Edgar Filing: ION NETWORKS INC

SCHEDULE 14A/A INFORMATION
Amendment No. 1
---------------

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

Filed by the Registrant [X]

Filed by a party other than the Registrant [_]

Check the appropriate box:

[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12

Ion Networks, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
Common Stock, par value $.01 per share
2) Aggregate number of securities to which transaction applies:
_____________.
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): $ _______.
4) Proposed maximum aggregate value of transaction: $_________________
5) Total fee paid: $____________.

[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:

ION NETWORKS, INC.
1551 South Washington Avenue
Piscataway New Jersey 08854

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 17, 2002

To the Stockholders of ION NETWORKS, INC.:

NOTICE IS HEREBY GIVEN that the 2002 Annual Meeting of Stockholders
(the "Annual Meeting") of ION Networks, Inc., a Delaware corporation (the
"Company"), will be held at the offices of the Company at Washington Plaza, 1551
South Washington Avenue, Piscataway, New Jersey, on Thursday, October 17, 2002,
at 10:30 A.M., Eastern Time, for the following purposes:

1. To elect a board of six (6) directors to serve until the next annual
meeting of stockholders or until their respective successors are duly elected
and qualified;

2. To approve an amendment to the Company's Certificate of
Incorporation, as amended, to effect a reverse stock split;

3. To adopt the ION Networks, Inc. 2002 Stock Incentive Plan (the "2002
Plan");

4. To ratify the selection of Deloitte and Touche LLP as the Company's
independent auditors; and

5. To transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.

The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Management is aware of no other business
which will come before the Annual Meeting.

The Board of Directors has fixed the close of business on August 26,
2002 as the record date for the determination of stockholders entitled to notice
of and to vote at the Annual Meeting or any adjournment or postponement thereof.
Holders of a majority of the outstanding shares must be present in person or by
proxy in order for the Annual Meeting to be held.

ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING.
YOU ARE URGED TO SIGN, DATE AND OTHERWISE COMPLETE THE ENCLOSED PROXY CARD AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND
THE ANNUAL MEETING. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE YOUR SHARES
IN PERSON IF YOU WISH TO DO SO, EVEN IF YOU HAVE SIGNED AND RETURNED YOUR PROXY
CARD. YOUR PROXY IS REVOCABLE IN ACCORDANCE WITH THE PROCEDURE SET FORTH IN THE
PROXY STATEMENT.

By Order of the Board of Directors,

Cameron Saifi, Secretary
Piscataway, New Jersey
_____________, 2002

To be mailed to stockholders on or about September 10, 2002.

ION NETWORKS, INC.
1551 South Washington Avenue
Piscataway New Jersey 08854

PROXY STATEMENT

------------

General Information

This Proxy Statement is furnished in connection with the solicitation
by the board of directors ("Board of Directors" or the "Board") of Ion Networks,
Inc., a Delaware corporation (the "Company"), of proxies to be voted at the
Annual Meeting of Stockholders of the Company to be held on Thursday, October
17, 2002 (the "Annual Meeting"), at 10:30 A.M., Eastern Time, at Washington
Plaza, 1551 South Washington Avenue, Piscataway, New Jersey and at any
adjournment or postponement thereof.

Revocability of Proxy

A form of proxy is enclosed for use at the Annual Meeting. The proxy
may be revoked by a stockholder at any time before it is voted by execution of a
proxy bearing a later date or by written notice to the Secretary before the
Annual Meeting, and any stockholder present at the Annual Meeting may revoke his
or her proxy at the Annual Meeting and vote in person if he or she desires. When
such proxy is properly executed and returned, the shares it represents will be
voted at the Annual Meeting in accordance with any instructions noted thereon.

Solicitation and Voting Procedure

If no direction is indicated, all shares represented by valid proxies
received pursuant to this solicitation (and not revoked prior to exercise) will
be voted (i) FOR the election of the nominees for director named in this Proxy
Statement; (ii) FOR the approval of an amendment to the Company's Certificate of
Incorporation, as amended, to effect a reverse stock split; (iii) FOR the
adoption of the 2002 Plan; (iv) FOR the ratification of the selection of
Deloitte and Touche LLP as the Company's independent auditors; and (v) to
transact such other business as may properly come before the Annual Meeting and
any adjournment or postponement thereof.

The solicitation of proxies will be conducted primarily by mail. The
cost for soliciting proxies on behalf of the Board of Directors, if any, will be
borne by the Company. In addition to solicitation by mail, proxies may be
solicited in person or by telephone, Internet, telefax or cable by personnel of
the Company who will not receive any additional compensation for such
solicitation. The Company may reimburse brokers or other persons holding stock
in their names or the names of their nominees for the expenses of forwarding
soliciting material to their principals and obtaining their proxies. The Company
has retained American Stock Transfer & Trust Co. to aid in the distribution of
the proxy materials at an estimated cost not to exceed $65,000.

This Proxy Statement and the accompanying form of proxy will be first
mailed to stockholders on or about September 10, 2002.

Record Date and Quorum Requirements

The close of business on August 26, 2002 has been fixed as the record
date (the "Record Date") for the determination of stockholders entitled to
notice of and to vote at the Annual Meeting. As of August 26, 2002, there were
[______________] shares of common stock, par value $.001 per share, of the
Company (the "Common Stock") outstanding. The required vote for each proposal is
further

described under the heading of the relevant proposals. The holders of a majority
of the shares of Common Stock outstanding on the Record Date, present in person
or by proxy, will constitute a quorum for the transaction of business at the
Annual Meeting and at any adjournment or postponement thereof. Votes withheld in
the election of directors, and abstentions and broker non-votes with respect to
any other proposal, will be deemed as present for purposes of determining a
quorum at the Annual Meeting. A "broker non-vote" occurs when a nominee holding
shares for a beneficial owner does not vote on a particular proposal because the
nominee does not have discretionary power for that particular item and has not
received instructions from the beneficial owner.

------------------------------------------------------

PROPOSAL NO. 1

Election of Directors

------------------------------------------------------

The Company's By-Laws authorize the number of directors to be not less
than three (3) but no more than fifteen (15). The number of directors on the
Board currently consists of eight (8) members. At the Annual Meeting, the
stockholders will elect six (6) directors to serve until the next annual meeting
of stockholders or until their respective successors are elected and qualified:
Messrs. Stephen M. Deixler, Baruch Halpern, Alexander C. Stark, Jr., Frank S.
Russo, Vincent Curatolo and Kam Saifi (the "nominees"). Proxies cannot be voted
for a greater number of persons than the number of nominees named. Directors are
elected by a plurality of the votes present in person or represented by proxy at
the Annual Meeting and entitled to vote on the election of directors. Votes
withheld in the election of directors, and abstentions and broker non-votes if
any, will not be counted towards the election of any person as a director.

Each of the nominees has consented to serve as a director if elected.
To the best of the Company's knowledge, all the nominees will be available to
serve, but in the event that any of the nominees for director should, before the
Annual Meeting, become unable to serve, it is intended that shares represented
by proxies which are executed and returned will be voted for such substitute
nominees as may be recommended by the Company's existing Board of Directors.
Unless authority to vote for any director is withheld in a proxy, it is intended
that each proxy will be voted FOR each of the nominees.

Information Concerning Nominees

Set forth below is certain information with respect to each director
nominee:

KAM SAIFI has served as Chief Executive Officer, President and
Director of the Company since October 2001. Prior to joining ION, from November
2000 to August 2001, Mr. Saifi served as the Chairman of the Board of Directors
and Chief Executive Officer of Internet Refinery, a provider of collaborative
commerce and business intelligence solutions. From June 2000 to August 2000, Mr.
Saifi served as Vice Chairman and Executive Vice President of Visual Networks,
Inc. which merged with Avesta Technologies, Inc., a New York-based software
company focusing on managing Internet infrastructure. Mr. Saifi was the Founder,
Chairman of the Board of Directors, Chief Executive Officer and President of
Avesta Technologies, Inc. from October 1996 to May 2000. He has also served as a
member of the Board of Directors for MetaMatrix from 1998 to 2000.

STEPHEN M. DEIXLER has been Chairman of the Board of Directors
since 1985 and served as Chief Executive Officer of the Company from April 1996
to May 1997. He was President of the Company from May 1982 to June 1985 and
served as Treasurer of the Company from its formation in 1982 until September
1993. Mr. Deixler currently also serves as Chairman of the Board of Trilogy
Leasing Co, LLC and, in March 2002, became Chief Financial Officer of Multipoint
Communications, LLC, a company which provides video conferencing services. Mr.
Deixler was the Chairman of Princeton Credit Corporation until April 1995.

ALEXANDER C. STARK, JR. has been a director of the Company
since 1997. From 1995 to 2000, Mr. Stark served as the President of AdCon, Inc.,
a consulting firm organized to advise and counsel senior officers of global
telecom companies. Mr. Stark previously worked for 40 years at AT&T, where he
most recently served as a Senior Vice President.

BARUCH HALPERN has served as a director of the Company since
1999. From 1995 to 1999, Mr. Halpern was an institutional research analyst with
Goldsmith & Harris Incorporated, where he advised institutions about investment
opportunities. He was also an advisor in connection with a leveraged buy-out of
a public company and several private placements. In 1999, Mr. Halpern formed
Halpern Capital as a DBA entity under Goldsmith & Harris Incorporated.
Currently, Halpern Capital is a DBA entity under UVEST Investment Services, a
member of NASD/SIPC.

FRANK RUSSO has served as a director of the Company since
2000. Mr. Russo was with AT&T Corporation from September 1980 to September 2000
and most recently served as its Corporate Strategy and Business Development Vice
President. While at AT&T, Mr. Russo held a number of other positions including
that of General Manager, Network Management Services from which he helped
architect and launch AT&T's entry into the global network outsourcing and
professional services business. Mr. Russo retired from AT&T in 2000. Prior to
joining AT&T, Mr. Russo was employed by IBM Corporation in a variety of system
engineering, sales and sales management positions. Mr. Russo served on the Board
of Director of Oak Industries, Inc., a manufacturer of highly engineered
components, in 1999 and 2000, and currently serves on the Board of Directors of
Advance-com, a private e-commerce company headquartered in Boston,
Massachusetts.

VINCENT CURATOLO has served as director of the Company since
2002. Mr. Curatolo has held several executive positions at Cisco Systems since
May 1998. He is currently the Senior Director of Business Development for the
Global Service Provider Business Unit of Cisco Systems. Prior to that position,
he served as the Senior Director and Director of Cisco Systems in the areas of
field operations and technical field operations. From December 1994 to May 1998,
Mr. Curatolo served as Vice President of Global Data Networks at JP Morgan.

