E NET INC, 10KSB, 1999-06-29

E NET INC
10KSB, 1999-06-29
COMPUTER PROGRAMMING SERVICES

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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM 10-KSB

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

For the fiscal year ended: MARCH 31, 1999 Commission file number: 000-20865

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

For the transition period from to

E-NET, INC.

(Name of small business Issuer in its charter)

<TABLE>
<S> <C>
DELAWARE 52-1929282
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

12800 MIDDLEBROOK ROAD, SUITE 400,
GERMANTOWN, MD 20874
(Address of principal executive offices) (Zip Code)
</TABLE>

(301) 601-8700
(Issuer's telephone number)

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

<TABLE>
<S> <C>
Title of Each Class Name of Each Exchange on
Which Registered
NOT APPLICABLE NOT APPLICABLE
</TABLE>

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

COMMON STOCK, $.01 PAR VALUE
(Title of Class)

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

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

State the issuer's revenues for its most recent fiscal year: $1,672,809.

The aggregate market value of the issuer's voting common stock held by
non-affiliates was approximately $30,917,000 based upon the closing price of the
common stock on June 24, 1999, as quoted by the Nasdaq SmallCap Market.

State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date: on June 14, 1999, the number of
issued and outstanding shares of common stock was 8,293,124.

Transitional Small Business Disclosure Format: Yes [ ] No [X]

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E-NET, INC.

INDEX

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PAGE
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PART I
Item 1. Description of Business........................................................................ 3
Item 2. Description of Properties...................................................................... 11
Item 3. Legal Proceedings.............................................................................. 12
Item 4. Submission of Matters to a Vote of Security Holders............................................ 12

PART II
Item 5. Market for Common Equity and Related Stockholders Matters...................................... 13
Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations.......... 14
Item 7. Financial Statements........................................................................... 17
Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........... 31

PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of
the Exchange Act............................................................................. 33
Item 10. Executive Compensation......................................................................... 36
Item 11. Security Ownership of Certain Beneficial Owners and Management................................. 39
Item 12. Certain Relationships and Related Transactions................................................. 40
Item 13. Exhibits, List and Reports on Form 8-K......................................................... 42
</TABLE>

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PART I

ITEM 1. DESCRIPTION OF BUSINESS.

OVERVIEW

e-Net develops, produces, markets and supports open telecommunications
software and related hardware that enable, enhance, and manage telephone
communications over the Internet, private Internet Protocol networks and
"intranets," and other types of digital data networks (collectively, "Digital
Data Networks"). Our Telecom 2000-TM- products ("Telecom 2000 Products") provide
a user-friendly method of high fidelity telephone communications through Digital
Data Networks. Through the use of Telecom 2000 Products, our enterprise
customers can reduce their telephone expenses by extending their telephone
services to remote offices and mobile employees, in some cases bypassing long
distance service charges, while using their existing internal Digital Data
Networks. Our service provider customers can offer reduced long distance service
or enhanced messaging services combined with Internet Protocol data and
telephony services.

We believe that, due to demand for lower cost telephone service, the market
for telephony through Digital Data Networks, while in its early stages, holds
significant potential for growth. Several reports issued by technology industry
analysts forecast the growth of this market for Internet telephony gateways to
be in the multiple billions by 2001. We continue to believe in the forecast
potential. However, neither e-Net nor the industry as a whole has yet
experienced that growth for a variety of reasons. We have continued to market
and sell to service provider customers while the market for enterprise customers
develops and matures.

We own U.S. Patent No. 5,526,353, "System and Method for Communicating Audio
Data over a Packet-Based Network" (the "353 Patent"). We believe that the 353
Patent is the first patent that specifically involves telephony through Digital
Data Networks. We believe that the 353 Patent may provide certain strategic and
technological advantages in the emerging market for telephony through Digital
Data Networks. We cannot make any assurances, however, as to the advantages or
protection that may result from the 353 Patent. Our current and anticipated
product line is not wholly dependent on the validity or applicability of the 353
Patent. Not all of our products are covered by the 353 Patent.

Our Telecom 2000 Products enable telephony through Digital Data Networks.
Telecom 2000 products generally provide high fidelity duplex voice and
tele-facsimile through Digital Data Networks, and also generally offer
traditional telephony features like call waiting, call holding, call transfer,
conference calling, billing, voice-mail and the like. We view our products as
offering several competitive advantages. First, Telecom 2000 Products facilitate
low-cost Digital Data Network telephone service with substantially the same
operating features and the voice quality of traditional telephone service. Next,
the use of Telecom 2000 Products can be gradually implemented so the user grows
from small installations to large installations while maintaining high levels of
performance and preserving a substantial amount of its prior technology
investment. Finally, the distributed architecture of Telecom 2000 Products is
designed to avoid certain problems associated with centralized systems, such as
the risk of system-wide telephony loss due to the malfunction of a single
computer or PBX, limitations on system growth and excessive hardware cost.

There are three classes of Telecom 2000 Products, two of which have products
available for delivery now. The first class comprises the smallest system with
the lowest number of ports, and includes the Telecom 2000 Desktop System and the
Telecom 2000 retail system called "NetConnect", both of which currently are
being sold. The second class, Telecom 2000 Customer Premises-based Gateway
Systems, now available for delivery, comprises medium-sized systems with between
24 and 96 ports in a single chassis, serving as a "gateway" to Digital Data
Networks. These systems consolidate customer site-originated telephone calling
with Digital Data Network-based transport efficiency and lower cost than
traditional methods. The third class, Telecom 2000 Carrier-Class Gateways, now
under development, comprises gateway products with a large number of ports,
which are expected to offer over 1,000 simultaneous call

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capacity in a single chassis. We intend these systems to meet interconnection
and compression standards and to be appropriate for sales to telephone carriers.

We have established, and expect to continue to establish, a variety of
strategic relationships that are intended to result in the embedding of e-Net
telephony-enabling technology in various Digital Data Network devices. Examples
of our existing strategic relationships follow:

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STRATEGIC RELATIONSHIP DATE ESTABLISHED PURPOSE
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<S> <C> <C>
Sprint Communications Company March 1996 Main Carrier Internet Services and voice-over
data product planning and testing

Magellan Network Systems, Inc August 1997 Carrier-Class Gateway Product applications
software

Summa Four, Inc. (now part of Cisco Systems, December 1997 Carrier-Class Gateway Product hardware
Inc.) resource/programmable switch backplane

Com21, Inc. January 1998 Cable television modem telephony

IDT Corporation April 1998 Retail consumer product telephone software
bundling and network access

Edutek Education Systems, Inc. May 1999 Reseller of wireless voice-over-data system
</TABLE>

COMPANY BACKGROUND

Since our founding in 1995, we have focused on the development of
software-based telecommunications products that enable, enhance or manage
telephone communications. We announced our first Telecom 2000 Products in April
1996, then we established "beta" test sites for the Telecom 2000 system. After
completing "beta" testing, in May 1997 we announced the Internet Protocol
version of Telecom 2000. In July 1997, we began sales of Telecom 2000 Products
with the introduction of the Telecom 2000 Desktop System.

We began to sell Telecom 2000 Products in July 1997 with the introduction of
the Telecom 2000 Desktop System. We announced the Telecom 2000 Customer Premise
Equipment Gateway Systems, also known as the Telecom 2000 T1/E1 Digital Trunk
Interface, in October 1997; that product became generally available in February
1998. In December 1997, we announced our development plan for the Telecom 2000
Carrier-Class Gateway in conjunction with Summa Four, Inc. We began planning for
large-systems development in 1998, although this project has been delayed due to
the acquisition of Summa Four by Cisco Systems, Inc. in mid-1998. We announced
the general availability of our Telecom 2000 retail system called "NetConnect"
in May 1998.

In 1998 we expanded the use of our technology by beginning to develop
voice-over-cable-television products in conjunction with Com 21, Inc. In 1998,
we also delivered our 24 port and 30 port T1/E1 Digital Trunk Interface product
in the medium system range. We also developed customer relationships with
emerging communications services companies in the domestic U.S., Latin America,
and Europe.

In 1998, we recognized that the delay in growth of generally forecast demand
for Digital Data Network telephony meant that we needed to focus our immediate
sales activities in niche areas. By early 1999, we had identified three such
niche markets: voice-over-cable-television, small-to-mid-sized, newer
telecommunications services companies ("Next-Generation Telcos"), and World Wide
Web-based Internet telephony for internet commerce and otherwise. To further the
voice-over-cable-television niche, we modified and expanded our Com21 contract
to include more telephone features and to address the Internet Protocol for the
product. Also in this niche, we began to seek additional voice-over-cable-

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television product partners. To further the Next-Generation Telco niche, we
completed development of an intelligent module for the medium-sized Digital
Trunk Interface product called the T2000 Gatekeeper. Also in this niche, we
developed the capability to use our products on wireless Digital Data Networks,
offering this customer base a low infrastructure cost system alternative, and we
contracted with Edutek Education Systems, Inc. to sell our wireless product to
school systems. To further the World Wide Web-based internet telephony niche, we
developed and enhanced our software-only T2000 product, T2000 TS Express. As a
distribution strategy for this niche, we created a wholly-owned subsidiary,
ZeroPlus.Com, Inc.

INDUSTRY BACKGROUND

In the mid-1990's, companies began to develop and market products that
delivered audio, including voice, over the Internet. Early Internet telephony
required cumbersome components to make Internet-based telephone calls, such as
personal computer speakers and microphones. In addition, participants in the
telephone call had to use identical software, running at the same time. Voice
quality was often poor. Many products had a half-duplex nature and experienced
long delays. However, the promise of this technology was established because the
Internet telephone call could seemingly be made "free," even over long
international distances. Because of the extraordinary increase in users of the
Internet, a large target market for the products began to develop. See
"--Competition."

"Voice-over-Internet Protocol" refers to the transmission of voice as
digital data on Internet Protocol-compatible networks, which include the
Internet as well as Internet-compatible, private "Intranets." Internet Protocol
networks are increasing in usage and popularity as a function of an increase in
the number of Internet users. "Telephony" is distinguishable from "voice" in
that voice is the sound of speech, whereas "telephony" means voice coupled with
features such as full-duplex, call waiting, call holding, call transfer,
conference calling, billing, voice-mail and the like. We believe that telephony
on Internet Protocol networks is becoming more attractive because of the low
cost of using Internet Protocol networks (especially the Internet), because of
the growing number of Internet Protocol network users and because Internet
Protocol telephony products like ours are improving their voice sound quality.

TELECOM 2000-TM- PRODUCTS

Our Telecom 2000 Products enable telephony through Digital Data Networks.
Telecom 2000 Products provide high fidelity duplex voice and tele-facsimile
through Digital Data Networks, and also generally offer traditional telephony
features such as call waiting, call holding, call transfer, conference calling,
billing, voice-mail and the like. We view our products as offering several
competitive advantages. First, Telecom 2000 Products facilitate low-cost Digital
Data Network telephone service with substantially the same operating features
and the voice quality of traditional telephone service. Next, the use of Telecom
2000 Products can be gradually implemented so that growth from small
installations to large installations can occur while the user maintains high
levels of performance and preserves a substantial amount of its prior technology
investment. Finally, the distributed architecture of Telecom 2000 Products is
designed to avoid problems associated with centralized systems, such as
system-wide telephony loss due to the malfunction of a single computer or PBX,
limitations on system growth and excessive hardware cost. There are three
classes of Telecom 2000 Products, two of which include products that are
available for delivery.

TELECOM 2000 DESKTOP--SMALL SYSTEMS

This product set, with sales commencing in July 1997, consists of our
award-winning Telecom 2000 Desktop system with two main components, the station
card (the T2000-TS) and the two port central office card (the T2000-CO). This
system uses the customer's existing network computer installed base and its
fixed-cost, available-capacity local area network or wide area network, as well
as the public internet, to provide peer-to-peer toll-quality telephony, with or
without the use of a PBX. Also in this set is a station

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card, which does not include a network interface component (the T2000-TS Lite),
but which allows users to use any existing PC network interface.

The small systems product set also includes the Telecom 2000 retail consumer
product called NetConnect, which we announced as generally available in May
1998. This product is a station card, similar to the T2000-TS Lite, with a
dial-up functionality enabling public internet telephony for the individual
consumer and home use. It is the lowest-priced Telecom 2000 Product offering
and, in our view, offers a broad market potential. In combination with some of
the advanced internet "chat-room" services, this product is designed to provide
a unique, secure, private-dialing-plan Internet telephony service with high
fidelity, at a low price. We also have a software only product for telephony
over Digital Data Networks, called T2000 TS Express.

Generally speaking, Telecom 2000 Desktop products are characterized by
embedded firmware, which can be placed on a computer integrated circuit board,
in the assembly of a modem (cable TV set-top, DSL box, ISDN pipe) or in a
router, switch or multiplexer. Telecom 2000 Desktop products start with one port
and scale up to 24 ports. The current price range of the Telecom 2000 Desktop
product set is between $100 and $5,000.

TELECOM 2000 CUSTOMER-PREMISES-BASED GATEWAY--MEDIUM SYSTEMS

We announced the Telecom 2000 Customer-Premises-based Gateway product set in
October 1997 and made it available for shipment in February 1998. This product
provides port density voice-over-data advantages in increments of 8, 12, 24 or
30 ports, consolidates customer site-originated telephone calling for data
network-based transport and efficiency and delivers a mid-level of data network
call volume handling on a cost-effective basis. This product set has an
entry-level unit that starts with 8 or 12 analog ports (the T2000 MultipleTelSet
Gateway). The next largest unit of product in this set is the 24 or 30 port
digital gateway, (the T2000 Digital Trunk Interface). The T2000 Digital Trunk
Interface Gateway can be expanded to 48 and 96 or 60 ports in a single chassis
depending on the telephone switching interface requirement. Each chassis is
capable of being interconnected to obtain single-device performance, gaining
more ports as a function of this "linking" or "ganging."

This product set also has a component (the T2000 GateKeeper) that provides
the intelligence needed to support our Next-Generation Telco customers,
including the capability for, for example, call routing and related table
formation, least cost routing, and call detail record/billing record formation.

The resulting product suite delivers a customer site application of high
voice quality with a low per-port data network telephony price. The current
price range of the Telecom 2000 Customer-Premises-based Gateway product set is
between $5,000 and $50,000.

TELECOM 2000-TM- CARRIER-CLASS GATEWAY--LARGE SYSTEMS

We announced the large systems product set, Telecom 2000 Carrier-Class
Gateways, in December 1997. However, this project has been delayed due to the
acquisition of Summa Four by Cisco Systems, Inc.

The Telecom 2000 Carrier-Class Gateway is being designed to meet all
interconnection and compression standards, will be certified in most foreign
countries, and is designed to be fully NEBS-compliant for main long distance
carriers, alternate access carrier, local exchange carrier and CLEC customers.
When all products are announced, the price range of the Telecom 2000
Carrier-Class Gateways product set is expected to be between $100,000 and
$500,000.

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OTHER PRODUCTS AND SERVICES

E-NET NMS-TM- AND INTELLISERIES-TM-

We sell a proprietary, expert systems-based, user friendly, object-oriented
network and system management product called the e-Net NMS-TM- network
management system. e-Net NMS provides enterprises with a broad range of
capabilities for managing global telephone and data networks. This product
offers automated management of operating problems, system configuration, system
performance, system security, accounting, network traffic optimization and
re-routing, configuration and database management, and system failure detection.

We have developed a set of products called IntelliSeries-TM- to provide a
simple, inexpensive network usage and billing reporting capability.
IntelliSeries uses imaging technology and is a general-purpose search and
retrieval engine that can be used in a wide variety of user applications. One of
our clients, Sprint, uses IntelliSeries products to provide its clients with
database access to their monthly call detail record data and frame relay
performance data.

We believe that Telecom 2000 Products and competitors' voice-over-data
products will gain usage on Digital Data Networks, and that this increase in
usage will create greater data volume on Digital Data Networks. We anticipate
that this volume growth will increase the opportunity for sales of data network
management and network reporting products like our NMS and IntelliSeries
products. We intend to couple sales and marketing of Telecom 2000 Products with
marketing activity for our NMS and IntelliSeries Products.

STRATEGIC RELATIONSHIPS

We have established, and intend to continue to establish, a variety of
strategic relationships that are intended to result in the embedding of our
telephony-enabling technology in various Digital Data Network devices. Strategic
partners are important to us because they have developed products or they
deliver services established in the Digital Data Network communications market,
but have not yet implemented telephony capability within those products or
services.

To date, Sprint has been our largest customer. The IP Dial Support contract
provided a significant increase in revenue to the Company, grew the Sprint
technology relationship, validated the efficacy of the use of the IntelliSeries
products and increased our involvement in the Internet-related business and
technology.

In January 1998, we announced that we had been awarded a contract from
Com21, Inc. This agreement provides that we will deliver certain of its existing
software to Com 21 and develop additional software for Com21. We intend the
combined software delivered and developed by e-Net for Com21 to be used to
integrate telephone and tele-facsimile capabilities into a cable television
modem embedded in the cable television control unit typically located on top of
the consumer's television set. We expect this new system to allow customers to
plug their telephone, tele-facsimile and/or computer into their cable television
system to take advantage of the speed of the cable system, which far exceeds the
speed of other home data network transmission lines. Customers of cable systems
would be able to make local calls without existing local exchange carrier fees,
and customers of cable systems that are connected to cable systems in other
localities would be able to make long distance calls through the cable
television system without incurring the long distance toll charges assessed by
traditional long-distance telephony service carriers. The contract calls for us
to receive an up-front payment, milestone payments and a per-unit royalty for
the 30 months following the introduction of the product. In January 1999, we
expanded this contract to add more telephone features and to address the
Internet Protocol for the product, and the royalty period was extended from 30
to 42 months. The contract is not exclusive, and we hope to expand our offering
of telephony products in the cable television market. Com21, which is located in
Milpitas, California, develops, manufactures and markets cable modem based
communication systems. Its

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ComUNITY Access system provides end-to-end Ethernet data communications over
cable TV networks. The underlying ATM architecture makes possible mixed media
(voice, data, video) applications from the same cable modem platform. Com21's
systems serve business, small office, home office and residential markets.

Magellan Network Systems, Inc. and e-Net began work together in August 1997.
Magellan specializes in developing software-based billing systems for carriers.
The two companies are in discussion to cooperatively develop and sell billing,
account provisioning, and commissioning systems for Telecom 2000 Carrier-Class
Gateway Large Systems.

SummaFour, Inc. and e-Net entered into a contract in December 1997 to
jointly develop a product within the Telecom 2000 Carrier-Class Gateway Large
Systems product set. e-Net acquired a SummaFour VCO 4K programmable switch in
April 1998, and began the development effort. However, in July 1998 SummaFour
was acquired by Cisco Systems, Inc. Although e-Net and Cisco have since had
discussions regarding continuing this project, the effort has been delayed while
SummaFour reorganizes within Cisco.

IDT Corporation and e-Net began work together in April 1998. IDT licenses a
software product called Net2Phone-TM-, which e-Net bundles with its retail
consumer hardware product called NetConnect. Net2Phone-TM- and NetConnect
together allow a personal computer user to make telephone calls with an ordinary
telephone handset either on a Digital Data Network to another personal computer
user equipped with these products, or off a Digital Data Network to any
telephone on the public telephone system. Under its contract with IDT, e-Net
receives a six percent of revenue overriding royalty from IDT on revenues IDT
derives from e-Net's NetConnect sales.

Edutek Education Systems, Inc. and e-Net reached an agreement in May 1999
under which Edutek integrates our products into a wireless voice-over-data
system designed to deliver internet access, data communication, and telephony on
a single network. Edutek resells this system to school districts for classroom
teaching purposes, especially in portable classrooms that do not have a wiring
infrastructure for communications. In May, Edutek ordered over $2 million of
e-Net products for delivery in the next 12 months.

SALES AND MARKETING STRATEGY

Our primary sales and marketing strategy is to expand our sales force and
dedicate that force to creating strategic end-users and reseller channels for
our products. This strategy commenced with the hiring of our first
Vice-President of Sales in October 1997, and the subsequent hiring of four new
Account Managers. With this sales force in place, we are seeking to establish a
few larger installed bases of users of Telecom 2000 Products.

With the over one hundred corporate customers who have purchased the Telecom
2000 Starter Kit, an introductory unit of Telecom 2000 Desktop system, we
believe we are beginning to create a class of "strategic end users." We believe
that many of these corporate enterprises have the capability to evolve into
multi-user Telecom 2000 customers. Therefore, a first priority for our business
strategy is to take advantage of these accounts and increase their usage of our
products.

We expect to further promote this sales strategy by the expansion of
distribution arrangements through distributors and systems integrators. We
intend to use a "channel sales" approach to penetrate its target markets. These
channels will be based upon "value-added" inventory/warehousing capability,
sales volume commitments, geographical positioning and other factors. We have
and are developing relationships with carrier product distributors, personal
computer system integrators, complex information system builders and managers,
Government-oriented resellers and foreign-country located dealers. We have
existing reseller relationships with Edutek Education Systems, Inc., Government
Technology Services, Inc., and Eagle Communications, Inc. Several other major
corporations have engaged in significant product testing dialogue with us and
have acquired products for testing as a preliminary step toward developing more
formal distribution arrangements.

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We adopted a number of additional sales techniques and have targeted certain
other markets in order to enhance our primary sales strategy. These include:
entering into royalty and licensing agreements for our intellectual products
(such as the Com21 contract); stressing the advantages offered by telephone
usage on the Internet and private IP networks to the increasing number of major
corporations that make routine use of these DDNs; marketing to the increasing
numbers of small businesses and individuals that use the Internet by stressing
the cost advantages and ease of use of our products; marketing on the Internet
itself, our web site, to more directly target the existing Internet users who we
believe are more likely to recognize the advantages of our products; marketing
to PC users through print and television advertisements, with sales promotions
such as trade shows and technology expositions, and other efforts to garner
media coverage; and through our three-person telephone sales organization.

