PART I

Item 1. BUSINESS

Overview

The Company was organized in September 1998 as North American Software Associates, Limited, a Delaware corporation. The Company was organized to provide a variety of telecommunications services. Effective December 21, 1999, North American Software Associates, Limited was acquired by Pierce International, Inc., a Colorado corporation, in a share exchange transaction and in March 2000 the Company moved its state of incorporation to Delaware and changed its name to North American DataCom, Inc.

The Company intends to provide communications and information technology services with an emphasis on wideband fiber optic and wireless telecommunications services that support enterprise data storage solutions. These services are intended to include Internet access services, on-line critical data storage and retrieval, and data and voice networking. The Company's business plan envisions offering a wideband fiber optics and wireless telecommunications network that will service primarily Tier 2 markets by supporting wideband data, voice and internet transmission. Tier 2 markets consist of those population centers that are not in the primary 100 largest areas but are uniquely located along railroad rights-of-way where fiber optic transmission facilities can be easily accessed. The Company's short-term focus is on providing such services to Tier 2 markets in the southeast, primarily from Atlanta to Memphis.

In September 2000, the Company retained Cap Gemini Ernst & Young to revise the Company's existing Business Plan and Business Model, which were completed in December 2000. The 5-year Plan calls for a $725 million capital investment for seven EDS Centers and the 3,000-route-mile Fiber optic network. In February 2001, the Company announced its Interim Business Plan focusing on a 550 mile segment, identified as Segment 1, from Atlanta to Memphis, plus three EDS Centers.  This announcement disclosed an 18-month planned capital investment of approximately $75 million. In November 2000, the Company announced revisions to its original Business Plan. This Plan had been formulated with the assistance of Cap Gemini/Ernst & Young, and called for the construction of a 3,000-mile fiber optic network throughout the Southeast United States. Under the revised Plan, the Company will divide its proposed fiber optic network construction into six discreet segments.

The Company is engaged, or plans to engage, in the following lines of business:

Enterprise Data Storage. The Company is in the process of furnishing and equipping a facility in Iuka, Mississippi to position the Company to provide secure enterprise data storage and Internet access services for corporate, government and other users. In January 1999 the Company entered into a lease agreement for use of the facility that was originally constructed for the National Aeronautics and Space Administration ("NASA") in 1994 to support the advanced solid rocket motor project. When completed the facility originally housed a fully functional $20 million computer and network operations center and provided information processing and on-line data storage with a high level of security. Budget cuts for the space shuttle caused the closure of this facility in 1996. The Company believes that this facility, with its existing infrastructure and security features, is ideally suited for providing secure enterprise data storage and access services. In November 2000, the Company was awarded a $300,000 research contract to demonstrate commercial applications of statewide remote sensing data. The Company will work with PixSell Inc., a Mississippi information technology company, and The University of Mississippi's Department of Computer and Information Science. Under the six-month contract, which was completed in September 2001, the Company will expand and enhance the existing "Mississippi View" data management system. The View System was developed by PixSell to provide greater access to Mississippi statewide remote sensing satellite and imagery. The enhanced archived View System makes it a Real Time asset for education, state agencies, and MSCI commercial users. MSCI is a partnership between the National Aeronautics and Space Administration (NASA), The University of Mississippi, and high technology businesses. NASA and The State of Mississippi fund MSCI projects. The mission of MSCI is to develop a remote sensing industry in Mississippi by commercializing the technologies developed by NASA at the Stennis Space Center in Hancock County, MS.

Fiber Optic and Broadband Wireless Network. The Company is in the process of building a fiber optic and broadband wireless communications network, which will allow for the high-speed transmission of large amounts of data. The Company intends to market its high-speed data transmission network to businesses, government agencies and institutions that may prefer optical networks over existing telephone and satellite data transmission systems.

In March 2000, the Company entered into an agreement with Qwest Communications in which the Company purchased 504 miles of conduit installed along the CSX railroad track from New Orleans, Louisiana to Mobile, Alabama, and from Pensacola, Florida to Jacksonville, Florida. Fiber optic cable has not yet been installed within such conduit purchased from Qwest Communications. The agreement with Qwest calls for payments of approximately $15 million over the course of the agreement, all of which is currently past due by the Company. Qwest has declared a default, but has not initiated arbitration or other proceedings to recover the conduit. In August 2000, the Company entered into an agreement with a third-party contractor to lay fiber conduit between Atlanta, Georgia and Chattanooga, Tennessee and from Chattanooga to Memphis, Tennessee. The Company made no payments under the agreement, and the agreement has been terminated by the third-party contractor, although the Company continues negotiations with the third-party contractor to revive the agreement. The Company has installed 24 miles of conduit, of which approximately 8 miles was sold to Bell South, providing access to the Company’s enterprise data center in Iuka, Mississippi.

Internet Access Service Provider. As of June 30, 2001, the Company provided Internet access services to 1,473 customers in Mississippi, Tennessee and Alabama. Internet services provided by the Company include basic dial-up access to the Internet through standard computer modems, high-speed Internet access and the design and hosting of websites for customers, which was acquired in April 1999. As the Company's fiber optic and broadband wireless network expands, the Company will attempt to market its Internet access provider services to businesses and retail customers along the route of the network.

Digital and Alpha Paging Services. Through its wholly-owned subsidiary, Action Communications, Inc. ("Action"), the Company provides digital and alpha numeric paging services to nine southeastern states and is expanding its coverage area to include portions of the eastern and southwestern United States. As a specialized mobile radio carrier, Action also provides dispatch, telephone and global position system services.

Telecommunications Consulting Projects. The Company also proposes to engage in telecommunications consulting projects for corporations, governmental agencies and institutions to upgrade their computer systems to function more effectively.

Internet usage is growing rapidly, and businesses are increasingly embracing the Internet as a venue to sell their products and services. Many Internet operations are critical to the businesses and customers using the operations. In order to provide the quality, reliability, availability and redundancy of these critical operations, corporate information technology teams must make significant capital investments in facilities, personnel, equipment and networks, which must be maintained and upgraded on a continuous basis. This investment is an inefficient use of resources, and has created the opportunity for businesses like the Company to offer server hosting, Internet connectivity, remote enterprise data storage and managed and professional telecommunications services to third parties to enable reliable, high performance for critical Internet operations.

