 shares at $2.8625 expiring on December 31,
2009.

Limitation of Liability and Indemnification Matters

The General Corporation Law of the State of Delaware permits
indemnification of directors, officers, and employees of corporations under
certain conditions subject to certain limitations. Article XII of the our
certificate of incorporation states that the we may provide indemnification of
our directors, officers, employees and agents to the maximum extent permitted by
the General Corporation Law. Article VI of the our bylaws provides that we
shall, to the maximum extent and in the manner permitted, indemnify each of our
directors, officers, employees and agents against expenses, judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding arising by reason of the fact any such person is or was an
agent of ours.

SELLING STOCKHOLDERS

The following table sets forth certain information regarding the
beneficial ownership of shares of common stock by the selling stockholders as of
July 31, 2000, and the number of shares of common stock covered by this
prospectus. The number of shares in the table represents an estimate of the
number of shares of common stock to be offered by the selling stockholders,
including shares that may be acquired upon the exercise of warrants or other
rights to acquire shares.

The shares being offered by Torneaux Ltd. consist of shares of common
stock that it may purchase from us pursuant to the common stock purchase
agreement, including upon exercise of warrants issued pursuant to that
agreement. For additional information about the stock purchase agreement, please
see the "Common Stock Purchase Agreement" subsection of "THE OFFERING" section
of this prospectus. The address of Torneaux Ltd. is, Charlotte House, Charlotte
Street, P.O. Box N9204, Nassau, Bahamas.

[Enlarge/Download Table]

Number of Number of Common
Common Shares Number of Shares Beneficially
Beneficially Owned Common Shares Owned Following
Name of Stockholder Prior to the Offering Offered Hereby(1) the Offering(1)
---------------------------------- -------------------------- ----------------- -------------------------
# of Shares % of Class # of Shares # of Shares % of Class
----------- ---------- ------------------ ----------- ----------
Torneaux Ltd. -0- -0- 4,500,000(2) -0-(3) -0-

Courtney Benham 121,718(4) * 121,718 -0- -0-

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Number of Number of Common
Common Shares Number of Shares Beneficially
Beneficially Owned Common Shares Owned Following
Name of Stockholder Prior to the Offering Offered Hereby(1) the Offering(1)
---------------------------------- -------------------------- ----------------- -------------------------
# of Shares % of Class # of Shares # of Shares % of Class
----------- ---------- ------------------ ----------- ----------

