INTELISPAN INC /WA/, SB-2/A, 2000-05-03

INTELISPAN INC /WA/
SB-2/A, 2000-05-03
COMPUTER PROGRAMMING SERVICES

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 3, 2000

REGISTRATION NO. 333-94291
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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 5

FORM SB-2

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

INTELISPAN, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)

<TABLE>
<S> <C> <C>
WASHINGTON 7379 91-1738902
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
ORGANIZATION)
</TABLE>

1720 WINDWARD CONCOURSE, SUITE 100

ALPHARETTA, GEORGIA 30005

(678) 256-0300

(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
------------------------
JAMES D. SHOOK, ESQ.

VICE PRESIDENT, GENERAL COUNSEL, AND SECRETARY
1720 WINDWARD CONCOURSE, SUITE 100
ALPHARETTA, GEORGIA 30005

(678) 256-0300

(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
COPIES TO:
ROBERT S. KANT, ESQ.
JEAN E. HARRIS, ESQ.
SCOTT K. WEISS, ESQ.
GREENBERG TRAURIG, LLP
ONE EAST CAMELBACK
PHOENIX, ARIZONA 85012-1656
(602) 263-2300
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CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value 1,420,000 Shares $3.03 (1) $4,304,375 $1,136.36(4)
$.0001..........................
600,000 Shares
$4.625(2) 2,775,000 $732.60(4)
233,750 Shares
$4.02 (3) 938,652 $247.26(4)
-------------------
------------------- -------------------
2,253,750 Shares
$8,018,027 $2,116.22(4)
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</TABLE>

(1) Calculated upon the average of the bid and asked price of our common stock
as of January 7, 2000.

(2) Calculated upon the average of the bid and asked price of our common stock
as of February 22, 2000.

(3) Calculated upon the average of the bid and asked price of our common stock
as of March 24, 2000.

(4) Previously paid.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

SUBJECT TO COMPLETION MAY 2, 2000

PROSPECTUS

2,253,750 SHARES OF COMMON STOCK

INTELISPAN, INC.

Certain shareholders of Intelispan, Inc. are offering for sale up to
2,253,750 shares of common stock under this prospectus, consisting of the
following:

- 1,280,000 shares of common stock that shareholders have the right to
acquire upon conversion of Series A preferred stock,

- 600,000 shares of common stock that may be sold upon exercise of warrants
that were issued in September and October 1999 in connection with
short-term financings,

- 108,000 shares of common stock that were issued in January 1999 in
connection with an investor relations agreement,

- 32,000 shares of common stock that may be sold upon exercise of warrants
that were issued in June 1998 in connection with another investor
relations agreement,

- 23,750 shares of common stock that were issued in March 2000 to employees
pursuant to restricted stock grants, and

- 210,000 shares of common stock that may be sold upon issuance from time
to time to our employees or consultants.

The selling shareholders will determine when they will sell their shares,
and in all cases, they will sell their shares at the current market price or at
negotiated prices at the time of the sale. We will pay the expenses incurred to
register the shares for resale, but the selling shareholders will pay any
underwriting discounts, concessions, and brokerage commissions associated with
the sale of their shares of common stock. The selling shareholders and the
brokers and dealers that they utilize may be deemed to be "underwriters" within
the meaning of the securities laws, and any commissions received and any profits
realized by them on the sale of shares may be considered to be underwriting
compensation.

We will not receive any of the proceeds of sales by the selling
shareholders. Securities laws and Securities and Exchange Commission regulations
may require the selling shareholders to deliver this prospectus to purchasers
when they resell their shares of common stock.

Our common stock currently is traded on the NASD over-the-counter bulletin
board, or OTCBB, under the symbol "IVPNE." On May 1, 2000, the last sale price
of the common stock as reported on the OTCBB was $2.13 per share. The OTCBB
eligibility rules provide that companies must be reporting companies under the
federal securities laws in order to be quoted on the OTCBB. BECAUSE WE WERE NOT
A REPORTING COMPANY UNDER THE FEDERAL SECURITIES LAWS ON JANUARY 12, 2000, THE
NASD SCHEDULED THE REMOVAL OF OUR STOCK QUOTATIONS FROM THE OTCBB ON THAT DATE.
WE OBTAINED A TEMPORARY STAY FROM THE REMOVAL AND ARE AWAITING THE SCHEDULING OF
AN APPEAL. WE ARE TAKING STEPS TO BECOME A REPORTING COMPANY. IN ADDITION, WE
HAVE APPLIED TO HAVE OUR COMMON STOCK LISTED ON THE NASDAQ NATIONAL MARKET UNDER
THE SYMBOL "IVPN."

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

SEE "RISK FACTORS," BEGINNING ON PAGE 6, FOR A DISCUSSION OF CERTAIN RISK
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF COMMON STOCK
OFFERED HEREBY.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

The date of this prospectus is , 2000.
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by more detailed
information appearing elsewhere in this prospectus. This prospectus contains
certain forward-looking statements that involve risks and uncertainties. Our
actual results could differ materially from the results anticipated in these
forward-looking statements as a result of the factors set forth in this
prospectus, including those set forth under "Risk Factors." You should read the
entire prospectus carefully before making an investment decision.

OUR COMPANY

INTRODUCTION

We provide complete and seamless managed network solutions that enable
secure and efficient electronic communications among businesses through virtual
private networks and the Internet. A virtual private network is a private
network that exists within a public or shared network, including the Internet,
through which access is controlled and users can communicate securely. Our
solutions include providing secure network connectivity on a metered or
flat-rate basis together with technology that verifies the identity of users and
manages e-commerce transactions. We believe we differentiate our services by
integrating complex technologies to create our own branded network services.

Our InteliGate suite, our principal services for secure electronic
communications between businesses, currently includes the following:

- InteliGate-SP, a virtual private network that exists within a shared
network;

- InteliGate, a virtual private network that allows users to access
securely their private network through an Internet connection provided by
a third party;

- InteliGate II, a virtual private network that allows users to access
securely their private network through an Internet connection provided by
us; and

- TradeSPAN, a premium service that provides for electronic document
exchange.

We plan to differentiate our services through a comprehensive service level
agreement with our customers whereby we guarantee that our services will be
highly available with minimum downtime.

OUR MARKET OPPORTUNITY

Infonetics Research reports that the market for virtual private networks
was $205 million in 1997 and is estimated to grow to $12 billion by the end of
2001. The Gartner Group predicts that by 2003, more than 137 million users
worldwide, including one-third of the U.S. work force, will be accessing
computer networks from remote locations. We believe the following are key
driving forces behind our current market opportunity:

- the growth of e-commerce between businesses,

- the increasing demand for secure computer networks,

- the increase in users accessing computer networks from remote locations,

- the increasing demand for cost-efficient outsourced services to support
computer networks, and

- the adoption of third-party hosting of business applications.
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OUR STRATEGY

Our goal is to be a leading single-source provider of managed network
solutions that enable secure and efficient electronic communications among
businesses through virtual private networks and the Internet. Key elements of
the strategy to achieve this goal include the following:

- targeting small- and medium-sized businesses through resellers, system
integrators, and strategic relationships;

- building a direct sales force and developing a marketing campaign to
target specific industries with the greatest perceived demand for our
services, such as healthcare and financial services;

- increasing brand awareness through an aggressive media campaign;

- continuing to pursue strategic relationships to acquire technologies and
service offerings to complement and expand our existing service
offerings;

- providing high-quality service and responsiveness to customers; and

- pursuing strategic acquisitions to enhance our technology portfolio,
expand our product offerings, and build our distribution channels.

RECENT DEVELOPMENTS

In November 1999, we announced the appointment of Travis Lee Provow, a
director of our company since August 1998, as our Chief Executive Officer,
effective January 1, 2000. Mr. Provow served as Chief Operating Officer of
Slingshot Networks, LLC, a provider of digital media storage, and has more than
18 years of network experience. Mr. Provow was a founder of GridNet
International, Inc., the network backbone of our virtual private network
solution, which was sold to MCI WorldCom in 1997. Prior to founding GridNet, Mr.
Provow held several domestic and international technical, marketing, product
management, and strategic planning positions with NCR, now AT&T Global
Information Services, from 1981 to 1995.

During February 2000, Maurice J. Gallagher, Jr. became the Chairman of the
Board of Directors of our company. Mr. Gallagher is the Chairman of the Board of
Directors of MGC Communications, Inc., which he was instrumental in organizing.
Mr. Gallagher is also a founder and Chairman of BankServ, Inc., a private
payments company founded in 1996. Mr. Gallagher also served as a director of
PurchasePro.com Inc. during 1998 and 1999. Mr. Gallagher co-founded ValuJet
Airlines, Inc. in 1993 and served as director of that company from 1993 until
November 1997. Mr. Gallagher held prior positions with ValuJet from 1993 to
1994, including Chief Financial Officer, and served as Vice Chairman of its
board of directors from 1994 to 1997. Prior to co-founding ValuJet, Mr.
Gallagher was a founder and President of WestAir Holding, Inc., a commuter
airline headquartered in Fresno, California. WestAir was sold to Mesa Airlines
in June 1992, and Mr. Gallagher was a member of the Mesa board of directors from
June 1992 through March 1993.

During January 2000, we completed a private placement of 300 units to
accredited investors through Commonwealth Associates, L.P. as placement agent,
resulting in net proceeds to us of $26.7 million. Each unit, which sold for
$100,000, consisted of 133,333 shares of common stock and a warrant to purchase
66,667 shares of common stock at an
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<PAGE> 5

exercise price of $0.75 per share. In connection with the offering, the
placement agent received, among other things, seven-year warrants to purchase
33.33% of the shares of common stock included in the units and issuable upon
exercise of the warrants included in the units at an exercise price of $0.75 per
share. As a result of the sale of the 300 units, the placement agent received an
aggregate of 20,000,000 agent warrants. Prior to the offering, ComVest Capital
Management, LLC, an affiliate of the placement agent, and its designees made
available to us approximately $595,000, evidenced by bridge notes that were
converted into units in the offering. In connection with the bridge notes and to
induce Commonwealth to raise additional capital for our company, we issued to
ComVest and its designees bridge warrants to purchase 10,000,000 shares of
common stock at an exercise price of $0.01 per share. The holders of the bridge
warrants exercised the warrants prior to the first closing of the private
placement.

During February 2000, we completed another private placement of 13.5 units
to accredited investors through Commonwealth Associates, L.P. as placement
agent, from which we received net proceeds of $1.2 million. The units were sold
at $100,000 per unit and were identical to the units sold in the private
placement completed in January 2000. In connection with the offering, the
placement agent received, among other things, seven-year warrants to purchase
33.33% of the shares of common stock included in the units and issuable upon
exercise of the warrants included in the units at an exercise price of $0.75 per
share. As a result of the sale of the 13.5 units, the placement agent received
an aggregate of 900,000 agent warrants.

Our Board of Directors and our shareholders have approved the
reincorporation of our company from Washington to Delaware through a merger into
a newly formed Delaware corporation formed solely for the purposes of the
reincorporation. Upon effectiveness, the reincorporation provides for the
conversion of shares of the Washington corporation into shares of the Delaware
corporation, on the basis of one share of common stock of the Delaware
corporation for each three shares of common stock previously issued and
outstanding. The presently issued and outstanding shares of Series A preferred
stock will remain the same, however, the conversion ratio for the Series A
preferred stock will be adjusted to reflect the combination of the common stock
into a smaller number of shares. Currently, each share of Series A preferred
stock is convertible into 50 shares of common stock. After the reincorporation,
each share of Series A preferred stock will be convertible into 16.67 shares of
common stock. Our Board of Directors may choose to effect the reincorporation at
any time in the future, amend or modify the terms of the reincorporation, or may
choose to terminate and abandon the reincorporation. Upon the effectiveness of
the reincorporation, our company will be governed by the a new certificate of
incorporation, the bylaws of the Delaware corporation, and Delaware law.

OUR OFFICES

Our principal offices are located at 1720 Windward Concourse, Suite 100,
Alpharetta, Georgia 30005, telephone (678) 256-0300, facsimile (678) 256-0301.

4
<PAGE> 6

THE OFFERING

<TABLE>
<S> <C>
Securities offered by the selling
shareholders........................ 2,253,750 shares of common stock
Common stock currently outstanding.... 71,103,334 shares
Use of proceeds....................... We will not receive any of the
proceeds of sales by the selling
shareholders.
OTCBB symbol.......................... IVPNE
</TABLE>

SUMMARY CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
SEPTEMBER 15, 1997 YEAR ENDED
(INCEPTION) DECEMBER 31,
THROUGH -------------------------
DECEMBER 31, 1997 1998 1999
------------------ ----------- -----------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue............................... $ 11,303 $ 129,596 $ 743,709
Gross loss............................ (4,535) (785,807) (542,701)
Loss from operations.................. (681,539) (5,928,716) (5,370,153)
Net loss.............................. (572,608) (5,210,560) (5,806,864)
Net loss per common share -- basic and
diluted............................. $ (0.06) $ (0.32) $ (0.28)
Weighted average number of common
shares outstanding.................. 10,337,094 16,334,670 20,817,660
</TABLE>

<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
-------------------------
1998 1999
---------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital...................................... $ (364,654) $ 8,144,658
Total assets......................................... 2,042,261 11,769,746
Total debt........................................... 188,957 263,655
Shareholders' equity................................. 997,983 9,341,930
</TABLE>

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<PAGE> 7

RISK FACTORS

An investment in our common stock involves a high degree of risk.
Prospective investors should consider carefully the following risk factors, in
addition to the other information contained in this prospectus, before
purchasing any of our common stock.

INVESTORS WILL HAVE SIGNIFICANTLY LESS LIQUIDITY AND LIMITED AVAILABILITY
OF QUOTATIONS IF OUR COMMON STOCK IS NO LONGER ELIGIBLE FOR QUOTATION ON THE
NASD BULLETIN BOARD OR IS NOT LISTED ON A NATIONAL EXCHANGE.

Although we have applied to have our common stock listed on the Nasdaq
National Market, our common stock is currently quoted on the OTCBB operated by
the NASD. The OTCBB eligibility rule provides that no issuer may be quoted on
the OTCBB unless it is required to make current filings pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934. We did not meet this
requirement by our required compliance date of January 12, 2000, but we obtained
a temporary stay to continue to have our common stock quoted on the OTCBB.

During this time, we have appealed the NASD-scheduled removal of our stock
quotations from the OTCBB. As part of that effort, we applied to the Securities
and Exchange Commission for a stay of the removal until our appeal could be
resolved. On January 12, the SEC issued an order temporarily staying the removal
of our quotations from the OTCBB. Since that time, the SEC has accepted our
appeal, but has not yet set a schedule to hear the arguments of the parties. No
assurances can be given that our appeal will be successful or when the SEC will
continue the stay. If we are not successful in our appeal, our common stock will
not be eligible for quotation on the OTCBB, which could occur at any time
without notice.

If our common stock is no longer quoted on the OTCBB or a national
exchange, we believe our common stock quotations will be published in the "pink
sheets," which generally does not provide real time quotes. As a result, we
believe investors will have significantly less liquidity and limited
availability of quotations, which could have a material adverse effect on the
market price of our common stock. No assurance can be given when, if ever, we
will meet the OTCBB qualifications to permit our common stock to be quoted on
the OTCBB, or when our common stock will be listed on a national exchange.

WE HAVE INCURRED SUBSTANTIAL LOSSES, AND OUR ABILITY TO GENERATE REVENUE TO
SUPPORT OUR OPERATIONS IS UNCERTAIN.

We have generated limited revenue, have incurred substantial losses since
our inception, and currently are experiencing a substantial cash flow deficiency
from operations. Our inability to generate revenue sufficient to achieve
profitability may have an adverse effect on the market price of our common
stock. We expect to incur substantial additional losses for the foreseeable
future. We incurred net losses of approximately $573,000 during 1997,
approximately $5.2 million during 1998, and approximately $5.8 million during
1999. As of December 31, 1999, we had an accumulated deficit of approximately
$11.6 million. Our ability to generate revenue to support our operations is
uncertain, and we may never achieve profitability.

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<PAGE> 8

WE HAVE A LIMITED OPERATING HISTORY UPON WHICH YOU CAN EVALUATE OUR POTENTIAL
FOR FUTURE SUCCESS.

We began to introduce our products and services during 1998. We have
generated limited revenue and have a very limited operating history on which you
can evaluate our potential for future success. Rather than relying on historical
financial information to evaluate our company, you should evaluate our company
in light of the expenses, delays, uncertainties, and complications typically
encountered by early-stage businesses, many of which will be beyond our control.
Early-stage businesses commonly face risks such as the following:

- lack of sufficient capital,

- unanticipated problems, delays, and expenses relating to product
development and implementation,

- lack of intellectual property,

- licensing and marketing difficulties,

- competition,

- technological changes, and

- uncertain market acceptance of products and services.

OUR LIMITED OPERATING HISTORY MAY MAKE IT DIFFICULT FOR US TO FORECAST
ACCURATELY OUR OPERATING RESULTS.

Our planned expense levels will be based in part on our expectations
concerning future revenue, which is difficult to forecast accurately based on
our stage of development. We may be unable to adjust spending in a timely manner
to compensate for any unexpected shortfall in revenue. Further, business
development and marketing expenses may increase significantly as we expand
operations. To the extent that these expenses precede or are not rapidly
followed by a corresponding increase in revenue, our business, operating
results, and financial condition may be materially and adversely affected.

THE LOSS OF ANY OF OUR KEY EXECUTIVES OR OUR FAILURE TO ATTRACT, INTEGRATE,
MOTIVATE, AND RETAIN ADDITIONAL KEY EMPLOYEES COULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR BUSINESS.

Our success depends to a large degree upon the skills of our senior
management team and current key employees and upon our ability to identify,
hire, and retain additional sales, marketing, technical, and financial
personnel. The loss of any of our key executives or the failure to attract,
integrate, motivate, and retain additional key employees could have a material
adverse effect on our business. We may be unable to retain our existing key
personnel or attract and retain additional key personnel. We depend particularly
upon the following key executives: Travis Lee Provow, Chief Executive Officer
and President; Ronald W. Loback, Executive Vice President-Sales; and Kenton G.
Dallas, Vice President of Network Technologies. We do not have any employment
agreements with any of our employees. We maintain key person life insurance only
for Mr. Provow. We do not require our executives or our employees to enter
non-competition agreements with us, and those executives or employees could
leave our company to form or join a competitor.

7
<PAGE> 9

WE DEPEND ON KEY CONTRACTUAL RELATIONSHIPS, AND THE LOSS OF ANY OF THOSE
RELATIONSHIPS WOULD LIKELY HAVE A MATERIAL ADVERSE EFFECT ON OUR OPERATIONS.

We enter into licensing, strategic, and other similar contractual
relationships under which we utilize proprietary technology and incorporate key
products and services into our customer solutions. If any of these relationships
are terminated, expired, or breached, or if any of the parties to these
agreements cease operations or stop offering its product or service, our
operations would have a material adverse effect on our operations. We currently
depend to a great extent upon six key agreements:

- a reseller agreement with GridNet via MCI WorldCom that enables us to
provide exSPAND-VPN;

- a technology supply agreement between our majority-owned Contego, LLC
subsidiary and Baltimore Technologies, plc;

- a strategic alliance agreement between Contego and GridNet permitting the
integration of Contego's product in the GridNet network;

- a supply agreement with Contego that enables us to provide exSPAND-PKI;

- a software license and distribution agreement with Cyclone Software
Corporation that enables us to offer TradeSPAN; and

- a distributor agreement with Altiga Networks that enables us to offer
exSPANd-INT.

Any changes to the offerings provided by these third parties under these
agreements may require us to change or reengineer our own services, which will
likely cause a material disruption of our business. In any of such cases, there
is no assurance that we would be able to timely modify our services or to
replace any of the services on favorable terms or at all.

WE RELY ON OUR GRIDNET SUPPLY AGREEMENT FOR THE MAJORITY OF OUR SERVICE
OFFERINGS, AND THE TERMINATION OF THIS AGREEMENT OR THE INTRACONNECT SERVICE
WOULD REQUIRE US TO FIND AN ALTERNATIVE NETWORK TO PROVIDE OUR PRODUCTS AND
SERVICES TO CUSTOMERS.

Under the GridNet supply agreement, MCI WorldCom can eliminate its service
offerings, including the IntraConnect service, upon 60 days' notice to our
company. If MCI WorldCom terminates the IntraConnect service, or if the
agreement is terminated, we would have to find an alternative network to provide
our products and services to customers. Even if we located an alternate network,
an agreement may not be reached on terms that are acceptable to us and the terms
and the time required to migrate our offerings to an alternative network could
materially and adversely affect our business. In addition, MCI WorldCom has
notified us that it is currently changing the network configuration and
technology infrastructure underlying its services. These changes are requiring
us to reengineer our product offerings to adapt to these changes and may require
us to reposition our offerings in the market. There can be no assurance that
this re-engineering will be possible, successful, or cost-effective.

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<PAGE> 10

WE WOULD NOT BE ABLE TO OFFER OUR PRODUCTS WITHOUT THE TECHNOLOGY THAT WE
LICENSE FROM THIRD PARTIES.

We license most of the technology integral to our business from third
parties, and we do not have any patents or copyrights for the technology we
utilize. Our success will depend in part on the continued availability of that
technology, the technology not infringing the proprietary rights of others, and
our not breaching technology licenses. It is uncertain whether any third-party
patents will require us to utilize or develop alternative technology, alter our
products or services, obtain alternative licenses, or cease activities that
infringe on third-parties' intellectual property rights. We may not be able to
obtain any additional required licenses on commercially favorable terms, if at
all. Our inability to acquire any third-party product licenses, or to integrate
the related third-party products into our products and services, could result in
delays in product development unless and until equivalent products can be
identified, licensed, and integrated. We also expect to require new licenses in
the future as our business expands and technology evolves. Existing or future
licenses may not continue to be available to us on commercially reasonable
terms. Litigation, which could result in substantial cost to us, may also be
necessary to enforce any patents issued or licensed to us or to determine the
scope and validity of third-party proprietary rights.

IF WE DO NOT FIND ADDITIONAL SOURCES OF CAPITAL, WE MAY BE REQUIRED TO REDUCE
THE SCOPE OF OUR BUSINESS ACTIVITIES UNTIL WE CAN OBTAIN OTHER FINANCING.

We will not receive any proceeds from this offering. We believe that our
current capital will satisfy our operating capital needs through the end of this
calendar year based upon our currently anticipated business activities. We
anticipate incurring substantial losses in the future and will likely require
significant additional financing in order to satisfy our cash requirements. Our
need for additional capital to finance our operations and growth will be greater
should, among other things, our revenue or expense estimates prove to be
incorrect, particularly if we do not find additional sources of capital. We
cannot predict the timing or amount of our capital requirements at this time. We
may not be able to obtain additional financing in sufficient amounts or on
acceptable terms when needed, which could adversely affect our operating results
and prospects.

OUR PRODUCTS AND SERVICES MAY NOT BE BROADLY ACCEPTED BY THE MARKET.

We offer secure electronic business communication solutions. The market for
providing integrated and secure network services is in the early stage of
development. It is difficult to predict the rate at which this market will grow,
if at all, because this market is relatively new and current and future
competitors are likely to introduce competing services or products. Our
business, operating results, and financial condition would be materially and
adversely affected if the markets for our products and services fail to grow,
grow more slowly than anticipated, or become more competitive, or if our
products and services are not accepted by targeted customers even if a
substantial market develops. New or increased competition may result in market
saturation, more competitive pricing, or lower margins. Certain critical issues
concerning commercial use of our products and services remain unresolved and may
impact the growth of these services. These issues include, among others, the
ultimate security and reliability of networks, the ease and cost of access, and
the quality of service.

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OUR FAILURE TO SUCCESSFULLY DEVELOP AND MARKET NEW PRODUCTS AND SERVICES COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR OPERATIONS.

Any failure by us to anticipate or respond adequately to technological
developments, customer requirements, or new design and production techniques or
any significant delays in product development or introduction could have a
material adverse effect on our operations. The emerging market for our products
and services is characterized by rapid technological developments and evolving
industry standards. These factors will require us continually to improve the
performance and features of our products and services and to introduce new
products and services, particularly in response to offerings from our
competitors, as quickly as possible. As a result, we will be required to expend
substantial funds for and commit significant resources to the conduct of
continuing product development. We may not be successful in developing and
marketing new products and services that respond to competitive and
technological developments and changing customer needs.

WE OFFER SOME OF OUR SERVICES FOR A FIXED MONTHLY CHARGE, AND OUR OPERATING
MARGINS WILL BE REDUCED IF OUR CUSTOMERS USE OUR SERVICES AT LEVELS GREATER THAN
WE EXPECT.

We have recently begun to offer to our customers our InteliGate,
InteliGate-II, and InteliGate-SP services for a fixed monthly charge. Our
pricing is based upon projected customer use of our services and the projected
cost of these services, however, we have little historical basis upon which to
estimate these amounts. Higher than expected use by our customers or higher than
expected costs would decrease our operating margins. Repeated or significant
decreases in our operating margins would have a material adverse effect on our
operations.

INCREASED CUSTOMER CREDITS REQUIRED BY OUR SERVICE LEVEL AGREEMENTS MAY HAVE A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS.

We have recently announced an aggressive service level agreement with our
customers whereby we plan to guarantee that our services will be available to
our customers. If we fail to maintain agreed-upon service levels, our service
level agreements will require us to grant our customers a credit. Historically,
our industry has guaranteed availability of similar services at lower levels,
and have required customers to request such credits. We have little historical
data upon which to estimate the credits that we may have to grant for failing to
maintain the agreed-upon service levels. In addition, our third-party providers
do not provide us with similar guarantees. Accordingly, our service level
agreements could require our company to grant significant credits to customers
which would result in higher than expected costs and decreased operating
margins. Repeated or significant decreases in our operating margins would have a
material adverse effect on our operations.

INVESTORS MAY NOT BE ABLE TO EXERCISE CONTROL OVER OUR COMPANY AS A RESULT OF
MANAGEMENT'S AND OTHER PRINCIPAL SHAREHOLDERS' OWNERSHIP.

The current executive officers and directors of our company beneficially
own 43.2% of our outstanding common stock. As a result, the executive officers
and directors of our company can significantly influence the management and
affairs of our company and all matters requiring shareholder approval, including
the election of directors and approval of significant corporate transactions.
This concentration of ownership could have the effect of delaying or preventing
a change in control of our company, even when such change of

10
<PAGE> 12

control is in the best interests of shareholders. Control by management might
adversely affect the market price of the common stock and the voting and other
rights of our company's other shareholders.

THE MARKETS FOR ELECTRONIC COMMERCE, SECURE REMOTE ACCESS, AND STRONG
AUTHENTICATION ARE HIGHLY COMPETITIVE.

Our products and services compete in the secure network access and secure
business-to-business communication markets with virtual private network
providers, value-added network providers, and electronic data interchange
providers. Value-added networks are communications networks that provide
services beyond normal transmission, such as automatic error detection and
correction, data conversion, and message storing and forwarding. The competition
in these markets is extremely competitive.

Competition for our products and services arise from several sources in the
virtual private network market. Most major networking device companies provide
or have announced intentions to provide encryption or other secure access
through their hardware. This group includes Lucent and Cisco; firewall vendors,
such as Axent and Checkpoint Software; and modem-pool companies, such as Shiva.
Competitors providing a service-based virtual private network include Sprint,
AT&T, GTE, IBM, and MCI WorldCom, as well as smaller companies such as
Concentric Networks. In addition, several companies, including Sun Microsystems
and Microsoft, provide or have announced their intention to provide software
product-based solutions, some of which will be integrated into their operating
systems.

Our products and services compete with different technologies that provide
electronic data interchange services including electronic data interchange
applications based on value-added networks and other secure document exchange
applications. Many existing value-added networks have strong, long-standing
relationships with customers and have demonstrated their ability to deliver a
complete solution. Competitors in this marketplace include GE Information
Services, Sterling Commerce, IBM, Kleinschmidt, and Harbinger. Some of these
companies, together with newer entrants in the market, have introduced
Internet-based products and services. We may also compete in this segment with
enterprise resource software providers that integrate electronic data
interchange services into their products, such as PeopleSoft, BAAN, SAP, and
Oracle.

Competition may develop from companies that integrate their current user
authentication technology into a network solution. These companies include
Entrust, VeriSign, and Baltimore, which utilize public key infrastructure
technology, and Security Dynamics, ActivCard, and Vasco, which use other
technology in their solutions.

Although we believe that our products and services will compete favorably
in these market segments, we may not maintain a competitive position against
current and potential competitors and market acceptance for our products and
services has not yet been demonstrated. Many of our current and potential
competitors have longer operating histories, greater name recognition, larger
installed customer bases, and significantly greater financial, technical,
marketing, and sales resources than we do. As a result, competitors may be able
to react more quickly to emerging technologies and changes in customer
requirements or to devote greater resources to the promotion and sale of their
products. In addition, certain of our current competitors in particular segments
of the security marketplace may broaden or enhance their offerings to provide a
more comprehensive solution competing more effectively with our products and
services.

11
<PAGE> 13

OUR BUSINESS RELIES ON THE POPULARITY OF THE INTERNET AS A METHOD OF CONDUCTING
BUSINESS.

Our future revenue and any future profits will depend upon the widespread
acceptance and use of the Internet and related technologies as an effective
medium to conduct business. The failure of the Internet and related technologies
to continue to develop as a commercial or business medium to conduct business
would adversely affect our business, operating results, and financial condition.
The market for Internet-based, business electronic commerce products is
relatively new and is evolving rapidly. The acceptance and use of the Internet
for business could be limited by a number of factors, such as potential slowing
growth and use of the Internet in general, the relative ease of conducting
business on the Internet, the efficiencies and improvements that conducting
commerce on the Internet provides, concerns about transaction security, and
taxation of transactions on the Internet.

SECURITY RISKS OF ELECTRONIC COMMERCE MAY DETER FUTURE USE OF OUR PRODUCTS AND
SERVICES.

A fundamental requirement to conducting Internet-based electronic commerce
is the secure transmission of confidential information over public networks.
Failure to prevent security breaches of business trading communities, or
well-publicized security breaches affecting the Internet in general, could deter
retailers and manufacturers from conducting electronic transactions that
transmit confidential information. Advances in computer capabilities, new
discoveries in the field of cryptography, and other developments may result in a
compromise or breach of the algorithms we use to protect content and
transactions on the trading communities. Anyone that is able to circumvent our
security measures could misappropriate proprietary confidential user information
or cause interruptions in operations. There may be significant cost requirements
to protect against security breaches or to alleviate problems caused by
breaches. Any such occurrences could materially and adversely affect our
business.

ANY FUTURE ACQUISITIONS COULD DIVERT MANAGEMENT'S TIME AND ATTENTION, DILUTE THE
VOTING POWER OF EXISTING SHAREHOLDERS, AND HAVE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS.