The data storage management market has expanded rapidly as more businesses and governmental agencies are outsourcing their data storage needs. This has led to significant growth in the industry of data storage infrastructure services, enterprise storage resource management, data replication product development and an increase in the number of data centers necessary for the growth in the data storage market. Although the Company is still in its development phase, the Company believes that its current infrastructure and planned expansion facilities will be well-positioned for servicing the growing need of data storage services.

Enterprise Data Storage. The Company proposes to become a Tier IV data center supporting secure enterprise data hosting and storage services. The Company leases a state-of-the-art facility in Iuka, Mississippi that was originally designed and constructed to house the computer engineering and programming center for the NASA advanced solid rocket motor project. The Company believes that this facility is uniquely designed to provide the physical environment necessary for a Tier IV data center with relatively minimal additional expenditure. If completed, this data center will enable the Company to offer enterprise storage operations, Internet hosting co-location, web-based data storage and general real-time data backup running 24-hours-a-day, 7-days-a-week. The facility is custom designed with raised floors, HVAC temperature control systems with separate cooling zones and full electric power redundancy. The Company intends to continue to develop and upgrade its current data center in Iuka, Mississippi to support up to 65,000 square feet of raised floor data center services.

The Company's facility contains a full range of security features. These include 24-hour-a-day secured access with security breach alarms, cipher lock systems and security guards on premises. The facility is housed in a government constructed, nearly tornado-proof building using full redundant primary power from two sources with multiple backup power generators. The facility currently has a 1,000 square foot, temperature controlled telecommunications room adjacent to a 3,200 square foot raised floor, temperature controlled computer room complete with security, UPS power backup and emergency diesel generator backup. The complex has a 50 mega-watt redundant power source provided by a TVA power station for current and additional power requirements that should meet all of the Company's power requirements.

In addition, 24-hour systems management is provided with onsite personnel trained in the areas of networks, Internet and transmission systems, and is available to monitor enterprise storage operations, data center services, network operation controls, and Internet hosting. This physical and technical environment is expected to provide the Company's potential customers the reliability and flexibility necessary to store mission critical web-based information at affordable rates.

In order to upgrade the Company's existing facilities to offer Tier IV services the Company will need to upgrade various elements of its facilities, including: (i) multiple data entrances, (ii) multiple power supplies, (iii) enhanced physical security for the premises and (iv) expansion of square footage of raised floor space. Currently the Company has data access to its hosting facility provided by microwave wireless transmission and leased lines from Atlanta and Memphis. As the Company's fiber capacity is completed the Company expects to be able to provide dual redundant alternative data entrances to its hosting and storage facility.

The Company plans to construct its enterprise data storage infrastructure around the E-Business Infrastructure Architecture. The core components of the Company's data storage infrastructure are expected to be fault tolerant enterprise storage, Hewlett-Packard and Sun Micro servers, and Oracle database software. The Company has selected a proven network structure and best in class components to build its enterprise storage system. The hardware configuration for data storage is expected to be EMC's Symmetrix open storage solution. The redundant storage architecture and world class support is expected to make the Company's storage solution equal to other business data center providers.

The software that the Company has chosen for use in its enterprise storage centers provides backups, testing, offline processing and performance measurements to customers that require zero downtime. The Company's remote storage facility is planned to provide mirroring of data between customer's data storage systems to ensure continuous data availability.

The Company expects to use its fiber optic backbone for optical data transport and retrieval.

Fiber Optic and Broadband Wireless Network. The Company proposes to develop a fiber optic network to provide access services for the Company's vertically integrated technology businesses to service Tier 2 communities in the Southeast. This network is initially designed to service the Atlanta to Memphis route, through Chattanooga.

In March 2000, the Company entered into an agreement with Qwest Communications in which the Company purchased 504 miles of conduit installed along the CSX railroad track from New Orleans, Louisiana to Mobile, Alabama, and from Pensacola, Florida to Jacksonville, Florida. Fiber optic cable has not yet been installed within such conduit purchased from Qwest Communications. The agreement with Qwest calls for payments of approximately $15 million over the course of the agreement, all of which is currently past due by the Company. Qwest has declared a default, but has not initiated arbitration or other proceedings to recover the conduit. In August 2000, the Company entered into an agreement with a third-party contractor to lay fiber conduit between Atlanta, Georgia and Chattanooga, Tennessee and from Chattanooga to Memphis, Tennessee. The Company made no payments under the agreement, and the agreement has been terminated by the third-party contractor, although the Company continues negotiations with the third-party contractor to revive the agreement. The Company has installed 24 miles of conduit, of which approximately 8 miles was sold to Bell South, providing access to the Company’s enterprise data center in Iuka, Mississippi.

While the Company is building its fiber network, the Company has installed a communications tower to provide wireless connectivity, initially at 155 MBPS, from the Company's facility in Iuka, Mississippi into the nationwide Internet and telecommunications system through Atlanta and Memphis. This provides the Company with an interim capability to test market its enterprise data storage services, web-hosting services, and competitive local exchange carrier (CLEC) and interstate exchange carrier (IXC) telephone services to select markets. In March 2001, the Company provided video streaming to a local broadcasting company by using this wireless connectivity. This generated $1,500 in revenue for the fiscal year ending June 30, 2001.

Internet Access Service Provider. The Company provides Internet access service under the tradename "Freedom 2000." The Company offers a wide range of Internet access services in the northeastern Mississippi area, including access services to business, government and residential users, web site development, web hosting, and Internet network development.

Digital and Alpha Paging Services. Action provides digital and alpha numeric paging in nine southeastern states and is currently attempting to expand its coverage area to include portions of the eastern and southwestern United States. Action is a specialized mobile radio carrier in northern Mississippi providing dispatch, telephone and global positioning system services to support automated vehicle location services in the coverage area.

Telecommunications Consulting Projects. The Company anticipates providing telecommunications consulting services to governments, agencies, institutions and business customers. In August 2000, the Company became a member of the Smart Solutions Group. This group has proposed a complete state-of-the-art healthcare information system for the country of Turkey. Smart Solutions Group includes U.S. corporations such as EMC, Cisco, Oracle, Sun Microsystems and Hewlett-Packard. The Smart Solutions Group has previously provided consultation services in connection with security and healthcare plans in Belgium, Germany, Slovenia and Singapore. The Company believes that its experience in creating its fiber optic network in the southeastern United States will make it uniquely qualified to consult and advise on construction on a similar system in Turkey. As of October 11, 2001, no formal agreements have been reached for consulting or other services with Turkey.