In early 1999, we identified a need to focus sales activities in three niche
markets: voice-over-cable-television; small-to-mid-sized newer
telecommunications services companies (i.e. Next-Generation Telcos); and World
Wide Web-based internet telephony for internet commerce and otherwise. To
further the voice over-cable-television niche, we modified and expanded our
Com21, Inc. contract to include more telephone features and to address the
Internet Protocol for the product. Also in this niche, we sought and continue to
seek, additional voice-over-cable-television product partners. To further the
Next-Generation Telco niche, we completed development of an intelligent module,
the T2000 Gatekeeper, for the medium-sized digital trunk interface product. Also
in this niche, we developed a capability to use our products on wireless Digital
Data Networks offering this customer base a low-infrastructure cost system
alternative, and we contracted with Edutek Education Systems, Inc. to sell the
wireless product to school systems. To further the World Wide Web-based internet
telephony niche, we developed and enhanced our software-only T2000 product,
T2000-TS Express. As a distribution strategy for this niche, we created a
wholly-owned subsidiary, ZeroPlus.Com, Inc.

The market for our software and services has only recently begun to develop,
is rapidly evolving and is characterized by an increasing number of market
entrants who have introduced or developed products and services for
communication and commerce over Digital Data Networks. As is typical in the case
of a new and rapidly evolving industry, demand and market acceptance for
recently introduced products and services are subject to a high level of
uncertainty. The industry is young and has few proven products. While we believe
that our products offer significant advantages for telephony over Digital Data
Networks, there can be no assurance that Digital Data Network telephony will
become widespread, or that our products for Digital Data Network telephony will
become adopted for these purposes.

GOVERNMENT REGULATION

We are not currently subject to direct regulation by any government agency,
other than regulations applicable to businesses generally including the need to
obtain Federal Communications Commission approval of certain products that
connect directly to the public telephone system, and there are currently few
laws or regulations directly applicable to access to or commerce on the Internet
or to Internet telephony. However, due to the increasing popularity and use of
the Internet, it is possible that a number of laws and regulations may be
adopted with respect to the Internet, covering issues such as regulation of
prices charged for this kind of telephony, user privacy, and quality of products
and services. The adoption of any such laws or regulations may decrease the
growth of the Internet or of Internet telephony, which may in turn decrease the
demand for our products and increase our cost of doing business or otherwise
have a material adverse effect on our business, operating results or financial
condition. Moreover, the applicability to the Internet of existing laws
governing issues such as property ownership, libel and personal privacy is
uncertain.

PATENT, TRADEMARK, COPYRIGHT AND PROPRIETARY RIGHTS

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believe that the 353 Patent may provide certain strategic and technological
advantages in the emerging market for telephony through Digital Data Networks.
We can make no assurances, however, as to the advantages or protection that may
result from the 353 Patent. Our current and anticipated product line is not
wholly dependent on the validity or applicability of the 353 Patent. Not all of
our products are covered by the 353 Patent.

Our success and ability to compete is dependent in part upon its proprietary
technology. The source code for our proprietary software is protected both as a
trade secret and as a patented work, which we believe is a competitive
advantage. We can make no assurances as to the advantages or protection that may
result from our proprietary technology. We also use technology that we purchase
or license from third parties, including software that is integrated with
internally developed software and used in our products to perform key functions.
Of particular note is standards-based compression software that we currently
license from elemedia, an affiliate of Lucent Technologies, Inc. We can make no
assurances that these technology licenses will continue to be available to us on
commercially reasonable terms. We believe that we are not unduly reliant on any
of these third parties or their products. We are aware of alternate sources of
supply; however, the loss of or inability to maintain any of these technology
licenses may result in delays or reductions in product shipments until
equivalent technology may be identified, licensed and integrated. Any such
delays or reductions in product shipments may materially and adversely affect
our business, operating results and financial condition.

COMPETITION

The market for Digital Data Network products and services, including the
telephony application, is new, intensely competitive, rapidly evolving and
subject to rapid technological change. We expect competition to persist,
intensify and increase in the future, from start-up companies to major
technology and telecommunications companies. Almost all of our current and
potential competitors have longer operating histories, greater name recognition,
larger installed customer bases and significantly greater financial, technical
and marketing resources than us. Such competition may materially and adversely
affect our business, operating results or financial condition.

The sets of competitors associated with the three classes of Telecom 2000
Products are:

DIGITAL DATA NETWORK TELEPHONY SMALL SYSTEMS

A number of companies in this field have developed low-speed, half-duplex
audio/voice communications software programs that use the internet as a voice
network and deliver voice by means of PC-based software, mostly for home users.
These products compete with the Telecom 2000 Desktop Retail Consumer systems.
Some of these competing products use the telephone handset, while some rely on
PC-based speakers and microphones. Many of these products deliver voice sound
which is delayed or which contains echo and "jitter," producing overall low
quality, but some of these products are sold at a price substantially lower than
our products. Generally designed for the home user market, these competitor
products have gained market share compared to us, and some of the competitors
are large software corporations that specialize in home PC software, giving them
a competitive marketing advantage to us due to their greater distribution
channel capacity and name recognition.

Some of the competitive products in this market provide computer telephony
graphical user interfaces in accordance with the Microsoft Telephony
Applications Programmer Interface standard, as do we, while some do not. The
level of sophistication of the graphical user interface varies among the
competitors. Some of our competitors have developed, produced and marketed
products strictly for internet telephony, not for other Digital Data Networks,
while other competitors do not offer Internet Protocol telephony but reside only
on Asynchronous Transfer Mode-type Digital Data Networks. We believe that our
products are well-positioned because they offer telephony on all Digital Data
Networks, including Ethernet in local area networks, which is relatively
uncommon among our competitors. Within this field of competitors, some

10
<PAGE>
companies have developed, produced and marketed end-user/client application
products that extend or replace PBX devices with computer software technology,
like us, delivering PBX-like features such as call waiting, call holding, call
transfer, conference calling, billing, voice-mail and the like.

Microsoft Corp., VocalTec Inc., NetSpeak Corp., Altigen Communications,
Inc., Sphere Communications, Inc. and Quicknet Technologies, Inc. are some of
the companies that compete with e-Net in the small systems market.

DIGITAL DATA NETWORK TELEPHONY MEDIUM SYSTEMS

The companies that offer customer-premises-based gateway products delivering
voice over Digital Data Networks that compete with Telecom 2000
Customer-Premises-based Gateway systems are, in some cases, larger and have more
significant revenues than us. The greater size and market share of such
companies may offer them greater distribution channel capacity and name
recognition. Most of these companies offer telephony software features residing
in computer file servers, so that all common telephone features such as
dial-tone and off-hook detection are centralized. This approach has allowed
these competitors to complete product development earlier in the technology
cycle than us; however, we believe that our products are well positioned now to
gain market share due to the performance and cost advantages of their
distributed architecture.

VocalTec Inc., NetSpeak Corp., Micom Communications Corporation (a
wholly-owned subsidiary of Nortel Corporation), Clarent Corporation and
Inter-Tel Communications are some of the companies that compete with us in the
medium systems market.

DIGITAL DATA NETWORK TELEPHONY LARGE SYSTEMS

We have reviewed a number of competitors' announcements that make general
reference to intentions to launch or commence IP telephony products to enable
voice for Internet service providers and data communications carriers.
Communication product companies with announced plans of this general nature that
may compete with us in the future include Cisco Systems, Inc., Lucent
Technologies, Inc., 3Com Corporation, and Nortel Networks, Inc.

PRODUCT DEVELOPMENT

Our current development efforts are focused on new products, product
enhancements and implementing existing products within the three classes of
Telecom 2000 Products: the Telecom 2000 Desktop and Retail Consumer systems,
Telecom 2000 Customer-Premises-based Gateway, and the Telecom 2000 Carrier-Class
Gateway system.

DIGITAL DATA NETWORK TELEPHONY SMALL SYSTEMS

For the Telecom 2000 Desktop product, one development priority is the
improvement of DDN telephony network management software specific to the Telecom
2000 Desktop product. If very large numbers of Telecom 2000 Desktop product are
installed on an private Digital Data Network intranet, we believe that customers
will need network traffic engineering software to optimize the product's
performance. We are also enhancing the conference-calling capability of this
product to create a teleconferencing bridge that will extend the number of
simultaneous conference calls on the system from the current three-call maximum
to a 24 call maximum. We believe that the development associated with the
Telecom 2000 Desktop product network management software and teleconferencing
bridge will be completed by September 1999. In addition, we continue to develop
the Com21, Inc. voice-over-cable-television product, both in accordance with
estimated schedules and the contract's requirements.

11
<PAGE>
DIGITAL DATA NETWORK TELEPHONY MEDIUM SYSTEMS

A development priority for our Telecom 2000 Customer-Premises-based Gateway
products is the implementation of a greater level of "voice compression." Voice
compression allows the products to transport more digital telephony on Digital
Data Networks without increasing the bandwidth of the Digital Data Network.
Digital Data Network bandwidth is valuable, and by compressing telephony,
greater financial savings are gained by users. We currently use a relatively
modest compression scheme, known in the industry as "PCM," for our Telecom 2000
Customer-Premises-based Gateway products. We have also made SX7300 compression
generally available, which is a significantly greater degree of compression, for
Telecom 2000 Customer-Premises-based Gateway products since May 1998. We have
developed a PCM compression capability for our wireless systems, and we have
developed ADPCM compression for the Telecom 2000 medium systems. We had
available for delivery to customers additional alternative compression schemes
by the end of 1998.

Greater voice compression, generally speaking, degrades voice quality for
Digital Data Network telephony, so that Digital Data Network telephony users
choose between the benefits of low bandwidth consumption and poor voice quality
or the expense of higher bandwidth consumption with better voice quality. Our
development seeks to reduce the lower voice quality of compression, and to allow
customers to determine which bandwidth cost/voice quality tradeoff best suits
their needs.

DIGITAL DATA NETWORK TELEPHONY LARGE SYSTEMS

The Telecom 2000 Carrier-Class Gateway product, currently under development
in conjunction with SummaFour, Inc., now a part of Cisco Systems, Inc., remains
a longer-term priority, although our focus currently is on three niche markets
for which this product is not currently required. Although we continue to hold
discussions regarding the implementation of this project, it has been delayed
while SummaFour is reorganized within Cisco. While we hope to complete this
project with SummaFour, we intend to seek a product development partner to
replace SummaFour, if necessary.

We can give no assurance that product development will occur as expected or
otherwise on a timely and cost-effective basis, or, if introduced, that our
products will achieve market acceptance. If not, then our business, financial
condition and results of operations would be materially and adversely affected.

At March 31, 1999, we capitalized approximately $488,600, net of
amortization, in software product development costs. All other product
development costs have been expensed as incurred. We believe that significant
investments in research and development are required to remain competitive. As a
consequence, we intend to maintain the amount of research and development
expenditures in the future.

YEAR 2000 MATTERS

The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year, consequently, in the
year 2000 those systems may be unable to accurately process certain date-based
information. We potentially could be affected by this issue through the internal
computer applications on which we rely, as well as the software that we develop
and sell. We are in process of reviewing all of our significant third party
applications and obtaining documentation from the manufacturers that certify
Year 2000 compliance or provide appropriate assurances of future compliance. We
are also in process of examining the architecture of our products, as well as
documentation on the third party components that are integrated into our
software products. We believe, although at this stage no assurance can be given,
that our products already are Year 2000 compliant. We are also implementing a
test plan, both for third party-supplied internal applications and for our
developed or integrated program products, to validate the results of its initial
review.

Our testing plan for the computer programs acquired from third parties and
used internally for our infrastructure (financial, administration, internal data
communications, and the like) was completed by

12
<PAGE>
December 31, 1998. The results of this testing and internal systems review
indicate that either no program-based outages or significant system degradation
arising from Year 2000 is expected regarding the programs, or any such issues
are covered by suppliers' warranties; or the programs are supplied by major
manufacturers (Microsoft Corporation, Intel Corporation, and the like) for whom
no viable alternative suppliers exist. For programs without viable alternatives,
there is no contingency plan available to us; however, our Year 2000 performance
issues under these programs will not be significantly different from problems
which users of those programs generally experience, and users of those programs
represent a significant number of all business computer program users. The costs
of testing and reviewing third party-supplied internal applications has been
relatively nominal, and principally related to our on-staff Operations
organization reviewing third party documentation, examining program performance
under test scenarios, and querying third party vendor technical points of
contact about Year 2000 compliance.

Our testing plan for our own products, both those developed by us and those
that integrate third party products, is still underway and is due to be
completed by September 30, 1999. Should we find any items that are not Year 2000
compliant in the course of our testing, we will endeavor to take the necessary
actions to correct the matter, and will endeavor to develop a contingency plan
by September 30, 1999. The costs of any such remediation effort are unknown at
this time; however, we anticipate that this testing activity and associated
costs will be borne internally within our Quality Assurance organization, and
that this remediation activity and associated costs will be borne internally
within our Product Development organization.

At this time, we do not anticipate that Year 2000 compliance activities will
have a material effect on our business, product development, financial position
or results of operations. However, we can make no assurance that our systems and
products are Year 2000 compliant until the successful completion of our testing
procedures. Additionally, despite the testing and review undertaken by us, there
can be no assurance that the systems of other companies on which we rely will be
Year 2000 compliant. Either of these unfavorable results could result in a
material adverse effect on our business, financial condition and results of
operations.

FORWARD-LOOKING AND CAUTIONARY STATEMENTS

Certain statements that we have made herein that are not historical are
forward-looking within the meaning of the Private Securities Litigation Reform
Act of 1995. We and our representatives may from time to time make other written
or oral forward-looking statements, including statements contained in our
filings with the Securities and Exchange Commission and in our reports to
stockholders. The words "estimate," "project," "intend," "expect," "believe" and
similar expressions are intended to identify forward-looking statements.
Forward-looking statements involve known and unknown risks and uncertainties.
Many factors could cause the actual results, performance or achievements for us
to be materially different from those contemplated by forward-looking
statements, including the following important factors.

The markets we serve are subject to rapid technological change, changing
customer requirements, frequent new product introductions and evolving industry
standards that may render existing services and products obsolete. As a result,
our position in our existing markets or other markets that we may enter could be
eroded rapidly by product advancements by competitors. The life cycles of our
services and products are difficult to estimate. Broad acceptance of our
products and services by customers is critical to our future success, as is our
ability to design, develop, test and support new software products and
enhancements on a timely basis that meet changing customer needs and respond to
technological developments and emerging industry standards, particularly
client/server and Internet communications and security protocols. We can give no
assurance that we will not experience difficulties that could delay or prevent
the successful development, introduction and marketing of services and products,
or that new services and products and enhancements will meet the requirements of
the marketplace and achieve market acceptance. Further, because we have only
recently commenced sales of our Telecom 2000

13
<PAGE>
Products, we can give no assurance that, despite testing by us and by current
and potential customers, errors will not be found in our products, or, if
discovered, that we will successfully correct them in a timely manner. If we are
unable to develop and introduce services and products in a timely manner in
response to changing market conditions or customer requirements, our business,
financial condition and results of operations would be materially and adversely
affected.

Businesses in the United States and abroad that are engaged in internet
technologies, products and services are substantial in number and highly
competitive, particularly in the field of internet and Internet Protocol network
telephony. Many of the companies with which we intend to compete are
substantially larger and have substantially greater resources than us. It is
also likely that other competitors will emerge in the future. We will compete
with companies that have greater market recognition, greater resources and
broader capabilities than we will. As a consequence, there is no assurance that
we will be able to successfully compete in the marketplace.

We believe that our future success will depend in large part upon our
continued ability to recruit and retain highly qualified technical personnel.
Competition for highly qualified technical personnel is significant,
particularly in the geographic area in which our operations are located. No
assurances can be made that our relationships with our employees will remain
favorable to us.

In March 1996, we acquired all right, title and interest in and to the 353
Patent. We believe that the 353 Patent is the first patent that specifically
involves telephony through Digital Data Networks. We also believe that the 353
Patent may provide certain strategic and technological advantages in the
emerging market for telephony through Digital Data Networks. We can make no
assurances, however, as to the advantages or protection that may result from the
353 Patent.

We currently have other patent and trademark applications pending; however,
there can be no assurance that these applications will be granted, or, if
granted, will result in substantial value to us. We file additional patent,
trademark and copyright applications relating to certain of our products and
technologies. If patents, trademarks or copyrights are granted, there can be no
assurance as to the extent of the protection that will be granted to us as a
result of having such patents, trademarks or copyrights or that we will be able
to afford the expenses of any litigation which may be necessary to enforce its
proprietary rights. Failure of our patents, trademark and copyright applications
may have a material adverse effect on our business. Except as may be required by
the filing of patent, trademark and copyright applications, we will attempt to
keep all other proprietary information secret and to take such actions as may be
necessary to prevent the disclosure of the results of its development activities
and protect its trade secrets under applicable law. Such steps are expected to
include the execution of nondisclosure agreements by key personnel and may also
include the imposition of restrictive agreements on purchasers of our products
and services. There is no assurance that the execution of such agreements will
be effective to protect us, that we will be able to enforce the provisions of
such nondisclosure agreements or that technology and other information acquired
by us pursuant to its development activities will be deemed to constitute trade
secrets by any court of competent jurisdiction.

We caution that the preceding list of cautionary statements is not
exclusive. We do not undertake to update any forward-looking statements that may
be made from time to time by or on behalf of us.

ITEM 2. DESCRIPTION OF PROPERTIES.

We lease approximately 19,100 square feet for our principal executive
offices, which are located at 12800 Middlebrook Road, Suite 400, Germantown,
Maryland 20874. Our Austin, Texas product development facilities are
approximately 4,000 square feet and are located at 12710 Research Blvd., Austin,
Texas 78759. We also lease approximately 1,500 square feet for storage and
excess capacity located at 12325 Hymeadow Drive, Austin, Texas 78750. Base
rental for the current premises is approximately $23,900, $6,600, and $1,200 per
month, respectively. The leases require us to pay certain property taxes and
certain

14
<PAGE>
operating expenses. We believe that our current and anticipated facilities are
suitable and adequate for our operations.

ITEM 3. LEGAL PROCEEDINGS.

We are the defendant in civil litigation originally brought in the 15(th)
Judicial Circuit in and for Palm Beach County, Florida, by the holders of
300,000 warrants issued in connection with the underwriting of our initial
public offering. The warrant holders allege that we did not register the
re-offer and resale of those warrants when required by the Underwriting
Agreement and Representative's Warrant Agreement between the Company and Barron
Chase Securities, Inc., the underwriter of our initial public offering. The
warrant holders, to whom Barron Chase assigned its rights to receive those
warrants and who include Robert Kirk, the President of Barron Chase (as holder
of 240,000 of the 300,000 total warrants), seek to recover between $2,562,000
and $2,862,000 in alleged losses. We have removed the case to the United States
District Court for the Southern District of Florida.

We dispute the warrant holders' interpretation of the Underwriting Agreement
and Representative's Warrant Agreement and believe that we have complied with
our obligations under the Underwriting Agreement and Representative's Warrant
Agreement. While we intend to vigorously defend this case, we believe it is too
early to form an opinion as to its ultimate impact on our financial condition or
results of operations and can give no assurance in that regard.

We are a co-defendant in civil litigation brought by Prudential Securities,
Inc., which seeks to recover in excess of $3 million in alleged losses
associated with a margin loan made to a non-affiliated shareholder of e-Net. The
action alleges that either we or American Stock Transfer & Trust Co., the
transfer agent for our common stock, improperly removed a restrictive legend
from the stock certificate underlying the shares used to collateralize the
margin loan. We have moved to have the Prudential suit dismissed and have filed
a countersuit against Prudential and a cross-claim against American Stock
Transfer seeking indemnity. American Stock Transfer has filed a cross-claim
against us for, among other things, indemnity, to recover any amounts it pays
Prudential or expends in defending the suit American Stock Transfer has
cross-claimed against the non-affiliate shareholder, and also against Morgan
Stanley Dean Witter and a broker formerly employed by Morgan Stanley and
Prudential.

We believe the claims against us are without merit and that our actions will
cause the matter to be either entirely dismissed or will otherwise eliminate us
from any liability. We are vigorously defending the matter and do not believe
the outcome of the suit or any related countersuits or cross-claims will have a
material adverse impact on our financial position or results of operations.

We have applied for exemptions from states in which we solicited the
exercise of our publicly-traded common stock warrants, which we redeemed on June
19, 1998. We have been notified by the states of Alabama, Idaho, Maryland,
Massachusetts, Michigan, New Hampshire, and North Carolina that those states
disagree with our claim of exempt status for this solicitation and that our
solicitation have asserted we allegedly violated these states' securities laws.
We have reached settlement agreements with these states whereby we will offer
rescission of warrant exercises to eligible residents of these states, will pay
a $5000 fine in some of the states, and we will monitor any complaints we
receive from residents of these states regarding this solicitation. Under the
settlement, we admit to no wrongdoing with regard to the solicitation in
question.

We believe that the complaining states' positions are legally incorrect;
however, we also believe that the cost of disputing this matter with these
states would outweigh any costs associated with settling this matter. The costs
of accomplishing this settlement, specifically of the rescission element of the
settlement, are impossible to estimate to a reasonable degree of accuracy;
however, these costs appear to be declining over time as the settlement process
with the complaining states is finalized. We believe it is too early to form an
opinion as to this matter's ultimate cost. However, we do not believe the
outcome of this matter will have a material adverse impact on our financial
position or results of operations.

15
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

16
<PAGE>
PART II

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

Our common stock, par value $.01 per share, has traded on the Nasdaq
SmallCap Market since April 8, 1997, under the symbol "ETEL." On June 14, 1999,
the closing price of the Common Stock was $2.9375 per share. There are
approximately 65 record holders of our Common Stock. The following table sets
forth the range of high and low bid prices for our common stock, as quoted on
Nasdaq, for the period from April 1, 1998 through March 31, 1999.

<TABLE>
<CAPTION>
COMMON STOCK
---------------------
PERIOD HIGH LOW
- ----------------------------------------------------------------------- ---------- ---------
<S> <C> <C>
April 1--June 30, 1998................................................. $ 19.5000 $ 6.6250
July 1--September 30, 1998............................................. $ 20.0000 $ 2.6250
October 1--December 31, 1998........................................... $ 8.0310 $ 1.8750
January 1--March 31, 1999.............................................. $ 6.5000 $ 2.7500
</TABLE>

Holders of our Common Stock are entitled to dividends when, as and if
declared by the Board of Directors out of funds legally available therefor. We
do not anticipate the declaration or payment of any dividends in the foreseeable
future. We intend to retain earnings, if any, to finance the development and
expansion of our business. Future dividend policy will be subject to the
discretion of the Board of Directors and will be contingent upon future
earnings, if any, our financial condition, capital requirements, general
business conditions and other factors. Therefore, there can be no assurance that
we will ever pay any dividends of any kind.

