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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549
                                    FORM 10-K

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
    of 1934 for the Fiscal Year ended December 31, 2000

                                       OR

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934

                          Commission file number 0-6272

                                   DATUM INC.
             (Exact name of Registrant as specified in its charter)

            Delaware                                             95-2512237
  (State or other jurisdiction                                (I.R.S. Employer
of incorporation or organization)                            Identification No.)

                    9975 Toledo Way, Irvine, California 92618
                    (Address of principal executive offices)
       Registrant's telephone number, including area code: (949) 598-7500

           Securities registered pursuant to Section 12(b) of the Act:

Title of each class                    Name of each exchange on which registered
-------------------                    -----------------------------------------
      None                                               None

           Securities registered pursuant to Section 12(g) of the Act:

                                  COMMON STOCK
                                  ------------
                                (Title of 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 voting stock held by non-affiliates of the
Registrant, based upon the closing sales price of the Common Stock as of March
13, 2001, was approximately $91,639,086.

The number of outstanding shares of the Registrant's Common Stock as of March
13, 2001 was 6,089,062.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of Registrant's Proxy Statement for the Annual Meeting of Stockholders
to be held on June 14, 2001 (to be filed with the Commission within 120 days of
December 31, 2000): Part III, Items 10-13.

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                                INTRODUCTORY NOTE

This Annual Report on Form 10-K (this "Report") contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 and Datum Inc. ("Datum" or
the "Company") intends that such forward-looking statements be subject to the
safe harbors created thereby. All statements other than statements of historical
fact included in this Report, including, without limitation, the statements
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Business" regarding: the Company's ability to design,
develop, manufacture and market products, the ability of the Company's products
to maintain commercial acceptance, the Company's ability to achieve new product
commercialization, the anticipated growth of its target markets, its ability to
maintain profitability, and other matters are forward-looking statements.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable at this time, it can give no assurance
that such expectations will prove to have been correct. The Company makes no
undertaking to correct or update any such statements in the future. Important
factors that could cause actual results to differ materially from the Company's
expectations ("Cautionary Statements") are set forth in "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business".
All subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements.

                                     PART I

Item 1. BUSINESS.

GENERAL

         Datum designs, manufactures or contracts for manufacture, and markets a
wide variety of high-performance time and frequency products used to synchronize
the flow of information in telecommunications networks and in numerous other
applications. Utilizing its more than 30 years of experience with time and
frequency standards, Datum supplies products that can provide accurate time to
within a fraction of one second over 100,000 years. Datum serves the markets for
high-precision time and frequency devices in the telecommunications industry,
which is rapidly expanding as a result of the conversion from analog to digital
systems and the expansion of cellular, and Personal Communications Services
("PCS") networks. The Company's Efratom subsidiary invented the Rubidium
oscillator in 1971 and believes it currently supplies approximately 80% of the
high precision, Rubidium atomic clocks used in cellular and PCS network base
stations in the United States. Datum is a major supplier of extremely precise
Cesium standards and Global Positioning System ("GPS") receivers that generate
or capture time and frequency information for use in wireline telecommunications
infrastructures.

         In addition to providing time and frequency products for
telecommunications applications, Datum is a growing supplier of timing products
used to ensure the integrity of information transmitted through enterprise
computing networks. Datum also manufactures time and frequency devices for
satellites, including GPS satellites, which utilize the Company's Cesium clocks
to provide highly accurate timing and navigation information throughout the
world. The Company also provides time and frequency products and systems for a
wide range of scientific and industrial test and measurement applications,
including missile guidance, geographic mapping and electric utility operations.
The Company is exploring the developing market for encrypted trusted time. The
hardware and software products we believe necessary for legal, non-repudiable
time stamps electronic business transactions are in development by the Company.

MARKETS

    Telecommunications

         The telecommunications system is comprised of numerous interconnected
networks employing many different transmission technologies. The traditional
wireline network is itself a series of networks connected through numerous
switches that allow voice, data and video traffic to be transmitted to their
ultimate destinations. Wireless networks, including cellular and PCS, are also
connected to components of the wireline network through switches. In order for
the overall telecommunications system, and the various components within that
system, to operate efficiently, it is critical that each network be synchronized
and operate within extremely narrow frequency tolerances. Accurate and precise
time and frequency devices are necessary at all levels of the telecommunications
system to ensure proper synchronization, throughput and quality of service.

         Wireless -- Cellular. Cellular telecommunications networks consist of
numerous cells located throughout a service area, each with its own base station
connected by wire or microwave radio to the wireline network through a network
switch. Originally, cellular networks used analog technology and frequency
division multiple access ("FDMA") to fit more channels into existing frequency
bands. This requires accurate frequency control at the base station level, which
is accomplished through the use of quartz or higher precision Rubidium
oscillators. In order to improve transmission quality, increase network capacity
and expand network coverage, many network operators are converting older
networks from analog to digital technology and expanding their digital wireless
networks. Currently, the three leading digital technologies are Time Division


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Multiple Access ("TDMA"), Code Division Multiple Access ("CDMA") and Global
System for Mobile Communications ("GSM"). In each of these transmission
protocols, calls are segmented, transmitted over a wider spectrum of bandwidth
than otherwise available under FDMA and reassembled by the applicable receiver
within the network. As a result of the segmentation/reassembling process, signal
degradation from improper synchronization is more likely to result in dropped
calls and loss of data than would occur in analog networks. Dropped calls and
data losses, in turn, require retransmission, thus decreasing network efficiency
and capacity. In order to minimize the problems resultant from improper
synchronization, many cellular operators utilize highly precise timing equipment
located at each base station and its associated network switch.

         Wireless -- PCS. PCS was developed, in part, to provide an improved
quality of wireless service and accommodate the increasing volume of
transmissions utilizing wireless networks. PCS systems operate in a manner
similar to cellular networks, but at a much higher frequency. As a result, PCS
networks require a greater number of lower powered "microcells," located more
closely together. As in cellular networks, time and frequency devices are
necessary to synchronize the flow of voice and data transmissions. The base
station in each PCS microcell and each PCS network switch connected to the
wireline network requires one or more stable, reliable timing devices to ensure
accurate synchronization.

         Wireline. The wireline sector of the telecommunications market has
experienced increased need for high-accuracy timing and frequency equipment
primarily as a result of the upgrading of existing networks from analog to
digital and the installation of new wireline networks. The wireline sector
currently consists of numerous networks and lines, which are connected by
switches that provide a transferring mechanism to route transmissions to their
ultimate destinations. In order to transfer voice, data or video traffic from
one line or network to another, both lines or segments of the network must
operate at the same frequency within a very narrow tolerance. Increased demand
for higher capacity, higher speed and more accurate information flow has
required the transition of wireline networks from analog to digital systems.
Imperfect synchronization in an analog system may result merely in static or
delayed communication. The failure to synchronize the components in digital
networks, however, may result in the loss of information, requiring
re-transmission and thus decreasing network efficiency, and increasing the costs
to the network operator. As a result, digital systems have a greater need for
accurate synchronization, which is accomplished through the use of precise
timing devices located throughout the networks.

         The wireline sector of the telecommunications market is also growing as
operators expand their networks in order to meet the growing demand for
telecommunications services. In developing countries, new wireline networks are
being installed to provide basic telephony service. In developed countries,
increased demand for new services and government deregulation has encouraged the
development of expanded networks, particularly in the local exchange and long
distance markets. The expansion of wireline networks has led to an increased
need for timing devices to synchronize the flow of information and maximize the
efficiency of the networks.

     e-Business

         The Datum e-Business mission is to build Information Technology (IT)
solutions that meet increasing demand for secure and auditable electronic
timestamps, synchronized IT business infrastructures and secure information
distribution. The Internet is rapidly accelerating the transformation of "paper
to bits" for organizations and is creating operational, security, and auditing
challenges that have never before arisen.

         The Company believes that as of today there is no basis for certifiable
accurate time within the business world's vast network of computers. The ability
to track an electronic transaction's time delivery is important because without
the benefit of a secure and auditable time stamp, any transaction or log file
has the potential to be questioned.

         An examination of physical evidence is needed in order to create an
audit trail of Who, What, Where and When. In the paper world, a notary, a
canceled check, or postage mark accomplished this. In the electronic world, the
use of time stamping is widely used in conjunction with applications to tie
together the who to the when, but there is no security associated with the time
and no audit information with the time-stamp. Most time-stamps are derived from
inaccurate and easily manipulated internal clocks on servers and network
devices. Until recently, this has not been an issue, but with the rapid adoption
of electronic commerce, the security and auditability of the present
time-stamping methods is proving weak and inadequate.

         Trusted Time(TM) is a suite of products that will provide e-Business
with a secure and auditable time stamp. Trusted Time enables any electronic
transaction or log - from digital signatures to stock purchases to document
filings to invoice payments - to have a certifiable, traceable, and verifiable
time stamp. End-user organizations or Digital Trust Authorities will be able to
deploy a world-class, secure time stamp solution within their IT infrastructure
to create a non-repudiable electronic audit trail for time stamps.

         Trusted Time's security and audit features significantly improve the
authenticity, traceability and verification of electronic time stamps. The
Trusted Time solution is comprised of Datum's Trusted Master Clocks and Trusted
Local Clocks, specialized software and secure network timing devices that will
be linked to National Timing Authorities, such as the National Institute of
Standards and Technology (NIST) in the U.S, the National Physics Laboratory
(NPL) in the United Kingdom, and the Products and Standards Bureau (PSB) in
Singapore.


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         Electronic transactions and logs now have a complex interdependency on
multiple servers and network appliances. This complex environment is generating
a need for all IT components participating in electronic business to have their
internal clocks synchronized to a world standard time. Fortunately, through
established international agreement, this time is available anywhere in the
world and is referred to as UTC time or Universal Coordinated Time. Datum's
TymServe NTP time-server product has been the pioneer solution for IT
synchronization to UTC time.

TIME AND FREQUENCY TECHNOLOGY

         Three sources of timing and frequency information are generally used in
telecommunications and commercial applications: Cesium standards, Rubidium
oscillators and quartz oscillators. In addition, GPS receivers capture and
process timing information generated by satellite-based Cesium and Rubidium
timing devices.

         The most stable and accurate timing devices in widespread use are based
on the resonance of Cesium atoms. Cesium standards operate by energizing a
reserve of Cesium atoms with microwave energy at a precise frequency. At this
frequency, due to the atomic structure of Cesium, some of the Cesium atoms
experience a change in energy state. These "excited" atoms are directed to a
collector through the use of focusing magnets, resulting in an increased atomic
flow. Since the flow of atoms does not increase unless the Cesium atoms are
excited at exactly the correct frequency, the detection of the increased atomic
flow by the collector indicates that the desired frequency has been obtained.
The highly stable frequency is then captured by the standard's electronics
package and generated as a series of user outputs. Cesium clocks are used as
international primary reference standards and are stable to within a fraction of
one second over 100,000 years.

         Rubidium oscillators combine sophisticated glassware, light detection
devices and electronics packages to generate a highly stable frequency output.
Rubidium, when energized by a specific radio frequency, will absorb less light.
The oscillator's electronics package generates this specific frequency and the
light detection device ensures, through monitoring the decreased absorption of
light by the Rubidium and the use of feedback control loops, that this specific
frequency is maintained. This highly stable frequency is then captured by the
electronic package and generated as an output signal. Rubidium oscillators
provide atomic oscillator stability, somewhat less stable than Cesium over long
durations, but generally at lower cost and in smaller packages.

         Quartz oscillators utilize the unique physical properties of quartz
crystals. Applying a voltage potential across a properly prepared quartz crystal
causes the crystal to vibrate and generate an electric signal with a relatively
stable frequency. Quartz oscillators consist of specially prepared synthetic
quartz crystals and associated electronics to apply the voltage and generate the
frequency signal. Quartz oscillators provide a less stable frequency than
Rubidium oscillators, but are available at a substantially lower cost.

         Stable and accurate timing and frequency information is also obtained
through the use of GPS receivers, which capture timing information from Cesium
standards or Rubidium oscillators aboard GPS satellites. GPS receivers are
typically used in systems integrated with quartz or Rubidium oscillators that
provide consistent timing output in the event the receiver loses the external
satellite-based signal.

         The Company applies its core understanding of timing and frequency
technology and its experience in delivering highly stable and accurate clocking
devices to provide a wide range of timing and frequency products for
telecommunications, enterprise computing and a variety of other commercial
applications. The Company designs, manufactures and markets Cesium standards,
Rubidium oscillators, quartz oscillators and GPS receivers in numerous
configurations, depending on the desired application. The Company's products are
the result of substantial research and development performed in the areas of
atomic physics, electronics engineering and software design. The Company designs
and manufactures its own physics packages, through which Cesium or Rubidium is
energized as part of the frequency detection and control process. Datum also
designs the electronics packages for its products, which are necessary to
convert the signal generated by the physics package into highly stable
electronic pulses.

         Datum is a leading supplier of time and frequency products for the
overall telecommunications system, for satellite applications, enterprise
computing networks, and for a variety of other test and measurement
applications. For telecommunications markets, Datum provides rubidium and quartz
oscillators that operate as stand-along frequency sources in cellular and PCS
base stations and network switches or are combined with the Company's GPS
receivers to provide timing information in the event of a loss of signal. In
addition, Datum provides time and frequency cesium standards for network
switches within wireline networks. The Company also supplies cesium standards
for GPS satellites that transmit precise timing information and GPS receivers
that receive and process the satellite timing transmissions throughout wireless
and wireline networks.


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         In addition to telecommunications applications, the Company's timing
products help ensure that enterprise computing networks operate in a
synchronized manner. The Company also provides quartz oscillators for a variety
of satellite programs and test and measurement products used for a variety of
applications, including missile guidance, geographic mapping and electric
utility operations.

PRODUCTS

         Datum designs and manufacturers a broad line of time and frequency
products for telecommunications systems, enterprise computing networks,
e-business, satellites and a variety of other test and measurement applications.
Datum's products generate highly precise timing and frequency information
through the manipulation of Cesium or Rubidium atoms or quartz crystals, or by
capturing Cesium or Rubidium-based signals from GPS satellite transmissions.

     Telecommunications Products

     Wireless-Cellular and PCS Products

         Cellular and PCS networks require both accurate frequency control and
timing information. The Company provides a variety of products to meet these
needs.

         Quartz and Rubidium Clocks -- For analog cellular and GSM applications,
the Company provides highly cost-effective quartz oscillator clocking units to
synchronize the transmissions of voice and data traffic at the base-station
level. For customers requiring a more stable timing source, the Company provides
Rubidium clocks.

         GPS Disciplined Clocks -- For digital TDMA and CDMA applications,
considerably more stable timing sources are required to maintain the base
station's clocking integrity. To meet this need, the Company provides GPS time
and frequency receivers that capture Cesium or Rubidium-based time signals
produced by GPS satellites. GPS receivers combine the external Cesium or
Rubidium-based timing signals with internal Rubidium or quartz oscillators to
provide consistent timing output in the event the receiver loses the external
signal.

     Wireline Products

         Wireline telecommunications network synchronization systems involve two
principal components, a primary frequency reference, to provide an accurate
frequency source, and a timing signal generator, to provide control, management
and distribution of the timing signals required for network operations.

         Cesium Beam Primary Reference Sources --Primary Reference Sources
("PRSs") generate the most stable frequency output in general commercial use.
PRSs provide Cesium-based stability at the central offices of wireline networks
for distribution of timing and frequency information to other components within
the networks.