Codera Wine Group Profit Sharing
Plan 114,227(5) * 114,227 -0- -0-

Patrick Watt House Living Trust 79,728(6) * 79,728 -0- -0-

Robert Michael House Living Trust 104,920(7) * 104,920 -0- -0-

Edward Pease 53,686(7) * 53,686 -0- -0-

Gary Kremen 28,991(7) * 28,991 -0- -0-

Rolland Mark House Living Trust 29,728(7) * 29,728 -0- -0-

Michael B. Hill, M.D. 113,868(7) * 113,868 -0- -0-

Alex Steinleitner 35,294(7) * 35,294 -0- -0-

Jeanne A. Popadiuk 30,000(7) * 30,000 -0- -0-

James H. Huelskamp 30,000(7) * 30,000 -0- -0-

Paul Dupuis 54,135(7) * 54,135 -0- -0-

SJ Capital 57,586(8) * 57,586 -0- -0-

Beacon Capital Corporation 250,000(8) 1.7% 250,000 -0- -0-

International Space Brokers 130,000(8) * 130,000 -0- -0-

Barclays Bank Plc 100,000(8) * 100,000 -0- -0-

Michael Associates 100,000(9) * 100,000 -0- -0-

Michael Fitzsimmons 54,676(9) * 54,676 -0- -0-

Fourteen Hill Capital 666,666(9) 4.3% 666,666 -0- -0-

High Peak, Ltd. 166,666(9) 1.1% 166,666 -0- -0-

The Bridge Group 65,453 * 63,239 2,214

Eurockot Launch Services GmbH 1,333,334 9.0% 1,333,334 -0- -0-

Cyrrus Consulting 20,000(10) * 20,000 -0- -0-

Surrey Satellite Technology 333,333 2.2% 333,333 -0- -0-

Cardinal Capital LLC 325,000(11) 2.2% 325,000 -0- -0-

Paul Bakker 200,000(9) 1.3% 200,000 -0- -0-

William R. Geery 80,000(9) * 80,000 -0- -0-

Ted Landkammer 12,000(9) * 12,000 -0- -0-

Lloyd & Dee Chelli 12,000(9) * 12,000 -0- -0-

David Sutherland 110,000(9) * 110,000 -0- -0-

MJH Partners 250,000(9) 1.7% 250,000 -0- -0-

Eddie Barretto 500,000(9) 3.4% 500,000 -0- -0-

Friedman Family Partnership 250,000(9) 1.7% 250,000 -0- -0-

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Number of Number of Common
Common Shares Number of Shares Beneficially
Beneficially Owned Common Shares Owned Following
Name of Stockholder Prior to the Offering Offered Hereby(1) the Offering(1)
---------------------------------- -------------------------- ----------------- -------------------------
# of Shares % of Class # of Shares # of Shares % of Class
----------- ---------- ------------------ ----------- ----------

Bradley N. Rotter 84,900(9) * 84,900 -0- -0-

The Echelon Group 27,092(9) * 27,092 -0- -0-

Blaine Miller 20,000(9) * 20,000 -0- -0-

Viviana Partners L.P. 400,000(9) 2.6% 400,000 -0- -0-

Mallory Hill 140,000(9) * 140,000 -0- -0-

H&N Partners 333,334(8) 2.2% 333,334 -0- -0-

Coach House Group 400,000(8) 2.6% 400,000 -0- -0-

Securities Trading Services, LLC. 400,000(8) 2.6% 400,000 -0- -0-

Bartel Eng Linn & Schroder 266,667(12) 1.7% 266,667 -0- -0-

The Genesis Group 43,000(13) * 43,000 -0- -0-

William Arthur & Joyce Appling 20,000(9) * 20,000 -0- -0-

Vivian L. Schneider 25,000(9) * 25,000 -0- -0-

Caryl Hogan 10,000(9) * 10,000 -0- -0-

Paul Schoos 50,000(9) * 50,000 -0- -0-

Jerome Rossel 20,000(9) * 20,000 -0- -0-

Michael J. and Barbara Stoiber 55,000(9) * 50,000 -0- -0-

Astoria Capital Partners L.P. 1,480,000 9.9% 1,480,000 -0- -0-

Performance Programming 200,000(9) 1.3% 200,000 -0- -0-

Zimmerman Revocable Trust 50,000(9) * 50,000 -0- -0-

Yelina Investments 150,000(8) 1.0% 150,000 -0- -0-

Barbara Drew 358,333(14) 2.4% 358,333 -0- -0-

Paul Dix 11,080(10) * 11,080 -0- -0-

Leslie Taylor Associates 97,068 * 58,392 38,676

Randall Smith

Former Executive Vice President 10,321 * 10,321 -0- -0-

Karen Haddad 6,881 * 6,881 -0- -0-

Sierra Delta Corp. 13,640 * 13,640 -0- -0-

George DiCostanzo 4,701 * 4,701 -0- -0-

W.L. Pritchard 7,500 * 7,500 -0- -0-

John L. Faessel 75,000(8) * 75,000 -0- -0-

Jerome W. Carlson
Director 87,500(15) * 37,500 50,000

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Number of Number of Common
Common Shares Number of Shares Beneficially
Beneficially Owned Common Shares Owned Following
Name of Stockholder Prior to the Offering Offered Hereby(1) the Offering(1)
---------------------------------- -------------------------- ----------------- -------------------------
# of Shares % of Class # of Shares # of Shares % of Class
----------- ---------- ------------------ ----------- ----------

Michael Schieber
Director 328,989(16) 2.2% 12,500 316,489

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

* Less than 1% of the outstanding common stock.

(1) Assumes the sale of the shares of common stock which have been offered
pursuant to the prospectus.

