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Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
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<SEC-DOCUMENT>0001082324-01-500014.txt : 20020410
<SEC-HEADER>0001082324-01-500014.hdr.sgml : 20020410
ACCESSION NUMBER:		0001082324-01-500014
CONFORMED SUBMISSION TYPE:	10QSB
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20010930
FILED AS OF DATE:		20011113

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			PASW INC
		CENTRAL INDEX KEY:			0001082324
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-COMPUTER PROGRAMMING SERVICES [7371]
		IRS NUMBER:				770390628
		STATE OF INCORPORATION:			CA
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10QSB
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-26895
		FILM NUMBER:		1782806

	BUSINESS ADDRESS:	
		STREET 1:		703 RANCHO CONEJO BLVD
		CITY:			NEWBURY PARK
		STATE:			CA
		ZIP:			75081
		BUSINESS PHONE:		8054997722

	MAIL ADDRESS:	
		STREET 1:		703 RANCHO CONEJO BLVD
		STREET 2:		10390 SANTA MONICA BLVD, FOURTH FL
		CITY:			NEWBURY PARK
		STATE:			CA
		ZIP:			75801

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	PACIFIC SOFTWORKS INC
		DATE OF NAME CHANGE:	19990322
</SEC-HEADER>
<DOCUMENT>
<TYPE>10QSB
<SEQUENCE>1
<FILENAME>pasw930.htm
<TEXT>
<html>

<head>
<title>C:\AAAWork\Pacific Softworks\filings\pasw930.htm</title>
</head>

<body LINK="#0000ff">
<font SIZE="3"><b>

<p ALIGN="CENTER">UNITED STATES</p>

<p ALIGN="CENTER">SECURITIES AND EXCHANGE COMMISSION</p>

<p ALIGN="CENTER">WASHINGTON, D.C. 20549</p>

<p ALIGN="CENTER">FORM 10-QSB</p>

<blockquote>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE</p>
</blockquote>

<p ALIGN="CENTER">SECURITIES EXCHANGE ACT OF 1934</p>

<p ALIGN="CENTER">For the quarterly period ended September 30, 2001</p>

<p ALIGN="CENTER">OR</p>

<p ALIGN="CENTER">( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934</p>

<p ALIGN="CENTER">Commission file number 333-75137</p>

<p ALIGN="CENTER">PASW, INC.</p>

<p ALIGN="CENTER">(Exact name of registrant as specified in its charter)</p>
</b></font>

<table CELLSPACING="0" BORDER="0" CELLPADDING="7" WIDTH="757">
  <tr>
    <td WIDTH="175" VALIGN="TOP"></td>
    <td WIDTH="294" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">California</b></font></td>
    <td WIDTH="246" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">77-0390628</b></font></td>
  </tr>
  <tr>
    <td WIDTH="175" VALIGN="TOP"></td>
    <td WIDTH="294" VALIGN="TOP"><b><p ALIGN="CENTER">(State or other jurisdiction of<font
    SIZE="3"> incorporation or organization)</font></b></td>
    <td WIDTH="246" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">(I.R.S. Employer
    Identification No.)</b></font></td>
  </tr>
</table>

<table CELLSPACING="0" BORDER="0" CELLPADDING="7" WIDTH="721">
  <tr>
    <td WIDTH="186" VALIGN="TOP"></td>
    <td WIDTH="281" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">2007 Simsbury Court </p>
    <p ALIGN="CENTER">Thousand Oaks, California</b></font></td>
    <td WIDTH="212" VALIGN="BOTTOM"><font SIZE="3"><b><p ALIGN="CENTER">91360</b></font></td>
  </tr>
  <tr>
    <td WIDTH="186" VALIGN="TOP"></td>
    <td WIDTH="281" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">(Address of principal
    executive offices)</b></font></td>
    <td WIDTH="212" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">(Zip Code)</b></font></td>
  </tr>
</table>
<font SIZE="3"><b>

<p ALIGN="CENTER">(805) 492-6623</p>

<p ALIGN="CENTER">Registrant&#146;s telephone number, including area code)</p>

<p>Indicate by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.</p>

<p>Yes _<u> X</u>__ No____</p>

<p>There were 4,997,400 shares outstanding of the registrant&#146;s Common Stock, par
value $.001 per share, as of November 5, 2001.</p>
</b></font>

<p><font SIZE="3"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
PASW, INC.</b></font></p>

<table CELLSPACING="0" BORDER="0" CELLPADDING="7" WIDTH="619">
  <tr>
    <td WIDTH="8%" VALIGN="TOP"></td>
    <td WIDTH="81%" VALIGN="BOTTOM"><font SIZE="3"><b>&nbsp;<p ALIGN="CENTER">INDEX</b></font></td>
    <td WIDTH="11%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">Page No.</b></font></td>
  </tr>
  <tr>
    <td WIDTH="8%" VALIGN="TOP"></td>
    <td WIDTH="81%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">PART I &#150; FINANCIAL
    INFORMATION</b></font></td>
    <td WIDTH="11%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="89%" VALIGN="TOP" COLSPAN="2"><font SIZE="3"><b>Item l. Financial Statements
    (Unaudited):</b></font></td>
    <td WIDTH="11%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="8%" VALIGN="TOP"></td>
    <td WIDTH="81%" VALIGN="TOP"><font SIZE="3"><b>Balance Sheets at September 30, 2001 and
    December 31, 2000</b></font></td>
    <td WIDTH="11%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">3</b></font></td>
  </tr>
  <tr>
    <td WIDTH="8%" VALIGN="TOP"></td>
    <td WIDTH="81%" VALIGN="TOP"><font SIZE="3"><b>Statements of Operations for the three
    months ended September 30, 2001 and 2000 </b></font></td>
    <td WIDTH="11%" VALIGN="BOTTOM"><font SIZE="3"><b><p ALIGN="CENTER">5</b></font></td>
  </tr>
  <tr>
    <td WIDTH="8%" VALIGN="TOP"></td>
    <td WIDTH="81%" VALIGN="TOP"><font SIZE="3"><b>Statements of Operations for the nine
    months ended September 30, 2001 and 2000 </b></font></td>
    <td WIDTH="11%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">6</b></font></td>
  </tr>
  <tr>
    <td WIDTH="8%" VALIGN="TOP"></td>
    <td WIDTH="81%" VALIGN="TOP"><font SIZE="3"><b>Statements of Cash Flows for the nine
    months ended September 30, 2001 and 2000</b></font></td>
    <td WIDTH="11%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">8</b></font></td>
  </tr>
  <tr>
    <td WIDTH="8%" VALIGN="TOP"></td>
    <td WIDTH="81%" VALIGN="TOP"><font SIZE="3"><b>Notes to Condensed Financial Statements</b></font></td>
    <td WIDTH="11%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">9</b></font></td>
  </tr>
  <tr>
    <td WIDTH="89%" VALIGN="TOP" COLSPAN="2"><b><font SIZE="3">Item 2. Management&#146;s
    Discussion and Analysis or</font> Plan of Operations</b></td>
    <td WIDTH="11%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">14</b></font></td>
  </tr>
  <tr>
    <td WIDTH="8%" VALIGN="TOP"></td>
    <td WIDTH="81%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">PART II &#150; OTHER
    INFORMATION</b></font></td>
    <td WIDTH="11%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="89%" VALIGN="TOP" COLSPAN="2"><font SIZE="3"><b>Item 1. Legal Proceedings</b></font></td>
    <td WIDTH="11%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">22</b></font></td>
  </tr>
  <tr>
    <td WIDTH="89%" VALIGN="TOP" COLSPAN="2"><font SIZE="3"><b>Item 2. Changes in Securities
    and Use of Proceeds</b></font></td>
    <td WIDTH="11%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">22</b></font></td>
  </tr>
  <tr>
    <td WIDTH="89%" VALIGN="TOP" COLSPAN="2"><font SIZE="3"><b>Item 3. Defaults Upon Senior
    Securities</b></font></td>
    <td WIDTH="11%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">22</b></font></td>
  </tr>
  <tr>
    <td WIDTH="89%" VALIGN="TOP" COLSPAN="2"><font SIZE="3"><b>Item 4. Submission of Matters
    to a Vote of Security Holders</b></font></td>
    <td WIDTH="11%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">22</b></font></td>
  </tr>
  <tr>
    <td WIDTH="89%" VALIGN="TOP" COLSPAN="2"><font SIZE="3"><b>Item 5. Other Information</b></font></td>
    <td WIDTH="11%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">22</b></font></td>
  </tr>
  <tr>
    <td WIDTH="89%" VALIGN="TOP" COLSPAN="2"><b>Item 6. Exhibits and Reports on Form 8-K</b></td>
    <td WIDTH="11%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">22</b></font></td>
  </tr>
  <tr>
    <td WIDTH="89%" VALIGN="TOP" COLSPAN="2"><font SIZE="3"><b>Signatures</b></font></td>
    <td WIDTH="11%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">23</b></font></td>
  </tr>
</table>
<font SIZE="3"><b>

<p>&nbsp;</p>

<p ALIGN="CENTER">PART I &#150; FINANCIAL INFORMATION</p>

<p>ITEM 1. FINANCIAL STATEMENTS</p>

<p ALIGN="CENTER">PASW, INC.</p>

<p ALIGN="CENTER">CONSOLIDATED BALANCE SHEETS</p>

<blockquote>
  <blockquote>
    <blockquote>
      <blockquote>
        <blockquote>
          <blockquote>
            <blockquote>
              <blockquote>
                <blockquote>
                  <blockquote>
                    <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (Unaudited)</p>
                  </blockquote>
                </blockquote>
              </blockquote>
            </blockquote>
          </blockquote>
        </blockquote>
      </blockquote>
    </blockquote>
  </blockquote>
</blockquote>
</b></font>