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

RESULTS OF OPERATIONS

YEARS ENDED MARCH 31, 1999 AND MARCH 31, 1998

SALES

Sales for the year ended March 31, 1999 were approximately $1,672,800, an
increase of 131% from the approximately $722,800 recorded for fiscal year 1998.
The revenue increase was due to increased sales of our Telecom 2000 product
line. Product sales for the Telecom 2000 product line resulted in approximately
$1,127,500 of sales for the fiscal year ended March 31, 1999, compared to
approximately $347,500 of product sales for the corresponding fiscal year 1998.
Revenue from services for the year ended March 31, 1999, were primarily from two
customers.

GROSS PROFIT

Gross profits for the year ended March 31, 1999 were approximately $72,600
or 4% of sales, compared to the approximately $375,700 or 52% of sales for
fiscal year 1998. The gross profit percentage decrease resulted primarily from
the writedown in inventory carrying value on Telecomm 2000 products of
approximately $565,000 due to the lower than expected sales of those items.

OPERATING EXPENSES

Selling, general & administrative expenses for the year ended March 31, 1999
were approximately $6,783,600, an increase of 95% over the approximately
$3,474,900 recorded for fiscal year 1998. The dollar increase in these expenses
over the prior year reflected additional spending for personnel and programs
consistent with our emphasis on the Telecom 2000 product line. Also included in
these expenses was bad debt expense of approximately $626,400 resulting from an
increased allowance against the slow collection of receivables associated with
international customers. The increased spending level in fiscal year 1999 also

17
<PAGE>
reflected higher spending for programs and promotions needed to generate and
support product roll-out of, as well as substantial marketing expenditures made
in connection with increased sales of, our Telecom 2000 product line. We expect
increases in selling, general & administrative expenses to moderate in fiscal
year 2000.

Research & development expenses for the year ended March 31, 1999, were
approximately $2,767,500, a 244% increase over the approximately $804,800
recorded for fiscal year 1998. The increased expenditures for research and
development are due to the increase in number of employees and other
expenditures devoted to the general development of our technology products. We
expect increases in research & development expenses to moderate in fiscal year
2000.

OTHER INCOME (EXPENSE)

Other income (expense) charges for the year ended March 31, 1999, were
approximately $208,100, an increase from the approximately $5,100 recorded for
fiscal year 1998. This increase reflects increased interest income arising from
an increase in funds invested over the same period in 1998.

OTHER

To date, inflation and seasonality have not had a material impact on our
results of operations.

LIQUIDITY AND CAPITAL RESOURCES

In the year ended March 31, 1999, we received net proceeds of approximately
$14,300,000 from a private placement of the company's common Stock, the exercise
and redemption of our publicly traded common stock warrants, and the exercise of
common stock options. We also extended our $1,000,000 credit facility, which is
secured by investments, receivables and fixed assets, for two years in June
1999. We used approximately $(7,516,000) in cash flows from operating activities
excluding changes in assets and liabilities during the year ended March 31,
1999, compared to approximately $(3,488,000) for fiscal year 1998. The increase
in cash flows used in operating activities excluding changes in assets and
liabilities was mainly due to the increase in selling, general and
administrative expenses and research and development expenses discussed above.
The total net cash used by operating activities was approximately $(9,330,000)
for the year ended March 31, 1999, compared to approximately $(3,642,300) for
the corresponding fiscal year 1998.

Cash used by investing activities totaled approximately $4,102,000 for the
year ended March 31, 1999 as compared to approximately $1,762,000 for fiscal
year 1998. The main component of that investing activity was the purchase of
short-term securities of approximately $3,658,300, as well as continued
expenditures for property and equipment and capitalized software development of
approximately $413,700 and $30,000, respectively. The majority of these
expenditures related to continuing development of the Telecom 2000 product line.

Cash provided by financing activities totaled approximately $14,336,400 for
the year ended March 31, 1999, compared to approximately $5,880,600 for the
corresponding fiscal year 1998. We successfully completed a private placement of
750,000 shares of common stock in April 1998 with net proceeds of approximately
$5,121,700. In May 1998, we met the requirements for redeeming our 1,725,000
outstanding publicly traded common stock warrants on June 19, 1998. Warrant
exercises prior to redemption yielded net proceeds to us of approximately
$8,900,00. We also had common stock option exercises which yielded approximately
$223,600 for the year ended March 31, 1999. We have access to a $1,000,000
credit line through May 2001, secured by investments, fixed assets and
receivables, but did not borrow against that line of credit during the year
ended March 31, 1999.

We expect to continue to make significant investments in the future to
support our overall growth. Currently, we anticipate that ongoing operations
will be financed primarily from net proceeds of the

18
<PAGE>
private placement, warrant exercises, the line of credit facility, and from
internally generated funds. We presently have a line of credit, investments, and
cash and cash equivalents on hand and believe that these will be sufficient to
meet short-term cash requirements as needed. However, while operating activities
have provided and may provide cash in certain periods, to the extent that we
have experienced or will experience growth, our operating and product
development activities have used and may use cash and consequently, such growth
may require us to obtain additional sources of financing. While to date we have
not arranged to obtain additional capital to meet possible future cash
requirements, we recognize that we may need to do so in the future. We can give
no assurance that unforeseen events may not require more working capital than we
currently have at our disposal, or that we will be able to obtain financing from
additional sources.

FUTURE OPERATING RESULTS

The preceding paragraphs and the following discussion include
forward-looking statements regarding our future financial position and results
of operations. Actual financial position and results of operations may differ
materially from these statements. All such statements are qualified by the
cautionary statements set forth in Part I, Item 1 under "Forward Looking and
Cautionary Statements," as well as the following statements.

We have invested significant amounts in the research and development and the
initial product roll-out marketing and selling for the Telecom 2000 product
line. The emphasis, attention, and dedication of our limited resources for the
Telecom 2000 product line have caused and, in management's view, will continue
to cause negative operating earnings. However, we believe that the ultimate
value and sales potential of the Telecom 2000 product line outweighs the risk of
continued operating losses.

The first products of the Telecom 2000 product line became generally
available during the second quarter of fiscal 1998 and we believe that revenues
will continue to grow as contracts are finalized and products are delivered over
fiscal 2000. The protracted process of obtaining governmental regulatory
approval of products (i.e. Federal Communications Commission product
certification) and the hiring of senior telecommunications sales and technical
staff in the current low-unemployment-rate economy have caused, and may continue
to cause, an effect on the delivery of our products to market. To date we have
received all regulatory approvals that we have sought, and have been able to
hire senior telecommunications sales and technical staff, although we cannot
assure such results in the future.

In 1998, we recognized that the delay in growth of generally forecast demand
for telephony over Digital Data Networks meant that we needed to focus our
immediate sales activities in niche areas. By early 1999, we had identified
three such niche markets: voice-over-cable-television; Next-Generation Telcos;
and World Wide Web-based internet telephony for internet commerce and otherwise.
While we hope that the interim focus on these niche markets will enable us to
generate increased revenues while broader market demand develops for Digital
Data Network telephony products, we cannot assure this result. In connection
with the wireless market niche, in May 1999, Edutek Education Systems, Inc.
ordered over $2 million of e-Net products for delivery in the next 12 months.

We do not expect revenue growth to occur ratably over the 2000 and 2001
fiscal years; instead, we currently expect that the major impact of the Telecom
2000 product introduction on revenues and earnings will occur during fiscal
2000. Revenue growth in fiscal 2000 will depend to a large extent on the timing
of our rollout for additional products in the Telecom 2000 product line, the
success of our niche market strategy and the development of market demand for
Digital Data Network telephony products.

Because of the foregoing uncertainties affecting our future operating
results, past performance should not be considered to be a reliable indicator of
future performance. The use of historical trends to anticipate results or trends
in future periods may be inappropriate. In addition, we participate in a highly
dynamic industry that may result in significant volatility in the price of our
common stock.

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<PAGE>
IMPACT OF INFLATION

We do not believe that inflation has had a material adverse effect on sales
or income during the past several years. Increases in supplies or other
operating costs may adversely affect our operations; however, we believe we may
increase prices of our products and systems to offset increases in costs of
goods sold or other operating costs.

SEASONALITY

Based on our experience to date, we believe that our future operating
results may be subject to quarterly variations based on a variety of factors,
but seasonal changes in weather should have little or no effect.

ITEM 7A. MARKET RISK

Our exposure to market risk for changes in interest rates relates primarily
to our investment portfolio. We do not use derivative instruments in our
investment portfolio. We place our investments, by policy, with instruments
backed by the full faith and credit of the U.S. Government. We have no cash flow
exposure due to interest rate changes.

20
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS......................................................... 18

FINANCIAL STATEMENTS.......................................................................................

Balance Sheets as of March 31, 1999 and 1998............................................................. 19

Statements of Operations for the years ended March 31, 1999 and 1998..................................... 20

Statements of Cash Flows for the years ended March 31, 1999 and 1998..................................... 21

Statements of Stockholders' Equity as of March 31, 1999 and 1998......................................... 22

Notes to Financial Statements............................................................................ 23
</TABLE>

21
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
e-Net, Inc.

We have audited the accompanying balance sheets of e-Net, Inc. (a Delaware
corporation), as of March 31, 1999 and 1998, and the related statements of
operations, cash flows and stockholders' equity for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of e-Net, Inc., as of March 31,
1999 and 1998, and the results of its operations and its cash flows for the
years then ended, in conformity with generally accepted accounting principles.

Grant Thornton LLP
Vienna, Virginia
June 10, 1999

22
<PAGE>
E-NET, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
MARCH 31,
------------------------
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents...................................... $ 1,760,627 $ 855,743
Short-term investments......................................... 4,618,587 960,248
Accounts receivable, net of allowance.......................... 749,903 334,602
Inventory, net................................................. 583,634 202,917
Prepaid expenses............................................... 120,873 176,264
----------- -----------
TOTAL CURRENT ASSETS............................................. 7,833,624 2,529,774
OTHER ASSETS..................................................... 44,322 14,821
PROPERTY, PLANT AND EQUIPMENT, NET............................... 500,627 372,403
SOFTWARE DEVELOPMENT COSTS, NET.................................. 488,570 805,188
----------- -----------
$ 8,867,143 $ 3,722,186
----------- -----------
----------- -----------

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable--trade........................................ $ 279,266 $ 314,010
Accrued liabilities............................................ 669,652 561,093
----------- -----------
TOTAL CURRENT LIABILITIES........................................ 948,918 875,103

TOTAL LIABILITIES................................................ 948,918 875,103

STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 50,000,000 shares authorized,
8,291,955 and 5,750,000 shares outstanding at March 31, 1999
and 1998, respectively....................................... 82,919 57,500
Stock subscriptions and notes receivable....................... (23) (46)
Additional paid-in capital..................................... 28,479,060 14,163,090
Retained deficit............................................... (20,643,731) (11,373,461)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY....................................... 7,918,225 2,847,083
----------- -----------
$ 8,867,143 $ 3,722,186
----------- -----------
----------- -----------
</TABLE>

The accompanying notes are an integral part of these statements.

23
<PAGE>
E-NET, INC.

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED

<TABLE>
<CAPTION>
MARCH 31, 1999 MARCH 31, 1998
-------------- --------------
<S> <C> <C>
SALES
Products....................................................................... $ 1,127,086 $ 347,451
Services....................................................................... 545,723 375,388
-------------- --------------
Total sales...................................................................... 1,672,809 722,839
COST OF PRODUCT SOLD AND SERVICE PROVIDED
Products....................................................................... 852,139 155,109
Inventory writedown............................................................ 565,000 --
Services....................................................................... 183,031 191,995
-------------- --------------
Total cost of product sold and service provided.................................. 1,600,170 347,104
GROSS PROFIT..................................................................... 72,639 375,735
OPERATING EXPENSES
Selling, general and administrative............................................ 6,783,566 3,474,852
Research and development....................................................... 2,767,455 804,830
-------------- --------------
LOSS FROM OPERATIONS............................................................. (9,478,382) (3,903,947)
OTHER INCOME (EXPENSE)
Interest expense............................................................... -- (5,214)
Other expenses................................................................. (217,944) (195,403)
Interest income................................................................ 426,056 205,752
-------------- --------------
LOSS BEFORE INCOME TAXES......................................................... (9,270,270) (3,898,812)
INCOME TAX PROVISION............................................................. -- --
-------------- --------------
NET LOSS......................................................................... $ (9,270,270) $ (3,898,812)
-------------- --------------
-------------- --------------
LOSS PER SHARE--BASIC AND DILUTED................................................ $ (1.17) $ (.68)
-------------- --------------
-------------- --------------
WEIGHTED AVERAGE SHARES OUTSTANDING--BASIC AND DILUTED........................... 7,903,197 5,708,904
</TABLE>

The accompanying notes are an integral part of these statements.

24
<PAGE>
E-NET, INC.

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED

<TABLE>
<CAPTION>
MARCH 31, 1999 MARCH 31, 1998
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss....................................................................... $ (9,270,270) $ (3,898,812)
Adjustments to reconcile net loss to net cash from operating activities
Depreciation and amortization................................................ 632,072 346,387
Loss on retirement of property and equipment................................. -- 1,779
Stock based compensation..................................................... 5,056 62,244
Inventory writedown.......................................................... 565,000 --
Bad debt expense............................................................. 552,144 --
Changes in operating assets and liabilities
(Increase) in accounts receivable.......................................... (967,444) (221,421)
(Increase) in inventory.................................................... (945,717) (202,917)
(Increase) in prepaid expenses and deposits................................ 25,889 (168,755)
Increase in accounts payable and accrued liabilities....................... 73,815 439,222
-------------- --------------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES.............................. (9,329,455) (3,642,273)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures........................................................... (413,678) (336,528)
Short term investments......................................................... (3,658,339) (960,248)
Capitalized software development costs......................................... (30,000) (465,251)
-------------- --------------
NET CASH USED IN INVESTING ACTIVITIES............................................ (4,102,017) (1,762,027)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from initial public offering.......................................... -- 5,885,082
Proceeds from private placement of common stock................................ 5,121,688 --
Proceeds from exercise of common stock warrants................................ 8,991,036 --
Proceeds from exercise of common stock options................................. 223,609 --
Payments on common stock subscriptions......................................... 23 --
Payments on capital leases..................................................... -- (4,480)
-------------- --------------
NET CASH PROVIDED BY FINANCING ACTIVITIES........................................ 14,336,356 5,880,602
-------------- --------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS............................. 904,884 476,302
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD................................. 855,743 379,441
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD....................................... $ 1,760,627 $ 855,743
-------------- --------------
-------------- --------------
SUPPLEMENTAL DISCLOSURES:
Income Taxes Paid.............................................................. $ -- $ --
-------------- --------------
-------------- --------------
Interest Paid.................................................................. $ -- $ 326
-------------- --------------
-------------- --------------
</TABLE>

The accompanying notes are an integral part of these statements.

25
<PAGE>
E-NET, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK STOCK
------------------ SUBSCRIPTIONS ADDITIONAL TOTAL
NO. OF AND NOTES PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT RECEIVABLE CAPITAL DEFICIT EQUITY
--------- ------- --------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, APRIL 1, 1997.................. 4,250,000 $42,500 $(46) $ 8,307,627 $ (7,474,649) $ 875,432
Issuance of common stock associated with
the initial public offering........... 1,500,000 15,000 -- 5,793,219 -- 5,808,219
Stock based compensation................ -- -- -- 62,244 -- 62,244
Net loss................................ -- -- -- -- (3,898,812) (3,898,812)
--------- ------- --------- ----------- ------------ -------------
BALANCE, MARCH 31, 1998................. 5,750,000 57,500 (46) 14,163,090 (11,373,461) 2,847,083
--------- ------- --------- ----------- ------------ -------------
Issuance of common stock associated
with:
private placement..................... 750,000 7,500 -- 5,114,188 -- 5,121,688
warrant exercises..................... 1,720,924 17,209 -- 8,973,827 -- 8,991,036
stock option exercises................ 71,031 710 -- 222,899 -- 223,609
Stock based compensation................ -- -- -- 5,056 -- 5,056
Stock subscription payment.............. -- -- 23 -- -- 23
Net loss................................ -- -- -- -- (9,270,270) (9,270,270)
--------- ------- --------- ----------- ------------ -------------
BALANCE, MARCH 31, 1999................. 8,291,955 $82,919 $(23) $28,479,060 $(20,643,731) $ 7,918,225
--------- ------- --------- ----------- ------------ -------------
--------- ------- --------- ----------- ------------ -------------
</TABLE>

The accompanying notes are an integral part of these statements.

26
<PAGE>
E-NET, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

e-Net, Inc. ("e-Net" or the "Company"), a Delaware corporation, was
incorporated on January 9, 1995, and commenced operations on June 8, 1995.
e-Net, develops, produces, markets and supports open telecommunications software
and related hardware that enable, enhance, and manage telephone communications
over the Internet, private Internet Protocol ("IP") networks and "intranets,"
and other types of digital data networks (collectively, "Digital Data Networks"
or "DDNs"). The Company's Telecom 2000-TM- products ("Telecom 2000 Products")
provide a user-friendly method of high fidelity telephone communications through
DDNs. Through the use of Telecom 2000 Products, organizations can reduce their
telephone expenses by extending their telephone services to remote offices and
mobile employees, in some cases bypassing long distance service charges, while
using their existing internal DDNs. The Company has two office locations:
corporate headquarters in Germantown, Maryland and research and development in
Austin, Texas. The significant accounting policies used in the preparation of
the accompanying financial statements are as follows:

INVENTORY

Inventory is stated at the lower of cost or market value. Cost is determined
by the first-in, first-out method. The elements of cost include subcontracted
costs and materials handling charges. Management periodically reviews and
assesses inventory items and carrying costs for obsolescence and sales
realizability as compared to the relative revenues for each item. When such an
assessment indicates that items are either obsolete or have experienced slower
than expected revenues a writedown is charged to cost of sales based on an
estimate of future sales or revenue realizability. In the fourth quarter of the
fiscal year ended March 31, 1999, management recorded a writedown of $565,000
for certain specific inventory items where the sales realizability was deemed to
be impaired.

REVENUE RECOGNITION

Revenue is recognized on the sale of software products upon shipment unless
future obligations exist wherein a portion of the revenue is deferred until the
obligation is satisfied. Revenue from services rendered is recognized either as
the services are rendered based upon fixed hourly rates or at contractually
determined fixed monthly fees.

For the year ended March 31, 1999, the Company derived 24% of its sales from
one customer.

For the year ended March 31, 1998, the Company derived 56% and 19% of its
sales from two customers, respectively.

ACCOUNTS RECEIVABLE

Accounts receivable are stated at the unpaid balances, less allowance on
uncollectible accounts, if any. Management periodically reviews its outstanding
accounts receivable to assess collectibility of balances based on past
experience and evaluation of current adverse situations which may affect
collectibility of receivables. At March 31, 1999 and 1998, management
established an allowance for uncollectible accounts in the amount of $555,300
and $3,200, respectively. In the fourth quarter of the fiscal year ended March
31, 1999, management recorded an increase to the allowance for uncollectible
accounts receivable of $371,000.

27
<PAGE>
E-NET, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

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

PROPERTY AND EQUIPMENT

Property and equipment are carried at cost, net of an allowance for
accumulated depreciation and amortization. Depreciation is computed on equipment
and furniture, using a straight-line method over a three-year period.

INVESTMENTS

The Company's investments in debt securities, which typically mature in one
year or less, are generally held to maturity and valued at amortized cost, which
approximates fair value. The aggregate fair value at March 31, 1999 and 1998 was
$4,618,587 and $960,248, respectively, for investments in United States Treasury
debt securities. Securities investments that the Company has the positive intent
and ability to hold to maturity are classified as held-to-maturity securities
and recorded at cash and cash equivalents when maturity is three months or less
and as short-term investments when maturity is longer than three months and less
than one year.

EARNINGS PER SHARE

The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
128 for the fiscal year ended March 31, 1999. SFAS No. 128 replaces the
presentation of primary and fully diluted earnings per share with a presentation
of basic earnings per share and diluted earnings per share, if dilutive shares
are outstanding. Basic earnings per share excludes dilution and is computed by
dividing income or loss available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted earnings per share
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were converted into common stock, but such
securities or contracts are excluded if their effects would be anti-dilutive.
Pursuant to the requirements of Staff Accounting Bulletin ("SAB") No. 98 of the
Securities and Exchange Commission, issued in February 1998, common equivalent
shares which have an anti-dilutive effect on net loss per share are no longer
included in computing net loss per share for the periods presented. All
prior-period loss per share data has been restated in accordance with SFAS No.
128 and SAB No. 98.

28
<PAGE>
E-NET, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
per share since the Company has a net loss for all periods presented which would
make the conversion of securities or other contracts to common stock
anti-dilutive.

<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
------------------------
1999 1998
----------- -----------
<S> <C> <C>
Net Loss.......................................................................................... $(9,270,270) $(3,898,812)
Loss per common share--basic & diluted............................................................ $ (1.17) $ (.68)
Number of common shares--basic & diluted.......................................................... 7,903,197 5,708,904
</TABLE>

SOFTWARE DEVELOPMENT COSTS

In accordance with the Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed," the Company has capitalized certain software development costs
incurred after establishing technological feasibility. Costs incurred prior to
such feasibility and certain hardware-related, development costs have been
expensed as incurred as research and development costs. Software costs are
amortized based upon the greater of amortization computed using the estimated
useful life of the software or units sold as a function to expected units to be
sold when the product is available for general release to customers. At March
31, 1999, the Company has capitalized $1,016,000 in software development costs
and has recorded accumulated amortization of $528,000. Amortization expense for
1999 and 1998 was $343,000 and $180,900, respectively.

Critical to the recoverability of the capitalized software costs is the
generation of related sales sufficient to recover such costs. Should sufficient
sales fail to materialize, the carrying amount of capitalized software costs may
be reduced accordingly in the future.

CASH AND CASH EQUIVALENTS

For purposes of the statement of cash flows, the Company considers all cash
held in checking and investment accounts with maturity dates of three months or
less to be cash equivalents. The carrying amount approximates fair value because
of the short-term maturity of the instruments.

NOTE B--SIGNIFICANT TRANSACTIONS

PRIVATE PLACEMENT TRANSACTION

In April 1998, the Company offered for sale to accredited investors 750,000
shares of the Company's restricted common stock, par value $.01 per share, at
$7.50 per share. The share price was based upon the average of the last reported
sales prices for the Common Stock for the five (5) business days immediately
preceding the date upon which the Offering Price is determined, which was April
3, 1998. The transaction was completed in April 1998, and resulted in proceeds,
net of transaction costs, to the Company of approximately $5,100,000.

