DIGITAL DATA NETWORKS, INC.
                          NOTES TO FINANCIAL STATEMENTS

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

(Mark One)
      [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [Fee Required] For the fiscal year ended December 31, 2001.

      [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [No Fee Required]

      For the transition period from ________________to_______________

                         Commission file number: 0-27704

                           DIGITAL DATA NETWORKS, INC.
                 (Name of small business issuer in its charter)


Washington                                              91-1426372
(State or other jurisdiction of              (IRS Employer Identification No.)
incorporation or organization)

3102 Maple Avenue, Suite 230
Dallas, Texas                                              75201
(Address of principal executive offices)                 (Zip Code)

                                 (214) 969-7200
              (Registrant'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, no par value
                                                        (Title of class)

Check whether the issuer (1) 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 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. [ X ]

The issuer's revenues for its most recent fiscal year were $835,000.

The aggregate market value of the voting stock held by non-affiliates of the
issuer on February 28, 2002 was approximately $144,525.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of February 28, 2002, 2,458,390
shares of Common Stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:  None.


<PAGE>

                                     PART I

Item 1.     Business.

Company Background

         Digital Data Networks, Inc. (the "Registrant", the "Company" or "DDN"),
was incorporated as Transit Information Systems, Inc. under the laws of the
State of Washington on October 17, 1988. The present name was adopted in July,
1995. The Company also operates as The Transit Network under an assumed name
certificate. The Company's offices are currently located at 3102 Maple Avenue,
Suite 230, Dallas, Texas 75201, and its telephone number is (214) 969-7200.

         In February 1996, the Company completed an initial public offering, and
received net cash proceeds of approximately $5.8 million. The Company's Common
Stock is reported on the OTC Electronic Bulletin Board under the trading symbol
"DIDA".

         DDN generates advertising revenue in the out-of-home advertising
industry, primarily through its Transit Network operation, which operates a
digital information network. The Transit Network's digital information network
is a network of computerized electronic displays that delivers information, both
text and graphics, to riders on-board public transit vehicles, utilizing an FM
subcarrier signal to transmit the data. The Transit Network currently operates
its digital information network on the Dallas Area Rapid Transit ("DART") bus
and rail system, having begun operations in 1991. The Company's contract with
DART expires on October 15, 2002. If DART decides it wants to continue having a
digital information network on its vehicles, as the Company believes it will,
DART must solicit new proposals for this project. There can be no guarantee that
the Company will be the successful bidder.

         In 2000, the Company entered into an agency relationship, whereby the
Company also sells truckside advertising. Under its arrangement, the Company is
responsible for selling the advertising, for which the Company receives a
commission calculated as a percentage of the revenue, which varies.

         The Company continues to experience net losses and negative cash flows
from operations and has an accumulated deficit at December 31, 2001 of
$13,556,000 and a negative working capital position. The Company has pursued
merger possibilities and continues to do so, but there can be no assurance that
the Company will be successful finding a merger candidate.

The Transit Network's Digital Information Network

         Background

         The Transit Network's digital information network is a network of
computerized electronic displays that delivers news, information and advertising
to riders on-board public transit vehicles. The network consists of specialized
electronic LED displays, transmission protocol, and control software. The system
also requires an agreement with a local FM radio station for the use of an FM
subcarrier signal.

         The electronic display utilized on the DART vehicles is approximately
six inches high by twenty-six inches in length, strategically located to enhance
its visibility inside the vehicle. The software for the digital information
network is licensed from Sunrise Systems. See "--Digital Information Network
Technology" and "--Software License."

                                       2
<PAGE>


         News briefs, weather, trivia questions, sports reports, transit
authority information and other features are continuously presented,
interspersed with advertising messages. The program sequence runs approximately
12-15 minutes, generally assuring that the full program cycle is viewed more
than once during an average commute, which lasts approximately 30 minutes
according to United States Department of Transportation statistics. Programs are
normally updated twice a day, changing content to reflect late-developing news
and sports stories, new information from the transit authority, and often times,
new advertising messages. By accessing the Internet, the Company is able to
obtain current programming information on news, weather, sports and
entertainment, and can monitor stories throughout the day, allowing for news
stories to be changed more frequently if the events of the day warrant such
updates. Advertising copy is usually supplied by the advertiser, while public
service and transit information announcements are provided by the transit
authority.

         The digital information network has other important capabilities,
including the ability to (i) target specific buses and routes with different
programming and (ii) display information in Spanish and other foreign languages.
The network allows certain messages to be displayed system-wide, on selected
vehicles, or on vehicles in selected geographical areas. In addition to regular
programming, special programming can be custom-tailored for specific events.
This ability to target vehicles and selected geographical areas is a feature of
the system that can be sold to advertisers desiring to reach specific riders.
Targeting of individual buses which have been chartered for one-day special
events is also available on the system.

         Digital Information Network Technology

         The digital information network consists of specialized electronic LED
displays, transmission protocol, and control software. The software allows a
programmer to enter information and entertainment data into a personal computer.
The program is updated via a modem connected between the programming site and
the transmitting location. It is then broadcast through an FM subcarrier signal
and received by a small antenna located on each vehicle. The digital information
is then transferred into buffer memory inside the LED display. As the program
then being displayed completes its cycle, the new data automatically replaces
the old data without any interruption. The entire broadcast cycle - from
in-house computer, to transmitter, to transit vehicle, to its on-screen
appearance, can be completed in just minutes. The Company is responsible for
repairing or replacing its electronic displays that are defective or damaged
after installation, and contracts with a third party to provide monthly
maintenance and repair services on all installed message displays.

         Software License

         The Company licenses the software to operate its digital information
network from Sunrise Systems, pursuant to a License Agreement (the "Software
License") dated November 1, 1995, as amended. The Software License grants the
Company a perpetual, fully paid up license to use the software wherever it
wishes. The Software License is exclusive with regard to each metropolitan area
in the United States and Canada (the "Primary Territory") which has a population
of at least 100,000 people, and is otherwise non-exclusive in the Primary
Territory. In areas other than the United States and Canada (the "Option
Territory"), the Software License is non-exclusive, although the Software
License allows it to become exclusive if certain conditions are met.

         Dallas Area Rapid Transit

         In a 2000 industry survey, DART ranked 21st in the North American bus
transit market, with approximately 822 vehicles. The Company entered into a
contract with DART in October 1990, which granted the Company exclusive rights
to install and operate its digital information network on-board DART's buses for

                                       3
<PAGE>

a period of five years. Installation of the DART system was completed in August
1993. The Company and DART entered into a new contract in 1995 for an additional
three years. In 1997, the Company and DART modified their contract, whereby the
Company was granted approval to install its electronic information system on
DART's forty (40) light rail vehicles, the installation of which was completed
in July 1998. During 2000, DART received an additional fifty-five (55) trains,
and the Company has recently completed the installation of its system on these
vehicles.