<table BORDER="0" CELLSPACING="1" CELLPADDING="2" WIDTH="595">
  <tr>
    <td WIDTH="59%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">September 30,</p>
    <p ALIGN="CENTER">2001</b></font></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">December 31, </p>
    <p ALIGN="CENTER">2000</b></font></td>
  </tr>
  <tr>
    <td WIDTH="59%" VALIGN="TOP" HEIGHT="20"><font SIZE="3"><b>ASSETS</b></font></td>
    <td WIDTH="19%" VALIGN="bottom" HEIGHT="20"></td>
    <td WIDTH="3%" VALIGN="bottom" HEIGHT="20"></td>
    <td WIDTH="19%" VALIGN="bottom" HEIGHT="20"></td>
  </tr>
  <tr>
    <td WIDTH="59%" VALIGN="TOP"><font SIZE="3"><b>Current assets:</b></font></td>
    <td WIDTH="19%" VALIGN="bottom"></td>
    <td WIDTH="3%" VALIGN="bottom"></td>
    <td WIDTH="19%" VALIGN="bottom"></td>
  </tr>
  <tr>
    <td WIDTH="59%" VALIGN="TOP"><font SIZE="3"><b>Cash and cash equivalents</b></font></td>
    <td WIDTH="19%" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="RIGHT">$ 205,861</b></font></td>
    <td WIDTH="3%" VALIGN="bottom"></td>
    <td WIDTH="19%" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="RIGHT">$ 254,369</b></font></td>
  </tr>
  <tr>
    <td WIDTH="59%" VALIGN="TOP"><font SIZE="3"><b>Accounts receivable, net of allowance of <p>$0
    and $0</b></font></td>
    <td WIDTH="19%" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="RIGHT">14,426</b></font></td>
    <td WIDTH="3%" VALIGN="bottom"></td>
    <td WIDTH="19%" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="RIGHT">157,381</b></font></td>
  </tr>
  <tr>
    <td WIDTH="59%" VALIGN="TOP"><font SIZE="3"><b>Securities available for sale</b></font></td>
    <td WIDTH="19%" VALIGN="bottom"></td>
    <td WIDTH="3%" VALIGN="bottom"></td>
    <td WIDTH="19%" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="RIGHT">198,541</b></font></td>
  </tr>
  <tr>
    <td WIDTH="59%" VALIGN="TOP"><font SIZE="3"><b>Prepaid expenses</b></font></td>
    <td WIDTH="19%" VALIGN="bottom" style="border-bottom: thin solid"><font SIZE="3"><b><u><p
    ALIGN="RIGHT"></u>0 </b></font></td>
    <td WIDTH="3%" VALIGN="bottom" style="border-bottom: thin none"></td>
    <td WIDTH="19%" VALIGN="bottom" style="border-bottom: thin solid"><font SIZE="3"><b><u><p
    ALIGN="RIGHT"></u>30,867</b></font></td>
  </tr>
  <tr>
    <td WIDTH="59%" VALIGN="TOP"><font SIZE="3"><b>Total current assets</b></font></td>
    <td WIDTH="19%" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="RIGHT">220,287</b></font></td>
    <td WIDTH="3%" VALIGN="bottom"></td>
    <td WIDTH="19%" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="RIGHT">641,158</b></font></td>
  </tr>
  <tr>
    <td WIDTH="59%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="bottom"></td>
    <td WIDTH="3%" VALIGN="bottom"></td>
    <td WIDTH="19%" VALIGN="bottom"></td>
  </tr>
  <tr>
    <td WIDTH="59%" VALIGN="TOP" HEIGHT="55"><font SIZE="3"><b>Property and equipment less
    accumulated depreciation and amortization of $43,852 and $43,852</b></font></td>
    <td WIDTH="19%" VALIGN="bottom" HEIGHT="55"><font SIZE="3"><b><p ALIGN="RIGHT">13,762</b></font></td>
    <td WIDTH="3%" VALIGN="bottom" HEIGHT="55"></td>
    <td WIDTH="19%" VALIGN="bottom" HEIGHT="55"><font SIZE="3"><b><p ALIGN="RIGHT">12,784</b></font></td>
  </tr>
  <tr>
    <td WIDTH="59%" VALIGN="TOP" HEIGHT="24"><font SIZE="3"><b>Other assets</b></font></td>
    <td WIDTH="19%" VALIGN="bottom" HEIGHT="24" style="border-bottom: thin double"><font
    SIZE="3"><b><p ALIGN="RIGHT">6,442</b></font></td>
    <td WIDTH="3%" VALIGN="bottom" HEIGHT="24" style="border-bottom: thin none"></td>
    <td WIDTH="19%" VALIGN="bottom" HEIGHT="24" style="border-bottom: thin double"><font
    SIZE="3"><b><p ALIGN="RIGHT">6,732</b></font></td>
  </tr>
  <tr>
    <td WIDTH="59%" VALIGN="TOP" HEIGHT="24"><font SIZE="3"><b>Total assets</b></font></td>
    <td WIDTH="19%" VALIGN="bottom" HEIGHT="24" style="border-bottom: thin double"><font
    SIZE="3"><b><p ALIGN="RIGHT">$ 240,491</b></font></td>
    <td WIDTH="3%" VALIGN="bottom" HEIGHT="24" style="border-bottom: thin none"></td>
    <td WIDTH="19%" VALIGN="bottom" HEIGHT="24" style="border-bottom: thin double"><font
    SIZE="3"><b><p ALIGN="RIGHT">$ 660,674</b></font></td>
  </tr>
</table>
<b><font FACE="Courier New" SIZE="3">

<p>&nbsp;</p>
</font><font SIZE="3">

<p>See accompanying notes to condensed financial statements.</p>

<p ALIGN="CENTER">PASW, INC.</p>

<p ALIGN="CENTER">CONSOLIDATED BALANCE SHEETS</p>

<blockquote>
  <blockquote>
    <blockquote>
      <blockquote>
        <blockquote>
          <blockquote>
            <blockquote>
              <blockquote>
                <blockquote>
                  <blockquote>
                    <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (Unaudited)</p>
                  </blockquote>
                </blockquote>
              </blockquote>
            </blockquote>
          </blockquote>
        </blockquote>
      </blockquote>
    </blockquote>
  </blockquote>
</blockquote>
</font></b>

<table BORDER="0" CELLSPACING="1" CELLPADDING="2" WIDTH="601">
  <tr>
    <td WIDTH="363" VALIGN="TOP"></td>
    <td WIDTH="103" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="CENTER">September 30,</p>
    <p ALIGN="CENTER">2001</b></font></td>
    <td WIDTH="11" VALIGN="bottom"></td>
    <td WIDTH="100" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="CENTER">December 31, </p>
    <p ALIGN="CENTER">2000</b></font></td>
  </tr>
  <tr>
    <td WIDTH="363" VALIGN="TOP"><font SIZE="3"><b>LIABILITIES AND STOCKHOLDERS&#146;EQUITY</b></font></td>
    <td WIDTH="103" VALIGN="bottom"></td>
    <td WIDTH="11" VALIGN="bottom"></td>
    <td WIDTH="100" VALIGN="bottom"></td>
  </tr>
  <tr>
    <td WIDTH="363" VALIGN="TOP"><font SIZE="3"><b>Current liabilities:</b></font></td>
    <td WIDTH="103" VALIGN="bottom"></td>
    <td WIDTH="11" VALIGN="bottom"></td>
    <td WIDTH="100" VALIGN="bottom"></td>
  </tr>
  <tr>
    <td WIDTH="363" VALIGN="TOP"><font SIZE="3"><b>Accounts payable and accrued expenses</b></font></td>
    <td WIDTH="103" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="RIGHT">$ 79,659</b></font></td>
    <td WIDTH="11" VALIGN="bottom"></td>
    <td WIDTH="100" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="RIGHT">$ 657,162</b></font></td>
  </tr>
  <tr>
    <td WIDTH="363" VALIGN="TOP"><font SIZE="3"><b>Note payable</b></font></td>
    <td WIDTH="103" VALIGN="bottom" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">32,075</b></font></td>
    <td WIDTH="11" VALIGN="bottom"></td>
    <td WIDTH="100" VALIGN="bottom" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">0 </b></font></td>
  </tr>
  <tr>
    <td WIDTH="363" VALIGN="TOP"><font SIZE="3"><b>Total current liabilities</b></font></td>
    <td WIDTH="103" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="RIGHT">111,734</b></font></td>
    <td WIDTH="11" VALIGN="bottom"></td>
    <td WIDTH="100" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="RIGHT">657,162</b></font></td>
  </tr>
  <tr>
    <td WIDTH="363" VALIGN="TOP" HEIGHT="20"><font SIZE="3"><b>Commitments and contingencies</b></font></td>
    <td WIDTH="103" VALIGN="bottom" HEIGHT="20"></td>
    <td WIDTH="11" VALIGN="bottom" HEIGHT="20"></td>
    <td WIDTH="100" VALIGN="bottom" HEIGHT="20"></td>
  </tr>
  <tr>
    <td WIDTH="363" VALIGN="TOP"><font SIZE="3"><b>Stockholders&#146; equity:</b></font></td>
    <td WIDTH="103" VALIGN="bottom"></td>
    <td WIDTH="11" VALIGN="bottom"></td>
    <td WIDTH="100" VALIGN="bottom"></td>
  </tr>
  <tr>
    <td WIDTH="363" VALIGN="TOP"><font SIZE="3"><b>Preferred stock, par value $.01 per share,
    10,000,000 shares authorized; no shares outstanding</b></font></td>
    <td WIDTH="103" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="RIGHT">0</b></font></td>
    <td WIDTH="11" VALIGN="bottom"></td>
    <td WIDTH="100" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="RIGHT">0</b></font></td>
  </tr>
  <tr>
    <td WIDTH="363" VALIGN="TOP"><font SIZE="3"><b>Common stock, par value $.001 per share,
    50,000,000 shares authorized; 4,517,400 and 4,517,400 shares issued and outstanding</b></font></td>
    <td WIDTH="103" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="RIGHT">4,518</b></font></td>
    <td WIDTH="11" VALIGN="bottom"></td>
    <td WIDTH="100" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="RIGHT">4,518</b></font></td>
  </tr>
  <tr>
    <td WIDTH="363" VALIGN="TOP"><font SIZE="3"><b>Additional paid in capital</b></font></td>
    <td WIDTH="103" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="RIGHT">6,265,653</b></font></td>
    <td WIDTH="11" VALIGN="bottom"></td>
    <td WIDTH="100" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="RIGHT">6,265,653</b></font></td>
  </tr>
  <tr>
    <td WIDTH="363" VALIGN="TOP"><font SIZE="3"><b>Accumulated deficit</b></font></td>
    <td WIDTH="103" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="RIGHT">(6,206,871</b></font></td>
    <td WIDTH="11" VALIGN="bottom"></td>
    <td WIDTH="100" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="RIGHT">(6,241,830)</b></font></td>
  </tr>
  <tr>
    <td WIDTH="363" VALIGN="TOP"><font SIZE="3"><b>Cumulative adjustment for currency
    translation</b></font></td>
    <td WIDTH="103" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="RIGHT">65,457</b></font></td>
    <td WIDTH="11" VALIGN="bottom"></td>
    <td WIDTH="100" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="RIGHT">(24,829)</b></font></td>
  </tr>
  <tr>
    <td WIDTH="363" VALIGN="TOP"><font SIZE="3"><b>Total stockholders&#146; equity</b></font></td>
    <td WIDTH="103" VALIGN="bottom" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">128,757</b></font></td>
    <td WIDTH="11" VALIGN="bottom"></td>
    <td WIDTH="100" VALIGN="bottom" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">3,512</b></font></td>
  </tr>
  <tr>
    <td WIDTH="363" VALIGN="TOP"></td>
    <td WIDTH="103" VALIGN="bottom" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">$ 240,491</b></font></td>
    <td WIDTH="11" VALIGN="bottom"></td>
    <td WIDTH="100" VALIGN="bottom" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">$ 660,674</b></font></td>
  </tr>
</table>
<b><font SIZE="3">

<p>See accompanying notes to condensed financial statements.</p>
</font><font FACE="Courier New" SIZE="3">

<p>&nbsp;</p>
</font><font SIZE="3">

<p ALIGN="CENTER">PASW, INC.</p>

<p ALIGN="CENTER">CONSOLIDATED STATEMENTS OF OPERATIONS</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(Unaudited)</p>
</font></b>

