<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                        COMMISSION FILE NUMBER 000-28220

                                 MIGRATEC, INC.
                 (Name of Small Business Issuer in its Charter)

         DELAWARE                                               65-0125664
(STATE OR OTHER JURISDICTION OF                              (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)                              IDENTIFICATION NO.)

             11494 LUNA ROAD, SUITE 100, FARMERS BRANCH, TEXAS 75234
                    (Address of Principal Executive Offices)

                                 (972) 969-0300
                (Issuer's Telephone Number, Including Area Code)

       SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT: NONE

         SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:

                    COMMON STOCK, $0.001 PAR VALUE PER SHARE
                                (Title of Class)

         Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 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 [ ]

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

         Issuer's revenues for its most recent fiscal year: $201,500.

         The aggregate market value of the voting stock held by non-affiliates
of the registrant, based on the closing sale price of such stock as reported on
March 13, 2001 on the over-the-counter bulletin board operated by the National
Association of Securities Dealers, Inc. was approximately $28,448,000.

         As of March 13, 2001, approximately 91,991,000 shares of the
registrant's common stock, $0.001 par value per share, were outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

         None.


<PAGE>   2
                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

OTHER THAN HISTORICAL AND FACTUAL STATEMENTS, THE MATTERS AND ITEMS DISCUSSED IN
THIS ANNUAL REPORT ON FORM 10-KSB ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. ACTUAL RESULTS OF MIGRATEC, INC. MAY DIFFER MATERIALLY
FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. CERTAIN FACTORS
THAT COULD CONTRIBUTE TO SUCH DIFFERENCES ARE DISCUSSED WITH THE FORWARD-LOOKING
STATEMENTS THROUGHOUT THIS REPORT AND ARE SUMMARIZED IN THIS SECTION AND
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - FORWARD-LOOKING STATEMENTS."

GENERAL

         MigraTEC, Inc., a Delaware corporation ("MigraTEC" or the "Company"),
designs, develops and markets proprietary software code engines that automate
the migration and upgrade of software applications between operating systems
(e.g., Windows, Unix, Linux) and between hardware architectures (e.g., IA-32,
IA-64, SPARC-32, RISC-32). The Company's patent-pending technology enables
businesses to substantially reduce the costs of migrating legacy software
applications to more powerful operating environments, while optimizing the code
for the new environment and improving its quality. The Company's code engines
can dramatically increase the efficiency and productivity of a programmer. With
our automated processes, a programmer can effectively upgrade 20 to 25 times
more lines of code per day as compared to the typical manual migration process.
In addition to this baseline improvement in project completion timelines, the
products enhance overall quality assurance and mitigate project risk by imposing
standardization of the processes and ongoing software code documentation.

         The Company generates revenue by (i) licensing its technology and
software maintenance solutions to Independent Software Vendors ("ISVs") and
Systems Integrators who then act as distribution partners by using the Company's
solutions to aid in the delivery of their services; (ii) providing migration
services directly to customers; and (iii) consulting on specific migration
assignments.

         Although the Company's migration products are only now coming to
market, the Company has established strategic technology partnerships with Intel
and IBM, and a consulting agreement with Dell. The Company expects to develop
similar relationships with other companies such as Hewlett-Packard, Unisys and
Microsoft.

         The Company was established in 1991 and, prior to 2000, concentrated on
software consulting and Y2K remediation. The Company has restructured its
operations and research and development activities to concentrate on selling
migration software and services. These products are only now entering the
commercial marketplace. As a result, the Company expended well over 80% of its
time and efforts to research and development activities in 1999 and 2000. In
2001, the Company expects this percentage to decrease significantly due to
increased sales and marketing efforts.

         MigraTEC's offices are located at 11494 Luna Road, Suite 100, Farmers
Branch, Texas 75234-9421. The Company's wholly-owned operating subsidiary, One
Up Corporation, a Texas corporation, was merged into MigraTEC in February 2000.
MigraTEC, formerly a Florida corporation, reincorporated in the state of
Delaware in August 2000.

INDUSTRY OVERVIEW

         The Internet and e-commerce are revolutionizing the way business is
conducted. Being able to fully exploit the opportunity this revolution
represents demands the creation of new, more powerful and more capable
technological infrastructures. Original equipment manufacturers and developers
of operating systems are focusing on building these new infrastructures, with
the result being that legacy platforms are becoming rapidly outdated and far
more difficult - if not impossible - to support. Businesses that are deploying
the new technologies are faced with





                                       2
<PAGE>   3

the unpalatable choices of (i) abandoning previous investments in software and
writing all new programs (a prohibitively expensive and time-consuming process)
or (ii) modifying the software programs that run their businesses today, so that
they will run efficiently in the new environment (a less expensive but equally
time-consuming process known as "software migration"). A significant benefit of
this second option, however, is that a business can leverage past investment and
can continue to depend on software that contains the rules it has refined and
perfected over time.

         Historically, migration of software to a new technological base has
been done manually. However, the typical manual migration is highly problematic
for a number of reasons, including the following:

          o       Too slow: In a competitive environment, businesses cannot
                  afford to wait the time required to upgrade manually (for
                  example, the earlier 16-bit to 32-bit migration took the
                  industry over ten years to complete).

          o       Not enough resources: The Company estimates that on average, a
                  capable software engineer can migrate only about 1,000 lines
                  of computer code per day. Information technology ("IT")
                  industry sources report that an estimated 300,000 IT jobs were
                  unfilled during 2000, making it virtually impossible for
                  businesses to hire the substantial number of additional
                  programmers required for migration activities.

          o       Too expensive: Estimates and previous manual migration
                  experience have shown that the cost for manually migrating an
                  average line of code is approximately $0.75 to $1.25, and
                  expected to increase as a result of the ever-increasing
                  shortage of skilled labor. With potentially billions of lines
                  of code world-wide needing to be migrated, the total cost is
                  unacceptable.

          o       Quality is more important than ever: The fundamental drivers
                  of the need to migrate - realizing the full potential of the
                  internet and e-commerce - also demand that the programs that
                  are migrated to the new environment perform 24 hours a day and
                  7 days per week without failure. Experienced IT professionals
                  know that, due to the repetitive and tedious nature of
                  performing a manual migration, the quality of the end product
                  does not meet this standard.

MARKET OPPORTUNITY

         MigraTEC focuses on migration involving "C" and "C++" code. Estimates
by the Aberdeen Group, a widely respected information technology consultant,
indicate that "C" and "C++" based code comprises 20%-30% of the entire United
States business application code base. This market size equates to over 20
billion unique lines of code in the United States alone that are actively
maintained and tens of billions more that are customized versions of prepackaged
code. World-wide, Aberdeen estimates there are over 100 billion unique lines of
code with potentially tens of billions of additional lines in customized code.
Over time, with the movement by original equipment manufacturers towards more
powerful platforms and the abandonment of older platforms, a substantial portion
of this code will need to be migrated to more capable hardware platforms and
operating systems.

         Current costs to manually upgrade or migrate software applications are
expensive, with a cost estimated by the Company at about $0.75 to $1.25 per line
of code. By contrast, the Company's automated code migration engines permit it
to migrate code at a small fraction of that cost. The majority of this code (70%
or more) is thought to reside in the custom code of corporate enterprises, with
the remainder belonging primarily to the thousands of individual ISVs. Clearly
the task of migrating even a small fraction of this massive base over the next
five years is a daunting one.

         While the initial set of products that MigraTEC has developed and is
bringing to market are focused on migrating software from the 32-bit to the
64-bit environment that will be created with the introduction of the Intel IA-64
chip known as "Itanium(TM)," there is currently significant demand for 32 bit to
32 bit (or platform to platform) migration technology as well. A typical
enterprise information system consists of multiple file servers running on
disparate platforms. For example, a manufacturing company may have their
engineering applications running on Sun Solaris, their financial accounting
systems on IBM, AIX and their customer relationship management systems on
Microsoft NT. With IT budgets shrinking and resource availability declining,
companies have adopted a strategy of server consolidation to reduce their total
cost of ownership. These initiatives allow companies to dramatically reduce
their IT budgets and costs by decreasing the number of different
systems/environments they utilize and therefore have to support. An IBM study
conducted in 1999 indicated that roughly $65 billion will be spent over a
five-year period on software, hardware and services to facilitate server
consolidation. A key component of any




                                       3
<PAGE>   4

server consolidation effort is the migration of the software to the surviving
platform/environment. The introduction and rapid market penetration of the open
source Linux operating system has served to not only highlight this need but
also to grow this market.

         The potential market for MigraTEC products/services consists of C/C++
based business application code, and can be segmented primarily by operating
system.

         According to the Aberdeen Group, while Unix remains the largest
operating platform and is growing at 11% per year, the Windows operating
platforms (NT and 2000) are growing at 25% per year and Linux is growing at 25%
or greater per year. The Company's MigrationSUITE(TM) enables the efficient
upgrading of business applications from 32-bit to 64-bit systems both within and
across Unix and Windows NT platforms. In addition, the MigrationSUITE(TM) also
enables 32-bit to 32-bit migration within and across these platforms.

         Assuming that server operating system revenue market share is a
reasonable proxy for code written for each environment, Unix based code offers
the single largest pool of code, while the Windows and Linux bases are growing
most rapidly.

<TABLE>
<CAPTION>
                                MARKET SHARE 1995-2000
           OPERATING SYSTEM          (BY REVENUE)              PER ANNUM GROWTH
--------------------------------------------------------------------------------
<S>                                       <C>             <C>
Unix                                      75%             11%   per year
Microsoft Windows (NT; 2000)              24%             25%   per year
Linux                                      1%             25% + per year
--------------------------------------------------------------------------------
</TABLE>

THE MIGRATEC SOLUTION

         The Company believes that the overwhelming need for businesses to
migrate software, when combined with the inherent problems and issues of manual
migrations, presents a very large market opportunity. By automating the majority
of the migration process, substantial benefits result:

          o       Faster: Using MigrationSUITE(TM) a programmer can migrate more
                  than 10,000 lines of code per day - ten times the manual rate.
                  The sheer "volume of code" issue, therefore, can be easily
                  addressed by deploying additional software, not hiring an army
                  of programmers.

          o       Frees up critical resources: Because of the intelligence built
                  into the product, a less qualified (therefore less expensive)
                  programmer can perform the migration, allowing a company to
                  keep its highly skilled, high-cost computer engineers focused
                  on developing new programs and generating new revenue.

          o       Less expensive: Due to the dramatically decreased labor
                  content, shortened cycle time and improved quality, the cost
                  of migrating a line of code using the MigrationSUITE(TM) is a
                  fraction of that of a manual process.

          o       Near perfect quality: Because of the ability to replicate
                  actions perfectly time and again, the quality of an automated
                  migration using MigrationSUITE(TM) is virtually flawless.

         In addition to providing the benefits shown above, MigrationSUITE(TM)
reduces the risk typically associated with a migration project. It helps ensure
a project's successful completion - on time and within budget estimates. By
providing ongoing documentation of systems changes as they evolve,
MigrationSUITE(TM) protects a company's investment in its enterprise information
systems.



                                       4
<PAGE>   5
PRODUCT LINES

         The MigraTEC MigrationSUITE(TM) assists in the migration and porting of
software written in the C/C++ language from one technological environment to
another (for example, Win32 to Win64, Unix to Unix, Windows to Unix/Linux and
vice versa). The underlying breakthrough technology that makes this possible is
MigraTEC's proprietary source code analysis and migration engine called the
Migration Workbench(TM). The Company's products are built on the Migration
Workbench(TM) technology and facilitate solutions to migration problems related
to specific platform problem domains. The "Direct(TM)" series of products
assists customers in migrating applications from one platform/operating
environment to another. The Company's "64Express(TM)" product series helps
customers deliver their applications on the new 64-bit operating systems,
including Windows 2000/64, Linux IA64 and AIX 5L among others.

The Company's existing product line consists of the following:

MigrationSUITE(TM) to Windows includes:

          o       Visual Direct(TM) assists in the migration of Unix
                  applications to Microsoft Windows Visual Studio.

          o       64Express(TM) to Windows enables rapid migration of existing
                  32-bit Windows applications to 64-bit Windows on Intel's IA-64
                  architecture.

MigrationSUITE(TM) to Linux includes:

          o       64Express(TM) to Linux enables rapid migration of existing
                  32-bit Linux e-commerce applications to 64-bit Linux on
                  Intel's IA-64 architecture.

MigrationSUITE(TM) to AIX includes:

          o       VA Direct(TM) addresses the first step in migrating AIX
                  applications to the new AIX 5L for IA-64, which is upgrading
                  applications to the most current version of IBM's Visual Age
                  compiler.

          o       64Express(TM) to AIX 5L enables rapid migration of existing
                  32-bit AIX applications to 64-bit AIX on Intel's IA-64
                  architecture.

Current product development efforts will leverage the underlying Workbench
technology by building specific tools to assist businesses in cross platform
migrations among platforms and software code analysis.

         At the core of the MigrationSUITE(TM) is a patent-pending technological
engine, which the Company believes to have broader applicability in solving
additional business problems in both the applications as well as the operations
portion of the information technology world.

         This core source code analysis engine supports a large variety of
existing and potential products focused on migration (to a new processor -
64Express(TM), a new Compiler version - VA Direct(TM) or operating system (such
as "To Linux")). It can also provide analytical data to permit automated
documentation of application architecture in support of Client/Server Tier
isolation, reoffering of embedded User Interface code with a Java Client, or a
suite of tools to support maintenance of an existing set of source code.



                                       5
<PAGE>   6
COMPETITIVE ADVANTAGES

         Unique and Proprietary Software Addressing a Market Need

         Over the past two years, the Company has invested the majority of its
efforts in developing its code engines and building their unique propagation
abilities across the industry's major hardware and software platforms. This
investment has created a technological advantage in the Company's proprietary
source code analysis engine. Unlike the traditional and manual approaches to
analyzing source code by (i) text scanning, (ii) using a formal specification
language or (iii) mathematical rendering in algebraic notation, MigraTEC uses
syntactic and semantic analysis based on a customized parse of the source code.
This approach automatically permits:

         o        extraction of contextual attributes to support identification
                  of issues specific to a migration such as a 32-bit to 64-bit
                  upgrade;

         o        identification of data relationships and sequences;

         o        data flow tracing to identify the impact of a change; and

         o        grouping or extraction of related data and functionality.

         Upgrades Legacy Software at Low Cost

         The Company believes that its migration solutions produce the following
key benefits for businesses:

         o        Significantly reduces the cost of migrating software while
                  dramatically enhancing the quality of the end product.

                  o        Reduces average time for migration by over 60%;

                  o        Reduces labor input into migration effort on average
                           by over 80%;

                  o        Reduces test cycle dramatically by producing
                           virtually  error-free source code due to automated
                           generation capability; and

                  o        Greatly improves accuracy of project planning efforts
                           by providing accurate data concerning the effort
                           which is otherwise unavailable.

         o        Maximizes current technology investment. A business can retain
                  the functionality of current software applications as they are
                  upgraded or migrated to a new operating system, thereby
                  maximizing the investment in their current technology.

                  o        Businesses do not have to rewrite custom code;
                           instead, they can migrate it in a cost effective
                           manner.

         o        Minimizes or eliminates retraining expense. Much of the
                  productivity that comes from new technology can be exploited
                  without the corresponding need to retrain every user of that
                  technology. Migration of the user interface allows the
                  application to keep the current "look and feel" on the new
                  platform, thereby eliminating otherwise significant retraining
                  expense.

         o        Focuses information systems staff on application enhancements.
                  Skilled information systems staff is a precious commodity and
                  should be assigned to projects with the highest return on
                  investment to the business. By using the Company's automated
                  technology, such staff will not be burdened with the
                  time-consuming process of manual migration.

                  o        In today's labor-constrained environment, most
                           information systems departments and software
                           businesses are under tremendous pressure to develop
                           new products that will generate incremental revenue.
                           Migrating applications manually only helps protect




                                       6
<PAGE>   7

                           existing revenue streams. Automated migration frees
                           those precious technical resources to focus on new
                           revenue streams while safeguarding existing revenue
                           streams.

         o        Significantly reduces the time required for development of new
                  software versions.

                  o        In the technology sector, time to market often
                           determines success or failure. Because automated
                           migration is more than 60% faster than writing an
                           application from scratch or manually moving it,
                           businesses who avail themselves of MigraTEC's
                           automated migration products and expertise may have
                           an immediate and significant competitive advantage
                           over their competition.

         o        Extends life of software applications. Due to the frequent and
                  dramatic changes in computing technology, vendors may abandon
                  a platform. MigraTEC's technology allows software vendors to
                  offer customers the tactical alternative of simply migrating
                  their current applications to a new platform.

                  o        Due to the prohibitive cost of traditional
                           migrations, vendors have abandoned platforms instead
                           of incurring the cost of maintaining them for
                           customers. MigraTEC's technology and expertise
                           dramatically reduces the cost of the migration,
                           making the extension of life of the software or the
                           supporting of an old platform possible.

