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

                                    FORM 10-K
(Mark One)
  [X]         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                     For fiscal year ended December 31, 2001
                                       OR
  [ ]       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

     For the transition period from __________________ to __________________

                        Commission file number: 000-24597
                           CARRIER ACCESS CORPORATION
             (Exact name of registrant as specified in its charter)

              DELAWARE                                  84-1208770
 (State or other jurisdiction of          (I.R.S. Employer Identification No.)
  incorporation or organization)

                      5395 PEARL PARKWAY, BOULDER, CO 80301
               (Address of principal executive offices) (Zip Code)

                                 (303) 442-5455
              (Registrant's telephone number, including area code)

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

            Securities registered pursuant to 12(b) of the Act: NONE
           Securities registered pursuant to Section 12(g) of the Act:
                    COMMON STOCK, PAR VALUE $0.001 PER SHARE
                                (Title of Class)


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

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

     As of March 1, 2002, there were 24,746,220 shares of the Registrant's
common stock outstanding, and the aggregate market value of such shares held by
non-affiliates of the Registrant (based upon the closing sale price of such
shares on the Nasdaq National Market on March 1, 2002) was approximately
$40,250,484. Shares of the Registrant's common stock held by each executive
officer and director and by each entity that owns 10% or more of the
Registrant's outstanding common stock have been excluded in that such persons or
entities may be deemed to be affiliates. This determination of affiliate status
is not necessarily a conclusive determination for other purposes.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Certain sections of the Registrant's definitive Proxy Statement for the
2002 Annual Meeting of Stockholders are incorporated by reference in Part III of
this Form 10-K to the extent stated herein.



<PAGE>
                           CARRIER ACCESS CORPORATION
                       INDEX TO ANNUAL REPORT ON FORM 10-K
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

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                                                                                                                    Page No.
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<S>                                                                                                                 <C>
PART I

Item 1.  Business.......................................................................................................3

         Risk Factors..................................................................................................10

Item 2.  Properties....................................................................................................19

Item 3.  Legal Proceedings.............................................................................................19

Item 4.  Submission of Matters to a Vote of Security Holders...........................................................19

         Executive Officers of the Registrant..........................................................................19

PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.........................................20

Item 6.  Selected Financial Data.......................................................................................20

Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations.........................22

Item 7A. Quantitative and Qualitative Disclosures About Market Risk....................................................29

Item 8.  Consolidated Financial Statements and Supplementary Data......................................................29

Item 9.  Changes in and Disagreements With Accountants on Accounting and Financial Disclosure..........................43

PART III

Item 10. Directors and Executive Officers of the Registrant............................................................44

Item 11. Executive Compensation........................................................................................44

Item 12. Security Ownership of Certain Beneficial Owners and Management................................................44

Item 13. Certain Relationships and Related Transactions................................................................44

PART IV

Item 14. Exhibits, Consolidated Financial Statement Schedules, and Reports on Form 8-K.................................45
</Table>


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                           FORWARD LOOKING STATEMENTS


     The information in this report contains certain forward-looking statements,
including forward-looking statements regarding future customer sales of our
products, inventory levels, our anticipated product offerings, expectations
regarding selling, general and administrative expenses over the next few
quarters, customer revenue mix, gross margins, and operating costs and expenses.
In some cases, forward-looking statements can be identified by the use of
terminology such as "may," "will," "expects," "intends," "plans," "anticipates,"
"estimates," "potential," or "continue, " or the negative thereof or other
comparable terminology. These statements are based on current expectations and
projections about our industry and assumptions made by the management and are
not guarantees of future performance. Although we believe that the expectations
reflected in the forward-looking statements contained herein are reasonable,
these expectations or any of the forward-looking statements could prove to be
incorrect, and actual results could differ materially from those projected or
assumed in the forward-looking statements. Factors that could cause or
contribute to material differences include the factors set forth in the "Risk
Factors" section in this report, as well as our other periodic reports on Form
10-Q filed with the Securities and Exchange Commission. We undertake no
obligation to update any forward-looking statements or reasons why actual
results may differ in this Report on Form 10-K.

     Unless otherwise indicated, references in this report to specific years and
quarters are to our fiscal year and fiscal quarters.

     Our principal executive offices are located at 5395 Pearl Parkway, Boulder,
Colorado 80301; our telephone number is (800) 442-5455 and our web site is
http://www.carrieraccess.com. The information on our web site is not
incorporated in this report.





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<PAGE>





                                     PART I


ITEM 1. BUSINESS

GENERAL

     Carrier Access Corporation manufactures high-performance equipment for
telecommunications carriers that helps to accelerate revenue, lower operating
costs and extend capital budgets. We were incorporated in Colorado in September
1992, reincorporated in Delaware in June 1998 and completed our initial public
offering in July 1998. Our solutions deliver more than 2.5 million voice and
data lines into 4,500 cities for customers, including all the incumbent carriers
and the top wireless service providers and competitive cable companies.

     We focus our business on three areas: broadband access from the Central
Office, or "CO" (a physical building where the local switching equipment is
found), to the customer premise, enterprise voice and data service delivery and
wireless infrastructure. Our solutions meet the industry's highest reliability
and interoperability standards, including Telcordia TIRKS/OSMINE, NEBS Level 3,
and ISO 9001. Depending upon product configuration, the retail list prices of
our products range from $995 to $50,000.

RECENT DEVELOPMENTS

     BROADBAND ACCESS: We efficiently deliver broadband access from the CO to
the end-user's location and our digital equipment provides a solution for the
distribution and management of high bandwidth services. Our CO communications
solutions enable service providers to reach a large number of voice and
high-speed Internet access businesses and consumers. Service providers can
cost-effectively connect end-user customers to their network platforms, decrease
ongoing transmission equipment and maintenance expenses, and, at the same time,
increase revenue through new service delivery.

     ENTERPRISE VOICE/DATA SERVICE DELIVERY: As the demand for sophisticated
voice and data service delivery increases, national and local service providers
are focused on optimizing service margins by decreasing access transport and
labor costs. These costs have proven more difficult to control than other
expenditures but are just as influential on profitability. Our complete and
custom solutions provide multiple voice and data access services in one platform
that is both easy to install and easy to manage while delivering the quality of
services that end-users demand.

     WIRELESS INFRASTRUCTURE: In a relatively short period of time, mobile
wireless networks have gone from early analog creation to multiple forms of
digital transmissions. Now wireless providers are focusing inside of their
networks to reduce inefficiency and improve service delivery. Our scalable
solutions enable wireless carriers to optimize bandwidth resources, lower
operating expenses, cost-effectively deliver revenue-generating services, and
effectively migrate from 2.5G to 3G with the additional features and
functionality added to digital cellular phones, such as Internet access and
messaging.

     On March 22, 2002, we announced a reduction in force of approximately 75
employees which will result in a charge of approximately $404,000 in the first
quarter of 2002.


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<PAGE>




PRINCIPAL PRODUCTS

     ACCESS BANK(R) PRODUCTS

     The Access Bank products are a line of Customer Service Terminals ("CST"s)
designed to deliver carrier-class voice and data services in a one rack-unit.
The Access Bank products provide a solution for major services, including voice
only, voice and data over T1, voice and data over high-bit-rate digital
subscriber line, and data over symmetrical digital subscriber line. The Access
Bank products deliver quality services for regional Bell operating companies
("RBOC"s), incumbent local exchange carriers ("ILEC"s), interexchange carriers,
and Internet Service Providers ("ISP"s).

     ACCESS BANK I. Released in June 1995, this product provides a solution for
converting T1 digital access services from communications service providers
including ILECs and competitive local exchange carriers ("CLEC"s) to 12 or 24
individual analog telephone circuits at end user locations. The Access Bank I
incorporates an integrated T1 Channel Service Unit, which allows customers to
plug in a T1 line without having to connect other external devices to perform
service termination. Six different types of 12-channel telephone line interface
circuit cards provide many popular voice service options while also delivering
enhanced local services such as caller ID and distinctive ringing. The Access
Bank I supports data services such as fax and high-speed modem traffic. The
Access Bank I is principally used by service providers for economical local
service delivery, long distance service delivery using T1 access, digital
service interconnection to PBXs and key systems, Internet modem pool connections
to T1, branch office connectivity to T1, and rapid deployment of temporary
telephone services.

     ACCESS BANK I TR-08. Released in November 1996, this product provides a
Bellcore Standard TR-08 digital loop carrier software protocol in addition to
the basic features of the Access Bank I. TR-08 signaling delivers T1 connections
directly to the line side T1 ports of local switches and is widely deployed in
local exchange carrier, CLEC, and ILEC networks. The Access Bank I TR-08
provides low-cost, compact, wiring closet deployment of carrier-class enhanced
voice features such as Caller ID and distinctive ringing to service providers
using Lucent Technologies, Inc. ("Lucent"), Northern Telecom Limited ("Nortel"),
Siemens and other local exchange switches.

     ACCESS BANK II VOICE AND DATA MULTIPLEXER. Released in November 1996, this
product delivers twice the T1 capacity of the Access Bank I in the same size
package, enabling service providers to integrate high-speed Internet service
with multi-line voice service in a single unit. Each of the two T1 interfaces
can accommodate current and future bandwidth requirements for a combination of
facsimile, modem, high-speed Internet, voice, and PBX telephone services. The
integral V.35 data interface and T1 interfaces offer connectivity for Internet
access routers, enterprise routers, frame relay devices, video and other
high-speed data applications. Service providers rely on the flexibility of the
Access Bank II to deliver multi-line voice plus high-speed Internet connections
to enterprise branch offices, small business customers, and medium-sized
business locations. The Access Bank II also includes sophisticated management
capabilities such as an optional Ethernet simple network management protocol
("SNMP") and local area network management connection for configuration and
monitoring.

     ACCESS EXCHANGE. Released in April 1998, this product performs the
functions of the Access Bank II and integrates software and digital signal
processing capability to provide automatic call routing and number translation
on a call-by-call basis. This product allows long distance service providers to
combine local voice services with long distance and high-speed Internet access
on their existing switch infrastructure while routing calls to the local
exchange carrier for local calling, directory, 911, and other lifeline services.

     WIDE BANK(R) PRODUCTS

     The Wide Bank DS3 and STS-1 access products were engineered to replace
old-generation equipment and significantly reduce the size and power
requirements of older communications equipment. In addition, the Wide Bank
products utilize new levels of software integration over older equipment to
provide a feature-rich and cost-effective platform supporting full high- and
low-speed redundancy, hitless T3 and STS-1 network protection, built-in Network
Interface Units and Bit Error Rate Test capabilities. The Wide Bank products
also conform to the most popular management schemes used by our service provider
customers, including SNMP via Ethernet, local or remote Command Line Interface
and Transaction Language 1 ("TL1"). Certification to Network Equipment Building
Systems ("NEBS") enables installation in a wide array of service provider
environments including CO and co-location facilities while the modular design
permits a platform cost and configuration to be matched exactly to the service
provider needs.

     WIDE BANK 28/DS3 MULTIPLEXER. Released November 1997, this product connects
a high bandwidth digital T3 (672 telephone line equivalents) network access line
to 28 T1 or 21 E1 service connections. The Wide Bank 28 allows communications
service providers (wireline and wireless), ISP, enterprise, and government
customers to consolidate multiple T1's or E1's into T3 services to reduce
monthly access costs. The Wide Bank 28 also provides redundant T3 service
distribution from digital radio connections, T1 service expansion from fiber
multiplexers and connects T3 incumbent local exchange carrier services to ISP
remote access servers. The Wide Bank 28 incorporates T1 Network Interface Unit
functionality to eliminate additional equipment and installation labor costs for
service providers. A Maintenance Service Option ("MSO") is available for
providing testing and maintenance capabilities without disruption of services by
field technicians.



                                       4
<PAGE>

     Wide Bank 28 is NEBS Level 3 certified and offers the features and
performance in compliance with NEBS Level 3 criteria as outlined by Telcordia
Technologies for CO equipment. The NEBS certification allows service providers
to install the Wide Bank 28 in CO locations where the product is designed to
operate under electrical and physical environmental stresses such as
electromagnetic interference, high and low temperature range and earthquake and
vibration conditions. The Wide Bank 28 offers multiple management controls and
TL-1 Management Control and a Java-based Graphical User Interface for ease of
operations and management on the service providers' network, as well as a SNMP
systems enterprise MIB providing ease of integration with existing Network
Management Systems.

     WIDE BANK 28/STS-1 MULTIPLEXER. Released in June 1999, this product
cost-effectively delivers T1 service connections from SONET STS-1 electrical
interfaces. This addition to our widely accepted and deployed Wide Bank 28
products offers new capabilities for high-bandwidth network access technology.

     The Wide Bank 28/STS-1 Multiplexer reduces the overall cost of deploying T1
services at service provider Local Digital Switch ("LDS"), collocation,
Point-of-Presence ("POP"), Service Access Point ("SAP") and on-network building
locations. Our Wide Bank 28/STS-1 Multiplexer is designed to eliminate the
additional expense of transmultiplexing T3 signals over SONET for fiber
transport and reduce the amount of stranded bandwidth within the SONET shelf,
while greatly decreasing the cost per T1 connection provided to service provider
customers. High-capacity SONET add/drop multiplexers and digital radios can be
more economically deployed to provide high-capacity T1 services.

     The Wide Bank 28/STS-1 Multiplexer optimizes valuable space in CO,
co-location, or digital loop carrier cabinets. Services can be added in scalable
quad T1 increments, suiting applications from small outside cabinets to large
switching centers.

     The Wide Bank 28/STS-1 Multiplexer offers SNMP, Telnet, and TL-1 management
options as well as alarm reporting and performance monitoring to the Virtual
Tributary 1.5 (VT1.5) tributary-based DSX-1 services, enabling service providers
to gain the cost and management advantages of STS-1 interconnections in a very
compact, scalable network product.

     ACCESS NAVIGATOR(R) PRODUCTS

     The Access Navigator products include the Access Navigator/DCS Service
Manager, which provides a cost effective 1/0 cross-connect solution; the Access
Navigator/GR-303 + Data Host, which provides an easy to manage GR-303 host
solution; and the most recent addition to the product, the Navigator Valet
Graphical User Interface configuration tool. With both NEBS and customer
premises certifications, Access Navigator products were designed to be located
in service provider racks or on end-user customer walls such that they
significantly reduce space, power and installation labor as compared to old
generation digital cross connect and channel service equipment. Access Navigator
products provide management access via Ethernet SNMP, Telnet CLI, RS-232 CLI,
Navigator Valet Graphical User Interface, and GR-303 EOC (for the GR-303 + Data
Host version).

     ACCESS NAVIGATOR DCS. Released in January 1999, this product provides a
complete solution for managing four to 32 T1 access connections in a highly
integrated package. With the functions of a 1/0 digital cross connect system,
plus demarcation testing, service providers are able to decrease maintenance
costs and labor, while increasing service availability.

     ACCESS NAVIGATOR GR-303 + DATA HOST. Released in January 1999, this product
offers a highly integrated solution for combining multi-line local voice and
data services on customer T1 access lines. In addition to the concentration and
management of CLASS voice services, the Access Navigator/GR-303 grooms
fractional T1 data connections, including Internet traffic, from customer
locations.

     NAVIGATOR VALET. Released in January 2000, this product provides a
Graphical User Interface that eases the configuration of system parameters and
cross connection mappings. The Navigator Valet can be used in a standalone
configuration or in conjunction with a customer's upper level Network Management
System.

     ADIT(TM) PRODUCTS

     The Adit products are a line of CSTs and are providing from four to eight
voice channels designed to bring next-generation technologies to today's
telecommunications networks. The Adit products are designed as a modular,
scalable solution to help service providers deliver the technologies and
services their customers are demanding. Currently, the Adit products support
features such as analog telephony; ISDN BRI; Centrex Services and high speed
internet and video.

     ADIT 600. Released in December 1999, this product builds on Access Bank
concepts, doubling voice circuit density, and is designed to add digital
subscriber line transport, ISDN BRI, integrated routing, and expandable V.35
port capacity. Data and voice traffic can be groomed directly across 18 T1/E1s
(up to 512 DS0s) with the integrated 1/0 digital cross connect at a fraction of
the cost and size of previous solutions.

     A unique feature of the Adit 600 is its ability to support TDM, designed
with a migration path for asynchronous transfer mode ("ATM"), or inverse
multiplexing over ATM network connections. The product architecture is designed
for scalability for



                                       5
<PAGE>

communications service providers, allowing them to deliver additional services
to end-users and grow their access solution set as their business grows, without
costly replacement of customer located equipment.

     ADIT 105. Released in December 2000, this product is designed to enable
deployment of integrated voice and data DSL services. The Adit 105 supports
delivery of up to eight telephone line equivalents of voice services plus
Ethernet data over xDSL transport interfaces using ATM. The first release of the
Adit 105 works with the Lucent Stinger SDSL and Jetstream ATM voice gateway
platforms.

     BROADMORE(TM) PRODUCTS

     The Broadmore products enable service providers to extend their capital
budgets, reduce their operating costs, and accelerate service availability. They
provide cost efficient transport of traditional services across ATM Networks.

     BROADMORE 1750. Released October 2000, this product brings the proven
cost-efficiency and high performance of ATM networks to TDM-based DS3 service
creation. By encapsulating TDM-based traffic within ATM cells using
standards-based Circuit Emulation Service ("CES"), the Broadmore 1750 allows
traffic to be transported over Permanent Virtual Circuits ("PVC"s) or Switched
Virtual Circuits ("SVC"s). Concurrently, it concentrates lower-speed DS3
circuits onto a single high-speed OC-12c/STM-4c optical ATM circuit. The
Broadmore 1750 provides carrier-class reliability in its 17-slot chassis through
1+1 SONET automatic protection switching ("APS"), 1:4 DS3 drop-side protection,
fully redundant CPU, common equipment, and power supplies.

     BROADMORE 1700. Released in October 2000, this product offers an economical
means of provisioning, grooming, and routing DS3, T1, E1, E3 and high-speed
serial data circuits using logical ATM connections. The cost and complexities of
equipping and managing SONET and Digital Cross-Connect (DCS) circuits are
replaced by the speed, capacity, and cost improvements of logical ATM circuit
provisioning--leveraging existing SONET optical networks. The Broadmore 1700
converts and aggregates TDM circuits--such as T1, E1, DS3, and E3 -- into
OC-3c/STM-1c or OC-12c/STM-4c ATM connections. TDM to ATM conversion is
accomplished using standards-based ATM CES supporting both PVC's and SVC's. The
integrity of TDM traffic is maintained, while providing the benefits and
efficiency of ATM transport for converged voice and data access networks.

     BROADMORE 500. Released in October 2000, this product offers, in a five
slot chassis, an economical means of provisioning common TDM and serial data
circuits through an ATM network without incurring the costs typical of large,
full-featured ATM core switches. Simple ATM circuit provisioning replaces the
complexities of configuring and managing more complex SONET and Digital
Cross-connect Systems (DCS). Conversion to ATM is performed using
standards-based ATM CES with support for both PVC's and SVC's.

     VALET(TM) PRODUCTS

     VALET. Released in January of 2000, this product is a local configuration
and provisioning software tool which increases installer productivity by
simplifying the tasks of deployment and maintenance of network elements. Valet
is a Java(TM)-based GUI that requires minimal training and technical expertise.

     Valet supports our following Network Elements:

          o    Access Bank II

          o    Access Navigator

          o    Adit 105

          o    Adit 600

          o    Adit 600 Router Service Card

          o    Wide Bank 28/DS3

          o    Wide Bank 28/STS-1

     Valet resides on the installer's laptop computer and connects directly to
our products through Ethernet management interfaces. Using the intuitive
point-and-click product-specific GUIs allows quick completion of the
installation, configuration and provisioning process. Valet handles the circuit
configuration process for various types of service, system setups and
connections required by on-site technicians, enabling rapid service deployment.
Network operators can manage diverse product configurations through displays of
existing configurations.

     NETWORKVALET(TM). Released in March 2001, this product is EMS-designed to
meet the transport and access-management needs of service providers. With a
user-friendly GUI, NetworkValet is built on a Java(TM) framework that is
CORBA(R)-compliant and Operational Support Systems ("OSS") capable. Network
managers can remotely monitor our deployed network elements through the most
widely employed interfaces, including SNMP, TL1, CLI, and CORBA. The result is a
remote management solution that enables productive and cost-effective
management, monitoring, configuration, and provisioning of our devices
throughout the network.



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     With NetworkValet, customers deploying Access Bank II, Access Navigator,
Adit 105, Adit 600, and Wide Bank 28 products will decrease the cost of
ownership by reducing the number of service calls required for routine
configuration, maintenance and troubleshooting activities. Remote product
configuration and provisioning for carrier-quality voice, high-speed data and
broadband Internet access services can be accomplished down to the DS0 level
from the Network Operations Center ("NOC"). NetworkValet automatically detects
our new elements, allowing most users to begin managing these elements after
completing the basic configuration process. NetworkValet receives alarms
associated with line outages, downed links, and failed cards directly from the
network elements as they occur in real-time. The built-in topology view can
group elements geographically by region, state, city, building, or sub-network,
providing drill-down network views and simplifying troubleshooting and element
management.

     Service providers can count on NetworkValet's security features to
safeguard their valued network elements. System or network administrators can
customize user access based on the functionality they want to assign to users.