<table BORDER="0" CELLSPACING="1" CELLPADDING="2" WIDTH="607">
  <tr>
    <td WIDTH="60%" VALIGN="TOP"></td>
    <td WIDTH="40%" VALIGN="TOP" COLSPAN="3"><font SIZE="3"><b><p ALIGN="CENTER">Three Months
    Ended </b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">September 30,</p>
    <p ALIGN="CENTER">2001</b></font></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">September 30,</p>
    <p ALIGN="CENTER">2000</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Net revenue:</b></font></td>
    <td WIDTH="18%" VALIGN="TOP"></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Sales </b></font></td>
    <td WIDTH="18%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">$ 21,919</b></font></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">$ 205,482 </b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Royalties and other </b></font></td>
    <td WIDTH="18%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">40,883</b></font></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">187,129</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">62,802</b></font></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">392,611</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="TOP"></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Cost of revenue -</b></font></td>
    <td WIDTH="18%" VALIGN="TOP"></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Purchases and royalty fees</b></font></td>
    <td WIDTH="18%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">30,646</b></font></td>
    <td WIDTH="3%" VALIGN="top" style="border-bottom: thin none"></td>
    <td WIDTH="19%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">9,253</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="TOP"></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Gross profit</b></font></td>
    <td WIDTH="18%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">32,156</b></font></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">383,358</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="TOP"></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Expenses:</b></font></td>
    <td WIDTH="18%" VALIGN="TOP"></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Selling, general and administrative</b></font></td>
    <td WIDTH="18%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">38,357</b></font></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">431,083</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Research and development</b></font></td>
    <td WIDTH="18%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">0</b></font></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">192,424</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Depreciation and amortization</b></font></td>
    <td WIDTH="18%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">0</b></font></td>
    <td WIDTH="3%" VALIGN="top" style="border-bottom: thin none"></td>
    <td WIDTH="19%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">19,008</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">38,357</b></font></td>
    <td WIDTH="3%" VALIGN="top" style="border-bottom: thin none"></td>
    <td WIDTH="19%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">642,515</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Other income (expenses):</b></font></td>
    <td WIDTH="18%" VALIGN="TOP"></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Loss on sale of securities</b></font></td>
    <td WIDTH="18%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">( 84)</b></font></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"><font SIZE="3"><b><u><p align="right"></u>0</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Gain on cancellation of debt </b></font></td>
    <td WIDTH="18%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><u><p
    align="right"></u>17,241 </b></font></td>
    <td WIDTH="3%" VALIGN="top" style="border-bottom: thin solid"></td>
    <td WIDTH="19%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><u><p
    align="right"></u>0</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">17,157</b></font></td>
    <td WIDTH="3%" VALIGN="top" style="border-bottom: thin solid"></td>
    <td WIDTH="19%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="right">0</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Income (loss) from continuing operations</b></font></td>
    <td WIDTH="18%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">10,956</b></font></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">(259,157)</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP">&nbsp;<p><font SIZE="3"><b>Discontinued operations:</b></font></td>
    <td WIDTH="18%" VALIGN="TOP"></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Gain on sale of assets</b></font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><font SIZE="3"><b>0</b></font></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP" align="right"><font SIZE="3"><b>(897,104)</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Gain from discontinued operations</b></font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right" style="border-bottom: thin solid"><font
    SIZE="3"><b>0</b></font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom: thin none"></td>
    <td WIDTH="19%" VALIGN="TOP" align="right" style="border-bottom: thin solid"><font
    SIZE="3"><b>2,548,436</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="TOP" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">0</b></font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom: thin none"></td>
    <td WIDTH="19%" VALIGN="TOP" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">1,651,332</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP">&nbsp;<p><font SIZE="3"><b>Net income </b></font></td>
    <td WIDTH="18%" VALIGN="bottom" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">$ 10,956</b></font></td>
    <td WIDTH="3%" VALIGN="bottom" style="border-bottom: thin none"></td>
    <td WIDTH="19%" VALIGN="bottom" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">$1,392,175</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="TOP"></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Net income (loss) per common share:<p>basic
    and diluted</b></font></td>
    <td WIDTH="18%" VALIGN="TOP"></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Continuing operations</b></font></td>
    <td WIDTH="18%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">$ (0.00) </b></font></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">$ (0.06)</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Discontinued operations</b></font></td>
    <td WIDTH="18%" VALIGN="TOP" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">$ 0.00</b></font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom: thin none"></td>
    <td WIDTH="19%" VALIGN="TOP" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">$ 0.36</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Total</b></font></td>
    <td WIDTH="18%" VALIGN="TOP" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">$ (0.00)</b></font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom: thin none"></td>
    <td WIDTH="19%" VALIGN="TOP" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">$ 0.30</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Weighted average common stock shares
    outstanding Basic and diluted</b></font></td>
    <td WIDTH="18%" VALIGN="bottom" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">4,640,900</b></font></td>
    <td WIDTH="3%" VALIGN="bottom" style="border-bottom: thin none"></td>
    <td WIDTH="19%" VALIGN="bottom" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">4,640,900</b></font></td>
  </tr>
</table>
<font SIZE="3"><b>

<p>See accompanying notes to condensed financial statements.</p>

<p>&nbsp;</p>

<p ALIGN="CENTER">PASW, INC.</p>

<p ALIGN="CENTER">CONSOLIDATED STATEMENTS OF OPERATIONS</p>

<p align="center">(Unaudited)</p>
</b></font>

<table BORDER="0" CELLSPACING="1" CELLPADDING="2" WIDTH="607">
  <tr>
    <td WIDTH="60%" VALIGN="TOP"></td>
    <td WIDTH="40%" VALIGN="TOP" COLSPAN="3"><font SIZE="3"><b><p ALIGN="CENTER">Nine Months
    Ended </b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">September 30,</p>
    <p ALIGN="CENTER">2001</b></font></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">September 30,</p>
    <p ALIGN="CENTER">2000</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Net revenue:</b></font></td>
    <td WIDTH="18%" VALIGN="TOP"></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Sales </b></font></td>
    <td WIDTH="18%" VALIGN="bottom" align="right"><font SIZE="3"><b><p ALIGN="RIGHT">$ 392,721</b></font></td>
    <td WIDTH="3%" VALIGN="bottom" align="right"></td>
    <td WIDTH="19%" VALIGN="bottom" align="right"><font SIZE="3"><b><p ALIGN="RIGHT">$ 206,016</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Royalties and other</b></font></td>
    <td WIDTH="18%" VALIGN="bottom" align="right" style="border-bottom: thin solid"><font
    SIZE="3"><b><p ALIGN="RIGHT">106,743</b></font></td>
    <td WIDTH="3%" VALIGN="bottom" align="right"></td>
    <td WIDTH="19%" VALIGN="bottom" align="right" style="border-bottom: thin solid"><font
    SIZE="3"><b><p ALIGN="RIGHT">384,560</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="bottom" align="right"><font SIZE="3"><b><p ALIGN="RIGHT">499,464</b></font></td>
    <td WIDTH="3%" VALIGN="bottom" align="right"></td>
    <td WIDTH="19%" VALIGN="bottom" align="right"><font SIZE="3"><b><p ALIGN="RIGHT">590,576</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="bottom" align="right"></td>
    <td WIDTH="3%" VALIGN="bottom" align="right"></td>
    <td WIDTH="19%" VALIGN="bottom" align="right"></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Cost of revenue -</b></font></td>
    <td WIDTH="18%" VALIGN="bottom" align="right"></td>
    <td WIDTH="3%" VALIGN="bottom" align="right"></td>
    <td WIDTH="19%" VALIGN="bottom" align="right"></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Purchases and royalty fees</b></font></td>
    <td WIDTH="18%" VALIGN="bottom" align="right" style="border-bottom: thin solid"><font
    SIZE="3"><b><p ALIGN="RIGHT">276,796</b></font></td>
    <td WIDTH="3%" VALIGN="bottom" align="right"></td>
    <td WIDTH="19%" VALIGN="bottom" align="right" style="border-bottom: thin solid"><font
    SIZE="3"><b><p ALIGN="RIGHT">47,163</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="bottom" align="right"></td>
    <td WIDTH="3%" VALIGN="bottom" align="right"></td>
    <td WIDTH="19%" VALIGN="bottom" align="right"></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Gross profit</b></font></td>
    <td WIDTH="18%" VALIGN="bottom" align="right"><font SIZE="3"><b><p ALIGN="right">222,668</b></font></td>
    <td WIDTH="3%" VALIGN="bottom" align="right"></td>
    <td WIDTH="19%" VALIGN="bottom" align="right"><font SIZE="3"><b><p ALIGN="RIGHT">543,413</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="bottom" align="right"></td>
    <td WIDTH="3%" VALIGN="bottom" align="right"></td>
    <td WIDTH="19%" VALIGN="bottom" align="right"></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Expenses:</b></font></td>
    <td WIDTH="18%" VALIGN="bottom" align="right"></td>
    <td WIDTH="3%" VALIGN="bottom" align="right"></td>
    <td WIDTH="19%" VALIGN="bottom" align="right"></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Selling, general and administrative</b></font></td>
    <td WIDTH="18%" VALIGN="bottom" align="right"><font SIZE="3"><b><p ALIGN="RIGHT">178,033</b></font></td>
    <td WIDTH="3%" VALIGN="bottom" align="right"></td>
    <td WIDTH="19%" VALIGN="bottom" align="right"><font SIZE="3"><b><p ALIGN="RIGHT">1,607,538</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Research and development</b></font></td>
    <td WIDTH="18%" VALIGN="bottom" align="right"><font SIZE="3"><b><p ALIGN="RIGHT">0</b></font></td>
    <td WIDTH="3%" VALIGN="bottom" align="right"></td>
    <td WIDTH="19%" VALIGN="bottom" align="right"><font SIZE="3"><b><p ALIGN="RIGHT">574,011</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Depreciation and amortization</b></font></td>
    <td WIDTH="18%" VALIGN="bottom" align="right" style="border-bottom: thin solid"><font
    SIZE="3"><b><p ALIGN="RIGHT">0</b></font></td>
    <td WIDTH="3%" VALIGN="bottom" align="right"></td>
    <td WIDTH="19%" VALIGN="bottom" align="right" style="border-bottom: thin solid"><font
    SIZE="3"><b><p ALIGN="RIGHT">22,981</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="bottom" align="right"><font SIZE="3"><b><p ALIGN="RIGHT">178,033</b></font></td>
    <td WIDTH="3%" VALIGN="bottom" align="right"></td>
    <td WIDTH="19%" VALIGN="bottom" align="right"><font SIZE="3"><b><p ALIGN="RIGHT">2,204,530</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Other income (expenses):</b></font></td>
    <td WIDTH="18%" VALIGN="bottom" align="right"></td>
    <td WIDTH="3%" VALIGN="bottom" align="right"></td>
    <td WIDTH="19%" VALIGN="bottom" align="right"></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Loss on sale of securities</b></font></td>
    <td WIDTH="18%" VALIGN="bottom" align="right"><font SIZE="3"><b>( 31,417)</b></font></td>
    <td WIDTH="3%" VALIGN="bottom" align="right"></td>
    <td WIDTH="19%" VALIGN="bottom" align="right"><font SIZE="3"><b>0</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Gain on cancellation of debt</b></font></td>
    <td WIDTH="18%" VALIGN="bottom" align="right" style="border-bottom: thin solid"><font
    SIZE="3"><b>21,741</b></font></td>
    <td WIDTH="3%" VALIGN="bottom" align="right" style="border-bottom: thin none"></td>
    <td WIDTH="19%" VALIGN="bottom" align="right" style="border-bottom: thin solid"><font
    SIZE="3"><b>0</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="bottom" align="right" style="border-bottom: thin solid"><font
    SIZE="3"><b><p ALIGN="RIGHT">( 9,676) </b></font></td>
    <td WIDTH="3%" VALIGN="bottom" align="right" style="border-bottom: thin none"></td>
    <td WIDTH="19%" VALIGN="bottom" align="right" style="border-bottom: thin solid"><font
    SIZE="3"><b><p ALIGN="RIGHT">0</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Income (loss) from continuing operations</b></font></td>
    <td WIDTH="18%" VALIGN="bottom" align="right"><font SIZE="3"><b><p ALIGN="RIGHT">34,959</b></font></td>
    <td WIDTH="3%" VALIGN="bottom" align="right"></td>
    <td WIDTH="19%" VALIGN="bottom" align="right"><font SIZE="3"><b><p ALIGN="RIGHT">(1,661,117)</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP">&nbsp;<p><font SIZE="3"><b>Discontinued operations:</b></font></td>
    <td WIDTH="18%" VALIGN="bottom" align="right"></td>
    <td WIDTH="3%" VALIGN="bottom" align="right"></td>
    <td WIDTH="19%" VALIGN="bottom" align="right"></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Loss from operations</b></font></td>
    <td WIDTH="18%" VALIGN="bottom" align="right"><font SIZE="3"><b>0</b></font></td>
    <td WIDTH="3%" VALIGN="bottom" align="right"></td>
    <td WIDTH="19%" VALIGN="bottom" align="right"><font SIZE="3"><b>(1,343,395)</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Gain on sales of assets</b></font></td>
    <td WIDTH="18%" VALIGN="bottom" align="right" style="border-bottom: thin solid"><font
    SIZE="3"><b>0</b></font></td>
    <td WIDTH="3%" VALIGN="bottom" align="right" style="border-bottom: thin none"></td>
    <td WIDTH="19%" VALIGN="bottom" align="right" style="border-bottom: thin solid"><font
    SIZE="3"><b>2,548,436</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="bottom" align="right" style="border-bottom: thin solid"><strong>0</strong></td>
    <td WIDTH="3%" VALIGN="bottom" align="right" style="border-bottom: thin none"></td>
    <td WIDTH="19%" VALIGN="bottom" align="right" style="border-bottom: thin solid"><font
    SIZE="3"><b><p ALIGN="RIGHT">1,205,041</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP">&nbsp;<p><font SIZE="3"><b>Net income (loss)</b></font></td>
    <td WIDTH="18%" VALIGN="bottom" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">$ 34,959</b></font></td>
    <td WIDTH="3%" VALIGN="bottom" style="border-bottom: thin none"></td>
    <td WIDTH="19%" VALIGN="bottom" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">$ ( 456,076)</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="TOP"></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Net income (loss) per common share:<p>basic
    and diluted</b></font></td>
    <td WIDTH="18%" VALIGN="TOP"></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Continuing operations</b></font></td>
    <td WIDTH="18%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">$ 0.01</b></font></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">$ (0.36)</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Discontinued operations</b></font></td>
    <td WIDTH="18%" VALIGN="TOP" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">$ 0.00</b></font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom: thin none"></td>
    <td WIDTH="19%" VALIGN="TOP" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="right">$ 0. 26</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Total</b></font></td>
    <td WIDTH="18%" VALIGN="TOP" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">$ 0.01</b></font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom: thin none"></td>
    <td WIDTH="19%" VALIGN="TOP" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">$ (0.10)</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Weighted average common stock shares
    outstanding Basic and diluted</b></font></td>
    <td WIDTH="18%" VALIGN="bottom" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">4,640,900</b></font></td>
    <td WIDTH="3%" VALIGN="bottom" style="border-bottom: thin none"></td>
    <td WIDTH="19%" VALIGN="bottom" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">4,617,900</b></font></td>
  </tr>
</table>
<font SIZE="3"><b>

