<PAGE>   1


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

          For the transition period from     to

                         COMMISSION FILE NUMBER 0-26140

                       HIGHWAYMASTER COMMUNICATIONS, INC.
             (Exact name of Registrant as specified in its charter)

<TABLE>
                           DELAWARE                                                 51-0352879
<S>                                                                  <C>
 (State or other jurisdiction of incorporation or organization)      (I.R.S. Employer Identification Number)
</TABLE>

                                 1155 KAS DRIVE
                             RICHARDSON, TEXAS 75081
          (Address of principal executive offices, including zip code)

       (Registrant's telephone number, including area code) (972) 301-2000

        Securities Registered Pursuant to Section 12(b) of the Act: NONE

           Securities Registered Pursuant to Section 12(g) of the Act:

                          COMMON STOCK, $.01 PAR VALUE
                              (Title of each Class)

         Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES  X   NO   .
    ---    ---

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. __

         The aggregate market value of the common equity held by non-affiliates
of the Registrant as of March 16, 2000 was $73,233,223.*

         The number of shares outstanding of Registrant's Common Stock was
25,319,731 as of March 16, 2000.


<PAGE>   2





                       DOCUMENTS INCORPORATED BY REFERENCE


         Portions of Registrant's definitive Proxy Statement to be filed with
the Securities and Exchange Commission pursuant to Regulation 14A in connection
with the 2000 annual meeting of stockholders are incorporated herein by
reference into Part III of this Report. Such proxy statement will be filed with
the Securities and Exchange Commission not later than 120 days after the
Registrant's fiscal year ended December 31, 1999.

         Certain exhibits filed with the Registrant's Registration Statement on
Form S-1 (Registration No. 33-91486), as amended, the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995, the Registrant's Form
10-Q Quarterly Report for the quarterly period ended June 30, 1996, the
Registrant's Current Report on Form 8-K filed on October 7, 1996, the
Registrant's Annual Report on Form 10-K for the fiscal year ended December 31,
1996, the Registrant's Form 10-Q Quarterly Report for the quarterly period ended
March 31, 1997, the Registrant's Form 10-Q Quarterly Report for the quarterly
period ended June 30, 1997, the Registrant's Registration Statement on S-3
(Registration No. 333-57281), as amended, the Registrant's Registration
Statement on Form S-4 (Registration No. 333-38361), as amended, the Registrant's
Form 10-Q Quarterly Report for the quarterly period ended September 30, 1997,
the Registrant's Annual Report on Form 10-K for the fiscal year ended December
31, 1997, the Registrant's Form 10-Q Quarterly Report for the quarterly period
ended March 31, 1998, the Registrant's Form 10-Q Quarterly Report for the
quarterly period ended June 30, 1998, the Registrant's Form 10-Q Quarterly
Report for the quarterly period ended September 30, 1998, the Registrant's
Current Report on Form 8-K on September 4, 1998, the Registrant's Current Report
on Form 8-K on September 17, 1998, the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1998, the Registrant's Form 10-Q
Quarterly Report for the quarterly period ended March 31, 1999, the Registrant's
Form 10-Q Quarterly Report for the quarterly period ended June 30, 1999, the
Registrant's Form 10-Q Quarterly Report for the quarterly period ended September
30, 1999, and the Registrant's Current Report on Form 8-K on October 20, 1999
are incorporated herein by reference into Part IV of this Report.

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

*Excludes the Common Stock held by executive officers, directors and by
stockholders whose ownership exceeds 5% of the Common Stock outstanding at March
16, 2000. Exclusion of such shares should not be construed to indicate that any
such person possesses the power, direct or indirect, to direct or cause the
direction of the management or policies of the Registrant or that such person is
controlled by or under common control with the Registrant.


<PAGE>   3


                       HighwayMaster Communications, Inc.

                                    FORM 10-K
                   For the Fiscal Year Ended December 31, 1999

                                      INDEX

<TABLE>
<CAPTION>
                                                                                               Page
                                                                                               ----
<S>             <C>                                                                            <C>
PART I .......................................................................................   1
       ITEM 1.  BUSINESS .....................................................................   1
       ITEM 2.  PROPERTIES ...................................................................  20
       ITEM 3.  LEGAL PROCEEDINGS ............................................................  20
       ITEM 4.  SUBMISSIONS OF MATTERS TO VOTE OF SECURITY HOLDERS ...........................  20

PART II ......................................................................................  21
       ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ........  21
       ITEM 6.  SELECTED FINANCIAL DATA ......................................................  23
       ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS ........................................  24
       ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ...................  28
       ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ..................................  28
       ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                  ACCOUNTING AND FINANCIAL DISCLOSURE ........................................  28

PART III .....................................................................................  29
       ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ...........................  29
       ITEM 11. EXECUTIVE COMPENSATION .......................................................  29
       ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ...............  29
       ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ...............................  29

PART IV ......................................................................................  30
       ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K .............  30
</TABLE>


                                        i

<PAGE>   4


                                     PART I

ITEM 1.  BUSINESS

GENERAL

         The following discussion is qualified in its entirety by the more
detailed information and financial statements (including the notes thereto)
appearing elsewhere in this Annual Report on Form 10-K. Stockholders should
carefully consider the information presented under "Risk Factors" below.


HISTORICAL BACKGROUND

         HighwayMaster Communications, Inc., a Delaware Corporation, (the
"Company" or "HighwayMaster") develops and implements mobile communications
solutions for long-haul truck fleets, service vehicle fleets and other
mobile-asset fleets, including integrated voice, data and position location
services. The Company provides mobile communications services through a wireless
enhanced services network, which utilizes patented technology developed and
owned by the Company, to integrate various transmission, long-distance,
switching, tracking and other services provided through contracts with certain
telecommunications companies and 66 cellular carriers. Through its agreements
with cellular carriers, the Company is able to capitalize on the more than $66
billion which cellular carriers have invested to establish and expand cellular
coverage in the United States. The Company's communications network covers 98%
of the available cellular service areas in the United States and 100% of the
available A-side coverage in Canada. Call processing and related functions for
the Company's network are provided through the Company's Network Services Center
(the "NSC"). The Company holds 30 United States and four foreign patents that
cover certain key features of its network that are used in locating and
communicating with vehicles using the existing cellular infrastructure.

         The Company was organized on April 24, 1992 as By-Word Joint Venture
L.P., a Delaware limited partnership with one general partner, By-Word
Technologies, Inc. and one limited partner, the FBR Eighteen Corporation
("FBR"). FBR was wholly owned by the Eighteen Wheeler Corporation ("Eighteen
Wheeler"). On April 27, 1992, By-Word Joint Venture L. P. changed its name to
HighwayMaster, L. P.

         On February 4, 1994, HighwayMaster, L. P. was recapitalized, resulting
in the creation of HM Holding Corporation with Eighteen Wheeler becoming a
wholly owned subsidiary of HM Holding Corporation. FBR and HighwayMaster, L. P.
were merged with and into Eighteen Wheeler, and the name of the surviving
corporation was changed to HighwayMaster Corporation. By virtue of the merger,
HighwayMaster Corporation became the successor in interest to HighwayMaster, L.
P. In February 1995, HM Holding Corporation changed its name to HighwayMaster
Communications, Inc.

         On December 31, 1999, the Company's wholly owned subsidiary,
HighwayMaster Corporation, a Delaware corporation, merged with and into the
Company. Following the consummation of the merger, the Company was the sole
surviving and operating entity. The merger was undertaken primarily to eliminate
an unnecessary corporate layer, and thus, reduce administrative expenses
associated with maintaining the separate existence of HighwayMaster Corporation.
When the merger became effective, all assets, obligations and liabilities of
HighwayMaster Corporation became the assets, obligations and liabilities of the
Company by operation of law. In connection with the merger, the Company obtained
consents to the assignment of third party contracts from HighwayMaster
Corporation to the Company, and other consents deemed necessary or advisable by
the Company.


                                       1
<PAGE>   5


PRODUCTS AND SERVICES

         The Company's products and services can be classified into three major
categories: truck fleet mobile communications, service vehicle management and
mobile asset tracking.

TRUCK FLEET MOBILE COMMUNICATIONS

         The initial application for the Company's wireless enhanced services
network has been developed for, and is currently being marketed and sold to,
companies that operate mobile fleets in the long-haul trucking market. The
Company provides long-haul trucking customers with a comprehensive package of
mobile communications and management information services, enabling these
customers to effectively monitor their operations and improve the performance of
their fleets.

         The Company's solution links customers to the Company's network through
the installation of Series 5000 Mobile Units in each customer's truck fleet. The
Series 5000 Mobile Unit enables truck drivers to send and receive voice and data
messages and utilize all of the other features and capabilities of the Company's
enhanced communications network. The Series 5000 Mobile Unit also has
navigational tracking capabilities that allow trucking companies to establish
and track a truck's location, typically within 100 meters, anywhere in the
United States or Canada. Furthermore, the Series 5000 Mobile Unit is capable of
performing a number of other functions, such as calculating fuel tax mileage,
estimating times of arrival, storing data and monitoring engine performance. For
small to mid-sized fleets, the Company offers a dispatch software package that
enables a trucking dispatcher to optimize the use of its fleet by processing
data transmitted by the Series 5000 Mobile Units and performing a variety of
fleet management information functions.

         Each Series 5000 Mobile Unit consists of the following: (i) a
menu-driven display module that provides two large lines of scrollable text on
the dashboard; (ii) a microphone that clips on the sun visor for "hands free"
communication utilizing voice-recognition and voice-synthesis technologies;
(iii) a modified cellular telephone handset and cradle; (iv) a cellular antenna;
(v) a Global Positioning System ("GPS") navigational antenna; and (vi) a
computerized system module in the vehicle that contains the positional reporting
device, the cellular transceiver and the on-board computer. The system module
also houses voice-activation and voice-synthesis software, data storage
capability and unique technology that significantly reduces the risk of cellular
roaming fraud. The module provides ports that allow for the incorporation of
peripheral equipment, such as a fax machine, printer and engine monitoring
equipment. The Series 5000 Mobile Unit was designed to be "user-friendly," to
have shorter installation times than competing mobile communication device
installations, and to limit driver training to an average of one hour. The unit
can be remotely programmed from the host computer at the trucking company or by
the Company.

SERVICE VEHICLE MANAGEMENT

         The initial product application was modified to assist the member
companies of SBC Communications, Inc. (the "SBC Companies") in maximizing the
productivity of their service vehicle fleets. The units installed are Series
5005S Mobile Units and are based on the Series 5000 platform with customized
proprietary hardware and software. In addition to fleet monitoring and voice and
data communications capabilities, the Series 5005S features alarm monitoring
functionality. This product feature provides the driver the ability to summon
emergency assistance by pressing a panic alarm button on a key fob when away
from, but in proximity to, the service vehicle.

         As of December 31, 1999, the SBC Companies have purchased and installed
approximately 15,000 Series 5005S mobile units. In February 2000, the Company
announced that it has been chosen to provide Ameritech and other SBC Companies
an additional 28,000 HighwayMaster Series 5005S Mobile Units. The installation,
which will occur throughout 2000, also includes enhanced proprietary software
and services. See "Risk Factors -- Dependence on SBC Regional Service Vehicle
Contract."

         The Company also plans to market this product to other service fleets
that desire to benefit from the advanced technologies initially developed for
the SBC Companies.


                                       2
<PAGE>   6


MOBILE ASSET TRACKING

         The Company entered the mobile asset tracking market in October 1999
with the introduction of its trailer-tracking product, TrackWare(TM). The new
Trackware product, which was over 18 months in development, combines the
technologies of GPS and control channel messaging to report location details and
specific trailer events, such as connection and non-connection to a tractor. The
TrackWare Remote Unit ("TrackWare Unit") comes equipped with a GPS satellite
receiver, a Cellemetry(R)-enabled cellular transceiver, microprocessor, antenna,
battery and cables. It is pre-configured to report the data requested by the
specific fleet customer and shipped ready for a 30-minute installation.
Utilizing the Cellemetry data network to deliver short data messages, the
Company is able to offer an efficient, yet competitively priced, tracking
solution.

         Trackware is being marketed to trucking companies, which the Company
believes represent a potential market of approximately 2.5 million dry-van
trailers currently operating in the U.S. This translates into approximately
three trailers for every tractor. At any point in time, the Company believes the
location of 10-15 percent of these trailers is unknown to the companies who own
them. As a result, the Company believes that between $5.0-$7.5 billion in
dry-van assets are idle, delivering no value to their owners. The Company
expects TrackWare to provide the visibility to trucking company asset managers
that will enable them to better utilize their trailer fleets.


COMPETITION

         Each market currently targeted by the Company has a number of other
companies that offer or plan to offer some form of two-way mobile communication
using a variety of different technologies that compete, or could eventually be
used to compete, with the Company's products and services. These companies
primarily utilize satellite-based communications technologies, specialized
mobile radio ("SMR"), enhanced specialized mobile radio ("Enhanced SMR"), and
terrestrial links for dedicated short-range communications systems. See "Risk
Factors -- Competition and Technological Change."

         Conventional Satellite Communications. Satellite communication is
accomplished through transmission of a signal from an earth-based transmitter to
a satellite, which automatically retransmits the signal to an earth-based
receiver. Many communication satellites are geo-stationary, remaining in the
same position over the equator by orbiting the earth in the same direction and
at the same speed as the rotation of the earth. Mobile equipment designed for
satellite communication is equipped with highly specialized rotating antennae,
which are continuously directed toward the satellite, and utilize highly complex
data or voice compression systems to minimize demands on satellite capacity.
This type of mobile communication equipment broadcasts over the radio frequency
spectrum. Domestically, the Federal Communications Commission ("FCC") regulates
and controls the number of satellite communication systems that may be placed in
service.

         Satellite communication available to the transportation industry
generally utilizes a single earth station to transmit and receive data via
satellite to and from satellite communication units installed in trucks.
Messages created by truck drivers on an onboard keyboard can be stored,
compressed and transmitted in short bursts. Although voice communication is
theoretically possible for mobile communication systems that utilize satellite
transmissions, the current limited capacity and high cost of satellite
communication have tended to limit competitive product offerings to data-only
services.

         Satellite systems currently cover 100% of the continental United
States, and their comprehensive coverage may be perceived by truckers and
trucking companies as an advantage over a cellular system. The Company believes
that any marketing or operational advantage derived from satellite coverage, as
compared to the Company's system (which covers approximately 99% of the United
States interstate highway system), is offset by the fact that satellite systems
require more costly equipment and do not currently offer cost-effective voice
communication capabilities. Furthermore, satellite system users can experience
queuing delays during peak periods between transmission and receipt of messages.
In addition, because geo-stationary satellites stay over the equator,
transmission and receipt of data in North America may be interrupted or rendered
ineffective by obstacles on the southern horizon, such as nearby tall buildings
or mountains. There can be no assurance, however, that the costs of satellite
systems and satellite-based voice communication services will remain higher than
the cost of the


                                       3
<PAGE>   7


Company's integrated data and voice communication services. See "Risk Factors --
Competition and Technological Change."

         The Company's primary satellite competitor in the long-haul trucking
market is Qualcomm, Incorporated ("Qualcomm"), which markets its products and
services primarily to long-haul fleets in the United States. Drivers access and
utilize the system through an onboard keyboard and data display screen.
Management believes that Qualcomm offers or plans to offer its products and
services in certain international markets, including Canada, Mexico and Europe.
The Company believes Qualcomm has about 320,000 OmniTRACS(R) systems worldwide,
of which an estimated 190,000 are in service within the United States.
OmniTracs(R) is a registered trademark of QualComm.

         The Company believes that at least one other entity offers or plans to
offer satellite-based data communication and tracking services to the long-haul
trucking industry. American Mobile Satellite Corporation's ("AMSC")
geo-stationary satellite-based system is similar to the Qualcomm system in that
the mobile communications equipment consists of a keyboard and data screen
mounted in each truck. Recent enhancements allow dual SMR or satellite
communication in a single unit in order to produce least-cost routing of data.
The AMSC system offers both voice and data communications, and in 1998 AMSC
acquired Motorola's Ardis data messaging business.

         Middle and Low Earth Orbit Satellites. In order to maintain a
stationary position over the earth, communication satellites currently in use
must maintain a very high orbit, which requires earth stations to generate
relatively high-powered transmissions for communication with the satellite.
Certain entities, including Qualcomm, are participating in the development of
Middle Earth Orbit ("MEO") and Low Earth Orbit ("LEO") satellite networks, which
are designed to employ multiple satellites in relatively lower earth orbits,
rapidly circling the earth. The lower earth orbits should facilitate both voice
and data communication services and will be accessible through relatively
lower-powered transmitters and receivers, allowing them to be installed in
portable communication equipment. In terms of product and service offerings, MEO
and LEO systems can be expected to compete directly with cellular services,
including the Company's products and services, and can be expected to offer
coverage in remote areas and foreign countries currently not served by cellular
carriers.

         The Company's primary competitor in the trailer-tracking marketplace is
Vantage, whose trailer-tracking solution communicates via the LEO satellite
network. Trucking companies access location information and a limited amount of
sensor data through this product, which is installed inside the dry-van trailer.

         Specialized Mobile Radio. SMR has traditionally been used to serve the
needs of local dispatch services, such as taxis and couriers, which typically
broadcast short messages to a large number of units. SMR wireless communication
systems rely on high-powered voice or data transmissions among widely spaced
receiver/transmitter sites within a discrete local or regional area. These
systems generally have lower capacity to support simultaneous transmissions in a
given area than do cellular systems, which transmit and receive radio
communications from numerous closely spaced cell sites. The radio hardware
currently used to operate the various SMR systems varies widely, making it
impossible for a customer to "roam" into a neighboring region that is served by
a carrier with a different hardware configuration.

         Enhanced Specialized Mobile Radio. Enhanced SMR operators are currently
developing and implementing Enhanced SMR digital technology to offer relatively
low-cost mobile telephone services. One company, Nextel, Inc., has implemented a
nationwide digital Enhanced SMR network to provide mobile telephone service and
has begun providing service in dozens of major metropolitan areas. Nextel is
developing its Enhanced SMR network using uniform standards and a coordinated
infrastructure to provide mobile telephone services with no roaming charges
anywhere in the U.S. Other local and regional Enhanced SMR operators in addition
to Nextel may eventually be able to offer region-to-region calling and call
delivery services that will compete with the Company's services.

         Dedicated Data Networks. Bell South Wireless Data (formerly RAM Mobile
Data), ARDIS (now owned by American Mobile Satellite), and Teletrac each own and
operate dedicated wireless data networks. Bell South Wireless Data and ARDIS
have built packet data networks in most metropolitan areas and a few rural
areas, but


                                       4
<PAGE>   8


Teletrac's coverage is more restricted to a limited number of markets. Most
users of dedicated data networks are field service personnel, transportation,
security, field sales and public sector operations.

         Telecommunications Act of 1996. The Telecommunications Act is intended
to increase competition in virtually every arena of communications and eliminate
many regulatory barriers to new competitors. It is unknown at this time what
effect this legislation will have on the Company's continuing ability to compete
in the marketplace. See "Risk Factors -- Uncertainty of Government Regulation."

         Although there can be no assurance that competitors of the Company will
not adversely impact the ability of the Company to effectively market its
products and services, management believes that several significant factors
differentiate the products and services provided by the Company through its
wireless enhanced services network from conventional cellular service, including
the following:

         Nationwide Network. The Company's network spans across substantially
all the United States and Canada, and represents the broadest enhanced cellular
coverage in the mobile-asset-tracking industry.

         Low-Cost Data Transmission. The Company's TrackWare product, which
utilizes the unused capacity in the overhead control channel of the existing
wireless infrastructure, enables customers to send and receive data messages at
costs far below existing wireless data transmission rates.

         Additional Value-Added Services. The Company offers its customers
additional value-added services that are not offered by cellular carriers who
are unable or unwilling to supplement the capabilities of the existing cellular
infrastructure with the features and capabilities of the Company's enhanced
communications network. The value-added services currently offered by the
Company include data transmission, fleet tracking, and a number of other
ancillary services, such as estimating times of arrival, calculating fuel tax
mileage and engine monitoring. There can be no assurance, however, that
competitors will not be able to provide similar or superior value-added services
in the future that directly compete with the Company's services.

INDUSTRY SEGMENTS

         The Company considers its operations to be classified into one industry
segment: Cellular and Other Wireless Communications.

EMPLOYEES

         At December 31, 1999, the Company had 233 employees. The Company's
employees are not represented by a collective bargaining agreement.

INFRASTRUCTURE AND OPERATIONS

         Networks. The Company uses wireless data and voice technologies,
combined with GPS satellite technology, for all of its products. The Company's
strategy is to select and use wireless networks that provide the "best fit" for
each product and application or specific customer need.

         Series 5000 Mobile Units. These units use circuit switched analog
cellular technology for transmitting location, as well as information, to the
Company's NSC. The NSC then routes the data to the appropriate destination,
which may be a customer's dispatcher workstation for data or any other telephone
for voice communication. In addition, these units take advantage of the
Company's patented Advanced Cellular Transmission Technology ("ACTT"). ACTT is a
one-way data communication technology from the mobile unit back to the NSC. ACTT
takes advantage of unused fields in the cellular control channel to provide very
short data bursts suitable for providing status updates of vehicle location
information. The primary benefit of ACTT is reduced cost to the customer and the
Company. The Company believes that analog cellular technology provides the best
ubiquitous coverage for over-the-road vehicles that travel across the United
States. As digital technologies further penetrate existing cellular
infrastructure, digital cellular networks may become a viable alternative for
over-the-road vehicles.