As part of our growth strategy, we may acquire complementary businesses and
assets. Acquisitions that we may make in the future could result in the
diversion of time and personnel from our business. We also may issue shares of
common stock or other securities in connection with acquisitions, which could
result in the dilution of the voting power of existing shareholders and could
dilute earnings per share. Any acquisitions would be accompanied by other risks
commonly encountered in such transactions, including the following:

- difficulties integrating the operations and personnel of acquired
companies;

- the additional financial resources required to fund the operations of
acquired companies;

- the potential disruption of our business;

- our ability to maximize our financial and strategic position by the
incorporation of acquired technology or businesses with our product and
service offerings;

- the difficulty of maintaining uniform standards, controls, procedures,
and policies;

- the potential loss of key employees of acquired companies;

12
<PAGE> 14

- the impairment of employee and customer relationships as a result of
changes in management; and

- significant expenditures to consummate acquisitions.

As a part of our acquisition strategy, we may engage in discussions with
various businesses respecting their potential acquisition. In connection with
these discussions, we and each potential acquired business may exchange
confidential operational and financial information, conduct due diligence
inquiries, and consider the structure, terms, and conditions of the potential
acquisition. In certain cases, the prospective acquired business may agree not
to discuss a potential acquisition with any other party for a specific period of
time, may grant us certain rights in the event the acquisition is not completed,
and may agree to take other actions designed to enhance the possibility of the
acquisition. Potential acquisition discussions may take place over a long period
of time, may involve difficult business integration and other issues, and may
require solutions for numerous family relationship, management succession, and
related matters. As a result of these and other factors, potential acquisitions
that from time to time appear likely to occur may not result in binding legal
agreements and may not be consummated. Our acquisition agreements may contain
purchase price adjustments, rights of set-off, and other remedies in the event
that certain unforeseen liabilities or issues arise in connection with an
acquisition. These remedies, however, may not be sufficient to compensate us in
the event that any unforeseen liabilities or other issues arise.

OUR PROPOSED GROWTH AND EXPANSION COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS.

We anticipate a period of significant growth in connection with our entry
into the market for business e-commerce. The resulting strain on our managerial,
operational, financial, and other resources could be significant. Success in
managing this expansion and growth will depend, in part, upon the ability of
senior management to manage effectively the growth of our company.

RIGHTS TO ACQUIRE SHARES OF COMMON STOCK WILL RESULT IN DILUTION TO OTHER
HOLDERS OF COMMON STOCK.

Outstanding stock options and warrants could adversely affect the terms on
which we can obtain additional financing, and the holders can be expected to
exercise these securities at a time when, in all likelihood, we would be able to
obtain additional capital by offering shares of common stock on terms more
favorable to us than those provided by the exercise or conversion of these
securities. Holders of these securities will have the opportunity to profit from
an increase in the market price of our common stock, with resulting dilution in
the interests of the holders of common stock. Upon conversion of the Series A
preferred stock, there will be outstanding 72,203,334 shares of common stock. In
addition, as of March 20, 2000, we have outstanding the following securities:

- options held by our directors, officers, and employees to purchase
8,384,400 shares of common stock with exercise prices ranging from $0.75
to $2.75 per share;

- warrants to purchase 42,939,285 shares of common stock with exercise
prices ranging from $0.75 to $9.00 per share.

13
<PAGE> 15

OUR COMMON STOCK IS A "PENNY STOCK," AND COMPLIANCE WITH REQUIREMENTS FOR
DEALING IN PENNY STOCKS MAY MAKE IT DIFFICULT FOR HOLDERS OF OUR COMMON STOCK TO
RESELL THEIR SHARES.

Although we have applied to have our common stock listed on the Nasdaq
National Market, our common stock currently is deemed to be "penny stock" as
that term is defined in Rule 3a51-1 under the Securities Exchange Act of 1934,
or Exchange Act. Section 15(g) of the Exchange Act and Rule 15g-2 under the
Exchange Act require broker/dealers dealing in penny stocks to provide potential
investors with a document disclosing the risks of penny stocks and to obtain
manually signed and dated written receipt of the document before effecting a
transaction in a penny stock for the investor's account. Compliance with these
requirements may make it more difficult for holders of our common stock to
resell their shares to third parties or otherwise, which could have a material
adverse affect on the liquidity and market price of our common stock.

Penny stocks are stocks

- with a price of less than $5.00 per share;

- that are not traded on a "recognized" national exchange;

- whose prices are not quoted on the Nasdaq automated quotation system; or

- issued by companies with net tangible assets less than $2.0 million (if
the issuer has been in continuous operation for at least three years) or
$5.0 million (if in continuous operation for less than three years), or
with average revenue of less than $6.0 million for the last three years.

SHARES OF COMMON STOCK ELIGIBLE FOR SALE IN THE PUBLIC MARKET MAY ADVERSELY
AFFECT THE MARKET PRICE OF OUR COMMON STOCK.

Sales of substantial amounts of common stock by shareholders in the public
market, or even the potential for such sales, are likely to adversely affect the
market price of the common stock and could impair our ability to raise capital
by selling equity securities. As of the date of this prospectus, approximately
9,000,000 of the 71,103,334 shares of common stock currently outstanding were
freely transferable without restriction or further registration under the
securities laws, unless held by "affiliates" of our company, as that term is
defined under the securities laws. We also have outstanding approximately
20,000,000 shares of restricted stock, as that term is defined in Rule 144 under
the securities laws, that are eligible for sale in the public market, subject to
compliance with the holding period, volume limitations, and other requirements
of Rule 144. Moreover, the exercise of outstanding options and warrants and the
conversion of Series A preferred stock will result in additional outstanding
shares of common stock and will create additional potential for sales of
additional shares of common stock in the public market.

THE PRICE OF OUR COMMON STOCK HAS BEEN VOLATILE.

The trading volume of our common stock historically has been limited and
sporadic, and the stock prices have been volatile. For example, during the last
12 months, our common stock has traded at prices ranging from $0.41 to $7.06. As
a result of the limited and sporadic trading activity and lack of public
information regarding our company in the marketplace, the quoted price for our
common stock is not necessarily a reliable indicator

14
<PAGE> 16

of its fair market value. The price at which our common stock will trade may be
highly volatile and may fluctuate as a result of a number of factors, including
the following:

- quarterly variations in our operating results,

- large purchases or sales of our common stock,

- actual or anticipated announcements of new products or services by us,
our business partners, or competitors,

- investor perception of our business prospects or the Internet industry in
general,

- general conditions in the markets in which we compete, and

- worldwide economic and financial conditions.

WE ARE REQUIRED TO PAY DIVIDENDS ON SHARES OF SERIES A PREFERRED STOCK, AND WE
DO NOT INTEND TO PAY DIVIDENDS ON OUR COMMON STOCK.

We are required to pay quarterly a 10% annual dividend on the Series A
preferred stock. The dividends may be paid in either stock or cash. The holders
of Series A preferred stock are entitled to receive payment of dividends prior
to our paying any dividends to holders of common stock. For the foreseeable
future, we intend to retain any remaining future earnings, if any, to finance
our operations and do not anticipate paying any cash dividends with respect to
our common stock.

OUR CONTEGO SUBSIDIARY DEPENDS ON OUR COMPANY FOR WORKING CAPITAL, AND WE MAY
NOT CONTINUE TO HAVE SUFFICIENT CASH RESOURCES TO FUND ITS OPERATIONS.

Contego has not generated revenue, and no assurances can be given when, if
ever, it will. We intend to continue to fund the working capital needs and
operating losses of Contego. We currently provide employees and services to
Contego under an oral management agreement. There can be no assurance that we
will continue to have sufficient cash resources to fund Contego or that we can
attract or provide appropriate personnel to Contego to continue development of
its products.

LEGAL UNCERTAINTIES SURROUND THE DEVELOPMENT OF THE INTERNET, AND COMPLIANCE
WITH ANY NEWLY ADOPTED LAWS MAY PROVE DIFFICULT FOR OUR COMPANY AND MAY HARM OUR
BUSINESS.

The laws governing Internet transactions remain largely unsettled. The
adoption or modification of laws or regulations relating to the Internet could
adversely effect our business, operating results, and financial condition by
increasing our costs and administrative expenses. It may take years to determine
whether and how existing laws such as those governing intellectual property,
privacy, libel, consumer protection, and taxation apply to the Internet. Laws
and regulations directly applicable to communications or commerce over the
Internet are becoming more prevalent. We must comply with new regulations in the
United States, as well as any other regulations adopted by other countries in
which we may do business. The growth and development of the market for online
commerce may prompt calls for more stringent consumer protection laws, both in
the United States and abroad, as well as new laws governing the taxation of
Internet commerce. Compliance with any newly adopted laws may prove difficult
for our company and may harm our business, operating results, and financial
condition.

15
<PAGE> 17

FORWARD-LOOKING STATEMENTS

Some of the statements and information contained in this prospectus
concerning our future, proposed, and anticipated activities; certain trends with
respect to our revenue, operating results, capital resources, and liquidity; the
markets in which we compete; the secure business-to-business communication
markets in general; and other statements contained in this prospectus regarding
matters that are not historical facts are forward-looking statements, as such
term is defined in the securities laws. Forward-looking statements, by their
very nature, include risks and uncertainties, many of which are beyond our
control. Accordingly, actual results may differ, perhaps materially, from those
expressed in or implied by the forward-looking statements. Factors that could
cause actual results to differ materially include those discussed under "Risk
Factors."

USE OF PROCEEDS

We will not receive any of the proceeds of sales of common stock by the
selling shareholders.

16
<PAGE> 18

PRICE RANGE OF COMMON STOCK

Our common stock has been quoted on the OTCBB under the symbol "IVPN" since
August 1998 and "IVPNE" since December 10, 1999. The following table sets forth
the high and low sales prices of our common stock for the calendar quarters
indicated as reported on the OTCBB.

<TABLE>
<CAPTION>
HIGH LOW
------ -----
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1998:
Third quarter............................................... $14.50 $2.75
Fourth quarter.............................................. 5.50 2.25
YEAR ENDED DECEMBER 31, 1999:
First quarter............................................... 3.81 1.25
Second quarter.............................................. 2.00 0.75
Third quarter............................................... 1.25 0.44
Fourth quarter.............................................. 4.50 0.41
YEAR ENDED DECEMBER 31, 2000:
First quarter............................................... 7.06 2.88
Second quarter (through May 1, 2000)........................ 1.53 4.03
</TABLE>

As of May 1, 2000, there were approximately 526 holders of record of our
common stock. On May 1, the closing sales price of our common stock as quoted on
the OTCBB was $2.13 per share.

Our common stock currently is quoted on the OTCBB. The OTCBB is a quotation
service that displays real-time quotes, last-sale prices, and volume information
for qualifying securities. In January 1999, the NASD announced that it would
limit quotations on the OTCBB to the securities of companies that, among other
requirements, are "reporting" companies under the federal securities laws.
Because we were not a reporting company as of January 12, 2000, the NASD
scheduled the removal of our stock quotations from the OTCBB on that date. We
obtained a temporary stay from the removal and are awaiting the scheduling of an
appeal. We are taking steps to become a reporting company. In addition, we have
applied to have our common stock listed on the Nasdaq National Market. If our
common stock is no longer quoted on the OTCBB, and if we have not yet met the
listing requirements of the Nasdaq National Market, we believe our common stock
will be published in the "pink sheets," which generally does not provide
real-time quotes. As a result, we believe there will be significantly less
liquidity and limited availability of quotations, which could have a material
adverse effect on the market price of our common stock. No assurance can be
given when, if ever, we will meet the OTCBB qualifications to permit our common
stock to be quoted on the OTCBB or we will meet the listing requirements of the
Nasdaq National Market.

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<PAGE> 19

DIVIDEND POLICY

We are required to pay a 10% annual dividend on our Series A preferred
stock. The dividend is payable quarterly and may be paid in either stock or
cash. The holders of the Series A preferred stock will have preference in
payment of dividends over the holders of common stock. On November 1, 1999, the
first dividend payment became payable on the Series A preferred stock. As a
result, we have recorded approximately 87,500 shares of common stock to be
issued as a reduction to shareholders' equity in our financial statements as of
December 31, 1999. On February 1, 2000 and May 1, 2000, the second and third
dividend payments became payable on the Series A preferred stock. We have not
yet determined whether we will pay these dividends in cash or common stock.

For the foreseeable future, we intend to retain any remaining future
earnings to finance our operations and do not anticipate paying any cash
dividends with respect to our common stock. Subject to the preferences that may
be applicable to any then-outstanding preferred stock, the holders of common
stock will be entitled to receive such dividends, if any, as may be declared by
our board of directors from time to time out of legally available funds.
Payments of any cash dividends in the future will depend on our financial
condition, results of operations, and capital requirements as well as other
factors deemed relevant by our board of directors.

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<PAGE> 20

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data presented below under the captions
"Consolidated Statement of Operations Data" for the period from September 15,
1997 (inception) through December 31, 1997, and for the years ended December 31,
1998 and 1999, and "Consolidated Balance Sheet Data" as of December 31, 1998 and
1999 are derived from the consolidated financial statements of Intelispan, Inc.,
which have been audited by KPMG LLP, independent certified public accountants.
The consolidated financial statements as of December 31, 1998 and 1999 and for
the years then ended and the report thereon are included elsewhere in this
prospectus. The following data should be read in conjunction with "Management's
Discussion and Analysis" and our consolidated financial statements and notes
thereto included elsewhere in this prospectus.

<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 15, 1997 DECEMBER 31,
(INCEPTION) THROUGH --------------------------------
DECEMBER 31, 1997 1998 1999
------------------- ------------ -----------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue......................... $ 11,303 $ 129,596 $ 743,709
Cost of revenue................. 15,838 915,403 1,286,410
----------- ------------ ------------
Gross loss.................... (4,535) (785,807) (542,701)
Selling expenses................ 9,796 2,299,072 1,183,183
General and administrative
expenses...................... 667,208 2,618,287 3,644,269
Cost of abandoned
acquisition(1)................ -- 225,550 --
----------- ------------ ------------
Loss from operations.......... (681,539) (5,928,716) (5,370,153)
Interest income (expense) net... 454 21,276 (519,258)
Minority interest............... 108,477 696,880 82,547
----------- ------------ ------------
Net loss...................... (572,608) (5,210,560) (5,806,864)
----------- ------------ ------------
Preferred Stock dividends....... (--) -- (96,000)
----------- ------------ ------------
Net loss to common
shareholders............... $ (572,608) $ (5,210,560) $ (5,902,864)
=========== ============ ============
Net loss per common
share -- basic and diluted.... $ (0.06) $ (0.32) $ (0.28)
Weighted average number of
common shares................. 10,337,094 16,334,670 20,817,660
CONSOLIDATED BALANCE SHEET DATA
(AT END OF PERIOD):
Working capital (deficit)....... $ (76,580) $ (364,654) $ 8,144,658
Total assets.................... 1,635,657 2,042,261 11,769,746
Total debt...................... 700,000 188,957 263,655
Shareholders' equity............ 27,392 997,983 9,341,930
</TABLE>

- -------------------------
(1) Relates to an acquisition that we abandoned on September 30, 1998. In
accordance with the merger and acquisition agreement, we were required to
pay a break-up fee and legal fees of the intended acquiree.

19
<PAGE> 21

MANAGEMENT'S DISCUSSION AND ANALYSIS

You should read the following discussion and analysis with the selected
consolidated financial data and our consolidated financial statements including
the notes, which appear elsewhere in this prospectus. The following discussion
contains forward-looking statements that reflect our plans, estimates, and
beliefs. Our actual results could differ materially from those discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below and elsewhere in this prospectus,
particularly in "Risk Factors."

OVERVIEW

We provide complete and seamless managed network solutions that enable
secure and efficient business-to-business communications through virtual private
networks and the Internet. These solutions include providing secure network
connectivity on a usage-billed or flat fee basis together with public key
infrastructure-based authentication service and e-commerce transactions
management services. We attempt to differentiate our services by integrating
complex technologies to create our own branded network services.

We began operating our business in September 1997 as Intelispan Ventures,
Inc., offering secure computer network communications solutions as a value-added
reseller of products and services of our service providers. In July 1998,
Intelispan Ventures merged into Equipment Leasing & Sales Corporation, a
Washington corporation formed in September 1996 to provide equipment leasing
services. We changed our name at the time of the merger to "Intelispan, Inc."
Intelispan Ventures is the successor corporation for accounting purposes while
Equipment Leasing & Sales Corporation is the surviving legal entity.

Our results of operations include the results of Contego, LLC, a developer
of a secure user-authentication product, of which we own 66.8%. The remaining
33.2% ownership in Contego is held by Baltimore Technologies, plc, a United
Kingdom-based company. We consolidate our financial reporting with the Contego
subsidiary. It is unlikely that we could liquidate our interest in Contego if we
had short-term cash needs.

We have historically generated revenue from three primary sources:

- Sales of our secure remote access services (the exSPANd VPN, exSPANd INT
and exSPANd-PKI services), which include flat monthly fees or monthly
fees based on actual hourly usage, non-recurring startup costs, and
recurring monthly charges for circuit installation and similar charges;

- Sales of Internet access, both wholesale and retail sales. Historically,
these sales have provided the majority of our revenue as we have built
market presence and awareness for our other products, but we do not
expect revenue from Internet access to represent a substantial portion of
our revenue in the future;

- Sales of our professional services, typically as part of designing or
modifying a network prior to providing our other services. These
represent only a small portion of our revenue.

In the future, we expect our planned e-commerce hub, known as E-munity, and
our TradeSPAN EDI service to provide an increasing portion of our revenue,
although we expect the amount to remain at less than 5% of total revenue until
early 2001.

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<PAGE> 22

While historically our revenue has been subject to monthly fluctuations and
most of our revenue has been based on actual usage by customers, our future
revenue will be more flat fee driven based on the number of users on the network
and not on the amount of usage. This should eliminate the seasonal fluctuations.

Our operations have been almost entirely funded through equity and
convertible debt financing. We have not had lines of credit or other credit
facilities available to us. In January and February 2000, we completed equity
financing of approximately $27.9 million, which we believe will satisfy our
operating capital needs for at least 12 months based upon our current
anticipated business activities.

Our company is changing substantially as a result of the equity funds
raised in December 1999 and the first two months of 2000, and we believe that an
analysis of our historical operating results is not necessarily meaningful. You
should not rely on this information as a basis for predicting our future
performance.

RESULTS OF OPERATIONS

The following table provides, for the periods shown, the percentage of
total revenue represented by certain line items included in our consolidated
statements of operations.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
9/15/97 DECEMBER 31,
(INCEPTION) -- -----------------
12/31/1997 1998 1999
-------------- ------- ------
<S> <C> <C> <C>
Revenue....................................... 100.0% 100.0% 100.0%
Cost of sales................................. 140.1 706.4 173.0
------- ------- ------
Gross loss.................................... (40.1) (606.4) (73.0)
Selling expenses.............................. 86.7 1774.0 159.1
General and administrative expenses........... 5902.9 2020.4 490.0
Cost of abandoned acquisition................. 0.0 174.0 0.0
------- ------- ------
Operating loss................................ (6029.7) (4574.8) (722.1)
Interest income (expense) and other, net...... 4.0 16.5 (69.8)
Minority interest............................. 959.7 537.7 11.1
------- ------- ------
Net loss...................................... (5066.0)% (4020.6)% (780.8)%
======= ======= ======
</TABLE>

RESULTS OF OPERATIONS FOR FISCAL YEARS ENDED DECEMBER 31, 1999 AND DECEMBER 31,
1998

Our total revenue increased 474% to approximately $744,000 for the fiscal
year ended December 31, 1999, up from approximately $130,000 for the fiscal year
ended December 31, 1998. The increase in revenue is primarily due to customers
that began use of exSPANd VPN service, which accounted for approximately
$564,000, or 76% of total revenue during such period, an increase of 740% from
fiscal year ended December 31, 1998. Usage and recurring monthly charges for the
exSPANd VPN accounted for approximately $547,000 or 96% of total exSPANd VPN
revenue, with the balance comprised of installation and other non-recurring
charges. Wholesale and retail sales of Internet access and other income
comprised approximately $179,000 or 24% of total revenue.

21
<PAGE> 23

During fiscal year ended December 31, 1999, we generated revenue from 17
customers and one reseller. The reseller, Aquis Communications IP, represented
approximately 21.8% of our total revenue. This revenue consisted of the resale
of Internet services. Three customers, PSI Technologies, California Bank &
Trust, and FormFactor, Inc., represented approximately 14.6%, 14.3%, and 9.8%,
respectively, of our total revenue, and represented approximately 19.7%, 19.1%
and 12.8%, respectively, of the exSPANd VPN revenue.

Our cost of sales for the fiscal year ended December 31, 1999 was
approximately $1,286,000 compared to approximately $915,000 for the fiscal year
ended December 31, 1998. Primarily as a result of the increase in the percentage
of revenue in the exSPANd VPN service, which has a higher gross margin, our
gross margin was a negative 73% in 1999 as opposed to a negative gross margin of
606% in 1998. Our cost of goods sold consists primarily of payments to MCI
WorldCom for network usage and the costs of running a network operations center.
For the exSPANd-PKI service, we have an additional payment that is made to our
majority-owned Contego subsidiary for licensing fees on certain PKI technology
used in the product. For our TradeSPAN service, in addition to the network usage
fees, we pay certain licensing fees to Cyclone Commerce, Inc., which provides
the software technology underlying the product, and a small fee to RSA, Inc. for
licensing certain PKI technology used in Cyclone's product.

Operating expenses decreased by 6% to approximately $4,827,000 for the
fiscal year ended December 31, 1999 from approximately $5,143,000 for the fiscal
year ended December 31, 1998. For 1999, payroll and related expenses decreased
18% from 1998, and professional fees decreased 50% in 1999 from 1998. The
remaining decrease is largely attributable to a 71% reduction in advertising and
marketing expenses as well as maintaining a smaller staff. We expect payroll
expenses to substantially increase in the near future as we build our national
sales force and increase our management team.

Capital expenditures for the fiscal year ended December 31, 1999 were
approximately $139,000. We expect this amount to increase substantially during
fiscal year 2000 as we build out our network infrastructure and servicing
capabilities. We expect to depreciate most capital equipment purchases, which
will consist primarily of routers, server class computers, software, and network
access servers on a straight-line basis over three years.

Our net loss increased to approximately $5,807,000 for the fiscal year
ended December 31, 1999 from approximately $5,211,000 for the fiscal year ended
December 31, 1998. In 1998, we recorded a one-time loss of $225,550 for
acquisition break-up fees and related legal expenses. Our net loss per share
decreased to $0.28 in 1999 from $0.32 in 1998.

LIQUIDITY AND CAPITAL RESOURCES

On December 31, 1999, we had a cash balance of approximately $9,632,000
with a working capital surplus of approximately $8,145,000. As a result of a
private placement completed in January 2000, our cash balance as of January 31,
2000 was approximately $24,500,000. For the fiscal year ended December 31, 1999,
our net cash used in operating activities was approximately $3,223,000. As set
forth in the next paragraph, we received cash proceeds after December 31, 1999
from the sale of equity to private investors. Our working capital requirements
depend upon numerous factors, including the timing of expenditures related to
our network infrastructure, the rate at which we expand our staff, and our
ability to meet revenue projections, among other items.

22
<PAGE> 24

We received approximately $1.2 million in net proceeds from private
investors purchasing shares of our common stock and common stock purchase
warrants from a transaction completed during February 2000.

We cannot predict the timing and amount of our future capital expenditures.
However, we believe that the proceeds from the private placement in December
1999 and the first two months in 2000 will be sufficient to fund our current
operations through the first quarter of 2001. We intend to accelerate our
development and infrastructure spending in the coming calendar quarters if we
have sufficient available capital resources. Beyond that period, we may require
additional financing which may come from future equity or debt offerings that
could result in further dilution to our shareholders. Adequate capital may not
be available at that time and the lack of such capital could adversely affect
our business.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, Accounting for Certain Transactions involving Stock
Compensation (an interpretation of APB Opinion No. 25). This interpretation
provides guidance regarding the application of APB Opinion 25 to Stock
Compensation involving employees. This interpretation is effective upon issuance
and is not expected to have a material effect on our consolidated financial
statements.

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<PAGE> 25

BUSINESS

We provide complete and seamless managed network solutions that enable
secure and efficient electronic communications among businesses through virtual
private networks and the Internet. A virtual private network is a private
network that exists within a public or shared network, including the Internet,
through which access is controlled and users can communicate securely. Our
solutions include providing secure network connectivity on a metered or flat fee
basis together with technology that verifies the identity of users and manages
e-commerce transactions. We believe we differentiate our services by integrating
complex technologies to create our own branded network services.

MARKET OPPORTUNITY

Infonetics Research reports that the market for virtual private networks
was $205 million in 1997 and is estimated to grow to $12 billion by the end of
2001. The Gartner Group predicts that by 2003, more than 137 million users
worldwide, including one-third of the U.S. work force, will be accessing
computer networks from remote locations. We believe the growth of e-commerce
between businesses, the increasing demand for secure computer networks, and
other factors are key driving forces behind our current market opportunity.

STRATEGY

- targeting small- and medium-sized businesses through resellers, system
integrators, and strategic relationships;

- building a direct sales force and developing a marketing campaign to
target specific industries with the greatest perceived demand for our
services, such as healthcare and financial services;

- increasing brand awareness through an aggressive media campaign;

- continuing to pursue strategic relationships to acquire technologies and
service offerings to complement and expand existing service offerings;

- providing high-quality service and responsiveness to customers; and

- pursuing strategic acquisitions to enhance our technology portfolio,
expand our product offerings, and build our distribution channels.

THE NEED FOR INTEGRATED SECURE NETWORK ACCESS SERVICES

We believe that companies implementing secure network solutions, including
solutions for electronic business communication and secure access, typically
face numerous implementation issues. Secure network solutions require large
investments in hardware, software, and personnel. The implementation process is
complex and demands a great deal of management time and attention. Computer
systems, hardware, and software become obsolete in a relatively short period of
time, requiring additional investments from time to

24
<PAGE> 26

time. In order to support these systems, companies must hire, train, and retain
qualified support personnel. As a result, we believe there is a desire by many
of these companies to outsource integrated secure network access services.

Virtual private networks are made secure through encryption or other means
so that only authorized users can access the network, preventing unauthorized
users from intercepting data, destroying files, or otherwise gaining access to
confidential material. Typical virtual private networks use a technique called
"tunneling" to encapsulate and protect the data transmitted over their networks.
Tunneling, however, requires significant network support, which degrades the
performance and speed of the network.

THE INTELISPAN SOLUTION

Our solutions enable customers to conduct electronic business
communications with their trading partners without the typical up-front costs,
complexity, and other capital resources typically required by other virtual
private networks. Our solutions are designed to be user-friendly and enable
customers to implement them quickly, efficiently, and cost-effectively, thereby
allowing customers to focus on their core businesses. We provide our integrated
network solutions to customers on a flat fee or fee for usage basis, thereby
eliminating technological obsolescence and ongoing network maintenance.

The InteliGate Suite is a suite of virtual private network services that
offer enhanced security through the utilization of public key infrastructure
technology. Public key infrastructure technology uses policies and procedures to
manage digital certificates that identify users and control their access to a
network or other resource. The InteliGate Suite empowers customers themselves to
issue, revoke, and create policies and rights for each certificate, rather than
relying on the network or a third party to perform those services. Our
InteliGate Suite includes the following:

- InteliGate-SP, a virtual private network that exists within a shared
network;

- InteliGate, a virtual private network that allows users to access
securely their private network through an Internet connection provided by
a third party;

- InteliGate II, a virtual private network that allows users to access
securely their private network through an Internet connection provided by
us; and

- TradeSPAN EDI, a premium service that provides for electronic document
exchange.

We plan to differentiate our services through a comprehensive service level
agreement with our customers whereby we guarantee that our services will be
highly available with minimum downtime.

INTELIGATE-SP

InteliGate-SP is a virtual private network service, built on the backbone
of MCI WorldCom's GridNet Network, that enables users to dial into a central
network to conduct secure electronic business communications. Users can access
the InteliGate-SP service from over 500 points of presence domestically and 60
countries internationally.

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<PAGE> 27

Unlike other virtual private network services that utilize hardware and
software programs, or corporate firewalls, as their primary protection against
unauthorized users, InteliGate-SP embeds authentication and routing intelligence
security within the network itself. As a result, InteliGate-SP supplements the
security provided by corporate firewalls and grants users access only to
authorized areas of the network.

INTELIGATE

InteliGate is an Internet-based virtual private network service designed to
allow our network users to access their virtual private network through the
public Internet. InteliGate provides an encrypted tunnel between the customer's
software and our managed security gateway to maintain the confidentiality and
integrity of the communication.

TradeSPAN

TradeSPAN is a communication application that allows customers to establish
and manage secure electronic business trading relationships. TradeSPAN removes
the interoperability and incompatibility barriers between businesses using
electronic data interchange and their trading partners who do not use such
technology. TradeSPAN allows customers to automate business transactions with
trading partners, such as issuing purchase orders, shipping documents, and other
mission-critical business documents that companies would not otherwise transmit
over the Internet. Customers can tailor the TradeSPAN service to conform to
their own systems and standards, removing the need for the customers to alter
their existing business processes.

INTELICENTER

InteliCenter is a suite of specialized, browser-based network management
tools and database access applications that allow customers' network
administrators to monitor and manage users of our services. InteliCenter
provides network administrators real-time network visibility, allowing them to
add or delete users and otherwise control user activity. InteliCenter will be
included with any of the services in InteliGate Suite, and TradeSPAN services,
and customers may elect to receive more advanced InteliCenter options for an
additional charge. With InteliCenter, network administrators will be able to
monitor and manage their networks more efficiently by providing administrators
the ability to

- troubleshoot and provide customer support,

- obtain data necessary for billing and network planning,

- monitor the state of dedicated network connections and network access
points, and

- access our help desk and trouble ticket systems.

E-Munity Services

We intend to further develop our E-Munity services, which are intended to
be a suite of services hosted by us and offered to customers on a transactional
basis. E-Munity services are intended to enable our customers to communicate
with their trading partners. These services include document management, carbon
copy, non-repudiation, encryption, and data warehouse query sets. We are
designing E-Munity to act as a "hub" with which customers and their trading
partners interface, thus avoiding the need for customers to

26
<PAGE> 28

install and manage the applications on their own computer systems. To date, we
have not generated revenue from E-Munity services, have not successfully tested
these services, and cannot provide assurance that these services will be
functional or will generate revenue in the future.

STRATEGIC RELATIONSHIPS

We have the following strategic relationships:

- MCI WorldCom. We depend on a non-exclusive, renewable five-year reseller
agreement with GridNet via MCI WorldCom, which provides the backbone for
InteliGate-SP.

- Contego, LLC. Contego owns the technology underlying the public key
infrastructure technology incorporated in our services and the right to
integrate that technology into the GridNet Network. We have a
distribution agreement with Contego, which enables us to integrate this
technology into our services. Contego is owned 66.8% by us and 33.2% by
Baltimore Technologies plc, which licenses to Contego certain public key
infrastructure technology incorporated into Contego's technology.

- Cyclone Software Corporation. We license certain software from Cyclone
Software Corporation and incorporate that software with other
technologies to form TradeSPAN. Our license agreement with Cyclone
expires in June 2003. We pay an annual maintenance fee and may incur
certain incremental fees depending on our licensing arrangements with our
customers. Cyclone has the non-exclusive right to resell our services.

