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

                                   FORM 10-KSB

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Fiscal Year Ended December 31, 1999.
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 000-29032
                       ---------

                      CHAMPION COMMUNICATION SERVICES, INC.

           DELAWARE                                      76-0448005
 (State or other jurisdiction of            (I.R.S. Employer Identification No.)
 incorporation or organization)

1610 WOODSTEAD COURT, SUITE 330
THE WOODLANDS, TEXAS                                     77380
(Address of Principal Offices)                         (Zip Code)

                                 (281) 362-0144
                (Issuer's Telephone Number, including area code.)

Securities registered under Section 12(b) of the Exchange Act:

         Title of Each Class               Name of Exchange on which Registered
                 NONE                                      NONE

Securities registered under Section 12(g) of the Exchange Act:

         Title of Each Class               Name of Exchange on which Registered
COMMON STOCK, PAR VALUE $.01 PER SHARE                     NONE

Check whether the issuer (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 periods that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes   [X]     No    [ ]

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

State issuer's revenues for its most recent fiscal year.  $7,897,105

State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and ask prices of such stock, as of a specified date within the past 60
days. (See definition of affiliate in Rule 12b-2 of the Exchange Act.)

As of March 17, 2000, there were 6,150,622 shares of common stock, $0.01 par
value, of the registrant issued and outstanding. The aggregate market value of
the voting stock held by non-affiliates of the registrant as of March 17, 2000
was $1,723,223 based upon the average bid and ask price of the common stock on
such date of U.S. $0.713 per share. For purposes of this computation, all
executive officers, directors and 10% shareholders were deemed affiliates. Such
a determination should not be an admission that such executive officers,
directors or 10% shareholders are affiliates.


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                      CHAMPION COMMUNICATION SYSTEMS, INC.

<TABLE>
<CAPTION>
                                                INDEX                              PAGE NUMBER

<S>        <C>                                                                    <C>
DOCUMENTS INCORPORATED BY REFERENCE .....................................................i

GLOSSARY OF TERMS ......................................................................ii


                                                PART I

ITEM 1.    DESCRIPTION OF BUSINESS.......................................................1

ITEM 2.    DESCRIPTION OF PROPERTY......................................................12

ITEM 3.    LEGAL PROCEEDINGS............................................................12

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..........................12

                                                PART II

ITEM 5.    MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.....................12

ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
             OF OPERATION...............................................................14

ITEM 7.    FINANCIAL STATEMENTS.........................................................16

ITEM 8.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
            AND FINANCIAL DISCLOSURE....................................................16

                                                PART III

ITEM 9.    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
              WITH SECTION 16(a) OF THE EXCHANGE ACT....................................17

ITEM 10.   EXECUTIVE COMPENSATION.......................................................17

ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...............17

ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............................17

ITEM 13.   EXHIBITS AND REPORTS ON FORM 8-K.............................................18

SIGNATURES..............................................................................22
</TABLE>


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                       DOCUMENTS INCORPORATED BY REFERENCE


           The information required by Part III of this Annual Report on Form
10-KSB is incorporated by reference from the Registrant's definitive proxy
statement for the Registrant's 2000 annual meeting of shareholders.

<TABLE>

<S>       <C>                               <C>
Item  9     Directors and Executive         Incorporated by reference from "Nominees for Election
            Officers of the Registrant      of Directors" of the Company's definitive proxy
                                            statement to be filed pursuant to Regulation 14A of the
                                            Securities Exchange Act of 1934, as amended (the "Exchange
                                            Act"), for the Company's 2000 annual meeting of shareholders.
                                            The incorporated portions consist of all of the disclosures
                                            that appear in that Proxy Statement under the headings
                                            "Nominees for Election as Directors" and "Executive Officers."

Item 10    Executive Compensation           Incorporated by reference from "Executive
                                            Compensation" of the Company's definitive proxy
                                            statement to be filed pursuant to Regulation 14A of the
                                            Exchange Act for the Company's 2000 annual meeting of
                                            shareholders.

Item 11    Security Ownership of            Incorporated by reference from "Security
           Certain Beneficial Owners        Ownership of Certain Beneficial Owners and
           and Management                   Management" of the Company's definitive proxy
                                            statement to be filed pursuant to Regulation 14A of the
                                            Exchange Act for the Company's 2000 annual meeting of
                                            shareholders.

Item 12    Certain Relationships and        Incorporated by reference from "Certain Relationships
           Related Transactions             and Related Transactions" of the Company's definitive
                                            proxy statement to be filed pursuant to Regulation 14A
                                            of the Exchange Act for the Company's 2000 annual
                                            meeting of shareholders.
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                                        i

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                                GLOSSARY OF TERMS

<TABLE>

<S>                                <C>
Airtime Charges                      Charges to users of wireless communications
                                     services based on the actual minutes of
                                     use.

Analog                               A transmission method employing a
                                     continuous (rather than pulsed or digital)
                                     electrical signal that varies in amplitude
                                     or frequency in response to changes in
                                     sound or other input impressed on a
                                     transducer in the sending device. Current
                                     SMR technology primarily uses analog
                                     transmission.

Bandwidth                            The relative range of frequencies that can
                                     be passed through a transmission medium
                                     between two defined limits without
                                     distortion. The greater the bandwidth, the
                                     more information the medium can carry.
                                     Bandwidth is measured in Hertz.

Base Station                         A station located at a specified site
                                     authorized to communicate with mobile
                                     stations.

Cellular                             The wireless radio telephone service
                                     licensed by the FCC to provide services on
                                     a CMRS basis utilizing 50 MHz of spectrum
                                     in the 800 MHz band.

Channel                              A pathway for the transmission of
                                     information between a sending point and a
                                     receiving point; also referred to as
                                     "frequency." In SMR, a channel refers to a
                                     set of paired send and receive frequencies.
                                     Thus, a five-channel 800 MHz SMR actually
                                     has 10-25 kHz channels: five send channels
                                     and five receive channels.

Co-channel                           Relates to the authorization or operation
                                     of two transmitters on the same frequency,
                                     normally separated by some defined
                                     distance. Co-channel operators may not
                                     interfere with each other unless separated
                                     by sufficient distance or operated in a
                                     coordinated manner.

Commercial Mobile
Radio Service ("CMRS")               Mobile services that are provided for
                                     profit, are interconnected to the PSN and
                                     are available to the general public on a
                                     non-discriminatory basis. These CMRS
                                     providers historically have been referred
                                     to as "common carriers."

Community Repeater ("CR")            Conventional two-way radio systems
                                     consisting of a control station, a
                                     repeater station and mobile and/or portable
                                     radios. The repeater is shared by otherwise
                                     unrelated users.

Conventional System                  A method of operation in which one
                                     or more radio frequency channels are
                                     assigned to mobile and base stations but
                                     are not employed as a trunked group.

Digital                              A method of storing, processing and
                                     transmitting information through the use of
                                     distinct electronic or optical pulses.
                                     Digital transmission and switching
                                     technologies employ a sequence of discrete,
                                     distinct pulses to represent information,
                                     as opposed to the continuously variable
                                     analog signal.
</TABLE>


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<TABLE>

<S>                                <C>
Dispatch                             A service provided to customers who want to
                                     transmit and receive short messages to and
                                     from a fleet of vehicles operating within
                                     range of the system's repeater.

Extended Area ("EA")                 A specialized block of SMR spectrum within
                                     one (1) of the 175 Extended Areas as
                                     defined by the U.S. Department of Commerce
                                     Bureau of Economic Analysis.