WARRANT REDEMPTION

In May 1998, the Company authorized the redemption of its publicly traded
Redeemable Common Stock Purchase Warrants ("Warrants"). The Company issued
1,725,000 Warrants in its initial public offering, effective April 7, 1997.
Under the terms governing these Warrants, the Company could, for $.05

29
<PAGE>
E-NET, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE B--SIGNIFICANT TRANSACTIONS (CONTINUED)
per Warrant, redeem the warrants that had not already been exercised and
converted to a share of common stock at an exercise price of $5.25, if the
Company's common stock closing bid price equaled or exceeded $10.00 per share
for a thirty consecutive trading day period. Such a period ended on May 14,
1998. The redemption occurred on June 19, 1998 and the transaction yielded
proceeds, net of transaction costs, of approximately $8,900,000.

NOTE C--COMPOSITION OF CERTAIN BALANCE SHEET CAPTIONS

PROPERTY AND EQUIPMENT

Property and equipment consist of the following at March 31:

<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
Furniture and office equipment......................................................... $ 982,397 $ 568,719
Leasehold improvements................................................................. 23,438 23,438
------------ -----------
1,005,835 592,157
Less accumulated depreciation.......................................................... (505,208) (219,754)
------------ -----------
Property and equipment--net............................................................ $ 500,627 $ 372,403
------------ -----------
------------ -----------
</TABLE>

ACCRUED LIABILITIES

Accrued liabilities consist of the following at March 31:

<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Accrued salaries.......................................................................... $ 130,788 $ 119,151
Accrued vacation.......................................................................... 133,060 91,961
Accrued profit-sharing plan............................................................... -- 80,000
Accrued bonuses........................................................................... 29,400 233,100
Accrued deferred rent..................................................................... 23,582 24,582
Accrued taxes and payroll liabilities..................................................... 2,097 1,139
Accrued legal............................................................................. 144,829 --
Other accrued costs....................................................................... 205,896 11,160
---------- ----------
$ 669,652 $ 561,093
---------- ----------
---------- ----------
</TABLE>

INVENTORY

Inventory consist of the following at March 31:

<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Finished Goods............................................................................ $ 583,634 $ 202,917
---------- ----------
Inventory--net............................................................................ $ 583,634 $ 202,917
---------- ----------
---------- ----------
</TABLE>

30
<PAGE>
E-NET, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE D--INCOME TAXES

For the periods ended March 31, 1998 and 1999, no benefit from income taxes
associated with net operating losses has been reflected due to uncertainty as to
the realizability of tax benefits associated with net operating losses to date.

The income tax provision consists of the following for the period ended
March 31, 1999 and 1998:

<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Deferred
Federal........................................................................... $ 2,940,524 $ 1,211,257
State............................................................................. 552,038 227,395
Valuation allowance................................................................. (3,492,562) (1,438,652)
------------- -------------
Net provision....................................................................... $ -- $ --
------------- -------------
------------- -------------
</TABLE>

The effective tax rate for the period ended March 31, 1999, was 0%. A
reconciliation between the U.S. federal statutory rate and the effective tax
rate follows:

<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Tax (benefit) at U.S. federal statutory rates....................................... $ (2,966,486) $ (1,325,596)
Increase (decrease) resulting from:
State tax (benefit)............................................................... (533,618) (154,393)
Permanent differences............................................................. 7,542 41,337
Valuation allowance............................................................... 3,492,562 1,438,652
------------- -------------
Income tax provision................................................................ $ -- $ --
------------- -------------
------------- -------------
</TABLE>

The Company's reporting period for tax purposes is the calendar year. Taxes
on the net loss for the period January through March is reflected in the
calculation of the deferred tax asset. A valuation allowance has been recognized
in an amount equal to the deferred tax asset.

The tax effect of temporary differences between the financial statement
amounts and tax bases of assets and liabilities which give rise to a deferred
tax asset is as follows at March 31, 1999 and 1998:

<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Net loss for January 1 through March 31,............................................ $ 1,173,521 $ 599,035
Capitalized software................................................................ (366,366) (339,766)
Other assets........................................................................ 66,244 467
Accrued expenses.................................................................... 47,823 47,819
Accrued warranty and patent expenses................................................ 14,596 1,485
Depreciation expense................................................................ 14,307 (7,193)
Net operating loss.................................................................. 4,543,987 1,692,895
Deferred rent....................................................................... (6,808) --
Valuation allowance................................................................. (5,487,304) (1,994,742)
------------- -------------
Deferred taxes payable.............................................................. $ -- $ --
------------- -------------
------------- -------------
</TABLE>

31
<PAGE>
E-NET, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE D--INCOME TAXES (CONTINUED)
The use of net operating losses of the Company in the future to offset
taxable income may be limited in the event of a change in control of the Company
in accordance with Section 382 of the Internal Revenue Code. The Company has net
operating loss carryforwards totaling $11,960,000 that expire in 2019.

NOTE E--COMMITMENTS AND CONTINGENT LIABILITIES

LEASE COMMITMENT

The Company has three leases for office space that provide for aggregate
monthly rent payments of approximately $31,672. At March 31, 1999, approximate
future rental commitments are as follows:

<TABLE>
<CAPTION>
YEAR ENDING MARCH 31,
- ------------------------------------------------------------------------------------------------------
<S> <C>
2000.................................................................................................. $ 377,975
2001.................................................................................................. 437,969
2002.................................................................................................. 449,392
2003.................................................................................................. 404,462
Thereafter............................................................................................ 354,606
</TABLE>

Rent expense for the years ended March 31, 1999, and March 31, 1998, totaled
$220,997 and $201,000 respectively.

EMPLOYMENT AGREEMENT

The Company has an employment agreement with an officer with minimum future
annual salary commitments of the Company under the agreements as follows:

<TABLE>
<CAPTION>
YEAR ENDING MARCH 31, SALARY BONUS TOTAL
- ----------------------------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
2000................................................................... 175,000 87,500 262,500
2001................................................................... 175,000 87,500 262,500
---------- ---------- ----------
$ 350,000 $ 175,000 $ 525,000
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

The agreement also provides for bonuses upon certain performance criteria of
the Company and the determination of the Board of Directors. Pursuant to the
agreement, employment may be terminated by the Company with cause or by the
executive with or without good reason. Termination by the Company without cause,
or by the executive for good reason, would subject the Company to liability for
an amount equal to six months of the terminated executive's salary at the date
of termination plus comparable insurance benefits being received prior to
termination.

LITIGATION

The Company is the defendant in civil litigation by the holders of 300,000
common stock warrants issued in connection with the underwriting of the
Company's initial public offering, where the warrant holders seek to recover
between $2,562,000 and $2,862,000 in alleged losses. The Company disputes the
warrant holders' interpretation of the Underwriting Agreement and
Representative's Warrant Agreement and believes that the Company has complied
with its obligations under the Underwriting Agreement and

32
<PAGE>
E-NET, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE E--COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
Representative's Warrant Agreement. While the Company intends to vigorously
defend this case, management believes it is too early to form an opinion as to
its ultimate impact on the Company's financial condition or results of
operations and can give no assurance in that regard.

The Company is a co-defendant in civil litigation brought by Prudential
Securities, Inc., which seeks to recover in excess of $3 million in alleged
losses associated with a margin loan made to a non-affiliated shareholder of the
Company. The Company believes the claims against it are without merit and that
its actions will cause the matter to be either entirely dismissed or will
otherwise eliminate any liability. The Company is vigorously defending the
matter and management does not believe the outcome of the suit or any related
countersuits or cross-claims will have a material adverse impact on the
Company's financial position or results of operations.

The Company has been notified by seven states, who have disagreed with the
Company's claim of exempt status for the solicitation of the exercise of the
Company's publicly-traded common stock warrants, which were redeemed on June 19,
1998. Those states assert the Company allegedly violated the applicable states'
securities laws. The Company believes that the complaining states' positions are
legally incorrect; however, the Company also believes that the cost of disputing
this matter with these states would outweigh any costs associated with settling
this matter. The costs of accomplishing this settlement, specifically of the
rescission element of the settlement, are impossible to estimate to a reasonable
degree of accuracy; however, these costs appear to be declining over time as the
settlement process with the complaining states is finalized. Management believes
it is too early to form an opinion as to this matter's ultimate cost. However,
management does not believe the outcome of this matter will have a material
adverse impact on the Company's financial position or results of operations.

NOTE F--RELATED PARTY TRANSACTIONS

The Company rents an aircraft for business purposes from an entity owned by
the Company's president. For the years ended March 31, 1999 and 1998, the
Company paid $199,060 and $63,000, respectively, for the rental of the aircraft.

The Company entered into a post-employment consulting agreement for
continued development services. The former employee is a significant shareholder
and the Company paid $87,242 for the year ended March 31, 1999 under the
post-employment consulting agreement.

The Company pays royalties to the original patent holders of U.S. Patent No.
5,526,353, "System and Method for Communicating Audio Data Over a Packet-Based
Network", who also are or were significant shareholders, based on the gross
profits of product sales related to the patent. For the year ended March 31,
1999 the Company paid a total of $9,760 to the patent holders.

The Company entered into a consulting agreement with the chairman of the
board to provide services for a fixed monthly amount of $1,000 per month. For
each of the years ended March 31, 1999 and 1998, the Company paid $12,000,
respectively under the consulting agreement.

NOTE G--DEFINED CONTRIBUTION PLAN

The Company established a Profit Sharing Plan and Trust (the "Plan") in
December 1995. Employees who were employed by the Company on the effective date
of the Plan (January 14, 1995) were automatically eligible for participation.
Employees hired after the effective date become eligible to participate if they
are at least 21 years of age and have completed one year of service with the
Company. Contributions

33
<PAGE>
E-NET, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE G--DEFINED CONTRIBUTION PLAN (CONTINUED)
are made at the discretion of management. Contributions to the Plan for the
years ended March 31, 1999 and 1998, were approximately $-0- and $80,000,
respectively. In January 1998, the Plan was converted into a retirement plan
qualified under section 401(k) of the Internal Revenue Code (the 401(k) Plan).
The 401(k) Plan allows the Company to determine the matching amount on an annual
basis. The initial matching amount was established at 50% of employee deferrals
up to 5% of eligible wages. Contributions to the 401(k) Plan for the year ended
March 31, 1999, were approximately $89,000.

NOTE H--STOCK OPTION PLANS

At March 31, 1999, the Company has two stock-based compensation plans which
are described below. As permitted under generally accepted accounting
principles, grants under those plans are accounted for following APB Opinion No.
25 and related interpretations. Accordingly, only the compensation cost
associated with grants to non-employees or non-directors of the Company or for
employees who had their options re-priced have been recognized for the years
ended March 31, 1999 and 1998 in the amounts of $5,056 and $62,244,
respectively. The fair value for options issued in 1999 has been estimated at
$2,380,000 as of the grant date using the Black Scholes model with the following
weighted average assumptions: risk free interest rate of 4.9%; volatility factor
of the expected market price of 123.2%; and a weighted average expected life of
the option of 3 years. Because option valuation models require the input of
highly subjective assumptions and because changes in the assumptions can
materially affect the fair value estimate, the existing model may not
necessarily provide a reliable measure of the fair value of its stock options.
Had compensation cost for the two stock-based compensation plans been determined
based on the grant date fair values of the awards (the method prescribed in SFAS
No. 123), reported net loss and loss per common share would have been reduced to
the pro forma amounts shown below.

<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31
-----------------------
1999 1998
----------- ----------
<S> <C> <C>
Net Loss
As reported..................................................... $(9,270,270) $(3,898,812)
PRO FORMA....................................................... (10,601,612) (4,978,812)
Loss per common share--basic & diluted
As reported..................................................... $ (1.17) $ (.68)
PRO FORMA....................................................... (1.34) (.87)
</TABLE>

Stock option plans:

In April 1998, the Board of Directors approved the adoption of the e-Net,
Inc. 1997 Non-Qualified
Stock Option Plan, including the allocation of up to 500,000 shares for option
grants. In December 1998, the shareholders approved the adoption of the e-Net,
Inc. 1998 Stock Compensation Plan, including the allocation of 1,000,000 shares
for option grants. The options are exercisable at fair market value measured at
the grant date with varying vesting schedules. Options granted and vested under
the plan to non-employees or directors in the twelve months ended March 31, 1999
and 1998 were recorded as compensation expense of $5,056 and $62,244,
respectively. Since April 1, 1998, the Company has granted

34
<PAGE>
E-NET, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE H--STOCK OPTION PLANS (CONTINUED)
588,553 options, of which 455,255 are exercisable at March 31, 1999. Generally,
stock options are granted at fair market value as determined by a moving average
of trading activity prior to the grant date.

<TABLE>
<CAPTION>
STOCK OPTIONS
----------------------------
WEIGHTED
AVERAGE
OUTSTANDING EXERCISE PRICE
----------- ---------------
<S> <C> <C>
Balance at March 31, 1998........................................ 767,953 $ 4.49
Granted........................................................ 588,553 6.29
Exercised...................................................... (71,031) 3.15
Canceled....................................................... (359,221) 6.66
----------- -----
Balance at March 31, 1999........................................ 926,254 $ 4.94
</TABLE>

<TABLE>
<CAPTION>
NUMBER OF OPTIONS
----------------------
YEAR ENDED
MARCH 31
----------------------
1999 1998
---------- ----------
<S> <C> <C>
Exercisable, end of year........................................... 450,255 177,120
Weighted-average fair value per option of options granted during
the year......................................................... $ 3.99 $ 3.14
</TABLE>

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------- ------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- ------------------------------------------ ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$0.00 to $1.73............................ 5,837 7.7 $ 0.00 5,837 $ 0.00
$1.74 to $3.45............................ 217,166 7.2 3.42 52,498 3.42
$3.46 to $5.18............................ 430,251 6.5 4.17 292,252 4.14
$5.19 to $6.91............................ 3,000 6.8 6.11 3,000 6.11
$6.92 to $8.64............................ 270,000 7.0 7.49 96,668 7.46
Totals................................ 926,254 6.8 $ 4.94 450,255 $ 4.73
</TABLE>

35
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

36
<PAGE>
Part III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.

Our executive officers and directors as of the date hereof are as follows:

<TABLE>
<CAPTION>
NAME AGE TITLE
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Alonzo E. Short...................................... 58 Chairman of the Board
Robert A. Veschi..................................... 37 President, Chief Executive Officer, Director
Donald J. Shoff...................................... 44 Vice President, Finance and Chief Financial Officer
William W. Rogers, Jr................................ 57 Director
Clive Whittenbury, Ph.D.............................. 66 Director
William L. Hooton.................................... 47 Director
Christina Swisher.................................... 34 Vice President, Operations
David W. Wells....................................... 42 General Counsel
</TABLE>

Each of our directors holds office for a term of one year or until his or
her successor is elected and qualified. There are no family relationships among
any of our officers or directors and none of our officers and directors had been
involved in any material legal proceedings during the past five years. Our
officers devote full time to our business.

The principal occupation and business experience for each officer and
director for at least the last five years are as follows:

ALONZO E. SHORT, JR., Lt. Gen., USA (ret.), 58, has been chairman of the
board since January 1996. General Short has more than 30 years experience in
executive management, operations and the engineering, design and development of
large-scale telecommunications and data systems. General Short retired from the
service in 1994 following a career that included serving as deputy commanding
general (1988-1990) and commanding general (1990-1991) of the U.S. Army
Information Systems Command, a major information technology organization, which
was responsible for all telecommunications during the Desert Shield/Desert Storm
operation, among other responsibilities. From 1991 to 1994, General Short was
director of the Defense Information Systems Agency, a major information
technology organization which is responsible for telecommunications and related
services to the President of the United States, Secret Service, Joint Chiefs of
Staff, Secretary of Defense, among other high level federal entities. From
1994-1997, General Short was president and chief executive officer of MICAH
Systems, Inc., a Washington, D.C. metropolitan area based information,
technologies management and consulting firm. In September 1997, General Short
joined Lockheed Martin, an aerospace, defense, and information technology
company, as a Vice-President. Since January 1996, General Short has been
instrumental in the organization and development of e-Net's business.

ROBERT A. VESCHI, 37, has been our president, chief executive officer, and a
director since January 1995. Mr. Veschi founded e-Net, which began its
operations in June 1995. Mr. Veschi has significant experience in executive
management, operations and the engineering, design and development of
telecommunications and computer products and systems. From 1986 to 1990, Mr.
Veschi was manager of systems engineering for International Telemanagement,
Inc., a Washington, D.C. metropolitan area based information, data and network
systems firm. From 1990 to 1994, Mr. Veschi was a group president of I-Net,
Inc., a Washington, D.C. metropolitan area based information, data and network
systems firm. From December 1994 to May 1995, for approximately six months, Mr.
Veschi was president and chief executive officer of Octacom, Inc., a Washington,
D.C. metropolitan area based information, data and network systems firm, and a
wholly-owned subsidiary of Octagon, Inc., an Orlando, Florida metropolitan area
based publicly held technical services firm. From July 1994 to May 1995, for
approximately nine months, Mr. Veschi was a vice president of telecommunications
for Octagon, Inc., and from January 1995 to May 1995, for approximately four
months, Mr. Veschi was a member of the board of directors of such company. Since
June 1995, Mr. Veschi has been instrumental in our organization, development and
promotion.

37
<PAGE>
DONALD J. SHOFF, CPA, 44, has been vice president of finance and chief
financial officer since November 1997. Prior to that, Mr. Shoff was director of
finance and assisted us as a consultant prior to employment. Mr. Shoff has 21
years of significant experience in both public accounting firms and with high
technology companies, both public and private. From 1977 to 1981, Mr. Shoff was
a staff accountant and senior accountant on the staff of local Washington, D.C.
public accounting firms. From 1982 to 1986, Mr. Shoff was the corporate cost
accounting manager and a group controller for Science Applications International
Corporation, a high technology products and professional services public
corporation, where he was responsible for the corporate cost accounting
functions and controllership of a high technology services operation group. From
1987 to 1992 and from 1993 to 1996, Mr. Shoff consulted independently and as a
Senior Manager of Grant Thornton LLP, a major accounting and management
consulting firm, with public and privately held high technology companies doing
business with the Federal government. From 1992 to 1993 Mr. Shoff was vice
president of finance and administration for Comsis Corporation, a Washington,
D.C. based privately held engineering and technology company doing business with
the Federal and various state governments. Mr. Shoff holds a B.B.A. degree from
the Pennsylvania State University and is a certified public accountant.

WILLIAM W. ROGERS, JR., 57, has been a director since January 1997. Mr.
Rogers has substantial senior management, operations and technical and
engineering services experience. From 1972 to 1987, Mr. Rogers was a general
manager engaged in operations, technical and engineering services for Boeing
Computer Services, Inc. From 1987 to 1989, Mr. Rogers was president and chief
executive officer of International Telemanagement, Inc., a McLean, Virginia
based telecommunications and systems engineering and services company. From 1989
to 1991, Mr. Rogers was a vice president of Fluor-Daniel, where he was
responsible for telecommunications and systems integration services. From 1991
through 1998, Mr. Rogers was a vice president with Computer Sciences
Corporation, a McLean, Virginia based technology products, systems and services
company, where he is responsible for systems integration and related technical
services. Since April 1998, Mr. Rogers has been a senior vice president of CACI,
Inc., a Washington, D.C. based information technology company. Since January
1997, Mr. Rogers has been instrumental in e-Net's organization and development.
Mr. Rogers holds a B.A. degree from West Virginia University.

WILLIAM L. HOOTON, 47, has been a director since January 1996. Mr. Hooton
has substantial experience in the management, design, operation, marketing and
sales of image conversion systems, electronic imaging system integration, data
automation and high performance data storage subsystems. From 1990 to 1993, Mr.
Hooton was vice president of operations and technical and business development
of the Electronic Information Systems Group of I-Net, Inc., a Washington, D.C.
metropolitan area based information, data and network systems firm. From 1993 to
1998, Mr. Hooton was president and chief executive officer of Q Corp., a
Washington, D.C. metropolitan area high technology consulting firm specializing
in digital imaging systems and other complex imagery in media. In September
1998, Mr. Hooton became chief executive officer of Tower Software Corporation, a
Northern Virginia based digital imaging software company. Since January 1996,
Mr. Hooton has been a director of the Company and has been instrumental in
e-Net's organization and development. Mr. Hooton holds a B.B.A. degree from the
University of Texas.

CLIVE G. WHITTENBURY, Ph.D., 66, has been a director since June 1996. Dr.
Whittenbury has substantial senior management, operations and technical advisory
experience. From 1972 to 1979, Dr. Whittenbury was a senior vice president and,
from 1976 to 1986, a director of Science Applications International Corporation
("SAIC"), a La Jolla, California based major international systems engineering
firm with current annual revenues of approximately $4.7 billion. Since 1979, Dr.
Whittenbury has been executive vice president and a director of the Erickson
Group, Inc., a major international diversified products firm. Since 1994, Dr.
Whittenbury has been a director of Socrates Technologies Corporation., a
publicly held (Nadaq: "SOCT") Vienna, Virginia broad-based technology products
and services company (formerly MVSI, Inc.). Dr. Whittenbury is a member of the
International Advisory Board for the British Columbia Advanced Systems
Institute, which manages commercialization programs in technology at the three
major Vancouver/Victoria universities, a member of the Advisory Board of Compass
Technology

38
<PAGE>
Partners, an investment fund, and is chairman of the Advisory Board (Laser
Directorate) for the Lawrence Livermore National Laboratory. Dr. Whittenbury has
also served as a technical advisor to three U.S. Congressional Committees, the
Grace Commission and numerous major U.S. and foreign companies. Since June 1996,
Dr. Whittenbury has been instrumental in e-Net's organization and development.
Dr. Whittenbury holds a B.S. degree (physics) from Manchester University
(England) and a Ph.D. degree (aeronautical engineering) from the University of
Illinois.

CHRISTINA L. SWISHER, 34, has been vice president of operations since
December 1996 and was e-Net's secretary from February 1997 through January 1999.
Ms. Swisher has significant experience in the computer networking management,
systems and operations. From 1991 to 1993, Ms. Swisher was a technical and
graphics specialist with the Air Force Association, a Washington, DC area based
national services organization, where she was responsible for technical and
statistical analyses. From 1993 to 1995, Ms. Swisher was the manager for
computer networks for computer network systems and operations for I-Net, Inc., a
Washington, DC metropolitan area based information, data and network systems
firm. Since 1995, Ms. Swisher has been director of technical services with
e-Net, becoming vice president of operations in December 1996. Since June 1995,
Ms. Swisher has been instrumental in the organization and development of e-Net's
business.