- Altiga Networks, Inc. Our InteliGate and InteliGate-II services
incorporate technology from Altiga Networks, Inc., which we obtain
pursuant to a distributor agreement with Altiga. Altiga was recently
acquired by Cisco Systems, Inc.

We depend upon these strategic relationships and the loss or material
change in any of these relationships could have a material adverse effect on our
business.

OUR RELATIONSHIP WITH CONTEGO

Contego is owned 66.8% by us and 33.2% by Baltimore Technologies plc, which
licenses to Contego certain public key infrastructure software technology
incorporated into Contego's technology. The business and affairs of Contego are
managed exclusively by a board of three managers, one of whom is Mr. Nelson, the
Vice Chairman of our board of directors and an officer of our company. Contego
may not enter into certain transactions unless approved by one or more members
that own collectively 75% of the membership interests. In effect, both we and
Baltimore Technologies must approve certain transactions or corporate
activities, including the following:

- amendment of the articles of organization or the operating agreement of
Contego,

- sale or other disposal of all or substantially all of the assets of
Contego,

- approval of a plan of merger or consolidation of Contego with other
businesses,

- sale or issuance of an interest in Contego to a third party or admission
of new members of Contego,

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<PAGE> 29

- change of the equity interests or corporate structure of Contego,

- removal or replacement any of the existing managers of Contego, including
Mr. Nelson.

SALES AND MARKETING

We currently distribute our products and services through our direct sales
efforts and third-party resellers. We intend to hire additional sales and
marketing personnel and to target Fortune 500 companies, particularly in
industries in which we believe there is a high demand for our services, such as
health services and finance.

We also intend to target smaller companies through third-party resellers
that typically also sell a bundle of value-added services from other third
parties. Because of the variety of products and services they carry, we believe
that the resellers are well positioned to access and penetrate customers that we
might not otherwise reach. In addition, we have entered into wholesale
arrangements that allow third parties to sell our services under their brand
names. From time to time, we intend to evaluate the possibility of acquiring
reseller and other distribution channels to expand the reach of our distribution
network.

In addition, we intend to enter into strategic marketing relationships with
other companies to provide opportunities to cross-market our products with the
products and services of the strategic partners. For example, we are working
with IBM to attempt to host third-party applications over our network services
integrated on IBM's systems.

We intend to create an awareness of the Intelispan brand name and to focus
on the features of our integrated network services that differentiate them from
our competitors. We plan to accomplish this goal through a media campaign and
participation in trade shows and industry seminars.

COMPETITION

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<PAGE> 30

added networks have strong, long-standing relationships with customers and have
demonstrated their ability to deliver a complete solution. Competitors in this
marketplace include GE Information Services, Sterling Commerce, IBM,
Kleinschmidt, and Harbinger. Some of these companies, together with newer
entrants in the market, have introduced Internet-based products and services. We
may also compete in this segment with enterprise resource software providers
that integrate electronic data interchange services into their products, such as
PeopleSoft, BAAN, SAP, and Oracle.

Although we believe that our products and services will compete favorably
in these market segments, we may not maintain a competitive position against
current and potential competitors and market acceptance for our products and
services has not yet been demonstrated. Many of the current and potential
competitors have longer operating histories, greater name recognition, larger
installed customer bases, and significantly greater financial, technical,
marketing, and sales resources than we do. As a result, competitors may be able
to react more quickly to emerging technologies and changes in customer
requirements or to devote greater resources to the promotion and sale of their
products. In addition, certain of our current competitors in particular segments
of the security marketplace may broaden or enhance their offerings to provide a
more comprehensive solution competing more effectively with our products and
services.

THIRD-PARTY LICENSED TECHNOLOGY AND INTELLECTUAL PROPERTY

Our solutions include complex technology, including advanced and patented
encryption technology. Other than certain copyrights in software source code
owned by Contego, our 66.8% owned subsidiary, we do not have any patents or
copyrights for the technology we utilize. Instead, we license most of the
technology integral to our business from third parties. Our success will depend
in part on this licensed technology not infringing the proprietary rights of
others.

As of May 2000, we had obtained registrations for the service mark
"Intelispan" and have applications pending for the trademark and service mark
"TradeSPAN". Contego has an application pending for the service mark "Trusted
Domain". To our knowledge, there has not yet been any opposition to the marks,
although the process is in its early stages and the registration of the marks
may be challenged. We have never filed copyright applications with the U.S.
Patent and Trademark Office or filed for patents, copyrights, or trademarks in
any foreign countries.

We depend upon our licensed technology and only have limited intellectual
property. See "Risk Factors -- We would not be able to offer our products
without the technology that we license from third parties."

EMPLOYEES

As of May 2000, we had 64 full-time employees, including our ten executive
officers. Of our employees, 30 are involved in sales and marketing; 20 in
technical services, professional, or customer support services; and four in
finance and administration. No

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<PAGE> 31

employees are covered by any collective bargaining agreements with us, and we
believe that the relationship with our employees is good.

PROPERTIES

Our corporate headquarters are located in a 11,500 square-foot facility in
Alpharetta, Georgia. We are occupying this space under a verbal sub-lease
agreement and plan to formalize a lease for this space in the near future. The
facility includes executive and administrative offices. We also lease office
space and a network operations center located in a 5,500 square foot facility in
Tempe, Arizona. We believe these facilities will be adequate for our needs for
the foreseeable future.

LEGAL PROCEEDINGS

We are, and may in the future be, party to litigation arising in the
ordinary course of our business. We do not consider any current claims to be
material to our business, financial condition, or operating results. Our
insurance coverage may not be adequate to cover all liabilities arising out of
any claims that may be instituted in the future. A lack of insurance coverage
may have an adverse effect on our business, financial condition, and operating
results.

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<PAGE> 32

MANAGEMENT

The following table sets forth certain information regarding each of our
directors and executive officers:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Maurice J. Gallagher, Jr........ 50 Chairman of the Board of Directors
Travis Lee Provow............... 42 President, Chief Executive Officer, and
Director
Peter A. Nelson................. 46 Vice Chairman of the Board of
Directors, Vice President -- Business
Development and Founder
Scot A. Brands.................. 37 Executive Vice President and Chief
Financial Officer
James D. Shook.................. 35 Executive Vice President, General
Counsel, and Secretary
M. Ponder Harrison.............. 38 Executive Vice President -- Marketing
Michael S. Falk................. 38 Director
Philip R. Ladouceur............. 59 Director
</TABLE>

MAURICE J. GALLAGHER, JR. has served as our Chairman of the Board of
Directors since February 2000. Mr. Gallagher also serves as the Chairman of the
Board of Directors of MGC Communications, Inc., a public company that Mr.
Gallagher was instrumental in organizing. Mr. Gallagher is also a founder and
Chairman of BankServ, Inc., a private payments company founded in 1996. Mr.
Gallagher also served as a director of PurchasePro.com, Inc. during 1998 and
1999. Mr. Gallagher co-founded ValuJet Airlines, Inc. in 1993 and served as
director of that company from 1993 until November 1997. Mr. Gallagher also held
prior positions with ValuJet from 1993 to 1994, including Chief Financial
Officer, and served as Vice Chairman of the Board of Directors from 1994 to
1997. Prior to co-founding ValuJet, Mr. Gallagher was a founder and President of
WestAir Holding, Inc., a commuter airline headquartered in Fresno, California.
WestAir was sold to Mesa Airlines in June 1992, and Mr. Gallagher was a member
of the Mesa board of directors from June 1992 through March 1993.

TRAVIS LEE PROVOW has served as our President and Chief Executive Officer
since January 2000 and has served as a director of our company since August
1998. From May 1998 to December 1999, Mr. Provow served as the Chief Operating
Officer of Slingshot Networks LLC, a provider of digital media storage. From
June 1995 to May 1998, Mr. Provow served as the Executive Vice President and
Chief Operating Officer of GridNet International, a provider of enhanced data
communications services, which Mr. Provow founded and which was purchased by MCI
WorldCom in July 1997. Prior to founding GridNet, Mr. Provow spent 15 years with
NCR and its successor, AT&T Global Information Services, in various domestic and
international technical, marketing, product management, and strategic planning
positions, most recently as the Vice President of Retail Product and Systems
Marketing. Mr. Provow serves as a director of Slingshot Networks, LLC.

PETER A. NELSON has served as our Vice Chairman of the Board of Directors
and Vice President -- Business Development since January 2000. Mr. Nelson served
as our

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<PAGE> 33

Chairman of the Board of Directors, President, and Chief Executive Officer from
the time he formed our company in September 1997 until January 2000. Mr. Nelson
has been an entrepreneur for over 20 years, most recently serving as President
and Chief Executive Officer of UniDial Associates from 1993 to the present,
President of Neptune Marketing Technologies of Delaware, Inc. from 1995 to 1997,
and President of Video Electronics, Inc. from 1979 to 1994. Mr. Nelson serves as
a director of UniDial Associates, Inc. and Telecast Communications, Inc., both
private companies.

SCOT A. BRANDS has served as our Executive Vice President and Chief
Financial Officer since January 2000. Prior to joining our company, Mr. Brands
served as Vice President and General Counsel of Slingshot Networks LLC from May
1999 to December 1999. Prior to that, Mr. Brands served as the Controller and
General Counsel for GridNet International from May 1995 to April 1999.

JAMES D. SHOOK has served as Executive Vice President, General Counsel, and
Secretary of our company since August 1998. From July 1995 to July 1998, Mr.
Shook served as Vice President of Operations and General Counsel to Buzzeo,
Inc., a developer of enterprise software applications. From 1989 until 1995, Mr.
Shook was an attorney with the Phoenix-based law firm of Jennings, Strouss &
Salmon, where he specialized in intellectual property, securities, and
commercial litigation. Prior to Jennings, Strouss & Salmon, he worked in a
variety of different capacities in software development and quality assurance.
Mr. Shook is a member of the Arizona State Bar and earned a J.D. from the
University of Arizona and a B.S. in Computer Science from Arizona State
University.

M. PONDER HARRISON has served as Executive Vice President -- Marketing of
our company since January 2000. Prior to joining our company, Mr. Harrison
served as Senior Vice President -- Business Development for Meridian Management,
SA, a Switzerland-based company that secures and manages global marketing,
branding, and licensing agreements on behalf of the International Olympic
Committee. From August 1998 through June 1999, Mr. Harrison served as a
marketing and brand consultant for start-up Internet and private
aviation-related businesses. From November 1997 through July 1998, Mr. Harrison
served as the Senior Vice President -- Sales and Marketing for AirTran Airlines
(which was merged with ValuJet Airlines, of which Mr. Harrison was a founding
team member and was Vice President of Marketing from June 1993 until November
1997.) Mr. Harrison began his career in the airline industry in 1983 with Delta
Air Lines and has worked in the areas of strategic planning, advertising and
sales promotion, international field sales/operations, and analysis.

MICHAEL S. FALK has served as a director of our company since February
2000. Mr. Falk is the co-founder of Commonwealth Associates, a New York-based
merchant bank and investment bank established in 1988 that specializes in
early-stage investments in Internet, technology, and telecommunications
businesses. Mr. Falk has served as Commonwealth Associate's Chairman and Chief
Executive Officer since 1995. Mr. Falk serves as a director of FutureLink Corp.,
a public company that serves as an application service provider.

PHILIP R. LADOUCEUR has served as a director of our company since February
2000. Mr. Ladouceur is the Executive Chairman and Chief Executive Officer of
FutureLink Corp., an application service provider. From October 1996 to April
1998, Mr. Ladouceur was President, Chairman and Chief Executive Officer of
MetroNet Communications Corp. and served as MetroNet's Executive Chairman until
its merger with AT&T Canada in June 1999. From February 1995 to October 1996,
Mr. Ladouceur was Executive Vice

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<PAGE> 34

President of Operations at Bell Canada International Inc. From October 1992 to
February 1995, Mr. Ladouceur was the founding President and Chief Executive
Officer of ISM Information Systems Management (Alberta) Ltd., a computer and
network management outsourcing company, which was acquired by IBM Global
Services. Mr. Ladouceur founded and, from June 1990 to October 1992, was the
Managing Director of HDL Capital Corporation, a private merchant bank
specializing in business turnarounds, management buyouts, and financing for
companies in the telecommunications, technology, software, and retail sectors.
From 1986 to 1989, Mr. Ladouceur was Senior Vice President, Finance, Chief
Financial Officer, and a director of Rogers Communications Inc., one of the
largest cable, cellular and broadcasting companies in North America. Mr.
Ladouceur currently serves as a director of AT&T Canada and Cell-Loc Inc., both
public companies, and Plan B Communications, a private company.

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

Our bylaws authorize the Board of Directors to appoint from among its
members one or more committees consisting of one or more directors. Our board of
directors has established an audit committee and a compensation committee. The
audit committee and the compensation committee each consist of our three
independent directors. The audit committee reviews the annual financial
statements, any significant accounting issues, and the scope of the audit with
our independent auditors and discusses with the auditors any other audit-related
matters that may arise. The compensation committee reviews and acts on matters
relating to compensation levels and benefit plans for our key executives.

DIRECTOR COMPENSATION AND OTHER INFORMATION

Directors who are employees of our company do not receive any additional
compensation for serving as members of our board of directors. Each director
receives reimbursement of expenses for their service as a member of the board of
directors. None of our directors receive any cash compensation for their service
on our board of directors. Non-employee directors will receive options to
purchase 150,000 shares of common stock upon their appointment or election to
the board of directors and will receive options to purchase a specified amount
of shares of common stock annually. These options will have an exercise price of
the fair market value on the date of grant and will vest quarterly in equal
amounts over four years. We have granted to each of Messrs. Gallagher and
Ladouceur, two of the three director designees of Commonwealth, options to
purchase 150,000 shares of common stock.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

We have appointed a compensation committee consisting of three non-employee
members of our Board of Directors to make all compensation decisions regarding
our executive officers. Historically, our Board of Directors appointed one
non-employee member of the Board of Directors who, along with another former
non-employee director, made all compensation decisions relating to our executive
officers.

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<PAGE> 35

EXECUTIVE COMPENSATION

SUMMARY OF CASH AND OTHER COMPENSATION

The following table sets forth certain information concerning the
compensation for the fiscal years ended December 31, 1998 and 1999 earned by our
Chief Executive Officer and by three other executive officers whose cash salary
and bonus exceeded $100,000 during fiscal 1999.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
AWARDS
------------
SECURITIES ALL OTHER
NAME AND OTHER ANNUAL UNDERLYING COMPENSATION
PRINCIPAL POSITION(1) YEAR SALARY($) BONUS COMPENSATION($) OPTIONS(#) ($)(2)
- --------------------- ---- --------- ------ --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Peter A. Nelson(3)....... 1999 179,917 18,000 -- -- 4,672
Chairman of the Board, 1998 186,923 -- 18,600(4) -- 5,608
President, and Chief
Executive Officer
Ronald W. Loback......... 1999 159,718 16,000 --(5) -- 4,195
Executive Vice 1998 104,936 -- --(5) 580,000 2,798
President and Chief
Operating Officer
Kenton G. Dallas......... 1999 115,000 11,500 --(5) 150,000 3,791
Vice President of 1998 48,916 -- (5) 100,000 --
Network Services and
New Technologies
James D. Shook........... 1999 124,987 20,000 --(5) 170,000 3,000
Vice President, General 1998 50,481 -- --(5) 230,000 --
Counsel, and Secretary
</TABLE>

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

(1) We consider Messrs. Provow, Nelson, Loback, Brands, Dallas, Shook, and
Harrison to be our executive officers. Messrs. Provow, Brands, and Harrison
became employees of our company during January 2000. Messrs. Dallas and
Shook began their employment during 1998, and their cash compensation during
fiscal 1998 did not exceed $100,000.

(2) Amounts shown represent matching contributions made by us to our SIMPLE
plan.

(3) Mr. Nelson resigned as President and Chief Executive Officer during January
2000 and is now the Vice Chairman of our Board of Directors, Vice
President -- Business Development, and Founder. Mr. Provow became our Chief
Executive Officer and President during January 2000. Mr. Gallagher became
the Chairman of our Board of Directors in February 2000.

(4) Represents club dues and automobile allowances paid by us on behalf of Mr.
Nelson.

(5) Messrs. Loback, Dallas, and Shook also received certain perquisites, the
value of which did not exceed 10% of their salary during fiscal 1998 or
1999.

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<PAGE> 36

OPTION GRANTS

The following table provides information on stock options granted to the
officers listed during the fiscal year ended December 31, 1999.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED(#)(1) FISCAL YEAR PRICE($/SH) DATE(1)
- ---- ------------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Peter A. Nelson................. -- -- -- --
Ronald W. Loback................ -- -- -- --
Kenton G. Dallas................ 50,000(2) 1.2% $2.00 3/19/09
100,000(3) 2.3% $2.50 7/23/09
James D. Shook.................. 70,000(4) 1.6% $2.00 3/19/09
100,000(5) 2.3% $2.50 9/01/09
</TABLE>

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

(1) All options were granted at the fair market value of the shares on the date
of grant and expire upon the earlier of the expiration date listed or two
years after the termination of employment.

(2) The options vest and become exercisable at the rate of 10,000 on the date of
grant, 6,000 on the six-month anniversary of the date of grant, 3,000 every
three months thereafter through the second anniversary of the date of grant,
and 4,000 every three months thereafter through the third anniversary of the
date of grant.

(3) The options vest and become exercisable at the rate of 15,000 on the
six-month anniversary of grant, 7,500 every three months thereafter through
the second anniversary of the date of grant, and 10,000 every three months
thereafter during the third anniversary of the date of grant.

(4) The options vest and become exercisable as follows: 15,000 on the date of
grant, 8,250 on the six-month anniversary of the date of grant, 4,125 every
three months thereafter through the second anniversary of the date of grant,
and 5,500 every three months thereafter during the third anniversary of the
date of grant.

(5) The options were fully vested on the date of grant.

RECENT GRANTS OF STOCK OPTIONS

In connection with his employment with our company, we granted to Mr.
Provow options to purchase 3,000,000 shares of common stock at an exercise price
of $1.00 per share that vest ratably each month over a four-year period. We also
granted to Mr. Provow options to purchase 1,000,000 shares of common stock at an
exercise price of $2.50 per share that vest ratably each quarter over a
four-year period. In connection with their appointment to our Board of
Directors, we granted to each of Messrs. Gallagher and

35
<PAGE> 37

Ladouceur options to purchase 150,000 shares of common stock at an exercise
price of $2.50 per share that vest ratably each quarter over four years.

In connection with their employment with our company, we granted to Mr.
Brands options to purchase 250,000 shares of common stock at an exercise price
of $2.50 and options to purchase 150,000 shares of common stock at an exercise
price of $3.94, and we granted to Mr. Harrison options to purchase 400,000
shares of common stock at an exercise price of $2.50 per share. These options
vest ratably each quarter over a four-year period.

During January 2000, in connection with the termination of Mr. Nelson's
employment agreement and decrease in salary, we granted to Mr. Nelson options to
purchase 500,000 shares of common stock at an exercise price of $2.50 per share.
We continue to employ Mr. Nelson, and 31,250 of these options will vest every
three months from the date of grant during his employment. During January 2000,
we also granted options to purchase 90,000 shares of common stock to Mr. Dallas,
and 62,500 shares of common stock to each of Messrs. Shook and Loback. The
options have an exercise price of $3.94 per share and vest quarterly over a
four-year period.

YEAR-END OPTION VALUES

The following table provides information respecting the options held by the
listed officers as of December 31, 1999. None of the listed officers exercised
options during fiscal 1999.

AGGREGATED OPTION VALUES AS OF DECEMBER 31, 1999

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(1)
------------------------------ ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ -------------- ----------- -------------
<S> <C> <C> <C> <C>
Peter A. Nelson............ -- -- -- --
Ronald W. Loback........... 390,000 190,000 $269,100 $131,100
Kenton G. Dallas........... 90,000 160,000 $ 72,725 $124,775
James D. Shook............. 276,125 123,875 $204,214 $106,786
</TABLE>

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

(1) Calculated based upon the closing price of our common stock as quoted on the
OTCBB on December 31, 1999 of $3.19 per share.

EMPLOYMENT ARRANGEMENTS

We have no written employment contracts with any of our executive officers.
We offer our employees, including officers, medical and life insurance benefits.
The executive officers and all other employees are eligible to receive stock
options under our stock option plans and are eligible to receive bonuses under
our bonus plan upon meeting company, department, and individual goals.

36
<PAGE> 38

SEVERANCE PLAN

We have a severance plan that enables certain executives of our company to
receive one month of salary in the event of their termination of employment for
any reason other than for cause, death, or voluntary decision by the executive.
As of April 17, 2000, the only executives covered by the severance plan were
Messrs. Loback and Shook. Executives covered by the severance plan are deemed to
have been involuntarily terminated in the event of a change of control (as
defined in the severance plan) or if the executive experiences certain
conditions, including the following:

- a reduction in the executive's cash compensation;

- a reduction of compensation or benefits that are not made to all
employees; or

- the assignment of any duties inconsistent with the executive's current
position or any diminishment in such position, authority, duties,
functions, or responsibilities.

In the event of any of the foregoing conditions, the executive will be
provided with COBRA continuation coverage for a one-year period, and we will
accelerate the vesting of any previously granted stock options or awards that
would otherwise be vested one calendar quarter after termination.

PERFORMANCE EQUITY PLAN

We have adopted the Performance Equity Plan to enable our company to offer
to our key employees, officers, directors, and consultants who provide valuable
services to us an opportunity to acquire a proprietary interest in our company
and to link their interests and efforts to the long-term interests of our
shareholders. The plan provides for the granting of awards to employees,
officers, directors, and consultants eligible to receive awards under the plan.
These awards may include stock options, restricted stock, stock reload options,
and other stock-based awards. A total of 2,704,670 shares of common stock may be
issued under the plan. As of May 1, 2000, no shares of our common stock had been
issued upon exercise of options granted under to the plan, and there were
outstanding options to acquire 2,371,900 shares of our common stock. We had
granted 237,408 shares of restricted stock under the plan and had approximately
100,000 shares available for grant under the plan. The plan will remain in
effect until no further grants can be made and no awards remain outstanding.

Options and awards may be granted only to persons who at the time of grant
are key employees, officers, directors, or consultants, who are deemed to have
rendered or to be able to render significant services to our company, and who
are deemed to have or have the potential to contribute to the success of our
company. Options that are incentive stock options may only be granted to
employees of our company. To the extent that granted options are incentive stock
options, the terms and conditions of those options must be consistent with the
qualification requirements set forth in the Internal Revenue Code.

The plan is administered by the Board of Directors, except that the Board
of Directors may delegate its power to administer the plan to a committee
appointed by the Board of Directors. The Board of Directors or the committee
will have the authority to administer all matters governing the plan, including
the persons eligible to receive awards, the terms and conditions of grants of
awards, the specified performance goals or other criteria that need to be
attained for the vesting of awards, and the substitution of any awards.

37
<PAGE> 39

The exercise prices, expiration dates, maximum number of shares
purchasable, and the other provisions of the options will be established at the
time of grant. The exercise prices of options may not be less than 100% (110% if
the option is granted to a shareholder who, at the time of grant, owns common
stock possessing more than 10% of the combined voting power of all classes of
stock of our company) of the fair market value of the common stock on the date
of grant. Options may be granted for terms of up to 10 years and become
exercisable in whole or in one or more installments at such time as may be
determined upon a grant of the options. To exercise an option, the optionholder
will be required to deliver to us full payment of the exercise price of the
shares as to which the option is being exercised.

Under the plan, the Board or the committee also may award shares of
restricted stock or other stock-based awards either alone or in addition to
other awards granted under the plan. The committee will determine the eligible
persons, the number of shares to be awarded, the price (if any) to be paid by
the holder, and all other terms and conditions of such awards.

Under the plan, all options and other awards will immediately vest and
become exercisable if any person or entity (other than our company, or any
officer, director, or principal stockholder of our company) acquires securities
of our company in one or more transactions having at least 25% of the total
voting power of all of our company's securities then outstanding, and such
acquisition is not authorized or otherwise approved by our Board of Directors.

2000 EQUITY INCENTIVE COMPENSATION PLAN

In March 2000, our Board of Directors adopted the Intelispan, Inc. 2000
Equity Incentive Compensation Plan and our shareholders approved the plan at a
special meeting held on April 4, 2000. The terms of the 2000 Plan provide for
grants of stock options, stock appreciation rights, or SARs, restricted stock,
deferred stock, other stock-related awards, and performance or annual incentive
awards that may be settled in cash, stock, or other property. The effective date
of the 2000 Plan is March 1, 2000.

Under the 2000 Plan, the total number of shares of common stock that may be
subject to the granting of awards under the 2000 Plan at any time during the
term of the 2000 Plan shall not exceed in the aggregate 7.4% of the issued
shares of our common stock as of the date the 2000 Plan is adopted; provided
that, if the number of issued shares of common stock is increased after such
date, the maximum number of shares of common stock for which awards may be
granted under the 2000 Plan shall be increased by 7.4% of such increase.

The 2000 Plan limits the number of shares which may be issued pursuant to
incentive stock options to 5,000,000 shares.

In addition, the 2000 Plan imposes individual limitations on the amount of
certain awards in part to comply with Internal Revenue Code Section 162(m).
Under these limitations, during any fiscal year the number of options, SARs,
restricted shares of common stock, deferred shares of common stock, shares as a
bonus or in lieu of other company obligations, and other stock-based awards
granted to any one participant may not exceed 1,000,000 for each type of such
award, subject to adjustment in certain circumstances. The maximum amount that
may be paid out as an annual incentive award or other cash award in any fiscal
year to any one participant is $1,000,000, and the

38
<PAGE> 40

maximum amount that may be earned as a performance award or other cash award in
respect of a performance period by any one participant is $5,000,000.

We have authorized a committee to adjust the limitations described in the
two preceding paragraphs and to adjust outstanding awards (including adjustments
to exercise prices of options and other affected terms of awards) in the event
that a dividend or other distribution (whether in cash, shares of common stock,
or other property), recapitalization, forward or reverse split, reorganization,
merger, consolidation, spin-off, combination, repurchase, share exchange, or
other similar corporate transaction or event affects the common stock so that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of participants. The committee is also authorized to adjust performance
conditions and other terms of awards in response to these kinds of events or in
response to changes in applicable laws, regulations, or accounting principles.

Eligibility and Administration

The persons eligible to receive awards under the 2000 Plan are the
officers, directors, employees, and independent contractors of our company. The
2000 Plan is to be administered by a committee designated by the Board of
Directors consisting of not less than two directors, each member of which must
be a "non-employee director" as defined under Rule 16b-3 under the Exchange Act
and an "outside director" for purposes of Section 162(m) of the Code. However,
except as otherwise required to comply with Rule 16b-3 of the Exchange Act, or
Section 162(m) of the Code, the Board may exercise any power or authority
granted to the committee. Subject to the terms of the 2000 Plan, the committee
or the Board is authorized to select eligible persons to receive awards,
determine the type and number of awards to be granted and the number of shares
of common stock to which awards will relate, specify times at which awards will
be exercisable or settleable (including performance conditions that may be
required as a condition thereof), set other terms and conditions of awards,
prescribe forms of award agreements, interpret and specify rules and regulations
relating to the 2000 Plan, and make all other determinations that may be
necessary or advisable for the administration of the 2000 Plan.

Stock Options and SARs

The committee or the Board is authorized to grant stock options, including
both incentive stock options, or ISOs, which can result in potentially favorable
tax treatment to the participant, and nonqualified stock options, and SARs
entitling the participant to receive the amount by which the fair market value
of a share of common stock on the date of exercise (or defined "change in
control price" following a change in control) exceeds the grant price of the
SAR. The exercise price per share subject to an option and the grant price of an
SAR are determined by the committee, but in the case of an ISO must not be less
than the fair market value of a share of common stock on the date of grant. For
purposes of the 2000 Plan, the term "fair market value" means the fair market
value of common stock, awards, or other property as determined by the committee
or the Board or under procedures established by the committee or the Board.
Unless otherwise determined by the committee or the Board, the fair market value
of common stock as of any given date shall be the closing sales price per share
of common stock as reported on the principal stock exchange or market on which
common stock is traded on the date as of which such value is being determined
or, if there is no sale on that date, then on the last previous day on which a
sale was reported. The maximum term of each option or SAR,

39
<PAGE> 41

the times at which each option or SAR will be exercisable, and provisions
requiring forfeiture of unexercised options or SARs at or following termination
of employment generally are fixed by the committee or the Board, except that no
option or SAR may have a term exceeding ten years. Options may be exercised by
payment of the exercise price in cash, shares that have been held for at least 6
months, outstanding awards, or other property having a fair market value equal
to the exercise price, as the committee or the Board may determine from time to
time. Methods of exercise and settlement and other terms of the SARs are
determined by the committee or the Board. SARs granted under the 2000 Plan may
include "limited SARs" exercisable for a stated period of time following a
change in control of our company, as discussed below.

Restricted and Deferred Stock

The committee or the Board is authorized to grant restricted stock and
deferred stock. Restricted stock is a grant of shares of common stock that may
not be sold or disposed of, and that may be forfeited in the event of certain
terminations of employment, prior to the end of a restricted period specified by
the committee or the Board. A participant granted restricted stock generally has
all of the rights of a stockholder of our company, unless otherwise determined
by the committee or the Board. An award of deferred stock confers upon a
participant the right to receive shares of common stock at the end of a
specified deferral period, subject to possible forfeiture of the award in the
event of certain terminations of employment prior to the end of a specified
restricted period. Prior to settlement, an award of deferred stock carries no
voting or dividend rights or other rights associated with share ownership,
although dividend equivalents may be granted, as discussed below.

Dividend Equivalents

The committee or the Board is authorized to grant dividend equivalents
conferring on participants the right to receive, currently or on a deferred
basis, cash, shares of common stock, other awards or other property equal in
value to dividends paid on a specific number of shares of common stock or other
periodic payments. Dividend equivalents may be granted alone or in connection
with another award, may be paid currently or on a deferred basis and, if
deferred, may be deemed to have been reinvested in additional shares of common
stock, awards, or otherwise as specified by the committee or the Board.

Bonus Stock and Awards in Lieu of Cash Obligations

The committee or the Board is authorized to grant shares of common stock as
a bonus free of restrictions, or to grant shares of common stock or other awards
in lieu of company obligations to pay cash under the 2000 Plan or other plans or
compensatory arrangements, subject to such terms as the committee or the Board
may specify.

Other Stock-Based Awards

The committee or the Board is authorized to grant awards that are
denominated or payable in, valued by reference to, or otherwise based on or
related to shares of common stock. Such awards might include convertible or
exchangeable debt securities, other rights convertible or exchangeable into
shares of common stock, purchase rights for shares of common stock, awards with
value and payment contingent upon performance of our company or any other
factors designated by the committee or the Board, and awards

40
<PAGE> 42

valued by reference to the book value of shares of common stock or the value of
securities of or the performance of specified subsidiaries or business units.
The committee or the Board determines the terms and conditions of such awards.