800 MHz (SMR)                        As a group, the 280 channels of trunked
                                     SMR frequencies in the 800 MHz band with
                                     25 kHz channel bandwidth.  The cellular
                                     radio frequencies are also in the 800 MHz
                                     band.

ESMR                                 Enhanced Specialized Mobile Radio. SMR
                                     multi-site digital networks, which are
                                     designed to provide integrated
                                     telecommunications services, including
                                     wireless, telephone, paging, data
                                     transmission and dispatch services. ESMR
                                     generally is used as a dispatch technology,
                                     although it also may be interconnected with
                                     the PSN to provide mobile telephone
                                     services. The Company does not provide ESMR
                                     services.

FCC                                  Federal Communications Commission.

450-512 MHz Band                     450-470 MHz - A group of frequencies
                                     operating with a narrow channel
                                     bandwidth, which is shared with an
                                     unlimited number of users (co-channel
                                     operation) utilizing an unlimited number of
                                     units.

                                     470-512 MHz - A group of frequencies
                                     operating with a narrow channel bandwidth,
                                     an unlimited number of users, and a limited
                                     number of units. Thus, user exclusivity on
                                     a particular frequency during a call is
                                     currently achievable in this band.

Frequency Coordinator                An entity or organization that has been
                                     certified by the FCC to recommend
                                     frequencies for use by PMRS and other
                                     wireless licensees.

Hertz                                The unit for measuring the frequency with
                                     which an electromagnetic signal cycles
                                     through the zero-value state between lowest
                                     and highest state. One Hertz (abbreviated
                                     Hz) equals one cycle per second; kHz
                                     (kilohertz) stands for thousands of Hertz;
                                     MHz (megahertz) stands for millions of
                                     Hertz.

Loading                              The capacity utilization of a land mobile
                                     communications system. The FCC requires
                                     licensees of PMRS systems to load a
                                     specified number of units per channel
                                     within a certain time frame or before
                                     certain actions can be taken. If a licensee
                                     does not meet this loading requirement, the
                                     FCC may take back a proportionate number of
                                     the licensee's unloaded channels.

Major Metropolitan Areas             Metropolitan areas (as defined by the U.S.
                                     Office of Management and Budget) with a
                                     population of 1,000,000 or more.

Major Trading Areas ("MTAs")         Service areas based on the 47 areas
                                     contained in Rand McNally's 1992
                                     Commercial Atlas and Marketing Guide,
                                     123rd Edition, except that: (1) Alaska is
                                     separate from Seattle, (2) Guam and
                                     Northern Mariana Islands are licensed as a
                                     single area, (3) Puerto Rico and the United
                                     States Virgin Islands are licensed as a
                                     single area, and (4) American Samoa is
                                     licensed as a single MTA-like area. These
                                     modifications by the
</TABLE>

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<TABLE>

<S>                                  <C>
                                     FCC resulted in a total of 51 MTAs. A MTA
                                     license authorizes a specific block of SMR
                                     Spectrum in one (1) of 51 MTAs.

900 MHz SMR                          As a group, the 200 channels of trunked
                                     SMR frequencies in the 900 MHz band with
                                     12.5 kHz channel bandwidth. The FCC
                                     initially licensed these channels only in
                                     the top 50 markets.  The FCC has auctioned
                                     all 900 MHz SMR channels for every MTA.

Paging                               A one-way communications service from a
                                     base station to mobile or fixed receivers
                                     that provides signaling or information
                                     transfer by such means as tone, tone-voice,
                                     tactile or optical readout. Paging services
                                     are provided on several bands, including
                                     the 450-512 MHz and 900 MHz bands.

PCS                                  Personal Communications Services. The PCS
                                     is a wireless communication technology.
                                     It operates on the 900 MHz (narrowband)
                                     and on the 2 GHz (broadband) frequency
                                     bands. PCS is a radio communications
                                     service using mobile and ancillary fixed
                                     communication technologies to provide
                                     services for industry and business.
                                     This service can be integrated with a
                                     variety of competing networks. A broadband
                                     PCS, with a wider channel bandwidth,
                                     provides a greater variety of services
                                     than narrowband PCS (e.g., broadband can
                                     provide full voice and data transmission,
                                     but narrowband PCS generally is limited to
                                     one-way services).

Private Mobile Radio
Service ("PMRs")                     Two-way radio operations offering dispatch
                                     and other wireless communications
                                     services. These services generally cannot
                                     be interconnected to the PSN. An operator
                                     may provide such services on a
                                     discriminatory basis. Operators which
                                     provide dispatch services in the bands
                                     below 800 MHz, are regulated as PMRS
                                     licensees. These PMRS licensees
                                     historically have been referred to as
                                     "private carriers."

PSN                                  Public Switched Network. Historically
                                     referred to as the "Public Switched
                                     Telephone Network" or "PSTN."

Repeater                             A device which automatically retransmits
                                     received signals on an outbound circuit,
                                     generally in an amplified form.

Roam(ing)                            A service offered by mobile communications
                                     providers which allows a subscriber to use
                                     a mobile phone while in the service area of
                                     another carrier.

Site                                 The location of a base station or repeater
                                     in a radio communications system.

Specialized Mobile Radio ("SMR")     A radio system authorized by the FCC in
                                     which licensees provide mobile
                                     communications services (other than radio
                                     location services) in the 800 MHz and 900
                                     MHz bands on a commercial basis to
                                     eligible entities, federal government
                                     entities and individuals. It is
                                     generally used as a dispatch technology.
                                     However, SMR may be interconnected with the
                                     PSN to provide telephone interconnect
                                     services.

Spectrum                             A term generally applied to the range of
                                     electromagnetic radio frequencies used in
                                     the transmission of sound, data, and
                                     television.
</TABLE>

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<TABLE>

<S>                                <C>
Switch                               A device that opens or closes circuits or
                                     selects the paths or circuits to be used
                                     for transmission of information. Switching
                                     is the process of interconnecting circuits
                                     to form a transmission path between users.

T-Band                               The group of channels operating at 470-512
                                     MHz previously assigned to the UHF band.

Telephone Interconnect               Connection of a telecommunications device
                                     or service to the PSN. In SMR, Telephone
                                     Interconnect refers to the service provided
                                     to a customer which allows specified
                                     customer units to have the capability to
                                     connect directly to the PSN and thereby
                                     communicate with any other party that can
                                     be reached over the PSN.

Trunked System                       A system that combines multiple channels
                                     with unrestricted access in such a manner
                                     that user demands for channels are
                                     automatically "queued" and then allocated
                                     to the first available channel. Compared
                                     to a conventional system, this method
                                     allows for the use of frequencies by
                                     more users and provides faster access than
                                     a conventional system, thereby reducing
                                     the likelihood of network congestion. LTR
                                     for "logic Trunked radios" is one
                                     technology commonly used in Trunked
                                     systems.

UHF                                  An ultra high frequency in the
                                     450 - 512 MHz bandwidth.

Unit                                 A base, mobile or hand held radio.