Directors and Executive Officers

The directors and executive officers of the Company, their ages and
present positions with the Company as of July 12, 2002 are as follows:

Name Age Position Held with the Company
---- --- ------------------------------

Kam Saifi* 42 Chief Executive Officer, President and Director
Cameron Saifi* 40 Chief Operating Officer, Executive Vice
President and Secretary
David Arbeitel 41 Chief Technology Officer and Vice President
Ted Kaminer 43 Chief Financial Officer and Vice President
Ronald Forster 39 Vice President of Finance and Controller
Stephen M. Deixler/(1)(2) (3)(4)/ 66 Chairman of the Board of Directors
Alexander C. Stark, Jr. /(1)(2) (3)(4)/ 69 Director
Alan Hardie /(3)/ 62 Director
William Martin Ritchie/(4)/ 53 Director
Baruch Halpern 51 Director
Frank S. Russo/(4)/ 59 Director
Vincent Curatolo 43 Director

/(1)/ Member of Compensation/Stock Option Committee

/(2)/ Member of Nominating Committee

/(3)/ Member of Audit Committee

/(4)/ Member of Strategic Steering Committee

* Kam Saifi and Cameron Saifi are brothers.

Information Concerning Other Current Directors and Non-Director Executive
Officers

Set forth below is certain information with respect to other current
directors and each executive officer of the Company who is not also a director
nominee of the Company:

ALAN HARDIE has served as a director of the Company since
1999. From 1995 until 2001, when he retired, Mr. Hardie served as Chief of
Operations for AT&T and BT Global Venture-Concert.

WILLIAM MARTIN RITCHIE has served as a director of the Company
since 1999. Since 1995, Mr. Ritchie has been a consultant in his own consulting
entity, Mr. Ventures, where he provides various start-up companies with
management assistance and early stage investment. Mr. Ritchie was a founder of
Spider Systems, a Scottish electronics company, where he served in several
capacities, including as Managing Director, from 1984 to 1995. Mr. Ritchie
currently serves on the board of directors of various companies in Scotland.

CAMERON SAIFI has served as Chief Operating Officer and
Executive Vice President of the Company since October 2001 and Secretary of the
Company since December 2001. Prior to joining ION, from October 2000 to October
2001, Mr. Saifi served as the President, Chief Operating Officer and Co-Founder
of Internet Refinery, a provider of collaborative commerce and business
intelligence technology for Business-to-Business applications. Previously, from
January 1997 to June 2000, Mr. Saifi served as Senior Vice President and Chief
Operating Officer for Avesta Technologies, Inc.

DAVID ARBEITEL has served as Chief Technology Officer and Vice
President of the Company since October 2001. Prior to joining ION, Mr. Arbeitel
was the sole proprietor of his consulting firm, Arbeitel Associates from
September 2000 to October 2001. From June 2000 to September 2000, Mr. Arbeitiel
served as Vice President and Chief Technology Officer of Visual Networks, Inc.
and was one of the founders of Avesta Technologies, Inc. where he was Senior
Vice President and Chief Technology Officer from October 1996 to May 2000.

TED KAMINER has served as Chief Financial Officer and Vice
President of the Company since May 2002. Prior to joining ION, from October
2000 to April 2002, Mr. Kaminer was an independent consultant. From March 1998
to September 2000, Mr. Kaminer served as Senior Vice President of Finance and
Chief Financial Officer of CMPExpress, a provider of computer hardware and
software to corporate, government and education accounts. Previously, he served
as Senior Vice President, Investment Banking at Berwind Financial Group, L.P.,
from October 1994 to January 1998.

RONALD FORSTER has served as Vice President Finance/Controller
since October 2001, and was the Controller from February 2000 to October 2001.
Prior to joining ION, from March 1991 to February 2000, Mr. Forster served as
Controller of Meto, a company engaged in electronic bar code and human readable
marking and identification systems.

Board Meetings and Committees

During the Company's fiscal year ended March 31, 2002 there were six
meetings of the Board of Directors and the Board acted by unanimous written
consent seven times. Each of the members of the Board of Directors who is
currently a director, except for Mr. Hardie who attended five board meetings and
Mr. Russo who attended four board meetings, attended all of the meetings of the
Board of Directors during fiscal 2002 and attended all meetings held by the
committees on which such nominee served.

The Board of Directors has a Compensation/Stock Option Committee which
currently consists of Messrs. Stephen M. Deixler and Alexander C. Stark, Jr. The
function of the Compensation/Stock Option Committee is to review and establish
policies, practices and procedures relating to compensation of key employees,
including officers and directors who are key employees, outside directors and
consultants, to grant cash and non-cash bonuses to employees and grant non-plan
stock options and warrants to employees, outside directors and consultants and
to administer employee benefit plans, including all stock option plans of the
Company. During the fiscal year ended March 31, 2002, the Compensation/Stock
Option Committee held two meetings.

The Company's Audit Committee currently consists of Messrs. Stephen M.
Deixler, Alexander C. Stark, Jr. and Alan Hardie, a majority of which are
considered independent directors, as defined in Rule 4200(a)(15) of the National
Association of Securities Dealers ("NASD") listing standards. The function of
the Audit Committee is to review and advise the Board of Directors of the
Company with respect to matters concerning the financial condition and
operations of the Company, to nominate independent auditors, the scope of their
engagement and their compensation, to review the effectiveness of the Company's
internal accounting methods and procedures and to determine through discussions
with the independent auditors whether any instructions or limitations have been
placed upon them in connection with the scope of their audit or its
implementation. The specific functions and responsibilities of the Audit
Committee are set forth in a written charter of the Audit Committee, adopted by
the Board of Directors. The Audit Committee reviews and reassesses its Charter
annually and recommends any changes to the Board of Directors for approval. A
report of the Audit Committee appears under the caption "Audit Committee Report"
below. During the fiscal year ended March 31, 2002, the Audit Committee held one
meeting.

The Nominating Committee of the Board of Directors currently consists
of Messrs. Stephen M. Deixler and Alexander C. Stark, Jr. The Nominating
Committee nominates members of the Board of Directors and it will consider
nominees recommended by stockholders. Any nominations should be made in writing
and sent to: c/o Nominating Committee, ION Networks, Inc., 1551 South Washington
Avenue, Piscataway, NJ 08854, Attn: Stephen M. Deixler. During the fiscal year
ended March 31, 2002, the Nominating Committee held two meetings.

The Company's Strategic Steering Committee currently consists of
Messrs. Stephen M. Deixler, Alexander C. Stark, Jr., William Martin Ritchie and
Frank S. Russo The function of the Strategic Steering Committee is to discuss
and establish policy with respect to the Company's corporate direction and
future growth strategies. During the fiscal year ended March 31, 2002, the
Strategic Steering Committee held two meetings.

Audit Committee Report

To the Board of Directors
of ION Networks, Inc.

Our Committee has reviewed and discussed with management of the Company
and Deloitte & Touch LLP ("D&T"), the independent auditing firm of the Company,
the audited financial statements of the Company as of March 31, 2002 and for
each of the two years in the period ended March 31, 2002 (the "Audited Financial
Statements"). In addition, we have discussed with D&T the matters required by
Codification of Statements on Auditing Standards No. 61, Communications with
Audit Committee, as amended by the Auditing Standards Board of American
Institute of Certified Accountants.

The Committee also has received and reviewed the written disclosures
and the letter from D&T required by Independence Standards Board Standard No. 1,
Independence Discussion with Audit Committees, as amended by the Independence
Standards Board, and we have discussed with that firm its independence from the
Company. We also have discussed with management of the Company and the auditing
firm such other matters and received such assurances from them as we deemed
appropriate.

Management is responsible for the Company's internal controls and the
financial reporting process. D&T is responsible for performing an independent
audit of the Company's financial statements in accordance with generally
accepted auditing standards and issuing a report thereon. The Committee's
responsibility is to monitor and oversee these processes.

Based on the foregoing review and discussions and a review of the
report of D&T with respect to the Audited Financial Statements, and relying
thereon, we have recommended to the Company's Board of Directors the inclusion
of the Audited Financial Statements in the Company's Annual Report on Form
10-KSB for the year ended March 31, 2002.

Audit Committee

Alexander C. Stark, Jr.
Alan Hardie
Stephen M. Deixler

Compensation of Directors

For the fiscal year ended March 31, 2002, each of the members of the
Board of Directors who is not also an employee of the Company ("Non-Employee
Directors") received options to purchase 10,000 shares of Common Stock at
exercise prices per share equal to the fair market value of the Common Stock on
the date of grant on an annual basis. Non-Employee Directors were also granted
options to purchase an additional 1,500 shares of Common Stock for each meeting
of the Board of Directors attended by such Non-Employee Director. Non-Employee
Directors serving on committees of the Board of Directors were granted, on an
annual basis, options to purchase 1,500 shares of Common Stock for each
committee served thereby.

In October 2001, the Board of directors approved a grant of 25,000
options to each of Messrs. Deixler, Halpern, Stark, Hardie, Ritchie and Russo in
recognition of their services to the Company with the retention of the new
executive management team.

In July 2001, the Board of Directors approved a modification to the
director compensation plan for the fiscal year ending March 31, 2002. The
modification provides that any director who was not previously serving as such
at the time of the last annual stockholder's meeting would receive an additional
grant of options to purchase 20,000 shares upon election by the stockholders. In
addition, the Company reimburses all Non-Employee Directors traveling more than
fifty miles to a meeting of the Board of Directors for all reasonable travel
expenses.

The Company paid the Chairman of the Board of Directors of the Company,
$132,000 in the year ended March 31, 2002 for executive search and mergers and
acquisitions services provided to the Company from June through October 2001.

Executive Officers

The executive officers of the Company are Kam Saifi - President and
Chief Executive Officer, Cameron Saifi - Executive Vice President and Chief
Operating Officer, David Arbeitel - Vice President and Chief Technology Officer,
Ted Kaminer - Vice President and Chief Financial Officer and Ronald Forster -
Vice President of Finance and Controller.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities and Exchange Act of 1934, as amended
(the "Exchange Act"), requires the Company's directors, executive officers and
persons who own more than 10% of the Company's Common Stock (collectively,
"Reporting Persons") to file reports of ownership and changes in ownership of
the Company's Common Stock with the Securities and Exchange Commission and The
Nasdaq Stock Market, Inc. Copies of these reports are also required to be
delivered to the Company.