     AXXIUS(TM) PRODUCTS

     AXXIUS 800. Released in March 2002, this product was designed to enable
wireless carriers to provide additional services and lower costs. By integrating
many different access and bandwidth management functions into a single modular
platform, the Axxius 800 delivers transport, edge routing and bandwidth
intelligence to the access point of the wireless network which eliminates
bandwidth under-utilization and inefficiencies between wireless cell site
radios, periphery equipment, and the high-speed carrier edge or core network.

     Voice and high-speed data service can be deployed as needed, and protocol
mediation can be provisioned to converge dissimilar service protocols from a
variety of cell site assets onto an efficient access network. To keep pace with
evolving wireless access requirements, the Axxius 800, through upgradeable
software and replaceable cards, can be configured to deliver an array of service
offerings as well as address future needs for ATM, IP and broadband transport.

CUSTOMERS

     To date, a significant portion of our sales are made to distributors who
resell to communications service providers, such as ILECs, wireless service
providers, competitive carriers, ISPs, independent operating carriers and
utilities who provide enhanced voice and high-speed data and Internet services
to end-user businesses. In addition, we sell our products through direct sales
to this same customer base principally through volume purchase agreements.

     Since 1998, our products have been used by over 2,000 end-users; however,
our revenues are concentrated among a small number of distributors and direct
sale service provider customers that have historically accounted for a majority
of our net revenue. For example, with respect to our distributors, Walker &
Associates ("Walker") accounted for 23% of net revenue in 2001, and Walker and
ADC Telecommunications ("ADC") accounted for 17% and 16%, respectively, of net
revenue in 2000. We expect that the sale of our products will continue to be
made to a small number of distributors. With respect to direct sale service
provider customers, XO Communications, Inc. ("XO") and Adelphia Communications,
Inc. and Adelphia Business Solutions, Inc. (collectively "Adelphia") accounted
for 23% and 12%, respectively, of net revenue for the year ended December 31,
2001.

SALES, MARKETING AND CUSTOMER SUPPORT

     SALES. We currently employ a leveraged sales model consisting of (1) sales
to distributors and (2) direct sales and a sales engineering force, which works
with strategic accounts and with our distributors to identify potential
customers and provide pre- and post-sales support to our service provider
customers and other end-users. Sales to distributors accounted for approximately
half of our revenue for the year ended December 31, 2001. We typically ship
products soon after receipt of the customers' orders and, accordingly, backlog
has typically not been significant.

         Third-Party Distributors. Our distributors are responsible for
     fulfilling product orders, warehousing product, and identifying potential
     customers. We establish relationships with distributors through written
     agreements that provide prices, discounts and other material terms and
     conditions under which the distributor is eligible to purchase our products
     for resale. Such agreements generally do not grant exclusivity to the
     distributors, do not prevent the distributors from carrying competing
     product lines, and do not require the distributors to sell any particular
     dollar amount of our products, although the contracts may be terminated at
     our discretion if specified sales targets and end-user satisfaction goals
     are not attained. We occasionally provide our distributors with limited
     stock rotation and price protection rights. Other than limited stock
     rotation rights, we do not provide our distributors with general product
     return rights. We have limited knowledge of the financial condition of
     certain of our distributors; however, we are aware that some of our
     distributors have limited financial and other resources, which could impair
     their ability to pay us. Although the financial instability of these
     certain distributors has not limited any distributor's ability to pay us
     for our products to date, we cannot assure you that any bad debt we incur
     in connection with credit sales to these distributors will not exceed our
     bad debt reserves or that the financial instability of one or more of our
     distributors will not harm our business, or results of operations. We have
     limited knowledge of the inventory levels of our products carried by our
     distributors, and our distributors have in the past reduced, and may in the
     future reduce, planned purchases of our products due to overstocking.
     Moreover, distributors who have overstocked our products have in the past
     reduced, and may in the future reduce, their inventories of our products by
     selling




                                       7
<PAGE>

     such products at significantly reduced prices. Any such reduction in
     planned purchases or sales at reduced prices by distributors in the future
     could reduce the demand for our products, create conflicts with other
     distributors, or otherwise harm our business. In addition, three times a
     year, certain distributors are allowed to exercise stock rotation rights up
     to a maximum of 15% of our unsold products for an equal dollar amount of
     new equipment. The products must have been held in stock by such
     distributor and have been purchased within the four-month period prior to
     the return date.

         While to date these returns have not had a material impact on our
     results of operations, these returns through stock rotation could harm our
     future operations. We believe we have made adequate allowances to provide
     for these returns. We are generally required to give our distributors a
     60-day notice of price increases or decreases. In addition, we grant
     certain of our distributors "most favored customer" terms, pursuant to
     which we have agreed to not knowingly grant another distributor the right
     to resell our products on terms more favorable than those granted to the
     existing distributor, without offering equally favorable terms to the
     existing distributor. These price protection and "most favored customer"
     clauses could cause a material decrease in the average selling prices and
     gross margins of our products, which would harm our business and results of
     operations.

         Direct Sales. A significant portion of the sales of our products is
     made through direct sales. As a result, our continued success depends on
     building and maintaining good relations with our direct customers. We
     typically sell to these customers on credit. We have limited knowledge of
     the financial condition of certain of our direct customers; however, we are
     aware that some of our direct customers have limited financial and other
     resources that could impair their ability to pay us. We cannot assure you
     that any bad debts that we incur will not exceed our reserves or that the
     financial instability of one or more of our direct customers will not harm
     our business, financial condition or results of operations. Any reduction
     in planned purchases by direct customers in the future could harm our
     business. In addition, we grant certain of our direct customers "most
     favored customer" terms, pursuant to which we have agreed to not knowingly
     provide another direct customer with similar terms and conditions a better
     price than those provided to the existing direct customer, without offering
     the more favorable prices to the existing direct customer. It is possible
     that these price protection and "most favored customer" clauses could cause
     a material decrease in the average selling prices and gross margins of our
     products, which would harm our business and results of operations. Our
     direct customers do not have any obligation to purchase additional
     products, and accordingly they may terminate their purchasing arrangements
     with us, or significantly reduce or delay the amount of our products that
     they order. Any such termination, change, reduction or delay in orders
     would harm our business.

         Sales Engineering. Our sales group, which includes sales and sales
     engineering, is responsible for product configuration, evaluation,
     installation and telephone presales support activities. Our sales
     engineering strategy focuses on assisting service providers and end-users
     in rapidly integrating our products into their networks. The sales
     engineering support group identifies service provider and end-user leads
     and, based on initial presentations, provides evaluation units for trial in
     communication service provider and end-user networks. After successful
     trial and approval, the service provider or end-user is provided with
     product installation and maintenance training. The sale cycle of our
     products averages between four and twelve months in the case of certain
     service providers, but can take significantly longer in the case of ILECs
     and certain distributors and other end-users. Initially, our sales
     engineering support group is involved in educating service providers and
     end-users about the functionality and benefits that may be derived from
     using our products. Subsequently, members of both our sales engineering and
     research and development organizations are involved in providing the
     service provider or end-user with the required training and technical
     support to integrate our products into a new application or service.

     MARKETING. Our marketing organization develops strategies for products and,
along with the sales force, develops key account strategies and defines product
and service functions and features. Marketing is responsible for sales support,
requests for information, requests for quotes and requests for proposals,
in-depth product presentations, interfacing with operations, setting price
levels, developing new services and business opportunities and writing proposals
in response to customer requests for information or quotations. We engage in a
number of marketing activities that include exhibiting products and customer
applications at industry trade shows, advertising in selected publications aimed
at targeted markets, taking part in public relations activities with trade and
business press, publishing technical articles and distributing sales literature,
technical specifications and documentation in order to create awareness, market
demand and sales opportunities for our products.

     CUSTOMER SERVICE AND SUPPORT. Based on customer support calls, we believe
that ongoing customer support is critical to maintaining and enhancing
relationships with service providers, end-users and distributors. The service
provider and end-user support group has five functions: new product development
that provides for product ideas and enhancements based on customer requirements
through the pre- and post-sales support effort; inbound technical support which
focuses on pre- and post-sales calls made to us by our customers; outbound
application support and response to proposed quotation requests; training,
including installation and application development training for customers, sales
engineers, and employees; and reporting and analysis based on the automated
trouble ticket and returned material systems.

COMPETITION

     There is intense competition in the telecommunications equipment market
with a large number of suppliers providing a variety of products to diverse
market segments. We believe that the principal competitive factors for products
in our markets include:



                                       8
<PAGE>

          o    performance and reliability;

          o    flexibility, scalability and ease-of-use;

          o    breadth of features and benefits;

          o    end-to-end management systems; and

          o    lower initial and lifetime costs.

We believe our product solutions compete favorably with respect to each of these
factors.

     Our existing and potential competitors include many large domestic and
international companies, including certain companies that have substantially
greater financial, manufacturing, technological, sales and marketing,
distribution, and other resources. Our principal competitors for our products
include Adtran, Inc. ("Adtran"), Advanced Fibre Communications, Inc. ("AFC"),
Alcatel Alsthom Compagnie Generale d'Electricite ("Alcatel"), Asurent Wireless,
Inc., Cisco Systems, Inc. ("Cisco"), General DataCom Industries, Inc., Kentrox,
Lucent, NEC USA, Inc. ("NEC"), Nortel, Paradyne Corporation, Polycom, Telect,
Inc., Tellabs, Inc., VINA Technologies, Zhone Technologies ("Zhone") and other
small independent systems integrators and small private companies. Most of these
companies offer products competitive with one or more of our product lines.

     We expect that our competitors who currently offer products competitive
with only one of our product lines will eventually offer products competitive
with all of our products. In addition, many start-up companies have recently
begun to manufacture products similar to ours. Due to the rapidly evolving
markets in which we compete, additional competitors with significant market
presence and financial resources, including large telecommunications equipment
manufacturers and computer hardware and software companies, may enter these
markets through acquisition, thereby further intensifying competition.
Additionally, one of our distributors is currently competing with us, and
additional distributors may begin to develop or market products that compete
with our products.

     Many of our current and potential competitors are substantially larger than
we are and have significantly greater financial, sales and marketing, technical,
manufacturing, and other resources and more established channels of
distribution. As a result, such competitors may be able to respond more rapidly
to new or emerging technologies and changes in customer requirements, or to
devote greater resources than we can devote to the development, promotion, and
sale of their products. Such competitors may enter our existing or future
markets with solutions that may be less costly, provide higher performance or
additional features, or be introduced earlier than our solutions. Many
telecommunications companies have large internal development organizations that
develop software solutions and provide services similar to our products and
services. We expect our competitors to continue to improve the performance of
their current products and to introduce new products or technologies that
provide added functionality and other features. Successful new product
introductions or enhancements by our competitors could cause a significant
decline in sales or loss of market acceptance of our products. Competitive
products may also cause continued intense price competition or render our
products or technologies obsolete or noncompetitive.

     To be competitive, we must continue to invest significant resources in
research and development and sales and marketing. We may not have sufficient
resources to make such investments or be able to make the technological advances
necessary to be competitive. In addition, our current and potential competitors
have established or may establish cooperative relationships among themselves or
with third parties to increase the ability of their products to address the
needs of our prospective customers. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. Increased competition is likely to result in price
reductions, reduced gross margins, and loss of market share, any of which would
harm our business.

MANUFACTURING

     Our manufacturing operations consist of materials planning and procurement,
final assembly, product assurance testing, quality control, and packaging and
shipping. We currently use several independent manufacturers to provide certain
printed circuit boards, chassis and subassemblies. We have developed a
manufacturing process that enables us to configure our products to be adapted to
different customer hardware and software applications at the final assembly
stage. This flexibility is designed to reduce both our manufacturing cycle time
and our need to maintain a large inventory of finished goods. We believe that
the efficiency of our manufacturing process to date is largely due to our
product architecture and our commitment to manufacturing process design.

     We spend significant engineering resources producing customized software
and hardware to assure consistent high product quality. We test every product
both during and after the assembly process using internally developed automated
product assurance testing procedures. These procedures consist of automated
board and automated system testing as well as environmental testing. Although we
generally use standard parts and components for our products, many key
components are purchased from sole or single source vendors for which
alternative sources are not currently available. We cannot assure you that we
will not experience supply problems in the future from any of our manufacturers
or vendors. We believe that there may be seasonal fluctuations in the placement
of orders that may cause us to experience supply problems. Any such difficulties
could harm our business.



                                       9
<PAGE>

RESEARCH AND PRODUCT DEVELOPMENT

     We focus our development efforts on providing enhanced functionality to our
existing products, including total network solutions and performance and the
development of additional software-based features and functionality. Extensive
product development input is obtained from customers and our monitoring of
end-user needs and changes in the marketplace. Our current product development
focus has been on developing digital broadband access solutions and completing
new products. We believe that our success will depend, in part, on our ability
to develop and introduce in a timely fashion new products and enhancements to
our existing products. We have in the past made, and intend to continue making,
significant investments in product and technological development. Our
engineering, research and development expenditures totaled approximately $13.6
million in 1999, $28.7 million in 2000, and $33.2 million in 2001, respectively.
We perform our research and product development activities at our principal
offices in Boulder, Colorado, Tulsa, Oklahoma, and Roanoke, Virginia. Also, in
February of 2001, we added a research and development center in Camarillo,
California. Our inability to develop new products or enhancements to existing
products on a timely basis, or the failure of these new products or enhancements
to achieve market acceptance, could have a material adverse effect on our
business.

PATENTS, LICENSES AND PROPRIETARY INFORMATION

     We rely upon a combination of patent, copyright, trademark and trade secret
laws as well as confidentiality procedures and contractual restrictions to
establish and protect our proprietary rights. We have also entered into
confidentiality agreements with our employees and consultants and we enter into
non-disclosure agreements with our suppliers and distributors so as to limit
access to and disclosure of our proprietary information. However, such measures
may not be adequate to deter and prevent misappropriation of our technologies or
independent third-party development of similar technologies. The laws of certain
foreign countries in which our products are or may be developed, manufactured or
sold may not protect our products or intellectual property rights to the same
extent as do the laws of the United States and thus make the possibility of
piracy of our technology and products more likely.

     As of December 31, 2001, we had been issued nine U.S. patents and we had
eight U.S. patent applications pending. The issued patents cover various aspects
of voice and data circuits, switching technologies, and redundancy. The U.S.
patents begin to expire in the year 2015. We also have ten U.S. trademark
applications pending, ten international trademark applications pending, and five
trademarks registered, one of which is registered internationally. A large
number of patents and frequent litigation based on allegations of patent
infringement exist within the telecommunications industry. From time to time,
third parties may assert patent, copyright, trademark and other intellectual
property rights to technologies that are important to us. If any such claims
asserting that our products infringed proprietary rights of third parties were
determined adversely to us, it could have a material adverse effect on our
business, financial condition or results of operations.

EMPLOYEES

     As of March 25, 2002, we employed 362 full-time employees in 22 states, and
one employee in Canada. Additionally, we employ a number of engineering and
other employees on a part-time basis. No employees are covered by any collective
bargaining agreements and we have never experienced a work stoppage. We believe
that our relationships with our employees are good. The loss of any of our key
management or technical personnel could harm our business. On July 19, 2001 and
January 15, 2002 we resized our employee base to focus on the largest
opportunities in the ILECs, wireless, and global service provider markets. This
process included reducing our workforce by approximately 80 employees in July
2001, 26 employees in January 2002, and 75 employees in March 2002.

     Many of our employees are highly skilled, and our continued success depends
in part upon our ability to attract and retain such employees. In an effort to
attract and retain such employees, we continue to offer employee benefit
programs that we believe are at least equivalent to those offered by our
competitors. Despite these programs, we have experienced difficulties at times
in hiring and retaining certain skilled personnel. In critical areas, we have
utilized consultants and contract personnel to fill these needs until full time
employees could be recruited.

                                  RISK FACTORS

     Investors should carefully consider the risks described below before making
an investment decision. The risks described below are not the only ones facing
our company. Additional risks not presently known to us or that we currently
believe are immaterial may also impair our business operations. Our business
could be harmed by any of these risks. The trading price of our common stock
could decline due to any of these risks and investors may lose all or part of
their investment. In assessing these risks, investors should also refer to the
other information contained or incorporated by reference in this Form 10-K
Report, including our consolidated financial statements and related notes.

WE HAVE A LIMITED OPERATING HISTORY.

     We did not begin commercial deployment of our broadband digital access
equipment until 1995. Prior to 1997, we recorded only nominal product revenue.
Although we have been profitable on an annual basis in prior years, we had a
loss from operations of $27.1 million in 2001. Accordingly, an investor in our
common stock must evaluate the risks, uncertainties, and difficulties frequently



                                       10
<PAGE>

encountered by early stage companies in rapidly evolving markets such as the
communications equipment industry. Some of these risks include:

          o    significant fluctuations in quarterly operating results;

          o    the intensely competitive market for communications equipment;

          o    the expenses and challenges encountered in expanding our sales,
               marketing and research and development infrastructure;

          o    the risks related to our timely introduction of new packet-based
               products and product enhancements; and

          o    the risks associated with general economic conditions,
               particularly as they may effect the communications equipment
               industry.

     Due to our limited operating history and experience with respect to these
issues, we may not successfully implement any of our strategies or successfully
address these risks and uncertainties.

OUR QUARTERLY RESULTS FLUCTUATE SIGNIFICANTLY, AND WE MAY NOT BE ABLE TO
MAINTAIN OUR GROWTH RATES.

     Although our revenues grew from fiscal 1998 to 2000, these growth rates
have not been sustainable, as is evidenced by our decrease in revenue in 2001.
Past results should not be used to predict future revenue or operating results.
Additionally, we experienced operating losses in the fourth quarter of 2000 and
all four quarters of 2001. We cannot guarantee that we will not have revenue
shortfalls again in the future. Our quarterly and annual operating results have
fluctuated in the past and may vary significantly in the future. Our future
operating results will depend on many factors, many of which are outside of our
control, and which have affected our results in the past and could again in the
future, including the following:

          o    the size of the orders for our products, and the timing of such
               orders;

          o    the commercial success of our products, and our ability to ship
               enough products to meet customer demand;

          o    changes in the financial stability of our distributors,
               customers, or suppliers;

          o    changes in our pricing policies or the pricing policies of our
               competitors;

          o    fluctuations in ordering due to increased direct sales to
               customers;

          o    potential bad debt due to increased direct sales;

          o    inability of our service provider customers to obtain third party
               financing;

          o    seasonal fluctuations in the placement of orders;

          o    potential obsolescence of existing inventory;

          o    changes in the capital budgets of our service provider customers;

          o    changes in our distribution channels;

          o    potential delays or deferrals in our product implementation at
               customer sites;

          o    fluctuations in orders due to the amount of distributor
               inventory;

          o    technical problems in customizing or integrating our products
               with end-users' systems, and potential product failures or
               errors;

          o    certain government regulations; and

          o    general economic conditions as well as those specific to the
               communications equipment industry.

     A significant portion of our net revenue has been derived from a limited
number of large orders, and we believe that this trend will continue in the
future, especially if the percentage of direct sales to end-users increases. The
timing of these orders and our ability to fulfill them can cause material
fluctuations in our operating results, and we anticipate that such fluctuations
will occur. Also, our distribution and purchase agreements generally allow our
distributors and direct customers to postpone or cancel orders without penalty
until a relatively short period of time prior to shipment. We have experienced
cancellations and delays of orders in the past, and we expect to continue to
experience order cancellations and delays from time to time in the future. Any
shortfall in orders would harm our operating income for a quarter or series of
quarters, especially because operating expenses in a quarter are relatively
fixed. These fluctuations could affect our profitability and the market price of
our common stock.

     Because most of our sales have historically been through indirect
distribution channels, our ability to judge the timing and size of individual
orders is more limited than for manufacturers who have been selling directly to
the end-users of their products for longer periods of time. Moreover, the
current downturn in general economic conditions has led to significant
reductions in customer



                                       11
<PAGE>

spending for telecommunications equipment, which has resulted in delays or
cancellations of orders for our products. Our operating expenses are based on
our expectations of future revenues and are relatively fixed in the short term.
Due to these and other factors, if our quarterly or annual revenues continue to
fall below the expectations of securities analysts and investors, the trading
price of our common stock could significantly decline, as it has since the third
quarter of 2000.

WE DEPEND ON EMERGING SERVICE PROVIDERS FOR SUBSTANTIALLY ALL OF OUR BUSINESS.

     Our customers have consisted primarily of competitive carriers and, to a
lesser extent, long distance service providers, ISPs, independent operating
carriers ("IOCs"), and wireless service providers. The market for the services
provided by the majority of these service providers has only begun to emerge
since the passage of the Telecommunications Act of 1996 (the "1996 Act"), and
many new and existing service providers are continuing to build their networks
and infrastructure and to roll out their services in new geographical areas.
These new service providers require substantial capital for the development,
construction, and expansion of their networks and the introduction of their
services. The ability of these emerging service providers to fund such
expenditures often depends on their ability to obtain sufficient financing.
Recently, this financing has not been available to many of these emerging
service providers on favorable terms, if at all, particularly due to recent
negative market conditions in the United States. If our current or potential
emerging service provider customers cannot successfully raise the necessary
funds, or if they experience any other adverse affects with respect to their
operating results or profitability, these service providers' capital spending
programs may be adversely impacted. If our current or potential service provider
customers are forced to defer or curtail their capital spending programs, our
sales and operating results will likely be harmed.