         Industry Acceptance and Partners

         In April 2000, following extensive collaboration, the Company granted
Intel a license for its internal use of the Company's migration software
products in support of the new Intel(R) Itanium(TM) 64-bit chip, which is
expected to enter the market by the end of the first half of 2001. In May 2000,
the Company entered into a consulting agreement with Dell Corporation to provide
migration technology and process consultation services to Dell Precision
Workstation ISVs and customers. These ISVs and customers can and have used the
Company's technology to upgrade an initial software application to the Intel(R)
Itanium(TM) 64-bit platform. IBM has included the Company in its AIX 5L Beta
Program, which allows the Company to further develop its products to complement
IBM's new AIX 5L Operating System for the 64-bit processor. Additionally, the
Company expects to establish similar relationships with other vendors.

         Highly Experienced Management Team

         MigraTEC's executive management team consists of a mix of software
industry veterans and business professionals and is uniquely qualified to lead
and manage a rapidly growing technology business in today's competitive
environment.

PRODUCT DEVELOPMENT

         The Company's current technology is primarily focused on (i) automating
the migration of software from 32-bit to 64-bit environments and (ii) automating
migrations of software from one 32-bit environment to another to capitalize on
the market presented by server consolidation activities. The Company also has
aggressive plans to leverage the proprietary core software analysis technology
it has developed to solve a variety of additional IT related business problems.
Specifically, these plans focus on delivering operations/maintenance solutions
for use by systems integrator consultants and virtually every IT department in
businesses throughout the U.S. These solutions are designed to substantially
increase the efficiency of both consultants and IT departments by providing
real-time visibility into the software environment in which one is operating,
and to allow users to not only document changes they make to that environment,
but also to see the impact of those changes prior to making them.

         The Company is also currently evaluating the market potential for
additional future products, such as computer language conversion software and
products to address the burgeoning wireless marketplace.

         The Company previously announced formalized efforts to better protect
its intellectual property. The first phase of this initiative resulted in a
patent application for "System and Method for Automated Identification of
Computer Program Code Fragments with Variable Confidence Factors." Claims have
been allowed and an issue fee has been submitted to the Patent and Trademark
office; therefore, the Company expects this patent to be issued in mid-2001.
MigraTEC intends to continue such efforts by seeking additional patents as
warranted.

TECHNOLOGY PARTNERS

         Today, Intel and IBM are the two primary technology partners for the
Company. MigraTEC is developing and formalizing relationships with additional
technology partners, including Microsoft, Sun Microsystems and Hewlett-Packard.



                                       7
<PAGE>   8
DISTRIBUTION STRATEGY

         MigraTEC currently has a direct sales force that generates revenue by
licensing its products to both ISVs and other businesses. The Company intends to
leverage the capabilities and relationships of the major systems integrators to
introduce its technology to the market in a timely and efficient manner. The
Company generates revenue by licensing its technology to systems integrators who
act as distribution partners by using the Company's solutions to perform
outsourced projects for their own consultants. The Company anticipates these
licenses to be structured primarily on a per line of code pricing basis.
Additionally, MigraTEC plans to generate another stream of revenue through the
direct delivery of migration and consulting services.

         During the development and initial market introduction of the Company's
MigrationSUITE(TM) products, the Company forged a series of significant and
invaluable relationships with industry partners such as Intel, Dell and IBM and
expects to build additional partnerships to meet key business needs. To date,
these partners have facilitated the Company's development by providing it with
technical resources to speed the adaptation of MigraTEC's technology to their
platforms, by providing beta customers and by assisting in marketing the
MigrationSUITE(TM) to their customers and industry partners.

         In order to leverage existing customer bases and sales and marketing
infrastructures, the Company's sales model focuses on developing relationships
with large organizations that provide application development, maintenance,
conversion and upgrade services. Currently, MigraTEC's primary strategy is to
partner with technology companies introducing 64-bit operating systems and
hardware and to focus on offering migration of software to run on these systems.
The Company's management believes that its partnering strategy will provide:

         o        Partners that can direct development efforts towards emerging
                  markets and growing customer bases;

         o        Partners with extensive sales and marketing resources and a
                  vested interest in placing the end product into the market;
                  and

         o        Funding necessary to expand key development efforts.

COMPETITION

         Currently the Company is not aware of any direct competitors (e.g.,
other companies with an automated software solution to the migration problem),
although the Company expects that some will emerge as the market develops. The
competitive set therefore really consists only of the manual migrations
performed by either a company's internal staff using "home grown" tools, or a
professional service provider/systems integrator (such as IBM Global Services or
EDS). The Company believes that the value proposition of its code engines is so
compelling that these organizations and their efforts should be viewed not as
competitors, but rather as potential customers whose jobs will be significantly
simplified and whose performance will be dramatically improved through the use
of MigraTEC's solutions.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
   MIGRATION METHOD      MANUAL MIGRATION         USE OF "HOME GROWN TOOLS"(1)              MIGRATEC MIGRATION WORKBENCH(TM)
-----------------------------------------------------------------------------------------------------------------------------------
<S>                  <C>                        <C>                               <C>
PROS:                o    Can ultimately        o    Fairly inexpensive           o    Extremely short cycle
                          be done in most       o    Quicker than manual          o    Very thorough
                          every situation                                         o    Consistent methodology results in very
                                                                                       high quality work
                                                                                  o    Very low labor content (roughly 10% of
                                                                                       manual needs)
                                                                                  o    Relatively inexpensive
-----------------------------------------------------------------------------------------------------------------------------------
CONS:                o    Very time             o    Only works well with         o    Cost and time to train may exceed
                          consuming                  relatively "clean" code           benefits in certain cases involving small
                     o    Extremely labor       o    Very labor intensive              amounts of clean code
                          intensive and              and costly
                          costly, especially    o    Slow - fairly long
                          if systems                 cycle time
                          integrators are used  o    New tools must be
                     o    Long cycle time            developed for most
                     o    Lots of QA/Test            situations
                          required              o    Lots of QA/Test
                                                     required
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

(1) Software utilities that are built by systems integrators or independent
software vendors on behalf of an in-house IT department. These utilities are
usually focused on performing only a very specific portion of a code migration.


                                       8
<PAGE>   9
EMPLOYEES

         As of March 13, 2001, MigraTEC employed approximately 43 full-time
personnel, 25 of which are engineers concentrating on developing the Company's
software products and platforms, and engaged approximately 3 contract
programming consultants for particular projects. None of these employees are
covered by collective bargaining agreements and management believes its employee
relations are good.

ITEM 2. DESCRIPTION OF PROPERTIES

         MigraTEC does not own any real property. MigraTEC's headquarters are
located in Farmers Branch, a suburb of Dallas, Texas. The lease on MigraTEC's
office space extends through February 2004 with an option to renew for an
additional 60 months at the then prevailing rate and consists of approximately
12,313 square feet. Current annual rents are $203,724.

ITEM 3. LEGAL PROCEEDINGS

         On July 24, 1998, Carroll Independent School District filed suit
against MigraTEC in District Court, Tarrant County, Texas, seeking payment for
unpaid business and personal property taxes (Carroll Independent School District
v. One Up Corporation, Cause No. L-14690). Judgment was entered on January 27,
2000 for the plaintiff in the amount of $90,056.45, which includes interest and
court costs.

         From time to time MigraTEC is party to what it believes is routine
litigation and proceedings that may be considered as part of the ordinary course
of its business. Currently, MigraTEC is not aware of any current or pending
litigation or proceedings that would have a material adverse effect on
MigraTEC's business, results of operations or financial condition.

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

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



                                       9
<PAGE>   10
                                    PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The common stock of the Company is quoted and traded on a limited and
sporadic basis on the OTC Bulletin Board operated by The Nasdaq Stock Market,
Inc. under the trading symbol "MIGR". The limited and sporadic trading does not
constitute, nor should it be considered, an established public trading market
for the Company's common stock. The following table sets forth the high and low
closing bid prices for the Company's common stock for the periods indicated, as
reported by the OTC Bulletin Board, Nasdaq Trading and Market Services. Such
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commissions, and may not necessarily represent actual transactions. The
approximate number of holders of record of MigraTEC common stock on March 13,
2001 was 831.

<TABLE>
<CAPTION>
                                              HIGH       LOW
                                            --------  --------
<S>                                         <C>       <C>
                     2000
                          First Quarter     $ 3.2813  $ 0.2900
                          Second Quarter      2.6875    0.7188
                          Third Quarter       1.4688    0.8750
                          Fourth Quarter      1.0156    0.2031
                     1999
                          First Quarter       0.5000    0.1150
                          Second Quarter      0.4200    0.1450
                          Third Quarter       0.3900    0.0950
                          Fourth Quarter      0.3200    0.1700
</TABLE>

DIVIDENDS

         The Company has not declared or paid any cash dividends or
distributions on its common stock during the past two fiscal years or during
2001. For the foreseeable future, the Company expects to retain any earnings to
finance the operation and expansion of its business. The declaration of
dividends in the future will be determined by the Company's Board of Directors
based upon earnings, financial condition, capital requirements and other
relevant factors.

         Pursuant to the shareholders agreement between MigraTEC and certain
stockholders, dated as of January 25, 2000, the Company may not declare or pay
dividends, or make any distribution with respect to, MigraTEC capital stock
without the approval of 70% of the members of the Company's Board of Directors.

         MigraTEC's agreement with MJ Capital Partners III, L.P., dated November
16, 1998, restricts the Company's ability to declare or pay any dividends as
long as any obligation under the agreement remains outstanding. Pursuant to the
Assignment and Assumption Agreement, dated as of January 26, 2001, MJ Capital
Partners III, L.P. assigned its rights and obligations under the agreement to
BEM Capital Partners, L.P., leaving the provisions of the agreement unchanged.


RECENT SALES OF UNREGISTERED SECURITIES

         During the year ended December 31, 2000, MigraTEC sold its unregistered
securities in the transactions described below. Unless stated otherwise below,
for each such transaction, exemption from registration of the sale of these
securities under the applicable federal and state securities laws is claimed by
MigraTEC under Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"), and under comparable limited offering exemptions under state
securities laws, as a transaction by an issuer which does not involve a public
offering.

         During the fourth quarter of 2000, MigraTEC issued to an investor an
aggregate of 570,281 shares of its common stock at $0.075 per share, pursuant to
a stock option agreement which grants an option to purchase up to an aggregate
of 5,903,614 shares of the Company's common stock. As of December 31, 2000, an
aggregate of 4,000,000 option shares remained exercisable at the greater of (i)
$0.20 or (ii) 50% of the previous five-day average closing bid price per share
of the Company's common stock for the five trading days immediately prior to
exercise. Such option expires equally on May 13, 2001 and November 13, 2001. In
January 2001, MigraTEC agreed to modify the exercise price for the 2,000,000
options expiring May 13, 2001 to $0.18 per share in exchange for immediate
exercise. MigraTEC agreed to payment terms of $120,000 within forty-five days
from the date of exercise on February 16, 2001 and payments of $80,000 on March
15, 2001, April 15, 2001 and May 15, 2001. In February and March 2001, the
investor exercised an aggregate of 1,111,110 of such options.



                                       10
<PAGE>   11
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS

         The purpose of the following discussion and analysis is to explain the
major factors affecting MigraTEC's results of operations and variance of results
between periods. The following discussion of MigraTEC's financial condition and
results of operations should be read along with the financial statements and
notes to the financial statements included in Item 7.

         Management believes that the net loss for the year ended December 31,
2000 was primarily due to the Company's focus on development activities which
did not produce significant revenue but which, nevertheless, allowed MigraTEC to
significantly develop its upgraded 32 to 64-bit migration technology, as well as
enhance other automated migration tools. Management believes that its
development activities in 2000 positioned MigraTEC for the introduction of its
technology into the market during 2001.

         A portion of MigraTEC's product line and services are designed for use
with the Intel(R) Itanium(TM) 64-bit processor. On April 17, 2000, subsequent to
over six months of testing of MigraTEC's 32 to 64-bit upgrade technology by
Intel, MigraTEC entered into a software license agreement with Intel. Under the
terms of the agreement, MigraTEC granted a royalty-free license to use its
migration software products to Intel for internal use. The license is perpetual,
but may be terminated by MigraTEC after 12 months upon 90 days' notice. The
agreement allows Intel to use MigraTEC's technology at Intel's Application
Support Centers to educate independent software vendors on the use and
application of the technology. The agreement also requires Intel and MigraTEC to
use their best efforts to create and execute a joint marketing plan related to
the introduction and dissemination of MigraTEC's technology. The implementation
of the joint marketing plan is intended to include website links, training,
press releases, industry event participation and testimonials.

         The demand for MigraTEC's 32 to 64-bit migration products and services
largely depends on the introduction of the Intel(R) Itanium(TM) 64-bit
processor, which was originally expected in the summer of 2000. During the
quarter ended September 30, 2000, Intel released an earnings report announcing
that introduction of the Intel(R) Itanium(TM) 64-bit processor would be delayed
until the first half of 2001. MigraTEC's management believes that this delay
will result in a similar delay in the demand for MigraTEC's initial products and
services, but will not substantially impact the longer-term potential market for
the Company's products and services. However, if the Intel(R) Itanium(TM) 64-bit
processor is not successfully introduced in the first half of 2001, MigraTEC's
results of operations and financial condition will be materially adversely
affected.

         In May 2000, MigraTEC entered into a consulting agreement with Dell to
provide migration technology expertise, migration process expertise, process
consultation services and Migration Workbench(TM) technology to a minimum of ten
Dell precision Workstation ISVs and customers. This agreement provides these
ISVs and customers the opportunity to upgrade an initial software application to
the 64-bit Intel(R) Itanium(TM) platform using MigraTEC's technology. The
initial applications represent only a small fraction of the total code needing
to be migrated. MigraTEC believes that the Company will have the opportunity to
contract with these ISVs and customers to upgrade a significant number of
additional applications as a result of this agreement.

         During the second quarter of 2000, MigraTEC also began working with
IBM's Monterey development team to adapt MigraTEC's software migration
technology to provide an automated path for migrating 32-bit applications to the
64-bit Monterey environment. Management believes that this is the first step in
introducing MigraTEC's software migration technology to IBM's ISVs and the UNIX
marketplace. IBM renamed its Monterey Operating System AIX 5L in the summer of
2000.

YEAR ENDED DECEMBER 31, 2000, COMPARED TO YEAR ENDED DECEMBER 31, 1999

REVENUES

         During 2000, MigraTEC's revenues decreased by approximately 78% to
$201,500, compared to $905,179 for 1999. Management believes that this decrease
is attributable to MigraTEC shifting its strategic focus from selling Y2K
products in 1999 to development of its new technology.



                                       11
<PAGE>   12
OPERATING EXPENSES

         MigraTEC's total operating expenses increased by approximately 58% to
$6,595,313 during 2000, compared to $4,178,175 for 1999.

         The majority of MigraTEC's costs and expenses are related to
compensation costs. MigraTEC's operating expenses were higher in 2000 as
compared to 1999 because MigraTEC employed an average of 38 individuals during
2000, as compared to an average of 26 individuals in 1999.

         Costs of revenues decreased approximately 65% to $50,173 during 2000,
as compared to $141,650 for 1999. Costs of revenues in 2000 and 1999 consist of
personnel costs and benefits directly attributable to the associated revenues.
This decrease is a result of MigraTEC's change in focus from selling and
servicing its Y2K products to selling and marketing its software migration
technology.

         Selling and marketing expenses increased approximately 260% to
$1,021,142 during 2000, as compared to $283,491 for 1999. This increase was the
result of MigraTEC adding an average of 3 individuals to its selling and
marketing staff in 2000. This represents an increase of 78% over 1999 staffing
levels. Increased staffing was necessary to market its software migration
technology. In 2000, MigraTEC incurred expenses of approximately $371,000 for
marketing and market research to determine the scope and magnitude of the market
for MigraTEC's software migration technology. This represents an increase of
approximately $344,000 over 1999.

         Research and development expenses increased approximately 64% to
$2,434,125 during 2000, as compared to $1,485,281 for 1999. This increase was
the result of MigraTEC adding an average of 9 individuals to its research and
development staff in 2000. This represents an increase of 66% over 1999 staffing
levels. Additional staffing was necessary to continue development of its
software migration technology.

         General and administrative expenses increased 36% to $3,089,873 during
2000, as compared to $2,267,753 for 1999. The increase in general and
administrative expenses in 2000, as compared to 1999, was due to increases in
(i) insurance, which increased $106,294; (ii) director fees, which increased
$82,500; (iii) legal and accounting fees, which increased $362,129 and (iv)
stockholder meeting expenses, which increased $84,290.