Universal Licensing
Service("ULS")                       The FCC's electronic system for filing PMRS
                                     and other wireless applications,
                                     coordination data, and other accessory
                                     information.
</TABLE>


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                                     PART I


ITEM 1.   DESCRIPTION OF BUSINESS

           This Annual Report on Form 10-KSB includes "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act") and Section 21E of the Securities and Exchange
Act of 1934, as amended (the "Exchange Act."). All statements other than
statements of historical information provided herein are forward looking and may
contain information about financial results, economic conditions, trends and
known uncertainties. The Company cautions the reader that actual results could
differ materially from those expected by the Company, depending on the outcome
of certain factors, including those factors discussed in the Section of this
Annual Report on Form 10-KSB entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operation." Specifically, there can be no
assurance that the Company will be able to compete effectively, continue to sell
its licensed systems at a profit, increase its utilization on its 450 - 512 MHz
band systems, retain its key personnel or take any or all of the other actions
in this Annual Report. Readers are cautioned not to place undue reliance on
these forward looking statements, which speak only as of the date hereof. The
Company undertakes no obligation to release to investors the result of any
revisions to these forward looking statements which may be made to reflect
events or circumstances after the date herein, including, without limitation,
changes in the Company's business strategy or planned capital expenditures, or
to reflect the occurrence of unanticipated events.

                                   THE COMPANY

           The Company provides high-powered CR and Trunked dispatch services in
the United States, currently serving approximately 2,400 customers utilizing
37,000 subscriber units (either radio or base stations) in 19 states in the
United States. The Company's customers are principally businesses and government
agencies located in both metropolitan and rural geographic areas.

           Dispatch services are offered on the 450-512 MHz and 800 MHz bands.
Operators of these dispatch services are regulated as PMRS providers (i.e.,
private carriers) or as CMRS providers (i.e., common carriers). Under recent
rule changes, an operator, like the Company, provides service pursuant to a
frequency-specific, site-specific FCC license. Additionally, an operator, like
the Company, may provide service to an entity which is, itself, licensed to
operate on a specific frequency at a specific location. A repeater that is
operated as a PMRS is subject to more relaxed regulatory requirements than a
CMRS provider, such as cellular and certain SMR or ESMR licensees. See "Current
Business - Regulation."

            The Company primarily offers its dispatch services in the 450-512
MHz band. It also operates conventional and Trunked dispatch services in the 800
MHz band. The Company is concentrating its business in the 450-512 MHz band
because it believes that it can exploit economies of scale by providing
extensive coverage, obtaining equipment at favorable prices and charging lower
rates than its competitor's rates. However, there can be no assurance that this
strategy will be effective. In both the 450-512 MHz and 800 MHz bands, the
Company operates CRs without a license for individually licensed customers and
it operates CRs and SMRs with its own FCC license. None of the Company's CRs or
SMRs are interconnected to the PSN. Thus the Company's private carrier and SMR
licenses all are in the PMRS category. As a PMRS licensee, the Company is
subject to less stringent regulatory requirements than CMRS licensees.

           The Company has determined that UHF trunking is its primary goal for
business operations in its targeted metropolitan areas. The company believes
that achieving this goal has transformed the operations from a primarily
conventional CR business to trunked technology in selected major metropolitan
areas. This conversion has been accomplished by eliminating single site
repeaters and capitalizing upon the ability to trunk numerous repeaters into a
consolidated system with many channels offering wide geographic coverage.

           In the past, the Company has utilized independent dealers for sales
and service activities. Currently, the Company manages its assets and customers
through Company-owned sales and supporting services in the targeted markets as
well as through the efforts of independent dealers.

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           Management has observed that over the last decade most spectrum has
increased in value, precipitated by a fixed supply and increasing utilization.
In the process of securing a limited number of licenses for its own use,
management of the Company discovered that it was highly successful at
identifying and acquiring exclusive licenses after obtaining requisite FCC
consent. The process is technical and lengthy. As a result of the Company's
successes from 1996 through 1999 in securing exclusive licenses, the Company has
been able to sell several licensed systems in excess of $5,800,000 after
obtaining FCC consent. Based on this experience, management recognizes the value
of spectrum and will continue to evaluate its position in each market to
maximize value to the Company.

           The Company is a Delaware corporation. Its principal place of
business is 1610 Woodstead Court, Suite 330, The Woodlands, Texas 77380. The
Company's telephone number is (281) 362-0144.

                                     HISTORY

           The Company was incorporated under the laws of the State of Delaware
on September 29, 1994. In 1994, the Company acquired 1,501 CRs from Motorola
through several agreements. There were no FCC licenses assigned to the Company
as a part of this transaction.

           Since acquiring the CRs from Motorola, the Company evaluated its
total mix of dispatch services and identified markets in which it had sufficient
strength to build dispatch operations. The Company is gradually divesting itself
of various dispatch operations outside the markets identified for development
(after obtaining any necessary FCC consent). The Company also provides related
operations, such as equipment rental and maintenance, licensing and related
services for customers in its markets. In particular, in an effort to increase
its subscriber capacity, overall network control and revenue potential,
consistent with FCC rules, the Company has converted its systems in targeted
markets to Trunked Systems. In both the 450-512 MHz band and the 800 MHz band,
the Company, after obtaining any necessary FCC consents, converted many of the
individual licenses held by its subscribers to consolidated licenses in its own
name. As of March 1, 2000, the Company operated 677 repeaters and held 238
exclusive licenses of which 52 licenses, or 22%, are in the 800 MHz band; 172
licenses, or 72%, are in the 470-512 MHz band; and 14 licenses, or 6%, are in
the 450-470 MHz band. In addition, the Company held 535 co-channeled licenses,
of which 29 licenses are in the 800 MHz band, 158 licenses are in the 470-512
MHz band, and 348 licenses are in the 450-470 MHz band.

                             THE DISPATCH INDUSTRY

OVERVIEW

           Most businesses or service organizations with mobile work forces
require the ability to communicate with employees in order to conduct their
operations efficiently. They rely on radio communications as a tool to control
resources, personnel, materials and equipment in a cost-effective manner.
Dispatch services improve the efficiency and response time of such businesses
and organizations.

           The dispatch industry is a distinct segment of the wireless
communications industry, which also includes wireless telephone (cellular, PCS
and satellite), paging and data transmission services. Wireless telephone
services are designed for personal communications by providing two-way
communication among individuals. This segment of the industry refers to its
radios as "telephones" and is viewed as an extension of the traditional wireline
telephone network. Wireless telephones require a minimum seven digit dial-up
procedure and wireless telephone conversations typically average more than one
minute in duration. Paging services enable subscribers to contact an individual
or group of portable receivers which emit an audible, visual or tactile alert
and can sometimes record a numeric or alpha-numeric message. Paging systems
allow only the transmission of a limited amount of information and generally
only provide one-way communication. Data transmission services are, at present,
primarily offered on data-only (non-voice) packet switched networks. In
contrast, dispatch services provide for the immediate transmission of
information, whether voice messages or data, to groups of mobile or portable
radio users. Companies use dispatch services to communicate among

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others and provide task assignment and coordination. Dispatch services are
designed to provide bi-directional group communications and to allow the user to
address either entire groups, sub-groups or individuals with simple and rapid
push-to-talk call set-up procedures. Dispatch conversations are typically short
and allow for all participants to communicate with each other simultaneously.
Dispatch services are less expensive than other CMRS wireless communications
services, such as 800 MHz and 900 MHz SMR, cellular and PCS.

           Each segment of the wireless communications industry relies on a
different technology and serves distinct customer needs. The Company believes
that the various services address distinct markets and generally do not compete
effectively against each other. The Company believes the wireless communications
industry will continue to grow with the emergence of new technologies and
applications. There can be no assurance, however, that this growth will continue
or that the Company's targeted markets will flourish. A decrease in the growth
rate of the industry may have a material adverse effect on the Company's ability
to prosper.