In August 2001, the Company reached an agreement with Infusion Software Group, LLC (Infusion) to form Global PTX, LLC, a joint venture with 50% ownership by the Company. The Company and Infusion have established an Application Service Provider business to design, develop and implement data warehousing and data mining applications. Global PTX will establish Private Trade Exchanges focusing on providing customers with an "end-to-end" solution for their business strategies. Initial development activities will be designed to target the Manufacturing and Retail Business Industry Sectors, specifically focused on vendor/customer supply chain management. Infusion is a specialized software and marketing service provider to enterprises thought the US. The capital requirements for the Global PTX are included in the earlier announced capital planning. This is part of the EDS Center investment of Segment 1 of the bandwidth network and is contained in the Company's overall capital plan.

The Company has formed a sales and marketing group with its initial focus on wholesale fiber optic and broadband services. The direct sales group plans on forming strategic partnerships with other businesses offering complementary services to target market sectors for fiber, bandwidth and data storage. The Company also plans to explore alternative sales and marketing channels focusing on the inter-exchange carriers, competitive local exchange carriers, Internet service providers and data centers. Additional target markets include dotcom companies, service providers and businesses, which support small, medium and larger operations that are computing sensitive. The Company retains a government lobbying firm in Washington, D.C. to advise it on government contracting opportunities.

Fiber Optic and Broadband Wireless Network. When the Company's fiber optics network is complete the Company expects to market its services by focusing on Tier 2 communities along the route of the network. This will include interconnecting with providers in Atlanta, Chattanooga and Memphis.

Enterprise Data Storage. When the Company's data hosting and storage facilities are complete and operational, the Company expects to market its services primarily to governments, agencies, educational institutions, medical institutions and larger businesses. The Company's sales and marketing staff will focus on marketing its data center for dedicated Web hosting and complex custom hosting and professional services. In addition, the Company intends to offer general co-location and shared Web servers for customers that need multiple service offerings. The Company will further focus on developing strategic partnerships to offer multiple service offerings, including multiple service site support and dual data center redundancy. It is expected that the services will exploit the Company's network infrastructure for data availability, data protection, scalability and performance for the medical, financial, government and corporate arenas.

The Company's market is intensely competitive, and the Company expects competition from existing service providers and new market entrants in the future. The principal competitive factors that may affect the Company's ability to compete include ability to deliver services when requested by customers, technical expertise, network capability, reliability and quality of service, access to network resources, including circuits, equipment and interconnection capacity to other networks, price, brand name recognition, network security and financial resources.

There can be no assurance that the Company will have the resources or expertise to compete successfully in the future. Current and potential competitors in the market include providers of server hosting services, national foreign and regional ISPs, global, regional and local telecommunications companies and the Regional Bell Operating Companies, and other technology services companies.

Most of the Company's competitors have substantially greater resources, more customers, longer operating histories, greater name recognition, and more established relationships in the industry. As a result, these competitors may be able to develop and expand their network infrastructures and service offerings more quickly, devote greater resources to the marketing and sale of their products and adopt more aggressive pricing policies. In addition, these competitors have entered and will likely continue to enter into business relationships to provide additional services competitive with those that the Company is proposing to provide.

Some of the Company's competitors may be able to provide customers with additional benefits in connection with the Internet system and network management solutions, including reduced communications costs, which could reduce the overall costs of their services relative to the Company's. The Company may not be able to offset the effects of any price reductions. In addition, the Company believes that its market is likely to encounter consolidation in the future, which could result in increased price and other competition.

A significant portion of the services offered or to be offered by the Company are or will be subject to regulation at the federal and/or state levels. The Federal Communications Commission (the "FCC") and state public utility commissions regulate telecommunications carriers, which are companies that offer telecommunications services to the public or to all prospective users on standardized rates and terms. The Company's anticipated data transport and paging services are expected to be regulated services.

The FCC exercises jurisdiction over common carriers and their facilities and services, to the extent that they are providing interstate or international communications. The various state utility commissions retain jurisdiction over telecommunications carriers and their facilities and services to the extent that they are used to provide communications that originate and terminate within the same state. The degree of regulation varies from state to state.

In recent years, the regulation of the telecommunications industry has been in a state of flux as the United States Congress and various state legislatures have passed laws seeking to foster greater competition in telecommunications markets. The FCC and state commissions have adopted many new rules to implement those new laws and to encourage competition. These changes, which are still incomplete, have created new opportunities and challenges for the Company and its competitors. Certain of these and other existing federal and state regulations are currently the subject of judicial proceedings, legislative hearings and administrative proposals which could change, in varying degrees, the manner in which this industry operates. Neither the outcome of these proceedings nor their impact upon the telecommunications industry or the Company can be predicted at this time. Indeed, future federal or state regulations and legislation may be less favorable to the Company than current regulations and legislation and therefore have a material and adverse impact on the Company's business and financial prospects by undermining our ability to provide telecommunications services at competitive prices.

Federal Regulation and Legislation. The Company, together with its strategic partners, must comply with the requirements of a common carrier under the Communications Act of 1934, as amended, to the extent the Company provides regulated interstate services. These requirements include an obligation that the Company's charges, terms and conditions for communications services must be "just and reasonable" and that the Company may not make any "unjust or unreasonable discrimination" in its charges or terms and conditions. The FCC also has jurisdiction to act upon complaints against common carriers for failure to comply with their statutory obligations.

Comprehensive changes to the Communications Act were made by the 1996 Telecommunications Act, enacted on February 8, 1996. It represents a significant milestone in telecommunications policy by establishing competition in local telephone service markets as a national policy. The 1996 Telecommunications Act removes many state regulatory barriers to competition and forecloses state and local governments from creating laws preempting or effectively preempting competition in the telecommunications market.

The 1996 Telecommunications Act places substantial interconnection requirements on the traditional local telephone companies. Traditional local telephone companies are required to provide physical collocation, which allows companies such as the Company and other interconnectors to install and maintain their own network termination equipment in the central offices of traditional local telephone companies, and virtual collocation only if requested or if physical collocation is demonstrated to be technically infeasible. This requirement is intended to enable the Company, along with other competitive carriers, to deploy its equipment on a relatively convenient and economical basis.