     In addition, many of the industries in which the service providers operate
have recently experienced financial restructuring, consolidation, or bankruptcy.
In particular, many telecommunication service providers have recently acquired,
been acquired, or merged with ISPs or other service providers. The loss of one
or more of our service provider customers, such as occurred in 2000, through
industry consolidation or otherwise, could have a material adverse effect on our
sales and operating results.

OUR CUSTOMERS ARE SUBJECT TO HEAVY GOVERNMENT REGULATION IN THE
TELECOMMUNICATIONS INDUSTRY, AND REGULATORY UNCERTAINTY MAY HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS.

     Competitive local exchange carriers are allowed to compete with ILECs in
the provisioning of local exchange services primarily as a result of the
adoption of regulations under the 1996 Act that impose new duties on ILECs to
open their local telephone markets to competition. Although the 1996 Act was
designed to expand competition in the telecommunications industry, the
realization of the objectives of the 1996 Act is subject to many uncertainties.
Such uncertainties include judicial and administrative proceedings designed to
define rights and obligations pursuant to the 1996 Act, actions or inaction by
ILECs or other service providers that affect the pace at which changes
contemplated by the 1996 Act occur, resolution of questions concerning which
parties will finance such changes, and other regulatory, economic, and political
factors. Any changes to the 1996 Act or the regulations adopted thereunder, the
adoption of new regulations by federal or state regulatory authorities apart
from or under the 1996 Act, or any legal challenges to the 1996 Act could have a
material adverse impact upon the market for our products.

     We are aware of certain litigation challenging the validity of the 1996 Act
and local telephone competition rules adopted by the Federal Communications
Commission ("FCC") for the purpose of implementing the 1996 Act. Furthermore,
Congress has indicated that it may hold hearings to gauge the competitive impact
of the 1996 Act and we cannot assure you that Congress will not propose changes
to the Act. This litigation and potential regulatory change may delay further
implementation of the 1996 Act, which could negatively impact demand for our
products. Moreover, our distributors or service provider customers may require
that we modify our products to address actual or anticipated changes in the
regulatory environment. Furthermore, we may decide to modify our products to
meet anticipated changes. Our inability to modify our products in a timely
manner or address such regulatory changes could harm our business.

OUR MARKETS ARE HIGHLY COMPETITIVE AND HAVE MANY ESTABLISHED COMPETITORS.

     The market for our products is intensely competitive, with a large number
of equipment suppliers providing a variety of products to diverse market
segments within the telecommunications industry. Our existing and potential
competitors include many large domestic and international companies, including
certain companies that have substantially greater financial, manufacturing,
technological, sales and marketing, distribution, and other resources. Our
principal competitors for our products include Adtran, Inc. ("Adtran"), Advanced
Fibre Communications, Inc. ("AFC"), Alcatel Alsthom Compagnie Generale
d'Electricite ("Alcatel"), Asurent Wireless, Inc., Cisco Systems, Inc.
("Cisco"), General DataCom Industries, Inc., Kentrox, Lucent, NEC USA, Inc.
("NEC"), Nortel, Paradyne Corporation, Polycom, Telect, Inc., Tellabs, Inc.,
VINA Technologies, Zhone Technologies ("Zhone") and other small independent
systems integrators and small private companies. Most of these companies offer
products competitive with one or more of our product lines. These equipment
suppliers either have products or are making an entry into this area. We expect
that our competitors who currently offer products competitive with only one of
our products will eventually offer products competitive with all of our
products. In addition, many start-up companies have recently begun to
manufacture products similar to ours. Due to the rapidly evolving markets in
which we compete, additional competitors with significant market presence and
financial resources, including large telecommunications equipment manufacturers
and computer hardware and software companies, may enter these



                                       12
<PAGE>

markets through acquisition, thereby further intensifying competition.
Additionally, one of our distributors is currently competing with us, and
additional distributors may begin to develop or market products that compete
with our products.

    Many of our current and potential competitors are substantially larger than
we are and have significantly greater financial, sales and marketing, technical,
manufacturing, and other resources and more established channels of
distribution. As a result, such competitors may be able to respond more rapidly
to new or emerging technologies and changes in customer requirements, or to
devote greater resources than we can devote to the development, promotion, and
sale of their products. Such competitors may enter our existing or future
markets with solutions that may be less costly, provide higher performance or
additional features, or be introduced earlier than our solutions. Many
telecommunications companies have large internal development organizations that
develop software solutions and provide services similar to our products and
services. We expect our competitors to continue to improve the performance of
their current products and to introduce new products or technologies that
provide added functionality and other features. Successful new product
introductions or enhancements by our competitors could cause a significant
decline in sales or loss of market acceptance of our products. Competitive
products may also cause continued intense price competition or render our
products or technologies obsolete or noncompetitive.

    To be competitive, we must continue to invest significant resources in
research and development and sales and marketing. We may not have sufficient
resources to make such investments or be able to make the technological advances
necessary to be competitive. In addition, our current and potential competitors
have established or may establish cooperative relationships among themselves or
with third parties to increase the ability of their products to address the
needs of our prospective customers. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. Increased competition is likely to result in price
reductions, reduced gross margins, and loss of market share, any of which would
harm our business.

WE ARE SUBSTANTIALLY DEPENDENT ON OUR DISTRIBUTION CHANNELS.

     To date, approximately half of the sales of our products have been made
through distributors. Our distributors are responsible for warehousing products
and fulfilling product orders as well as servicing potential competitive service
provider customers and, in some cases, customizing and integrating our products
at end-users' sites. As a result, our success depends on maintaining good
relations with our distributors. Sales of our products historically have been
made to a limited number of distributors and other direct customers, as follows:

     o    In 2001, Walker accounted for 23% of net revenue.

     o    In 2000, Walker and ADC accounted for 17% and 16% of net revenue,
          respectively.

     o    In 1999, Walker and ADC accounted for 27% and 14% of net revenue,
          respectively.

     We expect that a significant portion of sales of our products will continue
to be made to a small number of distributors. In 2001, sales to ADC decreased as
a result of the divestiture of its Access Products Division. Accordingly, if we
lose any of our key distributors, or experience reduced sales to such
distributors, our business would be harmed.

     We have limited knowledge of the financial condition of certain of our
distributors. We are aware, however, that some of our distributors have limited
financial and other resources that could impair their ability to pay us.
Although we have increased our reserves for bad debt, based upon these and other
factors, we cannot assure you that any bad debts that we incur will not exceed
our reserves or that the financial instability of one or more of our
distributors will not harm our business, financial condition, or results of
operations.

     We generally provide our distributors with limited stock rotation and price
protection rights. Other than limited stock rotation rights, we do not provide
our distributors with general product return rights. We have limited knowledge
of the inventory levels of our products carried by our distributors.
Distributors have, in the past, reduced planned purchases of our products due to
overstocking and such reductions may occur again in the future. Moreover,
distributors who have overstocked our products have, in the past, reduced their
inventories of our products by selling such products at significantly reduced
prices. This may occur again in the future. Any reduction in planned purchases
or sales at reduced prices by distributors or in the future could reduce the
demand for our products, create conflicts with other distributors, or otherwise
harm our business. In addition, three times a year, certain distributors are
allowed to exercise stock rotation rights up to a maximum of 15% of our unsold
products for an equal dollar amount of new equipment. The products must have
been held in stock by such distributor and have been purchased within the
four-month period prior to the return date. We cannot assure you that we will
not experience significant returns in the future or that we will make adequate
allowances to offset these returns.

     We are generally required to give our distributors a 60-day notice of price
increases. Orders entered by distributors within the 60-day period are filled at
the lower product price. In the event of a price decrease, we are sometimes
required to credit distributors the difference in price for any stock they have
in their inventory. In addition, we grant certain of our distributors "most
favored customer" terms, pursuant to which we have agreed to not knowingly grant
another distributor the right to resell our products on terms more favorable
than those granted to the existing distributor, without offering the more
favorable terms to the existing distributor. It is possible that these price
protection and "most favored customer" clauses could cause a material decrease
in the average selling prices



                                       13
<PAGE>

and gross margins of our products, which could in turn have a material adverse
effect on distributor inventories, our business, financial condition, or results
of operations.

     Our distributors do not have any obligation to purchase additional
products, and accordingly, they may terminate their purchasing arrangements with
us, or significantly reduce or delay the amount of our products that they order
without penalty. Any such termination, change, reduction, or delay in orders
would harm our business.

WE ARE SUBSTANTIALLY DEPENDENT ON OUR DIRECT SALES TO END-USER CUSTOMERS.

     Currently, a significant portion of our product revenue is through direct
sales. Therefore, our continued success depends on building and maintaining good
relations with our direct customers. For the year ended December 31, 2001, XO
and Adelphia accounted for 23% and 12%, respectively, of net revenue.

     We have limited knowledge of the financial condition of certain of our
direct customers. We are aware, however, that some of our direct customers have
limited financial and other resources that could impair their ability to pay us.
XO and Adelphia are currently restructuring their operations and experiencing
financial difficulty, and they may not be in a position in the future to
continue their current purchase levels. We cannot assure you that any bad debts
that we incur in connection with direct sales will not exceed our reserves or
that the financial instability of one or more of our direct customers will not
harm our business, financial condition, or results of operations. In addition,
it is likely that an increase in sales to our direct customers may increase our
accounts receivable and our days sales outstanding.

     Any reduction in planned purchases by direct customers could harm our
business. In addition, we grant certain of our direct customers "most favored
customer" terms, pursuant to which we have agreed to not knowingly provide
another direct customer with similar terms and conditions or a better price than
those provided to the existing direct customer, without offering the more
favorable terms, conditions or prices to the existing direct customer. It is
possible that these price protection and "most favored customer" clauses could
cause a material decrease in the average selling prices and gross margins of our
products, which could, in turn, harm our business.

     Our direct customers do not have any obligation to purchase additional
products, and, accordingly, they may terminate their purchasing arrangements
with us, or significantly reduce or delay the amount of our products that they
order without penalty. Any such termination, change, reduction, or delay in
orders would harm our business.

GENERAL ECONOMIC CONDITIONS COULD CONTINUE TO HARM OUR BUSINESS.

     We have become increasingly subject to adverse changes in general economic
conditions, which can result in reductions in capital expenditures by the
end-user customers of our distributors and our direct sales customers, longer
sales cycles, deferral or delay of purchase commitments for our products, and
increased price competition. These factors materially impacted our business most
severely in the fourth quarter of 2000, and continued to have an impact
throughout 2001. If the current economic slowdown continues or worsens, these
factors would continue to adversely affect our business and results of
operations. In addition, in the last year some service providers that were among
our principal customers experienced capital budget constraints resulting from
their financial troubles. These financial troubles, combined with service
delays, slowed the expected growth in this market. If service providers continue
to experience problems, our business may continue to be adversely impacted.

OUR GROWTH IS DEPENDENT UPON SUCCESSFULLY MAINTAINING AND EXPANDING OUR
DISTRIBUTION CHANNELS AND DIRECT SALES.

     Our future net revenue growth will depend in large part on the following
factors:

     o    our success in maintaining our current distributor and direct sales
          relationships;

     o    diversifying our distribution channels by selling to new distributors
          and to new direct customers;

     o    improvement in general economic conditions and available funding for
          service providers; and

     o    increasing our sales into market segments that are financially
          stronger than our current market segments.

WE MUST MAINTAIN AND EXPAND OUR CURRENT SERVICE PROVIDER CUSTOMER BASE.

     Most of our existing distributors also currently distribute the products of
our competitors. Some of our existing distributors may in the future distribute
or use other competitive products. We cannot assure you that we will be able to
attract and retain a sufficient number of our existing or future distributors
and direct customers or that they will recommend, or continue to use, our
products or that our distributors will devote sufficient resources to market and
provide the necessary customer support for such products. In the event that any
of our current distributors or direct customers reduce their purchases of our
products, or that we fail to obtain future distributors or direct customers, our
business could be harmed.



                                       14
<PAGE>

     In addition, it is possible that our distributors will give a higher
priority to the marketing and customer support of competitive products or
alternative solutions than to our products. Furthermore, we cannot assure you
that our distributors will continue to offer our products. Our distributor
relationships are established through formal agreements that generally (1) do
not grant exclusivity, (2) do not prevent the distributor from carrying
competing products, and (3) do not require the distributor to purchase any
minimum dollar amount of our products. Additionally, our distribution agreements
do not attempt to allocate certain territories for our products among our
distributors. To the extent that different distributors target the same
end-users of our products, distributors may come into conflict with one another,
which could damage our relationship with, and sales to, such distributors.

OUR OPERATING RESULTS ARE SUBSTANTIALLY DEPENDENT ON SOLE AND SINGLE SOURCE
SUPPLIERS.

     Although we generally use standard parts and components for our products,
many key parts and components are purchased from sole source vendors for which
alternative sources are not currently available. We currently purchase
approximately 84 key components from vendors for which there are currently no
substitutes, and we purchase approximately 36 key components from single
vendors. In addition, we rely on several independent manufacturers to provide
certain printed circuit boards, chassis, and subassemblies for our products. Our
inability to obtain sufficient quantities of these components has in the past
resulted in, and may in the future result in, delays or reductions in product
shipments, which could harm our business, financial condition, or results of
operations. In the event of a reduction or interruption of supply, we may need
as much as six months before we would begin receiving adequate supplies from
alternative suppliers, if any. We cannot assure you that any such supplier would
become available to us or that any such supplier would be in a position to
satisfy our production requirements on a timely basis, if at all. In such event,
our business would be materially harmed.

     In addition, manufacturing certain of these single or sole source
components is extremely complex, and our reliance on the suppliers of these
components, especially for newly designed components, exposes us to potential
production difficulties and quality variations that the suppliers experience,
which has negatively impacted cost and timely delivery of our products. Any
significant interruption in the supply, or degradation in the quality, of any
such component could have a material adverse effect on our business, financial
condition, or results of operations.

OUR ABILITY TO MEET CUSTOMER DEMAND DEPENDS ON THE AVAILABILITY OF OUR
COMPONENTS.

     Our distributors and direct customers frequently require rapid delivery
after placing an order. Delays in shipment by one of our suppliers have led to
lost sales and sales opportunities. Lead times for materials and components vary
significantly and depend on many factors, some of which are beyond our control,
such as specific supplier performance, contract terms, and general market demand
for components. If distributor orders vary significantly from forecasts, we may
not have enough inventories of certain materials and components to fill orders.
Any shortages in the future, including those occasioned by increased sales,
could result in delays in fulfillment of customer orders. Such delays could harm
our business.

OUR DEPENDENCE ON INDEPENDENT MANUFACTURERS COULD RESULT IN PRODUCT DELIVERY
DELAYS.

     We currently use several independent manufacturers to provide certain
components, printed circuit boards, chassis, and subassemblies. Our reliance on
independent manufacturers involves a number of risks, including the potential
for inadequate capacity, the unavailability of, or interruptions in, access to
certain process technologies, and reduced control over delivery schedules,
manufacturing yields, and costs. Some of our manufacturers and suppliers are
undercapitalized, and such manufacturers or suppliers may be unable in the
future to continue to provide manufacturing services or components to us. If
these manufacturers are unable to manufacture our components in required
volumes, we will have to identify and qualify acceptable additional or
alternative manufacturers, which could take in excess of nine months. We cannot
assure you that any such source would become available to us or that any such
source would be in a position to satisfy our production requirements on a timely
basis, if available. Any significant interruption in our supply of these
components would result in delays or in the allocation of products to customers,
which in turn could have a material adverse effect on our business, financial
condition, or results of operations. Moreover, since all of our final assembly
and test operations are performed in one location, any fire or other disaster at
our assembly facility would harm our business.

OUR EXECUTIVE OFFICERS AND CERTAIN KEY PERSONNEL ARE CRITICAL TO OUR BUSINESS,
AND THESE OFFICERS AND KEY PERSONNEL MAY NOT REMAIN WITH US IN THE FUTURE.

     Our success depends to a significant degree upon the continued
contributions of our Chief Executive Officer, and key management, sales,
engineering, finance, customer support, and product development personnel, many
of whom would be difficult to replace. In particular, the loss of Roger L.
Koenig, President and Chief Executive Officer, our co-founder, could harm us. We
believe that our future success will depend in large part upon our ability to
attract and retain highly skilled managerial, sales, customer support and
product development personnel. Competition for qualified personnel in our
industry and geographic location is intense, and we cannot assure you that we
will be successful in attracting and retaining such personnel. We do not have
employment contracts with any of our key personnel with the exception of Bruce
R. Wildman, Executive Vice President, Sales. The loss of the services of any
such persons, the inability to attract or retain qualified personnel in the
future, or delays in hiring required personnel, particularly engineering
personnel and qualified sales personnel, could harm our business.



                                       15
<PAGE>

OUR GROWTH IS DEPENDENT ON OUR INTRODUCTION OF NEW PRODUCTS AND ENHANCEMENTS TO
EXISTING PRODUCTS, FAILURE TO BRING NEW PRODUCTS TO MARKET, AND ANY DELAY IN
CUSTOMERS' TRANSITION TO OUR NEW PRODUCTS COULD ADVERSELY AFFECT OUR BUSINESS.

     Our successes depends on our ability to enhance our existing products and
to timely and cost-effectively develop new products including features that meet
changing end-user requirements and emerging industry standards. However, we
cannot assure you that we will be successful in identifying, developing,
manufacturing, and marketing product enhancements or new products that will
respond to technological change or evolving industry standards. We intend to
continue to invest significantly in product and technology development. We have
in the recent past experienced delays in the development and commencement of
commercial shipment of new products and enhancements, resulting in distributor
and end-user frustration and delay or loss of net revenue. It is possible that
we will experience similar or other difficulties in the future that could delay
or prevent the successful development, production, or shipment of such new
products or enhancements, or that our new products and enhancements will not
adequately meet the requirements of the marketplace and achieve market
acceptance. Announcements of currently planned or other new product offerings by
our competitors or us have in the past caused, and may in the future cause,
distributors or end-users to defer or cancel the purchase of our existing
products. Our inability to develop, on a timely basis, new products or
enhancements to existing products, or the failure of such new products or
enhancements to achieve market acceptance, could harm our business.

     The development of new, technologically advanced products is a complex and
uncertain process requiring high levels of innovation, as well as the accurate
anticipation of technological and market trends. Our introduction of new or
enhanced products will require us to manage the transition from older products
in order to minimize disruption in customer ordering patterns, avoid excessive
levels of older product inventories, and ensure that adequate supplies of new
products can be delivered to meet customer demand. We have historically reworked
certain of our products in order to add new features that were included in
subsequent releases of such product. We can give no assurance that these
historical practices will not occur in the future and cause us to record lower
revenue or negatively affect our gross margins.

     We believe that average selling prices and gross margins for our products
will decline as such products mature and as competition intensifies. For
example, the average selling price for the Wide Bank products and Adit products
have decreased substantially in the past two years. These decreases were due to
general economic conditions and the introduction of competitive products. To
offset declining selling prices, we believe that we must successfully reduce the
costs of production of our existing products and introduce and sell new products
and product enhancements on a timely basis at a low cost or sell products and
product enhancements that incorporate features that enable them to be sold at
higher average selling prices. We may not be able to achieve the desired cost
savings. To the extent that we are unable to reduce costs sufficiently to offset
any declining average selling prices or that we are unable to introduce enhanced
products with higher selling prices, our gross margins will decline, and such
decline would harm our business.

WE FACE RISKS ASSOCIATED WITH ACQUISITIONS.

     In 2000, we acquired Millennia Systems, Inc. ("Millennia") and certain
product lines of Litton Network Access Systems, Inc. ("LNAS"). We may acquire or
make similar such investments in complementary companies, products, or
technologies in the future. If we buy a company, we could have difficulty
integrating that company's personnel and operations. Furthermore, the key
personnel of the acquired company may decide not to work for us. If we make
other types of acquisitions, we could have difficulty in assimilating the
acquired technology or products into our operations. These difficulties could
disrupt our ongoing business, distract our management and employees and increase
our expenses. We may have to incur debt, write-off software development costs or
other assets, incur severance liabilities, or issue equity securities to pay for
any future acquisitions. The issuance of equity securities could dilute our
existing stockholders' ownership.

     We cannot assure you that we will be successful in overcoming these or any
other significant risks encountered in any acquisition we may make. The failure
to achieve the anticipated benefits of these or any future acquisitions, or to
successfully integrate the acquired operations, could harm our business and
results of operations.

OUR PRODUCTS MAY SUFFER FROM DEFECTS OR ERRORS THAT MAY SUBJECT US TO PRODUCT
RETURNS AND PRODUCT LIABILITY CLAIMS.

     Our products have contained in the past, and may contain in the future,
undetected or unresolved errors when first introduced or when new versions are
released. Despite our extensive testing, errors, defects, or failures are
possible in our current or future products or enhancements. If such defects
occur after commencement of commercial shipments, the following may happen:

     o    delay in or loss of market acceptance and sales;

     o    product returns;

     o    diversion of development resources resulting in new product
          development delay;

     o    injury to our reputation; or

     o    increased service and warranty costs.



                                       16
<PAGE>

     Significant delays in meeting deadlines for announced product
introductions, or enhancements or performance problems with such products, could
undermine customer confidence in our products, which would harm our customer
relationships as well. Any of these results could have a material adverse effect
on our business.