(2) Includes the resale of up to 3,750,000 shares of common stock which we have
the right to cause Torneaux Ltd. to purchase pursuant to the common stock
purchase agreement and the resale of up to 1,250,000 shares that may be
acquired upon the exercise of warrants. Under the common stock purchase
agreement we are required to issue warrants to purchase from 20% to 50% of
the number of shares we sell to Torneaux Ltd.

(3) Assumes the resale of shares to be acquired by Torneaux Ltd. pursuant to
the common stock purchase agreement or upon the exercise of warrants.

(4) Includes 50,000 shares of common stock presently held and 71,718 shares
that may be acquired upon conversion of Series A preferred stock.

(5) Includes 66,298 shares of common stock presently held and 47,929 shares
that may be acquired upon conversion of Series A preferred stock.

(6) Includes 50,000 shares of common stock presently held and 29,728 shares
that may be acquired upon conversion of Series A preferred stock.

(7) Represents shares of common stock that may be acquired upon conversion of
Series A preferred stock.

(8) Represents shares that may be acquired upon the exercise of warrants.

(9) Of the shares beneficially owned, one-half represents shares of common
stock owned and one-half represents shares that may be acquired upon the
exercise of warrants.

(10) Includes shares that may be acquired upon the exercise of options.

(11) Includes 225,000 shares that may be acquired upon the exercise of warrants.

(12) Includes 200,000 shares that may be acquired upon the exercise of warrants.

(13) Includes 35,000 shares that may be acquired upon the exercise of warrants.

(14) Includes 10,000 shares of common stock that may be acquired upon the
exercise of warrants.

(15) Includes options to acquire 50,000 shares of common stock.

(16) Includes options to acquire 138,784 shares of common stock.

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PLAN OF DISTRIBUTION

The selling stockholders may, from time to time, sell all or a portion of
the shares of common stock on any market upon which the common stock may be
quoted, in privately negotiated transactions or otherwise, at fixed prices that
may be changed, at market prices prevailing at the time of sale, at prices
related to such market prices or at negotiated prices. The shares of common
stock may be sold by the selling stockholders by one or more of the following
methods, without limitation,

o block trades in which the broker or dealer so engaged will attempt to
sell the shares of common stock as agent but may position and resell a
portion of the block as principal to facilitate the transaction,

o purchases by broker or dealer as principal and resale by such broker
or dealer for its account pursuant to this prospectus,

o an exchange distribution in accordance with the rules of such
exchange,

o ordinary brokerage transactions and transactions in which the broker
solicits purchasers,

o privately negotiated transactions,

o market sales (both long and short to the extent permitted under the
federal securities laws), and

o a combination of any such methods of sale.

In effecting sales, brokers and dealers engaged by the selling
stockholders may arrange for other brokers or dealers to participate. Brokers or
dealers may receive commissions or discounts from the selling stockholders (or,
if any such broker-dealer acts as agent for the purchaser of such shares, from
such purchaser) in amounts to be negotiated which are not expected to exceed
those customary in the types of transactions involved. Broker-dealers may agree
with the selling stockholders to sell a specified number of such shares of
common stock at a stipulated price per share, and, to the extent such
broker-dealer is unable to do so acting as agent for the selling stockholders,
to purchase as principal any unsold shares of common stock at the price required
to fulfill the broker-dealer commitment to the selling stockholders. Broker-
dealers who acquire shares of common stock as principal may thereafter resell
those shares of common stock from time to time in transactions (which may
involve block transactions and sales to and through other broker-dealers,
including transactions of the nature described above) in the over-the-counter
market or otherwise at prices and on terms then prevailing at the time of sale,
at prices then related to the then-current market price or in negotiated
transactions and, in connection with such resales, may pay to or receive from
the purchasers of such shares of common stock commissions as described above.
The selling stockholders may also sell the shares of common stock in accordance
with Rule 144 under the Securities Act, subject to satisfaction of the
requirements under the rule, rather than pursuant to this prospectus.

From time to time, the selling stockholders may pledge their shares of
common stock under the margin provisions of customer agreements. Upon default by
the selling stockholders, the broker may offer and sell the pledged shares of
common stock from time to time. Upon sales of the shares of common stock, the

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selling stockholders intend to comply with the prospectus delivery requirements,
under the Securities Act, by delivering a prospectus to each purchaser in the
transaction. We intend to file any amendments or other necessary documents in
compliance with the Securities Act which may be required in the event a selling
stockholder defaults under any customer agreement with brokers.