                                       5
<PAGE>   9


         Series 5005S Mobile Units. For service vehicles, as part of the
Company's "best fit" strategy, these units also may be integrated with a global
system for mobile communications ("GSM") telephone utilizing the 1900 MHz
frequency, where required. GSM is a digital technology developed in Europe and
has been adapted for North America. GSM is by far the most popular digital
standard in the world. Since service vehicles primarily operate in urban areas,
these digital networks provide appropriate coverage.

         TrackWare(TM) Product. The TrackWare(TM) Remote Unit uses proprietary
overhead control channel technology to provide short two-way data messages on a
national basis. This network is provided by a third party provider, Cellemetry,
and the Company's NSC which has been adapted to integrate with the Cellemetry
network.

         Network Services Center. The Company's NSC provides switching services
among each Series 5000 and 5005S Mobile Unit (hereinafter collectively referred
to as "Mobile Unit" or "Mobile Units"), the nationwide network of cellular
providers, the customer's dispatcher workstation and the nationwide landline
telephone network. The NSC is capable of processing, storing and transmitting
data and provides a gateway for the Cellemetry network to enable transmission of
data to customers. Additionally, voice communications are routed from each
Series 5000 Mobile Unit through HighwayMaster's nationwide enhanced-services
network to the NSC, which automatically completes the call through the public
telephone network to the end user. Voice communications from the customer's
dispatcher or personal calls for the driver are routed through a toll-free
telephone number to the NSC, which completes the call through the appropriate
wireless cellular system for the region in which the truck is operating. Data
packets from the host or a Mobile Unit are stored in the NSC, then transmitted
in cost-effective batches. Time-critical information, as configured by the
customer, is immediately transmitted to the receiving party. The NSC records
data from each transmission, generates a call record and processes the
information into customer billing records. HighwayMaster can increase the
capacity of the NSC as needed to meet growing caller demands.

         Call Routing. Each time a Mobile Unit travels into a new cellular
metropolitan statistical area ("MSA") or rural statistical area ("RSA"), it
automatically registers with the cellular carrier under contract with the
Company. The cellular carrier routes the message to GTE-TSI or Electronic Data
Systems, Inc. ("EDS"). Pursuant to contracts with the Company, GTE-TSI and EDS
provide the NSC with call delivery information utilized by the NSC to deliver
calls to the Mobile Unit as it travels through a new MSA or RSA.

         Navigation Technology. Global Positioning System technology allows
customers to identify the location of any asset at any time via satellite. GPS
is operated by the United States government and broadcasts navigational
information from a network of dedicated satellites orbiting the earth. GPS
navigational receivers interpret signals from multiple satellites to determine
the receiver's geographical coordinates, elevation and velocity. GPS
navigational signals can be received worldwide, without adaptation of the
receiver unit to foreign standards. Management believes that the network of GPS
navigational satellites will be maintained by the United States Defense
Department in an operational status for the foreseeable future. Although
stand-alone GPS units are available for purchase by any consumer at relatively
low cost, the Company believes that raw navigational information is of little
use in tracking assets unless the GPS receiver is integrated with a computer
system, such as a Mobile Unit or TrackWare Unit, to record routes traveled
relative to mapped roadways or to transmit position reports to a central
dispatcher.

         Management believes the Company's use of government-operated GPS
satellites differs substantially from competitors' use of satellites for two-way
communications. GPS satellites send one-way signals to mobile receivers,
allowing the Company's products to plot their geographical coordinates. GPS
satellites are not capable of two-way communication, and no charges are assessed
to users of the GPS services. For two-way mobile communications, the Company
relies exclusively on terrestrial wireless systems. The Company's primary
competitors utilize leased or owned communication satellites for two-way data
communications, incurring costs associated with ownership or leasing of
satellite communication capacity.

         Wireless Infrastructure. The FCC has provided for a two-operator
duopoly in each cellular market. Only two licenses were awarded to provide
cellular service in any specific cellular MSA or RSA. One of the two licenses in
each market was initially awarded to a company or group that was affiliated with
a local landline telephone carrier in the market (the "Wireline" or "B-Side"
license) and the other license in each market was initially awarded to a
company, individual or group not affiliated with any landline telephone carrier
(the "Non-Wireline" or "A-Side" license). However, once a license was awarded,
the license holder could sell the license to another qualified entity,


                                       6
<PAGE>   10
including the sale of "B-Side" licenses to groups not affiliated with the
landline telephone carrier, and the sale of "A-Side" licenses to a landline
telephone carrier. HighwayMaster's system utilizes both the A-Side and B-Side
carriers in its coverage areas, and has agreements with both A-Side and B-Side
carriers in approximately 75% of its markets, allowing system redundancy and
greater flexibility. In addition to cellular licenses, the FCC has issued up to
six licenses in each market for the 1.9 megahertz ("PCS") spectrum. Currently,
PCS is generally available only in certain metropolitan markets and surrounding
areas, and these new carriers are creating increased competition for cellular
operators. See "Risk Factors -- Competition and Technological Change."

         Increased demand for wireless service is driving investment in wireless
networks and improving service coverage. Cumulative capital investment within
the wireless industry has reached $66.8 billion as of June 1999, up from
approximately $50.2 billion in June 1998. The total number of cellular tower
sites increased to 74,157 in June 1999, up from 57,674 in June 1998. Total
wireless customers reached more than 76.3 million in June 1999.

         A number of cellular carriers are in the process of upgrading from
existing analog cellular systems to enhanced systems utilizing digital
technology. However, the Company believes that the large number of analog
telephones already owned by cellular subscribers will ensure that cellular
telephone operators continue to offer services to existing analog users
concurrently with digital users over an extended phase-in period that exceeds
the expected useful life of the current analog Mobile Units. See "Risk Factors
-- Dependence on Cellular Infrastructure."


STRATEGIC SERVICE ALLIANCES OF THE COMPANY

         Wireless Carriers. The Company has established a network for the United
States that offers mobile communication coverage in 98% of the available
wireless service areas in the United States (which covers approximately 95% of
the United States interstate highway system) and 100% of the A-Side coverage in
Canada. The Company has agreements in place with 66 wireless carriers, including
all the regional Bell operating companies, AT&T Wireless Inc. and Rogers Cantel,
Inc., in 703 markets in the United States and Canada. The Company has entered
into contracts with both A-side and B-side carriers in approximately 75% of
United States wireless coverage regions. In most cases, current terms of
contracts between the Company and each of its cellular carriers are generally
for one year, with automatic one-year successive renewal terms unless either
party elects to terminate the contract upon 30-day notice prior to the end of
the term. The Company has recently executed new contracts with certain of its
wireless carriers that are substantially similar to the existing contracts
except that they provide for an initial three-year term. The Company's
agreements with wireless carriers provide that the Company will not be required
to reimburse carriers for fraudulent usage unless the carriers have fully
implemented the Company's protocol. Although the Company's protocol has been
effective in preventing fraud to date, there can be no assurance that this will
be the case in the future. See "Risk Factors -- Dependence on Cellular
Infrastructure."

         Certain of the Company's contracts with wireless carriers only permit
the Company to utilize their cellular networks to provide mobile communications
services to vehicles engaged in long-haul transportation and certain
recreational uses so long as such vehicles travel outside of their home areas
for specified periods of time.

         GTE-TSI and EDS. GTE-TSI and EDS provide clearinghouse functions to the
cellular industry, creating the data link between a foreign network and a
traveling vehicle's home cellular service area, performing credit checking
functions and facilitating roamer incoming call delivery functions. The
Company's contract with GTE-TSI covers certain functions that are critical to
the Company's ability to instantly deliver calls nationwide. It covers an
initial term of three years that began on May 3, 1999. The Company is guaranteed
the right to renew the contract for up to 10 one-year periods beyond the initial
term, at a reasonable rate to be determined by GTE-TSI.

         The agreement between the Company and EDS involves the provision by EDS
of certain clearinghouse functions in connection with EDS' cellular carrier
customers. Fewer data processing functions are conducted by EDS due to the
Company's consolidation of certain common data processing functions with
GTE-TSI. The agreement with EDS expires on October 24, 2000 and is renewable for
subsequent one-year terms through 2003, unless 60 days notice is provided prior
to the termination date of the agreement. See "Risk Factors -- Dependence on
Clearinghouse Services."


                                       7
<PAGE>   11


         IEX Corp. IEX designed, tested and constructed the NSC. The NSC
constitutes a critical link in providing certain enhanced call processing and
data management services and is necessary for the Company to receive, store and
route voice and data transmissions to and from its customers.

         The Company relocated the NSC to the Company's headquarters, allowing
the Company to maintain greater control over the operation and expansion of the
NSC. In connection with the relocation, the Company hired the former IEX switch
technicians whose primary responsibility at IEX was maintaining the NSC. In
October 1999, the Company entered into a software maintenance and support
agreement with IEX for a three-year term. See "Risk Factors -- Company Operation
of NSC."

         Southwestern Bell Mobile Systems, Inc. On March 30, 1999, the Company
and Southwestern Bell Mobile Systems, Inc. ("SBMS") executed an Administrative
Carrier Agreement under which SBMS provides to the Company clearinghouse
services and cellular service previously provided by GTE Wireless.

         Alarm Monitoring Services. In April 1999, the Company entered into a
Confidential Memorandum of Understanding with Criticom International Corp.
("CIC") under which CIC provides certain alarm monitoring services in support of
the SBC Contract. See "Risk Factors-- Dependence on Third Party Alarm Monitoring
Service Provider."

         Key Suppliers. The Company does not manufacture or assemble its
products. The Company has an agreement with K-Tec Electronics Corporation
("K-Tec") for the assembly of the Mobile Units and an agreement with Wireless
Link, Inc. for the manufacture of the TrackWare(TM) Units. Because the Company
is dependent on a single supplier to manufacture and assemble the Mobile Units
and the TrackWare(TM) Units, the possibility exists that problems experienced by
the suppliers could adversely affect the Company. Additionally, the Company
subcontracts for the manufacture of various components for the Mobile Units from
various suppliers. All transceivers for the Mobile Units are manufactured by
Motorola, and the Company believes that there is a limited number of suppliers
who are capable of manufacturing transceivers that meet the Company's
requirements. See "Risk Factors -- No Long -Term Product Supply Arrangements."

PATENTS AND PROPRIETARY TECHNOLOGY

         The Company has obtained 30 domestic and four foreign patents and has
applied for additional domestic and foreign patents. In general, the Company's
existing patents cover the Company's innovative and novel utilization of the
existing wireless infrastructure as well as the particular operational features
and functionality of the Company's products and services. The Company's software
is also protected under patents, federal and state trade secret law and federal
copyright law. See "Risk Factors -- Uncertainty Regarding Patents and
Proprietary Rights."

REGULATION

         The Company's products and services are subject to various regulations
promulgated by the Federal Communications Commission that apply to the wireless
communications industry generally. The Company's Mobile Units and its
TrackWare(TM) Units must meet certain radio frequency emission standards so as
to avoid interfering with other devices. The Company relies on the manufacturer
of the cellular transceiver components of the Mobile Units and the TrackWare(TM)
Units to carry out appropriate testing and regulatory compliance procedures
regarding the radio emissions of the cellular transceiver component.

         The FCC also controls several other aspects of the wireless industry
that affect the Company's ability to provide services. The FCC controls the
amount of radio spectrum available to cellular carriers, which could eventually
limit growth in cellular carrier capacity.

         The FCC also regulates telecommunications service providers or common
carriers, requiring approval for entry into the marketplace and regulating the
service rates offered through tariff filing requirements. Additionally, most
state regulatory commissions regulate rate and entry for telecommunications
service providers. In order to encourage growth within the information services
segment of the telecommunications industry, the FCC issued an order creating the
enhanced services exemption from regulation. In general, providers of enhanced
services are not subject to regulation by the FCC or the various state
regulatory agencies. Services qualify as enhanced services if


                                       8
<PAGE>   12


data is transmitted between the provider and customer so that the customer is
able to interact with or manipulate the data regardless of whether the services
provided include telecommunications transmission components, such as wireless or
long distance services. The Company believes that the services it provides to
its customers in connection with the Mobile Units and TrackWare(TM) Units
qualify as enhanced services and are exempt from both FCC and state regulation.
Alternatively, the Company believes that its services may be characterized as a
private network not offered to the public at large but offered to specific group
of users, which management believes should also serve to exempt the Company from
FCC and state regulation.

         The wireless telecommunications industry currently is experiencing
significant regulatory changes that may require a re-examination of laws and
regulations applicable to the Company's operations. The Company's services may
be characterized by the FCC as Commercial Mobile Radio Services ("CMRS"). If the
Company's services are classified as CMRS, the Company may be subject to FCC
regulation as a telecommunications service provider. However, the FCC has
decided to forbear from most regulation of the CMRS marketplace, including
regulation of the rates and terms of entry for interstate services offered by
CMRS providers. In addition, Congress has preempted state regulation of CMRS
entry and rates. FCC decisions thus far have enhanced the development of CMRS,
including requiring local telephone companies to offer interconnection and
access to their networks to CMRS providers and to establish reciprocal
compensation arrangements with CMRS providers for the transportation and
termination of calls at prices that are cost-based and just and reasonable.

         If any services offered by the Company are determined to be
telecommunications services by the FCC, the revenues generated from these
services would be subject to the required contribution to the federal universal
service fund. At this time, revenues generated from the Company's services that
meet the definition of enhanced services are not subject to FCC-mandated
universal service fund contribution. However, based on a conservative
interpretation, the Company has reported certain revenues generated by the
personal calling plan service offered by the Company as a telecommunications
service for purposes of federal universal service fund contribution filings.
Various states have instituted their own universal service fund mechanisms which
may or may not follow the federal statutes in exempting revenues generated by
enhanced services. The Company cannot predict the impact of any requirement to
contribute to state and federal universal service mechanisms. See "Risk Factors
-- Uncertainty of Government Regulations."

         Long-distance providers face regulatory schemes similar to cellular
carriers, with greater state involvement in requiring posting of bonds as
security against customer deposits and in other matters. The Company believes
current long-distance regulations apply to those companies providing
long-distance services directly to its customers, without long-distance
regulatory involvement by the Company.

MERGER

         Effective December 31, 1999, the Company's wholly owned subsidiary,
HighwayMaster Corporation, a Delaware corporation, merged with and into the
Company. Following the consummation of the merger, the Company was the sole
surviving and operating entity. The merger was undertaken primarily to eliminate
an unnecessary corporate layer, and thus, reduce administrative expenses
associated with maintaining the separate existence of HighwayMaster Corporation.
When the merger became effective, all assets, obligations and liabilities of
HighwayMaster Corporation became the assets, obligations and liabilities of the
Company by operation of law. In connection with the merger, the Company obtained
consents to the assignment of third party contracts from HighwayMaster
Corporation to the Company, and other consents deemed necessary or advisable by
the Company.

RISK FACTORS

Forward-Looking Statements

         This Annual Report on Form 10-K ("Form 10-K") contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
that are based upon management's current beliefs and projections, as well as
assumptions made by and information currently available to management. When used
in this Form 10-K, the words "anticipate," "believe," "estimate," "expect" and
similar expressions are intended to identify forward-looking statements. Any
statement or conclusion concerning future events is a forward-looking statement,
and should not be interpreted as a promise or


                                       9
<PAGE>   13


conclusion that the event will occur. The Company's actual operating results or
the actual occurrence of any such event could differ materially from those
projected in the forward-looking statements. Factors that could cause or
contribute to such differences include those discussed in this section, as well
as those discussed elsewhere in this Form 10-K or in the documents incorporated
herein by reference.

Operating History: Significant Losses

         The Company has incurred significant operating losses since inception
and has a stockholders' deficit of approximately $38.1 million at December 31,
1999. The Company must significantly increase its product sales and service
revenues, while decreasing its operating expenses, to achieve profitability.
There can be no assurance that the Company's future operations will generate
operating or net income or positive cash flow from operations. If the Company
does not achieve significant operating and net income and positive cash flow, it
may not have the funds required to pay the principal amount of the 13 3/4%
Senior Notes ("Senior Notes") at maturity in 2005 or to make interest payments
on the Senior Notes beyond September 15, 2000. The Company will be required to
fund interest payments beginning with the interest payment due March 15, 2001.
Through such date, the payment of interest has been provided for through a
portfolio of U.S. Government securities held in escrow. If the Company is unable
to service the Senior Notes using earnings or cash flow from operations, it will
have to identify alternate means of repayment that could include restructuring
or refinancing its indebtedness or seeking additional sources of debt or equity
financing. There can be no assurance either that the indenture agreement for the
Senior Notes (the "Indenture") would permit the Company to pursue alternative
means of repayment or that the Company would be able to effect such a
restructuring or refinancing or obtain such additional financing if permitted to
do so. The likelihood of the long-term success of the Company must be considered
in light of the expenses, difficulties and delays frequently encountered in
connection with the early stages of the development and marketing of
telecommunications products and services, as well as the competitive environment
in which the Company operates and the other risks and uncertainties discussed in
this Form 10-K and the documents incorporated herein by reference. See "Item 6
-- Selected Financial Data," and "Item 7 -- Management's Discussion and Analysis
of Financial Condition and Results of Operations."

Limitations Due to Debt

         The Indenture imposes significant operating and financial limitations
on the Company. Such limitations will affect, and in many respects significantly
restrict or prohibit, among other things, the ability of the Company to pay
dividends, make investments and incur additional indebtedness. These
restrictions, in combination with the Company's substantial leverage, could
limit the ability of the Company to effect future financings or otherwise
restrict the nature and scope of its activities. The degree to which the Company
is leveraged could have important consequences to Company's stockholders and to
the holders of the Senior Notes, including: (i) the impairment of the Company's
ability to obtain additional financing in the future; (ii) the reduction of
funds available to the Company for its operations or for capital expenditures as
a result of the dedication of a substantial portion of the Company's net cash
flow from operations to the payment of principal and interest on the Senior
Notes; (iii) the possibility of an event of default under covenants contained in
the Indenture, which could have a material adverse effect on the business,
financial condition and results of operations of the Company; (iv) the placement
of the Company at a relative competitive disadvantage as compared to competitors
who are not as highly leveraged as the Company; and (v) vulnerability in the
event of a downturn in general economic conditions or its business because of
the Company's reduced financial flexibility. In addition, to the extent that the
Company enters into a bank credit agreement in the future as permitted by and
defined in the Indenture, such agreement is likely to impose additional
operating and financial restrictions on the Company, which may be more
restrictive than those provided for in the Indenture. See "Selected Financial
Data," and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."


                                       10
<PAGE>   14


No Remote Disaster Recovery System

         Currently, the Company's disaster recovery systems focus on internal
redundancy and diverse routing around and within the NSC operated for the
Company. The Company does not currently have access to a remote back-up complex
that would enable it to continue to provide mobile communications services to
customers in the event of a natural disaster or other occurrence that rendered
the NSC unavailable. Accordingly, the Company's business is subject to the risk
that such a disaster or other occurrence could hinder or prevent the Company
from continuing to provide services to some or all of its customers. See
"Business -- Infrastructure and Operations."

Company Operation of NSC

         Following the relocation of the NSC to the Company's headquarters in
Richardson, Texas, the Company now operates and maintains the NSC that was
previously operated and maintained by IEX Corp. The Company has limited
experience maintaining and supporting the NSC and its software and hardware
systems. Although the Company has successfully hired the former IEX switch
technicians, the Company has limited abilities to provide software maintenance
and support for the NSC. In October 1999, the Company entered into a software
maintenance and support agreement with IEX with a three-year term. Any
significant performance or other operational problems affecting the NSC could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business - Infrastructure and Operations."

Uncertainty Regarding Patents and Proprietary Rights

         The Company's success depends upon its technology and the scope and
limitations of its proprietary rights therein. In order to protect its
technology, the Company relies on a combination of patents, copyrights and trade
secret laws, as well as certain customer licensing agreements, employee and
third-party confidentiality and non-disclosure agreements, and other similar
arrangements. If the Company's assertion of proprietary rights is held to be
invalid or if another party's use of the Company's technology were to occur to
any substantial degree, the Company's business, financial condition and results
of operations could be materially adversely affected.

         The patents and other intellectual property rights of the Company
cannot prevent competitors from developing competing systems using other
terrestrial wireless communications systems or using the cellular system through
a different method. While the Company believes that the nature and scope of the
Company's communications system, including the Company's strategic business and
technological relationships, would be difficult for a competitor to duplicate,
there can be no assurance that a competitor would consider these hindrances to
be material in light of the market potential. A competitor could invest time and
resources in an attempt to duplicate certain key features of the Company's
products and services, which could result in increased competition and have a
material adverse effect on the Company's business.

         Several of the Company's competitors have obtained and can be expected
to obtain patents that cover products or services directly or indirectly related
to those offered by the Company. There can be no assurance that the Company is
aware of all patents containing claims that may pose a risk of infringement by
its products or services. In addition, patent applications in the United States
are confidential until a patent is issued and, accordingly, the Company cannot
evaluate the extent to which its products or services may infringe on future
patent rights held by others. In general, if it were determined that any of the
Company's products, services or planned enhancements infringed valid patent
rights held by others, the Company would be required to obtain licenses (which
might require the payment of royalties) to develop and market such products,
services or enhancements from the holders of the patents, to redesign such
products or services to avoid infringement, or cease marketing such products or
services or developing such enhancements. In such event, the Company also might
be required to pay past royalties or other damages. There can be no assurance
that the Company would be able to obtain licenses on commercially reasonable
terms, or that it would be able to design and incorporate alternative
technologies, without a material adverse effect on its business, financial
condition and results of operations.


                                       11
<PAGE>   15


Dependence on SBC Regional Service Vehicle Contract.