The 1996 Telecommunications Act in some sections is self-executing. The FCC issues regulations interpreting the 1996 Telecommunications Act that impose specific requirements upon which the Company and its competitors rely. The outcome of various ongoing FCC rulemaking proceedings or judicial appeals of such proceedings could materially affect the Company's business and financial prospects by increasing the cost or decreasing its flexibility in providing telecommunications services. The FCC prescribes rules applicable to interstate communications, including rules implementing the 1996 Telecommunications Act, a responsibility it shares in certain respects with the state regulatory commissions.

The 1996 Telecommunications Act also directs the FCC, in cooperation with state regulators, to establish a universal service fund that will provide subsidies to carriers that provide service to individuals that live in rural, insular, and high-cost areas. A portion of carriers' contributions to the universal service fund also will be used to provide telecommunications-related facilities for schools, libraries and certain rural health care providers. The FCC released its initial order in this context in June 1997, which requires all telecommunications carriers to contribute to the universal service fund. The FCC's implementation of universal service requirements remains subject to judicial and additional FCC review. Additional changes to the universal service regime could increase the Company's costs and could adversely affect the Company.

State Regulation. Some of the Company's services that are not limited to interstate access potentially may be classified as intrastate services subject to state regulation. All of the states where the Company operates, or intends to operate, require some degree of state regulatory commission approval to provide certain intrastate services and maintain ongoing regulatory supervision. In most states, intrastate tariffs are also required for various intrastate services, although the Company's services are not subject to price or rate of return regulation. Actions by state public utility commissions could cause the Company to incur substantial legal and administrative expenses and adversely affect its business.

Local Government Regulation. In certain instances, the Company may be required to obtain various permits and authorizations from municipalities, such as for use of rights-of-way, in which it operates transmission facilities. Subject to litigation are whether various actions of local governments over the activities of telecommunications carriers such as the Company's, including requiring payment of franchise fees or other surcharges, pose barriers to entry for competitive local exchange carriers that violate the 1996 Telecommunications Act or may be preempted by the FCC. While the Company is not a party to this litigation, it may be affected by the outcome. If municipal governments impose conditions on granting permits or other authorizations, or if they fail to act in granting such permits or other authorizations, the cost of providing telecommunications and transmission services may increase or negatively impact the Company's ability to expand its network on a timely basis and adversely affect its business.

As of June 30, 2001, the Company had 23 full-time and 4 part-time employees. None of the Company's employees is represented by a labor union and the Company believes that its employee relations are good. The Company believes that its future success will depend in part on its continued ability to attract, hire and retain qualified personnel. The competition for personnel are intense, and there can be no assurance that the Company will be able to identify, attract and retain personnel in the future.

Item 2. PROPERTIES

In March 2001, the Company agreed to a new 20-year lease with the State of Mississippi for its main facilities in Iuka, Mississippi. This lease provides the Company with 25,000 square feet of office and equipment space at the former National Aeronautics and Space Administration facility. The State, acting through the Mississippi Development Authority (MDA), has also granted NAD a 10-year right of first refusal to lease an additional 75,000 square feet at the Iuka facility, to accommodate NAD's expansive business plan. The facility was completed for NASA in 1994 to provide computer engineering and programming for the advanced solid rocket motor project. Budget cuts for the space shuttle caused closure of this facility in 1996. The Company believes that this facility, with its existing infrastructure and security features, is ideally suited for the Company’s present and proposed business operations.

The Company also leases approximately 3,000 square feet of office space in Denver, Colorado at an annual rent of approximately $36,000, which is used primarily for sales and marketing purposes.

Item 3. LEGAL PROCEEDINGS

David Cray, former Vice President and Corporate Treasurer, departed the Company effective March 5, 2001, upon his return from a leave of absence. Mr. Cray and the Company disagree about the terms and circumstances of Mr. Cray’s departure, and will attempt to reach an agreement, and, if necessary, resolve the matter through the arbitration process.

On March 26, 2001, the Company was served with a summons and complaint entitled Tom Epperson, Freddie Wilson and Omega Shelters, Inc. v. North American DataCom, Inc. and North American Infotech, LLC, (U.S.D.C. Northern District of Mississippi, Case No. 1:02CV105-D-D). The action relates to alleged damages resulting from an agreement to build a prototype composite fiber shelter by Omega Shelters, which prototype was subject to the Company’s receipt and acceptance. The agreement at issue also contains an arbitration provision. In the complaint plaintiff’s state that Omega Shelters’ immediate predecessor, Yellow Creek Lodges, Inc., was forced into bankruptcy in the United States Bankruptcy Court for the Northern District of Mississippi. While the dismissed action sought damages of $2.2 million, the Company believes that the claim for damages is wholly without merit and that the Company will not be materially adversely effected by the outcome of any future proceedings, if filed. By decision of the Court dated June 28, 2001, the matter was dismissed without prejudice for lack of subject matter jurisdiction.

On June 13, 2001, the Company was served with a summons and complaint in the matter known as OptiCom v. North American DataCom, Inc., (County Court of Tishomingo, State of Mississippi, Cause No. CV01-0077(G)T). Plaintiff OptiCom has alleged that the Company has failed to pay $28,000 for optical conduit provided for the last mile access along the Tishomingo Railroad. The Company is defending the lawsuit and has engaged OptiCom in settlement negotiations.

The Company does not believe the ultimate outcome of the aforementioned matters will have a significant impact on the Company’s financial position, results of operations or liquidity.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No shareholders meetings were held during the Company's fiscal year 2001.

PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's common stock is traded on the over-the-counter electronic bulletin board under the symbol "NADA". The market for the Company's common stock has often been sporadic, volatile and limited.

The following table shows the high and low bid prices for the Company's common stock as reported by NASDAQ during the past two years. The prices reflect inter-dealer quotations, without retail markup, markdown or commissions and may not represent actual transactions. The following per share prices for 1999 reflect the post-merger capitalization (see Note 2 to the consolidated financial statements).

On October 12, 2001, there were approximately 523 registered holders of record of the Company's common stock.

Holders of the Company's common stock are entitled to receive dividends when and if declared by the Board of Directors out of funds legally available therefor and, in the event of liquidation, to share pro rata in any distribution of the Company's assets after payment of liabilities. The Board of Directors is not obligated to declare a dividend. The Company has not paid any dividends on its common stock, and the Company does not have any current plans to pay any common stock dividends.