         In 2000 MigraTEC issued options to purchase an aggregate of 12,185,382
shares of common stock to directors, officers and employees, some of which have
exercise prices less than the market value at the date of grant. The aggregate
excess of the market value as compared to the exercise price at the date of
grant was deferred and will be amortized as compensation expense over the
respective vesting periods. The amount amortized as compensation expense in 2000
was $1,147,604. This total was expensed $1,014,271, $100,000 and $33,333 to
general and administrative, selling and marketing and research and development
costs, respectively. In 1999, MigraTEC did not issue any stock options to
directors, officers or employees which were exercisable at prices below market
value at the date of grant, and MigraTEC did not have any deferred compensation
expense from previous grants. In August 1999, MigraTEC entered into a stock
option agreement in settlement and replacement of a prior stock option agreement
entered into by MigraTEC and EAI Partners, Inc. and recorded an expense of
$706,500 which was included in general and administrative expenses. MigraTEC did
not incur any similar expense in 2000.

INTEREST AND FINANCING EXPENSE

         MigraTEC's interest and financing expense increased to $3,863,615
during the year ended December 31, 2000, as compared to $415,292 for 1999.
Interest expense increased to $3,828,685 during 2000, as compared to $228,299
for 1999. In 2000, the Company recorded $3,750,000 of interest expense in
accordance with EITF 98-5, "Accounting for Convertible Securities with
Beneficial Conversion Features or Contingently Adjustable Conversion Ratios."
The expense recorded relates to the convertible secured promissory notes payable
and related warrants issued with a conversion price below the market price of
the Company's common stock at the date of issuance. Financing fees decreased 81%
to $34,930 during 2000, as compared to $186,993 for 1999. Financing fees in 1999
represent the amortized portion of fees paid in connection with issuance of debt
in prior years. This debt was converted into common stock of the Company in
1999.

OTHER NET INCOME

         Other net income in 2000 was $64,298, as compared to $279 in 1999. In
2000, MigraTEC was able to invest in short-term interest bearing investments
using funds received from the $3,750,000 convertible secured promissory notes
issued in the first and second quarters of 2000.



                                       12
<PAGE>   13

PROVISION FOR INCOME TAXES

         As a result of operating losses for 2000 and 1999, MigraTEC has not had
a federal income tax obligation. During the year ended December 31, 2000,
MigraTEC incurred a net operating loss for federal tax purposes of approximately
$9,470,000. No tax benefit has been recorded due to the uncertainty that the
Company will generate sufficient taxable income during the carry forward period
to realize the benefit of the net deferred tax asset. The net operating loss
carryover for the year ended December 31, 2000 will expire in 2015. MigraTEC
has aggregate net operating loss carryforwards for federal tax purposes totaling
approximately $19,649,000, which will expire between 2011 and 2015.

EXTRAORDINARY ITEMS

         In 1999, MigraTEC incurred a loss of $496,069 related to the
restructuring of MigraTEC's senior secured promissory notes. These notes were in
default at maturity in 1999. MigraTEC successfully restructured this debt by
converting such notes into MigraTEC common stock at $0.125 per share.
Additionally, the exercise price for warrants associated with this debt was
reduced from $0.35 per share to $0.20 per share, and the expiration date was
extended one year to July 2001.

NET LOSS

         For the year ended December 31, 2000, MigraTEC incurred a net loss of
$10,193,130 or $0.13 per share, as compared to a net loss of $4,184,078 or $0.08
per share for the year ended December 31, 1999.

LIQUIDITY AND CAPITAL RESOURCES

         Net cash used by operating activities was $5,097,689 for 2000, which
resulted from the operating loss, decreased principally by non-cash charges of
$5,095,441. This compares to net cash used by operating activities of $2,339,753
for 1999, which resulted from the operating loss, decreased principally by
non-cash charges of $1,844,325.

         At December 31, 2000, MigraTEC had a net working capital deficit of
$772,853, compared to a net working capital deficit of $1,394,471 at December
31, 1999.

         At December 31, 2000, MigraTEC had cash of $242,254 and $15,000 in
outstanding accounts receivable, compared to cash of $1,417 and $160,700 in
outstanding accounts receivable at December 31, 1999.

         At December 31, 2000, MigraTEC's outstanding debt obligations included
(i) $565,000 in a short-term promissory note, (ii) $3,750,000 in two long-term
convertible notes, (iii) $28,565 in a note payable relating to a settlement with
a former employee, and (iv) $958 in advances from an investor. At December 31,
1999, the Company's outstanding debt obligations included (i) $273,341 in
short-term loans (net of $19,159 unamortized discount), (ii) $56,165 in other
notes payable relating to settlements with a vendor and a former employee, (iii)
$532,545 in advances from outside investors, (iv) $61,503 due to a consultant
for services, and (v) $58,362 (net of $1,638 unamortized discount) in advances
from a director and officer.

         During 2000, MigraTEC received net proceeds of $5,517,070 from
financing activities. MigraTEC received (i) $2,177,108 in connection with the
issuance of common stock, and (ii) $4,315,000 in proceeds from long and
short-term loans from three investors. The cash proceeds were offset by $975,038
expended for the repayment of principal of short-term loans from various
investors, directors, an officer and obligations under capital leases. During
1999, the Company received net proceeds of $2,423,435 from financing activities.
The Company received (i) $1,738,197 in connection with the issuance of common
stock, and (ii) $923,206 in proceeds from short-term loans from various
investors, directors and an officer. The cash proceeds were offset by $237,968
expended for the repayment of principal of short-term loans from various
investors, directors, an officer and obligations under a capital lease.

         MigraTEC had substantial operating losses during 2000 and the prior
three years. MigraTEC began active operations in January 1991, and while
MigraTEC has experienced certain periods of profitability since inception, it
has sustained substantial losses in recent years. For the years ended December
31, 2000, 1999, 1998 and 1997, MigraTEC incurred net losses of $10,193,130,
$4,184,078, $3,458,075 and $2,517,606, respectively. At December 31, 2000,
MigraTEC had an accumulated deficit of $21,831,317.



                                       13
<PAGE>   14
         In January 2000, MigraTEC entered into a private placement agreement
that has provided it with $3,750,000, which is the maximum funding under this
agreement. MigraTEC plans to raise additional capital in 2001 to fund expanded
sales and marketing as well as development efforts and other normal operating
costs. MigraTEC will need substantial additional capital over the next twelve
months to develop and aggressively market its new products and services. Results
of operations in the future will be influenced by numerous factors including,
but not limited to:

         o        internal technological developments and those of MigraTEC's
                  technology partners, such as Intel, IBM and Dell;

         o        the successful introduction of the Intel(R)Itanium(TM)64-bit
                  processor in the first half of 2001;

         o        rapid and wide-spread adoption of automated migration
                  technology;

         o        further development and protection of MigraTEC's proprietary
                  software products and services;

         o        expansion of MigraTEC's marketing program and market
                  acceptance of its products and services;

         o        capacity to further identify MigraTEC as a migration solutions
                  provider;

         o        MigraTEC's ability to control increases in expenses associated
                  with sales growth and other costs;

         o        the availability of substantial additional funding; and

         o        MigraTEC's ability to attract and maintain a skilled and
                  cohesive management group.

         MigraTEC's continued existence and plans for future growth are
dependent, in part, upon its ability to obtain the capital necessary to operate,
primarily through the issuance of additional debt or equity, and on its
ability to effectively penetrate the developing market for software migration
software, services and related products. If MigraTEC is not able to obtain
additional or alternative funding, or generate sufficient revenues and cash
flows in the near term, MigraTEC will be unable to continue as a going concern.

FORWARD LOOKING STATEMENTS

         The foregoing discussion may contain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Such statements
are intended to be covered by the safe harbors created by such provisions. All
statements, other than statements of historical fact, included in or
incorporated by reference into this Form 10-KSB, are forward-looking statements.
The forward-looking statements included herein are based on current expectations
that involve numerous risks and uncertainties. Assumptions relating to the
foregoing involve judgments with respect to, among other things, future
economic, competitive and market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and many of which are
beyond the control of MigraTEC.

         If one or more of these risks or uncertainties materialize, or if
underlying assumptions prove incorrect, then actual results may vary materially
from those anticipated, estimated or projected. Although management believes
that the expectations reflected in such forward-looking statements are
reasonable, no assurance can be given that such expectations will prove to have
been correct. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by MigraTEC, management or any other
person that the objectives of MigraTEC will be achieved.

         Key factors that could cause MigraTEC's actual results to differ
materially from expectations, estimates of costs, projected results or
anticipated results include, but are not limited to, the following risks:

         o        MigraTEC may not be able to generate sufficient cash flows to
                  fund operations or to obtain additional financing on favorable
                  terms;

         o        MigraTEC may not be able to effectively penetrate its target
                  markets for migration products and sales;

         o        MigraTEC may not be able to successfully develop and/or
                  protect its technology;

         o        MigraTEC may not be able to effectively control increases in
                  expenses associated with sales growth and other costs;

         o        Management may not be able to successfully implement the
                  business plan and sales strategy;


                                       14
<PAGE>   15
         o        MigraTEC may not be able to attract and retain a skilled and
                  cohesive management group; and

         o        Unfavorable changes in economic and industry conditions and
                  regulatory requirements may develop.

ITEM 7. FINANCIAL STATEMENTS

         The financial statements required to be filed under this Item are
enclosed as pages F-1 to F-21 elsewhere in this report. See "Index to
Consolidated Financial Statements" on page F-1.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

         None.



                                       15
<PAGE>   16
                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information with respect to the directors
and executive officers of MigraTEC:

<TABLE>
<CAPTION>
              NAME                    AGE                  POSITION
              ----                    ---                  --------
<S>                                   <C>      <C>
Kevin C. Howe                         52       Chairman of the Board
W. Curtis Overstreet                  55       Director and Chief Executive Officer
T. Ulrich Brechbuhl                   37       President, Chief Financial Officer and Secretary
Rick J. Johnson                       42       Chief Operating Officer
Richard A. Gray, Jr.                  52       Director
Drew R. Johnson                       32       Director
</TABLE>

         Directors hold office until the next annual meeting of stockholders or
until their successors are duly elected and qualify.

         Kevin C. Howe has been a director and Chairman of the Board since
January 2000. Since May 1991, Mr. Howe has been President of Sage U.S., Inc., a
business software publisher. Since March 1999, Mr. Howe has also been the
general partner and manager of Mercury Ventures, Ltd., a venture capital firm in
Dallas, Texas. Mr. Howe also serves on the board of directors of The Sage Group
plc, a publicly traded accounting software publisher in the United Kingdom.

         W. Curtis Overstreet has served as Chief Executive Officer and as a
director of MigraTEC since April 1997 and served as President from April 1997
through October 2000. From October 1994 to March 1997, Mr. Overstreet was
Regional Vice President for Software AG, Americas, based in Dallas, Texas.

         T. Ulrich Brechbuhl has served as Chief Financial Officer of MigraTEC
since March 1, 2000 and President since the third quarter of 2000. From 1997
until joining MigraTEC, Mr. Brechbuhl was Chief Financial Officer and a founding
partner of Thayer Aerospace, L.L.C. ("Thayer"), a Wichita, Kansas-based
manufacturer of precision machined parts for the aerospace industry. He
continues to serve as a director for Thayer. Prior to joining Thayer, Mr.
Brechbuhl worked as a consultant and manager with Bain & Company, Inc. in
Boston, Massachusetts and Dallas, Texas, for four years, where he focused on
high technology and aerospace industries.

         Rick J. Johnson has served as the Chief Operating Officer of MigraTEC
since July 1997, and served as Secretary from July 1997 to March 1998. From 1995
to July 1997, Mr. Johnson was with Software AG, Americas, based in Dallas,
Texas, where he served as Director of Operations Support - Integrated Business
Solutions, Director of Applications Solutions and Business Manager - West U.S.
Area.

         Richard A. Gray, Jr. has served as a director of the Company since
April 1998. Since 1985, he has been President and owner of Gray & Company
Realtors, Inc., a commercial real estate brokerage and developer in U.S. and
Asian markets based in Dallas, Texas.

         Drew R. Johnson has served as a director of the Company since January
2000. He has been a principal of Cardinal Investment Company ("Cardinal"), a
venture capital firm in Dallas, Texas, since 1997. Prior to joining Cardinal,
Mr. Johnson was employed with the consulting firm of McKinsey & Company.

         No family relationships exist among the directors and executive
officers of the Company.

         No events have occurred during the past five years that are material to
an evaluation of the ability or integrity of any director or executive officer,
promoter or control person of the Company.


                                       16
<PAGE>   17
SIGNIFICANT EMPLOYEES

         Joseph B. Meredith was Vice President of Business Development
from 1997 to February 2001 and has been Vice President of Sales since February
2001. Prior to joining MigraTEC, Mr. Meredith was an account executive for
Software AG, Americas, based in Dallas, Texas from 1995 to 1997.

         Sheldon Travis, Vice President of Research, has been with the company
since 1995. He has also held senior engineering positions (for both software and
hardware) with a variety of companies including Xerox, Adobe and Sprint, and has
degrees in both Electrical Engineering and Computer Sciences.

         Simon Mak joined MigraTEC as Vice President of Marketing in July 2000.
Mr. Mak has provided consulting services to various Internet start-ups, and
previously worked in sales for Mercury Interactive Corporation, where he
assisted in establishing the company's Dallas regional office. Mr. Mak has also
worked in sales and engineering for Digital Equipment Corporation and Raytheon.

         Tamie Joeckel, Vice President of Business Development, joined MigraTEC
in February 2001. Ms. Joeckel's business operations experience spans multiple
industries and practices, including serving as Chief Financial Officer for a
medium-sized holding company and as a financial systems consultant for Arthur
Andersen & Co. She gained channel management and marketing expertise in her
position as marketing manager for IBM. Upon leaving IBM, Ms. Joeckel started her
own computer systems consulting firm, which she sold to Vectrix Corporation, an
Internet full-service provider, in the summer of 2000.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires that MigraTEC's directors, executive officers and
persons who own more than 10% of the Company's outstanding common stock file
initial reports of ownership and reports of changes in ownership of the
Company's common stock with the Securities and Exchange Commission (the "SEC").
Officers, directors and stockholders who own more than 10% of the Company's
outstanding common stock are required by the SEC to furnish MigraTEC with copies
of all Section 16(a) reports they file.

         Based on a review of reports filed by the Company's directors,
executive officers and beneficial holders of 10% or more of the Company's shares
of common stock, and upon representations from those persons, MigraTEC believes
that all SEC stock ownership reports required to be filed by those reporting
persons during 2000 were timely made, except as follows: Each of Mr. Payne, MT
Partners, L.P. and Mercury Fund No. 1, Ltd. failed to file Form 3s on a timely
basis, and Mr. Thomas H. Cabe failed to file a Form 3 on a timely basis in 1998;
Mr. Gray failed to file one Form 4 on a timely basis in 2000 and two Form 4s on
a timely basis in 1999 and Mr. Cabe failed to file one Form 4 on a timely basis
in each of 1998 and 1999; and Mr. Cabe failed to file one Form 5 on a timely
basis in each of 1999 and 2000.

ITEM 10. EXECUTIVE COMPENSATION

COMPENSATION OF DIRECTORS

         During the year ended December 31, 2000, an aggregate of $82,500 was
earned by directors for serving on the Company's Board of Directors. Directors
who are not officers or employees of MigraTEC received $10,000 annually, or
$2,500 per fiscal quarter, while serving on the Board. Mr. Kevin Howe received
$60,000 annually, or $15,000 per fiscal quarter, while serving as Chairman of
the Board. Directors were also reimbursed for out-of-pocket expenses incurred in
attending Board and Committee meetings.



                                       17
<PAGE>   18
EXECUTIVE OFFICER COMPENSATION

The following table sets forth the total compensation paid or accrued by
MigraTEC for the three years ended December 31, 2000 on behalf of each of the
executive officers of MigraTEC.

                          SUMMARY OF COMPENSATION TABLE

<TABLE>
<CAPTION>
           NAME AND                                                    OTHER ANNUAL        LONG TERM            ALL OTHER
      PRINCIPAL POSITION                                               COMPENSATION       COMPENSATION        COMPENSATION
      ------------------                                               ------------       ------------        ------------
                                  YEAR          SALARY        BONUS                        OPTIONS (#)
                                  ----          ------        -----                       ------------
<S>                               <C>          <C>            <C>      <C>                <C>                 <C>
W. Curtis Overstreet              2000         $127,500        -0-         $18,150 (1)     3,000,000  (2)              -0-
      Chief Executive Officer     1999         $140,000        -0-                 -0-                -0-              -0-
                                  1998         $132,917        -0-         $27,404 (3)     6,000,000  (4)              -0-

T. Ulrich Brechbuhl               2000         $123,333        -0-                 -0-     3,500,000  (2)              -0-
      President, Chief Financial  1999              -0-        -0-                 -0-                -0-              -0-
      Officer and Secretary       1998              -0-        -0-                 -0-                -0-              -0-

Rick J. Johnson                   2000         $128,917        -0-                 -0-       937,500  (2)              -0-
     Chief Operating Officer      1999         $117,000        -0-                 -0-                -0-              -0-
                                  1998         $121,833        -0-                 -0-     1,500,000  (4)              -0-
</TABLE>

-----------

         (1)  Housing allowance paid directly to Chelsea Homes, Inc. on behalf
              of Mr. Overstreet. Mr. Deane Watson, a former director of
              MigraTEC, is President of Chelsea Homes, Inc.