         In August 1998, the SBC Companies entered into a one-year agreement for
the purchase of Series 5005S mobile units and accompanying support and network
management services that was extended to a three-year term in January 1999 (the
"SBC Contract"). The SBC Contract's minimum three-year term expires in August
2001. As of December 31, 1999, the SBC Companies have purchased and installed
approximately 15,000 Series 5005S Mobile Units pursuant to the SBC Contract. In
February 2000, the Company announced that it has been chosen to provide
Ameritech and other SBC Companies an additional 28,000 HighwayMaster Series
5005S mobile units pursuant to the SBC Contract. There can be no assurance that
the Company will have sufficient cash reserves to purchase the inventory
necessary to fulfill this order and may be required to renegotiate contractual
payment terms with the SBC Companies to require advance payments on the orders.
Also, there can be no assurance that the Company will be able to renegotiate
favorable payment terms with the SBC Companies, and its failure to do so would
have a material adverse effect on the Company's business. Finally, there can be
no assurances that the Company will be able to fulfill its contractual
obligations concerning installation of the Mobile Units.

Dependence on Third-Party Alarm Monitoring Services Provider

         The Company relies on CIC to provide certain alarm monitoring services
to the SBC Companies as required by the SBC Contract. If the Company is unable
to renew its Monitoring Services Agreement with CIC, the Company may be required
to either develop its own alarm monitoring center, including obtaining the
required licenses, or execute an agreement with another alarm monitoring
services provider. If the Company is unable to develop its own monitoring
services center or execute an agreement with another alarm monitoring services
company, this could have a material adverse effect on the Company's business,
financial condition and results of operations.

Dependence on Cellular Infrastructure

         The Company utilizes the existing cellular telephone infrastructure,
with certain enhancements, as the wireless segment of the HighwayMaster network.
In most cases, current terms of contracts between the Company and each of its
cellular carriers are for one year, with automatic one-year successive renewal
terms, unless either party elects to terminate the contract upon 30 days notice
prior to the end of the term. The Company has recently executed new contracts
with certain of its cellular carriers that are substantially similar to the
existing contracts, except that they provide for an initial three-year term. In
order to continue to provide mobile communications services to its customers,
the Company must continue to renew its agreements with individual cellular
carriers. If the Company is unable to renew or replace its contracts with
cellular carriers at competitive rates, the Company may be forced to absorb the
costs of increased cellular air time rates, or increase rates to customers where
allowed by individual contracts. In general, a failure on the part of the
Company to renew or replace its contracts with cellular carriers on favorable
terms could have a material adverse effect on its business, financial condition
and results of operations.

         The HighwayMaster network relies on continued technical compatibility
among its cellular service providers. Currently, cellular carriers utilize
analog technology, with digital technology offered in addition to analog in some
service areas. If, in the future, cellular carriers discontinue all service to
analog telephones, the Company would be required to dedicate financial resources
and engineering staff to integrate a digital cellular telephone transceiver into
its products. Although cellular providers have historically cooperated to
maintain technical compatibility between markets, if substantial changes to the
methods of interconnection utilized by cellular carriers occur, such as a
discontinuance of the existing out-of-area call clearing system or a decision by
cellular carriers to eliminate analog service and employ several diverse digital
technologies rather than a common digital technology, the Company may be
required to undertake costly system redesign or may encounter difficulty in
providing nationwide coverage. See "Business -- Infrastructure and Operations."


                                       12
<PAGE>   16


Dependence on Clearinghouse Services

         GTE-TSI and EDS provide clearinghouse functions to the cellular
industry, creating the data link between a foreign network and a traveling
vehicle's home cellular service area, performing credit checking functions and
facilitating roamer incoming call delivery functions. The Company's contract
with GTE-TSI covers certain functions that are critical to the Company's ability
to instantly deliver calls nationwide. It covers an initial term of three years
that began on May 3, 1999. The Company is guaranteed the right to renew the
contract for up to 10 one-year periods beyond the initial term, at a reasonable
rate to be determined by GTE-TSI.

         EDS also performs certain clearinghouse functions for the Company that
include, among other things, the validation of roaming numbers and routing of
call delivery information. The agreement with EDS expires on October 24, 2000
with successive automatic one-year renewal terms thereafter, unless terminated
at the option of either party upon 60 days notice prior to any expiration date.
There can be no assurance that the EDS agreement will be renewed upon
expiration.

         If the Company is unable to renew its agreements with GTE-TSI or, to a
lesser extent, EDS, the Company may be required to make substantial and costly
design changes to the HighwayMaster network in order to ensure continued
availability of the Company's services. Because of the unique position of
GTE-TSI and EDS as industry-wide clearinghouses and the difficulty associated
with their replacement, there can be no assurance that full functionality of the
HighwayMaster system could be maintained if such a redesign were necessary.

Southwestern Bell Mobile Systems, Inc.

         On March 30, 1999, the Company and SBMS executed an Administrative
Carrier Agreement whereby SBMS provides clearinghouse services to the Company,
including the direct payment of the Company's cellular service providers for
cellular airtime through the cellular clearinghouse process. SBMS also provides
the Company with cellular service. The Agreement provides for an initial term of
three years that automatically renews for five additional consecutive one-year
terms. The failure to renew this contract and continue existing arrangements for
payment to the Company's cellular service providers could require the Company to
post security deposits or provide other financial assurances, which could have a
material adverse effect on its business, financial condition or results of
operations. See "Business -- Infrastructure and Operations."


No Long-Term Product Supply Arrangements

         The Company does not manufacture or assemble its products. Because the
Company is dependent on a single supplier to manufacture and assemble the Mobile
Units and a second single supplier for the TrackWare(TM) Units, the possibility
exists that problems experienced by the suppliers could adversely affect the
Company. The Company has an agreement with K-Tec Electronics Corporation
("K-Tec") for the assembly of the Mobile Units, and an agreement with Wireless
Link, Inc. for the manufacture of the TrackWare(TM) Units. Additionally, the
Company subcontracts for the manufacture of various components for the Mobile
Units from various suppliers. All transceivers for the Mobile Units are
manufactured by Motorola, and the Company believes that there is a limited
number of suppliers who are capable of manufacturing transceivers that meet the
Company's requirements. In general, the failure to maintain or establish
satisfactory arrangements for the production and assembly of Mobile Units or the
TrackWare(TM) Units could have a material adverse effect on the Company's
business, financial condition and results of operations.

Control of the Company

         The Company, Southwestern Bell Wireless Holdings, Inc. ("SBWH"), the
Erin Mills Stockholders, the Carlyle Stockholders, the By-Word Stockholders and
certain other persons are parties to an Amended and Restated Stockholders'
Agreement, dated as of September 27, 1996 (the "Amended Stockholders'
Agreement") which amends and restates in its entirety the Stockholders'
Agreement dated February 4, 1994. The parties to the Amended Stockholders'
Agreement, which have not waived the right to designate directors under the
Amended Stockholder's


                                       13
<PAGE>   17


Agreement, beneficially own an aggregate of 12,289,203 shares of common stock,
representing approximately 48.9% of the shares outstanding as of December 31,
1999.

         The Amended Stockholders' Agreement contains provisions relating to,
among other things, the election of members of the Company's Board of Directors.
In particular, this agreement provides that the parties will take all action
(including the voting of shares of Common Stock owned by them) necessary to
ensure that the Board of Directors of the Company consists of: (i) two directors
designated by the Erin Mills Stockholders; (ii) one director designated by the
Carlyle Stockholders; (iii) two directors designated by the By-Word
Stockholders; and (iv) two independent directors. No Stockholder under the
Amended Stockholders' Agreement shall be entitled to designate any director if
the percentage of common stock beneficially owned by such Stockholder falls
below 5% (or with respect to the Erin Mills Stockholders and the ByWord
Stockholders, 20% for the right to designate two directors and 5% for the right
to designate one director) on a Fully Diluted Basis. For purposes of the Amended
Stockholders' Agreement, "on a Fully Diluted Basis" is determined by taking into
account the number of shares of common stock which are issued and outstanding
plus the number of shares of common stock: (a) issuable upon conversion of any
outstanding Series D Preferred Stock, and if authorized and issued, Class B
common stock; and (b) issuable pursuant to outstanding options, warrants, rights
or obligations to purchase or subscribe for shares of common stock or securities
of the Company which are exchangeable or exercisable into shares of common stock
of the Company. However, excluded from the determination of "on a Fully Diluted
Basis" are (a) the Warrants issued to SBWH; (b) options, warrants, rights or
obligations to acquire common stock of the Company issued by any person or
entity other than the Company; and (c) the number of shares of common stock
issuable pursuant to options granted to employees of the Company to acquire
common stock of the Company. Each of the parties has designated the number of
directors specified in the Amended Stockholders' Agreement, except that the
Carlyle Stockholders have declined to exercise their right to designate a
director. Prior to the receipt of regulatory relief ("Regulatory Relief")
permitting SBWH to provide landline, interLATA long-distance service pursuant to
the Communications Act of 1934, as amended by the Telecommunications Act of
1996, SBWH will not be entitled to designate a director, but will have the right
to designate a non-voting delegate who will attend all meetings of the Board of
Directors and receive all materials distributed to directors of the Company.
Upon the conversion of Series D Preferred Stock into Class B Common Stock, which
will occur upon receipt of Regulatory Relief, SBWH will be entitled to designate
one member of the Board of Directors of the Company. In addition, if SBWH and
its affiliates beneficially own 20% or more of the outstanding common stock on a
Fully Diluted Basis, SBWH will under certain circumstances be entitled to
designate a second member of the Board of Directors.

         As a result of the provisions of the Amended Stockholders' Agreement
and the number of shares of common stock owned by the stockholders who are
parties thereto, these stockholders, if they choose to act together, have the
ability to control the management and policies of the Company.

Repurchase of Senior Notes Upon Change of Control

         Under the terms of the Senior Notes, upon the occurrence of a change of
control, the Company will be required to offer to repurchase all of the
outstanding Senior Notes at a price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest and liquidated damages, if any, to the
repurchase date. There can be no assurance that the Company would have
sufficient resources to repurchase the Senior Notes upon the occurrence of a
change of control. The failure to repurchase all of the Senior Notes tendered to
the Company would constitute an event of default under the Indenture.
Furthermore, the repurchase of the Senior Notes by the Company upon a change of
control might result in a default on the part of the Company in respect of other
future indebtedness of the Company, as a result of the financial effect of such
repurchase on the Company or otherwise. The change of control repurchase feature
of the Senior Notes may have anti-takeover effects and may delay, defer or
prevent a merger, tender offer or other takeover attempt.

Competition and Technological Change

         The Company faces competition from numerous other suppliers of mobile
communications services. Currently, the Company's primary competitors in the
long-haul trucking market offer data-only, two-way communications via satellite.
Other companies that compete or are planning to compete with the Company in its
target markets also offer or plan to offer satellite-based voice and data
communication systems. The primary advantage of satellite-based communication
over the Company's cellular-based system is that satellite coverage is


                                       14
<PAGE>   18


available in certain remote areas and foreign countries that have not developed
cellular networks, enabling data transmissions in areas not served by cellular
systems. In addition, satellite-based communication systems generally utilize a
less complicated infrastructure than the Company's network and may be able to
make updates and changes to their system more quickly than the Company.

         Certain technological advances and future product offerings could
substantially change the nature of the Company's competition. For example,
geo-stationary orbit, MEO and LEO satellite systems are expected to offer voice
and data communications that could compete directly with existing cellular-based
services, including the Company's system. One of the Company's current
competitors, AMSC, launched a geo-stationary satellite in 1995 and offers both
data and voice communications. In addition, networks of MEO and LEO satellites
are in the early implementation stage, funded by consortiums of companies that
intend to provide worldwide voice communication capability. The addition of
voice capability to satellite systems may reduce the Company's competitive
advantage over certain of its competitors, and it is possible that satellite
owners may, at least on a temporary basis, offer rates at or below the Company's
rates.

         Certain conventional mobile radio and Enhanced SMR providers offer
digital services that are competitive with current cellular services, including
the HighwayMaster system. If Enhanced SMR providers expand coverage and
establish a significant degree of uniformity, through use of proprietary digital
technology or otherwise, Enhanced SMR providers could eventually develop an
integrated network to allow nationwide roaming. Enhanced SMR operators also
offer dispatching services, data transmission and other services through their
expanding networks that could compete with the Company's services. One
telecommunications company already has implemented a system of nationwide
roaming limited to densely populated urban areas where it has built out its
network. Several other cellular and PCS carriers are currently in various stages
of implementing similar systems.

         The wireless industry has developed a uniform standard for incoming
call delivery at a reduced cost. This inexpensive autonomous-registration
incoming call delivery system for cellular roamers reduces the competitive
advantages of the Company's system. Moreover, if cellular carriers were to
develop additional standard protocol and hardware for inexpensive data
transmission and fraud control, or if the cost of roaming services were to
decline further, other competitive advantages of the Company's system would be
significantly reduced or lost.

         In general, technology in the wireless communications industry is in a
rapid and continuing state of change as new technologies and enhancements to
existing technologies continue to be introduced. The Company believes that its
future success will depend upon its ability to develop and market products and
services that meet changing customer needs and that anticipate or respond to
technological changes on a timely and cost-effective basis. There can be no
assurance that the Company will be able to keep pace with technological
developments.

         Certain of the Company's competitors, including Qualcomm, have
significantly greater name recognition, financial and other resources than the
Company. Among other things, it appears that certain of these resources have
been or are being used by Qualcomm and other competitors of the Company to
subsidize initial hardware purchases and provide extended periods of free
services in an attempt to achieve rapid penetration of certain of the Company's
target markets. See "Business -- Competition."

         The failure of the Company to develop and market products and services
that meet changing customer needs and that anticipate or respond to
technological changes on a timely and cost-effective basis could have a material
adverse effect on the Company's business, financial condition and results of
operations.

Uncertainty of Government Regulation

         The Company believes that the nature of its services does not require
the Company to be classified as a common carrier for either wireless or
long-distance regulatory purposes. This conclusion is based on several
alternative regulatory interpretations. Specifically, the FCC regulates
telecommunications service providers or common carriers requiring approval for
entry into the marketplace and regulating the service rates offered through
tariff filing requirements. Additionally, most state regulatory commissions
regulate rate and entry for telecommunications service providers. In order to
encourage growth within the information services segment of the
telecommunications industry, the FCC issued an order creating the enhanced
services exemption from regulation. Basically, providers of enhanced services
are not subject to regulation by the FCC or the various state regulatory


                                       15
<PAGE>   19


agencies. Generally, services qualify as enhanced services if data is
transmitted between the provider and customer so that the customer is able to
interact with or manipulate the data regardless of whether the services provided
include telecommunications transmission components such as cellular or
long-distance services. The Company believes that the services it provides to
its customers in connection with the Mobile Units and TrackWare(TM) Units
qualify as enhanced services and are exempt from both FCC and state regulation.
Alternatively, the Company believes that its services may be characterized as a
private network not offered to the public at large, but offered to a specific
group of users, which also exempts the Company from FCC and state regulation.
The Company relies on its long-distance providers and wireless providers to
comply with any regulatory requirements. The reclassification of the Company's
services as telecommunications services could have a material adverse effect on
the Company's business, financial condition and results of operations.

         The wireless telecommunications industry currently is experiencing
significant regulatory changes that may require a re-examination of laws and
regulations applicable to the Company's operations. The Company's services may
be characterized by the FCC as CMRS. If the Company's services are classified as
CMRS, the Company may be subject to FCC regulation as a telecommunications
service provider. However, the FCC has decided to forbear from most regulation
of the CMRS marketplace, including regulation of the rates and terms of entry
for interstate services offered by CMRS providers. In addition, Congress has
preempted state regulation of CMRS entry and rates. FCC decisions thus far have
enhanced the development of CMRS, including requiring local telephone companies
to offer interconnection and access to their networks to CMRS providers and to
establish reciprocal compensation arrangements with CMRS providers for the
transportation and termination of calls at prices that are cost-based and just
and reasonable.

         If any services offered by the Company are determined to be
telecommunications services by the FCC, the revenues generated from these
services would be subject to the required contribution to the federal universal
service fund. At this time, revenues generated from the Company's services that
meet the definition of enhanced services are not subject to FCC mandated
universal service fund contribution. However, based on a conservative
interpretation, the Company has reported certain revenues generated by the
personal calling plan service offered by the Company as a telecommunications
service for purposes of federal universal service fund contribution filings.
Various states have instituted their own universal service fund mechanisms that
may or may not follow the federal statutes in exempting revenues generated by
enhanced services. The Company cannot predict the impact of any requirement to
contribute to state and federal universal service mechanisms.

         Long-distance providers face regulatory schemes similar to cellular
carriers, with greater state involvement in requiring posting of bonds as
security against customer deposits and in other matters. The Company believes
current long-distance regulations apply to the companies providing long-distance
services directly to Company customers, without long-distance regulatory
involvement by the Company. The reclassification of the Company's services as
long distance services could have a material adverse effect on the Company's
business, financial condition and results of operations.

         In February 1996, the Telecommunications Act of 1996 was signed into
law. This is the most comprehensive set of telecommunications laws to be enacted
since the original Communications Act of 1934 was passed. The Telecommunications
Act encourages competition in virtually every arena of communications and
eliminates many regulatory barriers to new competitors by, in some instances,
preempting state and local restrictions. The Telecommunications Act requires the
FCC to extensively revise many of the rules and regulations under which the
telecommunications industry has been operating. To that end, the FCC has
completed approximately 80 different proceedings in connection with the
Telecommunications Act. At this time, it is unclear how the Telecommunications
Act will affect the activities of the Company, its strategic business
relationships with other communications companies, or its customers. There can
be no assurance that the relaxing of barriers to competition in the industry
will not hinder the Company's growth and viability in the marketplace.

Dependence on Key Personnel

         The Company is dependent on the efforts of Jana Bell, President and
Chief Executive Officer; Michael Smith, Executive Vice President and Chief
Financial Officer; Todd Felker, Senior Vice President - Sales & Marketing;
Marshall Lamm, Senior Vice President - Operations; Pierre Parent, Chief
Technology Officer; J. Raymond Bilbao, General Counsel and Secretary, and a
group of employees with technical knowledge regarding the


                                       16
<PAGE>   20


Company's systems. The loss of services of one or more of these individuals
could materially and adversely affect the business of the Company and its future
prospects. The Company has employment agreements with Ms. Bell, and Messrs.
Smith, Felker, Lamm, Parent and Bilbao. The Company does not maintain key-man
life insurance on any of the Company's officers or employees. The Company's
future success will also depend on its ability to attract and retain additional
management and technical personnel required in connection with the growth and
development of its business.

Year 2000 Software Risk

         The Year 2000 problem, also known as "Y2K," refers to the inability of
 some computer programs and microprocessors to interpret dates beyond December
 31, 1999. The Y2K problem can be traced to the early days of computers, when
 memory and data storage were very expensive. To conserve these limited
 resources, computer programmers decided to use just two digits in the date
 fields to identify calendar year. For example, the year 1999 would be
 identified as "99." The assumption is that the date is within the twentieth
 century. In the year 2000, this assumption is invalid and some systems will not
 properly recognize dates.

         The Company took the appropriate steps to ensure that its operations,
 products and services were not adversely impacted by potential Year 2000
 failures. The Company established a Year 2000 project team, which included
 employees with various functional responsibilities and outside consultants. The
 Year 2000 readiness project was overseen by senior management of the Company
 with regular progress reports made to the Board of Directors.

         The project team identified five phases in becoming Year 2000
 compliant: (1) locating, listing and prioritizing specific technology that is
 potentially subject to Year 2000 challenges; (2) assessing and determining the
 element of risk that exists through inquiry, research and testing; (3)
 resolving Year 2000-related issues that were identified in previous phases by
 repair in a testing environment; (4) validation testing, monitoring, obtaining
 certification, and verifying the correct manipulation of dates and date-related
 data, including the systems of material third parties; and (5) implementation,
 installation, integration and application of Year 2000-ready solutions by
 replacement, upgrade or repair of technology systems, including those of
 material third parties. Finally, the Company engaged two third-party consulting
 firms to assist the Company in assessing its products and internal systems.

         The Year 2000 project team, in conjunction with the third-party
 consulting firms, has determined that: (1) the Company's hardware and software
 products, including embedded microprocessors, are Year 2000 compliant with
 non-material exceptions; and (2) the Company's internal information processing
 systems, including embedded microprocessors, are Year 2000 compliant with
 non-material exceptions. Solutions for the minor issues with the Company's
 hardware and software products are in place, and deployment to customers was
 completed on a timely basis. The Company did not defer any specific projects,
 goals or objectives relating to its operations as a result of Year 2000
 compliance efforts.

         The Company has requested written Year 2000 compliance status reports
 from each of its material vendors and suppliers. It is the policy of the
 Company to continue to seek requests for Year 2000 compliance status reports
 from material vendors and suppliers until such status reports are obtained. To
 date, the Company has received such reports from its material vendors and
 suppliers with no material non-compliance issues identified.

         The Company expended approximately $600,000 to become Year 2000
 compliant. All costs associated with Year 2000 readiness and remediation were
 funded from operating cash flows.

         The Company's products and services are materially dependent upon
 third-party service providers, including local telephone companies,
 cellular-service providers and long-distance telephone companies, for proper
 operation. Additionally, the Company's ability to bill its customers for
 enhanced services is materially dependent on third-party billing companies. The
 Company's ability to provide products for sale is also materially dependent on
 third party manufacturers and suppliers. The failure of these third parties to
 provide Year 2000-compliant products and/or services could have a material
 adverse effect on the Company's financial condition and results of operations.
 Such risks include, but are not limited to, the inability of the Company to
 provide services to its customers, bill existing customers, accept new orders
 for products and services, and/or perform other customer-care tasks.