Performance Awards, Including Annual Incentive Awards

The right of a participant to exercise or receive a grant or settlement of
an award, and the timing thereof, may be subject to such performance conditions
(including subjective individual goals) as may be specified by the committee or
the Board. In addition, the 2000 Plan authorizes specific annual incentive
awards, which represent a conditional right to receive cash, shares of common
stock, or other awards upon achievement of certain preestablished performance
goals and subjective individual goals during a specified fiscal year.
Performance awards and annual incentive awards granted to persons whom the
committee expects will, for the year in which a deduction arises, be "covered
employees" (as defined below) will, if and to the extent intended by the
committee, be subject to provisions that should qualify such awards as
"performance-based compensation" not subject to the limitation on tax
deductibility by us under Code Section 162(m). For purposes of Section 162(m),
the term "covered employee" means our chief executive officer and each other
person whose compensation is required to be disclosed in our filings with the
SEC by reason of that person being among our four highest compensated officers
as of the end of a taxable year. If and to the extent required under Section
162(m) of the Code, any power or authority relating to a performance award or
annual incentive award intended to qualify under Section 162(m) of the Code is
to be exercised by the committee and not the Board.

Subject to the requirements of the 2000 Plan, the committee or the Board
will determine performance award and annual incentive award terms, including the
required levels of performance with respect to specified business criteria, the
corresponding amounts payable upon achievement of such levels of performance,
termination, and forfeiture provisions and the form of settlement. In granting
annual incentive or performance awards, the committee or the Board may establish
unfunded award "pools," the amounts of which will be based upon the achievement
of a performance goal or goals based on one or more of certain business criteria
described in the 2000 Plan (including, for example, total stockholder return,
net income, pretax earnings, EBITDA, earnings per share, and return on
investment). During the first 90 days of a fiscal year or performance period,
the committee or the Board will determine who will potentially receive annual
incentive or performance awards for that fiscal year or performance period,
either out of the pool or otherwise.

After the end of each fiscal year or performance period, the committee or
the Board will determine

- the amount of any pools and the maximum amount of potential annual
incentive or performance awards payable to each participant in the pools;
and

- the amount of any other potential annual incentive or performance awards
payable to participants in the 2000 Plan.

The committee or the Board may, in its discretion, determine that the amount
payable as an annual incentive or performance award will be reduced from the
amount of any potential award.

41
<PAGE> 43

Other Terms of Awards

Awards may be settled in the form of cash, shares of common stock, other
awards or other property, in the discretion of the committee or the Board. The
committee or the Board may require or permit participants to defer the
settlement of all or part of an award in accordance with such terms and
conditions as the committee or the Board may establish, including payment or
crediting of interest or dividend equivalents on deferred amounts, and the
crediting of earnings, gains and losses based on deemed investment of deferred
amounts in specified investment vehicles. The committee or the Board is
authorized to place cash, shares of common stock, or other property in trusts or
make other arrangements to provide for payment of our obligations under the 2000
Plan. The committee or the Board may condition any payment relating to an award
on the withholding of taxes and may provide that a portion of any shares of
common stock or other property to be distributed will be withheld (or previously
acquired shares of common stock or other property be surrendered by the
participant) to satisfy withholding and other tax obligations. Awards granted
under the 2000 Plan generally may not be pledged or otherwise encumbered and are
not transferable except by will or by the laws of descent and distribution, or
to a designated beneficiary upon the participant's death, except that the
committee or the Board may, in its discretion, permit transfers for estate
planning or other purposes subject to any applicable restrictions under Rule
16b-3 promulgated under the Securities Exchange Act.

Awards under the 2000 Plan are generally granted without a requirement that
the participant pay consideration in the form of cash or property for the grant
(as distinguished from the exercise), except to the extent required by law. The
committee or the Board may, however, grant awards in exchange for other awards
under the 2000 Plan, awards under other company plans, or other rights to
payment from us, and may grant awards in addition to and in tandem with such
other awards, rights, or other awards.

Acceleration of Vesting; Change in Control

The committee or the Board may in the case of a "change of control" of our
company, as defined in the 2000 Plan, in its discretion, accelerate the
exercisability, the lapsing of restrictions, or the expiration of deferral or
vesting periods of any award (including the cash settlement of SARs and "limited
SARs" which may be exercisable in the event of a change in control). In
addition, the committee or the Board may provide in an award agreement that the
performance goals relating to any performance based award will be deemed to have
been met upon the occurrence of any "change in control." Upon the occurrence of
a change in control, if so provided in the award agreement, stock options and
limited SARs (and other SARs which so provide) may be cashed out based on a
defined "change in control price," which will be the higher of

- the cash and fair market value of property that is the highest price per
share paid (including extraordinary dividends) in any reorganization,
merger, consolidation, liquidation, dissolution, or sale of substantially
all assets of our company; or

- the highest fair market value per share (generally based on market
prices) at any time during the 60 days before and 60 days after a change
in control.

42
<PAGE> 44

For purposes of the 2000 Plan, the term "change in control" generally means

- approval by shareholders of any reorganization, merger, or consolidation
or other transaction or series of transactions if persons who were
shareholders immediately prior to such reorganization, merger, or
consolidation or other transaction do not, immediately thereafter, own
more than 50% of the combined voting power of the reorganized, merged, or
consolidated company's then outstanding, voting securities, or a
liquidation or dissolution of our company or the sale of all or
substantially all of the assets of our company (unless the
reorganization, merger, consolidation or other corporate transaction,
liquidation, dissolution or sale is subsequently abandoned),

- a change in the composition of the Board such that the persons
constituting the Board on the date the award is granted, or the Incumbent
Board, and subsequent directors approved by the Incumbent Board (or
approved by such subsequent directors), cease to constitute at least a
majority of the Board, or

- the acquisition by any person, entity or "group", within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act, of more than
50% of either the then outstanding shares of our common stock or the
combined voting power of our company's then outstanding voting securities
entitled to vote generally in the election of directors excluding, for
this purpose, any acquisitions by (1) our company, (2) any person,
entity, or "group" that as of the date on which the award is granted owns
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Securities Exchange Act) of a controlling interest, or (3) any
employee benefit plan of our company.

Amendment and Termination

The Board of Directors may amend, alter, suspend, discontinue, or terminate
the 2000 Plan or the committee's authority to grant awards without further
shareholder approval, except shareholder approval must be obtained for any
amendment or alteration if such approval is required by law or regulation or
under the rules of any stock exchange or quotation system on which shares of
common stock are then listed or quoted. Thus, shareholder approval may not
necessarily be required for every amendment to the 2000 Plan which might
increase the cost of the 2000 Plan or alter the eligibility of persons to
receive awards. Shareholder approval will not be deemed to be required under
laws or regulations, such as those relating to ISOs, that condition favorable
treatment of participants on such approval, although the Board may, in its
discretion, seek shareholder approval in any circumstance in which it deems such
approval advisable. Unless earlier terminated by the Board, the 2000 Plan will
terminate at such time as no shares of common stock remain available for
issuance under the 2000 Plan and we have no further rights or obligations with
respect to outstanding awards under the 2000 Plan.

LIMITATION OF LIABILITY; INDEMNIFICATION OF DIRECTORS AND OFFICERS

Our articles of incorporation, as amended and restated, provide that a
director of our company will not be personally liable to our company or our
shareholders for monetary damages for conduct as a director, except for

- acts or omissions involving intentional misconduct by the director or a
knowing violation of law by the director,

43
<PAGE> 45

- assenting to an unlawful distribution where it is established that the
director did not perform the director's duty of loyalty to our company,
or

- any transaction from which the director will personally receive a benefit
in money, property, or services to which the director is not legally
entitled.

Our articles of incorporation also provide that if the Washington Business
Corporation Act is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of our company will be eliminated or limited to the fullest extent permitted by
the Washington Business Corporation Act, as so amended.

Our articles of incorporation also provide that we will indemnify and
advance expenses, to the fullest extent permitted by the Washington Business
Corporation Act, to each person who is a director or officer of our company.
This indemnity will not apply if

- acts or omissions of the director or officer are found to be intentional
misconduct or a knowing violation of law,

- a director assents to an unlawful distribution and it is established that
such director did not perform the director's duty of loyalty to our
company; or

- any transaction with respect to which it was found that such director or
officer personally received a benefit in money, property, or services to
which the director or officer was not legally entitled.

In addition, we have adopted provisions in our bylaws that require us to
indemnify our directors, officers, and certain other representatives of our
company against expenses and certain other liabilities arising out of their
conduct on behalf of our company.

Our Board of Directors has approved, subject to approval by our
shareholders, the reincorporation of our company from Washington to Delaware. We
have submitted the reincorporation proposal to our shareholders for approval.

44
<PAGE> 46

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information regarding the shares of
our common stock beneficially owned as of May 1, 2000 by each of our directors
and executive officers, all of our directors and executive officers as a group,
each person known by us to be the beneficial owner of more than 5% of our common
stock, and each selling shareholder. The table also sets forth the number of
shares of common stock that each selling shareholder may offer and sell under
this prospectus. The shares to be offered may be sold from time to time, subject
to the conversion of preferred stock or the exercise of warrants.

<TABLE>
<CAPTION>
SHARES OF COMMON
SHARES STOCK WHICH MAY
BENEFICIALLY BE OFFERED
NAME OF BENEFICIAL OWNER(1) OWNED(1) PERCENT(2) PURSUANT HERETO
- --------------------------- ------------ ----------- ----------------
<S> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
Maurice J. Gallagher, Jr.**............ 6,509,375(3) 8.7% --
Travis Lee Provow...................... 1,458,750(4) 2.0% --
Peter A. Nelson........................ 4,564,223(5) 6.3% --
Ronald W. Loback....................... 630,175(6) * --
Scot A. Brands......................... 225,000(7) * --
Kenton G. Dallas....................... 333,125(8) * --
James D. Shook......................... 320,833(9) * --
M. Ponder Harrison..................... 525,001(10) * --
Michael S. Falk**...................... 24,565,121(11) 28.3% --
Philip R. Ladouceur**.................. 428,715(12) * --
Directors and executive officers as a
group (10 persons)................... 39,560,318 43.2% --
5% SHAREHOLDERS:....................... --
Commonwealth Associates, L.P........... 19,963,862(11) 24.1% --
SELLING SHAREHOLDERS(13):
Abdullah M. Basodan.................... 750,000(14) 1.1% 750,000
Security Systems, Inc. ................ 400,000(15) * 400,000
Maher Mohamed Al-Nowaiser.............. 250,000(14) * 250,000
James W. Lees.......................... 3,600,000(16) 4.4% 200,000
Continental Capital & Equity
Corporation.......................... 350,000(17) * 108,000
Peter F. Duerr......................... 101,250 * 101,250
Lars Ewaldsen.......................... 52,500 * 52,500
Stan A. Moore.......................... 50,000(14) * 50,000
Tomasovich Family Trust................ 151,787(18) * 37,500
IC Holdings II, LLC.................... 53,551(19) * 32,000
Dr. Claus D. Martin.................... 26,250 * 26,250
Bill R. Poland......................... 12,500(14) * 12,500
Keith Walsh(20)........................ 10,000 * 10,000
Robert Scarborough(21)................. 7,500 * 7,500
Diane Courtney-Bell(22)................ 6,250 * 6,250
</TABLE>

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

* Less than 1%.

** These individuals are designees of Commonwealth Associates, L.P. In
connection with the private placement completed in January 2000, we granted
Commonwealth the right to appoint four of seven of our directors. These
three individuals joined our

45
<PAGE> 47

board of directors during February 2000 as designees of Commonwealth, which
has waived its right to appoint a fourth director.

(1) Beneficial ownership information is based on information provided to us,
and as of the date of this prospectus, the beneficial owner had no
obligation to inform us of or otherwise report any such changes in
beneficial ownership. Except as indicated, and subject to community
property laws when applicable, the persons named in the table above have
sole voting and investment power with respect to all shares of common stock
shown as beneficially owned by them. Except as otherwise indicated, each
director or officer may be reached through our offices at 1720 Windward
Concourse, Alpharetta, Georgia, 30005.

(2) The percentages shown are calculated based upon 72,203,334 shares of common
stock outstanding on May 1, 2000, which assumes 1,100,000 shares of common
stock issuable upon conversion of the Series A preferred stock and a Series
A preferred stock dividend payable of 87,453 shares of common stock. The
numbers and percentages shown include the shares of common stock actually
owned as of May 1, 2000 and the shares of common stock that the person or
group had the right to acquire within 60 days of May 1, 2000. In
calculating the percentage of ownership, all shares of common stock that
the identified person or group had the right to acquire within 60 days of
May 1, 2000 upon the exercise of options and warrants are deemed to be
outstanding for the purpose of computing the percentage of the shares of
common stock owned by such person or group, but are not deemed to be
outstanding for the purpose of computing the percentage of the shares of
common stock owned by any other person.

(3) Includes 2,000,010 shares of common stock issuable upon the exercise of
warrants, 500,000 shares of common stock issuable upon exercise of agent
warrants allocated to Mr. Gallagher from Commonwealth Associates, and 9,375
shares of common stock issuable upon exercise of stock options.

(4) Includes 418,750 shares of common stock issuable upon the exercise of stock
options and 346,668 shares of common stock issuable upon the exercise of
warrants.

(5) Excludes 171,000 shares of common stock held by Mr. Nelson's spouse, Wendy
Rusing Nelson, as her sole and separate property, and 444,823 shares of
common stock owned by CyberTrust 2000, Kurt Kittleson trustee, dated May
22, 1998, an irrevocable trust for the benefit of their children. Mr.
Kittleson has the full power to vote and exercise investment power with
respect to the shares of the trust. Includes 28,278 shares of common stock
issuable upon exercise of warrants, and 31,250 shares of common stock
issuable upon exercise of stock options.

(6) Includes 463,906 shares of common stock issuable upon exercise of stock
options and 33,334 shares of common stock issuable upon exercise of
warrants.

(7) Includes 25,000 shares of common stock issuable upon the exercise of stock
options and 66,667 shares of common stock issuable upon the exercise of
warrants.

(8) Includes 133,125 shares of common stock issuable upon the exercise of stock
options and 66,667 shares of common stock issuable upon exercise of
warrants.

(9) Includes 307,781 shares of common stock issuable upon the exercise of stock
options and 4,351 shares of common stock issuable upon exercise of
warrants.

(10) Includes 25,000 shares of common stock issuable upon exercise of stock
options and 166,668 shares of common stock issuable upon exercise of
warrants.
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<PAGE> 48

(11) Mr. Falk and Commonwealth Associates, L.P. are affiliates. Mr. Falk is also
a control person of ComVest Capital Partners, LLC, an affiliate of
Commonwealth. Includes (a) 9,250,000 shares of common stock held by
ComVest, (b) 10,453,862 shares of common stock issuable upon the exercise
of agent warrants, and (c) 66,667 shares of common stock issuable upon the
exercise of warrants. Mr. Falk, ComVest, and Commonwealth have shared
voting and dispositive power with respect to the shares, warrants, and
agent warrants held by ComVest and Commonwealth.

In addition to the amounts held by Commonwealth, Mr. Falk's individual
ownership includes (i) 566,665 shares of common stock, (ii) 283,335 shares
of common stock issuable upon the exercise of warrants, and (iii) 3,751,259
shares of common stock issuable upon the exercise of agent warrants
allocated to Mr. Falk from Commonwealth, and such amounts are not included
in the beneficial ownership of Commonwealth. Amounts individually owned by
Mr. Falk include 33,334 shares of common stock and 16,666 shares of common
stock issuable upon exercise of warrants that are held in trust for the
benefit of Mr. Falk's children.

The amount of securities beneficially owned by Commonwealth set forth in
the above table and elsewhere in this prospectus are adjusted to give
effect to the transfers by Commonwealth of agent warrants to employees,
account executives, and certain third parties as finder fees in connection
with the our private placements of units. The address of Commonwealth and
ComVest is 830 Third Avenue, 4th Floor, New York, New York 10022.

(12) Includes 100,000 shares of common stock issuable upon the exercise of
warrants, 119,340 shares of common stock issuable upon exercise of agent
warrants allocated to Mr. Ladouceur from Commonwealth Associates, and 9,375
shares of common stock issuable upon exercise of stock options.

(13) Except as indicated, none of the selling shareholders have ever held any
position, office, or other material relationship with our company.

(14) Represents shares of common stock that the shareholder may acquire upon
conversion of shares of Series A preferred stock.

(15) Represents shares of common stock issuable upon exercise of warrants. We
issued these warrants to Security Systems, Inc. in connection with a loan
during fiscal 1999. Mr. Lees is a control person of Security Systems, Inc.

(16) Includes 200,000 shares of common stock issuable upon exercise of warrants
held by Mr. Lees. We issued these warrants to Mr. Lees in connection with a
loan during fiscal 1999. Also includes 1,999,995 shares of common stock and
1,400,005 warrants to purchase shares of common stock owned by entities in
which Mr. Lees is a control person. Mr. Lees has shared voting and
dispositive power with respect to all shares and 1,000,005 warrants held by
these entities. Mr. Lees has sole voting and dispositive power with respect
to 400,000 of the warrants held by these entities. See footnote 15.

(17) Includes 200,000 shares of common stock issuable upon exercise of warrants.
Continental Capital & Equity Corporation served as our public relations
firm from January 1999 until May 1999.

(18) Includes 37,500 shares of common stock issuable upon conversion of shares
of Series A preferred stock.

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<PAGE> 49

(19) IC Holdings II, LLC provided investor relations services to our company
from June 1998 until November 1998. Includes 32,000 shares of common stock
issuable upon exercise of warrants.

(20) Mr. Walsh has served as our Director of Sales Engineering since April 2000.

(21) Mr. Scarborough has served as our Vice President -- Sales Engineering since
April 2000.

(22) Ms. Courtney-Bell has served as our Vice President -- Partner Channel since
April 2000.

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<PAGE> 50

CERTAIN TRANSACTIONS

Mr. Nelson, the Vice Chairman of our Board of Directors and a principal
shareholder of our company, is also the principal shareholder of another company
that sublet office space from us through December 31, 1999. That company paid us
$5,000 per month for rent, office supplies, support staff, and management. These
payments totaled approximately $60,000 during 1998 and approximately $60,000
during 1999. We believe that this sublease was on terms no less favorable to Mr.
Nelson's affiliated company than it could have obtained from an unaffiliated
third party.

Mr. Falk is the co-founder, Chairman, and Chief Executive Officer of
Commonwealth Associates. Mr. Falk is also a control person of ComVest Capital
Management LLC, an affiliate of Commonwealth. The relationships and agreements
among us, ComVest, and Commonwealth create certain conflicts of interest for
Commonwealth in acting in the best interests of itself as opposed to other
shareholders of our company and provide Commonwealth with substantial influence
and control over our company. See "Risk Factors," "Principal and Selling
Shareholders," and "Management."

In October 1999, ComVest and its designees made available to us up to $1.0
million in a bridge financing. The bridge financing was evidenced by bridge
notes that allowed the holder to convert the principal amount of the bridge
notes into units in a private placement of equity during December 1999. Between
November 1999 and December 1999, we ultimately borrowed an aggregate of $595,000
from ComVest and its designees. The holders converted the bridge notes pursuant
to the existing conversion privileges into units at the first closing of our
private placement of units on December 21, 1999. As a result of the conversion,
at the first closing on December 21, 1999, ComVest and its designees received
5.95 units in the private placement consisting of 793,331 shares of common stock
and warrants to purchase 396,669 shares of common stock at an exercise price of
$0.75 per share. The conversion of bridge notes into units did not result in any
income statement effect, but rather a reduction in notes payable and an increase
in additional paid-in capital of an amount equal to $377,136. This amount
represents $595,000 of principal and $3,539 of accrued interest, less $221,403
of unamortized debt discount. In November 1999, we granted ComVest and its
designees bridge warrants to purchase 10,000,000 shares of common stock at an
exercise price of $0.01 per share. The warrants were granted without cash
consideration in connection with the bridge financing and to induce Commonwealth
to raise additional capital for our company. The bridge warrants were determined
to have a value of $7.4 million based on a Black-Scholes model calculated on the
date of grant. The value of the bridge warrants was allocated $349,582 to the
bridge notes and $7,050,418 to the private placement of units based on the ratio
of debt to equity proceeds. The value of bridge warrants allocated to the debt
was to be amortized by the interest method over six months, the term of the
bridge notes. Upon conversion of the bridge notes, the unamortized debt discount
of $221,403 was recorded as an increase in additional paid-in capital.

During January 2000, we completed a private placement of 300 units to
accredited investors through Commonwealth Associates as placement agent. These
300 units included 15.95 units that were issued upon conversion of debt
instruments at the option of the holder pursuant to the existing conversion
privileges. In connection with the offering, Commonwealth Associates received
(1) a commission equal to 7% of the aggregate purchase price of the units sold,
and (2) a structuring fee equal to 3% of the aggregate purchase price of the
units sold. We issued to Commonwealth seven-year agent warrants to purchase, at
an exercise price of $0.75 per share, 33.33% of the shares of common stock

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<PAGE> 51

(a) included in units sold, and (b) issuable upon exercise of the warrants
included in the units sold.

The following table presents certain information regarding our private
placement of 300 units during December 1999 and January 2000:

<TABLE>
<CAPTION>
DECEMBER 1999 JANUARY 2000 TOTAL
------------- ------------ -----------
<S> <C> <C> <C>
Units sold................................ 139.51 160.49 300.00
Shares of common stock issued............. 18,601,287 21,398,613 39,999,900
Warrants issued at $0.75 per share........ 9,300,713 10,699,387 20,000,100
Agent warrants issued at $0.75 per
share................................... 9,300,667 10,699,333 20,000,000
Value of bridge warrants allocated to cost
of capital.............................. $ 7,050,418 -- $ 7,050,418
Value of 60,000 share retainer as cost of
capital................................. $ 31,800 -- $ 31,800
Commissions paid to Commonwealth.......... $ 934,920 $ 1,123,430 $ 2,058,350
Structuring fees paid to Commonwealth..... $ 400,680 $ 481,470 $ 882,150
Offering expenses......................... $ 347,808 $ 52,500 $ 400,308
</TABLE>

During February 2000, we completed another private placement of 13.5 units
to accredited investors through Commonwealth Associates as placement agent. In
connection with the offering, Commonwealth Associates received (1) a commission
equal to 7% of the aggregate purchase price of the units sold, and (2) a
structuring fee equal to 3% of the aggregate purchase price of the units sold.
We issued to Commonwealth seven-year warrants to purchase, at an exercise price
of $0.75 per share, 33.33% of the shares of common stock (a) included in the
units sold, and (b) issuable upon exercise of the warrants included in the units
sold.

The following table presents certain information regarding our private
placement of 13.5 units during February 2000:

<TABLE>
<S> <C>
Units sold.................................................. 13.50
Shares of common stock issued............................... 1,799,996
Warrants issued at $0.75 per share.......................... 900,005
Agent warrants issued at $0.75 per share.................... 900,000
Commissions paid to Commonwealth............................ $ 94,500
Structuring fees paid to Commonwealth....................... $ 40,500
Offering expenses........................................... $ 50,000
</TABLE>

On October 29, 1999, the date we entered into a commitment with
Commonwealth to act as placement agent in the private placement, we issued to
Commonwealth 60,000 shares of common stock as a non-refundable retainer to act
as the placement agent. In our consolidated financial statements as of December
31, 1999, we recorded the cost associated with the issuance of the retainer to
cost of capital, reflected as a reduction to additional paid-in capital. The
shares were valued at $0.53 per share, representing the closing price of our
common stock on October 29, 1999. Upon the closing of the private placement, we
granted Commonwealth the right to appoint four of seven directors to our Board
of Directors. Commonwealth has designated three of these directors to our Board
of Directors and has waived its right to appoint a fourth director.

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<PAGE> 52

We have entered into an finder's agreement with Commonwealth under which we
will pay Commonwealth a fee ranging from 1% to 5% of the amount of certain
transactions with an individual or entity that is introduced to us by
Commonwealth. We believe that this agreement was provided on terms no less
favorable than could have been obtained from unaffiliated third parties.

In addition, upon the first closing of the private placement of units on
December 21, 1999, we entered into an 18-month financial advisory agreement with
Commonwealth for financial and investment banking services providing for a
monthly fee to Commonwealth of $5,000, the first three months of which were paid
in advance upon the closing of the private placement. During January 2000, the
parties agreed to terminate the financial advisory agreement. None of the
monthly fees paid in advance were refunded to us upon termination of the
agreement. Since we expensed all of these fees during fiscal 1999, the
termination resulted in no additional financial impact to our company. We
believe that this agreement was provided on terms no less favorable than could
have been obtained from unaffiliated third parties.

After the completion of our private placements of units, Commonwealth
allocated agent warrants to purchase up to 3,751,259 shares of common stock to
Mr. Falk, agent warrants to purchase up to 500,000 shares of common stock to Mr.
Gallagher, and agent warrants to purchase up to 119,340 shares of common stock
to Mr. Ladouceur. Commonwealth also allocated agent warrants to purchase up to
750,000 shares of common stock to certain third parties as a finder fee in
connection with the private placements of units completed during January and
February 2000. Commonwealth has allocated agent warrants to employees and
account executives employed by Commonwealth.

We granted to each of Messrs. Gallagher and Ladouceur options to purchase
150,000 shares of common stock at an exercise price of $2.50 per share. The
options will vest ratably each quarter over a four-year period.

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<PAGE> 53

DESCRIPTION OF SECURITIES

GENERAL

The authorized capital stock of our company consists of 250,000,000 shares
of common stock, par value $.0001 per share, and 10,000,000 shares of preferred
stock, par value $.0001 per share. As of May 1, 2000, there were issued and
outstanding 71,103,334 shares of common stock and 22,000 shares of Series A
preferred stock. In addition, we have reserved the following:

- 8,384,400 shares of common stock reserved for issuance upon exercise of
outstanding stock options,

- 22,114,185 shares of common stock reserved for issuance upon exercise of
outstanding warrants,

- 1,100,000 shares of common stock reserved for issuance upon conversion of
the Series A preferred stock, and

- 20,900,000 shares of common stock reserved for issuance upon exercise of
the agent warrants issued to Commonwealth.

COMMON STOCK

The holders of common stock are entitled to one vote for each share on all
matters submitted to a vote of shareholders and do not have cumulative voting
rights. Accordingly, the holders of a majority of the common stock entitled to
vote in any election of directors may elect all of the directors standing for
election. Subject to the preferences that may be applicable to any
then-outstanding preferred stock, the holders of common stock will be entitled
to receive such dividends, if any, as may be declared by the Board of Directors
from time to time out of legally available funds. Upon the liquidation,
dissolution, or winding up of our company, the holders of common stock will be
entitled to share ratably in all the assets that are legally available for
distribution, after payment of all debts and other liabilities and subject to
the prior rights of holders of any preferred stock then outstanding. The holders
of common stock have no preemptive, subscription, redemption, or conversion
rights.

PREFERRED STOCK

Our Board of Directors is authorized, subject to any limitations prescribed
by Washington law, but without further action by the shareholders, to provide
for the issuance of serial preferred stock in one or more series; to establish
from time to time the number of shares to be included in these series; to fix
the designations, powers, preferences, and rights of the shares of each such
series and any qualifications, limitations, or restrictions thereof; and to
increase or decrease the number of shares of any such series, but not below the
number of shares of such series then outstanding, without any further vote or
action by the shareholders. The Board of Directors may authorize and issue
serial preferred stock with voting or conversion rights that could adversely
affect the voting power or other rights of the holders of common stock. In
addition, the issuance of serial preferred stock may have the effect of
delaying, deterring, or preventing a change in control of our company.

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<PAGE> 54

SERIES A PREFERRED STOCK

We have outstanding 22,000 shares of Series A preferred stock. Holders of
the Series A preferred stock are entitled to votes equal to 80% of the number of
shares of common stock into which the Series A preferred stock are convertible.
Unless otherwise specified or required by law, holders of the Series A preferred
stock will vote with the holders of common stock as a single class on all
matters submitted to a vote of shareholders. The holders are entitled to a
cumulative annual dividend of 10%, which is payable quarterly either in cash or
in common stock at our option. The holders of the Series A preferred stock will
have preference in payment of dividends over the holders of common stock. In the
event of any liquidation, dissolution, or winding up of our company, the holders
of Series A preferred stock will be entitled to receive $100 per share of Series
A preferred stock, plus any accrued but unpaid dividends, before the holders of
common stock receive any distribution. Beginning in February 2000, each share of
Series A preferred stock became convertible at any time by the holders into 50
shares of common stock, an aggregate of 1,100,000 shares. In the event that the
closing price of the shares of common stock on the OTCBB for 20 days out of a 30
consecutive trading day period is at least $6.00 per share, we will have the
right to redeem the Series A preferred stock at a redemption rate of $100 per
share plus accrued and unpaid dividends. The Series A preferred stock will
convert automatically into common stock if

- the closing price of the shares of common stock on the OTCBB for 20 days
out of a 30 consecutive trading day period is at least $8.00,

- we raise at least $6.0 million from the sale of our common stock at a
price per share greater than or equal to $5.00, or

- we complete a merger in which our company is not the surviving legal
entity.

WARRANTS

UNIT WARRANTS

In connection with our private placements of units in December 1999 and
January and February 2000, we issued warrants to purchase 20,900,105 shares of
common stock. As of May 1, 2000, all of these unit warrants remained
outstanding. Each unit warrant entitles the holder to purchase at any time for a
period of five years, a specified number of shares of common stock at an
exercise price of $0.75 per share. After the expiration of the exercise period,
unit warrant holders will have no further rights to exercise the unit warrants.

The unit warrants may be exercised only for full shares of common stock. We
will not issue fractional shares of common stock or cash in lieu of fractional
shares of common stock. Unit warrant holders do not have any voting or other
rights as shareholders of our company.

The exercise price and the number of shares of common stock purchasable
upon the exercise of each unit warrant are subject to adjustment upon the
happening of certain events, such as stock dividends, distributions, and splits.
No adjustment in the exercise price will be required unless cumulative
adjustments require an adjustment of at least $0.01. In case of any
consolidation, merger, or sale of all or substantially all of the assets of our
company, the holder of each of the unit warrants will have only the right, upon
the subsequent exercise thereof, to receive the kind and amount of shares and
other securities

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<PAGE> 55

and property, including cash, that the holder would have been entitled to
receive by virtue of such transaction had the unit warrants been exercised
immediately prior to such transaction.

Commencing on the date 60 days following their issuance, the unit warrants
will be callable by us at $0.01 per unit warrant if the average closing price of
the common stock is greater than or equal to $3.00 per share on the OTCBB or
NASDAQ for a period of 20 consecutive trading days and if the common stock
issuable upon exercise of the unit warrants is then covered by an effective
registration statement.

AGENT WARRANTS

In connection with the completion of the private placements of 300 units
which occurred in December 1999 and January 2000 and with the completion of the
February 2000 private placement of 13.5 units, we issued to Commonwealth as
placement agent 20,900,000 common stock purchase warrants. As of May 1, 2000,
all of these agent warrants remained outstanding. The agent warrants entitle the
holder to purchase, at any time prior to December 2006, 20,900,000 shares of
common stock at an exercise price of $0.75 per share, subject to adjustment in
accordance with the antidilution and other provisions referred to below. The
agent warrants may be exercised in whole or in part. Until the agent warrants
are exercised, the holders of the agent warrants will not have the rights or
privileges of holders of common stock.