         GPS Primary Reference Receivers -- Primary Reference Receivers ("PRRs")
capture and process time and frequency signals from GPS satellites. Integrated
Rubidium or quartz oscillators back up the external frequency source to maintain
timing accuracy during periods of loss of signal. Typically, a PRR would be
installed in telecommunications network switches to provide a stable frequency
at the network switch level, thereby allowing transmissions to be efficiently
processed with minimal degradation or retransmission requirements.

         Timing Signal Generators -- Distribution of network synchronization
information is achieved through timing signals embedded within the flow of
network communications which are referenced to the primary frequency source,
such as the Company's PRS at the central office, or to a PRR at the network
switch level. In the event of the loss of the reference frequency, the Company's
timing signal generators can maintain, for extended time periods, switch and
network synchronization quality by using internal high-stability Rubidium and
quartz oscillators as "holdover" clocking sources.

         End Office Primary References -- The Company's End Office Primary
References combines a PRR with a timing signal generator in a single
cost-effective unit designed for use where fewer telecommunications lines
require timing inputs.

     Enterprise Computing Products

         The Company's products provide accurate time-stamping of information
flowing through enterprise computing networks.

         GPS Time Servers -- The Company's time servers, which are installed in
enterprise computing networks, acquire UTC time from GPS satellite
transmissions. Worldwide coverage of GPS provides that all server-equipped sites
operate with time data that is uniform to within a few milliseconds, thereby
allowing time-sensitive information input at one location to be meaningfully
analyzed at any other site in the network. In a typical application of this
technology, the Securities Industry Automation Corporation, which supports
member firms of the New York Stock Exchange, uses the Company's time servers to
accurately time-annotate stock transactions.


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         Computer Time Modules -- The Company's computer time modules acquire
time from external sources (such as GPS satellites) to perform a variety of
timing functions within the host computer with a high degree of accuracy. The
products are physically packaged as computer plug-in units and chip sets and are
functionally configured to operate under program control as any other
data-bus-linked component of the user's data system. The Company produces
modules for IBM PC compatible computers and computers manufactured by Sun
Microsystems and Digital Equipment Corporation. The Company also produces
modules for VME and VXI bus architectures. The Company markets its computer
modules in both fully configured forms and as board products and chipsets for
use by original equipment manufacturers ("OEMs") and value-added resellers
("VARs"). Computer time modules are also marketed for use in stand-alone
computers and workstations used for test and measurement applications.

     e-Business Products

         Trusted Time-- Datum e-Business is developing a suite of products that
provides e-businesses with secure and auditable time stamps. Trusted Time
enables any electronic transaction - from digital signatures to stock purchases
to document filings to invoice payments - to have a certifiable, traceable, and
verifiable time stamp. Trusted Time's security and audit features significantly
improve the authenticity, traceability and verification of electronic time
stamps. The Trusted Time solution is comprised of Datum's Trusted Master Clocks
and Trusted Local Clocks, specialized software and secure network timing devices
that will be linked to a National Timing Authority, such as the National
Institute of Standards and Technology (NIST) in the U.S.

         Confidential Courier(R)-- Confidential Courier is data encryption
software that provides an easy way for organizations to manage and secure their
confidential, proprietary, and /or sensitive information. It uses powerful,
industry-standard encryption algorithms from RSA to scramble data into
ciphertext format, thus rendering it useless if accessed by an unauthorized
party. Confidential Courier lets the user drag and drop files to easily create
secure information packs - CourierPAKS - for distribution of proprietary
information. A single CourierPAK can contain tens of thousands of files and be
distributed to an unlimited number of clients.

         TymServe -- TymServe NTP time servers enable companies to ensure the
integrity of e-business operations through computer system and component
synchronization. The TymServe network time server meets the rapidly evolving
need for precise synchronization in TCP/IP enterprise and LAN networks. It
operates as a rack-mounted, stand-alone time serving device providing UTC time
within an organization's firewall. Offering a variety of time sources including
GPS and dial-up services, as well as high performance crystal or very high
performance Rubidium oscillators, ensures systems are always synchronized to
standard, UTC time.

     Satellite Products

         The Company provides time and frequency products for a variety of
satellites used for communications, navigation, television, and military
applications. These products are designed around the Company's core technology
and are highly durable so as to meet the demanding requirements of space.

         Cesium Clocks -- The Company's Cesium clocks are installed aboard each
of the twenty-four GPS satellites now operating in space. Because these
satellites have a life expectancy of approximately 7.5 years, it is necessary
that additional units be designed to be available as replenishment.

         Quartz Clocks -- The Company also produces and markets a broad line of
lightweight, highly stable quartz clocks, particularly suited for space
applications. Space qualified versions of these quartz units are aboard
satellites used for inter-planetary study, missile tracking and weather
monitoring and forecasting, as well as communications and other applications.

     Test and Measurement Products

         The Company's timing and frequency technology was initially developed
to create instrumentation for defense and aerospace applications. This
technology continues to be utilized in test and measurement products for a wide
range of scientific and industrial applications, including missile guidance,
precise geographic mapping and electric utility operation.

     Atomic Frequency Sources

         The Company produces and markets atomic reference frequency sources for
a wide variety of commercial and scientific applications.


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         Cesium Frequency Standards -- The Company has developed a broad line of
Cesium frequency products for numerous applications that require a constant
frequency reference. Electric utilities use the Company's Cesium frequency
standards to set the frequency of electric power. Other uses include master
timing stations for telecommunications networks, global navigation, satellite
communications, missile guidance, and precise geographic mapping for offshore
oil exploration and accurate placement of offshore oil drilling platforms. The
Company also supplies spare and replacement Cesium tubes for a broad segment of
the industry.

         Rubidium Oscillators -- In addition to their widespread use in the
telecommunications industry, the Company's Rubidium oscillators have a number of
other specific applications, such as frequency control for television networks,
Doppler radar, satellite tracking and guidance and laboratory instrumentation.
The Company's Rubidium oscillator line includes military qualified models
designed for high stability and reliability in adverse environments. The
Company's newer models feature lower profiles and are on standard plug-in
circuit cards specifically designed for ease of integration.

     GPS Time and Frequency Receivers

         The Company's GPS receivers, in addition to their use in
telecommunications markets, are used in a wide variety of other applications.
Electric utilities use the Company's GPS receivers to determine the exact
geographical location of transmission line faults by comparing the times a which
the fault is detected at various stations in the power distribution network,
eliminating the need to visually search along the right-of-way. Other customers
utilize the Company's GPS receivers to distribute highly accurate time to
multiple sites in order to synchronize the recording of simultaneous test data,
such as during missile testing or astronomical observations. In addition to
fully configured GPS receivers, the Company also manufactures board level
modules for OEM applications.

     Time Code Instrumentation Products

         In addition to the time and frequency standards described above, the
Company manufactures and markets a line of products that process or utilize
basic time and frequency information for various applications. The time is
generated from either an internal or external frequency reference in the form of
digital codes tailored to specific applications, usually to time-annotated data
recording or transmission. To correspond with the time generating equipment
described above, the Company makes devices that "read" the coded time,
transmitting it to computers, displays, or other devices where the recording of
accurate time is required.

     Product Development

         The Company believes that its future success depends largely on its
ability to maintain its technological leadership through enhancements of
existing products and development of new products that meet a wide range of
customer needs. The Company focuses its research and development efforts on
improving the core physics and electronics packages in its time and frequency
products. Specifically, the Company is conducting research and development in
three areas: developing new time and frequency technologies, improving product
manufacturability, and enhancing software functionality.

         Although the Company maintains an active development program to improve
its product offerings, including specific goals of smaller product size and
lower unit cost, there can be no assurance such efforts will be successful, that
its new products will achieve customer acceptance or that its customers'
products will achieve market acceptance. Failure to develop, or introduce on a
timely basis, new products, or product enhancements that achieve market
acceptance could adversely affect the Company's business, operating results and
financial condition. There can be no assurance that the Company will be
successful in selecting, developing, manufacturing and marketing new products or
enhancing its existing products on a timely or cost-effective basis.

         Research and development expenses totaled $15.3 million, $15.2 million
and $11.9 million in 2000, 1999 and 1998, respectively.

CUSTOMERS

         A small number of customers accounts for a substantial portion of the
Company's net sales, and the Company expects that a limited number of customers
will continue to represent a substantial portion of the Company's net sales for
the foreseeable future. The Company's largest customer, Lucent Technologies,
Inc. ("Lucent"), accounted for approximately 33% and 33% of net sales for the
years ended December 31, 2000 and 1999, respectively. The Company's five largest
customers accounted for approximately 48% and 45% of net sales during the same
period. The Company believes that its major customers continually evaluate
whether to purchase time and frequency products from alternate or additional
sources. Accordingly, there can be no assurance that a major customer will not
reduce, delay or eliminate its purchases from the Company. Any such reduction,
delay or loss in orders could have a material adverse effect on the Company's
business and results of operations. Major customers also have significant
leverage and may attempt to change the terms, including pricing, upon which the
Company and such customers do business, which could materially adversely affect
the Company's business, results of operations and financial condition.


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MARKETING, DISTRIBUTION AND INTERNATIONAL SALES

         The Company's marketing efforts are focused on establishing and
developing long-term relationships with potential customers. Sales cycles for
certain of the Company's products, particularly for its larger
telecommunications timing systems, are lengthy, and can range up to 36 months.
Sales are typically made through standard purchase orders that can be subject to
cancellation, postponement or other types of delays. Much of the Company's sales
occur through independent sales representatives and distributors that target the
specific markets that they serve. Corporate personnel in the United States and
Germany provide additional direct sales and marketing support for larger
accounts.

         Export sales of the Company's products were approximately 25%, 25% and
24% of net sales for the years ended December 31, 2000, 1999 and 1998,
respectively. The Company expects that international revenues will continue to
account for a significant percentage of the Company's total sales for the
foreseeable future. As a result, the Company is subject to various risks, which
include: economic instability in the United States and internationally; a
greater difficulty of administering its business globally; compliance with
multiple and potentially conflicting regulatory requirements such as export
requirements, tariffs and other barriers; differences in intellectual property
protections; health and safety requirements; difficulties in staffing and
managing foreign operations; longer accounts receivable cycles; currency
fluctuations; restrictions against the repatriation of earnings; export control
restrictions; overlapping or differing tax structures; political instability and
general trade restrictions. There can be no assurance that any of the foregoing
factors will not have a material adverse effect on the Company's business,
results of operations and financial condition.

         The Company's foreign sales are generally invoiced in U.S. dollars and,
accordingly, the Company does not currently engage in foreign currency hedging
transactions. However, as the Company continues to expand its international
operations, the Company may be paid in foreign currencies and exposure to losses
in foreign currency transactions may increase. The Company may choose to limit
such exposure by the purchase of forward foreign exchange contracts or through
similar hedging strategies. There can be no assurance that any currency hedging
strategy would be successful in avoiding exchange-related losses. In addition,
if the relative value of the U.S. dollar in comparison to the currency of the
Company's foreign customers should increase, the resulting effective price
increase of the Company's products to such foreign customers could result in
decreased sales which could have a material adverse impact on the Company's
business, results of operations and financial condition. See "Quantitative and
Qualitative Disclosures About Market Risk."

COMPETITION

         Intense competition exists among manufacturers of time and frequency
products, and the Company believes that competition in the Company's markets
from both new and existing competitors will increase in the future. The Company
competes principally in several specialized market segments against a limited
number of companies, some of which are more established, enjoy higher name
recognition and possess far greater financial, technological and marketing
resources that the Company. The Company currently competes principally on the
basis of the performance and quality of its products, including reliability, as
well as on cost and timely manufacture and delivery. While the Company believes
that overall it competes favorably with respect to the foregoing elements, there
can be no assurance that it will continue to be able to do so.

         In the cellular and PCS markets, the Company competes primarily with
Frequency Electronics, Inc., and various other quartz oscillator manufacturers.
In the wireline market, the Company competes primarily with Symmetricom, Inc.,
and Oscilloquartz SA. In the enterprise computing market, the Company competes
primarily with Tech-Sym Corp., Odetics, Inc. and True-Time, Inc. In the Cesium
standards market, the Company competes primarily with Agilent Technologies, Inc.
and Frequency Electronics, Inc. In the Rubidium oscillators market, the Company
competes primarily with Frequency Electronics, Inc. In addition, certain
companies, such as EG&G, Inc. that currently manufacture products exclusively
for use in military applications, could enter commercial markets, and compete
directly with the Company. In the e-Business market, the Company's pioneering
efforts do not have defined competitors at this time. There can be no assurance
that the Company will be able to compete successfully in the future against
existing or new competitors, that new technologies will not reduce the demand
for its products or that it will be able to adapt successfully to changes in the
markets served by its products. In addition, there can be no assurance that
competitive pressures will not cause the Company to reduce prices, which would
negatively affect gross margins and could have a material adverse effect on the
Company's results of operations and financial condition.

BACKLOG

         The Company's backlog of orders was approximately $40.9 million on
December 31, 2000, compared to approximately $29.7 million a year earlier. The
increase was primarily due to increased demand in both the wireless and wireline
markets. The Company considers as backlog all orders that are expected to ship
to customers within a 6-month period. As part of the Company's close working
relationships with its major OEM customers, such customers expect the Company to
respond quickly to changes in the volume and delivery schedule of their time and
frequency product requirements and to inventory products at the Company's
facilities for just-in-time delivery to the OEM customers.


                                        8

<PAGE>   9

Therefore, although contracts with such customers typically specify aggregate
volumes of products to be purchased over an extended time period, such contracts
also provide that scheduled shipment dates of particular volumes are generally
released to the Company only days or a few weeks prior to the required delivery
date to the OEM customer. As a result of possible changes in product delivery
schedules, cancellations of orders and potential delays in product shipments and
orders received for products shipped in the same quarter, the Company's backlog
at any particular date may not necessarily be representative of actual sales for
any succeeding period.

GOVERNMENT CONTRACTS

         The Company believes that approximately 7% of its sales in 2000 were
made either directly to United States government agencies or indirectly to U.S.
government agencies through subcontracts as compared to approximately 10% in
1999 and 12% in 1998 for these sales. Because several of the Company's customers
are involved in commercial as well as governmental activities, it is difficult
to accurately determine the percentage of its business attributable to the U.S.
government.

         Government-related contracts and subcontracts are subject to standard
provisions for termination at the convenience of the government. In such event,
however, the Company is generally entitled to reimbursement of costs incurred on
the basis of work completed plus other amounts specified in each individual
contract. These contracts and subcontracts are either fixed price or cost
reimbursable contracts. Fixed-price contracts provide fixed compensation for
specified work. Under cost reimbursable contracts, the Company agrees to perform
specified work in return for reimbursement of costs (to the extent allowable
under government regulations) and a specified fee. In general, while the risk of
loss is greater under fixed-price contracts than under cost reimbursable
contracts, the potential for profit under such contracts is greater than under
cost reimbursable contracts.

MANUFACTURING

         The Company manufactures its products at its plants in Irvine,
California; Austin, Texas; Beverly, and Lexington, Massachusetts; and Hofolding,
Germany. The Company's Irvine, Austin and Beverly facilities have received ISO
9001 certification. The manufacturing process involves the assembly of numerous
individual components by technically oriented production personnel. The parts
and materials used by the Company consist primarily of printed circuit boards,
fabricated housings, relays, and small electric circuit components, such as
integrated circuits, semiconductors, resistors and capacitors. The Company also
manufactures the physics packages for its Cesium and Rubidium oscillators. The
Company manufactures products to fill firm orders and to meet forecasts received
from its major customers. In some cases, as a result of customer requirements
and the long manufacturing process of certain of the Company's products, the
Company maintains up to four weeks of forecasted amounts in finished goods
inventory and up to an additional eight weeks of forecasted amounts in
work-in-process inventory.