                                       17
<PAGE>   21


         Contingency planning is an integral part of the Company's Year 2000
 preparedness. Because of the many uncertainties that continue to exist, the
 Company's readiness and remediation methodology dictate that contingency plans
 be established for likely non-compliance scenarios. The Company is continually
 developing contingency plans as new risks are uncovered and will continue to
 plan and implement contingency plans throughout 2000. The foregoing discussion
 regarding Year 2000 project timing, effectiveness, implementation and costs is
 based on management's current evaluation using available information. Factors
 that might cause material changes include, but are not limited to, the
 availability of resources, the Year 2000 readiness of material third-party
 vendors and suppliers, and the Company's ability to respond to unforeseen Year
 2000 compliance issues.

         The Company's products and services successfully transitioned to the
 Year 2000 without incident. The Company did not experience any interruption in
 its operations or its ability to offer its products and services on or
 subsequent to January 1, 2000, nor did any of the Company's customers
 experience service interruptions as a result of Y2K.

 Expansion Risk

         To the extent that the Company is successful in implementing its
business strategy, the Company may experience periods of rapid expansion in the
future. In order to manage growth effectively in the complex environment in
which it operates, the Company will need to maintain and improve its operating
and financial systems and expand, train and manage its employee base. In
addition, the Company must carefully manage production and inventory levels to
meet product demand and facilitate new product introductions. Inaccuracies in
demand forecasts could result in insufficient or excessive inventories and
disproportionate overhead expenses. The Company must also expand the capacity of
its sales, distribution and installation networks in order to achieve continued
growth in its existing and future markets. In general, the failure to manage
growth effectively could have a material adverse effect on the Company's
business, financial condition and results of operations.

Customer Concentration

         The SBC Companies, Wal-Mart Stores East, Inc. and Contract Freighters,
Inc. collectively account for approximately 47% of the Company's installed base
of mobile units as of March 15, 2000. The loss of any of these customers, or any
event, occurrence or development which adversely affects the relationship
between the Company and any of these customers, could have a material adverse
effect upon the Company's business, financial condition and results of
operations.

Product Liability

         Testing, manufacturing and use of the Company's products entail the
risk of product liability. Although management believes its Mobile Units offer
safety advantages over conventional cellular telephones, it is possible that
operation of the product may give rise to product liability claims. Product
liability claims present a risk of protracted litigation, substantial money
damages, attorney's fees, costs and expenses, and diversion of management
attention. In addition, as the Company expands its business to include the
provision of alarm monitoring services in connection with the SBC Contract, the
Company is exposed to an increased risk of litigation regarding various safety,
performance and other matters. Product liability claims that exceed policy
limits applicable to the Company's liability insurance or that are excluded from
the policy coverage could have a material adverse effect on the business or
financial condition of the Company.

Common Stock Available for Purchase by SBWH

         Pursuant to a Purchase Agreement dated September 27, 1996 (the
"Purchase Agreement"), and certain agreements and instruments related thereto,
the Company issued to SBWH (i) 1,000 shares of Series D Preferred Stock and (ii)
Warrants. The shares of Series D Preferred Stock issued to SBC are initially
convertible into an aggregate of 1,600,000 shares of Common Stock at the option
of SBWH. The Warrants generally entitle SBWH to purchase from the Company (i)
3,000,000 shares of Common Stock at an exercise price of $14.00 per share and
(ii) 2,000,000 shares of Common Stock at an exercise price of $18.00 per share,
in each case subject to adjustment to prevent dilution. If all of the shares of
Series D Preferred Stock were converted into Common Stock and all the


                                       18
<PAGE>   22


Warrants were exercised by SBWH, SBWH would hold approximately 20.4% of the
outstanding shares of Common Stock (based on the total number of shares of
Common Stock outstanding as of December 31, 1999).

Certain Rights of SBWH

         The Purchase Agreement and certain of the other agreements and
instruments related thereto afford various rights to SBWH that are not available
to the other stockholders of the Company. For example, the Company has granted
to SBWH, as the holder of Series D Preferred Stock, the right to approve certain
actions on the part of the Company, including: (i) mergers or consolidations
involving the Company that require stockholder approval under the General
Corporation Law of the State of Delaware (the "DGCL"); (ii) sales of all or
substantially all of the assets of the Company that require stockholder approval
under the DGCL; (iii) amendments to the Company's Certificate of Incorporation;
(iv) the dissolution of the Company; (v) the adoption, implementation or
acceptance by the Company of certain anti-takeover provisions; (vi) the issuance
by the Company of equity securities, including securities convertible into
equity securities (subject to specified exceptions), and the incurrence by the
Company of debt obligations in an amount exceeding $5.0 million in any year;
(vii) the Company entering into any line of business other than its existing
line of business or entering into joint ventures, partnerships or similar
arrangements that would require expenditures of more than $3.0 million; (viii)
the disposition by the Company in any 12-month period of assets (other than
assets sold in the ordinary course of business) of which the fair market value
exceeds $3.0 million; and (ix) any amendment, alteration or repeal of the terms
of the Series D Preferred Stock.

Dividend Policy

         The Company has never paid cash dividends on its Common Stock and has
no plans to do so in the foreseeable future. The Company intends to retain
earnings, if any, to develop and expand its business.

Shares Eligible for Future Sale

         At December 31, 1999. the Company had 25,120,213 shares of Common Stock
outstanding, of which approximately 12,831,000 shares of Common Stock are freely
tradable without restrictions or further registration under the Securities Act.
The remaining shares are deemed "restricted securities" within the meaning of
the Securities Act as a result of the issuance thereof in private transactions
prior to the Company's initial public offering in June 1995 and pursuant to the
Recapitalization Agreement entered into at the time of the SBWH transaction.
These "restricted securities" may be publicly sold only if registered under the
Securities Act or sold in accordance with an applicable exemption from
registration, such as those provided by Rules 144 and 144A promulgated under the
Securities Act.

         The Amended Stockholder's Agreement provides for certain demand,
piggyback or other registration rights to the stockholders who are parties to
it. In particular, the agreement provides that, with respect to an aggregate of
1,818,018 shares of Common Stock issued to the Erin Mills Stockholders and
certain of the Carlyle Stockholders in connection with the Recapitalization
Transactions, the Company would register one-half each of such shares under the
Securities Act, for sale during the three-month periods beginning March 31, 1997
and September 27, 1997. The Erin Mills Stockholders have waived the right to
cause the Company to register such shares, although they have reserved the right
to revoke such waiver at any time. The Carlyle Stockholders executed a waiver
similar to the Erin Mills Stockholders' waiver; however, they then exercised
their piggyback rights in connection with the registration of warrants and
warrant shares that were issued in connection with the 1997 sale of Senior
Notes. The Carlyle Shareholders offered all 2,723,468 shares beneficially owned
by them to the public under the warrant registration statement filed on
September 18, 1998. During 1999, none of the Company's Common Stock held by the
Carlyle Stockholders' was purchased pursuant to the offering. See "Part II, Item
5. Market for Registrant's Common Equity and Related Stockholder Matters."

         The sale of a substantial number of shares of Common Stock or the
availability of a substantial number of shares for sale may adversely affect the
market price of the Common Stock and could impair the Company's ability to raise
additional capital through the sale of its equity securities.


                                       19
<PAGE>   23


Volatility of Stock Price

         Historically, the market prices for securities of emerging companies in
the telecommunications industry have been highly volatile. Future announcements
concerning the Company or its competitors, including results of technological
innovations, new commercial products, financial transactions, government
regulations, proprietary rights or product or patent litigation, may have a
significant impact on the market price of the Company's common stock. The
Company's stock price has been highly volatile in recent periods.


ITEM 2.  PROPERTIES

REAL PROPERTY AND LEASES

         The Company does not own any real property. The Company leases
approximately 73,400 square feet of office space for its corporate headquarters
in Richardson, Texas, of which approximately 18,600 square feet is sub-leased to
another company. In addition, the Company leases approximately 15,000 square
feet of warehouse and office space in Dallas, Texas.

ITEM 3.  LEGAL PROCEEDINGS

LEGAL PROCEEDINGS

         The Company is involved in various claims and lawsuits incidental to
its business, primarily collections lawsuits in which the Company is seeking
payment of amounts owed to it by customers. In connection with the Company's
efforts to collect payments from a small number of former customers, such former
customers have on occasion alleged breaches of contractual obligations under
service agreements with the Company. The Company does not believe that these
claims and lawsuits will have a material adverse affect on the Company's
business, financial condition and results of operations.

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

         No matters were submitted to a vote of security holders during the
fourth quarter of the year 1999 covered by this report through the solicitation
of proxies or otherwise.


                                       20
<PAGE>   24


                                     PART II

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

         The Company's Common Stock was initially offered to the public on June
22, 1995, and was quoted on the Nasdaq National Market ("Nasdaq NMS") through
close of business on February 1, 1999, after which time it began trading on the
Nasdaq SmallCap Market ("Nasdaq SmallCap") under the symbol "HWYM". The
following table sets forth the range of high and low trading prices on Nasdaq
NMS and Nasdaq SmallCap, as applicable, for the Common Stock for the periods
indicated. Such price quotations represent inter-dealer prices without retail
markup, markdown or commission and may not necessarily represent actual
transactions.

<TABLE>
<CAPTION>
                                              BID PRICES
                                         HIGH             LOW
                                         -----           -----
<S>                                      <C>              <C>
                1998
                First Quarter            $8.00           $5.38
                Second Quarter           $6.50           $2.31
                Third Quarter            $4.50           $0.88
                Fourth Quarter           $2.13           $0.83

                1999
                First Quarter            $2.19           $1.22
                Second Quarter           $1.88           $1.25
                Third Quarter            $1.66           $1.06
                Fourth Quarter           $2.94           $1.31
</TABLE>

         The Company had approximately 4,950 holders of common stock as of March
16, 2000. The last sales price for the Company's Common Stock as reported on
March 16, 2000 was $5.50. The Company did not pay dividends on its Common Stock
for the year ended December 31, 1999 and has no plans to do so in the
foreseeable future.

         On September 18, 1998, under the Securities Act of 1933, as amended,
the Securities and Exchange Commission ("SEC") declared effective the Company's
registration statement on Form S-3, as amended (the "Registration Statement").
The Company registered warrants and warrant shares as required pursuant to the
Warrant Registration Rights Agreement entered into as part of the Company's 1997
Debt Offering. Under the terms of the Warrant Registration Rights Agreement, the
Company is obligated to use its best efforts to keep the Registration Statement
continuously effective until the earlier of (i) the expiration of the warrants
or (ii) the time when all warrants have been exercised; provided, however, that
during any consecutive 365-day period, the Company may suspend the effectiveness
of the Registration Statement on up to two occasions for a period of not more
than 45 consecutive days in connection with a possible acquisition, business
combination or other development affecting the Company if the Board of Directors
determines that disclosure thereof would not be in the best interests of the
Company. The Company will not receive any proceeds from the sale of the warrants
by the selling warrant holders. To the extent that any warrants are exercised,
the Company will receive the exercise price for the warrant shares. During 1999,
no warrants were sold and no warrant shares were exercised.

         Additionally, the Company registered shares required pursuant to the
Amended Stockholders' Agreement (the "Stockholders' Agreement"). The
Stockholders' Agreement grants piggyback registration rights to certain
stockholders who are parties thereto. Accordingly, whenever the Company proposes
to register any shares of Common Stock (or securities convertible into or
exchangeable for, or options, warrants or other rights to acquire Common Stock)
under the Securities Act of 1933 (other than registrations on Form S-4 or Form
S-8), the eligible parties to the Stockholders' Agreement have the right to
include shares of Common Stock held by them in any such registration. However,
if the inclusion of shares of Common Stock pursuant to the piggyback
registration provisions is reasonably determined by the managing underwriter or
underwriters to materially adversely affect the success of the proposed
offering, the Company may exclude certain shares from the offering. All eligible
parties under the


                                       21
<PAGE>   25


Stockholders' Agreement were given notice of their opportunity to piggyback the
offering of their Company Common Stock holdings on the Registration Statement.
The Carlyle Stockholders were the only eligible parties who exercised their
piggyback rights in connection with the registration of warrants and warrant
shares under the Registration Statement. The Carlyle Shareholders offered all
2,723,468 shares beneficially owned by them to the public under the Registration
Statement. During 1999, none of the Carlyle Stockholders' Company Common Stock
was purchased pursuant to the offering.


                                       22
<PAGE>   26


ITEM 6.  SELECTED FINANCIAL DATA

SELECTED FINANCIAL DATA

         The selected financial data set forth for each of the years 1995, 1996,
1997, 1998 and 1999 have been derived from audited financial statements,
including the balance sheets at December 31, 1999 and 1998 and the related
statements of operations, of cash flows and of changes in stockholders' equity
(deficit) for each of the three years in the period ended December 31, 1999 and
notes thereto appearing elsewhere herein.

<TABLE>
<CAPTION>
Year ended December 31,                                 1999        1998        1997        1996        1995
                                                      --------    --------    --------    --------    --------
                                                         (In thousands, except per share and operating data)
<S>                                                   <C>         <C>         <C>         <C>         <C>
STATEMENT OF OPERATIONS DATA
Revenues:
  Product                                             $ 43,914    $ 16,832    $ 27,187    $ 14,645    $ 16,946
  Service                                               51,576      46,463      27,445      16,056       9,908
                                                      --------    --------    --------    --------    --------
     Total revenues                                     95,490      63,295      54,632      30,701      26,854
                                                      --------    --------    --------    --------    --------
Cost of revenues:
  Product                                               37,422      12,991      22,133      15,099      17,730
  Service                                               23,799      32,419      21,397      11,489       9,172
  Writedown of inventory                                    --          --          --       1,943          --
                                                      --------    --------    --------    --------    --------
    Total cost of revenues                              61,221      45,410      43,530      28,531      26,902
                                                      --------    --------    --------    --------    --------

Gross profit (loss)                                     34,269      17,885      11,102       2,170         (48)
                                                      --------    --------    --------    --------    --------

Expenses:
  General and administrative                            14,706      22,748      11,872       7,997       6,488
  Customer service                                       7,842      10,844      11,493       8,089       5,727
  Sales and marketing                                    4,091       7,372       7,723       9,139       6,273
  Engineering                                            2,685       5,399       4,604       3,487       2,868
  Network services center                                1,437       1,992       1,416         607          --
  Severance and AutoLink(R) termination costs             (189)      5,357          --          --          --
  Depreciation and amortization                          6,551       5,829       2,684       1,482         811
                                                      --------    --------    --------    --------    --------
                                                        37,123      59,541      39,792      30,801      22,167
                                                      --------    --------    --------    --------    --------

    Operating loss                                      (2,854)    (41,656)    (28,690)    (28,631)    (22,215)

Interest income                                          2,037       4,827       2,500         809       1,041
Interest expense                                       (13,422)    (17,099)     (4,857)     (1,691)     (5,106)
Other income (expense)                                   2,715          --          --        (230)       (117)
                                                      --------    --------    --------    --------    --------
Loss before income taxes and extraordinary item        (11,524)    (53,928)    (31,047)    (29,743)    (26,397)
                                                      --------    --------    --------    --------    --------
Income tax provision                                        --          --          --          --          --
                                                      --------    --------    --------    --------    --------
    Loss before extraordinary item                     (11,524)    (53,928)    (31,047)    (29,743)    (26,397)
Extraordinary item                                          --      18,867          --        (317)     (6,980)
                                                      --------    --------    --------    --------    --------
    Net loss                                          $(11,524)   $(35,061)   $(31,047)   $(30,060)   $(33,377)
                                                      ========    ========    ========    ========    ========

Basic and diluted loss per share:
    Loss before extraordinary item                    $  (0.46)   $  (2.17)   $  (1.25)   $  (1.39)   $  (1.43)
    Extraordinary item
                                                            --        0.76          --       (0.01)      (0.35)
                                                      --------    --------    --------    --------    --------
    Net loss                                          $  (0.46)   $  (1.41)   $  (1.25)   $  (1.40)   $  (1.78)
                                                      ========    ========    ========    ========    ========

Weighted average number of shares outstanding           24,974      24,899      24,864      22,763      19,813
                                                      ========    ========    ========    ========    ========

OTHER FINANCIAL AND OPERATING DATA (unaudited)(1)
Units installed at December 31,                         50,825      47,657      33,122      20,354      14,751
Average monthly service revenue per unit ("ARPU")     $  80.81    $  99.26    $  85.54    $  76.23    $  79.08
</TABLE>

(1) Service revenues are composed of a monthly access fee and charges
for usage of cellular minutes. The Company has discontinued reporting average
monthly usage of minutes per unit since ARPU is considered to be a more
meaningful measurement of activity.


                                       23
<PAGE>   27


<TABLE>
<CAPTION>
December 31,                             1999         1998         1997        1996        1995
                                       ---------    ---------    ---------   ---------   ---------
<S>                                    <C>          <C>          <C>         <C>         <C>
BALANCE SHEET DATA

Cash and short-term investments        $  17,768    $  26,169    $  46,486   $  19,725   $  23,969
Working capital                           35,660       29,143       64,729      24,605      25,772
Network, equipment and software, net      15,703       20,649       15,482       8,629       5,020
Total assets                              74,073      103,126      146,473      42,929      42,369
Notes payable                             92,090       91,697      120,956          --      11,488
Redeemable preferred stock                    --           --           --          --       8,126
Stockholders' equity (deficit)           (38,051)     (26,791)       8,270      34,664      13,101

Capital expenditures                   $   3,103    $  10,520    $   9,499   $   5,139   $   4,076
</TABLE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL

      The Company develops and implements mobile communications solutions,
including integrated voice, data and position location services. The initial
application for the Company's wireless enhanced services has been developed for,
and is marketed and sold to, companies that operate in the long-haul trucking
market. The Company provides long-haul trucking companies with a comprehensive
package of mobile communications and management information services, thereby
enabling its trucking customers to effectively monitor the operations and
improve the performance of their fleets. The initial product application was
customized and has been sold to and installed in the service vehicle fleets of
the member companies of SBC Communications, Inc. During the fourth quarter of
1999, the Company entered the mobile asset tracking market with the introduction
of its trailer-tracking product, Trackware(TM). There were no TrackWare(TM)
revenues in 1999.

      The Company's installed base of mobile units was 50,825 at December 31,
1999, compared to 47,657 at December 31, 1998, an increase of 6.6 percent.
Continuing increases in the installed base, which will generate greater service
revenues, are critical to achieving profitable operations and, therefore, key to
the ultimate success of the Company. Continuing operating losses and negative
cash flow are anticipated in 2000. However, based on projected operating
results, the Company believes its existing capital resources will be sufficient
to fund its currently anticipated operating needs and capital expenditure
requirements for the next 12 months.

      During the third quarter of 1998 the Company announced that it was: (i)
halting the development of its AutoLink(R) service, and (ii) implementing a
number of key management and structural changes designed to more closely align
the Company's expenditures with its revenues. As a result of these
announcements, the Company reduced its workforce by approximately 25% and
recorded charges of $2,481,000 for obligations under employment contracts and
severance payments to terminated employees, and $2,431,000 to recognize asset
impairments and record estimated amounts to be incurred to extinguish
contractual obligations associated with the AutoLink(R) program.

      Until the third quarter of 1996, the Company's service revenues were
generated from mobile communications units served exclusively by a switching
complex operated by AT&T Corp. (the "AT&T Complex"). The Company's NSC commenced
service during the third quarter of 1996. During 1997, voice and data
communication services were provided by both the Company's NSC and the AT&T
Complex while the provision of service was transitioned from the AT&T Complex to
the NSC. Since January 1, 1998, the Company has provided voice and data
communication services for all of its customers exclusively through the NSC
together with related customer billing, credit and collection activities. The
amount of service revenues and related expenses recognized by the Company varied
significantly based upon whether a particular customer received service through
the AT&T Complex or the NSC. In the case of customers served through the AT&T
Complex, service charges were collected


                                       24
<PAGE>   28


by AT&T. The Company recognized as revenue the portion of service charges
received from AT&T, with the remainder of the service charges retained by AT&T
as compensation for its cost of providing services. In the case of customers
served by the NSC, the entire amount of the service charges to customers is
recognized by the Company as revenue and additional operating and service
expenses are borne by the Company. The operating expenses associated with the
NSC are reflected in the Company's financial statements as general and
administrative expenses (customer billing, credit and collection activities),
network services center (other third party and internal operating expenses) and
depreciation. Because of the difference in the economic relationships described
above, as a greater proportion of customers have been served by the NSC, the
Company recognized increased service revenues, which are offset by additional
operating and service expenses.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1999, COMPARED TO YEAR ENDED DECEMBER 31, 1998

         Total revenues increased 50.9% to $95.5 million in 1999 from $63.3
million in 1998. Product revenues increased 160.9% to $43.9 million in 1999 from
$16.8 million in 1998. The increase in product revenues is a result of
recognizing $29.7 million of revenues on the service vehicle contract entered
into during 1998 that required delivery of mobile units coupled with development
and delivery of additional features over the term of the installation period.
Service revenues increased 11.0% to $51.6 million in 1999 from $46.5 million in
1998 due to the increased installed base of mobile units. The average installed
base of mobile units during 1999 increased 35.4% from the 1998 average installed
base. Average monthly revenue per mobile unit decreased 18.6% to $80.81 in 1999
from $99.26 in 1998. The decrease was attributable to: (i) the decision in the
second quarter of 1998 to cancel the personal calling accounts promotion and
strengthen credit policies related to personal calling accounts, thereby
reducing personal calling revenues; and (ii) the increasing proportion of
service vehicles in the installed base. Average revenue for service vehicles is
less than that of long-haul trucking because of different product functionality.