         When the Company and DART modified their contract in 1997, they
simultaneously extended it through October 2001. That date was subsequently
extended an additional year until October 2002. Under the existing contract, the
Company pays DART 4% of its gross advertising receipts. In addition, DART has
reserved a permanent position on the digital information network program for its
exclusive use, as well as limited access to advertising space for its own
printed material. The Company must reserve up to 30% of available space on
interior advertising panels and one message block on the digital information
network during each cycle of messages for DART'S use and public service
announcements. Advertising revenues from the interior advertising panels account
for less than five percent of total advertising revenues and the reservation of
advertising space to DART does not materially affect the Company's total
advertising revenues. Maintenance of the digital information network is
subcontracted to an independent party. Each vehicle is inspected monthly to
ensure that the hardware is functioning properly and the program is accurately
displayed. Defective hardware is sent to a third party vendor for repair or
replacement.

         The Company's contract with DART expires on October 15, 2002. If DART
wishes to continue having a digital information network on its vehicles, as the
Company believes it does, DART must solicit new proposals for this project and
allow any and all interested parties to submit a bid. There can be no guarantee
that the Company will be the successful bidder.

         Advertiser Participation

         In the DART market, where The Transit Network depends on the sale of
advertising to generate revenues, its clients consist primarily of local
colleges, hospitals and other consumer products and service companies, as well
as regional and local offices of national companies.

         Competition for Advertisers

         The advertising industry is intensely competitive. The Company competes
for advertising dollars with all advertising and promotional channels, including
television, radio, magazines, newspapers, outdoor and direct mailings.
Management believes that its primary competition is radio and newspapers, which
charge rates significantly higher than those charged by the Company. The Company
believes that the primary basis for competition in the advertising industry is
price and value, although other factors such as market coverage, audience
demographics, and time and cost of production are also of importance.

         Manufacturing, Supply and Installation

         The Company does not manufacture its hardware, but contracts with third
parties to produce the equipment. Sunrise Systems assembled The Transit
Network's original hardware from components and subassemblies manufactured by
others. Currently, Sunrise Systems does not provide any production of equipment
to the Company. While the Company believes that most of such components and
subassemblies are available from multiple sources, there can be no assurance
that the Company will be able to obtain commitments from qualified manufacturers
to provide the components and subassemblies within the Company's time and cost
estimates. The Company incorporates both system and application software, most
of which has been licensed from Sunrise Systems. See "-Software License."

                                       4
<PAGE>

         The Company contracts with third party electrical contractors to
install the hardware in participating transit authority vehicles. The Company
has an agreement with a Dallas electrical contractor who has installed The
Transit Network's hardware in DART vehicles, whereby the contractor has the
right of first refusal to install the hardware in other transit systems in the
United States, unless there are union labor or transit authority requirements
which the contractor cannot meet.


Employees

         As of January 31, 2002, the Company had five employees, of whom four
were employed full-time, and one part-time.


Item 2.     Properties.

         The Company leases approximately 1,370 square feet in Dallas for
approximately $2,600 per month pursuant to a lease that terminates on November
30, 2002.


Item 3.     Legal Proceedings.

         In 1997, the Company entered into a letter of intent with Advanced
Communication and Information Services ("ACIS") to acquire all of the capital
stock of ACIS in exchange for DDN common shares. Pursuant to the letter of
intent, the Company forwarded ACIS $1,048,000 cash under terms of promissory
notes for working capital pending completion of the acquisition. Subsequently,
ACIS withdrew from the letter of intent and defaulted on repayment of amounts
owed. In April 1998, the Company received a judgment from the King County
Superior Court in the State of Washington against ACIS, ordering ACIS to pay the
Company the amount of the loan, plus interest, plus a $300,000 cancellation fee.
The Company continues to monitor various collection actions but believes it is
unlikely that it will be successful in recovering any, all or part of this
judgment.

         An action in damages for breach of settlement agreement commenced
against the Company in connection with the April 1998 settlement agreement with
the former shareholder of hip Communications. As part of that settlement
agreement, the Company was required to transfer the "hip.com" domain name to the
former shareholder. The Company failed to transfer the domain name and no longer
has registration rights to such domain name. As a result, in 1999 the former
shareholder filed an action against the Company in the Supreme Court of British
Columbia for damages for breach of settlement agreement. The Company contacted
the party which holds the registration rights to the hip.com domain name and
attempted to reacquire it, but was not successful in those efforts. In October
2001, the Company and former shareholder entered into a new settlement
agreement, whereby plaintiff received $25,000 and 100,000 shares of the
Company's stock, and in exchange, the former shareholder terminated its pending
legal action and agreed to take no further legal action in this matter.


         The Company is subject to various legal proceedings and claims that
arise in the ordinary course of business. Company management currently believes
that resolution of such other legal matters will not have a material adverse
impact on the Company's financial position, results of operations or cash flows.

                                       5
<PAGE>

Item 4.     Submission of Matters to a Vote of Security Holders.

         No matter was submitted to a vote of security holders during the fourth
quarter of 2001.


                                     PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

         (a) Since May 1998, the Company's Common Stock (symbol "DIDA") has been
reported on the OTC Electronic Bulletin Board. The following table sets forth
the high and low closing prices.

                     Period                     High              Low
                 2000:
                 1st Quarter               $    1.02           $  0.16
                 2nd Quarter                    0.69              0.16
                 3rd Quarter                    0.41              0.16
                 4th Quarter                    0.31              0.05
                 2001:
                 1st Quarter               $    0.19           $  0.09
                 2nd Quarter                    0.49              0.05
                 3rd Quarter                    0.15              0.04
                 4th Quarter                    0.10              0.04




         The above prices represent inter-dealer prices, without retail mark-up,
mark-down or commissions, and may not represent actual transactions.


         (b) As of February 19, 2002, the Company had approximately 194
shareholders of record.

         (c) The Company has never paid cash dividends on its Common Stock, and
currently intends to retain earnings, if any, for use in the operation of its
business and therefore does not anticipate paying any cash dividends on the
Common Stock in the foreseeable future.

                                       6
<PAGE>

Item 6.     Management's Discussion and Analysis of Financial Condition and
            Results of Operations.

The following discussion and analysis should be read in conjunction with the
Company's Consolidated Financial Statements included elsewhere in this Annual
Report on Form 10-KSB (the "Annual Report"). This Annual Report contains
forward-looking statements that involve risks and uncertainties, such as
statements of the Company's plans, objectives, expectations and intentions.
Forward-looking statements, within the meaning of Section 21E of the Securities
and Exchange Act of 1934, are made throughout this Management's Discussion and
Analysis of Financial Condition and Results of Operations. For this purpose, any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the foregoing, the
words "believes", "anticipates", "plans", "expects", "estimates" and similar
expressions are intended to identify forward-looking statements. There are a
number of important factors that could cause the results of the Company to
differ materially from those indicated herein. The cautionary statements made in
this Annual Report should be read as being applicable to all related
forward-looking statements wherever they appear in this Annual Report.

Background

In February 1996, the Company closed its initial public offering and received
net cash proceeds of approximately $5.8 million from the issuance of
approximately 1.3 million shares of common stock. Subsequent to its public
offering, the Company acquired three internet-related businesses, and in 1998,
disposed of such businesses.

