<DOCUMENT>
<TYPE>10KSB
<SEQUENCE>1
<FILENAME>a2077005z10ksb.txt
<DESCRIPTION>10KSB
<TEXT>
<Page>

================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-KSB
(Mark One)
|X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
      ACT OF 1934

      FOR THE YEAR ENDED DECEMBER 31, 2001; OR

|_|   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934

      FOR THE TRANSITION PERIOD FROM ______ TO ______

COMMISSION FILE NUMBER 1-10185

                              DOCUCON, INCORPORATED
                              ---------------------
                 (Name of Small Business Issuer in its Charter)

            DELAWARE                                      74-2418590
--------------------------------                     -------------------
 (State or Other Jurisdiction                         (I.R.S. Employer
of Incorporation or Organization)                    Identification No.)

         329 E. Ramsey
       San Antonio, Texas                                  78216
------------------------------------                 -------------------
(Address of Principal Executive                           (Zip Code)
          Offices)

Issuer's Telephone Number, Including Area Code:         (210) 342-1190
                                                        --------------

Securities Registered Under Section 12(b) of the Exchange Act:

                                                    NAME OF EACH EXCHANGE
     TITLE OF EACH CLASS                             ON WHICH REGISTERED
-----------------------------                       ---------------------
COMMON STOCK, PAR VALUE $.01 PER SHARE                      NONE

Securities Registered Under Section 12(g) of the Exchange Act: NONE

      Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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.
                   Yes  |X|                            No  |_|

      Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B in this form, and no disclosure will be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. |X|

      State Issuer's revenues for its most recent fiscal year:  NONE

      State the aggregate market value of the voting stock held by
non-affiliates as of April 12, 2002:

               Common Stock, par value $.01 per share - $503,421


                                  Page 1 of 16

<Page>

      State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.


<Table>
<Caption>

          CLASS                             OUTSTANDING AT April 12, 2002
--------------------------------------------------------------------------------
<S>                                         <C>
   COMMON STOCK, PAR VALUE                           3,658,767  SHARES
       $.01 PER SHARE

</Table>

                       DOCUMENTS INCORPORATED BY REFERENCE
Certain documents are incorporated by reference into this Annual Report on Form
                              10-KSB. See Item 13.

           Transitional Small Business Issuer Format: Yes |_| No |X|



                                  Page 2 of 16

<Page>

                                     PART I

Certain statements contained in this Form 10-KSB, including statements regarding
the anticipated development and expansion of the Company's business,
expenditures, the intent, belief or current expectations of the Company, its
directors or its officers, primarily with respect to the future operating
performance of the Company and other statements contained herein regarding
matters that are not historical facts, are "forward-looking" statements (as such
term is defined in the Private Securities Litigation Reform Act of 1995).
Because such statements include risks and uncertainties, actual results may
differ materially from those expressed or implied by such forward-looking
statements.

ITEM 1. DESCRIPTION OF BUSINESS.

GENERAL

      Docucon, Incorporated ("Docucon" or the "Company") was incorporated under
the laws of the State of Delaware in 1988 and is the successor by merger to a
Texas corporation organized in 1986. In May 2000, Docucon sold substantially all
of its operating assets to TAB Products Co. ("TAB"). Prior to the asset sale to
TAB, the Company's primary business was the conversion of documents from paper
to electronic formats. As a result of the sale to TAB, the Company effectively
became a "shell" company with no revenues and continuing general and
administrative expenses. The Company's on-going activities are related to
management's efforts to realize value for its remaining assets.

ASSET PURCHASE AGREEMENT WITH TAB

      On May 25, 2000, the Company completed the sale of substantially all of
its operating assets and certain liabilities and obligations ("TAB Sale") to
Bunt Acquisition Corporation, a Delaware corporation, and a wholly owned
subsidiary of TAB. The TAB Sale was consummated in accordance with the terms of
an Asset Purchase Agreement dated as of March 7, 2000 ("Asset Purchase
Agreement").

      Under the Asset Purchase Agreement with TAB, the consideration paid to the
Company was approximately $2,800,000, and the liabilities and obligations
assumed by TAB were valued at about $2,300,000. The total consideration paid in
the TAB Sale was determined through arm's length negotiations between the
parties. Neither the Company nor any of its affiliates had, nor to the knowledge
of the Company did any director or officer, or any associate of any such
director or officer of the Company have, any material relationship with TAB.

DISCONTINUED OPERATIONS

      As a result of the TAB sale, Docucon has discontinued its document
conversion operation. The Company's on-going activities are related to efforts
to realize value, if any, from its remaining assets (which may include the
Company's publicly traded "shell"), payment of any remaining liabilities,
including income taxes, and a potential distribution to shareholders.

PROPOSED REVERSE MERGER OF DIGITAL VISION SYSTEMS, INC. INTO DOCUCON

      On April 3, 2001, the Company announced that its Board of Directors had
agreed to the terms of a letter of intent calling for Docucon to acquire all of
the outstanding and issued shares of Digital Vision Systems, Inc., a Nevada
corporation ("DVS"). The proposed reverse merger (the "Merger") of DVS into
Docucon would result in DVS shareholders owning approximately 90.5% of the
combined entity. Additionally, Docucon's shareholders would receive warrants for
an additional 2.0% of the combined entity, depending upon future performance of
the combined entity's common stock, as measured by the market price of such
common stock.

         The Board of Directors subsequently approved changes to the terms of
the letter of intent and, on September 25, 2001, reported on Form 8-K that DVS
shareholders would receive an increased number of shares of common stock of the
Company, such that DVS shareholders would own 92.5% of the Company's common
stock and the Company's shareholders would own the remaining 7.5% of the common
stock of the combined entity. Further changes provided that the Company's
shareholders would not receive any warrants, and Robert W. Schwartz, the
Company's CEO, would receive a reduced 0.5% share to be allocated from the 7.5%
interest received by the Company's


                                  Page 3 of 16

<Page>

shareholders. In calculating the foregoing percentages, it is assumed that
ownership percentages are determined by reference to fully diluted shares of
the Company's common stock, as if converted shares of the Company's common
stock were outstanding for both the Company and DVS. Through the Merger, DVS
would become a wholly owned subsidiary of the Company.

         The proposed combination is subject to various, significant conditions
including but not limited to negotiation and execution of definitive agreements,
DVS' pre-merger commitment to fund an additional $2.5 million in operating
capital, and approval of the merger by both Docucon and DVS shareholders. If the
Company is unsuccessful in completing the planned combination with DVS,
management's alternative plan includes a further search for a similar business
combination or strategic alliance. The Company is currently not in discussions
with any other entity, other than DVS. There is no assurance that this
transaction, or management's alternative plan, will be realized.

      DVS, a privately held Nevada corporation chartered in May 2000,
manufactures and distributes video surveillance systems based upon digital
compression technology. DVS' software management system and related digital
video recording hardware are marketed worldwide for camera surveillance security
applications by retail, education, manufacturing, government and military users,
among others. DVS is based in San Antonio, Texas.

EMPLOYEES

      Currently, the Company has no full-time employees. The Company uses
temporary staffing to provide financial and administrative human resources to
support the Company's on going, limited activities.

ITEM 2. DESCRIPTION OF PROPERTY.

      On October 12, 2000, the Company leased a 125 square foot office space for
$1,600 per month in Wayne, Pennsylvania. The lease carried a 30-day termination
notice requirement. The office space was used by temporary support staff and for
record keeping. The lease was terminated, effective November 30, 2001, and the
Company moved all of its remaining assets to the offices of DVS in San Antonio,
Texas. DVS serves as custodian of these assets and records for the Company
pursuant to the terms of a Custodial Agreement between the two parties.

      In management's opinion, the Company's facilities are adequate for the
Company's current needs and are consistent with the Company's plans described
elsewhere in this Annual Report.

ITEM 3. LEGAL PROCEEDINGS.

      On February 2, 1999, the Company contacted the Department of Defense's
Voluntary Disclosure Program Office to request admission into its Voluntary
Disclosure Program. The Voluntary Disclosure Program is intended to encourage
government contractors to disclose voluntarily potential violations of
government contracting policies and procedures. In general, companies who
volunteer information and cooperate with the government's investigation are not
subject to criminal and administrative sanctions such as suspension and
debarment from government contracting activities.

      Admission into the Voluntary Disclosure Program does not protect companies
from any potential civil liability the government may assert. The Company's
request for admission into the Voluntary Disclosure Program was the result of an
internal review by the Company that indicated a billing practice, with respect
to certain invoices submitted during the period from September 1996 through July
1997, which might be perceived by the government as a technical violation of DOD
billing procedures.

      The DOD Inspector General formally admitted the Company into the Voluntary
Disclosure Program in June 1999 and commenced its investigation of the Company's
voluntary disclosure in the second half of that year. In February 2000, Company
counsel was advised informally that the Government's investigation of the
Company's voluntary disclosure was complete and that criminal prosecution had
been declined. Since February 2000, the Company has received no other notice of
any further claims relating to this matter. While the Company remains
potentially liable for civil damages, it does not believe that material civil
damages, if any, will ultimately be assessed.


                                  Page 4 of 16

<Page>

         Under the terms of the TAB Sale, TAB paid $250,000 of the purchase
price into an Escrow Fund ("Escrow Fund") for the purposes of indemnifying TAB
from certain indemnifiable losses, including any failure of the Company to
discharge any liability not assumed by TAB. On November 9, 2000, TAB asserted
claims against the Escrow Fund based upon certain claims asserted by the
Department of Labor ("DOL") relating to government wage and benefit orders, and
that certain employees may not have been paid in compliance with these orders.
DOL has not asserted these claims against the Company. On December 7, 2000, the
Company objected to the entirety of all claims made by TAB against the Escrow
Fund. Additionally, the Company notified TAB of its intention to participate in
defense of these claims. TAB consented to Docucon's participation. Docucon and
TAB then engaged in negotiations with the Department of Labor throughout 2001.

