"Effective June 1, 2002, Cell-Loc will hand-off its commercial Calgary Cellocate Beacon^TM Network to IQ2 Communications", said Dr. Michel Fattouche, President & CEO, Cell-Loc Inc. "Concurrently with Cell-Loc's final testing, IQ2 is completing its testing, and upon completion we are confident that IQ2 will make a declaration of the contractual obligation being met by Cell-Loc, and will commence offering location-based services through TimesThree Calgary."

CORPORATE HIGHLIGHTS

$40 Million Line of Equity
On May 16, 2002, the Company announced that it had received final receipts from the Alberta and Ontario securities commissions and closed its prospectus offering of subscription shares and commitment warrants under an equity line of credit for proceeds of up to $40 million (US). The Company has not yet drawn on this equity line of credit.

Joint Venture Agreement
On December 5, 2001, the Company entered into joint venture agreement to license and manufacture Cell-Loc's proprietary Cellocate^TM CDMA technology in China. The joint venture entity, Cell-Loc (Chongqing) Wireless Location Inc. will hold the license from Cell-Loc for exclusive use in China, including Hong Kong and Macau. Cell-Loc will hold 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 CDMA equipment manufactured by the joint venture under advantageous terms for sale and use worldwide and will also retain the rights to its technology outside of China, including any improvements achieved by the joint venture.

Board and Executive Appointments
Mr. Sergio Leite was appointed to the Cell-Loc board of directors on March 27, 2002. Mr. Leite is the President of PST Industria Electronica da Amazonia Ltda. ("PST"), Cell-Loc's Cellocate Beacon^TM manufacturing partner. Mr. Leite has over 15 years of experience in the consumer electronics market and the car and truck manufacturing industry.

Private Placement
In April 2002, the Company completed a private placement of 290,000 units with Halidon Investing Inc., a private company of which Mr. Leite holds the position of President. This placement resulted in net proceeds of approximately $565,500.

Interim Management Discussion & Analysis

During the quarter ended March 31, 2002 the Company incurred a loss of $2.05 million. The loss is a substantial decrease from the $18.3 million loss for the same period last year, which included $14.4 million of restructuring charge. The improved performance can be attributed to a commitment to commercialize our product, the continued focus on core competencies and limiting capital and discretionary expenditures. The company used $1.5 million for operations this quarter, which is a 28 percent decrease from the $2.1 million for the quarter ended December 2001 and a 75 percent decrease from the same quarter last year. Network and capital expenditures for the quarter increased to $134,000 from $6,000 last quarter and $1.5 million for the quarter ended March 2001.

Deferred Revenue
In March 2002, the Company received $800,000 which has been recorded as deferred revenue from the license agreement with IQ2 Communications Corp. ("IQ2") for exercising its option to acquire from Cell-Loc the sole rights to Cell-Loc's intellectual property for use in the Austin, Texas geographic market, subject to an agreement between the parties dated October 5, 2001.

Advances
In February 2002, the Company received $238,000 from Jinn-Mei. This payment covered equipment provided by Cell-Loc to Cell-Loc (Chongqing) as well as general and administrative costs incurred by the company on behalf of the joint venture.

Operations
Operation expenses decreased 9 percent to $579,000 from the previous quarter and from $1.639 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 US tower lease contracts. The lease terms have been adjusted and reflected in the commitment note in the financial statements. Cost savings continue to be realized through consolidation of the number of inventory storage facilities.

Marketing and Business Development
Expenses for marketing and business development for the quarter ended March 2002 were $54,000. This number has decreased substantially from $134,000 for last quarter and decreased 80 percent from the same period last year. The reductions this quarter were realized as a result of the restructuring program undertaken in September 2001 and a continued focus on reducing travel and related expenses.

General and Administration
A reduction to $346,000 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 49 percent reduction from the $675,000 spent during the quarter ended December 2001 and is a 71 percent decrease from the $1.121 million for the same period in March 2001.

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 commercialize our products. The $666,000 of expenses this quarter reflects no change from the $666,000 last quarter, and reflects a marginal decrease from the $693,000 for the quarter ended March 2001.

Liquidity and Capital Resources
The March 31, 2002 total cash balance of $2.5 million represents a $400,000, or 14 percent, decrease from the December 31, 2001 quarter cash balance of $2.9 million. The working capital balance has decreased from a $1.72 million surplus from the previous year at this time to a $4.57 million deficit for the quarter ending March 31, 2002. The increase in working capital deficit for the period ended March 2002 is a direct result of deferring the funds received from IQ2 Communications Corp. The monthly burn continues to be scrutinized to ensure optimal use of the Company's cash resources.

Business Risks and Prospects
The Company is actively negotiating commercial contracts. The joint venture agreements, as executed, are examples of the focused business strategy that Cell-Loc has now undertaken. Joint venture arrangements, such as those negotiated with IQ2, Cell-Loc (Chongqing) and PST, will enable the company to introduce the Cell-Loc technology to the global market.

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 Companys ability to continue to generate revenue 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 wireless location industry, is the developer of Cellocate^TM, a family of network-based wireless location products that enable location-based services. Located in Calgary, Alberta, Cell-Loc currently develops, markets and supports its patented wireless location technology globally. Cell-Loc is listed on the Toronto Stock Exchange under the trading symbol: "CLQ."

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