"Cell-Loc continues to focus on core competencies with the goal of creating technology that will provide revenue to the Company and value to its shareholders," said Dr. Michel Fattouche, president & CEO, Cell-Loc Inc. "Our deferred revenue and proceeds are evidence of this commitment."

CORPORATE HIGHLIGHTS

Joint Venture Agreement

On December 5, 2001, the Company entered into an agreement to license and manufacture Cell-Loc's proprietary Cellocate^TM technology in China, subject to the government of China's approval. Cell-Loc will provide the rights to the technology and have a 35 percent ownership in the joint venture. The other joint venture partners are A-Info Electronic Technology Group Inc. (12 percent ownership) and Chongqing Jinmei Communications Co. Ltd. (53 percent ownership). In addition to the partnership interest, Cell-Loc will have the right to purchase Cellocate^TM equipment manufactured by the joint venture under advantageous terms for sale and use worldwide and will retain the rights to its technology outside of China, including any improvements achieved by the joint venture.

Board and Executive Appointments
Mr. Sheldon Reid was appointed to the position of executive vice president on October 19, 2001. Mr. Reid was also appointed to the Cell-Loc Board of Directors on November 27, 2001. He has had years of experience crafting complex commercial transactions involving multiple players in an international setting.

Mr. Keith Bohn was appointed to the Cell-Loc Board of Directors on November 27, 2001. Mr. Bohn has many years of business and management experience in the energy and commodities sector and is a senior vice president with PG&E Energy Trading, Canada Corporation. Mr. Bohn is also a director of IQ2 Communications Corp.

INTERIM MANAGEMENT DISCUSSION AND ANALYSIS
During the quarter ended December 31, 2001 the Company incurred a loss of $2.6 million. The loss is a decrease from the $3.3 million loss for the quarter ended September 20, 2001 and a substantial decrease from the $11.3 million loss for the same period last year. The improved performance can be attributed to a commitment to commercialize our product, the continued focus on core competencies and projects and limiting capital and discretionary expenditures. The Company used $2.1 million for operations this quarter, which is a 25 percent decrease from the $2.8 million for the quarter ended September 2001 and a 77 percent decrease from the same quarter last year. Network and capital expenditures for the quarter decreased to $.008 million from $.042 million last quarter and $11.7 million for the quarter ended December 2000.

Deferred Revenue
In October 2001, the Company received $1.5 million, which has been recorded as deferred revenue, from a license agreement with IQ2 Communications Corp. (IQ2) for issuing a license to exploit its technology in the City of Calgary with the ability to elect further territories upon additional payment of fees. At IQ2's selection, they will be granted first right of opportunity to acquire additional interests in the Calgary market and a select number of other North American markets upon the payment to Cell-Loc of sums up to $5.3 million.

In December 2001, IQ2 exercised its right to increase its interest in the joint venture arrangements established in the October licensing agreement.. As consideration for increasing its net profits interest to 70 percent from the original interest of 50 percent, IQ2 paid Cell-Loc an additional $1.5 million which has been deferred.

Recognition of revenue and proceeds associated with the $3.0 million in payments received has been deferred pending completion of the Company's performance obligations under the October licensing agreement with IQ2. The deferred proceeds have been reduced by the value of the options to purchase common shares issued to IQ2 and a third party and have been included in current liabilities.

Each transaction with IQ2 also included, subject to regulatory approval, an option to purchase Cell-Loc common shares at a specified price. The options vest immediately upon grant and have an expiry date of five years from the date of issue. The fair value of these options, plus an additional amount of options granted under an agreement with a third party for services provided to Cell-Loc relating to the joint venture agreement, have been valued in accordance with the Black Scholes option pricing model.

Operations
Operation expenses decreased 53 percent to $.638 million from the previous quarter and from $2.8 million for the same quarter last year. The reduction of costs can be largely attributed to an amendment in the length of the term of U.S. tower lease contracts. The lease terms have been adjusted and reflected in the commitment note in the financial statements. Cost savings were also realized through consolidation of the number of inventory storage facilities.