         Product gross profit margin was 14.8% in 1999, compared to 22.8% in
1998 because of the $3.5 million warranty provision that is discussed in more
detail in Note 3 to the accompanying financial statements. Excluding the effect
of this $3.5 million charge, 1999 product gross profit margin would have been
22.8%.

         Service gross profit margin was 53.9% in 1999, compared to 30.2% in
1998. As more fully described in Note 3 to the accompanying financial
statements, during 1999 the Company recorded $4.4 million of credits related to
a contract settlement. Excluding the effect of these credits, service gross
profit margin would have been 45.3%. The increase in service margin from 30.2%
to 45.3% is primarily a result of: (i) the additional access fees generated by
the 35.4% increase in the average installed base of mobile units; (ii) the
effect of a new, lower-cost contract with one of the Company's major vendors;
and (iii) the effect of technical adjustments and modifications implemented to
reduce the amount of airtime costs incurred that are not billable to customers.

         Operating expenses decreased 37.7% to $37.1 million in 1999 from $59.5
million in 1998. This decrease is primarily as a result of: (i) the
restructuring of operations implemented in the second and third quarters of
1998; and (ii) 1998 expenses being unusually high as the result of charges
aggregating $11.0 million for bad debt expense, sales tax liability, and
severance and AutoLink(R) termination costs. Excluding these charges from 1998,
the decrease in operating expenses from 1998 would have been 23.5%. The average
number of employees decreased 25.0% in 1999 from 1998. Sales and marketing
expense and engineering expense decreased significantly because 1998 included
significant advertising and development costs associated with products that were
discontinued in the third quarter of 1998.

         Interest income was $2.0 million in 1999 compared to $4.8 million in
1998. Interest expense was $13.4 million in 1999 compared to $17.1 million in
1998. The change in these relationships reflects the lower average outstanding
balances during 1999 in cash and short-term investments, pledged securities and
Senior Notes payable.

         Other income reflects the gain from the settlement of a customer
contract, and the proceeds from the settlement of the litigation with AT&T
Corp., net of related expenses, as more fully described in Note 3 to the
accompanying financial statements.


                                       25
<PAGE>   29


YEAR ENDED DECEMBER 31, 1998, COMPARED TO YEAR ENDED DECEMBER 31, 1997

      Total revenues increased to $63.3 million in 1998, compared to $54.6
million in 1997. Product revenues declined to $16.8 million in 1998 from $27.2
million in 1997, primarily as a result of a 45.5% decrease in mobile units sold.
Product shipments in 1998 were less than the Company's expectations primarily as
a result of the absence of any contribution from major new contracts and the
introduction of the Series 3000 mobile unit that did not generate any
significant sales volumes. After a reassessment of the market, the Series 3000
product offering was discontinued. The Company signed one major new contract
during 1998; however, the 8,686 units shipped and placed in service in
connection with this contract are not reflected in product revenues because the
earnings process was not complete at December 31, 1998. Service revenues
increased to $46.5 million in 1998, compared to $27.4 million in 1997 due to the
combined effect of (i) the increased installed base of mobile units and (ii)
increased service revenues per mobile unit. Average monthly revenue per mobile
unit in 1998 increased to $99.26 from $85.54 in 1997 because the entire
installed base of mobile units was served through the NSC in 1998, while the
majority of the installed base was served through the AT&T Complex in 1997. See
discussion under "General" above.

      Product gross profit margin was 22.8% in 1998, compared to 18.6% in 1997.
The improvement in product gross profit margin is primarily attributable to a
lower provision for warranty costs.

      Service gross profit margin was 30.2% in 1998, compared to 22.0% in 1997.
The Company incurs certain costs for airtime usage that are not billable to
customers under current billing practices. The improvement in service gross
profit margin in 1998 reflects the changed economic relationships described
above, and the effect of technical adjustments and modifications implemented to
reduce the amount of airtime costs incurred that are not billable to customers

      General and administrative expenses increased to $22.7 million in 1998,
compared to $11.9 million in 1997. Of this $10.8 million increase, approximately
$4.3 million represents a provision for bad debts related to the Company's
accounts receivable, and approximately $3.0 million represents a charge to
accrue an estimated liability for sales taxes and associated costs as described
in more detail in Note 9 to the accompanying financial statements. Of the $4.3
million provision for bad debts, $1.5 million relates to personal calling
accounts activated in connection with a promotion designed to increase minutes
of airtime usage. As a result of the unfavorable experience in connection with
these personal account customers, during the second quarter of 1998 the Company
discontinued the promotion and changed the credit process with respect to
personal accounts in an attempt to reduce the Company's credit risk. The Company
recorded a $2.7 million provision as a result of a major customer's filing for
Chapter 11 bankruptcy protection. The remainder of the increase in general and
administrative expenses is represented primarily by: (i) ordinary and customary
costs associated with billing, credit and collection activities for the NSC;
(ii) growth in the average number of employees and salary increases; (iii)
consulting fees in connection with evaluation of the Company's information
systems and efforts to improve service gross profit margin; and (iv) legal and
professional fees.

      Customer service expenses decreased to $10.8 million in 1998, compared to
$11.5 million in 1997. This decrease is attributable to the reduction in the
number of employees pursuant to a reorganization announced in the second quarter
of 1998. The reduction in the number of employees primarily reflects the
elimination of redundancies that had been necessary as a result of having
customers served by both the AT&T Complex and the NSC.

      Sales and marketing expenses decreased to $7.4 million in 1998, compared
to $7.7 million in 1997, primarily from cost savings realized in the fourth
quarter as a result of the reorganization announced during the third quarter of
1998.

      Engineering expenses increased to $5.4 million in 1998, compared to $4.6
million in 1997. This increase is primarily attributable to increases in
payroll-related costs as a result of an increase in the number of engineering
personnel devoted to continuation engineering and new product development, and
other costs specifically related to the development of the AutoLink(R) service.


                                       26
<PAGE>   30


                  Depreciation and amortization expense increased to $5.8
million in 1998, compared to $2.7 million in 1997 reflecting the additional
depreciation and amortization as a result of additions to network, equipment and
capitalized software during 1997 and 1998.

                  Interest income was $4.8 million in 1998, compared to $2.5
million in 1997. Interest expense was $17.1 million in 1998, compared to $4.9
million in 1997. The change in these relationships reflects higher average
outstanding balances during 1998 in cash and short-term investments, temporary
investments, and notes payable as a result of the issuance of $125,000,000 of
Senior Notes in September 1997.

LIQUIDITY AND CAPITAL RESOURCES

                  The Company's cash and short-term investments balances
decreased $8.4 million to $17.8 million at December 31, 1999 from $26.2 million
at December 31, 1998. Based on projected operating results, the Company believes
its existing capital resources will be sufficient to fund its currently
anticipated operating needs and capital expenditure requirements for the next 12
months. However, the Company's future cash flow from operations and operating
requirements may vary depending on a number of factors, including the rate of
installation of mobile units, the level of competition, success of new products,
general economic conditions and other factors beyond the Company's control.

                  The Company has incurred significant operating losses since
inception and has a stockholders' deficit of approximately $38.1 million at
December 31, 1999. The Company must significantly increase its product sales and
service revenue while decreasing its operating expenses to achieve
profitability. The Company's ability to achieve profitable operations will be
affected by the expenses, difficulties and delays frequently encountered in the
development and marketing of telecommunication products and services, the
competitive environment in which the Company operates, the Company's dependence
upon certain key customers and other risks and uncertainties. Although the
Company believes it will be able to successfully mitigate these risks, there is
no assurance that the Company ever will be able to achieve profitability.

                  Beginning March 15, 2001, the Company will be required to fund
the interest payment on its 13 3/4% Senior Notes from cash generated from
operations or obtain an alternative means of repayment. Prior to March 15, 2001,
interest payments on the Senior Notes are provided for through a portfolio of U.
S. Government securities held in escrow. If the Company is unable to service the
Senior Notes through cash generated from operations, the Company would be
required to obtain additional financial resources to fund such interest payments
or seek to restructure the terms of the Senior Notes. Although the Company
believes that it will be able to fund such interest payments out of cash flow
from operations, there is no assurance that the Company's future operations will
generate sufficient positive cash flow for this purpose or that the Company
would be able to obtain additional financial resources or restructure the terms
of the Senior Notes on terms acceptable to the Company.

                  The Company's ability to generate positive cash flow from
operations is dependent upon the continued retention of certain key customers.
The loss of any such customers would significantly reduce the Company's ability
to generate sufficient cash flow to fund the interest payments on the Senior
Notes beginning March 15, 2001.

                  The future success of the Company is dependent upon its
ability to profitably develop and market its products and services in the highly
competitive and rapidly changing telecommunications industry and the support of
its creditors, stockholders and customers.

                  The Company's capital resources may be insufficient to fund
its operating needs, capital expenditures and debt service requirements in the
long term. The Company believes that, in order to address its long-term capital
requirements, it will need to take steps to: (i) increase the installed base of
mobile units in service and improve the efficiency of its operations to reduce
or eliminate its operating losses; or (ii) restructure the terms of the Senior
Notes; or (iii) obtain additional sources of debt or equity financing. The
Company's ability to obtain additional debt financing is materially restricted
under the terms of the Indenture governing the Senior Notes. There can be no
assurance that the Company would be able to either restructure the Senior Notes
or obtain additional debt or equity financing on satisfactory terms, if at all.


                                       27
<PAGE>   31


ITEM 7A:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company does not have any material exposure to market risk
associated with its cash and short-term investments. The Company's Senior Notes
payable are at a fixed rate and, thus, are not exposed to interest rate risk.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The Company's financial statements, Schedule II - Valuation and
Qualifying Accounts, and reports of independent public accountants, are included
on pages F-1 through F-16 and pages S-1 through S-2.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

         None.


                                       28
<PAGE>   32


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Information regarding Directors and Executive Officers is incorporated
by reference to the section entitled "Election of Directors" in the Registrant's
definitive Proxy Statement to be filed with the Securities and Exchange
Commission in connection with the Annual Meeting of Stockholders to be held on
May 23, 2000 (the "Proxy Statement").

ITEM 11.  EXECUTIVE COMPENSATION

         The information required by this item is incorporated by reference from
the Proxy Statement under the heading "Executive Compensation."

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by this item is incorporated by reference from
the Proxy Statement under the heading "Security Ownership of Certain Beneficial
Owners and Management."

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by this item is incorporated by reference from
the Proxy Statement under the heading "Certain Transactions."


                                       29
<PAGE>   33


                                     PART IV

              ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
                               REPORTS ON FORM 8-K

<TABLE>
<CAPTION>
                                                                    Page Number
<S>      <C>                                                        <C>
(a)  Documents filed as part of the report:

     (1) Reports of Independent Public Accountants .................... F-1

         Balance Sheets as of December 31, 1999 and 1998 .............. F-2

         Statements of Operations for the Years Ended
               December 31, 1999, 1998 and 1997 ....................... F-3

         Statements of Cash Flows for the Years Ended
               December 31, 1999, 1998 and 1997 ....................... F-4

         Statements of Changes in Stockholders'
               Equity (Deficit) for the Years Ended
               December 31, 1999, 1998 and 1997 ....................... F-5

         Notes to Financial Statements ................................ F-6

     (2) Financial Statement Schedules

         Reports of Independent Public Accountants on
           Financial Statement Schedules............................... S-1

         Schedule II-Valuation and Qualifying Accounts................. S-2
</TABLE>

Financial statement schedules other than those listed above have been omitted
because they are either not required, not applicable or the information is
otherwise included.

 (3) Exhibits

<TABLE>
<CAPTION>
              EXHIBIT
              NUMBER                        TITLE
              -------                       -----
<S>                     <C>
                  3.1 - Certificate of Incorporation of the Company, as amended.
                        (1)(9)
                  3.2 - Amended and Restated By-Laws of the Company.(13)
                  4.1 - Specimen of certificate representing Common Stock, $.01
                        par value, of the Company.(1)
                  4.2 - Warrant Certificate, dated September 27, 1996, issued to
                        SBW.(7)
                  4.3 - Recapitalization Agreement, dated September 27, 1996, by
                        and among the Company, the Erin Mills Stockholders, the
                        Carlyle Stockholders and the other persons named
                        therein.(7)
                  4.4 - Amended and Restated Stockholders Agreement, dated
                        September 27, 1996, by and among the Company, SBW, the
                        Erin Mills Stockholders, the Carlyle Stockholders, the
                        By-Word Stockholders and the other persons named
                        therein.(7)
                  4.5 - Indenture dated September 23, 1997 by and among the
                        Company, HighwayMaster Corporation and Texas Commerce
                        Bank, National Association.(12)
                  4.6 - Pledge Agreement dated September 23, 1997, by and among
                        the Company, Bear, Stearns & Co. Inc. and Smith Barney
                        Inc.(12)
                  4.7 - Registration Rights Agreement dated September 23, 1997,
                        by and among the Company, HighwayMaster Corporation,
                        Bear, Stearns & Co. Inc. and Smith Barney Inc.(12)
</TABLE>


                                       30
<PAGE>   34


<TABLE>
<S>                     <C>
                  4.8 - Warrant Agreement dated September 23, 1997, by and among
                        the Company, Bear, Stearns & Co. Inc. and Smith Barney
                        Inc.(12)
                  4.9 - Warrant Registration Rights Agreement dated September
                        23, 1997, by and among the Company, Bear, Stearns & Co.
                        Inc. and Smith Barney, Inc.(12)
                 10.1 - License Agreement, dated April 23, 1992, by and between
                        Voice Control Systems and the Company (as successor to
                        By-Word Technologies, Inc.)(1)
                 10.2 - Second Amendment to Employment Agreement, dated
                        September 1, 1998, by and between HighwayMaster
                        Corporation and William C. Saunders. (16)
                 10.3 - Agreement and General Release, dated September 30, 1998,
                        by and between HighwayMaster Corporation and William C.
                        Kennedy, Jr.(15)
                 10.4 - Release of HighwayMaster Communications, Inc. and
                        HighwayMaster Corporation by William C. Saunders, dated
                        December 15, 1998. (16)
                 10.5 - Release of William C. Saunders by HighwayMaster
                        Communications, Inc. and HighwayMaster Corporation,
                        dated December 15, 1998. (16)
                 10.6 - Amended and Restated 1994 Stock Option Plan of the
                        Company, dated February 4, 1994, as amended.(1)(5)(6)
                 10.7 - Purchase Agreement, dated September 27, 1996, between
                        the Company and SBW.(7)
                 10.8 - Mobile Communications (Voice and Data) Services
                        Agreement, dated as of July 15, 1993, between the
                        Company and EDS Personal Communications
                        Corporation.(1)(2)
                 10.9 - Stock Option Agreement, dated June 22, 1998, by and
                        between the Company and John Stupka. (16)
                10.10 - Services Agreement, dated March 20, 1996, between the
                        Company and GTE-Mobile Communications Service
                        Corporation.(3)(4)
                10.11 - Acknowledgment by William C. Saunders dated December 15,
                        1998. (16)
                10.12 - Amendment dated November 16, 1995 to that certain Mobile
                        Communications (Voice and Data) Services Agreement,
                        dated as of July 15, 1993, between the Company and EDS
                        Personal Communications Corporation.(3)(4)
                10.13 - Mutual Separation and Release, dated December 22, 1998,
                        by and between HighwayMaster Corporation and Gordon D.
                        Quick. (16)
                10.14 - Product Development Agreement, dated December 21, 1995,
                        between HighwayMaster Corporation and IEX
                        Corporation.(3)(4)
                10.15 - Technical Services Agreement, dated September 27, 1996,
                        between HighwayMaster Corporation and Southwestern Bell
                        Wireless Holdings, Inc.(7)
                10.16 - Letter Agreement, dated February 19, 1996, between
                        HighwayMaster Corporation and IEX Corporation.(3)
                10.17 - Form of Adoption Agreement, Regional Prototype Cash or
                        Deferred Profit-Sharing Plan and Trust Sponsored by
                        McKay Hochman Co., Inc., relating to the HighwayMaster
                        Corporation 401(k) Plan. (1)
                10.18 - February 27, 1997 Addendum to Original Employment
                        Letter, dated September 19, 1997 by and between the
                        HighwayMaster Corporation and Robert LaMere. (16)
                10.19 - Software Transfer Agreement, dated April 25, 1997,
                        between HighwayMaster Corporation and Burlington Motor
                        Carriers, Inc.(9)(10)
                10.20 - Employment Agreement, dated June 3, 1998, by and between
                        HighwayMaster Corporation and Todd A. Felker. (16)
                10.21 - Employment Agreement, dated June 3, 1998, by and between
                        HighwayMaster Corporation and William McCausland.(16)
                10.22 - Employment Agreement, dated May 29, 1998, by and between
                        HighwayMaster Corporation and Jana Ahlfinger Bell. (14)
                10.23 - Lease Agreement, dated March 20, 1998, between
                        HighwayMaster Corporation and Cardinal Collins Tech
                        Center, Inc.(15)
</TABLE>


                                       31
<PAGE>   35


<TABLE>
<S>                     <C>
                10.24 - First Amendment to Employment Agreement, dated September
                        15, 1998, by and between HighwayMaster Corporation and
                        Jana A. Bell. (16)
                10.25 - Employment Agreement, dated November 24, 1998, by and
                        between HighwayMaster Corporation and Michael Smith.
                        (16)
                10.26 - September 18, 1998 Amended and Restated Stock Option
                        Agreement of May 29, 1998 by and between the Company and
                        Jana Ahlfinger Bell. (16)
                10.27 - Stock Option Agreement, dated August 12, 1998, by and
                        between the Company and Jana Ahlfinger Bell. (16)
                10.28 - Stock Option Agreement, dated September 18, 1998, by and
                        between the Company and Jana Ahlfinger Bell. (16)
                10.29 - September 18, 1998 Amended and Restated Stock Option
                        Agreement of February 29, 1996, by and between the
                        Company and William H. McCausland. (16)
                10.30 - Stock Option Agreement, dated September 18, 1998, by and
                        between the Company and William H. McCausland. (16)
                10.31 - September 18, 1998 Amended and Restated Stock Option
                        Agreement of April 25, 1997, by and between the Company
                        and Robert LaMere. (16)
                10.32 - September 18, 1998 Amended and Restated Stock Option
                        Agreement of June 3, 1998, by and between the Company
                        and Todd A. Felker (16)
                10.33 - Stock Option Agreement dated November 24, 1998, by and
                        between the Company and Michael Smith. (16)
                10.34 - Stock Option Agreement, dated April 4, 1995, by and
                        between the Company and Terry Parker. (16)
                10.35 - Agreement No. 980427 between Southwestern Bell Telephone
                        Company, Pacific Bell, Nevada Bell, Southern New England
                        Telephone and HighwayMaster Corporation executed on
                        January 13, 1999 (17)(18)
                10.36 - Administrative Carrier Agreement entered into between
                        HighwayMaster Corporation and Southwestern Bell Mobile
                        Systems, Inc. on March 30, 1999 (17)(18)
                10.37 - Addendum to Agreement entered into between HighwayMaster
                        Corporation and International Telecommunications Data
                        Systems, Inc. on February 4, 1999 (17)(18)
                10.38 - Second Addendum to Agreement entered into between
                        HighwayMaster Corporation and International
                        Telecommunication Data Systems, Inc. on February 4, 1999
                        (17)(18)
                10.39 - Manufacturing and Equipment Purchase Agreement entered
                        into between HighwayMaster Corporation and Wireless Link
                        Corporation on March 9, 1999 (17)(18)
                10.40 - Agreement entered into between HighwayMaster Corporation
                        and Cellemetry LLC on January 19, 1999 (17)(18)
                10.41 - Agreement entered into between HighwayMaster Corporation
                        and Cellemetry LLC on January 19, 1999 (17)(18)
                10.42 - Agreement entered into between HighwayMaster
                        Corporation and Cellemetry LLC on January 19, 1999
                        (17)(18)
                10.43 - Agreement entered into between HighwayMaster Corporation
                        and Cellemetry LLC on January 7, 1999 (17)(18)
                10.44 - Stock Option Agreement dated June 24, 1999, by and
                        between the Company and J. Raymond Bilbao (19)
                10.45 - Stock Option Agreement dated June 24, 1999, by and
                        between the Company and Marshall Lamm (19)
                10.46 - Stock Option Agreement dated June 14, 1999, by and
                        between the Company and Marc A. Bringman (19)
                10.47 - Transition Agreement entered into between GTE Wireless
                        Services Corporation and HighwayMaster Corporation on
                        April 30, 1999 (19)(20)
</TABLE>


                                       32
<PAGE>   36


<TABLE>
<S>                     <C>
                10.48 - Fleet-on-Track Services Agreement entered into between
                        GTE Telecommunications Services Incorporated and
                        HighwayMaster Corporation on May 3, 1999 (19)(20)
                10.49 - Confidential Memorandum of Understanding entered into
                        between Criticom International Corp. and HighwayMaster
                        Corporation on April 16, 1999 (19)(20)
                10.50 - Stock Option Agreement dated September 3, 1999, by and
                        between the Company and J. Raymond Bilbao (21)
                10.51 - Stock Option Agreement dated September 3, 1999, by and
                        between the Company and Todd Felker (21)
                10.52 - Stock Option Agreement dated September 3, 1999, by and
                        between the Company and C. Marshall Lamm (21)
                10.53 - Stock Option Agreement dated September 3, 1999, by and
                        between the Company and William H. McCausland (21)
                10.54 - Stock Option Agreement dated September 3, 1999, by and
                        between the Company and Pierre H. Parent (21)
                10.55 - Stock Option Agreement dated September 3, 1999, by and
                        between the Company and W. Michael Smith (21)
                10.56 - Stock Option Agreement dated September 3, 1999, by and
                        between the Company and Robert W. LaMere (21)
                10.57 - Stock Option Agreement dated September 3, 1999 by and
                        between the Company and Stephen P. Tacke (21)
                 23.1 - Consent of Arthur Andersen LLP (22)
                 23.2 - Consent of PricewaterhouseCoopers LLP (22)
                   27 - Financial Data Schedule (22)
</TABLE>

             -------


         (1)    Filed in connection with the Company's Registration Statement on
                Form S-1, as amended (No. 33-91486), effective June 22, 1995.