         The Company currently procures various components from single-sources
due to unique component designs as well as certain quality and performance
requirements. If single-sourced components were to become unavailable or were to
become unavailable on terms satisfactory to the Company, the Company would be
required to purchase comparable components from other sources. If for any reason
the Company could not obtain comparable replacement components from other
sources in a timely manner, the Company's business, results of operations and
financial condition could be adversely affected. In addition, many of the
Company's suppliers require long lead-times to deliver requested quantities of
components. If the Company were unable to obtain sufficient quantities of
components used in the manufacture of its time or frequency products, resulting
delays or reductions in product shipments could occur and could have a material
adverse effect on the Company's business, result of operations and financial
condition. Due to rapid changes in semiconductor and other technology, on
occasion one or more of the electronic components used in the Company's products
have become unavailable, resulting in unanticipated redesign and related delays
in shipments. There can be no assurance that the Company will not experience
similar delays in the future, the occurrence of which could have a material
adverse effect on the Company's business, financial condition and results of
operations.

         We rely on a continuous power supply to conduct our business, and
California's current energy crisis could disrupt our operations and increase our
expenses at our Irvine facility.

         California is in the midst of an energy crisis that could disrupt our
operations and increase our expenses. In the event of an acute power shortage --
that is, when power reserves for the state of California fall below certain
critical levels -- California has on some occasions implemented, and may in the
future continue to implement, rolling blackouts throughout California. We
currently do not have backup generators or alternate sources of power in the
event of a blackout, and our current insurance does not provide coverage for any
damages we or our customers may suffer as a result of any interruption in our
power supply. If blackouts interrupt our power supply, we would be temporarily
unable to continue operations at our Irvine facility. Any such interruption in
our ability to continue operations at our Irvine facility could damage our
reputation, harm our ability to retain existing customers and to obtain new
customers, and could result in lost revenue, any of which could substantially
harm our business and results of operations. Additionally, an interruption of
power could require the testing of new product to be repeated, causing a delay
in shipment of up to one week. Datum is currently evaluating sources for backup
power.


                                        9

<PAGE>   10

         Furthermore, the deregulation of the energy industry instituted in 1996
by the California government has caused power prices to increase. Under
deregulation, utilities were encouraged to sell their plants, which
traditionally had produced most of California's power, to independent energy
companies that were expected to compete aggressively on price. Instead, due in
part to a shortage of supply, wholesale prices have skyrocketed over the past
year. If wholesale prices continue to increase, the operating expenses
associated with our facilities located in California will likely increase which
would harm our results of operations.

INTELLECTUAL PROPERTY RIGHTS

         The Company seeks to protect certain key technologies through U.S. and
foreign patents and by maintaining such technologies as trade secrets. The
Company has licenses under various other patents. While the Company believes
that its patents and licenses have value, it does not regard any such patents or
licenses as essential to its business or to the maintenance of its competitive
position. Accordingly, the Company does not have any material patent protection
on its technology. To the extent that it depends on proprietary information it
primarily relies on the protections afforded to trade secrets. There can be no
assurance that others will not independently develop or otherwise acquire
equivalent technology or that the Company can maintain such technology as trade
secrets. In addition, the laws of some foreign countries do not protect the
Company's proprietary rights to the same extent as the laws of the United
States. The failure of the Company to protect its intellectual property rights
could have a material adverse effect on its business, operating results and
financial condition.

         From time to time the Company has received communications from third
parties asserting that features of certain of its products may infringe upon the
intellectual property rights of such third parties. Although the Company makes
reasonable efforts to ensure that its products do not violate the intellectual
property rights of others, there can be no assurance that patent or other
intellectual property infringement claims will not be asserted against the
Company in the future. Although patent and intellectual property disputes may be
settled through licensing or similar arrangements, costs associated with such
arrangements may be substantial and there can be no assurance that necessary
licenses would be available to the Company on satisfactory terms or at all.
Accordingly, an adverse determination in a judicial or administrative proceeding
or failure to obtain necessary licenses could prevent the Company from
manufacturing and selling certain of its products, which would have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, should the Company decide to, or be forced to, litigate
such claims, such litigation could be expensive and time consuming, could divert
management's attention from other matters and could have a material adverse
effect on the Company's business, operating results and financial condition,
regardless of the outcome of the litigation.

EMPLOYEES

         The Company had 565 employees at December 31, 2000. None of the Company
employees are represented by a union. The Company believes its relations with
its employees are good.

         The Company's success depends upon the continued services of its key
management personnel. The Company and Erik van der Kaay, its Chief Executive
Officer, President and a Director, have entered into an employment agreement
with an indefinite term. The Company's other key personnel, including technical
personnel, would be difficult to replace and are not parties to employment or
noncompetitive agreements. The Company's growth and future success will depend
largely upon its ability to attract and retain additional highly qualified
engineering, sales and marketing personnel. In certain of the Company's
locations, the Company has experienced difficulty in attracting and retaining
highly qualified technical personnel. The loss of technical personnel who become
known and trusted by customers of the Company can have an adverse impact on the
Company's relationships with such customers. Delay in adding appropriately
trained personnel can lead to program delays, higher product costs, and customer
dissatisfaction.

Item 2.  PROPERTIES

         The Company's Irvine, California, manufacturing and executive office
facilities occupy an aggregate of 109,000 square feet in two sites under leases,
each expiring July 31, 2005. The Company also occupies a facility located in San
Jose, California, consisting of 5,800 square feet of sales and marketing space,
under a lease expiring on September 30, 2005. The Company has leased office
facilities in Lexington, Massachusetts, consisting of 7,280 square feet, that
expires on October 31, 2004. The Company also operates a facility located in
Hofolding, Germany, consisting of an 8,600 square foot manufacturing facility,
expiring on May 31, 2004. The Company owns its facility in Beverly,
Massachusetts, comprised of a 32,000 square foot building located on
approximately four acres of land. The Company also owns its facility in Austin,
Texas, comprised of a 50,000 square foot building, located on approximately nine
acres of land. The Company is planning a 20,000 square foot addition to its
Beverly facility in 2001 and is contemplating an addition to its Austin plant to
meet increased demand in the Cesium standards and wireline markets. The Company
believes that its current facilities at its other sites are adequate for its
present level of operations.


                                       10

<PAGE>   11

Item 3.  LEGAL PROCEEDINGS

         In late 1996, the Company received notice of potential environmental
contamination from the owner of premises in Austin, Texas that had previously
been occupied by Austron, Inc., the Company's wireline operation ("Austron"),
prior to the Company's acquisition of Austron in 1988. Although Austron had
remediated the site pursuant to then-existing environmental regulations in
connection with vacating the site in 1983, the applicable environmental
regulations were modified after 1983, providing the basis for the property
owner's claim that the soil at the site contains the same contaminants that were
the focus of Austron's previous remediation efforts. In compliance with current
law, the Company has established the extent of the site contamination, which
contamination extends to adjoining properties owned by third parties. The
Company believes that it will continue to incur monitoring costs for the next
several years in connection with the site contamination and may be subject to
claims from adjoining landowners in addition to the claim for remediation
discussed above, and the amount of such costs and the extent of the Company's
exposure to such claims cannot be determined at this time. Although there can be
no assurance that the remediation efforts, the property owners' claims or any
related governmental action will not singly or in the aggregate have a material
adverse effect on the Company's business, financial condition and results of
operations, the Company does not believe the aggregated potential liability will
have such an effect.

         The Company is also a party to ordinary disputes arising in the normal
course of business. The Company does not believe that the outcome of these
matters will have a material adverse effect on the Company's consolidated
financial position, results of operations or cash flows.

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

         No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year ended December 31, 2000.


Item 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

The following is a list of the executive officers of the Registrant:

<TABLE>
<CAPTION>
      Name              Age         Positions and Offices with the Registrant
      ----              ---         -----------------------------------------
<S>                     <C>         <C>
Erik H. van der Kaay    60          President and Chief Executive Officer since April 1998. Prior to
                                    joining Datum, Mr. van der Kaay served as Allen Telecom's
                                    Executive Vice President from 1997 to 1998 and a variety of
                                    senior positions from 1990 to 1997. He was President and Chief
                                    Executive Officer of Millitech Corporation from 1988 to 1990. He
                                    currently serves on the board of directors for RF Micro-Devices
                                    and TranSwitch Corporation.

Paul E. Baia            48          Vice President of the Company since January 1996 and President
                                    of its Frequency Time Systems subsidiary since January 1996.
                                    From January 1990 to January 1996 Mr. Baia was General Manager
                                    of FTS. From March 1988 to January 1990 he was Director of
                                    Operations for FTS.

Ilan Havered            45          Vice President, International Sales and Marketing of the Company
                                    since May 2000. From May 1996 to May 2000 Mr. Havered was
                                    Director of International Sales, responsible for activities in
                                    Asia Pacific, Australia and Africa. From April 1995 to May 1996,
                                    he was Manager of International Sales. From July 1990 to April
                                    1995 he served as Systems Product Marketing Manager.

Robert J. Krist         51          Vice President, Chief Financial Officer, Secretary and Treasurer
                                    of the Company since November 2000. From September 1997 to
                                    October 2000, Mr. Krist served as Chief Financial Officer at
                                    Bridge Medical, Inc., a medical supplies company. From 1991 to
                                    1997 he worked at McGaw, Inc., a medical information technology
                                    company, serving as Chief Financial Officer from 1991 to 1994
                                    and as President, Central Admixture Pharmacy Services from 1994
                                    to 1997.

Michael J. Patrick      44          Vice President of the Company and President of the Company's
                                    Efratom Time and Frequency Products, Inc. subsidiary since
                                    October 1999. Mr. Patrick also served as Executive Vice
                                    President of Efratom from March 1999 to October 1999, and was
                                    Vice President of Operations from May 1998 to March 1999 for
                                    Efratom. From 1980 to 1998 he worked at Interstate Electronics
                                    where he served as Vice President Operations.

John (Jack) R. Rice     56          Vice President of the Company since April 1994 and President of
                                    the Company's Austron, Inc. subsidiary since May 1995. Mr. Rice
                                    also served as President of the Company's Efratom Time &
                                    Frequency Products, Inc. subsidiary from April 1998 to March
                                    1999. From April 1994 to May 1995 he was General Sales Manager
                                    of the Company. From 1987 to 1994, he served as Director of
                                    North American Sales and of OEM Sales for Emulex Corporation, a
                                    computer hardware manufacturing company.
</TABLE>


                                       11

<PAGE>   12

                                     PART II

Item 5.  MARKET FOR THE REGISTRANT'S EQUITY AND RELATED STOCKHOLDER MATTERS.

         Shares of the Company's common stock are traded on The NASDAQ Stock
Market under the symbol "DATM". The following table sets forth the range of high
and low closing sales price per share of common stock of the Company as reported
on The NASDAQ Stock Market for each quarter of the two most recent fiscal years:

                                                              HIGH      LOW
                                                             -------   ------
         YEAR ENDED DECEMBER 31, 2000
         1st Quarter........................................ 29 5/16   11 1/2
         2nd Quarter........................................ 22 5/8    13 5/8
         3rd Quarter........................................ 40 5/16   17
         4th Quarter........................................ 34 3/16   19

         YEAR ENDED DECEMBER 31, 1999
         1st Quarter........................................  9         6 1/4
         2nd Quarter........................................ 12 13/16   6 9/32
         3rd Quarter........................................ 11 1/16    6 5/8
         4th Quarter........................................ 10 5/16    6

         It is the policy of the Company to retain earnings to finance the
future growth and development of its business. Therefore, the Company does not
anticipate paying cash dividends on its common stock in the foreseeable future.
In addition, the Company's existing credit arrangements restrict the Company
from paying cash dividends.

         At March 13, 2001, there were 316 stockholders of record.


                                       12
<PAGE>   13

Item 6.  SELECTED FINANCIAL DATA

         The following selected consolidated financial data has been derived
from the financial statements of the Company audited by PricewaterhouseCoopers
LLP, independent accountants. The consolidated balance sheet at December 31,
2000 and 1999 and the related consolidated statements of operations and of cash
flows for the three years ended December 31, 2000 and notes thereto appear
elsewhere in this Report.

<TABLE>
<CAPTION>
                                                                          Year Ended December 31,
                                                     -------------------------------------------------------------------
                                                       2000          1999           1998           1997           1996
                                                     --------      ---------      ---------      ---------      --------
                                                                    (In thousands, except per share data)
<S>                                                  <C>           <C>            <C>            <C>            <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net Sales                                            $132,239      $ 100,168      $ 101,233      $ 114,092      $ 91,854
  Costs and expenses:
    Cost of goods sold                                 73,052         60,097         65,172         68,235        56,285
    Selling                                            17,088         14,475         15,003         15,808        12,182
    Product development                                15,305         15,237         11,903         10,650         7,667
    General and administrative(1)(2)                   16,438         10,842          9,946          9,479        10,127
                                                     --------      ---------      ---------      ---------      --------
    Operating income (loss)                            10,356           (483)          (791)         9,920         5,593
                                                     --------      ---------      ---------      ---------      --------
    Interest expense                                    1,673          1,919          2,051          2,085         2,255
    Interest income                                      (214)          (524)          (434)          (349)           (7)
                                                     --------      ---------      ---------      ---------      --------
Income (loss) before income taxes                       8,897         (1,878)        (2,408)         8,184         3,345
Income tax provision (benefit)                          3,559           (728)          (951)         3,355         1,371
                                                     --------      ---------      ---------      ---------      --------
Net income (loss)                                    $  5,338      $  (1,150)     $  (1,457)     $   4,829      $  1,974
                                                     ========      =========      =========      =========      ========
Net income (loss) per share:
  Basic                                              $   0.90      $   (0.20)     $   (0.27)     $    0.97      $   0.49
                                                     ========      =========      =========      =========      ========
  Diluted                                            $   0.85      $   (0.20)     $   (0.27)     $    0.90      $   0.46
                                                     ========      =========      =========      =========      ========
Shares used in per share calculation:
  Basic                                                 5,949          5,663          5,414          4,973         4,061
                                                     ========      =========      =========      =========      ========
  Diluted                                               6,296          5,663          5,414          5,390         4,253
                                                     ========      =========      =========      =========      ========
</TABLE>

<TABLE>
<CAPTION>
                                                                                December 31,
                                                     -------------------------------------------------------------------
                                                       2000           1999           1998           1997          1996
                                                     --------      ---------      ---------      ---------      --------
<S>                                                  <C>           <C>            <C>            <C>            <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital                                      $ 44,324      $  42,017      $  46,089      $  47,482      $ 26,029
Total assets                                           95,276         87,782         86,920         85,746        68,688
Long-term debt                                          1,750         11,671         14,533         17,418        17,318
Stockholders' equity                                   67,539         58,320         56,978         56,844        34,623
</TABLE>

------------
(1)  Includes $1.5 million, $1.5 million, $1.5 million, $1.5 million and $1.5
     million for 2000, 1999, 1998, 1997 and 1996, respectively, of amortized
     goodwill and increased depreciation resulting from the step-up of the
     assets purchased in the March 1995 acquisition of Efratom.

(2)  Includes $1.2 million and $0.5 million in 2000 and 1999, respectively, of
     amortized goodwill relating to the purchase of Digital Delivery on July 29,
     1999.



                                       13
<PAGE>   14

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

         The following discussion and analysis should be read in conjunction
with "Selected Consolidated Financial Data" and the Company's Consolidated
Financial Statements and Notes thereto included elsewhere in this report.

OVERVIEW

         Datum designs, manufactures and markets a wide variety of
high-performance time and frequency products used to synchronize the flow of
information in telecommunications networks. The Company is also a leading
supplier of precise timing products for enterprise computing networks,
e-business, and a wide variety of space, scientific and industrial test and
measurement applications.