The Company believes, based solely on its review of the copies of such
reports received or written representations from certain Reporting Persons, that
during the fiscal year ended March 31, 2002, Mr. Vincent Curatolo was
inadvertently late in filing his Form 3 to report his appointment to the Board
of Directors of the Company in March 2002 and a grant of options to purchase
10,000 shares of Common Stock. Mr. Ronald Forster was inadvertently late in
filing his Form 3 to report his appointment to the office of Vice President
Finance/Controller in October 2001 and a grant of options to purchase 80,000
shares of Common Stock and his holding of 180 shares of Common Stock and options
to purchase 81,273 shares of Common Stock at the time of the filing of his Form
3. Mr. Douglas Reilly was in advertently late in filing his Form 3 to report his
appointment to the office of Vice President and Managing Director of Market
Operations for EMEA and the Pacific Rim in October 2001 and a grant of options
to purchase 100,000 shares of Common Stock and his holding of options to
purchase 124,652 shares of Common Stock at the time of the filing of his Form 3.
All such inadvertently late filings have been filed and reported by the
Reporting Persons on a Form 5 for the fiscal year ended March 31, 2002.

Executive Compensation

The following table sets forth the compensation earned, whether paid or
deferred, by the Company's Chief Executive Officer, its other four most highly
compensated executive officers during the year ended March 31, 2002 and up to
two additional individuals for whom disclosure would have

been provided but for the fact that the individual was not serving as an
executive officer at the end of fiscal year ended March 31, 2002 (the "Named
Executive Officers") for services rendered in all capacities to the Company.

Summary Compensation Table

Annual Compensation Long-term Compensation
-------------------------------------------- ---------------------------------------------------------------------
Awards Payouts
--------------------------- -----------------------

Other
Annual Restricted Securities All Other
Principal Compen- Stock Underlying LTIP Compen-sation
Position Year Salary($) Bonus($) sation($) Award(s)($) Options (#) Payouts($) ($)/(1/)
-------- ---- --------- -------- ------ ------------ ----------- ---------- -------

Current CEO and Executive Officers:

Kam Saifi /(2)(7)/ 2002 132,681/(8)/ 50,000 -- 240,000/(11)/ -- -- 1,398
President & Chief
Executive Officer

Cameron Saifi /(3)(7)/ 2002 90,519 25,000 -- 186,000/(12)/ -- -- 1,641
Executive Vice
President & Chief
Operating Officer

David Arbeitel /(4)(7)/ 2002 72,231 12,500 -- 93,000/(13)/ -- -- --
Vice President & Chief
Technology Officer

Ronald Forster 2002 107,019 9,000 -- -- 80,000 -- 2,034
Vice President of 2001 94,000 3,540 64,809 -- 1,756
Finance & Controller 2000 13,962 -- 16,476 -- --

Douglas Reilly /(14)/ 2002 129,246/(9)/ 2,250 -- -- 100,000 -- --
Vice President, Sales & 2001 78,936/(10)/ -- -- -- 124,652 -- --
Managing Director, EMEA

Former CEO and Executive Officers:

Ronald C. Sacks /(5)(7)/ 2002 -- -- -- -- 21,500 -- --
Former Chief-Executive 2001 -- -- -- -- 119,400 -- --
Officer and Interim
Principal Financial
Officer

Jane Kaufman /(6)/ 2002 93,402 10,000 22,383 -- 50,000 -- 1,984
Former President and 2001 159,000 -- -- -- 172,430 -- 3,187
Chief Operating Officer 2000 36,115 -- 10,000 -- 153,376 -- 232

____________________________

/(1)/ Represents contribution of the Company under the Company's 401(k) Plan.

/(2)/ Mr. K. Saifi joined the Company on October 1, 2001. Pursuant to his
employment agreement, he will receive an annualized base salary of
$250,000.

/(3)/ Mr. C. Saifi joined the Company on October 17, 2001. Pursuant to his
employment agreement, he will receive an annualized base salary of
$186,000.

/(4)/ Mr. Arbeitel joined the Company on October 17, 2001. Pursuant to his
employment agreement, he will receive an annualized base salary $148,000.

/(5)/ The services of Mr. Sacks were being provided through a consulting
agreement between the Company and Venture Consulting Group, Inc.
("VCGI"). During the fiscal year ended March 31, 2002, $248,000 was paid
to VCGI for consulting fees related to services performed by Mr. Sacks.
Mr. Sacks terminated his consulting services with the Company as of
September 18, 2001.

/(6)/ Ms. Kaufman separated from the Company on October 3, 2001 as the result
of a reduction in force. As per the terms of her Severance Agreement and
General Release, Ms. Kaufman received a one-time severance payment of
$15,542. Ms. Kaufman also received payment of $6,841 for accrued unused
vacation time.

/(7)/ Refer to the Employment Contracts, Termination of Employment and Change
of Control Arrangements section below for a more detailed description of
all consulting and employment agreements.

/(8)/ Includes $7,200 in auto allowance.

/(9)/ Includes $9,000 in auto allowance and $21,496 in commissions.

/(10)/ Includes $6,750 in auto allowance and $4,686 in commissions.

/(11)/ These shares vest as follows: 250,000 on October 4, 2001, 550,000 on
September 30, 2002 and 150,000 at the end of each quarter, commencing
with the quarter ended December 31, 2002, and ending with the quarter
ending September 30, 2004, for a total of 1,200,000. The value of these
shares as of March 31, 2002 is $1,520,000 and dividends, if declared,
will be paid.

/(12)/ These shares vest as follows: 75,000 on October 17, 2001, 165,000 on
September 30, 2002 and 45,000 at the end of each quarter, commencing with
the quarter ended December 31, 2002, and ending with the quarter ending
September 30, 2004, for a total of 360,000. The value of these shares as
of March 31, 2002 is $456,000 and dividends, if declared, will be paid.

/(13)/ These shares vest as follows: 37,500 on October 17, 2001, 82,500 on
September 30, 2002 and 22,500 at the end of each quarter, commencing with
the quarter ended December 31, 2002, and ending with the quarter ending
September 30, 2004, for a total of 180,000. The value of these shares as
of March 31, 2002 is $228,000 and dividends, if declared will be paid.

/(14)/ Mr. Reilly separated from the Company on July 8, 2002 as a result of
reduction in force.

Option Grants in Fiscal Year Ended March 31, 2002

The following table sets forth certain information concerning stock
option grants during the fiscal year ended March 31, 2002 to the Named Executive
Officers:

Individual Grants
---------------------------------------------------------------
Percent
Number of of Total
Securities Options Exercise
Underlying Granted to or Base
Options Employees in Price Expiration
Name Granted(#) Fiscal Year ($/Sh) Date
---- ---------- ----------- ------ -----

Current CEO and Executive Officers:

Kam Saifi --

Cameron Saifi --

David Arbeitel --

Ronald Forster 80,000/(1)(4)/ 3.5% .175 10/11/06

Douglas Reilly 100,000/(1)(5)/ 4.3% .175 10/11/06

Former CEO and Executive Officers:

Ronald C. Sacks 21,500/(2)/ 1.0% .205 9/23/06

Jane Kaufman 50,000/(3)/ 2.2% 5/1/06

_____________________________

(1) Represents options granted for retention purposes following the October 3,
2001 reduction in force.

(2) 20,000 options were granted upon election to the Board of Directors on
September 24, 2001 and 1.500 options were granted for attendance at Annual
Meeting of the Board of Directors held on September 24, 2001. These options
vested immediately and have been exercised

(3) Represents options granted upon promotion to President and Chief Operating
Officer. These options vested immediately upon Ms. Kaufman's resignation
from the Company on October 3, 2001. Ms. Kaufman has until October 3, 2003
to exercise these options.

(4) 27,200 options will vest on October 12, 2002 and 6,600 options will vest
every 3 months thereafter.

(5) 34,000 options will vest on October 12, 2002 and 8,250 options will vest
every 3 months thereafter.

Aggregated Option Exercises in Fiscal Year Ended March 31, 2002
And Fiscal Year End Option Values

The following table sets forth certain information concerning each
exercise of stock options during the fiscal year ended March 31, 2002 by each of
the Named Executive Officers and the number and value of unexercised options
held by each of the Named Executive Officers on March 31, 2002.

Value of
Number of Securities Unexercised
Underlying Unexer- In-the-Money
Shares cised Options Options at
Acquired on Value at FY-End(#) FY-End($)/(1)/
Name Exercise (#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------ ----------- ------------------------- -------------------------

Current CEO and Executive
Officers:

Kam Saifi -- -- -- --

Cameron Saifi -- -- -- --

David Arbeitel -- -- -- --

Ronald Forster -- -- 37,225/124,060 0/47,200

Douglas Reilly -- -- 49,600/175,052 0/59,000

Former CEO and Executive
Officers:

Ronald C. Sacks 21,500 5,160 119,400/0 0/0

Jane Kaufman -- -- 200,000/0 0/0

------------------

(1) The average price for the Common Stock as reported by the Nasdaq Stock
Market on March 28, 2002, was $.76 per share. Value is calculated on
the basis of the difference between the option exercise price and $.76
multiplied by the number of shares of Common Stock underlying the
options.

Employment Contracts, Termination of Employment and Change of Control
Arrangements

The Company entered into an employment agreement with Kam Saifi dated
October 4, 2001. Pursuant to the agreement, Mr. Saifi shall serve as Chief
Executive Officer and President commencing October 1, 2001 and continuing until
September 30, 2004, unless earlier terminated as provided in the agreement. Mr.
Saifi will receive a base salary at an annual rate of $250,000 during the period
of October 1, 2001 and ending March 31, 2002, or total compensation for the
six-month period of $125,000. He will receive a base salary at an annual rate of
$350,000 during the period of April 1, 2002 and ending September 30, 2002, or
total compensation for the six-month period of $175,000. In addition he will
receive a monthly car allowance of $1,200. Mr. Saifi will also receive a
quarterly

bonus payment of $50,000 if the Company achieves its gross sales target in such
fiscal quarter. Pursuant to the agreement, Mr. Saifi purchased restricted stock
consisting of 2,000,000 shares of the Company's Common Stock at a price of $0.13
per share. These shares vest as follows: 250,000 on execution of the agreement,
550,000 on September 30, 2002 and 150,000 at the end of each quarter, commencing
with the quarter ended December 31, 2002, and ending with the quarter ending
September 30, 2004, for a total of 1,200,000. In the event of a change in
control event (as described in the employment agreement) all shares will become
immediately vested. If Mr. Saifi's employment is terminated by the Company for
other than "Cause", Mr. Saifi shall be entitled to a severance payment equal to
the lesser of the remaining salary due for the balance of the contract or
payment of salary for the next six months as if the Agreement had not been
terminated.