     Although we have not experienced any product liability claims to date, the
sale and support of our products entails the risk of such claims, and it is
possible that we will be subject to such claims in the future. A successful
product liability claim brought against us could harm our business. Our
agreements with our distributors and direct customers typically contain
provisions designed to limit our exposure to potential product liability claims.
However, it is possible that the limitation of liability provisions contained in
our agreements may not be effective or adequate under the laws of certain
jurisdictions.

A LONGER THAN EXPECTED SALES CYCLE MAY AFFECT OUR REVENUES AND OPERATING
RESULTS.

     The sale of our broadband digital access products averages approximately
four to twelve months in the case of service providers, but can take
significantly longer in the case of ILECs and other end-users. This process is
often subject to delays over which we have little or no control, including (1) a
distributor's or a service provider's budgetary constraints, (2) distributor or
service provider internal acceptance reviews, (3) the success and continued
internal support of a service provider's own development efforts, and (4) the
possibility of cancellation or delay of projects by distributors or service
providers. In addition, as service providers have matured and grown larger,
their purchase process may have become more institutionalized, and thus it may
become increasingly difficult, and may require more of our time and effort, to
gain the initial acceptance and final adoption of our products by these
end-users. Although we attempt to develop our products with the goal of
facilitating the time to market of our service provider's products, the timing
of the commercialization of a new distributor or service provider applications
or services based on our products is primarily dependent on the success and
timing of a service provider's own internal deployment program. Delays in
purchases of our products can also be caused by late deliveries by other
vendors, changes in implementation priorities, and slower than anticipated
growth in demand for our products. A delay in, or a cancellation of, the sale of
our products could harm our business and cause our results of operations to vary
significantly from quarter to quarter.

WE MUST KEEP PACE WITH RAPID TECHNOLOGICAL CHANGE TO REMAIN COMPETITIVE.

     The communications marketplace is characterized by (1) rapidly changing
technology, (2) evolving industry standards, (3) changes in end-user
requirements, and (4) frequent new product introductions and enhancements, each
of which may render our existing products obsolete. We expect that new
packet-based technologies will emerge as competition in the communications
industry increases and the need for higher volume and more cost efficient
transmission equipment expands. Industry standards for multi-service digital
access equipment and technology are still evolving. The introduction of products
embodying new technologies or the emergence of new industry standards can render
existing products obsolete or unmarketable. For example, if the business market
were to broadly adopt telecommunications equipment based on cable modems or
cable telephony, sales of our existing or future products could be significantly
diminished. As standards and technologies evolve, we will be required to modify
our products or develop and support new versions of our products. The failure of
our products to comply, or delays in achieving compliance, with the various
existing and evolving industry standards could harm sales of our current
products or delay introduction of our future products.

FAILURE TO MEET FUTURE CAPITAL NEEDS MAY ADVERSELY AFFECT OUR BUSINESS.

     We require substantial working capital to fund our business. As of December
31, 2001, we had approximately $36.6 million dollars in cash and short-term
investments. We believe that such cash and cash equivalents, together with cash
generated by operations, if any, will be sufficient to meet our capital
requirements for at least the next twelve months. However, our capital
requirements depend on several factors, including the rate of market acceptance
of our products, the ability to expand our client base, the growth of sales and
marketing, and other factors. If capital requirements vary materially from those
currently planned, we may require additional financing sooner than anticipated.
If additional funds are raised through the issuance of equity securities, the
percentage ownership of our stockholders will be reduced, stockholders may
experience additional dilution, or such equity securities may have rights,
preferences, or privileges senior to those of the holders of our common stock.
Additional financing may not be available when needed on terms favorable to us
or at all. If adequate funds are not available or are not available on
acceptable terms, we may be unable to develop or enhance our services, take
advantage of future opportunities, or respond to competitive pressures, which
could harm our business.

CONTINUED EXPANSION OF THE MARKET FOR COMMUNICATIONS SERVICES IS NECESSARY FOR
OUR FUTURE GROWTH.

     Our success will also depend on continued growth in the market for
communications services. The global communications marketplace is evolving, and
it is difficult to predict our potential size or future growth rate. We cannot
assure you that this market will continue to grow. Moreover, increased
regulation may present barriers to the sales of existing or future products. If
this market fails to grow or grows more slowly or in a different direction than
we currently anticipate, our business would be harmed. In the last five
quarters, adverse changes and economic conditions had a negative impact on the
market for communications services. If the




                                       17
<PAGE>

current economic slowdown continues or worsens, the market for communications
services will continue to be affected, which would subsequently have an adverse
effect on our business.

OUR FAILURE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS MAY ADVERSELY AFFECT
US.

     We rely primarily on a combination of patent, copyright, trademark, and
trade secret laws, as well as confidentiality procedures and contractual
restrictions, to establish and protect our proprietary rights. As of December
31, 2001, we have been issued a total of nine U.S. patents and had eight U.S.
patents pending. We have ten U.S. trademark applications pending, ten
international trademark applications pending, and have five trademarks
registered, one of which is registered internationally. We have entered into
confidentiality agreements with our employees and consultants, and
non-disclosure agreements with our suppliers, customers, and distributors in
order to limit access to and disclosure of our proprietary information. However,
such measures may not be adequate to deter and prevent misappropriation of our
technologies or independent third-party development of similar technologies.

     Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our products or to obtain and use trade secrets
or other information that we regard as proprietary. Furthermore, we may be
subject to additional risks as we enter into transactions in foreign countries
where intellectual property laws do not protect our proprietary rights as fully
as do the laws of the U.S. We cannot assure you that our competitors will not
independently develop similar or superior technologies or duplicate any
technology that we have. Any such events could harm our business.

     The telecommunications industry is characterized by the existence of a
large number of patents and frequent litigation based on allegations of patent
infringement. As the number of entrants in our markets increases and the
functionality of our products is enhanced and overlaps with the products of
other companies, we may become subject to claims of infringement or
misappropriation of the intellectual property rights of others. From time to
time, third parties may assert patent, copyright, trademark, and other
intellectual property rights to technologies that are important to us. We have
no assurance that any future claims, if determined adversely to us, would not
harm our business. In our distribution agreements, we agree to indemnify
distributors and service provider customers for any expenses or liabilities
resulting from claimed infringements of patents, trademarks, or copyrights of
third parties. In certain limited instances, the amount of such indemnities may
be greater than the net revenue we may have received from the distributor.

     In the event litigation is required to determine the validity of any
third-party claims, such litigation, whether or not determined in our favor,
could result in significant expense to us, divert the efforts of our technical
and management personnel, or cause product shipment delays. In the event of an
adverse ruling in any litigation, we might be required to discontinue the use
and sale of infringing products, expend significant resources to develop
non-infringing technology, or obtain licenses from third parties. In the event
of a claim or litigation against us, or our failure to develop or license a
substitute technology on commercially reasonable terms, our business could be
harmed.

OUR STOCK PRICE HAS BEEN HIGHLY VOLATILE.

     The market price of our common stock has been, and is likely to continue to
be, subject to fluctuations in response to variations in operating results,
announcements of technological innovations or new products by us or our
competitors, changes in financial estimates or recommendations by securities
analysts, regulatory developments, and other events or factors. In addition, the
stock market in general, and the market prices of equity securities of many high
technology companies in particular, have experienced extreme price fluctuations,
which often have been unrelated to the operating performance of such companies.
These broad market fluctuations may harm the market price of our common stock.
Our stock price and the stock market in general have been particularly volatile
in recent quarters.

WE ARE CONTROLLED BY A SMALL NUMBER OF STOCKHOLDERS.

     The members of our Board of Directors and executive officers, together with
members of their families and entities that may be deemed affiliates of or
related to such persons or entities, beneficially own approximately 53% of our
outstanding shares of common stock. In particular, Mr. Koenig and Ms. Pierce,
each a Director and our President and Chief Executive Officer, and Secretary and
Corporate Development Officer respectively, are married and together
beneficially own approximately 52% of our outstanding shares of common stock.
Accordingly, these two stockholders are able to elect all members of our Board
of Directors and determine the outcome of all corporate actions requiring
stockholder approval, such as mergers and acquisitions. This level of ownership
by such persons and entities may delay, defer, or prevent a change in control
and may harm the voting and other rights of other holders of our common stock.




                                       18
<PAGE>




ITEM 2. PROPERTIES

     Our principal administrative, sales and marketing, research and
development, and support facilities consist of approximately 80,000 square feet
of office space in Boulder, Colorado. We occupy these premises under a lease
expiring December 31, 2009. As of December 31, 2001, the annual base rent for
this facility was approximately $776,553.

     We lease three other facilities in the Boulder, Colorado area. One
building, approximately 7,500 square feet, is our former office building and is
leased through June 30, 2007. On October 1, 2001, we were released from
approximately half of the 15,000 square feet we originally leased. We are
seeking a subtenant for the remaining space. We lease approximately 39,000
square feet of manufacturing space in a facility located outside of Boulder
under a lease that expires on December 31, 2005. We have a lease for a warehouse
of approximately 57,000 square feet in Boulder, Colorado, which expires on
November 22, 2005. We are seeking a subtenant for a portion of this space.

     In addition, we lease research and development facilities in three other
states: Oklahoma, California, and Virginia. The facility in Tulsa, Oklahoma,
consists of approximately 18,000 square feet with an expiration date of April
30, 2005. The space in Camarillo, California, consists of approximately 14,500
square feet and expires on August 31, 2005. We lease approximately 17,000 square
feet in Roanoke, Virginia, with an expiration date of November 30, 2007.

     We lease two small offices for our field sales and support organization.
One office is located in Greensboro, North Carolina, and the other in Toronto,
Ontario, Canada.

     We believe that our current facilities and planned expansions are adequate
to meet our needs through the next twelve months. See "Management's Discussion
and Analysis of Financial Conditions and Results of Operations -- Liquidity and
Capital Resources."

ITEM 3. LEGAL PROCEEDINGS

     On December 28, 2001, SCI, Inc., one of our manufacturers, filed a breach
of contract claim for $4.5 million against us in Alabama Circuit Court. We
currently do not have enough information to make an estimate of any loss or
range of loss at this time. As such, no provision for any liability that may
result has been made in the consolidated financial statements. We intend to
vigorously defend this lawsuit.

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

     No matters were submitted to a vote of security holders during the fourth
quarter of 2001.

EXECUTIVE OFFICERS OF THE REGISTRANT

     The names, ages and positions of all our executive officers as of March 1,
2002 are listed below, followed by a brief summary of their business experience.
Executive officers are normally appointed annually by the Board of Directors at
a meeting of the directors immediately following the Annual Meeting of the
Stockholders. There are no family relationships among these officers, other than
between Mr. Koenig and Ms. Pierce, who are married, or any arrangements or
understandings between any officer and any other person pursuant to which an
officer was selected.

<Table>
<Caption>

         Name                           Age       Position
         ----                           ---       --------
<S>                                     <C>     <C>
        Roger L. Koenig............      47     President and Chief Executive Officer
        Nancy Pierce...............      44     Corporate Development Officer, Secretary
        Timothy R. Anderson........      42     Chief Financial Officer, Vice President of Finance and Administration, Treasurer
        Mark D. Herbst.............      41     Chief Operations Officer
        Bruce R. Wildman...........      39     Executive Vice President, Sales
</Table>

     Roger L. Koenig. Mr. Koenig has served as President, Chief Executive
Officer and Chairman of the Board since its formation in September 1992. Prior
to co-founding the Company, Mr. Koenig served as the President and Chief
Executive Officer of Koenig Communications, Inc., an equipment systems
integration and consulting firm. Prior to founding Koenig Communications, Mr.
Koenig held a number of positions with IBM/ROLM Europe, a telecommunications
equipment manufacturer, including Engineering Section Manager for Europe. Mr.
Koenig received a B.S. in Electrical Engineering from Michigan State University
and an M.S. in Engineering Management from Stanford University.

     Nancy Pierce. Ms. Pierce has served as Corporate Development Officer since
April 2000. Ms. Pierce has also served as Secretary and a Director of the
Company since its formation in September 1992. Ms. Pierce held previous
positions of Corporate Controller, Chief Financial Officer, Vice
President-Finance and Administration and Treasurer with the Company. Prior to
co-founding the Company, Ms. Pierce served as the Controller of Koenig
Communications, Inc., a systems integration and consulting firm. Prior to
joining Koenig Communications, Inc., Ms. Pierce held positions at IBM
Corporation and ROLM Corporation. Pierce also serves as a director and chairman
of the Audit Committee of the Board of Directors of Koala Corporation. She holds
a B.S degree in



                                       19
<PAGE>

communication disorders from Colorado State University and an M.B.A. from
California State University, Chico. In addition, Ms. Pierce holds an honorary
doctorate degree in Commercial Science from St. Thomas Aquinas University.

     Timothy R. Anderson. Mr. Anderson has served as Treasurer, Chief Financial
Officer and Vice President of Administration of Carrier Access since April 2000.
Mr. Anderson has served as the Vice President of Finance since July 1999. Mr.
Anderson previously held the position of the Company's Corporate Controller from
February 1996 to July 1999. Prior to joining Carrier Access, Mr. Anderson served
as the Controller of RIK Medical LLC from September 1994 to February 1996. Mr.
Anderson received a B.S. in finance and an M.B.A. in accounting from the
University of Colorado and is a Certified Management Accountant.

     Mark D. Herbst. Mr. Herbst has served as Chief Operations Officer of
Carrier Access since January 2001. Mr. Herbst previously held the position
within the company of Vice President of Operations, since June 2000. Prior to
joining Carrier Access, Mr. Herbst served as the Senior Vice President for the
Dii Group, a leading provider of contract electronics manufacturing solutions,
from July 1987 to May 2000. Mr. Herbst received a B.S. in accountancy from
Northern Arizona University.

     Bruce R. Wildman. Mr. Wildman has served as Executive Vice President, Sales
of Carrier Access since October 2001. Prior to joining Carrier Access, Mr.
Wildman served in management positions including Operations Director and
Regional Manager at Cisco, from November 1999 to October 2001. Prior to joining
Cisco, Mr. Wildman was Account Director at Cerent, Inc., from July 1999 until
Cisco acquired the company in November 1999. Prior to joining Cerent, Inc., Mr.
Wildman served at Alcatel USA, from November 1987 to July 1999 in many
capacities in product management and sales. Prior to joining Alcatel USA, Mr.
Wildman served in product management and sales from July 1984 to November 1987.
Mr. Wildman received a M.B.A. in marketing and finance from the University of
Chicago and a B.S. in mechanical engineering from the University of Illinois.

                                     PART II

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

     Our initial public offering was held on July 30, 1998 at a price of $12.00
per share. Our common stock is listed on the Nasdaq National Market under the
symbol "CACS." The table below sets forth the high and the low closing sales
prices per share as reported on the Nasdaq National Market for the periods
indicated.

<Table>
<Caption>

             YEAR ENDED DECEMBER 31, 2000                       HIGH         LOW
             ----------------------------                       ----         ---
<S>                                                            <C>         <C>
           First quarter ended March 31, 2000                  $69.938     $44.00
           Second quarter ended June 30, 2000                  $52.875     $33.56
           Third quarter ended September 30, 2000              $66.938     $19.81
           Fourth quarter ended December 31, 2000              $20.875     $6.750
</Table>

<Table>
<Caption>

             YEAR ENDED DECEMBER 31, 2001                      HIGH         LOW
             ----------------------------                      ----         ---
<S>                                                            <C>         <C>
           First quarter ended March 31, 2001                  $9.5        $5.03
           Second quarter ended June 30, 2001                  $8.19       $4.44
           Third quarter ended September 30, 2001              $6.0        $2.69
           Fourth quarter ended December 31, 2001              $3.88       $2.15
</Table>

     On March 1, 2002, the last reported sale price of the Registrant's common
stock was $3.77 per share. As of March 1, 2002, there were approximately 102
record holders of our common stock. Because brokers and other institutions on
behalf of stockholders hold many of our shares of common stock, we are unable to
accurately estimate the total number of stockholders represented by these record
holders. We have never declared cash dividends on our common stock. We currently
intend to retain any earnings for use in our business and do not anticipate
paying any cash dividends in the foreseeable future.

ITEM 6. SELECTED FINANCIAL DATA

     The selected financial data for the years ended December 31, 1997, 1998,
1999, 2000, and 2001 have been derived from our audited consolidated financial
statements. The information set forth below should be read in connection with
our audited consolidated financial statements and the notes thereto and
"Management's Discussion and Analysis of the Financial Condition and Results of
Operations" included elsewhere in this Annual Report.



                                       20
<PAGE>

CONSOLIDATED FINANCIAL HIGHLIGHTS

<Table>
<Caption>

                                                      AS OF OR FOR THE YEAR ENDED
                                                             DECEMBER 31,(1)
                                       -------------------------------------------------------------
                                                   (In thousands, except per share data)
                                         1997         1998          1999        2000          2001
                                       ---------    ---------    ---------    ---------    ---------
<S>                                    <C>          <C>          <C>          <C>          <C>
Revenue, net ......................    $  18,719    $  48,133    $ 108,815    $ 148,050    $ 100,706
Gross profit ......................    $   9,250    $  25,066    $  63,316    $  81,281    $  46,616
Operating income (loss) ...........    $   2,346    $   9,437    $  33,106    $  23,269    $ (27,051)
Net income (loss) .................    $   1,735    $   6,949    $  23,565    $  18,550    $ (14,855)
Net income (loss) available
    to common stockholders ........    $     614    $   5,363    $  23,565    $  18,550    $ (14,855)
Income (loss) per share:
    Basic .........................    $    0.04    $    0.29    $    0.98    $    0.76    $   (0.60)
    Diluted .......................    $    0.04    $    0.28    $    0.93    $    0.74    $   (0.60)
Working capital ...................    $  16,615    $  60,571    $  90,153    $  99,851    $  91,597
Total assets ......................    $  21,680    $  72,313    $ 108,345    $ 154,999    $ 133,017
Redeemable preferred stock ........    $  17,358    $      --    $      --    $      --    $      --
Stockholders' equity ..............    $     560    $  63,358    $  97,234    $ 132,797    $ 118,593
</Table>


(1) No cash dividends were paid for any of the years presented.



                                       21
<PAGE>




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

NOTICE CONCERNING FORWARD-LOOKING STATEMENTS

     This Management's Discussion and Analysis contains forward-looking
statements that are based on current expectations, estimates and projections
about our industry, management's beliefs, and assumptions made by management.
The information in this report contains certain forward-looking statements,
including forward-looking statements regarding future customer sales of our
products, inventory levels, our anticipated product offerings, expectations
regarding selling, general and administrative expenses over the next few
quarters, customer revenue mix, gross margins and operating costs and expenses.
In some cases, forward-looking statements can be identified by the use of
terminology such as "may," "will," "expects," "intends," "plans," "anticipates,"
"estimates," "potential," or "continue, " or the negative thereof or other
comparable terminology. These statements are based on current expectations and
projections about our industry and assumptions made by the management and are
not guarantees of future performance. Although we believe that the expectations
reflected in the forward-looking statements contained herein are reasonable,
these expectations or any of the forward-looking statements could prove to be
incorrect, and actual results could differ materially from those projected or
assumed in the forward-looking statements. Factors that could cause or
contribute to material differences include the factors set forth in the "Risk
Factors" section in this report, as well as our other periodic reports on Form
10-Q filed with the Securities and Exchange Commission. We undertake no
obligation to update any forward-looking statements or reasons why actual
results may differ in this Report on Form 10-K.

OVERVIEW

     We manufacture high-performance equipment for telecommunications carriers.
Our products have delivered more than 2.5 million voice and data lines for
customers, including many incumbent carriers and top wireless service providers.
We focus on broadband access from the CO to the customer premise; voice and data
service creation at end-user locations; and next-generation wireless
infrastructure. Our products meet the industry's highest reliability and
interoperability standards, including Telcordia(R) TIRKS/OSMINE, NEBS Level 3,
and ISO 9001.

     Our Access Bank(R), Access Navigator(R), Adit and, Broadmore(TM) products
are connected to T1, digital subscriber line, digital radio, T3, and optical
access networks to provide enhanced communications for businesses. Our
NetworkValet(TM) product, an element management system, coordinates the
provisioning, monitoring, and maintenance among the products and interfaces with
other network management systems.

     Our digital equipment provides a "last mile" solution for the distribution
and management of high bandwidth services from service providers throughout the
United States. Reaching large numbers of consumers using voice and high-speed
Internet access requires connectivity from service providers to end-users.
Installation of our CO communications and customer-located voice and data
communications equipment enables this connectivity. We believe our products
allow service providers to cost-effectively connect end-users to their network
products and decrease ongoing transmission equipment and maintenance expenses,
while enabling new service delivery, such as integrated voice, video, data, and
high-speed Internet access. Our products enable high bandwidth digital
deployments targeted at end-users requiring between four and 2,800 telephone and
data line equivalents of bandwidth. We believe that over 2,000 service providers
and other end-users have purchased our products directly or through our
distributors since 1998.

