FLASH MEMORY INDUSTRY

The Company's technology employs flash ("Flash") memory as the storage media.
The traditional data storage market encompasses several types of memory and
storage devices designed primarily for specific components of computer systems.
Dynamic random access memory ("DRAM") provides main system memory; static random
access memory ("SRAM") provides specialized and high speed memory; hard disk
drives provide high capacity data storage; and floppy disk drives permit low
capacity removable data storage.

In recent years, digital computing and processing have expanded beyond the
boundaries of desktop computer systems to include an array of electronic
systems. These new devices include handheld data collection terminals, medical
monitors, mobile communication systems, highly portable computers, digital
cameras, cellular telephones, communications switches, wireless base stations,
network computers, pay telephones, digital audio recorders and other electronic
systems. These emerging applications have storage requirements that are not well
addressed by traditional storage solutions. Important

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requirements include small form factor, high reliability, low power consumption
and the capability to withstand high levels of shock and vibration and extreme
temperature fluctuations. In the late 1980s, a new memory technology, known as
Flash memory, was developed as an extension of ultraviolet erasable programmable
read-only memory ("EPROM"). Flash memory is non-volatile, unlike DRAM and SRAM,
requiring no power to retain data and is electrically reprogrammable, unlike
EPROM.

Flash memory-based products are solid-state devices, making them very reliable.
Flash products are non-volatile, meaning that no on-going source of power is
required in order for the products to retain data, images or audio indefinitely.
Flash is noiseless, considerably lighter, more rugged and consumes less than 10
percent of the power required by a rotating disk drive. The use of Flash memory
is seen by the Company as the most practical solution for storing data on
removable and interchangeable modules, given that other memory technologies
either require battery back-up, draw too much power, are physically too large,
or are mechanically or magnetically sensitive.

Flash products are produced by a large number of firms including Intel Corp.,
SanDisk Corporation, AMD, M-Systems, Samsung, TDK, Toshiba and others. Industry
estimates indicate Flash cartridge shipments exceeded 859,000 units in 1995 and
are projected to exceed 10.7 million units in 1999 according to Disk/Trend, Inc.
Recent product applications by the Company have focused on CompactFlash a
product of SanDisk Corporation. CompactFlash products provide full PC Card ATA
functionality but are only one-fourth the size of a standard Type II PCMCIA card
(a CompactFlash cartridge is approximately 1.7" x 1.4" x 0.13"). CompactFlash is
compact, rugged and has low-power requirements. CompactFlash is available in
capacities ranging from 2 megabyte to 24 megabyte with higher capacities
expected to be available during calendar 1997 and at reduced unit costs over
time.

CompactFlash is being promoted as a standard form factor by the 70+
corporations, including the Company, who are members of the CompactFlash
Association ("CFA"). The CFA is actively promoting the development of products
using CompactFlash. Founding members of the CFA were SanDisk Corporation, Apple
Computer, Inc., Canon Inc., Eastman Kodak Co., Hewlett-Packard Company, LG
Semicon, Matsushita Electric Industrial Co. (Panasonic), Motorola, NEC
Corporation ("NEC"), Polaroid Corp., Seagate Technology, Inc. ("Seagate") and
Seiko Epson Corp.

The Company's technology also supports the Intel Miniature Card format offering
customers design flexibility and choices among Flash memory.

As a developer of advanced electronic products and technologies employing Flash
memory the Company's success is in part dependent upon the continued growth and
use of various forms of Flash memory. New product applications are also premised
on continued reductions in the per-megabyte cost of Flash memory of which there
can be no assurance.

EXISTING OEM CONSUMER PRODUCTS

The Company has developed a line of consumer products, including the
Flashback(R), the Flashback VoiceLink(TM), SoundClips(R), and bundles of these
products as the Flashback Mobile Office(TM) family all based on the Company's
proprietary Flashback technology. The technology developed for the Flashback
product line integrates a sophisticated micro-processor based control system,
digital signal processing ("DSP"), sophisticated digital/analog and
analog/digital conversion along with advanced data compression and non-volatile
storage media (Flash memory) to produce a no-moving-parts recording scheme with
advanced features and capabilities. The Company's unique patent-pending approach
eliminates the need for a high powered CPU thereby reducing cost and improving
efficiency of Flash memory utilization.

The Company was unsuccessful in its efforts to directly distribute the products
and incurred significant expenditures and operating losses. In late 1996 the
Company, as a part of its restructuring, discontinued direct sales and elected
to private label the products. In November 1996, under the terms of the Sanyo
agreement, Sanyo commenced private labeling the products under an exclusive
arrangement in the United Kingdom. In March 1997, the Sanyo agreement was
expanded to provide for sales to the rest of Europe. The agreement, which
terminates in October 1999, provides that Sanyo must purchase at least 500
product units per month (plus or minus 20%) in order to maintain exclusivity. As
of June 1997, the Company had received approximately $500,000 in orders from
Sanyo, of which approximately $225,000 had been shipped. Management believes
Sanyo has the established infrastructure, brand recognition, and marketing
expertise required to be successful in retail channels. The product is currently
shipping in the U.K., Germany, France, with the rest of Europe scheduled for
calendar 1997. There can be no assurance that Sanyo will be successful in
distributing Flashback products in Europe or continue to order from the Company.

The Company is seeking additional OEM private label relationships for existing
Flashback products in other markets.

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A description of each of the Company's proprietary products follows:

FLASHBACK: The Flashback digital hand-held voice recorder is a 3 ounce,
palm-sized unit that is used to record ideas, conversations, and voice
memos. The Company believes it is the first and leading digital
recorder to feature removable, reusable Flash memory cartridges for
long recording times. The Company holds the US patent #5,491,774 for
the product. A two-button control pad lets users record, playback, fast
forward, and reverse as well as rapid search, instant rewind and
variable speed playback without altering pitch. On-board editing
functions include insert and delete of words, sentences or even whole
paragraphs.