The agent warrants contain certain antidilution provisions, which makes the
exercise price of the agent warrants and the number of underlying agent warrant
shares subject to adjustment upon the happening of certain events. No
adjustments will be made unless such adjustment, or aggregation of adjustments,
would require an increase or decrease of at least $0.01 in the exercise price of
the agent warrants.

OTHER WARRANTS

In June 1998, in connection with an investor relations agreement, we issued
to an investor relations firm five-year warrants to purchase 32,000 shares of
common stock at an exercise price of $8.50 per share. In satisfaction of amounts
payable to this firm, we amended the terms of the warrants in July 1999 to (a)
reduce the exercise price to $4.00 per share, and (b) grant certain "demand" and
"piggyback" registration rights with respect to the shares of common stock
purchasable pursuant to the warrants, as described below.

In connection with services rendered to our company, we have issued to
third parties other warrants to purchase 1,139,180 shares of our common stock.
The holders have not

54
<PAGE> 56

exercised any of the warrants. The following table sets forth certain
information regarding the warrants:

<TABLE>
<CAPTION>
SHARES
DATE OF UNDERLYING
ISSUANCE WARRANTS EXERCISE PRICE
- -------- ---------- --------------
<S> <C> <C>
6/26/98 32,000 $4.00
8/1/98 30,000 $7.50
8/1/98 10,000 $9.00
8/27/98 25,000 $9.00
8/28/98 25,000 $9.00
9/11/98 35,715 $7.00
10/1/98 51,465 $2.00
12/23/98 30,000 $4.00
2/17/99 50,000 $1.68
9/22/99 200,000 $1.05
10/7/99 400,000 $1.05
10/26/99 125,000 $0.75
1/14/00 125,000 $0.75
---------
Total 1,139,180
</TABLE>

REGISTRATION RIGHTS

In connection with the issuance of the shares of Series A preferred stock,
we agreed to use our "best efforts" to register the common stock issuable upon
conversion of the Series A preferred stock no later than November 1999. During
April 2000, holders of 3,600 shares of Series A preferred stock converted those
shares into 180,000 shares of common stock. As of May 1, 2000, 22,000 shares of
Series A preferred stock were outstanding, which are convertible into an
aggregate of 1,100,000 shares of common stock.

In August 1998, we granted to a third party warrants to purchase 40,000
shares at prices ranging from $7.50 to $9.00 per share. In October 1998 we
granted the same party additional warrants to purchase 51,500 shares at $2.00
per share. We agreed to use our "best efforts" to register, after their
issuance, the 91,500 shares of common stock underlying the warrants at our sole
cost and expense. None of these warrants have been exercised, and we have not
yet filed such registration statement.

We granted certain "piggy-back" registration rights with respect to 32,000
shares of common stock purchasable pursuant to the warrants granted to an
investor relations firm. Under these registration rights, the holder of common
stock acquired on exercise of the warrants may request us to register such stock
if we propose to register any securities under the securities laws using the
same registration form that would be used to register the warrants. We have also
granted certain "demand" registration rights with respect to the shares of
common stock purchasable pursuant to the warrants. Under these registration
rights, the holder may request us to register such stock. If the registration
statement to be filed pursuant to the "demand" or "piggyback" registration
rights is pursuant to an underwritten offering, the managing underwriter may
reduce the shares to be included in the registration if, in the judgment of the
underwriter, the shares to be included would

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<PAGE> 57

interfere with the successful marketing of the offering. We have agreed to pay
all expenses associated with any registration of the common stock acquired
pursuant to the exercise of the warrants.

We have granted certain "demand" registration rights commencing six months
from the final closing of the private placement of units in January 2000 with
respect to the shares of common stock included in the units, issuable upon
exercise of the unit warrants, the agent warrants, and the bridge warrant shares
relating to that private placement. Under such registration rights, the
following parties may request us to register the resale of such securities:

- the holders of the bridge warrant shares,

- the holders of at least 50% of the shares of common stock included in the
units, and

- the holders of at least 50% of the shares of common stock issuable upon
exercise of the agent warrants.

We will not be obligated to file more than

- one "demand" registration with respect to the bridge warrant shares,

- one "demand" registration with respect to the shares of common stock
included in the units and issuable upon exercise of the unit warrants,
and

- one "demand" registration with respect to the agent warrants.

We also have granted certain "piggyback" registration rights with respect to the
these securities. In the event a demand is made pursuant to the demand
registration rights pursuant to the unit warrants and we do not file a
registration statement with the Securities and Exchange Commission within the
required period, the exercise price of the unit warrants will be reduced by 10%
and will be reduced by an additional 10% for each 90 days thereafter until a
registration statement is so filed.

We have agreed to pay all expenses associated with any registration of
these securities, except that any underwriter's fees, discounts, and commissions
relating to the securities registered for these holders will be the
responsibility of the holder.

LOCK-UP AGREEMENTS

Each investor in the private placement of units during December 1999,
January 2000, and February 2000 agreed with Commonwealth, the placement agent in
that offering, not to sell, transfer, or otherwise dispose of any securities
included in the units for one year following the final closing of the private
placement, and thereafter, and not to sell, transfer, or otherwise dispose of
more than 25% of such securities on a cumulative basis during each subsequent
90-day period thereafter (such 24-month period will be referred to as the
"Lock-Up Period"). If we undertake certain private or public offerings during
the Lock-Up Period, the investors agreed not to sell, transfer, or otherwise
dispose of their securities for such period of time following such qualified
offering, not to exceed 12 months, as the managing underwriter or placement
agent of the qualified offering may request, provided Commonwealth agrees.
Certain officers and directors of our company, Commonwealth, ComVest, and
certain other persons are subject to similar lock-up agreements.

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<PAGE> 58

In connection with our agreement to register the warrants issued to them,
Mr. Lees and Security Systems, Inc. agreed not to sell, transfer, or otherwise
dispose of more than 20,000 and 40,000 shares of common stock underlying the
warrants, respectively, in any calendar month following exercise of the
warrants.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is American
Securities Transfer & Trust, Inc., Denver, Colorado.

PLAN OF DISTRIBUTION

This prospectus relates to a total of 2,253,750 shares of common stock
currently outstanding or issuable to the selling shareholders upon exercise of
outstanding warrants or conversion of Series A preferred stock. These shares may
be sold from time to time by the selling shareholders. As used in this
prospectus, "selling shareholders" include transferees, donees, pledgees,
legatees, heirs, or legal representatives that sell shares received from a named
selling shareholder after the date of this prospectus.

The selling shareholders have advised us that they have not entered into
any agreements, understandings, or arrangements with any underwriters or
broker-dealers regarding the sale of their securities, nor is there an
underwriter or coordinating broker acting in connection with the proposed sale
of shares by the selling shareholders. At the time a particular offering of
common stock is made and to the extent required, the aggregate number of shares
being offered, the name or names of the selling shareholders, and the terms of
the offering, including the name of names of any underwriters, broker-dealers or
agents, any discounts, concessions, or commissions and other terms constituting
compensation from the selling shareholders, and any discounts, concessions, or
commissions allowed or reallowed or paid to broker-dealers, will be set forth in
an accompanying prospectus supplement.

Sales of the common stock offered hereby may be effected by or for the
account of the selling shareholders from time to time in transactions, which may
include block transactions, in the over-the-counter market, in negotiated
transactions, through a combination of such methods of sale, or otherwise, at
fixed prices that may be changed, at market prices prevailing at the time of
sale, at prices related to the prevailing market price, or at negotiated prices.
The selling shareholders may effect these transactions by selling the common
stock offered hereby directly to purchasers, through broker-dealers acting as
agents for the selling shareholders, or to broker-dealers that may purchase such
shares as principals and thereafter sell the shares from time to time in
transactions, which may include block transactions, in the over-the-counter
market, in negotiated transactions, through a combination of such methods of
sales or otherwise. In effecting sales, broker-dealers engaged by selling
shareholders may arrange for other broker-dealers to participate. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions, or commissions from the selling shareholders or the purchasers of
the common stock offered hereby for whom such broker-dealers may act as agents
or to whom they may sell as principals, or both. As to a particular
broker-dealer, such compensation might be in excess of customary commissions.

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<PAGE> 59

The selling shareholders may resell the shares of common stock being
registered for resale hereby

- in transactions that are exempt from registration under the Securities
Act or

- as long as the registration statement there is a qualification in effect
under, or an available exemption from, any applicable state securities
law with respect to the resale of such shares.

There is no assurance that any selling shareholder will sell any common
stock offered hereby, and any selling shareholder may transfer, devise, or gift
the common stock by other means not described in this prospectus. For example,
in addition to selling pursuant to the registration statements of which this
prospectus is a part or to which it relates, the selling shareholders also may
sell under Rule 144.

The selling shareholders and any broker-dealers, agents, or underwriters
that participate with the selling shareholders in the distribution of common
stock offered hereby may be deemed to be "underwriters" within the meaning of
the Securities Act. Accordingly, the selling shareholders will be subject to the
prospectus delivery requirements of the Securities Act. Any commissions paid or
any discounts or concessions allowed to any such persons, and any profits
received on the resale of the common stock offered hereby and purchased by them,
may be deemed to be underwriting commissions or discounts under the Securities
Act. We will not pay any compensation to any NASD member in connection with this
offering. Brokerage commissions, if any, attributable to the sale of the shares
of common stock offered hereby will be borne by the selling shareholders.

We will not receive any proceeds from the sale of any shares of common
stock by the selling shareholders. We have agreed to bear all expenses, other
than selling commissions, in connection with the registration and sale of the
common stock being offered by the selling shareholders. We have agreed to
indemnify certain of the selling shareholders against certain liabilities under
the Securities Act. Each selling shareholder may indemnify any broker-dealer
that participates in transactions involving sales of the shares against certain
liabilities, including liabilities arising under the Securities Act.

To comply with the securities laws of certain jurisdictions, if applicable,
the shares of common stock offered hereby will be offered or sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states the common stock offered hereby may not be sold
unless they have been registered or qualified for sale in the applicable state
or an exemption from the registration or qualifications requirement is available
and is complied with.

Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the common stock offered pursuant to this
prospectus may be limited in its ability to engage in market activities with
respect to the common stock. Without limiting the foregoing, each selling
shareholder will be subject to applicable provisions of the Exchange Act and the
rules and regulations thereunder, including Regulation M. Those rules and
regulations may limit the timing of purchases and sales of any of the common
stock offered by the selling shareholders pursuant to this prospectus, which may
affect the marketability of the common stock offered hereby.

The selling shareholders also may pledge the shares of common stock being
registered for resale hereby to NASD broker/dealers pursuant to the margin
provisions of each

58
<PAGE> 60

selling shareholder's customer agreements with such pledgees. Upon default by a
selling shareholder, the pledgee may offer and sell shares of common stock from
time to time as described above.

LEGAL MATTERS

The validity of the shares of common stock offered hereby will be passed
upon for us by Greenberg Traurig, LLP, Phoenix, Arizona.

EXPERTS

The consolidated financial statements of Intelispan, Inc. as of December
31, 1998 and 1999, and the years ended December 31, 1998 and 1999 have been
included herein and in the registration statement in reliance upon the report of
KPMG LLP, independent certified public accountants, appearing elsewhere herein,
and upon the authority of said firm in accounting and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We filed a registration statement on Form SB-2 with the Securities and
Exchange Commission relating to the common stock offered by this prospectus.
This prospectus does not contain all of the information set forth in the
registration statement and the exhibits and schedules thereto. Statements
contained in this prospectus as to the contents of any contract or other
document referred to are not necessarily complete and in each instance we refer
you to the copy of such contract or other document filed as an exhibit to the
registration statement, each such statement being qualified in all respects by
such reference. For further information with respect to Intelispan, Inc. and the
common stock offered by this prospectus, we refer you to the registration
statement, exhibits, and schedules.

Anyone may inspect a copy of the registration statement without charge at
the public reference facilities maintained by the Securities Exchange and
Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; the
Chicago Regional Office, Suite 1400, 500 West Madison Street, Citicorp Center,
Chicago, Illinois 60661; and the New York Regional Office, Suite 1300, 7 World
Trade Center, New York, New York 10048. Copies of all or any part of the
registration statement may be obtained from the Public Reference Section of the
Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, upon payment of the prescribed fees. The public may obtain information on
the operation of the Public Reference Room by calling the Securities and
Exchange Commission at 1-800-SEC-0330. The registration statement is also
available through the Securities and Exchange Commission's Web site at the
following address: http://www.sec.gov.

This prospectus includes statistical data regarding the virtual private
network market and growth of the remote access that were obtained from industry
publications, including reports generated by Infonetics Research and the Gartner
Group. These industry publications generally obtain information from sources
believed to be reliable. We have not sought the consent of any of these
organizations to refer to their reports in this prospectus.

59
<PAGE> 61

INTELISPAN, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets as of December 31, 1998 and
1999...................................................... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1998, and 1999............................... F-4
Consolidated Statements of Shareholders' Equity for the
Years Ended December 31, 1998 and 1999.................... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998 and 1999................................ F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>

F-1
<PAGE> 62

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Intelispan, Inc.:

We have audited the accompanying consolidated balance sheets of Intelispan,
Inc. as of December 31, 1998 and 1999 and the related consolidated statements of
operations, shareholders' equity and cash flows 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Intelispan,
Inc. as of December 31, 1998 and 1999 and the results of its operations and its
cash flows for the years then ended, in conformity with generally accepted
accounting principles.

/s/ KPMG LLP

February 18, 2000
Phoenix, Arizona

F-2
<PAGE> 63

INTELISPAN, INC.

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1999

<TABLE>
<CAPTION>
PRO FORMA
1999
1998 1999 (SEE NOTE 1(D))
----------- ----------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................ $ 27,459 9,631,638 25,231,308
Accounts receivable net of allowance of
$0 at December 31, 1998 and $176,666
at December 31, 1999.................. 82,040 447,739 447,739
Prepaid expenses......................... 235,775 95,110 95,110
Other current assets..................... 53,163 61,833 61,833
----------- ----------- -----------
Total current assets............. 398,437 10,236,320 25,835,990
Property and equipment, net................ 376,671 348,079 348,079
Intangibles, net........................... 1,029,322 957,386 957,386
Other long-term assets..................... 237,831 227,961 227,961
----------- ----------- -----------
$ 2,042,261 11,769,746 27,369,416
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable........................... $ 561,846 746,048 746,048
Accrued liabilities........................ 201,245 1,288,364 1,288,364
Notes payable to shareholders.............. -- 57,250 57,250
----------- ----------- -----------
Total current liabilities........ 763,091 2,091,662 2,091,662
Note payable............................... 188,957 206,405 206,405
Minority interest.......................... 92,230 129,749 129,749
Commitments, contingencies and subsequent
events
Shareholders' equity:
Preferred Stock, $.0001 par value; 25,600
shares issued and outstanding......... -- 3 3
Common Stock, $.0001 par value;
100,000,000 shares authorized; issued
and outstanding 18,377,471 shares in
1998, and 47,471,833 shares in 1999;
150,000,000 shares authorized pro
forma; issued and outstanding
23,556,814 shares pro forma........... 1,837 4,747 2,356
Paid-in capital.......................... 6,779,314 20,927,212 36,529,273
Accumulated deficit...................... (5,783,168) (11,590,032) (11,590,032)
----------- ----------- -----------
Total shareholders' equity....... 997,983 9,341,930 24,941,600
----------- ----------- -----------
$ 2,042,261 11,769,746 27,369,416
=========== =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE> 64

INTELISPAN, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998 AND 1999

<TABLE>
<CAPTION>
1998 1999
----------- ----------
<S> <C> <C>
Revenue.............................................. $ 129,596 743,709
Costs of sales....................................... 915,403 1,286,410
----------- ----------
Gross loss................................. (785,807) (542,701)
----------- ----------
Operating expenses:
Selling............................................ 2,299,072 1,183,183
General and administrative......................... 2,618,287 3,644,269
Cost of abandoned acquisition...................... 225,550 --
----------- ----------
Total operating expenses................... 5,142,909 4,827,452
----------- ----------
Operating loss............................. (5,928,716) (5,370,153)
Interest expense..................................... (18,980) (531,331)
Interest income...................................... 40,256 12,073
Minority interest.................................... 696,880 82,547
----------- ----------
Net loss................................... $(5,210,560) (5,806,864)
=========== ==========
Preferred stock dividends............................ -- (96,000)
----------- ----------
Net loss applicable to common $(5,210,560) (5,902,864)
shareholders............................
=========== ==========
Net loss per common share -- basic and diluted....... $ (0.32) (0.28)
=========== ==========
Weighted average common shares outstanding........... 16,334,670 20,817,660
=========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 65

INTELISPAN, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1999

<TABLE>
<CAPTION>
PREFERRED ADDITIONAL TOTAL
PREFERRED SHARE COMMON SHARE PAID-IN ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNTS CAPITAL DEFICIT EQUITY
--------- --------- ---------- ------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1997.... -- $ -- 10,371,429 $1,037 598,963 (572,608) 27,392
Common shares issued to
investors under revised Stock
Purchase Agreement........... -- -- 303,630 30 (30) -- --
Common shares issued in January
1998 private offering........ -- -- 1,468,939 147 3,324,853 -- 3,325,000
Common shares issued for
efforts in raising funds in
January 1998 private
offering..................... -- -- 5,784,639 578 (578) -- --
Purchase of net assets from the
merger of ELSC............... -- -- -- -- 268,646 -- 268,646
Common shares issued in July
1998 private offering, net of
$195,000 costs............... -- -- 341,334 34 2,364,971 -- 2,365,005
Common shares issued as
compensation for services.... -- -- 107,500 11 222,489 -- 222,500
Net loss....................... -- -- -- -- -- (5,210,560) (5,210,560)
------ ------- ---------- ------ ----------- ------------ ----------
Balances, December 31, 1998.... -- -- 18,377,471 1,837 6,779,314 (5,783,168) 997,983
Common shares issued in January
1999 private offering, net of
$64,800 costs................ -- -- 542,001 55 693,946 -- 694,001
Common shares exchanged for
preferred shares............. 25,600 3 (341,334) (34) 31 -- --
Common shares issued as
compensation for services.... -- -- 232,408 23 353,682 -- 353,705
Issuance of warrants to third
parties for services......... -- -- -- -- 502,414 -- 502,414
Issuance of bridge warrants and
shares in connection with
bridge financings and a
private placement............ -- -- 60,000 6 332,173 -- 332,179
Exercise of warrants by third
parties in connection with
debt and equity financing.... -- -- 10,000,000 1,000 99,000 -- 100,000
Common shares issued in
December 1999, private
placement, net of $1,683,408
related costs................ -- -- 18,601,287 1,860 12,262,652 -- 12,264,512
Dividends accrued for preferred
stock........................ -- -- -- -- (96,000) -- (96,000)
Net loss....................... -- -- -- -- -- (5,806,864) (5,806,864)
------ ------- ---------- ------ ----------- ------------ ----------
Balances, December 31, 1999.... 25,600 $ 3 47,471,833 $4,747 $20,927,212 $(11,590,032) 9,341,930
====== ======= ========== ====== =========== ============ ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 66

INTELISPAN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1999

<TABLE>
<CAPTION>
1998 1999
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(5,210,560) (5,806,864)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.......................... 261,130 382,506
Minority interest...................................... (696,880) (82,547)
Noncash compensation................................... 69,958 --
Bad debt expense....................................... -- 176,666
Loss on disposal of property and equipment,
intangibles........................................... -- 10,934
Common stock and warrants issued as compensation for
services.............................................. 222,500 1,118,917
Noncash interest expense............................... -- 276,100
Decrease (increase) in assets:
Accounts receivable.................................. (76,187) (542,365)
Prepaid expenses..................................... (227,085) 140,665
Other current assets................................. (8,206) (8,670)
Other long-term assets and intangibles............... (665,243) (64,128)
Increase in liabilities:
Accounts payable..................................... 402,985 184,202
Accrued expenses..................................... 170,992 991,121
----------- ----------
Net cash used in operating activities............. (5,756,596) (3,223,463)
----------- ----------
Cash flows from investing activities:
Purchases of property and equipment....................... (386,138) (138,848)
Proceeds from sale of property and equipment.............. -- 40,000
----------- ----------
Net cash used in investing activities............. (386,138) (98,848)
----------- ----------
Cash flows from financing activities:
Issuance of common stock.................................. 5,690,005 12,851,792
Proceeds from note payable................................ 188,957 2,501,405
Principal payments on notes payable, stockholders......... (700,000) (2,426,707)
----------- ----------
Net cash provided by financing activities......... 5,178,962 12,926,490
----------- ----------
Net increase (decrease) in cash and cash equivalents........ (963,772) 9,604,179
Beginning cash and cash equivalents......................... 991,231 27,459
----------- ----------
Ending cash and cash equivalents............................ $ 27,459 9,631,638
=========== ==========
</TABLE>

The Company's initial contribution in the investment in Contego, LLC was a note
payable in the amount of $868,000. The Company subsequently paid this note along
with accrued interest of $17,411.

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 67

INTELISPAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) NATURE OF ORGANIZATION

Intelispan, Inc. (the Company) was incorporated on September 15, 1997. The
Company was formed with the intention of providing a comprehensive package of
data communication services designed to meet the developing global
communications and electronic commerce needs of businesses and other
organizations. Management anticipates incurring additional losses as it pursues
its development efforts and implements its business plan.

In 1999, the Company completed the development of its technology products
and is able to commence principal operations. The Company is no longer
considered a development stage enterprise.

(b) MERGER

The Company (accounting acquirer) entered into a Plan of Merger and
Reorganization as of July 27, 1998 whereby the legal acquirer, Equipment Leasing
and Sales Corporation (ELSC), was merged with the Company using the purchase
method of accounting. Under the terms of the merger, shareholders of the Company
received one share of ELSC stock for every 1.131769 shares and/or warrants owned
as of the merger effective date. Immediately upon closing, the officers and
directors of ELSC resigned and were replaced by the Company's officers and
directors. Additionally, ELSC changed its name to Intelispan, Inc.

The Company held a 43% interest in Contego, LLC as of December 31, 1997. On
September 28, 1998, the Chief Executive Officer of Intelispan, Peter Nelson,
transferred his 8% interest in Contego to the Company in accordance with a
previous shareholder investment agreement. As a result of the Company's direct
ownership interest of 43% and the Company's CEO interest of 8% the Company
effectively controlled 51% of Contego and therefore consolidated Contego. On
November 30, 1998, the Company acquired an additional 9.4% as a result of
contributing $400,000 in a capital call that was not met by the other members of
Contego. During October 1999, one member transferred his 6.5% interest in
Contego to the Company as the result of a lawsuit settlement. Therefore, the
Company held a 66.8% interest in Contego, LLC as of December 31, 1999.

(d) PRO FORMA BALANCE SHEET (UNAUDITED)

The pro forma balance sheet as of December 31, 1999 gives effect to the
change in the number of shares of common stock as a result of (a) the Company's
proposed reincorporation of the Company from Washington to Delaware, and (b) the
sale of units to accredited investors in the Company's private placements
completed in January and February 2000. Upon the Board of Directors election to
effect this change, which the Company's shareholders have approved, the Company
will reincorporate from Washington

F-7
<PAGE> 68
INTELISPAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

to Delaware through a merger into a newly formed Delaware corporation formed
solely for the purposes of the reincorporation. The reincorporation proposal
provides for the conversion of shares of the Washington corporation into shares
of the Delaware corporation on the basis of one share of common stock of the
Delaware corporation for each three shares of common stock previously issued and
outstanding. Because fractional shares will not be issued as a result of the
reincorporation, the pro forma shares of common stock issued and outstanding as
of December 31, 1999 are subject to adjustment based on rounding. With respect
to the sale of equity subsequent to December 31, 1999, the pro forma balance
sheet reflects the proceeds received by the Company as a result of the sale of
160.49 units (representing 21,398,613 shares of common stock) during January
2000 and 13.50 units (representing 1,799,996 shares of common stock) during
February 2000, net of offering commissions and expenses.

(e) USE OF ESTIMATES

The Company has made a number of estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contingent assets and
liabilities to prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from those
estimates.

(f) CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of
three months or less at the time of purchase to be cash equivalents.

(g) PROPERTY AND EQUIPMENT

Property and equipment is recorded at cost. Depreciation of equipment is
determined using the straight-line method over the estimated useful lives of the
related assets, which is seven years for furniture and fixtures and three to
five years for equipment and software. Depreciation expense charged to
operations during the years ended December 31, 1998 and 1999 was $49,801 and
$98,054, respectively.

F-8
<PAGE> 69
INTELISPAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(h) INTANGIBLES

Intangibles are recorded at cost and are amortized over their estimated
useful lives using the straight-line method. Intangibles at December 31, 1998
and 1999 respective amortization periods are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1998 1999
---------- ---------
<S> <C> <C> <C>
Software code............................... $ 827,628 827,628 5 years
Product license fee......................... 400,000 410,000 5 years
Product license fee......................... 25,000 25,000 2 years
Trademarks.................................. 8,222 8,222 15 years
Goodwill.................................... -- 195,064 3 years
Other....................................... 22,527 19,367 5 years
---------- ---------
1,283,377 1,485,281
Accumulated amortization.................... (254,055) (527,895)
---------- ---------
$1,029,322 957,386
========== =========
</TABLE>

The software code was contributed to Contego, LLC by one of its members.
The code is currently in use and is the backbone of the Public Key
Infrastructure (PKI) product. The amounts of unamortized software development
costs included in intangible assets, net, at December 31, 1998 and 1999, were
$620,721 and $455,195, respectively. The amortization expense for 1998 and 1999
was $212,149 and $285,877, respectively.

(i) ADVERTISING COSTS

Advertising costs are expensed at the time the advertisement takes place.
Advertising expense charged to operations during the years ended December 31,
1998 and 1999 was $352,538 and $0, respectively. As of December 31, 1999, the
Company has recorded $180,000 of deferred advertising costs which are included
in other long term assets.

(j) COST OF ABANDONED ACQUISITION

The Company abandoned a planned acquisition on September 30, 1998. In
accordance with the merger and acquisition agreement, the Company was required
to pay a break-up fee and legal fees of the intended acquiree. Included in 1998
was the negotiated breakup fee of $165,909, and the corresponding legal fees of
$59,641.

(k) STOCK BASED COMPENSATION

In accordance with the provisions of Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees, the Company measures
stock-based compensation expense as the excess of the market price on date of
grant over the amount the employee must pay for the stock. The Company's policy
is to generally grant stock options

F-9
<PAGE> 70
INTELISPAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

at fair market value at the date of grant; therefore no compensation expense is
recognized. As permitted, the Company has elected to adopt only the disclosure
provisions of SFAS No. 123, Accounting for Stock-based Compensation (see note
8).

(l) LOSS PER SHARE OF COMMON STOCK

Basic earnings (loss) per share is computed by dividing income (loss)
attributable to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted earnings (loss) per share reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or resulted in
the issuance of common stock that then shared in the earnings (loss) of the
Company. In calculating diluted net loss per common share for 1998 and 1999,
common stock equivalent shares of 2,060,947 and 2,113,962, respectively,
consisting of stock options and warrants have been excluded because their
inclusion would have been anti-dilutive.

(m) IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF

The Company accounts for long-lived assets under the provisions of SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of. This Statement requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future undiscounted net cash
flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceed the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
costs to sell.

(n) REVENUE RECOGNITION

The Company recognizes revenue on a monthly basis for services provided to
and accepted by a customer during that month.

(o) SEGMENT REPORTING

During 1999, the Company adopted the provisions of SFAS No. 131,
Disclosures About Segments of an Enterprise and Related Information. SFAS 131
establishes annual and interim reporting standards for operating segments of a
company. The statement requires disclosures of selected segment-related
financial information about products, major customers, and geographic areas. The
Company has one operating segment because it is not organized by multiple
segments for purposes of making operating decisions or assessing performance.
The chief operating decision maker evaluates performance, makes operating
decisions, and allocates resources based on financial data consistent with the
presentation in the accompanying financial statements.

F-10
<PAGE> 71
INTELISPAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company's revenues have all been earned from customers in the United
States. In addition, all operations and assets are based in the United States.
Three customers account for approximately 25%, 15% and 14% of 1999 revenue. Five
of the Company's customers represent 16%, 16%, 12%, 11% and 10% of the accounts
receivable at December 31, 1999.

(p) RECLASSIFICATION

Certain amounts in 1998 were reclassified to conform with the 1999
presentation.

(2) PROPERTY AND EQUIPMENT

Property and Equipment at December 31, 1998 and 1999 consists of the
following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- ESTIMATED
1998 1999 USEFUL LIFE
-------- -------- -----------
<S> <C> <C> <C>
Furniture and fixtures........................ $202,540 152,968 7 years
Computer equipment and software............... 219,743 289,947 3 years
Office equipment.............................. 5,188 51,763 5 years
-------- --------
427,471 494,678
Less accumulated depreciation................. (50,800) (146,599)
-------- --------
$376,671 348,079
======== ========
</TABLE>

(3) NOTES PAYABLE

In September 1998, the Company entered into a financial advisory services
agreement with a third party. The term of the agreement is three years, unless
terminated by either party before the end of the term. In exchange for the
agreed upon financial advisory services and advertising (see Note 1(i)), the
Company is obligated to pay the third party an initial payment of $30,000
(expensed during 1998), a fee of $4,000 per month over term of the agreement,
and $250,000 non-interest bearing note payable, due October 11, 2001. The
Company has imputed interest at 11% per annum and charged interest expense,
accordingly. The indebtedness evidenced by the note shall be subordinate and
junior to any present or future debts and obligations, whether secured or
unsecured, arising from the borrowing of money from a bank, trust company,
insurance company, pension trust fund, or other financial institution.

In March 1999 and April 1999, the Company received convertible debt
financing in the amount of $206,250 from a third party. On June 22, 1999, the
Company issued a $1,000 promissory note to the third party in exchange for
extending the due dates of each note to October 31, 1999. The notes payable bear
interest at the rate of 10% per annum. On December 21, 1999, the third party
converted $150,000 of the notes payable into units as part of the Company's
December private placement. The Company recorded this conversion as a reduction
of notes payable and an increase to additional paid-in capital.

F-11
<PAGE> 72
INTELISPAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The remaining principal balance and accrued interest was repaid to the third
party from net proceeds of the December 1999 private placement.

In April 1999, the Company entered into a standstill agreement with another
corporation in connection with a proposed merger. Under that agreement, that
corporation advanced the sum of $800,000 to the Company over the period from
April 1999 through June 1999. In November 1999, the Company and the corporation
terminated the negotiations of the proposed merger. As a result, the Company and
the corporation entered into a settlement agreement in December 1999. As part of
the settlement agreement, the Company agreed to repay a negotiated amount of
$846,000 to the corporation in connection with the funds advanced to the Company
under the standstill agreement. The Company paid the $846,000 in December 1999
from the net proceeds of the December 1999 private placement.