Marketing and Business Development
Expenses for marketing and business development for the quarter ended December 2001 were $.134 million. This number has decreased slightly from $.183 million for last quarter and decreased 90 percent from the same period last year. The small reduction this quarter was realized as a result of the restructuring program undertaken in September 2001 and is offset by an increase in business development travel and related expenses that are required as a result of current negotiations.

General and Administration
A reduction to $.675 million of general and administrative expenses can also be attributed to the restructuring program of September 2001. The reduction of staff levels, and the focus on ensuring expenditures are limited to core projects and essential items, have resulted in a consistent level of general and administrative expenditures. The current quarter shows a 5 percent reduction from the $.713 million spent during the quarter ended September 2001 and is a 62 percent decrease from the $1.8 million for the same period in December 2000.

Research and Development
As the Company continues to upgrade and develop the Cell-Loc technology, research and development expenses will be required. The expenditures are and will continue to be specifically related to the ongoing technical development and refinement required to bring our product to commercialization. The $.666 million of expenses this quarter, is a marginal increase from the $.620 million last quarter and a substantial decrease from the $1.6 million for the quarter ended December 2000. The 60 percent reduction in expenses over the same period last year is a testament to the commitment made to focus only on core projects.

Liquidity and Capital Resources
The December 2001 total cash balance of $3.1 million represents a $1.1 million, or 54 percent, increase from the September quarter cash balance of $2.0 million. The increase in cash is due to the payments from IQ2 during the quarter. The working capital deficit has decreased 67 percent to $3.1 million from $9.2 million for the same period the previous year. The increase in working capital deficit from $1.5 million for the period ended September 2001 is a direct result of deferring $3.0 million received from IQ2 Communications Corp.

The monthly burn has been tightly controlled and will continue to be scrutinized to ensure optimal use of the Company's cash resources. The Company anticipates sourcing additional cash through various avenues, which may include commercial agreements and the pending $40 million U.S. equity line commitment previously announced that is awaiting final regulatory approval.

Business Risks and Prospects
The company is actively negotiating commercial contracts. The joint venture agreements as executed this quarter are examples of the focused business strategy that Cell-Loc has now undertaken. Joint venture arrangements, such as those negotiated with IQ2 and Cell-Loc Chongqing, will enable the company to introduce the Cell-Loc technology to the global market. The technology has received endorsement from independent third parties and testing of the product has delivered results as expected.

Continued support from vendors and creditors is essential to achieving the goals of the restructuring plan introduced in September 2001. The ability to source products and continue research and development is contingent on the Company's ability to be able to continue the working relationships that have been established with the vendors and creditors who supply goods and services to Cell-Loc.

The Company's ability to continue ongoing operations is also dependent upon obtaining financing and revenue to expand its network, while developing and commercializing its business and services to the point that it achieves profitable operations and positive cash flows on a commercial scale. The Company's ability to continue to generate net income and achieve positive cash flow in the future is dependent upon various factors, including the level of market acceptance of its services, the degree of competition encountered by the Company, the cost of acquiring new customers, technology risks, the ability to fund continued network deployment and operations, general economic conditions and regulatory requirements.

About Cell-Loc Inc.
Cell-Loc Inc. (www.cell-loc.com), a leader in the emerging wireless location industry, is the developer of Cellocate^TM, a family of wireless location products that enable location-based services. Located in Calgary, Alberta, Cell-Loc currently develops, markets and supports its patented wireless location technology in North and South American countries with a view to expanding globally. Cell-Loc is listed on the Toronto Stock Exchange under the trading symbol: "CLQ."

About TimesThree Inc.
Based in Texas, TimesThree Inc. (www.timesthree.com), wholly owned by Cell-Loc Inc., is designed to enable location-sensitive services such as L411, fleet tracking, asset tracking, child/senior find and pet tracking.

- 30 -