The Company currently generates advertising revenue in the out-of-home
advertising industry, primarily through its Transit Network operation, which
operates a digital information network. The Transit Network's digital
information network is a network of computerized electronic displays that
delivers information, both text and graphics, to riders on-board public transit
vehicles, utilizing an FM subcarrier signal to transmit the data. The Transit
Network currently operates its digital information network on the DART bus and
rail system, having begun operations in 1991. The Company's contract with DART
expires on October 15, 2002. If DART wishes to continue having a digital
information network on its vehicles, as the Company believes it does, DART must
solicit new proposals for this project and allow any and all interested parties
to submit a bid. While the Company intends to seek to continue to provide
services to DART and enter into a new contract to do so, there can be no
guarantee that the Company will be the successful bidder.

In 2000, the Company entered into an agency relationship, whereby the Company
sells truckside advertising. Under its arrangement, the Company is responsible
for selling the advertising and paying a percentage of the revenue to a third
party. Additionally, the Company has credit risk, risk of loss, and is fully
responsible for delivery and performance. Accordingly, the Company has recorded
this revenue as gross instead of net.

                                       7
<PAGE>

Results of Operations

         2000 Compared to 1999

Revenues increased slightly from $589,000 in 1999 to $590,000 in 2000. Revenues
remained flat, due primarily to increased time spent developing a market for
truckside advertising, which resulted in less marketing and sales time for the
existing products.

Total expenses decreased to $703,000 from $724,000 during the year ended
December 31, 2000, as compared to the prior year. Direct costs decreased to
$170,000 from $197,000 primarily due to decreased depreciation expense in 2000
as more equipment became fully depreciated. Salaries and related remained
relatively unchanged, increasing to $343,000 from $337,000, as did marketing,
general and administrative, which remained at $190,000 for each year.

Other income, net decreased to $61,000 for the year ended December 31, 2000 from
$78,000 of income for 1999, primarily the result of the $60,000 gain on
termination of merger settlement in 1999, and a reduction of provision for
disputed liabilities of $105,000 offset by an unrealized loss on equity
securities in 2000 in the amount of $58,000.

         2001 Compared to 2000

Revenues increased from $590,000 in 2000 to $835,000 in 2001, or approximately
42%, due primarily to the sales of new advertising products, the Marquee
Headliner and truckside. Revenues from the Marquee Headliner and truckside in
2001 accounted for $286,000 and $135,000 respectively, compared to $38,000 and
$8,000, respectively, in the prior year. Revenues from transit advertising
declined from $544,000 in 2000 to $413,000 in 2001, the result of lower demand
for this product.

Total expenses increased to $1,031,000 from $703,000 during the year ended
December 31, 2001, as compared to the prior year, primarily due to a $307,000
increase in direct costs. Direct costs increased significantly as a result of:
a) expenses related to the new truckside advertising product, as production and
installation expenses account for approximately 80% of truckside revenue; and b)
expenses related to the installation of electronic information systems on new
DART trains. Salaries and related remained relatively unchanged, increasing to
$362,000 from $343,000, as did marketing, general and administrative, which
increased from $190,000 to $192,000.

Other income (expense) was $15,000 of expense in 2001, primarily the result of
an additional $20,000 provision for litigation settlement. Other income
(expense) was $61,000 of income in 2000, primarily the result of a reduction of
provision for disputed liabilities of $105,000, offset by a $58,000 unrealized
loss on equity securities.

Financial Condition, Liquidity and Capital Resources

Operating activities used cash in the amount of $235,000 in 2001 as compared to
providing cash of $7,000 during 2000. Cash used by operating activities in 2001
was primarily the result of the Company's net loss of $211,000 and decrease in
deferred revenue of $127,000. Investing activities used $80,000 of cash for
capital expenditures in 2001 as compared to using cash of $32,000 in 2000.

                                       8
<PAGE>

The Transit Network has recently completed installing its information system on
new trains that have been added to DART's fleet, and is in the final stages of
re-installing its system on new DART buses that are periodically being added to
replace older buses. In addition, the Company has had to lease an FM subcarrier
signal from a different radio station, requiring the Company to replace crystals
on most of its equipment. The Company is funding this recrystalization project
and (re)installations primarily from existing cash and cash equivalents. The
Company's contract with DART is due to expire in October 2002 and DART is
expected to rebid the Contract. There can be no assurance that the Company will
be the successful bidder for the new contract.

At December 31, 2001, the Company's principal current assets consisted of
$26,000 of cash and cash equivalents, $93,000 of net accounts receivable,
$51,000 of prepaid expenses and $95,000 of receivables from officer and
director. The Company's total liabilities of $458,000 consisted of $124,000 of
deferred revenue, $122,000 of accounts payable and accrued payroll and related
liabilities, other accrued liabilities of $45,000, and $167,000 of notes
payable.

The Company has incurred net losses for several years, including approximately
$2 million and $3 million during 1996 and 1997, and $322,000 during 1998. It was
in 1998 that the Company's securities were delisted from the Nasdaq SmallCap
Market as a result of non-compliance with tangible net worth continued listing
requirements. As noted in an explanatory paragraph in the Report of Independent
Certified Public Accountants on the Company's consolidated financial statements,
these conditions raised substantial doubt about the Company's ability to
continue as a going concern.

The Company continues to experience net losses and negative cash flows from
operations and has an accumulated deficit at December 31, 2001 of $13,556,000
and a negative working capital position. The Company has pursued merger
possibilities and continues to do so. The ability of the Company to generate
positive cash flows from operations and net income, is dependent, among other
things, on market conditions, the recovery of recorded assets, cost control,
identifying and securing additional revenue sources, and the Company's ability
to raise capital under acceptable terms. While the Company has had some
successes in certain of these endeavors in the past, there can be no assurance
that its efforts will be successful in the future. The accompanying financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.

Quantitative and Qualitative Disclosure about Market Risk

The Company believes that it does not have any material exposure to interest or
commodity risks. The Company does not own any derivative instruments and does
not engage in any hedging transactions.

                                       9

<PAGE>

Item 7.     Financial Statements.
                                                                           Page
      Index to Financial Statements:                                       F-1

      Report of Independent Certified Public Accountants                   F-2

      Consolidated Balance Sheets                                          F-3

      Consolidated Statements of Operations                                F-4

      Consolidated Statement of Stockholders' Equity (Deficit)             F-5

      Consolidated Statements of Cash Flows                                F-6

      Notes to Financial Statements                                        F-7
                                                                        to F-12

Item 8.     Changes In and Disagreements With Accountants on Accounting and
            Financial Disclosure.

      None.


                                    PART III

Item 9.     Directors, Executive Officers, Promoters and Control Persons;
                 Compliance With Section 16(a) of the Exchange Act.