DAVID W. WELLS, 42, has been Director of Contracts and General Counsel since
e-Net's founding, originally as a consultant and, since October 1996, as an
employee. Prior to working for e-Net, David worked for Digicon, Inc., Octagon,
Inc., and, from 1990 through 1994, for I-Net, Inc. At I-Net, David was
instrumental in managing all legal affairs of the corporation as it grew from
approximately $10 million dollars to over $200 million dollars in annual sales,
prior to its sale to Wang Laboratories, Inc. Previously, David held contract or
legal counsel positions at Planning Research Corporation, Federal Data
Corporation, and Honeywell Information Systems, Inc. David is a graduate of the
University of Virginia (B.A. with distinction,1977) and Marshall-Wythe Law
School at the College of William and Mary (J.D., 1980).

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires our officers and directors, and
persons who own more than ten percent of a registered class of our equity
securities, to file reports and changes in ownership of such securities with
e-Net and with the Securities and Exchange Commission. The following information
is based solely on a review of Forms 3. 4 and 5 and amendments thereto furnished
to us pursuant to Rule 16a-3(e) under the Securties and Exchange Act of 1934, as
amended, and other information provided to us, with respect to e-Net's most
recent fiscal year, to the best of our knowledge and information.

Each of Alonzo E. Short, Robert A. Veschi, Donald J. Shoff, Christina
Swisher, William W. Rogers, Jr., Clive Whittenbury, Ph.D. and William L. Hooton
was granted stock options on December 18, 1998, and those grants should have
been reported on Form 4 or Form 5 no later than February 15, 1998. Each of them
has filed a Form 4 reporting the grant of his or her options on June 29, 1999.

David W. Wells, while not an officer of e-Net under Delaware law, was
granted sufficient additional authority in an internal reorganization effective
January 1, 1999 that he may be deemed to have become an "officer" (as defined in
Rule 16a-1 under the Exchange Act) at that time. He did not file a Form 3 until
June 29, 1999. Mr. Wells sold certain of his shares of common stock on April 15,
16 and 20, 1999, but did not file a Form 4 reflecting those sales by May 10,
1999. He filed a Form 4 reflecting these sales on June 29, 1999.

Based solely on the most recent information provided to us verbally by
Edward Ratkovich, Maj. Gen. USA (ret.): Gen. Ratkovich beneficially owned
significantly more than ten percent of e-Net's issued and outstanding shares of
common stock for a period during e-Net's last fiscal year. On or about September
30, 1998 he filed delinquent Forms 3 and 4 covering his transactions to date in
e-Net stock and reflecting beneficial ownership at that time of just over ten
percent of e-Net's issued and outstanding shares of common stock. Shortly
thereafter, Gen. Ratkovich sold enough additional shares of e-Net common stock
to bring his beneficial ownership below ten percent of the issued and
outstanding shares. He did not file a Form 4 or Form 5 to reflect that
transaction, which remains unreported.

39
<PAGE>
Item 10. Executive Compensation.

SUMMARY COMPENSATION TABLE

The following table sets forth certain compensation information for the
fiscal years ended March 31, 1997, 1998 and 1999 with regard to the Chief
Executive Officer, the Chief Financial Officer and the other executive officers
(as determined at March 31, 1999) whose annual salary and bonus for that year
was at least $100,000 (the "Named Officers"):

Summary Compensation Table

<TABLE>
<CAPTION>
OTHER SECURITIES
ANNUAL UNDERYING
NAME OF INDIVIDUAL POSITION WITH COMPANY YEAR SALARY BONUS COMPENSATION(1) OPTIONS
- -------------------------- ------------------------------- --------- --------- --------- ------------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Veschi President, Chief Executive 1999 175,000 190,000(2) -- 200,000
Officer, Director 1998 175,000 87,500 --
1997 167,708 87,500 --
Christina L. Swisher Vice President, Operations 1999 125,329 16,500 -- 60,000
1998 88,333 21,000 --
1997 66,251 5,607 --
David Wells General Counsel 1999 125,329 16,500 -- 30,000
1998 116,059 7,688 --
1997 33,319 -- --
Donald J. Shoff Vice President, Finance Chief 1999 125,329 16,500 -- 72,750
Financial Officer and Secretary 1998 95,512 -- --
1997 22,926 -- --
</TABLE>

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

(1) Our officers may receive remuneration as part of an overall group insurance
plan providing health, life and disability insurance benefits for our
employees. The amount allocable to each Named Officer cannot be specifically
ascertained, but, in any event, did not in any reported fiscal year exceed
the lesser of $50,000 and such Named Officer's combined salary and bonus. We
have purchased key-man term life insurance on Mr. Veschi in the amount of $2
million, which designates us as the owner and beneficiary of the policy.

(2) Mr. Veschi's contractual bonuses for the fiscal years ending March 31, 1999
and 1998 were paid in the fiscal year ended March 31, 1999.

DIRECTOR COMPENSATION

Our directors, with the exception of Mr. Veschi, are entitled to annual
remuneration of $24,000 pursuant to oral agreements between them and e-Net. In
addition, General Short receives $1,000 per month under a consulting services
agreement for his additional specific business services on our behalf.

Each outside director is also entitled to receive reasonable expenses
incurred in attending meetings of the Board of Directors.

40
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth certain information related to the options
granted to the Named Officers during the fiscal year ended March 31, 1999:

<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE
NAME GRANTED FISCAL YEAR PRICE EXPIRATION DATE
- ------------------------------------------------- ----------- --------------- ----------- ----------------------
<S> <C> <C> <C> <C>
Robert A. Veschi................................. 200,000(1) 34% $ 7.5063(2) April 7, 2006
Christina L. Swisher............................. 60,000(3) 10 4.1375(4) September 30, 2005
David Wells...................................... 30,000(5) 5 4.1375(4) September 30, 2005
Donald J. Shoff.................................. 72,750(6) 12 4.1375(4) September 30, 2005
</TABLE>

- ------------------------
(1) 33,334 vested on December 18, 1998 (date of grant), 33,333 vested on April
7, 1999 and 33,333 will vest on April 7, 2000.

(2) e-Net agreed to grant on April 7, 1998 but did not actually grant until
December 18, 1998. Exercise price was set based on date e-Net agreed to
grant.

(3) 40,000 vested on December 18, 1998 (date of grant) and 20,000 will vest on
September 30, 1999.

(4) e-Net agreed to grant on September 30, 1998 but did not actually grant until
December 18, 1998. Exercise price was set based on date e-Net agreed to
grant.

(5) 20,000 vested on December 18, 1998 (date of grant) and 10,000 will vest on
September 30, 1999.

(6) 52,750 vested on December 18, 1998 (date of grant) and 20,000 will vest on
September 30, 1999.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES

The following table sets forth certain information related to option
exercises by the Named Officers during the fiscal year ended March 31, 1999 and
the value of their unexercised options at March 31, 1999:

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED VALUE OF
OPTIONS AT UNEXERCISED IN-THE-
FISCAL YEAR MONE OPTIONS AT
SHARES END (#) FISCAL YEAR END ($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- -------------------------------------------------- ----------- ---------- ---------------- -------------------
<S> <C> <C> <C> <C>
Robert A. Veschi.................................. -- $ -- 133,334/66,666 $ --(1)
Christina L. Swisher.............................. -- -- 40,000/20,000 --(1)
David Wells....................................... -- -- 20,000/10,000 --(1)
Donald J. Shoff................................... -- -- 52,750/20,000 --(1)
</TABLE>

- ------------------------
(1) None of the options held by the Named Officers was in-the-money at March 31,
1999.

EMPLOYMENT AGREEMENT

We have entered into an employment agreement with Robert A. Veschi, our
president and chief executive officer, dated as of April 1, 1996. This agreement
will expire on March 31, 2001. The current annual salary under Mr. Veschi's
agreement is $175,000, which salary may be increased to reflect annual cost of
living increases and may be supplemented by discretionary merit and performance
increases as determined by our Board of Directors of the Company. Mr. Veschi is
entitled to an annual bonus equal to

41
<PAGE>
50 percent of the salary provided under his agreement, which bonus is not
subject to any performance criteria.

Mr. Veschi's agreement provides, among other things, for participation in an
equitable manner in any profit-sharing or retirement plan for employees or
executives and for participation in other employee benefits applicable to our
employees and executives. The agreement provides for the use of an automobile,
payment of club dues and other fringe benefits commensurate with his duties and
responsibilities. The Agreement also provides for benefits in the event of
disability. The agreement also contains non-compete provisions which are limited
in geographical scope to the Washington, D.C. metropolitan area.

Pursuant to Mr. Veschi's agreement, his employment may be terminated by us
with cause or by Mr. Veschi with or without good reason. Termination by us
without cause, or by Mr. Veschi for good reason, would subject us to liability
for liquidated damages in an amount equal to Mr. Veschi's current salary and a
PRO RATA portion of his bonus for the remaining term of the agreement, payable
in a lump sum cash payment, without any set-off for compensation received from
any new employment. In addition, Mr. Veschi would be entitled to continue to
participate in and accrue benefits under all employee benefit plans and to
receive supplemental retirement benefits to replace benefits under any qualified
plan for the remaining term of the agreement to the extent permitted by law.

42
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth certain information regarding e-Net's common
stock owned as of June 22, 1999 by (i) each person who is known by us to own
beneficially more than five percent of our common stock; (ii) each of our
directors; (iii) each Named Officer; and (iv) all executive officers and
directors as a group. With regard to five percent beneficial owners who are not
either a director or officer, the information set forth below reflects the most
recent reliable information available to us. Unless otherwise indicated and
subject to applicable community property and similar statutes, insofar as is
known by us, all persons listed below have sole voting and investment power over
all shares of common stock beneficially owned. Share ownership has been computed
in accordance with the Securities and Exchange Commission rules and does not
necessarily indicate beneficial ownership for any other purpose.

<TABLE>
<CAPTION>
NUMBER PERCENTAGE
NAME AND ADDRESS POSITION WITH COMPANY OF SHARES OF SHARES
- ------------------------------------------- ------------------------------------------- ---------- -----------
<S> <C> <C> <C>
Alonzo E. Short, Jr., Lt. Gen., USA (ret.)
(1)...................................... Chairman of the Board 105,000 1.26
Robert A. Veschi (2)....................... President, Chief Executive Officer, 1,508,334 17.90
Director
Christina Swisher (3)...................... Vice President, Operations 85,000 1.02
Donald J. Shoff (4)........................ Vice President, Chief Financial Officer and 102,750 1.23
Secretary
David W. Wells (5)......................... General Counsel 80,000 .96
William L. Hooton (6)...................... Director 65,000 .78
Clive W. Whittenbury, Ph.D. (7)............ Director 65,000 .78
William W. Rogers, Jr. (8)................. Director 20,000 .24
Edward Ratkovich, Maj. Gen. USA (ret.)
(9)...................................... Stockholder 514,867 6.21
All Executive Officers and Directors as a
Group (8 persons) (10)................... 1,951,084 22.58
</TABLE>

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

(1) c/o Lockheed Martin, 5203 Leesburg Pike, Suite 1501, Falls Church, Virginia
22041. Includes vested options to purchase 15,000 shares of common stock.

(2) c/o e-Net, Inc., 12800 Middlebrook Road, Suite 200, Germantown, Maryland
20874.c/o e-Net, Inc., 12800 Middlebrook Road, Suite 200, Germantown,
Maryland 20874. Includes vested options to purchase 133,334 shares of common
stock.

(3) c/o e-Net, Inc., 12800 Middlebrook Road, Suite 200, Germantown, Maryland
20874. Includes vested options to purchase 40,000 shares of common stock.

(4) c/o e-Net, Inc., 12800 Middlebrook Road, Suite 200, Germantown, Maryland
20874. Includes vested options to purchase 52,750 shares of common stock..

(5) c/o e-Net, Inc., 12800 Middlebrook Road, Suite 200, Germantown, Maryland
20874. Includes vested options to purchase 20,000 shares of common stock.

(6) 11490 Commerce Park Dr., Suite 120, Reston VA 20191. Includes vested options
to purchase 15,000 shares of common stock.

(7) 511 Trinity Avenue, Yuba City, California 95991. Does not include 350,000
shares that are, to our knowledge, beneficially owned Socrates Technology
Corporation. Includes vested options to purchase 15,000 shares of common
stock. Dr. Whittenbury is, to our knowledge a director of Socrates.

(8) c/o CACI, 14200 Park Meadow Drive, Suite 200, Chantilly, Virginia 20151.
Includes vested options to purchase 15,000 shares of common stock.

43
<PAGE>
(9) 1030 Delf Drive, McLean, Virginia 22101. Does not include 350,000 shares
that are, to our knowledge, beneficially owned Socrates Technology
Corporation. Gen. Ratkovich is, to our knowledge, a director of Socrates.

(10) Includes vested options to purchase 347,751 shares of Common Stock.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

In January 1995, in connection our founding, we issued 300 shares of common
stock to Alonzo E. Short, Jr., 4,332 shares to Robert A. Veschi, 400 shares to
Christina L. Swisher, 167 shares to William L. Hooten, 167 shares to Donald J.
Shoff, 1,583 shares to Arthur Henley and 1,500 shares to Thomas T. Prousalis,
Jr. Each such founding shareholder was assessed $0.01 per share for his or her
Common Stock, which amount was equivalent to its par value at the time. Taking
into account a 600:1 stock split effective as of March 1996 (the "Forward
Split") and a 2:1 reverse stock split effective as of March 1997 (the "Reverse
Split"), each such shareholder acquired at that time the equivalent of 90,000,
1,300,000, 120,000, 50,000, 50,000, 475,000 and 450,000 shares of today's common
stock.

In March 1996, we were loaned $500,000 by Edward Rakovitch, $250,000 by
Robert Foise, $200,000 by Armstrong Industries and $50,000 by Martin Sumichrast.
Principal and interest computed at the rate of eight percent annually was to
become due at the earlier of June 1, 1997 or the expected June 1996 closing date
of a proposed initial public offering of our securities. As additional
consideration for these loans, the Company issued 500,000 bridge units to Mr.
Rakovitch, 250,000 to Mr. Foise, 200,000 to Armstrong Industries and 50,000 to
Mr. Sumichrast. Each bridge unit contained one share of common stock, one Class
A Warrant and one Class B Warrant. In June 1996, the loan principal was
converted into paid-in capital and accounted for as consideration for the bridge
units. The Class A Warrants and Class B Warrants were canceled in March 1997 in
exchange for each such shareholder receiving additional shares of common stock
such that, even taking the Reverse Split into account, each such shareholder had
500,000, 250,000, 200,000 and 50,000 shares of today's common stock.

In August 1996, we entered into a letter of intent with Socrates
Technologies Corporation ("Socrates"), a publicly held (Nasdaq "SOCT"), Vienna,
Virginia broad-based technology products and services company, in which we
agreed to be acquired and become a wholly-owned subsidiary of Socrates in an
exchange of securities. To our knowledge, Edward Ratkovitch is a significant
shareholder and the chairman and chief executive officer of Socrates, and Clive
Whittenbury is a director of Socrates. Pursuant to the letter of intent,
Socrates loaned us $500,000 for working capital. In October 1996, we entered
into an agreement to be acquired by Socrates, subject to shareholder approval.
Socrates loaned an additional $500,000 to us in November 1996. However, in
January 1997, the parties mutually agreed to terminate the acquisition,
primarily due to market conditions that involved a significant decrease in the
bid price of Socrates' common stock and, thereby, the value of the purchase
price.

As part of a mutual cooperation agreement, in January 1997 Socrates loaned
us an additional $250,000 under a convertible debenture. The aggregate principal
amount of the convertible debenture at that time was $1,275,081, reflecting the
total amount of loan advances made to us by Socrates. The terms provided for
outstanding principal to bear annual interest of nine percent, and for principal
to be convertible into Common Stock upon the completion of our initial public
offering at a ratio calculated using the offering price per share. In March
1997, Socrates converted the convertible debenture into 250,000 shares of common
stock.

In March 1996, we acquired all right, title and interest in the 353 Patent
from Arthur Henley and Scott Grau in consideration of a five percent overriding
royalty interest against gross profits involving the use of the 353 Patent. We
agreed to allocate $1,000,000 of its capital to develop and exploit the market
opportunities of the 353 Patent by December 31, 1996, or the 353 Patent would be
subject to repurchase by its inventors. We satisfied this commitment timely. For
the year ended March 31, 1999 we paid a total of $9,760 to the patentholders.

44
<PAGE>
We paid legal fees of approximately $380,000 during the year ended March 31,
1997, to Thomas T. Prousalis, Jr., an attorney who was a significant
stockholder, relating to our initial public offering. We also paid $100,000
during the year ended March 31, 1997, to Mr. Prousalis for services relating to
an offering that was abandoned in September 1996.

We rent an aircraft for business purposes from an entity owned by Robert A.
Veschi, our President and Chief Executive Officer. For the years ended March 31,
1999 and 1998, the Company paid $199,060 and $62,936, respectively, for the
rental of the aircraft.

On April 16, 1997, we entered into a consulting agreement with Alonzo E.
Short, Jr., Lt. Gen., USA (ret.), the Chairman of the Board, to provide services
for a fixed monthly amount of $1,000. The amounts paid to him under that
agreement totaled $12,000 for each of the fiscal years ending March 31, 1999 and
1998.

All ongoing and future transactions between e-Net and any affiliates will be
entered into on terms at least as favorable as could be obtained from
unaffiliated, independent third parties.

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

A. Exhibits.

<TABLE>
<C> <S>
3.0 Restated Certificate of Incorporation, filed December 18, 1998.(4)

3.1 Restated By-laws.(4).

4.0 Specimen Copy of Common Stock Certificate.(1)

4.1 Form of Warrant Certificate.(1)

4.2 Form of Representative's Warrant Agreement.(1)

4.3 Form of Warrant Agreement.(1)

10.0 Employment Agreement, Robert A. Veschi, dated April 1, 1996 (management contract or
compensatory plan or arrangement).(1)

10.1 United States Patent, Notice of Allowance, dated January 23, 1996.(1)

10.2 Assignment of Patent Rights, dated March 22, 1996.(1)

10.3 Sprint Agreement, dated March 1, 1996.(1)

10.4 Financial Advisory Agreement with Barron Chase Securities, Inc., dated April 10,
1997.(1)

10.5 Merger and Acquisition Agreement with Barron Chase Securities, Inc. dated April 10,
1997.(1)

10.6 Mutual Cooperation Agreement with MVSI, Inc., dated January 14, 1997.(1)

10.7 Lockheed Martin Agreement, dated January 3, 1997.(1)

10.8 Product Sales Agreement with Diamond Telecom, dated March 6, 1998.(2)

10.9 Software Development Agreement with Com21, dated January 22, 1998.(2)

10.10 Distributor Agreement with Comtel Electronic System GMBH, dated April 9, 1998.(2)

10.11 Joint Market Agreement with Paradyne Corporation, dated May 29, 1997.(2)

10.12 Form of Product Sales Agreement with PC Importers, Inc. d/b/a Unicent
Technologies.(2)

10.13 1997 Nonqualified Stock Option Plan (management contract or compensatory plan or
arrangement).(2)
</TABLE>

45
<PAGE>
<TABLE>
<C> <S>
10.14 Government Reseller Agreement with Government Technology Services, Inc., dated August
27, 1997.(2)

10.15 Memorandum of Understanding with Summa Four, Inc., dated April 17, 1998.(2)

10.16 Net2Phone Bundling Agreement with IDT Corporation, dated April 23, 1998.(2)

10.17 Joint Marketing Agreement with Magellan Network Systems, Inc., dated August 27,
1997.(3)

10.18 Common Stock Purchase Agreement dated as of April 9, 1998 with the purchaser
signatories thereto regarding the sale of 750,000 shares of e-Net common stock.(4)

10.19 Registration Rights Agreement dated as of April 8, 1998 with the purchaser
signatories thereto.(4)

10.20 Consulting Agreement dated as of April 16, 1997, with Gen. Alonzo Short (management
contract or compensatory plan or arrangement).(5)

10.21 1998 Stock Compensation Plan (management contract or compensatory plan or
arrangement).(5)

10.22 Original Equipment Manufacture Agreement with Edutek Education Systems, Inc. dated
May 5, 1999.(5)

11.0 Computation of Per Share Loss.(5)

21.0 Subsidiaries.(5)

23.0 Consent of Grant Thornton LLP.(5)
</TABLE>

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

(1) Incorporated by reference from the Company's Registration Statement on Form
SB-2, Registration No. 333-3860, as amended and declared effective on April
7, 1997 (the "IPO Registration Statement").

(2) Incorporated by reference from Post-Effective Amendment No. 1 to the IPO
Registration Statement, as declared effective on May 8, 1999.

(3) Incorporated by reference from e-Net's Registration Statement on Form SB-2,
Registration No. 333-58109, as amended and declared effective on September
4, 1998 (the "Resale Registration Statement").

(4) Incorporated by reference from Post-Effective Amendment No. 1 to the Resale
Registration Statement, as amended through Post-Effective Amendment No. 3
thereto and declared effective on January 27, 1999.

(5) Filed herewith.

B. Reports on Form 8-K.

During the last quarter of e-Net's fiscal year on March 31, 1998, we filed
the following report on Form 8-K:

<TABLE>
<CAPTION>
DATE OF REPORT ITEM REPORTED
- ------------------- -------------------------

<S> <C>
January 29, 1999 Item 5--Other Events
</TABLE>

46
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

<TABLE>
<S> <C> <C>
June 29, 1999 E-NET, INC.

By: /s/ DONALD J. SHOFF
-----------------------------------------
Donald J. Shoff
VICE PRESIDENT,
CHIEF FINANCIAL OFFICER
</TABLE>

In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------

<C> <S> <C>
/s/ ALONZO E. SHORT, JR., LT.
GEN., USA (RET.)
- ------------------------------ Chairman of the Board June 29, 1999
Alonzo E. Short, Jr., Lt.
Gen., USA (ret.)