RESULTS OF OPERATIONS

         The Company has experienced, and expects to continue to experience,
fluctuations in sales and operating results on an annual and quarterly basis. As
a result, the Company believes that period-to-period comparisons of its
operating results are not necessarily meaningful, and that such comparisons
cannot be relied upon as indicators of future performance. A significant
component of these fluctuations may result from rescheduling of orders by the
Company's major customers. Due to these and other unanticipated factors, it is
likely that in some future quarters the Company's operating results may be below
the expectations of public market analysts or investors.

         Net Sales. The Company's net sales are derived primarily from the sale
of time and frequency products for use in telecommunications networks,
enterprise computing networks, e-business, satellites and in a variety of other
test and measurement and e-business applications. Net sales for the Company were
$132.2 million, $100.2 million and $101.2 million for the years ended December
31, 2000, 1999 and 1998, respectively. These amounts represent an increase from
1999 to 2000 of 32.0% and a decrease from 1998 to 1999 of 1.1%. Wireline and
wireless telecommunications sales increased 61.3% and 31.8%, respectively, in
2000 due to increased product demand. Wireline telecommunications sales
increased by 25.7% in 1999, offset by decreased sales in the cellular and PCS
wireless telecommunications markets.

         A small number of customers account for a substantial portion of the
Company's net sales, and the Company expects that a limited number of customers
will continue to represent a substantial portion of the Company's net sales for
the foreseeable future. The Company's largest customer, Lucent Technologies Inc.
(Lucent), accounted for approximately 33%, 33%, and 34% of net sales for the
fiscal years ended December 31, 2000, 1999 and 1998, respectively. Further, the
Company's five largest customers, including Lucent, accounted for approximately
48%, 45%, and 52% of net sales during the same periods. The reduction in orders
by, or loss of, any major customer could adversely affect the Company's
business, financial condition and results of operations.

         Direct and indirect sales to the United States government were
approximately $9.6 million in 2000, $9.9 million in 1999 and $12.5 million in
1998, constituting approximately 7.3%, 9.9% and 12.3% of net sales,
respectively. These amounts represent decreases of 3.0% from 1999 to 2000 and
20.5% from 1998 to 1999. Government-related contracts and subcontracts are
subject to standard provisions for termination at the convenience of the
government. In such event, however, the Company is generally entitled to
reimbursement of costs incurred on the basis of work completed plus other
amounts specified in each individual contract.

         Gross Margins. Gross margins are derived from net sales and cost of
goods sold, which consists primarily of raw materials, labor, overhead and
warranty costs. Gross margins were 44.8%, 40.0% and 35.6% in 2000, 1999 and
1998, respectively. The increase from 1999 to 2000 was predominantly in the
wireless telecommunication market and was primarily a result of enhanced
manufacturing and development efficiencies, improved supply chain management and
efficiencies gained from increases in sales. The increase in gross margin from
1998 to 1999 was primarily the result of increased gross margins in the wireline
telecommunication, enterprise computing, and satellite markets. A decrease in
lower margin sales in the wireless telecommunication market also contributed to
the increase in gross margin. Gross margins can be adversely affected by a
number of factors, including pricing pressure from the Company's customers and
the difficulty of reducing fixed expenses in connection with the Company's
rescheduling of customers' orders.

         Selling Expense. Selling expense consists primarily of salaries and
other expenses of its sales and marketing personnel, along with sales
commissions paid to the Company's third-party representatives and distributors.
Selling expense was $17.1 million in 2000, $14.5 million in 1999 and $15.0
million in 1998. These amounts represent an increase of 18.1% from 1999 to 2000
and a decrease of 3.5% from 1998 to 1999. As a percent of net sales, these
amounts were 12.9%, 14.5% and 14.8% in 2000, 1999 and 1998, respectively. The
increase in expense in 2000 was due to the higher volume of net sales. The
decreases in 2000 and 1999 as a percentage of net sales were due to the
Company's continued efforts to reduce commissions by replacing outside sales
representatives with internal sales staff.



                                       14
<PAGE>   15

         Product Development. Product development expense consists primarily of
salary, applied overhead, materials and third-party design services. Product
development expense was $15.3 million in 2000, $15.2 million in 1999 and $11.9
million in 1998. These amounts represented increases of 0.4% from 1999 to 2000
and 27.7% from 1998 to 1999. Product development expenditures represented 11.6%,
15.2% and 11.8% of net sales in 2000, 1999 and 1998, respectively. The spending
increase in 2000 and 1999 from 1998 reflects the continual emphasis on new
product design and enhancement of current products.

         Although the Company maintains an active development program to improve
its product offerings, there can be no assurance that such efforts will be
successful, that its new products will be developed on a timely basis or will
achieve customer acceptance. Failure to develop, or introduce on a timely basis,
new products or product enhancements that achieve market acceptance could
adversely affect the Company's business, operating results and financial
condition.

         General and Administrative. General and administrative expense consists
primarily of salaries and other expenses for management, finance, accounting and
human resources, as well as amortization of goodwill and depreciation charges.
General and administrative expenses were $16.4 million in 2000, $10.8 million in
1999 and $9.9 million in 1998. These amounts represent increases of 51.6% from
1999 to 2000 and 9.0% from 1998 to 1999. As a percentage of net sales, these
amounts were 12.4%, 10.8% and 9.8% in 2000, 1999 and 1998, respectively. The
increase in 2000 was predominantly caused by increased incentive accruals
related to the Company's profitability, twelve months of Digital Delivery
expense, including goodwill amortization, in 2000 versus five months expense in
1999, and charges related to management changes and the consolidation of the San
Jose and Beverly operations. The 1999 increase included legal and other expenses
related to an unsolicited merger proposal and a receivable write-off related to
bankruptcy of a telecom customer, both in the fourth quarter of 1999; an accrual
for compliance costs related to a previously disclosed environmental issue at a
previous Austin facility; and costs related to a potential acquisition no longer
pursued. Such expenses include $2.9 million, $2.1 million and $1.5 million for
2000, 1999 and 1998, respectively, of goodwill amortization and increased
depreciation resulting from the step-up of the assets purchased in the March
1995 acquisition of Efratom and the July 1999 acquisition of Digital Delivery.

         Interest, Net. Net interest expense was $1.5 million, $1.4 million and
$1.6 million in 2000, 1999 and 1998, respectively. These amounts constitute an
increase of 4.6% from 1999 to 2000 and a decrease of 13.7% from 1998 to 1999.
The increase in 2000 in net interest expense was a result of lower interest
income and the write-off of unamortized debt expense in the second quarter of
2000 in relation to the Company's refinancing of its debt. The decrease in 1999
was primarily the result of the reduced debt level in 1999.

LIQUIDITY AND CAPITAL RESOURCES

         The Company finances its operations primarily through a combination of
cash provided from operations, a commercial bank line of credit and long-term
debt. Cash provided by operations was approximately $1.8 million in 2000,
compared to approximately $5.5 million in 1999, and approximately $6.4 million
in 1998. The decrease in cash for the year ended December 31, 2000 was
principally due to the Company using its excess cash to pay down debt. Cash
generated from net income was offset by increases in accounts receivable and
inventory. The increase in cash for the year ended December 31, 1999 primarily
resulted from decreased inventory and increased accounts payable balances,
offset by an increase in accounts receivable. The increase in cash for the year
ended December 31, 1998, was primarily the result of a decrease in inventory
offset by a net loss for the year.

         Capital expenditures were approximately $3.9 million, $2.4 million, and
$2.7 million in 2000, 1999, and 1998, respectively. The increase in 2000 was
primarily the result of the need to provide manufacturing test equipment for the
increased volumes produced in 2000.

         At December 31, 2000, the Company had working capital of $44.3 million
and a current ratio of 2.9:1, compared to working capital of $42.0 million and a
current ratio of 3.7:1 at December 31, 1999. The increase in working capital was
primarily the result of the increase in accounts receivable of approximately
$12.1 million and an increase in inventories of approximately $4.6 million in
2000. This was offset by decreased cash of $7.3 million in 2000, increased
accounts payable balances of $2.1 million in 2000, an increase in accrued
expense of $2.7 million in 2000 and an advance on the Company's line of credit
of $2.0 million as of December 31, 2000.

         The Company's credit facility includes a $6.0 million term loan
maturing June 15, 2002, bearing interest at the rate of 9.15% on the unpaid
principal, payable monthly, with the principal repaid in equal installments of
$250,000 on the first of every month. In connection with the issuance of
promissory notes issued in 1996 that were fully paid off in 2000, the Company
issued to The Prudential Insurance Company of America common stock warrants
which currently allow for the purchase of 176,303 shares of common stock at an
exercise price per share of $11.415.

         The maturity date of the revolving component of the Company's line of
credit with Wells Fargo Bank has been extended to June 15, 2001 in a principal
amount not to exceed $10.0 million and bearing interest at Wells Fargo's prime
rate or at LIBOR plus 2.25%. Under the Wells Fargo credit facility, the Company
is required to maintain certain financial ratios, limit other indebtedness and
may not pay dividends. Other restrictions include limitations on the amounts of
leases and capital expenditures that may be incurred. At December 31, 2000, the
Company was in compliance with all debt covenants. The Company believes that
cash, cash equivalents, short-term investments and funds generated from
operations will be sufficient to satisfy working capital requirements and
capital expenditures in fiscal 2001.



                                       15
<PAGE>   16

NEW ACCOUNTING PRONOUNCEMENTS

         In June 1998 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 133; Accounting for Derivative instruments
and Hedging Activities ("SFAS 133"). SFAS 133 is required to be adopted in
fiscal years beginning after June 15, 2000 and establishes accounting and
reporting standards for derivative instruments and for hedging activities. The
Company does not anticipate that the adoption of SFAS 133 will have a material
impact on its financial position or results of operations.

         In December 1999, the Securities and Exchange Commission (the "SEC")
released Staff Accounting Bulletin ("SAB") No. 101, which provides guidance on
the recognition, presentation and disclosure of revenue in financial statements
filed with the SEC. The Company implemented SAB 101 in the fourth quarter of
2000 retroactive to January 1, 2000. The impact from implementing SAB 101 was
not material to the Company's financial position or results of operations.

FORWARD-LOOKING STATEMENTS

         All statements other than statements of historical fact included in
this Report, including, without limitation, the statements under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business" regarding the Company's strategies, plans, objectives and
expectations, the Company's exposure to quarterly fluctuations, the Company's
future capital needs, the anticipated growth of its target markets and other
matters are forward-looking statements. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable at this
time, it can give no assurance that such expectations will prove to have been
correct. Important factors that could cause actual results to differ materially
from the Company's expectations ("Cautionary Statements") are set forth in this
Section as well as in "Business." All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by the Cautionary Statements.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         The Company is primarily exposed to market risks that relate to changes
in foreign currency fluctuations. The Company's foreign sales are generally
invoiced in U.S. dollars, and the Company does not presently enter into foreign
currency forward exchange contracts. The Company generally does not enter into
derivative financial instrument transactions for speculative purposes.
Additional information for this item is contained under the captions
"Disclosures About Fair Value of Financial Instruments" and "Foreign Currency
Translation" in Note A, "Description of the Company and Summary of Significant
Accounting Policies" in Notes to the Consolidated Financial Statements set forth
elsewhere in this Report.

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The consolidated financial statements and report of independent
accountants thereon are filed with this Annual Report on Form 10-K as shown on
the Index to Consolidated Financial Statements covered by Report of Independent
Accountants.

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

         None.


                                       16
<PAGE>   17

                                    PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         There is hereby incorporated by reference the information appearing
under the captions "Election of Directors" and "Compliance with Section 16(a) of
the Securities Exchange Act of 1934" from the Company's definitive proxy
statement for the Annual Meeting of the Stockholders to be held June 14, 2001 to
be filed with the Commission on or before April 30, 2001. Information as to the
Company's executive officers is included in Item 4A of Part I of this Annual
Report on Form 10-K.

Item 11. EXECUTIVE COMPENSATION

         There is hereby incorporated by reference information appearing under
the caption "Executive Compensation" from the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held June 14, 2001 to be
filed with the Commission on or before April 30, 2001.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         There is hereby incorporated by reference the information appearing
under the caption "Security Ownership of Certain Beneficial Owners and
Management" from the Company's definitive proxy statement for the Annual Meeting
of Stockholders to be held June 14, 2001 to be filed with the Commission on or
before April 30, 2001.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         There is hereby incorporated by reference the information appearing
under the caption "Executive Compensation" from the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held June 14, 2001 to be
filed with the Commission on or before April 30, 2001.



                                       17
<PAGE>   18

                                     PART IV

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

         (a) The following documents are filed as part of this report:

             (1) Financial Statements

                 The list of financial statements contained in the accompanying
                 Index to Consolidated Financial Statements covered by Report of
                 Independent Accountants is herein incorporated by reference.

             (2) Financial Statement Schedules

                 The list of financial statement schedules contained in the
                 accompanying Index to Consolidated Financial Statements covered
                 by Report of Independent Accountants is herein incorporated by
                 reference.

All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.

             (3) Exhibits

                 The list of exhibits on the accompanying Exhibit Index is
                 herein incorporated by reference.

         (b) Reports on Form 8-K.

             No reports on Form 8-K were filed with the Securities and Exchange
             Commission during the quarter ended December 31, 2000.



                                       18
<PAGE>   19

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized, at
Irvine, California this 23rd day of March, 2001.


                                             DATUM INC.

                                             By /s/ Erik H. van der Kaay
                                                --------------------------------
                                                    Erik H. van der Kaay
                                                    Chief Executive Officer,
                                                    President and Director

                                POWER OF ATTORNEY

The undersigned directors and officers of Datum Inc. constitute and appoint Erik
H. van der Kaay and Robert J. Krist, or any of them, as their true and lawful
attorney and agent with power of substitution, to do any and all acts and things
in our name and behalf in our capacities as directors and officers and to
execute any and all instruments for us and in our names in the capacities
indicated below, which said attorney and agent may deem necessary or advisable
to enable said corporation to comply with the Securities Exchange Act of 1934,
as amended and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with this Annual Report on Form 10-K,
including specifically but without limitation, power and authority to sign for
us or any of us in our names in the capacities indicated below, any and all
amendments (including post-effective amendments) hereto, and we do hereby ratify
and confirm all that said attorney and agent, shall do or cause to be done by
virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.

<TABLE>
<S>                                    <C>                                      <C>
/s/ Erik H. van der Kaay               President, CEO, Chairman                 March 23, 2001
---------------------------------      (Principal Executive Officer)
    Erik H. van der Kaay


/s/ Robert J. Krist                    Chief Financial Officer                  March 23, 2001
-----------------------------------    (Principal Financial
    Robert J. Krist                    and Accounting Officer)


/s/ Elizabeth A. Fetter                Director                                 March 23, 2001
-----------------------------------
    Elizabeth A. Fetter


/s/ G. Tilton Gardner                  Director                                 March 23, 2001
-----------------------------------
    G. Tilton Gardner


/s/ R. David Hoover                    Director                                 March 23, 2001
-----------------------------------
    R. David Hoover


/s/ Louis B. Horwitz                   Director                                 March 23, 2001
-----------------------------------
    Louis B. Horwitz


/s/ Dan L. McGurk                      Director                                 March 23, 2001
-----------------------------------
    Dan L. McGurk


/s/ Michael M. Mann                    Director                                 March 23, 2001
-----------------------------------
    Michael M. Mann
</TABLE>



                                       19
<PAGE>   20

                           DATUM INC. AND SUBSIDIARIES

               Index To Consolidated Financial Statements Covered
                      By Report of Independent Accountants

                              Item 14(a)(1) and (2)

                                                                 Page references

                                                                            Form
                                                                            10-K
                                                                           -----
The information under the following captions, is included herein:

      Financial Statements

      Report of independent accountants.....................................F-1

      Consolidated balance sheet at December 31,
        2000 and 1999 ......................................................F-2

      Consolidated statement of operations for each of the three years in the
        period ended December 31, 2000 .....................................F-3

      Consolidated statement of stockholders' equity for each of the
        three years in the period ended December 31, 2000...................F-4

      Consolidated statement of cash flows for each of the three years in the
        period ended December 31, 2000 .....................................F-5

      Notes to consolidated financial statements............................F-6


      Financial Statement Schedules

      VIII - Valuation and Qualifying Accounts..............................S-1



                                       20
<PAGE>   21

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Datum Inc.