         The Company reached a settlement regarding this matter on December 3,
2001. Under the terms of a settlement between TAB and the Company, the amount
held in the Escrow Fund was released in January 2002 to the extent of
$250,000.00 plus accumulated interest, with TAB receiving $192,571.86,
$10,000.00 remaining in escrow and the Company receiving the remainder or
$65,387.39. The amounts released to TAB included approximately $147,000 owed to
TAB for cash received on TAB's behalf, as well as approximately $46,000 in
reimbursements for legal and other fees incurred by TAB and recorded in the
fourth quarter of 2001, based on the terms of the settlement. The amount of
$10,000 is to remain in the Escrow Fund until June 30, 2002 or may be released
earlier, if the parties mutually agree.

         Except as noted above, no actions are currently pending against the
Company. The Company maintains insurance coverage, which it believes to be
adequate and typical in the industry.

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

         The Annual Meeting of Shareholders of Docucon, Incorporated was held on
December 27, 2001, for the following purposes:

         1.       To elect six Directors to serve until the next Annual Meeting
                  of Stockholders and until their successors are duly elected
                  and qualified.

         2.       To approve the Company's retention of Ernst & Young LLP as its
                  independent auditors for the fiscal year 2001.

         No other matters were submitted to a vote of security holders of the
Company during the fourth quarter of 2001.

                                     PART II

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

         The Company's common stock, par value $.01 per share, is traded on the
OTC Bulletin Board (Symbol: DOCU.OB).

         On March 10, 1999, the Company received notice that it was subject to
delisting on the NASDAQ SmallCap Market System because the Company's average
closing bid price per share had not exceeded $1.00 during the prior thirty-day
period. The Company's common stock was delisted from the NASDAQ SmallCap Market
on June 11, 1999. The Company's common stock now trades on the OTC Bulletin
Board.



                                  Page 5 of 16

<Page>

         The following table sets forth for the fiscal periods indicated the
high and low bid prices per share for the Company's common stock on the OTC
Bulletin Board.


<Table>
<Caption>

                                                                 REPORTED
                                                                BID PRICE
                                                            -----------------
                                                             HIGH        LOW
-----------------------------------------------------------------------------
<S>                                                         <C>        <C>
          2001
       ---------
       First Quarter....................................... $ 0.09     $ 0.08
       Second Quarter......................................   0.17       0.07
       Third Quarter.......................................   0.09       0.06
       Fourth Quarter......................................   0.36       0.06

          2000
       ---------
       First Quarter....................................... $ 0.44     $ 0.08
       Second Quarter......................................   0.47       0.16
       Third Quarter.......................................   0.45       0.16
       Fourth Quarter......................................   0.69       0.28

</Table>

      The last reported sale price for the common stock on the OTC Bulletin
Board on April 12, 2002, was $0.16 per share. Bid and asked prices reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not necessarily represent actual transactions.

      There were approximately 217 holders of record of the common stock as of
April 12, 2002, excluding those shares held by depository companies for certain
beneficial owners.

      The Company has never paid cash dividends on its common stock. Under the
terms of the Company's Series A Convertible Preferred Stock, the Company cannot
pay dividends on its common stock until all accumulated but unpaid dividends on
such preferred stock have been paid. At December 31, 2001, cumulative undeclared
dividends on the Series A Convertible Preferred Stock were approximately
$217,250. On January 24, 2002, the Board of Directors authorized the Company to
offer and to issue 20,000 shares of the Company's common stock, in full
satisfaction of each share of Series A Preferred Stock outstanding. There are
currently seven shares of the Company's Series A Preferred Stock outstanding.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

2001 COMPARED TO 2000

      The Company's ongoing activities are related to efforts to realize value,
if any, from its remaining assets (which may include the Company's publicly
traded "shell") and payment of remaining liabilities. The Company does not
expect to have future operating revenues unless it is successful in completing
the planned business combination with DVS or another entity.

      For the years ended December 31, 2001 and 2000, the Company had net income
(loss) applicable to common shareholders of approximately ($422,241) and $2.1
million, respectively. The loss for 2001 represents the ongoing operation of the
publicly traded shell that includes payments made to maintain and operate an
office, payments for insurance and depreciation of assets. Legal and accounting
expenses related primarily to filing regulatory reports and expenses related to
engaging temporary accounting assistance comprise approximately $260,000 of
total expenses of approximately $385,000 for the year ended December 31, 2001.
The gain in 2000 can be attributed to the Company's sale of substantially all of
its operating assets and certain liabilities to TAB that resulted in a pre-tax
gain of approximately $4.1 million.



                                  Page 6 of 16

<Page>

LIQUIDITY AND CAPITAL RESOURCES

      At December 31, 2001, the Company has current assets of approximately
$337,000, including the TAB related Escrow Fund with a balance of approximately
$268,000. The Company has current liabilities of approximately $579,000,
consisting of accounts payable, accrued expenses and other current liabilities.
Approximately $46,000 on the Company's accrued expenses are related to amounts
accrued under the TAB settlement in the fourth quarter of 2001. Current assets
exceed current liabilities by approximately $242,000. Remaining liabilities
include related-party notes in the amount of approximately $108,000. Additional
liabilities are expected to be incurred relating to the ongoing maintenance of
the Company.

      On September 29, 1999, two directors of the Company lent the Company a
total of $325,000. The promissory notes (the "Notes") issued in conjunction with
these loans carried a 12 percent annual interest rate. Principal and interest on
the Notes were payable on the earlier of (i) September 28, 2000, or (ii) within
10 days of an equity-based financing (the "Financing"), as defined therein. In
conjunction with the Notes, the two directors were issued a total of 243,750
warrants to purchase common stock of the Company. Upon consummation of the TAB
Sale, the two directors agreed to waive the accrued interest due on the Notes
and to cancel the related warrants, among other terms. In accordance with these
revised agreements, the Company paid two-thirds of the obligations promptly
after closing of the TAB Sale, with the remaining one-third to be negotiated
upon release of the Escrow Fund. The Escrow Fund was settled in December 2001,
and in January 2002 the Board of Directors approved settlements of the Notes for
cash and stock.

         The Company expects to be able to settle some liabilities for amounts
that are less than recorded values. The Board of Directors approved settlements
of the related-party notes of approximately $108,000, as well as a business
consultant agreement of approximately $38,000, for cash and stock in January
2002. Payables of approximately $103,000 to former executives of the Company are
to be settled at the time the Escrow Agreement is terminated, from available
cash of the Company, less any reasonable provision for additional net costs to
wind down and/or dispose of the Company, under agreements reached with those
parties in 2000. The Company does not expect to have any cash available from the
release of the Escrow Fund, or otherwise, to pay any of these recorded
liabilities. Negotiations are currently in process to settle other remaining
liabilities for less than the recorded amounts.

      On November 9, 2000, TAB asserted claims against the $250,000 Escrow Fund.
The Company and TAB negotiated a resolution of the matter on December 3, 2001.
Under the terms of such Agreement, the funds in the Escrow Fund were distributed
to TAB and to the Company in January 2002. The Company received $65,387; TAB
received $192,572; and, the residual $10,000 remains in the Escrow Fund until
June 30, 2002, or such sum may be released earlier, if the parties mutually
agree.

         As part of the business combination between Docucon and DVS, DVS has
agreed to pay all merger related expenses. The Company's only current source of
liquidity is the realization of value from Company assets, and there is no
assurance that the remaining assets will yield material value. Management cannot
be certain that the remaining assets will be sufficient to settle the final
negotiated liability balances.

         The accompanying financial statements of the Company have been prepared
on the basis of accounting principles applicable to a going concern. As
previously discussed throughout, the Company sold substantially all of its
operating assets and certain liabilities to TAB and effectively became a "shell"
company with no revenues and continuing general and administrative expenses.
Further, as of December 31, 2001, the Company had cumulative losses of
approximately $10.5 million, and a working capital deficit of approximately
$242,000. For the years ended December 31, 2001 and 2000, the Company had
negative operating cash flows of approximately $168,000 and $2.0 million,
respectively. These matters raise substantial doubt about the Company's ability
to continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.



                                  Page 7 of 16

<Page>

ITEM 7. FINANCIAL STATEMENTS.

      Financial statements of the Company meeting the requirements of Regulation
S-B are filed on the succeeding pages of this Item 7 of this Annual Report on
Form 10-KSB, as listed below:


<Table>
<Caption>

                                                                          PAGE
                                                                          ----
       <S>                                                                <C>
       Reports of Independent Auditors.....................................F-1

       Balance Sheet as of December 31, 2001...............................F-3

       Statements of Operations for the Years Ended
       December 31, 2001 and 2000..........................................F-4

       Statements of Stockholders' Equity (Deficit) for the
       Years Ended December 31, 2001 and 2000..............................F-5

       Statements of Cash Flows for the Years Ended
       December 31, 2000 and 2000..........................................F-6

       Notes to Financial Statements.......................................F-8

</Table>

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.

      Effective February 22, 2001, Docucon, acting on the direction of its Board
of Directors, approved the dismissal of Arthur Andersen LLP as the Company's
independent accountants. The reports of Arthur Andersen LLP on the Company's
financial statements for the fiscal year ending December 31, 1999 were modified
to discuss matters, which raise substantial doubt about the Company's ability to
continue as a going concern. Those reports did not contain an adverse opinion or
disclaimer of opinion nor were they qualified or modified as to audit scope or
accounting principles. In connection with the audits of the Company's financial
statements for the fiscal year ended December 31, 1999 and through February 22,
2001, there were no disagreements with Arthur Andersen LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
Arthur Andersen LLP, would have caused Arthur Andersen LLP to make reference to
the matter in their reports on the financial statements for such years nor were
there any reportable events. Arthur Andersen LLP has furnished the Company with
a letter addressed to the Securities and Exchange Commission indicating Arthur
Andersen LLP's agreement with the above statements.