/s/ ROBERT A. VESCHI
- ------------------------------ President, Chief Executive June 29, 1999
Robert A. Veschi Officer, Director

Vice President, Chief
/s/ DONALD J. SHOFF Financial Officer
- ------------------------------ (Principal Accounting June 29, 1999
Donald J. Shoff Officer)

/s/ WILLIAM L. HOOTON
- ------------------------------ Director June 29, 1999
William L. Hooton

/s/ CLIVE WHITTENBURY, PH.D.
- ------------------------------ Director June 29, 1999
Clive Whittenbury, Ph.D.

/s/ WILLIAM W. ROGERS, JR.
- ------------------------------ Director June 29, 1999
William W. Rogers, Jr.
</TABLE>

48
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
PAGE DOCUMENT
- ----------- -----------------------------------------------------------------------------------------------------------
<C> <S>

46 10.20 Consulting Agreement dated as of April 19, 1997, with Gen. Alonzo Short (management contract or
compensatory plan or arrangement).

48 10.21 1998 Stock Compensation Plan (management contract or compensatory plan or arrangement).

59 10.22 Original Equipment Manufacture Agreement with Edutek Education Systems, Inc. dated May 5, 1999.

70 11.0 Computation of Per Share Loss.

71 21.0 Subsidiaries.

72 23.0 Consent of Grant Thornton LLP.
</TABLE>

<PAGE>

EXHIBIT 10.20

CONSULTING AGREEMENT DATED AS OF APRIL 16, 1997 WITH GEN. ALONZO SHORT

AGREEMENT

Between Alonzo Short, Social Security Number ###-##-####, ( "Consultant"), an
individual with an office at Alexandria, VA, and e-Net, Inc. ("e-Net"), a
Delaware corporation located at 12800 Middlebrook Rd., Ste.200, Germantown, MD
20874, WHEREAS, e-Net is desirous of acquiring certain services generally
offered by Consultant, and WHEREAS, Consultant wishes to provide services to
e-Net, NOW, THEREFORE, in consideration hereof, the parties agree as follows :

1.0 STATEMENT OF WORK
Consultant will provide consulting services to e-Net. These services will
require Consultant to spend approximately 5 hours on behalf of e-Net. A portion
of these hours will require Consultant to be present at the offices of e-Net.
Consultant shall perform services as directed by Robert Veschi, CEO of e-Net.

2.0 PRICE AND PAYMENT
In consideration for the services performed, e-Net agrees to pay one thousand
dollars ($1000.00) as a fixed monthly fee. This base fee is payable whether or
not any hours are worked as consideration for the engagement of Consultant.
All amounts hereunder shall be paid monthly.

3.0 TAXES
Consultant is obligated to pay all federal, state, local or governmental taxes,
relating hereto.

4.0 NONDISCLOSURE AND NONCIRCUMVENTION

The parties hereto may disclose certain information to one another that the
owner of such information deems confidential. The parties agree to limit
disclosure of such information in accordance with this clause. As used herein,
confidential information shall mean any information and data, whether oral or in
writing, of a confidential nature, including but not limited to proprietary
technical, financial, marketing, operation, performance information, software,
costs, profit margins, bidding information, know how, business pricing policies,
programs, data systems, inventions, discoveries, trade secrets, or information
relating to clients' past, present, or future, or to any research, development
or business activities.

The parties agree that the party receiving confidential information understands
that such confidential information is regarded by the disclosing party as
valuable and agrees to hold such information in confidence and protect it from
dissemination to and use by unauthorized persons. In the absence of the
disclosing party's written consent, the receiving party shall not publish,
reproduce, or disclose such information, in whole or in part, to any third
party, nor induce any other person to use any of the designated confidential
information. Confidential information is to be designated by the providing party
by placing "e-Net Confidential" on any written information provided which is not
to be disclosed.

The party receiving the confidential information agrees that it shall neither
use this information nor circulate it within its own organization except to the
extent necessary for: (a) evaluation of the parties' technical capabilities and
products; and (b) any other purpose the disclosing party may hereafter authorize
in writing consistent with the purpose of this Agreement.

The party receiving confidential information agrees that it shall use the same
degree of care employed by it in safeguarding its own confidential information
as well as that of others.

Neither party shall be liable for the inadvertent or accidental disclosure of
confidential information provided such party has exercised the required standard
of care and further provided that the receiving party has taken all necessary
and appropriate precautions to insure that its employees comply with the terms
of this Agreement. In the event confidential information is inadvertently or
accidentally disclosed, the responsible party shall notify the other in writing
and shall take all necessary precautions to avoid further dissemination of the
disclosed information as well as precautions to prevent further disclosure.

1
<PAGE>

This agreement of the parties to hold confidential information of the other
party in confidence shall impose no obligation upon the receiving party with
respect to any portion of the received confidential information which:

i. is now or hereafter becomes publicly known or available through no act
or omission on the part of the receiving party;

ii. is known to the receiving party at the time of the receipt of such
confidential information;

iii. has been or is hereafter furnished by the disclosing party to a third
party without restriction on disclosure;

iv. has been or is hereafter furnished to the receiving party by a third
party who has obtained such confidential information without
restriction on disclosure;

v. has been or is hereafter disclosed pursuant to the requirement of any
Government entity; or

vi. has been or is hereafter independently developed by the receiving
party or a third party.

The rights and obligations of both parties under the terms of this clause shall
continue in force for a period of five (5) years after the effective date of
this Agreement.

All aspects of e-Net products including, without limitation, programs and their
interaction and unique programming techniques employed therein as well as
documentation, copyrights, trade secrets, patents and other intellectual
property rights related to e-Net products, shall remain the sole and exclusive
property of e-Net and its assignors, and shall not be sold, revealed, disclosed
or otherwise communicated, directly or indirectly, by Consultant to any person,
company or institution other than as set forth by the e-Net in writing. All work
product of Consultant hereunder, as well as any related or derived products,
ideas, items, or output of any kind, is the sole and exclusive property of
e-Net.

Consultant agrees not to disclose the terms of this Agreement to any other party
without the consent of e-Net. Consultant agrees not to broker nor to otherwise
circumvent the express meaning or intent of this agreement.

5.0 INDEPENDENT CONTRACTORS

It is expressly agreed that the parties are acting hereunder as independent
contractors, and under no circumstances shall any of the employees of one party
be deemed the employees of the other for any purpose. This Agreement shall not
be construed as authority for either party to act for the other party in an
agency or other capacity, or to make commitments of any kind for the account of
or on the behalf of the other.

6.0 TERM AND TERMINATION

Either party may terminate this Agreement at any time for any reason. Such
termination shall have no effect on the continuing obligation of both parties
with regard to 4.0.

7.0 EXPENSES
Consultant shall be allowed to obtain reimbursement for expenses, if such
expenses are reasonable and approved by e-Net in advance.

8.0 GENERAL PROVISIONS

This agreement is subject to the law of the state of Delaware, venue for
disputes Montgomery County, Maryland. Neither party will be liable to the other
for any indirect or consequential damages relating to or arising out of this
agreement. Each party agrees to indemnify and hold harmless the other party for
any damage a party suffers as a result of the negligence or intentional wrongful
act of a party. Each party agrees that it is responsible for full compliance
with all applicable law. Notices required under this agreement shall be provided
to each other at their respective principal addresses, which are acknowledged as
known to each other. A party may not assign this agreement or any portion
thereof without the approval of the other party. Made this 16th day of April,
1997, between the authorized representatives of e-Net and Consultant.

- -------------------- ----------------------
e-Net Consultant

<PAGE>

EXHIBIT 10.21

1998 STOCK COMPENSATION PLAN

E-NET, INC.

1998 STOCK COMPENSATION PLAN

EFFECTIVE AS OF JUNE 30, 1998

1
<PAGE>

E-NET, INC.
1998 STOCK COMPENSATION PLAN

I. THE PLAN

1.1 PURPOSE. The purpose of the e-Net, Inc. 1998 Stock Compensation
Plan is to promote the success of the Corporation and its Subsidiaries by
providing an additional means through the grant of Awards to provide officers
and employees with stock compensation that is comparable with compensation for
employment with other similar companies in order to attract, motivate, retain
and reward officers and employees; to provide incentives for high levels of
individual performance and improved financial performance; to attract, motivate
and retain experienced and knowledgeable independent directors; to attract,
motivate and retain experienced and knowledgeable independent contractors; and
to promote a close identity of interests between directors, officers, employees,
independent contractors and stockholders.

1.2 DEFINITIONS.

The following terms shall have the meanings set forth below:

(1) "AWARD" shall mean an award of any Option authorized under
Section 1.6, that is authorized by and granted under this plan.

(2) "AWARD DATE" shall mean the date upon which the Outside
Board or the Board, as applicable as determined pursuant to Section
1.3, takes the action granting an Award or such later date as the
Outside Board or the Board designates as the Award Date at the time of
granting the Award.

(3) "AWARD DOCUMENT" shall mean any writing, which may be an
agreement, setting forth the terms of an Award that has been granted by
the Outside Board or the Board.

(4) "AWARD PERIOD" shall mean the period beginning on an Award
Date and ending on the expiration date of such Award.

(5) "BENEFICIARY" shall mean the person or persons designated
by a Participant in writing to the Board to receive the benefits
specified in an Award Document and under this Plan in the event of the
Participant's death, or, if the Participant has not designated such
person or persons, or such person or persons shall all have predeceased
the Participant, the executor or administrator of the Participant's
estate.

(6) "BOARD" shall mean the Board of Directors of the
Corporation.

(7) "CODE" shall mean the Internal Revenue Code of 1986, as
amended from time to time. Any reference herein to a section of the
Code shall include any corresponding future provision of federal tax
law.

(8) "COMMON STOCK" shall mean the common stock of the
Corporation and, in the event such common stock is converted to another
security or property pursuant to Section 3.2, such other security or
property.

(9) "CORPORATION" shall mean e-Net, Inc. and its successors,
and, where the context requires, its Subsidiaries.

(10) "EMPLOYEE" shall mean any employee of the Corporation or
a Subsidiary, including a director who is also an employee.

(11) "ELIGIBLE PARTICIPANT" shall mean any Employee or
Independent Contractor.

(12) "ERISA" shall mean the Employee Retirement Income
Security Act of 1947, as amended.

(13) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended from time to time, and any successor provision.

2
<PAGE>

(14) "FAIR MARKET VALUE" shall have such meaning as determined
by the Outside Board from time to time based upon its reasonable
judgement as indicated by its written approval.

(15) "INDEPENDENT CONTRACTOR" shall mean any individual who
engages in service for hire for the Corporation or a Subsidiary under a
written contract approved by the Board.

(16) "INSIDER" shall mean an officer of the Corporation, a
director of the Corporation, or a beneficial owner of ten percent (10%)
or more of the Corporation's issued and outstanding Common Stock or
other equity security registered pursuant to Section 12 of the Exchange
Act, as defined pursuant to Section 16 of the Exchange Act and the
rules and regulations thereunder.

(17) "NONMANAGEMENT DIRECTOR" shall mean a member of the Board
who is not an officer or employee of the Corporation or a Subsidiary.

(18) "OPTION" shall mean an option to purchase Common Stock
pursuant to an Award.

(19) "OUTSIDE BOARD" shall mean the Outside Directors, as a
group.

(20) "OUTSIDE DIRECTOR" shall mean a member of the Board who
is a Non-management Director and who otherwise falls under the
definition of "Non-Employee Director" in Rule 16b-3.

(21) "PARTICIPANT" shall mean a Nonmanagement Director or an
Eligible Participant who has been granted an Award under this Plan.

(22) "PERSONAL REPRESENTATIVE" shall mean to person or persons
who, upon the incompetence of a Participant, shall have acquired on
behalf of the Participant, by legal proceeding, pursuant to a durable
power of attorney or otherwise, the power to exercise the rights or
receive benefits under this Plan and who shall have become the legal
representative of the Participant.

(23) "PLAN" shall mean this e-Net, Inc. 1998 Stock
Compensation Plan.

(24) "PLAN TERMINATION DATE" shall mean the tenth anniversary
of the effective date of the Plan, as determined pursuant to Section
3.7.

(25) "QDRO" shall mean a qualified domestic relations order as
defined in Section 414(p) of the Code or Section 206(d)(3) of ERISA (to
the same extent as if this Plan were subject thereto), or the
applicable rules thereunder.

(26) "RETIREMENT" shall mean, in the case of an Employee,
retirement as defined in the Corporation's Retirement Pension Plan, as
amended from time to time.

(27) "RULE 16B-3" shall mean Rule 16b-3 as promulgated by the
Securities and Exchange Commission pursuant to the Exchange Act.

(28) "SUBSIDIARY" shall mean any subsidiary of the Corporation
which meets the definition of a "subsidiary corporation" set forth in
Section 424(f) of the Code.

(29) "TOTAL DISABILITY" shall mean complete and permanent
inability by reason of illness or accident to perform the duties of the
occupation at which the Participant was employed when the illness
commenced or accident occurred, as determined by the Corporation's
independent medical consultant, and, in the case of Eligible
Participants who are Insiders, ratified by the Outside Board.

1.3 ADMINISTRATION AND AUTHORIZATION; POWER AND PROCEDURE.

(a) THE OUTSIDE BOARD AND THE BOARD. This Plan shall be administered
by, and all Awards to Eligible Participants shall be authorized by, the Outside
Board in the cases of Eligible Participants who are Insiders and of
Nonmanagement Directors, and the Board in the case of Eligible Participants who
are not Insiders. Action of the Outside Board or the Board

3
<PAGE>

with respect to the administration of this Plan shall be taken pursuant to a
majority vote or by unanimous written consent of the respective members,
PROVIDED, HOWEVER, that no director may participate in a decision to grant an
Award to himself or herself. All references in this Plan to actions or
determinations in respect of Awards by the Outside Board shall be references to
Awards granted to Eligible Participants who are Insiders and to Nonmanagement
Directors. All references in this Plan to action or determinations in respect of
Awards by the Board shall be references to Awards granted to Eligible
Participants who are not Insiders. The Outside Board shall administer this Plan
with respect to all Awards held by Eligible Participants who are Insiders and by
Nonmanagement Directors, including Awards granted prior to the time that any
such Eligible Participant becomes an Insider.

(b) PLAN AWARDS; INTERPRETATION; POWERS. Subject to the express
provisions of this Plan, the Outside Board or the Board shall have the
authority:

(i) to determine the Eligible Participants and Nonmanagement
Directors who will receive Awards; PROVIDED, HOWEVER, that no director
may participate in a decision to grant an Award to himself or herself;

(ii) to grant Awards to such Eligible Participants and
Nonmanagement Directors, to determine the amount of and the price at
which Common Stock will be offered or awarded thereto, to determine the
other specific terms and conditions of such Awards consistent with the
express limits of this Plan, to establish the installments (if any) in
which such Awards shall become exercisable or shall vest, and to
establish the expiration date and the events of termination of such
Awards; PROVIDED, HOWEVER, no director may participate in a decision to
grant an Award to himself of herself;

(iii) to construe and interpret this Plan and any Award
Documents, to further define the terms used in this Plan, and to
prescribe, amend and rescind rules and regulations relating to the
administration of this Plan;

(iv) to cancel, modify, or waive the Corporation's rights with
respect to, or modify, discontinue, suspend, or terminate any or all
outstanding Awards held by Eligible Participants and Nonmanagement
Directors, subject to any required consents under Section 3.5;

(v) to accelerate or extend the ability to exercise or extend
the term of any or all outstanding Awards (subject to the maximum term
of Awards under Section 1.7); and

(vi) to make all other determinations and take such other
actions as contemplated by this Plan or as may be necessary or
advisable for the administration of this Plan and effectuation of its
purposes.

(c) BINDING DETERMINATIONS. Any action taken by, or inaction of, the
Corporation, any Subsidiary, the Board or the Outside Board, relating or
pursuant to this Plan shall be within the absolute discretion of that entity or
body and shall be conclusive and binding upon all persons. Subject only to
compliance with the express provisions hereof, the Board and the Outside Board
may act in their absolute discretion in matters within their authority related
to this Plan.

(d) RELIANCE ON EXPERTS. In making any determination or in taking or
not taking any action under this Plan, the Board and the Outside Board may
obtain and may rely upon the advice of experts, including professional advisors
to the Corporation.

(e) DELEGATION. The Board may delegate some or all of its authority
under the Plan to one or more members of the Board. The Outside Board and the
Board may delegate ministerial, non-discretionary functions to individuals who
are officers or employees of the Corporation.

(f) NO LIABILITY. No member of the Board, or director, officer or
employee of the Corporation or any Subsidiary, shall be liable, responsible or
accountable in damages or otherwise for any determination made or other action
taken or any failure to act by such person so long as such person is not
determined to be guilty by a final adjudication of willful misconduct with
respect to such determination, action or failure to act.

(g) INDEMNIFICATION. To the extent permitted by law, each of the
members of the Board, and each of the directors, officers and employees of the
Corporation and any Subsidiary, shall be held harmless and be indemnified by the
Corporation for any liability, loss (including amounts paid in settlement),
damages or expenses (including reasonable attorneys' fees) suffered by virtue of
any determinations, acts or failures to act, or alleged acts or failures to act,
in connection with the

4
<PAGE>

administration of this Plan so long as such person is not determined by a final
adjudication to be guilty of willful misconduct with respect to such
determination, action or failure to act.

1.4 PARTICIPATION. Awards may be granted by the Outside Board or the
Board only to Eligible Participants or to Nonmanagement Directors; PROVIDED
HOWEVER, that no director may participate in a decision to grant an Award to
himself or herself. An Eligible Participant or Nonmanagement Director who has
been granted an Award may, if otherwise eligible, be granted additional Awards
if the Outside Board or the Board shall so determine.

1.5 SHARES AVAILABLE FOR AWARDS.

(a) COMMON STOCK. Subject to the provisions of Section 3.2, the Common
Stock that may be delivered under this Plan shall be shares of the Corporation's
authorized but unissued Common Stock, any shares of Common Stock held as
treasury shares, and shares of Common Stock purchased by the Corporation on the
open market.

(b) NUMBER OF SHARES. Subject to adjustments in accordance with Section
3.2, the maximum number of shares of Common Stock that may be delivered pursuant
to Awards granted to Eligible Participants and Nonmanagement Directors under
this Plan shall not exceed one million (1,000,000) shares.

(c) CALCULATION OF AVAILABLE SHARES AND REPLENISHMENT. A good faith
estimate of the number of shares of Common Stock subject to outstanding Awards
that will be satisfied by delivery of shares of Common Stock, plus the number of
shares of Common Stock referenced for purposes of determining other Awards,
shall be reserved from the number of shares of Common Stock available for Awards
under this Plan. The aggregate number of shares of Common Stock delivered under
this Plan plus the number of shares referenced with respect to Awards paid in
cash shall reduce the number of shares of Common Stock remaining available. If
any Award shall expire or be canceled or terminated without having been
exercised in full, or any Common Stock subject to an Award shall not vest or be
delivered, the unpurchased, nonvested or undelivered shares of Common Stock
subject thereto or the shares of Common Stock referenced with respect thereto
shall again be available under this Plan; PROVIDED, HOWEVER, that no such
unpurchased, nonvested or undelivered shares shall again be available if the
holder received dividends with respect to such shares or any other benefits of
ownership of such shares, other than voting rights or the accumulation of
dividends that are never paid to the holder. If the Corporation withholds shares
of Common Stock pursuant to Section 3.4, the number of shares that would have
been deliverable with respect to an Award but that are withheld pursuant to the
provisions of Section 3.4 shall be treated as issued and the aggregate number of
shares issuable with respect to the applicable Award and under this Plan shall
be reduced by the number of shares so withheld and such shares shall not be
available for additional Awards.

1.6 GRANT OF AWARDS. Subject to the express provisions of this Plan,
the Outside Board or the Board shall determine the number of shares of Common
Stock subject to each Award, the price (if any) to be paid for the shares or the
Award and other terms and conditions of the Award. Each Award to an Eligible
Participant or a Nonmanagement Director shall be evidenced by an Award Document
signed by the Corporation and, if required by the Outside Board or the Board, by
the Eligible Participant or Nonmanagement Director.

1.7 AWARD PERIOD. Each Award and all executory rights or obligations
under the related Award Document shall expire on such date (if any) as shall be
determined by the Outside Board or the Board, but in the case of Options or
other rights to acquire Common Stock, not later than ten (10) years after the
Award Date.

1.8 LIMITATIONS ON EXERCISE AND VESTING OF AWARDS.

(a) PROVISIONS FOR EXERCISE. An Award shall be exercisable or shall
vest as determined by the Outside Board or the Board.

(b) PROCEDURE. Any exercisable Award shall be exercised when the person
appointed by the Outside Board or the Board receives written notice of such
exercise from the Participant, together with satisfactory arrangements for any
required payment to be made in accordance with Sections 2.2. or 3.4 or the terms
of the Award Document, as the case may be.

(c) FRACTIONAL SHARES/MINIMUM ISSUE. Fractional share interests shall
be disregarded, but may be accumulated. However, the Outside Board or the Board
may determine that cash will be paid or transferred in lieu of any fractional
share interests.

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(d) HOLDING PERIOD. Notwithstanding any provision of this Plan to the
contrary, except in the case of sales by an executor or administrator of the
estate of a deceased Participant, shares of Common Stock acquired by an Insider
through the exercise of an Award granted hereunder may not be sold until a date
six (6) months after the date of the grant of such Award as specified in the
Award Document.

1.9 ACCEPTANCE OF NOTES TO FINANCE EXERCISE. Where the Outside Board or
the Board deems it appropriate under the circumstances as indicated by its
written approval, the Corporation may accept one or more notes from any
Participant in connection with the exercise or receipt of any outstanding Award
or the payment of the amount of any taxes that the Corporation may be required
to withhold with respect to such exercise or receipt; PROVIDED, HOWEVER, that
any such note shall be subject to the following terms and conditions:

(1) The principal of the note shall not exceed the amount
required to be paid to the Corporation upon the exercise or receipt of
one or more Awards under the Plan, including the amount of any taxes
required to be withheld, and the note shall be delivered directly to
the Corporation in consideration of such exercise or receipt.

(2) The initial term of the note shall be determined by the
Outside Board or the Board; PROVIDED, HOWEVER, that the term of the
note, including extensions, shall not exceed ten (10) years.

(3) The note shall provide for full recourse of the
Participant, including a right of set-off against amounts otherwise
payable by the Corporation to the Participant, and shall bear interest
at a rate determined by the Outside Board or the Board, but not less
than the applicable federal rate determined under Section 1274.