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 21 present fairly, in all material
respects, the financial position of Datum Inc. and its subsidiaries at December
31, 2000 and 1999, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 2000 in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedule listed in the index
appearing under Item 14(a)(2) on page 21 presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements. These financial statements and
financial statement schedule are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States of America, 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.


/s/ PRICEWATERHOUSECOOPERS LLP
----------------------------------
Orange County, California
February 14, 2001



                                       F-1

<PAGE>   22

                           DATUM INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET

                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                           ----------------------
                                                            2000           1999
                                                           --------      --------
<S>                                                        <C>           <C>
ASSETS

Current assets:
  Cash and cash equivalents                                $  1,017      $  8,271
  Accounts receivable, less allowance for doubtful
    accounts of $664 and $561                                34,988        22,927
  Inventories                                                26,400        21,811
  Prepaid expenses                                              375           495
  Deferred income taxes                                       4,613         3,359
  Income tax refund receivable                                  161           463
                                                           --------      --------
      Total current assets                                   67,554        57,326
Land, buildings and equipment, net                           14,732        14,759
Excess of purchase price over net assets acquired, net
  of accumulated amortization of $7,412 and $5,285           12,595        14,722
Other assets                                                    395           975
                                                           --------      --------
                                                           $ 95,276      $ 87,782
                                                           ========      ========
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                        $  8,777      $  6,706
   Accrued salaries and wages                                 4,179         2,269
   Accrued warranty                                           2,173         1,635
   Other accrued expenses                                     1,376         1,144
   Income taxes payable                                       1,705           553
   Advances on line of credit                                 2,020            --
   Current portion of long-term debt                          3,000         3,002
                                                           --------      --------
       Total current liabilities                             23,230        15,309
                                                           --------      --------
Long-term debt                                                1,750        11,671
                                                           --------      --------
Postretirement benefits                                       1,188         1,034
                                                           --------      --------
Other long-term liabilities                                     584           418
                                                           --------      --------
Deferred income taxes                                           985         1,030
                                                           --------      --------
Stockholders' equity
  Preferred stock, par value $.25 per share
    Authorized - 1,000,000 shares
    Issued - none                                                --            --
  Common stock, par value $.25 per share
    Authorized - 10,000,000 shares
    Issued - 6,067,065 shares in 2000
             5,854,997 shares in 1999                         1,517         1,464
  Additional paid-in capital                                 51,441        47,709
  Retained earnings                                          15,516        10,178
  Unamortized stock compensation                               (127)         (309)
  Accumulated other comprehensive loss                         (808)         (722)
                                                           --------      --------
      Total stockholders' equity                             67,539        58,320
                                                           --------      --------
                                                           $ 95,276      $ 87,782
                                                           ========      ========
</TABLE>


See notes to consolidated financial statements.

                                       F-2

<PAGE>   23

                           DATUM INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS

                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                  YEAR ENDED DECEMBER 31,
                                          ---------------------------------------
                                            2000           1999            1998
                                          ---------      ---------      ---------
<S>                                       <C>            <C>            <C>
Net Sales                                 $ 132,239      $ 100,168      $ 101,233

Operating expenses:
  Cost of sales                              73,052         60,097         65,172
  Selling                                    17,088         14,475         15,003
  Product development                        15,305         15,237         11,903
  General and administrative                 16,438         10,842          9,946
                                          ---------      ---------      ---------
Operating income (loss)                      10,356           (483)          (791)
                                          ---------      ---------      ---------

Interest expense                              1,673          1,919          2,051
Interest income                                (214)          (524)          (434)
                                          ---------      ---------      ---------

Income (loss) before income taxes             8,897         (1,878)        (2,408)
Income tax provision (benefit)                3,559           (728)          (951)
                                          ---------      ---------      ---------
Net income (loss)                         $   5,338      $  (1,150)     $  (1,457)
                                          =========      =========      =========
Net income (loss) per common share:
  Basic                                   $    0.90      $   (0.20)     $   (0.27)
                                          =========      =========      =========
  Diluted                                 $    0.85      $   (0.20)     $   (0.27)
                                          =========      =========      =========

Shares used in per share calculation:
  Basic                                       5,949          5,663          5,414
                                          =========      =========      =========
  Diluted                                     6,296          5,663          5,414
                                          =========      =========      =========
</TABLE>


See notes to consolidated financial statements.

                                      F-3

<PAGE>   24

                           DATUM INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                              COMMON STOCK        ADDITIONAL               UNAMORTIZED     ACCUMULATED
                                           --------------------    PAID-IN    RETAINED       STOCK        COMPREHENSIVE
                                            SHARES      AMOUNT     CAPITAL    EARNINGS    COMPENSATION     INCOME (LOSS)    TOTAL
                                           ---------    -------   ----------  --------    ------------    --------------  --------
<S>                                        <C>          <C>       <C>         <C>         <C>             <C>             <C>
Balances at December 31, 1997              5,332,860    $ 1,333    $43,231    $ 12,785       $   --           $ (505)     $ 56,844
Issuance of common stock under
  401(k) and ESP Plans                       100,733         25        970                                                     995
Exercise of stock options                     42,250         11        208                                                     219
Income tax benefit from restricted
  stock issued and stock options
  exercised                                                            127                                                     127
Issuance of restricted stock                  30,000          7        405                     (412)                            --
Amortization of stock compensation                                                               44                             44

Comprehensive income:
  Cumulative translation adjustment                                                                              206           206
Net income                                                                      (1,457)                                     (1,457)
                                                                                                                          ---------
Total comprehensive income                                                                                                  (1,251)
                                           ---------    -------    -------    --------       ------           ------      --------
Balances at December 31, 1998              5,505,843      1,376     44,941      11,328         (368)            (299)       56,978
Issuance of common stock under
  401(k) and ESP Plans                       114,877         29        796                                                     825
Exercise of stock options                     20,000          5         81                                                      86
Income tax benefit from restricted
  stock issued and stock options
  exercised                                                             30                                                      30
Amortization of stock compensation                                                               59                             59
Acquisition of Digital Delivery              214,277         54      1,861                                                   1,915

Comprehensive income:
  Cumulative translation adjustment                                                                             (423)         (423)
Net income                                                                      (1,150)                                     (1,150)
                                                                                                                          ---------
Total comprehensive income                                                                                                  (1,573)
                                           ---------    -------    -------    --------       ------           ------      --------
Balances at December 31, 1999              5,854,997      1,464     47,709      10,178         (309)            (722)       58,320
Issuance of common stock under
  401(k) and ESP Plans                        54,888         14      1,032                                                   1,046
Exercise of stock options                    183,473         46      1,453                                                   1,499
Income tax benefit from restricted
  stock issued and stock options
  exercised                                                          1,389                                                   1,389
Amortization of stock compensation                                                              182                            182
Stock based compensation                                               102                                                     102
Cancelled shares from Digital
  Delivery acquisition                       (26,293)        (7)      (244)                                                   (251)

Comprehensive income:
  Cumulative translation adjustment                                                                              (86)          (86)
Net income                                                                       5,338                                       5,338
                                                                                                                          --------
Total comprehensive income                                                                                                   5,252
                                           ---------    -------    -------    --------       ------           ------      --------
Balances at December 31, 2000              6,067,065    $ 1,517    $51,441    $ 15,516       $ (127)          $ (808)     $ 67,539
                                           =========    =======    =======    ========       ======           ======      ========
</TABLE>

See notes to consolidated financial statements.

                                      F-4

<PAGE>   25

                           DATUM INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                        YEAR ENDED DECEMBER 31,
                                                                 ------------------------------------
                                                                   2000          1999           1998
                                                                 --------      --------      --------
<S>                                                              <C>           <C>           <C>
Cash flows from operating activities:
  Net income (loss)                                              $  5,338      $ (1,150)     $ (1,457)
                                                                 --------      --------      --------
  Adjustments to reconcile net income (loss) to
    net cash provided by operating activities:
      Depreciation and amortization                                 4,459         3,913         3,636
      Amortization of goodwill                                      2,127         1,439           894
      Contribution of shares of common stock to
        the Company's 401(k) plan                                     747           603           706
      Stock based compensation                                        285            59            44
      Income tax benefit from restricted stock issued
        and stock options exercised                                 1,389            30           127

      Changes in assets and liabilities:
        Increase in accounts receivable                           (12,060)       (3,585)       (4,284)
        (Increase) decrease in inventories                         (4,589)        2,743         6,664
        (Increase) decrease in prepaid expenses                       120           (14)         (116)
        Decrease in income tax refund receivable                      302           727           258
        Increase in deferred income taxes                          (1,299)         (895)         (609)
        (Increase) decrease in other assets                           157          (282)         (416)
        Increase in accounts payable                                2,071         1,744           899
        Increase (decrease) in accrued expenses                     2,669          (235)         (297)
        Increase (decrease) in income taxes payable                  (237)          234           162
        Increase (decrease) in other long-term liabilities            166           (18)           16
        Increase in postretirement benefits                           154           216           216
                                                                 --------      --------      --------
      Total reconciling items                                      (3,539)        6,679         7,900
                                                                 --------      --------      --------
      Net cash provided (used) by operating activities              1,799         5,529         6,443
                                                                 --------      --------      --------

Cash flows from investing activities:
  Proceeds from equipment disposals                                    56            --            55
  Capital expenditures                                             (3,938)       (2,359)       (2,699)
  Payment for acquisition, net of cash acquired                        --        (2,111)           --
  Other                                                               (39)           16            (3)
                                                                 --------      --------      --------
      Net cash used by investing activities                        (3,921)       (4,454)       (2,647)
                                                                 --------      --------      --------

Cash flows from financing activities:
  Proceeds from line of credit                                      2,020            --            --
  Proceeds from long-term debt                                      6,000            --            --
  Payments of long-term debt                                      (16,253)       (3,025)          (22)
  Proceeds from exercise of stock options and ESP plan              3,187           337           508
                                                                 --------      --------      --------
      Net cash provided (used) for financing activities            (5,046)       (2,688)          486
Effect of exchange rate changes on cash and cash equivalents          (86)         (423)          206
                                                                 --------      --------      --------
Net increase (decrease) in cash and cash equivalents               (7,254)       (2,036)        4,488
Cash and cash equivalents at beginning of period                    8,271        10,307         5,819
                                                                 --------      --------      --------
Cash and cash equivalents at end of period                       $  1,017      $  8,271      $ 10,307
                                                                 ========      ========      ========
</TABLE>

See notes to consolidated financial statements.


                                      F-5


<PAGE>   26

                           DATUM INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2000, 1999 AND 1998

NOTE A -- DESCRIPTION OF THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING
          POLICIES

          Description of the Company: Datum designs, manufactures and markets a
wide variety of high-performance time and frequency products used to synchronize
the flow of information in telecommunications networks. The Company is also a
leading supplier of precise timing products for enterprise computing networks
and a wide variety of space, scientific and industrial test and measurement
applications.

          Principles of Consolidation: The consolidated financial statements
include the accounts of the Company and its subsidiaries, all of which are
wholly owned. All significant intercompany transactions and accounts have been
eliminated.

          Revenue Recognition: Most revenues are recorded when title transfers
and risks of ownership are passed to customers. This usually occurs when
products are shipped. Revenues from the sale of products in consigned inventory
are recognized when a customer uses the product. In cases where customer
acceptance clauses are present in a sales arrangement, revenue subject to
contractual acceptance clauses is deferred until acceptance occurs.

          Use of Estimates: 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 respective reporting periods. Actual results could differ from those
estimates.

          Inventory Valuation: Inventories are stated at lower of cost or
market; cost is determined on a first-in, first-out basis.

          Inventories comprise the following (in thousands):

                                                           DECEMBER 31,
                                                        ------------------
                                                          2000       1999
                                                        -------     ------
          Purchased parts                               $13,015     $8,720
          Work-in-process                                 7,873      8,082
          Finished products                               5,512      5,009
                                                        -------     ------
                                                        $26,400    $21,811
                                                        =======    =======

          Land, Buildings and Equipment: Land, buildings and equipment, which
are recorded at cost and depreciated where appropriate by the straight-line
method, consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                     DECEMBER 31,
                                                ---------------------      DEPRECIABLE
                                                 2000          1999           LIFE
                                                -------       -------    --------------
<S>                                             <C>           <C>        <C>
          Land                                  $ 2,040       $ 2,040
          Buildings                               5,435         5,210    30 to 40 years
          Equipment                              23,509        21,974    3 to 10 years
          Leasehold improvements                  1,315         1,185    5 to 10 years
                                                -------       -------
                                                 32,299        30,409
          Less accumulated depreciation
            and amortization                     17,567        15,650
                                                -------       -------
                                                $14,732       $14,759
                                                =======       =======
</TABLE>

          Expenditures for maintenance and repairs are charged directly to
operations, and betterments and major renewals are capitalized.


                                      F-6

<PAGE>   27

          Excess of Purchase Price Over Fair Value of Net Assets of Businesses
Acquired: The excess of the purchase price of businesses or assets acquired over
the fair value of the net assets ("goodwill") is amortized over varying periods
ranging from 4 to 40 years. At each balance sheet date, the Company reviews the
recoverability of long-lived assets and certain intangible assets, including
goodwill. In the event the sum of expected undiscounted future cash flows
resulting from the use of an asset is less than the carrying amount of the
asset, an impairment loss equal to the excess of the asset's carrying value over
its fair value is recorded.

          Income Taxes: The Company uses the liability method of accounting for
income taxes. Deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax bases of assets and
liabilities as measured by the enacted tax rates which will be in effect when
these differences reverse. Deferred tax expense for the period is calculated as
the change in net deferred tax liabilities and assets.

          Consolidated Statement of Cash Flows: For purposes of the consolidated
statement of cash flows, cash equivalents include highly liquid investments with
an original maturity of less than three months. Cash paid for interest totaled
$1.1 million, $1.7 million and $1.8 million in 2000, 1999 and 1998,
respectively. Cash paid for income taxes totaled $2.5 million, $0.2 million and
$0.3 million in 2000, 1999 and 1998, respectively. Significant non-cash
transactions affecting the Company's accounts consisted of tax benefits from the
exercise of common stock options of $1.3 million, $0.03 million and $0.1 million
in 2000, 1999 and 1998, respectively.

          Stock Options and Awards: The Company accounts for employee
stock-based compensation in accordance with Accounting Principles Board Opinion
No. 25. See the disclosures in accordance with Statement of Financial Accounting
Standards No. 123 (FAS 123) in Note E.