<p>&nbsp;</p>

<p>See accompanying notes to condensed financial statements.</p>

<p ALIGN="CENTER">PASW, INC.</p>

<p ALIGN="CENTER">CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)</p>

<p align="center">(Unaudited)</p>

<p>&nbsp;</p>
</b></font>

<table BORDER="0" CELLSPACING="1" CELLPADDING="2" WIDTH="734">
  <tr>
    <td WIDTH="478" VALIGN="TOP"></td>
    <td WIDTH="220" VALIGN="TOP" COLSPAN="3"><font SIZE="3"><b><p ALIGN="CENTER">Three Months
    Ended </b></font></td>
  </tr>
  <tr>
    <td WIDTH="478" VALIGN="TOP"></td>
    <td WIDTH="91" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">September 30,</p>
    <p ALIGN="CENTER">2001</b></font></td>
    <td WIDTH="3" VALIGN="TOP"></td>
    <td WIDTH="90" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">September 30,</p>
    <p ALIGN="CENTER">2000</b></font></td>
  </tr>
  <tr>
    <td WIDTH="478" VALIGN="TOP" HEIGHT="4"></td>
    <td WIDTH="91" VALIGN="TOP" HEIGHT="4"></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="4"></td>
    <td WIDTH="90" VALIGN="TOP" HEIGHT="4"></td>
  </tr>
  <tr>
    <td WIDTH="478" VALIGN="TOP"><font SIZE="3"><b>Net income (loss)</b></font></td>
    <td WIDTH="91" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">$ 10,956</b></font></td>
    <td WIDTH="3" VALIGN="TOP"></td>
    <td WIDTH="90" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">$1,392,175</b></font></td>
  </tr>
  <tr>
    <td WIDTH="478" VALIGN="TOP"><font SIZE="3"><b>Other comprehensive income (loss):</b></font></td>
    <td WIDTH="91" VALIGN="TOP"></td>
    <td WIDTH="3" VALIGN="TOP"></td>
    <td WIDTH="90" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="478" VALIGN="TOP"><blockquote>
      <font SIZE="3"><b><p>Net unrealized loss on available securities for sale</b></font></p>
    </blockquote>
    </td>
    <td WIDTH="91" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">(4,568)</b></font></td>
    <td WIDTH="3" VALIGN="TOP"></td>
    <td WIDTH="90" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">( 704,139)</b></font></td>
  </tr>
  <tr>
    <td WIDTH="478" VALIGN="TOP"><blockquote>
      <font SIZE="3"><b><p>Foreign currency translation adjustment</b></font></p>
    </blockquote>
    </td>
    <td WIDTH="91" VALIGN="top" align="right" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">57,278</b></font></td>
    <td WIDTH="3" VALIGN="top" align="right" style="border-bottom: thin none"></td>
    <td WIDTH="90" VALIGN="top" align="right" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">109,454</b></font></td>
  </tr>
  <tr>
    <td WIDTH="478" VALIGN="TOP"><font SIZE="3"><b>Comprehensive income (loss)</b></font></td>
    <td WIDTH="91" VALIGN="top" align="right" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">$ 63,666</b></font></td>
    <td WIDTH="3" VALIGN="top" align="right" style="border-bottom: thin none"></td>
    <td WIDTH="90" VALIGN="top" align="right" style="border-bottom: thin solid"><font SIZE="3"><b>$
    797,490</b></font></td>
  </tr>
</table>
<font SIZE="3"><b>

<p>&nbsp;</p>

<p>&nbsp;</p>

<p ALIGN="CENTER">PASW, INC.</p>

<p ALIGN="CENTER">CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)</p>

<p align="center">(Unaudited)</p>

<p>&nbsp;</p>
</b></font>

<table BORDER="0" CELLSPACING="1" CELLPADDING="2" WIDTH="740" height="280">
  <tr>
    <td WIDTH="485" VALIGN="TOP" height="21"></td>
    <td WIDTH="216" VALIGN="TOP" COLSPAN="3" height="21"><font SIZE="3"><b><p ALIGN="CENTER">Nine
    Months Ended </b></font></td>
  </tr>
  <tr>
    <td WIDTH="485" VALIGN="TOP" height="59"></td>
    <td WIDTH="90" VALIGN="TOP" height="59"><font SIZE="3"><b><p ALIGN="CENTER">September 30,</p>
    <p ALIGN="CENTER">2001</b></font></td>
    <td WIDTH="2" VALIGN="TOP" height="59"></td>
    <td WIDTH="91" VALIGN="TOP" height="59"><font SIZE="3"><b><p ALIGN="CENTER">September 30,</p>
    <p ALIGN="CENTER">2000</b></font></td>
  </tr>
  <tr>
    <td WIDTH="485" VALIGN="TOP" HEIGHT="21"></td>
    <td WIDTH="90" VALIGN="TOP" HEIGHT="21"></td>
    <td WIDTH="2" VALIGN="TOP" HEIGHT="21"></td>
    <td WIDTH="91" VALIGN="TOP" HEIGHT="21"></td>
  </tr>
  <tr>
    <td WIDTH="485" VALIGN="TOP" height="21"><font SIZE="3"><b>Net income (loss)</b></font></td>
    <td WIDTH="90" VALIGN="TOP" align="right" height="21"><font SIZE="3"><b><p ALIGN="RIGHT">$
    34,959</b></font></td>
    <td WIDTH="2" VALIGN="TOP" align="right" height="21"></td>
    <td WIDTH="91" VALIGN="TOP" align="right" height="21"><font SIZE="3"><b><p ALIGN="right">$(456,076)</b></font></td>
  </tr>
  <tr>
    <td WIDTH="485" VALIGN="TOP" height="21"></td>
    <td WIDTH="90" VALIGN="TOP" align="right" height="21"></td>
    <td WIDTH="2" VALIGN="TOP" align="right" height="21"></td>
    <td WIDTH="91" VALIGN="TOP" align="right" height="21"></td>
  </tr>
  <tr>
    <td WIDTH="485" VALIGN="TOP" height="21"><font SIZE="3"><b>Other comprehensive income
    (loss):</b></font></td>
    <td WIDTH="90" VALIGN="TOP" align="right" height="21"></td>
    <td WIDTH="2" VALIGN="TOP" align="right" height="21"></td>
    <td WIDTH="91" VALIGN="TOP" align="right" height="21"></td>
  </tr>
  <tr>
    <td WIDTH="485" VALIGN="TOP" height="21"><blockquote>
      <font SIZE="3"><b><p>Net unrealized loss on available securities for sale</b></font></p>
    </blockquote>
    </td>
    <td WIDTH="90" VALIGN="TOP" align="right" height="21"></td>
    <td WIDTH="2" VALIGN="TOP" align="right" height="21"></td>
    <td WIDTH="91" VALIGN="TOP" align="right" height="21"><font SIZE="3"><b><p ALIGN="right">(704,139)</b></font></td>
  </tr>
  <tr>
    <td WIDTH="485" VALIGN="TOP" height="20"><blockquote>
      <font SIZE="3"><b><p>Foreign currency translation adjustment</b></font></p>
    </blockquote>
    </td>
    <td WIDTH="90" VALIGN="top" align="right" height="20" style="border-bottom: thin solid"><font
    SIZE="3"><b>90,287</b></font></td>
    <td WIDTH="2" VALIGN="top" align="right" height="20" style="border-bottom: thin none"></td>
    <td WIDTH="91" VALIGN="top" align="right" height="20" style="border-bottom: thin solid"><font
    SIZE="3"><b>213,962</b></font></td>
  </tr>
  <tr>
    <td WIDTH="485" VALIGN="TOP" height="21"><font SIZE="3"><b>Comprehensive gain (loss)</b></font></td>
    <td WIDTH="90" VALIGN="top" align="right" height="21" style="border-bottom: thin solid"><font
    SIZE="3"><b><p ALIGN="RIGHT">$ 125,246</b></font></td>
    <td WIDTH="2" VALIGN="top" align="right" height="21" style="border-bottom: thin none"></td>
    <td WIDTH="91" VALIGN="top" align="right" height="21" style="border-bottom: thin solid"><font
    SIZE="3"><b><p ALIGN="right">$ (946,253) </b></font></td>
  </tr>
</table>
<b><font SIZE="3">

<p>See accompanying notes to condensed financial statements.</p>
</font><font FACE="Courier New" SIZE="3">

<p>&nbsp;</p>
</font><font SIZE="3">

<p ALIGN="CENTER">PASW, INC.</p>

<p ALIGN="CENTER">STATEMENT OF CASH FLOWS</p>

<blockquote>
  <blockquote>
    <blockquote>
      <blockquote>
        <blockquote>
          <blockquote>
            <blockquote>
              <blockquote>
                <blockquote>
                  <blockquote>
                    <p align="center">(Unaudited)</p>
                  </blockquote>
                </blockquote>
              </blockquote>
            </blockquote>
          </blockquote>
        </blockquote>
      </blockquote>
    </blockquote>
  </blockquote>
</blockquote>
</font></b>