         (2)  Options to purchase shares of MigraTEC common stock granted in
              2000.

         (3)  Commissions paid to Mr. Overstreet based on revenue.

         (4)  These options to purchase shares of MigraTEC common stock were
              granted in 1998 and voluntarily reduced by each holder by 50% in
              September 1999. As a result of such reduction, Mr. Overstreet and
              Mr. Rick Johnson had options to purchase 3,000,000 shares and
              750,000 shares of MigraTEC common stock, respectively, as of
              December 31, 1999.

The following table sets forth information with respect to stock options to
purchase MigraTEC common stock issued to the Company's executive officers during
the year ended December 31, 2000.

                        OPTION GRANTS IN LAST FISCAL YEAR
                               (INDIVIDUAL GRANTS)

<TABLE>
<CAPTION>
                                      NUMBER OF              PERCENT OF TOTAL
                                     SECURITIES             OPTIONS GRANTED TO      EXERCISE     MARKET
          NAME AND                UNDERLYING OPTIONS        EMPLOYEES IN FISCAL       PRICE       PRICE         EXPIRATION
      PRINCIPAL POSITION               GRANTED                  YEAR (1)             ($/SH)     ($/SH)(2)          DATE
      ------------------          ------------------        -------------------     --------    ----------  -----------------
<S>                               <C>                       <C>                     <C>         <C>         <C>
W. Curtis Overstreet                  1,500,000                  12.84%               $0.20       $0.73      January 30, 2010
      Chief Executive Officer           750,000                   6.42%               $0.75       $0.73      January 30, 2010
                                        750,000                   6.42%               $0.22       $0.22     December 28, 2010

T. Ulrich Brechbuhl                     600,000                   5.13%               $0.75       $2.58     February 21, 2010
      President, Chief Financial      2,900,000                  24.82%               $0.22       $0.22     December 28, 2010
      Officer and Secretary

Rick J. Johnson                         250,000                   2.14%               $0.75       $0.73      January 30, 2010
      Chief Operating Officer           375,000                   3.21%               $0.20       $0.76      January 31, 2010
                                        312,500                   2.67%               $0.22       $0.22     December 28, 2010
</TABLE>

----------

         (1)  Percent of Total Options is based on options to purchase a total
              of 11,685,382 shares of MigraTEC common stock granted to employees
              during the year ended December 31, 2000.

         (2)  The Company deferred the aggregate excess of the market value as
              compared to the exercise price at the date of grant. Such amount
              will be amortized as compensation expense over the respective
              vesting periods.


                                       18
<PAGE>   19
The following table sets forth information with respect to stock options
exercised and held by the Company's executive officers as of December 31, 2000.
The closing bid price for MigraTEC common stock on December 31, 2000 was
$0.2188.

           AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL
                             YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
                                                                   NUMBER OF SECURITIES        VALUE OF UNEXERCISED
                                      SHARES          VALUE       UNDERLYING UNEXERCISED      IN-THE-MONEY OPTIONS AT
            NAME AND               ACQUIRED ON      REALIZED         OPTIONS AT FY-END         FY-END EXERCISABLE/
       PRINCIPAL POSITION            EXERCISE          ($)       EXERCISABLE/UNEXERCISABLE         UNEXERCISABLE
       ------------------          -----------      --------     -------------------------    -----------------------
<S>                                <C>              <C>          <C>                          <C>
W. Curtis Overstreet
      Chief Executive Officer       525,000 (1)     $909,043       2,850,000 / 2,625,000         $51,230 / $23,500

T. Ulrich Brechbuhl
      President, Chief Financial
      Officer and Secretary             -0-            -0-          100,000 / 3,400,000              -0- / -0-

Rick J. Johnson
     Chief Operating Officer          300,000       $230,625         554,167 / 833,333            $9,635 / $5,875
</TABLE>

----------

         (1)  On January 25, 2000 and March 28, 2000, Mr. Overstreet transferred
              options to acquire 125,000 and 400,000 shares of MigraTEC common
              stock, respectively, to certain individuals in exchange for
              releases from prior obligations. The options were exercised in
              June 2000 and March 2000, respectively.

EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS

         The Company entered into an employment agreement with Mr. Curtis
Overstreet, the Company's Chief Executive Officer, dated April 10, 1997,
providing for an annual base salary (currently $140,200) and incentives for
salary increases and bonuses to be determined by and subject to the discretion
of the Company's Board.

         The Company entered into an employment agreement with Mr. Rick Johnson,
the Company's Chief Operating Officer, on July 1, 1997, providing for an annual
base salary (currently $135,000) and incentives for salary increases and bonuses
to be determined by and subject to the discretion of the Company's Board.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth information regarding the beneficial
ownership of common stock for each person who is known by the Company to be the
beneficial owner of more than five percent of MigraTEC's voting securities, for
each director and named executive officer of MigraTEC, and all directors and
executive officers of MigraTEC as a group. Unless otherwise indicated in the
footnotes, each person named below has sole voting and investment power over the
shares indicated.

         All information is as of March 13, 2001. As of such date, 91,991,313
shares of common stock were outstanding. For purposes of this table, a person is
deemed to be the "beneficial owner" of the number of shares of common stock that
such person has the right to acquire within 60 days of March 13, 2001 through
the exercise of any option, warrant or right, through the conversion of any
security, through the power to revoke a trust, discretionary account, or similar
arrangement, or through the automatic termination of a trust, discretionary
account or similar arrangement.



                                       19
<PAGE>   20


<TABLE>
<CAPTION>
                                              AMOUNT AND NATURE OF
     NAME AND ADDRESS (1)                     BENEFICIAL OWNERSHIP         PERCENT OF CLASS
     --------------------                     --------------------         ----------------
<S>                                           <C>                          <C>
W. Curtis Overstreet                               3,225,000 (2)                  3.39%
T. Ulrich Brechbuhl                                  202,500 (3)                      *
Rick J. Johnson                                      755,834 (4)                      *
Richard A. Gray, Jr.                               3,020,000 (5)                  3.26%
Kevin C. Howe                                     17,039,800 (6)                 15.92%
Drew R. Johnson                                           -0-                       -0-
EAI Partners, Inc.                                 5,903,614 (7)                  6.22%
Thomas H. Cabe                                    10,680,800 (8)                 11.46%
Mercury Fund No. 1, Ltd.                          17,039,800 (9)                 15.92%
MT Partners, L.P.                                 17,210,700 (10)                16.36%
Marshall Payne                                    17,210,700 (11)                16.36%
Directors and Executive Officers as a group       24,243,134                     21.67%
</TABLE>

----------

          *   Less than 1%

         (1)  The business address for Messrs. Overstreet, Brechbuhl and Rick
              Johnson is 11494 Luna Road, Suite 100, Farmers Branch, Texas
              75234. The address for Mr. Gray is 2611 Cedar Springs, Dallas,
              Texas 75201. The business address for Mr. Howe and Mercury Fund
              No. 1, Ltd. is 2707 Hibernia St., Dallas, Texas 75204. The
              business address for Mr. Payne, Mr. Drew Johnson and MT Partners,
              L.P. is 500 Crescent Court, Suite 250, Dallas, Texas 75201. The
              business address for EAI Partners, Inc. is 1900 Corporate Blvd.,
              Suite 305W Boca Raton, Florida 33431. The business address for
              Thomas H. Cabe is 5114 Yolanda Lane, Dallas, Texas 75229.

         (2)  All of these shares are issuable to Mr. Overstreet upon the
              exercise of outstanding stock options.

         (3)  Includes 200,000 shares issuable to Mr. Brechbuhl upon the
              exercise of outstanding stock options.

         (4)  Includes 658,334 shares issuable to Mr. Rick Johnson upon the
              exercise of outstanding stock options.

         (5)  Includes 750,000 shares issuable to Mr. Gray upon the exercise of
              outstanding stock options, 100,000 shares held by Mr. Gray's
              spouse and 100,000 shares held by the Gray Family Trust, of which
              Mr. Gray is the beneficiary.

         (6)  Includes 12,200,000 shares issuable to Mercury Fund No. 1, Ltd.
              upon the conversion of a note and 2,839,800 shares issuable to
              Mercury Fund No. 1, Ltd. upon the exercise of outstanding warrants
              to purchase common stock. Mr. Howe exercises voting control over
              these shares on behalf of the general partner of Mercury Fund No.
              1, Ltd. See "Certain Relationships and Related Transactions."

         (7)  Includes 2,888,890 shares issuable to EAI Partners, Inc. upon the
              exercise of a stock option.

         (8)  Includes 1,196,800 shares issuable to Mr. Cabe upon the exercise
              of outstanding warrants to purchase common stock and 3,500,000
              shares held by Phoenix Energy Companies, Inc. Mr. Cabe is the
              President of Phoenix Energy Companies, Inc. and exercises voting
              control over these shares.

         (9)  Includes 12,200,000 shares issuable to Mercury Fund No. 1, Ltd.
              upon the conversion of a note and 2,839,800 shares issuable to
              Mercury Fund No. 1, Ltd. upon the exercise of outstanding warrants
              to purchase common stock.

         (10) Includes 11,800,000 shares issuable to MT Partners, L.P. upon the
              conversion of a note and 1,410,200 shares issuable to MT Partners,
              L.P. upon the exercise of outstanding warrants to purchase common
              stock.

         (11) Includes 11,800,000 shares issuable to MT Partners, L.P. upon the
              conversion of a note and 1,410,200 shares issuable to MT Partners,
              L.P. upon the exercise of outstanding warrants to purchase common
              stock. Mr. Payne exercises voting control over these shares on
              behalf of the general partner of MT Partners, L.P. See "Certain
              Relationships and Related Transactions."

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         In January and February 1998, Mr. Deane Watson, a former director of
MigraTEC who resigned in November 2000, and Mr. Rick Gray loaned MigraTEC
$104,000 and $100,000 respectively, pursuant to convertible notes with interest
rates of 10% and 12%, respectively. Mr. Watson and Mr. Gray converted these
notes into shares of MigraTEC common stock at $0.20 per share in March 1998.
Accrued interest on the notes was paid in April 1998. In connection with this
transaction, Mr. Watson and Mr. Gray also received warrants to purchase 100,000
and 50,000 shares of MigraTEC common stock, respectively, at prices of $0.01 to
$0.20 per share. Mr. Gray exercised these warrants in March 1999 and Mr. Watson
exercised these warrants in January 2000.



                                       20
<PAGE>   21

         In 1999, Mr. Watson received cash compensation of $1,350 for legal
services provided to MigraTEC.

         During 1999, Mr. Watson loaned the Company $25,000 at an interest rate
of 10% and received a warrant to purchase 50,000 shares of MigraTEC common stock
at $0.01 per share. Mr. Watson exercised these warrants in February 1999 and the
loan was repaid in February 2000.

         In August 1999, Mr. Gray loaned the Company $100,000 at an interest
rate of 10%. Mr. Gray received a warrant to purchase 20,000 shares of MigraTEC
common stock at $0.01 per share for consulting services in connection with this
loan, which he exercised in 1999. MigraTEC repaid the loan in September 1999.

         During 1999 and 2000, Mr. Mark Myers, a former executive officer of
MigraTEC who resigned in January 2000, received warrants to purchase an
aggregate of 7,000 shares of MigraTEC common stock at $.01 per share as
compensation for consulting services. He exercised these warrants in January
2000. Mr. Myers also loaned $30,000 to the Company in January 1999 at an
interest rate of 16%. The loan was repaid in February 1999. In connection with
the loan, Mr. Myers received a warrant to purchase 3,000 shares of MigraTEC
common stock at $0.01 per share, which he exercised in 1999.

         In August 1999, MigraTEC entered into an agreement with EAI Partners,
Inc. ("EAI") in settlement and replacement of a prior stock option agreement
entered into by EAI and the former Chief Executive Officer of MigraTEC in 1996.
Pursuant to the August 1999 agreement, EAI was issued an option to purchase an
aggregate of 5,903,614 shares of MigraTEC common stock, exercisable as follows:
EAI may acquire 1,903,614 shares at $0.075 per share and the remaining 4,000,000
shares at the greater of $0.20 or 50% of the average closing bid prices per
share of MigraTEC common stock for the five trading days immediately prior to
exercise. Such option expires equally on May 13, 2001 and November 13, 2001. As
of December 31, 1999, EAI had acquired 1,333,333 shares through the exercise of
this option. During the fourth quarter of 2000, MigraTEC issued to EAI an
aggregate of 570,281 shares of its common stock at $0.075 per share, pursuant to
the stock option agreement. As of December 31, 2000, an aggregate of 4,000,000
option shares remained exercisable under the agreement. In January 2001,
MigraTEC agreed to modify the exercise price for the 2,000,000 options expiring
May 13, 2001 to $0.18 per share in exchange for immediate exercise. The Company
agreed to payment terms of $120,000 within forty-five days from the date of
exercise on February 16, 2001 and payments of $80,000 on March 15, 2001, April
15, 2001 and May 15, 2001. In February and March 2001, EAI exercised an
aggregate of 1,111,110 of such options.

         Mr. Kevin Howe, Chairman, and Mr. Drew Johnson joined the Board in
January 2000 as representatives of Mercury Fund No. 1, Ltd. ("Mercury") and MT
Partners, L.P. ("MT Partners"), respectively, in connection with the initial
tranche of funding in a three-stage $3,750,000 investment in MigraTEC, completed
May 1, 2000. As a result of this investment, Mercury and MT Partners each
received convertible promissory notes and warrants convertible into an aggregate
of up to 17,039,800 and 18,960,200 shares of MigraTEC common stock,
respectively. The notes are convertible at any time, at the election of Mercury
and MT Partners, on the basis of one share of common stock for each $0.125 in
principal amount of the notes outstanding at the time of conversion. The notes
do not accrue interest. The warrants are exercisable at $0.20 per share and
expire in increments of 2,000,000 shares on January 25, 2005, March 31, 2005 and
May 1, 2005. As of March 13, 2001, Mercury had converted $250,000 of its
convertible promissory note into 2,000,000 shares of MigraTEC common stock and
MT Partners had converted $500,000 of its convertible promissory note into
4,000,000 shares of MigraTEC common stock, exercised warrants to purchase
1,750,000 shares of MigraTEC common stock and sold 1,749,500 shares of common
stock.

         In December 2000, Mercury loaned the Company $565,000 with an interest
rate that varies between 0% and 10%. This loan is due the earlier of December 1,
2001 or upon the occurrence of a qualified financing transaction. Upon the
occurrence of a qualified financing, the loan is to be repaid out of the
proceeds of the qualified financing; however, at the request of the Company,
Mercury will use the loan repayment proceeds to exercise warrants previously
issued to Mercury pursuant to the convertible promissory note dated January 25,
2000.



                                       21
<PAGE>   22
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

         The exhibits required to be furnished pursuant to Item 13(a) are listed
in the Exhibit Index filed herewith, which Exhibit Index is hereby incorporated
herein by reference.

(b)      Reports on Form 8-K

         No reports on Form 8-K were filed by the registrant during the
quarterly period ended December 31, 2000.




                                       22
<PAGE>   23
                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized on this 16th day of March, 2001.

                                                    MIGRATEC, INC.

                                                    By: /s/ W. CURTIS OVERSTREET
                                                       -------------------------
                                                        W. Curtis Overstreet,
                                                        Chief Executive Officer

         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant, and in the capacities and
on the dates indicated.

<TABLE>
<S>                                  <C>                           <C>
 By:  /s/ W. CURTIS OVERSTREET       Chief Executive Officer       Dated: March 16, 2001
    -------------------------------  and Director
          W. Curtis Overstreet

 By:                                 Chairman of the Board         Dated: March   , 2001
    -------------------------------
          Kevin C. Howe

 By:  /s/ T. ULRICH BRECHBUHL        President, Chief Financial    Dated: March 16, 2001
    -------------------------------  Officer, and Secretary
          T. Ulrich Brechbuhl

 By:  /s/ RICHARD A. GRAY, JR.       Director                      Dated: March 16, 2001
    -------------------------------
          Richard A. Gray, Jr.