The Company entered into an employment agreement with Cameron Saifi
dated October 17, 2001. Pursuant to the agreement, Mr. C. Saifi shall serve as
Chief Operating Officer and Executive Vice President commencing October 17, 2001
and continuing until September 30, 2004, unless earlier terminated as provided
in the agreement. Mr. C. Saifi will receive a base salary at an annual rate of
$186,000. Mr. C. Saifi will also receive a quarterly bonus payment of $25,000 if
the Company achieves its gross sales target in such fiscal quarter. Pursuant to
the agreement, Mr. C. Saifi purchased restricted stock consisting of 600,000
shares of the Company's Common Stock at a price of $0.31 per share. These shares
vest as follows: 75,000 on execution of the agreement, 165,000 on September 30,
2002 and 45,000 at the end of each quarter, commencing with the quarter ended
December 31, 2002, and ending with the quarter ending September 30, 2004, for a
total of 360,000. In the event of a change in control event (as described in the
employment agreement) all shares will become immediately vested. If Mr. Saifi's
employment is terminated by the Company for other than "Cause", Mr. Saifi shall
be entitled to a severance payment equal to the lesser of the remaining salary
due for the balance of the contract or payment of salary for the next three
months as if the Agreement had not been terminated.

The Company entered into an employment agreement with David Arbeitel
dated October 17, 2001. Pursuant to the agreement, Mr. Arbeitel shall serve as
Chief Technology Officer and Vice President commencing October 17, 2001 and
continuing until September 30, 2004, unless earlier terminated as provided in
the agreement. Mr. Arbeitel will receive a base salary at an annual rate of
$148,000. Mr. Arbeitel will also receive a quarterly bonus payment of $12,500 if
the Company achieves its gross sales target in such fiscal quarter. Mr. Arbeitel
purchased restricted stock consisting of 300,000 shares of the Company's Common
Stock at a price of $0.31 per share. These shares vest as follows: 37,500 on
execution of the agreement, 82,500 on September 30, 2002 and 22,500 at the end
of each quarter, commencing with the quarter ended December 31, 2002, and ending
with the quarter ending September 30, 2004, for a total of 180,000. In the event
of a change in control event (as described in the employment agreement) all
shares will become immediately vested. If Mr. Arbeitel's employment is
terminated by the Company for other than "Cause", Mr. Arbeitel shall be entitled
to a severance payment equal to the lesser of the remaining salary due for the
balance of the contract or payment of salary for the next three months as if the
Agreement had not been terminated.

The Company entered into a consulting agreement with Venture Consulting
Group, Inc. ("VCGI") on October 5, 2000 (the "Consulting Agreement"). VCGI
performed certain management services for the Company and provided the services
of Ronald C. Sacks, William Gilbert, George Jarrold and Daniel Hunt. Pursuant to
the terms of the Consulting Agreement, Mr. Sacks was appointed as the Chief
Executive Officer of the Company and provided his services on a full time,
exclusive basis until September 18, 2002. The other persons specified above
provided consulting services 10 days per quarter each, with respect to such
services. The Consulting Agreement was terminable at will on thirty days written
notice by either party, and provided for a fee of $500,000, payable over twelve
(12) months to VCGI. The Company did not pay salaries to any of the VCGI
management team members.

In addition, the Company granted options to the persons performing services on
behalf of VCGI to purchase an aggregate of 240,000 shares of Common Stock, at an
exercise price of $2.00 per share which are fully vested. The consulting
relationship established by this contract terminated effective September 18,
2001.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of July 12, 2002 by each
person (or group within the meaning of Section 13(d)(3) of the Securities
Exchange Act of 1934) known by the Company to own beneficially 5% percent or
more of the Company's Common Stock, and by the Company's directors and named
executive officers, both individually and as a group.

As used in this table, "beneficial ownership" means the sole or shared
power to vote or direct the voting or to dispose or direct the disposition of
any security. A person is deemed to be the beneficial owner of securities that
can be acquired within sixty days from July 12, 2002 through the exercise of any
option, warrant or right. Shares of Common Stock subject to options, warrants or
rights which are currently exercisable or exercisable within sixty days are
deemed outstanding for computing the ownership percentage of the person holding
such options, warrants or rights, but are not deemed outstanding for computing
the ownership percentage of any other person. The amounts and percentage are
based upon 25,138,001 shares of Common Stock outstanding as of July 12, 2002.

Name and Address/(16)/ Shares Owned Percent of Class
---------------- - ------------ ----------------
Stephen M. Deixler 956,140/(1)/ 3.8%

Alexander C. Stark, Jr. 418,938/(2)/ 1.7 %

Alan Hardie 132,000/(3)/ *

William Martin Ritchie 94,000/(4)/ *

Frank Russo 58,500/(5)/ *

Vincent Curatolo 11,500/(6)/ *

Baruch Halpern 517,700/(7)/ 2.1 %

Kam Saifi 2,170,000/(8)/ 8.6%

Cameron Saifi 600,000/(9)/ 2.4%

David Arbeitel 300,000/(10)/ 1.2%

Ronald Forster 37,405/(11)/ *

Name and Address/(16)/ Shares Owned Percent of Class
---------------------- ------------ ----------------
Douglas Reilly 59,600/(12)/ *

Ronald C. Sacks 119,400/(13)/ *

Jane Kaufman 200,000/(14)/ *

AWM Investment Company 5,407,882/(15)/ 21.5%
153 East 53/rd/ Street, 55/th/ Floor
New York, NY 10022

Directors and Executive Officers as a 5,664,557 22.5%
group (14 persons)

----------------

(1) Does not include 135,489 shares of Common Stock owned by Mr. Deixler's
wife, mother, children and grandchildren as to which shares Mr. Deixler
disclaims beneficial ownership. Includes 361,428 shares of Common Stock
subject to options that are currently exercisable or exercisable within
60 days of July 12, 2002.

(2) Includes 288,938 shares of Common Stock subject to options that are
currently exercisable or exercisable within 60 days of July 12, 2002.

(3) Includes 132,000 shares of Common Stock subject to options that are
currently exercisable or exercisable within 60 days of July 12, 2002.

(4) Includes 94,000 shares of Common Stock subject to options that are
currently exercisable or exercisable within 60 days of July 12, 2002.

(5) Includes 58,500 shares of Common Stock subject to options that are
currently exercisable or exercisable within 60 days of July 12, 2002.

(6) Includes 11,500 shares of Common Stock subject to options that are
currently exercisable or exercisable within 60 days of July 12, 2002.

(7) Does not include 17,000 shares of Common Stock owned by Mr. Halpern's
daughter as to which Mr. Halpern disclaims beneficial ownership.
Includes 268,500 shares of Common Stock subject to options that are
currently exercisable or exercisable within 60 days of July 12, 2002
and 100,000 shares of Common Stock subject to warrants that are
currently exercisable or exercisable within 60 days of July 12, 2002.

(8) Includes 1,750,000 restricted shares of Common Stock that have not
vested.

(9) Includes 525,000 restricted shares of Common Stock that have not
vested.

(10) Includes 262,500 restricted shares of Common Stock that have not
vested.

(11) Includes 37,225 shares of Common Stock subject to options that are
currently exercisable or exercisable within 60 days of July 12, 2002.

(12) Includes 59,600 shares of Common Stock subject to options that are
currently exercisable or exercisable within 60 days of July 12, 2002.

(13) Includes 119,400 shares of Common Stock subject to options that are
currently exercisable or exercisable within 60 days of July 12, 2002.

(14) Includes 200,000 shares of Common Stock subject to options that are
currently exercisable or exercisable within 60 days of July 12, 2002.

(15) Based on Schedule 13D as filed by such beneficial owner with the
Securities and Exchange Commission on February 21, 2002.

(16) Unless otherwise noted, the address of each such person is c/o the
Company, 1551 S. Washington Avenue, Piscataway, New Jersey 08854.

------------------------
*Indicates ownership of Common Stock of less than one (1%) percent of the total
issued and outstanding Common Stock on June 19, 2002.

Certain Relationships and Related Transactions

The Company entered into a definitive Sublease Agreement with
Multipoint Communications, LLC (the "Tenant" on April 17, 2002 to sublease
approximately 5,400 square feet of its facility for a period of 24 months. The
rental rate and the other material terms of the lease with Multipoint
Communications, LLC ("Multipoint") were negotiated through a real estate broker
and separate attorneys representing each party. The rental rate was established
by prorating the amount of space leased by Multipoint by the current rent paid
by the Company to its landlord. Given the current real estate market condition
in the area, the Company believes that the terms of the lease with Multipoint
are comparable to terms of leases that might have been obtained from a
non-affiliate. The rent will be $5,200 per month for the first nine months and
$10,400 per month for the last fifteen months, but with a 100% abatement for the
first three months. As part of the rental payment the Tenant will issue shares
totaling the value of $77,400, which shall be based on the per share price of
the Tenant's common stock as priced in the first round of institutional
financing (the "Financing") which shall close on or before June 30, 2002. These
shares shall have the registration rights as other shares issued in the
Financing. In the event that the Financing does not close on or before June 30,
2002, the Tenant shall pay the Company additional rent in the amount of $4,300
per month commencing on July 1, 2002. Future minimum lease payments due from the
Tenant are approximately $187,200. The Chairman of the Board of Directors of the
Company currently serves as the Chief Financial Officer of the Tenant.

During April 2000, the Company made a loan (the "Loan") to the former
Chief Executive Officer (the "Former CEO") of the Company in the amount of
$750,000. At the time that the Loan was made to the Former CEO in April 2000,
the Company was contemplating a secondary public offering and potential mergers
and acquisitions opportunities. As a result, the Company did not want the Former
CEO to exercise his stock options. In consideration for not exercising his stock
options at that time, the Company issued the Loan to him. At that time, the
Company had sufficient cash and it was contemplated that the Loan would be
repaid within one year. The Loan accrues interest at a rate of LIBOR plus 1%.
The LIBOR plus one percent interest rate in April 2000 was 7.197% as compared to
the first mortgage interest rate in April 2000 of 6.90% for a 1-year ARM, 7.97%
for a 15-year FRM and 8.30% for a 30-year FRM. The Loan had an original maturity
date of the earlier of April 2005 or thirty days after the Company for any
reason no longer employed the Former CEO. The Former CEO resigned his position
at the Company effective September 29, 2000. On October 5, 2000, the

Company entered into an agreement with the Former CEO pursuant to which the
$750,000 promissory note for the Loan was amended to extend the due date to
April 30, 2001, and to provide that interest on the note shall accrue through
September 29, 2000 (the "Seperation and Forebearance Agreement"). The loan is
collateralized by a first mortgage interest on the personal residence of the
Former CEO. The Company agreed to extend the repayment date of the Loan so that
the Former CEO would be able to repay the Loan to the Company by selling his
personal residence. In addition to the Loan, pursuant to the terms of the
Seperation and Forebearance Agreement between the Company and the Former CEO,
the Former CEO also agreed to reimburse the Company for certain expenses
totaling $200,000, to be paid over a period of six months ending March 31, 2001.
These certain expenses were incurred by the Former CEO as part of his
personal expense account arrangement with the Company. During the year ended
March 31, 2001, $50,000 of the amounts owed to the Company by the Former CEO was
repaid and $22,000 has been recorded as a non-cash offset as a result of earned
but unpaid vacation owed to the Former CEO. During the year ended March 31,
2002, $813,593 was paid on the note, which included proceeds in the amount of
$777,713.48 received by the Company on August 3, 2001 for the sale of the
Former CEO's personal residence. At March 31, 2002, the total amount owed to
the Company by the Former CEO was approximately $83,657, and is classified as a
related party note receivable on the Company's consolidated balance sheet.
Because these amounts were not paid by their respective maturity dates, interest
is currently accruing at the default interest rate of 12%.