<table BORDER="0" CELLSPACING="1" CELLPADDING="2" WIDTH="745" height="1501">
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"></td>
    <td WIDTH="211" VALIGN="TOP" COLSPAN="3" height="19"><font SIZE="3"><b><p ALIGN="CENTER">Nine
    Months Ended </b></font></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="57"></td>
    <td WIDTH="89" VALIGN="TOP" height="57"><font SIZE="3"><b><p ALIGN="CENTER">September 30,</p>
    <p ALIGN="CENTER">2001</b></font></td>
    <td WIDTH="2" VALIGN="TOP" height="57"></td>
    <td WIDTH="90" VALIGN="TOP" height="57"><font SIZE="3"><b><p ALIGN="CENTER">September 30,</p>
    <p ALIGN="CENTER">2000</b></font></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="57"><font SIZE="3"><b>Cash flows from operating
    activities:<p>Continuing operations</b></font></td>
    <td WIDTH="89" VALIGN="TOP" height="57"></td>
    <td WIDTH="2" VALIGN="TOP" height="57"></td>
    <td WIDTH="90" VALIGN="TOP" height="57"></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="17"><font SIZE="3"><b>Net income (loss)</b></font></td>
    <td WIDTH="89" VALIGN="TOP" height="17"><font SIZE="3"><b><p ALIGN="RIGHT">$ 34,959</b></font></td>
    <td WIDTH="2" VALIGN="TOP" height="17"></td>
    <td WIDTH="90" VALIGN="TOP" height="17"><font SIZE="3"><b><p ALIGN="RIGHT">$ (1,661,117)</b></font></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="38"><font SIZE="3"><b>Adjustments to reconcile net
    loss to net cash used in operating activities:</b></font></td>
    <td WIDTH="89" VALIGN="TOP" height="38"></td>
    <td WIDTH="2" VALIGN="TOP" height="38"></td>
    <td WIDTH="90" VALIGN="TOP" height="38"></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"><font SIZE="3"><b>Depreciation and amortization</b></font></td>
    <td WIDTH="89" VALIGN="TOP" height="19"><font SIZE="3"><b><p ALIGN="RIGHT">0</b></font></td>
    <td WIDTH="2" VALIGN="TOP" height="19"></td>
    <td WIDTH="90" VALIGN="TOP" height="19"><font SIZE="3"><b><p ALIGN="RIGHT">22,981</b></font></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"><font SIZE="3"><b>(Increase) decrease in assets:</b></font></td>
    <td WIDTH="89" VALIGN="TOP" height="19"></td>
    <td WIDTH="2" VALIGN="TOP" height="19"></td>
    <td WIDTH="90" VALIGN="TOP" height="19"></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"><font SIZE="3"><b>Accounts receivable</b></font></td>
    <td WIDTH="89" VALIGN="TOP" height="19"><font SIZE="3"><b><p ALIGN="RIGHT">142,955</b></font></td>
    <td WIDTH="2" VALIGN="TOP" height="19"></td>
    <td WIDTH="90" VALIGN="TOP" height="19"><font SIZE="3"><b><p ALIGN="RIGHT">41,246</b></font></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"><font SIZE="3"><b>Loss on marketable securities</b></font></td>
    <td WIDTH="89" VALIGN="TOP" height="19"><font SIZE="3"><b><p ALIGN="RIGHT">(31,417)</b></font></td>
    <td WIDTH="2" VALIGN="TOP" height="19"></td>
    <td WIDTH="90" VALIGN="TOP" height="19"><font SIZE="3"><b><p ALIGN="RIGHT">0</b></font></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"><font SIZE="3"><b>Prepaid expenses</b></font></td>
    <td WIDTH="89" VALIGN="TOP" height="19"><font SIZE="3"><b><p ALIGN="RIGHT">30,867</b></font></td>
    <td WIDTH="2" VALIGN="TOP" height="19"></td>
    <td WIDTH="90" VALIGN="TOP" height="19"><font SIZE="3"><b><p ALIGN="RIGHT">75,753</b></font></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"><font SIZE="3"><b>Other assets</b></font></td>
    <td WIDTH="89" VALIGN="TOP" height="19"><font SIZE="3"><b><p ALIGN="RIGHT">290</b></font></td>
    <td WIDTH="2" VALIGN="TOP" height="19"></td>
    <td WIDTH="90" VALIGN="TOP" height="19"><font SIZE="3"><b><p ALIGN="RIGHT">( 60,772)</b></font></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"><font SIZE="3"><b>Increase (decrease) in
    liabilities:</b></font></td>
    <td WIDTH="89" VALIGN="TOP" height="19"></td>
    <td WIDTH="2" VALIGN="TOP" height="19"></td>
    <td WIDTH="90" VALIGN="TOP" height="19"></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"><font SIZE="3"><b>Accounts payable and accrued
    expenses</b></font></td>
    <td WIDTH="89" VALIGN="TOP" height="19"><font SIZE="3"><b><p ALIGN="RIGHT">(545,428)</b></font></td>
    <td WIDTH="2" VALIGN="TOP" height="19"></td>
    <td WIDTH="90" VALIGN="TOP" height="19"><font SIZE="3"><b><p ALIGN="RIGHT">(80,605)</b></font></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"><font SIZE="3"><b>Accrued compensation expense</b></font></td>
    <td WIDTH="89" VALIGN="top" height="19" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">0</b></font></td>
    <td WIDTH="2" VALIGN="top" height="19" style="border-bottom: thin none"></td>
    <td WIDTH="90" VALIGN="top" height="19" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">377,500</b></font></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"><font SIZE="3"><b>Net cash used in operating
    activities </b></font></td>
    <td WIDTH="89" VALIGN="TOP" height="19"><font SIZE="3"><b><p ALIGN="RIGHT">(367,774)</b></font></td>
    <td WIDTH="2" VALIGN="TOP" height="19"></td>
    <td WIDTH="90" VALIGN="TOP" height="19"><font SIZE="3"><b><p ALIGN="RIGHT">(1,285,014)</b></font></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"></td>
    <td WIDTH="89" VALIGN="TOP" height="19"></td>
    <td WIDTH="2" VALIGN="TOP" height="19"></td>
    <td WIDTH="90" VALIGN="TOP" height="19"></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"><font SIZE="3"><b>Loss from discontinued
    operations</b></font></td>
    <td WIDTH="89" VALIGN="top" height="19" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">0 </b></font></td>
    <td WIDTH="2" VALIGN="TOP" height="19"></td>
    <td WIDTH="90" VALIGN="top" height="19" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">(1,300,300)</b></font></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"><font SIZE="3"><b>Total cash used in operating
    activities</b></font></td>
    <td WIDTH="89" VALIGN="TOP" height="19"><font SIZE="3"><b><p ALIGN="RIGHT">(367,774)</b></font></td>
    <td WIDTH="2" VALIGN="TOP" height="19"></td>
    <td WIDTH="90" VALIGN="TOP" height="19"><font SIZE="3"><b><p ALIGN="RIGHT">(2,585,314)</b></font></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19">&nbsp;<p><font SIZE="3"><b>Cash flows from investing
    activities:</b></font></td>
    <td WIDTH="89" VALIGN="TOP" height="19"></td>
    <td WIDTH="2" VALIGN="TOP" height="19"></td>
    <td WIDTH="90" VALIGN="TOP" height="19"></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"><font SIZE="3"><b>Acquisition of fixed assets</b></font></td>
    <td WIDTH="89" VALIGN="TOP" height="19"><font SIZE="3"><b><p ALIGN="RIGHT">(1,677)</b></font></td>
    <td WIDTH="2" VALIGN="TOP" height="19"></td>
    <td WIDTH="90" VALIGN="TOP" height="19"><font SIZE="3"><b><p ALIGN="RIGHT">(71,174)</b></font></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"><font SIZE="3"><b>Disposition of assets, net </b></font></td>
    <td WIDTH="89" VALIGN="TOP" height="19"><font SIZE="3"><b><p ALIGN="RIGHT">699</b></font></td>
    <td WIDTH="2" VALIGN="TOP" height="19"></td>
    <td WIDTH="90" VALIGN="TOP" height="19"><font SIZE="3"><b><p ALIGN="RIGHT">0</b></font></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"><font SIZE="3"><b>Proceeds of sale or marketable
    securities</b></font></td>
    <td WIDTH="89" VALIGN="TOP" height="19"><font SIZE="3"><b><p ALIGN="RIGHT">366,458</b></font></td>
    <td WIDTH="2" VALIGN="TOP" height="19"></td>
    <td WIDTH="90" VALIGN="TOP" height="19"><font SIZE="3"><b><p ALIGN="RIGHT">0</b></font></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"><font SIZE="3"><b>Purchase of marketable
    securities</b></font></td>
    <td WIDTH="89" VALIGN="top" height="19" style="border-bottom: thin solid"><b><p
    ALIGN="RIGHT">(136,500)</b></td>
    <td WIDTH="2" VALIGN="top" height="19" style="border-bottom: thin none"></td>
    <td WIDTH="90" VALIGN="top" height="19" style="border-bottom: thin solid"><b><p
    ALIGN="RIGHT">0</b></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"><font SIZE="3"><b>Net cash from (used) in
    investing activities</b></font></td>
    <td WIDTH="89" VALIGN="TOP" height="19"><font SIZE="3"><b><p ALIGN="right">228,980</b></font></td>
    <td WIDTH="2" VALIGN="TOP" height="19"></td>
    <td WIDTH="90" VALIGN="TOP" height="19"><font SIZE="3"><b><p ALIGN="RIGHT">(71,174)</b></font></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"></td>
    <td WIDTH="89" VALIGN="TOP" height="19"></td>
    <td WIDTH="2" VALIGN="TOP" height="19"></td>
    <td WIDTH="90" VALIGN="TOP" height="19"></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="95"><font SIZE="3"><b>Cash flows from financing
    activities:<p>Sale of subsidiary stock</p>
    <p>Proceeds from borrowings</b></font></td>
    <td WIDTH="89" VALIGN="TOP" height="95"></td>
    <td WIDTH="2" VALIGN="TOP" height="95"></td>
    <td WIDTH="90" VALIGN="TOP" height="95"><font SIZE="3"><b><p ALIGN="RIGHT">&nbsp;</p>
    <p ALIGN="RIGHT">400,000</p>
    <p ALIGN="RIGHT">200,000</b></font></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"><font SIZE="3"><b>Exercise of warrants</b></font></td>
    <td WIDTH="89" VALIGN="top" height="19" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">0</b></font></td>
    <td WIDTH="2" VALIGN="top" height="19" style="border-bottom: thin none"></td>
    <td WIDTH="90" VALIGN="top" height="19" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">569,250</b></font></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"><font SIZE="3"><b>Net cash provided by financing
    activities</b></font></td>
    <td WIDTH="89" VALIGN="TOP" height="19"><font SIZE="3"><b><p ALIGN="RIGHT">0</b></font></td>
    <td WIDTH="2" VALIGN="TOP" height="19"></td>
    <td WIDTH="90" VALIGN="TOP" height="19"><font SIZE="3"><b><p ALIGN="RIGHT">1,169,250</b></font></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"></td>
    <td WIDTH="89" VALIGN="TOP" height="19"></td>
    <td WIDTH="2" VALIGN="TOP" height="19"></td>
    <td WIDTH="90" VALIGN="TOP" height="19"></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"><font SIZE="3"><b>Effect of exchange rate changes
    on cash</b></font></td>
    <td WIDTH="89" VALIGN="top" height="19" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">90,286</b></font></td>
    <td WIDTH="2" VALIGN="top" height="19" style="border-bottom: thin none"></td>
    <td WIDTH="90" VALIGN="top" height="19" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">188,384</b></font></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"><font SIZE="3"><b>Net increase (decrease) in cash</b></font></td>
    <td WIDTH="89" VALIGN="top" height="19" style="border-bottom: thin none"><font SIZE="3"><b><p
    ALIGN="RIGHT">( 48,508)</b></font></td>
    <td WIDTH="2" VALIGN="top" height="19" style="border-bottom: thin none"></td>
    <td WIDTH="90" VALIGN="top" height="19" style="border-bottom: thin none"><font SIZE="3"><b><p
    ALIGN="RIGHT">(1,298,854)</b></font></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"></td>
    <td WIDTH="89" VALIGN="TOP" height="19"></td>
    <td WIDTH="2" VALIGN="TOP" height="19"></td>
    <td WIDTH="90" VALIGN="TOP" height="19"></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"><font SIZE="3"><b>Cash &#150; Beginning</b></font></td>
    <td WIDTH="89" VALIGN="top" height="19" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">254,369</b></font></td>
    <td WIDTH="2" VALIGN="top" height="19" style="border-bottom: thin none"></td>
    <td WIDTH="90" VALIGN="top" height="19" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">1,661,708</b></font></td>
  </tr>
  <tr>
    <td WIDTH="492" VALIGN="TOP" height="19"><font SIZE="3"><b>Cash &#150; Ending</b></font></td>
    <td WIDTH="89" VALIGN="top" height="19" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">$ 205,861</b></font></td>
    <td WIDTH="2" VALIGN="top" height="19" style="border-bottom: thin none"></td>
    <td WIDTH="90" VALIGN="top" height="19" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">$ 362,854</b></font></td>
  </tr>
</table>
<font SIZE="3"><b>

