The term "Year 2000 issue" is a general term used to describe the various problems that may result from the improper processing of dates and date-sensitive calculations by computers and other machinery as the year 2000 is approached and reached. These problems generally arise from the fact that most of the world's computer hardware and software have historically used only two digits to identify the year in a date, often meaning that the computer will fail to distinguish dates in the "2000's" from dates in the "1900's." These problems may also arise from other sources as well, such as the use of special codes and conventions in software that make use of the date field.

State of Readiness

The Company recently established a Year 2000 Program Commitee to coordinate appropriate activity and report to the Multi-Tech Computer Experts President on a continuing basis with regard to the Year 2000 issue. The Company's Year 2000 Program Office has developed and is currently implementing a comprehensive plan (the "Year 2000 Program") for the Company to become Year 2000 ready. The Year 2000 Program consists of six phases: (i) project planning and inventory of all of the Company's assets, (ii) assessment, (iii) renovation (whether by upgrade or replacement), (iv) testing and validation, (v) implementation and (vi) creation of contingency plans in the event of year 2000 failures.

The Year 2000 Program covers: (i) software products which are supplied by the Company to its customers, (ii) the Company's information technology and operating systems ("IT Systems"), and (iii) the Company's non-information technology systems, including embedded technology ("Non-IT Systems") and accounting systems. In addition, the Program calls for the Company to identify and assess the systems and services of the Company's major vendors, third party network service providers and other material service providers ("Third Party Systems"), and take appropriate remedial actions and develop contingency plans where appropriate in connection with such Third Party Systems.

The Company supplies its customers with software packages that, among other things, allows its customers to access the Company's ISP and hosting services. The software package consists of  third party software (collectively, the "Access Product"). The Company believes that the current shipping version of its ISP software package (including Microsofts "Internet Explorer or Netscape's Navigator) is Year 2000 ready. In addition, the Company believes that substantially all of its customer base is presently using a version of the Access Product that is Year 2000 ready.

The Company has substantially completed the inventory phase of the Year 2000 Program for both its IT Systems and Non-IT Systems and has completed a majority of the assessment phase of the Year 2000 Program for the IT Systems and Non-IT Systems. The Company anticipates that it will complete the first two phases for such systems during the first quarter of 1999. The Year 2000 Program calls for the completion of all six phases for both IT and Non-IT Systems by the end of the second quarter of 1999.

The Company has performed a technical review of many of the more critical Third Party Systems and has surveyed the publicly available statements issued by the vendors of such systems. Additionally, the Company has recently sent inquiry letters to its significant providers of Third Party Systems requesting information regarding their vulnerability to Year 2000 issues and whether the products and services purchased from such entities are Year 2000 compliant. The Company intends to pursue appropriate responses to such inquiries and will evaluate the responses it receives.

Costs

The Company has funded, and it will continue funding, the costs of the Year 2000 Program from cash flows. The estimates for the costs of the Year 2000 Program are well within budgets, based upon management's best estimates, and may be updated or revised as additional information becomes available. The Company believes such costs will not have a material effect on the Company's financial condition, liquidity or results of operations.

Risks

The failure by the Company to correct a material Year 2000 problem could result in an interruption in, or a failure of, certain normal business activities or operations. Presently, however, the Company perceives that its most reasonably likely worst case scenario related to the Year 2000 is associated with potential concerns with third party services or products. Specifically, the Company is heavily dependent on a significant number of third party vendors to provide both network services and equipment. A significant year 2000-related disruption of the network services or equipment provided to the Company by third party vendors could cause customers to consider seeking alternate providers or cause an unmanageable burden on customer service and technical support, which in turn could materially and adversely affect the Company's results of operations, liquidity and financial condition.

The Company is not presently aware of any vendor related Year 2000 issue that is likely to result in such a disruption. Although there is inherent uncertainty in the year 2000 issue, the Company expects that as it progresses in its Year 2000 Program, the level of uncertainty about the impact of the Year 2000 issue on the Company will be reduced significantly and the Company should be better positioned to identify the nature and extent of material risk to the Company as a result of any Year 2000 disruptions.

Contingency Plans

The Year 2000 Program calls for the development of contingency plans for at-risk functions. The Company has established a Contingency Plan Committee to monitor and address the development of contingency plans. Due to the current phase in which the Company is in of its Year 2000 Program, the Company is currently unable at this time to fully assess its risks and determine what contingency plans, if any, need to be implemented by the Company. As the Company progresses in its Year 2000 Program and identifies specific risk areas, the Company intends to timely implement appropriate remedial actions and contingency plans.

The estimates and conclusions herein contain forward-looking statements and are based on management's best estimates of future events. The Company's expectations about risks, future costs, and the timely completion of its Year 2000 modifications are subject to uncertainties that could cause actual results to differ materially from what has been discussed above. Factors that could influence risks, amount of future costs and the effective timing of remediation efforts include the Company's success in identifying and correcting potential Year 2000 issues and the ability of third parties to appropriately address their Year 2000 issues. In all cases we are actively persuing remedies and alternate service sources we feel will keep Multi-Tech and our clients from any interuption of services.