During the last three fiscal years, the Company issued the following equity securities in transactions that were not registered under the Securities Act of 1933, as amended:

In June 1999 the Company authorized the exchange of $512,120 of Notes and debt for 51,212 shares of Series A Convertible Preferred stock. These 51,212 shares outstanding as of June 30, 1999 were converted into 2,020,296 shares of the Company's pre-merger common stock and subsequently exchanged for 23,319,933 shares of post-merger restricted common stock as part of its reverse merger with PRCI in December 1999. In March 2000, options attached to the Notes were exercised and payment of $342,244 was received for 11,620,964 of post-merger common shares. In addition, $2,145 of debt was converted to 39,002 shares of common stock. There are no Series A preferred shares outstanding as of June 30, 2001.

As discussed in Notes 2 and 3 of the consolidated financial statements, the Company completed a reverse acquisition of PRCI in a transaction accounted for in a manner similar to a recapitalization. Shareholders of the Company received approximately 11.54 shares of PRCI common stock for each share of common stock they held in the Company at the date of merger.

In April 1999, the Company issued 50,000 shares of pre-merger common stock for the acquisition of Freedom 2000 and 1,731,339 shares of post-merger common shares for the acquisition of Action Communications, Inc. (See Note 3 to the consolidated financial statements)

In November 1998, and January 1999, the Company entered into employment agreements with five initial employees to issue 450,000 restricted pre merger common shares, based on a vesting formula, in exchange for $112,500. (See Note 9 to the consolidated financial statements)

In February 1999, the Company exchanged 10,000 shares of its pre merger common stock for services rendered, aggregating $10,000.

During the period from March to May 1999, the Company sold 20,000 shares of restricted common stock for a total of $10,000.

During the period from April 1999 to December 3, 1999, the Company sold 175,500 shares of restricted common stock for a total of $227,500 at prices ranging from $0.50 to $5.00 per share. There were options for the purchase of 55,500 shares of pre merger common stock of the Company for $10 per share attached to certain of the sales.

During November 1999, the Company exchanged 164,916 shares of restricted common stock for $74,000 of convertible notes and $34,104 of advances made from a director.

During December 1999, the Company exchanged 1,687,934 shares of restricted common stock for services rendered, aggregating $101,275 for services rendered in facilitating the PRCI merger.

In January 2000, the 80,000 preferred shares were converted into 80,000 shares of common stock of the Company. Also in January 2000, the warrants attached to these preferred shares were exercised with payment of $60,000, and 80,000 restricted common shares were issued.

In February 2000, a $10,000 convertible note of PRCI was converted into 170,000 shares of common stock.

In May 2000, the Company exchanged 111,320 pre merger (1,284,883 post merger shares) shares of common stock for $173,830 of services provided to the Company by James White in the period January 1999 to March 2000. The Board approved this exchange in November 1999.

In May 2000, the Board authorized 500,000 shares of Series B Senior Preferred Stock. In June 2000 the Company authorized the sale of up to 5,000 shares of Series B convertible preferred stock for $1,000 per share to a principal shareholder. Each share is convertible into 500 shares of Rule 144 restricted common stock of the Company. Each share carries a $60 dividend payable in July annually with these dividends accumulating if not paid and has a right upon liquidation to be redeemed before any common shareholders. If dividends are not current the holders will have 500 voting rights for each share held. There are no redemption rights for retiring this issue. As of June 30, 2001, 1,756 shares have been purchased.

In July 2000, $10,000 of stock options were exercised for 11,542 shares of common stock.

In July 2000, the Company awarded 1,000 shares of its common stock to three individuals for non-cash prize from a logo contest held for local-area students.

In August 2000, $10,000 of stock options were exercised for 115,423 shares of common stock.

In August 2000, the Company sold 317,500 shares of common stock for a total purchase price of $635,000 to a private investor. In October 2000, the company issued 30,000 shares of common stock for costs and services totaling $60,000 to the investor pursuant to the agreement.

In September 2000, the Company sold 500 shares of Series B Convertible Preferred Stock to a principal shareholder for $500,000. During December 2000, the Company sold 326 shares of Series B Convertible Preferred Stock to a principal shareholder for $325,904. In March 2001, the Company sold 378 shares of Series B Convertible Preferred Stock to a principal shareholder for $377,738. In June 2001, the Company sold 252 shares of Series B Convertible Preferred Stock to a principal shareholder for $251,850.

The conversion ratio was amended by action of the Board of Directors from 500 shares of restricted common stock for each share of Series B Convertible Preferred Stock that was issued after September 30, 2000 to 2000 restricted shares of common stock, to reflect recent changes in the price of our shares of common stock on the OTC:BB. The Board of Directors approved that the conversion right of these shares would vary depending on 70 percent of the average price of the common stock for the 5 trading days prior to the end of each quarter beginning April 1, 2001 for future preferred stock issuances. The conversion ratio for the third quarter 2001 issuances was 2,200 shares of restricted common stock for each share of Series B Convertible Preferred Stock that was issued. The conversion ratio for the fourth quarter 2001 issuances was 6,000 shares of restricted common stock for each share of Series B Convertible Preferred Stock that was issued.

In September 2000, the Company closed the private placement of 150,000 shares of common stock for a total purchase price of approximately $442,125. The Company agreed to pay certain fees associated with the placement through the issuance of an additional 3,000 shares of common stock and the payment of $13,700 in cash. The agreement provided that the Company shall file a registration statement with the SEC for the resale of the 150,000 shares by October 5, 2000. For each fifteen day period following this deadline in which the registration statement is not filed with the SEC, the Company was required to make a payment to the private investor equal to an amount payable in cash or common stock based upon the closing OTC bid price of the shares of the Company's common stock as of the end of each fifteen day period. The Company has since filed a registration statement for the resale of such shares, and paid additional shares of common stock to such private investors pursuant to the agreement. The registration was effective on January 31, 2001. In October, November, and December 2000, the Company issued 20,225 total shares of common stock valued at $44,190 as payment in full pursuant to the terms of an agreement previously entered into by the Company and such investors.

In December 2000, $1,305 of stock options were exercised for 15,000 shares of common stock.

In March 2001, the Company issued 115,423 shares of common stock totaling $64,925 to an employee for services rendered.

In March 2001, the Company issued 11,542 shares of common stock totaling $6,494 to a shareholder pursuant to the terms of a common stock option purchase agreement.