                        DIRECTORS AND EXECUTIVE OFFICERS

       Information regarding the executive officers and directors of the Company
as of December 31, 2001 is as follows:

Name                       Age          Position with the Company

Donald B. Scott, Jr.       47           President and Chairman of the Board

James F. Biagi, Jr.        45           Secretary and Director

Robert F. Hussey           52           Director

Richard J. Boeglin         44           Vice President, Finance and Operations
                                        Chief Financial Officer

Susan E. Hassel            55           Vice President, Sales

________________


       The names and a brief description of their business experience for at
least the past five years of the directors and executive officers of the Company
follows:

                                       10

<PAGE>

        Donald B. Scott, Jr. has served as President and a director of the
Company since March 1993. In July 1996, Mr. Scott was also elected as the
Company's Chairman of the Board. Mr. Scott served as the Company's Acting
President from December 1992 through March 1993. Mr. Scott was previously a
principal of Rutkowski, Erickson, Scott ("RES"), a consulting firm, from 1991 to
July 1995. Prior to his association with RES, Mr. Scott was with Paine Webber in
New York from 1987 to 1991.

        James F. Biagi, Jr. has served as Secretary and a director of the
Company since its inception in 1988. He is a practicing attorney in Seattle,
Washington, and has been a principal of the law firm Monahan & Biagi since March
1996. Prior to Monahan & Biagi, Mr. Biagi practiced law at the firm Monahan &
Robinson since 1989, where he has specialized in tax, corporate and securities
matters.

        Robert F. Hussey has served as a director of the Company since November
1997. Mr. Hussey was President and CEO of MetroVision of North America, Inc., a
niche cable television company, from February 1991 until April 1997, when the
company was sold. Mr. Hussey has been a director of Vennworks since May 1993,
Nur Macroprinters Ltd. since December 1997, New World Power since April 2000,
Digital Lightwave since August 2000, and H.C. Wainwright & Co. since July 2001.

        Richard J. Boeglin has served as Vice President of Finance and
Operations and the Chief Financial Officer since April 1995. He has been with
the Company since 1991. He has fifteen years of management experience, including
direct management of transit system design, development and installation. From
1987 to 1991, Mr. Boeglin worked in the outdoor advertising industry.

        Susan E. Hassel has served as Vice President of Sales since she started
with the Company in April 1992. She has seventeen years of sales and marketing
experience. From 1985 until 1991, Ms. Hassel was the Director of Sales and
Marketing for The Relocation Center, a relocation counseling company in Dallas,
Texas.


                             SECTION 16 REQUIREMENTS

        Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's directors and officers, and persons who own more
than 10% of a registered class of the Company's equity securities, to file
initial reports of ownership and reports of changes in ownership with the
Securities and Exchange Commission (the "SEC"). Such persons are required by SEC
regulations promulgated pursuant to the Exchange Act to furnish the Company with
copies of all Section 16(a) report forms they file with the SEC.

        The Company's registration statement under Section 12 of the Exchange
Act became effective February 13, 1996. Based solely on its review of the copies
of report forms received by it with respect to initial filings from reporting
persons, the Company believes that all filing requirements applicable to its
directors, officers and persons who own more than 10% of a registered class of
the Company's equity securities have been timely complied with in accordance
with Section 16(a) of the Exchange Act.

                                       11
<PAGE>

Item 10.          Executive Compensation.

The following table sets forth certain information regarding cash and non-cash
compensation paid by the Company during each of the Company's last three fiscal
years to the Company's Chief Executive Officer and the other most highly
compensated executive officers of the Company whose annual compensation exceeded
$100,000 during the fiscal year ended December 31, 2001 (the "Named Persons").
<TABLE>
<CAPTION>

                                   Annual Compensation   Long-Term Compensation
                                                                Awards
Name and                                                                        Securities
Principal Position                      Year      Salary      Bonus        Underlying Options

<S>                                     <C>      <C>          <C>            <C>
Donald B. Scott, Chairman               2001     $  -0-       $10,000         -0-
  of the Board and President            2000        -0-        10,000        44,723
                                        1999        -0-        20,000        20,000

Richard J. Boeglin, V.P.,               2001     $104,667     $ -0-          20,000
  Finance and Operations                2000       98,446       -0-             559
                                        1999       96,000       -0-          21,798

Susan E. Hassel, V.P. Sales             2001     $139,088     $ -0-          20,000
                                        2000      125,697       -0-             559
                                        1999      125,561       -0-          11,179
</TABLE>
________________


The following table sets forth information with respect to options exercised and
held by the Named Persons at December 31, 2001 and during the year then ended.

<TABLE>
<CAPTION>
                                                                                           Number of
                                                                                           Securities            Value of
                                                                                           Underlying           Unexercised
                                                                                          Unexercised          In-the-Money
                                                 Shares                                    Options at             Options
                                                Acquired               Value                 Fiscal         At Fiscal Year-End
                Name                          On Exercise             Realized            Year-End (1)            (1)(2)


<S>                                            <C>                     <C>                   <C>                 <C>   <C>
Donald B. Scott, President                     44,723                  $    -0-              69,643              $    -0-

Richard J. Boeglin, V.P.,                         559                                        41,798              $    200
  Finance and Operations                                               $    -0-

Susan E. Hassel, V.P., Sales                      559                  $    -0-              31,179              $    200
</TABLE>

                                       12

<PAGE>

(1) All options were exercisable on December 31, 2001. The value of unexercised
options is based on an estimated fair market value of the Company's Common Stock
on December 31, 2001, of $.08 per share.
(2) Certain options to officers and directors were repriced to $.125 per share
in February 2001.



                            COMPENSATION OF DIRECTORS

         As compensation for serving in 2001, Mr. Hussey was awarded $25,000,
and Messrs. Scott and Biagi were awarded $10,000 each. Mr. Biagi was paid in
November 2001, and Messrs. Scott and Hussey were paid in February 2002 by
reducing their notes payable to the Company. In addition during 2001, the
Company issued 50,000 options each to Messrs. Hussey and Biagi, as well as
repriced certain options for its officers and directors to $.125 per share.


Item 11. Security Ownership of Certain Beneficial Owners and Management.

         The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of December 31, 2001, by
(i) each person or entity who beneficially owns 5% or more of the Common Stock,
(ii) each director, (iii) the Named Persons, and (iv) all officers and directors
of the Company as a group. Unless otherwise noted, the persons and entities
named below have sole voting and investment power with respect to such shares.
<TABLE>
<CAPTION>

Name of                                         Total Beneficial Ownership        Percent of Class Beneficially
Beneficial Owner                                  (including options)             Owned as of December 31, 2001

<S>                                                   <C>                                  <C>
Whiterock, Inc.                                       248,500 (1)                           8.6%
Donald B. Scott, Jr., Chairman of
   the Board and President                            125,209 (2)                           4.3%
James F. Biagi, Jr., Secretary and Director           154,946 (3)                           5.3%
Robert F. Hussey, Director                            232,000 (4)                           8.0%
Richard J. Boeglin, V.P., Finance and                  44,035 (5)                           1.5%
   Operations
Susan E. Hassel, V.P. Sales                            32,857 (6)                           1.1%
All Executive Officers and Directors                  589,047 (7)                          20.3%
  as a group (5 persons)
</TABLE>
_______________________
(1)       According to a Schedule 13d filed with the Securities and Exchange
          Commission, Whiterock, Inc. is a Texas corporation, principally
          engaged in the business of investments, of which Mr. Kevan Casey is
          founder, president and chairman of the board.
(2)       Includes options to purchase 69,643 shares exercisable within 60 days.
(3)       Includes options to purchase 101,181 shares exercisable within 60
          days.
(4)       Includes options to purchase 200,000 shares exercisable within 60
          days.
(5)       Includes options to purchase 41,798 shares exercisable within 60 days.
(6)       Includes options to purchase 31,179 shares exercisable within 60 days.
(7)       Includes options to purchase 443,801 shares exercisable within 60
          days.