On June 29, 2000, the Company made an advance of $135,000 to the Former
CEO. The advance was subsequently repaid in full on July 26, 2000.

The Company issued advances to two officers of the Company in the
amount of $50,000 each on August 31, 1998. These advances accrued interest at
the prime rate plus 1%. These advances were due and payable in full upon the
officers cessation of employment with the Company or August 31, 2000, whichever
is earlier. The advances were repaid in full prior to August 31, 2000.

Effective October 2001, the Company approved and granted 2,900,000
shares of restricted stock to three executives at fair value. The restricted
shares are subject to a repurchase right which will permit the Company to
repurchase any shares which have not yet vested at the effective date of
termination of the officers' employment, as defined in their employment
agreements, for an amount equal to the purchase price per share paid by the
officers. The Company received a series of full recourse interest bearing
promissory notes for the value of the shares to be repaid by the officers. The
notes are to be repaid by the officers at the earlier of ten years or the date
upon which the employees dispose of their shares. The issuance of the restricted
shares and the notes receivable due from the officers is recorded in the
Company's financial statements. Only the vested portion of the shares has been
included in the weighted average number of common shares outstanding at March
31, 2002.

------------------------------------------------------
PROPOSAL NO. 2

Amendment to the
Certificate of Incorporation
to Effect a Reverse Stock Split
------------------------------------------------------

On June 27, 2002, the Company's Board of Directors adopted resolutions,
subject to approval by the Company's stockholders, to amend the Company's
Certificate of Incorporation (the "Amendment") to (i) effect, at any time within
one year following stockholder approval, a reverse stock split (the "Reverse
Split") of the Company's Common Stock, in an exchange ratio to be approved by
the Board of Directors ranging from one share of New Common Stock ("New Common
Stock") in exchange for each two issued and outstanding shares of Old Common
Stock ("Old Common Stock"), to one share of New Common Stock for each ten issued
and outstanding shares of Old Common Stock; (ii) to provide that no fractional
shares or scrip representing fractions of a share shall be issued, but in lieu
thereof, each fraction of a share that any stockholder would otherwise be
entitled to receive shall be rounded up to the nearest whole share, and (iii)
further that there be no change in the par value per share of each share of New
Common Stock as a result of the Reverse Split. The Company's Board of Directors
will have the discretion to determine the appropriate exchange ratio immediately
prior to effecting the Reverse Split, including determining whether the number
of shares of Old Common Stock to be exchanged for shares of New Common Stock
shall be a whole number of shares of Old Common Stock or a whole number and a
fraction of a whole number. The Company's Board believes that stockholder
approval of an exchange ratio in a range from one-for-two to one-for-ten (as
opposed to approval of one specified ratio) in which the Reverse Split may be
effected will provide the Company's Board of Directors with the maximum
flexibility to achieve the purposes of the Reverse Split and is in the best
interests of the Company and its stockholders. The form of the proposed
Amendment is annexed to this Proxy Statement as Appendix A.

Vote Required

Approval of the Reverse Split proposal requires the affirmative vote of
a majority of the shares of Common Stock outstanding as of the Record Date.
Abstentions and broker non-votes are not affirmative votes and therefore will
have the same effect as votes against the proposal. The Company's Board of
Directors has unanimously determined that the Reverse Split proposal is
advisable and in the best interests of the Company and the stockholders of the
Company. The Board of Directors unanimously recommends that the Company's
stockholders vote "FOR" approval of the Reverse Split Proposal.

Reasons For The Reverse Split

The Company's Common Stock is quoted on Nasdaq's National Market
("Nasdaq/NMS"). In order for the Common Stock to continue to be quoted thereon,
the Company and its Common Stock are required to continue to comply with various
listing maintenance standards established by Nasdaq. Among other things, the
Company is required to maintain an adjusted tangible net worth of at least
$4,000,000, the aggregate market value of shares of Common Stock held by persons
other than officers and directors ("public float") must be at least $5,000,000,
at least 400 persons must own at least 100 shares, and the minimum bid price of
the Common Stock must be at least $1.00 per share. The Company believes it
currently complies with all these requirements, except as discussed below with
respect to the minimum bid price standard.

Under Nasdaq's listing maintenance standards, if the closing bid price
of the Common Stock is under $1.00 per share for thirty consecutive business
days and does not thereafter regain compliance for a minimum of ten consecutive
business days during the ninety calendar days following notification by Nasdaq,
Nasdaq may de-list the Common Stock from trading on the Nasdaq/NMS. This minimum
bid requirement also applies to the Nasdaq Small Cap Market. If a de-listing
were to occur, the Common Stock would trade on the OTC Bulletin Board or in the
"pink sheets" maintained by the National Quotation Bureau, Inc. Such
alternatives are generally considered to be less efficient markets.

On March 13, 2002, the Company received a letter from Nasdaq advising
it that the Company's Common Stock had not met Nasdaq's minimum bid price
closing requirement for thirty consecutive trading days and that, if the Company
is unable to demonstrate compliance with this requirement during the ninety
calendar days ending June 11, 2002, its Common Stock will be de-listed (subject
to the Company's right to appeal the de-listing determination). The Company has
applied for transfer to the Nasdaq Small Cap Market and, if such transfer is
approved by Nasdaq, the Company would have until September 11, 2002 to be in
compliance with Nasdaq's minimum bid closing price requirement. In the 10
trading days preceding the mailing of this Proxy Statement, the Company's Common
Stock was trading in a range of $___ to $___. The Company understands that it is
Nasdaq's position that an ability to demonstrate sustained compliance is also
necessary to achieve compliance with this requirement. The principal purpose of
the Reverse Split is to increase the market price of the Company's Common Stock
above the Nasdaq minimum bid requirement. Giving the Company's Board of
Directors authority to implement the Reverse Split will avoid the need to call a
special meeting of, or seek consents from, stockholders under time constraints
to authorize a reverse split should it become necessary in order to seek to meet
Nasdaq's listing maintenance criteria.

Furthermore, the Company believes that maintaining the Company's
Nasdaq/NMS listing may provide the Company with a broader market for its Common
Stock and facilitate the use of the Common Stock in acquisitions and financing
transactions in which the Company may engage. There can be no assurance that,
even after effecting the Reverse Split, the Company will continue to meet the
minimum bid price and otherwise meet the requirements of Nasdaq for continued
inclusion for trading on Nasdaq.

Board Discretion To Implement Reverse Split

If the Reverse Split is approved by the Company's stockholders, the
Reverse Split will be implemented only if the Company's Board of Directors
determines that the Reverse Split (in an exchange ratio determined by the
Company's Board of Directors within the limits set forth in this proposal) is in
the best interests of Company and its stockholders, at any time within one year
following stockholder approval. The determination by the Company's Board to
select one exchange ratio or alternatively, to reject all of the exchange ratios
and not effect the Reverse Split, with the intention of maximizing the Company's
ability to remain in compliance with the continued listing maintenance
requirements of the Nasdaq Stock Market, Inc., will be based upon certain
factors including the minimum bid criteria of the Nasdaq National Market (or the
Nasdaq SmallCap Market or any other securities exchange or market, if
applicable), the existing and expected marketability and liquidity of the Common
Stock, the then current market price of the Common Stock, prevailing market
conditions and the Board's determination as to the likely effect of the Reverse
Split on the market price of the Common Stock. If the Reverse Split is not
effected within one year following stockholder approval, the Reverse Split will
not be effected without further approval by the stockholders pursuant to Section
242(c) of the Delaware General Corporation Law (the "DGCL").

Effects Of The Reverse Split On The Common Stock

The effect of a Reverse Split on the market prices for the Company's
Common Stock cannot be accurately predicted. Specifically, the Company cannot
assure that prices for shares of the Common Stock following the Reverse Split
will be proportionately increased by the stock split ratio selected for the
Reverse Split. In addition, the Company cannot assure that the Reverse Split
will achieve the desired results as outlined above. The Company cannot assure
that the Reverse Split will not adversely affect the market price of the Common
Stock, or that any increase in the price per share that may occur immediately
after the proposed Reverse Split could be sustained for any prolonged period of
time. As a result, there can be no assurance that implementation of the Reverse
Split will result in the Company complying with the requirements for continued
inclusion for trading on Nasdaq. Also, if the Reverse Split does not
proportionally increase the market prices for the Common Stock, the market value
of a Stockholder's holdings will consequently decrease.

Proportionate voting rights and other rights of the holders of Common
Stock will not be affected by the Reverse Split (other than immaterial amount as
a result of the rounding up of fractional shares as described below). For
example, a holder of 2% of the voting power of the outstanding shares of the Old
Common Stock immediately prior to the effective time of the Reverse Split will
continue to hold 2% of the voting power of the outstanding shares of the New
Common Stock after the Reverse Split. Although the Reverse Split will not affect
the rights of stockholders or any stockholder's proportionate equity interest in
the Company (subject to the treatment of fractional shares), the number of
authorized shares of the Common Stock will not be reduced. The Company is
currently authorized to issue a maximum of fifty million (50,000,000) shares of
Common Stock. This will increase the ability of the Company's Board of Directors
to issue such authorized and unissued shares without further stockholder action.
For example, the Company may use authorized but unissued shares as consideration
for acquisitions as part of its business strategy. The number of stockholders of
record will not be affected by the Reverse Split.

If approved, the Reverse Split will result in some stockholders owning
"odd-lots" of less than 100 shares of Common Stock. Brokerage commissions and
other costs of transactions in odd-lots are generally higher than the costs of
transactions in "round-lots" of even multiples of 100 shares.

Unless such approval is required by applicable law or regulation, the
Company may issue additional authorized but unissued shares of Common Stock
without the need to obtain stockholder approval. To the extent additional shares
are issued in this manner, the percentage interest of the Company's stockholders
and other reserved shares affected by the Reverse Split could be significantly
reduced. Although, the effective increase in the number of authorized but
unissued shares of Common Stock may be construed as having an antitakeover
effect by permitting the issuance of shares to purchasers who might oppose a
hostile takeover bid, the Reverse Split is not being proposed in response to any
effort of which management of the Company is aware to accumulate shares of
Common Stock or obtain control of the Company, nor is it part of a similar plan
by management. Holders of the Common Stock have no preemptive or other
subscription rights.