     We were incorporated in September of 1992 as a successor company to Koenig
Communications, Inc., an equipment systems integration and consulting company
which had been in operation since 1986. In the summer of 1995, we ceased our
systems integration and consulting business and commenced our main product sales
with the introduction of the Access Bank products. In the fourth quarter of
1997, we began commercial deployment of our Wide Bank products and in January of
1999, we began commercial deployment of our Access Navigator products. In
December of 1999, we began deployment of the first of our Adit products, and in
October of 2000, we acquired the Broadmore products. Accordingly, we have only a
limited operating history on which to base an evaluation of our business and
prospects. Our prospects must be considered in light of the risks, uncertainties
and difficulties frequently encountered by companies in an early stage of
development, particularly companies in new and rapidly evolving markets.

     Our net revenue is derived from the sales of broadband digital access
equipment and accessories. In 1997, our Access Bank products and the Wide Bank
products accounted for approximately 90% of our net revenue. In 2001, our Access
Bank products were less than 10% of net revenue and our Adit products and Wide
Bank products together accounted for a substantial majority of our net revenue.
The decline in the sales of our Access Bank products is due principally to their
being displaced by our Adit products. Our Access Navigator and Broadmore
products each accounted for approximately 10% of net revenue in 2001.

     Most of the sales of our products have historically been through
distributors. Our distributors are responsible for warehousing products and
fulfilling product orders as well as identifying potential service provider
customers and, in some cases, customizing and integrating our products at
end-users' sites. As a result, our success depends on maintaining good relations
with our distributors. We have historically made sales of our products to a
limited number of distributors. In 1999, Walker and ADC accounted for 27% and
14% of net revenue, respectively. In 2000, Walker and ADC accounted for 17% and
16% of net revenue, respectively. In 2001,



                                       22
<PAGE>

Walker accounted for 23% of net revenue, and ADC accounted for less than 10% of
net revenue. In 2001, sales to ADC decreased as a result of the divestiture of
its Access Products Division.

     In addition, significant portions of the sales of our products are
currently being made through our direct sales force. Therefore, our continued
success also depends on building and maintaining good relations with our direct
customers. For the year ended December 31, 2001, XO and Adelphia accounted for
23% and 12%, respectively, of net revenue. In 2000, Winstar Wireless, Inc.
("Winstar") accounted for 13% of net revenue. In 2001, sales to Winstar
decreased as a result of their bankruptcy filing.

     We have limited knowledge of the financial condition of certain of our
customers. However, we are aware that some of our customers have limited
financial and other resources, which could impair their ability to pay us. XO
and Adelphia are currently restructuring their operations and experiencing
financial difficulty, and they may not be in a position in the future to
continue their current purchase levels. While we believe we have adequately
provided for uncollectable accounts, we cannot assure you that any bad debts
that we incur will not exceed our reserves or that the financial instability of
one or more of our customers will not harm our business, financial condition or
results of operations. For example, it is unclear whether XO or Adelphia will be
able to fully pay the outstanding amounts owed to us.

     Any reduction in planned purchases by our customers in the future could
harm our business. In addition, we grant certain of our customers "most favored
customer" terms, pursuant to which we have agreed to not knowingly provide
another customer with similar terms and conditions or a better price than those
provided to the existing customer, without offering the more favorable prices to
the existing customer. It is possible that these price protection and "most
favored customer" clauses could cause a material decrease in the average selling
prices and gross margins of our products, which could, in turn, have a material
adverse effect on our business, financial condition, or results of operations.

     Our customers do not have any obligation to purchase additional products,
and accordingly, they may terminate their purchasing arrangements with us, or
significantly reduce or delay the amount of our products that they order. Any
such termination, change, reduction or delay in orders could have a material
adverse effect on our business.

     In addition to being dependent on a small number of distributors and direct
customers for a majority of our net revenue, we believe that the end-users of
our products consist of a limited number of service provider customers. We
believe that in 2000, 35 service provider customers, indirectly accounted for
74% of our net revenue and that in 2001, approximately 33 service provider
customers, indirectly accounted for 81% of our net revenue. In particular, we
believe that two of these service provider customers accounted for more than 10%
of our net revenue in 2001. See Note 9 of Notes to Consolidated Financial
Statements. None of these customers has any obligation to purchase additional
products or services. Accordingly, there can be no assurance that present or
future customers will not terminate their purchasing arrangements with us or our
distributors or significantly reduce or delay the amount of our products that
they order. Any such termination, change, reduction or delay in orders could
have a material adverse effect on our business. We generally provide our
distributors with limited stock rotation and price protection rights, and we
have granted certain of our distributors "most favored customer" terms. There
can be no assurance that these stock rotation rights, price protection rights or
most favored customer provisions will not have a material adverse effect on our
business, operating results or financial condition.

     We believe that average selling prices and gross margins for our products
will decline as such products mature, and as competition intensifies, among
other factors. In 2001, we reduced the price of our Wide Bank, Adit, and Access
Bank products, and we expect to make further price reductions in 2002 with
respect to certain Wide Bank, Adit, and Access Bank products. In addition,
discounts to distributors and direct customers vary among product lines and are
based on volume shipments, which affect gross margins. We believe our gross
margins are likely to fluctuate based on product and channel mix. Gross margins
will also likely be reduced from time to time by new product introductions.

     In August of 2000, we acquired all of the issued and outstanding common
stock of Millennia for cash of approximately $2.1 million, 163,004 shares of
common stock valued at approximately $7.3 million and the exchange of vested
employee stock options valued at approximately $400,000 for total consideration
of approximately $9.8 million. Based on the purchase price allocation,
approximately $9.8 million of the purchase price was allocated to goodwill and
other intangible assets which is being amortized on a straight-line basis over
periods ranging from three to five years.

     In October of 2000, we acquired the ATM product lines of LNAS located in
Roanoke, Virginia. The new Carrier Access Broadmore product supplies OC-3c,
DS-3, and T1/E1 services via broadband ATM service provisioning and management
for commercial and government applications. We acquired the product lines for
cash of approximately $8.6 million. Based on the purchase price allocation,
approximately $8.0 million was allocated to goodwill and other intangible assets
that are being amortized on a straight-line basis over periods ranging from
three to five years. During the third quarter of 2001, the projected demand for
the commercial version of the Broadmore product line decreased significantly. As
a result of such decline in demand, we determined that goodwill and other
intangible assets associated with the acquisition were impaired and recorded a
noncash impairment charge of $4.2 million in the third quarter of 2001.

     On March 22, 2002, we announced a reduction in force of approximately 75
employees which will result in a charge of approximately $404,000 in the first
quarter of 2002.


                                       23
<PAGE>

RESULTS OF OPERATIONS

<Table>
<Caption>

                                                                           YEAR ENDED DECEMBER 31,
                                                                ----------------------------------------------
(In thousands, except percentages and per share amounts)            1999             2000             2001
                                                                ------------     ------------     ------------
<S>                                                             <C>              <C>              <C>
Net revenue ................................................    $    108,815     $    148,050     $    100,706
Gross margin as a percentage of revenue ....................              58%              55%              46%
Net income (loss) ..........................................          23,565           18,550          (14,855)
Earnings (loss) per share (diluted) ........................    $       0.93     $       0.74     $      (0.60)
</Table>

     For the year ended 2001, our net revenue decreased to $100.7 million
compared to $148.1 million and $108.8 million for the years ended December 31,
2000 and 1999, respectively. This decrease in net revenue in 2001 was primarily
caused by a decrease in the sale of existing products due to overall economic
weakness and capital market constraints impacting telecommunication service
providers. The increase in net revenue from the year ended 2000 were due to a
significant increase in the sales of all products including the Adit and Access
Navigator products, enhancements to existing products and increased acceptance
of the Wide Bank products. For the year ended 2001, our net loss was $14.9
million compared to net income of $18.6 million and $23.6 million for the years
ended December 31, 2000 and 1999, respectively. Net income was lower in 2001 due
to lower than anticipated net revenue in 2001, which resulted in increased
operating expenses as a percentage of net revenue and a decrease in gross
margin. The decrease in net income from the year ended 2000, particularly in the
fourth quarter, resulted in increased operating expenses as a percentage of net
revenue and a decrease in gross margins. Our gross margin was 46%, 55%, and 58%
for the years ended December 31, 2001, 2000, and 1999, respectively. For the
year ended 2001, operating expenses increased as employees were hired to
develop, market, and sell new and existing products. Operating expenses also
increased as a percentage of net revenue due primarily to the decrease in net
revenues, and due to amortization of goodwill and other intangibles related to
the acquisitions of Millennia and LNAS. For the year ended 2000, operating
expenses increased due to amortization of goodwill and other intangibles related
to the acquisitions of Millennia and LNAS.

     After conducting a thorough business plan review, we resized our company on
July 19, 2001, January 15, 2002, and March 22, 2002 to focus on the largest
opportunities in ILECs, wireless, and global service provider markets. This
process included reducing our work force by approximately 80 employees in July
2001, 26 employees in January 2002, and 75 employees in March 2002. Severance
costs relating to the July 19, 2001 resizing of $381,000 were recorded in the
third quarter of 2001. In addition, severance costs relating to the January 15,
2002 and March 22, 2002 resizing totaling $136,000 and $404,000, respectively,
were recorded in the first quarter of 2002. As a result of the July 2001
reduction and other cost control measures, our operating expenses, excluding
goodwill amortization and amortization of deferred stock compensation, decreased
by approximately $3.4 million from the second quarter of 2001 to the fourth
quarter of 2001.

         NET REVENUE AND COST OF SALES

<Table>
<Caption>

                                            YEAR ENDED DECEMBER 31,
                                  --------------------------------------------
(In thousands)                       1999             2000            2001
                                  ------------    ------------    ------------
<S>                               <C>             <C>             <C>
Net revenue ..................    $    108,815    $    148,050    $    100,706
Cost of sales ................          45,499          66,679          54,090
</Table>

     Net revenue for the year ended 2001 was $100.7 million. This represented a
decrease of $47.3 million from $148.1 million of net revenue in 2000. The
decrease was attributable to a decrease in the sale of existing products due to
capital expenditure reductions by competitive carrier customers and a downturn
in the economy in 2001. Net revenue increased to $148.1 million in 2000 from
$108.8 million in 1999, representing an increase of $39.2 million. This increase
was due to the introduction of the Adit product line along with increases in the
volume of sales of existing products to distributors and other direct customers.
The timing and quantities of orders for our products may vary from quarter to
quarter in the future, as they have in the past, due to factors such as demand
for our products, economic conditions, and ordering patterns of distributors and
other direct customers. We believe that this trend will continue in the future,
especially if the percentage of direct sales to end-users increases. The timing
of customer orders and our ability to fulfill them can cause material
fluctuations in our operating results and we anticipate that such fluctuations
will occur in the future.

     During 2001, approximately half of our revenue from the sales of our
products was made through distributors. Our success depends in part on the
continued sales and customer support efforts of our network of distributors and
increased sales to our direct customers. In 2001, Walker accounted for 23% of
net revenue. We expect that the sale of our products will continue to be made to
a small number of distributors. Accordingly, the loss of, or a reduction in
sales to, any of our key distributors could have a material adverse effect on
our business. In addition to being dependent on a small number of distributors
for a majority of our net revenue, we believe that our products are distributed
to a limited number of service provider customers. In 2001, two of these
competitive carrier end-user customers accounted for more than 10% of our
revenue. XO and Adelphia accounted for 23%, and 12%, respectively, of our net
revenue for the year ended December 31, 2001. A decrease in sales to any of
these competitive carrier customers could have a material adverse effect on our
business. XO and Adelphia are currently restructuring their operations and is
experiencing financial difficulty, and they may not be in a position in the
future to continue their current purchase levels.



                                       24
<PAGE>

     Cost of sales was $54.1 million for 2001 compared to $66.8 million for
2000, and $45.5 million for 1999. The decrease in 2001 was primarily
attributable to decreased product shipments, partially influenced by selling
price reductions in existing product platforms, and partially offset by the $2.5
million charge taken in the third quarter of 2001 for slow moving and excess
inventory. In the prior years, the increases were primarily attributable to
increased product shipments, and were partially offset by cost reductions in
existing product platforms.


GROSS MARGINS

<Table>
<Caption>

                                        YEAR ENDED DECEMBER 31,
                             ----------------------------------------------
(In thousands)                   1999             2000             2001
                             ------------     ------------     ------------
<S>                          <C>              <C>              <C>
Gross profit ............    $     63,316     $     81,281     $     46,616
Gross margin ............              58%              55%              46%
</Table>


     Our gross profit for 2001 was $46.6 million. This represents a decrease of
$34.7 million from the 2000 gross profit of $81.3 million. Gross margin
decreased to 46% in 2001 from 55% in 2000. The decrease in gross margin was
driven primarily by charges taken for slow moving and excess inventory, as well
as product mix. Our gross margins vary between products. The Wide Bank and
Navigator products generate higher gross margins than the Adit and Access Bank
products. Gross margins were also impacted by lower production volumes,
decreases in selling prices, and increased overhead expenses. These decreases
were partially offset by product cost reductions including reductions in the
Adit and Wide Bank cost structures. Gross profit was approximately $81.3 million
in 2000, an increase of $18.0 million from 1999. This increase was caused by the
increased shipments of our products and by cost reductions. Gross margins for
2000 and 1999 were 55% and 58%, respectively.

     We believe that gross margins could continue to decrease if additional
pricing declines occur in our products at a greater rate than anticipated cost
reductions. New product introductions could also harm gross margins until
production volumes increase. We believe that average selling prices and gross
margins for our products will decline as such products mature, as volume price
discounts in distributor contracts and direct sales relationships take effect,
and as competition intensifies, among other factors. For example, the average
selling price for the Wide Bank products and Adit products have decreased
substantially in the past two years. These decreases were due to unfavorable
general economic conditions and the introduction of competitive products. In
addition, discounts to distributors vary among product lines and are based on
volume shipments, each of which affects gross margins. As a result, we believe
that our gross margins are likely to fluctuate in the future based on product
mix and channel mix. Furthermore, gross margins will likely be reduced from time
to time as a result of new product introductions by our competitors and us.


RESEARCH AND DEVELOPMENT EXPENSES

<Table>
<Caption>

                                                       YEAR ENDED DECEMBER 31,
                                            ----------------------------------------------
(In thousands)                                  1999             2000              2001
                                            ------------     ------------     ------------
<S>                                         <C>              <C>              <C>
Research and development expenses ......    $     13,601     $     28,697     $     33,205
As a percentage of net revenue .........            12.5%            19.4%            33.0%
</Table>

     Research and development expenses increased to $33.2 million for 2001 from
$28.7 million for 2000. This increase of $4.5 million was primarily due to an
increase in personnel engaged in new product development and enhancement of
existing products, and the creation of three research and development facilities
in late 2000 and early 2001. Expenditures for prototyping and regulatory
compliance also contributed to the increase, although to a much lesser extent.
Research and development expenses increased from $13.6 million in 1999 to $28.7
million for 2000. This increase of $15.1 million was primarily attributable to
an increase in the number of personnel engaged in the development of new
products, specifically the Adit 600 and Adit 105 products, the acquisition of
two research and development facilities in Roanoke, Virginia and personnel added
for enhancing our existing products. We expect the amount of research and
development expenses to decrease in 2002 as a result of our first quarter
restructuring.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

<Table>
<Caption>

                                                                      YEAR ENDED DECEMBER 31,
                                                           ----------------------------------------------
(In thousands)                                                 1999             2000             2001
                                                           ------------     ------------     ------------
<S>                                                        <C>              <C>              <C>
Sales and marketing expenses ..........................    $     11,154     $     20,035     $     23,299
General and administrative expenses ...................           4,637            7,877            9,034
Goodwill amortization expense .........................              --              906            3,460
Asset impairment charge ...............................              --               --            4,220
                                                           ------------     ------------     ------------
Total selling, general and administrative expenses ....    $     15,791     $     28,818     $     40,013
As a percentage of net revenue ........................            14.5%            19.5%            39.7%
</Table>

     Selling, general and administrative expenses increased to $40.0 million in
2001 from $28.8 million in 2000, which represented an increase of $11.2 million.
Sales and marketing expense increases reflect increased hiring and marketing
activity to increase sales in



                                       25
<PAGE>


target markets which include ILECs, wireless, cable, and international
customers. In addition, there was increased marketing activity in customer
support, advertising, and trade shows. The increases in sales and marketing
expenses were the result of our expanded sales and marketing activities, an
increase in the size of the sale force, and a corresponding increase in sales
salaries, bonuses, and commissions. General and administrative expenses
increased, in part, due to additional headcount, primarily in information
systems, and increased expenses for bad debt reserves and goodwill amortization.
Also, during the third quarter of 2001, a noncash asset impairment charge of
$4.2 million related to the goodwill associated with the LNAS acquisition was
recorded. We instituted cost control measures during the third quarter of 2001,
including reductions in staff, and anticipate that as a result, selling, general
and administrative expenses will remain flat or slightly decrease over the next
few quarters. These cost control measures resulted in a decrease in selling,
general and administrative expenses excluding goodwill amortization and asset
impairment charge from $9.1 million in the second quarter of 2001 compared to
$7.5 million in the fourth quarter of 2001. Selling, general and administrative
expenses excluding goodwill amortization and asset impairment charge increased
to 32% of revenue in 2001 from 20% of revenue in 2000 in part due to less than
anticipated revenue in 2001.

     For the year ended 2000, selling, general and administrative expense
increased. Marketing expense increases reflect increased hiring and marking
activity with respect to the introduction of the Access Navigator, Adit 600 and
Adit 105 products, customer support, advertising and trade shows. The increase
in sales and marketing expenses was the result of our expanded sales and
marketing activities and an increase in the size of the sales force and a
corresponding increase in sales salaries, bonuses and commissions. General and
administrative expenses increased, in part, due to the amortization of goodwill
and other intangibles related to the acquisitions of Millennia and the ATM
product lines from LNAS.

STOCK-BASED COMPENSATION

     As discussed in Note 1 to the Consolidated Financial Statements, we account
for our stock-based compensation plans in accordance with Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. During 1997 and the six months ended June 30, 1998, we granted
options to employees with exercise prices less than the fair value per share
based upon our previous preferred stock offerings and the estimated price per
share in the initial public offering. Accordingly, we recorded deferred
compensation expenses totaling approximately $3.1 million. In connection with
the acquisition of Millennia, we assumed options with exercise prices below the
fair market value on the date of the grant. We recorded a deferred compensation
expense totaling approximately $877,000 for these stock options. Compensation
expense will be recognized pro rata over the 48-month vesting period of the
options. Compensation expense totaled approximately $818,000, $497,000, and
$449,000, for 1999, 2000, and 2001, respectively. At December 31, 2001, the
unamortized balance of the deferred compensation charge was $466,000. It is our
intention to generally grant future stock options with exercise prices equal to
the fair value of the underlying common stock on the date of grant.

INTEREST AND OTHER INCOME

     Interest and other income decreased to $1.6 million in 2001 from $3.6
million in 2000. This decrease of $2.0 million was due to interest income earned
on lower cash and cash equivalent balances as well as lower interest rates.
Interest and other income increased to $3.5 million in 2000 from $2.3 million in
1999. The increase was primarily due to interest income earned on higher cash
and cash equivalent balances.

INCOME TAXES

     For 2001, our effective combined federal and state income tax rate benefit
was 41.6%, compared to an income tax rate of 30.8% for 2000. In both 2001 and
2000, we realized a tax benefit from research and development tax credits. We
had a combined income tax rate in 1999 of 33.5 %. See Note 7 of Notes to
Consolidated Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

     To date, we have funded our operations primarily through cash generated
from operations and sales of common and preferred stock.

<Table>
<Caption>

                                                     AS OF DECEMBER 31,
                                                 ----------------------------
(In thousands)                                      2000             2001
                                                 ------------    ------------
<S>                                              <C>             <C>
Working capital .............................    $     99,851    $     91,597
Cash, cash equivalents and securities .......          52,460          36,614
Total assets ................................         154,999         133,017
</Table>

<Table>
<Caption>

                                                   YEAR END DECEMBER 31,
                                       ---------------------------------------------
(In thousands)                             1999            2000              2001
                                       ------------     ------------    ------------
<S>                                    <C>              <C>             <C>
Net cash provided (used) by:
    Operating activities ..........    $     14,176     $      2,899    $    (10,751)
    Investing activities ..........         (22,387)           1,368           2,624
    Financing activities ..........           2,470            3,085              56
</Table>

                                       26
<PAGE>

     CASH FLOWS

     Net cash used by operating activities for 2001 totaled approximately $10.8
million, while operating activities in 2000 generated approximately $2.9 million
of net cash. This increase in cash used by operating activities was primarily
due to increases in inventory, decreases in accounts payable, an increase in
income tax receivable, and a net loss. Cash provided by operating activities in
2000 was mainly due to net income and increases in accounts payable and accrued
compensation and was offset by increases in inventory, accounts receivable, and
a decrease in income taxes payable. We anticipate that increased sales to direct
customers could increase days sales outstanding and therefore accounts
receivable balances could increase in the future.

     Our inventory levels increased to approximately $36.5 million at December
31, 2001 from approximately $30.7 million at December 31, 2000. The increase was
due to obligations to receive shipments for non-cancelable orders placed in the
third and fourth quarters of 2000. These obligations were made when there were
long lead times in the contract manufacturing industry and our revenues were at
higher levels. We anticipate that inventory levels will decline due to decreased
purchasing since the fourth quarter of 2000. Inventory levels declined in the
fourth quarter of 2001, compared to the second quarter of 2001 by $4.4 million.
We believe that our inventory reserves are appropriate.