 By:  /s/ DREW R. JOHNSON            Director                      Dated: March 16, 2001
    -------------------------------
          Drew R. Johnson
</TABLE>





                                       23
<PAGE>   24
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                        PAGE
                                                                        ----
<S>                                                                     <C>
       REPORT OF INDEPENDENT AUDITORS                                    F-2

       FINANCIAL STATEMENTS

                Consolidated Balance Sheets                              F-3

                Consolidated Statements of Operations                    F-4

                Consolidated Statements of Stockholders' Deficit         F-5

                Consolidated Statements of Cash Flows                    F-6

                Notes to Consolidated Financial Statements               F-7
</TABLE>





                                      F-1
<PAGE>   25

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors MigraTEC, Inc.

We have audited the accompanying consolidated balance sheets of MigraTEC, Inc.
and subsidiary (the "Company") as of December 31, 2000 and 1999, and the related
consolidated statements of operations, stockholders' deficit and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of MigraTEC, Inc. and
subsidiary at December 31, 2000 and 1999, and the consolidated results of their
operations and their cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company's recurring losses, negative cash flow from operations,
and net capital deficiency, raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans as to these matters are also
described in Note 2. The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classifications of liabilities that might result from
the outcome of this uncertainty.

                                                      /s/ ERNST & YOUNG LLP
                                                      --------------------------
                                                      ERNST & YOUNG LLP

Dallas, Texas
March 2, 2001



                                      F-2
<PAGE>   26
                          MIGRATEC, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                      DECEMBER 31,
                                                                              ------------------------------
                                                                                  2000             1999
                                                                              -------------    -------------
<S>                                                                           <C>              <C>
ASSETS
CURRENT ASSETS
     Cash                                                                     $     242,254    $       1,417
     Accounts receivable                                                             15,000          160,700
     Other current assets                                                            78,318           28,216
                                                                              -------------    -------------
            Total current assets                                                    335,572          190,333


PROPERTY AND EQUIPMENT, NET                                                         150,093           73,365

OTHER ASSETS
     Deferred financing costs                                                            --           30,000
     Capitalized software costs, net of amortization of $65,317 and $37,500
           in 2000 and 1999, respectively                                            29,776           52,500
     Other assets                                                                     7,756           21,548
                                                                              -------------    -------------
           Total other assets                                                        37,532          104,048
                                                                              -------------    -------------

           Total Assets                                                       $     523,197    $     367,746
                                                                              =============    =============

LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
     Current portion of long term debt and notes payable, net of
            unamortized discount of $ 0 and $20,797 in 2000 and 1999,
            respectively                                                      $     574,643    $     953,151
     Accounts payable                                                               297,778          443,539
     Accrued expenses                                                               179,345          164,801
     Deferred income                                                                 55,500           12,000
     Obligation under capital leases                                                  1,159           11,313
                                                                              -------------    -------------
            Total current liabilities                                             1,108,425        1,584,804

LONG-TERM LIABILITIES
     Long-term portion of notes payable                                           3,769,880           28,765
     Long-term portion of obligation under capital leases                             4,203               --
                                                                              -------------    -------------
            Total long-term liabilities                                           3,774,083           28,765
                                                                              -------------    -------------
            Total liabilities                                                     4,882,508        1,613,569

MINORITY INTEREST                                                                    (3,752)          (3,752)

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT
     Preferred stock 50,000,000 shares authorized; $0.001 par value;
           none issued or outstanding                                                    --               --
     Common stock $0.001 par value in 2000 and no par value in 1999;
           200,000,000 shares authorized; 91,353,074 and 78,660,189 shares
           issued at December 31, 2000 and December 31, 1999, respectively           91,353        9,912,535
     Additional paid-in capital                                                  20,989,692        2,261,472
     Deferred stock compensation                                                 (1,827,396)              --
     Treasury stock, at cost (9,864,449 shares in 2000 and 1999)                 (1,777,891)      (1,777,891)
     Accumulated deficit                                                        (21,831,317)     (11,638,187)
                                                                              -------------    -------------
            Total stockholders' deficit                                          (4,355,559)      (1,242,071)
                                                                              -------------    -------------

            Total Liabilities and Stockholders' Deficit                       $     523,197    $     367,746
                                                                              =============    =============
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.



                                      F-3
<PAGE>   27
                          MIGRATEC, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31,
                                                         ----------------------------
                                                             2000            1999
                                                         ------------    ------------
<S>                                                      <C>             <C>
REVENUES
 Software licenses                                       $         --    $    417,319
 Consulting services                                          189,067         484,860
 Software maintenance fees                                     12,433           3,000
                                                         ------------    ------------
     TOTAL REVENUES                                           201,500         905,179

COSTS AND EXPENSES
 Cost of revenues                                              50,173         141,650
 Selling and marketing                                      1,021,142         283,491
 Research and development                                   2,434,125       1,485,281
 General and administrative                                 3,089,873       2,267,753
                                                         ------------    ------------
     TOTAL COSTS AND EXPENSES                               6,595,313       4,178,175
                                                         ------------    ------------

LOSS FROM OPERATIONS                                       (6,393,813)     (3,272,996)
 Other income (expense)
     Interest and financing expense                        (3,863,615)       (415,292)
     Other income, net                                         64,298             279
                                                         ------------    ------------
                  TOTAL OTHER INCOME (EXPENSE)             (3,799,317)       (415,013)
                                                         ------------    ------------

LOSS BEFORE EXTRAORDINARY EXPENSE                         (10,193,130)     (3,688,009)

EXTRAORDINARY EXPENSE FOR RESTRUCTURE OF DEBT                      --        (496,069)
                                                         ------------    ------------

            NET LOSS                                     $(10,193,130)   $ (4,184,078)
                                                         ============    ============

LOSS BEFORE EXTRAORDINARY EXPENSE PER COMMON SHARE       $      (0.13)   $      (0.07)

EXTRAORDINARY EXPENSE PER COMMON SHARE                             --           (0.01)
                                                         ------------    ------------

NET LOSS PER COMMON SHARE (BASIC AND DILUTED)            $      (0.13)   $      (0.08)
                                                         ============    ============

WEIGHTED AVERAGE COMMON SHARES
            ISSUED AND OUTSTANDING (BASIC AND DILUTED)     79,249,917      53,216,891
                                                         ============    ============
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.




                                      F-4
<PAGE>   28
                          MIGRATEC, INC. AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                      Years Ended December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                                                                       DEFERRED
                                           COMMON         COMMON        ADDITIONAL       STOCK          TREASURY        TREASURY
                                           STOCK          STOCK           PAID-IN       COMPEN-          STOCK           STOCK
                                          (SHARES)        AMOUNT          CAPITAL        SATION         (SHARES)         AMOUNT
                                        ------------   ------------    ------------   ------------    ------------    ------------
<S>                                     <C>            <C>             <C>            <C>             <C>             <C>
Balance at January 1, 1999                54,421,618   $  7,041,890    $    886,458   $         --      (9,864,449)   $ (1,777,891)

Issuance of stock in connection with
private placements for cash               11,679,500      1,459,937              --             --              --              --

Issuance of stock in connection with
conversion of debt to equity               9,059,605      1,132,448         496,069             --              --              --

Issuance of stock in connection with
exercise of options and warrants           3,498,786        278,260              --             --              --              --

Issuance of stock for services rendered           --             --           8,450             --              --              --

Issuance of options-settlement with
EAI Partners, Inc.                                --             --         706,500             --              --              --

Issuance of warrants for financing fees           --             --         163,995             --              --              --

Issuance of stock to employees
under the Employee Stock Purchase
Plan - shares matched by employer                680             --              --             --              --              --

Net loss                                          --             --              --             --              --              --
                                        ------------   ------------    ------------   ------------    ------------    ------------
Balance at December 31, 1999              78,660,189      9,912,535       2,261,472             --      (9,864,449)     (1,777,891)

Issuance of stock in connection with
private placements for cash                2,451,000        306,375              --             --              --              --

Issuance of stock in connection with
the exercise of options and warrants      10,241,885      1,822,498          48,235             --              --              --

Change in par value of common stock               --    (11,950,055)     11,950,055             --              --              --

Deferred stock compensation                       --             --       2,975,000     (2,975,000)             --              --

Deferred stock compensation expense               --             --              --      1,147,604              --              --

Issuance of warrants for financing fees           --             --           4,930             --              --              --


Expense associated with beneficial
conversion feature of convertible debt            --             --       3,750,000             --              --              --


Net loss                                          --             --              --             --              --              --
                                        ------------   ------------    ------------   ------------    ------------    ------------
Balance at December 31, 2000              91,353,074   $     91,353    $ 20,989,692   $ (1,827,396)     (9,864,449)   $ (1,777,891)
                                        ============   ============    ============   ============    ============    ============
<CAPTION>
                                             ACCUMU-
                                              LATED
                                             DEFICIT          TOTAL
                                           ------------    ------------
<S>                                        <C>             <C>
Balance at January 1, 1999                 $ (7,454,109)   $ (1,303,652)

Issuance of stock in connection with
private placements for cash                          --       1,459,937

Issuance of stock in connection with
conversion of debt to equity                         --       1,628,517

Issuance of stock in connection with
exercise of options and warrants                     --         278,260

Issuance of stock for services rendered              --           8,450

Issuance of options-settlement with
EAI Partners, Inc.                                   --         706,500

Issuance of warrants for financing fees              --         163,995

Issuance of stock to employees
under the Employee Stock Purchase
Plan - shares matched by employer                    --              --

Net loss                                     (4,184,078)     (4,184,078)
                                           ------------    ------------
Balance at December 31, 1999                (11,638,187)     (1,242,071)

Issuance of stock in connection with
private placements for cash                          --         306,375

Issuance of stock in connection with
the exercise of options and warrants                 --       1,870,733

Change in par value of common stock                  --              --

Deferred stock compensation                          --              --

Deferred stock compensation expense                  --       1,147,604

Issuance of warrants for financing fees              --           4,930


Expense associated with beneficial
conversion feature of convertible debt               --       3,750,000


Net loss                                    (10,193,130)    (10,193,130)
                                           ------------    ------------
Balance at December 31, 2000               $(21,831,317)   $ (4,355,559)
                                           ============    ============
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                      F-5
<PAGE>   29
                          MIGRATEC, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                           December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                                                                        YEAR ENDED DECEMBER 31,
                                                                                      ----------------------------
                                                                                          2000            1999
                                                                                      ------------    ------------
<S>                                                                                   <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                                            $(10,193,130)   $ (4,184,078)
  Adjustments to reconcile net loss to net cash (used by) operating activities:
      Extraordinary expense for restructure of debt                                             --         496,069
      Depreciation and amortization                                                        119,185         172,491
      Deferred stock compensation                                                        1,147,604              --
      Interest expense associated with beneficial conversion feature of
        convertible debt                                                                 3,750,000              --
      (Gain) loss on sale and disposal of assets                                             1,252              --
      Provision for doubtful accounts                                                           --          43,303
      Provision for foreign subsidiary assets                                                   --          36,808
      Warrants issued  for  financing fees                                                   4,930         163,995
      Amortization of discount on notes payable                                             20,797          25,359
      Common stock options and warrants issued  for goods and services                          --           8,450
      Conversion of debt to common stock                                                        --          19,949
      Issuance of options - settlement with EAI Partners, Inc.                                  --         706,500
      Change in assets and liabilities:
               (Increase) decrease in accounts receivable                                  145,700          54,179
               (Increase) decrease in other current assets                                 (50,102)           (120)
               (Increase) decrease in deferred financing costs                              30,000           3,794
               (Increase) decrease in other assets                                          13,792              --
               Increase (decrease) in accounts payable                                    (145,761)         96,244
               Increase (decrease) in accrued expenses                                      14,544           5,304
               Increase (decrease) in deferred income                                       43,500          12,000
                                                                                      ------------    ------------

      Net cash (used by) operating activities                                           (5,097,689)     (2,339,753)

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of property and equipment                                                  (173,451)         (9,654)
     Increase in capitalized software costs                                                 (5,093)        (90,000)
                                                                                      ------------    ------------
     Net cash (used in) investing activities                                              (178,544)        (99,654)

CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from notes payable                                                         4,315,000         923,206
     Proceeds from issuance of common stock                                              2,177,108       1,738,197
     Payments under obligations of capital lease                                            (1,848)        (30,075)
     Repayment of notes payable                                                           (973,190)       (207,893)
                                                                                      ------------    ------------
     Net cash provided by financing activities                                           5,517,070       2,423,435
                                                                                      ------------    ------------
     Net increase (decrease) in cash                                                       240,837         (15,972)

Cash - beginning                                                                             1,417          17,389
                                                                                      ------------    ------------
Cash - ending                                                                         $    242,254    $      1,417
                                                                                      ============    ============

SUPPLEMENTAL DISCLOSURES:
     Interest paid                                                                    $    124,103    $    228,393
                                                                                      ============    ============

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
     Issuance of stock upon conversion of debt to equity                              $         --    $  1,132,448
                                                                                      ============    ============
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.




                                      F-6
<PAGE>   30
                          MIGRATEC, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

MigraTEC, Inc., a Delaware corporation (the "Company"), is a developer and
provider of software technology and expertise that automates the process of
upgrading or migrating software, enabling it to operate on increasingly advanced
operating and hardware systems.

During 1999, the Company redirected its strategic focus from selling software
products aimed at Y2K solutions to developing proprietary technology designed to
automate a significant amount of the manual upgrade or migration process from 32
bit to 64 bit operating systems and associated hardware. The majority of the
Company's efforts in 2000 and 1999 were related to research and development
activities.

The Company provides migration services and consulting to customers. The Company
also intends to license, on a line of code basis, its software solutions to "end
users" for their own internal migration projects, and to systems integrators and
large services providers to perform outsourced projects for their own customers.

The Company is the parent of a majority owned foreign subsidiary, One Up
Computer Services, Ltd. ("One Up, Ltd."), incorporated under the laws of the
Province of Ontario, Canada. One Up, Ltd. ceased its operations in 1997. At
December 31, 1999, a reserve was provided for all of the assets of One Up, Ltd.
in the amount of $36,808, which the Company does not expect to be realizable.
Liabilities of One Up, Ltd. of $45,736 will remain until the obligations are
resolved.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and
One Up, Ltd., collectively referred to as "the Company." Intercompany
transactions and balances have been eliminated in consolidation.

INDUSTRY SEGMENT

The Company operates in a single industry segment, the developing and providing
of software technology that automates the process of upgrading or migrating
software.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, less accumulated depreciation and
amortization. The Company provides for depreciation on the straight-line basis
over the estimated useful life of 3 to 5 years for the related assets. Leasehold
improvements are amortized over the life of the improvements or the lease term
if shorter on a straight-line basis.

Major repairs or replacements of property and equipment are capitalized.
Maintenance, repairs and minor replacements are expensed as incurred.

DEFERRED FINANCING COSTS

Deferred financing costs relate to costs incurred in the placement of the
Company's debt and are amortized using the effective interest method over the
term of the related debt.

CAPITALIZED SOFTWARE

The cost of purchased software is capitalized and amortized on a straight-line
basis over the estimated useful life, which has been estimated to be 3 years.
Amortization expense in 2000 and 1999 was $27,817 and $37,500, respectively.



                                      F-7
<PAGE>   31
                          MIGRATEC, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

FAIR VALUE OF FINANCIAL INSTRUMENTS

         The Company's financial instruments include accounts receivable and
accounts payable, for which the carrying amounts approximate fair value. Based
on prevailing interest rates, management believes that the fair value of notes
payable approximates book value.


COSTS OF SOFTWARE DEVELOPED FOR SALE

The Company expenses or capitalizes development costs of software to be sold in
accordance with SFAS 86, "Accounting for the Costs of Computer Software to be
Sold, Leased, or Otherwise Marketed." These development costs are expensed as
incurred until technological feasibility has been established, at which time
such costs are capitalized until the product is available for general release to
customers.

INCOME TAXES

The provision for income taxes is based on pretax income as reported for
financial statement purposes. Deferred income taxes are provided in accordance
with the liability method of accounting for income taxes to recognize the tax
effects of temporary differences between financial statement and income tax
accounting. Valuation allowances are established when necessary to reduce tax
assets to the amount more likely than not to be realized.

REVENUE RECOGNITION

The Company's revenues consist of software license revenues, consulting services
revenues and software maintenance and support revenues.

Revenues are recognized in accordance with American Institute of Certified
Public Accountant's Statement of Position (SOP) 97-2 "Software Revenue
Recognition".

The Company licenses software under license agreements. License fee revenues are
recognized when an agreement is in force, the product has been delivered, the
license fee is fixed or determinable, no significant production modification or
customization of the software is required and collectibility is reasonably
assured. License fee revenue for certain application development and data access
tools is recognized upon direct shipment to the end user. If collectibility is
not considered probable, revenue is recognized when the fee is collected.