HISTORY OF DISPATCH NETWORKS

           The dispatch industry is comprised of operator-licensed systems and
user-licensed systems. The Company currently provides both of these dispatch
services. In the 800 MHz and 900 MHz bands, trunked dispatch systems are
referred to as SMRs or ESMRs. These systems are operated by licensees that
provide dispatch services to others for a monthly fee. In contrast, providers of
dispatch services, such as the Company, derive revenues from the sale, rental
and servicing of end-user equipment and from dispatch fees.

           The development of military wireless communications in the 1940s led
to the first dispatch systems for business and industrial use. Shared repeater
services, the predecessors to SMR systems, developed in the early 1970s as
available radio spectrum became increasingly scarce. By the mid-1980s, the
number of commercial users in major urban areas was surpassing the capacity of
shared repeater services, and trunked SMR systems were introduced to satisfy the
increasing demand for dispatch services.

           Implementation of emerging, spectrum-efficient digital switching and
transmission technologies will increase dispatch system capacity even further.
These new technologies are currently being implemented on ESMR systems. However,
the Company has no current plans to operate ESMR systems.

DISPATCH FREQUENCIES

           Under international agreements, specific bands of frequencies may be
used for radio communications: low band (which includes low ("LF"), medium
("MF") and high ("HF") frequencies), Very High Frequency ("VHF"), Ultra High
Frequency ("UHF") and Super High Frequencies ("SHF").

           In the United States, the FCC has exclusive responsibility for
allocating radio frequencies assigned to non-government use. The FCC has
established rules governing the licensing of, and operations on, such
frequencies. The FCC grants licenses to use radio frequencies pursuant to formal
applications from prospective users or operators, consistent with its spectrum
allocation. The dispatch industry operates in various band segments, including
the 450-512 MHz and 800 MHz bands. Within each band, channels are created by the
allocation of specified bandwidths. See "Current Business - Regulation." The
wireless mobile communications industry operates primarily within the UHF
frequencies and can be categorized by operations in the following frequency
ranges:

           450-512 MHz. Dispatch communications services are provided in the
450-512 MHz band to vehicle-mounted and hand-held portable two-way radio units.
These services operate at a higher transmitter power level than other wireless
services, such as cellular and PCS, yielding a greater service area. This band,
which was developed in the 1950s, is populated by PMRS licensees, such as the
Company and its customers.

           Users of the 450-512 MHz band have begun to experience channel
congestion and spectrum crowding, especially in metropolitan areas. This
spectrum is frequently incapable of handling the demands

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placed upon it, and users are often unable to find a clear channel. To remedy
this situation, beginning in 1997 the FCC has adopted rules, and is considering
additional rules, to promote more effective and efficient use of the bands below
512 MHz. These actions, which have been implemented as part of the FCC's ongoing
"refarming proceeding," have increased and shall continue to increase,
opportunities for the Company to use higher capacity trunking technology in
these bands. See "Current Business - Regulation."

           800 MHz (SMR). Dispatch services are provided not only in the 450-512
MHz band, but also in the 800 MHz band. Due to technological developments and
regulatory changes, 800 MHz band operators may elect to convert their systems
from analog to digital. Conversion of systems to digital technology may make
this band more appropriate for services other than dispatch. See "Current
Business - Competition." If the Company gains exclusive use of frequency
channels and trunking authority from the FCC, it will operate 800 MHz band
systems in trunked repeater format.

           900 MHz. The 900 MHz band (SMR) analog operating format is very much
like the 800 MHz band format. Initially, the FCC awarded 900 MHz band SMR
licenses in the top 50 markets in the United States by lottery. In 1996, the FCC
completed auctions for the remaining 900 MHz band SMR licenses to operate in 51
MTAs in the United States, Puerto Rico, United States Virgin Islands, Guam -
Northern Mariana Islands and American Samoa. Specifically, 1,020 licenses were
offered in these 51 MTAs, or 20 channels per MTA. The Company participated in
the 900 MHz auction, but was not granted licenses as a result of its
participation.

EMERGING TECHNOLOGIES

           The limited number of available frequencies, particularly in urban
areas, has generated ongoing introduction of new and advanced technologies and
applications that allow for better spectrum utilization. The first technology
developed for that purpose was "trunking," which was developed in the late 1970s
and which uses microprocessors to allow many users to share frequencies without
interfering with one another. In non-trunked conventional systems, the channels
assigned to each group of users are independent. If a channel is occupied by
another conversation, the user has to wait, even though another channel in the
system may be idle. The user may have to try several times before the channel is
free. In contrast, trunking allocates messages to various frequencies in the
most efficient way. In a "trunked" system, user calls are assigned to the first
available channel and a different channel may be assigned for each transmission
during the same conversation. The trunked system therefore can handle more call
traffic with a given number of channels. In addition, the channel "switching" on
a trunked system makes eavesdropping more difficult and therefore enhances the
privacy of conversations.

           Advances in digital technology are improving spectrum efficiency and
increasing loading capacity (the use of a channel by subscriber radios). Use of
digital rather than analog transmission expands channel capacity by a factor of
two, three or more times.

           The Company is currently using trunking technology to serve more
customers with either new or upgraded existing equipment. Depending upon cost
and competitive factors, the Company also might implement digital technology to
increase its customer base even further. However, the Company has no current
plans to convert to digital technology.

                                CURRENT BUSINESS

GENERAL

           The Company provides high-powered repeater dispatch services in 19
states in the United States. The Company currently serves approximately 2,400
customers utilizing 37,000 two-way radio units. The Company provides its
customers, primarily business and governmental agencies, with equipment,
equipment rentals and dispatch services. Under applicable FCC rules, the Company
is not required to obtain FCC licenses

                                        4

<PAGE>   12


for those CR systems serving individually-licensed customers. However, the
Company is licensed by the FCC to operate its Trunked Systems serving customers
which do not have their own licenses.

           Pursuant to several contracts with Motorola executed in 1994 (the
"Motorola Agreements"), the Company acquired 1,501 CRs. There were no FCC
licenses assigned to the Company as part of this transaction. The Company
historically has operated CRs and trunked repeaters exclusively for dispatch
purposes. It is expanding the dispatch services provided to include data
transmission which allows text messaging and vehicle tracking by satellite.

           Equipment products for the 450-512 MHz band frequencies, where the
Company provides most of its services, and for the 800 MHz band, are available
from numerous manufacturers. Prices for this equipment range from $300 to $900
per unit, depending on the features offered and the warranty provided. The
Company's principal equipment suppliers are Motorola and Kenwood, and the
Company has entered into dealer agreements with both companies. Both dealer
agreements, however, may be terminated at any time by either party without cost.
Termination of either of these agreements would have a materially adverse effect
on the Company.

           The Company operates its dispatch repeaters primarily in the 450-512
MHz frequency band. The Company also has limited operations in the 800 MHz band.
However, the Company is not active in the 220 MHz band, 900 MHz band, cellular
or PCS segments of the wireless communications industry and it currently does
not intend to become active in those segments.

           450-512 MHz REPEATER OPERATIONS. The Company conducts the majority of
its operations in the 450-512 MHz frequency band. The Company is actively
pursuing widespread utilization of trunking technology for its systems in this
band. A trunked 450-512 MHz band repeater is superior to a conventional repeater
in that trunked systems make more channels available to handle calls and thus
provide greater capacity than conventional systems. See "The Dispatch Industry -
New Technologies." The trunked repeater format also provides the customer with
more calls and faster calls than a conventional system. See "The Dispatch
Industry - New Technologies." These factors, in turn, allow a greater number of
users to make more calls than a conventional system, which should generate
additional revenues for the Company. The trunked 450-512 MHz band repeaters
function similarly to 800 MHz band trunked SMR systems. Although the Company's
systems are not interconnected to PSN, if they were, they would be comparable to
cellular telephone technology.