To the extent required under the Securities Act, a supplemental
prospectus will be filed, disclosing, the name of any broker-dealers, the number
of shares of common stock involved, the price at which the common stock is to be
sold, the commissions paid or discounts or concessions allowed to such
broker-dealers, where applicable, that such broker-dealers did not conduct any
investigation to verify the information set out or incorporated by reference in
this prospectus, as supplemented, and other facts material to the transaction.

We and the selling stockholders will be subject to applicable provisions
of the Exchange Act and the rules and regulations under it, including, without
limitation, Rule 10b-5 and, insofar as the selling stockholders are distribution
participants and we, under certain circumstances, may be a distribution
participant, Regulation M. All of the foregoing may affect the marketability of
the common stock.

Torneaux Ltd.

We have been advised by Torneaux Ltd. that it may sell the common stock
from time to time in transactions on the OTC Bulletin Board, or any exchange
where the common stock is then listed, in negotiated transactions, or otherwise,
or by a combination of these methods, at fixed prices which may be changed, at
market prices at the time of sale, at prices related to market prices or at
negotiated prices. Torneaux Ltd. may effect these transactions by selling the
common stock to or through broker-dealers, who may receive compensation in the
form of discounts, concessions or commissions from Torneaux Ltd. or the
purchasers of common stock to or through broker-dealers, who may receive
compensation in the form of discounts, concessions or commissions from Torneaux
Ltd. or the purchasers of common stock for whom the broker-dealer may act as an
agent or to whom it may sell the common stock as a principal, or both. The
compensation to a particular broker-dealer may be in excess of customary
commissions.

Torneaux Ltd. is an "underwriter" within the meaning of the Securities
Act in connection with the sale of the common stock offered hereby. Assuming
that we are in compliance with the conditions of the common stock purchase
agreement, Torneaux Ltd. must accept draw downs of shares from us, subject to
maximum aggregate dollar amounts, during the 24 month term of the agreement.
Broker-dealers who act in connection with the sale of the common stock may also
be deemed to be underwriters. Profits on any resale of the common stock as a
principal by such broker-dealers may be deemed to be underwriting discounts and
commissions under the Securities Act. Any broker-dealer participating in such
transactions as agent may receive commissions from Torneaux Ltd. and, if they
act as agent for the purchaser of our common stock, from such purchaser.
Broker-dealers may agree with Torneaux Ltd. to sell a specified number of shares
of our common stock at a stipulated price per share, and, to the extent such a
broker-dealer is unable to do so acting as agent for Torneaux Ltd., to purchase
as principal any unsold common stock at the price required to fulfill the
broker-dealer commitment to Torneaux Ltd. Broker-dealers who acquire common
stock as principal may thereafter resell the common stock from time to time in
transactions (which may involve crosses and block transactions and which may
involve sales to and through other broker-dealers, including transactions of the
nature described above) in the over-the-counter market, in negotiated
transactions or otherwise, at market prices prevailing at the time of sale or at
negotiated prices, and in connection with such resales may pay to or receive
from the purchasers of such common stock commissions computed as described
above.

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The common stock offered hereby is being registered pursuant to our
contractual obligations, and we have agreed to pay the costs of registering the
shares hereunder. We have also agreed to reimburse Torneaux Ltd.'s costs and
expenses incurred in connection with the common stock purchase agreement,
including fees, expenses and disbursements of counsel for Torneaux Ltd. for the
preparation of the agreement up to a maximum of $30,000, and all reasonable fees
incurred in connection with any amendment, modification or waiver, to or
enforcement of the agreement.

The price at which the common shares will be issued by us to Torneaux
Ltd. will fluctuate. The price will be between 87% and 92.50% of the daily
volume weighted average closing price over an 18-day trading period on the OTC
Bulletin Board. Please see the "Common Stock Purchase Agreement" subsection of
"THE OFFERING" section of this prospectus.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Except as otherwise indicated below, during 1999 and 1998, we have not
been a party to any transaction, proposed transaction, or series of transactions
in which the amount involved exceeds $60,000, and in which, to our knowledge any
director or executive officer, nominee, five percent beneficial security holder,
or any member of the immediate family of the foregoing persons have or will have
a direct or indirect material interest.