      Effective on February 22, 2001, the Company retained the accounting firm
of Rothstein, Kass & Company, P.C. to serve as its independent accountants to
audit its financial statements, beginning with the year ended December 31, 2000.
This engagement was effective February 22, 2001. Prior to its engagement as the
Company's independent auditors, Rothstein, Kass & Company, P.C. had not been
consulted by the Company either with respect to the application of accounting
principles to a specific transaction or the type of audit opinion that might be
rendered on the Company's financial statements or on any other matter that was
the subject of any prior disagreement between the Company and the Company's
previous certifying accountants.

         Effective September 21, 2001, the Company approved the dismissal of
Rothstein, Kass & Company, P.C. as the Company's independent accountants. The
statements for the year ended December 31, 2000 did not contain an adverse
opinion or disclaimer of opinion, nor was it qualified or modified as to
uncertainty, audit scope or accounting principles, except for the last paragraph
which raised substantial doubt regarding the Company's ability to continue as a
going concern. In connection with the audit of the Company's financial
statements for the year ended December 31, 2000, there were no disagreements
with Rothstein, Kass and Company, P.C. on any matter of accounting principles or
practices, financial statements disclosure, or auditing scope or procedure,
which disagreements, if not resolved to the satisfaction of


                                  Page 8 of 16

<Page>

Rothstein, Kass & Company, P.C., would have caused Rothstein, Kass & Company,
P.C. to make reference to the matter in their report on the financial
statements, nor were there any reportable events.

         Effective September 21, 2001, the Company retained the accounting firm
of Ernst & Young LLP to serve at its independent accountants to audit its
financial statements beginning with the third quarter ended September 30, 2001.
Prior to its engagement as the Company's independent auditors, Ernst & Young had
not been consulted by the Company on any matters, including any matter that
related to the type of opinion that might be rendered on the Company's financial
statements, or on any other matter that was the subject of any prior
disagreement between the Company and the Company's previous certifying
accountants.

      The Company has had no disagreements with its independent accountants
within the twenty-four months prior to December 31, 2001 or subsequent to that
date.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.

DIRECTORS, EXECUTIVE OFFICERS AND KEY TECHNICAL PERSONNEL

         The following table sets forth certain information with respect to the
Company's Directors and executive officers:


<Table>
<Caption>

         NAME                AGE                     POSITION
         ----                ---                     --------
   <S>                       <C>      <C>
   Edward P. Gistaro         66       Chairman of the Board of Directors

   Robert W. Schwartz        56       President, Chief Executive Officer, Chief
                                      Financial Officer and Director

   Ralph Brown               67       Secretary and Director

   Al R. Ireton              66       Director

   Chauncey E. Schmidt       68       Director

   Douglas P. Gill           52       Director

</Table>

         Edward P. Gistaro has served as Chairman of the Board since 1990. He
served as Chief Executive Officer of the Company from June 4, 1988 until April
1, 1998, when the Board of Directors accepted his recommendation that he be
replaced by Douglas P. Gill as Chief Executive Officer. Pursuant to Mr.
Gistaro's retirement, the Board requested that he continue to serve as Chairman,
and he accepted. Mr. Gistaro also served as President of the Company from July
10, 1988 until March 18, 1991. Mr. Gistaro was employed by Datapoint
Corporation, a company involved in the manufacturing of computer systems, in
various managerial positions from 1973 to 1987. From 1982 to 1985, Mr. Gistaro
served as the President and Chief Operating Officer of Datapoint Corporation;
and, from 1985 to 1987, he served as its President and Chief Executive Officer.

         Robert W. Schwartz was elected President, Chief Executive Officer and
Chief Financial Officer on May 19, 2000, in a part-time capacity. He was elected
to the Board of Directors of the Company in April 1998. Mr. Schwartz founded the
Schwartz Heslin Group, Inc. ("SHG"), an investment banking firm, in 1985. As
Managing Director of SHG, Mr. Schwartz specializes in corporate planning,
finance and development. From 1980 to 1985, he was founder, President and Chief
Executive Officer of Winsource, Inc., a high tech firm that packaged and
marketed integrated telephone and computer systems. Mr. Schwartz served as
President, Chief Operating Officer and Director of Coradian Corporation and as
Vice President and Chief Financial Officer of Garden Way Manufacturing
Corporation from 1975 to 1980 and 1970 to 1975, respectively. The Company has
retained SHG in the past to provide investment and financial advisory services.


                                  Page 9 of 16

<Page>

         Douglas P. Gill was elected as a Director of the Company on May 19,
2000. From April 1998 to May 2000, he had served as President and Chief
Executive Officer of the Company. Mr. Gill was a general partner of Foster
Management Company, a venture capital firm, from 1994 until 1998. From 1984 to
1994 Mr. Gill served as First Vice President of Janney Montgomery Scott, Inc., a
regional investment banking and brokerage firm, and in various management
capacities at Scott Paper Company from 1975 to 1984. Mr. Gill also served as a
senior auditor at Arthur Andersen & Co. (now LLP) from 1972 to 1975.

         Ralph Brown, an attorney in private practice since 1968, has served as
Director and as Secretary of the Company since May 1, 1987. From 1987 to 1989,
he served also as Treasurer of the Company. Mr. Brown has also served since 1975
as President of Cherokee Ventures, Inc., a real estate leasing firm, since 1978
as President of East Central Development Corporation and since 1982 as President
of Southeast Suburban Properties, Inc. The latter two businesses are real estate
development firms.

         Al R. Ireton was elected as a Director of the Company in May 1993. Mr.
Ireton has been Chairman of Manchester Partners, an investment and growth
strategy advisory organization providing capital and strategic assistance to
growing companies, since October 1988. From 1985 through September 1988, he
served as President and Chief Executive Officer of Texet Corporation, a desktop
publishing company. Mr. Ireton has 25 years' experience serving as president and
chief executive officer of growth-oriented companies, and has served on several
corporate boards.

         Chauncey E. Schmidt was elected to the Board of Directors of the
Company in February 1993. He has been Chairman of C. E. Schmidt & Associates, an
investment firm, since April 1989. From 1987 to March 1989, he was Vice Chairman
of the Board of AMFAC, Inc., a New York Stock Exchange-listed company engaged in
diversified businesses. He has previously served as President of The First
National Bank of Chicago and Chairman of the Board and Chief Executive Officer
of The Bank of California, N.A. Mr. Schmidt is on the Board of Trustees of the
U. S. Naval War College Foundation and is active in several civic and charitable
organizations.

GENERAL

         Directors of the Company hold office until the next Annual Meeting of
Stockholders of the Company and until their successors are elected and
qualified. Executive officers of the Company are elected annually by, and serve
at the discretion of the Board of Directors. There are no arrangements or
understandings known to the Company between any of the Directors, nominees for
Director or executive officers of the Company and any other person pursuant to
which any of such persons was elected as a Director or an executive officer,
except as set forth below under Item 10, "Executive Compensation Employment
Agreements" and Item 12, "Certain Relationships and Related Transactions." There
are no family relationships between any Directors, nominees for Director or
executive officers of the Company.


COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

         Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's Officers and Directors, and persons who beneficially own more than 10%
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC"). Officers, Directors and beneficial owners of more than 10% of the
Company's Common Stock are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms that they file. Based solely on review of
the copies of such forms furnished to the Company, or written representations
that no reports on Form 5 were required, the Company believes that for the
period from January 1, 2001 through April 12, 2002, all officers, Directors and
greater-than-10% beneficial owners complied with all Section 16(a) filing
requirements applicable to them.



                                 Page 10 of 16
<Page>

ITEM 10. EXECUTIVE COMPENSATION.

EXECUTIVE COMPENSATION - GENERAL

                           The following table sets forth compensation earned by
or awarded to the Chief Executive Officer and the named executive officers for
all services rendered to the Company in 2001, 2000 and 1999.


<Table>
<Caption>

                                                     ANNUAL COMPENSATION                                   LONG-TERM COMPENSATION
                                         -------------------------------------------------------------------------------------------
                                                        BONUS/ANNUAL         OTHER         RESTRICTED     SECURITIES        ALL
         NAME AND PRINCIPAL                            INCENTIVE AWARD       ANNUAL          STOCK        UNDERLYING       OTHER
              POSITION            YEAR   SALARY (1)         (2)           COMPENSATION     AWARDS (3)       OPTIONS     COMPENSATION
------------------------------------------------------------------------------------------------------------------------------------
<S>                               <C>    <C>           <C>                <C>              <C>            <C>           <C>
Robert W. Schwartz                2001   $      --     $          --      $         --             --             --    $         --
President, Chief Executive        2000          --                --                --        150,000     $       --    $         --
Officer and Chief Financial
Officer

Douglas P. Gill                   2001           --               --                --             --             --              --
President and                     2000       94,770               --                --             --             --          96,666
Chief Executive Officer           1999      200,000           10,407                --             --         71,920              20

Warren D. Barratt                 2001           --               --                --             --             --              --
Senior Vice President             2000       56,287               --                --             --        116,825          42,430
Chief Financial Officer           1999      140,000            7,285                --             --             --              20
and Treasurer

Paul M. Nunley                    2001           --               --                --             --             --              --
Vice President, Operations        2000       46,795               --                --             --             --          39,604
and Technology                    1999      130,000            6,764                --         98,460             --              20

</Table>

----------

 (1) Effective March 31, 2000, the Company terminated the employment
     agreements of Messrs. Gill, Barratt, Nunley and Hardin (Controller of
     Company) and entered into Employment Agreement Settlement Agreements as
     further described below.

 (2) Aggregate perquisites and other personal benefits did not exceed the
     lesser of either $50,000 or 10% of the total annual salary and bonus
     listed above.

 (3) In May 2000, as consideration for acceptance of services as the
     Company's President, the Company's board of directors authorized the
     issuance of 150,000 shares of the Company's common stock to Mr.
     Schwartz.


                                 Page 11 of 16

<Page>

STOCK OPTIONS

         In 2001, the Company awarded no options to its executive officers.
Furthermore, any previously issued options have been canceled, terminated or
expired without having been exercised.