     Cash provided by investing activities was approximately $2.6 million for
the year ended December 31, 2001 compared to approximately $1.4 million for the
year ended December 31, 2000. Cash provided by investing activities in 2001 was
primarily the result of the maturity of U.S. Government agency and corporate
bonds with maturities greater than three months. Our capital expenditures for
2001 were $5.0 million for additions to facilities and equipment to support our
research, development and manufacturing activities, compared to $9.5 million for
2000. In addition, in 2000 we used $9.5 million to acquire Millennia and LNAS.
We believe our current facilities and equipment are sufficient to meet our
current operating requirements.

     Cash provided by financing activities was approximately $56,000 for 2001
and $3.1 million for 2000. Cash provided by financing activities in 2001 and
2000 was primarily due to the exercise of stock options.

     LIQUIDITY

     At December 31, 2001, our principal sources of liquidity included cash and
cash equivalents and marketable securities available for sale of approximately
$36.6 million compared to $52.5 million at December 31, 2000. At December 31,
2000, our working capital was approximately $99.9 million and decreased to $91.6
million at December 31, 2001. We have no significant capital spending or
purchase commitments other than facilities leases. See "Contractual Obligations
and Commercial Commitments" below and Note 11 of Notes to Consolidated Financial
Statements.

     We believe that our existing cash and investment balances are adequate to
fund our projected working capital and capital expenditure requirements for at
least the next 12 months. We are currently negotiating the renewal of our line
of credit. Although operating activities may provide cash in certain periods, to
the extent we experience growth in the future, we anticipate that our operating
and investing activities may use cash. Moreover, because our operating results
fluctuate significantly due to decreases in customer demand or decreases in the
acceptances of our future products, we may be unable to generate positive cash
flow from operations. Should the need arise, we believe we would be able to
borrow additional funds or otherwise raise additional capital. However, we
cannot assure you that additional funds or capital will be available to us in
adequate amounts and with reasonably acceptable terms. We may consider using our
capital to make strategic investments or to acquire or license technology or
products. We may also enter into strategic alliances with third parties that
could provide access to additional capital. Any such activities could require us
to obtain additional financing.

     CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

     We have obligations under certain operating lease commitments. The future
rent obligations as of December 31, 2001, under these commitments are $6.4
million, $2.7 million, and $1.1 million, for one to three years, four to five
years, and after five years, respectively. In addition, we have no inventory
purchase commitments, minimum cash requirements, debt obligations or other
contractual obligations and commercial commitments as of December 31, 2001.



                                       27
<PAGE>

CRITICAL ACCOUNTING POLICIES

     Our discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with generally accepted accounting principles. The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities. On an
ongoing basis, we evaluate our estimates, including those related to revenue and
product returns, inventory valuations, allowance for doubtful accounts,
intangible assets, deferred income taxes and warranty reserves. We base our
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimated under different assumptions or conditions. We consider the
following accounting areas to have the most significant impact on the reported
financial results and financial position of our company.

     Revenue Recognition. We recognize revenue from product sales at the time of
shipment and passage of title using guidance from SEC Staff Accounting Bulletin
No. 101 "Revenue Recognition in Financial Statements." In addition, we also
offer certain of our customers the right to return products for a limited time
after shipment as part of a stock rotation. We estimate what future stock
rotation returns may occur based upon actual historical return rates and reduce
our revenue by these estimated returns. If future returns exceed estimates,
revenue could be misstated.

     Inventory Reserves. We value our inventory at the lower of the actual cost
to purchase and/or manufacture the inventory or the current estimated market
value of inventory. We regularly review inventory quantities on hand and record
a provision for excess and obsolete inventory based primarily on our estimated
forecast of product demand and production requirements. We write down our
inventory for estimated obsolescence or unmarketable inventory equal to the
difference between the cost of inventory and the estimated market value based
upon assumptions about future demand and market conditions. If actual future
demand or market conditions are less favorable than our estimates, then
additional inventory write-downs may be required.

     Allowance for Doubtful Accounts. We perform ongoing credit evaluations of
our customers and adjust open account status based upon payment history and the
customer's current creditworthiness, as determined by our review of current
credit information. We continuously monitor collections and payments from our
customers and maintain a provision for estimated credit losses based upon the
age of outstanding invoices and any specific customer collection issues that we
have identified. While such credit losses have historically been within our
expectations and the provisions established, we cannot guarantee that we will
continue to experience the same credit loss rates that we have in the past.
Since our accounts receivable are concentrated in a relatively few number of
customers, a significant change in the liquidity or financial position of any
one of these customers could have a material adverse impact on the
collectability of our accounts receivables and our future operating results.

     Valuation of Intangible Assets. Under the guidance of SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
will be Disposed of" and under the guidance of SFAS No. 142 "Goodwill and Other
Intangible Assets," we regularly evaluate the potential impairment of goodwill
and other intangible assets from our purchase business acquisitions. In
assessing whether the value of our goodwill and other intangibles has been
impaired, we must make assumptions regarding estimated future cash flows and
other factors to determine the fair value of these assets. If these estimates or
their related assumptions change in the future, we may be required to record
impairment charges not previously recorded for these assets.

     Deferred Income Taxes. We account for our deferred tax assets pursuant to
SFAS No. 109 "Accounting for Income Taxes." Under SFAS No. 109, a deferred tax
asset is recognized for temporary differences that will result in tax deductions
in future years and for tax credit carryforwards. For example, a temporary
difference is created when an estimated amount is recorded as an expense for a
financial reporting purpose that is not deductible in the current year for
income tax purposes (e.g. warranty reserves, sales return reserves, inventory
reserves, etc.). A deferred tax asset is recognized in the current year for the
reduction in taxes payable in future years when the expenses are actually
incurred. A deferred tax asset valuation allowance was not established because
we believe that we will be able to use the tax benefit and carryback in future
years.

     Warranty Reserves. We offer warranties of various lengths to our customers
depending on the specific product and the terms of our customer purchase
agreements. Our standard warranties require us to repair or replace defective
product returned to us during the warranty period at no cost to the customer. We
record an estimate for warranty related costs based on our actual historical
return rates and repair costs at the time of sale. On an on-going basis,
management reviews these estimates against actual expenses and makes adjustments
when necessary. While our warranty costs have historically been within our
expectations and the provisions established, we cannot guarantee that we will
continue to experience the same warranty return rates or repair costs that we
have in the past. A significant increase in products return rates or the costs
to repair our products could have a material adverse impact on our operating
results.

     Off Balance Sheet Financing.  We have no off balance sheet financing.



                                       28
<PAGE>

     RECENT ACCOUNTING PRONOUNCEMENTS

     In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards (SFAS No. 141), "Business
Combinations." This statement requires that all business combinations initiated
after June 30, 2001 be accounted for by the purchase method and supercedes APB
Opinion No. 16, "Business Combinations." The statement also requires separate
recognition, apart from goodwill, of intangible assets that can be identified
and named. SFAS 141 is effective for our financial statements for the year ended
December 31, 2002. The adoption of SFAS No. 141 is not expected to have a
significant impact on our financial position, results of operations, or cash
flows.

     In July 2001, the FASB issued Statement of Financial Accounting Standards
(SFAS 142), "Goodwill and Other Intangible Assets." This statement addresses
financial accounting and reporting for acquired goodwill and other intangible
assets and supersedes APB Opinion No. 17, "Intangible Assets." Goodwill and
other intangible assets acquired after June 30, 2001 were not be subject to
amortization. The statement also sets forth specific guidelines to test
intangible assets for impairment. Subsequent to the effective date of SFAS No.
142, testing of intangible assets for impairment is required annually. The
Company adopted this statement as of January 1, 2002, and at that time, goodwill
and other intangible assets were tested for impairment in accordance with the
provisions of SFAS 142 and it was determined that no impairment existed. Upon
adoption of this standard, our unamortized goodwill of $7.8 million as of
December 31, 2001 will no longer be subject to amortization. Amortization
expense for 2001 and 2000 was $3.5 million and $906,000, respectively. There was
no amortization expense in 1999.

     In August 2001, the FASB issued Statement of Financial Accounting Standards
No. 143, "Accounting for Asset Retirement Obligations" which requires that the
fair value of a liability for an asset retirement obligation be recognized in
the period in which it is incurred if a reasonable estimate of fair value can be
made. The statement also requires that the associated asset retirement costs are
capitalized as part of the carrying amount of the long-lived asset. The
statement is effective for financial statements issued for periods beginning
after June 15, 2002. The Company does not believe the adoption of this statement
will have a material impact on our financial position, results of operations, or
cash flows.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
This statement supercedes prior statements that address the disposal of a
segment of a business, and eliminates the exception to consolidation for
subsidiaries for which control is likely to be temporary. This statement retains
the prior statement's fundamental provisions for the recognition and measurement
of impairment of long-lived assets to be held and used, as well as the
measurement of long-lived assets to be disposed of by sale. The statement is
effective for fiscal years beginning after December 15, 2001. The adoption of
this statement did not have a material impact on our financial position, results
of operations, or cash flows.

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

     Market risk represents the risk of loss that may impact our financial
position, results of operations or cash flows due to adverse changes in
financial and commodity market prices and rates. Historically, and as of
December 31, 2001, we have had little or no exposure to market risk in the area
of changes in foreign currency exchange rates and interest rates as measured
against the United States dollar. Historically, and as of December 31, 2001, we
have not used derivative instruments or engaged in hedging activities.

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
                   CONSOLIDATED FINANCIAL STATEMENT SCHEDULE

<Table>
<Caption>

                                                                                                                              PAGE
                                                                                                                              ----
<S>                                                                                                                          <C>
CONSOLIDATED FINANCIAL STATEMENTS:

INDEPENDENT AUDITORS' REPORT...................................................................................................30

CONSOLIDATED BALANCE SHEETS
   December 31, 2000 and 2001..................................................................................................31

CONSOLIDATED STATEMENTS OF OPERATIONS
   Years ended December 31, 1999, 2000, and 2001...............................................................................32

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
   Years ended December 31, 1999, 2000, and 2001...............................................................................33

CONSOLIDATED STATEMENTS OF CASH FLOWS
   Years ended December 31, 1999, 2000 and 2001................................................................................34

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.....................................................................................35
</Table>




                                       29
<PAGE>




                          INDEPENDENT AUDITORS' REPORT


THE BOARD OF DIRECTORS
CARRIER ACCESS CORPORATION:

     We have audited the accompanying consolidated balance sheets of Carrier
Access Corporation and subsidiaries as of December 31, 2000 and 2001, and the
related consolidated statements of operations, stockholders' equity and
comprehensive income, and cash flows for each of the years in the three-year
period ended December 31, 2001. These consolidated financial statements are the
responsibility of Carrier Access Corporation's management. Our responsibility is
to express an opinion on these consolidated 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 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Carrier
Access Corporation and subsidiaries as of December 31, 2000 and 2001, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States of America.


KPMG LLP

Boulder, Colorado
January 16, 2002



                                       30
<PAGE>





                           CARRIER ACCESS CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<Table>
<Caption>

                                                                                      DECEMBER 31,
                                                                                 -----------------------
                                                                                   2000           2001
                                                                                 ---------     ---------
<S>                                                                              <C>           <C>
ASSETS
Current assets:
  Cash and cash equivalents                                                      $  32,812     $  24,741
  Marketable securities available for sale                                          19,648        11,873
  Accounts receivable, net of allowance for doubtful accounts of $653 and
     $1,332 in 2000 and 2001, respectively                                          23,856        17,808
  Other receivables                                                                  5,331         1,704
  Income tax receivable                                                              4,383         8,468
  Inventory, net (note 3)                                                           30,711        36,500
  Deferred income taxes (note 7)                                                     3,417         3,958
  Prepaid expenses and other                                                         1,895           969
                                                                                 ---------     ---------
  Total current assets                                                             122,053       106,021
                                                                                 ---------     ---------
Property and equipment, net of accumulated depreciation and amortization
  (note 4)                                                                          13,942        14,140
Goodwill and other intangibles, net of amortization (note 2 and note 5)             16,879         9,354
Deferred income taxes (note 7)                                                       1,894         3,361
Other assets                                                                           231           141
                                                                                 ---------     ---------
  Total assets                                                                   $ 154,999     $ 133,017
                                                                                 =========     =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                                               $  15,746     $   8,864
  Accrued compensation payable                                                       4,340         3,856
  Accrued warranty costs payable                                                       907           599
  Cooperative advertising                                                               29           165
  Deferred rent concessions (note 11)                                                  579           782
  Other liabilities                                                                    601           158
                                                                                 ---------     ---------
  Total current liabilities                                                         22,202        14,424
                                                                                 ---------     ---------
Stockholders' equity (note 8):
Preferred stock, $0.001 par value, 5,000 shares authorized and no shares
  issued or outstanding at December 31, 2000 and 2001                                   --            --
Common stock $0.001 par value, 60,000 authorized and 24,673 shares issued and
  outstanding at December 31, 2000, and 24,740 shares issued and outstanding
  at December 31, 2001                                                                  30            30
Additional paid-in capital                                                          86,135        85,968
Deferred compensation                                                               (1,425)         (466)
Retained earnings                                                                   47,867        33,012
Accumulated other comprehensive income                                                 190            49
                                                                                 ---------     ---------
  Total stockholders' equity                                                       132,797       118,593
                                                                                 ---------     ---------
Commitments and contingencies (note 11)
Total liabilities and stockholders' equity                                       $ 154,999     $ 133,017
                                                                                 =========     =========
</Table>


          See accompanying notes to consolidated financial statements.



                                       31
<PAGE>
                           CARRIER ACCESS CORPORATION
                            STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<Table>
<Caption>


                                                                                       YEAR ENDED DECEMBER 31,
                                                                                  -------------------------------------
                                                                                    1999          2000          2001
                                                                                  ---------     ---------     ---------
<S>                                                                               <C>           <C>           <C>
Net revenue                                                                       $ 108,815     $ 148,050     $ 100,706
Cost of sales                                                                        45,499        66,769        54,090
                                                                                  ---------     ---------     ---------
   Gross profit                                                                      63,316        81,281        46,616
                                                                                  ---------     ---------     ---------
Operating expenses:
   Sales and marketing (exclusive of stock based compensation expense of $370,
      $147, and $58, respectively for the years
      ending December 31, 1999, 2000, and 2001)                                      11,154        20,035        23,299
   Research and development (exclusive of stock based compensation
      expense of $178, $191, and $363, respectively for the years
      ending December 31, 1999, 2000, and 2001)                                      13,601        28,697        33,205
   General and administrative (exclusive of stock based
      compensation expense of $270, $159, and $28, respectively
      for the years ending December 31, 1999, 2000, and 2001)                         4,637         7,877         9,034
   Goodwill amortization (note 2)                                                        --           906         3,460
   Asset impairment charge (note 5)                                                      --            --         4,220
   Amortization of deferred stock option compensation (note 8)                          818           497           449
                                                                                  ---------     ---------     ---------
   Total operating expenses                                                          30,210        58,012        73,667
                                                                                  ---------     ---------     ---------
     Income (loss) from operations                                                   33,106        23,269       (27,051)
Interest income                                                                       2,354         3,589         1,638
Other income, net                                                                       (24)          (63)           (3)
                                                                                  ---------     ---------     ---------
     Income (loss) before income taxes                                               35,436        26,795       (25,416)
Income tax expense (benefit) (note 7)                                                11,871         8,245       (10,561)
                                                                                  ---------     ---------     ---------
   Net income (loss)                                                              $  23,565     $  18,550     $ (14,855)
                                                                                  =========     =========     =========
Income (loss) per share:
   Basic                                                                          $    0.98     $    0.76     $   (0.60)
   Diluted                                                                        $    0.93     $    0.74     $   (0.60)
Weighted average common shares outstanding:
   Basic                                                                             23,939        24,428        24,695
   Diluted                                                                           25,223        24,975        24,695
</Table>

          See accompanying notes to consolidated financial statements.



                                       32
<PAGE>




                           CARRIER ACCESS CORPORATION
    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
                  YEARS ENDED DECEMBER 31, 1999, 2000, AND 2001
                                 (In thousands)

<Table>
<Caption>

                                                                                                        ACCUMULATED
                                                    COMMON STOCK    ADDITIONAL    DEFERRED                 OTHER           TOTAL
                                                  ----------------   PAID-IN    STOCK OPTION  RETAINED  COMPREHENSIVE  STOCKHOLDERS
                                                   SHARES   AMOUNT   CAPITAL    COMPENSATION  EARNINGS     INCOME          EQUITY
                                                  -------  -------  ----------  ------------  --------  -------------  ------------
<S>                                               <C>      <C>      <C>          <C>          <C>       <C>            <C>
  BALANCES AT DECEMBER 31, 1998 ................   23,630  $    28  $   59,955   $  (2,377)   $  5,752           --    $   63,358
Exercise of stock options ......................      549        1       1,469          --          --           --         1,470
Amortization of deferred stock compensation
  (note 8) .....................................       --       --          --         818          --           --           818
Tax benefit from exercise of stock options
  (note 7) .....................................       --       --       8,023          --          --           --         8,023
Comprehensive income
Net income .....................................       --       --          --          --      23,565           --        23,565
                                                   ------  -------  ----------   ---------    --------   ----------    ----------
      Total comprehensive income ...............       --       --          --          --      23,565           --        23,565
                                                   ------  -------  ----------   ---------    --------   ----------    ----------
  BALANCES AT DECEMBER 31, 1999 ................   24,179       29      69,447      (1,559)     29,317           --        97,234
Exercise of stock options ......................      331        1       4,084          --          --           --         4,085
Amortization of deferred stock compensation
  (note 8) .....................................       --       --          --         497          --           --           497
Forfeitures of deferred stock compensation
  related to stock options issued at less than
  fair value ...................................       --       --        (514)        514          --           --            --
Issuance of common stock and stock options in
  connection with acquisition ..................      163       --       8,561        (877)         --           --         7,684
Tax benefit from exercise of stock options
  (note 7) .....................................       --       --       4,557          --          --           --         4,557
Comprehensive income
Net income .....................................       --       --          --          --      18,550           --        18,550
Unrealized gain on investments, net of tax .....       --       --          --          --          --          190           190
                                                   ------  -------  ----------   ---------    --------   ----------    ----------
      Total comprehensive income ...............       --       --          --          --      18,550          190        18,740
                                                   ------  -------  ----------   ---------    --------   ----------    ----------
  BALANCES AT DECEMBER 31, 2000 ................   24,673       30      86,135      (1,425)     47,867          190       132,797
Exercise of stock options ......................       67       --          56          --          --           --            56
Amortization of deferred stock compensation
  (note 8) .....................................       --       --          --         449          --           --           449
Forfeitures of deferred stock compensation
  related to stock options issued at less
  than fair value ..............................       --       --        (510)        510          --           --            --
Tax benefit from exercise of stock options
  (note 7) .....................................       --       --         160          --          --           --           160
Stock options issued for services (note 8) .....       --       --         127          --          --           --           127
Comprehensive loss
Unrealized loss on investments, net of tax .....       --       --          --          --          --         (141)         (141)
Net loss .......................................       --       --          --          --     (14,855)          --       (14,855)
                                                   ------  -------  ----------   ---------    --------   ----------    ----------
      Total comprehensive loss .................       --       --          --          --     (14,855)        (141)      (14,966)
                                                   ------  -------  ----------   ---------    --------   ----------    ----------
  BALANCES AT DECEMBER 31, 2001 ................   24,740  $    30  $   85,968   $    (466)   $ 33,012   $       49    $  118,593
                                                   ======  =======  ==========   =========    ========   ==========    ==========
</Table>


          See accompanying notes to consolidated financial statements.