                                       13
<PAGE>


Item 12. Certain Relationships and Related Transactions.

         During the period June 1996 through July 1997, through advances and the
payment of personal expenses, the Company's president and CEO, Donald B. Scott,
owed the Company approximately $42,000. The Company has been accruing interest
at various rates on this amount over the years. The Company's Board of Directors
awarded Mr. Scott $20,000 for services performed as a director in 1999 (of which
$10,000 was used to reduce his note with the Company), $10,000 was awarded for
services performed as a director in 2000, and $10,000 was awarded for services
performed as a director in 2001 (which was used to reduce his note with the
Company). As of December 31, 2001, the balance of Mr. Scott's receivable was
$35,454, including accrued interest, which is fully reserved.


         In April 1999 the Company advanced one of its directors, Robert F.
Hussey, $100,000 pursuant to a promissory note bearing interest at the rate of
8% per year. The original note was to mature in September 1999, and has been
subsequently extended. The new maturity date is December 31, 2002, and the
current rate of interest is 5% per year. This note is collateralized by shares
of Company common stock owned by Mr. Hussey, as well as Mr. Hussey's options to
purchase the Company's common stock. The Company's Board of Directors awarded
Mr. Hussey $35,000 for services performed as a director in 1999 (of which
$25,000 was used to reduce his note with the Company), $10,000 was awarded for
services performed as a director in 2000, and $25,000 was awarded for services
performed as a director in 2001 (which was used to reduce his note with the
Company). As of December 31, 2001, the balance of Mr. Hussey's receivable was
$94,856, including accrued interest.

         The Company believes that the foregoing transactions with its officers
and directors were on terms no less favorable than could have been obtained from
independent third parties. All future transactions with such persons will also
be on terms no less favorable than could be obtained from independent third
parties.

Item 13.     Exhibits and Reports on Form 8-K.

         (a)      Exhibits - Consent of Independent Certified Public Accountants
                  dated March 12, 2002.

         (b)      Reports on Form 8K - No Form 8-K was filed by the Company
                  during the fourth quarter of 2001.

                                       14


<PAGE>

                                     EXHIBIT


               CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Digital Data Networks, Inc.
Dallas, Texas

We hereby consent to the incorporation by reference in the Company's Form S-8 of
our report dated March 12, 2002 relating to the consolidated financial
statements of Digital Data Networks, Inc. appearing in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 2001. Our report contains
an explanatory paragraph regarding the Company's ability to continue as a going
concern.





BDO Seidman, LLP
Seattle, Washington
March 12, 2002




                                       15
<PAGE>

                                   SIGNATURES

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


                             Digital Data Networks, Inc.
                                  (Registrant)


                             By: /s/ Donald B. Scott
                                 Donald B. Scott, Chairman of the Board
                                 (Principal Executive Officer)


                             Date:  March 12, 2002


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.


Signatures                  Capacity                            Date


/s/  Donald B. Scott        Chairman of the Board,              March 12, 2002
Donald B. Scott             President, Director,
                            (Principal Executive Officer)

/s/  James F. Biagi, Jr.    Secretary and Director              March 12, 2002
James F. Biagi, Jr.


/s/  Robert  F. Hussey      Director                            March 12, 2002
Robert F. Hussey


/s/  Richard J. Boeglin     Vice President, Finance and         March 12, 2002
Richard J. Boeglin          Operations (Principal Financial
                            and Accounting Officer)


                                       16
<PAGE>


                           DIGITAL DATA NETWORKS, INC.
                        CONSOLIDATED FINANCIAL STATEMENTS


                                      INDEX

                                                                           Page

Report of Independent Certified Public Accountants                         F-2

Consolidated Balance Sheets                                                F-3

Consolidated Statements of Operations                                      F-4

Consolidated Statement of Stockholders' Equity (Deficit)                   F-5

Consolidated Statements of Cash Flows                                      F-6

Notes to Financial Statements                                      F-7 to F-12










                                      F-1
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Board of Directors and Stockholders of
Digital Data Networks, Inc.


         We have audited the accompanying consolidated balance sheets of Digital
Data Networks, Inc. and its subsidiaries ("the Company"), as of December 31,
2000 and 2001 and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of 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 of America. Those standards require that we plan
and perform the audits 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Digital Data
Networks, Inc. and its subsidiaries as of December 31, 2000 and 2001, and the
results of their operations and their cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.

         The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has incurred recurring losses
from operations and has experienced negative cash flows from operations.
Additionally, the Company's contract with Dallas Area Rapid Transit ("DART") is
due to expire in October 2002 and DART is required to rebid the contract. There
can be no assurance that the Company will be the successful bidder of the new
contract. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans concerning these matters are
also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.



BDO Seidman, LLP
Seattle, Washington



March 12, 2002

                                      F-2

<PAGE>

                           DIGITAL DATA NETWORKS, INC.
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)

<TABLE>
<CAPTION>

                                                                                           December 31,
                                                                                  -----------------------------
                                                                                      2000              2001
                                                                                      ----              ----
Current assets
<S>                                                                               <C>               <C>
  Cash and cash equivalents                                                       $    347          $     26
  Trade accounts receivable, net of allowance
     for doubtful accounts of $8                                                        73                93
  Prepaid expenses and other current assets                                             63                51
  Receivables from officer and director, net of reserves (Note 8)                       87                95
                                                                                  --------          --------
     Total current assets                                                              570               265

Equipment, net (Notes 4 and 5)                                                          44                39
Other assets                                                                             3                 1
                                                                                  --------          --------

Total assets                                                                      $    617          $    305
                                                                                  ========          ========


Current liabilities
  Accounts payable                                                                $     81          $    100
  Accrued payroll and related                                                           21                22
  Deferred revenue                                                                     251               124
  Other accrued liabilities                                                             45                45
  Notes payable (Note 5)                                                               174               167
                                                                                  --------          --------
     Total current liabilities                                                         572               458
                                                                                  --------          --------

Commitments and contingencies (Notes 2, 10, and 11)