<Table>
<Caption>

                                                         INDIVIDUAL GRANTS
                              -----------------------------------------------------------------
                                  NUMBER OF        % OF TOTAL
                                 SECURITIES      OPTIONS GRANTED     EXERCISE
                                 UNDERLYING        TO EMPLOYEES        PRICE         EXPIRATION
   NAME                       OPTIONS GRANTED     IN FISCAL YEAR     PER SHARE          DATE
   ----                       ---------------     --------------     ---------       ----------
<S>                           <C>                 <C>                <C>             <C>
Robert W. Schwartz                    --                --               --              --
Douglas P. Gill ............          --                --               --              --
Warren D. Barratt...........          --                --               --              --
Paul M. Nunley .............          --                --               --              --

</Table>

EMPLOYMENT AGREEMENTS

         On March 31, 2000, and in conjunction with the TAB Sale, the Company
entered into Employment Agreement Settlement Agreements with Messrs. Douglas P.
Gill, President and Chief Executive Officer; Paul M. Nunley, Vice President,
Operations and Technology; Warren D. Barratt, Chief Financial Officer; and, Mark
G. Hardin, Controller of Company. Under the terms of these settlement
agreements, the Company agreed to pay a total amount of $308,830.19. This amount
included $196,500, which represented thirty percent (30%) of the amounts these
officers would be entitled to receive as severance under their respective
employment contracts with the Company. In addition, these officers were to be
paid an aggregate of $112,330.19 for accrued, but unpaid wages and accrued
vacation earned or to be earned through April 30, 2000.

         Two-thirds of the total payments, or $205,886.79, were paid at closing
of the TAB Sale, with the balance to be paid at the termination of the Escrow
Agreement, from available cash of the Company less any reasonable provision for
additional net costs to wind-down and/or dispose of the Company. Since no
available cash exists in order to make additional payments, the Company has no
obligation to the named, former executive officers.

         The Company has not entered into any other employment agreements in
2001.

      In full and final payment of the Company's obligations to Mr. Alan
Hobgood, former President of the Company, under a buyout of his employment
contract in 1998 and consulting agreement with Company, Mr. Hobgood and the
Company entered into a Business Consultant Agreement Settlement Agreement for
the amount of $113,615. This amount represents $25,000 in past due amounts
payable, and $88,615.00 or thirty percent (30%) of the balance due to Mr.
Hobgood under the buyout agreement. Mr. Hobgood was paid two-thirds of this
amount at closing of the sale, or $75,743.33, with the balance being owed at
termination of the TAB related Escrow Agreement. The Board of Directors approved
settlement of Mr. Hobgood's Business Consultant Agreement Settlement Agreement
for cash and stock in January 2002.

         All stock option plans of the Company have expired or been terminated
by the Board of Directors.




                                 Page 12 of 16

<Page>



ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

            The following table sets forth certain information regarding
beneficial ownership of the Company's common stock as of April 12, 2002 (a) by
each of the Company's Directors, (b) by the Company's Chief Executive Officer
and the other named executive officers, and (c) by all Directors and executive
officers as a group.


<Table>
<Caption>

                       NAME AND                AMOUNT AND
                      ADDRESS OF               NATURE OF             PERCENT
TITLE OF CLASS    BENEFICIAL OWNER (1)   BENEFICIAL OWNERSHIP (2)   OF CLASS (3)
--------------------------------------------------------------------------------
<S>               <C>                    <C>                        <C>
Common Stock,     Edward P. Gistaro              217,098                  5.84%
par value $.01    Douglas P. Gill                 92,451                  2.49
per share         Ralph Brown                     53,833                  1.45
                  Al R. Ireton                    21,333                  0.57
                  Chauncey E. Schmidt             21,333                  0.57
                  Robert W. Schwartz             164,667                  4.43
                  Warren D. Barratt                                       0.00
                  Paul M. Nunley                                          0.00
                  All Directors and
                  executive officers
                  as a Group (8
                  persons including
                  the above)                     570,715                 15.35%

</Table>

----------
(1)   The address for all persons named is 329 E. Ramsey, San Antonio, TX 78216.

(2)     The persons named in the table have sole voting and investment power
        with respect to all shares of common stock shown as beneficially owned
        by them, except as otherwise indicated.

(3)     Unless otherwise indicated below, the percentage of ownership is based
        upon 3,717,098 shares of common stock outstanding, which includes 58,331
        shares of common stock into which outstanding shares of preferred stock
        are convertible and which the holders of the preferred stock are
        entitled to vote.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

      On September 29, 1999, two directors of the Company loaned the Company an
aggregate of $325,000. The promissory notes (the "Notes"), issued in conjunction
with these loans, carried a 12 percent annual interest rate. Principal and
interest on the Notes are payable on the earlier of (i) September 28, 2000, or
(ii) within 10 days of an equity-based financing (the Financing), as defined. In
conjunction with the Notes, the two directors were issued an aggregate of
243,750 warrants to purchase common stock of the Company. Pursuant to an
agreement with the two Directors, the warrants were canceled and interest
payable on these related-party loans was waived upon consummation of the TAB
transaction described above. The Escrow Fund was settled in December 2001, and
the Board of Directors approved settlements of the Notes for cash and stock in
January 2002.

         On March 31, 2000, and in conjunction with the TAB Sale, the Company
entered into Employment Agreement Settlement Agreements with Messrs. Douglas P.
Gill, President and Chief Executive Officer; Paul M. Nunley, Vice President,
Operations and Technology; Warren D. Barratt, Chief Financial Officer; and, Mark
G. Hardin, Controller of Company. Under the terms of these settlement
agreements, the Company agreed to pay a total amount of $308,830.19. This amount
included $196,500, which represented thirty percent (30%) of the amounts these
officers would be entitled to receive as severance under their respective
employment contracts with the Company. In addition, these officers were to be
paid an aggregate of $112,330.19 for accrued, but unpaid wages and accrued
vacation earned or to be earned through April 30, 2000.



                                 Page 13 of 16

<Page>

         Two-thirds of the total payments, or $205,886.79, were paid at closing
of the TAB Sale, with the balance to be paid at the termination of the Escrow
Agreement, from available cash of the Company less any reasonable provision for
additional net costs to wind-down and/or dispose of the Company. Management does
not expect additional payments to be made.

         In full and final payment of the Company's obligations to Mr. Alan
Hobgood, former President of the Company, under a buyout of his employment
contract in 1998 and consulting agreement with Company, Mr. Hobgood and the
Company entered into a Business Consultant Agreement Settlement Agreement for
the amount of $113,615. This amount represents $25,000 in past due amounts
payable, and $88,615.00 or thirty percent (30%) of the balance due to Mr.
Hobgood under the buyout agreement. Mr. Hobgood was paid two-thirds of this
amount at closing of the sale, or $75,743.33, with the balance, or approximately
$38,000, being owed at termination of the TAB related Escrow Agreement. The
Board of Directors approved settlement of Mr. Hobgood's Business Consultant
Agreement Settlement Agreement for cash and stock in January 2002.

         In May 2000, as consideration for acceptance of service as the
Company's president, the Company's Board of Directors authorized the issuance of
150,000 shares of the Company's common stock to a company in which the Company's
president has material ownership.

         Except as stated above, since May 2000, no officer, executive officer,
or affiliate of the Company has entered into any other direct or indirect
material transactions, or series of transactions, or had any direct or indirect
material interest in any proposed transaction, or series of transactions, to
which the Company is to be a party where the amount involved exceeds $60,000.

ITEM 13. EXHIBITS.

(a)   Exhibits.

         The Exhibits required by Regulation S-B are set forth in the following
list and are filed either by incorporation by reference from previous filings
with the Securities and Exchange Commission or by attachment to this Annual
Report on Form 10-KSB, as so indicated in such list.


         10.8     Note and Warrant Purchase Agreement, dated as of December 15,
                  1992, between the Company and Demuth, Folger & Terhune,
                  including all Exhibits thereto (which include the form of
                  Promissory Note, the form of Common Stock Purchase Warrant and
                  the form of Deed of Trust executed and delivered in connection
                  with the transaction), filed as Exhibit 5.1 to the Company's
                  Current Report on Form 8-K dated December 16, 1992, is hereby
                  incorporated herein by reference.

         10.20    Asset Purchase Agreement by and among TAB Products Co., Bunt
                  Acquisition Corp. and Docucon, Incorporated dated March 7,
                  1999, files as Exhibit 10.20 to the Company's Annual Report on
                  Form 10-KSB for the year ended December 31, 1999, is hereby
                  incorporated herein by reference.


(b)      Reports on Form 8-K.

         1.       The Company filed a Current Report on Form 8-K on June 9, 2000
                  for the purpose of reporting the consummation of the sale of
                  substantially all of its operating assets and certain
                  liabilities and obligations to Bunt Acquisition Corporation, a
                  Delaware corporation and wholly owned subsidiary of Tab
                  Products Co.

         2.       The Company filed a Current Report on Form 8-K on February 28,
                  2001 for the purpose of reporting the change in Company's
                  certifying accountant from Arthur Andersen LLP to Rothstein,
                  Kass & Company, P.C.



                                 Page 14 of 16

<Page>

         3.       The Company filed a Current Report on Form 8-K on April 4,
                  2001 to announce the approval of the Letter of Intent
                  proposing the reverse merger of Digital Vision Systems, Inc.
                  into Docucon.

         4.       The Company filed a Current Report on Form 8-K on September
                  25, 2001 for the purpose of reporting the change in Company's
                  certifying accountant from Rothstein, Kass & Company, P.C. to
                  Ernst & Young LLP. The Company also reported that it had
                  entered into a Letter Agreement that changed the terms of the
                  proposed reverse merger of Digital Vision Systems, Inc. into
                  Docucon.