           The Company has converted its original 450-512 MHz band repeaters to
 the LTR trunking format. Concurrently, the Company has sold or removed the
 majority of its CRs in non-core rural areas. The planned
conversion to trunked operations has involved obtaining exclusive use of a
frequency by being assigned individual user licenses, claiming licenses for
unused channels, and receiving all necessary FCC approvals. There can be no
assurance that the Company will continue to obtain requisite licenses, however
substantial conversion is completed.

           The 470-512 MHz portion of the 450-512 MHz band is available in the
top 13 U.S. major metropolitan areas and is known commonly as the T-Band.
Operation on the T-Band is particularly advantageous as it contains the only
frequencies in the 450-512 MHz band on which exclusive business radio service
channels are available. The Company operates approximately 250 T-Band repeaters
in its metropolitan areas. Exclusive channels are superior to co-channel
operations because an operator, such as the Company, has more available capacity
and less restrictions on service provision. As of March 1, 2000, the Company has
been granted 330 T-Band channels in good standing in the Houston, Dallas/Ft.
Worth, San Francisco Bay, Washington/Baltimore and Chicago areas. Through these
efforts, the Company has gained exclusive control over channels in these areas
(with appropriate FCC approvals), and now operates trunked repeaters in Houston,
Dallas/Ft. Worth, Northern California, Washington/Baltimore and Chicago. As of
March 1, 2000, the Company holds 172 exclusive use licenses and an additional
158 non-exclusive licenses. The Company's Spectrum Division has dedicated
considerable effort to removing dormant or otherwise unnecessary co-channel
licenses, generally through purchases or trades (with FCC consent). There can be
no assurance that the Company will be able to continue to obtain exclusive
control over all or substantially all of these channels.


                                        5

<PAGE>   13




           800 MHz REPEATER OPERATIONS. Under the Motorola Agreements, the
Company acquired 92 CRs in the 800 MHz band. As with the 450-512 MHz band CRs
which were acquired from Motorola, the 800 MHz band CR licenses were held by the
users. Through license filings and assignments, the Company has been successful
(with FCC consent) in obtaining a number of licenses for its own benefit in this
band. With appropriate FCC consent, twenty of these licenses were cleared to an
exclusive status. The related systems were sold in 1997 for in excess of
$3,500,000. In 1998, another five systems were sold with FCC consent for
$1,100,000. In late 1997, the FCC auctioned all 800 MHz band SMR licenses in the
175 EAs, including those markets that had been subject to an application freeze.
The Company with FCC consent sold and traded other systems and currently
operates 37 repeaters in Northern California, of which 26 have been converted,
with FCC approval to SMRs, while the remainder continue to be operated in the CR
format. It is the intention of the Company to continue expanding its 800 MHz
operations in Northern California. There can be no assurance that the Company
will be granted exclusive licenses, and FCC approval for all assignments and
sales, will be successful in concluding additional assignments or will realize
profit from such transactions. The Company's inability to carry out this
strategy could have a material adverse effect on its business.

BUSINESS STRATEGY

           The Company's business strategy includes the following:

           EXPANSION OF HOLDINGS. The Company seeks to expand its spectrum and
infrastructure holdings within its selected metropolitan markets through the
FCC-approved acquisition of operating and start-up 450-512 MHz band trunked
dispatch systems. Simultaneously, the Company, with FCC approval, has undertaken
a program to dispose of CRs in non-core areas.

           DEVELOPMENT OF EXISTING INTRINSIC VALUE. The intrinsic value of the
Company today lies in the value of its spectrum as measured by recent sales
and/or the potential cash flow capacity.

           As of March 1, the Company held 224 exclusive and 187 co-channeled
licenses in the 450-512 MHz and 800 MHz bandwidth. Existing constructed Trunked
Systems capacity is deemed to be 22,000 units. If these systems were fully
loaded, the Company would anticipate revenues of approximately $5,293,500 per
year and estimated gross operating margin of approximately $3,946,500 per year.
However, there can be no assurance that the Company will be able to successfully
load to construction capacity. The assets associated with the Trunked Systems
which give rise to this existing revenue potential are valued on the balance
sheet at $2,091,000. The Company believes that the efforts necessary to achieve
these results will span several years, however there is no assurance that the
Company will be successful in these efforts. It is the intention of management
to bring the intrinsic value to fruition by continuing to sell non-strategic
assets and creating cash flow through systematic loading.

           Under the Motorola Agreements, the Company also purchased 92
 unlicensed 800 MHz band CRs. At that time, the Company believed that, if it
 obtained FCC consent to assignments of a sufficient number of
800 MHz band licenses, it could obtain exclusivity over the related channels and
could then enhance the value of the assets. The Company has achieved this
objective by obtaining FCC consent to convert 26 of these unlicensed CRs to four
(4) 800 MHz Trunked Systems for which it now holds the exclusive license. By
enhancing the value of its assets in this manner, the Company has realized
approximately $5.8 million from the assignment and sales since 1996.

           SPECTRUM. Spectrum is critical in the communications business.
Without spectrum on which to operate, the best communications equipment is
worthless. The Company is spending considerable funds to acquire FCC licensed
stations to provide dispatch services. The Company is receiving assignments of
these licenses, and the corollary right to use the spectrum, through FCC
approved purchases of existing systems and through FCC grant of new licenses.
The Company anticipates that these efforts will be ongoing. There can be no
assurance that the Company will be successful in any or all of these efforts to
obtain the rights to use the spectrum.


                                        6

<PAGE>   14


           Specifically, the Company is actively pursuing additional licenses
from the FCC to operate on the 470-512 MHz T-Band channels. As the FCC grants
these licenses, the Company intends to construct such T-Band systems. The
Company anticipates that, after constructing T-Band systems, its next licensing
project will involve obtaining FCC consent to convert the individual 450-470 MHz
band customer licenses using the Company's CRs to FB-6 (Private Carrier)
Classification in the selected markets, which would result in the Company
becoming the licensee of a trunked system using the formerly
individually-licensed channels. The Company also participated in the filing for
offset channel licenses from the FCC (i.e., new narrowband channels located
adjacent to existing channels). As of March 1, 2000, the Company has been
granted 6 licenses by the FCC for offset channels in the 470-512 MHz band.

           In 1997, as part of its "refarming" proceeding, the FCC adopted a
consolidation plan and related rules for the PMRS bands below 800 MHz. These
rules changed how the frequencies are assigned, established a method for PMRS
users to implement highly efficient trunked systems in the bands below 800 MHz
and provided for operation of offset channels in the 450-470 MHz band. See
"Regulation."

           EQUIPMENT RENTAL. To augment its sales activities, the Company has
established a Rental Division. This division currently rents approximately 900
units. The Company provides equipment rental directly to customers, as well as
through approved dealers.

COMPETITION

           The Company faces intense competition from the following types of
operations:

           OTHER 450-512 MHz BAND CR OPERATORS. The Company currently competes
with many other 450-512 MHz band CR operators. With FCC approval, the Company
has converted its Metropolitan Area 450-512 MHz band CRs from user-licensed
conventional operations to the trunked multi-channel format. Although the
Company believes that this conversion will help distinguish it from the 450-512
MHz conventional CR operators, there can be no assurance that the Company will
continue to expand its conversion to the trunked multi-channel format or that
such conversion will indeed distinguish the Company from conventional CR
operators. In addition, a limited number of paging operations are provided in
the 450-512 MHz band, but the Company does not anticipate that these services
will compete with its repeater dispatch services in this band.