During the period from July 1, 1999 through October 31, 1999, the Company
received convertible debt financing in the amount of $750,000. The notes payable
had a maturity date of June 30, 2000, bear interest at the rate of 15% per annum
and have a premium of 10% of the principal amount. In conjunction with the
notes, the Company also issued warrants to purchase 600,000 shares of the
Company's common stock at a price of $1.05 per share. On December 21, 1999, the
third party converted $856,000 into units in the private placement, representing
$750,000 of principal, $75,000 of unamortized note premium, and $31,000 of
accrued interest. The Company recorded this conversion as a reduction of notes
payable and an increase to additional paid-in capital. This amount is recorded
as part of the common shares issued in the December 1999 private placement. In
addition, the remaining $147,920 unamortized financing cost associated with the
warrants was charged to interest expense upon the conversion of the notes.

In October 1999, a lender made available to the Company up to $1.0 million
in bridge financing. The bridge financing was evidenced by bridge notes that
allowed the holder to convert the principal amount of the bridge notes into
units in a private placement of equity during December 1999. Between November
1999 and December 1999, the Company ultimately borrowed an aggregate of $595,000
from the lender and its designees. The lender and its designees converted the
bridge notes, pursuant to the existing conversion privileges of the lender, into
units at the first closing of the private placement on December 21, 1999. As a
result of the conversion, at the first closing of the private placement the
lender and its designees received 5.95 units consisting of 793,331 shares of
common stock and warrants to purchase 396,669 shares of common stock at an
exercise price of $0.75 per share. The conversion of bridge notes into units did
not result in any income statement effect, but rather a reduction in notes
payable and an increase in additional paid-in capital of an amount equal to
$377,136. This amount represents $595,000 of principal and $3,539 of accrued
interest less $221,403 of unamortized debt discount. This amount is recorded as
part of common shares issued in December 1999 private placement.

In connection with the bridge financing and to induce the lender to raise
additional capital for the Company, the Company issued to the lender and its
designees bridge warrants to purchase 10,000,000 shares of common stock at an
exercise price of $.01 per share, which the lender and its designees exercised
in December 1999. The bridge warrants

F-12
<PAGE> 73
INTELISPAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

were determined to have a value of $7.4 million based on a Black-Scholes model
calculated on the date of grant. The value of the bridge warrants was allocated
$349,582 to the bridge notes and $7,050,418 to the private placement of units
based on the ratio of debt to equity proceeds. The value of bridge warrants
allocated to the debt was to be amortized by the interest method over six
months, the term of the bridge notes. Upon conversion of the bridge notes, the
unamortized debt discount of $221,403 was recorded as an increase in additional
paid-in capital. The value of the warrants attributable to the bridge notes was
recorded as a discount and amortized to interest expense. Prior to the
conversion of the bridge notes, $128,179 was charged to interest expense. The
Company recognized the unamortized discount of $221,403, recorded as a component
of "Issuance of bridge warrants and shares to a placement agent in connection
with bridge financing and a private placement" in the consolidated statement of
shareholders' equity. The Company also recognized non-cash cost of capital of
$7,050,418 related to the warrants issued in connection with the December 1999
private placement offering in additional paid-in capital. This amount was
recorded as in increase and corresponding decrease to additional paid-in
capital.

(4) LEASE OBLIGATIONS

The Company has entered into lease agreements for office space and office
equipment. These leases have been accounted for as operating leases by the
Company. The Company expects to renew or replace the leases in the ordinary
course of business. The leases expire from 2000 to 2002 and total payments are
currently approximately $11,796 per month. Expense charged to operations related
to the leases during the years ending December 31, 1998 and 1999 was
approximately $126,129 and $216,355, respectively.

Future minimum payments required for years after 1999 are as follows:

<TABLE>
<S> <C>
Year ending December 31:
2000....................................................... $131,286
2001....................................................... 125,201
2002....................................................... 123,277
--------
$379,764
========
</TABLE>

(5) INCOME TAXES

For the years ended December 31, 1998 and 1999, the Company generated a net
loss for both financial reporting and income tax purposes, therefore no income
tax provision has been recorded.

F-13
<PAGE> 74
INTELISPAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Deferred tax assets
(liabilities) are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1999
----------- -----------
<S> <C> <C>
Allowance for bad debt...................... $ -- $ 70,666
Net operating loss carryforwards............ 1,817,511 3,910,913
Differences in book and tax basis
depreciation and amortization............. (20,490) (36,955)
----------- -----------
Total deferred tax assets................. 1,797,021 3,944,624
Valuation allowance....................... (1,797,021) (3,944,624)
----------- -----------
Net deferred tax assets................... $ -- $ --
=========== ===========
</TABLE>

The valuation allowance increased by $1,619,402 and $2,147,603 for the
years ended December 31, 1998 and 1999, respectively.

The Company has available approximately $9,777,000 in net operating losses
which may be carried forward to offset future federal taxable income for fifteen
years and state taxable income for five years. The Internal Revenue Code
substantially restricts the ability of a corporation to utilize existing net
operating losses and credits in the event of an "ownership change." The issuance
of preferred stock may have resulted in multiple ownership changes since
inception of the Company. The federal net operating loss carryforward may be
subject to an annual limitation. Any unused annual limitation can be carried
over and added to the succeeding year's annual limitation within the allowable
carryforward period. Future changes in ownership may result in additional
limitations.

(6) SHAREHOLDERS' EQUITY

(a) STOCK PURCHASE AGREEMENT

In September 1997, the Company completed an equity financing with a small
group of investors. The Stock Purchase Agreement ("SPA") originally called for
an initial investment of $660,000, issuance of 918,474 shares, and continued
investment at periodic intervals culminating in a cumulative investment of
$3,500,000 and ownership of 49% of the total common stock outstanding. In
January 1998, the original SPA was nullified and replaced with a revised SPA
resulting in a refund of the initial investment. The revised SPA called for an
initial investment of $600,000, the issuance of 303,630 shares in addition to
the 918,474 previously issued and provided for 5,784,639 incentive shares to be
issued to the investors covered under the revised SPA for their efforts in
raising additional capital in the January 1998 private placement offering.

(b) PRIVATE PLACEMENT OFFERINGS

The Company completed two equity financings during 1998. A private
placement offering at $2.00 per share was begun in January 1998, resulting in
net proceeds of $3.325 million. A second equity offering was begun in July 1998
that raised additional capital of

F-14
<PAGE> 75
INTELISPAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$2,365,005 net of $195,000 in costs. The July offering was priced at $7.50 per
unit, which consisted of one share of common stock and one-half of a warrant.
The warrant granted the holder the option to purchase additional shares at $8.00
if exercised within one year of purchase or $8.50 if exercised in the second
year. A total of 170,667 warrants were originally issued and all remained
outstanding as of December 31, 1998. The Company had made verbal commitments to
the July investors that they will be offered the option to exchange their
investment to the same terms and conditions of the Company's next private
offering. The Company honored those commitments in August of 1999. The 170,667
warrants were all cancelled in the exchange.

In March 1999, the Company completed a private placement offering in which
542,001 shares of common stock were issued at $1.40 per share for net proceeds
of approximately $635,200.

In December 1999, the Company commenced a private placement offering of up
to 250 units at a price of $100,000 per unit. The placement agent had a right to
sell an additional 50 units to cover any over-allotments. Each unit consists of
(a) 133,333 shares of common stock and (b) a warrant to purchase 66,667 shares
of common stock at an exercise price of $0.75 per share. The warrants are
callable by the Company under certain circumstances. The Company issued to the
placement agent seven-year warrants to purchase, at an exercise price of $0.75
per share, 33.33% of the shares of common stock (a) included in the units sold,
and (b) issuable upon exercise of the warrants. The following table presents
certain information regarding the units solid in this private placement during
1999:

<TABLE>
<S> <C>
Units sold.................................................. 139.51
Shares of common stock issued............................... 18,601,287
Warrants issued at $0.75 per share.......................... 9,300,713
Agent warrants issued at $0.75 per share.................... 9,300,667
Value of bridge warrants allocated to cost of capital....... $ 7,050,418
Value of 60,000 share retainer as cost of capital........... $ 31,800
Commissions paid to placement agent......................... $ 934,920
Structuring fees paid to placement agent.................... $ 400,680
Offering expenses........................................... $ 347,808
</TABLE>

The Company entered into an agreement with a consultant to assist with the
merger completed in July 1998. The agreement called for a cash payment of
$75,000 and issuance of 102,500 post-merger shares upon successful completion of
the merger. The Company recorded total expense of $275,000 in 1998 related to
the agreement.

During 1999, the Company entered into agreements with a consultant to
provide market consulting services. The agreements called for the issuance of
102,857 common stock shares in exchange for the fair value of consulting
services. The Company recorded total expense of $127,714 in 1999 related to the
agreements.

F-15
<PAGE> 76
INTELISPAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In January 1999, the Company entered into an agreement with a public
relations and direct marketing advertising firm to provide various consulting
and marketing services to the Company. In exchange for the services, the Company
issued 108,000 shares of the Company's restricted common stock to the firm. The
Company recorded total expense of $270,000 in 1999 related to the agreement. As
part of the agreement, the firm also purchased 42,000 shares of the Company's
common stock valued at $58,800 as part of the Company's private placement
offering. In addition, the firm was granted a warrant to purchase 200,000 shares
of the Company's common stock, exercisable as follows: (1) 100,000 shares
exercisable at $7.00 per share, and (2) 100,000 shares exercisable at $9.00 per
share. The term of the warrant will expire twelve (12) months from the day the
shares underlying the warrants are registered. The Company used the
Black-Scholes option pricing model to value the warrants on the date of grant
and again at December 31, 1999 and recorded total expense of $502,414 in 1999
related to the warrants. These warrants were marked to market in accordance with
variable plan accounting. See Note 11.

In July 1999, the Company entered into an agreement with a consultant to
resolve outstanding payment issues due the consultant for services provided by
the consultant in 1998. As part of the agreement, the Company issued 21,551
shares of restricted common stock to the consultant, in lieu of cash payment of
$23,491, for full payment of the amount due for prior services.

(d) EXCHANGE OF PRIOR INVESTMENTS FOR PREFERRED STOCK

In August 1999, seven investors from a July 1998 private placement elected
to exchange their original investments into the Company's most recent private
placement. These investors originally invested a total of $2.56 million in the
July 1998 offering by purchasing 341,333 units at $7.50 per unit. Each unit
consisted of a share of common stock and a warrant to purchase an additional
half share of common stock. The original investment included the Company's
commitment to permit these investors to exchange their investments, at the
option of the investor, for an investment in the Company's next private
offering. Each investor exercised this right and exchanged their units in the
August 1999 private placement, in which the Company offered Series A preferred
shares at $100 per share. These preferred shares include a 10% annual dividend,
best efforts registration rights, and conversion into 50,000 shares of common
stock (an effective cost of $2 per share of common stock). These preferred
shares also have a conversion right into 50 shares of common stock, exercisable
at the option of the holder at any time beginning in February 2000. No new
investors purchased securities in the August 1999 offering.

(e) WARRANTS

As of December 31, 1999, the Company had outstanding 19,815,514 warrants at
exercise prices ranging from $0.75 to $9.00 per share. Subsequent to year-end,
in connection with the Company's private placements of units, the Company issued
warrants to purchase 23,198,771 shares of common stock at an exercise price of
$0.75 per share.

F-16
<PAGE> 77
INTELISPAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(f) COST OF CAPITAL

During fiscal year 1999, the Company recorded cost of capital related to a
non-refundable retainer of 60,000 shares of common stock issued to the placement
agent in the private placement. The Company recorded the cost associated with
the issuance of the retainer to cost of capital, reflected as a reduction to
additional paid-in capital, in the Company's consolidated financial statements
as of December 31, 1999. The shares were valued at $0.53 per share, representing
the closing price of the Company's common stock on October 29, 1999, the date
the Company signed a commitment letter with the placement agent in the private
placement. The Company also recorded cost of capital of $128,179 related to the
amortized portion of the debt discount related to the bridge notes for the
period the bridge notes were outstanding during fiscal 1999. See Note 3.

(7) PENSION PLAN

The Company has a SIMPLE Plan (the Plan), which covers all employees who
have earned or are expected to earn at least $5,000 during the year or who have
been employed by the Company for six months. Eligible employees may elect to
defer up to $6,000 each year. The Company matches employee deferrals up to 3% of
an employee's salary. During December 31, 1998 and 1999, the Company contributed
$18,844 and $28,135, respectively, to the Plan.

(8) STOCK OPTION PLAN

The Company adopted The Intelispan, Inc. Performance Equity Plan (the
"Option Plan") in September 1998. The Option Plan provides for the issuance of
stock options (incentive and non-qualified), restricted stock grants and other
stock-based awards granting the right to purchase up to 2,704,670 shares of
common stock to employees, directors and consultants. Under the stock option
provisions of the Option Plan, options may be granted to purchase shares of the
Company's common stock at not less than fair market value at the date of grant,
and are exercisable for a period not exceeding ten years from that date.

Effective with the adoption of the Option Plan, the Company has adopted the
disclosure requirements of SFAS No. 123, Accounting for Stock-Based
Compensation. As permitted under SFAS No. 123, the Company will measure
stock-based compensation expense based on the principles of APB No. 25 for the
excess of the market price at the grant date over the amount the employee must
pay for the stock. SFAS No. 123 requires disclosure of pro forma net earnings
and pro forma net earnings per share as if the fair value based method had been
applied in measuring compensation expense for awards granted.

At December 31, 1999 there were approximately 175,000 shares available for
grant under the Option Plan. The per share weighted-average fair value of stock
options granted under the Option Plan for the year ended December 31, 1998 and
1999 were $0.79 and $1.96, respectively, based on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions: expected dividend yield of 0%, expected volatility of 204%,
risk-free interest rate of 6% and an expected life of 1.5 years.

F-17
<PAGE> 78
INTELISPAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes the activity under this plan:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE EXERCISE
OF OPTIONS PRICE PRICE EXERCISABLE
---------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Outstanding December 31, 1997... -- -- -- --
Granted....................... 1,746,600 $4.00-$9.00 $4.21
Share grants.................. (5,000)
Forfeitures................... (8,500) $4.00 $4.00
--------- ----------- ----- ---------
Outstanding December 31, 1998... 1,733,100 $4.00-$9.00 $4.23 716,880
Granted....................... 1,044,708 $0.75-$3.63 $1.96
Share grants.................. (262,408)
Forfeitures................... (253,438) $2.50-$9.00 $3.52
--------- ----------- ----- ---------
Outstanding December 31, 1999... 2,261,962 $0.75-$3.63 $2.51 1,342,693
========= =========== ===== =========
</TABLE>

The following table summarizes information about the stock options
outstanding at December 31, 1999:

<TABLE>
<CAPTION>
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
RANGE OF OPTIONS REMAINING EXERCISE OPTIONS EXERCISE
EXERCISE PRICE OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- -------------- ----------- --------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.75 - $3.63 2,261,962 8.70 $2.51 1,342,693 $2.47
--------- ---- ----- --------- -----
</TABLE>

In 1998, two employees entered into an agreement with the Company that
grants them a put right covering 30,000 of their options. The put granted them
the right to have the Company purchase half of their shares at market value
during the week of January 18, 1999 and the remaining half at market value
during the week of June 14, 1999. Market value was capped at $6.00. The
employees exercised their put rights during 1999. The Company purchased a total
of 30,000 shares at a total market value of $76,800.

On January 15, 1999, the Board of Directors of the Company approved a
repricing of incentive stock options and non-qualified options granted to
employees and non-employee directors on September 18, 1998. The previous
exercise price of $4.00 per share was repriced to $2.50 per share. Options for
1,651,100 shares were repriced.

Common stock received through the exercise of non-qualified options results
in a tax deduction for the Company equivalent to the taxable income recognized
by the optionee at time of exercise. For financial reporting purposes, the tax
effect of this deduction is accounted for as a credit to
additional-paid-in-capital rather than as a reduction of income tax expense.
There were no exercises of such options during the period ended December 31,
1999. Stock grants for 232,408 restricted shares exercisable at no cost to the
holder were awarded to consultants in 1999 under the Option Plan. Accordingly,
$353,705 of expense was recorded for fiscal 1999.

F-18
<PAGE> 79
INTELISPAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company applies APB Opinion No. 25 in accounting for its various stock
plans and, accordingly, no compensation costs for the Option Plan are reflected
in the consolidated financial statements. Had the Company determined
compensation cost in accordance with SFAS No. 123, the Company's net loss per
share would have increased the pro forma amounts indicated below:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1998 1999
----------- ----------
<S> <C> <C>
Net loss:
As reported........................................ $(5,210,560) (5,806,864)
=========== ==========
Pro forma (unaudited).............................. $(6,714,255) (6,573,773)
=========== ==========
Net loss per common share:
As reported........................................ $ (0.32) (0.28)
=========== ==========
Pro forma (unaudited).............................. $ (0.41) (0.32)
=========== ==========
</TABLE>

(9) SIGNIFICANT SUPPLIER

The Company currently contracts its private IP network backbone services
from an independent third party. This network serves as the platform for most of
the Company's services and is a key enabling component of the Company's product
offering. The current contract for supply of the network expires in September
2003 and contains automatic one year renewal options unless canceled by either
party. Additionally, the supplier can elect to discontinue offering the service
upon sixty days notice. The contract also contains provisions for guaranteed
minimum monthly billing commitments that the Company must meet. Shortfalls in
billed revenue for each of the first twelve months ending April 1999 are added
to the guaranteed commitment levels in the corresponding months of year three of
the contract. Beginning with the first month of year two, May 1999, a minimum
monthly payment of $100,000 will be due each month thereafter.

In November 1999, the third party informed the Company that it would
suspend the payment of the Company's monthly minimum usage commitment. The
Company continues to accrue the $100,000 monthly minimum usage under this
commitment agreement, and all amounts payable under this agreement will be due
to the third party upon 30 days' notice to the Company.

(10) CONTINGENCIES

The Company is involved in litigation and claims arising in the normal
course of operations. In the opinion of management, based on consultation with
legal counsel, losses, if any, from this litigation are immaterial.

F-19
<PAGE> 80
INTELISPAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(11) SUBSEQUENT EVENTS

During January 2000, the Company completed its private placement of 250
units, including the placement agent's exercise of the over-allotment option of
50 units. The following table presents certain information regarding the private
placement completed during January 2000:

<TABLE>
<S> <C>
Units sold................................................ 160.49
Shares of common stock issued............................. 21,398,613
Warrants issued at $0.75 per share........................ 10,699,387
Agent warrants issued at $0.75 per share.................. 10,699,333
Commissions paid to the placement agent................... $ 1,123,430
Structuring fees paid to the placement agent.............. $ 481,470
Offering expenses......................................... $ 52,500
</TABLE>

During February 2000, the Company completed another private placement of up
to 14 units at a price of $100,000 per unit. Each unit consists of (a) 133,333
shares of common stock and (b) a warrant to purchase 66,667 shares of common
stock at an exercise price of $0.75 per share. In connection with the offering,
the Company paid the placement agent (1) a commission equal to 7% of the
aggregate purchase price of the units sold, and (2) a structuring fee equal to
3% of the aggregate purchase price of the units sold. The Company also issued to
the placement agent warrants to purchase, at an exercise price of $0.75 per
share, 33.33% of the shares of common stock (a) included in the units sold, and
(b) issuable upon exercise of the warrants. The following table presents certain
information regarding the units sold in the private placement during February
2000:

<TABLE>
<S> <C>
Units sold................................................. 13.50
Shares of common stock issued.............................. 1,799,996
Warrants issued at $0.75 per share......................... 900,005
Agent warrants issued at $0.75 per share................... 900,000
Commissions paid to Commonwealth........................... $ 94,500
Structuring fees paid to Commonwealth...................... $ 40,500
Offering expenses.......................................... $ 50,000
</TABLE>

During April 2000, as part of a negotiated settlement with the consultant
referenced in Note 6(c), the consultant returned to the Company 8,000 restricted
shares, 42,000 unrestricted shares, and the warrants to purchase 200,000 shares.

F-20
<PAGE> 81

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

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK.

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

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................. 2
Risk Factors........................ 6
Forward Looking Statements.......... 16
Use of Proceeds..................... 16
Price Range of Common Stock......... 17
Dividend Policy..................... 18
Selected Consolidated Financial
Data.............................. 19
Management's Discussion and
Analysis.......................... 20
Business............................ 24
Management.......................... 31
Principal and Selling
Shareholders...................... 45
Certain Transactions................ 49
Description of Securities........... 52
Plan of Distribution................ 57
Legal Matters....................... 59
Experts............................. 59
Where You Can Find Additional
Information....................... 59
Index to Consolidated Financial
Statements........................ F-1
</TABLE>

- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
2,253,750 SHARES OF
COMMON STOCK
INTELISPAN, INC.

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

PROSPECTUS
-------------------------

, 2000
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 82

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Our Amended and Restated Articles of Incorporation provide that a director
of our company will not be personally liable to our company or our shareholders
for monetary damages for conduct as a director, except for

- acts or omissions involving intentional misconduct by the director or a
knowing violation of law by the director,

- assenting to an unlawful distribution where it is established that the
director did not perform the director's duty of loyalty to our company,
or

- any transaction from which the director will personally receive a benefit
in money, property, or services to which the director is not legally
entitled.

- acts or omissions of the director or officer are found to be intentional
misconduct or a knowing violation of law,

- a director assents to an unlawful distribution and it is established that
such director did not perform the director's duty of loyalty to our
company; or

II-1
<PAGE> 83

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the expenses in connection with the offering
described in the Registration Statement. All such expenses are estimates except
for the SEC registration fee.

<TABLE>
<S> <C>
SEC registration fee........................................ $ 2,116
Accountants' fees and expenses.............................. $ 20,000
Legal fees and expenses..................................... $ 60,000
Printing and engraving expenses............................. $ 80,000
Transfer agent and registrar fees........................... $ 2,000
Miscellaneous fees.......................................... $ 2,884
--------
Total.................................................. $167,000
========
</TABLE>

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

In November 1996 through September 1997, we as Equipment Leasing & Sales
Corporation, or ELSC, issued 3,500,000 shares of common stock to our founders
for a total purchase price of $15,250. We issued these shares in reliance on an
exemption under Section 4(2) of the Securities Act as a transaction by an issuer
not involving a public offering.

In February 1997, we, as ELSC, completed an offering in which we issued to
approximately 15 accredited investors 266,000 shares of common stock for a total
of $53,200. We issued these shares in reliance on an exemption under Section
4(2) of the Securities Act as a transaction by an issuer not involving a public
offering and Rule 504 of Regulation D of the General Rules and Regulations under
the Securities Act.

In January 1998, we, as Intelispan Ventures, Inc., or IVI, completed an
offering in which we issued to five international investors 1,383,139 shares of
Class A common stock for a total purchase price of $600,000. These shareholders
received rights to acquire additional Class A and B Shares and incentive
warrants to acquire additional Class B shares depending upon the amount of funds
raised in our next offering. This offering was completed, in part, to nullify a
stock purchase agreement begun in September 1997. We issued these shares in
reliance on an exemption under Section 4(2) of the Securities Act as a
transaction by an issuer not involving a public offering and Rule 506 of
Regulation D of the General Rules and Regulations under the Securities Act.

In March 1998, we, as IVI, completed an offering in which we issued to 21
accredited investors 1,662,500 shares of Class A common stock for a total
purchase price of $3.325 million. We issued these shares in reliance on an
exemption under Section 4(2) of the Securities Act as a transaction by an issuer
not involving a public offering and Rule 506 of Regulation D of the General
Rules and Regulations under the Securities Act.

In June 1998, we, as ELSC, completed an offering in which we issued to
fourteen accredited investors 2,390,000 shares of common stock for a total
purchase price of $239,000. We issued these shares in reliance on an exemption
under Rule 504 of Regulation D of the General Rules and Regulations Under the
Securities Act.
II-2
<PAGE> 84

In July 1998, we, as ELSC, issued 15,235,000 shares of common stock to the
shareholders of IVI in connection with the merger of the companies. For each
1,000 shares of common stock held, each IVI shareholder received 884 shares of
ELSC. We issued these shares in reliance on an exemption under Section 4(2) of
the Securities Act as transactions by an issuer not involving any public
offering and Rule 506 of Regulation D of the General Rules and Regulations Under
the Securities Act.

In September 1998, we completed an offering in which we issued units at a
price of $7.50 per unit. Each unit consisted of one share of common stock and a
warrant to purchase one-half of a share of common stock. We sold units to eight
accredited investors, and as a result issued 341,334 shares of common stock for
a total purchase price of $2.56 million. We issued these shares in reliance on
an exemption under Section 4(2) of the Securities Act and Rule 506 of Regulation
D of the General Rules and Regulations Under the Securities Act. In August 1999,
these eight investors exchanged the amount of investment value that they
purchased in the September 1998 unit offering into Series A 10% Convertible
Preferred Stock at $100 per share. Holders of Series A Preferred Stock are
entitled to voting rights, and preferences in dividend and liquidation payments
over the holders of common stock. See "Description of Securities -- Preferred
Stock -- Series A Preferred Stock." Each share of Series A Preferred Stock is
convertible into 50 shares of common stock beginning February 2000. In
connection with this exchange, we granted the holders of Series A Preferred
Stock certain registration rights with respect to the underlying common stock.
We issued the Series A Preferred Stock in reliance upon Section 4(2) of the
Securities Act and Rule 506 of Regulation D of the General Rules and Regulations
under the Securities Act.

In March 1999, we completed an offering in which we issued to seven
accredited investors, one of which was an international investor, 542,001 shares
of common stock for a total purchase price of $760,000. We issued these shares
in reliance on an exemption under Section 4(2) of the Securities Act and Rule
504 of Regulation D of the General Rules and Regulations under the Securities
Act.

In March 1999 and April 1999, we sold notes totaling $206,250 to one
international corporate accredited investor. In June, we issued an additional
$1,000 promissory note to this investor to extend the maturity date of these
notes to October 31, 1999. We issued these notes in reliance on an exemption
under Section 4(2) of the Securities Act as a transaction by an issuer not
involving a public offering. The investor converted $150,000 of the amounts
outstanding into units in the first closing of our private placement on December
21, 1999. The Company recorded this conversion as a reduction of notes payable
and an increase to additional paid-in capital. The remaining principal balance
and accrued interest was repaid to the third party from net proceeds of the
December 1999 private placement.

In July 1999 through October 1999, we sold to two accredited investors an
aggregate of $750,000 principal amount of notes. In connection with the issuance
of the notes, we issued to the holders warrants to purchase 600,000 shares of
common stock at an exercise price of $1.05 per share. At that time, we were
anticipating merging with another corporation. If we completed the merger, the
notes automatically converted into common stock. The notes were due May 2000. We
issued these notes in reliance on an exemption under Section 4(2) of the
Securities Act as a transaction by an issuer not involving a public offering.
Because the merger with the other corporation was not completed, at the first
closing of the private placement on December 21, 1999, the investors converted
$856,000 into units in the private placement, representing $750,000 of
principal, $75,000 of

II-3
<PAGE> 85

unamortized note premium, and $31,000 of accrued interest. The Company recorded
this conversion as a reduction of notes payable and an increase to additional
paid-in capital. In addition, the remaining $147,920 unamortized financing cost
associated with the warrants was charged to interest expense upon the conversion
of the notes.

In October 1999, ComVest, an affiliate of Commonwealth, made available to
us up to $1.0 million in a bridge financing. The bridge financing was evidenced
by bridge notes that allowed the holder to convert the principal amount of the
bridge notes into units in a private placement of equity during December 1999.
Between November 1999 and December 1999, we ultimately borrowed an aggregate of
$595,000 from ComVest and its designees. At the first closing of the private
placement on December 21, 1999, ComVest and its designees converted the bridge
notes into 5.95 units in the private placement, consisting of 793,331 shares of
common stock and unit warrants to purchase 396,669 shares of common stock at an
exercise price of $0.75 per share. The conversion of bridge notes into units did
not result in any income statement effect, but rather a reduction in notes
payable and an increase in additional paid-in capital of $377,136. This amount
represents $595,000 of principal and $3,539 of accrued interest less $221,403 of
unamortized debt discount. In connection with the bridge financing, we issued to
ComVest and its designees bridge warrants to purchase 10,000,000 shares of
common stock at an exercise price of $.01 per share, which ComVest and its
designees exercised prior to the closing of the private placement. The bridge
warrants were determined to have a value of $7.4 million based on a
Black-Scholes model calculated on the date of grant. The value of the bridge
warrants was allocated $349,582 to the bridge notes and $7,050,418 to the
private placement of units based on the ratio of debt to equity proceeds. The
value of bridge warrants allocated to the debt was to be amortized by the
interest method over six months, the term of the bridge notes. Upon conversion
of the bridge notes, the unamortized debt discount of $221,403 was recorded as
an increase in additional paid-in capital. ComVest sold a portion of the bridge
warrants to affiliates of Commonwealth. We issued the bridge notes and bridge
warrants in reliance on an exemption under Section 4(2) of the Securities Act as
a transaction by an issuer not involving a public offering.

In December 1999 and January 1999, we offered and sold units at a price of
$100,000 per unit in a private placement. We offered the units only to persons
that were "accredited investors," as defined under the Securities Act and
Regulation D promulgated thereunder. Each unit consisted of 133,333 shares of
common stock and a warrant to purchase 66,667 shares of common stock at an
exercise price of $0.75 per share. Commonwealth Associates, L.P. offered the
units on behalf of us as the placement agent in the offering on a "best efforts"
basis. In connection with this offering, Commonwealth received (i) a commission
equal to 7% of the aggregate purchase price of the units sold, and (ii) a
structuring fee equal to 3% of the aggregate purchase price of the units sold.
We also issued to Commonwealth seven-year agent warrants to purchase, at an
exercise price of $0.75 per share, 33.33% of the shares of common stock (a)
included in the units sold, and (b) issuable upon exercise of the unit warrants
included in the units sold. The following

II-4
<PAGE> 86

table presents certain information regarding our private placement of 300 units
during December 1999 and January 2000:

<TABLE>
<CAPTION>
DECEMBER JANUARY
1999 2000 TOTAL
---------- ---------- ----------
<S> <C> <C> <C>
Units sold............................... 139.51 160.49 300.00
Shares of common stock issued............ 18,601,287 21,398,613 39,999,900
Warrants issued at $0.75 per share....... 9,300,713 10,699,387 20,000,100
Agent warrants issued at $0.75 per
share.................................. 9,300,667 10,699,333 20,000,000
Value of bridge warrants allocated to
cost of capital........................ $7,050,418 -- $7,050,418
Value of 60,000 share retainer as cost of
capital................................ $ 31,800 -- $ 31,800
Commissions paid to Commonwealth......... $ 934,920 $1,123,430 $2,058,350
Structuring fees paid to Commonwealth.... $ 400,680 $ 481,470 $ 882,150
Offering expenses........................ $ 347,808 $ 52,500 $ 336,431
</TABLE>

As of the date of the private placement, ComVest, an affiliate of
Commonwealth, had lent us approximately $595,000 evidenced by bridge notes. At
the first closing of the private placement on December 21, 1999, ComVest and its
designees converted the bridge notes into 5.95 units in the offering pursuant to
the existing conversion privileges and received 793,331 shares of common stock
and unit warrants to purchase 396,669 shares of common stock. At that closing,
we also converted approximately $1.0 million of other short-term indebtedness
issued in return for capital financing and approximately $116,500 of deferred
compensation payable to certain directors and officers into units in the
offering. These amounts were converted into units at the option of the holders.
In connection with these conversions, we reduced short-term indebtedness and
accrued compensation payable and increased capital stock and additional paid-in
capital for the respective amounts. We issued the units and agent warrants in
reliance on an exemption under Section 4(2) of the Securities Act and Rule 506
of Regulation D of the Securities Act as a transaction by an issuer not
involving a public offering.