In April 2001, the Company issued 60,000 shares of common stock for services rendered totaling $26,400.

In June 2001, the Company issued 200,000 shares of common stock for consulting services totaling $50,000.

In June 2001, the Company issued 142,976 shares of common stock totaling $28,596 to former employees for services rendered to the Company.

In June 2001, the Company issued 100,000 shares of common stock for financial services rendered totaling $20,000.

In June 2001, the Company issued 837,500 shares of common stock $167,500 to officers of the Company for services rendered.

In June 2001, $1,305 of stock options were exercised for 15,000 shares of common stock.

The sales and issuances of securities in the transactions described above were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(2) of the Securities Act, Regulation D promulgated thereunder or Rule 701 promulgated under Section 3(b) of the Securities Act, as transactions by an issuer not involving any public offering or transactions pursuant to compensatory benefit plans and contracts relating to compensation as provided under Rule 701.

The selected financial data set forth below as of and for each of the three fiscal years since the Company's inception in September 1998 have been derived from the Company's audited consolidated financial statements, which have been audited by BDO Seidman, LLP, independent Certified Public Accountants. The information set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's consolidated financial statements and related notes thereto included elsewhere in this report.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The Company was organized in September 1998 as North American Software Associates, Limited, a Delaware corporation. The Company was organized to provide a variety of telecommunications services. On April 1, 1999, the Company acquired all of the assets of Freedom 2000, a local Internet service provider, in exchange for 577,123 shares of restricted common stock of the Company. On December 3, 1999, the Company acquired all of the common stock of Action Communications, Inc. ("Action"), a provider of digital and alpha numeric paging services, in exchange for 1,731,339 shares of restricted common stock of the Company. The Action transaction has been treated for accounting purposes as a purchase of assets and liabilities, and revenues and expenses of Action prior to December 3, 1999 have not been consolidated. Effective December 21, 1999, North American Software Associates, Limited ("NAS") was acquired by Pierce International, Inc. in a share exchange transaction and in March 2000 the Company changed its name to North American DataCom, Inc. The transaction with Pierce International, Inc. has been accounted for as a reverse acquisition since the former shareholders of NAS owned controlling interest in the Company immediately following the transaction and management of Pierce International, Inc. was replaced by management of NAS.

The Company intends to provide broad-based communications and information technology services with an emphasis on wideband fiber optic and wireless telecommunications services that support enterprise data storage solutions. These services are intended to include Internet access services, on-line critical data storage and retrieval, and data and voice networking. Currently the Company only provides Internet access services and digital and alpha numeric paging services. All of the Company's historical revenues have been derived from these services.

In September 2000, the Company retained Cap Gemini Ernst & Young to revise the Company's existing Business Plan and Business Model, which were completed in December 2000. The 5-year Plan calls for a $725 million capital investment for seven EDS Centers and the 3,000-route-mile Fiber optic network. In February 2001, the Company announced its Interim Business Plan focusing on a 550 mile segment, identified as Segment 1, from Atlanta to Memphis, plus three EDS Centers.  This announcement disclosed a 18 month planned capital investment of approximately $75 million. In November 2000, the Company announced revisions to its original Business Plan. This Plan had been formulated with the assistance of Cap Gemini/Ernst & Young, and called for the construction of a 3,000-mile fiber optic network throughout the Southeast United States. Under the revised Plan, the Company will divide its proposed fiber optic network construction into six discreet segments.

The Company's historical net service revenues consist primarily of monthly fees from customers subscribing to the Company's Internet service provider services or the Company's digital and alphanumeric paging services. Net service revenues increased to $475,426 in fiscal 2001 from $269,649 in fiscal 2000, an increase of approximately 76%. This growth in net service revenues was primarily the result of an increase in customer base. The Company provided Internet access service to 1,473 customers at June 30, 2001, as compared with 1,131 customers at June 30, 2000. Additionally, the Company recognized revenues totaling $79,034 from the PixSell agreement in fiscal 2001, and $43,534 from the sale of conduit to Bell South as previously discussed in fiscal 2001.

The Company's cost of services consist primarily of paging airtime, postage and delivery expenses and allocated overhead costs. Cost of services increased to $225,919 in fiscal 2001 from $117,924 in fiscal 2000, an increase of approximately 92%. This increase in cost of services was primarily related to the increase in net services provided. Cost of service, as a percent of net service revenue, increased from 43.7% in fiscal 2000 to 47.5% in fiscal 2001. As a result, gross profit in fiscal 2001 was $249,507, as compared with $151,725 in fiscal 2000.

The Company incurred selling, general and administrative expenses of $3,292,230 in fiscal 2001 compared with $1,744,701 in fiscal 2000, an increase of approximately 89%. These expenses consisted primarily of telephone expenses, insurance expenses, payroll expenses, legal and professional services and rent expense, as well as non-cash stock compensation. With the exception of two items, totaling approximately $1.2 million, the expense increases are directly attributable to increased revenue. The Company incurred approximately $861,000 of general and administrative expense in fiscal 2001 in order to pursue its broadband telecommunications network and enterprise data center business plans compared to $195,000 in fiscal 2000. The Company incurred expenses associated with the filing of SEC documents of $354,500 in fiscal 2001 compared with only $8,513 in fiscal 2000.

The Company incurred $525,378 in other expense in fiscal 2001 as compared with $214,710 in fiscal 2000. Other expense was primarily imputed interest of $540,827 recorded in fiscal 2001 relating to a contract to acquire rights-of-way and fiber conduit, which provided for payments over a period of months without stated interest.

The Company's historical net service revenues consist primarily of monthly fees from customers subscribing to the Company's Internet service provider services or the Company's digital and alphanumeric paging services. Net service revenues increased to $269,649 in fiscal 2000 from $19,539 in fiscal 1999, an increase of approximately 1,280%. This growth in net service revenues was primarily the result of having a full year of operations for the internet service provider in fiscal 2000, as compared with only three month's of operations in fiscal 1999 and having seven months of operations generating approximately $93,000 of revenues for the paging services in fiscal 2000, as compared with no operations in fiscal 1999. In addition, the Company provided Internet access service to 1,131 customers at June 30, 2000 as compared with only about 250 customers at June 30, 1999.