(4) If the employment of the Participant terminates, the
unpaid principal balance of the note shall become due and payable on
the tenth business day after such termination.

(5) If required by the Outside Board or the Board or by
applicable law, the note shall be secured by a pledge of any shares or
rights financed thereby in compliance with applicable law.

(6) The terms, repayment provisions, and collateral release
provisions of the note and the pledge securing the note shall conform
with applicable rules and regulations of the Federal Reserve Board as
then in effect.

1.10 NO TRANSFERABILITY. Awards may be exercised only by the
Participant or the Participant's Personal Representative, if any, or, if the
Participant has died, the Participant's Beneficiary. Amounts payable or shares
of Common Stock issuable pursuant to an Award shall be paid to (or registered in
the name of) such person or persons as specified by the person exercising the
Award. Other than by will or the laws of descent and distribution or pursuant to
a QDRO or other exception to transfer restrictions under Rule 16b-3, no right or
benefit under this Plan or any Award, including, without limitation, any Option
that has not vested, shall be transferable by the Participant or shall be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or charge (other than to the Corporation), and any such
attempted action shall be void. The Corporation shall disregard any attempt at
transfer, assignment or other alienation prohibited by the preceding sentences
and shall pay or deliver such cash or shares of Common Stock in accordance with
the provisions of this Plan. The designation of a Beneficiary hereunder shall
not constitute a transfer for these purposes.

1.11 SECTION 83(b) ELECTIONS. If a Participant shall file an election
with the Internal Revenue Service to include the value of any Award in the
Participant's gross income while such Award remains subject to restrictions, the
Participant shall promptly furnish the Corporation with a copy of such election.

II. OPTIONS

2.1 GRANTS. One or more Options may be granted under this Article to
any Eligible Participant or Nonmanagement Director.

2.2 OPTION PRICE.

(a) PRICING LIMITS. The exercise price for shares of Common Stock
covered by Options shall be determined by the Outside Board or the Board at the
time of the Award.

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(b) PAYMENT PROVISIONS. The exercise price for any shares of Common
Stock purchased on exercise of an Option granted under this Article shall be
paid in full at the time of each purchase in one or a combination of the
following methods: (i) in cash or by electronic funds transfer; (ii) by good
check payable to the order of the Corporation; (iii) by the delivery of shares
of Common Stock already owned by the Participant; or (iv) if authorized by the
Outside Board or the Board or specified in the applicable Award Document, by a
promissory note of the Participant consistent with the requirements of Section
1.9; PROVIDED, HOWEVER, that the Outside Board or the Board may, in its absolute
discretion, limit the Participant's ability to exercise an Option by delivering
shares of Common Stock, including by imposing a requirement that the Participant
satisfy a minimum holding period with respect to the shares so delivered. Shares
of Common Stock used to satisfy the exercise price of an Option shall be valued
at their Fair Market Value on the date of exercise.

2.3 NOT INCENTIVE STOCK OPTIONS. It is not intended that any Option
granted under this Plan shall constitute an incentive stock option as defined in
Section 422 of the Code.

2.4. OPTION PERIOD.

(a) AWARD PERIOD. Each Option shall specify the Award Period for which
the Option is granted and shall provide that the Option shall expire at the end
of such Award Period. The Outside Board or the Board may extend the Award Period
by amendment of an Option. Notwithstanding the foregoing, the Award Period with
respect to an Option, including all extensions, shall not exceed ten (10) years.

(b) EFFECT OF TERMINATION OF EMPLOYMENT OR SERVICE. Notwithstanding the
provisions of Section 2.4(a), unless otherwise provided by the Outside Board or
the Board, an Option shall expire on the earliest to occur of (i) the end of the
Award Period, (ii) if the Participant is an Employee or Nonmanagement Director,
the date three (3) months following the Participant's termination of employment
or service for the Corporation for any reason other than Retirement, Total
Disability or death, (iii) if the Participant is an Employee or Nonmanagement
Director, the date twelve (12) months following the Participant's termination of
employment or service for the Corporation by reason of Retirement, Total
Disability or death, (iv) if the Participant is an Independent Contractor, the
date three (3) months following the termination of the Participant's contract
with the Corporation, and (v) the date of termination of the Option pursuant to
Section 3.14.

2.5. VESTING; FORFEITURE.

(a) An Option shall be exercisable or shall vest upon such terms and
conditions or pursuant to such schedule as the Outside Board or the Board shall
determine at the time of the Award. Notwithstanding the foregoing, unless
otherwise specified by the Outside Board or the Board, an Option shall become
immediately exercisable and fully vested upon the termination of the
Participant's employment by, service for or contract with the Corporation by
reason of Retirement, Total Disability or death. Unless otherwise specified by
the Outside Board or the Board, an Option that is not vested upon the
termination of the Participant's employment by, service for or contract with the
Corporation shall be forfeited.

(b) Notwithstanding the provisions of Section 2.5(a), an Option shall
become immediately exercisable and fully vested in the event of (i) a merger,
consolidation or reorganization to which the Corporation is a party other than
as the surviving entity, unless the surviving entity shall elect to continue the
Plan in its existing form and abide by the terms of all Awards granted
thereunder, (ii) a merger, consolidation or reorganization to which the
Corporation is a party as the surviving entity, other than any such merger,
consolidation or reorganization resulting in a change of ownership of less than
fifty percent (50%) of the then outstanding Common Stock; (iii) any transaction
or series of related transactions resulting in the acquisition of a majority of
the outstanding shares of Common Stock; (iv) any transfer of all or
substantially all of the assets of the Corporation; or (v) the liquidation or
dissolution of the Corporation. In such event, the Corporation may, but shall
not be required to, give the Participant prior written notice of the
effectiveness of any such event, and the Participant may exercise the Option (to
the extent it is still in effect) on or prior to the last day specified by the
Corporation; to the extent that the Option has not been exercised, it will
expire at 5:00 P.M. on the last day specified in such notice by the Corporation.

2.6 OPTION REPRICING, CANCELLATION, SUBSTITUTION OR WAIVER OF
RESTRICTIONS. Subject to Sections 1.5 and 3.5 and the specific limitations on
Awards contained in this Plan, the Outside Board or the Board from time to time
may authorize, generally or in specific cases only, for the benefit of any
Participant who is an Employee or an Independent Contractor, any adjustment in
the exercise or purchase price, the vesting schedule, the number of shares
subject to, the restrictions upon or the term of, an Award granted under this
Article by cancellation of an outstanding Award and a subsequent granting of an
Award, by amendment, by substitution of an outstanding Award, by waiver or by
other legally

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valid means. Such amendment or other action may result, among other changes, in
an exercise or purchase price that is higher or lower than the exercise or
purchase price of the original or prior Award, provide for a greater or lesser
number of shares subject to the Award, or provide for a longer or shorter
vesting or exercise period.

III. OTHER PROVISIONS

3.1 RIGHTS OF ELIGIBLE PARTICIPANTS, PARTICIPANTS AND BENEFICIARIES.

(a) EMPLOYMENT STATUS. Status of an Eligible Participant or a
Nonmanagement Director shall not be construed as a commitment that any Award
will be made under this Plan to an Eligible Participant or a Nonmanagement
Director or to Eligible Participants or Nonmanagement Directors generally.

(b) NO EMPLOYMENT CONTRACT. Nothing contained in this Plan (or in any
other documents related to this Plan or to any Award) shall confer upon any
Participant any right to continue in the employ or other service of the
Corporation or constitute any contract or agreement of employment or other
service, nor shall this Plan interfere in any way with the right of the
Corporation to change such person's compensation or other benefits or to
terminate the employment of such person, with or without cause; PROVIDED,
HOWEVER, that nothing contained in this Plan or any document related hereto
shall adversely affect any independent contractual right of any Participant
without his or her consent.

(c) PLAN NOT FUNDED. Awards payable under this Plan shall be payable in
shares of Common Stock or from the general assets of the Corporation, and
(except as provided in Section 1.5(c)) no special or separate reserve, fund or
deposit shall be made to assure payment of such Awards. No Participant,
beneficiary or other person shall have any right, title or interest in any fund
or in any specific asset (including share of Common Stock, except as expressly
otherwise provided) of the corporation by reason of any Award hereunder. Neither
the provisions of this Plan (or of any related documents), nor the creation or
adoption of this Plan, nor any action taken pursuant to the provisions of this
Plan shall create, or be construed to create, a trust of any kind or a fiduciary
relationship between the Corporation and any Participant, Beneficiary or other
person. To the extent that a Participant, Beneficiary or other person acquires
right to receive payment pursuant to any Award hereunder, such right shall be no
greater than the right of any unsecured general creditor of the Corporation.

3.2 ADJUSTMENTS.

(a) EVENTS REQUIRING ADJUSTMENTS. If any of the following events occur,
the Outside Board or the Board shall make the adjustments described in Section
3.2(b): (i) any extraordinary dividend or other extraordinary distribution in
respect of the Common Stock (whether in the form of cash, Common Stock, other
securities, or other property), (ii) any recapitalization, stock split
(including a stock split in the form of a stock dividend), reverse stock split,
reorganization, merger, combination, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Common Stock or other securities of the
Corporation, (iii) any issuance of warrants or other rights to purchase shares
of Common Stock or other securities of the Corporation (other than to employees)
at less than eighty percent (80%) of fair value on the date of such issuance, or
(iv) any other like corporate transaction or event in respect of the Common
Stock or a sale of substantially all the assets of the Corporation.

(b) ADJUSTMENTS TO AWARDS. If any of the events described in Section
3.2(a) occurs, then the Outside Board or the Board shall, in such manner and to
such extent (if any) as it deems appropriate and equitable, (i) proportionately
adjust any or all of (1) the number and type of shares of Common Stock that
thereafter may be made the subject of Awards (including the specific maximum set
forth in Section 1.5), (2) the number, amount and type of shares of Common Stock
subject to any or all outstanding Awards, (3) the grant, purchase, or exercise
price of any or all outstanding Awards, (4) the Common Stock or cash deliverable
upon exercise of any or all outstanding Awards, or (5) the performance standards
appropriate to any or all outstanding Awards; or (ii) make provision for a cash
payment or for the substitution or exchange of any or all outstanding Awards
based upon the distribution or consideration payable to holders of Common Stock
upon or in respect of the event.

3.3 COMPLIANCE WITH LAWS. This Plan, the granting and vesting of Awards
under this Plan and the issuance and delivery of shares of Common Stock and the
payment of money under this Plan or under Awards granted hereunder are subject
to compliance with all applicable federal and state laws, rules and regulations
(including but not limited to state and federal securities law and federal
margin requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Corporation, be
necessary or advisable in connection therewith. Any securities delivered under
this Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if

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requested by the Corporation, provide such assurances and representations to the
Corporation as the Corporation may deem necessary or desirable to assure
compliance with all applicable legal requirements.

3.4 TAX WITHHOLDING. Upon any exercise, vesting, or payment of any
Award, the Outside Board or the Board may make such provisions and take such
steps as it may deem necessary or appropriate for the withholding by the
Corporation of all federal, state, local and other taxes required by law to be
withheld, including without limitation, the right, at its option, (i) to require
the Participant (or Personal Representative or Beneficiary, as the case may be)
to pay or provide for payment of the amount of any taxes that the Corporation
may be required to withhold with respect to such transaction as a condition to
the release of Common Stock or the making of any payment or distribution, (ii)
to deduct from any amount payable in cash, (iii) to reduce the number of shares
of Common Stock otherwise deliverable (or otherwise reacquire such shares),
based upon their Fair Market Value on the date of delivery, or to grant the
Participant the right to elect such reduction in the number of shares upon such
terms and conditions as it may establish, or (iv) to permit the Corporation to
accept a note for the amount of any taxes that the Corporation may be required
to withhold with respect to such transaction in accordance with Section 1.9.

3.5 PLAN AMENDMENT, TERMINATION AND SUSPENSION.

(a) BOARD AUTHORIZATION. Subject to this Section 3.5, the Board may, at
any time, terminate or, from time to time, amend, modify or suspend this Plan,
in whole or in part. No Awards may be granted during any suspension of this Plan
or after termination of this Plan, but the Outside Board or the Board shall
retain jurisdiction as to Awards then outstanding in accordance with the terms
of this Plan.

(b) STOCKHOLDER APPROVAL. If any amendment would (i) materially
increase the benefits accruing under this Plan, (ii) materially increase the
aggregate number of shares of Common Stock that may be issued under this Plan
(except as provided in Section 3.2), or (iii) materially modify the requirements
as to eligibility for participation in the Plan, such amendment shall be subject
to stockholder approval.

(c) AMENDMENTS TO AWARDS. Without limiting any other express authority
granted under this Plan, but subject to its express limits, the Outside Board or
the Board by agreement or resolution may waive conditions of or limitations on
Awards to Eligible Participants or Nonmanagement Directors that the Outside
Board or the Board in the prior exercise of its discretion has imposed, without
the consent of the Participant, and may make other changes to the terms and
conditions of Awards that do not affect the Participant's rights and benefits
under an Award in any materially adverse manner.

(d) LIMITATIONS ON AMENDMENTS TO PLAN AND AWARDS. No amendment,
suspension or termination of the Plan or any change affecting any outstanding
Award shall, without the written consent of the Participant, Beneficiary or
Personal Representative, as applicable, affect in any manner materially adverse
to such person any rights or benefits of any such person or any obligations of
the Corporation under any Award granted under this Plan prior to the effective
date of such change; however, any changes made pursuant to Section 3.2 shall not
be deemed to constitute changes or amendments for purposes of this Section 3.5.

3.6 PRIVILEGES OF STOCK OWNERSHIP. Except as otherwise expressly
authorized by the Outside Board or the Board or this Plan and expressly stated
in an Award Document, a Participant shall not be entitled to any privilege of
stock ownership as to any shares of Common Stock not actually delivered to and
held of record by the Participant. No adjustment shall be made for dividends or
other stockholder rights for which a record date is prior to the date of
delivery of such shares.

3.7 EFFECTIVE DATE OF THE PLAN. This Plan shall be effective as of the
date the Plan is approved by the Board, subject to approval by a vote of the
holders of a majority of the outstanding shares of Common Stock at a meeting of
stockholders of the Corporation held within twelve (12) months before or after
the date the Plan is approved by the Board. Awards may be granted hereunder on
or after the effective date and prior to the termination of the Plan.

3.8 TERM OF THE PLAN. No Award shall be granted after the Plan
Termination Date. Unless otherwise expressly provided in this Plan or in an
applicable Award Document, any Award may extend beyond such date, and all
authority of the Outside Board or the Board with respect to Awards hereunder
shall continue during any suspension of this Plan and in respect of Awards
outstanding on the Plan Termination Date.

3.9 GOVERNING LAW/SEVERABILITY.

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<PAGE>

(a) CHOICE OF LAW. This Plan, the Awards, all documents evidencing
Awards, and all other related documents shall be governed by, and construed in
accordance with the laws of the State of Delaware, without reference to any
otherwise applicable principles of conflicts of law.

(b) SEVERABILITY. If any provision shall be held by a court of
competent jurisdiction to be valid and unenforceable, the remaining provisions
of this Plan shall continue in effect.

3.10 CAPTIONS. Captions and headings are given to the sections and
subsections of this Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the construction
or interpretation of the Plan or any provision thereof.

3.11 EFFECT OF CHANGE OF SUBSIDIARY STATUS. For purposes of this Plan
and any Award hereunder, if any entity ceases to be a Subsidiary, the
employment, service or contract of all Participants who are employed by, in the
service of or under contract with such entity shall be deemed to have
terminated, except any such Participant who continues as an employee, servant or
contractor of the Corporation or another Subsidiary.

3.12 NONEXCLUSIVITY OF PLAN. Nothing in this Plan shall limit or be
deemed to limit the authority of the Board to grant awards or authorize any
other compensation, with or without reference to the Common Stock, under any
other plan or authority.

3.13 PLAN BINDING ON SUCCESSORS. The obligations of the corporation
under the Plan shall be binding upon any successor corporation or organization
resulting from the merger, consolidation or other reorganization of the
corporation, or upon any successor corporation or organization succeeding to
substantially all of the assets and business of the Corporation. The Corporation
agrees that it will make appropriate provisions for the preservation of all
Participants' rights under the Plan in any agreement or plan that it may enter
into or adopt to effect any such merger, consolidation, reorganization or
transfer of assets.

3.14 COMPETITION BY PARTICIPANTS.

(a) In the event that the Outside Board or the Board determines that a
Participant, within such period of time as shall be specified in the related
Award Document, directly or indirectly, individually or as an employee, partner,
officer, director, or stockholder or in any other capacity whatsoever of any
person, firm, partnership or corporation: (i) recruits, hires, assists others in
recruiting or hiring, discusses employment with or refers to others any person
who is, or within the preceding twelve (12) months was, an employee of the
Corporation or any Subsidiary or any prospective or former Subsidiary; (ii)
competes with the Corporation or any Subsidiary in such segments of the business
of the Corporation and within such territory as shall be specified in such
related Award Documents; (iii) uses in competition with the Corporation or any
Subsidiary, customer, prospective customer or former customer, within such
segments and specified territory, any of the methods, information or systems
developed by the Corporation or any Subsidiary for its customers, prospective
customers or former customers where the Corporation or Subsidiary or such
customer, prospective customer or former customer does business; or (iv) calls
upon, solicits, accepts employment with, sells or endeavors to sell to, within
such segments and specified territory, any customer, prospective customer or
former customer of the Corporations or any Subsidiary; the following provision
shall apply with respect to any shares of Common Stock received and Awards
granted under this Plans as of the date of the first occurrence prohibited under
this provision:

(i) Such Participant: (x) shall immediately sell and deliver
to the Corporation, upon demand, all shares of Common Stock sold or
awarded to the Participant under the Plan as to which the Participant
is still the direct or indirect beneficial owner at the cash price per
share, if any, paid by the Participant; and (y) shall pay to the
Corporation an amount in cash with respect to each share of Common
Stock not still so held equal to the Fair Market Value of each such
share on the first date on which such share is no longer held less the
price paid by the Participant for such share.

(ii) Any Award outstanding under the Plan shall automatically
terminate and shall no longer be exercisable and all Shares of
Restricted Stock then held shall automatically terminate.

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(b) The provisions of this Section 3.14 shall not limit or restrict in
any manner any rights or remedies which the Corporation and its Subsidiaries may
have under any separate employment agreement with a Participant and or otherwise
with respect to competition by a Participant.

(c) If any provisions of this Section 3.14 should be found by any court
of competent jurisdiction to be unreasonable by reason of being too broad as to
the period of time, territory, aspects of business or customers covered or
otherwise, then and in that event, such provision shall nevertheless remain
valid and fully effective, but shall be considered to be amended so that the
period of time, territory, aspects of business or customers covered or otherwise
set forth shall be changed to be the maximum period of time, the largest
territory, the most aspects of business and customers covered and/or the
broadest other limitations, as the case may be, which would be found reasonable
and enforceable by such court, and similarly, if any remedy is so found to be
unenforceable in whole or in part, or to any extent, such provision shall remain
in effect only to the extent the remedies would be enforceable by such court.

<PAGE>

EXHIBIT 10.22

ORIGINAL EQUIPMENT MANUFACTURE AGREEMENT WITH EDUTEK EDUCATIONAL SYSTEMS, INC.

ORIGINAL EQUIPMENT MANUFACTURER AGREEMENT

Between Seller, Inc., a Delaware corporation with principal offices at 12800
Middlebrook Rd., Germantown, MD 20874-5204 ("Seller") and __Edutek ORIGINAL
EQUIPMENT MANUFACTURER AGREEMENT (OEM), with a principal place of business at
3499 N.W. 97th , Gainesville, FL,

WHEREAS, Seller is the manufacturer of a product called
Telecom 2000(-TM-), and

WHEREAS, OEM wishes to make purchases of Telecom 2000(-TM-)
to incorporate additional products or capabilities to produce an
enhanced product for which it certifies herein that it is the Original
Equipment Manufacturer, for resale or other purposes, and

WHEREAS, the parties believe that it would be mutually
beneficial for them to cooperate in order for OEM to resell Telecom
2000(-TM-),

NOW, THEREFORE, in order to establish the terms and conditions
under which the parties' respective goals may be accomplished, in
exchange of the mutual covenants and premises here in below, the
parties agree as follows:

1.0 DEFINITIONS

Seller Product shall mean those products listed in Attachment
A hereto. Seller Product consists of both hardware and software
products.

Telecom 2000(-TM-) shall mean the intellectual property underlying Seller
Product related to or derived from Telecom 2000(-TM-) and / or related to or
derived from US Patent No. 5, 526, 353 including specifically, for purposes
of clarification and not limitation, algorithms, electronic computer
protocols, routines, subroutines or programs developed by or on behalf of
Seller or otherwise owned by or in the custody of Seller. The Products may
shall be sold on an OEM's label basis, where OEM will badge the Product
according to the Specification. The Specification is: Paint of the units will
be identical to the color and texture of the Seller ____ product line
e-Net logo will appear on the front of all chassis, less prominent than OEM's
label, but in a reasonably conspicuous size and location

2.0 LICENSE AND SCOPE OF AGREEMENT

2.1 LICENSE RIGHTS AND SCOPE. Subject to the terms and
conditions set forth herein, Seller hereby grants to OEM, and OEM
accepts, a non-transferable and non-exclusive license to use, resell,
or sublicense Seller Product which are software products.

2.2 RESTRICTIONS ON USE. All purchase, use, and resale by OEM
of Seller Product is restricted as follows:

(a) OEM is strictly prohibited from reverse engineering,
reverse compilation, or reverse assembly of Seller Product;

(b) OEM is strictly prohibited from making a copy or copies of
Seller Product;

(c) OEM shall not misuse the trademarks or trade names of
Seller, but OEM may use the trademarks or trade names of Seller in
advertising Seller Products;

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(d) OEM shall not make any foreign sales without full
compliance with United States import/export laws and restrictions, and
shall be responsible to Seller and indemnify Seller for any failure to
abide with this clause; and

(e) OEM shall not make any government contract sales that
impair the rights of Seller hereunder, and must take all necessary
steps to insure compliance with the intellectual property ownership
rights of Seller hereunder, and shall be responsible to Seller and
indemnify Seller for any failure to abide with this clause.

2.3 TERM. This Agreement shall be for a term of one year,
subject to termination by either party at any time in accordance with
the terms hereof.