During February 2000, we offered and sold units at a price of $100,000 per
unit in another private placement private placement of 13.5 units. We offered
the units only to persons that were "accredited investors" as defined under the
Securities Act of Regulation D promulgated thereunder. Each unit consisted of
133,333 shares of common stock and a warrant to purchase 66,667 shares of common
stock at an exercise price of $0.75 per share. Commonwealth Associates, L.P.
offered the units on behalf of us as the placement agent in the offering on a
"best efforts" basis. In connection with the offering, Commonwealth received (1)
a commission equal to 7% of the aggregate purchase price of the units sold, and
(2) a structuring fee equal to 3% of the aggregate purchase price of the units
sold. We also issued to Commonwealth seven-year agent warrants to purchase, at
an exercise price of $0.75 per share, 33.33% of the shares of common stock (a)
included in the units sold, and (b) issuable upon exercise of the warrants
included in the units sold.

II-5
<PAGE> 87

The following table presents certain information regarding our private placement
of 13.5 units during February 2000:

<TABLE>
<CAPTION>
FEBRUARY 2000
-------------
<S> <C>
Units sold................................................ 13.50
Shares of common stock issued............................. 1,799,996
Warrants issued at $0.75 per share........................ 900,005
Agent warrants issued at $0.75 per share.................. 900,000
Commissions paid to Commonwealth.......................... $94,500
Structuring fees paid to Commonwealth..................... $40,500
Offering expenses......................................... $50,000
---------
</TABLE>

We issued the units and agent warrants in reliance on an exemption under Section
4(2) of the Securities Act and Rule 506 of Regulation D of the Securities Act as
a transaction by an issuer not involving a public offering.

ITEM 27. EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
3.1 Amended and Restated Articles of Incorporation of the
Registrant**
3.2 Bylaws of the Registrant**
4.1 Specimen of Common Stock Certificate**
4.2 Specimen of Series A 10% Convertible Participating Preferred
Stock Certificate**
5 Opinion of Greenberg Traurig, a partnership of limited
liability entities**
10.1 The GridNet International, Inc. Program Enrollment Terms in
connection with its agreement for Data Communication
Products or Services dated April 9, 1998 (and the Terms and
Conditions attached thereto dated February 1998) by and
between GridNet International, Inc. and the Registrant**+
10.2 Information Technology Supply Agreement dated September 10,
1997 between Contego, LLC and Security Domain Pty Limited**
10.3 Strategic Alliance Agreement dated December 11, 1997 by and
between Contego, LLC and GridNet International, Inc.**+
10.4 Distributor Agreement dated January 15, 1999 between
Contego, LLC and the Registrant**
10.5 Software License and Distribution Agreement dated June 18,
1998 by and between the Registrant and Cyclone Software
Corporation**
10.6 Altiga Networks, Inc. Authorized Distributor Agreement dated
June 23, 1999 between Altiga Networks, Inc. and the
Registrant**+
10.7 Performance Equity Plan**
10.8 The Registrant's Severance Plan and Summary Plan
Description**
10.9 2000 Equity Incentive Compensation Plan
</TABLE>

II-6
<PAGE> 88

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
23.1 Consent of Greenberg Traurig, a partnership of limited
liability entities (included in Exhibit 5)**
23.2 Consent of KPMG LLP
23.3 Consents of Proposed Directors**
24 Power of Attorney of Directors and Executive Officers
(included on Signature Page of the Registration Statement)**
27.1 Financial Data Schedule for Fiscal Year Ended December 31,
1997**
27.2 Financial Data Schedule for Nine Months Ended September 30,
1998**
27.3 Financial Data Schedule for Fiscal Year Ended December 31,
1998**
27.4 Financial Data Schedule for Nine Months Ended September 30,
1999**
27.5 Financial Data Schedule for Fiscal Year Ended December 31,
1999
</TABLE>

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

** Previously filed.

+ Portions of the exhibit have been omitted pursuant to a request for
confidential treatment.

II-7
<PAGE> 89

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the city of
Alpharetta, state of Georgia, on May 2, 2000.

INTELISPAN, INC.

By: /s/ TRAVIS LEE PROVOW
------------------------------------
Travis Lee Provow
President and Chief Executive
Officer
(Principal Executive Officer)

In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.

* Chairman of the Board of May 2, 2000
- --------------------------------------------------- Directors
Maurice J. Gallagher, Jr.

/s/ TRAVIS LEE PROVOW President, Chief Executive May 2, 2000
- --------------------------------------------------- Officer, and Director
Travis Lee Provow (Principal Executive
Officer)

/s/ PETER A. NELSON Vice Chairman of the Board of May 2, 2000
- --------------------------------------------------- Directors, Vice
Peter A. Nelson President -- Business
Development, and Founder

/s/ SCOT A. BRANDS Chief Financial Officer May 2, 2000
- --------------------------------------------------- (Principal Accounting
Scot A. Brands Officer)

* Director May 2, 2000
- ---------------------------------------------------
Michael S. Falk

* Director May 2, 2000
- ---------------------------------------------------
Philip R. Ladouceur

*By: /s/ TRAVIS LEE PROVOW
---------------------------------------------
Attorney-in-fact
</TABLE>

II-8
<PAGE> 90

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
3.1 Amended and Restated Articles of Incorporation of the
Registrant**
3.2 Bylaws of the Registrant**
4.1 Specimen of Common Stock Certificate**
4.2 Specimen of Series A 10% Convertible Participating Preferred
Stock Certificate**
5 Opinion of Greenberg Traurig, a partnership of limited
liability entities**
10.1 The GridNet International, Inc. Program Enrollment Terms in
connection with its agreement for Data Communication
Products or Services dated April 9, 1998 (and the Terms and
Conditions attached thereto dated February 1998) by and
between GridNet International, Inc. and the Registrant**+
10.2 Information Technology Supply Agreement dated September 10,
1997 between Contego, LLC and Security Domain Pty Limited**
10.3 Strategic Alliance Agreement dated December 11, 1997 by and
between Contego, LLC and GridNet International, Inc.**+
10.4 Distributor Agreement dated January 15, 1999 between
Contego, LLC and the Registrant**
10.5 Software License and Distribution Agreement dated June 18,
1998 by and between the Registrant and Cyclone Software
Corporation**
10.6 Altiga Networks, Inc. Authorized Distributor Agreement dated
June 23, 1999 between Altiga Networks, Inc. and the
Registrant**+
10.7 Performance Equity Plan**
10.8 The Registrant's Severance Plan and Summary Plan
Description**
10.9 2000 Equity Incentive Compensation Plan
23.1 Consent of Greenberg Traurig, a partnership of limited
liability entities (included in Exhibit 5)**
23.2 Consent of KPMG LLP
23.3 Consents of Proposed Directors**
24 Power of Attorney of Directors and Executive Officers
(included on Signature Page of the Registration Statement)**
27.1 Financial Data Schedule for Fiscal Year Ended December 31,
1997**
27.2 Financial Data Schedule for Nine Months Ended September 30,
1998**
27.3 Financial Data Schedule for Fiscal Year Ended December 31,
1998**
27.4 Financial Data Schedule for Nine Months Ended September 30,
1999**
27.5 Financial Data Schedule for Fiscal Year Ended December 31,
1999
</TABLE>

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

** Previously filed.

+ Portions of the exhibit have been omitted pursuant to a request for
confidential treatment.

<PAGE> 1
EXHIBIT 10.9

INTELISPAN, INC.

2000 EQUITY INCENTIVE COMPENSATION PLAN
<PAGE> 2
INTELISPAN, INC.

2000 EQUITY INCENTIVE COMPENSATION PLAN

<TABLE>
<S> <C> <C>
1. Purpose..................................................................................................1
2. Definitions..............................................................................................1
3. Administration...........................................................................................4
(a) Authority of the Committee......................................................................4
(b) Manner of Exercise of Committee Authority.......................................................4
(c) Limitation of Liability.........................................................................5
4. Stock Subject to Plan....................................................................................5
(a) Limitation on Overall Number of Shares Subject to Awards........................................5
(b) Application of Limitations......................................................................5
5. Eligibility; Per-Person Award Limitations................................................................5
6. Specific Terms of Awards.................................................................................6
(a) General.........................................................................................6
(b) Options.........................................................................................6
(c) Stock Appreciation Rights.......................................................................7
(d) Restricted Stock................................................................................8
(e) Deferred Stock..................................................................................9
(f) Bonus Stock and Awards in Lieu of Obligations..................................................10
(g) Dividend Equivalents...........................................................................10
(h) Other Stock-Based Awards.......................................................................10
7. Certain Provisions Applicable to Awards.................................................................11
(a) Stand-Alone, Additional, Tandem, and Substitute Awards.........................................11
(b) Term of Awards.................................................................................11
(c) Form and Timing of Payment Under Awards; Deferrals.............................................11
(d) Exemptions from Section 16(b) Liability........................................................11
8. Performance and Annual Incentive Awards.................................................................12
(a) Performance Conditions.........................................................................12
(b) Performance Awards Granted to Designated Covered Employees.....................................12
(c) Annual Incentive Awards Granted to Designated Covered Employees................................14
(d) Written Determinations.........................................................................15
(e) Status of Section 8(b) and Section 8(c) Awards Under Code Section 162(m).......................15
9. Change in Control.......................................................................................15
(a) Effect of "Change in Control.".................................................................15
(b) Definition of "Change in Control"..............................................................16
(c) Definition of "Change in Control Price.".......................................................17
10. General Provisions......................................................................................17
(a) Compliance With Legal and Other Requirements...................................................17
(b) Limits on Transferability; Beneficiaries.......................................................17
(c) Adjustments....................................................................................18
(d) Taxes..........................................................................................18
(e) Changes to the Plan and Awards.................................................................19
</TABLE>

(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
(f) Limitation on Rights Conferred Under Plan......................................................19
(g) Unfunded Status of Awards; Creation of Trusts..................................................19
(h) Nonexclusivity of the Plan.....................................................................20
(i) Payments in the Event of Forfeitures; Fractional Shares........................................20
(j) Governing Law..................................................................................20
(k) Plan Effective Date and Stockholder Approval; Termination of Plan..............................20
</TABLE>

(ii)
<PAGE> 4
INTELISPAN, INC.

2000 EQUITY INCENTIVE COMPENSATION PLAN

1. Purpose. The purpose of this 2000 Equity Incentive Compensation Plan
(the "Plan") is to assist Intelispan, Inc., a Washington corporation (the
"Company") and its subsidiaries in attracting, motivating, retaining and
rewarding high-quality executives and other employees, officers, directors and
independent contractors by enabling such persons to acquire or increase a
proprietary interest in the Company in order to strengthen the mutuality of
interests between such persons and the Company's stockholders, and providing
such persons with annual and long term performance incentives to expend their
maximum efforts in the creation of shareholder value. In the event that the
Company is or becomes a Publicly Held Corporation (as hereinafter defined), the
Plan is intended to qualify certain compensation awarded under the Plan for tax
deductibility under Section 162(m) of the Code (as hereafter defined) to the
extent deemed appropriate by the Committee (or any successor committee) of the
Board of Directors of the Company.

2. Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof.

(a) "Annual Incentive Award" means a conditional right granted
to a Participant under Section 8(c) hereof to receive a cash payment, Stock or
other Award, unless otherwise determined by the Committee, after the end of a
specified fiscal year.

(b) "Award" means any Option, SAR (including Limited SAR),
Restricted Stock, Deferred Stock, Stock granted as a bonus or in lieu of another
award, Dividend Equivalent, Other Stock-Based Award, Performance Award or Annual
Incentive Award, together with any other right or interest, granted to a
Participant under the Plan.

(c) "Beneficiary" means the person, persons, trust or trusts
which have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or to which Awards or
other rights are transferred if and to the extent permitted under Section 10(b)
hereof. If, upon a Participant's death, there is no designated Beneficiary or
surviving designated Beneficiary, then the term Beneficiary means the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.

(d) "Beneficial Owner", "Beneficially Owning" and "Beneficial
Ownership" shall have the meanings ascribed to such terms in Rule 13d-3 under
the Exchange Act and any successor to such Rule.

(e) "Board" means the Company's Board of Directors.

(f) "Change in Control" means a Change in Control as defined
with related terms in Section 9 of the Plan.
<PAGE> 5
(g) "Change in Control Price" means the amount calculated in
accordance with Section 9(c) of the Plan.

(h) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, including regulations thereunder and successor provisions and
regulations thereto.

(i) "Committee" means a committee designated by the Board to
administer the Plan; provided, however, that the Committee shall consist of at
least two directors, and, in the event the Company is or becomes a Publicly Held
Corporation (as hereinafter defined), each member of which shall be (i) a
"non-employee director" within the meaning of Rule 16b-3 under the Exchange Act,
unless administration of the Plan by "non-employee directors" is not then
required in order for exemptions under Rule 16b-3 to apply to transactions under
the Plan, and (ii) an "outside director" within the meaning of Section 162(m) of
the Code, unless administration of the Plan by "outside directors" is not then
required in order to qualify for tax deductibility under Section 162(m) of the
Code.

(j) "Corporate Transaction" means a Corporate Transaction as
defined in Section 9(b)(i) of the Plan.

(k) "Covered Employee" means an Eligible Person who is a
Covered Employee as specified in Section 8(e) of the Plan.

(l) "Deferred Stock" means a right, granted to a Participant
under Section 6(e) hereof, to receive Stock, cash or a combination thereof at
the end of a specified deferral period.

(m) "Director" means a member of the Board.

(n) "Disability" means a permanent and total disability
(within the meaning of Section 22(e) of the Code), as determined by a medical
doctor satisfactory to the Committee.

(o) "Dividend Equivalent" means a right, granted to a
Participant under Section 6(g) hereof, to receive cash, Stock, other Awards or
other property equal in value to dividends paid with respect to a specified
number of shares of Stock, or other periodic payments.

(p) "Effective Date" means the effective date of the Plan,
which shall be March 1, 2000.

(q) "Eligible Person" means each Executive Officer of the
Company (as defined under the Exchange Act) and other officers, Directors and
employees of the Company or of any Subsidiary, and independent contractors with
the Company or any Subsidiary. The foregoing notwithstanding, only employees of
the Company or any Subsidiary shall be Eligible Persons for purposes of
receiving any Incentive Stock Options. An employee on leave of absence may be
considered as still in the employ of the Company or a Subsidiary for purposes of
eligibility for participation in the Plan.

(r) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, including rules thereunder and successor
provisions and rules thereto.

2
<PAGE> 6
(s) "Executive Officer" means an executive officer of the
Company as defined under the Exchange Act.

(t) "Fair Market Value" means the fair market value of Stock,
Awards or other property as determined by the Committee or the Board, or under
procedures established by the Committee or the Board. Unless otherwise
determined by the Committee or the Board, the Fair Market Value of Stock as of
any given date shall be the closing sale price per share reported on a
consolidated basis for stock listed on the principal stock exchange or market on
which Stock is traded on the date as of which such value is being determined or,
if there is no sale on that date, then on the last previous day on which a sale
was reported.

(u) "Incentive Stock Option" or "ISO" means any Option
intended to be designated as an incentive stock option within the meaning of
Section 422 of the Code or any successor provision thereto.

(v) "Incumbent Board" means the Incumbent Board as defined in
Section 9(b)(ii) of the Plan.

(w) "Limited SAR" means a right granted to a Participant under
Section 6(c) hereof.

(x) "Option" means a right granted to a Participant under
Section 6(b) hereof, to purchase Stock or other Awards at a specified price
during specified time periods.

(y) "Other Stock-Based Awards" means Awards granted to a
Participant under Section 6(h) hereof.

(z) "Parent Corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company, if each
of the corporations in the chain (other than the Company) owns stock possessing
50% or more of the combined voting power of all classes of stock in one of the
other corporations in the chain.

(aa) "Participant" means a person who has been granted an
Award under the Plan which remains outstanding, including a person who is no
longer an Eligible Person.

(bb) "Performance Award" means a right, granted to an Eligible
Person under Section 8 hereof, to receive Awards based upon performance criteria
specified by the Committee or the Board.

(cc) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, and shall include a "group" as defined in Section 13(d) thereof.

(dd) "Publicly Held Corporation" shall have the meaning
ascribed to such term in Section 162(m)(2) of the Code.

3
<PAGE> 7
(ee) "Restricted Stock" means Stock granted to a Participant
under Section 6(d) hereof, that is subject to certain restrictions and to a risk
of forfeiture.

(ff) "Rule 16b-3" and "Rule 16a-1(c)(3)" means Rule 16b-3 and
Rule 16a-1(c)(3), as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act.

(gg) "Stock" means the Company's Common Stock, and such other
securities as may be substituted (or resubstituted) for Stock pursuant to
Section 10(c) hereof.

(hh) "Stock Appreciation Rights" or "SAR" means a right
granted to a Participant under Section 6(c) hereof.

(ii) "Subsidiary" means any corporation or other entity in
which the Company has a direct or indirect ownership interest of 50% or more of
the total combined voting power of the then outstanding securities or interests
of such corporation or other entity entitled to vote generally in the election
of directors or in which the Company has the right to receive 50% or more of the
distribution of profits or 50% or more of the assets on liquidation or
dissolution.

3. Administration.

(a) Authority of the Committee. The Plan shall be administered
by the Committee; provided, however, that except as otherwise expressly provided
in this Plan or in order to comply with Code Section 162(m) or Rule 16b-3 under
the Exchange Act, the Board may exercise any power or authority granted to the
Committee under this Plan. The Committee or the Board shall have full and final
authority, in each case subject to and consistent with the provisions of the
Plan, to select Eligible Persons to become Participants, grant Awards, determine
the type, number and other terms and conditions of, and all other matters
relating to, Awards, prescribe Award agreements (which need not be identical for
each Participant) and rules and regulations for the administration of the Plan,
construe and interpret the Plan and Award agreements and correct defects, supply
omissions or reconcile inconsistencies therein, and to make all other decisions
and determinations as the Committee or the Board may deem necessary or advisable
for the administration of the Plan. In exercising any discretion granted to the
Committee or the Board under the Plan or pursuant to any Award, the Committee or
the Board shall not be required to follow past practices, act in a manner
consistent with past practices, or treat any Eligible Person in a manner
consistent with the treatment of other Eligible Persons.

(b) Manner of Exercise of Committee Authority. In the event
that the Company is or becomes a Publicly Held Corporation, the Committee, and
not the Board, shall exercise sole and exclusive discretion on any matter
relating to a Participant then subject to Section 16 of the Exchange Act with
respect to the Company to the extent necessary in order that transactions by
such Participant shall be exempt under Rule 16b-3 under the Exchange Act. Any
action of the Committee or the Board shall be final, conclusive and binding on
all persons, including the Company, its subsidiaries, Participants,
Beneficiaries, transferees under Section 10(b) hereof or other persons claiming
rights from or through a Participant, and stockholders. The express grant of any
specific power to the Committee or the Board, and the taking of any

4
<PAGE> 8
action by the Committee or the Board, shall not be construed as limiting any
power or authority of the Committee or the Board. The Committee or the Board may
delegate to officers or managers of the Company or any subsidiary, or committees
thereof, the authority, subject to such terms as the Committee or the Board
shall determine, (i) to perform administrative functions, (ii) with respect to
Participants not subject to Section 16 of the Exchange Act, to perform such
other functions as the Committee or the Board may determine, and (iii) with
respect to Participants subject to Section 16, to perform such other functions
of the Committee or the Board as the Committee or the Board may determine to the
extent performance of such functions will not result in the loss of an exemption
under Rule 16b-3 otherwise available for transactions by such persons, in each
case to the extent permitted under applicable law and subject to the
requirements set forth in Section 8(d). The Committee or the Board may appoint
agents to assist it in administering the Plan.

(c) Limitation of Liability. The Committee and the Board, and
each member thereof, shall be entitled to, in good faith, rely or act upon any
report or other information furnished to him or her by any executive officer,
other officer or employee of the Company or a Subsidiary, the Company's
independent auditors, consultants or any other agents assisting in the
administration of the Plan. Members of the Committee and the Board, and any
officer or employee of the Company or a subsidiary acting at the direction or on
behalf of the Committee or the Board, shall not be personally liable for any
action or determination taken or made in good faith with respect to the Plan,
and shall, to the extent permitted by law, be fully indemnified and protected by
the Company with respect to any such action or determination.

4. Stock Subject to Plan.

(a) Limitation on Overall Number of Shares Subject to Awards.
Subject to adjustment as provided in Section 10(c) hereof, the total number of
shares of Stock for which Awards may be granted under the Plan shall not exceed
in the aggregate 7.4 percent of the issued shares of Stock of the Company as of
the date this plan is adopted; provided that, if the number of issued shares of
Stock is increased after such date, the maximum number of shares of Stock for
which Awards may be granted under the Plan shall be increased by 7.4 percent of
such increase. Any shares of Stock delivered under the Plan may consist, in
whole or in part, of authorized and unissued shares or treasury shares. Subject
to adjustment as provided in Section 10(c) hereof, in no event shall the
aggregate number of shares of Stock which may be issued pursuant to ISOs exceed
5,000,000 shares.

(b) Application of Limitations. The limitation contained in
Section 4(a) shall apply not only to Awards that are settleable by the delivery
of shares of Stock but also to Awards relating to shares of Stock but settleable
only in cash (such as cash-only SARs). The Committee or the Board may adopt
reasonable counting procedures to ensure appropriate counting, avoid double
counting (as, for example, in the case of tandem or substitute awards) and make
adjustments if the number of shares of Stock actually delivered differs from the
number of shares previously counted in connection with an Award.

5. Eligibility; Per-Person Award Limitations. Awards may be granted
under the Plan only to Eligible Persons. In each fiscal year during any part of
which the Plan is in effect, an

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<PAGE> 9
Eligible Person may not be granted Awards relating to more than 1,000,000 shares
of Stock, subject to adjustment as provided in Section 10(c), under each of
Sections 6(b), 6(c), 6(d), 6(e), 6(f), 6(g), 6(h), 8(b) and 8(c). In addition,
the maximum amount that may be earned as an Annual Incentive Award or other cash
Award in any fiscal year by any one Participant shall be $2,000,000, and the
maximum amount that may be earned as a Performance Award or other cash Award in
respect of a performance period by any one Participant shall be $1,000,000.

6. Specific Terms of Awards.

(a) General. Awards may be granted on the terms and conditions
set forth in this Section 6. In addition, the Committee or the Board may impose
on any Award or the exercise thereof, at the date of grant or thereafter
(subject to Section 10(e)), such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee or the Board
shall determine, including terms requiring forfeiture of Awards in the event of
termination of employment by the Participant and terms permitting a Participant
to make elections relating to his or her Award. The Committee or the Board shall
retain full power and discretion to accelerate, waive or modify, at any time,
any term or condition of an Award that is not mandatory under the Plan. Except
in cases in which the Committee or the Board is authorized to require other
forms of consideration under the Plan, or to the extent other forms of
consideration must be paid to satisfy the requirements of Washington law, no
consideration other than services may be required for the grant (but not the
exercise) of any Award.

(b) Options. The Committee and the Board each is authorized to
grant Options to Participants on the following terms and conditions:

(i) Exercise Price. The exercise price per share of
Stock purchasable under an Option shall be determined by the
Committee or the Board, provided that such exercise price
shall not, in the case of Incentive Stock Options, be less
than 100% of the Fair Market Value of the Stock on the date of
grant of the Option and shall not, in any event, be less than
the par value of a share of Stock on the date of grant of such
Option. If an employee owns or is deemed to own (by reason of
the attribution rules applicable under Section 424(d) of the
Code) more than 10% of the combined voting power of all
classes of stock of the Company or any Parent Corporation or
Subsidiary and an Incentive Stock Option is granted to such
employee, the option price of such Incentive Stock Option (to
the extent required by the Code at the time of grant) shall be
no less than 110% of the Fair Market Value of the Stock on the
date such Incentive Stock Option is granted.

(ii) Time and Method of Exercise. The Committee or
the Board shall determine the time or times at which or the
circumstances under which an Option may be exercised in whole
or in part (including based on achievement of performance
goals and/or future service requirements), the time or times
at which Options shall cease to be or become exercisable
following termination of employment or upon other conditions,
the methods by which such exercise price may be paid or deemed
to be paid (including in the discretion of the Committee or
the Board a cashless exercise procedure), the form of such
payment, including,

6
<PAGE> 10
without limitation, cash, Stock, other Awards or awards
granted under other plans of the Company or any subsidiary, or
other property (including notes or other contractual
obligations of Participants to make payment on a deferred
basis), and the methods by or forms in which Stock will be
delivered or deemed to be delivered to Participants.

(iii) ISOs. The terms of any ISO granted under the
Plan shall comply in all respects with the provisions of
Section 422 of the Code. Anything in the Plan to the contrary
notwithstanding, no term of the Plan relating to ISOs
(including any SAR in tandem therewith) shall be interpreted,
amended or altered, nor shall any discretion or authority
granted under the Plan be exercised, so as to disqualify
either the Plan or any ISO under Section 422 of the Code,
unless the Participant has first requested the change that
will result in such disqualification. Thus, if and to the
extent required to comply with Section 422 of the Code,
Options granted as Incentive Stock Options shall be subject to
the following special terms and conditions:

(A) the Option shall not be exercisable more
than ten years after the date such Incentive Stock Option is
granted; provided, however, that if a Participant owns or is
deemed to own (by reason of the attribution rules of Section
424(d) of the Code) more than 10% of the combined voting power
of all classes of stock of the Company or any Parent
Corporation and the Incentive Stock Option is granted to such
Participant, the term of the Incentive Stock Option shall be
(to the extent required by the Code at the time of the grant)
for no more than five years from the date of grant; and

(B) The aggregate Fair Market Value
(determined as of the date the Incentive Stock Option is
granted) of the shares of stock with respect to which
Incentive Stock Options granted under the Plan and all other
option plans of the Company or its Parent Corporation during
any calendar year exercisable for the first time by the
Participant during any calendar year shall not (to the extent
required by the Code at the time of the grant) exceed
$100,000.

(c) Stock Appreciation Rights. The Committee and the Board
each is authorized to grant SAR's to Participants on the following terms and
conditions:

(i) Right to Payment. A SAR shall confer on the
Participant to whom it is granted a right to receive, upon
exercise thereof, the excess of (A) the Fair Market Value of
one share of stock on the date of exercise (or, in the case of
a "Limited SAR" that may be exercised only in the event of a
Change in Control, the Fair Market Value determined by
reference to the Change in Control Price, as defined under
Section 9(c) hereof), over (B) the grant price of the SAR as
determined by the Committee or the Board. The grant price of
an SAR shall not be less than the Fair Market Value of a share
of Stock on the date of grant except as provided under Section
7(a) hereof.

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<PAGE> 11
(ii) Other Terms. The Committee or the Board shall
determine at the date of grant or thereafter, the time or
times at which and the circumstances under which a SAR may be
exercised in whole or in part (including based on achievement
of performance goals and/or future service requirements), the
time or times at which SARs shall cease to be or become
exercisable following termination of employment or upon other
conditions, the method of exercise, method of settlement, form
of consideration payable in settlement, method by or forms in
which Stock will be delivered or deemed to be delivered to
Participants, whether or not a SAR shall be in tandem or in
combination with any other Award, and any other terms and
conditions of any SAR. Limited SARs that may only be exercised
in connection with a Change in Control or other event as
specified by the Committee or the Board, may be granted on
such terms, not inconsistent with this Section 6(c), as the
Committee or the Board may determine. SARs and Limited SARs
may be either freestanding or in tandem with other Awards.

(d) Restricted Stock. The Committee and the Board each is
authorized to grant Restricted Stock to Participants on the following terms and
conditions:

(i) Grant and Restrictions. Restricted Stock shall be
subject to such restrictions on transferability, risk of
forfeiture and other restrictions, if any, as the Committee or
the Board may impose, which restrictions may lapse separately
or in combination at such times, under such circumstances
(including based on achievement of performance goals and/or
future service requirements), in such installments or
otherwise, as the Committee or the Board may determine at the
date of grant or thereafter. Except to the extent restricted
under the terms of the Plan and any Award agreement relating
to the Restricted Stock, a Participant granted Restricted
Stock shall have all of the rights of a stockholder, including
the right to vote the Restricted Stock and the right to
receive dividends thereon (subject to any mandatory
reinvestment or other requirement imposed by the Committee or
the Board). During the restricted period applicable to the
Restricted Stock, subject to Section 10(b) below, the
Restricted Stock may not be sold, transferred, pledged,
hypothecated, margined or otherwise encumbered by the
Participant.

(ii) Forfeiture. Except as otherwise determined by
the Committee or the Board at the time of the Award, upon
termination of a Participant's employment during the
applicable restriction period, the Participant's Restricted
Stock that is at that time subject to restrictions shall be
forfeited and reacquired by the Company; provided that the
Committee or the Board may provide, by rule or regulation or
in any Award agreement, or may determine in any individual
case, that restrictions or forfeiture conditions relating to
Restricted Stock shall be waived in whole or in part in the
event of terminations resulting from specified causes, and the
Committee or the Board may in other cases waive in whole or in
part the forfeiture of Restricted Stock.

8
<PAGE> 12
(iii) Certificates for Stock. Restricted Stock
granted under the Plan may be evidenced in such manner as the
Committee or the Board shall determine. If certificates
representing Restricted Stock are registered in the name of
the Participant, the Committee or the Board may require that
such certificates bear an appropriate legend referring to the
terms, conditions and restrictions applicable to such
Restricted Stock, that the Company retain physical possession
of the certificates, and that the Participant deliver a stock
power to the Company, endorsed in blank, relating to the
Restricted Stock.

(iv) Dividends and Splits. As a condition to the
grant of an Award of Restricted Stock, the Committee or the
Board may require that any cash dividends paid on a share of
Restricted Stock be automatically reinvested in additional
shares of Restricted Stock or applied to the purchase of
additional Awards under the Plan. Unless otherwise determined
by the Committee or the Board, Stock distributed in connection
with a Stock split or Stock dividend, and other property
distributed as a dividend, shall be subject to restrictions
and a risk of forfeiture to the same extent as the Restricted
Stock with respect to which such Stock or other property has
been distributed.

(e) Deferred Stock. The Committee and the Board each is
authorized to grant Deferred Stock to Participants, which are rights to receive
Stock, cash, or a combination thereof at the end of a specified deferral period,
subject to the following terms and conditions:

(i) Award and Restrictions. Satisfaction of an Award
of Deferred Stock shall occur upon expiration of the deferral
period specified for such Deferred Stock by the Committee or
the Board (or, if permitted by the Committee or the Board, as
elected by the Participant). In addition, Deferred Stock shall
be subject to such restrictions (which may include a risk of
forfeiture) as the Committee or the Board may impose, if any,
which restrictions may lapse at the expiration of the deferral
period or at earlier specified times (including based on
achievement of performance goals and/or future service
requirements), separately or in combination, in installments
or otherwise, as the Committee or the Board may determine.
Deferred Stock may be satisfied by delivery of Stock, cash
equal to the Fair Market Value of the specified number of
shares of Stock covered by the Deferred Stock, or a
combination thereof, as determined by the Committee or the
Board at the date of grant or thereafter. Prior to
satisfaction of an Award of Deferred Stock, an Award of
Deferred Stock carries no voting or dividend or other rights
associated with share ownership.