The Company also has outstanding certain stock options and warrants to
purchase shares of Common Stock. Under the terms of the outstanding stock
options and warrants, the Reverse Split will effect a reduction in the number of
shares of Common Stock issuable upon exercise of the stock options and warrants
in proportion to the exchange ratio of the Reverse Split and will effect a
proportionate increase in the exercise price of the stock options and warrants.

Based on approximately 25,138,001 shares of Common Stock outstanding as
of July 12, 2002, the following table reflects the approximate percentage
reduction in the outstanding shares of Common Stock and the approximate number
of shares of Common Stock that would be outstanding as a result of the Stock
Split:

Approximate Number of
Proposed Reverse Stock Split Percentage Reduction Shares to be Outstanding
---------------------------- -------------------- ------------------------

1 for 2 50% 12,569,000
1 for 3 66.7% 8,379,334
1 for 4 75% 6,284,500
1 for 5 80% 5,027,600
1 for 6 83.3% 4,189,667
1 for 7 85.7% 3,591,143
1 for 8 87.5% 3,142,250
1 for 9 88.9% 2,793,111
1for 10 90% 2,513,800

Amendment Effective Date

The Reverse Split would become effective at the time of the filing of
the Amendment with the Secretary of State of the State of Delaware or at such
later time as may be specified therein (the "Amendment Effective Time"). At the
Amendment Effective Time, each share of Old Common Stock issued and outstanding
immediately prior to the Amendment Effective Time will be, automatically and
without any further action on the part of the stockholders, reclassified into a
fraction of a share of New Common Stock, such fraction to be determined based on
the exchange ratio approved by the Board of Directors. For example, if a person
held 120 shares of Old Common Stock prior to the Amendment Effective Time, at
the Amendment Effective Time such person would hold 60 shares of New Common
Stock if a one-for-two ratio were selected, 40 shares of New Common Stock if a
one-for-three ratio were selected and 30 shares of New Common Stock if a
one-for-four ratio were selected.

New Shares Issued in Lieu of Fractional Shares

No scrip or fractional certificates will be issued as a result of the
Reverse Split. Any fraction of a share that any stockholders of record otherwise
would be entitled to receive shall be rounded up to the nearest whole share.

No Dissenter's Rights

No appraisal rights are available under DGCL or under the Company's
Certificate of Incorporation, as amended, or By-Laws to any stockholder who
dissents from the proposal to approve the Amendment. There may exist other
rights or actions under state law for stockholders who are aggrieved by reverse
stock splits generally. Although the nature and extent of such rights or actions
are uncertain and may vary depending upon the facts or circumstances,
stockholder challenges to corporate action in general are related to the
fiduciary responsibilities of corporate officers and directors and to the
fairness of corporate transactions.

Exchange Of Stock Certificates

As soon as practicable after the Amendment Effective Time, each holder
of record of Old Common Stock will receive instructions for the surrender of
certificate(s) representing the Old

Common Stock from an exchange agent designated by the Company. The instructions
will include a form of transmittal letter to be completed and returned to the
exchange agent. Upon proper completion and execution of the letter of
transmittal and return thereof to the exchange agent, together with the
certificate(s) representing the Old Common Stock into which the surrendered
shares have been reclassified, a stockholder will be entitled to receive a
certificate representing the number of full shares of the New Common Stock.
Until surrendered as contemplated herein, each certificate representing Old
Common Stock shall be deemed at and after the Reverse Split to represent the
corresponding number of full shares of New Common Stock contemplated by the
preceding sentence. Stockholders should not destroy any stock certificate and
should not submit any stock certificate until requested to do so.

Certain Federal Income Tax Consequences of the Reverse Split

The following discussion summarizing certain federal income tax
consequences of the Reverse Split is based on the Internal Revenue Code of 1986,
as amended, the applicable Treasury Regulations promulgated thereunder, judicial
authority and current administrative rulings and practices in effect on the date
of this Proxy Statement, all of which could be repealed, overruled or modified
at any time, possibly with retroactive effect. The Company has not sought and
will not seek an opinion of counsel or a ruling from the Internal Revenue
Service regarding the federal income tax consequences of the Reverse Split. This
discussion is for general information only and does not discuss consequences
which may apply to certain stockholders in light of their individual
circumstances (such as persons subject to the alternative minimum tax) or to
special classes of taxpayers (such as non-resident alien individuals and foreign
entities, dealers in securities, insurance companies, and tax-exempt entities).
This discussion also does not address any tax consequences of the Reverse Split
under state, local or foreign law.

STOCKHOLDERS ARE URGED AND EXPECTED TO CONSULT THEIR TAX ADVISORS AS TO
THE PARTICULAR CONSEQUENCES TO THEM OF THE REVERSE SPLIT.

The federal income tax consequences of the Reverse Split generally
should be as follows:

(a) a stockholder generally should recognize no gain or loss on the
receipt of New Common Stock solely in exchange for Old Common Stock;

(b) a stockholder's adjusted tax basis in shares of New Common Stock
generally should be the same as such stockholder's adjusted tax basis in the
shares of Old Common Stock exchanged therefor;

(c) a stockholder's holding period of the New Common Stock generally
should include such stockholder's holding period of the Old Common Stock
exchanged therefor; and

(d) the Company will not recognize gain or loss as a result of Reverse
Split.

Miscellaneous

The Old Common Stock is currently registered under the Exchange Act
and, as a result, the Company is subject to the periodic reporting and other
requirements of the Exchange Act. The Reverse Split will not affect the
registration of the New Common Stock under the Exchange Act. The par value of
the New Common Stock will not change as a result of the Reverse Split.
Accordingly, the New Common Stock account on the Company's Consolidated Balance
Sheet will be reduced with the Additional Paid-in Capital account being credited
with the amount by which the Common Stock

account was reduced.

IN ACCORDANCE WITH THE DGCL, NOTWITHSTANDING STOCKHOLDER APPROVAL OF
THE REVERSE SPLIT PROPOSAL, AT ANY TIME PRIOR TO THE EFFECTIVENESS OF THE
REVERSE SPLIT, THE COMPANY'S BOARD MAY ABANDON THE REVERSE SPLIT PROPOSAL
WITHOUT FURTHER ACTION BY THE STOCKHOLDERS.

------------------------------------------------------
PROPOSAL NO. 3

Adoption of the
2002 Stock Incentive Plan
------------------------------------------------------

The Company's stockholders are being asked to vote on the adoption of
ION Networks, Inc. 2002 Stock Incentive Plan (the "2002 Plan"). The 2002 Plan
provides for the issuance of stock options and grants of Common Stock covering
up to 1,250,000 shares of Common Stock. The Company's Board of Directors has
determined that the 2002 Plan is in the Company's best interests and in the best
interests of the Company's stockholders. The Company's Board of Directors
believes that the Company's long-term success is dependent upon its ability to
attract and retain highly qualified individuals who, by virtue of their ability
and qualifications, make important contributions to the company.

A general description of the principal terms of the 2002 Plan is set
forth below. However, the summary does not purport to be a complete description
of all of the provisions of the 2002 Plan. A copy of the 2002 Plan is attached
hereto as Appendix B.

Vote Required

The affirmative vote of the holders of a majority of Common Stock,
present in person or represented by proxy at the annual meeting and entitled to
vote, is required to approve the 2002 Plan. With respect to this proposal, the
Company believes that brokers who are member firms of the New York Stock
Exchange ("NYSE") and who hold shares in street name for customers have the
authority under the rules of the NYSE to vote those shares.

General Description

The 2002 Plan was approved by the Company's board of directors in June
2002. The purposes of the 2002 Plan are to give the Company's employees and
others who perform substantial services for the company an incentive, through
ownership of Common Stock, to continue in their service, and to help the company
compete effectively with other enterprises in the industry to attract qualified
individuals. The 2002 Plan permits the grant of awards to the Company's
directors, consultants and other employees, as well as the directors,
consultants and employees of a parent company or subsidiary.

Administration

The 2002 Plan is administered by the administrator, defined as either
the Company's board of directors or a committee designated by the Company's
board. We intend for the compensation committee of the Company's board of
directors to administer the 2002 Plan. The compensation committee is constituted
in such a manner as to satisfy applicable laws, including Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended, and is comprised solely
of two or more "outside directors" as defined under Internal Revenue Code
Section 162(m) and its applicable tax regulations. For grants of awards to
individuals not subject to Rule 16b-3 and the Internal Revenue Code Section
162(m), the Company's board of directors may authorize one or more officers to
grant such awards.

Amendment and Termination

The Company's board of directors may amend, suspend or terminate the
2002 Plan at any time. To the extent necessary to comply with applicable
provisions of Federal securities laws, state corporate and securities laws, the
Internal Revenue Code, the rules of any applicable stock exchange or national
market system, and the rules of any foreign jurisdiction applicable to awards
granted to residents therein, we will obtain stockholder approval of any
amendment to the 2002 Plan in such a manner and to such a degree as required. In
addition, the reduction of the exercise price of any option awarded under the
2002 Plan will be subject to stockholder approval and such provision may not be
amended without stockholder approval. Furthermore, no amendment, suspension or
termination shall adversely affect any rights under outstanding awards without
the grantee's consent. The 2002 Plan will terminate in June 2012, unless
previously terminated by the Company's board of directors.

Terms & Conditions of Awards

The 2002 Plan permits the grant of "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code only to the Company's
employees or employees of a parent company or subsidiary. Awards other than
incentive stock options may be granted to employees, directors and consultants.
Under the 2002 Plan, awards may be granted to such employees, directors or
consultants who are residing in foreign jurisdictions as the administrator may
determine from time to time. In addition, awards of unrestricted or restricted
stock may be granted to employees, directors and consultants, provided that no
more than 250,000 shares of Common Stock reserved under the 2002 Plan may be
issued in connection with awards of stock or stock appreciation rights.

The 2002 Plan authorizes the administrator to select the employees,
directors and consultants to whom awards may be granted, to determine whether
and to what extent awards are granted, to determine the number of shares of
Common Stock issuable under each award, to approve award agreements for use
under the 2002 Plan, to construe and interpret the terms of the 2002 Plan and
awards granted thereunder, to establish additional terms, conditions, rules or
procedures to accommodate the rules or laws of applicable foreign jurisdictions
and to take such other actions not inconsistent with the 2002 Plan.
Notwithstanding the foregoing, the term of an award may not be for more than 10
years (or 5 years in the case of incentive stock options granted to any grantee
who owns stock representing more than 10% of the combined voting power of the
Company's stock or the stock of a parent company or subsidiary). Additionally,
in no event may any participant in the 2002 Plan be granted stock options and
stock appreciation rights for more than 300,000 shares in any fiscal year.