          Net Income Per Share: Net income per share-Basic excludes dilution and
is computed by dividing net income by the weighted average number of common
shares outstanding during the reported period. Net income per share-Diluted
reflects the potential dilution that could occur if stock warrants or options
were exercised. In 1999 and 1998, the Company did not include potential common
stock issuances in the calculation of Net income per share-Diluted as such
inclusion would have an anti-dilutive effect. Net income per share is calculated
as follows (in thousands, except share data):

<TABLE>
<CAPTION>
                                                  YEAR ENDED DECEMBER 31,
                                         -----------------------------------------
                                            2000           1999            1998
                                         ----------    -----------     -----------
<S>                                      <C>           <C>             <C>
Net income (loss)                        $    5,338    $    (1,150)    $    (1,457)
                                         ==========    ===========     ===========
Shares outstanding - Basic                5,948,789      5,663,146       5,414,075
Effect of dilutive securities:
    Warrants                                 49,893             --              --
     Stock options                          297,185             --              --
                                         ----------    -----------     -----------
Shares outstanding - Diluted              6,295,867      5,663,146       5,414,075
                                         ==========    ===========     ===========
Net income (loss) per share - Basic      $     0.90    $     (0.20)    $     (0.27)
                                         ==========    ===========     ===========
Net income (loss) per share - Diluted    $     0.85    $     (0.20)    $     (0.27)
                                         ==========    ===========     ===========
</TABLE>

          Because the effect would have been anti-dilutive, stock options
representing 134,957 and 87,461 shares in 1999 and 1998, respectively, and
warrants representing 21,093 shares in 1998 have been excluded from the
computation of diluted earnings per share.

          Disclosures About Fair Value of Financial Instruments: The carrying
values of cash, cash equivalents, accounts receivable, accrued liabilities and
notes payable approximate their fair values because of the short maturity of
these instruments. The carrying value of long-term debt approximates its fair
value.

          Comprehensive Income: Comprehensive income is defined as a change in
equity of a business enterprise during a period from transactions and other
events and circumstances from non-owner sources. The only component of
comprehensive income other than net income of the Company is currency
translation adjustments.

          Foreign Currency Translation: Assets and liabilities of the Company's
German subsidiary are translated at current exchange rates, while revenue and
expenses are translated at average rates prevailing during the year. Translation
adjustments are reported in other comprehensive income.

          Concentration of Credit Risk: A small number of customers accounts for
a substantial portion of the Company's net sales, and therefore also represents
a substantial amount of receivables at any point in time. As of December 31,
2000, one customer accounted for approximately 15.7% of accounts receivables and
four others collectively accounted for approximately 19.9%. The Company performs
regular credit evaluations of its customers and has not experienced any
significant credit losses.


                                      F-7

<PAGE>   28

          New Accounting Pronouncements: In June 1998 the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"). SFAS
133 is required to be adopted in fiscal years beginning after June 15, 2000 and
establishes accounting and reporting standards for derivative instruments and
for hedging activities. The Company does not anticipate that the adoption of
SFAS 133 will have a material impact on its financial position or results of
operations.

          In December 1999, the Securities and Exchange Commission (the "SEC")
released Staff Accounting Bulletin ("SAB") No. 101, which provides guidance on
the recognition, presentation and disclosure of revenue in financial statements
filed with the SEC. The Company implemented SAB 101 in the fourth quarter of
2000 retroactive to January 1, 2000. The impact from implementing SAB 101 was
not material to the Company's financial position or results of operations.

NOTE B -- DEBT

          Long-term obligations outstanding are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                         DECEMBER 31,
                                                                     --------------------
                                                                      2000         1999
                                                                     -------     --------
<S>                                                                  <C>         <C>
$6,000 term loan, principal due monthly beginning August 1, 2000,
  to June 15, 2002, with interest payable monthly at 9.15%,
  secured by all assets                                              $ 4,750     $     --

$6,000 Series A Senior Secured Notes (net of discount of $49),
  principal due semi-annually beginning March 27, 1999, to
  September 27, 2000, with interest payable quarterly at 9.07%,
  secured by all assets                                                   --        2,951

$12,000 Series B Senior Secured Notes (net of discount of $281),
  principal due semi-annually beginning March 27, 2001, to
  September 27, 2003, with interest payable quarterly at 10.25%,
  secured by all assets                                                   --       11,719

Capital equipment leases for machinery and equipment with
  interest at 11.59% maturing in 2000                                     --            3
                                                                     -------     --------
Total debt                                                             4,750       14,673

  Less current portion                                                (3,000)      (3,002)
                                                                     -------     --------
Long-term debt, less current portion                                 $ 1,750     $ 11,671
                                                                     =======     ========
</TABLE>

          Aggregate maturities of long-term debt before debt discount at
December 31, 2000 are as follows (in thousands):


                        2001                    $3,000
                        2002                     1,750
                        2003                        --
                        2004                        --
                        2005                        --
                                                ------
                              Total             $4,750
                                                ======

          The Company's current two-year revolving line of credit was renewed on
June 15, 1999 and amended on July 7, 2000 at an amount not to exceed $10
million. Interest is payable at prime or at LIBOR plus 2.25% (9.5% at December
31, 2000). The line is secured by all assets of the Company. The line had an
outstanding balance of $2.0 million at December 31, 2000.

          The Company issued common stock warrants in connection with the Series
A and Series B Senior Secured Notes allowing for the purchase of up to 175,000
shares of common stock at an exercise price of $11.50 per share. The common
stock warrants, which were valued at $0.8 million by the Company, have been
reflected as debt discount and have been fully amortized as additional interest
expense. As a result of the Company's follow-on public offering in 1997 and the
acquisition of Digital Delivery in 1999, the warrants were adjusted to allow for
the purchase of 176,303 shares of common stock at an adjusted exercise price of
$11.415. The value of the common stock warrants is included in additional
paid-in capital.

          The current credit agreements impose operating and financial
restrictions on the Company, including a requirement to maintain certain
financial ratios and a certain profitability level. Such restrictions affect,
and in some respects limit or prohibit, among other things, the ability of the
Company to incur additional indebtedness, repay certain indebtedness prior to
its stated maturity, create liens, engage in mergers and acquisitions, transfer
assets, make certain capital expenditures and pay dividends. At December 31,
2000, the Company was in compliance with all debt covenants.


                                      F-8

<PAGE>   29

NOTE C -- INCOME TAXES

          In 2000, 1999, and 1998, pretax income (loss) was attributed to the
following jurisdictions (in thousands):


                                  2000       1999        1998
                                 ------    -------     -------

          Domestic Operations    $8,655    $(2,095)    $(2,696)
          Foreign Operations        242        217         288
                                 ------    -------     -------
          Total                  $8,897    $(1,878)    $(2,408)
                                 ======    =======     =======


          The income tax provision (benefit) comprises the following (in
thousands):

                                                     YEAR ENDED DECEMBER 31,
                                                   ---------------------------
                                                    2000        1999      1998
                                                   -------     -----     -----
          Provision (benefit) for income taxes:

            Current:
               Federal                             $ 4,020     $(613)    $(682)
               State                                   729       682       210
               Foreign                                 109        98       130
                                                   -------     -----     -----
                                                     4,858       167      (342)
                                                   -------     -----     -----

            Deferred:
               Federal                              (1,295)     (207)     (336)
               State                                    (4)     (688)     (273)
                                                   -------     -----     -----
                                                    (1,299)     (895)     (609)
                                                   -------     -----     -----
                                                   $ 3,559     $(728)    $(951)
                                                   =======     =====     =====

          The tax benefits associated with the exercise of non-qualified stock
options reduced taxes currently payable as shown above by $1.4 million, $0.03
million and $0.1 million in 2000, 1999 and 1998, respectively. Such benefit was
credited to additional paid in capital.

          The income tax provision (benefit) differs from the amount computed by
applying the statutory federal income tax rate to income (loss) before taxes as
follows (in thousands):

<TABLE>
<CAPTION>
                                                                        YEAR ENDED DECEMBER 31,
                                                -----------------------------------------------------------------------
                                                        2000                      1999                     1998
                                                --------------------       ------------------       -------------------
                                                              Pretax                   Pretax                    Pretax
                                                Amount        Income       Amount      Income       Amount       Income
                                                -------       ------       ------      ------       ------       ------
<S>                                             <C>            <C>         <C>          <C>         <C>          <C>
Computed expected tax expense (benefit)         $ 3,025        34.0%       $(640)       (34.0%)     $(819)       (34.0%)

State income tax (benefit), net of federal
  income tax effect                                 639         7.2%        (127)       (6.8%)        (63)       (2.6%)

Amortization of excess of purchase price
  over net assets acquired                          443         5.0%         209        11.0%          31         1.2%

Foreign earnings taxed at different
  rates                                              24         0.3%          22         1.2%          28         1.2%

Research and development tax credits               (785)       (8.8%)       (242)       (12.9%)      (123)       (5.1%)

Other                                               213         2.3%          50         2.8%          (5)       (0.2%)
                                                -------        ----        -----        ----        -----        ----
                                                $ 3,559        40.0%       $(728)       (38.7%)     $(951)       (39.5%)
                                                =======        ====        =====        ====        =====        ====
</TABLE>


                                      F-9

<PAGE>   30

          The primary components of temporary differences that give rise to the
Company's net deferred tax assets are as follows (in thousands):

                                                        DECEMBER 31,
                                                     ------------------
                                                      2000        1999
                                                     ------      ------
Deferred tax assets:
  Inventory                                          $1,627      $1,522
  Accruals and reserves                               2,616       2,247
  Net operating loss carryovers                           9         246
  Tax credits                                         1,572         580
                                                     ------      ------
                                                      5,824       4,595
                                                     ------      ------
 Deferred tax liabilities:
  Property, plant and equipment                       2,162       2,237
  Other                                                  34          29
                                                     ------      ------
                                                      2,196       2,266
                                                     ------      ------
                                                     $3,628      $2,329
                                                     ======      ======

          The Company has a California net operating loss carryover of $103
thousand that begins expiring in 2003. The Company also has federal and
California research and development tax credit carryovers of $844 thousand and
$728 thousand, respectively. The federal tax credits begin expiring in 2018 and
the California tax credits do not expire.

NOTE D -- POST-RETIREMENT BENEFITS

          Post-retirement benefits are recognized over the employee's service
period based on the expected costs of providing such benefits to the employee
and the employee's beneficiaries after retirement. The Company elected to
recognize the transition obligation over a 20-year period.

          The Company's post-retirement benefit program comprises two plans, the
life insurance plan and the health care plan. Any permanent full-time employee
is eligible for participation upon retirement after age 62 and with 12 years of
service. The health care plan is a contributory plan.

          The following sets forth the Company's post-retirement program's
status reconciled with amounts reported in the consolidated balance sheet (in
thousands):

<TABLE>
<CAPTION>
                                                                          DECEMBER 31,
                                                                     ---------------------
                                                                       2000          1999
                                                                     -------       -------
<S>                                                                  <C>           <C>
          Accumulated post-retirement benefit obligation:
              Benefit obligation at beginning of year                $ 1,427       $ 1,239
                 Service cost                                            127           127
                 Interest cost                                            86            86
                 Actuarial gains                                         (59)            5
                 Expected benefits paid                                  (30)          (30)
                                                                     -------       -------
              Benefit obligation at end of year                        1,551         1,427
              Plan assets at fair value                                   --            --
                                                                     -------       -------
              Accumulated post-retirement benefit obligation
                in excess of plan assets                               1,551         1,427
              Unrecognized transition obligation                        (361)         (391)

              Unrecognized net gain (loss)                                (2)           (2)
                                                                     -------       -------
              Accrued post-retirement benefit obligation             $ 1,188       $ 1,034
                                                                     =======       =======
</TABLE>


                                      F-10


<PAGE>   31

          Net periodic post-retirement benefit cost includes the following
components (in thousands):

                                                       YEAR ENDED DECEMBER 31,
                                                     --------------------------
                                                     2000       1999       1998
                                                     ----       ----       ----
          Service cost                               $127       $127       $127
          Interest cost                                86         86         86
          Amortization of transition obligation        30         30         30
          Amortization of actuarial loss                3          3          3
                                                     ----       ----       ----
          Net periodic postretirement expense        $246       $246       $246
                                                     ====       ====       ====
          Discount rate                              6.75%      6.75%      6.75%
                                                     ====       ====       ====

          For measurement purposes, an 8.5% annual rate of increase in the per
capita cost of covered healthcare benefits was assumed for 2000. The rate was
assumed to decrease gradually to 4.75% for 2007 and remain at that level
thereafter. The effect of one percentage point increase in the assumed
healthcare cost trend rate would increase the total of the service and interest
cost components by $7 thousand and increase the post-retirement benefit
obligation by $32 thousand. A one percent decrease in the assumed trend rate
would decrease the total of the service and interest components by $7 thousand
and decrease the post-retirement benefit obligation by $27 thousand.

NOTE E -- COMMON STOCK RESERVED

          In June 1994, the stockholders of the Company approved the 1994
Incentive Stock Plan. This plan provides for the granting of incentive or
nonqualified options or restricted shares of the Company's common stock to the
Company's officers, directors and employees and also to consultants, business
associates and others with important business relationships with the Company.
The exercise price of the shares covered by each nonqualified option granted and
purchase price of restricted shares is determined by the Administrator. The
exercise price of common stock covered by each incentive option cannot be less
than the fair market value of such shares on the date of grant. As of December
31, 2000 there have been no nonqualified options issued at an exercise price
less than the market value on the date of grant and there have been no incentive
options granted. Generally, options vest in 25% increments over four years and
have a 10-year term. The initial shares available under the Plan for issuance
were 250,000 with annual increases of 50,000 on the last day of each calendar
year. The stockholders of the Company approved amendments to the Plan, providing
for 200,000 additional option shares in March 1995, June 1997, June 1998 and
June 2000, to be reserved for issuance thereunder. In June 1998, the
stockholders also approved an amendment to change the annual increase from
50,000 to 2% of the number of shares of common stock outstanding as of the
Company's fiscal year-end. As of December 31, 2000, 1,598,442 shares have been
reserved for the Plan. This plan replaced the prior stock plan and Restricted
Stock Award Plan that expired in 1994.

          The stock option activity includes the cancellation of options for
170,750 shares in November 1998 and the corresponding grant of new options for
170,750 shares in November 1998 at an exercise price of $10.76, an amount
greater than the fair market value on the date the new options were granted.
This option repricing was made available to employees only and excluded
directors and officers. The new options vest in annual installments of 25%, 25%
and 50% from the date of grant and expire 10 years from the date of grant.

          The stock option activity also includes 30,000 shares of restricted
stock awarded in April 1998. These shares were issued with a purchase price less
than the market value of shares on the date of grant. The shares vest over seven
years with provisions to accelerate vesting if certain financial milestones are
met.


                                      F-11

<PAGE>   32

          Stock option activity for years ended December 31, 2000, 1999 and 1998
is as follows:

                                                      OPTIONS OUTSTANDING
                                                 -----------------------------
                                                   NUMBER     WEIGHTED AVERAGE
                                                  OF SHARES    EXERCISE PRICE
                                                 ----------   ----------------
          Outstanding at December 31, 1997         556,023        $ 11.84
              Granted                              564,250        $ 12.36
              Exercised                            (72,250)       $  3.03
              Cancelled                           (225,875)       $ 17.73
                                                 ---------        -------
          Outstanding at December 31, 1998         822,148        $ 11.35
              Granted                              316,500        $  7.18
              Exercised                            (20,000)       $  4.28
              Cancelled                            (89,000)       $ 13.89
                                                 ---------        -------
          Outstanding at December 31, 1999       1,029,648        $  9.99
              Granted                              373,750        $ 20.70
              Exercised                           (183,473)       $  7.98
              Cancelled                            (90,438)       $ 11.70
                                                 ---------        -------
          Outstanding at December 31, 2000       1,129,487        $ 13.72
                                                 =========        =======

          The number of options exercisable and the related weighted average
exercise price were 415,174 shares at $10.86 at December 31, 2000, 409,585
shares at $9.95 at December 31, 1999 and 276,022 shares at $8.16 at December 31,
1998.