         5.       The Company filed a Current Report on Form 8-K/A on October 9,
                  2001 for the purpose of reporting the change in Company's
                  certifying accountant from Rothstein, Kass & Company, P.C.

         6.       The Company filed a Current Report on Form 8-K on March 20,
                  2002 for the purpose of reporting the Company's intent on
                  filing a definitive proxy statement relating to reverse merger
                  with Digital Vision Systems, Inc. once the auditors have
                  completed year 2001 audited financial statements for both the
                  Company and Digital Vision Systems, Inc.









                                 Page 15 of 16

<Page>

                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                    DOCUCON, INCORPORATED

                                    By: ROBERT W.SCHWARTZ
                                        /s/ Robert W. Schwartz
                                        President, Chief Executive Officer, and
                                        Director

                                    Date: April 16, 2002

      In accordance with the Exchange Act, this Report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.


<Table>
<Caption>

         SIGNATURE                              CAPACITY                           DATE
       -------------                          ------------                      ----------
<S>                                <C>                                        <C>
     ROBERT W. SCHWARTZ                 President, Chief Executive            April 16, 2002
----------------------------               Officer and Director
   /S/ Robert W. Schwartz

      EDWARD P. GISTARO            Chairman of the Board of Directors         April 16, 2002
----------------------------
    /S/ Edward P. Gistaro

         RALPH BROWN                            Director                      April 16, 2002
----------------------------
       /S/ Ralph Brown

       DOUGLAS P. GILL                          Director                      April 16, 2002
----------------------------
     /S/ Douglas P. Gill

        AL R. IRETON                            Director                      April 16, 2002
----------------------------
      /S/ Al R. Ireton

     CHAUNCEY E. SCHMIDT                        Director                      April 16, 2002
----------------------------
   /S/ Chauncey E. Schmidt

</Table>



                                              Page 16 of 16

<Page>

                              DOCUCON, INCORPORATED

                              FINANCIAL STATEMENTS
                                       AND
                         REPORTS OF INDEPENDENT AUDITORS

                           DECEMBER 31, 2001 AND 2000




                          INDEX TO FINANCIAL STATEMENTS


<Table>
<Caption>

                                                                            Page
                                                                            ----
<S>                                                                        <C>
Reports of Independent Auditors                                            F-1-2

Financial Statements

     Balance Sheet                                                           F-3

     Statements of Operations                                                F-4

     Statements of Stockholders' Equity (Deficit)                            F-5

     Statements of Cash Flows                                              F-6-7

     Notes to Financial Statements                                        F-8-17

</Table>

<Page>

                         Report of Independent Auditors

Board of Directors and Stockholders
Docucon, Incorporated

We have audited the accompanying balance sheet of Docucon, Incorporated (the
Company) as of December 31, 2001, and the related statements of operations,
stockholders' deficit, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Docucon, Incorporated as of
December 31, 2001, and the results of its operations and its cash flows for the
year then ended, in conformity with accounting principles generally accepted in
the United States.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As more fully described in Note 1, the
Company sold substantially all of its operating assets and certain liabilities
and obligations and effectively became a "shell" company with no revenues and
continuing general and administrative expenses. In addition, at December 31,
2001, the Company has sustained an operating loss, has a deficit in
stockholders' equity, and has a working capital deficiency. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 1. The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the outcome
of this uncertainty.


                                        /s/ Ernst & Young LLP


San Antonio, Texas
March 31, 2002



                                     F-1

<Page>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders of
Docucon, Incorporated

We have audited the accompanying statements of operations, stockholders' equity
(deficit), and cash flows of Docucon, Incorporated for the year ended December
31, 2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of Docucon, Incorporated's operations and its
cash flows for the year ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company sold substantially all of its operating assets
and certain liabilities and obligations and effectively became a "shell" company
with no revenues and continuing general and administrative expenses. Further, at
December 31, 2000, the Company had significant cumulative losses and a working
capital deficit. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans regarding those
matters are also described in Note 1. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.


                                /s/ Rothstein, Kass & Company, P.C.


Roseland, New Jersey
April 12, 2001




                                     F-2

<Page>

                                            DOCUCON, INCORPORATED

                                                 BALANCE SHEET

                                              December 31, 2001


<Table>

<S>                                                                                    <C>
                                                    ASSETS

Current assets

  Cash and cash equivalents                                                            $     65,545
  Other current assets                                                                        3,712
  Restricted cash                                                                           267,500
                                                                                       ------------
    Total current assets                                                                    336,757

Property and equipment held for disposal                                                     10,266

Other assets                                                                                  1,760
                                                                                       ------------

                                                                                       $    348,783
                                                                                       ============

                                    LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

  Accounts payable                                                                     $    224,612
  Accrued expenses and other current liabilities                                            246,301
  Notes payable - Related Party                                                             108,334
                                                                                       ------------

Total current liabilities                                                                   579,247
                                                                                       ------------


Commitments and contingencies

Stockholders' deficit
  Preferred stock, $1.00 par value, 10,000,000 shares authorized-Series A, 60
   shares authorized, 7 shares issued and outstanding, liquidation
   preference of $175,000                                                                         7
  Common stock $.01 par value, 25,000,000 shares
   authorized, 3,658,767 shares outstanding                                                  36,588
  Additional paid-in capital                                                             10,231,240
  Accumulated deficit                                                                   (10,494,063)
  Treasury stock, at cost, 4,495 shares                                                      (4,236)
                                                                                       ------------

Total stockholders' deficit                                                                (230,464)
                                                                                       ------------

                                                                                       $    348,783
                                                                                       ============

</Table>

      The accompanying notes are an integral part of these financial statements.

                                         F-3

<Page>

                                   DOCUCON, INCORPORATED

                                 STATEMENTS OF OPERATIONS

                          Years Ended December 31, 2001 and 2000


<Table>
<Caption>

                                                                2001                  2000
                                                             -----------           -----------
<S>                                                          <C>                   <C>
Revenues                                                     $        --           $        --
                                                             -----------           -----------
Costs and expenses
  General and administrative                                     384,621               865,457
  Depreciation                                                    36,901                15,381
                                                             -----------           -----------

Total costs and expenses                                         421,522               880,838

Interest expense                                                     719               107,477
                                                             -----------           -----------

Loss from continuing operations                                 (422,241)             (988,315)
                                                             -----------           -----------

Discontinued operations
  Loss from discontinued operations                                                 (1,007,170)
  Gain on disposal                                                                   4,072,064
                                                             -----------           -----------
Income from discontinued operations                                                  3,064,894
                                                             -----------           -----------

Net income (loss)                                               (422,241)            2,076,579

Preferred stock dividend requirement                             (19,250)              (19,250)
                                                             -----------           -----------

Net income (loss) applicable to common stockholders          $  (441,491)          $ 2,057,329
                                                             ===========           ===========


EARNINGS (LOSS) PER COMMON SHARE:

Basic and diluted
  From continuing operations                                 $     (0.12)          $     (0.28)
  From discontinued operations                                        --                  0.85
                                                             -----------           -----------
    Net income (loss) per common share                       $     (0.12)          $      0.57
                                                             ===========           ===========

</Table>

      The accompanying notes are an integral part of these financial statements.


                                         F-4

<Page>



                                              DOCUCON, INCORPORATED

                                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

                                     Years Ended December 31, 2001 and 2000

<Table>
<Caption>
                                                 Preferred Stock                 Common Stock
                                           ---------------------------   ----------------------------    Additional
                                                                                                          paid-in
                                              Shares         Amount         Shares          Amount        capital
                                           ------------   ------------   ------------    ------------   ------------
<S>                                        <C>            <C>            <C>             <C>            <C>

Balances, January 1, 2000                             7              7      3,508,767          35,088     10,209,903

Shares issued to officer as compensation                                      150,000           1,500         21,337

Net income
                                           ------------   ------------   ------------    ------------   ------------

Balances, December 31, 2000                           7              7      3,658,767          36,588     10,231,240

Net loss
                                           ------------   ------------   ------------    ------------   ------------

Balances, December 31, 2001                           7   $          7      3,658,767    $     36,588   $ 10,231,240
                                           ============   ============   ============    ============   ============

<Caption>
                                                                              Total
                                            Accumulated     Treasury      stockholders'
                                              Deficit         stock      equity (deficit)
                                           ------------    ------------  ----------------

Balances, January 1, 2000                   (12,148,401)         (4,236)     (1,907,639)

Shares issued to officer as compensation                                         22,837

Net income                                    2,076,579                       2,076,579
                                           ------------    ------------    ------------

Balances, December 31, 2000                 (10,071,822)         (4,236)        191,777


Net loss                                       (422,241)                       (422,241)
                                           ------------    ------------    ------------

Balances, December 31, 2001                $(10,494,063)   $     (4,236)   $   (230,464)
                                           ============    ============    ============
</Table>

   The accompanying notes are an integral part of these financial statements.