The Company's cost of services consist primarily of paging airtime, postage and delivery expenses and allocated overhead costs. Cost of services increased to $117,924 in fiscal 2000 from $24,667 in fiscal 1999, an increase of approximately 378%. This increase in cost of services was primarily related to the increase in net services provided. Cost of service, as a percent of net service revenue, fell from 126% in fiscal 1999 to 43% in fiscal 2000. As a result, gross profit in fiscal 2000 was $151,725, as compared with a gross loss of $5,128 in fiscal 1999.

The Company incurred selling, general and administrative expenses of approximately $1,744,701 in fiscal 2000 compared with $477,612 in fiscal 1999, an increase of approximately 265%. These expenses consisted primarily of telephone expenses, insurance expenses, payroll expenses, legal and professional services and rent expense, as well as non-cash stock compensation. This increase in selling, general and administrative expenses was primarily the result of having a full year of operations for the Internet service provider in fiscal 2000, as compared with only three month's of operations in fiscal 1999 and having seven months of operations for the paging services in fiscal 2000, as compared with no operations in fiscal 1999. The Company experienced an increase of approximately 200% in the number of employees from fiscal 1999 to fiscal 2000. Approximately $195,161 of general and administrative expense in fiscal 2000 was incurred by the Company in order to pursue its broadband telecommunications network and enterprise data center business plans. In addition, approximately $211,000 of general and administrative expense was attributed to the merger with Pierce International, Inc. during fiscal 2000.

The Company incurred approximately $214,710 in other expense in fiscal 2000 as compared with $184,650 of other income in fiscal 1999. Other income (expense) was primarily associated with the sale of 500,000 shares of New York Regional Rail Corporation stock, investment income, interest expense and various miscellaneous expenses in fiscal year 1999.. Imputed interest of approximately $180,282 was recorded in fiscal 2000 relating to a contract to acquire rights-of-way and fiber conduit which provided for payments over a period of months without stated interest.

The Company's primary liquidity and capital needs consist of funding cash flow losses from operations, constructing and equipping the Company's enterprise data center and constructing the Company's fiber optic and broadband wireless telecommunications network. In fiscal 2001, the Company used $1,180,201 of net cash in operations compared to $1,183,421 and $429,698 in fiscal 2000 and 1999, respectively. In fiscal 2001, $616,045 was used by investing activities, of which $416,045 was used for the purchase of property and equipment, compared to $236,906 provided by investing activities, of which $463,094 was used for the purchase of property and equipment, in fiscal 2000 and to $142,399 used by investing activities, of which only $142,399 was used for the purchase of property and equipment, in fiscal 1999. In fiscal 2001, $1,793,782 in funds were provided from financing activities, principally consisting of proceeds from issuance of equity securities of $2.367 million offset by $575,000 in debt retirement, compared to only $954,110 and $585,450 in fiscal 2000 and 1999, respectively.

The Company's liquidity and capital needs are substantial and the Company is attempting to fund those needs. As reflected in the accompanying financial statements for fiscal 2001, the accountant's opinion includes a going concern qualification. As stated in note 14 to the financial statements, as of June 30, 2001, the Company has negative working capital with obligations totaling $16,944,152 due within one year compared to $15,451,759 at June 30, 2000. The increase is attributable to a $1.5 million net increase in trade payables. The Qwest obligation, discussed earlier under "Fiber Optic and Broadband Wireless Network", accounts for $15 million of this amount. The Company has an arrearage of certain federal tax liabilities of approximately $500,000, including payroll liabilities. In addition, the Company has sustained losses totaling $5,727,912 during the last two years. The inability of the Company to secure additional capital and financing and the inability of the Company to attain and maintain profitable operations would have a material adverse effect on whether the Company would be successful in implementing its proposed business plan and continue as a going concern.

Management expects that the Company will require approximately $18,000,000 in capital over the next twelve months to fund the following anticipated needs. Estimated expenditures include, but are not limited to, approximately $5,000,000 to acquire network rights-of-way, installation of conduit and fiber optic cable, and $8,000,000 for Tier IV enterprise data center infrastructure upgrade and improvements and $5,000,000 for working capital requirements. Actual costs may vary from management's current expectations. These are included in the $725 million  five year capital plan discussed herein.

In March 2000, the Company entered into an agreement with Qwest Communications in which the Company purchased 504 miles of conduit installed along the CSX railroad track from New Orleans, Louisiana to Mobile, Alabama, and from Pensacola, Florida to Jacksonville, Florida. Fiber optic cable has not yet been installed within such conduit purchased from Qwest Communications. The agreement with Qwest calls for payments of approximately $15 million over the course of the agreement, all of which is currently past due by the Company. Qwest has declared a default, but has not initiated arbitration or other proceedings to recover the conduit. In August 2000, the Company entered into an agreement with a third-party contractor to lay fiber conduit between Atlanta, Georgia and Chattanooga, Tennessee and from Chattanooga to Memphis, Tennessee. The Company made no payments under the agreement, and the agreement has been terminated by the third-party contractor, although the Company continues negotiations with the third-party contractor to revive the agreement. The Company has installed 24 miles of conduit, of which approximately 8 miles was sold to Bell South for approximately $44,000, providing access to the Company’s enterprise data center in Iuka, Mississippi.

The Company plans to fund its liquidity and capital needs through the issuance of equity and debt securities, joint venture arrangements with strategic business partners, and vendor financing. In March 2001, the Company entered into a binding Letter of Agreement for a minimum of $25 million in equity financing, with an option for an additional $25 million, with IFG Private Equity, LLC, an Atlanta-based institutional investor. Under the terms of the IFG-North American DataCom Agreement, IFG will purchase up to $50 Million of North American DataCom's common stock over the next 24 months. The agreement is planned to operate in a manner similar to a line of credit, allowing the Company to draw upon funds periodically, when and if desired. The funding is planned to provide the underlying support to proceed with the business plan. The funding is subject to SEC approval of a registration filing regarding the equity financing. The Company intends to use the financing to immediately expand its fiber optic network and related data storage operations. As of September 2001, the registration filing has not been submitted to the SEC for review, and the Company can make no assurances that such registration statement will become effective when filed.