The 2002 Plan authorizes the administrator to grant options at an
exercise price of not less than 100% (or 110%, in the case of incentive stock
options granted to any grantee who owns stock representing more than 10% of the
combined voting power of the Company's stock or the stock of a parent company or
subsidiary) of the fair market value of the common stock on the date of the
option grant. The exercise price of awards intended to qualify as
performance-based compensation for purposes of the Internal Revenue Code,
Section 162(m), will be not less than 100% of the fair market value. The
exercise price is generally payable in cash, check, surrender of pre-owned
shares of common stock or, in certain circumstances, with such documentation as
the administrator and the broker, if applicable, will require to effect an
exercise of an award and delivery to us of the sale or loan proceeds required to
pay the exercise price. The aggregate fair market value of the common stock with
respect to any incentive stock options that are exercisable for the first time
by an eligible employee in any calendar year may not exceed $100,000.

The awards may be granted subject to vesting schedules and restrictions
on transfer and repurchase or forfeiture rights in the Company's favor as
specified in the agreements to be issued under the 2002 Plan. The administrator
has the authority to accelerate the vesting schedule of awards so that they
become fully vested, exercisable, and released from any restrictions on transfer
and repurchase or forfeiture rights in the event of a change in control or
corporate transaction, as defined in

the 2002 Plan. Effective upon the consummation of the corporate transaction, all
outstanding awards under the 2002 Plan will terminate unless assumed by the
successor company or its parent.

Under the 2002 Plan, incentive stock options may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised during the
lifetime of the grantee only by the grantee. However, the 2002 Plan permits the
designation of beneficiaries by holders of incentive stock options. Other awards
are transferable by will or by the laws of descent and distribution, and during
the grantee's lifetime, by gift and/or pursuant to a domestic relations order to
the grantee's immediate family to the extent and in the manner permitted by the
administrator.

Under the 2002 Plan, the administrator may establish one or more
programs under the 2002 Plan to permit selected grantees the opportunity to
elect to defer receipt of consideration payable under an award. The
administrator also may establish under the 2002 Plan, separate programs for the
grant of particular forms of awards to one or more classes of grantees.

Certain Federal Tax Consequences

The grant of a non-qualified stock option under the 2002 Plan will not
result in any federal income tax consequences to the grantee or to us. Upon
exercise of a non-qualified stock option, the grantee is subject to income taxes
at the rate applicable to ordinary compensation income on the difference between
the option exercise price and the fair market value of the shares on the date of
exercise. This income is subject to withholding for federal income and
employment tax purposes. We are entitled to an income tax deduction in the
amount of the income recognized by the grantee, subject to the requirement of
reasonableness, certain limitations imposed by Internal Revenue Code Section
162(m) and the satisfaction of withholding obligations. Any gain or loss on the
grantee's subsequent disposition of the shares of common stock will receive long
or short-term capital gain or loss treatment, depending on whether the shares
are held for more than one year following exercise. We are not entitled to
receive an income tax deduction for any such gain.

The grant of an incentive stock option under the 2002 Plan will not
result in any federal income tax consequences to the grantee or to us. A grantee
recognizes no federal taxable income upon exercising an incentive stock option
(subject to the alternative minimum tax rules discussed below), and we will not
receive a deduction at the time of exercise. In the event of a disposition of
stock acquired upon exercise of an incentive stock option, the tax consequences
depend upon how long the grantee has held the shares of common stock. If the
grantee does not dispose of the shares within two years after the incentive
stock option was granted, nor within one year after the incentive stock option
was exercised, the grantee will recognize a long-term capital gain (or loss)
equal to the difference between the sale price of the shares and the exercise
price. We are not entitled to any tax deduction under these circumstances.

If the grantee fails to satisfy either of the foregoing holding
periods, he or she must recognize ordinary income in the year of the disposition
(referred to as a "disqualifying disposition"). The amount of such ordinary
income generally is the lesser of (i) the difference between the amount realized
on the disposition and the exercise price or (ii) the difference between the
fair market value of the stock on the exercise date and the exercise price. Any
gain in excess of the amount taxed as ordinary income will be treated as a long
or short-term capital gain, depending on whether the stock was held for more
than one year. In the year of the disqualifying disposition, we are entitled to
a tax deduction equal to the amount of ordinary income recognized by the
grantee, subject to the requirement of reasonableness and certain limitations
imposed by Internal Revenue Code Section 162(m).

The exercise of an incentive stock option may increase a grantee's
alternative minimum tax.

The "spread" under an incentive stock option -- i.e., the difference between the
fair market value of the shares at exercise and the exercise price -- is
classified as an item of adjustment in the year of exercise for purposes of the
alternative minimum tax. If a grantee's alternative minimum tax liability
exceeds such grantee's regular income tax liability, the grantee will owe the
larger amount of taxes. In order to avoid the application of alternative minimum
tax with respect to incentive stock options, the grantee must sell the shares
within the same calendar year in which the incentive stock options are
exercised. However, such a sale of shares within the same year of exercise will
constitute a disqualifying disposition, as described above.

The grant of restricted stock will subject the recipient to ordinary
compensation income on the difference between the amount paid for such stock and
the fair market value of the shares on the date that the restrictions lapse.
This income is subject to withholding for federal income and employment tax
purposes. We are entitled to an income tax deduction in the amount of the
ordinary income recognized by the recipient, subject to possible limitations
imposed by Internal Revenue Code Section 162(m), the requirement of
reasonableness and the satisfaction of withholding obligations. Any gain or loss
on the recipient's subsequent disposition of the shares will receive long or
short-term capital gain or loss treatment depending on whether the shares are
held for more than one year and depending on how long the stock has been held
since the restrictions lapsed. We are not entitled to receive a tax deduction
for any such gain.

Recipients of restricted stock may make an election under Internal
Revenue Code Section 83(b) to recognize as ordinary compensation income in the
year that such restricted stock is granted, the amount equal to the spread
between the amount paid for such stock and the fair market value on the date of
the issuance of the stock. If such an election is made, the recipient recognizes
no further amounts of compensation income upon the lapse of any restrictions and
any gain or loss on subsequent disposition will be long or short-term capital
gain to the recipient. The election must be made within thirty days from the
time the restricted stock is issued.

The foregoing is only a summary of the federal income tax consequences
of the 2002 Plan transactions, and is based upon federal income tax laws in
effect on the date of this proxy statement. Reference should be made to the
applicable provisions of the Internal Revenue Code. This summary does not
purport to be complete, and does not discuss the tax consequences of a grantee's
death or the tax laws of any municipality, state or foreign country to which the
grantee may be subject.

Amended Plan Benefits

As of the date of this proxy statement, no executive officer or
director, and no associate of any executive office or director, has been granted
an option to purchase shares under the 2002 Plan. The benefits to be received
pursuant to the adoption of the 2002 Plan by the Company's executive officers,
directors and employees are not determinable at this time.

Recommendation of the Board of Directors

OUR BOARD OF DIRECTORS HAS APPROVED THE 2002 STOCK INCENTIVE PLAN AND
RECOMMENDS THAT THE STOCKHOLDERS APPROVE THE 2002 STOCK INCENTIVE PLAN.

Equity Compensation Plan Information

The following table sets forth information regarding the Company's
equity compensation plans as of March 31, 2002:

(a) (b) (c)
Number of securities to Weighted-average Number of securities
be issued upon exercise exercise price of remaining available for
of outstanding options, outstanding future issuance under equity
warrants, and rights options, warrants, compensation plans
and rights (excluding securities
reflecting in column (a)

Plan Category

Equity compensation plans approved by 4,438,260 1.82 1,079,080
security holders/(1)/

Equity compensation plans not approved 688,000 1.30 -
by security holders/(2)/
Total 5,126,260 1.75 1,079,080

(1) Shareholder Approved Plans

In November 2000, the Company adopted its 2000 Stock Option Plan (the
"2000 Plan"). The aggregate number of shares of common stock for which options
may be granted under the 2000 Plan is 3,000,000. The maximum number of options
which may be granted to an employee during any calendar year under the 2000 Plan
shall be 400,000. The term of these non-transferable stock options may not
exceed ten years. The exercise price of these stock options may not be less than
100% (110% if the person granted such options owns more than ten percent of the
outstanding common stock) of the fair value of one share of common stock on the
date of grant. During the years ended March 31, 2002 and 2001, the Company
granted options to purchase 1,854,000 and 1,724,500 shares, respectively. At
March 31, 2002, 2,560,200 options were outstanding under the 2000 Plan, of which
759,915 options were exercisable.

The aggregate number of shares of common stock for which options may be
granted under the 1998 Stock Option Plan (the "1998 Plan") is 3,000,000. The
maximum number of options which may be granted to an employee during any
calendar year under the 1998 Plan shall be 400,000. The term of these
non-transferable stock options may not exceed ten years. The exercise price of
these stock options may not be less than 100% (110% if the person granted such
options owns more than ten percent of the outstanding common stock) of the fair
value of one share of common stock on the date of grant. During the years ended
March 31, 2002 and 2001, the Company granted options to purchase 463,800 and
1,596,078 shares, respectively. At March 31, 2002, 1,783,459 options were
outstanding under the 1998 Plan, of which 1,367,642 options were exercisable.

In August 1994, the Company adopted its 1994 Stock Option Plan (the
"1994 Plan"). The 1994 Plan, as amended, increased the number of shares of
common stock for which options may be granted to a maximum of 1,250,000 shares.
The term of these non-transferable stock options may not exceed

ten years. The exercise price of these stock options may not be less than 100%
(110% if the person granted such options owns more than ten percent of the
outstanding common stock) of the fair market value of one common stock on the
date of grant. During the years ended March 31, 2002 and 2001, there were no
option grants provided under the 1994 Plan. At March 31, 2002, 94,601 options
were outstanding under the 1994 Plan, of which 64,991 options were exercisable.

Of the options granted in fiscal 2002 and 2001, 0 and 578,528,
respectively, were granted under the Company's Time Accelerated Restricted Stock
Award Plan ("TARSAP"). The options vest after seven years, however, under the
TARSAP, the vesting is accelerated to the last day of the fiscal year in which
the options are granted if the Company meets certain predetermined sales
targets. The Company did not meet the targets for 2001 and, as such, all options
granted under the TARSAP in 2001 will vest seven years from the original date of
grant.

(2) Non-Shareholder Approved Awards

The Company has granted options and warrants to purchase 688,000 shares
of Common Stock outside of the shareholder approved plans. The awards have been
made to employees, directors and consultants and have been granted with an
exercise price equal to the fair market value of the Common Stock on the date of
grant. The Company has not reserved a specific number of shares for such awards.
The non-shareholder approved awards are more specifically described below.