          As of December 31, 2000, 1999 and 1998, there were 226,455, 188,542
and 298,942 shares, respectively, available for grant under the 1994 Incentive
Stock Plan.

          Additional information regarding options outstanding at December 31,
2000 is as follows:

<TABLE>
<CAPTION>
                                              OPTIONS OUTSTANDING                                OPTIONS EXERCISABLE
                           ----------------------------------------------------------      ----------------------------------
                               NUMBER           WEIGHTED AVERAGE          WEIGHTED             NUMBER             WEIGHTED
   RANGE OF                  OUTSTANDING           REMAINING              AVERAGE           EXERCISABLE           AVERAGE
   EXERCISE PRICES         AS OF 12/31/00       CONTRACTUAL LIFE       EXERCISE PRICE      AS OF 12/31/00      EXERCISE PRICE
   ----------------        --------------     -------------------      --------------      --------------      --------------
<S>                        <C>                <C>                      <C>                 <C>                 <C>
   $ 3.75 - $ 7.00             261,212                 7.64                 $6.51              104,087               $5.87
   $ 7.25 - $10.76             283,525                 6.69                $10.18              185,775              $10.33
   $10.81 - $15.75             232,250                 7.65                $14.05               96,250              $14.14
   $16.25 - $21.88             302,500                 9.27                $21.18               21,562              $20.12
   $22.69 - $28.88              50,000                 8.88                $24.89                7,500              $24.50
   ---------------           ---------                 ----                ------              -------              ------
   $ 3.75 - $28.88           1,129,487                 7.90                $13.72              415,174              $10.86
   ===============           =========                 ====                ======              =======              ======
</TABLE>

          In June 1997, the stockholders of the Company approved the Employee
Stock Purchase Plan ("the Purchase Plan"), which authorized the Company to issue
and reserve for the Purchase Plan, or purchase up to an aggregate of 250,000
shares of common stock in open market transactions for the benefit of
participating employees during the term of the Purchase Plan. The purchase price
per share for which shares of common stock are purchased in an offering period
under the Purchase Plan is the lesser of 90% of the fair market value of a share
of common stock on the grant date or 90% of the fair market value of a share of
common stock on the purchase date. Shares issued under the Plan were 17,451 in
2000, 35,922 in 1999 and 34,931 in 1998 at a weighted average price of $17.14,
$6.16 and $8.31, respectively.

          Had compensation cost been determined on the basis of fair value
pursuant to FAS 123 net income (loss) and net income (loss) per share would have
been as follows (in thousands, except share data):

                                              YEAR ENDED DECEMBER 31,
                                           -----------------------------
                                            2000       1999       1998
                                           ------     -------    -------

          Net income (loss)
            As reported                    $5,338     $(1,150)   $(1,457)
                                           ======     =======    =======
            Pro forma                      $3,994     $(2,108)   $(2,497)
                                           ======     =======    =======

          Net income (loss) per share
            As reported - Diluted          $ 0.85     $ (0.20)   $ (0.27)
                                           ======     =======    =======
            Pro forma - Diluted            $ 0.63     $ (0.37)   $ (0.46)
                                           ======     =======    =======

          Pro forma information regarding net income (loss) and net earnings
(loss) per common share has been estimated at the date of grant using the
Black-Scholes option-pricing model based on the following assumptions:


                                      F-12

<PAGE>   33

<TABLE>
<CAPTION>
                                         EMPLOYEE STOCK OPTIONS                 EMPLOYEE STOCK PURCHASE PLAN
                                   ----------------------------------        ----------------------------------
                                    2000          1999          1998          2000          1999          1998
                                   ------        ------        ------        ------        ------        ------
<S>                                <C>           <C>           <C>           <C>           <C>           <C>
Expected life (years)                  5             5             5          0.25          0.25          0.25
Expected volatility                82.92%        78.86%        74.84%        89.46%        75.29%        78.72%
Risk free interest rate             6.06%         5.55%         4.94%         5.86%         4.67%         4.93%
Expected dividend yield             0.00%         0.00%         0.00%         0.00%         0.00%         0.00%
</TABLE>

          The Black-Scholes option-pricing model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable and negotiable in a free trading market. In addition,
option valuation models require the input of highly subjective assumptions,
including the expected stock price volatility. Because the Company's options
have characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in the opinion of management, the existing models do not
necessarily provide a reliable single measure of the fair value of its options.
The weighted average estimated fair values of stock options granted during 2000,
1999 and 1998 were $14.42, $4.83 and $8.61 per share, respectively. The weighted
average estimated fair values of shares granted under the Employee Stock
Purchase Plan during 2000, 1999 and 1998 were $5.65, $1.93 and $2.97 per share,
respectively.

NOTE F -- SAVINGS AND RETIREMENT PLAN

          Effective July 1, 1984, the Company adopted a savings and retirement
plan which covers all eligible employees. The plan provides for matching by the
Company of 100% of the first 3% of employee deferral. Employer matching
contributions are made in the form of shares of the Company's common stock.
Total retirement expense under the Plan amounted to $0.8 million, $0.6 million
and $0.7 million for the years ended December 31, 2000, 1999 and 1998,
respectively. Employees vest in increments of 20% for each year of service and
are fully vested after 5 years.

NOTE G -- SEGMENT AND RELATED INFORMATION

          The Company has six reportable segments: Irvine, CA, Austin, TX,
Beverly, MA, San Jose, CA, Lexington, MA, and Hofolding, Germany. The Irvine, CA
segment produces product primarily for the wireless telecommunication market. At
the Austin, TX segment, products are primarily produced for the wireline
telecommunication market. At the Beverly, MA segment, Cesium standards are
produced for the telecommunications test and measurement and satellite markets.
The San Jose, CA segment produces product for both the enterprise computing and
test and measurement markets. The San Jose, CA segment was successfully combined
with the Beverly, MA segment in the fourth quarter of 2000. The Lexington, MA
segment produces products for the e-business market. The Hofolding, Germany
segment produces product for the wireless and wireline telecommunications and
test and measurement markets.

          The accounting policies for the segments are the same as those
described in the "Summary of Significant Accounting Policies." The Company
evaluates the performance of its segments and allocates resources to them based
on operating income. Segment net sales include sales to external customers and
to other Company segments (intersegment sales). Segment operating income does
not include corporate expenses, amortization of goodwill, and intersegment
profit elimination. Identifiable assets include accounts receivable,
inventories, and land, building and equipment and do not include cash, income
tax refund receivable and deferred income taxes, prepaid expenses, goodwill and
other long-term corporate assets.

          The Company accounts for intersegment sales and transfers at terms
that allow a reasonable profit to the seller.

          The Company's reportable segments are strategic business units that
offer different product and services. They are managed separately because each
business utilizes different technology and requires different marketing
strategies. All of the businesses were acquired as a unit, and the management
teams at the time of the acquisitions were retained.


                                      F-13

<PAGE>   34

          The table below presents information about reported segments for the
years ended December 31 (in thousands):

<TABLE>
<CAPTION>
                               IRVINE,       AUSTIN,      BEVERLY,       SAN JOSE,     LEXINGTON,   HOFOLDING,
                                 CA            TX            MA            CA             MA         GERMANY         TOTAL
                              --------       -------      --------       ---------     ----------   ----------     --------
<S>                           <C>            <C>          <C>            <C>           <C>          <C>            <C>
2000

Net sales                     $ 57,904       $51,511      $ 22,104       $ 10,068       $   470       $ 6,122      $148,179
Operating income (loss)         11,365         9,768         3,318         (2,162)       (2,964)          273        19,598
Identifiable assets             23,927        27,762        16,526          1,101         1,372         3,129        73,817
Capital expenditures             1,209         1,047           572            296           323            36         3,483

1999

Net sales                     $ 43,277       $31,824      $ 14,901       $ 14,511       $   130       $ 5,413      $110,056
Operating income (loss)         (2,259)        5,081         1,555            363          (504)          380         4,616
Identifiable assets             17,126        19,436        12,260          4,977           206         1,920        55,925
Capital expenditures               601           866           365            326            74            92         2,324

1998

Net sales                     $ 48,340       $25,309      $ 14,882       $ 14,128       $    --       $ 6,249      $108,908
Operating income (loss)         (2,565)        5,083         1,117            188            --           536         4,359
Identifiable assets             22,722        14,765         9,867          6,027            --         2,251        55,632
Capital expenditures             1,177           538           772            115            --            97         2,699
</TABLE>

          A reconciliation of total segment net sales, operating income,
identifiable assets and capital expenditures to total consolidated amounts, for
the years ended December 31 is as follows (in thousands):

<TABLE>
<CAPTION>
                                                  2000            1999            1998
                                                ---------       ---------       ---------
<S>                                             <C>             <C>             <C>
NET SALES
  Total segment net sales                       $ 148,179       $ 110,056       $ 108,908
  Elimination of intersegment revenue             (15,940)         (9,888)         (7,675)
                                                ---------       ---------       ---------
    Consolidated net sales                      $ 132,239       $ 100,168       $ 101,233
                                                =========       =========       =========
OPERATING INCOME
  Total operating income for segment sales      $  19,598       $   4,616       $   4,359
  Corporate expense                                (5,790)         (2,952)         (3,242)
  Amortization of goodwill                         (2,867)         (2,179)         (1,634)
  Intercompany profit                                (585)             32            (274)
                                                ---------       ---------       ---------
    Consolidated operating income               $  10,356       $    (483)      $    (791)
                                                =========       =========       =========
IDENTIFIABLE ASSETS
  Total segment assets                          $  73,817       $  55,925       $  55,632
  Goodwill                                         16,016          18,883          16,131
  Cash                                              1,017           8,271          10,307
  Income tax receivable and deferred
    income taxes                                    4,774           3,822           4,287
  Other assets                                       (348)            881             563
                                                ---------       ---------       ---------
    Consolidated assets                         $  95,276       $  87,782       $  86,920
                                                =========       =========       =========
CAPITAL EXPENDITURES
  Total segment capital expenditures            $   3,483       $   2,324       $   2,699
  Other additions                                     455              35              --
                                                ---------       ---------       ---------
    Consolidated capital expenditures           $   3,937       $   2,359       $   2,699
                                                =========       =========       =========
</TABLE>


                                      F-14

<PAGE>   35

          The following table sets forth the geographical components of
international sales for the years ended December 31 (in thousands):

      INTERNATIONAL SALES       2000           1999          1998
                              -------        -------        -------
          China               $ 3,960        $ 1,208        $ 2,782
          Brazil                3,736          1,530            649
          Canada                3,518          3,209          5,280
          Germany               3,406          2,965          3,190
          South Korea           2,484          2,974          1,367
          Japan                 1,379            885          1,981
          Other                14,333         11,825          9,108
                              -------        -------        -------
                              $32,816        $24,596        $24,357
                              =======        =======        =======

          Sales from one customer of the Company's Irvine, CA segment
represented 33%, 33% and 34% of the Company's consolidated net sales in 2000,
1999 and 1998, respectively.

NOTE H -- COMMITMENTS

          Total rental expense for operating leases amounted to $1.7 million,
$1.6 million and $1.9 million in 2000, 1999 and 1998, respectively. The future
minimum rental commitments under all non-cancelable operating leases, exclusive
of property taxes and certain occupancy costs, are as follows (in thousands):

                       2001                               $2,049
                       2002                                1,913
                       2003                                1,784
                       2004                                1,588
                       2005                                1,063
                       Thereafter                            474
                                                          ------
                         Total minimum lease payments     $8,871
                                                          ======

NOTE I -- ACQUISITION

          On July 29, 1999, the Company acquired all of the outstanding capital
stock of Digital Delivery, Inc. (DDI), a Massachusetts corporation. The Company
issued 214,277 shares of its Common Stock and paid $1.5 million in cash. The DDI
stockholders will also receive additional consideration based on certain
performance criteria through December 31, 2001. The acquisition has been
accounted for using the purchase method of accounting. Goodwill of approximately
$4.9 million is being amortized over four years using the straight-line method.

          DDI is a leading provider of secure information and management
software. DDI's patented encryption models and leading-edge compression
technologies enable organizations to distribute data and conduct electronic
commerce securely via the Internet, Intranet, Extranet, CD-ROM and digital
versatile disk.

          The unaudited pro forma combined results of operations of the Company
and DDI for the twelve months ended December 31, 1999 and 1998, presuming the
acquisition had taken place on January 1, 1998, after giving effect to certain
pro forma adjustments, are as follows (In thousands, except per share data):

                                                  YEAR ENDED DECEMBER 31,
                                              ------------------------------
                                                 1999                1998
                                              ----------         -----------
          Net sales                           $  100,523         $   101,349
                                              ==========         ===========
          Net income (loss)                   $   (2,335)        $    (3,227)
                                              ==========         ===========

          Net income (loss) per share:
               Basic                          $    (0.40)        $     (0.57)
                                              ==========         ===========
               Diluted                        $    (0.40)        $     (0.57)
                                              ==========         ===========

          The condensed pro forma combined financial information is provided for
informational purposes only and does not purport to be indicative of the future
results of the Company or what the results of operations would have been had the
acquisition been effective on the date indicated.


                                      F-15

<PAGE>   36

NOTE J -- SUMMARIZED QUARTERLY DATA (UNAUDITED)

          The following financial information reflects all normal recurring
adjustments that are, in the opinion of management, necessary for a fair
statement of the results of the interim periods. Summarized quarterly data for
the years ended December 31, 2000 and 1999 is as follows (in thousands, except
per share data):

<TABLE>
<CAPTION>
                                                           QUARTER ENDED
                                      ----------------------------------------------------------
                                      MARCH 31         JUNE 30        SEPT. 30          DEC. 31
                                      --------         -------        --------         ---------
<S>                                   <C>              <C>            <C>              <C>
2000:

Net sales                             $ 28,944         $33,567        $ 36,197         $ 33,531
Gross profit                          $ 12,222         $15,880        $ 16,421         $ 14,663
Net income                            $    328         $ 1,062        $  2,047         $  1,900
Net income per share - basic          $   0.06         $  0.18        $   0.34         $   0.32
Net income per share - diluted        $   0.05         $  0.17        $   0.32         $   0.30

1999:

Net sales                             $ 24,552         $24,765        $ 25,017         $ 25,834
Gross profit                          $  9,239         $10,630        $ 10,109         $ 10,093
Net income                            $   (191)        $   222        $   (619)        $   (562)
Net income per share - basic          $  (0.03)        $  0.04        $  (0.11)        $  (0.10)
Net income per share - diluted        $  (0.03)        $  0.04        $  (0.11)        $  (0.10)
</TABLE>

          The interim financial information was reviewed by the Company's
independent accountants in accordance with standards established for such
reviews.