On March 31, 1999, we entered into a launch services agreement with
Eurockot. Pursuant to that agreement, we paid Eurockot an initial payment of
$4.4 million under the launch services agreement. On April 8, 1999, Eurockot
purchased 1,333,334 shares of our common stock for a total purchase price of $4
million.

DESCRIPTION OF CAPITAL STOCK

Under our certificate of incorporation, we are authorized to issue
50,000,000 shares of common stock, $0.0004 par value, of which 14,883,988 were
outstanding as of July 31, 2000, and 5,000,000 shares of preferred stock of
which 700,000 shares have been designated as Series A Convertible Preferred
Stock and of which 35,897 were outstanding as of July 31, 2000.

Common Stock

The holders of common stock are entitled to one vote for each share held
of record on all matters presented to stockholders. Holders of the common stock
are not entitled to cumulative voting rights. The common stock has no preemptive
or similar rights. Upon liquidation, dissolution or winding up of our affairs
any assets remaining after provision for payment of creditors and preferred
stockholders, if any, are distributable pro rata among the holders of common
stock. Holders of our common stock are entitled to receive dividends when and as
declared by the board of directors out of legally available funds. Any such
dividend may be paid in cash, property or shares of common stock. We have not
paid any dividends since our inception and do not presently anticipate that any
dividends on our common stock will be declared or paid in the foreseeable
future.

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Preferred Stock

We are authorized to issue 5,000,000 shares of preferred stock as
designated in series, from time to time, by our board of directors. Of the
5,000,000 shares, 700,000 shares have been designated as Series A Convertible
Preferred Stock, or Series A preferred stock. Holders of Series A preferred
stock are entitled to vote on all matters presented to stockholders and are
entitled to the number of votes equal to the highest number of full shares of
common stock to which each share of Series A preferred stock is convertible.

Each share of Series A preferred stock is initially convertible into ten
shares of common stock. If, ninety days from the original issuance of the Series
A preferred stock, the average trading price of our shares of common stock for
the five prior days (85th through 90th days) is less than $3.00 per share then
the preferred stock is convertible into the number of shares derived by dividing
the liquidation preference, of the Series A preferred stock by the five prior
days average trading price.

The holders of the Series A preferred stock are also entitled to
receive, out of any legally available funds, annual cumulative dividends equal
to five percent of the liquidation preference one year from original issuance
payable thereafter on December 31st and on each subsequent December 31st. All
dividends must be paid on the preferred stock before any dividends may be
declared and paid on the common stock.

Subject to the holder's right to convert the Series A preferred stock
into common stock, we have the right to redeem the shares, in whole or in part,
if the average trading price of our common stock is $6.00 or greater for twenty
consecutive days.

Warrants and Options

As of July 31, 2000, we had outstanding warrants to purchase 2,115,636
shares of our common stock at exercise prices ranging between $0.6749 and $4.00
per share and we had outstanding options to purchase 4,140,356 shares of our
common stock at exercise prices ranging between $0.531 and $5.60 per share.

Transfer Agent

Computershare Trust Co., 12039 W. Alameda Parkway, Suite Z-2, Lakewood,
Colorado 80228 is the transfer agent for our common stock.

CERTIFICATE OF INCORPORATION

Certain provisions of our certificate of incorporation and bylaws have
the effect of deterring a change of control. Our certificate of incorporation
contains provisions requiring the approval of 80% of the our stockholders for
certain mergers, sales of all or substantially all of our assets and certain
other corporate action unless the transaction is approved by 75% of the
disinterested board members or unless all stockholders receive a price for their
shares of our capital stock which meets certain minimum price criteria. In
addition, our certificate of incorporation also contains a provision which
establishes a classified board of directors consisting of three classes, members
of which would serve staggered terms of three years. A vacancy of the board can
be filled only by vote of 75% of the continuing directors (as defined). Further

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directors would be removable, for cause only, by either an 80% vote or by vote
of a majority of the continuing directors (as defined). Our certificate of
incorporation also requires the approval of 80% of our stockholders in order to
amend the provisions.