<p>Supplemental non-cash financing activities: None</p>

<p>See accompanying notes to condensed financial statements.</p>

<p ALIGN="CENTER">PASW, INC.</p>

<p ALIGN="CENTER">NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</p>

<p ALIGN="CENTER">(UNAUDITED)</p>

<blockquote>
  <p ALIGN="JUSTIFY">(1)&nbsp; Basis of presentation</p>
</blockquote>
</b>

<p ALIGN="JUSTIFY">The accompanying unaudited consolidated financial statements of PASW,
INC. (&quot;PASW&quot;, or the &quot;Company&quot;) have been prepared in accordance with
generally accepted accounting principles for interim financial information and the
instructions to Form 10-QSB. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of only normal
recurring accruals) considered necessary for a fair presentation of the Company&#146;s
financial position at September 30, 2001, the results of operations for the three months
and nine months ended September 30, 2001 and September 30, 2000, and the cash flows for
the nine months ended September 30, 2001 and September 30, 2000 are included. Operating
results for the three-month and nine month periods ended September 30, 2001 are not
necessarily indicative of the results that may be expected for the year ending December
31, 2001.</p>

<p ALIGN="JUSTIFY">The information contained in this Form 10-QSB should be read in
conjunction with audited financial statements and related notes for the year ended
December 31, 2000 which are contained in the Company&#146;s Annual Report on Form 10-KSB
filed with the Securities and Exchange Commission (the &quot;SEC&quot;) on March 28, 2001,
Form 10KSBA Number 1 filed on April 27, 2001 and the Company&#146;s Registration Statement
on Form SB-2 filed with the Securities and Exchange Commission on July 29, 1999 (File
333-75137).</p>
<b>

<blockquote>
  <p ALIGN="JUSTIFY">(2)&nbsp; Earnings per share</p>
</blockquote>
</b>

<p ALIGN="JUSTIFY">The Company adopted SFAS No. 128, &quot;Earnings Per Share&quot;,
during 1998. SFAS No. 128 requires presentation of basic and diluted earnings per share.
Basic earnings per share is computed by dividing income available to common stockholders
by the weighted average number of common shares outstanding for the reporting period.
Diluted earnings per share reflects the potential dilution that could occur if securities
or other contracts, such as stock options, to issue common stock were exercised or
converted into common stock. All prior period weighted average and per share information
has been restated in accordance with SFAS No. 128.</p>

<p ALIGN="JUSTIFY"><b>COMPUTATION OF WEIGHTED AVERAGE COMMON SHARES OUTSTANDING</b></p>
</font>

<table BORDER="0" CELLSPACING="1" CELLPADDING="2" WIDTH="635">
  <tr>
    <td WIDTH="284" VALIGN="TOP"></td>
    <td WIDTH="91" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="CENTER">Total Number of Shares</b></font></td>
    <td WIDTH="12" VALIGN="bottom"></td>
    <td WIDTH="97" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="CENTER">Three Months Ended </p>
    <p ALIGN="CENTER">September 30, 2001</b></font></td>
    <td WIDTH="8" VALIGN="bottom"></td>
    <td WIDTH="107" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="CENTER">Nine Months Ended </p>
    <p ALIGN="CENTER">September 30, 2001</b></font></td>
  </tr>
  <tr>
    <td WIDTH="284" VALIGN="TOP"><font SIZE="3"><b>Outstanding shares as of January 1, 2001</b></font></td>
    <td WIDTH="91" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">4,517,400</b></font></td>
    <td WIDTH="12" VALIGN="TOP"></td>
    <td WIDTH="97" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">4,517,400</b></font></td>
    <td WIDTH="8" VALIGN="TOP"></td>
    <td WIDTH="107" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">4,517,400</b></font></td>
  </tr>
  <tr>
    <td WIDTH="284" VALIGN="TOP"><font SIZE="3"><b>Options treated as Common Stock</b></font></td>
    <td WIDTH="91" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">123,500</b></font></td>
    <td WIDTH="12" VALIGN="TOP"></td>
    <td WIDTH="97" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">123,500</b></font></td>
    <td WIDTH="8" VALIGN="TOP"></td>
    <td WIDTH="107" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">123,500</b></font></td>
  </tr>
  <tr>
    <td WIDTH="284" VALIGN="TOP"><b><font SIZE="3">Total weighted average</font> <font
    SIZE="3">shares outstanding</font></b></td>
    <td WIDTH="91" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="RIGHT">4,640,900</b></font></td>
    <td WIDTH="12" VALIGN="bottom"></td>
    <td WIDTH="97" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="RIGHT">4,640,900</b></font></td>
    <td WIDTH="8" VALIGN="bottom"></td>
    <td WIDTH="107" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="RIGHT">4,640,900</b></font></td>
  </tr>
  <tr>
    <td WIDTH="284" VALIGN="TOP"><font SIZE="3"><b>Net gain </b></font></td>
    <td WIDTH="91" VALIGN="TOP"></td>
    <td WIDTH="12" VALIGN="TOP"></td>
    <td WIDTH="97" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">$ 10,956</b></font></td>
    <td WIDTH="8" VALIGN="TOP"></td>
    <td WIDTH="107" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">$ 34,959</b></font></td>
  </tr>
  <tr>
    <td WIDTH="284" VALIGN="TOP"><font SIZE="3"><b>Net loss per common share basic and diluted</b></font></td>
    <td WIDTH="91" VALIGN="TOP"></td>
    <td WIDTH="12" VALIGN="TOP"></td>
    <td WIDTH="97" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="RIGHT">$ 0.00 </b></font></td>
    <td WIDTH="8" VALIGN="bottom"></td>
    <td WIDTH="107" VALIGN="bottom"><font SIZE="3"><b><p ALIGN="RIGHT">$ 0.01</b></font></td>
  </tr>
</table>
<font SIZE="3"><b>

<p>(3) Proposed Simmons Energy Services Inc. (&quot;SES&quot;) Merger </p>
</b>

<p ALIGN="JUSTIFY">In February 2001, PASW entered into a letter of intent to acquire the
operations of Simmons Energy Services Inc. (&quot;SES&quot;), a privately held Alberta
(Canada) company. Under the terms of the proposed transaction, PASW would issue shares of
its common stock, Series B preferred stock and Series C convertible preferred stock to
acquire SES in a transaction to be accounted for as a reverse acquisition.</font><font
FACE="Courier New" SIZE="3"><b> </b></font><font SIZE="3">A definitive combination
agreement between PASW and SES was executed in March 2001.<b> </b>A term of the agreement
called for PASW to initiate a private placement offering of 5,000,000 units at $4.00 per
unit for an aggregate offering price of $20,000,000. </p>

<p ALIGN="JUSTIFY">On July 18, 2001 the Company was verbally notified by Simmons Energy
Services Inc that the efforts by SES to secure the $20 million private placement were not
progressing and that it appeared to SES that current market conditions could delay or
curtail any future efforts to complete the private placement in time to cure the NADSAQ
deficiencies in a timely manner. SES concluded that it therefore appeared that the Company
could face delisting and notified the Company of its intent to terminate the combination
agreement. On July 23, 2001 the Company received formal notification from SES of its
intent to terminate the agreement.</p>
<b>

<p ALIGN="JUSTIFY">(4) </font>Appointment of New Director and Chairman</p>
</b><font SIZE="3">

<p ALIGN="JUSTIFY">On August 21, 2001 the Board of Directors received the resignation of
Reg J. Greenslade as a member of the board of directors. Mr. Greenslade submitted his
resignation subsequent to termination of negotiations with Simmons Energy Services Inc
citing the need to concentrate his efforts on other business activities. The board
nominated Glenn P. Russell to replace Mr. Greenslade and to assume the position of
Chairman. Concurrent with Mr. Russell&#146;s election as Chairman William E. Sliney
resigned his position as Chairman but continues his positions as President and Chief
Financial Officer.</p>
<b>

<p ALIGN="JUSTIFY">(5) Repricing of Registered Warrants</p>
</b>

<p ALIGN="JUSTIFY">In March 2001 the Board of Directors announced the repricing of the
Company's registered warrants (NASDAQ:PASWW). The exercise price of the warrants was
reduced from $7.50 to $4.00 per share. In September 2001 the Board of Directors amended
the terms to extend the exercise date to November 30, 2001 and to reduce the price to
$1.00 on a pre-reverse split basis In September 2001 the Board of Directors further
amended the terms to reduce the price to twenty five ($0.25) cents per share and extend
the exercise date to November 30, 2002. </p>
<b>

<p ALIGN="JUSTIFY">(6) Notification of Delisting from NASDAQ.</p>
</b>

<p ALIGN="JUSTIFY">In April 2001 the Company was notified by NASDAQ that at December 31,
2000 it was not in compliance with the Net Tangible Asset requirements of NASDAQ Market
Place Rule 4310 (c)(2)(B) in that PASW failed to have a minimum of $2 million in net
tangible assets. At the same time PASW was notified that in light of the &quot;going
concern&quot; opinion from our auditors we may not be able sustain compliance with the
continued listing requirements of the NASDAQ Stock Market. In May 2001 the Company was
notified that is not in compliance with the minimum bid price requirements of NASDAQ
Market Place Rule 4310(c)(8)(B) in that the closing bid price of the Company's common
stock did not meet or exceed $1.00 over 30 consecutive trading days. The Company was given
until August 22, 2001 to achieve compliance. At September 30, 2001 the Company was not in
compliance with any of the rules and, although notification has not been received from
NASDAQ, the Company believes it is not in compliance with Market Place Rule 4310(c)(7) in
that it has not maintained a minimum market value of public float of $1,000,000 over 30
consecutive trading days. </p>
<b>

<p ALIGN="JUSTIFY">(7) Subsequest Event</b> - <b>Notification of Delisting from NASDAQ.</p>
</b>

<p ALIGN="JUSTIFY">On October 1, 2001 the Company received notification from The NASDAQ
Stock Market, Inc. that it was not in compliance with the Net Tangible Assets or Net
Equity requirements for continued listing as set forth in Market Place Rule 4310(c)(2)(B)
as modified by SR-NASD-01-14 and that its securities will be delisted from The NASDAQ
National/Small Cap Market at the opening of business on October 9, 2001. The securities
were removed form NASDAQ and subsequent to that date the PASW Common Stock (PASW) and
Warrants (PASWW) have been trading on the OTC Bulletin Board Market (OTCBB).</p>
<b>

<p>(8) Subsequent Event -</b> <b>Conversion of Preferred Stock in Subsidiary to PASW
Common Stock</p>
</b>