Stockholders' equity (deficit)
  Preferred stock, no par value, 1,000,000 shares authorized,
     no shares issued or outstanding                                                     -                 -
  Common stock, no par value, 10,000,000 shares authorized,
    2,284,597 and 2,458,390 shares issued and outstanding                           13,390            13,403
  Accumulated deficit                                                              (13,345)          (13,556)
                                                                                  --------          --------
     Total stockholders' equity (deficit)                                               45              (153)
                                                                                  --------          --------
     Total liabilities and stockholders' equity (deficit)                         $    617          $    305
                                                                                  ========          ========
</TABLE>

















                 See accompanying notes to financial statements

                                      F-3
<PAGE>

                           DIGITAL DATA NETWORKS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>

                                                                      Year Ended December 31,
                                                                 ----------------------------------
                                                                         2000             2001
                                                                         ----             ----
<S>                                                                   <C>              <C>
Revenues                                                              $   590          $   835
                                                                      -------          -------
Expenses:
   Direct operating costs                                                 170              477
   Salaries and related                                                   343              362
   Marketing, general and administrative                                  190              192
                                                                      -------          -------
      Total expenses                                                      703            1,031
                                                                      -------          -------
Loss from operations                                                     (113)            (196)
                                                                      -------          -------
Other income (expense):
   Interest expense                                                        (8)              (8)
   Investment income                                                       22               15
   Unrealized loss on equity securities                                   (58)              (2)
   Provision for litigation settlement                                      -              (20)
   Reduction of provision for disputed liabilities                        105
                                                                      -------          -------
      Total other income (expense), net                                    61              (15)
                                                                      -------          -------
Net loss                                                              $   (52)         $  (211)
                                                                      =======          =======
Net loss per share - basic and diluted                                $ (0.02)         $ (0.09)
                                                                      =======          =======
Weighted average shares outstanding                                     2,284            2,369
                                                                      =======          =======
</TABLE>


















                 See accompanying notes to financial statements
                                      F-4

<PAGE>

                           DIGITAL DATA NETWORKS, INC.
            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
                                 (in Thousands)
<TABLE>
<CAPTION>
                                                                  Unrealized
                                                                 Appreciation
                                                                  on Equity
                                                                  Securities
                                             Common Stock         Available      Accumulated
                                        Shares       Amount        For Sale      Deficit        Total
                                        ------       ------      ------------    -----------    ------
<S>                                      <C>       <C>            <C>           <C>             <C>
Balance, January 1, 2000                 2,284     $ 13,411       $   90        $ (13,293)      $  208

Net loss                                     -            -            -              (52)         (52)
Decrease in unrealized
   appreciation on equity
   securities available for sale             -            -          (90)               -          (90)
Total comprehensive income                   -            -            -                -         (142)
Stock-based compensation                     -          (21)           -                -          (21)
                                         -----     --------       ------        ---------       ------

Balance, December 31, 2000               2,284       13,390            -          (13,345)          45


Exercise of stock options                   74            9            -                -            9
Shares issued in settlement of
  litigation (Note 11)                     100            4            -                -            4
Net loss                                     -            -            -             (211)        (211)
                                         -----     --------       ------        ---------       ------

Balance, December 31, 2001               2,458     $ 13,403       $    -        $ (13,556)      $ (153)
                                         =====     ========       ======        =========       ======
</TABLE>
























                 See accompanying notes to financial statements
                                      F-5
<PAGE>

                           DIGITAL DATA NETWORKS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in Thousands)

                Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>

                                                                                Year Ended December 31,
                                                                              --------------------------
                                                                                      2000        2001
                                                                                     ------      ------
Cash flows from operating activities
<S>                                                                                  <C>         <C>
Net Loss                                                                             $   (52)    $  (211)
   Adjustments to reconcile net loss to net cash
     provided (used) by operating activities
       Depreciation and amortization                                                      16          85
       Unrealized loss on equity securities                                               58           2
       Reduction of provision for disputed liabilities                                  (105)          -
       Compensatory option expense                                                       (21)          -
       Increase in accounts receivable                                                   (17)        (20)
       Decrease (increase) in prepaid expenses and other current assets                  (60)         12
       Increase in accounts payable and other current liabilities                         32          20
       Increase (decrease) in deferred revenue                                           153        (127)
       Other                                                                               3           4
                                                                                     -------     -------
Net cash provided (used) by operating activities                                           7        (235)
                                                                                     -------     -------
Cash flows from investing activities
   Purchases of equipment
                                                                                         (32)        (80)
Net cash used  by investing activities                                               -------     -------
                                                                                         (32)        (80)
                                                                                     -------     -------
Cash flows from financing activities
   Proceeds from exercise of stock options                                                 -           9
   Debt principal payments                                                                 -         (15)
                                                                                     -------     -------
Net cash used by financing activities                                                      -          (6)
                                                                                     -------     -------
Net decrease in cash and cash equivalents                                                (25)       (321)

Cash and cash equivalents
   Beginning of year                                                                     372         347
                                                                                     -------     -------
   End of year                                                                       $   347     $    26
                                                                                     =======     =======
</TABLE>













                 See accompanying notes to financial statements
                                      F-6

<PAGE>

                           DIGITAL DATA NETWORKS, INC.
                          NOTES TO FINANCIAL STATEMENTS

Note 1  Description of Business and Summary of Significant Accounting Policies

Digital Data Networks, Inc. ("the Company" or "DDN"), a wireless, passenger
communication and advertising company, is principally engaged in the operation
of a "digital information network", a network of computerized electronics
message displays that deliver current news, information and advertising to
riders on-board public transit vehicles. The digital information network
consists of a series of electronic information displays utilizing digital radio
transmission technology. The Company, incorporated in 1988, operates a digital
information network in Dallas, Texas under the name The Transit Network. Through
an arrangement with a third party, the Company also derives additional revenue
from selling truckside advertising.

Principles of Consolidation - The consolidated financial statements of DDN
include the accounts of its subsidiaries after elimination of intercompany
balances and transactions.

Cash and Cash Equivalents - For purposes of balance sheet classification and the
statements of cash flows, the Company considers all highly liquid investments
purchased with an original maturity of three months or less to be cash
equivalents.

Equipment - Equipment is stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the respective assets,
typically three years, or remaining contract term, whichever is shorter.

Impairment of Long-Lived Assets - The Company follows the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed
Of", as superceded by SFAS No. 144, "Accounting for the Impairment and Disposal
of Long-Lived Assets". The Company evaluates its long-lived assets for financial
impairment and continues to evaluate them as events or changes in circumstances
indicate that the carrying value of such assets may not be fully recoverable.
The carrying value of long-lived assets is considered impaired when the
anticipated undiscounted cash flows from an asset is less than its carrying
value. In that event, a loss is recognized for the amount by which the carrying
value exceeds the fair value of the long-lived asset. The Company has not
recognized any impairment losses.

Investments in Equity Securities - The Company's investments in equity
securities are stated at estimated market value and considered available for
sale. Unrealized gain (loss) on equity securities available for sale are
recorded as a separate component of stockholders' equity, unless unrealized
losses resulting from declines in market value are considered other than
temporary. If declines in market value are considered to be other than
temporary, then the unrealized loss is recognized as a loss in the statement of
operations.