(ii) Forfeiture. Except as otherwise determined by
the Committee or the Board, upon termination of a
Participant's employment during the applicable deferral period
thereof to which forfeiture conditions apply (as provided in
the Award agreement evidencing the Deferred Stock), the
Participant's Deferred Stock that is at that time subject to
deferral (other than a deferral at the election of the
Participant) shall be forfeited; provided that the Committee
or the Board may provide, by rule or regulation or in any
Award agreement, or may determine in any

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<PAGE> 13
individual case, that restrictions or forfeiture conditions
relating to Deferred Stock shall be waived in whole or in part
in the event of terminations resulting from specified causes,
and the Committee or the Board may in other cases waive in
whole or in part the forfeiture of Deferred Stock.

(iii) Dividend Equivalents. Unless otherwise
determined by the Committee or the Board at date of grant,
Dividend Equivalents on the specified number of shares of
Stock covered by an Award of Deferred Stock shall be either
(A) paid with respect to such Deferred Stock at the dividend
payment date in cash or in shares of unrestricted Stock having
a Fair Market Value equal to the amount of such dividends, or
(B) deferred with respect to such Deferred Stock and the
amount or value thereof automatically deemed reinvested in
additional Deferred Stock, other Awards or other investment
vehicles, as the Committee or the Board shall determine or
permit the Participant to elect.

(f) Bonus Stock and Awards in Lieu of Obligations. The
Committee and the Board each is authorized to grant Stock as a bonus, or to
grant Stock or other Awards in lieu of Company obligations to pay cash or
deliver other property under the Plan or under other plans or compensatory
arrangements, provided that, in the case of Participants subject to Section 16
of the Exchange Act, the amount of such grants remains within the discretion of
the Committee to the extent necessary to ensure that acquisitions of Stock or
other Awards are exempt from liability under Section 16(b) of the Exchange Act.
Stock or Awards granted hereunder shall be subject to such other terms as shall
be determined by the Committee or the Board.

(g) Dividend Equivalents. The Committee and the Board each is
authorized to grant Dividend Equivalents to a Participant entitling the
Participant to receive cash, Stock, other Awards, or other property equal in
value to dividends paid with respect to a specified number of shares of Stock,
or other periodic payments. Dividend Equivalents may be awarded on a
free-standing basis or in connection with another Award. The Committee or the
Board may provide that Dividend Equivalents shall be paid or distributed when
accrued or shall be deemed to have been reinvested in additional Stock, Awards,
or other investment vehicles, and subject to such restrictions on
transferability and risks of forfeiture, as the Committee or the Board may
specify.

(h) Other Stock-Based Awards. The Committee and the Board each
is authorized, subject to limitations under applicable law, to grant to
Participants such other Awards that may be denominated or payable in, valued in
whole or in part by reference to, or otherwise based on, or related to, Stock,
as deemed by the Committee or the Board to be consistent with the purposes of
the Plan, including, without limitation, convertible or exchangeable debt
securities, other rights convertible or exchangeable into Stock, purchase rights
for Stock, Awards with value and payment contingent upon performance of the
Company or any other factors designated by the Committee or the Board, and
Awards valued by reference to the book value of Stock or the value of securities
of or the performance of specified subsidiaries or business units. The Committee
or the Board shall determine the terms and conditions of such Awards. Stock
delivered pursuant to an Award in the nature of a purchase right granted under
this Section 6(h) shall be purchased for such consideration, paid for at such
times, by such methods, and in such forms, including, without limitation, cash,
Stock, other Awards or other property, as the

10
<PAGE> 14
Committee or the Board shall determine. Cash awards, as an element of or
supplement to any other Award under the Plan, may also be granted pursuant to
this Section 6(h).

7. Certain Provisions Applicable to Awards.

(a) Stand-Alone, Additional, Tandem, and Substitute Awards.
Awards granted under the Plan may, in the discretion of the Committee or the
Board, be granted either alone or in addition to, in tandem with, or in
substitution or exchange for, any other Award or any award granted under another
plan of the Company, any subsidiary, or any business entity to be acquired by
the Company or a subsidiary, or any other right of a Participant to receive
payment from the Company or any subsidiary. Such additional, tandem, and
substitute or exchange Awards may be granted at any time. If an Award is granted
in substitution or exchange for another Award or award, the Committee or the
Board shall require the surrender of such other Award or award in consideration
for the grant of the new Award. In addition, Awards may be granted in lieu of
cash compensation, including in lieu of cash amounts payable under other plans
of the Company or any subsidiary, in which the value of Stock subject to the
Award is equivalent in value to the cash compensation (for example, Deferred
Stock or Restricted Stock), or in which the exercise price, grant price or
purchase price of the Award in the nature of a right that may be exercised is
equal to the Fair Market Value of the underlying Stock minus the value of the
cash compensation surrendered (for example, Options granted with an exercise
price "discounted" by the amount of the cash compensation surrendered).

(b) Term of Awards. The term of each Award shall be for such
period as may be determined by the Committee or the Board; provided that in no
event shall the term of any Option or SAR exceed a period of ten years (or such
shorter term as may be required in respect of an ISO under Section 422 of the
Code).

(c) Form and Timing of Payment Under Awards; Deferrals.
Subject to the terms of the Plan and any applicable Award agreement, payments to
be made by the Company or a subsidiary upon the exercise of an Option or other
Award or settlement of an Award may be made in such forms as the Committee or
the Board shall determine, including, without limitation, cash, other Awards or
other property, and may be made in a single payment or transfer, in
installments, or on a deferred basis. The settlement of any Award may be
accelerated, and cash paid in lieu of Stock in connection with such settlement,
in the discretion of the Committee or the Board or upon occurrence of one or
more specified events (in addition to a Change in Control). Installment or
deferred payments may be required by the Committee or the Board (subject to
Section 10(e) of the Plan) or permitted at the election of the Participant on
terms and conditions established by the Committee or the Board. Payments may
include, without limitation, provisions for the payment or crediting of a
reasonable interest rate on installment or deferred payments or the grant or
crediting of Dividend Equivalents or other amounts in respect of installment or
deferred payments denominated in Stock.

(d) Exemptions from Section 16(b) Liability. If and to the
extent that the Company is or becomes a Publicly Held Corporation, it is the
intent of the Company that this Plan comply in all respects with applicable
provisions of Rule 16b-3 or Rule 16a-1(c)(3) to the extent necessary to ensure
that neither the grant of any Awards to nor other transaction by a Participant

11
<PAGE> 15
who is subject to Section 16 of the Exchange Act is subject to liability under
Section 16(b) thereof (except for transactions acknowledged in writing to be
non-exempt by such Participant). Accordingly, if any provision of this Plan or
any Award agreement does not comply with the requirements of Rule 16b-3 or Rule
16a-1(c)(3) as then applicable to any such transaction, such provision will be
construed or deemed amended to the extent necessary to conform to the applicable
requirements of Rule 16b-3 or Rule 16a-1(c)(3) so that such Participant shall
avoid liability under Section 16(b). In addition, the purchase price of any
Award conferring a right to purchase Stock shall be not less than any specified
percentage of the Fair Market Value of Stock at the date of grant of the Award
then required in order to comply with Rule 16b-3.

8. Performance and Annual Incentive Awards.

(a) Performance Conditions. The right of a Participant to
exercise or receive a grant or settlement of any Award, and the timing thereof,
may be subject to such performance conditions as may be specified by the
Committee or the Board. The Committee or the Board may use such business
criteria and other measures of performance as it may deem appropriate in
establishing any performance conditions, and may exercise its discretion to
reduce the amounts payable under any Award subject to performance conditions,
except as limited under Sections 8(b) and 8(c) hereof in the case of a
Performance Award or Annual Incentive Award intended to qualify under Code
Section 162(m). At such times as the Company is a Publicly Held Corporation, if
and to the extent required under Code Section 162(m), any power or authority
relating to a Performance Award or Annual Incentive Award intended to qualify
under Code Section 162(m), shall be exercised by the Committee and not the
Board.

(b) Performance Awards Granted to Designated Covered
Employees. If and to the extent that the Committee determines that a Performance
Award to be granted to an Eligible Person who is designated by the Committee as
likely to be a Covered Employee should qualify as "performance-based
compensation" for purposes of Code Section 162(m), the grant, exercise and/or
settlement of such Performance Award shall be contingent upon achievement of
preestablished performance goals and other terms set forth in this Section 8(b).

(i) Performance Goals Generally. The performance
goals for such Performance Awards shall consist of one or more
business criteria and a targeted level or levels of
performance with respect to each of such criteria, as
specified by the Committee consistent with this Section 8(b).
Performance goals shall be objective and shall otherwise meet
the requirements of Code Section 162(m) and regulations
thereunder including the requirement that the level or levels
of performance targeted by the Committee result in the
achievement of performance goals being "substantially
uncertain." The Committee may determine that such Performance
Awards shall be granted, exercised and/or settled upon
achievement of any one performance goal or that two or more of
the performance goals must be achieved as a condition to
grant, exercise and/or settlement of such Performance Awards.
Performance goals may differ for Performance Awards granted to
any one Participant or to different Participants.

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<PAGE> 16
(ii) Business Criteria. One or more of the following
business criteria for the Company, on a consolidated basis,
and/or specified subsidiaries or business units of the Company
(except with respect to the total stockholder return and
earnings per share criteria), shall be used exclusively by the
Committee in establishing performance goals for such
Performance Awards: (1) total stockholder return; (2) such
total stockholder return as compared to total return (on a
comparable basis) of a publicly available index such as, but
not limited to, the Standard & Poor's 500 Stock Index or the
S&P Specialty Retailer Index; (3) net income; (4) pretax
earnings; (5) earnings before interest expense, taxes,
depreciation and amortization; (6) pretax operating earnings
after interest expense and before bonuses, service fees, and
extraordinary or special items; (7) operating margin; (8)
earnings per share; (9) return on equity; (10) return on
capital; (11) return on investment; (12) operating earnings;
(13) working capital or inventory; and (14) ratio of debt to
stockholders' equity. One or more of the foregoing business
criteria shall also be exclusively used in establishing
performance goals for Annual Incentive Awards granted to a
Covered Employee under Section 8(c) hereof that are intended
to qualify as "performanced-based compensation under Code
Section 162(m).

(iii) Performance Period; Timing For Establishing
Performance Goals. Achievement of performance goals in respect
of such Performance Awards shall be measured over a
performance period of up to ten years, as specified by the
Committee. Performance goals shall be established not later
than 90 days after the beginning of any performance period
applicable to such Performance Awards, or at such other date
as may be required or permitted for "performance-based
compensation" under Code Section 162(m).

(iv) Performance Award Pool. The Committee may
establish a Performance Award pool, which shall be an unfunded
pool, for purposes of measuring Company performance in
connection with Performance Awards. The amount of such
Performance Award pool shall be based upon the achievement of
a performance goal or goals based on one or more of the
business criteria set forth in Section 8(b)(ii) hereof during
the given performance period, as specified by the Committee in
accordance with Section 8(b)(iii) hereof. The Committee may
specify the amount of the Performance Award pool as a
percentage of any of such business criteria, a percentage
thereof in excess of a threshold amount, or as another amount
which need not bear a strictly mathematical relationship to
such business criteria.

(v) Settlement of Performance Awards; Other Terms.
Settlement of such Performance Awards shall be in cash, Stock,
other Awards or other property, in the discretion of the
Committee. The Committee may, in its discretion, reduce the
amount of a settlement otherwise to be made in connection with
such Performance Awards. The Committee shall specify the
circumstances in which such Performance Awards shall be paid
or forfeited in the event of termination of

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<PAGE> 17
employment by the Participant prior to the end of a
performance period or settlement of Performance Awards.

(c) Annual Incentive Awards Granted to Designated Covered
Employees. The Committee may, within its discretion, grant an Annual Incentive
Award to an Eligible Person, subject to the terms and conditions set forth in
this Section 8(c).

(i) Annual Incentive Award Pool. The Committee may
establish an Annual Incentive Award pool, which shall be an
unfunded pool, for purposes of measuring Company performance
in connection with Annual Incentive Awards. In the case of
Annual Incentive Awards intended to qualify as
"performance-based compensation" for purposes of Code Section
162(m), the amount of such Annual Incentive Award pool shall
be based upon the achievement of a performance goal or goals
based on one or more of the business criteria set forth in
Section 8(b)(ii) hereof during the given performance period,
as specified by the Committee in accordance with Section
8(b)(iii) hereof. The Committee may specify the amount of the
Annual Incentive Award pool as a percentage of any such
business criteria, a percentage thereof in excess of a
threshold amount, or as another amount which need not bear a
strictly mathematical relationship to such business criteria.

(ii) Potential Annual Incentive Awards. Not later
than the end of the 90th day of each fiscal year, or at such
other date as may be required or permitted in the case of
Awards intended to be "performance-based compensation" under
Code Section 162(m), the Committee shall determine the
Eligible Persons who will potentially receive Annual Incentive
Awards, and the amounts potentially payable thereunder, for
that fiscal year, either out of an Annual Incentive Award pool
established by such date under Section 8(c)(i) hereof or as
individual Annual Incentive Awards. In the case of individual
Annual Incentive Awards intended to qualify under Code Section
162(m), the amount potentially payable shall be based upon the
achievement of a performance goal or goals based on one or
more of the business criteria set forth in Section 8(b)(ii)
hereof in the given performance year, as specified by the
Committee; in other cases, such amount shall be based on such
criteria as shall be established by the Committee. In all
cases, the maximum Annual Incentive Award of any Participant
shall be subject to the limitation set forth in Section 5
hereof.

(iii) Payout of Annual Incentive Awards. After the
end of each fiscal year, the Committee shall determine the
amount, if any, of (A) the Annual Incentive Award pool, and
the maximum amount of potential Annual Incentive Award payable
to each Participant in the Annual Incentive Award pool, or (B)
the amount of potential Annual Incentive Award otherwise
payable to each Participant. The Committee may, in its
discretion, determine that the amount payable to any
Participant as an Annual Incentive Award shall be reduced from
the amount of his or her potential Annual Incentive Award,
including a determination to make no Award whatsoever. The
Committee shall specify the circumstances in which an Annual
Incentive Award shall be paid or forfeited in the event of

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<PAGE> 18
termination of employment by the Participant prior to the end
of a fiscal year or settlement of such Annual Incentive Award.

(d) Written Determinations. All determinations by the
Committee as to the establishment of performance goals, the amount of any
Performance Award pool or potential individual Performance Awards and as to the
achievement of performance goals relating to Performance Awards under Section
8(b), and the amount of any Annual Incentive Award pool or potential individual
Annual Incentive Awards and the amount of final Annual Incentive Awards under
Section 8(c), shall be made in writing in the case of any Award intended to
qualify under Code Section 162(m). The Committee may not delegate any
responsibility relating to such Performance Awards or Annual Incentive Awards if
and to the extent required to comply with Code Section 162(m).

(e) Status of Section 8(b) and Section 8(c) Awards Under Code
Section 162(m). It is the intent of the Company that Performance Awards and
Annual Incentive Awards under Section 8(b) and 8(c) hereof granted to persons
who are designated by the Committee as likely to be Covered Employees within the
meaning of Code Section 162(m) and regulations thereunder shall, if so
designated by the Committee, constitute "qualified performance-based
compensation" within the meaning of Code Section 162(m) and regulations
thereunder. Accordingly, the terms of Sections 8(b), (c), (d) and (e), including
the definitions of Covered Employee and other terms used therein, shall be
interpreted in a manner consistent with Code Section 162(m) and regulations
thereunder. The foregoing notwithstanding, because the Committee cannot
determine with certainty whether a given Participant will be a Covered Employee
with respect to a fiscal year that has not yet been completed, the term Covered
Employee as used herein shall mean only a person designated by the Committee, at
the time of grant of Performance Awards or an Annual Incentive Award, as likely
to be a Covered Employee with respect to that fiscal year. If any provision of
the Plan or any agreement relating to such Performance Awards or Annual
Incentive Awards does not comply or is inconsistent with the requirements of
Code Section 162(m) or regulations thereunder, such provision shall be construed
or deemed amended to the extent necessary to conform to such requirements.

9. Change in Control.

(a) Effect of "Change in Control." If and to the extent
provided in the Award, in the event of a "Change in Control," as defined in
Section 9(b):

(i) The Committee may, within its discretion,
accelerate the vesting and exercisability of any Award
carrying a right to exercise that was not previously vested
and exercisable as of the time of the Change in Control,
subject to applicable restrictions set forth in Section 10(a)
hereof;

(ii) The Committee may, within its discretion,
accelerate the exercisability of any limited SARs (and other
SARs if so provided by their terms) and provide for the
settlement of such SARs for amounts, in cash, determined by
reference to the Change in Control Price;

15
<PAGE> 19
(iii) The Committee may, within its discretion, lapse
the restrictions, deferral of settlement, and forfeiture
conditions applicable to any other Award granted under the
Plan and such Awards may be deemed fully vested as of the time
of the Change in Control, except to the extent of any waiver
by the Participant and subject to applicable restrictions set
forth in Section 10(a) hereof; and

(iv) With respect to any such outstanding Award
subject to achievement of performance goals and conditions
under the Plan, the Committee may, within its discretion, deem
such performance goals and other conditions as having been met
as of the date of the Change in Control.

(b) Definition of "Change in Control. A "Change in Control"
shall be deemed to have occurred upon:

(i) Approval by the shareholders of the Company of a
reorganization, merger, consolidation or other form of corporate transaction or
series of transactions, in each case, with respect to which persons who were the
shareholders of the Company immediately prior to such reorganization, merger or
consolidation or other transaction do not, immediately thereafter, own more than
50% of the combined voting power entitled to vote generally in the election of
directors of the reorganized, merged or consolidated company's then outstanding
voting securities, or a liquidation or dissolution of the Company or the sale of
all or substantially all of the assets of the Company (unless such
reorganization, merger, consolidation or other corporate transaction,
liquidation, dissolution or sale (any such event being referred to as a
"Corporate Transaction") is subsequently abandoned);

(ii) Individuals who, as of the date on which the
Award is granted, constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board, provided that any person
becoming a director subsequent to the date on which the Award was granted whose
election, or nomination for election by the Company's shareholders, was approved
by a vote of at least a majority of the directors then comprising the Incumbent
Board (other than an election or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the Directors of the Company, as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Securities
Exchange Act) shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or

(iii) the acquisition (other than from the Company)
by any person, entity or "group", within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act, of more than 50% of either the then
outstanding shares of the Company's Common Stock or the combined voting power of
the Company's then outstanding voting securities entitled to vote generally in
the election of directors (hereinafter referred to as the ownership of a
"Controlling Interest") excluding, for this purpose, any acquisitions by (1) the
Company or its Subsidiaries, (2) any person, entity or "group" that as of the
date on which the Award is granted owns beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Securities Exchange Act) of a Controlling
Interest or (3) any employee benefit plan of the Company or its Subsidiaries.

16
<PAGE> 20
(c) Definition of "Change in Control Price." The "Change in
Control Price" means an amount in cash equal to the higher of (i) the amount of
cash and fair market value of property that is the highest price per share paid
(including extraordinary dividends) in any Corporate Transaction triggering the
Change in Control under Section 9(b)(i) hereof or any liquidation of shares
following a sale of substantially all of the assets of the Company, or (ii) the
highest Fair Market Value per share at any time during the 60-day period
preceding and the 60-day period following the Change in Control.

10. General Provisions.

(a) Compliance With Legal and Other Requirements. The Company
may, to the extent deemed necessary or advisable by the Committee or the Board,
postpone the issuance or delivery of Stock or payment of other benefits under
any Award until completion of such registration or qualification of such Stock
or other required action under any federal or state law, rule or regulation,
listing or other required action with respect to any stock exchange or automated
quotation system upon which the Stock or other Company securities are listed or
quoted, or compliance with any other obligation of the Company, as the Committee
or the Board, may consider appropriate, and may require any Participant to make
such representations, furnish such information and comply with or be subject to
such other conditions as it may consider appropriate in connection with the
issuance or delivery of Stock or payment of other benefits in compliance with
applicable laws, rules, and regulations, listing requirements, or other
obligations. The foregoing notwithstanding, in connection with a Change in
Control, the Company shall take or cause to be taken no action, and shall
undertake or permit to arise no legal or contractual obligation, that results or
would result in any postponement of the issuance or delivery of Stock or payment
of benefits under any Award or the imposition of any other conditions on such
issuance, delivery or payment, to the extent that such postponement or other
condition would represent a greater burden on a Participant than existed on the
90th day preceding the Change in Control.

(b) Limits on Transferability; Beneficiaries. No Award or
other right or interest of a Participant under the Plan, including any Award or
right which constitutes a derivative security as generally defined in Rule
16a-1(c) under the Exchange Act, shall be pledged, hypothecated or otherwise
encumbered or subject to any lien, obligation or liability of such Participant
to any party (other than the Company or a Subsidiary), or assigned or
transferred by such Participant otherwise than by will or the laws of descent
and distribution or to a Beneficiary upon the death of a Participant, and such
Awards or rights that may be exercisable shall be exercised during the lifetime
of the Participant only by the Participant or his or her guardian or legal
representative, except that Awards and other rights (other than ISOs and SARs in
tandem therewith) may be transferred to one or more Beneficiaries or other
transferees during the lifetime of the Participant, and may be exercised by such
transferees in accordance with the terms of such Award, but only if and to the
extent such transfers and exercises are permitted by the Committee or the Board
pursuant to the express terms of an Award agreement (subject to any terms and
conditions which the Committee or the Board may impose thereon, and further
subject to any prohibitions or restrictions on such transfers pursuant to Rule
16b-3). A Beneficiary, transferee, or other person claiming any rights under the
Plan from or through any Participant shall be subject to all terms and
conditions of the Plan and any Award agreement applicable to

17
<PAGE> 21
such Participant, except as otherwise determined by the Committee or the Board,
and to any additional terms and conditions deemed necessary or appropriate by
the Committee or the Board.

(c) Adjustments. In the event that any dividend or other
distribution (whether in the form of cash, Stock, or other property),
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange, liquidation,
dissolution or other similar corporate transaction or event affects the Stock
such that a substitution or adjustment is determined by the Committee or the
Board to be appropriate in order to prevent dilution or enlargement of the
rights of Participants under the Plan, then the Committee or the Board shall, in
such manner as it may deem equitable, substitute or adjust any or all of (i) the
number and kind of shares of Stock which may be delivered in connection with
Awards granted thereafter, (ii) the number and kind of shares of Stock by which
annual per-person Award limitations are measured under Section 5 hereof, (iii)
the number and kind of shares of Stock subject to or deliverable in respect of
outstanding Awards and (iv) the exercise price, grant price or purchase price
relating to any Award and/or make provision for payment of cash or other
property in respect of any outstanding Award. In addition, the Committee (and
the Board if and only to the extent such authority is not required to be
exercised by the Committee to comply with Code Section 162(m)) is authorized to
make adjustments in the terms and conditions of, and the criteria included in,
Awards (including Performance Awards and performance goals, and Annual Incentive
Awards and any Annual Incentive Award pool or performance goals relating
thereto) in recognition of unusual or nonrecurring events (including, without
limitation, events described in the preceding sentence, as well as acquisitions
and dispositions of businesses and assets) affecting the Company, any Subsidiary
or any business unit, or the financial statements of the Company or any
Subsidiary, or in response to changes in applicable laws, regulations,
accounting principles, tax rates and regulations or business conditions or in
view of the Committee's assessment of the business strategy of the Company, any
Subsidiary or business unit thereof, performance of comparable organizations,
economic and business conditions, personal performance of a Participant, and any
other circumstances deemed relevant; provided that no such adjustment shall be
authorized or made if and to the extent that such authority or the making of
such adjustment would cause Options, SARs, Performance Awards granted under
Section 8(b) hereof or Annual Incentive Awards granted under Section 8(c) hereof
to Participants designated by the Committee as Covered Employees and intended to
qualify as "performance-based compensation" under Code Section 162(m) and the
regulations thereunder to otherwise fail to qualify as "performance-based
compensation" under Code Section 162(m) and regulations thereunder.

(d) Taxes. The Company and any Subsidiary is authorized to
withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Stock, or any payroll or other payment to
a Participant, amounts of withholding and other taxes due or potentially payable
in connection with any transaction involving an Award, and to take such other
action as the Committee or the Board may deem advisable to enable the Company
and Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participant's tax obligations,
either on a mandatory or elective basis in the discretion of the Committee.

18
<PAGE> 22
(e) Changes to the Plan and Awards. The Board may amend,
alter, suspend, discontinue or terminate the Plan, or the Committee's authority
to grant Awards under the Plan, without the consent of stockholders or
Participants, except that any amendment or alteration to the Plan shall be
subject to the approval of the Company's stockholders not later than the annual
meeting next following such Board action if such stockholder approval is
required by any federal or state law or regulation (including, without
limitation, Rule 16b-3 or Code Section 162(m)) or the rules of any stock
exchange or automated quotation system on which the Stock may then be listed or
quoted, and the Board may otherwise, in its discretion, determine to submit
other such changes to the Plan to stockholders for approval; provided that,
without the consent of an affected Participant, no such Board action may
materially and adversely affect the rights of such Participant under any
previously granted and outstanding Award. The Committee or the Board may waive
any conditions or rights under, or amend, alter, suspend, discontinue or
terminate any Award theretofore granted and any Award agreement relating
thereto, except as otherwise provided in the Plan; provided that, without the
consent of an affected Participant, no such Committee or the Board action may
materially and adversely affect the rights of such Participant under such Award.
Notwithstanding anything in the Plan to the contrary, if any right under this
Plan would cause a transaction to be ineligible for pooling of interest
accounting that would, but for the right hereunder, be eligible for such
accounting treatment, the Committee or the Board may modify or adjust the right
so that pooling of interest accounting shall be available, including the
substitution of Stock having a Fair Market Value equal to the cash otherwise
payable hereunder for the right which caused the transaction to be ineligible
for pooling of interest accounting.

(f) Limitation on Rights Conferred Under Plan. Neither the
Plan nor any action taken hereunder shall be construed as (i) giving any
Eligible Person or Participant the right to continue as an Eligible Person or
Participant or in the employ of the Company or a Subsidiary; (ii) interfering in
any way with the right of the Company or a Subsidiary to terminate any Eligible
Person's or Participant's employment at any time, (iii) giving an Eligible
Person or Participant any claim to be granted any Award under the Plan or to be
treated uniformly with other Participants and employees, or (iv) conferring on a
Participant any of the rights of a stockholder of the Company unless and until
the Participant is duly issued or transferred shares of Stock in accordance with
the terms of an Award.

(g) Unfunded Status of Awards; Creation of Trusts. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant or
obligation to deliver Stock pursuant to an Award, nothing contained in the Plan
or any Award shall give any such Participant any rights that are greater than
those of a general creditor of the Company; provided that the Committee may
authorize the creation of trusts and deposit therein cash, Stock, other Awards
or other property, or make other arrangements to meet the Company's obligations
under the Plan. Such trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan unless the Committee otherwise determines with the
consent of each affected Participant. The trustee of such trusts may be
authorized to dispose of trust assets and reinvest the proceeds in alternative
investments, subject to such terms and conditions as the Committee or the Board
may specify and in accordance with applicable law.

19
<PAGE> 23
(h) Nonexclusivity of the Plan. Neither the adoption of the
Plan by the Board nor its submission to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board or a committee thereof to adopt such other incentive arrangements as it
may deem desirable including incentive arrangements and awards which do not
qualify under Code Section 162(m).

(i) Payments in the Event of Forfeitures; Fractional Shares.
Unless otherwise determined by the Committee or the Board, in the event of a
forfeiture of an Award with respect to which a Participant paid cash or other
consideration, the Participant shall be repaid the amount of such cash or other
consideration. No fractional shares of Stock shall be issued or delivered
pursuant to the Plan or any Award. The Committee or the Board shall determine
whether cash, other Awards or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.

(j) Governing Law. The validity, construction and effect of
the Plan, any rules and regulations under the Plan, and any Award agreement
shall be determined in accordance with the laws of the state in which the
Company is incorporated without giving effect to principles of conflicts of
laws, and applicable federal law.

(k) Plan Effective Date and Stockholder Approval; Termination
of Plan. The Plan shall become effective on the Effective Date, subject to
subsequent approval within 12 months of its adoption by the Board by
stockholders of the Company eligible to vote in the election of directors, by a
vote sufficient to meet the requirements of Code Sections 162(m) (if applicable)
and 422, Rule 16b-3 under the Exchange Act (if applicable), applicable NASDAQ
requirements, and other laws, regulations, and obligations of the Company
applicable to the Plan. Awards may be granted subject to stockholder approval,
but may not be exercised or otherwise settled in the event stockholder approval
is not obtained. The Plan shall terminate at such time as no shares of Common
Stock remain available for issuance under the Plan and the Company has no
further rights or obligations with respect to outstanding Awards under the Plan.

1185345.1

<PAGE> 1
EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors
Intelispan, Inc.

We consent to the use of our reports included herein and to the reference to our
firm under the headings "Experts" and "Selected Consolidated Financial Data" in
the registration statement on Form SB-2.

/s/ KPMG LLP

Phoenix, Arizona
May 2, 2000

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
CONSOLIDATED FINANCIAL STATEMENTS OF INTELISPAN, INC. FOR THE PERIOD ENDED
DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS. THIS EXHIBIT SHALL NOT BE DEEMED FILED FOR THE PURPOSE OF
SECTION 11 OF THE SECURITIES ACT OF 1933 AND SECTION 18 OF THE SECURITIES
EXCHANGE ACT OF 1934, OR OTHERWISE SUBJECT TO THE LIABILITY OF SUCH SECTIONS,
NOR SHALL IT BE DEEMED A PART OF ANY OTHER FILING WHICH INCORPORATED THIS
REGISTRATION STATEMENT BY REFERENCE, UNLESS SUCH OTHER FILING EXPRESSLY
INCORPORATES THIS EXHIBIT BY REFERENCE.
</LEGEND>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> DEC-31-1999
<CASH> 9,631,638
<SECURITIES> 0
<RECEIVABLES> 624,405
<ALLOWANCES> 176,666
<INVENTORY> 0
<CURRENT-ASSETS> 10,236,320
<PP&E> 494,678
<DEPRECIATION> 146,599
<TOTAL-ASSETS> 11,769,746
<CURRENT-LIABILITIES> 2,091,662
<BONDS> 0
0
3
<COMMON> 4,747
<OTHER-SE> 9,337,180
<TOTAL-LIABILITY-AND-EQUITY> 11,769,746
<SALES> 733,401
<TOTAL-REVENUES> 743,709
<CGS> 1,286,410
<TOTAL-COSTS> 4,567,288
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 531,331
<INCOME-PRETAX> (5,806,864)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,806,864)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,806,864)
<EPS-BASIC> (0.28)
<EPS-DILUTED> (0.28)

</TABLE>