<p ALIGN="JUSTIFY">On October 19, 2001 the Company converted 480,000 shares of Convertible
Preferred Stock of its Alera Systems Inc. (&quot;Alera&quot;), a wholly owned subsidiary,
to shares of the Company&#146;s Common Stock. The preferred stock was issued in April and
July 2000 as part of a private placement to provide funding for the Alera technology
development activities. Each share of preferred is convertible into one share of Alera at
$2.50 per share at any time within two years from closing date of the private placement
or, if Alera did not become a public company or be sold to an outside party within this
two year period, the holders of the preferred stock would be entitled to exchange their
preferred shares into shares of PASW common stock at Eighty-five percent (85%) of its then
current market price subject to a collar limit of One Dollar ($1.00) per share and a
maximum of Fifteen Dollars ($15.00) per share. Operations of Alera were terminated in
December 2000 and subsequently all preferred shareholders elected to convert in 2001 at
One Dollar per share. The conversion increase&#146;s the outstanding common shares of PASW
from 4,517,400 to 4,997,400. </p>
<b>

<p ALIGN="JUSTIFY">&nbsp;</p>

<p ALIGN="JUSTIFY">ITEM 2. MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION</p>

<p ALIGN="JUSTIFY">AND RESULTS OF OPERATIONS.</p>

<p ALIGN="JUSTIFY">Cautionary Note Regarding Forward-Looking Statements</p>

<p ALIGN="JUSTIFY"></b>Except for historical information contained herein, the statements
in this report (including without limitation, statements indicating that the Company
&quot;expects,&quot; &quot;estimates,&quot; anticipates,&quot; or &quot;believes&quot; and
all other statements concerning future financial results, product offerings, proposed
acquisitions or combinations or other events that have not yet occurred) are
forward-looking statements that are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995, Section 21E of the Securities Exchange
Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended.</p>

<p ALIGN="JUSTIFY">Forward-looking statements involve known and unknown factors, risks and
uncertainties, which may cause the Company&#146;s actual results in future periods to
differ materially from forecasted results. Those factors, risks and uncertainties include,
but are not limited to; the consummation of possible acquisitions or combinations; and the
Company&#146;s ability to integrate acquired or combined operations with its existing
business and otherwise manage growth; and the Company&#146;s ability to generate or obtain
additional capital resources to fund its operations and growth. </p>

<p ALIGN="JUSTIFY">Additional information on these and other risk factors are included in
the &quot;Factors That May Affect Future Results&quot; section in the Company&#146;s
Annual Report on Form 10-KSB filed with the SEC on March 28, 2001, Form 10KSBA Number 1
filed on April 27, 2001 and the risks discussed in PASW&#146;s other filings with the SEC.
Readers are cautioned not to place undue reliance on these forward-looking statements,
which reflect management&#146;s analysis, judgement, belief and expectations only as of
the date hereof. PASW undertakes no obligation to publicly revise these forward-looking
statements to reflect events or circumstances that arise after the date hereof.</p>
<b>

<p ALIGN="JUSTIFY">General</p>
</b>

<p ALIGN="JUSTIFY">The Company was incorporated in California in November 1992 as a
developer and licensor of Internet and Web related software and software development
tools. Our operations are conducted principally from an office in Southern California and
we have a sales office in Japan. The Company completed an initial public offering of
950,000 units consisting of one share of common stock and one warrant on July 29, 1999. An
additional 142,500 units representing the underwriter&#146;s overallotment was sold on
September 13, 1999. </p>

<p ALIGN="JUSTIFY">The Company has historically developed and licensed software which
enabled Internet and web based communications. Our software products were embedded into
systems and &quot;information appliances&quot; developed or manufactured by others.
Information appliances are internet-connected versions of every day products such as
telephones, fax machines, personal digital assistants and other digitally based devices.
We developed a proprietary Internet browser for use within independent, &quot;non
Windows&quot; information appliances. The browser may be effectively placed in use without
an operating system and does not require substantial amounts of memory. We began marketing
the initial version of this browser during the first quarter of 2000.</p>

<p ALIGN="JUSTIFY">The Company operates in one business segment. The Company&#146;s fiscal
year ends on December 31</p>
<b>

<p ALIGN="JUSTIFY">Results of Operations </p>
</b>

<p ALIGN="JUSTIFY">The following table sets forth, for the periods indicated, the
percentage of net revenue by principal geographic area to total revenue:</p>

<p ALIGN="JUSTIFY">&nbsp;</p>

<table border="0" width="72%" cellpadding="2">
  <tr>
    <td width="35%"></td>
    <td width="32%" colspan="2" align="center"><b>Unaudited</b></td>
    <td width="33%" colspan="2" align="center"><b>Unaudited</b></td>
  </tr>
  <tr>
    <td width="35%"></td>
    <td width="32%" colspan="2" align="center"><b><p ALIGN="CENTER">Three Months Ended</p>
    <u><p ALIGN="CENTER">September 30,</u></b></td>
    <td width="33%" colspan="2" align="center"><b><p ALIGN="CENTER">Nine Months Ended</p>
    <u><p ALIGN="CENTER">September 30,</u></b></td>
  </tr>
  <tr>
    <td width="35%"></td>
    <td width="17%" align="center"><b><u>2001</u></b></td>
    <td width="15%" align="center"><b><u>2000</u></b></td>
    <td width="19%" align="center"><b><u>2001</u></b></td>
    <td width="14%" align="center"><b><u>2000</u></b></td>
  </tr>
  <tr>
    <td width="35%"><b>United States </b></td>
    <td width="17%" align="center"><strong>0%</strong></td>
    <td width="15%" align="center"><strong>51%</strong></td>
    <td width="19%" align="center"><strong>0%</strong></td>
    <td width="14%" align="center"><strong>50%</strong></td>
  </tr>
  <tr>
    <td width="35%"><b>United Kingdom and Europe </b></td>
    <td width="17%" align="center"><strong>0%</strong></td>
    <td width="15%" align="center"><strong>2%</strong></td>
    <td width="19%" align="center"><strong>100%</strong></td>
    <td width="14%" align="center"><strong>6%</strong></td>
  </tr>
  <tr>
    <td width="35%"><b>Japan and Asia</b></td>
    <td width="17%" align="center"><strong>100%</strong></td>
    <td width="15%" align="center"><strong>47%</strong></td>
    <td width="19%" align="center"><strong>0%</strong></td>
    <td width="14%" align="center"><strong>42%</strong></td>
  </tr>
  <tr>
    <td width="35%"><b>Other </b></td>
    <td width="17%" align="center"><strong>0%</strong></td>
    <td width="15%" align="center"><strong>0%</strong></td>
    <td width="19%" align="center"><strong>0%</strong></td>
    <td width="14%" align="center"><strong>2%</strong></td>
  </tr>
  <tr>
    <td width="35%"><b>Total </b></td>
    <td width="17%" align="center"><strong>100%</strong></td>
    <td width="15%" align="center"><strong>100%</strong></td>
    <td width="19%" align="center"><strong>100%</strong></td>
    <td width="14%" align="center"><strong>100%</strong></td>
  </tr>
</table>
<b>

<p>&nbsp;</p>

<p ALIGN="JUSTIFY">Three months ended September 30, 2001 and 2000.</p>

<p ALIGN="JUSTIFY">Net revenue</p>
</b>

<p ALIGN="JUSTIFY">For the three months ended September 30, 2001 revenues decreased 84% to
$62,802 from $392,611 for the three months ended September 30, 2000. Sales of licenses
decreased 89% for the three months ended September 30, 2001 due the cessation of all
revenue producing activities in the Company except sales activity in Japan which accounted
for 100% of license and royalty sales.</p>
<b>

<p ALIGN="JUSTIFY">Cost of revenue</p>
</b>

<p ALIGN="JUSTIFY">The cost of revenue for the three months ended September 30, 2001 was
$30,646 or 48% of sales compared to $9,253 or 2.3% of sales for the three months ended
September 30, 2000. The increase in cost of sales reflects the impact of distribution fees
under a contract negotiated by our Japanese subsidiary in August 2000. </p>
<b>

<p ALIGN="JUSTIFY">Selling, general and administrative</p>

<p ALIGN="JUSTIFY"></b>Selling, general and administrative expense was $38,357 for the
three months ended September 30, 2001 compared to $431,083 for the three months ended
September 30, 2000. The decrease in 2001 reflects the closure of all operations except
those associated with seeking a reverse merger or other financial transactions for the
Company.</p>
<b>

<p ALIGN="JUSTIFY">Research and development expense</p>

<p ALIGN="JUSTIFY"></b>Research and development expense was $0 for the three months ended
September 30, 2001 compared to $192,424 for the three months ended September 30, 2000 as a
result of ceasing all development activities in the Company at the end of December 2000.</p>
<b>

<p ALIGN="JUSTIFY">Depreciation and amortization</p>

<p ALIGN="JUSTIFY"></b>Depreciation and amortization was $0 in the three months ended
September 30, 2001 compared to $19,008 for the three months ended September 30, 2000
reflecting the sale of asset to another company in August 2000 and the write down of the
Company's remaining operating assets at the end of December 2000.</p>
<b>

<p ALIGN="JUSTIFY">Other income and expenses</p>

<p ALIGN="JUSTIFY"></b>During the three months ended September 30, 2001 the Company had a
net gain of $17,157 consisting of losses from the sale of securities of $84 and a gain of
$17,241 from the cancellation of debt. The Company had no income or expenses of this
nature in the three months ended September 30, 2000.</p>
<b>

<p ALIGN="JUSTIFY">Provision for taxes</p>

<p ALIGN="JUSTIFY"></b>Commencing in 1995 the Company elected to be treated as a
subchapter S corporation. Through 1998 all federal tax liabilities were recognized at the
individual stockholder level. In February 1999 the Company terminated the S election and
became subject to taxation at the corporate level. Had the Company been subject to
taxation as a C corporation in 1998, it would have received a pro forma tax benefit of
$1,099. For the three months ended September 30, 2001 the Company had no income tax
liability. </p>
<b>

<p ALIGN="JUSTIFY">Nine months ended September 30, 2001 and 2000.</p>

<p ALIGN="JUSTIFY">Net revenue</p>
</b>

<p ALIGN="JUSTIFY">For the nine months ended September 30, 2001 revenues decreased 15.4%
to $499,464 from $590,576 for the nine months ended September 30, 2000. Sales for the nine
months ended September 30, 2001 increased and royalty income decreased due to the change
in the distribution agreement in Japan which accounted for 100% of license and royalty
sales.</p>
<b>

<p ALIGN="JUSTIFY">Cost of revenue</p>
</b>

<p ALIGN="JUSTIFY">The cost of revenue for the nine months ended September 30, 2001 was
$276,796 or 55.4% of sales compared to $47,163 or 8% of sales for the nine months ended
September 30, 2000. The increase in cost of sales reflects the impact of distribution fees
under a contract negotiated by our Japanese subsidiary in August 2000. </p>
<b>

<p ALIGN="JUSTIFY">Selling, general and administrative</p>

<p ALIGN="JUSTIFY"></b>Selling, general and administrative expense was $178,033 for the
nine months ended September 30, 2001 compared to $1,607,538 for the nine months ended
September 30, 2000. The decrease reflects the closure of all operations in the Company
except those expenses associated with seeking a reverse merger or other financial
transactions for the Company.</p>
<b>

<p ALIGN="JUSTIFY">Research and development expense</p>

<p ALIGN="JUSTIFY"></b>Research and development expense was $0 for the nine months ended
September 30, 2001 compared to $574,011 for the nine months ended September 30, 2000 as a
result of ceasing all development activities in the Company at the end of December 2000.</p>
<b>

<p ALIGN="JUSTIFY">Depreciation and amortization</p>

<p ALIGN="JUSTIFY"></b>Depreciation and amortization was $0 in the nine months ended
September 30, 2001 compared to $22,981 for the nine months ended September 30, 2000
reflecting the sale of assets to another company and the write down of the Company's
remaining operating assets at the end of December 2000.</p>
<b>