Software maintenance and support revenues are recognized ratably over the term
of the related agreements, which in most cases is one year. Revenues from
consulting services under time and materials contracts and for training are
recognized as services are performed. Consulting services revenues includes
revenue related to the Company's contract with Dell. This contract is a multiple
elements agreement for which revenue is recognized pro rata over the contract
term.

CASH EQUIVALENTS

Cash equivalents include time deposits, certificates of deposits, and all highly
liquid debt instruments with original maturities of three months or less when
purchased.

LOSS PER SHARE

Basic earnings per share is computed only on the weighted average number of
common shares outstanding during the respective periods, and the dilutive effect
of stock options and warrants is excluded. Diluted earnings per share is
computed to show the dilutive effect, if any, of stock options and warrants
using the treasury stock method based on the average market price of the stock
during the respective periods.




                                      F-8
<PAGE>   32
                          MIGRATEC, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999


The effect of stock options and warrants that aggregated 31,029,143 and
23,131,381 shares as of December 31, 2000 and 1999, respectively, would be
anti-dilutive due to the Company's losses in 2000 and 1999 and, accordingly, are
not included in the computation of diluted earnings per share for the respective
periods.

If the convertible secured promissory notes discussed in Note 4 are converted,
an additional 30,000,000 shares of the Company's common stock would be
outstanding.

USE OF ESTIMATES AND ASSUMPTIONS

Management uses estimates and assumptions in preparing financial statements in
accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities and the reported amounts of
revenues and expenses. Actual results could vary from estimates used.

STOCK-BASED COMPENSATION

The Company has elected to account for stock-based compensation to employees
using the intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees", and
related Interpretations. Accordingly, compensation for stock options is measured
as the excess, if any, of the fair market value of the Company's stock at the
date of the grant over the amount an employee must pay to acquire the stock.
Such excess is deferred and amortized as compensation expense over the
respective vesting periods, which are principally 36 months. See Note 11
regarding the pro forma net loss per common share information as required by the
alternative fair value accounting provided for under Financial Accounting
Standards Board Statement No. 123, "Accounting for Stock-Based Compensation",
(SFAS No. 123).

The Company accounts for stock-based awards issued to non-employees in
accordance with the fair value method of SFAS 123 and Emerging Issues Task Force
Issue No. 96-18. Accordingly, the Company measures the cost of such awards based
on the fair value of the options using the Black-Scholes method option-pricing
model.

EXTRAORDINARY ITEM

For the year ended December 31, 1999, an extraordinary expense of $496,069 was
recorded as the result of a debt restructuring which is more fully discussed in
Note 4.

NEW ACCOUNTING STANDARDS

In June, 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 requires companies to record
derivatives on the balance sheet as assets or liabilities, measured at fair
value. Gains or losses resulting from changes in the values of those derivatives
would be accounted for depending on the use of the derivative and whether it
qualifies for hedge accounting. SFAS 133 is effective for fiscal years beginning
after June 15, 2000. The adoption of SFAS 133 is not expected to have a material
impact on the financial position or results of operations of the Company.

In December 1999, the SEC issued Staff Accounting Bulletin No. 101, (SAB101)
"Revenue Recognition in Financial Statements." SAB 101 summarizes certain SEC
views in applying generally accepted accounting principles to revenue
recognition in financial statements. It is effective not later than the fourth
quarter of fiscal years beginning after December 15, 1999. The adoption of SAB
101 has not had a material effect on the Company's results of operations or
financial condition.



                                      F-9
<PAGE>   33
                          MIGRATEC, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

RECLASSIFICATIONS

Certain reclassifications have been made to prior year amounts to conform to the
current year presentation.

NOTE 2. GOING CONCERN UNCERTAINTY

The Company incurred a loss of $10,193,130 and used cash in operations of $
5,097,689 for the year ended December 31, 2000. In addition, at December 31,
2000, the Company's current liabilities exceed current assets by $772,853 and
the Company has a net stockholders' deficit of $4,355,559. The Company's
continued existence and plans for future growth are dependent, in part, upon its
ability to obtain the capital necessary to operate, primarily through the
issuance of additional debt or equity, and on its ability to effectively
penetrate the developing market for software migration software, services and
related products. If the Company is not able to obtain additional or alternative
funding, or generate sufficient revenues and cash flows in the near term, the
Company will be unable to continue as a going concern.

During 1999, the Company actively sought a large investor to assist in funding
the Company's working capital requirements. In January 2000 the Company entered
into a private placement agreement that has provided the Company $3,750,000 (See
Note 4). The Company plans to raise additional capital in 2001 to fund expanded
sales and marketing as well as development efforts and continued operations.
There can be no assurance that the Company will successfully raise additional
funds sufficient to finance its continued operations.

The financial statements do not include any adjustments to reflect the possible
effects on recoverability and classification of assets or classification of
liabilities which may result from the inability of the Company to continue as a
going concern.

NOTE 3.  PROPERTY AND EQUIPMENT

Property and equipment consists of the following at December 31, 2000 and 1999:

<TABLE>
<CAPTION>
                                                                         2000            1999
                                                                      ------------    ------------
<S>                                                                   <C>             <C>
                     Furniture and equipment                          $    854,813    $    706,966
                     Equipment under capital lease                           7,069         101,379
                     Leasehold improvements                                 22,041          30,746
                                                                      ------------    ------------
                                                                           883,923         839,091
                     Less accumulated depreciation and amortization       (733,830)       (765,726)
                                                                      ------------    ------------
                                                                      $    150,093    $     73,365
                                                                      ============    ============
</TABLE>

Depreciation expense for the years ended December 31, 2000 and 1999, was $78,126
and $99,397, respectively. Amortization expense for equipment under capital
lease and leasehold improvements was $13,242 and $35,594 for the years ended
December 31, 2000 and 1999, respectively.




                                      F-10
<PAGE>   34
                          MIGRATEC, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

NOTE 4. NOTES PAYABLE

Notes payable at December 31, 2000 and 1999, include the following:

<TABLE>
<CAPTION>
                                                                                                    2000           1999
                                                                                                 ------------   ------------
<S>                                                                                              <C>            <C>
              Notes payable to an officer, dated November 12 and 15, 1999, bearing interest
              at 10% per annum, due upon demand, paid January 2000.  Pursuant to a short-
              term convertible loan and services agreement, the note holder was issued a
              two-year warrant to purchase 3,500 shares of common stock at $0.01 per
              share in 1999 and an additional 3,500 shares in 2000.                              $         --   $     35,000

              Note payable to a director of the Company, net of unamortized discount of
              $1,638, bearing interest at 10% per annum, due and paid in February 2000. The
              note holder was issued a two-year warrant to purchase 50,000 shares of common
              stock at $0.01 per share.                                                                    --         23,362

              Note payable to an investor, dated December 1, 2000, with interest varying
              between 0% and 10%, due the earlier of December 1, 2001 or upon the
              occurrence of a qualified financing transaction, collateralized by all
              assets owned or thereafter acquired, subject to collateral rights of notes
              dated December 4 and 28, 1998 and January 25, 2000.  Upon the occurrence
              of a qualified financing transaction, the Company has the option to
              require the note holder to exercise warrants issued with the convertible
              note date January 25, 2000.                                                             565,000             --

              Convertible note payable to an investor, dated January 25, 2000,
              without interest, due January 24, 2003, collateralized by all
              assets owned or thereafter acquired, subject to collateral rights
              of notes dated December 4 and 28, 1998.
              More fully described below.                                                           1,775,000             --

              Convertible note payable to an investor, dated January 25, 2000,
              without interest, due January 24, 2003, collateralized by all
              assets owned or thereafter acquired, subject to collateral rights
              of notes dated December 4 and 28, 1998.
              More fully described below.                                                           1,975,000             --

              Various one-year notes payable, net of unamortized discount of
              $19,159, bearing interest at 10% per annum, due in February and
              March 2000, paid in February 2000. Note holders were issued
              two-year warrants to purchase an aggregate of 585,000 shares of
              common stock at $0.01 per share.                                                             --        273,341

              Notes payable to an investor, dated December 4 and December 28,
              1998, bearing interest at 16% per annum, collateralized by all
              assets owned or thereafter acquired. Modified, extended and
              renewed October 31, 1999 bearing interest at 16% per annum,
              repayable with monthly installments of principal and interest
              totaling $21,100 with a final maturity of December 31, 2000. In
              connection with the modification, the note holder was issued
              two-year warrants to purchase 100,000 shares of common stock at
              $0.01 per share and 100,000 shares of common stock at $0.20 per share.                      958        232,545

              Note payable to an investor, dated December 23, 1999, bearing interest
              at 16% per annum, due January 23, 2000, paid in January 2000.                                --        100,000

              Note payable to an investor, dated December 13, 1999, bearing interest at 16%
              per annum, due December 31, 1999, paid in January 2000. The note holder
              was issued a two-year warrant to purchase 10,000 shares of common stock at
              $0.01 per share.                                                                             --        100,000

              Note payable to an investor, dated July 29, 1999, bearing interest at 16% per
              annum, due upon demand with an option to renew monthly with payment of
              interest and monthly commitment fee of $2,000.  Beginning in September 1999
              two-year warrants issued upon each renewal for 10,000 shares of the
              Company's common stock at $0.01 per share, paid January 2000.                                --        100,000

              Note payable to a former employee, dated March 3, 1998, bearing interest at
              14%, payable in monthly installments of $1,000, due December 10, 2003.                   28,565         36,165

              Note payable to a third party, as settlement of suit, dated October 28, 1998,
              payable in monthly installments of $2,000 with a final maturity of October 1,
              2000.                                                                                        --         20,000
</TABLE>



                                      F-11
<PAGE>   35

                          MIGRATEC, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                                                                       2000           1999
                                                                                   -----------    -----------
<S>                                                                                <C>            <C>
              Note payable to a consultant for services, dated October 1, 1999,
              bearing interest at 16% per annum, due and paid January 31, 2000
              The note holder was issued a two-year warrant to purchase 6,150
              shares of common stock at $0.01 per share                                     --         61,503
                                                                                   -----------    -----------
                           Total outstanding, net of unamortized discounts           4,344,523        981,916
                           Less current portion                                       (574,643)      (953,151)
                                                                                   -----------    -----------
                           Long-term portion                                       $ 3,769,880    $    28,765
                                                                                   ===========    ===========
</TABLE>

A summary of future maturities follows:

<TABLE>
<CAPTION>
                        YEAR ENDING DECEMBER 31,
                        ------------------------
<S>                                                   <C>
                                 2001                 $  574,643
                                 2002                      9,926
                                 2003                  3,759,954
                                 2004                         --
                                                      ----------
                                                      $4,344,523
                                                      ==========
</TABLE>

On January 25, 2000, the Company closed the first stage of a three-stage private
financing of the Company by MT Partners, L.P., an affiliate of Cardinal
Investment Company, Inc., and Mercury Fund No. 1, Ltd., an affiliate of Mercury
Ventures, Ltd. (collectively, the "Investors"). Since January 25, 2000, each of
the Investors has had a representative on the Company's Board of Directors.

The Investors entered into a Note and Warrant Purchase Agreement with the
Company (the "Agreement") pursuant to which the Investors agreed to provide up
to $3,750,000 of private financing to the Company, evidenced by convertible
secured promissory notes of the Company. The Investors have provided the maximum
amount of funding under the agreement, which aggregates $3,750,000.

The notes are convertible at any time, at the election of the Investors, into
shares of the Company's common stock, on the basis of one share of common stock
for each $.125 in principal amount of the notes outstanding at the time of
conversion. The notes do not accrue interest.

Effective June 1, 2000, the Agreement was modified to eliminate the Company's
obligation to create a new series of convertible preferred stock. The notes have
been modified to automatically convert into shares of common stock on the terms
described above, upon the earlier of either:

          -    The closing of a sale of the Company's common stock, preferred
               stock or issuance of debt with equity features in one or more
               transactions in which the Company receives aggregate proceeds of
               at least $5,000,000; or

          -    The first trading day following a period of 90 consecutive
               trading days, during which the closing sale price of the
               Company's common stock has been in excess of $1.25, such 90 day
               period to begin after June 1, 2000.

At the initial closing, the Company issued to the Investors warrants to purchase
up to an aggregate of 2,000,000 shares of common stock. On March 31, 2000, the
second $1,250,000 was funded by the Investors and the Company issued to the
Investors additional warrants to purchase up to 2,000,000 shares of common
stock. On May 1, 2000, the final $1,250,000 was funded by the Investors and the
Company issued to the Investors additional warrants to purchase up to 2,000,000
shares of common stock. All of such warrants are exercisable for a period of 5
years from the date of issuance and have an exercise price of $0.20 per share.
The notes and the associated warrants contain conversion features considered to
be "beneficial" because the conversion prices were below the market price of the
common stock at the date of issuance. As a result, the Company recorded
$3,750,000 of interest expense during the year ended December 31, 2000 in
accordance with Emerging Issues Task Force Pronouncement Number 98-5,
"Accounting for Convertible Securities with Beneficial Conversion Features or
Contingently Adjustable Conversion Ratios."



                                      F-12
<PAGE>   36
                          MIGRATEC, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

In connection with this private financing, the Investors, the Company and
certain shareholders executed a Shareholders' Agreement which requires approval
of at least 70% of the Company's Board of Directors for any of the following
corporate actions:

     1.   permitting authorization of additional series or classes of shares
          of any capital stock resulting in dilution greater than 10% when
          compared to the fully diluted common stock equivalent position of the
          Company as of January 25, 2000;

     2.   disposing of all or substantially all of the properties or assets of
          the Company;

     3.   merging where such transaction involves greater than 20% of the
          Company's market capitalization;

     4.   voluntarily dissolving, liquidating or partially liquidating the
          Company;

     5.   incurring additional debt in excess of $250,000;

     6.   incurring any single capital expenditure in excess of $150,000;

     7.   declaring or paying any dividend with respect to any capital stock
          of the Company;

     8.   purchasing any capital stock of the Company;

     9.   amending the employment contracts or making material changes to the
          compensation or severance amounts of certain officers of the Company;

     10.  amending, altering or repealing the Company's Certificate of
          Incorporation or Bylaws; or

     11.  entering into contracts with any affiliate of the Company.

Additionally, the Shareholders' Agreement restricts transfers of the Company's
common stock and provides the Investors with a right of first refusal for
private transfers of shares of the Company's common stock.

The Company was unable to repay the $1,112,500 of Senior Secured Promissory
Notes at maturity on July 1, 1999. During the period September 2, 1999 to
November 30, 1999, the Company reached agreements with the holders of the Senior
Secured Promissory Notes to convert the $1,112,500 plus $19,949 of accrued
interest into 9,059,605 shares of common stock at $0.125 per share. In
connection with the conversion of the Senior Secured Notes to equity and
extension of the term of the related warrants, the Company recognized an
extraordinary expense of $496,069.

During the year ended December 31, 1999, loan origination fees of $1,300 were
paid to directors and officers of the Company who granted loans to the Company.

NOTE 5. ACCRUED EXPENSES

Accrued expenses consist of the following as of December 31, 2000 and 1999:

<TABLE>
<CAPTION>
                                                       2000          1999
                                                   -----------   -----------
<S>                                                <C>           <C>
                 Interest                          $     5,333   $    52,751
                 Legal and professional                 25,797        41,050
                 Salaries and employee benefits        110,516        55,008
                 Contract labor                             --        14,760
                 Deferred rent                          37,274            --
                 Other                                     425         1,232
                                                   -----------   -----------
                                                   $   179,345   $   164,801
                                                   ===========   ===========
</TABLE>

NOTE 6. OTHER INCOME (EXPENSE)

Other income (expense) for the years ended December 31, 2000 and 1999 were
comprised of the following:

<TABLE>
<CAPTION>
                                                       2000            1999
                                                   ------------    ------------
<S>                                                <C>             <C>
                          Interest income          $     65,365    $        269
                          Miscellaneous income              185              10
                          Loss on sale of assets         (1,252)             --
                                                   ------------    ------------
                                                   $     64,298    $        279
                                                   ============    ============
</TABLE>


                                      F-13
<PAGE>   37
                          MIGRATEC, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

NOTE 7.  INCOME TAXES

Temporary differences that give rise to deferred income tax assets and
liabilities are as follows, as of December 31, 2000 and 1999:

<TABLE>
<CAPTION>
                                                     2000           1999
                                                 -----------    -----------
<S>                                              <C>            <C>
Deferred income tax assets
     Benefit of net operating losses             $ 6,680,691    $ 3,460,863
     Deferred stock compensation                     390,185             --
     Issuance of options - settlement with EAI       240,210        240,210
     Expense associated with restructure of debt      85,846         85,846
     Depreciation                                     85,454         67,881
     Accrued vacation, severance and bonuses          31,145         19,343
     Deferred software revenues                       18,870             --
     Deferred rent expense                            12,673             --
     Other                                            12,580         35,316
                                                 -----------    -----------
                                                   7,557,654      3,909,459
                                                 -----------    -----------

Deferred income tax liabilities
     Abandonment of property and equipment           (36,109)       (36,109)
     Warrants issued for financing fees              (35,025)       (35,025)
     Other                                               (72)           (43)
                                                 -----------    -----------
                                                     (71,206)       (71,177)
                                                 -----------    -----------
     Valuation allowance                          (7,486,448)    (3,838,282)
                                                 -----------    -----------
     Net deferred income tax asset (liability)   $        --    $        --
                                                 ===========    ===========
</TABLE>

The net deferred tax asset has been fully reserved due to the uncertainty of
generating future taxable income during the carry forward period. The valuation
allowance increased by $3,648,166 from December 31, 1999 to December 31, 2000.