In Fiscal Year 2001 and 2000, the Company sold 1,456 and 300 shares, respectively, of Series B Cumulative Convertible Preferred Stock to the Company’s president, director and principal shareholder for a purchase price of $1,000 per share. The conversion ratio was amended by action of the Board of Directors from 500 shares of restricted common stock for each share of Series B convertible preferred stock that was issued after September 30, 2000 to 2,000 restricted shares of common stock, to reflect recent changes in the price of the Company’s shares of common stock on the OTC:BB. The Board of Directors approved that the conversion right of these shares would be 70 percent of the average price of the common stock for the 5 trading days prior to the end of each quarter for future issuances. The conversion ratio for the third quarter 2001 issuances was 2,200 shares of restricted common stock for each share of Series B Convertible Preferred Stock that was issued. The conversion ratio for the fourth quarter 2001 issuances was 6,000 shares of restricted common stock for each share of Series B Convertible Preferred Stock that was issued. Each share is entitled to an annual dividend of $60. Proceeds from these issuances were used to fund working capital.

In order to pay certain accounts payable and for use for working capital, in July 2000 the Company agreed to sell 317,500 shares of common stock for a total purchase price of $635,000. In August 2000, the Company closed the placement of these shares, and the Board of Directors authorized the issuance of the 317,500 shares of common stock to satisfy the agreement. The Company, as agreed, registered the resale of such shares with the SEC, and this registration became effective on January 31, 2001.

In September 2000, the Company closed the private placement of 150,000 shares of common stock for a total purchase price of approximately $442,125. The Company agreed to pay certain fees associated with the placement through the issuance of an additional 3,000 shares of common stock and the payment of $13,700 in cash. The agreement provided that the Company shall file a registration statement with the SEC for the resale of the 150,000 shares by October 5, 2000. For each fifteen day period following this deadline in which the registration statement is not filed with the SEC, the Company was required to make a payment to the private investor equal to an amount payable in cash or common stock based upon the closing OTC bid price of the shares of the Company's common stock as of the end of each fifteen day period. The Company has since filed a registration statement for the resale of such shares, and paid additional shares of common stock to such private investors pursuant to the agreement. The registration was effective on January 31, 2001. In October, November, and December 2000, the Company issued 20,225 total shares of common stock valued at $44,190 as payment in full pursuant to the terms of an agreement previously entered into by the Company and such investors.

See note 15 to the Consolidated financial statements for additional equity raised subsequent to June 30, 2001.

A number of risk factors exist that may impair or prevent the Company from accomplishing its proposed business plan in some or all respects. Those risk factors include the following matters among others:

The Company is a Start Up with Historical Losses. Substantially all of the Company's historical revenues have been derived from its Internet access provider services and its digital and alpha paging services. The Company has no customers or revenues from its fiber optic and wireless broadband network that it is developing or its enterprise data storage facility that it is constructing. The Company has experienced operating losses in each fiscal quarter since it was founded and will likely continue to experience such losses. Because the Company's operating history is extremely limited, and the Company has not actually commenced operations on its fiber optic and wireless broadband network or its enterprise data storage facility, it is difficult to evaluate the Company's business operations and prospects.

The Company Needs Substantial Additional Capital-Insolvency. The Company's present operations do not provide sufficient cash flow to pay its debts as they become due. The Company had negative working capital of approximately $16,600,000 at June 30, 2001 and expects it will need to obtain additional capital of approximately $18,000,000 to finance its operating and capital needs over the next twelve months. See "Liquidity." The failure of the Company to obtain additional capital will significantly restrict the Company's proposed operations and may make it impossible for the Company to pursue its proposed business plan.

Default on Certain Obligations. In March 2000, the Company entered into an agreement with Qwest Communications in which the Company purchased 504 miles of conduit installed along the CSX railroad track from New Orleans, Louisiana to Mobile, Alabama, and from Pensacola, Florida to Jacksonville, Florida. Fiber optic cable has not yet been installed within such conduit purchased from Qwest Communications. The agreement with Qwest calls for payments of approximately $15 million over the course of the agreement, all of which is currently past due by the Company. Qwest has declared a default, but has not initiated arbitration or other proceedings to recover the conduit. In August 2000, the Company entered into an agreement with a third-party contractor to lay fiber conduit between Atlanta, Georgia and Chattanooga, Tennessee and from Chattanooga to Memphis, Tennessee. The Company made no payments under the agreement, and the agreement has been terminated by the third-party contractor, although the Company continues negotiations with the third-party contractor to revive the agreement. The Company has installed 24 miles of conduit, of which approximately 8 miles was sold to Bell South, providing access to the Company’s enterprise data center in Iuka, Mississippi.

The Company Leases its Facilities. The Company's primary facility in Iuka, Mississippi is leased by the Company from the Mississippi Department of Economic and Community Development. This facility is critical to the Company's proposed business plan because it already contains many of the features necessary to establish an enterprise data storage facility. See "Properties".

The Company Experiences General Risks Associated with Business. The future success of the Company is heavily dependent on its ability to develop, promote and sustain strong government relationships, reach agreements with certain third parties necessary for the telecommunications needs of its operations and attract and retain customers at suitable prices. The Company's business involves competition with existing companies. There can be no assurance that the business of the Company will ever be profitable.

The Company will Likely Experience Customer Concentration. Until and unless the Company secures multiple customer relationships, it is likely that the Company will experience periods during which it will be highly dependent on one or a limited number of customers. Dependence on a single or a few customers will make it difficult to satisfactorily negotiate attractive prices for the Company's services and will expose the Company to the risk of substantial losses if a single dominant customer stops conducting business with the Company.

The Company Must Comply with Telecommunications Regulations. Most of the Company's proposed business services and products are subject to regulation at the federal and state levels. These regulations are in some cases uncertain and are often undergoing change. The failure of the Company to comply with these regulations could have a materially adverse effect on the Company. See "Description of Business - Government Regulation."

The Company Must Comply with Environmental Regulations. The Company's intended operations, especially the construction and operation of a fiber optic network, are subject to various federal, state and local laws and regulations relating to the protection of the environment. These environmental laws and regulations, which have become increasingly stringent, are implemented principally by the Environmental Protection Agency and comparable state agencies, and govern the management of hazardous wastes, the discharge of pollutants into the air and into surface and underground waters, and the manufacture and disposal of certain substances. There are no material environmental claims currently pending or, to the Company's knowledge, threatened against the Company. In addition, the Company believes that its operations are in material compliance with current laws and regulations. The Company estimates that any expenses incurred in maintaining compliance with current laws and regulations will not have a material effect on the Company's earnings or capital expenditures. However, there can be no assurance that current regulatory requirements will not change, that currently unforeseen environmental incidents wi