<p ALIGN="JUSTIFY">Other income and expenses</p>

<p ALIGN="JUSTIFY"></b>During the nine months ended September 30, 2001 the Company had a
net loss of $9,676 consisting of losses from the sale of securities of $31,417 and the
cancellation of debt of $21,741. The Company had no income or expenses of this nature in
the nine months ended September 30, 2000.</p>
<b>

<p ALIGN="JUSTIFY">Provision for taxes</p>

<p ALIGN="JUSTIFY"></b>Commencing in 1995 the Company elected to be treated as a
subchapter S corporation. Through 1998 all federal tax liabilities were recognized at the
individual stockholder level. In February 1999 the Company terminated the S election and
became subject to taxation at the corporate level. Had the Company been subject to
taxation as a C corporation in 1998, it would have received a pro forma tax benefit of
$1,099. For the nine months ended September 30, 2001 the Company had no income tax
liability. </p>
<b>

<p ALIGN="JUSTIFY">Liquidity and capital resources</p>
</b>

<p ALIGN="JUSTIFY">At September 30, 2001 and December 31, 2000 the Company had working
capital of $108,553 and ($16,004) and cash and cash equivalents of $205,861 and $254,369.</p>

<p ALIGN="JUSTIFY">The Company used $367,774 in cash flow from operating activities in the
nine months ended September 30, 2001 compared to using $1,285,014 in the nine months ended
September 30, 2000. The decrease in use of cash of $917,240 was the result of an decrease
of $101,709 in accounts receivable, a loss of $31,417 in the sale of marketable securities
a decrease of $44,886 in prepaid expenses, a decrease of $61,062 in other assets, a
decrease of $464,823 in accounts payable and a decrease of 377,500 in deferred
compensation expense. Total cash used in by the Company in all operations decreased by
$2,217,540 reflecting a decrease in the loss from discontinued operations of $1,300,300.</p>

<p ALIGN="JUSTIFY">Investing activities in the nine months ended September 30, 2001
consisted of the acquisition of assets of $1,677, the disposition of fixed assets of $699,
the sale of certain marketable securities for $366,458 and the purchase of other
securities for $136,500. In the nine months ended September 30, 2000 the Company purchased
$71,174 in fixed assets.</p>

<p ALIGN="JUSTIFY">The Company had no financing activities for the nine months ended
September 30, 2001 In the nine months ended September 30, 2000 the Company provided
$569,250 from financing activities through the exercise of warrants, proceeds from
borrowings of $200,000 and $400,000 through the sale of stock in a subsidiary. </p>
<b><u>

<p ALIGN="JUSTIFY">Factors That May Affect Future Results</p>
</u>

<p ALIGN="JUSTIFY"></b>This report, including Management&#146;s Discussion and Analysis or
Plan of Operation, contains forward looking statements and other prospective information
relating to future events. These forward-looking statements and other information are
subject to certain risks<b> </b>and uncertainties that could cause results to differ
materially from historical or anticipated results, including the following:</p>
<b>

<p ALIGN="JUSTIFY">We have received a Going Concern opinion from our auditors on our
financial statements for the year ended December 31, 2000. Those statements indicate that
we have reported losses for our last two years and if we do not become profitable our
business could be adversely affected.</p>
</b>

<p ALIGN="JUSTIFY">We reported net income of $34,959 for the nine months ended September
30, 2001 however we have incurred losses of $2,613,101 for the year ended December 31,
2000 and $2,464,067 for the year ended December 31, 1999. We also have an accumulated
deficit of $ 6,206,871 and stockholders equity of $128,757 as of September 30, 2001. We
can provide no assurance that we will be profitable in the future and if we do not become
profitable our business could be adversely affected.</p>
<b>

<p ALIGN="JUSTIFY">On October 1, 2001 the Company received notification from The NASDAQ
Stock Market, Inc. that it was not in compliance with the Net Tangible Assets or Net
Equity requirements for continued listing as set forth in Market Place Rule 4310(c)(2)(B)
as modified by SR-NASD-01-14 and that its securities will be delisted from The NASDAQ
National/Small Cap Market at the opening of business on October 9, 2001. The securities
were removed from NASDAQ on October 9, 2001 and subsequent to that date the PASW Common
Stock (PASW) and Warrants (PASWW) have been trading on the OTC Bulletin Board Market
(OTCBB).</p>

<p ALIGN="JUSTIFY">We have limited resources available to continue operations unless a
successful transaction is completed with a merger partner or that additional funding can
be obtained from outside sources</b>.</p>

<p ALIGN="JUSTIFY">At the present time we have limited resources available to continue
operations other than maintaining day-to-day operations without any capabilities for
expansion. The revenue received from our NRCJ subsidiary is sufficient to handle only
maintenance administrative operations for the Company. In the current market it is
doubtful that funding can be obtained for resumption of operations of our Alera subsidiary
therefore we run the risk of not being able to pursue activities that would ultimately
benefit the long range strategies of the Company . </p>
<b>

<p ALIGN="JUSTIFY">Because our operating subsidiary depends on a small number of large
orders, the loss or deferral of orders may have a negative impact on revenue.</p>
</b>

<p ALIGN="JUSTIFY">NRCJ is our only operating subsidiary and as such provides the majority
of the funds required to operate the Company. Although none of its customers has accounted
for 10% or more of total revenue in any fiscal year, a significant portion of software
license revenue in each quarter is derived from a small number of relatively large orders.
While we believe that the loss of any particular customer is not likely to have a material
adverse effect on our business, our operating results could be materially adversely
affected if our operating subsidiaries were unable to complete one or more substantial
license sales in any future period.</p>
<b>

<p ALIGN="JUSTIFY">Any decrease in the market acceptance of our operating subsidiary's
Internet and web products or lack of acceptance of new products would decrease our
revenue.</p>
</b>

<p ALIGN="JUSTIFY">Our future results depend heavily on continued market acceptance of our
operating subsidiary's products in existing and new markets. Our NRCJ subsidiary is a
distributor for products supplied by Net Silicon, Inc. Revenue from licenses of the suite
of Internet and Web products and sales of services accounted for all its revenue in the
nine months ended September 30, 2001 and the years ended December 31, 2000 and 1999. There
is no assurance that Net Silicon will continue to fund the research required to keep our
subsidiary supplied with state of the art products, that Net Silicon will continue the
Distribution Agreement with NRCJ beyond its current termination date or that our
subsidiary will have sufficient funds to properly advertise and market its product lines
as an independent distributor. Any of these factors could have a material effect on our
continued operations and financial results. </p>
<b>

<p ALIGN="JUSTIFY">Because our ownership is concentrated, our officers and directors and
independently our majority stockholder will be able to control all matters requiring
stockholder approval including delaying or preventing a change in our corporate control or
taking other actions of which individual shareholders may disapprove.</p>

<p ALIGN="JUSTIFY"></b>Our officers, directors and independently the majority stockholder
beneficially own approximately 73% of our outstanding common stock. These parties will be
able to exercise control over all matters requiring stockholder approval and other
investors will have minimal influence over the election of directors or other stockholder
actions. As a result, our officers, directors and independently the majority stockholder
could approve or cause the Company to take actions of which you disapprove or that are
contrary to your interests. While the majority stockholder has indicated his approval of
the transaction between the company and SES his ability to exercise control over all
matters requiring stockholder approval could prevent or significantly delay another
company from acquiring or merging with us at prices and terms that you might find to be
attractive.</p>
<b>

<p ALIGN="JUSTIFY">Issuance of our authorized preferred stock could discourage a change in
control, could reduce the market price of our common stock and could result in the holders
of preferred stock being granted voting rights that are superior to those of the holders
of common stock.</p>

<p ALIGN="JUSTIFY"></b>The Company is authorized to issue preferred stock without
obtaining the consent or approval of stockholders. The issuance of preferred stock could
have the effect of delaying, deferring, or preventing a change in control. Management also
has the right to grant superior voting rights to the holders of preferred stock. Any
issuance of preferred stock could materially and adversely affect the market price of the
common stock and the voting rights of the holders of common stock. The issuance of
preferred stock may also result in the loss of the voting control of holders of common
stock to the holders of preferred stock.</p>
<b>

<p ALIGN="JUSTIFY">You may experience dilution if we are compelled to litigate or
arbitrate claims that have been asserted by Golenberg &amp; Co. for the right to purchase
10% of the Company.</p>

<p ALIGN="JUSTIFY"></b>In April 1999 we were notified that a merchant banker, Golenberg
&amp; Co., has asserted rights under a September 1998 letter agreement to purchase 10% of
our then outstanding common stock for $400,000. In September 1999 counsel for Golenberg
&amp; Co. reiterated this demand and advised us that these claims were being evaluated for
possible legal action. Investors could be significantly diluted if Golenberg &amp; Co.
successfully brings a lawsuit against us.</p>
<b>

<p ALIGN="JUSTIFY">Trading in our common stock and warrants may be limited and could
negatively affect the ability to sell your securities.</p>
</b>

<p ALIGN="JUSTIFY">A public market for our common stock and our warrants has only existed
since July 29, 1999, the date of our initial public offering. We do not know how liquid
the market for our stock and warrants will remain and if the market becomes illiquid, it
may negatively affect your ability to resell your securities. </p>
<b>

<p ALIGN="JUSTIFY">&nbsp;</p>

<p ALIGN="CENTER">&nbsp;</p>

<p ALIGN="CENTER">PART II - OTHER INFORMATION</p>

<p ALIGN="JUSTIFY">ITEM 1. LEGAL PROCEEDINGS</p>

<p ALIGN="JUSTIFY"></b>In April 1999 the Company was notified that a merchant banker,
Golenberg &amp; Co., had asserted rights under a September 1998 letter agreement to
purchase 10% of the then outstanding common stock of the Company for $400,000. In
September 1999 counsel for Golenberg &amp; Co. reiterated this demand and advised the
Company that these claims were being evaluated for possible legal action. To date no
action has been taken by Golenberg &amp; Co.</p>

<p ALIGN="JUSTIFY">The Company is not currently involved in any litigation that is
expected to have a material adverse effect on the Company's business or financial
position. There can be no assurance, however, that third parties will not assert
infringement or other claims against the Company in the future which, regardless of the
outcome, could have an adverse impact on the Company as a result of defense costs,
diversion of management resources and other factors. </p>
<b>

<p ALIGN="JUSTIFY">ITEM 2. CHANGES IN SECURITIES.</p>

<p ALIGN="JUSTIFY">Not Applicable.</p>

<p ALIGN="JUSTIFY">ITEM 3. DEFAULTS UPON SENIOR SECURITIES.</p>

<p ALIGN="JUSTIFY">Not Applicable.</p>

<p ALIGN="JUSTIFY">ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.</p>

<p ALIGN="JUSTIFY">Not Applicable</p>

<p ALIGN="JUSTIFY">ITEM 5. OTHER INFORMATION.</p>

<p ALIGN="JUSTIFY">Not Applicable.</p>

<p ALIGN="JUSTIFY">ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.</p>

<blockquote>
  <blockquote>
    <p ALIGN="JUSTIFY">Exhibits - None</p>
    <p>Reports on Form 8-K - None</p>
    <p ALIGN="JUSTIFY">&nbsp;</p>
  </blockquote>
</blockquote>

<p ALIGN="CENTER">SIGNATURES</p>
</b>

<p ALIGN="JUSTIFY">Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.</p>
<b>

<p ALIGN="JUSTIFY">Date: November 12, 2001 </p>

<p ALIGN="JUSTIFY">PASW, INC.</p>

<p ALIGN="JUSTIFY">/s/ WILLIAM E. SLINEY</p>

<p ALIGN="JUSTIFY">_________________________________</p>

<p ALIGN="JUSTIFY">William E. Sliney</p>

<p ALIGN="JUSTIFY">President and Chief Financial Officer</p>

<p ALIGN="JUSTIFY">(Duly Authorized Officer and Principal</p>

<p ALIGN="JUSTIFY">Financial and Accounting Officer)</p>

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