                                       33
<PAGE>





                           CARRIER ACCESS CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)


<Table>
<Caption>

                                                                                             YEAR END DECEMBER 31,
                                                                                   --------------------------------------------
                                                                                      1999             2000            2001
                                                                                   ------------    ------------    ------------
<S>                                                                                <C>             <C>             <C>
Cash flows from operating activities:
   Net income (loss) ...........................................................   $     23,565    $     18,550    $    (14,855)
   Adjustments to reconcile net income (loss) to net cash
     provided (used) by operating activities:
   Depreciation and amortization expense .......................................          1,012           3,903           8,117
   Asset impairment charge .....................................................             --              --           4,220
   Compensation expense related to stock options issued at
     less than fair value ......................................................            818             497             449
   Stock options issued for services ...........................................             --              --             127
   Deferred income tax benefit .................................................           (926)         (3,068)         (2,008)
   Tax benefit relating to exercise of stock options ...........................          8,023           4,557             160
   Changes in operating assets and liabilities:
     Accounts receivable .......................................................        (13,961)         (1,168)          6,048
     Income tax receivable .....................................................             --          (4,383)         (4,085)
     Inventory .................................................................         (4,391)        (20,511)         (5,789)
     Prepaid expenses and other ................................................         (1,120)         (5,446)          4,643
     Accounts payable ..........................................................            510           9,748          (6,882)
     Accrued warranty costs payable ............................................            387            (224)           (307)
     Accrued compensation payable ..............................................            501           1,890            (484)
     Cooperative advertising ...................................................           (196)           (242)            136
     Deferred rent concessions .................................................            138             168             203
     Income taxes payable ......................................................           (601)         (1,400)             --
     Other liabilities .........................................................            417              28            (444)
                                                                                   ------------    ------------    ------------
     Net cash provided (used) by operating activities ..........................         14,176           2,899         (10,751)
                                                                                   ------------    ------------    ------------
Cash flows from investing activities:
   Purchase of equipment .......................................................         (5,303)         (9,498)         (5,010)
   Sales (purchases) of securities available for sale, net .....................        (17,084)         20,404           7,634
   Payments for net assets acquired in acquisitions, net
     of cash acquired ..........................................................             --          (9,538)             --
                                                                                   ------------    ------------    ------------
     Net cash provided (used) by investing activities ..........................        (22,387)          1,368           2,624
Cash flows from financing activities:                                              ------------    ------------    ------------

   Proceeds from exercise of stock options .....................................          1,470           4,085              56
   Proceeds from short-term borrowings .........................................          1,000              --           2,000
   Payments on short-term borrowings ...........................................             --          (1,000)         (2,000)
                                                                                   ------------    ------------    ------------
     Net cash provided by financing activities .................................          2,470           3,085              56
                                                                                   ------------    ------------    ------------
     Net increase (decrease) in cash and cash equivalents ......................         (5,741)          7,352          (8,071)
   Cash and cash equivalents at beginning of year ..............................         31,201          25,460          32,812
                                                                                   ------------    ------------    ------------
   Cash and cash equivalents at end of year ....................................   $     25,460    $     32,812    $     24,741
                                                                                   ============    ============    ============

   Supplemental disclosure of cash flow and financing activities information:
   Cash paid (received) for income taxes .......................................   $      5,330    $     12,599    $     (4,578)
                                                                                   ============    ============    ============
</Table>

          See accompanying notes to consolidated financial statements.



                                       34
<PAGE>



                           CARRIER ACCESS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1999, 2000, and 2001


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     a. Business and Basis of Presentation. Carrier Access Corporation ("CAC" or
the "Company") is a leading provider of broadband digital access equipment to
communications service providers, including competitive local exchange carriers,
ISPs, IOCs, InterExchange Carrier ("IXC"s) and wireless service providers, which
is used for the provisioning of enhanced voice and high-speed Internet services
by service providers to end-users such as small and medium-sized businesses and
government and educational institutions. The Company sells its products through
distributors and directly to end-user customers. The Company operates in one
business segment and substantially all of its sales and operations are domestic.

     The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.

     The preparation of consolidated financial statements in conformity with
auditing standards generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the consolidated financial statements and
disclosures of contingent assets and liabilities and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.

     b. Cash and Cash Equivalents and Marketable Securities Available-for-Sale.
Cash and cash equivalents include investments in highly liquid debt securities
with maturities or interest reset dates of three months or less at the time of
purchase.

     Marketable securities "available-for-sale" represent U.S. Government agency
and corporate bonds with maturities of greater than three months and are
recorded at fair value. Securities "available-for-sale," all of which mature in
2002, consisted of the following as of December 31 (in thousands, except
percentages):

<Table>
<Caption>

                   AMORTIZED COST AND MARKET VALUE   2001 INTEREST RATES
                   -------------------------------   -------------------
                        2000            2001
                   -------------     -------------
<S>                <C>               <C>             <C>
Corporate Notes     $      4,682     $         --                --
Municipal Bonds            8,816            5,923     3.01% to 4.85%
Other                      6,150            5,950     1.70% to 2.90%
                    ------------     ------------
Total               $     19,648     $     11,873
                    ============     ============
</Table>

     Short-term investments are classified as "available-for-sale" as defined by
Statement of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities, and accordingly are recorded at fair
value. Increases or decreases in the fair value of investments classified as
available-for-sale are recorded in comprehensive income (loss), net of the
related tax effect.

     c. Other Receivables. Other receivables consist of amounts owed from third
party manufacturers for components delivered from the Company for their
manufacture in finished products.

     d. Fair Value of Financial Instruments. Cash and cash equivalents, accounts
receivable and accounts payable are recorded at cost which approximates fair
value because of the short-term maturity of these instruments.

     e. Inventory. Inventory is recorded at the lower of cost or market using
standard costs that approximate average costs. Costs include certain warehousing
costs and other allocable overhead. An allowance for excess and obsolete
inventory is established when 1) the cost of the inventory exceeds the estimated
market value determined by analyzing assumptions about future demand and market
conditions or 2) the technology associated with a product is considered obsolete
and the inventory cannot be used in the manufacture of other products.

     f. Property and Equipment. Property, equipment and leasehold improvements
are recorded at cost and are depreciated and amortized using the straight-line
method over useful lives ranging from three to thirty years or the lease term.
Depreciation and amortization expense for the years ended December 31, 1999,
2000 and 2001 totaled $1.0 million, $3.0 million, and $4.8 million,
respectively.

     g. Goodwill and Other Intangibles. Goodwill and other intangibles are
amortized on a straight-line basis over the estimated future periods to be
benefited which range from three to five years. Goodwill and other intangibles,
net were $9.4 million at December 31, 2001. Goodwill and other intangibles, net
were $16.9 million at December 31, 2000. Accumulated amortization on goodwill
and other intangibles was $949,000 and $4.4 million at December 31, 2000 and
December 31, 2001, respectively.



                                       35
<PAGE>

     h. Revenue Recognition. Revenue from sales of products is recognized upon
shipment. Reserves for estimated sales returns through stock rotation are
recorded when sales are made to customers with the right of return and are based
on management's estimate of expected returns and historical experience. The
Company records a provision for uncollectable accounts receivables based on
management's review of the aging of the receivable balances, customers current
creditworthiness and current market conditions.

     The Company provides limited price protection to its distributors, whereby
increases in prices are subject to a 60-day notice period before becoming
effective. In addition, the distributor is entitled to receive a credit for
subsequent price decreases to the extent of unsold distributor inventory at the
time of the price decrease. The Company also provides its distributors with
limited stock rotation rights, whereby products may be returned for an equal
dollar amount of new or different equipment. Customers are limited to three
exchanges per year and an amount equal to 15% of purchases in the preceding
four-month period. Neither of these rights affect the total sales price or
payment obligations of the customer. In addition, the customers' obligation to
the Company is not contingent upon the ultimate resale of the products. The
Company provides for the estimated impact of price protection and stock rotation
rights in its allowance for estimated returns based on historical experience and
management's forecasts of price protection credits and returns.

     i. Research and Development Costs. Research and development costs are
charged to operations as incurred.

     j. Long-Lived Assets. Long-lived assets are comprised of intangible assets
and property, plant and equipment. Long-lived assets, including certain
identifiable intangibles and goodwill related to those assets to be held and
used, are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be recoverable. An
estimate of undiscounted future cash flows produced by the asset, or the
appropriate grouping of assets, is compared to the carrying value to determine
whether an impairment exists, pursuant to the provisions of Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of. If an asset is
determined to be impaired, the loss is measured based on quoted market prices in
active markets, if available. If quoted market prices are not available, the
estimate of fair value is based on various valuation techniques, including a
discounted value of estimated future cash flows and fundamental analysis. The
Company reports an asset to be disposed of at the lower of its carrying value or
its estimated net realizable value.

     k. Income Taxes. The Company accounts for income taxes under the provisions
of Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes ("SFAS 109"). Under the asset and liability method of SFAS 109, deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the consolidated financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under SFAS 109, the effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. A valuation allowance is
required to the extent any deferred tax assets may not be realizable.

     l. Earnings Per Share. Earnings per share ("EPS") is presented in
accordance with Statement of Financial Accounting Standards No. 128, Earnings
Per Share ("SFAS 128"). SFAS 128 requires the presentation of basic and diluted
EPS. Under SFAS 128, basic EPS excludes dilution for potential common shares and
is computed by dividing income or loss available to common stockholders by the
weighted average number of common shares outstanding during the period. Diluted
EPS reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted and resulted in the
issuance of common stock.

A reconciliation of net income (loss) and basic to diluted share amounts is
presented below.

<Table>
<Caption>

(In thousands)                                                                           1999            2000            2001
                                                                                      -----------     -----------     -----------
<S>                                                                                   <C>             <C>             <C>
Basic earnings (loss) per share computation
     Net income (loss) available to shareholders .................................    $    23,565     $    18,550     $   (14,855)
                                                                                      ===========     ===========     ===========
     Average shares outstanding-basic ............................................         23,939          24,428          24,695
                                                                                      ===========     ===========     ===========
     Basic earnings (loss) per share .............................................    $      0.98     $      0.76     $     (0.60)
                                                                                      ===========     ===========     ===========
Diluted earnings (loss) per share computation
     Net income (loss) ...........................................................         23,565          18,550         (14,855)
     Income impact of exercises of assumed stock options .........................           (108)            (69)             --
                                                                                      ===========     ===========     ===========
         Net income (loss) available to shareholders plus assumed conversions ....    $    23,457     $    18,481     $   (14,855)
                                                                                      ===========     ===========     ===========
Weighted-average shares
     Average shares outstanding-basic ............................................         23,939          24,428          24,695
     Shares assumed issued through exercises of stock options ....................          1,284             547              --
                                                                                      -----------     -----------     -----------
     Average shares outstanding-diluted ..........................................         25,223          24,975          24,695
         Diluted earnings (loss) per share .......................................    $      0.93     $      0.74     $     (0.60)
                                                                                      ===========     ===========     ===========
</Table>




                                       36
<PAGE>

     m. Stock-Based Compensation. The Company accounts for its stock-based
employee compensation plan using the intrinsic value based method prescribed by
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB 25), and related interpretations. The Company has provided pro
forma disclosures of net income and income per share, as if the fair value based
method of accounting for the plan, as prescribed by Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS
123"), had been applied.

     Stock options issued to consultants and others for services are recorded at
fair value as prescribed by SFAS 123. Charges to operations associated with
these option grants were not significant during the years ended December 31,
1999, 2000, and 2001.

     n. Warranty Costs. The Company provides warranties of various lengths to
customers depending on the specific product and the terms of the customer
purchase agreements. The Company has accrued for its warranty obligations based
on historical experience and management's estimate of future warranty costs to
be incurred.

     o. Comprehensive Income. Comprehensive income consists of net unrealized
holding gains or losses on "available-for-sale" securities.

     p. Reclassifications. Certain reclassifications have been made in the 2000
financial statements to conform to the 2001 presentation.

2.   ACQUISITIONS

     In August of 2000, the Company acquired all of the issued and outstanding
common stock of Millennia, a developer of broadband communications equipment,
located in Roanoke, Virginia, for cash of approximately $2.1 million, 163,004
shares of common stock valued at approximately $7.3 million and the exchange of
vested employee stock options valued at approximately $0.4 million, for total
consideration of approximately $9.8 million. Based on the purchase price
allocation, approximately $9.8 million of the purchase price was allocated to
goodwill and other intangible assets, which are being amortized on a
straight-line basis over periods ranging from three to five years. In addition,
unvested Millennia stock options were replaced with equivalent unvested stock
options of the Company. The excess of the fair value of the Company's common
stock over the exercise prices of the stock options, which totaled approximately
$877,000, was recorded as deferred stock option compensation and will be
expensed over the vesting period of the stock options.

     In October of 2000, the Company acquired the ATM product lines of LNAS, a
division of Litton Systems, Inc., located in Roanoke, Virginia, for cash of
approximately $8.6 million. Based on the purchase price allocation,
approximately $8.0 million of the purchase price was allocated to goodwill and
other intangible assets, customer base and core technology, which is being
amortized on a straight-line basis over periods ranging from three to five
years.

     Both of the acquisitions were accounted for using the purchase method of
accounting and accordingly, the accompanying consolidated financial statements
include the results of operations of the acquired businesses since the dates of
acquisition. The aggregate purchase prices of the acquisitions were allocated
based on fair values to current assets, equipment, goodwill and other
intangibles and current liabilities in the amounts of $1.0 million, $0.5
million, $17.8 million and $0.9 million, respectively.

   The following unaudited pro forma information has been prepared assuming that
the acquisitions occurred on January 1, 2000 (in thousands, except per share
amounts).

<Table>
<Caption>

                                        YEARS ENDED DECEMBER 31,
                                     -------------------------------
                                        1999               2000
                                     -------------     -------------
<S>                                  <C>               <C>
Net revenue                          $     111,128     $     149,750
Net earnings                         $      19,233     $      15,355
Diluted earnings per share           $        0.76     $        0.61
</Table>

     The pro forma information is based on historical results and does not
necessarily reflect the actual operating results that would have occurred nor is
it necessarily indicative of future results of operations of the combined
enterprises.



                                       37
<PAGE>

3.   INVENTORY

     The components of inventory as of December 31 are summarized as follows (in
thousands):

<Table>
<Caption>

                                      2000               2001
                                   ------------      ------------
<S>                                <C>               <C>
Raw materials ................     $     15,600      $     22,416
Work-in-process ..............               36                 8
Finished goods ...............           15,644            17,192
Reserve for obsolescence .....             (569)           (3,116)
                                   ------------      ------------
                                   $     30,711      $     36,500
                                   ============      ============
</Table>

4.   PROPERTY AND EQUIPMENT

     Property and equipment as of December 31 consisted of the following (in
thousands):

<Table>
<Caption>

                                           2000               2001
                                        ------------      ------------
<S>                                     <C>               <C>
Machinery and software ............     $     16,382      $     20,539
Real property .....................              270               265
Furniture, fixtures and other .....              671               873
Leasehold improvements ............            1,471             2,128
                                        ------------      ------------
                                              18,794            23,805
Less accumulated depreciation .....           (4,852)           (9,665)
                                        ------------      ------------
                                        $     13,942      $     14,140
                                        ============      ============
</Table>

5.   ASSET IMPAIRMENT CHARGE

     During the third quarter of 2001, the projected demand for the commercial
version of the Broadmore product line decreased significantly. This product line
was acquired as part of the acquisition of the ATM product lines of LNAS. As a
result of such decline in demand, the Company determined that goodwill and other
intangible assets associated with the acquisition were impaired and recorded a
noncash impairment charge of $4.2 million in the third quarter of 2001.

6.   DEBT

     In 2001, the Company renewed a credit agreement with a bank that provided
for a $5.0 million revolving line of credit which expired September 2, 2001. The
Company is currently negotiating a new credit agreement.

7.   INCOME TAXES

     Income tax expense (benefit) consists of the following for the years ended
December 31 (in thousands):

<Table>
<Caption>

                                                 1999             2000               2001
                                             ------------      ------------      ------------
<S>                                          <C>               <C>               <C>
Current ................................     $     12,797      $     11,313      $     (8,553)
Deferred ...............................             (926)           (3,068)           (2,008)
                                             ------------      ------------      ------------
     Income tax expense (benefit) ......     $     11,871      $      8,245      $    (10,561)
                                             ============      ============      ============
</Table>

     A reconciliation of expected income tax expense (benefit) calculated by
applying the statutory Federal tax rate to actual income tax expense (benefit)
for the years ended December 31 is as follows (in thousands):

<Table>
<Caption>

                                                             1999             2000               2001
                                                         ------------      ------------      ------------
<S>                                                      <C>               <C>               <C>
Expected income tax expense (benefit) ..............     $     12,403      $      9,378      $     (8,792)
State income taxes, net of Federal tax benefit .....            1,160             1,022              (670)
Research and experimentation credit ................           (1,232)           (1,686)           (1,397)
Other, net .........................................             (460)             (469)              298
                                                         ------------      ------------      ------------
  Actual income tax expense (benefit) ..............     $     11,871      $      8,245      $    (10,561)
                                                         ============      ============      ============
</Table>




                                       38
<PAGE>

     The tax effects of significant temporary differences that result in
deferred tax assets and liabilities at December 31 are as follows (in
thousands):

<Table>
<Caption>
                                                               2000                2001
                                                            ------------      ------------
<S>                                                         <C>               <C>
Deferred tax assets:
  Net operating loss carryforward .....................     $         --      $        376
  Allowance for doubtful accounts and returns .........              828               503
  Inventory reserves ..................................              893             1,635
  Accrued warranty and cooperative advertising ........              302               289
  Amortization of goodwill related to acquisition .....               61             1,976
  Other accrued expenses ..............................              154                --
  Compensation accruals ...............................            1,600             1,775
  Research and experimentation credit .................            2,118             1,397
  Other, net ..........................................              224               375
                                                            ------------      ------------
           Total deferred tax asset ...................     $      6,180      $      8,326
                                                            ------------      ------------
Deferred tax liabilities:
     Property and equipment ...........................             (748)             (912)
     Other, net .......................................             (121)              (95)
                                                            ------------      ------------
           Total deferred tax liabilities .............             (869)           (1,007)
                                                            ------------      ------------
           Net deferred tax asset .....................     $      5,311      $      7,319
                                                            ============      ============
</Table>

     The Company has analyzed the sources and expected reversal periods of its
deferred tax assets. At December 31, 2001 the Company has a research and
experimentation credit carry-forward of approximately $1.4 million which will
expire in the year 2021 if not utilized. In addition, the Company incurred
approximately $13.8 million of net operating losses for the period ending
December 31, 2001. It is anticipated that the federal net operating loss will be
carried back to obtain a refund of prior taxes paid. The net operating losses
will expire in the year 2021 if not utilized. The Company believes that the tax
benefits attributable to deductible temporary differences will be realized by
recognition of future taxable amounts.

     For the years ended December 31, 1999, 2000, and 2001, the Company
recognized $8.0 million, $4.6 million, and $160,000 as a direct increase to
paid-in capital for the income tax benefit resulting from the exercise of
non-qualified stock options by employees.

8.   STOCK OPTIONS

     Pursuant to the Company's 1998 stock option plan (the "Plan"), a committee
appointed by the Company's Board of Directors may grant incentive and
nonqualified options to employees, consultants and directors. The Plan currently
authorizes the grant of options to purchase up to 6,967,014 shares of authorized
common stock. Incentive stock options have a ten-year term and non-qualified
stock options have a five-year term. A majority of the stock options vest 25% on
the first anniversary date of the grant and 6.25% each quarter thereafter, with
the remaining stock options vesting 100% four years from the grant date. As of
December 31, 2001, an aggregate of 9,483,014 options had been granted under the
Plan of which 1,234,120 were incentive stock options and 8,248,844 were
non-qualified stock options.




                                       39
<PAGE>

     The following summarizes stock option activity under the Plan:

<Table>
<Caption>

                                                                   SHARES     WEIGHTED AVERAGE
                                                                UNDER OPTION   EXERCISE PRICE
                                                                ------------  ----------------
<S>                                                             <C>           <C>
Options outstanding at December 31, 1998 ............              1,827,013            6.08
     Granted ........................................              1,084,871           40.08
     Exercised ......................................               (548,847)           2.68
     Canceled .......................................               (414,751)          20.84
                                                                ------------

Options outstanding at December 31, 1999 ............              1,948,286           22.83
     Granted ........................................              1,918,400           30.00
     Exercised ......................................               (331,041)          12.34
     Canceled .......................................               (817,651)          29.23
                                                                ------------
Options outstanding at December 31, 2000 ............              2,717,994           27.36
     Granted ........................................              2,603,250            5.76
     Exercised ......................................                (66,955)           0.84
     Canceled .......................................             (2,263,409)          27.50
                                                                ------------
Options outstanding at December 31, 2001 ............              2,990,880            9.05
                                                                ============

Options available for grant at December 31, 2001 ....              2,300,121
                                                                ============
Options exercisable at December 31, 1999 ............                215,503           11.60
                                                                ============
Options exercisable at December 31, 2000 ............                392,571           16.20
                                                                ============
Options exercisable at December 31, 2001 ............                365,739           14.69
                                                                ============
</Table>


     The following summarizes information about outstanding options at December
31, 2001:


<Table>
<Caption>

                                   OPTIONS OUTSTANDING                                        OPTIONS EXERCISABLE
       ----------------------------------------------------------------------       ---------------------------------------
                                                           Weighted-average
              Range of                   Number of             remaining                Number             Weighted-average
              exercise                    options           contractual life          of options               exercise
               prices                   outstanding            (in years)             exercisable                price
       --------------------          -----------------     ------------------       ---------------        ----------------
<S>                                  <C>                   <C>                      <C>                    <C>
           0.00 - 12.00                  2,497,562                 4.1                       173,980              4.30
          12.00 - 24.00                    242,118                 3.7                        71,725             12.33
          24.00 - 36.00                     55,950                 2.4                        35,666             30.47
          36.00 - 48.00                    158,800                 3.5                        73,641             39.34
          48.00 - 60.00                     36,450                 3.1                        10,727             52.09
                                         ---------                                           -------
                                         2,990,880                 4.0                       365,739             17.00
                                         =========                                           =======
</Table>

     As discussed in Note 1, the Company applies APB 25 and related
interpretations in accounting for stock options issued to employees and
directors. As a result, for options issued with exercise prices below the
estimated fair market value on the date of grant, the Company recorded deferred
compensation expense totaling approximately $1,227,000 for options granted
during the year ended December 31, 1997, and $1,921,000 for options granted
during the year ended December 31, 1998. Such deferred compensation expense will
be amortized to operations pro rata over the forty-eight month option vesting
period. Such amortization expense totaled approximately $818,000, $497,000, and
$449,000 for the years ended December 31, 1999, 2000 and 2001, respectively. The
Company reversed $514,000 and $510,000 in 2000 and 2001, respectively, against
additional paid-in capital for forfeitures of deferred stock compensation
related to stock options issued at less than fair value.