The Company's income tax expense (benefit) for the years ended December 31, 2000
and 1999, differed from the statutory federal tax rate as follows:

<TABLE>
<CAPTION>
                                                             2000           1999
                                                         -----------    -----------
<S>                                                      <C>            <C>
Statutory rate applied to loss before income taxes       $(3,465,664)   $(1,422,587)
Permanent differences between financial and tax losses
     Interest expense associated with beneficial
          conversion feature of convertible debt           1,275,000             --
     Expense from exercise of non-qualified
          stock options                                   (1,478,028)            --
     Other                                                    20,526          2,655
Increase in valuation allowance                            3,648,166      1,419,932
                                                         -----------    -----------
Income tax expense (benefit)                             $        --    $        --
                                                         ===========    ===========
</TABLE>

Net operating losses generated through December 31, 2000, eligible to be carried
forward to future years of approximately $19,649,000 will expire between 2011
and 2015.

NOTE 8. RELATED PARTY TRANSACTIONS

In August 1999, the Company entered into an agreement with EAI Partners, Inc.
("EAI") in settlement and replacement of a prior stock option agreement entered
into by EAI and the former Chief Executive Officer of the Company in 1996.
Pursuant to the August 1999 agreement, EAI was issued an option to purchase an
aggregate of 5,903,614 shares of the Company's common stock, exercisable as
follows: EAI may acquire 1,903,614 shares at $0.075 per share and the remaining
4,000,000 shares at the greater of $0.20 or 50% of the average closing bid
prices per share of the Company's common stock for the five trading days
immediately prior to exercise. As of December 31, 2000, EAI had acquired
1,903,614 shares through the exercise of this option. As a result of this
agreement, the Company recorded a loss in the amount of $706,500 as of December
31, 1999, which is included in general and administrative expenses in the
accompanying Consolidated Statements of Operations.


                                      F-14
<PAGE>   38

                          MIGRATEC, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

Mr. Kevin Howe, Chairman, and Mr. Drew Johnson joined the Company's Board in
January 2000 as representatives of Mercury Fund No. 1, Ltd. ("Mercury") and MT
Partners, L.P. ("MT Partners"), respectively, in connection with the initial
tranche of funding a three-stage $3,750,000 investment in the Company, completed
May 1, 2000.

As a result of this investment, Mercury and MT Partners each holds convertible
promissory notes and warrants convertible into an aggregate of up to 17,039,800,
and 18,960,200 shares of the Company's common stock, respectively, which
represents approximately 17.29% and 18.88%, respectively, of the total number of
shares of the Company's common stock outstanding as of December 31, 2000. The
notes are convertible at any time, at the election of Mercury and MT Partners,
on the basis of one share of common stock for each $0.125 in principal amount of
the notes outstanding at the time of conversion. The notes do not accrue
interest. The warrants are exercisable at $0.20 per share and expire in
increments of 2,000,000 shares on January 25, 2005, March 31, 2005 and May 1,
2005.

In December 2000, Mercury loaned the Company $565,000 with an interest rate that
varies between 0% and 10%. This loan is due the earlier of December 1, 2001 or
upon the occurrence of a qualified financing transaction. Upon the occurrence of
a qualified financing, the loan is to be repaid out of the proceeds of the
qualified financing; however, at the request of the Company, Mercury will use
the loan repayment proceeds to exercise warrants previously issued to Mercury
pursuant to the convertible promissory note dated January 25, 2000.

NOTE 9. COMMITMENTS AND CONTINGENCIES

On April 12, 2000, the Company executed a non-cancelable operating lease for its
office facility for a term of 39 months beginning May 1, 2000. This lease was
modified on November 16, 2000 to increase leased space and extend the term of
the lease through February 2004. The modified lease provides for a monthly base
rent of $16,977 until August 2001 and $18,720 thereafter. The original lease
term included three months of free rent, with the first rental payment due
August 1, 2000. At the end of the lease term, the Company has the right to renew
the lease for an additional 60 months at the then prevailing rental rates. The
following is a summary of future base rents as of December 31, 2000.

<TABLE>
<CAPTION>
                     YEAR ENDING DECEMBER 31,          AMOUNT
                     -------------------------         ------
<S>                                                  <C>
                            2001                     $210,696
                            2002                      224,640
                            2003                      224,640
                            2004                       37,440
                      Thereafter                           --
                                                     --------
                                                     $697,416
                                                     ========
</TABLE>

Total rent expense for the years ended December 31, 2000 and 1999 was $163,098
and $139,499, respectively.

On July 24, 1998, Carroll Independent School District filed suit against the
Company in District Court, Tarrant County, Texas, seeking payment for unpaid
business and personal property taxes (Carroll Independent School District v. One
Up Corporation, Cause No. L-14690). Judgment was entered on January 27, 2000 for
the plaintiff in the amount of $90,056, which includes interest and court costs.
A payable of $91,942 has been recorded for this claim as of December 31, 2000
and 1999.

From time to time the Company is party to what it believes is routine litigation
and proceedings that may be considered as part of the ordinary course of its
business. Currently, the Company is not aware of any current or pending
litigation or proceedings that would have a material adverse effect on the
Company's business, results of operations or financial condition.

NOTE 10. CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

Financial instruments, which potentially expose the Company to concentrations of
credit risk, consist primarily of accounts receivable. Accounts receivable which
aggregated $15,000 as of December 31, 2000, have been subsequently collected.
The Company's accounts receivables are unsecured.



                                      F-15
<PAGE>   39
                          MIGRATEC, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

For the years ended December 31, 2000 and 1999, significant customers accounted
for the percentages of the Company's total revenues as indicated below. Revenues
in 1999 were associated with the Company's Y2K product which is no longer being
marketed.

<TABLE>
<CAPTION>
                                                              2000        1999
                                                            --------    --------
<S>                                                         <C>         <C>
                             Dell Products, LP                    83%         --%
                             Centura Software Corporation         11          --
                             Ctek, Ltd.                           --          24
                             Sun Professional Services            --          18
                             Federal Express                       6          17
                             EDS                                  --          14
                             Reasoning, Inc.                      --          11
                                                            --------    --------
                                                                 100%         84%
                                                            ========    ========
</TABLE>

NOTE 11. CAPITAL STOCK, WARRANTS AND OPTIONS

CAPITAL STRUCTURE

The Company is authorized to issue 200,000,000 shares of common stock, $0.001
par value per share, of which approximately 91,353,074 and 78,660,189 shares
were issued, inclusive of treasury stock, at December 31, 2000 and 1999,
respectively. As discussed below, the Company reincorporated in Delaware in
August 2000 and, in connection with the reincorporation, established a par value
of $0.001 per common share. Accordingly, the Board of Directors authorized the
stated capital of the Company to be adjusted to reflect this new par value, with
a corresponding adjustment to additional paid-in capital.

On June 23, 2000, the Company held its Annual Stockholders' Meeting, at which
the stockholders approved reincorporation in Delaware and the creation of blank
check preferred stock. The reincorporation was completed in August 2000. As a
result, the Company's Board of Directors is now authorized to issue up to
50,000,000 shares of preferred stock in one or more series with such limitations
and restrictions as may be determined in its sole discretion without further
stockholder approval. The preferred stock authorized under the Company's
previous Florida Articles of Incorporation, none of which was outstanding at the
time of reincorporation, was cancelled at the time of reincorporation.

ISSUANCES OF COMMON STOCK

PRIVATE PLACEMENTS

During the first quarter of 2000, the Company completed private placements of
2,451,000 shares of unregistered common stock at a price of $0.125 per share and
issued two-year warrants to purchase a total of 490,200 unregistered shares of
common stock at $0.20 per share, yielding proceeds of $306,375. As of December
31, 2000, warrants to purchase 438,200 shares of common stock of the original
490,200 remain unexcercised.

During 1999, the Company completed private placements of 11,679,500 shares of
unregistered common stock, plus two-year warrants to purchase a total of
2,335,900 unregistered shares of common stock at $0.20 per share, at a price of
$0.125 per common share yielding proceeds of $1,459,937.

CONVERSION OF DEBT TO EQUITY

During the period September 2, 1999 to November 30, 1999, the Company issued
9,059,605 shares of common stock in settlement of principal and accrued interest
related to the Senior Secured Promissory Notes which became due July 1, 1999
(See Note 4).

EXERCISE OF OPTIONS AND WARRANTS

During 2000 and 1999, the Company issued 10,241,885 and 3,498,786 shares of
common stock, respectively, upon exercise of options and warrants yielding
proceeds of $1,870,733 and $278,260, respectively.




                                      F-16
<PAGE>   40
                          MIGRATEC, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

EMPLOYEE STOCK PURCHASE PLAN

During 1999, the Company issued 680 shares of common stock representing the
employers match of shares purchased by employees under the Company's Employee
Stock Purchase Plan.

WARRANTS

A summary of warrants outstanding as of December 31, 2000 and 1999 is as
follows:

<TABLE>
<CAPTION>
                                                                                              2000        1999
                                                                                            ---------   ---------
<S>                                                                                         <C>         <C>
                    Warrants for purchase of 2,335,900 shares at $0.20 per share, issued
                    in connection with private placements of unregistered common stock in
                    1999, expiring between March and December 2001                          1,974,200   2,335,900

                    Warrants for purchase of 1,000,000 shares at $0.10 per
                    share, issued in connection with the September 1998 private
                    placement of unregistered common stock, expiring September 2001           100,000     950,000

                    Warrants for purchase of 2,147,750 shares of common stock at
                    $0.20 per share, issued in connection with March 1998
                    private placement of common stock, expiring July 2001                     185,750   2,147,750

                    Warrants for purchase of 3,178,591 shares of common stock at
                    $0.20 per share, issued in connection with Senior Secured
                    Promissory Notes, expiring July 2001, as modified in 1999                 142,858   3,178,591

                    Warrants for purchase of 927,650 shares of common stock at $0.01 to
                    $0.20 per share, issued in connection with short term borrowings
                    in 1999, expiring between October and December 2001                       100,000     209,650

                    Warrants issued for purchase of 468,000 shares of common stock at
                    $0.01 to $0.20 per share, issued in connection with notes payable
                    dated in 1998                                                                  --     100,000

                    Warrants issued for purchase of 10,000 shares of common stock at
                    $0.35 per share, issued in connection with note payable dated in 1997          --      10,000

                    Warrants issued for purchase of 6,000,000 shares of common
                    stock at $0.20 per share, issued in connection with
                    convertible notes payable dated in January 2000, expiring
                    equally in January 2005, March 2005 and May 2005                        6,000,000          --

                    Warrants for purchase of 490,200 shares of common stock at
                    $0.20 per share, issued in connection with January 2000
                    private placement of common stock, expiring January 2002
                                                                                              438,200          --
                                                                                            ---------   ---------
                    Total                                                                   8,941,008   8,931,891
                                                                                            =========   =========
</TABLE>

Warrant activity is summarized as follows:

<TABLE>
<CAPTION>
                                                                               WARRANT PRICE
                                                                         --------------------------
                                                                          WEIGHTED
                                                           WARRANTS        AVERAGE        TOTAL
                                                          -----------    -----------    -----------
<S>                                                       <C>            <C>            <C>
                       Outstanding at December 31, 1998     7,486,719    $    0.2570    $ 1,923,887
                            Granted                         3,263,550         0.1518        495,457
                            Exercised                      (1,818,378)       (0.0688)      (125,120)
                            Exercise price modification            --        (0.1651)      (641,179)
                                                          -----------    -----------    -----------
                       Outstanding at December 31, 1999     8,931,891         0.1851      1,653,045
                            Granted                         6,507,200         0.1995      1,298,210
                            Exercised                      (6,498,083)       (0.1805)    (1,173,053)
                                                          -----------    -----------    -----------
                       Outstanding at December 31, 2000     8,941,008    $    0.1989    $ 1,778,202
                                                          ===========    ===========    ===========
</TABLE>




                                      F-17
<PAGE>   41
                          MIGRATEC, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

STOCK OPTIONS GRANTED TO NON-EMPLOYEES

A summary of stock options granted to non-employees outstanding as of December
31, 2000 and 1999 is as follows:

<TABLE>
<CAPTION>
                                                                                                       2000          1999
                                                                                                    -----------   -----------
<S>                                                                                                 <C>           <C>
                    Granted August 1999 to EAI Partners, Inc. to purchase 5,903,614
                    shares of common stock, expiring May 2001 to November 2001                        4,000,000     4,570,281

                    Granted March 1998 to former CEO, exercisable at $0.25 per share,
                    expiring March 2000                                                                      --       600,000

                    Granted September 1997 for services rendered, exercisable at $.70 per
                    share, expiring December 2002                                                       240,000       240,000

                    Granted July 1997 for services rendered, exercisable at $.50 per
                    share, expiring July 2000                                                                --        35,000

                    Granted June 1997 to a Director for services rendered, exercisable at
                    $.35 per share, expiring June 2000                                                       --        25,000

                    Granted July 1999 for services to be rendered, exercisable at $0.20
                    per share vesting at rate of 7,500 per month through July 2001, expiring July
                    2002; Agreement canceled February 2000 at which time 60,000 shares were
                    vested, expiring February 2002                                                       60,000       180,000

                    Granted August 1999 for prior services rendered, exercisable at $0.20
                    per share, immediately vested, expiring July 2001                                        --        25,000

                    Granted December 1999 for services rendered, exercisable at $0.01 per
                    share immediately vested, expiring December 2001                                         --        10,000
                                                                                                    -----------   -----------

                    Total                                                                             4,300,000     5,685,281
                                                                                                    ===========   ===========
</TABLE>

In August 1999, the Company entered into a Stock Option Agreement with EAI
Partners, Inc. ("EAI") which replaced a November 1996 stock option agreement,
covering 6,000,000 shares of the Company's common stock, between EAI and the
Company's former CEO, pursuant to which the Company was required to register the
shares under the options. As a part of the Company's settlement agreement with
the Company's former CEO, the Company agreed to indemnify the former CEO against
any liability arising from the Company's failure to register the EAI options as
required by the November 1996 stock option agreement. The August 1999 Agreement
granted EAI an option to purchase 5,903,614 shares of the Company's common
stock. The first 1,903,614 option shares are exercisable at a price of $0.075
per share with the final 4,000,000 option shares being exercisable at the
greater of $.20 or 50% of the average closing bid prices per share of the
Company's common stock for the five business days immediately prior to exercise.
Such option expires equally on May 13, 2001 and November 13, 2001. The Company
has filed a registration statement covering the option shares in accordance with
the terms of the August 1999 agreement. As of December 31, 2000, EAI has
exercised all of the first 1,903,614 option shares. In 1999, the Company
recognized a loss in the amount of $706,500 as a result of the August 1999
Agreement.

Stock options granted to non-employees is summarized as follows:

<TABLE>
<CAPTION>
                                                                                        OPTION PRICE
                                                                               ------------------------------
                                                                                WEIGHTED
                                                                 OPTIONS         AVERAGE            TOTAL
                                                              -------------    -------------    -------------
<S>                                                           <C>              <C>              <C>
                           Outstanding at December 31, 1998       1,100,000    $      0.3348    $     368,250
                                  Granted                         6,118,614           0.1608          983,871
                                  Exercised                      (1,533,333)         (0.0809)        (124,000)
                                                              -------------    -------------    -------------
                           Outstanding at December 31, 1999       5,685,281           0.2160        1,228,121
                                  Canceled                         (120,000)         (0.2000)         (24,000)
                                  Exercised                      (1,265,281)         (0.1771)        (224,121)
                                                              -------------    -------------    -------------
                           Outstanding at December 31, 2000       4,300,000    $      0.2279    $     980,000
                                                              =============    =============    =============
</TABLE>




                                      F-18
<PAGE>   42

                          MIGRATEC, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

STOCK OPTIONS GRANTED TO EMPLOYEES, OFFICERS AND DIRECTORS

In 1997, the Company established a stock option plan ("1997 Plan"); however, the
1997 Plan was not approved by the Company's stockholders within the time
specified and was terminated in 1999. Outstanding options issued pursuant to the
1997 Plan were canceled in 1999. Substantially all of the cancelled 1997 Plan
options were reissued under the 1999 Plan at the then current fair market value.
In accordance with FASB Interpretation No. 44, these modified grants are
accounted for as variable from the date of modification until the options are
exercised, forfeited or expire unexercised. No additional compensation expense
was recorded in 2000 related to these options.