FLASHBACK VOICELINK: The Flashback VoiceLink not only turns a PC
(personal computer) into a long-length audio recorder, it also allows
users to download voice messages from SoundClip cartridges directly
onto a computer hard drive. The VoiceLink plugs directly into the PC
card slot of a notebook or a desktop computer and permits connection of
either a wired or wireless microphone for recording directly to the
hard disk at a compressed rate of 18 minutes per megabyte of storage.
Users can send compressed files over the Internet saving time and
money. With a headset, keyboard and the VoiceLink software, users can
manipulate sound files for controlled record, play, fast forward,
reverse and edit functions. The VoiceLink product was selected as an
Innovations '97 award winner at the 1997 International Winter Consumer
Electronics Show.

SOUNDCLIP: Interchangeable SoundClip Flash cartridges are compatible
with both the Flashback and the VoiceLink. Users can remove SoundClips
and add new ones thereby extending recording time. SoundClips store
digitally recorded Flashback voice messages and transfer them to the
VoiceLink for downloading into a computer. Available in 18- or
36-minute capacities or longer capacities on special order, they
feature a write-protect switch to protect important recordings. Users
can store SoundClip cartridges indefinitely, and use them repeatedly.
They're not affected by magnets, X-rays, heat or cold.

FLASHBACK MOBILE OFFICE: The Flashback Mobile Office includes a
Flashback, SoundClip cartridge, VoiceLink and Software. The Flashback
Mobile Office Professional includes two VoiceLink cards for sending
compressed e-mail messages back and forth.

The technology developed for the Flashback products provide an alternative to
cassette sound recorders. VoiceLink also permits users to interface with
notebook and PC computers to record, edit and transmit highly compressed sound
files over networks and the Internet. The Company's voice recording technology
enables business travelers to carry a voice recorder and use it anywhere to
create voice memos or E-Mail. The digital recorder or a notebook or portable
computer become the transport and storage mediums for sound files which are
transmitted over existing networks to remote users. The direct benefits of the
Company's voice recording approach include:

o Digital recorders can be smaller, more compact and have no
moving parts as compared to cassette recorders.

o Digital voice recording technology permits users to compose
messages with editing, insertion and deletion capabilities.
Analog tape can only be appended and has no editing
capabilities

o Unlike analog tape digital voice recording technology
interfaces directly with computers, networks and the Internet.

o Digital voice recording provides the convenience of voice
communication instead of keyboard entry for messages.

The Company and its OEM customers are seeking additional markets to benefit from
the advantages of digital recording.

OEM TECHNOLOGY COMPONENTS

The Company owns intellectual property and expertise in the use of Flash media
for storing data, such as sound, pictures, and video. The development of the
proprietary MicroOS(TM) for both of the industry standard Flash memory
formats---Intel's Miniature Card and CompactFlash---establishes the Company with
experience developing for both. The Norris Flash File System 8:1 compression
technology---which allows 18 minutes of voice recordings in 1 megabyte of
memory---is efficient when compared to competing compression algorithms. In
addition, the Company holds a patent on the use of removable Flash media as
storage for a hand-held digital voice recording device.

A key feature of the Company's Flashback technology is the ease of computer
compatibility. The Company's approach to managing digital sound information
allows information to be manipulated, saved and transferred over any number of
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communication paths including the Internet and corporate Intranets. Information
may also be compressed or saved in traditional sound formats on hard drives or
other media. Management believes the rapid growth of the Internet and corporate
Intranets and the growing use of electronic mail will provide a growing market
for an efficient method to transmit voice messages, sound and other data over
these networks. Management believes the Company's technology provides an
efficient method to link this information between networks, personal, portable
and network computers and an array of miniature electronic devices.

The Company believes its expertise and technology offers OEMs a rapid path to
develop digital recording products using Flash memory. These products may
integrate the Company's technology as a primary or secondary feature set. In
most cases, the Company believes it offers less costly development and a faster
time to market for companies who would otherwise have to develop expertise in
the following technology areas available for licensing:

MICRO OS: The MicroOScf is a compact operating system with logic
specifically designed to interface with CompactFlash, a Flash memory
card about the size of a matchbook that was originally developed by
SanDisk and is now supported by a number of manufacturers. MicroOSi was
designed with logic specifically for the Intel Miniature Card, a
competing Flash technology to the CompactFlash. Management believes
MicroOS is the only operating system for Flash memory that has a data
transfer rate limited only by the Flash memory write speed. The
operating system therefore supports the recording speeds required to
write directly to primary memory without intermediary memory. This
reduces overall hardware costs, especially for imaging applications.
Written in highly compact and optimized C computer language code, the
MicroOS operates in 14K of ROM and requires only 300 bytes of RAM.

NORRIS FLASH FILE SYSTEM: The Norris Flash File System (.nfs) is a
software module that speeds up and simplifies the integration of Flash
memory into embedded systems by transparently managing the
peculiarities of different types of Flash memory and by offering a
sophisticated and feature rich API (Advanced Protocol Interface, a file
protocol) and advanced fault tolerance.

MULTICHIP MODULE (MCM): The MCM is a single, highly compact chip that
contains a DSP and micro controller. With the MicroOS operating system
and the Norris Flash File System, the unit is designed to reduce the
hardware and software development time for products such as digital
voice recorders, telephone answering devices, and cellular phone
answering machines. It can also be integrated as a voice processing
feature into products such as digital cameras.

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