           UHF TRUNKING. Since the FCC permitted the trunking of the UHF
channels in 1996, considerable competition has evolved in the UHF trunking
market.

           CELLULAR TELEPHONE SYSTEMS. The Company currently competes, and
believes that it will continue to compete, with cellular telephone systems to a
great extent. The Company charges a flat monthly rate for its services. By
contrast, cellular charges are primarily based on minutes of use. Additionally,
cellular service providers typically charge for a call whether the user placed
or received the call. Because many wireless calls are mobile-to-mobile, cellular
calls from one user to another result in two air time charges, one charge for
the caller and one charge for the receiver. Large fleet operators may find
cellular costs prohibitive, although extremely small fleets may be in a position
to justify the cost of cellular service. The Company believes that cellular
telephones are not an economical solution for medium to large dispatch users,
and that CRs offer a cost-effective alternative for high volume users of
cellular telephone services. Cellular is also limited to point- to- point
communication. Dispatch provides communication to entire worker groups, select
members of worker groups or one to one from among the members. However, this
price advantage could change because the FCC is considering imposing a "calling
party pays" requirement on cellular carriers.

           800 MHz BAND SMR OPERATORS. The FCC permits 800 MHz band SMR
operators to convert their systems from analog to digital. Nextel, the largest
SMR operator in the United States, is in the process of converting its analog
technology to digital, beginning with its major metropolitan area systems.
Conversion to the digital technology requires capital investment, and the
Company believes that companies that convert may be required to increase their
prices to recoup their capital costs. These factors may price digital 800 MHz
band

                                        7

<PAGE>   15


operators out of the dispatch market and into the cellular telephone market. For
this reason, the Company believes 800 MHz band SMR digital operators will not
represent a significant competitive threat. However, there can be no assurance
that this will be the case.

           The 800 MHz band SMR operators that retain analog technology probably
will continue to concentrate on dispatch services and therefore will continue to
compete with the Company. The Company believes that eventually many of these 800
MHz band SMR analog providers may be acquired by large digital operators
interested in obtaining their rights to additional spectrum so that loading
capacity could be optimized. However, there can be no assurance that such
acquisitions will take place or that the 800 MHz band SMR operators will not
continue to create significant competition for the Company.

           900 MHz BAND SMR OPERATORS. Operators of 900 MHz band SMR systems
currently provide the greatest dispatch service competition to the Company. Many
of these 900 MHz band system operators are using analog technology, thereby
minimizing capital costs so they can maintain rates at competitive levels. Rates
for these services could increase, however, because of higher capital costs for
auctioned systems and because of the costs of any conversion to digital
technology. However, there can be no assurance that these rates will increase or
that operation of 900 MHz band SMR systems will not continue to provide
significant competition to the Company.

           In addition to the existing 900 MHz band SMRs in the top 50 markets,
the FCC auctioned 900 MHz band systems in 51 MTAs during 1996. The Company
unsuccessfully participated in this auction. Per channel costs for the 900 MHz
band systems averaged in excess of $10,000 each in the auction. In contrast,
many licenses that the Company holds in the 450-512 MHz band cost less than
$1,000 per channel. There can be no assurance, however, that the Company will be
able to continue obtaining licensed systems for this price.

           Initially, the Company expects that the auctioned 900 MHz band
licensees will operate using analog technology. In some cases, the auction price
paid by the 900 MHz licensees per channel indicates that a higher rate may be
charged to each subscriber to produce a desired rate of return on the
investment. The Company believes that the comparative low cost of the Company's
dispatch services may result in lower, more competitive rates for its
subscribers. In addition, because of the high prices paid for spectrum in the
900 MHz band auction, the Company believes it is unlikely that analog technology
based services, such as dispatch services, will be offered on the 900 MHz band
on a long-term basis. However, there can be no assurance that 900 MHz band
services will be more expensive than the Company's services or that dispatch
will not continue to be offered by 900 MHz band operators. Competition from 900
MHz band operators could have a material adverse effect on the Company.

           220 MHz OPERATORS. The 220 MHz band has been available to potential
dispatch operators for several years. Although the Company is not aware of any
major equipment manufacturer that currently provides a full array of
communications equipment to operate at this frequency level, as spectrum becomes
more scarce, manufacturers will probably begin providing equipment for the 220
MHz band. If this occurs, 220 MHz band operators could become dispatch
competitors to the Company.

           PCS OPERATORS. The Personal Communications Service was established by
the FCC in 1994, when it adopted Part 24 of its Rules. The FCC established two
classes of PCS, broadband and narrowband. It awarded several authorizations in
each class in each of the Metropolitan Trading Areas or Basic Trading Areas.

           Broadband PCS offers a cellular phone-like service for a
significantly reduced price. Broadband PCS is broadly defined by the FCC as
radio communications encompassing mobile and ancillary fixed communication
services for individuals and businesses that can be integrated with a variety of
competing networks.

           The Broadband PCS authorizations awarded in the FCC's auctions
granted the use of different spectrum blocks, ranging from 10 MHz to 30 MHz in
various specified service areas. Further auctions of these frequency blocks are
intended in 2000.


                                        8

<PAGE>   16

           Narrowband PCS is defined as a family of mobile or portable radio
services that may be used to provide wireless telephony, data transmission,
advanced paging and other services to individuals and businesses. Narrowband PCS
may be integrated with a variety of competing networks.

           Narrowband PCS uses less than one voice grade channel. Narrowband PCS
likely will be used to provide new services, such as voice message paging,
two-way acknowledgment paging and other text-based services. Licenses were
awarded on a nationwide regional MTA and ETA basis.

           A substantial number of the companies which were high-bidders at the
PCS auctions were existing communication service providers or joint ventures
involving existing communications service providers. The Company anticipates
that PCS will be interchangeable with existing cellular and paging services.

           At this time, the impact of PCS growth on the Company's business is
uncertain. Although some PCS providers have also gained a significant presence,
cellular service providers have suffered the impact of their presence most
significantly. It is unclear whether PCS providers will expand their service
offerings to include dispatch-like services. Given the high cost of entry, the
Company anticipates that any entry into the low-cost dispatch services will be
delayed pending saturation of the higher-priced cellular service market.

REGULATION

           The FCC regulates the construction, operation and acquisition of
wireless communications systems, such as those operated by the Company, under
the Communications Act of 1934, as amended (the "Communications Act"), and
pursuant to the FCC's rules and policies adopted thereunder. The FCC rules
governing wireless communications are highly technical and subject to change.
The Company believes it is in material compliance with FCC licensing, loading,
technical and operating requirements. The Company has not received any
notification of problems or material deficiencies from the FCC.

           Under the Communications Act, dispatch operators, such as the
Company, generally are regulated as PMRS providers (i.e., private carriers)
rather than as CMRS providers (i.e., common carriers). A PMRS provider is
subject to less stringent regulations, both by the FCC and individual states,
than a CMRS provider. In contrast, cellular telephone, most paging services and
those SMR operators providing PSN telephone interconnect are, or will be,
regulated as CMRS providers. Generally, CMRS providers must provide services
under the same terms and conditions to any subscriber requesting services. These
CMRS providers also may be required to file tariffs and their revenues from
services may be regulated. As PMRS providers, dispatch operators, such as the
Company, may decline service to certain subscribers and may negotiate different
prices with each customer for "like" services. Certain changes to the
Communications Act and to the related FCC rules and policies could result in
minimizing or eliminating this distinction between PMRS and CMRS providers.
These changes could have a material adverse effect on the Company. See
"Regulatory Developments."