                                                         F-5
<Page>



                                        DOCUCON, INCORPORATED

                                      STATEMENTS OF CASH FLOWS

                                Years Ended December 31, 2001 and 2000

<Table>
<Caption>
                                                                                     2001                  2000
                                                                                  -----------           -----------
<S>                                                                               <C>                   <C>

Cash flows from operating activities
  Net income (loss)                                                               $  (422,241)          $ 2,076,579
  Less income from discontinued operations                                                 --             3,064,894
                                                                                  -----------           -----------
  Loss from continuing operations                                                    (422,241)             (988,315)
  Adjustments to reconcile loss from continuing operations
    to net cash used in continuing operations:
      Depreciation                                                                     36,901                15,381
      Noncash interest                                                                     --                70,666
      Common stock issued to officer                                                       --                22,837
      Loss on write-down of property and equipment held for disposal                   26,333                    --
      Write-off of deposits                                                                --                60,825
      Gain on forgiveness of certain accrued liabilities                                   --              (178,379)
        Increase (decrease) in cash and cash equivalents attributable to changes
          in operating assets and liabilities:
          Other current assets                                                          3,639                 5,972
          Restricted cash and other assets                                             (5,003)               16,509
          Accounts payable                                                            206,600              (138,207)
          Accrued expenses and other current liabilities                              (14,274)             (166,654)
                                                                                  -----------           -----------
  Net cash used in continuing operations                                             (168,045)           (1,279,365)
  Net cash used in discontinued operations                                                 --              (744,677)
                                                                                  -----------           -----------

Net cash used in operating activities                                                (168,045)           (2,024,042)
                                                                                  -----------           -----------

Cash flows from investing activities
  Proceeds from TAB transaction, net of amount paid to escrow fund
    of 250,000 and cash acquired by TAB of $92,433                                         --             2,464,254
  Proceeds from the sale of property and equipment                                        500
                                                                                  -----------           -----------
Net cash provided by investing activities                                                 500             2,464,254
                                                                                  -----------           -----------

Cash flows from financing activities
  Payments of notes payable and warrants, directors                                        --              (216,667)
  Principal payments under capital lease obligations                                    5,280               (14,010)
  Proceeds from short-term notes                                                           --             1,075,000
  Principal payments on short-term notes                                                   --            (1,075,000)
                                                                                  -----------           -----------

Net cash used in financing activities                                                   5,280              (230,677)
                                                                                  -----------           -----------

Net increase (decrease) in cash and cash equivalents                                 (172,825)              209,535

Cash and cash equivalents
  Beginning of year                                                                   238,370                28,835
                                                                                  -----------           -----------

  End of year                                                                     $    65,545           $   238,370
                                                                                  ===========           ===========
</Table>

   The accompanying notes are an integral part of these financial statements.






                                                         F-6
<Page>



                                          DOCUCON, INCORPORATED

                                  STATEMENTS OF CASH FLOWS (CONTINUED)

                                 Years Ended December 31, 2001 and 2000

<Table>
<Caption>
                                                                          2001           2000
                                                                      -----------    -----------
<S>                                                                   <C>            <C>

Supplemental disclosures of cash flow information,
 approximate cash paid during the year for interest                   $       719    $    32,000
                                                                      ===========    ===========

Supplemental disclosures of noncash investing and
 financing activities:
   Assumption of liabilities by TAB (see Note 3)                      $        --    $ 2,311,000
                                                                      ===========    ===========
</Table>


   The accompanying notes are an integral part of these financial statements.






















                                                 F-7
<Page>

                              DOCUCON, INCORPORATED

                          NOTES TO FINANCIAL STATEMENTS



1. Description, background and going concern consideration

Docucon, Incorporated ("Docucon" or the "Company") was incorporated under the
laws of the State of Delaware in 1988 and is the successor by merger to a Texas
corporation organized in 1986. Through May 2000, the Company's primary business
was the conversion of paper and microform documents to optical and other types
of storage media for use in document management systems and Internet
applications for customers in the federal and commercial markets. In May 2000,
the Company completed the sale of substantially all of its operating assets and
certain liabilities to Tab Products Co. ("TAB").

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed above and in Note 4, the Company
sold substantially all of its operating assets and certain liabilities to TAB
and effectively became a "shell" company with no revenues and continuing general
and administrative expenses. Further, at December 31, 2001, the Company has
cumulative losses of approximately $10.5 million and a working capital deficit
of approximately $242,000. For the years ended December 31, 2001 and 2000, the
Company had negative operating cash flows of approximately $168,000 and $2.0
million, respectively. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.

In March 2001, the Company agreed to the terms of a letter of intent to acquire
all outstanding and issued shares of Digital Vision Systems, Inc. ("DVS"), a
manufacturer and distributor of video surveillance systems. Based on the terms
of the September 25, 2001 letter of intent that revised the March 2001 letter of
intent, DVS shareholders would own 92.5% of the Company's common stock and the
Company's shareholders would own the remaining 7.5% of the common stock of the
combined entity. Robert W. Schwartz, the Company's CEO, would receive 0.5% share
to be allocated from the 7.5% interest received by the Company's shareholders.
In calculating the foregoing percentages, it is assumed that ownership
percentages are determined by reference to fully diluted shares of the Company's
common stock, as if converted shares of the Company's common stock were
outstanding for both the Company and DVS. Through the merger, DVS would become a
wholly owned subsidiary of the Company.

The proposed combination is subject to various, significant conditions,
including, but not limited to, negotiation and execution of definitive
agreements, DVS' pre-merger commitment to fund an additional $2.5 million in
operating capital, and approval of the merger by both Docucon and DVS
shareholders. If the Company is unsuccessful in completing the planned
combination with DVS, management's alternative plan includes a further search
for a similar business combination or strategic alliance. The Company is
currently not in discussions with any other entity, other than DVS. There is no
assurance that this transaction, or management's alternative plan, will be
realized.


2. Summary of significant accounting policies

Cash and Cash Equivalents

The Company maintains its cash with financial institutions in accounts that at
times may exceed insured limits. The Company has not experienced any losses in
such accounts and believes it is not subject to any significant credit risk on
cash. The Company also considers all highly liquid investments with an original
maturity of ninety days or less to be cash equivalents.


                                     F-8

<Page>

                              DOCUCON, INCORPORATED

                    NOTES TO FINANCIAL STATEMENTS (continued)



2. Summary of significant accounting policies (continued)

Property and Equipment Held for Disposal

Property and equipment held for use are stated at cost less accumulated
depreciation. Depreciation is provided using the straight-line method over 3 to
5 years. Property and equipment held for disposal is stated at the lower of cost
or estimated net realizable value as determined by the Company.

Long-Lived Assets

Impairment losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the carrying amount. The Company
evaluates impairments by using negative cash flows or other unfavorable
conditions as indicators of impairment. Impairment losses are also recorded for
long-lived assets that are expected to be disposed of, based on estimated fair
value, less costs to sell.

Revenue Recognition

Revenues from conversion service contacts were recognized at the time services
were provided and were based upon the number of documents converted and the
conversion rates established in the contracts.

Earnings (loss) per Common Share ("EPS")

The Company complies with Statement of Financial Accounting Standards ("SFAS")
No. 128, "Earnings Per Share" which requires dual presentation of basic and
diluted earnings per share. Basic EPS excludes dilution and is computed by
dividing income (loss) available to common stockholders by the weighted-average
common shares outstanding for the year. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity.

Earnings (loss) per Common Share ("EPS") (continued)

As the Company had a net loss from continuing operations for the years ended
December 31, 2001 and 2000, diluted EPS equals basic EPS as potentially dilutive
common stock equivalents are antidilutive. The average market price per share of
the Company's common stock for the years ended December 31, 2001 and 2000, was
approximately $.11 and $.28, respectively.

Income Taxes

The Company complies with SFAS No. 109, "Accounting for Income Taxes," which
requires an asset and liability approach to financial accounting and reporting
for income taxes. Deferred income tax assets and liabilities are computed for
differences between the financial statement and tax bases of assets and
liabilities that will result in future taxable or deductible amounts, based on
enacted tax laws and rates applicable to the periods in which the differences
are expected to affect taxable income. Valuation allowances are established,
when necessary, to reduce deferred income tax assets to the amounts expected to
be realized.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions



                                     F-9

<Page>

                              DOCUCON, INCORPORATED

                    NOTES TO FINANCIAL STATEMENTS (continued)



2. Summary of significant accounting policies (continued)

that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

New Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards No. 141, Business Combinations,
("SFAS 141"), and No. 142, Goodwill and Other Intangible Assets ("SFAS 142"),
effective for fiscal years beginning after December 15, 2001. SFAS 141 requires
all business combinations initiated after June 30, 2001 to be accounted for
using the purchase method. Under SFAS 142, goodwill and intangible assets that
have indefinite useful lives are no longer subject to amortization over their
estimated useful life. Rather, goodwill and indefinite-lived intangible assets
are subject to at least an annual assessment for impairment applying a
fair-value based test. Intangible assets with finite useful lives will continue
to be amortized over their useful lives. Additionally, an acquired intangible
asset should be separately recognized if the benefit of the intangible asset is
obtained through contractual or other legal rights, or if the intangible asset
can be sold, transferred, licensed, rented or exchanged, regardless of the
acquirer's intent to do so. The Company will adopt both statements on January 1,
2002. The Company believes the adoption of this statement will have no material
effect on the Company's financial position or results of operations.

The Financial Accounting Standards Board issued SFAS 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." The provisions of SFAS 144
supersede SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be disposed of," and will take effect in fiscal 2003 for
the Company. At that time, the Company will ensure existing policies are
consistent with the provisions of SFAS 144. Management does not anticipate that
the adoption of any other recent pronouncements will have a significant effect
on earnings or the financial position of the Company.

3. Impairment of Long-Lived Assets

The Company entered into a custodial agreement on January 7, 2002 with Digital
Vision Systems, Inc. (DVS), whereby DVS became the custodian of the Company's
books and records as well as the manager the Company's daily operations,
including the accounting functions and other financial matters of the Company.
As a result of this custodial agreement, the assets of the Company were
physically relocated to DVS' properties in November 2001. Once the assets were
transferred to DVS, DVS performed an inventory on all of the items that they
received.

There are no significant assets of the Company that are currently in use. As
such, the Company has classified the assets as held for disposal and has valued
the assets at their fair value, less costs to dispose. The Company's assessment
takes into consideration that most of the Company's fixed assets have been held
in storage since the TAB Sale and continue to be held in storage, certain
equipment no longer works and other equipment has been previously disposed of
before being transferred to DVS' offices. Therefore, the Company wrote-down
approximately $24,000 related to the difference between net book value at
December 31, 2001 and the estimated fair value of assets held for disposal,
which is included in general and administrative costs on the statement of
operations at December 31, 2001 as it relates primarily to software and office
furniture and equipment.