     The weighted average fair values of options granted during 1999, 2000, and
2001 were $40.08, $30.00, and $5.76 per share, respectively, using the
Black-Scholes option-pricing model with the following assumptions: no expected
dividends, 99.4% volatility in 1999, 111% volatility in 2000, and 106%
volatility in 2001, expected life of the options of five years in 1999, 2000,
and 2001, and a risk-free interest rate of 6.0% for 1999, 5.0% for 2000, and
3.8% for 2001. Had compensation cost for the Company's stock-based compensation
plan been determined based upon the fair value of options on the grant dates,
amortizing these costs on a straight-line basis, consistent with the provisions
of SFAS 123, the Company's 1999, 2000, and 2001 pro forma net income (loss)
would have been as follows (in thousands, except per share data):



                                       40
<PAGE>

<Table>
<Caption>

                                                                         YEAR ENDED DECEMBER 31,
                                                                 -------------------------------------------
                                                                    1999            2000             2001
                                                                 -----------     -----------     -----------
                                                                    (In thousands, except per share data)
<S>                                                              <C>             <C>             <C>
Net income (loss) available to common stockholders:
   As reported .............................................     $    23,565     $    18,550     $   (14,855)
   Pro forma ...............................................          14,779           7,504         (24,011)
Earning (loss) per common share:
   As reported:
     Basic .................................................     $      0.98     $      0.76     $     (0.60)
     Diluted ...............................................            0.93            0.74           (0.60)
   Pro forma:
     Basic .................................................     $      0.62     $      0.31     $     (0.97)
     Diluted ...............................................            0.59            0.30           (0.97)
</Table>

     Beginning August 20, 2001, the Company offered eligible employees who held
stock options with a price greater than or equal to $10.00 per share under the
Plan the opportunity to exchange certain outstanding options to purchase shares
of Carrier Access common stock for new options to be granted on March 20, 2002.
Eligible employees who participated in the option exchange will receive a number
of shares subject to new options for every share subject to the options tendered
which varies according to the most recent performance rating received by the
employee under the Company's performance rating system. Options to purchase a
total of 1,781,619 shares with an aggregate exercise price of $4.6 million as of
September 18, 2001 were exchanged pursuant to the offer.

     In addition to options issued to employees and directors, the Company
issued options to purchase 62,500 shares of common stock to consultants for
services during the year ended December 31, 2001. These options have an exercise
price from $2.80 to $6.50 per share, are exercisable at the date of grant and
expire at various dates from January 2, 2006 to October 16, 2006. The fair value
of these options was determined to be $127,000 for the year ended December 31,
2001 and was recognized in general and administrative expense. The fair value
was calculated using the Black-Scholes option-pricing model with the following
assumptions: risk-free interest rate of 3.81%; contractual lives of five years;
no dividend yield; and 102% volatility. As of December 31, 2001, none of these
options have been exercised.

9.   SIGNIFICANT CUSTOMERS, SUPPLIERS AND CONCENTRATION OF CREDIT RISK

     Our customers are primarily distributors and original equipment
manufacturers, who resell the Company's products to end-users.

     The Company recognized revenue from the following significant customers and
end-users for the years ended December 31 (in thousands):

<Table>
<Caption>

COMPANY                     1999              2000              2001
-------                  ------------     ------------     ------------
<S>                      <C>              <C>              <C>
A ..................     $     29,877     $     25,801     $     23,476
B ..................            2,003           28,856           23,716
C ..................            9,751           14,315           12,405
D ..................           15,195           23,923            8,621
E ..................            9,234           19,349              450
</Table>

     Although the Company generally uses standard parts and components for its
products, many key components are purchased from sole or single source vendors
for which alternative sources may not currently be available. The identification
and utilization of new suppliers for such items could adversely effect the
Company's future operating results.

     The Company is exposed to potential concentrations of credit risk from its
accounts receivable with its various customers and receivables are concentrated
in customers in the telecommunications industry. To reduce this risk, the
Company has a policy of assessing the creditworthiness of its customers and
monitors the aging of its accounts receivable for potential uncollectable
accounts.

10.  EMPLOYEE BENEFIT PLAN

     The Company has a defined contribution employee benefit plan (the "401(k)
Plan") under Section 401(k) of the Internal Revenue Code which is available to
all employees who meet the 401(k) Plan's eligibility requirements. Employees may
contribute up to the maximum limits allowed by the Internal Revenue Code. At the
beginning of 2001, the Company began matching 50% of the employee's pre-tax
contributions, up to 6% of each participating employee's annual salary. In 2001,
the cost of this plan was $860,000. The Company made no contributions to the
401(k) Plan in 1999 or 2000.

11.  COMMITMENTS AND CONTINGENCIES

     The Company leases office space under various noncancelable-operating
leases that expire through 2009. Future obligations under these leases are as
follows (in thousands):




                                       41
<PAGE>


<Table>
<Caption>

YEAR ENDING DECEMBER 31:
<S>                                        <C>
        2002 .........................     $      2,044
        2003 .........................            2,120
        2004 .........................            2,227
        2005 .........................            1,988
        2006 .........................              715
        Thereafter ...................            1,134
                                           ------------
                                           $     10,228
                                           ============
</Table>

     The Company records rent expense under noncancelable-operating leases using
the straight-line method after consideration of increases in rental payments
over the lease term, and records the difference between actual payments and rent
expense as deferred rent concessions.

     Rent expense for the years ended December 31, 1999, 2000, and 2001 totaled
$978,000, $1.5 million, and $1.9 million, respectively.

     On December 28, 2001, a contract manufacturer sued the Company in Alabama
Circuit Court for $4.5 million for breach of contract. The Company intends to
vigorously defend this lawsuit. Management believes that it is not currently
possible to estimate the impact, if any, that the resolution of this lawsuit
will have on the Company's results of operations, financial position or cash
flows.

12.   QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

     The following information summarizes selected quarterly financial
information for the two years ended December 31, 2001 (in thousands, except per
share data).

<Table>
<Caption>

                                                                         QUARTER ENDED DECEMBER 31, 2001
                                                           -------------------------------------------------------------
                                                             FIRST       SECOND        THIRD       FOURTH         YEAR
                                                           ---------    ---------    ---------    ---------    ---------
<S>                                                        <C>          <C>          <C>          <C>          <C>
Net revenue                                                $  28,838    $  29,434    $  20,899    $  21,535    $ 100,706
Cost of sales                                                 13,779       14,353       13,622       12,336       54,090
                                                           ---------    ---------    ---------    ---------    ---------
   Gross profit                                               15,059       15,081        7,277        9,199       46,616
Operating expenses:
   Selling, general and administrative                         8,664       10,036       13,212        8,101       40,013
   Research and development                                    8,519        9,220        8,015        7,451       33,205
   Amortization of deferred stock option compensation            182           74          104           89          449
                                                           ---------    ---------    ---------    ---------    ---------
       Loss from operations                                   (2,306)      (4,249)     (14,054)      (6,442)     (27,051)
Other income, net                                                581          475          350          229        1,635
                                                           ---------    ---------    ---------    ---------    ---------
       Loss before income taxes                               (1,725)      (3,774)     (13,704)      (6,213)     (25,416)
Income tax benefit                                              (873)      (1,700)      (5,506)      (2,482)     (10,561)
                                                           ---------    ---------    ---------    ---------    ---------
   Net loss                                                $    (852)   $  (2,074)   $  (8,198)   $  (3,731)   $ (14,855)
                                                           =========    =========    =========    =========    =========
Loss per share:
    Basic                                                  $   (0.03)   $   (0.08)   $   (0.33)   $   (0.15)   $   (0.60)
    Diluted                                                $   (0.03)   $   (0.08)   $   (0.33)   $   (0.15)   $   (0.60)
</Table>

<Table>
<Caption>
                                                                      QUARTER ENDED DECEMBER 31, 2000
                                                          ----------------------------------------------------------
                                                            FIRST      SECOND      THIRD       FOURTH         YEAR
                                                          ---------   ---------   ---------   ---------    ---------
<S>                                                       <C>         <C>         <C>         <C>          <C>
Net revenue                                               $  38,726   $  44,126   $  40,184   $  25,014    $ 148,050
Cost of sales                                                16,745      19,102      19,042      11,880       66,769
                                                          ---------   ---------   ---------   ---------    ---------
   Gross profit                                              21,981      25,024      21,142      13,134       81,281
Operating expenses:
   Selling, general and administrative                        5,590       7,005       8,427       7,797       28,818
   Research and development                                   5,931       7,153       7,437       8,176       28,697
   Amortization of deferred stock option compensation           124         103         114         155          497
                                                          ---------   ---------   ---------   ---------    ---------
       Income (loss) from operations                         10,336      10,763       5,164      (2,994)      23,269
Other income, net                                               721         801         842       1,162        3,526
                                                          ---------   ---------   ---------   ---------    ---------
       Income (loss) before income taxes                     11,057      11,564       6,006      (1,832)      26,795
Income tax expense (benefit)                                  3,538       3,701       1,922        (916)       8,245
                                                          ---------   ---------   ---------   ---------    ---------
   Net income (loss)                                      $   7,519   $   7,863   $   4,084   $    (916)   $  18,550
                                                          =========   =========   =========   =========    =========
Income (loss) per share:
    Basic                                                 $    0.31   $    0.32   $    0.17   $   (0.04)   $    0.76
    Diluted                                               $    0.30   $    0.32   $    0.16   $   (0.04)   $    0.74
</Table>




                                       42
<PAGE>


13.  VALUATION AND QUALIFYING ACCOUNTS

<Table>
<Caption>

                                              BALANCE AT       ADDITIONS                           BALANCE AT
                                              BEGINNING        CHARGED TO                             END
Allowance for doubtful accounts:              OF PERIOD        OPERATIONS        WRITE-OFFS        OF PERIOD
                                             ------------     ------------      ------------      ------------
<S>                                          <C>              <C>               <C>               <C>
   Year Ended:
December 31, 1999                            $        643              (47)             (132)     $        464
                                             ------------     ------------      ------------      ------------
December 31, 2000                            $        464              211               (22)     $        653
                                             ------------     ------------      ------------      ------------
December 31, 2001                            $        653              679                --      $      1,332
                                             ------------     ------------      ------------      ------------
Inventory Obsolescence Reserve:
Year Ended:

December 31, 1999                            $        576              794              (753)     $        617
                                             ------------     ------------      ------------      ------------
December 31, 2000                            $        617            1,076            (1,124)     $        569
                                             ------------     ------------      ------------      ------------
December 31, 2001                            $        569            5,662            (3,115)     $      3,116
                                             ------------     ------------      ------------      ------------
</Table>

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


     None.



                                       43
<PAGE>




                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required by this item concerning our directors and
executive officers is incorporated by reference to the information set forth in
the sections entitled "Proposal One--Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" in our Proxy Statement for the 2002
Annual Meeting of Stockholders to be filed with the Commission within 120 days
following the end of our fiscal year ended December 31, 2001 (the "2002 Proxy
Statement"), except that certain information required by this item concerning
our executive officers is incorporated by reference to the information set forth
in the section entitled "Executive Officers of the Company" at the end of Part I
of this Annual Report on Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

     The information required by this item regarding executive compensation is
incorporated by reference to the information set forth in the sections entitled
"Proposal One--Election of Directors--Director Compensation" and "Executive
Officer Compensation" in our 2002 Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this item regarding security ownership of
certain beneficial owners and management is incorporated by reference to the
information set forth in the section entitled "Security Ownership of Certain
Beneficial Owners and Management" in our 2002 Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this item regarding certain relationships and
related transactions is incorporated by reference to the information set forth
in the section entitled "Transactions with Management" in our 2002 Proxy
Statement.




                                       44
<PAGE>




                                     PART IV


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

     (a)      The following documents are filed as part of this Form 10-K:

         1.   Consolidated Financial Statements. The following consolidated
              financial statements of the Company and the Independent Auditors'
              Report are filed as part of this Form 10-K:

<Table>
<Caption>

                                                                                                                             Page
                                                                                                                             ----
<S>                                                                                                                          <C>
     Independent Auditors' Report..............................................................................................30

     Consolidated Balance Sheets as of December 31, 2000 and 2001..............................................................31

     Consolidated Statements of Operations for the years ended December 31, 1999, 2000, and 2001...............................32

     Consolidated Statements of Stockholders' Equity for the years ended December 31, 1999, 2000, and 2001.....................33

     Consolidated Statements of Cash Flows for the years ended December 31, 1999, 2000, and 2001...............................34

     Notes to Consolidated Financial Statements................................................................................35
</Table>

         2.   Consolidated Financial Statement Schedule. No schedule has been
              included since they are either not required, not applicable or the
              information is otherwise included.

              Schedules other than those listed above have been omitted since
              they are either not required, not applicable, or the information
              is otherwise included.

         3.   Exhibits. The exhibits listed on the accompanying index to
              exhibits immediately following the consolidated financial
              statement schedule are filed as part of, or incorporated by
              reference into, this Form 10-K.

     (b)      Reports on Form 8-K. No Reports on Form 8-K were filed during the
              fourth quarter ended December 31, 2001.




                                       45
<PAGE>




                                  EXHIBIT INDEX


 Exhibit
  Number         Description of Documents

   3.1            Registrant's Amended and Restated Certificate of Incorporation
                  (incorporated herein by reference to Exhibit 3.1 to the
                  Registrant's Registration Statement on Form S-1, Reg. No.
                  333-53947 ("Registrant's 1998 S-1")).

   3.2            Registrant's Bylaws (incorporated herein by reference to
                  Exhibit 3.2 to the Registrant's 1998 S-1).

   4.1            Form of Registrant's Specimen Common Stock Certificate
                  (incorporated herein by reference to Exhibit 4.1 to the
                  Registrant's 1998 S-1).

   4.2            Amended and Restated Investor Rights Agreement, among the
                  Registrant and the investors and founders named therein, dated
                  September 16, 1997 (incorporated herein by reference to
                  Exhibit 4.2 to the Registrant's 1998 S-1).

   10.1           Form of Diamond Level Distributor Agreement (incorporated
                  herein by reference to Exhibit 10.1 to the Registrant's 1998
                  S-1).

   10.2           Form of Platinum Level OEM Agreement (incorporated herein by
                  reference to Exhibit 10.2 to the Registrant's 1998 S-1).

   10.4           Lease Agreement between Carrier Access Corporation and
                  Cottonwood Land and Farms Ltd. for facilities at 5395 Pearl
                  Parkway, Boulder, Colorado, dated June 1, 1995 (incorporated
                  herein by reference to Exhibit 10.4 to the Registrant's 1998
                  S-1).

   10.5           Amendment to Lease Agreement between Carrier Access
                  Corporation and Cottonwood Land and Farms Ltd. Dated September
                  20, 1995 (incorporated herein by reference to Exhibit 10.5 to
                  the Registrant's 1998 S-1).

   10.6+          Registrant's 1995 Stock Option Plan (incorporated herein by
                  reference to Exhibit 10.6 to the Registrant's 1998 S-1).

   10.7+          Registrant's 1998 Stock Option Plan (incorporated herein by
                  reference to Exhibit 10.7 to the Registrant's 1998 S-1).

   10.8           Amendment to Lease Agreement between Carrier Access
                  Corporation and Cottonwood Land and Farms Ltd. Dated October
                  25, 1998 (incorporated herein by reference to Exhibit 10.8 to
                  the Registrant's 1998 S-1).

   10.9+          Form of Directors' and Officers' Indemnification Agreement
                  (which is incorporated herein by reference to Exhibit 10.9 to
                  the Registrant's 1998 S-1).

   10.10          Lease Agreement between Carrier Access Corporation and TC
                  Boulder Warehouse, LP, a Delaware limited partnership for
                  facilities at 6837 Winchester Circle, Boulder, Colorado, dated
                  November 13, 1998 (incorporated herein by reference to Exhibit
                  10.10 to the Registrant's 1998 S-1).

   23.1*          Consent of KPMG LLP, Independent Certified Public Accountants.

   24.1*          Power of Attorney (Reference is made to the following
                  Signature Page).

* Filed herewith.

+ Indicates management contract or compensatory plan or arrangement.



                                       46
<PAGE>




                                    SIGNATURE


     Pursuant to the requirements of section 13 or 15(d) of the Securities Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Boulder, State of
Colorado, on this 27th day of March 2002.

                                  CARRIER ACCESS CORPORATION



                                  By:  /s/ Timothy R. Anderson
                                       ----------------------------------------
                                       Timothy R. Anderson
                                       Chief Financial Officer, Vice President
                                       of Finance and Administration, Treasurer


                                POWER OF ATTORNEY


     Know all men by these presents, that each person whose signature appears
below constitutes and appoints Timothy R. Anderson, his or her attorney-in-fact,
with power of substitution in any and all capacities, to sign any amendments to
this Annual Report on Form 10-K, and to file the same with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that the attorney-in-fact or his
or her substitute or substitutes may do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act of 1934, this report has
been signed by the persons whose signatures appear below, which persons have
signed such report on March 27, 2002 in the capacities indicated:


<Table>
<Caption>

                                 Signature                                                        Title
                                 ---------                                                        -----
<S>                                                                     <C>
                 /s/ Roger L. Koenig
                 -------------------------------------------            President, Chief Executive Officer and Chairman of the
                 (Roger L. Koenig)                                        Board of Directors (Principal Executive Officer)

                 /s/ Timothy R. Anderson                                Chief Financial Officer, Vice President of Finance and
                 -------------------------------------------               Chairman and Administration, Treasurer (Principal
                 (Timothy R. Anderson)                                     Financial and Accounting Officer)

                 /s/ Nancy Pierce                                       Corporate Development Officer, Director, Secretary
                 -------------------------------------------
                 (Nancy Pierce)

                 /s/ John W. Barnett, Jr.                               Director
                 -------------------------------------------
                 (John W. Barnett, Jr.)

                 /s/ Joseph Graziano                                    Director
                 -------------------------------------------
                 (Joseph Graziano)

                 /s/ David R. Laube                                     Director
                 -------------------------------------------
                 (David R. Laube)

                 /s/ Mark A. Floyd.                                     Director
                 -------------------------------------------
                 (Mark A. Floyd)
</Table>





                                       47
<PAGE>

                                  EXHIBIT INDEX

<Table>
<Caption>

 EXHIBIT
  NUMBER         DESCRIPTION
 -------         -----------
<S>               <C>
   3.1            Registrant's Amended and Restated Certificate of Incorporation
                  (incorporated herein by reference to Exhibit 3.1 to the
                  Registrant's Registration Statement on Form S-1, Reg. No.
                  333-53947 ("Registrant's 1998 S-1")).

   3.2            Registrant's Bylaws (incorporated herein by reference to
                  Exhibit 3.2 to the Registrant's 1998 S-1).

   4.1            Form of Registrant's Specimen Common Stock Certificate
                  (incorporated herein by reference to Exhibit 4.1 to the
                  Registrant's 1998 S-1).

   4.2            Amended and Restated Investor Rights Agreement, among the
                  Registrant and the investors and founders named therein, dated
                  September 16, 1997 (incorporated herein by reference to
                  Exhibit 4.2 to the Registrant's 1998 S-1).

   10.1           Form of Diamond Level Distributor Agreement (incorporated
                  herein by reference to Exhibit 10.1 to the Registrant's 1998
                  S-1).

   10.2           Form of Platinum Level OEM Agreement (incorporated herein by
                  reference to Exhibit 10.2 to the Registrant's 1998 S-1).

   10.4           Lease Agreement between Carrier Access Corporation and
                  Cottonwood Land and Farms Ltd. for facilities at 5395 Pearl
                  Parkway, Boulder, Colorado, dated June 1, 1995 (incorporated
                  herein by reference to Exhibit 10.4 to the Registrant's 1998
                  S-1).

   10.5           Amendment to Lease Agreement between Carrier Access
                  Corporation and Cottonwood Land and Farms Ltd. Dated September
                  20, 1995 (incorporated herein by reference to Exhibit 10.5 to
                  the Registrant's 1998 S-1).

   10.6+          Registrant's 1995 Stock Option Plan (incorporated herein by
                  reference to Exhibit 10.6 to the Registrant's 1998 S-1).

   10.7+          Registrant's 1998 Stock Option Plan (incorporated herein by
                  reference to Exhibit 10.7 to the Registrant's 1998 S-1).

   10.8           Amendment to Lease Agreement between Carrier Access
                  Corporation and Cottonwood Land and Farms Ltd. Dated October
                  25, 1998 (incorporated herein by reference to Exhibit 10.8 to
                  the Registrant's 1998 S-1).

   10.9+          Form of Directors' and Officers' Indemnification Agreement
                  (which is incorporated herein by reference to Exhibit 10.9 to
                  the Registrant's 1998 S-1).

   10.10          Lease Agreement between Carrier Access Corporation and TC
                  Boulder Warehouse, LP, a Delaware limited partnership for
                  facilities at 6837 Winchester Circle, Boulder, Colorado, dated
                  November 13, 1998 (incorporated herein by reference to Exhibit
                  10.10 to the Registrant's 1998 S-1).

   23.1*          Consent of KPMG LLP, Independent Certified Public Accountants.

   24.1*          Power of Attorney (Reference is made to the following
                  Signature Page).
</Table>

* Filed herewith.

+ Indicates management contract or compensatory plan or arrangement.