           LICENSING. In order to provide dispatch services, the Company does
not need an FCC license if its customers are licensed. Most licenses in the
450-512 MHz, 800 MHz and 900 MHz bands are granted for 5-year or 10-year terms.
However, the FCC is considering granting all PMRS licenses for a 10-year term
and extending existing 5-year licenses to the same 10-year term. License
renewals are generally pro forma, absent material licensee misconduct or failure
to meet applicable construction and loading requirements. To the extent that the
Company operates its own systems in the 450-512 MHz or 800 MHz bands, it is
subject to the same licensing and related requirements as its customers. All of
the licenses issued to the Company and managed by the Company began to expire
after May 24, 1999, and to date all appropriate renewals have been granted by
the FCC. While the FCC generally grants renewal of PMRS licenses in routine
fashion, these licensees are not entitled to a renewal expectancy. There can be
no assurance that the FCC will continue its current renewal practices.

           Prior FCC approval is a prerequisite to any license assignment or to
the transfer of control over a licensee. In certain instances, the FCC
conditions the assignment of a license or transfer of control over a

                                        9

<PAGE>   17

licensee upon meeting certain loading requirements. For its licensed systems,
the Company believes that it is in compliance with all applicable FCC rules,
including any loading requirements.

           The ULS is being implemented. Once this system is fully implemented,
it will be beneficial to the Company because it will in expedite FCC application
processing and provide more efficient access to industry data.

           SYSTEM CONSTRUCTION. Licensees in the 450-512 MHz, 800 MHz and 900
MHz bands are subject to certain deadlines for completing construction and
commencing operation. If the licensee does not meet these deadlines and does not
obtain an extension from the FCC, the license is subject to cancellation or
modification. The Company continually monitors its compliance with FCC
requirements for its licenses. This ongoing review assists the Company in
ensuring that it completes construction within the FCC's deadlines.

           CHANNEL LOADING REQUIREMENTS. Presently, the FCC does not require
that a 450-470 MHz band PMRS system operator load a system with a specified
number of radio units within a prescribed time frame. However, the 470-490 MHz
T-Band is subject to loading requirements. Loading requirements also apply to
800 MHz and 900 MHz band SMR licensees. If a licensee does not meet loading
levels, the FCC may take back channels or cancel the license. A licensee that
loses channels cannot reapply for any channels at that location for a specified
period. As discussed above under "System Construction," the Company continually
monitors its compliance with general FCC requirements, including loading
requirements.

           SYSTEM OPERATION. Licensees in the 450-512 MHz, 800 MHz and 900 MHz
bands are subject to certain technical and other operating requirements. If a
licensee does not comply with these requirements, the FCC may impose a fine or,
if the violations are substantial, the FCC may revoke its license. For its
licensed systems, the Company continually monitors its operations and believes
that it is in material compliance with the FCC's requirements.

           INTERCONNECTION WITH PUBLIC SWITCHED NETWORK. Under the
Communications Act, wireless communications operators can provide their
customers with mobile radio services interconnected to the PSN. Because these
operators have access to the local telephone carrier, subscribers communicate
with non-subscribers. If the operator provides such interconnection to the PSN
on a "for-profit" basis, the FCC likely will regulate the operator as a CMRS
provider. The Company does not offer interconnected service.

           REFARMING PROCEEDING. In its "refarming" proceeding, the FCC adopted
rules to relieve congestion in the land mobile bands below 800 MHz. These new
rules became effective August 1, 1996. The rules (i) increase the number of
channels available on an exclusive basis by requiring conversion to narrowband
technologies; (ii) provide a phased-in 10-year transition for operators and
manufacturers to comply fully with the new requirements; (iii) permit narrowband
licensees to aggregate channels so they can provide service on a wide area
basis; and (iv) protect existing operators from harmful interference. On
February 14, 1997, additional "refarming" rules became effective which clarify
certain initial rules, modify the transition plan for compliance with the new
rules and provide coordinators greater flexibility in assigning frequencies.
Later in 1997, the FCC adopted rules providing for consolidation of operations
in the bands below 800 MHz, implementation of highly efficient Trunked systems,
and disposition of offset channels in the 450-470 MHz band. See "Business
Strategy--Spectrum."

           Finally, in late 1999, as part of the "refarming" proceeding, the FCC
took the following actions with respect to its licensing of 800 MHz SMR systems:
(i) adopted more specific service rules and clarified the rights and obligations
for operation on the lower 230 channels (including permitting EA licenses on the
lower 80 SMR and general category channels to switch between CMRS and PMRS
services, provided that channels designated exclusively for SMRs continue to be
used for SMRs; (ii) established procedures for relocating incumbent SMR licensee
to the lower channels; and (iii) affirmed all remaining 800 MHz SMR channels
will be subject to auction, which have now been scheduled for later in 2000. It
is uncertain at this time what impact, if any, these actions will have on the
Company.


                                       10

<PAGE>   18

           The FCC is also considering other issues that could benefit the
Company, such as imposing user fees, implementing further license auctions and
relaxing requirements for Trunked service. These new proposed rules could make
it easier for the Company to expand its footprint and scope of operations but at
greater expense. In particular, if the FCC holds auctions in the 450-512 MHz
band, the Company, as an established provider of services in this band, may be
able to secure exclusive license status in some of its markets. However, there
can be no assurance that the proposed rules will be adopted, that the Company
would be able to secure exclusive licenses if they were made available, that the
Company will be able to expand its footprint or that the Company would be
successful in any FCC auction. In addition, the "refarming" proceeding has been
controversial and could take several more years to complete. Thus, the impact
this proposal may have on the Company's operations is uncertain.

           REGULATORY RECLASSIFICATION. Under the Omnibus Budget Reconciliation
Act of 1993, the Communications Act was amended to establish two new regulatory
categories that involve certain Company businesses. Instead of distinguishing
between private carriers and common carriers, the FCC now must distinguish
between PMRS providers and CMRS providers. In general, CMRS providers are
subject to regulatory requirements comparable to the requirements for common
carriers and PMRS providers are subject to regulatory requirements comparable to
the requirements for private carriers. The FCC has classified all private
carrier licensees within the 450-512 MHz refarming bands, except Business Radio
Service licensees, as PMRS providers. One of the criteria for determining if a
carrier is subject to CMRS regulation, however, is if it provides
interconnection to the PSN. Since the Company does not offer such
interconnection, it is currently classified as a PMRS provider and is generally
free from the uniform rules applicable to CMRS providers. If the Company decided
to upgrade its services and provide interconnection to the PSN, it likely then
would be classified as a CMRS provider. The interconnection to PSN, if deemed
appropriate in the Company's business strategy, could provide another source of
revenue.

           SMR. The FCC has ruled that 800 MHz band SMR systems, to the extent
possible, should be licensed on a wide-area basis and should be subject to
auctions. Similar licensing requirements have been imposed upon 900 MHz band SMR
licensees. In addition, certain limits on aggregate spectrum held by CMRS
licensees, including SMR operators, have been imposed. As a result of these
changes, the Company believes that its licensed 800 MHz band systems may be
attractive to prospective purchasers. However, the FCC is considering relaxing
or eliminating this spectrum cap, and the Company cannot predict whether or when
such action might be taken, what such action might be, or what impact, if any,
it could have on the Company's business.

           NEW ALLOCATIONS. The FCC has proposals pending from time to time
seeking the allocation of additional spectrum for wireless communications
services. The Company cannot predict whether or when any such allocation might
be made or the extent to which any future allocation of additional spectrum
would affect the Company's existing operations or its opportunity to expand.