                                     F-10

<Page>

                              DOCUCON, INCORPORATED

                    NOTES TO FINANCIAL STATEMENTS (continued)



4. Discontinued operations and related contingency

In May 2000, the Company's shareholders approved the sale of substantially all
of the Company's operating assets to TAB for cash of approximately $2.8 million
and the assumption of approximately $2.3 million of operating liabilities,
resulting in a pre-tax gain of approximately $4.1 million. As a result, the
operating activity related to the operating assets and liabilities has been
accounted for as a discontinued operation. The following table provides certain
information related to the discontinued operations for the years ended December
31, 2001 and 2000:


<Table>
<Caption>

                                               2001               2000
      <S>                                  <C>                <C>
      Revenues                             $        --        $ 1,231,204
                                           -----------        -----------

      Costs and expenses
        Production                                  --          1,229,394
        All other                                   --          1,008,980
                                           -----------        -----------

                                                    --          2,238,374
                                           -----------        -----------

                                           $        --        $(1,007,170)
                                           ===========        ===========

</Table>

In conjunction with entering into a nonbinding letter of intent in January 2000,
and definitive asset purchase agreement dated March 7, 2000, by and among TAB
and TAB's wholly-owned subsidiary, Bunt Acquisition Corp., on one hand, and the
Company on the other hand ("TAB Asset Purchase Agreement"), TAB loaned the
Company cash, evidenced by secured promissory notes in the amount of $1,075,000,
to fund working capital deficits. This amount, plus accrued interest of
approximately $23,000, was deducted from cash proceeds at closing. In addition,
in accordance with the TAB Asset Purchase Agreement, promptly after closing, the
Company paid from the cash proceeds substantially all liabilities not assumed by
TAB, except for certain amounts due under employment agreements with certain
Company officers, a retirement obligation due to a former officer of the Company
and the notes payable discussed in Note 5. Prior to the closing of the TAB
transaction, certain Company officers and a former Company officer agreed to
reductions in the amounts due under employment agreements and a retirement
agreement, respectively, among other terms. The two directors of the Company who
had loaned the Company an aggregate of $325,000 agreed to waive the accrued
interest due on the notes and to the cancellation of the related warrants (as
described in Note 5), among other terms. In accordance with these revised
agreements, the Company paid two-thirds of the obligations after closing and the
remaining one-third will be satisfied upon release of the escrow fund, described
below, from available cash less a reasonable provision for any net costs
necessary to wind-down and/or dispose of the Company.

Under the terms of the TAB Asset Purchase Agreement, TAB paid $250,000 of the
purchase price into an Escrow Fund ("Escrow Fund") for the purposes of
indemnifying TAB from certain "indemnifiable losses," as defined therein,
including any failure of the Company to discharge any liability not assumed by
TAB. The Escrow Fund, which is classified as restricted cash in the accompanying
December 31, 2001 balance sheet, was scheduled to be released in November 2000,
net of any indemnification claims that have been agreed to by TAB and the
Company and any unresolved claims. Unresolved claims were to be satisfied or the
related Escrow Fund released after the claims resolution procedure detailed in
the TAB Asset Purchase Agreement has been



                                     F-11

<Page>

                              DOCUCON, INCORPORATED

                    NOTES TO FINANCIAL STATEMENTS (continued)



4. Discontinued operations and related contingency (continued)

completed. On November 9, 2000, TAB asserted claims against the Escrow Fund
pursuant to Article XII of the TAB Asset Purchase Agreement and pursuant to
Section 6 of the Escrow Agreement, based upon certain claims asserted by the
Department of Labor ("DOL") against TAB relating to government wage and benefit
orders, and that certain employees may not have been paid in compliance with
these orders. The DOL has not asserted these claims against the Company. On
December 7, 2000, the Company objected to the entirety of all claims made by TAB
against the Escrow Fund. Additionally, the Company notified TAB of its intention
to participate in defense of the DOL's claims. TAB consented to the Company's
participation. The Company and TAB agreed to a 90-day good-faith negotiation
period through March 7, 2001 (extended to April 30, 2001). Under the TAB Asset
Purchase Agreement, all claims by TAB are limited to the amount of the Escrow
Fund except as to claims asserted on the basis of fraud, willful misconduct or
the failure of the Company to perform post-closing obligations.

The Company effectively resolved this matter on December 3, 2001. Under the
terms of the Settlement Agreement with TAB ("TAB Settlement Agreement"), the
amount held in the Escrow Fund was released in January 2002 to the extent of
$250,000.00 plus accumulated interest, with TAB receiving $192,571.86,
$10,000.00 remaining in escrow and the Company receiving the remainder or
$65,387.39. The amounts released to TAB included approximately $147,000 owed to
TAB for cash received on TAB's behalf, as well as approximately $46,000 in
reimbursements for legal and other fees incurred by TAB and recorded in the
fourth quarter of 2001, based on the terms of the settlement. The amount of
$10,000 is to remain in the Escrow Fund until June 30, 2002 or may be released
earlier, if the parties mutually agree.

5. Notes payable

In September 1999, two directors of the Company loaned the Company an aggregate
of $325,000. The promissory notes (the "Notes"), issued in conjunction with
these loans, carried a 12 percent annual interest rate. Principal and interest
on the Notes was payable on the earlier of (i) September 28, 2000, or (ii)
within 10 days of an equity-based financing (the "Financing"), as defined. In
conjunction with the Notes, the two directors were issued an aggregate of
243,750 warrants to purchase common stock of the Company. The warrants were
exercisable for a period of five years, however, upon consummation of the TAB
transaction, the two directors agreed to cancel the warrants and waive accrued
interest, among other terms. The warrants were valued at an estimated fair
market value of $85,312 and were recorded as an original issue discount on the
Notes. The original issue discount on the Notes was charged to interest expense.
In accordance with these revised agreements, the Company paid two-thirds of the
obligations promptly after closing and the remaining one third was to be
negotiated upon release of the Escrow Fund. The Escrow Fund was settled in
December 2001, and the Board of Directors approved settlements of the Notes for
cash and stock in January 2002.

6. Other balance sheet items

At December 31, 2001, accrued expenses and other current liabilities consist of
the following:


<Table>

      <S>                                                         <C>
      Accrued salaries                                            $107,544
      Accrued professional fees                                     68,311
      Retirement benefit payable                                    37,834
      Capital Lease Obligation                                       5,525
      Costs incurred by TAB                                         13,273
      Other                                                         13,814
                                                                  --------

                                                                  $246,301
                                                                  ========

</Table>




                                     F-12

<Page>

                              DOCUCON, INCORPORATED

                    NOTES TO FINANCIAL STATEMENTS (continued)



7. Leases

In August 1999, the Company entered into a capital lease agreement with an
equipment leasing company. Under the terms of the agreement, the Company leased
servers with related accessories totaling $26,197. The Company is required to
make monthly payments of approximately $810 from August 1999 through July 2002.
Future minimum commitments at December 31, 2001 include $5,653 to be paid in
2002. This amount includes $128 in interest, thereby resulting in $5,525 as the
present value of the minimum payments.

The Company leased office space under a noncancelable operating lease that
expired in 2001. Rental expense was approximately $34,000 and $497,000 for the
years ended December 31, 2001 and 2000, respectively.

8. Preferred stock and common stock

Each share of the Company's preferred stock ($25,000 stated value) is
convertible into 8,333 shares of common stock and earns cash dividends of 11
percent per year. Each share of preferred stock is entitled to vote the
equivalent of 8,333 common shares and has a liquidation preference of $25,000
per share. Under the terms of the Company's preferred stock, the Company cannot
pay dividends on its common stock until all accumulated but unpaid dividends on
such preferred stock have been paid. The Company cannot make distributions to
common stockholders until cumulative undeclared dividends on the preferred stock
are paid. As of December 31, 2001, cumulative undeclared dividends on the
preferred stock approximated $217,250. As the cumulative dividends are
undeclared, they have not been recorded as a reduction of the Company's equity.
On January 24, 2002, the Board of Directors authorized the Company to offer and
to issue 20,000 of the Company's Common Stock, in full satisfaction of each
share of Series A Preferred Stock outstanding.

Common stock is subordinate to preferred stock in the event of liquidation. The
Company has never paid cash dividends on its common stock.

In May 2000, as consideration for acceptance of service as the Company's
president, the Company's Board of Directors authorized the issuance of 150,000
shares of the Company's common stock to a company in which the Company's
president has material ownership. The stock was fully vested on June 1, 2000,
and the fair value on date of grant, approximately $23,000, has been recorded as
a component of general and administrative expenses for the year ended December
31, 2000.

9. Stock options

The 1991 Director Non-Statutory Stock Option Plan (the "Director Plan") provides
for the granting of options at the common stock's current market value to
members of the Board of Directors of the Company who are not employees of the
Company. In June 1998, the Company's stockholders authorized an 85,000 share
increase in the number of shares of common stock reserved for issuance under the
Director Plan. As a result, the Director Plan authorizes the granting of options
to purchase up to 210,000 shares of the Company's common stock. The stock
options granted under the Director Plan are exercisable pursuant to the
individual agreements between the Company and the grantee and range from a
six-month to a three-year vesting period. All options granted under these plans
must be exercised within 10 years from the date of grant and expire within three
months after termination of employment or service as a director.



                                     F-13

<Page>

                              DOCUCON, INCORPORATED

                    NOTES TO FINANCIAL STATEMENTS (continued)



9. Stock options (continued)

On April 1, 1998, the Company approved the 1998 Employee Stock Option Plan (the
"1998 Employee Plan"), covering 187,500 shares of common stock. Unless
terminated earlier by the Board of Directors, the 1998 Plan will terminate on
March 31, 2008. The purpose of the plan is to supplement and replace the
Company's previous stock option plan. The 1998 Employee Plan provides for the
grant to key employees incentive stock options ("ISOs") intended to qualify
under Section 422(b) of the Internal Revenue Code and nonqualified stock options
("NQSOs").