LEGAL PROCEEDINGS

We are not a party to any legal proceedings.

LEGAL MATTERS

The validity of the shares of common stock offered by selling
stockholders will be passed upon by the law firm of Bartel Eng Linn & Schroder,
Sacramento, California. The firm and certain of its members own shares of common
stock representing less than 1% of our outstanding shares of common stock. In
addition, the firm holds a warrant to purchase up to 200,000 shares of common
stock.

EXPERTS

The consolidated balance sheets as of December 31, 1998 and 1999, and
the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for the years then ended, included in this prospectus
have been included herein in reliance on the report, which includes an
explanatory paragraph relating to our ability to continue as a going concern, as
described in note 1 to the financial statements, of PricewaterhouseCoopers LLP,
independent accountants, given the authority of that firm, as experts in
accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. Our Commission
filings are available to the public over the Internet at the SEC's Website at
http://www.sec.gov. You may also read and copy any document we file at the
Commission's public reference room at 450 Fifth Street, N.W., Washington, D.C.
20549, Seven World Trade Center, 13th Floor, New York, New York 10048 and 500
West Madison 1-800-SEC-0330 for further information about the public reference
room.

We have filed with the Commission a registration statement on form SB-2
under the Securities Act with respect to the securities offered under this
prospectus. This prospectus, which constitutes a part of the registration
statement, does not contain all of the information set forth in the registration
statement, certain items of which are omitted in accordance with the rules and
regulations of the Commission. Statements contained in this prospectus as to the
contents of any contract or other documents are not necessarily complete and in
each instance reference is made to the copy of such contact or documents filed
as an exhibit to the registration statement, each such statement being qualified
in all respects by such reference and the exhibits and schedules thereto. For
further information regarding DBS Industries, Inc. and the securities offered
under this prospectus, we refer you to the registration statement and such
exhibits and schedules which may be obtained from the Commission at its
principal office in Washington, D.C. upon payment of the fees prescribed by the
Commission.

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘424B2’ Filing	Date	First	Last	Other Filings

	6/30/10	43	44
	12/31/09	43	44
	10/7/09	43
	9/1/09	43	44
	8/25/09	44
	2/19/09	44
	5/12/08	43	44
	5/13/07	43
	12/15/06	43
	4/30/06	43
	2/15/06	43
	1/1/06	43
	2/15/05	43
	7/1/04	37
	7/31/03	33
	12/31/02	43
	7/1/02	37
	7/31/01	37
Filed on:	9/8/00
	8/11/00	1		10QSB
	8/7/00	1
	8/1/00	37
	7/31/00	4	51
	6/30/00	16		10QSB
	6/2/00	14		8-K
	6/1/00	37	40
	5/2/00	17	31
	3/31/00	5	21	10QSB, PRE 14A
	1/1/00	37
	12/31/99	19	52	10KSB
	12/9/99	40
	11/18/99	38
	10/18/99	38
	10/8/99	24
	9/1/99	41
	8/25/99	40
	7/31/99	24
	7/30/99	8
	7/28/99	37
	7/14/99	25
	7/1/99	37		424B3
	6/1/99	37
	4/8/99	30	50
	3/31/99	17	50	10-Q, 4, NT 10-K, NT 10-Q
	12/31/98	19	52	10KSB, NT 10-K
	3/31/98	17	30	10QSB, NT 10-K, NT 10-Q
	3/1/98	37
	12/31/97	21	37	10KSB, 10KSB/A, NT 10-K
	4/18/96	37
	1/1/96	37
				List all Filings

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Filing Submission 0001001277-00-000258 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

DBS Industries Inc – ‘424B2’ on 9/8/00

On: Friday, 9/8/00, at 10:31am ET · Accession #: 1001277-0-258 · File #: 333-41690

Prospectus — Rule 424(b)(2)Filing Table of Contents

Document Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Prospectus — Rule 424(b)(2)
Filing Table of Contents