During July 2001 in connection with services being performed by a
consultant, the Company issued warrants to purchase 48,000 shares of the
Company's Common Stock at $0.62 per share. The warrants vested immediately and
expire five years from the date of the grant.

During January 2002 in connection with services being performed by a
consultant, the Company issued warrants to purchase 100,000 shares of the
Company's Common Stock at $1.35 per share and 50,000 shares of Common Stock at
$1.80 per share. The warrants vested immediately and expire three years from the
date of the grant.

On March 19, 1999, the Company issued options to certain consultants
and employees to purchase an aggregate of 20,000 shares of the Company's Common
Stock, all of which vested on the first year anniversary of the date of grant.
The options expire six years from the date of grant. However, in the event of
(a) the liquidation or dissolution of the Company or (b) a merger in which the
Company is not the surviving corporation or a consolidation involving the
Company, the options shall terminate, unless other provision is made therefore
in the transaction. The exercise price of the options is $2.41 which was the
market value of the Company's Common Stock on the date of grant.

During September 1997 and March 1998, the Company issued options to
certain officers and directors to purchase an aggregate of 80,000 shares of the
Company's Common Stock, 25,000 of which vested on the date of grant, 7,500 of
which vested three months from the date of grant, 7,500 of which vested six
months from the date of grant, 7,500 of which vested nine months from the date
of grant and 32,500 of which vested on the first year anniversary of the date of
grant. The 55,000 options expire five years from the date of grant and 25,000
options expire six years from the date of grant. However, in the event of (a)
the liquidation or dissolution of the Company or (b) a merger in which the
Company is not the surviving corporation or a consolidation involving the
Company, the options shall terminate, unless other provision is made therefore
in the transaction. The options were granted at fair market value with exercise
prices ranging from $1.47 to $2.06.

On September 25, 1996, the Company issued options to certain officers
and directors to

purchase 400,000 shares of the Company's Common Stock, of which 200,000 vested
immediately and 100,000 vested on April 1, 1998 and 1999. The options expire ten
years from the date of grant. However, in the event of (a) the liquidation or
dissolution of the Company or (b) a merger in which the Company is not the
surviving corporation or a consolidation involving the Company, the options
shall terminate, unless other provision is made therefore in the transaction.
The exercise price of the options is $1.156 which was the market value of the
Company's Common Stock on the date of grant.

--------------------------------------------------
PROPOSAL NO. 4

Ratification of the Selection of Deloitte
and Touche LLP as the Company's
Independent Auditors
--------------------------------------------------

The Company's stockholders are being asked to ratify the selection of
Deloitte and Touche LLP to serve as independent auditors for the Company until
the next annual meeting of stockholders, or until a successor is appointed.

The affirmative vote of a majority of the Common Stock present in person or
by proxy at the Annual Meeting and entitled to vote is required for the adoption
of this Proposal No.4. The Board of Directors of the Company recommends a vote
for the ratification of the selection of Deloitte and Touche LLP as independent
auditors.

On June 27, 2001, PricewaterhouseCoopers LLP ("PwC") indicated that upon
completion of their audit of the financial statements for the year ended March
31, 2001, it would decline to stand for re-election as Ion Networks, Inc's
independent accountant for the fiscal year ending March 31, 2002. PwC completed
their audit on June 28, 2001. PwC's reports on the consolidated financial
statements of the Company for fiscal years 2001 and 2000 did not contain any
adverse opinion or a disclaimer of opinion, and were not qualified or modified
as to uncertainty, audit scope or accounting principles. During fiscal years
2001 and 2000 and the subsequent interim period through June 28, 2001, there
were no disagreements with PwC regarding any matters of accounting principles or
practices, financial statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of PwC, would have caused PwC
to make reference to the subject matter of the disagreement in their report on
the financial statements for such years. The Company requested that PwC furnish
it with a letter addressed to the Securities and Exchange Commission stating
whether it agrees with the above statements. The letter, dated June 28, 2001 was
filed as Exhibit 16.1 to the Company's annual report on Form 10-KSB.

On August 13, 2001, the Company engaged Deloitte & Touche LLP ("Deloitte")
as its new independent auditor for the fiscal year ending March 31, 2002. A
representative of Deloitte is expected to be at the Annual Meeting and will have
the opportunity to make a statement if the representative desires to do so and
is also expected to be available to respond to appropriate questions.

Audit Fees

Audit fees billed to the Company by Deloitte for its audit of the Company's
financial statement for the fiscal year 2002 and for its review of the financial
statements included in the Company's Quarterly Reports on Form 10-QSB filed with
the Securities and Exchange Commission for that period totaled $94,279.

Financial Information Systems Design and Implementation Fees

The Company did not engage Deloitte to provide advice to the Company
regarding financial information systems design and implementation during fiscal
year 2000.

All Other Fees

Fees billed to the Company by Deloitte during fiscal year 2002 for all
other non-audit services rendered to the Company, including tax related
services, totaled $4,500. In connection with the recently revised standards for
independence of the Company's independent public accountants promulgated by the
Securities and Exchange Commission, the Audit Committee has considered whether
the provision of such services is compatible with maintaining the independence
of Deloitte.

Stockholder Proposals

Stockholder proposals intended to be presented at the Company's 2003 Annual
Meeting of Stockholders must be received by the Company for inclusion in the
Company's proxy statement relating to that meeting no later than May 12, 2003.
Such proposals should be addressed to the Company's Secretary, at the address
set forth above. Notice of shareholder proposals submitted outside the process
of Rule 14a-8 of the Securities Exchange Act of 1934 (relating to proposals to
be presented at the Annual Meeting but not included in the Company's proxy
statement and form of proxy), will be considered untimely, and thus the
Company's proxy may confer discretionary voting authority on the persons named
is the proxy with respect to such proposals, if received after July 27, 2003.

Other Matters

The Board of Directors of the Company does not know of any other matters
that are to be presented for action at the Annual Meeting. Should any other
matters properly come before the Annual Meeting or any adjournments thereof, the
persons named in the enclosed proxy will have the discretionary authority to
vote all proxies received with respect to such matters in accordance with their
judgment.

Annual Report To Stockholders

The Company's 2002 Annual Report to Stockholders has been mailed to
stockholders simultaneously with the mailing of this Proxy Statement, but except
as herein stated, such report is not incorporated herein and is not deemed to be
a part of this proxy solicitation material.

A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB, AS AMENDED AND AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WITHOUT EXHIBITS, WILL BE
FURNISHED WITHOUT CHARGE TO ANY PERSON FROM WHOM THE ACCOMPANYING PROXY IS
SOLICITED UPON WRITTEN REQUEST TO THE COMPANY'S SECRETARY, CAMERON SAIFI, ION
NETWORKS, INC., 1551 SOUTH WASHINGTON AVENUE, PISCATAWAY, NEW JERSEY 08854.

By Order of the Board of Directors

Cameron Saifi
Secretary

Piscataway, New Jersey
_____________, 2002

STOCKHOLDERS ARE URGED TO SPECIFY THEIR CHOICES AND DATE, SIGN AND RETURN THE
ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE. A PROMPT RESPONSE IS HELPFUL AND
YOUR COOPERATION WILL BE APPRECIATED.

ION NETWORKS, INC.
(Solicited on behalf of the Board of Directors)

The undersigned holder of Common Stock of ION NETWORKS, INC., revoking all
proxies heretofore given, hereby constitutes and appoints Stephen M. Deixler and
Cameron Saifi and each of them, Proxies, will full power of substitution, for
the undersigned and in the name, place and stead of the undersigned, to vote all
of the undersigned's shares of said stock, according to the number of votes and
with all the powers the undersigned would possess if personally present, at the
2002 Annual Meeting of Stockholders of ION NETWORKS, INC. (the "Annual Meeting")
to be held at Washington Plaza, 1551 South Washington Avenue, Piscataway, New
Jersey on Thursday, October 17, 2002 at 10:30 A.M., Eastern Daylight Time, and
at any adjournments or postponements thereof.

The undersigned hereby acknowledges receipt of the Notice of Meeting and Proxy
Statement relating to the Annual Meeting and hereby revokes and proxy or proxies
heretofore given.

Each properly executed Proxy will be voted in accordance with the specifications
made on this Proxy and in the discretion of the Proxies on any other matter that
may come before the Annual Meeting. Where no choice is specified, this Proxy
will be voted (i) FOR all listed nominees to serve as directors, (ii) FOR the
approval of the amendment to the Company's Certificate of Incorporation to
effect a reverse stock split of the Company's Common Stock, (iii) FOR the
adoption of the ION Networks, Inc. 2002 Stock Incentive Plan, (iv) FOR the
ratification of the selection of Deloitte and Touche LLP as the Company's
independent auditors; and (v) to transact such other business as may properly
come before the Annual Meeting or any adjournment or postponement thereof.

TO VOTE BY MAIL

Please date, sign and mail your proxy card in the envelope provided as soon as
possible.

1. Election of Six Directors

FOR all nominees WITHHOLD AUTHORITY Nominees: Stephen M. Deixler
listed at right to vote for all Baruch Halpern
(except as marked to nominees listed at Alexander C. Stark, Jr.
the contrary) right Frank S. Russo
Kam Saifi
[_] [_] Vincent Curatolo

If you wish to withhold authority to vote for any individual nominee, write that
nominee's name in the space below.

The Board of Directors Recommends a Vote FOR ALL LISTED NOMINEES

2. Proposal to approve an amendment to the Company's Certificate of
Incorporation to effect a reverse stock split of the Company's Common
Stock.

FOR AGAINST ABSTAIN
[_] [_] [_]

The Board of Directors Recommends a Vote FOR the Amendment to the Company's
Certificate of Incorporation.

3. Proposal to adopt the ION Networks, Inc. 2002 Stock Incentive Plan.

FOR AGAINST ABSTAIN
[_] [_] [_]

The Board of Directors Recommends a Vote FOR the adoption of the ION Networks,
Inc. 2002 Stock Incentive Plan.

4. Proposal to ratify the selection of Deloitte & Touche LLP as the
Company's independent auditors.

FOR AGAINST ABSTAIN
[_] [_] [_]

The Board of Directors Recommends a Vote FOR the ratification of the selection
of Deloitte & Touche LLP as the Company's independent auditors.

5. The proxies are authorized to vote in their discretion upon such other
matters as may properly come before the Annual Meeting.

Dated: _________________________, 2002

______________________________________
Print Full Name

______________________________________
Signature

______________________________________
Print Full Name

______________________________________
Signature if held jointly

(Signature(s) should conform to names
as registered. For jointly owned
shares, each owner should sign. When
signing as attorney, executor,
administrator, trustee, guardian or
officer of a corporation, please give
full title.)