         (2)    Certain confidential portions deleted pursuant to Order Granting
                Application for Confidential Treatment issued in connection with
                Registration Statement on Form S-1 (No. 33-91486) effective June
                22, 1995.

         (3)    Filed in connection with the Company's Annual Report on Form
                10-K for the fiscal year ended December 31, 1995.

         (4)    Certain confidential portions deleted pursuant to Application
                for Confidential Treatment filed in connection with the
                Company's Annual Report on Form 10-K for the fiscal year ended
                December 31, 1995.

         (5)    Indicates management or compensatory plan or arrangement
                required to be identified pursuant to Item 14(a)(4).

         (6)    Filed in connection with the Company's Form 10-Q Quarterly
                Report for the quarterly period ended June 30, 1996.

         (7)    Filed in connection with the Company's Current Report on Form
                8-K filed on October 7, 1996.

         (8)    Filed in connection with the Company's Annual Report on Form
                10-K for the fiscal year ended December 31, 1996.

         (9)    Filed in connection with the Company's Form 10-Q Quarterly
                Report for the quarterly period ended March 31, 1997.

         (10)   Certain confidential portions deleted pursuant to Order Granting
                Application for Confidential Treatment issued in connection with
                the Company's Form 10-Q Quarterly Report for the quarterly
                period ended March 31, 1997.

         (11)   Filed in connection with the Company's Form 10-Q Quarterly
                Report for the quarterly period ended June 30, 1997.

         (12)   Filed in connection with the Company's Registration Statement on
                Form S-4, as amended (No. 333-38361).

         (13)   Filed in connection with the Company's Annual Report on Form
                10-K for the fiscal year ended December 31, 1997.



                                       33
<PAGE>   37


         (14)   Filed in connection with the Company's Form 10-Q Quarterly
                Report for the quarterly period ended June 30, 1998.

         (15)   Filed in connection with the Company's Form 10-Q Quarterly
                Report for the quarterly period ended September 30, 1998.

         (16)   Filed in connection with the Company's Form 10-K fiscal year
                ended December 31, 1998.

         (17)   Filed in connection with the Company's Form 10-Q Quarterly
                Report for the quarterly period ended March 31, 1999.

         (18)   Certain confidential portions deleted pursuant to Order Granting
                Application for Confidential Treatment issued June 22, 1999 in
                connection with the Company's Form 10-Q Quarterly Report for the
                quarterly period ended March 31, 1999.

         (19)   Filed in connection with the Company's Form 10-Q Quarterly
                Report for the quarterly period ended June 30, 1999.

         (20)   Certain confidential portions deleted pursuant to letter
                granting application for confidential treatment issued October
                10, 1999 in connection with the Company's Form 10-Q Quarterly
                Report for the quarterly period ended June 30, 1999.

         (21)   Filed in connection with the Company's Form 10-Q Quarterly
                Report for the quarterly period ended September 30, 1999.

         (22)   Filed herewith.


                                       34
<PAGE>   38


                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

March 24, 2000

                                    HIGHWAYMASTER COMMUNICATIONS, INC.


                                    By:   /s/ JANA AHLFINGER BELL
                                          -----------------------
                                          Jana Ahlfinger Bell,
                                          President and Chief Executive Officer


                                       35
<PAGE>   39


                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual
Report on Form 10-K for the fiscal year ended December 31, 1999, has been signed
below by the following persons on behalf of the Registrant in the capacities and
on the dates indicated.



<TABLE>
<CAPTION>
Signature                                   Title                                       Date
<S>                                         <C>                                         <C>
/s/ Jana Ahlfinger Bell                     President, Chief Executive Officer, and     March 24, 2000
--------------------------------------      Director (Principal Executive Officer)
Jana Ahlfinger Bell


                                            Executive Vice President and                March 24, 2000
/s/W. Michael Smith                         Chief Financial Officer
--------------------------------------      (Principal Financial Officer)
W. Michael Smith


                                            Vice President and Controller               March 24, 2000
/s/Stephen P. Tacke                         (Principal Accounting Officer)
--------------------------------------
Stephen P. Tacke


/s/Stephen L. Greaves                       Director                                    March 24, 2000
--------------------------------------
Stephen L. Greaves



/s/Gerry C. Quinn                           Director                                    March 24, 2000
--------------------------------------
Gerry C. Quinn



 /s/John T. Stupka                          Director                                    March 24, 2000
--------------------------------------
John T. Stupka
</TABLE>




                                       36

<PAGE>   40

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
HighwayMaster Communications, Inc.:

We have audited the accompanying balance sheet of HighwayMaster Communications,
Inc. (a Delaware corporation, the "Company") as of December 31, 1999, and the
related statements of operations, changes in stockholders' equity (deficit), and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of HighwayMaster Communications,
Inc. as of December 31, 1999, and the results of its operations and its cash
flows for the year then ended in conformity with accounting principles generally
accepted in the United States.



                                                    ARTHUR ANDERSEN LLP

Dallas, Texas,
February 7, 2000


REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
HighwayMaster Communications, Inc.

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, cash flows and changes in stockholders'
equity (deficit) present fairly, in all material respects, the financial
position of HighwayMaster Communications, Inc. and its subsidiary (the
"Company") at December 31, 1998, and the results of their operations and their
cash flows for each of the two years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above. We have not audited the consolidated financial statements of
HighwayMaster Communications, Inc. for any period subsequent to December 31,
1998.



                                               PRICEWATERHOUSECOOPERS LLP

Dallas, Texas
February 16, 1999


                                      F-1
<PAGE>   41

                       HIGHWAYMASTER COMMUNICATIONS, INC.
                                 BALANCE SHEETS
                    (in thousands, except share information)

<TABLE>
<CAPTION>
                                                                                December 31,   December 31,
                                                                                   1999            1998
                                                                                ------------   ------------
<S>                                                                             <C>            <C>
                                          ASSETS
Current assets:
  Cash and short-term investments                                               $     17,768   $     26,169
  Accounts receivable, net of allowance for doubtful accounts
     of $7,448 and $9,528, respectively                                               13,341         14,585
  Inventories                                                                          9,292         12,921
  Pledged securities - current portion                                                12,705         12,974
  Other current assets                                                                 2,588            714
                                                                                ------------   ------------
     Total current assets                                                             55,694         67,363
Network, equipment and software, net of accumulated depreciation
     and amortization of $13,842 and $10,202, respectively                            15,703         20,649
Pledged securities - long-term portion                                                    --         11,814
Other assets, net of accumulated amortization
     of $1,017 and $565, respectively                                                  2,676          3,300
                                                                                ------------   ------------
     Total assets                                                               $     74,073    $   103,126
                                                                                ============   ============

                            LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Accounts payable                                                              $      2,431    $    11,362
  Telecommunications costs payable                                                     4,462          5,920
  Accrued interest payable                                                             3,784          3,784
  Advance payments from customers                                                         --          7,452
  Other current liabilities                                                            9,357          9,702
                                                                                ------------   ------------
     Total current liabilities                                                        20,034         38,220
Senior notes payable                                                                  92,090         91,697
                                                                                ------------   ------------
     Total liabilities                                                               112,124        129,917
                                                                                ------------   ------------

Commitments and contingencies (Note 13)

Stockholders' equity (deficit):
  Series D participating convertible preferred stock, $0.01 par value,
     1,000 shares authorized; 1,000 shares issued and outstanding                         --             --
  Common Stock, $0.01 par value, 50,000,000 shares authorized;
     25,432,210 and 25,210,983 shares issued;  25,120,213 and 24,898,986
      shares outstanding at December 31, 1999 and 1998, respectively                     255            252
  Additional paid-in capital                                                         149,742        149,481
  Accumulated deficit                                                               (187,501)      (175,977)
  Treasury stock, 311,997 shares, at cost                                               (547)          (547)
                                                                                ------------   ------------
     Total stockholders' equity  (deficit)                                           (38,051)       (26,791)
                                                                                ------------   ------------
     Total liabilities and stockholders' equity (deficit)                       $     74,073   $    103,126
                                                                                ============   ============
</TABLE>


                 See accompanying notes to financial statements.


                                      F-2
<PAGE>   42

                       HIGHWAYMASTER COMMUNICATIONS, INC.
                            STATEMENTS OF OPERATIONS
                        (In thousands, except per share)

<TABLE>
<CAPTION>
                                                          Year ended December 31,
                                                      --------------------------------
                                                        1999        1998        1997
                                                      --------    --------    --------
<S>                                                   <C>         <C>         <C>
Revenues:
  Product                                             $ 43,914    $ 16,832    $ 27,187
  Service                                               51,576      46,463      27,445
                                                      --------    --------    --------
     Total revenues                                     95,490      63,295      54,632
                                                      --------    --------    --------

Cost of revenues (Note 3):
  Product                                               37,422      12,991      22,133
  Service                                               23,799      32,419      21,397
                                                      --------    --------    --------
    Total cost of revenues                              61,221      45,410      43,530
                                                      --------    --------    --------

Gross profit                                            34,269      17,885      11,102
                                                      --------    --------    --------

Expenses:
  General and administrative                            14,706      22,748      11,872
  Customer service                                       7,842      10,844      11,493
  Sales and marketing                                    4,091       7,372       7,723
  Engineering                                            2,685       5,399       4,604
  Network services center                                1,437       1,992       1,416
  Severance and AutoLink(R) termination cost              (189)      5,357          --
  Depreciation and amortization                          6,551       5,829       2,684
                                                      --------    --------    --------
                                                        37,123      59,541      39,792
                                                      --------    --------    --------

    Operating loss                                      (2,854)    (41,656)    (28,690)

Interest income                                          2,037       4,827       2,500
Interest expense                                       (13,422)    (17,099)     (4,857)
Other income (Note 3)                                    2,715          --          --
                                                      --------    --------    --------
    Loss before income taxes and extraordinary item    (11,524)    (53,928)    (31,047)
Income tax provision                                        --          --          --
                                                      --------    --------    --------
    Loss before extraordinary item                     (11,524)    (53,928)    (31,047)
Extraordinary item                                          --      18,867          --
                                                      --------    --------    --------
    Net loss                                          $(11,524)   $(35,061)   $(31,047)
                                                      ========    ========    ========

Basic and diluted loss per share:
    Loss before extraordinary item                    $  (0.46)   $  (2.17)   $  (1.25)
    Extraordinary item                                      --        0.76          --
                                                      --------    --------    --------
    Net loss                                          $  (0.46)   $  (1.41)   $  (1.25)
                                                      ========    ========    ========

Weighted average number of shares outstanding
   Basic                                                24,974      24,899      24,864
                                                      ========    ========    ========
   Diluted                                              24,974      24,899      24,864
                                                      ========    ========    ========
</TABLE>

                 See accompanying notes to financial statements.


                                      F-3
<PAGE>   43

                       HIGHWAYMASTER COMMUNICATIONS, INC.
                            STATEMENTS OF CASH FLOWS
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                                   Year ended December 31,
                                                                             -----------------------------------
                                                                               1999         1998         1997
                                                                             ---------    ---------    ---------
<S>                                                                          <C>          <C>          <C>
Cash flows from operating activities:
  Net loss                                                                   $ (11,524)   $ (35,061)   $ (31,047)
  Adjustments to reconcile net loss to cash used in
   operating activities:
     Depreciation and amortization                                               6,551        5,829        2,684
     Amortization of discount on notes payable                                     393          503          131
     Extraordinary item                                                             --      (18,867)          --
     Provision for bad debts                                                     4,294        6,650        2,327
     (Increase) in accounts receivable                                          (3,050)      (7,272)      (6,853)
     (Increase) decrease in inventory                                            3,629       (9,776)         313
     (Increase) in pledged securities                                               --           --         (815)
     Increase (decrease) in accounts payable                                    (8,931)       5,100        2,812
     Increase (decrease) in accrued expenses and other current liabilities      (9,255)      15,873        6,170
     Net book value of equipment retired                                         1,950           --           --
     Other                                                                      (1,702)       1,409         (652)
                                                                             ---------    ---------    ---------
          Net cash used in operating activities                                (17,645)     (35,612)     (24,930)
                                                                             ---------    ---------    ---------

Cash flows from investing activities:
     Additions to network and equipment                                         (2,329)      (9,202)      (7,072)
     Additions to capitalized software                                            (774)      (1,318)      (2,427)
     (Purchase of) liquidation of pledged securities                            12,083       14,553      (46,588)
     (Increase) decrease in temporary investments                                   --       13,626      (13,626)
     (Increase) decrease in short-term investments                              (2,893)      10,001      (19,709)
                                                                             ---------    ---------    ---------
          Net cash provided by (used in) investing activities                    6,087       27,660      (89,422)
                                                                             ---------    ---------    ---------

Cash flows from financing activities:
     Purchase of senior notes                                                       --      (10,427)          --
     Release of pledged securities allocable to retired senior notes                --        8,063           --
     Proceeds from issuance of senior notes, net                                    --           --      120,937
     Proceeds from exercise of stock options                                       264           --          467
                                                                             ---------    ---------    ---------
          Net cash provided by (used in) financing activities                      264       (2,364)     121,404
                                                                             ---------    ---------    ---------
Increase (decrease) in cash and cash equivalents                               (11,294)     (10,316)       7,052
Cash and cash equivalents, beginning of year                                    16,461       26,777       19,725
                                                                             ---------    ---------    ---------
Cash and cash equivalents, end of year                                           5,167       16,461       26,777
Short-term investments                                                          12,601        9,708       19,709
                                                                             ---------    ---------    ---------
Cash and short-term investments                                              $  17,768    $  26,169    $  46,486
                                                                             =========    =========    =========

Supplemental cash flow information:
     Interest paid                                                           $  12,974    $  16,806    $      --
                                                                             =========    =========    =========
</TABLE>


                 See accompanying notes to financial statements.


                                      F-4
<PAGE>   44

                       HIGHWAYMASTER COMMUNICATIONS, INC.
             STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                    (in thousands, except share information)


<TABLE>
<CAPTION>
                                                           Preferred Stock             Common Stock           Additional
                                                       ----------------------   ---------------------------     Paid-in
                                                         Shares      Amount        Shares         Amount        Capital
                                                       ----------   ---------   ------------   ------------   ----------
<S>                                                    <C>          <C>         <C>            <C>            <C>
Stockholders' equity (deficit) at December 31, 1996         1,000   $      --     25,150,527   $        251   $  144,829
  Exercise of stock options                                                           60,456              1          466
  Issuance of warrants                                                                                             4,186
  Net loss for year
                                                       ----------   ---------   ------------   ------------   ----------
Stockholders' equity (deficit) at December 31, 1997         1,000          --     25,210,983            252      149,481
  Net loss for year
                                                       ----------   ---------   ------------   ------------   ----------
Stockholders' equity (deficit) at December 31, 1998         1,000          --     25,210,983            252      149,481
  Exercise of stock options                                                          221,227              3          261
  Net loss for year
                                                       ----------   ---------   ------------   ------------   ----------
Stockholders' equity (deficit) at December 31, 1999         1,000          --     25,432,210   $        255   $  149,742
                                                       ==========   =========   ============   ============   ==========

<CAPTION>
                                                                Treasury Stock
                                                          --------------------------    Accumulated
                                                            Shares          Amount        Deficit        Total
                                                          -----------    -----------    -----------    -----------
<S>                                                       <C>            <C>            <C>            <C>
Stockholders' equity (deficit) at December 31, 1996           311,997    $      (547)   $  (109,869)   $    34,664
  Exercise of stock options                                                                                    467
  Issuance of warrants                                                                                       4,186
  Net loss for year                                                                         (31,047)       (31,047)
                                                          -----------    -----------    -----------    -----------
Stockholders' equity (deficit) at December 31, 1997           311,997           (547)      (140,916)         8,270
  Net loss for year                                                                         (35,061)       (35,061)
                                                          -----------    -----------    -----------    -----------
Stockholders' equity (deficit) at December 31, 1998           311,997           (547)      (175,977)       (26,791)
  Exercise of stock options                                                                                    264
  Net loss for year                                                                         (11,524)       (11,524)
                                                          -----------    -----------    -----------    -----------
Stockholders' equity (deficit) at December 31, 1999           311,997    $      (547)   $  (187,501)   $   (38,051)
                                                          ===========    ===========    ===========    ===========
</TABLE>

                See accompanying notes to financial statements.


                                      F-5
<PAGE>   45



HIGHWAYMASTER COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS

1.       BUSINESS OVERVIEW

General

         HighwayMaster Communications, Inc. is a Delaware corporation. On
December 31, 1999, HighwayMaster Corporation, a wholly owned subsidiary, was
merged into HighwayMaster Communications, Inc. (the "Company").

         The Company develops and implements mobile communications solutions,
including integrated voice, data and position location services. The initial
application for the Company's wireless enhanced services has been developed for,
and is marketed and sold to, companies that operate in the long-haul trucking
market. The Company provides long-haul trucking companies with a comprehensive
package of mobile communications and management information services, thereby
enabling its trucking customers to effectively monitor the operations and
improve the performance of their fleets. The initial product application was
customized and has been sold to and installed in the service vehicle fleets of
the member companies of SBC Communications, Inc. During the fourth quarter of
1999, the Company entered the mobile asset tracking market with the introduction
of its trailer-tracking product, Trackware.(TM) There were no TrackWare(TM)
revenues in 1999.

Future Operations

         The Company has incurred significant operating losses since inception
and has a stockholders' deficit of approximately $38.1 million at December 31,
1999. The Company must significantly increase its product sales and service
revenue while decreasing its operating expenses to achieve profitability. The
Company's ability to achieve profitable operations will be affected by the
expenses, difficulties and delays frequently encountered in the development and
marketing of telecommunication products and services, the competitive
environment in which the Company operates, the Company's dependence upon certain
key customers, and other risks and uncertainties. Although the Company believes
it will be able to successfully mitigate these risks, there is no assurance that
the Company ever will be able to achieve profitability.

         Beginning March 15, 2001, the Company will be required to fund the
interest payment on its 13 3/4% Senior Notes from cash generated from operations
or obtain an alternative means of repayment. Prior to March 15, 2001, interest
payments on the Senior Notes are provided for through a portfolio of U. S.
Government securities held in escrow. If the Company is unable to service the
Senior Notes through cash generated from operations, the Company would be
required to obtain additional financial resources to fund such interest payments
or seek to restructure the terms of the Senior Notes. Although the Company
believes that it will be able to fund such interest payments out of cash flow
from operations, there is no assurance that the Company's future operations will
generate sufficient positive cash flow for this purpose or that the Company
would be able to obtain additional financial resources or restructure the terms
of the Senior Notes, on terms acceptable to the Company.

         The Company's ability to generate positive cash flow from operations is
dependent upon the continued retention of certain key customers. The loss of any
such customers would significantly reduce the Company's ability to generate
sufficient cash flow to fund the interest payments on the Senior Notes beginning
March 15, 2001.

         The future success of the Company is dependent upon its ability to
profitably develop and market its products and services in the highly
competitive and rapidly changing telecommunications industry and the support of
its creditors, stockholders and customers.


                                      F-6
<PAGE>   46


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Estimates Inherent in the Preparation of Financial Statements

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Revenue Recognition

         Revenues from product sales and licensing of product software are
generally recognized at the time the mobile units are shipped to customers.
During 1998, the Company entered into a contract (the "Service Vehicle Contract"
or "Contract") for delivery of mobile units coupled with development and
delivery of additional features over the term of the installation period. The
earning process on the Contract was not complete until all of the additional
features had been delivered and accepted by the customer. Accordingly, revenue
was not recognized for the mobile units shipped in connection with the Contract
during 1998. Mobile units shipped under the Contract were reflected in inventory
as "equipment shipped not yet accepted," and payments received from the customer
for the equipment were classified in current liabilities as "advance payments
from customers," at December 31, 1998. The earning process on the Service
Vehicle Contract was completed during 1999, and revenue was recognized.

         Revenues generated from voice and data communications services are
recognized upon customer usage. Until the third quarter of 1996, AT&T Corp.
("AT&T") invoiced and collected payments from all of the Company's customers for
voice and data communication services associated with the Company's equipment.
The Company recorded as revenue an amount equal to the payments received from
AT&T, and the remainder of these service charges, including amounts for call
processing, enhanced long-distance services and customer collection fees, was
retained by AT&T under the terms of the Company's contract with AT&T. Beginning
in the third quarter of 1996, when the Company's Network Services Center ("NSC")
was placed into service, the Company started providing customer billing, credit
and collection activities for voice and data communication services. During
1997, voice and data communication services were provided by both the Company
and AT&T while the provision of service was transitioned from AT&T to the
Company. Since January 1, 1998, the Company has provided customer billing,
credit and collection activities for voice and data communication services for
all of its customers.

Financial Instruments

         The Company considers all liquid interest-bearing investments with a
maturity of three months or less at the date of purchase to be cash equivalents.
Short-term investments generally mature between three months and two years from
the purchase date. All cash and short-term investments are classified as
available for sale. Cost approximates market for all classifications of cash and
short-term investments; realized and unrealized gains and losses were not
material.