2.4 TERMINATION. Subject to Section 4.6 hereof, the Agreement
may be terminated by Seller if OEM does not pay Seller any amount due
hereunder or otherwise materially breaches this Agreement, or if OEM
violates any material term hereof, including specifically but not as a
limitation its restrictions under 2.0 and its duties under Section 3.0.
OEM shall have the right to terminate this Agreement if Seller fails to
provide support as described in Attachment B, or if Seller otherwise
materially breaches this Agreement. Either party may terminate this
Agreement if a force majeure event continues for more than ninety (90)
days or if the other party becomes insolvent or bankrupt or makes an
assignment for the benefit of creditors.

2.5 DUTIES UPON TERMINATION. Upon the termination or
expiration of this Agreement for any cause, the parties agree to
continue their cooperation in order to effect an orderly termination of
their relationship. OEM shall immediately cease representing itself as
a OEM of Seller Product, and shall accept no new orders for Seller
Product except pursuant to firm, outstanding bids or quotations.

2.6 SURVIVAL. Upon the termination or expiration of this
Agreement for any cause, the paragraphs which by their plain meaning,
including specifically but not as a limitation provisions which protect
the intellectual property rights of Seller shall survive.

2.7 BREACH OR DEFAULT. Neither party may terminate this
Agreement for breach or default of the other party unless and until the
party seeking to terminate has specified the breach or default in
writing and such breach or default has not been cured by the receiving
party within thirty (30) days after receipt of written notice.

3.0 OBLIGATIONS OF OEM

3.1 REASONABLE BEST EFFORTS SERVICES AND MINIMUM COMMITMENT.
In consideration of the license granted above and discounting schedules
extended in Attachment A, OEM agrees to exert its reasonable best
efforts to resell Seller Product, to meet agreed-upon sales goals, and
to purchase the Minimum Commitment of Seller Product outlined in
Attachment A. In consideration of the OEM efforts, the Seller agrees to
exert its reasonable best efforts to a deliver high quality product in
conformance with its published specifications, within a reasonable
period of time related to agreed upon delivery dates, in order for the
OEM to meet and/or exceed sales goals.

3.2 SALES CAPABILITY. OEM shall maintain offices as sales
locations, which offices shall be staffed by a sufficient trained
capable sales and technical staff, adequate to provide OEM's customers
with assistance and instructions on setup, installlation, and use of
Seller Product.

3.3 SALES REPORTS, SALES ESTIMATES, AND PRODUCT PERFORMANCE
DATA. Periodically, as agreed, OEM will forecast expected sales to be
made in the upcoming three month period on a "rolling" basis.The OEM is
required to forward to Seller any reports from users of the Seller
Product regarding either (i.) any outages or failures experienced by
users of the Seller Product which become

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<PAGE>

known to OEM, or (ii) any complaints of users of the Seller Product
regarding the quality, functionality or performance of Seller Product
which become knownto OEM.

3.4 INSURANCE COVERAGES. Based upon Seller's determination,
OEM shall acquire reasonable insurance coverages related hereto of the
kinds and in the amounts specified by Seller, at OEM's expense, with
loss payees and subrogation as specified by Seller.

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<PAGE>

4.0 ORDERING, DELIVERY, ACCEPTANCE, FEES, PAYMENT, AND SUPPORT

4.1 ORDERING AND DELIVERY. Individual firm funded purchase
orders of OEM issued to Seller shall be effective upon acceptance and
order receipt verification in writing by Seller at its headquarters at
Germantown, Maryland, USA. All Seller Products are listed in the
initial form of Attachment A with prices and the purchase orders of OEM
must reflect the description, prices, and model numbers contained
therein. The terms and conditions of this Agreement override those of
the purchase orders, with the exception of OEM's rights to return
ordered product (if any) after acceptance has occurred under the
provisions of 4.2 below. All Seller Products shall be delivered on or
about the delivery date set forth in the order receipt verification in
writing by Seller. Shipment will be at the risk of OEM. OEM shall have
15 business days to verify that all deliveries have been received.
Delivery of the Seller Products shall be conclusively deemed to be
completed at the end of the 15 business days verification period or at
such time as missing deliverables identified by OEM in writing during
the 15 business days verification period have been replaced by Seller.

4.2 ACCEPTANCE. The Seller Product shall be accepted by OEM if
the Seller Products perform substantially as described in Attachment C,
"Product Specifications". Failure of OEM to inform Seller of acceptance
or non-acceptance within thirty (30) days following completed delivery
or commercial use of the deliverables by OEM shall constitute
acceptance. Purchase prices and license fees shown in the initial form
of Attachment A are due and payable upon acceptance. Until full payment
is received, Seller retains a purchase money security interest in and
to Seller products. After full payment is received, title is
transferred to OEM.

4.3 AFTER-SALE SUPPORT OF PRODUCTS. Following delivery of the
Deliverables, OEM shall be exclusively responsible for the
installation, testing, modification, management, and control of its
resales of Seller Product, except for Seller's Warranty responsibility
in clause 5.3 below and After-Sale Support of Products responsibility
defined in Attachment B hereto.

4.4 PRICES AND PRICE CHANGES. OEM agrees to pay Seller the
amounts shown on Attachment A for Seller Product. Seller will have the
right through its independent auditors to inspect OEM's facilities and
records to verify the amounts and fees charged to OEM's customers
hereunder. OEM shall keep records regarding its resales and sublicenses
to OEM's customers hereunder in detail to permit Seller to make such a
verification. Seller may change the price of any Seller Product
subsequent to the date of this agreement. If prices are increased,
Seller will give OEM a written notice thereof effective immediately
upon increase.Firm funded purchase orders accepted by Seller before the
written notice of price increase is issued shall be honored at the old
(lower) price so long as the scheduled shipment date therefore is not
later than thirty (30) days after the date of the written notice of
price increase. If prices are decreased, Seller will give OEM a written
notice thereof effective immediately, and the decrease shall apply to
all unused unopened inventory purchased by OEM during the previous
thirty (30) days, as well as to orders-in-process.

4.5 TRAINING, UPDATES, MAINTENANCE & SUPPORT FEES. Except as
expressly provided in this Agreement, including the Attachments, all
training and support services provided by Seller shall be at an
additional fee in accordance with Seller's then current standard
rates. Unless otherwise stated, OEM shall reimburse Seller for all
reasonable travel and other out-of-pocket expenses incurred by Seller
in connection with the assistance furnished hereunder, provided same
have been approved and pre-authorized by OEM.

4.6 PAYMENT. All checks will be in U.S. currency unless
otherwise agreed and shall be drawn on U.S. banks. Except as otherwise
stated herein, based upon credit approval in the sole discretion of
Seller, all payments including license fees shall be due and payable
within thirty (30) calendar day after the receipt by OEM from Seller of
an invoice. If OEM fails to pay any amount due by the due date, OEM
shall pay late charges of 1.5% per month, but not more than the highest
rate permitted by law, together with all Seller's expenses and
collection charges

4
<PAGE>

4.7 TAXES. In addition to Seller's fees hereunder, OEM is
obligated to pay any federal, state, provincial, county, local or
governmental taxes, (including but not limited to sales tax and value
added taxes), duties fees and amounts in lieu thereof, now or hereafter
applied on the licenses granted or products sold herein or OEM's
production, storage, transportation, import, export, licensing or use
of Seller Product. Any such taxes, duties, fees and amounts payable in
lieu thereof, including interest and penalties thereon, paid or payable
at any time by Seller, exclusive of taxes based solely on Seller's net
income, shall be reimbursed by OEM.

5.0 OWNERSHIP AND PROPRIETARY RIGHTS

5.1 OWNERSHIP. All rights, title and interest to Telecom
2000(-TM-) shall at all times remain the exclusive property of Seller,
except for Seller Product fully paid for by OEM. All applicable
copyrights, trade secrets, patents and other intellectual property
rights in Seller Product and Telecom 2000(-TM-) shall remain the
exclusive property of Seller. No title to Telecom 2000(-TM-) is
transferred to OEM. OEM shall not remove the copyright, trademark and
proprietary rights notices of Seller, and shall prohibit any such
removal by its officers, agents, employees, and contractors. This
provision does not apply to applications, inventions, designs, or other
intellectual property developed after ther date hereof by any party.
Any party so developing shall be presumed to be the owner of such
applications, inventions, designs, or other intellectual property
developed after ther date hereof

5.2 PROPRIETARY RIGHTS. OEM acknowledges that Telecom
2000(-TM-) is proprietary and confidential and constitutes valuable
trade secrets of Seller. OEM agrees to safeguard Telecom 2000(-TM-)
with not less than the same degree of care as is exercised in
connection with OEM's own most proprietary and confidential materials.

All aspects of Telecom 2000(-TM-), including without
limitation, programs, methods of processing, specific design and
structure of individual programs and their interaction and unique
programming techniques employed therein, if any, shall remain the sole
and exclusive property of Seller, and shall not be used, sold,
revealed, disclosed or otherwise communicated, directly or indirectly,
by OEM to any person, company, or institution other than as set forth
herein, excepting such technical and business development
communications, products demonstrations, and detailed technical
discussions as OEM reasonably may deem necessary to perform the
reselling duties described herein.

5.3 WARRANTY AND DISCLAIMER OF WARRANTY. Seller Product
Hardware is warranted as free from defects in materials and workmanship
for a period of one year after shipment. In the event of warranty
claims hereunder, OEM shall return ship to seller, prepaid, with a
written description of the basis for warranty claim for a final
determination by Seller. Warranty-covered items shall be repaired or
replaced by Seller and shipped to OEM, at Seller's expense. All Seller
Product Software is delivered "AS IS". SELLER MAKES NO EXPRESSED OR
IMPLIED WARRANTIES WHATSOEVER WITH RESPECT TO SELLER PRODUCT. IN
PARTICULAR, AND WITHOUT LIMITING THE FOREGOING, THE PARTIES AGREE THAT
THERE IS NO EXPRESSED OR IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE OR OF MERCHANTABILITY. SELLER SHALL NOT BE FOUND LIABLE FOR ANY
MONETARY DAMAGES OF ANY KIND WHATESOEVER RELATED TO THE USE OF SELLER
PRODUCTS, AND ANY AND ALL RISK OF SUCH USE IS HEREBY SPECIFICALLY
ASSUMED BY OEM.

6.0 INDEMNIFICATION

6.1 LIMITATION OF LIABILITY. IN NO EVENT WILL EITHER PARTY BE
LIABLE TO THE OTHER OR TO ANY OTHER THIRD PARTY BASED ON CONTRACT, TORT
OR OTHERWISE FOR LOSS OF REVENUES, LOST PROFITS, LOST SAVINGS, OR
INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES
ARISING OUT OF OR RELATING IN ANY WAY TO THIS AGREEMENT, EXCEPT THAT
OEM MAY BE FOUND SO

5
<PAGE>

LIABLE TO SELLER FOR ANY DAMAGES ARISING OUT OF OR RELATING TO OEM'S
INTENTIONAL OR GROSSLY NEGLIGENT VIOLATION OF CLAUSES 2.2.

6.2 INDEMNIFICATION BY SELLER. Seller shall indemnify, defend
and hold OEM harmless from any claims, damages or judgments, including
all reasonable attorney's fees, directly or indirectly resulting from
any claimed infringement or violation of any US copyright, US patent or
other US intellectual property right with respect to Seller Product.
Seller shall have no liability for any such claims or liabilities based
on use of: (i) any version, modification or adaptation of Seller
Product, if such infringement would have been avoided by the use of a
then current unaltered release of Seller Product ; or (ii) a
combination of Seller Product with any product or data not included in
Seller Product when delivered to OEM by Seller.

Following notice of a claim or a threat of actual suit,
Seller, at its sole option, shall as OEM's sole remedy (except as
otherwise provided for in this section):

(a) procure for OEM the right to continue, as provided herein,
to use, distribute and sublicense Seller Product at no additional
expense to OEM; or

(b) provide OEM with a non-infringing version of Seller
Product.

6
<PAGE>

7.0 PUBLICITY

7.1 ISSUANCE OF PUBLICITY. Any and all publicity of any kind
whatsoever with regard to this Agreement shall be determined by Seller
in its sole discretion, except that with respect to the use of the
trademarks and trade names, any publicity is subject to the approval of
the party whose trademarks and trade names are to be used, only to the
extent of the use of such trademarks and trade names and with respect
to the portions of the publicity bearing any such trademarks and trade
names.

8.0 GENERAL

8.1 COMPLIANCE WITH LOCAL LAWS. OEM shall be exclusively
responsible at its own expense for compliance with all local laws
relating to Seller Product and the use thereof hereunder by OEM. OEM
shall indemnify and save harmless Seller from any claim by a third
party arising out of or related to non-compliance with local laws by
OEM.

8.2 JURISDICTION. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware,
Montgomery County, Maryland being the venue for all disputes, except
for Federal jurisdiction disputes, the venue for which shall be the
Eastern District of Virginia.

8.3 DISPUTE RESOLUTION. Any controversy arising under or
related to this Agreement, or any disputed claim by either party
against the other under this Agreement shall be settled in Washington,
DC, USA, by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association and judgment upon the
award rendered by the arbitrators shall be binding upon the parties and
may be entered by either party in the court or forum, state or federal,
having jurisdiction. In any action or proceeding to enforce rights
under this Agreement, the prevailing party will be entitled to recover
costs and reasonable attorneys' fees. Notwithstanding anything to the
contrary, nothing in this Agreement shall be deemed as preventing
either party from seeking injunctive relief (or any other provisional
remedy) from any court having jurisdiction over the parties and the
subject matter of the dispute as necessary to protect either party's
name, proprietary information, patents, copyrights, trade secrets,
know-how or any other proprietary rights.

8.4 INDEPENDENT CONTRACTORS. It is expressly agreed that
Seller and OEM are acting hereunder as independent contractors, and
under no circumstances shall any of the employees of one party be
deemed the employees of the other for any purpose.

8.5 NOTICE. Any notice required to be given by either party to
the other shall be deemed given ten (10) days after being deposited in
the postal system in registered or certified form with return receipt
requested, postage paid, addressed to the notified party at the address
set forth above.

8.6 ASSIGNMENT. A party may not assign this agreement or any
portion thereof without the approval of the other party, which shall
not be unreasonably withheld.

8.7 AMENDMENT; WAIVER. Any provision of this Agreement may
only be amended or waived if such amendment or waiver is in writing;
and, if an amendment, executed by all parties hereto and, if a waiver,
executed by the party which is waiving the term, condition or right.

8.8 SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforcable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforcability without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.

7
<PAGE>

8.9 HEADINGS. The headings of the various sections of this
Agreement have been inserted for ease of reference only and shall be
deemed not to be a part of this Agreement.

8.10 ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding of the parties with relation to the subject matter
hereof, and may be amended only by a writing in accordance with clause
8.7 above.

MADE AND ENTERED INTO this _________ day of _________, 199__,
by the undersigned authorized representatives of the parties.

e-Net, Inc. OEM

------------------------ ------------------------
(Signature) (Signature)

------------------------ ------------------------
(Name) (Name)

------------------------ ------------------------
(Title) (Title)

------------------------ ------------------------
(Date) (Date)

8
<PAGE>

ATTACHMENT A

SELLER PRODUCT AND OEM PRICES

PRODUCT RE-
SELLER
PRICE
-----
<S> <C> <C>
T2000-TS $412.00

T2000-CO $562.00

Net Connect $119.00

TelSet Lite $ 224.00

T2000-DTI T1 Single Span Dual Span
PCM $7,147.00 $12,997.00
SX 7300 $19,498.00 $34,447.00

T2000-DTI E1 Single Span Dual Span
PCM $8,447.00 $12,997.00
SX 7300 $19,497.00 $37,697.00

MTS 8 Port $5300.00
MTS 12 Port $7000.00

Gatekeeper Software $3750.00

</TABLE>

9
<PAGE>

ATTACHMENT B

SELLER'S AFTER-SALE SUPPORT OF SELLER PRODUCTS

SUPPORT

1.) "Warranty Only", equals no maintenance service unless a defect
in parts or workmanship causes a malfunction. See Clause 5.3. above.

2.) "Standard Support" for 15% of purchase price of ordered
item per year is specified in this attachment below under the title
"PRODUCT MALFUNCTION CORRECTION PROCEDURES".

3.) "Nonstandard Support" equals any customized services which
OEM requests and which Seller agrees to supply, at a cost of $1500 per
day plus Travel and Living, minimum of 2 days.

PRODUCT MALFUNCTION CORRECTION PROCEDURES

Problem Classifications - If OEM or its Customer encounters a
problem (classified below) with the product, then Seller is required to
respond to the OEM or its Sublicensee in the time specified below:

P1: CRITICAL SYSTEMS PROBLEM - Customer is unable to use the
product as documented, and a major operational problem or reliability
problem exists. Seller shall provide acknowledgment of the problem
within four (4) hours. At this time, OEM or its Customer may be
required to provide additional information to enable Seller to recreate
the problem. Seller shall use its best efforts to provide a work-around
(if a work-around is possible) for the problem and shall provide a plan
for resolution within one (1) day from the time at which the problem
can be reproduced by Seller. OEM or its Customer may be required to aid
in this task if the error can not be reproduced by Seller. A patch
release containing the fix shall be produced according to the plan
mentioned above. Status reports will be provided to OEM or its Customer
as required, but no less than twice a week.

P2: MINOR OPERATIONAL PROBLEM(S) - An intermittent `bug' in
the product exists, but it is not a critical systems reliability issue;
however, the product does not function as documented, and the `bug'
creates a minor operational impact. Seller shall provide acknowledgment
of the problem within one (1) business day. At this time, OEM or its
Customer may be required to provide additional information to enable
Seller to recreate the problem. OEM or its Customer may be required to
aid in this task if the error can not be reproduced by Seller. Seller
shall use its best efforts to provide a work-around (if a work-around
is possible) for the problem and shall provide a plan for resolution
within one (1) week from the time at which the problem can be
reproduced by Seller. Any fixes to address this problem shall be
incorporated into the next Maintenance Release.

10
<PAGE>

P3: ANNOYANCE TYPE PROBLEM - The use of the product produces a
user annoyance while the product is in application. Seller shall
provide acknowledgment of the problem within two (2) business days. At
this time, OEM or its Customer may be required to provide additional
information to enable Seller to recreate the problem. Seller shall use
its best efforts to provide a work-around (if a work-around is
possible) for the problem and shall provide a plan for resolution
within two (2) weeks from the time at which the problem can be
reproduced. OEM or its Customer may be required to aid in this task if
the error can not be reproduced by Seller. Seller and OEM or its
Customer will jointly determine if the annoyance is to be fixed. If it
is agreed upon that the annoyance is to be fixed, then Seller shall
provide a schedule for the next Scheduled Release and incorporate the
fix into that release.

DEFINITIONS:
1.) Scheduled release - includes new functionality
2.) Maintenance release - takes care of `bug' fixes
3.) Work-around - customer able to make alteration to
application or product as a temporary solution.

<PAGE>

EXHIBIT 11.0

COMPUTATION OF PER SHARE LOSS

EARNINGS PER SHARE

We adopted Statement of Financial Accounting Standards ("SFAS") No. 128
for the fiscal year ended March 31, 1998. SFAS No. 128 replaces the presentation
of primary and fully diluted earnings per share with a presentation of basic
earnings per share and diluted earnings per share, if dilutive shares are
outstanding. Basic earnings per share excludes dilution and is computed by
dividing income or loss available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted earnings per share
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were converted into common stock, but such
securities or contracts are excluded if their effects would be anti-dilutive.
Pursuant to the requirements of Staff Accounting Bulletin ("SAB") No. 98 of the
Securities and Exchange Commission, issued in February 1998, common equivalent
shares which have an anti-dilutive effect on net loss per share are no longer
included in computing net loss per share for the periods presented. All
prior-period loss per share data has been restated in accordance with SFAS No.
128 and SAB No. 98.

Basic loss per common share was calculated by dividing net loss by the
weighted average number of common shares outstanding during the period. Diluted
loss per share was calculated the same as basic loss per share since we have a
net loss for all periods presented which would make the conversion of securities
or other contracts to common stock anti-dilutive.
<TABLE>
<CAPTION>

YEAR ENDED
MARCH 31
1999 1998
---------- ---------

<S> <C> <C>
Net Loss (9,270,270) (3,898,812)

Loss per common share - basic & diluted (1.17) (.68)

Number of common shares - basic & diluted 7,903,197 5,708,904

</TABLE>

<PAGE>

EXHIBIT 21.0

SUBSIDIARIES

NAME OF SUBSIDIARY JURISDICTION OF INCORPORATION NAME(S) OF BUSINESS CONDUCT
------------------ ----------------------------- ---------------------------

<S> <C> <C>
ZeroPlus.Com, Inc. Delaware Corporation ZeroPlus.Com

</TABLE>

<PAGE>

Exhibit 23.0

[LETTERHEAD]

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We have issued our report dated June 10, 1999, accompanying the financial
statements incorporated by reference in the Annual Report of e-Net, Inc., on
Form 10-KSB for the year ended March 31, 1999. We hereby consent to the
incorporation by reference of said report in the Registration Statement of
e-Net, Inc., on Forms S-8 (File No. 333-59575, effective July 22, 1998 and
File No. 333-72923, effective February 25, 1999).

/s/Grant Thornton LLP
- --------------------
Vienna, Virginia
June 25, 1999

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> MAR-31-1999 MAR-31-1998
<PERIOD-START> APR-01-1998 APR-01-1997
<PERIOD-END> MAR-31-1999 MAR-31-1998
<CASH> 1,761 856
<SECURITIES> 4,619 960
<RECEIVABLES> 1,305 335
<ALLOWANCES> 555 0
<INVENTORY> 584 203
<CURRENT-ASSETS> 7,834 2,530
<PP&E> 1,006 592
<DEPRECIATION> 505 220
<TOTAL-ASSETS> 8,867 3,722
<CURRENT-LIABILITIES> 949 875
<BONDS> 0 0
0 0
0 0
<COMMON> 82 58
<OTHER-SE> 7,835 2,789
<TOTAL-LIABILITY-AND-EQUITY> 8,867 3,722
<SALES> 1,127 348
<TOTAL-REVENUES> 1,673 723
<CGS> 1,417 155
<TOTAL-COSTS> 1,600 347
<OTHER-EXPENSES> 9,551 4,280
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (9,270) (3,899)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (9,270) (3,899)
<EPS-BASIC> (1.17) (.68)
<EPS-DILUTED> 0 0

</TABLE>