                                      F-16

<PAGE>   37

                           DATUM INC. AND SUBSIDIARIES
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                          BALANCE AT                                  BALANCE
                                          BEGINNING                                  AT END OF
         DESCRIPTION                      OF PERIOD     ADDITIONS     DEDUCTIONS      PERIOD
         -----------                      ----------    ---------     ----------     ---------
<S>                                         <C>           <C>           <C>           <C>
YEAR ENDED DECEMBER 31, 2000

Allowance for doubtful accounts             $  561        $  814        $  711        $  664
Reserve for inventories                      4,157         1,431         2,178         3,410
Accumulated amortization of acquired
  intangible assets                          5,285         2,127            --         7,412

YEAR ENDED DECEMBER 31, 1999

Allowance for doubtful accounts             $  153        $  420        $   12        $  561
Reserve for inventories                      4,536         2,684         3,063         4,157
Accumulated amortization of acquired
  intangible assets                          3,845         1,440            --         5,285

YEAR ENDED DECEMBER 31, 1998

Allowance for doubtful accounts             $   71        $  119        $   37        $  153
Reserve for inventories                      3,737         2,275         1,476         4,536
Accumulated amortization of acquired
  intangible assets                          2,951           894            --         3,845
</TABLE>


                                      S-1

<PAGE>   38

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
                                                                                 SEQUENTIALLY
 EXHIBIT                                                                           NUMBERED
 NUMBER                            DESCRIPTION                                       PAGE
---------                          -----------                                   ------------
<S>         <C>                                                                  <C>
   2.2      Agreement and Plan of Merger Agreement, dated July 29, 1999, among        --
            the Registrant, Digital Delivery, Inc., certain stockholders of
            Digital Delivery and Datum Acquisition Sub, Inc. (incorporated by
            reference to the Registrant's Current Report on Form 8-K, dated July
            29, 1999, as amended).

   3.1      Certificate of Incorporation of Datum Inc., a Delaware corporation,       --
            as amended to date (incorporated by reference to the same numbered
            exhibit on Form 10-Q for the quarter ended June 30, 1996).

   3.2      Bylaws of Datum Inc. as amended to date (incorporated by reference        --
            to the exhibit 1 on Form 8-K dated November 17, 1999).

   4.2      Rights Agreement, dated as of November 8, 1999, between the               --
            Registrant and ChaseMellon Shareholder Services, L.L.C.
            (incorporated by reference to Exhibit 1 to the Company's
            Registration Statement on Form 8-A, Registration No. 000-06272).

  10.4      1984 Stock Option Plan, as amended to date (incorporated by               --
            reference to Registrant's Registration Statements on Form S-8,
            Registration No.'s 2-96564, 33-10035 and 33-41709).

  10.10     Form of Indemnification Agreement dated May 27, 1987 as entered into      --
            with certain directors and officers of Registrant (incorporated by
            reference to same numbered exhibit to Registrant's Annual Report on
            Form 10-K for the year ended December 31, 1991).

  10.19     Savings and Retirement Plan, as amended to date (incorporated by          --
            reference to same numbered exhibit to Registrant's Annual Report on
            Form 10-K for the year ended December 31, 1991).

  10.21     Consulting Agreement dated October 9, 1992 with Louis B. Horwitz          --
            (incorporated by reference to same numbered exhibit to Registrant's
            Annual Report on Form 10-K for the year ended December 31, 1992).

  10.21.1   First Amendment to Consulting Agreement, dated as of March 1, 1996,       --
            between Louis B. Horwitz and the Registrant (incorporated by
            reference to the same numbered exhibit to Registrant's Quarterly
            Report on Form 10-Q for the quarter ended September 30, 1996).

  10.29     1994 Stock Incentive Plan (incorporated by reference to Registrant's      --
            Registration Statement on Form S-8, Registration No. 33-79772).

  10.29.1   Amendment to 1994 Stock Incentive Plan, effective March 17, 1995.         --
            (incorporated by reference to the same numbered exhibit on Form 10-K
            for the year ended December 31, 1994).

  10.29.2   Second Amendment to 1994 Stock Incentive Plan, effective June 5,          --
            1997 (incorporated by reference to Registrant's Registration
            Statement on Form S-8, Registration No. 33-79772).

  10.30.5   Amended and Restated Credit Agreement dated as of September 27,           --
            1996, by and between the Registrant and Wells Fargo Bank, N.A.
            (incorporated by reference to the same numbered exhibit to the
            Registrant's Quarterly Report on Form 10-Q for the quarter ended
            September 30, 1996).
</TABLE>

<PAGE>   39

                            EXHIBIT INDEX (Continued)

<TABLE>
<CAPTION>
                                                                                 SEQUENTIALLY
 EXHIBIT                                                                           NUMBERED
 NUMBER                            DESCRIPTION                                       PAGE
---------                          -----------                                   ------------
<S>         <C>                                                                  <C>
  10.32     Lease Agreement dated September 15, 1986 by and between The Irvine        --
            Company and Efratom Division, Ball Corporation, for Efratom Time and
            Frequency Products, Inc.'s facility at 3 Parker, Irvine, California.
            (incorporated by reference to the same numbered exhibit on Form 10-K
            for the year ended December 31, 1994).

  10.32.1   First Amendment to Lease dated March 15, 1995 by and between The          --
            Irvine Company and Efratom Division, Ball Corporation for Lease
            Agreement dated September 15, 1986 (Exhibit 10.32) (incorporated by
            reference to the same numbered exhibit on Form 10-K for the year
            ended December 31, 1994).

  10.32.2   Amendment to Leases dated May 11, 1995 between the Irvine Company         --
            and the Registrant (incorporated by reference to the same numbered
            exhibit on Form 10-Q for the quarter ended June 30, 1995).

  10.32.4   Second Amendment to Lease dated May 11, 1995 for 3 Parker                 --
            (incorporated by reference to the same numbered exhibit on Form 10-Q
            for the quarter ended June 30, 1995).

  10.34     Industrial Lease dated May 11, 1995 between the Irvine Company and        --
            the Registrant (incorporated by reference to the same numbered
            exhibit to the Registrant's Form 10-Q for the quarter ended June 30,
            1995).

  10.35     Lease Agreement dated January 4, 1996, by and between Berg & Berg         --
            Developers and the Registrant relating to Registrant's Facility at
            6781 Via Del Oro, San Jose, California (incorporated by reference to
            the same numbered exhibit to the Registrant's Form 10-K for the year
            ended December 31, 1995).

  10.36     Note and Warrant Purchase Agreement, dated as of September 27, 1996,      --
            by and between The Prudential Insurance Company of America and the
            Registrant (incorporated by reference to the same numbered exhibit
            to the Registrant's Quarterly Report on Form 10-Q for the quarter
            ended September 30, 1996).

  10.37     Common Stock Purchase Warrant, dated September 27, 1996                   --
            (incorporated by reference to the same numbered exhibit to the
            Registrant's Quarterly Report on Form 10-Q for the quarter ended
            September 30, 1996).

  10.38     Series A Senior Secured Notes, dated September 27, 1996, in favor of      --
            The Prudential Insurance Company of America (incorporated by
            reference to the same numbered exhibit to the Registrant's Quarterly
            Report on Form 10-Q for the quarter ended September 30, 1996).

  10.39     Series B Senior Secured Notes, dated September 27, 1996, in favor of      --
            The Prudential Insurance Company of America (incorporated by
            reference to the same numbered exhibit to the Registrant's Quarterly
            Report on Form 10-Q for the quarter ended September 30, 1996).

  10.41     Employee Stock Purchase Plan (incorporated by reference to                --
            registrant proxy statement for its Annual Meeting of Stockholders on
            June 5, 1997, filed with the commission on May 1, 1997).

  10.42     Employee Agreement dated March 27, 1998, between the Company and          --
            Erik H. van der Kaay (incorporated by reference to the same numbered
            exhibit to the Registrant's Quarterly Report on Form 10-Q for the
            quarter ended March 31, 1998).

  10.43     Non-qualified stock option agreement, dated April 6, 1998, between        --
            the Company and Erik H. van der Kaay (incorporated by reference to
            the same numbered exhibit to the Registrant's Quarterly Report on
            Form 10-Q for the quarter ended June 30, 1998.
</TABLE>

<PAGE>   40

                            EXHIBIT INDEX (Continued)

<TABLE>
<CAPTION>
                                                                                 SEQUENTIALLY
 EXHIBIT                                                                           NUMBERED
 NUMBER                            DESCRIPTION                                       PAGE
---------                          -----------                                   ------------
<S>         <C>                                                                  <C>
  10.44     Restricted stock grant agreement, dated April 6, 1998, between the        --
            Company and Erik H. van der Kaay (incorporated by reference to the
            same numbered exhibit to the Registrant's Quarterly Report on Form
            10-Q for the quarter ended June 30, 1998.

  10.45     Agreement with Lucent Technologies Inc., signed July 2, 1998.             --
            (incorporated by reference to the same numbered exhibit to the
            Registrant's Annual Report on Form 10-K for the year ended December
            31, 1998. Portions of this Exhibit are omitted and were filed
            separately with the Secretary of the Commission pursuant to the
            Company's application requesting confidential treatment under Rule
            406 of the Securities Act of 1933).

  10.46     Employment Agreement, dated July 29, 1999, between the Company and        --
            Thomas Mark Hastings (incorporated by reference to the same numbered
            exhibit to the Registrant's Amended Annual Report on Form 10-K/A for
            the year ended December 31, 1999).

  10.47     Severance Compensation Agreement, dated October 29, 1999, by and          --
            between the Registrant and Erik van der Kaay (incorporated by
            reference to the same numbered exhibit to the Registrant's Amended
            Annual Report on Form 10-K/A for the year ended December 31, 1999).

  10.48     Severance Compensation Agreement, dated October 29, 1999, by and          --
            between the Registrant and David A. Young (incorporated by reference
            to the same numbered exhibit to the Registrant's Amended Annual
            Report on Form 10-K/A for the year ended December 31, 1999).

  10.49     Severance Compensation Agreement, dated October 29, 1999, by and          --
            between the Registrant and Paul E. Baia (incorporated by reference
            to the same numbered exhibit to the Registrant's Amended Annual
            Report on Form 10-K/A for the year ended December 31, 1999).

  10.50     Severance Compensation Agreement, dated October 29, 1999, by and          --
            between the Registrant and Michael J. Patrick (incorporated by
            reference to the same numbered exhibit to the Registrant's Amended
            Annual Report on Form 10-K/A for the year ended December 31, 1999).

  10.51     Severance Compensation Agreement, dated October 29, 1999, by and          --
            between the Registrant and John J. Rice (incorporated by reference
            to the same numbered exhibit to the Registrant's Amended Annual
            Report on Form 10-K/A for the year ended December 31, 1999).

  10.52     Severance Compensation Agreement, dated October 29, 1999, by and          --
            between the Registrant and Raymond L. Waguespack (incorporated by
            reference to the same numbered exhibit to the Registrant's Amended
            Annual Report on Form 10-K/A for the year ended December 31, 1999).

  10.53     Second Amended and Restated Credit Agreement, dated as of July 7,         --
            2000, by and between the Registrant and Wells Fargo Bank, National
            Association (incorporated by reference to the same numbered exhibit
            to the Registrant's Quarterly Report on Form 10-Q for the quarter
            ended September 30, 2000).

  10.54     Third Amended and Restated Revolving Line of Credit Note, dated July      --
            7, 2000, issued by the Registrant in favor of Wells Fargo Bank,
            National Association (incorporated by reference to the same numbered
            exhibit to the Registrant's Quarterly Report on Form 10-Q for the
            quarter ended September 30, 2000).

  10.55     Term Note dated July 7, 2000, issued by the Registrant in favor of        --
            Wells Fargo Bank, National Association (incorporated by reference to
            the same numbered exhibit to the Registrant's Quarterly Report on
            Form 10-Q for the quarter ended September 30, 2000).

  21        List of Subsidiaries.                                                     --

  23.1      Consent of Independent Accountants.                                       --
</TABLE>

<PAGE>   41

                                   DATUM INC.
                            FORM 10-K - ITEM 14(a)(3)

                  EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS

  10.4      1984 Stock Option Plan, as amended to date (incorporated by
            reference to Registrant's Registration Statements on Form S-8
            Registration numbers 2-96564, 33-10035 and 33-41709).

  10.10     Form of Indemnification Agreement dated May 27, 1987 as entered into
            with certain directors and officers of Registrant (incorporated by
            reference to same numbered exhibit to Registrant's Annual Report on
            Form 10-K for the year ended December 31, 1991).

  10.21     Consulting Agreement dated October 9, 1992 with Louis B. Horwitz
            (incorporated by reference to same numbered exhibit to Registrant's
            Annual Report on Form 10-K for the year ended December 31, 1992).

  10.21.1   First Amendment to Consulting Agreement, dated as of March 1, 1996,
            between Louis B. Horwitz and the Registrant (incorporated by
            reference to the same numbered exhibit to Registrant's Quarterly
            Report on Form 10-Q for the quarter ended September 30, 1996).

  10.29     1994 Stock Incentive Plan (incorporated by reference to Registrant's
            Registration Statement on Form S-8, Registration No. 33-79772).

  10.29.1   Amendment to 1994 Stock Incentive Plan, effective March 16, 1995
            (incorporated by reference to the same numbered exhibit to
            Registrant's Form 10-K for the year ended December 31, 1994).

  10.29.2   Second Amendment to 1994 Stock Incentive Plan, effective June 5,
            1997 (incorporated by reference to Registrant's Registration
            Statement on Form S-8, Registration No. 33-79772).

  10.41     Employee Stock Purchase Plan (incorporated by reference to
            registrant proxy statement for its Annual Meeting of Stockholders on
            June 5, 1997, filed with the commission on May 1, 1997).

  10.42     Employment Agreement, dated March 27, 1998, between the Company and
            Erik H. van der Kaay (incorporated by reference to the same numbered
            exhibit to the Registrant's Quarterly Report on Form 10-Q for the
            quarter ended March 31, 1998).

  10.43     Non-qualified Stock Option Agreement, dated April 6, 1998, between
            the Company and Erik H. van der Kaay (incorporated by reference to
            the same numbered exhibit to the Registrant's Quarterly Report on
            Form 10-Q for the quarter ended June 30, 1998).

  10.44     Restricted Stock Grant Agreement, dated April 6, 1998, between the
            Company and Erik H. van der Kaay (incorporated by reference to the
            same numbered exhibit to the Registrant's Quarterly Report on Form
            10-Q for the quarter ended June 30, 1998).

  10.46     Employment Agreement, dated July 29, 1999, between the Company and
            Thomas Mark Hastings (incorporated by reference to the same numbered
            exhibit to the Registrant's Amended Annual Report on Form 10-K/A for
            the year ended December 31, 1999).

  10.47     Severance Compensation Agreement, dated October 29, 1999, by and
            between the Registrant and Erik van der Kaay (incorporated by
            reference to the same numbered exhibit to the Registrant's Amended
            Annual Report on Form 10-K/A for the year ended December 31, 1999).

  10.48     Severance Compensation Agreement, dated October 29, 1999, by and
            between the Registrant and David A. Young (incorporated by reference
            to the same numbered exhibit to the Registrant's Amended Annual
            Report on Form 10-K/A for the year ended December 31, 1999).

  10.49     Severance Compensation Agreement, dated October 29, 1999, by and
            between the Registrant and Paul E. Baia (incorporated by reference
            to the same numbered exhibit to the Registrant's Amended Annual
            Report on Form 10-K/A for the year ended December 31, 1999).

  10.50     Severance Compensation Agreement, dated October 29, 1999, by and
            between the Registrant and Michael J. Patrick (incorporated by
            reference to the same numbered exhibit to the Registrant's Amended
            Annual Report on Form 10-K/A for the year ended December 31, 1999).

  10.51     Severance Compensation Agreement, dated October 29, 1999, by and
            between the Registrant and John J. Rice (incorporated by reference
            to the same numbered exhibit to the Registrant's Amended Annual
            Report on Form 10-K/A for the year ended December 31, 1999).

  10.52     Severance Compensation Agreement, dated October 29, 1999, by and
            between the Registrant and Raymond L. Waguespack (incorporated by
            reference to the same numbered exhibit to the Registrant's Amended
            Annual Report on Form 10-K/A for the year ended December 31, 1999).