         Pledged securities consist of a portfolio of U. S. Government
securities, including interest earned thereon, which will provide funds
sufficient to pay in full when due the interest payments on the Senior Notes
through September 15, 2000. These securities are classified as held to maturity.
Amortized cost of pledged securities approximates market; realized and
unrealized gains and losses were not material.

         The carrying amount of cash and short term investments, pledged
securities, accounts receivable, accounts payable and accrued liabilities
approximates fair value because of their short-term maturity.

Business and Credit Concentrations

         Accounts receivable generated from equipment sales are generally
secured by the respective mobile units shipped to the customer. Allowances have
been provided for amounts that may eventually become uncollectible and to
provide for any disputed charges. During 1999, one customer accounted for
approximately $35.8 million, or 37%, of total revenues. During 1997, another
customer accounted for approximately $6.7 million, or 12%, of total revenues.
During 1998, no customer accounted for more than 10% of total revenues.



                                      F-7
<PAGE>   47


Inventories

         Inventories consist primarily of component parts and finished products
that are valued at the lower of cost or market. Cost is determined using the
first-in, first-out (FIFO) method.

Network, Equipment and Software

         Network, equipment and software are stated at cost and are depreciated
on a straight-line basis over the estimated useful lives of the various classes
of assets, which generally range from three to five years. Maintenance and
repairs are charged to operations, while renewals or betterments are
capitalized.

Research and Development Costs

         The Company expenses research and development costs as incurred. During
1999, 1998 and 1997, the Company expensed $1,241,000, $2,286,000 and $1,616,000,
respectively, in research and development costs for hardware and software that
are reflected in "Engineering Expenses" in the Statements of Operations. The
1998 and 1997 amounts are net of $324,000 and $526,000, respectively, of
research and development expenditures reimbursed by a third party.

Software Development Costs

         Costs related to the research, design and development of computer
software are charged to research and development expense as incurred. During
1999, 1998 and 1997, the Company expensed $546,000, $1,236,000 and $553,000,
respectively, in research and development costs that are reflected in
"Engineering Expenses" in the Statements of Operations. The 1998 and 1997
amounts are net of $284,000 and $468,000, respectively, of research and
development expenditures reimbursed by a third party. Software development costs
that meet the capitalization requirements of Statement of Financial Accounting
Standards ("SFAS") No. 86, "Accounting for the Costs of Computer Software to be
Sold, Leased, or Otherwise Marketed," are capitalized. Software development
costs are amortized using the straight-line method over 18 months or the
estimated economic life of the product, whichever is less.

Advertising Costs

         Advertising costs are expensed as incurred. During 1999, 1998 and 1997,
the Company expensed $554,000, $1,692,000 and $1,511,000, respectively, in
advertising costs that are reflected in "Sales and Marketing Expenses" in the
Statements of Operations.

Income Taxes

         The Company accounts for income taxes pursuant to SFAS No. 109,
"Accounting For Income Taxes." Deferred income taxes are calculated using an
asset and liability approach wherein deferred taxes are provided for the tax
effects of basis differences for assets and liabilities arising from differing
treatments for financial and income tax reporting purposes. Valuation allowances
against deferred tax assets are provided where appropriate.

Earnings Per Share

         The Company computes earnings per share in accordance SFAS No. 128,
"Earnings Per Share." Net loss per share was computed by dividing the net loss
by the weighted average number of shares outstanding during the year. The
Company's potentially dilutive securities, consisting of options and warrants,
have been excluded from the weighted average number of shares outstanding since
their effect would be anti-dilutive.

Reclassifications

         Certain reclassifications have been made for consistent presentation.


                                      F-8
<PAGE>   48


3.       UNUSUAL ITEMS

         During 1999, the Company recorded the benefit of credits due from
cellular carriers related to 1997 and 1998 based on a settlement agreement
reached with GTE Wireless, Inc. and GTE Telecommunications Incorporated. These
credits had not been previously recognized because of significant uncertainty as
to their ultimate collectibility. The effect of these credits was to increase
income by $4,533,000, of which $4,389,000 is reflected as a reduction in "Cost
of Service Revenue" in the accompanying Statements of Operations.

         During 1997, the Company entered into a contract with a customer for a
new generation of mobile unit. Pending delivery of the contracted units, the
customer installed current-generation mobile units. In 1999, the Company and the
customer negotiated a settlement agreement, the terms of which included
termination of the contract and the return of approximately 2,900 mobile units
to the Company that had been installed by the customer. "Other Income" includes
a gain of approximately $800,000 related to this settlement.

         The remaining balance of "Other Income" primarily consists of the
proceeds from the settlement of the litigation with AT&T Corp., net of related
expenses. See Note 13.

         During 1999, the earning process was culminated and the Company
recognized product revenues of $29.7 million on the mobile units delivered under
the Service Vehicle Contract. Included in "Cost of Product Revenues" in the
accompanying Statements of Operations is a warranty provision of $3.5 million,
that is the estimated cost to be incurred to remediate a defective subcomponent
in the mobile units. The related liability is included in "Other Current
Liabilities" in the accompanying Balance Sheet at December 31, 1999.

4.       SEVERANCE AND AUTOLINK(R) TERMINATION COSTS

         During the third quarter of 1998, the Company announced that it was
halting the development of its AutoLink(R) service. As a consequence, the
Company recorded a charge of $2,431,000 to recognize asset impairments and
record estimated amounts to be incurred to extinguish contractual obligations
associated with the AutoLink(R) program.

         During 1998, the Company recorded $2,926,000 in severance costs related
to two reorganizations. Severance costs of $445,000 relate to a reduction in the
number of employees, announced in the second quarter of 1998, primarily
reflecting the elimination of redundancies that had been necessary as a result
of having customers served by both the AT&T Complex and the NSC. During the
third quarter of 1998, the Company announced a number of key management and
structural changes designed to more closely align the Company's expenditures
with its revenues. As a result of this announcement and the AutoLink(R)
announcement, the Company reduced its workforce by approximately 25% and
recorded charges of $2,481,000 for obligations under employment contracts and
severance payments to terminated employees.

         The following is a summary of activity relating to Severance and
AutoLink(R) termination costs payable:

<TABLE>
<S>                                                                                  <C>
         Balance at December 31, 1997                                                $        --
             1998 Activity:
                         Accrued severance and AutoLink(R) termination costs           5,357,000
                         Cash payments for severance and contractual obligations      (2,895,000)
                         Asset write-offs                                               (434,000)
                                                                                     -----------
         Balance at December 31, 1998                                                  2,028,000
             1999 Activity:
                         Cash payments for severance and contractual obligations      (1,839,000)
                         Restored to income                                             (189,000)
                                                                                     -----------
         Balance at December 31, 1999                                                $        --
                                                                                     ===========
</TABLE>


                                      F-9
<PAGE>   49


5.      CASH AND SHORT-TERM INVESTMENTS

         Cash and short-term investments consist of the following:

<TABLE>
<CAPTION>
December 31,                                1999           1998
                                         -----------   -----------
<S>                                      <C>           <C>
Cash and commercial paper                $ 2,533,000   $ 3,039,000
Corporate notes and bonds                         --     4,595,000
Money market accounts                      2,634,000     8,827,000
                                         -----------   -----------
     Cash and cash equivalents             5,167,000    16,461,000
                                         -----------   -----------

Corporate notes and bonds                  3,065,000     7,688,000
State, Municipal and Agency securities     1,015,000     2,020,000
Commercial Paper                           8,521,000            --
                                         -----------   -----------
     Short-term investments               12,601,000     9,708,000
                                         -----------   -----------
Total cash and short-term investments    $17,768,000   $26,169,000
                                         ===========   ===========
</TABLE>

6.      INVENTORIES

         Inventories consist of the following:

<TABLE>
<CAPTION>
December 31,                            1999          1998
                                     -----------   -----------
<S>                                  <C>           <C>
Complete systems                     $ 6,576,000   $ 1,577,000
Component parts                        2,302,000       826,000
Equipment shipped not yet accepted       414,000    10,518,000
                                     -----------   -----------
                                     $ 9,292,000   $12,921,000
                                     ===========   ===========
</TABLE>

7.        NETWORK, EQUIPMENT AND SOFTWARE

          Network, equipment and software consist of the following:

<TABLE>
<CAPTION>
December 31,                                           1999            1998
                                                   ------------    ------------
<S>                                                <C>             <C>
Network service center                             $ 14,945,000    $ 13,310,000
Computers and office equipment                        6,026,000       5,668,000
Mobile units and equipment                            2,909,000       6,862,000
Software                                              5,665,000       5,011,000
                                                   ------------    ------------
                                                     29,545,000      30,851,000
Less:  accumulated depreciation and amortization    (13,842,000)    (10,202,000)
                                                   ------------    ------------
                                                   $ 15,703,000    $ 20,649,000
                                                   ============    ============
</TABLE>

         Total depreciation expense charged to operations during 1999, 1998 and
1997 was $6,099,000, $4,753,000 and $1,999,000, respectively.

         As of December 31, 1999 and 1998, the unamortized portion of software
costs was $2,314,000 and $3,047,000, respectively. Amortization of such costs
charged to expense during 1999, 1998 and 1997 was $1,487,000, $584,000 and
$728,000, respectively.


                                      F-10
<PAGE>   50


8.       OTHER ASSETS

         Other assets consist primarily of debt issue costs related to the
issuance of the Senior Notes, net of accumulated amortization. Such costs are
amortized over the term of the related debt.

9.       OTHER CURRENT LIABILITIES

<TABLE>
<CAPTION>
          December 31,                                             1999            1998
                                                                ------------    ------------
<S>                                                             <C>             <C>
          Accrued warranty costs                                $  4,482,000    $    384,000
          Deferred revenue                                                --       1,475,000
          Severance and AutoLink(R) termination costs payable             --       2,028,000
          Excise and sales taxes payable                             559,000       3,077,000
          Other                                                    4,316,000       2,738,000
                                                                ------------    ------------
                                                                $  9,357,000    $  9,702,000
                                                                ============    ============
</TABLE>

         In late 1997, the Company retained experts to analyze and advise it
with respect to various taxation issues. This evaluation and analysis involved
the identification of exemptions from taxation for certain types of businesses
or services, the confirmation of taxes currently being passed through and the
identification of sales tax issues needing attention by the Company. Based on
estimates of possible exposure to sales taxes for current and prior periods, the
Company recorded a provision for taxes and other related costs in the amount of
$3,040,000 during 1998. Of this amount, $2,288,000 is included in "Excise and
Sales Taxes Payable" at December 31, 1998.

10.      SENIOR NOTES PAYABLE

         On September 23, 1997, the Company issued 125,000 Units comprised of
$125,000,000 of 13.75% Senior Notes due September 15, 2005 and warrants to
purchase 820,750 shares of common stock at $9.625 per share. Of the gross
proceeds, $120,814,000 was allocated to the Senior Notes and $4,186,000 was
allocated to the warrants. Interest is payable on the Senior Notes semi-annually
on March 15 and September 15. The Company used $46,588,000 of the proceeds from
the issuance of the Units to purchase a portfolio of U. S. Government securities
that provides funds sufficient to pay in full when due the scheduled interest
payments on the Senior Notes through September 15, 2000. This amount, including
interest earned thereon, is reflected in the accompanying Balance Sheets under
the captions "Pledged Securities."

         The Indenture for the Senior Notes contains certain covenants that,
among other things, limit the ability of the Company to incur additional
indebtedness, pay dividends or make other distributions, repurchase any capital
stock or subordinated indebtedness, make certain investments, create certain
liens, enter into certain transactions with affiliates, sell assets, enter into
certain mergers and consolidations, or enter into sale and leaseback
transactions. The Company was in compliance with all covenants at December 31,
1999. The Indenture does allow the Company to incur additional indebtedness in
the event certain conditions are satisfied.

         The Senior Notes are redeemable at any time on or after September 15,
2001 at redemption prices declining annually from 110.313% of principal amount
in 2001 to 100.000% of principal amount in 2004, plus accrued and unpaid
interest. Prior to September 15, 2001, the Company may redeem up to 35% in the
aggregate principal amount of the Senior Notes at a redemption price of 113.75%
of the principal amount thereof, plus accrued and unpaid interest with the net
proceeds of a qualifying equity offering (as defined).

         In 1998, the Company purchased and subsequently retired $30,645,000
principal amount of its Senior Notes on the open market for $9,885,000 plus
accrued interest thereon, resulting in a gain on extinguishment of debt of
$18,867,000 after the write-off of associated debt discount and debt issuance
costs. The gain is reported as an "Extraordinary Item" in the accompanying
Statements of Operations. Upon the retirement of the Senior Notes, the allocable
portion of the Pledged Securities related thereto, in the amount of $8,063,000,
was released to the Company.


                                      F-11
<PAGE>   51


         At December 31, 1999, the $94,355,000 of Senior Notes outstanding was
recorded at the accreted value of $92,090,000. The Senior Notes have an
effective interest rate of 14.1%.

         The fair value of the Senior Notes is less than their carrying amount
at December 31, 1998 and 1999. The principal amount of the Senior Notes is
$1,000 per individual Senior Note. The Senior Notes are publicly traded but
purchases and sales of the Senior Notes are infrequent. Based on the limited
trading activity in the Senior Notes during 1999, the market value per
individual Senior Note has ranged from approximately $400 to $600.

11.      INCOME TAXES

         The components of the Company's net deferred tax asset are as follows:

<TABLE>
<CAPTION>
December 31,                                      1999            1998
                                              ------------    ------------
<S>                                           <C>             <C>
Deferred tax assets
          Step-up of tax basis in assets      $  1,390,000    $  1,511,000
           Research and development credit         206,000         205,000
           Recapitalization costs                  158,000         167,000
           Allowance for doubtful accounts       2,576,000       3,240,000
           Accrued interest                        332,000       5,797,000
           Other accrued liabilities             1,827,000         390,000
           Inventory                               283,000         444,000
           Net operating loss carryforwards     55,312,000      46,206,000
                                              ------------    ------------
           Gross deferred tax assets            62,084,000      57,960,000
           Valuation allowance                 (60,405,000)    (56,501,000)
                                              ------------    ------------
           Net deferred tax assets               1,679,000       1,459,000
Deferred tax liability
           Depreciation                         (1,100,000)     (1,010,000)
           Other                                  (579,000)       (449,000)
                                              ------------    ------------
 Net deferred tax asset                       $         --    $         --
                                              ============    ============
</TABLE>

         The following is a reconciliation of the provision for income taxes at
the U.S. federal income tax rate to the income taxes reflected in the Statements
of Operations:

<TABLE>
<CAPTION>
December 31,                               1999            1998            1997
                                       ------------    ------------    ------------
<S>                                    <C>             <C>             <C>
Income tax at Federal statutory rate   $ (3,918,000)   $(11,921,000)   $(10,556,000)
Net operating losses not benefited        3,904,000      11,860,000      10,502,000
Other                                        14,000          61,000          54,000
                                       ------------    ------------    ------------
             Income tax benefit        $         --    $         --    $         --
                                       ============    ============    ============
</TABLE>

         At December 31, 1999, the Company had net operating loss carryforwards
aggregating approximately $162.7 million that expire in various years between
2007 and 2019. Due to the issuance of certain notes payable during 1994, there
was a change in ownership under the Internal Revenue Code, which limits the
annual utilization of approximately $18.0 million of these carryforwards and
will cause some amount of the carryforwards to expire unutilized. Any additional
changes in ownership could also result in additional limitations of loss
carryforwards.


                                      F-12
<PAGE>   52


12.      STOCKHOLDERS' EQUITY INSTRUMENTS AND RELATED MATTERS

Series D Preferred Stock

         Southwestern Bell Wireless Holdings, Inc. ("SBWH"), a wholly owned
subsidiary of SBC Communications Inc., owns all of the outstanding shares of
Series D Participating Convertible Preferred Stock ("Series D Preferred Stock").

         Each outstanding share of Series D Preferred Stock is convertible into
1,600 shares of Common Stock at the option of SBWH. In addition, at such time as
SBWH obtains certain regulatory relief required in order for it to offer
long-distance telephone services, all outstanding shares of Series D Preferred
Stock will automatically convert into an equal number of shares of a new series
of common stock designated as Class B Common Stock.

         Each outstanding share of Class B Common Stock will be convertible into
1,600 shares of Common Stock at the option of SBWH. The holders of Class B
Common Stock will be entitled to receive dividends and liquidating distributions
in an amount equal to the dividends and liquidating distributions payable on or
in respect of the number of shares of Common Stock into which such shares of
Class B Common Stock are then convertible. The holders of Common Stock and Class
B Common Stock will generally have identical voting rights and will vote
together as a single class, with the holders of Class B Common Stock being
entitled to a number of votes equal to the number of shares of Common Stock into
which the shares of Class B Common Stock held by them are then convertible. In
addition, the holders of Class B Common Stock will be entitled to elect one
director of the Company (or two directors if SBWH and its affiliates
beneficially own at least 20% of the outstanding shares of Common Stock on a
fully diluted basis) and will have the right to approve certain actions on the
part of the Company.

         SBWH holds warrants that entitle SBWH to purchase (i) 3,000,000 shares
of Common Stock at an exercise price of $14.00 per share and (ii) 2,000,000
shares of Common Stock at an exercise price of $18.00 per share. The warrants
will expire on September 27, 2001.

Incentive Plan and Other

         Pursuant to a 1994 Stock Option Plan, as amended (the "Plan"), options
may be granted to employees for the purchase of an aggregate of up to 2,474,463
shares of the Company's common stock. The Plan requires that the exercise price
for each stock option be not less than 100% of the fair market value of common
stock at the time the option is granted. Both nonqualified stock options and
incentive stock options, as defined by the Internal Revenue Code, may be granted
under the Plan. Generally, options granted under the Plan vest 20% on the date
of grant and 20% on each of the following four anniversary dates of the date of
grants and expire six years from the date of grant.

         The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for the Plan. Accordingly,
no compensation cost has been recognized for options issued under the Plan. Had
compensation cost been determined based on the fair value of the options as of
the grant dates for awards under the Plan consistent with the method provided by
SFAS No 123, "Accounting for Stock-Based Compensation," the Company's net loss
and net loss per share would have been increased to the pro forma amounts
indicated below:

<TABLE>
<CAPTION>
                                            For the Year Ended December 31,
                                     -------------------------------------------
                                         1999            1998           1997
                                     -------------   ------------   ------------
<S>                                  <C>              <C>           <C>
Net loss               As Reported   $ (11,524,000)  $(35,061,000)  $(31,047,000)
                       Pro Forma     $ (12,222,000)  $(36,007,000)  $(31,712,000)

Net loss per share     As Reported   $       (0.46)  $      (1.41)  $      (1.25)
                       Pro Forma     $       (0.49)  $      (1.45)  $      (1.28)
</TABLE>


                                      F-13
<PAGE>   53


         The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants during the years as follows:

<TABLE>
<CAPTION>
                               For the Year Ended December 31,
                               -------------------------------
                                1999         1998        1997
                               ------       ------      ------
<S>                            <C>          <C>         <C>
Dividend                           --           --          --
Expected volatility             83.83%       59.83%      65.10%
Risk-free rate of return         6.05%        4.96%       6.50%
Expected life in years            6.0          4.9         6.0
</TABLE>


          A summary of the status of the Company's Plan as of December 31, 1999,
1998 and 1997, and changes during the years ended on those dates, is presented
below:

<TABLE>
<CAPTION>
                                         1999                           1998                           1997
                                      -----------------------------------------------------------------------------------------
                                                       Weighted                       Weighted                      Weighted
                                                       Average                        Average                        Average
                                                       Exercise                       Exercise                       Exercise
                                        Shares          Price          Shares          Price          Shares           Price
                                      -----------    ------------    -----------    ------------   ------------    ------------
<S>                                   <C>            <C>             <C>            <C>            <C>             <C>
Outstanding at beginning of year        1,946,590    $       3.50      2,157,309    $       7.82      2,043,298    $       7.61
Granted                                   790,242            1.60      1,481,490            1.34        227,000            9.75
Exercised                                (221,227)           1.19             --              --        (60,456)           7.64
Forfeited                                (808,286)           6.82     (1,692,209)           7.12        (52,533)           7.93
                                      -----------    ------------    -----------    ------------   ------------    ------------
Outstanding at end of year              1,707,319    $       1.36      1,946,590    $       3.50      2,157,309    $       7.82
                                      ===========    ============    ===========    ============   ============    ============
Options exercisable at end of year        560,376    $       1.29      1,056,676    $       5.12      1,722,248    $       7.63
                                      ===========    ============    ===========    ============   ============    ============
Weighted average fair value of
    options granted during the year                  $       1.60                   $       0.74                   $       6.36
                                      ===========    ============    ===========    ============   ============    ============
</TABLE>

         The following table summarizes information about stock options
outstanding under the Plan at December 31, 1999:

<TABLE>
<CAPTION>
                                   Options Outstanding                                 Options Exercisable
                              -----------------------------                      ---------------------------------
                               Number of   Weighted Average   Weighted Average    Number of      Weighted Average
 Range of Option Price          Options     Remaining Life     Exercise Price      Options        Exercise Price
 ---------------------        -----------  ----------------   ----------------   ------------  -------------------
<S>                           <C>          <C>                <C>                <C>           <C>
      $1.00 to $1.19              812,882        4.1               $1.10            356,329            $1.12
      $1.41 to $1.66              752,437        5.5                1.49            175,647             1.50
      $2.03 to $2.19              142,000        5.3                2.17             28,400             2.17
                              -----------  ----------------   ----------------   ------------  -------------------
                                1,707,319        4.8               $1.36            560,376            $1.29
                              ===========  ================   ================   ============  ===================
</TABLE>

         A director of the Company holds options granted outside of the Plan to
purchase 3,798 shares of common stock of the Company at a price of $2.50 per
share. All of these options are exercisable at December 31, 1999.