Income Taxes - The Company accounts for income taxes in accordance with the
provisions of SFAS No. 109, "Accounting for Income Taxes". SFAS No. 109 requires
recognition of deferred income taxes to provide for temporary differences
between financial reporting and tax basis of assets and liabilities. Deferred
taxes are measured using enacted tax rates expected to be in effect in years in
which temporary differences are expected to reverse.

Fair Value of Financial Instruments - Carrying amounts reported in the balance
sheet for cash and cash equivalents, trade accounts receivable, notes
receivable, other current assets, accounts payable and other accrued expenses
approximate fair value because of their immediate or short-term nature. The
carrying amount reported in the balance sheet for investments in equity
securities approximates fair value because they are stated at estimated market
value based upon recent transactions in such securities. The fair value of debt
approximates its carrying value because of its near-term maturity date.

Revenue Recognition - The Company records revenue over the contractual period
which services are provided. To the extent payment is received in advance of the
contractual period expiration, such prepaid amounts are recorded as deferred
revenue until services are provided.


                                      F-7
<PAGE>

Note 1 Description of Business and Summary of Significant Accounting Policies
(continued)

Stock-Based Compensation - Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation", ("SFAS 123") encourages, but does not
require, companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has chosen to continue to account
for stock-based employee compensation utilizing the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" and related interpretations. Accordingly, compensation cost
for stock options is measured as the excess, if any, of the quoted market price
of the Company's stock at the date of grant over the amount an employee must pay
to acquire the stock. If stock options are repriced, the effects of changes in
the stock price are recognized as compensation expense in accordance with
accounting for variable stock option plans. Had the Company accounted for
stock-based compensation at fair value in accordance with SFAS 123, the pro
forma financial statement effect on net loss would have been insignificantly
different from actual amounts.

Net Loss Per Share - Basic "Earnings Per Share" ("EPS") is computed as net
income (loss) divided by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur from common shares issuable through stock options, warrants and
other convertible securities. As the Company's stock options and warrants for
approximately 2.6 million shares and 662,000 shares of Company common stock at
December 31, 2000 and 2001, respectively, are antidilutive, only basic EPS is
presented. These shares could potentially dilute future EPS calculations.

Accounting Estimates - Preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the financial statement date and reported amounts of revenues and
expenses during reported periods. Actual results could differ from those
estimates.

Comprehensive Income - Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income establishes standards for reporting and
presentation of comprehensive income and its components in a full set of
financial statements. Comprehensive income consists of the net loss for the year
and the decrease in unrealized appreciation on equity securities available for
sale, and is presented in the consolidated statement of stockholders' equity.


Note 2  Financial Condition, Liquidity and Going Concern

The Company continues to experience net losses and negative cash flows from
operations, and has an accumulated deficit at December 31, 2001 of $13,556,000
and a negative working capital position. As discussed in Note 5, the Company has
a contract to provide services with the Dallas Area Rapid Transit ("DART"),
which was extended for one year and which now expires in October 2002. If DART
wishes to continue having a digital information network on its vehicles, as the
Company believes it does, DART must solicit new proposals for this project via a
Request for Proposal ("RFP"), and allow any and all interested parties to submit
a bid. While the Company intends to respond to this RFP and hopes to enter into
a new contract in order to continue providing services to DART, there can be no
guarantee that the Company will be the successful bidder or that a new contract
would have terms similar to its current contract. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.

The ability of the Company to generate positive cash flows from operations and
net income, is dependent, among other things, on market conditions, the recovery
of recorded assets, cost control, identifying and securing additional revenue
sources, and the Company's ability to raise capital under acceptable terms. The
Company has pursued merger possibilities and continues to do so. While the
Company has had some successes in these endeavors in the past, there can be no
assurance that its efforts will be successful in the future. These financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.

                                      F-8
<PAGE>


Note 3  Investment in Equity Securities

The Company's investments in equity securities are stated at estimated fair
value, which was $2,000 and $0 at December 31, 2000 and 2001, respectively. At
January 1, 2000, the unrealized appreciation on these available-for-sale
securities is included as a separate component of stockholders' equity. At
December 31, 2000 and 2001, the unrealized loss is recognized as a loss in the
statement of operations, as the decline in market value is considered to be
other than temporary.

Note 4  Equipment
<TABLE>
<CAPTION>

Equipment consists of the following (in thousands):
                                                                                      December 31,
                                                                                      ------------
                                                                                     2000         2001
                                                                                   -------      --------
<S>                                                                                <C>          <C>
Equipment installed in public transit vehicles                                     $ 1,510      $ 1,581
Office equipment and other                                                              15           24
                                                                                   -------      -------
                                                                                     1,525        1,605
Accumulated depreciation                                                            (1,481)      (1,566)
                                                                                   -------      -------
Equipment, net                                                                     $    44      $    39
                                                                                   =======      =======
</TABLE>

Note 5  Contract with DART and Note Payable

The Company has a contract to provide services with DART, which was to expire in
October 2001 and was extended for one year, that includes a provision for a 4%
royalty payable to DART on certain gross advertising receipts. The extension of
the contract provided for the refinancing of the Company's note payable to DART.
Prior to its original October 15, 2001 due date, the note provided for interest
at 5% and at 18% after the maturity date. Terms of the note were revised to
extend the due date to October 15, 2002, require monthly payments of $5,000
commencing in October 2001, and provide for interest at 12% per annum. The
Company's equipment installed on DART public transit vehicles is pledged as
collateral for the note.

Note 6  Software License and Supply Agreement

Pursuant to terms of a 1993 agreement, as amended, the Company licenses
substantially all of its computer software, which is an essential element of the
digital information network, from an electronics supplier and software
development company. The fully-paid license provides the Company with exclusive
rights to such software in metropolitan areas of the United States and Canada
with populations over 100,000 and nonexclusive rights elsewhere in the world.

Note 7  Common Stock and Stock Options

In February 1996, the Company closed its initial public stock and warrant
offering and received net cash proceeds of approximately $5.8 million, after
deduction for underwriters commissions and certain other offering related costs.
The Company issued 1,322,500 shares of its common stock and 1,840,000 of its
common stock purchase warrants. Each warrant entitled the holder to purchase one
share of the Company's common stock at an exercise price of $6 per share during
the five years commencing upon issuance. All of these warrants expired,
unexercised, in February 2001.

During 1994, the Company adopted a Combined Incentive and Non-Qualified Stock
Option Plan (the "1994 Plan") which permits the issuance of options to acquire
shares of Company common stock. The 1994 Plan permits grants of incentive stock
options to employees and of non-qualified stock options to employees, directors,
consultants or independent contractors of the Company. The exercise price of
incentive stock options shall not be less than the fair market value of Company
common stock at the date of grant. The exercise price of non-qualified stock
options may be greater or less than the fair market value of Company common
stock at the date of grant. The duration of

                                      F-9
<PAGE>

Note 7  Common Stock and Stock Options (continued)

options shall be established by the Board of Directors, and shall not exceed ten
years. During 1996, the Company adopted a Combined Incentive and Non-Qualified
Stock Option Plan (the "1996 Plan") with provisions similar to the 1994 Plan.
The 1994 Plan and 1996 Plan reserve approximately 112,000 shares and 250,000
shares, respectively, of common stock for grant and provides that terms of each
award be determined by the Board of Directors. Prior to 1998, the Company
granted approximately 323,000 options under the 1994 and 1996 Plans.