Under the 1998 Employee Plan, which is administered by the Stock Option
Committee of the Board of Directors, key employees may be granted options to
purchase shares of the Company's common stock at 100 percent of fair market
value on the date of grant (or 110 percent of fair market value in the case of
an ISO granted to a 10 percent stockholder/grantee). Options granted under the
1998 Employee Plan must be exercised within 10 years from the date of grant,
vest at varying times, as determined by the Stock Option Committee, are
nontransferable except by will or pursuant to the laws of descent and
distribution, and expire within three months after termination of employment,
unless such termination is by reason of death or disability or for cause. All
shares purchased upon exercise of any option must be paid in full at the time of
purchase, in accordance with the terms set forth on the option. Such payment
must be made in cash or through delivery of shares of common stock or a
combination of cash and common stock, all as determined by the Stock Option
Committee. The 1998 Employee Plan may be amended at any time by a vote of the
Board of Directors. However, no amendment made without approval of the
stockholders of the Company may increase the total number of shares which may be
issued under options granted pursuant to the 1998 Employee Plan, reduce the
maximum exercise price or extend the latest date upon which options may be
granted or change the class of employees eligible to receive the options.

In June 1999, the Compensation Committee of the Board of Directors recommended
and the Board approved, subject to stockholder approval, an increase in shares
issuable under the 1998 Employee Plan, a grant to management and key employees
of an aggregate of 460,000 options to purchase shares of common stock at an
exercise price per share equal to the greater of fair market value or $1.00 on
the effective date of the grant. The proposal to increase the number of shares
issuable under the 1998 Employee Stock Option Plan to 687,500 shares was
approved by vote of the Company's stockholders on July 30, 1999. The closing
price per share of the Company's common stock on that date was $.875.

In 1998, the Company approved the 1998 Executive Non-Statutory Plan (the "1998
NQSO Plan"), covering 375,000 shares of common stock. Under the 1998 NQSO Plan,
identified executives may be granted long-term options to purchase shares of the
Company's common stock at a price specified on the date of the grant subject to
certain acceleration rights upon attainment of specific goals. The 1998 NQSO
Plan is administered by the Stock Option Committee. The 1998 NQSO Plan expires
on March 31, 2008. Options granted under the 1998 NQSO Plan will expire 10 years
from the date of grant, vest at varying times, as determined by the NQSO
committee, and are nontransferable except by will or pursuant to the laws of
descent and distribution.

In April 1998, the Company's Board of Directors granted options to certain
members of the Company's senior management to purchase 125,000 shares of the
Company's common stock at an exercise price of $4 per share under the 1998 NQSO
Plan. Additionally, in April 1998, the Company appointed a new president and
chief executive officer. The Company's Board of Directors granted this officer
options to purchase 225,000 shares of the Company's common stock at an exercise
price of $4 per share under a time accelerated restricted stock award. In
December 1998, the exercise price on these options was reset to $1 per share.
The time accelerated restricted stock award options become exercisable in March
2005. Exercisability of the time accelerated restricted stock award options is
accelerated, in 12,500 share increments, for each $2 per share incremental
increase in the quoted market price per share of the Company's common stock
above $4 per share.


                                     F-14

<Page>

                              DOCUCON, INCORPORATED

                    NOTES TO FINANCIAL STATEMENTS (continued)



9. Stock options (continued)

A summary of activity in the Company's stock option plans is set forth below:


<Table>
<Caption>

                                             Weighted
                                              Average
                                             Exercise          Exercise Price
                                               Price    --------------------------
                                   Shares    Per Share    Per Share       Total
                                  ---------  ---------  -------------  -----------
<S>                               <C>        <C>        <C>            <C>
Outstanding, January 1, 2000      1,298,348  $    1.36  $ .75 - $5.52  $ 1,764,754

2000 Granted                             --                                     --

2000 Terminated                          --                                     --
                                  ---------                            -----------

Outstanding, December 31, 2000    1,298,348       1.36     .75 - 5.52  $ 1,764,754

2001 Granted                             --                                     --

2001 Terminated                   1,298,348       1.36     .75 - 5.52  $ 1,764,754
                                  ---------                            -----------

Outstanding, December 31, 2001           --                                     --
                                  =========                             ==========

</Table>

All stock option plans of the Company have expired or were terminated by January
1, 2001, and all outstanding warrants have been canceled, terminated or have
expired as of December 31, 2001.

The Company complies with SFAS No. 123, "Accounting for Stock-Based
Compensation". SFAS No. 123 defines a fair value based method of accounting for
employee stock options or similar equity instruments and encourages all entities
to adopt that method of accounting for all of their employee stock compensation
plans. Under the fair value based method, compensation cost is measured at the
grant date based on the value of the award and is recognized over the service
period of the award, which is usually the vesting period. However, SFAS No. 123
also allows entities to continue to measure compensation costs for employee
stock compensation plans using the intrinsic value method of accounting
prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees"
(APB 25). Entities electing to remain with the accounting prescribed by APB 25,
as the Company has, must make pro forma disclosures of net income (loss) and
earnings (loss) per share as if the fair value based method recommended by SFAS
No. 123 had been applied. The following provides pro forma disclosures of net
loss and loss per share as if the fair value based method of accounting under
SFAS No. 123 had been applied.


                                    F-15

<Page>

                              DOCUCON, INCORPORATED

                    NOTES TO FINANCIAL STATEMENTS (continued)



9. Stock options (continued)

Had compensation cost for these plans been determined consistent with SFAS No.
123, the Company's net income (loss) applicable to common stockholders and basic
and diluted earnings (loss) per share would have been changed to the following
pro forma amounts:


<Table>
<Caption>

                                                                 2001            2000
                                                            -------------   -------------
      <S>                                                   <C>             <C>
      Net income (loss) applicable to common stockholders
        As reported                                         $          --   $   2,057,329
        Pro forma                                           $          --   $   1,197,609

      Basic and diluted earnings (loss) per common share
        As reported                                         $          --   $        0.57
        Pro forma                                           $          --   $        0.33

</Table>

As all options were canceled or terminated January 1, 2001, no pro forma
information has been shown.

10. Income taxes

For the years ended December 31, 2001 and 2000, income tax expense (benefit)
differs from the amount computed by applying the statutory federal income tax
rate to pretax income (loss) for the following reasons:


<Table>
<Caption>

                                                           2001          2000
                                                        ----------    ---------
     <S>                                                <C>           <C>
     Expected federal income tax (benefit)              $ (144,000)   $ 699,000
     Change in valuation allowance                         144,000
     Effect of temporary differences (primarily                 --     (699,000)
     accruals and reserves in the light of TAB          ----------    ---------
     transaction) and other
                                                        $       --    $      --
                                                        ==========    =========

</Table>

     The sources of the difference between the financial accounting and tax
     basis of the Company's assets and liabilities which give rise to the
     deferred tax assets and deferred tax liabilities are as follows:


<Table>
<Caption>

                                                             2001
                                                         -----------
     <S>                                                 <C>
     Deferred Tax Assets:
         Net Operating Loss                              $ 4,158,211
         Valuation Allowance                              (4,145,165)
                                                         -----------

     Net Deferred Tax Assets                             $    13,046

     Deferred Tax Liabilities:
         Depreciation                                    $    13,046
                                                         -----------

     Net Deferred Tax Liabilities                        $        --
                                                         ===========

</Table>

                                    F-16

<Page>

                              DOCUCON, INCORPORATED

                    NOTES TO FINANCIAL STATEMENTS (continued)



10. Income taxes (continued)

At December 31, 2001, the Company had, subject to the limitations discussed
below, net operating loss carryforwards for tax purposes of approximately
$12,192,000. These loss carryforwards are available to reduce future taxable
income and will expire 2005 through 2021 if not utilized.

Uncertainties exist as to the future realization of the deferred tax asset under
the criteria set forth under FASB Statement No. 109. Therefore, the Company has
established a valuation allowance of $4,145,165 for deferred tax assets at
December 31, 2001.

11. Other Contingency

On February 2, 1999, the Company contacted the Department of Defense's ("DOD")
Voluntary Disclosure Program Office to request admission into its Voluntary
Disclosure Program. The Voluntary Disclosure Program is intended to encourage
government contractors to voluntarily disclose potential violations of
government contracting policies and procedures. In general, companies who
volunteer information and cooperate with the government's investigation are not
subject to criminal and administrative sanctions such as suspension and
debarment from government contracting activities. Admission into the Voluntary
Disclosure Program does not protect companies from any potential civil liability
the government may assert. The Company's request for admission into the
Voluntary Disclosure Program was the result of an internal review by the Company
that indicated a billing practice, with respect to certain invoices submitted
during the period from September 1996 through July 1997, which might be
perceived by the government as a technical violation of DOD billing procedures.
The DOD Inspector General formally admitted the Company into the Voluntary
Disclosure Program in June 1999 and commenced its investigation of the Company's
voluntary disclosure in the second half of that year. In February 2000, Company
counsel was orally advised that the Government's investigation of the Company's
voluntary disclosure is complete and that criminal prosecution has been
declined. Since February 2000, the Company has received no further inquiry or
claim from DOD relating to this or any other matter. While the Company remains
potentially liable for civil damages, it does not believe that it is probable
that material civil damages, if any, will ultimately be assessed.

12. Weighted average common shares outstanding

For the years ended December 31, 2001 and 2000, weighted average common shares
outstanding applicable to earnings (loss) per common share is 3,658,767 and
3,598,767 respectively.

Unexercised stock options to purchase approximately 1.3 million shares of the
Company's common stock and warrants to purchase 243,750 shares of the Company's
common stock as of December 31, 2000 were not included in the computation of
diluted earnings (loss) per common share because the exercise prices were
greater than the average market prices of the Company's common stock during
2000. For the year ended December 31, 2001, there were no stock options or
warrants outstanding.

Common shares of 58,331 issuable upon the potential conversion of convertible
preferred stock as of December 31, 2001 and 2000 were not included in the
computation of diluted earnings (loss) per common share because they are
anti-dilutive.


                                    F-17

</TEXT>
</DOCUMENT>