Retirement Plan

         The Company sponsors a 401(k) Retirement Investment Profit-Sharing Plan
covering substantially all employees. The Company did not make matching
contributions to the Plan in 1999, 1998 or 1997.


                                      F-14
<PAGE>   54


13.      COMMITMENTS AND CONTINGENCIES

Litigation

         On February 16, 1996, the Company filed a lawsuit in the U. S. District
Court for the Northern District of Texas, Dallas Division, against AT&T Corp.
("AT&T") and Lucent Technologies, Inc. ("Lucent") alleging, among other things,
trade secret misappropriation, patent infringement and breach of contract. On
May 12, 1999, the Company, AT&T and Lucent executed formal settlement agreements
resolving all disputes and dismissing the lawsuit. See Note 3.

         The Company is involved in litigation matters that arise in the normal
course of conducting its business. These matters are not considered to be of a
material nature, nor are they expected to have a material effect on the
financial position or results of operations of the Company.

Leases

         The Company leases certain office facilities and furniture and
equipment under non-cancelable operating leases, with expirations through 2008.
The future minimum lease payments associated with such leases were as follows as
of December 31, 1999:

<TABLE>
<S>                                       <C>
              2000                        $ 1,330,000
              2001                          1,086,000
              2002                            936,000
              2003                            972,000
              2004                          1,083,000
              Thereafter                    4,060,000
                                          -----------
                                          $ 9,467,000
                                          ===========
</TABLE>

         During 1999, 1998 and 1997, total rent expense charged to operating
expenses was approximately $1,413,000, $1,606,000 and $1,664,000, respectively.

14.      RELATED PARTY TRANSACTIONS

         During 1998 and 1999, the Company shipped and installed approximately
15,000 mobile units to member companies of one of the Company's shareholders,
SBC Communications, Inc. ("SBC"). During 1999, the Company recognized total
product revenues from SBC of $29,748,000. (See Note 2 to the Financial
Statements regarding "revenue recognition.") Service revenues from SBC in 1999
and 1998 were $6,037,000 and $547,000, respectively.

         During 1998 and 1997, the Company paid $1,105,000 and $579,000,
respectively, for advertising services pursuant to an "Agency Agreement." The
Agency Agreement was terminated effective December 31, 1998. A former officer of
the Company was a principal stockholder and officer of the Agency until January
1, 1997, at which time his equity interest was sold. The former officer
continued to participate in the revenues of the Agency until certain contractual
obligations from the sale of the officer's equity interest in the Agency were
discharged. The former officer resigned from the Company in December, 1998.

         The Company leased office space from an affiliate of a stockholder
until September 30, 1998. Total rent paid under this agreement during 1998 and
1997 was approximately $729,000 and $817,000, respectively.

         The Company had a management consulting arrangement with a member of
its Board of Directors. During 1998 and 1997, the Company paid approximately
$69,000 and $286,000, respectively, under this consulting arrangement, which
amounts include reimbursed expenses.


                                      F-15
<PAGE>   55


15.      QUARTERLY RESULTS OF OPERATIONS (Unaudited)

         Unaudited quarterly results of operations for 1999 and 1998 are as
follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                First        Second        Third          Fourth
                                               Quarter       Quarter       Quarter       Quarter
                                              ----------    ----------    ----------    ----------
<S>                                           <C>           <C>           <C>           <C>
  1999
--------
Total revenues                                $   17,081    $   33,198    $   29,104    $   16,107
Gross profit                                      10,660        11,945         5,467         6,197
Operating income (loss)                            1,849         2,349        (3,991)       (3,061)
Net income (loss)                                    390           188        (6,156)       (5,946)
Income (loss) per share:
       Basic and diluted income (loss)        $     0.02    $     0.01    $    (0.25)   $    (0.24)
Weighted average shares outstanding
       Basic                                      24,993        24,981        24,987        25,015
       Diluted                                    25,444        25,308        24,987        25,015

 1998
------
Total revenues                                $   15,723    $   17,693    $   15,194    $   14,685
Gross profit                                       3,261         4,979         4,364         5,281
Operating loss                                    (8,491)      (11,100)      (15,265)       (6,800)
Loss before extraordinary item                   (11,589)      (14,067)      (18,484)       (9,788)
Extraordinary item                                    --            --            --        18,867
Net income (loss)                                (11,589)      (14,067)      (18,484)        9,079
Income (loss) per share:
       Before extraordinary item              $    (0.47)   $    (0.57)   $    (0.74)   $    (0.39)
       Extraordinary item                             --            --            --          0.76
       Basic and diluted income (loss)        $    (0.47)   $    (0.57)   $    (0.74)   $     0.37
Weighted average shares outstanding               24,899        24,899        24,899        24,899
</TABLE>


                                      F-16
<PAGE>   56


   REPORTS OF INDEPENDENT PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENTS SCHEDULES

To the Board of Directors and Stockholders of HighwayMaster Communications,
Inc.:

         We have audited, in accordance with auditing standards generally
accepted in the United States, the balance sheet of HighwayMaster
Communications, Inc. (the "Company") as of December 31, 1999, and the related
statements of operations, stockholders equity (deficit), and cash flows for the
year then ended, included in the Annual Report on Form 10-K, and have issued our
report thereon dated February 7, 2000. These financial statements and the
schedule referred to below are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
schedule based on our audit.

         Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule II - Valuation and Qualifying
Accounts for the year ended December 31, 1999, is not a required part of the
basic financial statements but is supplementary information required by the
Securities and Exchange Commission. This information has been subjected to the
auditing procedures applied in our audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.

                                                 ARTHUR ANDERSEN LLP

Dallas, Texas
February 7, 2000

To the Board of Directors and Stockholders of HighwayMaster Communications,
Inc.

Our audits of the consolidated financial statements referred to in our report
dated February 16, 1999 appearing on page F-1 of this Annual Report on Form 10-K
also included an audit of the financial statement schedules for each of the two
years in the period ended December 31, 1998. In our opinion, these financial
statement schedules present fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements.

                                               PRICEWATERHOUSECOOPERS LLP

Dallas, Texas
February 16, 1999



                                       S-1
<PAGE>   57


                                                                     SCHEDULE II

                       HIGHWAYMASTER COMMUNICATIONS, INC.
                        VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                                     Additions
                                      Balance at     Charged to
                                     Beginning of    Costs and                                      Balance at
              Description               Period        Expenses       Deductions        Other       End of Period
              -----------            ------------   ------------    ------------    ------------   -------------
<S>                                  <C>            <C>             <C>             <C>            <C>
Year ended December 31,1997
   Allowance for doubtful accounts
       Accounts receivable           $    774,000   $  1,427,000    $    (53,000)   $         --   $   2,148,000
       Other receivable                        --        900,000              --              --         900,000
   Inventory reserves                   2,248,000        892,000      (1,931,000)             --       1,209,000
   Valuation allowance against
       deferred tax asset              34,745,000     10,501,000              --          58,000      45,304,000

Year ended December 31,1998
   Allowance for doubtful accounts
       Accounts receivable              2,148,000      6,650,000         (38,000)        768,000       9,528,000
       Other receivable                   900,000             --        (900,000)             --              --
   Inventory reserves                   1,209,000        332,000        (234,000)             --       1,307,000
   Severance and AutoLink(R)
        termination costs payable              --      5,357,000      (3,329,000)             --       2,028,000
   Valuation allowance against
       deferred tax asset              45,304,000     11,197,000              --              --      56,501,000

Year ended December 31,1999
   Allowance for doubtful accounts
       Accounts receivable              9,528,000      4,294,000      (6,374,000)             --       7,448,000
   Inventory reserves                   1,307,000        245,000        (719,000)             --         833,000
   Severance and AutoLink(R)
        termination costs payable       2,028,000       (189,000)     (1,839,000)             --              --
   Valuation allowance against
       deferred tax asset              56,501,000      3,904,000              --              --      60,405,000
</TABLE>



                                       S-2
<PAGE>   58


                               INDEX TO EXHIBITS


<TABLE>
<CAPTION>
              EXHIBIT
              NUMBER                   DESCRIPTION
              -------                  -----------
<S>                     <C>
                  3.1 - Certificate of Incorporation of the Company, as amended.
                        (1)(9)
                  3.2 - Amended and Restated By-Laws of the Company.(13)
                  4.1 - Specimen of certificate representing Common Stock, $.01
                        par value, of the Company.(1)
                  4.2 - Warrant Certificate, dated September 27, 1996, issued to
                        SBW.(7)
                  4.3 - Recapitalization Agreement, dated September 27, 1996, by
                        and among the Company, the Erin Mills Stockholders, the
                        Carlyle Stockholders and the other persons named
                        therein.(7)
                  4.4 - Amended and Restated Stockholders Agreement, dated
                        September 27, 1996, by and among the Company, SBW, the
                        Erin Mills Stockholders, the Carlyle Stockholders, the
                        By-Word Stockholders and the other persons named
                        therein.(7)
                  4.5 - Indenture dated September 23, 1997 by and among the
                        Company, HighwayMaster Corporation and Texas Commerce
                        Bank, National Association.(12)
                  4.6 - Pledge Agreement dated September 23, 1997, by and among
                        the Company, Bear, Stearns & Co. Inc. and Smith Barney
                        Inc.(12)
                  4.7 - Registration Rights Agreement dated September 23, 1997,
                        by and among the Company, HighwayMaster Corporation,
                        Bear, Stearns & Co. Inc. and Smith Barney Inc.(12)
</TABLE>



<PAGE>   59


<TABLE>
<S>                     <C>
                  4.8 - Warrant Agreement dated September 23, 1997, by and among
                        the Company, Bear, Stearns & Co. Inc. and Smith Barney
                        Inc.(12)
                  4.9 - Warrant Registration Rights Agreement dated September
                        23, 1997, by and among the Company, Bear, Stearns & Co.
                        Inc. and Smith Barney, Inc.(12)
                 10.1 - License Agreement, dated April 23, 1992, by and between
                        Voice Control Systems and the Company (as successor to
                        By-Word Technologies, Inc.)(1)
                 10.2 - Second Amendment to Employment Agreement, dated
                        September 1, 1998, by and between HighwayMaster
                        Corporation and William C. Saunders. (16)
                 10.3 - Agreement and General Release, dated September 30, 1998,
                        by and between HighwayMaster Corporation and William C.
                        Kennedy, Jr.(15)
                 10.4 - Release of HighwayMaster Communications, Inc. and
                        HighwayMaster Corporation by William C. Saunders, dated
                        December 15, 1998. (16)
                 10.5 - Release of William C. Saunders by HighwayMaster
                        Communications, Inc. and HighwayMaster Corporation,
                        dated December 15, 1998. (16)
                 10.6 - Amended and Restated 1994 Stock Option Plan of the
                        Company, dated February 4, 1994, as amended.(1)(5)(6)
                 10.7 - Purchase Agreement, dated September 27, 1996, between
                        the Company and SBW.(7)
                 10.8 - Mobile Communications (Voice and Data) Services
                        Agreement, dated as of July 15, 1993, between the
                        Company and EDS Personal Communications
                        Corporation.(1)(2)
                 10.9 - Stock Option Agreement, dated June 22, 1998, by and
                        between the Company and John Stupka. (16)
                10.10 - Services Agreement, dated March 20, 1996, between the
                        Company and GTE-Mobile Communications Service
                        Corporation.(3)(4)
                10.11 - Acknowledgment by William C. Saunders dated December 15,
                        1998. (16)
                10.12 - Amendment dated November 16, 1995 to that certain Mobile
                        Communications (Voice and Data) Services Agreement,
                        dated as of July 15, 1993, between the Company and EDS
                        Personal Communications Corporation.(3)(4)
                10.13 - Mutual Separation and Release, dated December 22, 1998,
                        by and between HighwayMaster Corporation and Gordon D.
                        Quick. (16)
                10.14 - Product Development Agreement, dated December 21, 1995,
                        between HighwayMaster Corporation and IEX
                        Corporation.(3)(4)
                10.15 - Technical Services Agreement, dated September 27, 1996,
                        between HighwayMaster Corporation and Southwestern Bell
                        Wireless Holdings, Inc.(7)
                10.16 - Letter Agreement, dated February 19, 1996, between
                        HighwayMaster Corporation and IEX Corporation.(3)
                10.17 - Form of Adoption Agreement, Regional Prototype Cash or
                        Deferred Profit-Sharing Plan and Trust Sponsored by
                        McKay Hochman Co., Inc., relating to the HighwayMaster
                        Corporation 401(k) Plan. (1)
                10.18 - February 27, 1997 Addendum to Original Employment
                        Letter, dated September 19, 1997 by and between the
                        HighwayMaster Corporation and Robert LaMere. (16)
                10.19 - Software Transfer Agreement, dated April 25, 1997,
                        between HighwayMaster Corporation and Burlington Motor
                        Carriers, Inc.(9)(10)
                10.20 - Employment Agreement, dated June 3, 1998, by and between
                        HighwayMaster Corporation and Todd A. Felker. (16)
                10.21 - Employment Agreement, dated June 3, 1998, by and between
                        HighwayMaster Corporation and William McCausland.(16)
                10.22 - Employment Agreement, dated May 29, 1998, by and between
                        HighwayMaster Corporation and Jana Ahlfinger Bell. (14)
                10.23 - Lease Agreement, dated March 20, 1998, between
                        HighwayMaster Corporation and Cardinal Collins Tech
                        Center, Inc.(15)
</TABLE>



<PAGE>   60


<TABLE>
<S>                     <C>
                10.24 - First Amendment to Employment Agreement, dated September
                        15, 1998, by and between HighwayMaster Corporation and
                        Jana A. Bell. (16)
                10.25 - Employment Agreement, dated November 24, 1998, by and
                        between HighwayMaster Corporation and Michael Smith.
                        (16)
                10.26 - September 18, 1998 Amended and Restated Stock Option
                        Agreement of May 29, 1998 by and between the Company and
                        Jana Ahlfinger Bell. (16)
                10.27 - Stock Option Agreement, dated August 12, 1998, by and
                        between the Company and Jana Ahlfinger Bell. (16)
                10.28 - Stock Option Agreement, dated September 18, 1998, by and
                        between the Company and Jana Ahlfinger Bell. (16)
                10.29 - September 18, 1998 Amended and Restated Stock Option
                        Agreement of February 29, 1996, by and between the
                        Company and William H. McCausland. (16)
                10.30 - Stock Option Agreement, dated September 18, 1998, by and
                        between the Company and William H. McCausland. (16)
                10.31 - September 18, 1998 Amended and Restated Stock Option
                        Agreement of April 25, 1997, by and between the Company
                        and Robert LaMere. (16)
                10.32 - September 18, 1998 Amended and Restated Stock Option
                        Agreement of June 3, 1998, by and between the Company
                        and Todd A. Felker (16)
                10.33 - Stock Option Agreement dated November 24, 1998, by and
                        between the Company and Michael Smith. (16)
                10.34 - Stock Option Agreement, dated April 4, 1995, by and
                        between the Company and Terry Parker. (16)
                10.35 - Agreement No. 980427 between Southwestern Bell Telephone
                        Company, Pacific Bell, Nevada Bell, Southern New England
                        Telephone and HighwayMaster Corporation executed on
                        January 13, 1999 (17)(18)
                10.36 - Administrative Carrier Agreement entered into between
                        HighwayMaster Corporation and Southwestern Bell Mobile
                        Systems, Inc. on March 30, 1999 (17)(18)
                10.37 - Addendum to Agreement entered into between HighwayMaster
                        Corporation and International Telecommunications Data
                        Systems, Inc. on February 4, 1999 (17)(18)
                10.38 - Second Addendum to Agreement entered into between
                        HighwayMaster Corporation and International
                        Telecommunication Data Systems, Inc. on February 4, 1999
                        (17)(18)
                10.39 - Manufacturing and Equipment Purchase Agreement entered
                        into between HighwayMaster Corporation and Wireless Link
                        Corporation on March 9, 1999 (17)(18)
                10.40 - Agreement entered into between HighwayMaster Corporation
                        and Cellemetry LLC on January 19, 1999 (17)(18)
                10.41 - Agreement entered into between HighwayMaster Corporation
                        and Cellemetry LLC on January 19, 1999 (17)(18)
                10.42 - Agreement entered into between HighwayMaster
                        Corporation and Cellemetry LLC on January 19, 1999
                        (17)(18)
                10.43 - Agreement entered into between HighwayMaster Corporation
                        and Cellemetry LLC on January 7, 1999 (17)(18)
                10.44 - Stock Option Agreement dated June 24, 1999, by and
                        between the Company and J. Raymond Bilbao (19)
                10.45 - Stock Option Agreement dated June 24, 1999, by and
                        between the Company and Marshall Lamm (19)
                10.46 - Stock Option Agreement dated June 14, 1999, by and
                        between the Company and Marc A. Bringman (19)
                10.47 - Transition Agreement entered into between GTE Wireless
                        Services Corporation and HighwayMaster Corporation on
                        April 30, 1999 (19)(20)
</TABLE>


<PAGE>   61


<TABLE>
<S>                     <C>
                10.48 - Fleet-on-Track Services Agreement entered into between
                        GTE Telecommunications Services Incorporated and
                        HighwayMaster Corporation on May 3, 1999 (19)(20)
                10.49 - Confidential Memorandum of Understanding entered into
                        between Criticom International Corp. and HighwayMaster
                        Corporation on April 16, 1999 (19)(20)
                10.50 - Stock Option Agreement dated September 3, 1999, by and
                        between the Company and J. Raymond Bilbao (21)
                10.51 - Stock Option Agreement dated September 3, 1999, by and
                        between the Company and Todd Felker (21)
                10.52 - Stock Option Agreement dated September 3, 1999, by and
                        between the Company and C. Marshall Lamm (21)
                10.53 - Stock Option Agreement dated September 3, 1999, by and
                        between the Company and William H. McCausland (21)
                10.54 - Stock Option Agreement dated September 3, 1999, by and
                        between the Company and Pierre H. Parent (21)
                10.55 - Stock Option Agreement dated September 3, 1999, by and
                        between the Company and W. Michael Smith (21)
                10.56 - Stock Option Agreement dated September 3, 1999, by and
                        between the Company and Robert W. LaMere (21)
                10.57 - Stock Option Agreement dated September 3, 1999 by and
                        between the Company and Stephen P. Tacke (21)
                 23.1 - Consent of Arthur Andersen LLP (22)
                 23.2 - Consent of PricewaterhouseCoopers LLP (22)
                   27 - Financial Data Schedule (22)
</TABLE>

             -------


         (1)    Filed in connection with the Company's Registration Statement on
                Form S-1, as amended (No. 33-91486), effective June 22, 1995.

         (2)    Certain confidential portions deleted pursuant to Order Granting
                Application for Confidential Treatment issued in connection with
                Registration Statement on Form S-1 (No. 33-91486) effective June
                22, 1995.

         (3)    Filed in connection with the Company's Annual Report on Form
                10-K for the fiscal year ended December 31, 1995.

         (4)    Certain confidential portions deleted pursuant to Application
                for Confidential Treatment filed in connection with the
                Company's Annual Report on Form 10-K for the fiscal year ended
                December 31, 1995.

         (5)    Indicates management or compensatory plan or arrangement
                required to be identified pursuant to Item 14(a)(4).

         (6)    Filed in connection with the Company's Form 10-Q Quarterly
                Report for the quarterly period ended June 30, 1996.

         (7)    Filed in connection with the Company's Current Report on Form
                8-K filed on October 7, 1996.

         (8)    Filed in connection with the Company's Annual Report on Form
                10-K for the fiscal year ended December 31, 1996.

         (9)    Filed in connection with the Company's Form 10-Q Quarterly
                Report for the quarterly period ended March 31, 1997.

         (10)   Certain confidential portions deleted pursuant to Order Granting
                Application for Confidential Treatment issued in connection with
                the Company's Form 10-Q Quarterly Report for the quarterly
                period ended March 31, 1997.

         (11)   Filed in connection with the Company's Form 10-Q Quarterly
                Report for the quarterly period ended June 30, 1997.

         (12)   Filed in connection with the Company's Registration Statement on
                Form S-4, as amended (No. 333-38361).

         (13)   Filed in connection with the Company's Annual Report on Form
                10-K for the fiscal year ended December 31, 1997.



<PAGE>   62


         (14)   Filed in connection with the Company's Form 10-Q Quarterly
                Report for the quarterly period ended June 30, 1998.

         (15)   Filed in connection with the Company's Form 10-Q Quarterly
                Report for the quarterly period ended September 30, 1998.

         (16)   Filed in connection with the Company's Form 10-K fiscal year
                ended December 31, 1998.

         (17)   Filed in connection with the Company's Form 10-Q Quarterly
                Report for the quarterly period ended March 31, 1999.

         (18)   Certain confidential portions deleted pursuant to Order Granting
                Application for Confidential Treatment issued June 22, 1999 in
                connection with the Company's Form 10-Q Quarterly Report for the
                quarterly period ended March 31, 1999.

         (19)   Filed in connection with the Company's Form 10-Q Quarterly
                Report for the quarterly period ended June 30, 1999.

         (20)   Certain confidential portions deleted pursuant to letter
                granting application for confidential treatment issued October
                10, 1999 in connection with the Company's Form 10-Q Quarterly
                Report for the quarterly period ended June 30, 1999.

         (21)   Filed in connection with the Company's Form 10-Q Quarterly
                Report for the quarterly period ended September 30, 1999.

         (22)   Filed herewith.