During 2001, the Company repriced all options granted to officers and directors
from $.25 to $.125 per share. During 2000, the Company repriced 90,000 options
granted to directors having an exercise price of $.50 to $.30 per share, and
extended the life of approximately 74,000 options granted to officers and
directors having an exercise price of $.25 per share for one year to March 2001.

As a result of decreases in the excess of estimated fair value of Company common
stock over the exercise price for repriced options, which approximated $25,000
at January 1, 2000 and $0 at December 31 2000, the Company recognized an expense
reversal of $25,000 during 2000.

All stock options granted had an exercise price not less than the fair market
value of the Company's common stock on the date of grant. The following
summarizes stock option activity during the two years ended December 31, 2001
and represent exercise prices as adjusted for repricings (thousands of shares):
<TABLE>
<CAPTION>

                                                       Exercise Price      Weighted Average
                                            Shares       Per Share           Exercise Price
                                          --------     --------------      ----------------
<S>                                        <C>         <C>                    <C>
   Outstanding at January 1, 2000           788        $0.09 to $9.93         $      4.59

   Repriced or extended                     173        $0.25 to $0.30         $      0.28
   Expired, repriced or extended           (184)       $0.25 to $8.94         $      0.80
                                           ----        --------------         -----------

   Outstanding at December 31, 2000         777        $0.09 to $9.93         $      1.15


   Exercised                                (74)       $      0.125           $      0.125
   Granted                                  140        $      0.07            $      0.07
   Repriced                                 304        $      0.125           $      0.125
   Expired or repriced                     (485)       $0.25 to $5.00         $      0.34
                                           ----        --------------         ------------
   Outstanding at December 31, 2001         662        $0.07 to $9.93         $      1.16
                                           ====        ==============         ============
</TABLE>

Information relating to outstanding and exercisable stock options at December
31, 2001, summarized by exercise price are as follows (thousands of shares):
<TABLE>
<CAPTION>

                                                                      Weighted Average
                                                            ----------------------------------
          Range of                                          Remaining Life
      Exercise Price                        Shares             in Years         Exercise Price
   -------------------                    --------          --------------      --------------
<S><C>                                      <C>               <C>              <C>
   $  0.07 to $  0.125                      462               3.6              $  0.11
   $  0.25 to $  0.27                       123               1.0                 0.25
   $  4.47 to $  9.93                        77               1.5                 8.89
                                            ---
                                            662                                $  1.16
</TABLE>



                                      F-10
<PAGE>


Note 8  Related Party Transactions

Prior to 1998, the Company made cash advances to its President, who is also one
of the Company's directors, which approximated $42,000. The Company has
continued to request repayments on amounts due, although none have been made to
date. During 1998, the entire amount of the receivable was reserved. During 1999
and 2001, the Company's Board of Directors authorized a $10,000 reduction in
this receivable in consideration for consulting services provided. Since the
receivable had been fully reserved in 1998, no net additional expense was
recognized.

Included in receivables from officer and directors at December 31, 2000 and 2001
is $87,000 and $95,000 respectively, due from one of the Company's directors
pursuant to terms of a 5% promissory note, which had an original principal
balance of $100,000. The note's maturity date has been extended and is now due
December 31, 2002. The note is collateralized by shares of Company common stock
owned by the director and the director's options to purchase Company common
stock. During 2001, the Company's Board of Directors authorized a $25,000
reduction in the note receivable in consideration for consulting services, which
has been recorded as consulting expense included in marketing, general and
administrative expense, and accrued and included in accounts payable at December
31, 2001. In 2002, the Company paid the consulting fees to the Director and the
proceeds were returned to the Company and reduced the note receivable.


Note 9  Income Taxes

At December 31, 2000 and 2001, the Company had deferred tax assets of
approximately $2.7 million, principally arising from net operating loss
carryforwards. As management of the Company cannot determine that it is more
likely than not that the Company will receive the benefit of these assets, a
valuation allowance equal to the deferred tax asset has been established.

As of December 31, 2001 the Company had net operating loss carryforwards
available to reduce future taxable income of approximately $8 million, which
begin to expire in 2006. As a result of potential changes in stockholder
ownership, utilization of net operating loss carryforwards could be subject to
annual limitation.


Note 10  Operating Lease Commitments

The Company leases an FM subcarrier for transmission to electronic display signs
located on-board public transit vehicles. At December 31, 2001, the FM
subcarrier lease is pursuant to an agreement expiring November 2002, which
requires monthly payments of $4,000. Also, the Company leases an office facility
under an operating lease with monthly payments of approximately $2,600 expiring
in November 2002. At December 31, 2001, future annual minimum lease payments for
all leases approximate $73,000. Rent expense for 2000 and 2001 was $31,000 and
$30,000, respectively.


Note 11  Commitments and Contingencies

In 1998, the Company settled litigation between the Company and the former
stockholder of hip Communications pertaining to the Company's 1996 acquisition
of that company. As part of that settlement agreement, the Company was required
to transfer the "hip.com" domain name to the former stockholder. The Company
failed to transfer the domain name and no longer has registration rights to such
domain name. As a result, in 1999 the former stockholder filed an action against
the Company for damages for breach of settlement agreement. In October 2001, the
Company and former stockholder entered into a new settlement agreement, whereby
the Company paid the former stockholder $25,000 and 100,000 shares of the
Company's stock, and in exchange, the former stockholder terminated its pending
legal action and agreed to take no further legal action in this matter. As a
result of this new settlement agreement, the Company recorded an additional
provision for litigation settlement of $20,000 during the year ended December
31, 2001.

                                      F-11

<PAGE>

Note 11  Commitments and Contingencies (continued)

During the year ended December 31, 2000, the Company received no communications
from former vendors regarding previously recorded disputed liabilities, and
since it had been more than three years from invoice dates and more than a year
of no follow-up communications from vendors contesting the Company's dispute,
the Company reduced amounts previously provided for these liabilities by
$105,000 in the fourth quarter. The reduction of previously provided liabilities
is included in other income for the year ended December 31, 2000.

The Company is subject to various legal proceedings and claims that arise in the
ordinary course of business. Company management currently believes that
resolution of other various legal proceedings will not have a material adverse
impact on the Company's financial position, results of operations or cash flows.


Note 12  Segment, Geographic and Significant Customer Information

Revenues from major customers exceeding 10% of total revenue for 2000 included
Dallas County Community College District, accounting for approximately 17% of
consolidated revenues. During 2001, revenues from major customers exceeding 10%
of total revenue included three customers, Parkland Hospital, Methodist Hospital
and Dallas County Community College District, which accounted for approximately
38%, 13% and 12% of consolidated revenues, respectively.



                                      F-12
<PAGE>