The Company adopted a new stock option plan, the 1999 Stock Option Plan ("1999
Plan"). Under the terms of the 1999 Plan, the Company could grant up to
2,000,000 shares of the Company's common stock. The 1999 Plan was not approved
by the Company's stockholders within one year of adoption by the Company's Board
of Directors, thereby converting options, granted under the 1999 Plan to
non-qualified options for federal income tax purposes. All terms of the options
remained unchanged.

In January 2000, the Company's Board of Directors approved, subject to the
stockholders' approval, the MigraTEC, Inc. Long-Term Incentive Plan ("the 2000
Plan"), which provides for the issuance of up to 7,000,000 shares of the
Company's common stock in the form of stock options, dividend equivalent rights
or restricted share awards to Company directors, officers, employees and
consultants. The 2000 Plan was approved at the Company's Annual Stockholders'
meeting held June 23, 2000. In December 2000, the Company's Board of Directors
approved, subject to the stockholders' approval, an increase of the shares of
the Company's common stock issuable under the 2000 Plan to 14,000,000.

The Company has issued stock options to employees, officers and directors as
summarized in the table below.

<TABLE>
<CAPTION>
                                                              OPTION PRICE
                                                    ------------------------------
                                                       WEIGHTED
                                      OPTIONS          AVERAGE           TOTAL
                                   -------------    -------------    -------------
<S>                                <C>              <C>              <C>
Outstanding at December 31, 1998      15,353,192    $      0.2076    $   3,186,868
      Granted                          2,421,904           0.1985          480,706
      Canceled                        (9,113,812)         (0.2117)      (1,929,681)
      Exercised                         (147,075)         (0.1981)         (29,139)
                                   -------------    -------------    -------------
Outstanding at December 31, 1999       8,514,209           0.2007        1,708,754
      Granted                         12,185,382           0.4300        5,239,692
      Canceled                          (432,935)         (0.4270)        (184,842)
      Exercised                       (2,478,521)         (0.2014)        (499,273)
                                   -------------    -------------    -------------
Outstanding at December 31, 2000      17,788,135    $      0.3522    $   6,264,331
                                   =============    =============    =============
</TABLE>

Effective September 7, 1999, the Company officers and four directors agreed to
modify options previously granted for services provided as follows (a) the
number of shares underlying each option was voluntarily reduced by 50%, (b) the
remaining 50% of the shares underlying each option remained fully vested as of
the date of the modification, (c) for officers, the expiration date was
re-defined to be four years after the date of termination of employment, (d) for
directors the expiration date was re-defined to be four years after termination
of directorship. The exercise price for the modified options was unchanged at
$0.20 per share. There was no impact on the financial statements as a result of
this modification.

Employee options which aggregate 921,197 expire from April 2001, through
December 2004. Expiration of the remaining options, which aggregate 16,866,938,
is summarized below:

<TABLE>
<CAPTION>
                                   OFFICERS
                                      AND
EXPIRATION                         DIRECTORS     EMPLOYEES         TOTAL
                                  ----------     ---------      ----------
<S>                                <C>           <C>            <C>
48 months after termination of     4,835,000            --       4,835,000
   employment or directorship
January 2010 to December 2010      9,737,500     2,294,438      12,031,938
                                  ----------     ---------      ----------
                                  14,572,500     2,294,438      16,866,938
                                  ==========     =========      ==========
</TABLE>



                                      F-19
<PAGE>   43
                          MIGRATEC, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

COMPENSATION EXPENSE FOR OPTIONS AND WARRANTS GRANTED TO EMPLOYEES, OFFICERS AND
DIRECTORS

The Company recorded deferred stock compensation of $2,975,000 for the
difference between the exercise price and the market value of the Company's
common stock underlying certain options granted. This amount is being amortized
over the vesting period of the individual options, which vesting periods vary
from immediate to three years. Stock compensation expense charged to operations
was $1,147,604 for the year ended December 31, 2000.

Substantially all other options issued to directors, officers and employees were
issued with exercise prices equal to fair value. Fair value for all options
issued is generally the trading price at the date of issuance. Had compensation
cost for the Company's stock options been determined consistent with SFAS 123,
the Company's net loss per share would have been adjusted to the pro forma
amounts indicated below:

<TABLE>
<CAPTION>
                                                                                   YEARS ENDED DECEMBER 31,
                                                                             ----------------------------------
                                                                                  2000               1999
                                                                             ---------------    ---------------
<S>                                                                          <C>                <C>
                    Net income (loss)
                         As reported                                         $   (10,193,130)   $    (4,184,078)
                                                                             ===============    ===============
                         Pro forma                                           $   (11,220,879)   $    (4,263,881)
                                                                             ===============    ===============
                    Net income (loss) per common share (basic and diluted)
                         As reported                                         $         (0.13)   $         (0.08)
                                                                             ===============    ===============
                         Pro forma                                           $         (0.14)   $         (0.08)
                                                                             ===============    ===============
</TABLE>

The effects of applying SFAS 123 in this pro forma disclosure are not indicative
of future amounts. The Company anticipates making awards in the future under its
stock-based compensation plan.

The fair value of each option grant is estimated on the date of grant using the
Black-Scholes method option-pricing model. The following assumptions were used
for grants in 2000: dividend yield of 0%, volatility range of 122% to 155%, risk
free interest rate estimated as 6.3% with an expected life of 3 to 4 years. The
following assumptions were used for grants in 1999: dividend yield of 0%,
volatility range of 104% to 120%, risk free interest rate estimated as 5% with
an expected life of 2 to 4 years.

The fair value of each option grant given to both employees and non-employees is
estimated on the date of grant using the Black-Scholes method option-pricing
model. The weighted average fair value of the option granted under this model
when fair value equaled the exercise price and when the fair value was greater
than the exercise price was $0.59 and $0.13 per option, respectively, for the
years ended December 31, 2000 and 1999.

The model is based on historical stock prices and volatility which, due to the
low volume of transactions, may not be representative of future price variances.

The following summarizes information about options granted to employees,
officers, directors and non-employees outstanding at December 31, 2000:

<TABLE>
<CAPTION>
                                     OUTSTANDING OPTIONS                                          OPTIONS EXERCISABLE
                             ----------------------------------                             -------------------------------

                                               WEIGHTED AVERAGE         WEIGHTED                           WEIGHTED AVERAGE
       RANGE OF                NUMBER              REMAINING             AVERAGE               NUMBER          EXERCISE
    EXERCISE PRICES          OUTSTANDING       CONTRACTUAL LIFE       EXERCISE PRICE        EXERCISABLE          PRICE
    ---------------         -------------      ----------------       --------------        -----------    ----------------
<S>                         <C>             <C>                       <C>                   <C>            <C>
Employees
   $ 0.1719 to $ 2.87        3,215,635      7.708 years                  $ 0.5671              701,161          $0.5883

Officers and Directors
$  0.20 to $ 1.375          14,572,500      N/A                          $ 0.3047            6,214,167          $0.2258

Non-Employees-options
$  0.20  to $ 0.70           4,300,000      0.701 years                  $ 0.2279            4,300,000          $0.2279
Non-Employees-warrants
$ 0.10 to $ 0.20             8,941,008      3.038 years                  $ 0.1989            8,941,008          $0.1989
                          ------------                                                    ------------
                            31,029,143                                                      20,156,336
                          ============                                                    ============
</TABLE>




                                      F-20
<PAGE>   44
                          MIGRATEC, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

TOTAL OPTIONS AND WARRANTS OUTSTANDING AT DECEMBER 31, 2000

At December 31, 2000, the Company had options and warrants for the purchase of
common shares as follows:

<TABLE>
<S>                                                    <C>
              Warrants                                     8,941,008
              Stock Options:
                  Non-Employees                            4,300,000
                  Directors, Officers and Employees       17,788,135
                                                       -------------
              Total                                       31,029,143
                                                       =============
</TABLE>

COMPENSATION EXPENSE FOR OPTIONS AND WARRANTS

The Company has recorded compensation expense in 2000 and 1999 for all options
and warrants issued to non-employees. Such compensation expense was determined
using the Black-Scholes method option-pricing model, using assumptions
consistent with those noted above.

NOTE 12. EMPLOYEE SAVINGS PLAN

Effective January 1, 1994, the Company adopted a discretionary 401(k) savings
plan ("Plan") for its employees. This Plan is available to all employees meeting
certain eligibility requirements, as further described in the Plan documents. No
discretionary employer contributions were made for the years ended December 31,
2000 and 1999. Participants are 100% vested in the portion of the Plan
representing employee contributions. Participants vest 20% in employer
contributions after two years of service (as defined by the Plan document) and
20% each year thereafter.

NOTE 13. SUBSEQUENT EVENTS

Subsequent to December 31, 2000, the Company issued an aggregate of 7,750,000
shares of its common stock to two investors, as a result of the conversion of
$750,000 of convertible debt at $0.125 per share and the exercise of warrants to
purchase 1,750,000 shares at $0.20 per share.

Subsequent to December 31, 2000, the Company issued an aggregate of 505,000
shares of its common stock to a former director, as a result of the exercise of
options to purchase shares at $0.20 per share.

In January 2001, the notes payable dated December 4 and December 28, 1998, were
modified and extended. The modified terms included an additional advance of
$250,000 bearing interest at 15% per annum, payable interest only until May 1,
2001, repayable thereafter with monthly installments of principal and interest
totaling $22,565 with a final maturity of May 1, 2002. In connection with this
modification, the lender was paid a commitment fee of $5,000 and was issued a
one-year warrant to purchase 40,000 shares of Company common stock at $0.01 per
share. This warrant was exercised in March 2001.

In February and March 2001, the Company issued to EAI an aggregate of 1,111,110
shares of its common stock at $0.18 per share pursuant to a stock option
agreement which grants an option to purchase up to an aggregate of 5,903,614
shares of its common stock. At December 31, 2000, an aggregate of 4,000,000
option shares remain exercisable at the greater of (i) $0.20 or (ii) 50% of the
previous five-day average closing bid price per share of the Company's common
stock for the five business days immediately prior to exercise. Such option
expires equally on May 13, 2001 and November 13, 2001. The Company agreed to
modify the exercise price for the 2,000,000 options expiring May 13, 2001 to
$0.18 per share in exchange for immediate exercise. The Company agreed to
payment terms of $120,000 within forty-five days from the date of exercise on
February 16, 2001 and payments of $80,000 on March 15, 2001, April 15, 2001 and
May 15, 2001. As a result of this option modification, the Company will record
an expense of approximately $40,000 in the first quarter of 2001.




                                      F-21
<PAGE>   45
                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
     EXHIBIT
     NUMBER                  DESCRIPTION OF DOCUMENT
     ------                  -----------------------
<S>                <C>
       3.1         Certificate of Incorporation(1)

       3.2         Bylaws(1)

       4.1         Form of Common Stock Certificate (2)

       10.1        Employment Agreement between the Company and W. Curtis
                   Overstreet dated, April 10, 1997 (3)

       10.2        Employment Agreement between the Company and Joseph B.
                   Meredith, dated June 1, 1997 (3)

       10.3        Employment Agreement between the Company and Rick J. Johnson,
                   dated July 1, 1997 (3)

       10.4        Agreement between the Company and Electronic Data Systems
                   Corporation, dated as of September 1, 1998 (3)

       10.5        Stock Option Agreement between MigraTEC, Inc. and EAI
                   Partners, Inc., dated as of August 6, 1999 (2)

       10.6        MigraTEC, Inc. Long-Term Incentive Plan, as amended and
                   restated (5)

       10.7        Form of Stock Option Agreement pursuant to the MigraTEC, Inc.
                   Long-Term Incentive Plan, as amended and restated (5)

       10.8        Warrant Agreement between MigraTEC, Inc. and M.T. Partners,
                   L.P. and Mercury Fund No. 1, Ltd., dated as of January 25,
                   2000 (4)

       10.9        Form of Warrant to M.T. Partners, L.P. and Mercury Fund No.
                   1, Ltd. (4)

       10.10       $1,975,000 Convertible Secured Promissory Note by MigraTEC,
                   Inc. to M.T. Partners, L.P., dated as of January 25, 2000 (4)

       10.11       $1,775,000 Convertible Secured Promissory Note by MigraTEC,
                   dated as of January 25, 2000 (4)

       10.12       Security Agreement between MigraTEC, Inc. and M.T. Partners,
                   L.P. and Mercury Fund No. 1, Ltd., dated as of January 25,
                   2000 (4)

       10.13       Shareholders Agreement between MigraTEC, Inc. and certain
                   stockholders, dated as of January 25, 2000 (4)

       10.14       Registration Rights Agreement between MigraTEC, Inc. and
                   certain stockholders, dated as of January 25, 2000 (4)

       10.15       Form of Director Indemnification Agreement between MigraTEC,
                   Inc. and Kevin C. Howe and Drew R. Johnson, dated as of
                   January 25, 2000 (4)

       10.16       Amendment No. 1 to Convertible Secured Promissory Note by
                   MigraTEC, Inc. in favor of MT Partners, L.P., dated February
                   28, 2000 (6)

       10.17       Amendment No. 1 to Convertible Secured Promissory Note by
                   MigraTEC, Inc. in favor of Mercury Fund No. 1, Ltd., dated
                   February 28, 2000 (6)

       10.18       Office Lease Agreement between MigraTEC, Inc. and Charter
                   Crown Plaza Partners, L.P., dated as of April 12, 2000 (4)

       10.19       Amendment No. 2 to Convertible Secured Promissory Note by
                   MigraTEC, Inc. in favor of MT Partners, L.P., dated June 1,
                   2000 (6)

       10.20       Amendment No. 2 to Convertible Secured Promissory Note by
                   MigraTEC, Inc. in favor of Mercury Fund No. 1, Ltd., dated
                   June 1, 2000 (6)
</TABLE>


<PAGE>   46



<TABLE>
<CAPTION>
     EXHIBIT
     NUMBER                  DESCRIPTION OF DOCUMENT
     ------                  -----------------------
<S>                <C>
       10.21       Lease Modification Agreement Number One between MigraTEC,
                   Inc. and Charter Crown Plaza Partners, L.P., dated November
                   16, 2000 (6)

       10.22       Promissory Note by MigraTEC, Inc. to Mercury Fund No. 1,
                   Ltd., dated as of December 1, 2000 (6)

       10.23       Security Agreement between MigraTEC, Inc. and Mercury Fund
                   No. 1, Ltd., dated as of December 1, 2000 (6)

       10.24       Stock Option Amendment Agreement between MigraTEC, Inc. and
                   EAI Partners, Inc., dated January 2, 2001 (6)

       10.25       Modification, Renewal and Extension of Note and Security
                   Agreement between MigraTEC, Inc. and BEM Capital Partners,
                   Inc., dated January 26, 2001(6)

       10.26       Assignment and Assumption Agreement between MJ Capital
                   Partners III, L.P. and BEM Capital Partners, L.P., dated
                   January 26, 2001 (6)

       10.27       Common Stock Purchase Warrant for 40,000 shares of common
                   stock issued to BEM Capital Partners, L.P. dated, January 31,
                   2001 (6)

       11.1        Statement re: Computations of Net Loss per Share (6)

       16.1        Letter on Change in Certifying Accountant (7)

       21.1        Subsidiary of MigraTEC, Inc. (4)
</TABLE>

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

                   (1)    Incorporated by reference from MigraTEC's registration
                          statement on Form SB-2 filed August 31, 2000, File No.
                          333-44946.

                   (2)    Incorporated by reference from Post-Effective
                          Amendment No. 1 to MigraTEC's registration statement
                          on Form SB-2 filed November 13, 2000, File No.
                          333-44946.

                   (3)    Incorporated by reference from Post-Effective
                          Amendment No. 1 to MigraTEC's registration statement
                          on Form SB-2 filed May 7, 1999, File No. 333-65093.

                   (4)    Incorporated by reference from Form 10-KSB filed by
                          MigraTEC on April 14, 2000, for the year ended
                          December 31, 1999, File No. 000-28220.

                   (5)    Incorporated by reference from Form S-8 filed by
                          MigraTEC on November 6, 2000, File No. 333-49398.

                   (6)    Filed herewith.

                   (7)    Incorporated by reference from Form 8-K filed by
                          MigraTEC on March 20, 2000, File No. 000-28220.