           STATE REGULATION. State and local governments may exercise their
traditional regulatory powers (e.g., health, safety, consumer protection and
zoning regulation) over wireless communications systems. The Communications Act,
however, specifically preempts state and local government regulation of CMRS and
PMRS provider rate offerings and market entry.

           REGULATION OF RADIO TOWERS. The FCC, the Federal Aviation
Administration and certain state and local government agencies regulate radio
towers with respect to geographic location, height, construction standards and
tower maintenance. Failure to maintain radio towers in compliance with
regulations can result in penalties to the tower owner or operator. Compliance
with lighting and painting requirements is particularly important. The Company
believes each tower it uses is in material compliance with applicable
regulations. The Company maintains liability insurance to protect it from third
party claims relating to non-compliance with tower regulations.

           REGULATORY DEVELOPMENTS. The FCC is considering regulatory changes
that may affect the Company's businesses. These changes involve PMRS licensing,
including ongoing implementation of the Telecommunications Act of 1996,
deployment of broadband wireless technology, and adoption of consumer
obligations and public safety requirements. However, it is uncertain at this
time what impact, if any, these changes could have on the Company's operations.

                                       11

<PAGE>   19

OPERATIONS

           The Company performs billing, maintenance of subscriber records, FCC
licensing activities and equipment leasing at its Woodlands, Texas headquarters.

           The Company's operations are divided into five business regions as
follows: Houston, Dallas/Ft. Worth, Northern California, Chicago, and Washington
D.C./Baltimore. A manager oversees each region and selected regions have a full
staff of sales and service personnel. The manager's responsibility is to sell
and service customer's equipment and Company owned infrastructure. The manager
is also responsible for encouraging independent dealers to load the Company's
systems.

EMPLOYEES

           As of March 1, 2000, the Company employed 38 people of whom all are
employed on a full-time basis. None of the Company's employees belong to a
union.

ITEM 2.  DESCRIPTION OF PROPERTY

           The Company leases 4,738 square feet of office space and 1,525 square
feet of warehouse space in The Woodlands, Texas, a suburb of Houston, Texas,
where its principal offices are located. In addition, satellite regional offices
are located in Northern California, Chicago, Dallas and Virginia.

           The Company leases antenna and repeater space on approximately 290
tower sites. Other than its leases on the Sears Tower in Chicago, Illinois, and
Allied Tower in Houston, Texas, no one lease is material to the business of the
Company. The leases are generally for terms of one year and month-to-month
thereafter.

ITEM 3.  LEGAL PROCEEDINGS

           From time to time, the Company is involved in various legal
proceedings arising in the ordinary course of business. On November 13, 1998,
the Federal Communications Commission's ("Commission") Compliance and
Information Bureau ("CIB") for the Chicago, Illinois region, issued a Notice of
Violation ("Notice") to the Company, alleging that the Company operated the
single-channel shared community repeater station WIM351 in violation of the
Commission's rules. On November 25, 1998, the Company defended the allegations,
and asserted that it operates in full compliance with the Commission's rules and
policies. The Company has substantial defenses to the Notice of Violations,
based upon informal letters and other documents published by the Commission that
appear to permit the practice at issue. The Company at this time is unable to
predict the outcome and the FCC has not notified the Company of any pursuit of
this matter. Although the proceeding involves a single community repeater
station, an adverse decision in this proceeding could impact the Company's
decentralized trunking operation nationwide.

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

           Not Applicable.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

           The Company's Common Stock is currently traded on the Canadian
Dealing Network and trading commenced in July 1997 on the U.S. OTC Bulletin
Board. During the year ended December 31, 1998, and December 31, 1999, the high
and low bid prices were as follows:


                                       12

<PAGE>   20

<TABLE>
<CAPTION>
                              U. S. OTC Bulletin Board             Canadian Dealing Network
                             (All amounts are in U.S. $)          (All amounts are in CDN $)
                             ---------------------------          --------------------------
        Date                   High               Low               High              Low
        ----                 -------            --------           ------            -------
<S>                           <C>              <C>                 <C>               <C>
March 31, 1998                $1.250            $0.625             $1.500            $1.250
June 30, 1998                 $1.500            $0.812             $1.750            $1.250
September 30, 1998            $0.937            $0.500             $1.000            $1.000
December 31, 1998             $1.031            $0.312             $1.250            $0.700
March 31, 1999                $1.031            $0.312             $1.100            $0.400
June 30, 1999                 $1.000            $0.688             $0.900            $0.500
September 30, 1999            $1.000            $0.625             $1.250            $1.000
December 31, 1999             $0.750            $0.312             $0.750            $0.500
</TABLE>


The quotations reflect inter-dealer prices, without retail and mark-up, markdown
or commission and may not represent actual transactions.

As of March 1, 2000, the Company's Common Stock was held by 141 stockholders of
record.

           The Company has not declared or paid any dividends. The payment of
dividends in the future will depend on the Company's earnings, capital
requirements, operating and financial position and general business conditions.
The Company anticipates that earnings will be retained to finance future growth
and operations, including research and product development. As such, management
anticipates that no dividends will be paid on the Common Stock in the
foreseeable future.

           For information concerning recent sales of unregistered securities,
see Item 10, "Executive Compensation -- Outstanding Options." The fiscal 1999
options therein described were granted by the Company during the past fiscal
year to 6 of its officers, employees and directors. These transactions were
exempt from registration under the Securities Act pursuant to Section 4(2), as
not involving any public offering. At an appropriate time, the Company expects
to file a registration statement on Form S-8 to register the transactions
relating to the grant and exercise of these options. The following options were
granted as additional compensation for employee and non-employee director
services:

<TABLE>
<CAPTION>
                                   No. of Options              Exercise
Date of Grant                        Granted                    Price
-------------                      --------------              --------
<S>                               <C>                         <C>
April 16, 1999                         75,000                   $0.875
May 17, 1999                           50,000                   $0.875
December 31, 1999                       3,000                   $0.500
</TABLE>


                                       13

<PAGE>   21

ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS.

           The following discussion should be read in conjunction with the
consolidated financial statements of the Company and the notes thereto included
elsewhere in this Report on Form 10-KSB. The discussion in this section of this
Report on Form 10-KSB contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in this section, those
discussed in "Risk Factors" and those discussed elsewhere in this Report on Form
10-KSB.

RESULTS OF OPERATIONS

           Total revenues for 1999 were $7,897,000, a decrease of $713,000, or
8%, from 1998. Lower revenues were the result of decreases in spectrum sales and
dispatch revenue partially offset by increases in revenue from equipment sales,
rental and service. Gross spectrum system sales and licensing revenues decreased
from $1,336,000 in 1998 to $117,000 in 1999. Spectrum system sales are sporadic
in nature as they rely upon the FCC approval for the assignment of licenses.
Dispatch revenue totaled $5,461,000 in 1999, a decrease of $280,000 or 5% from
1998, due in large part to the sale and removal of uneconomical repeaters in the
rural community repeater areas. Equipment sales increased $569,000 to $1,562,000
in 1999 as a result of expanded regional sales and service facilities. Radio
rental revenues increased from $382,000 in 1998 to $464,000 in 1999, a 22%
increase. Service revenue totaled $283,000 in 1999, an increase of $158,000
compared to 1998, as a result of the expansion in the regional markets.
Miscellaneous revenues decreased $23,000 from 1998 to 1999.

           Costs of sales decreased to $4,202,000 in 1999 from $4,826,000 in
1998. The costs of spectrum systems sales decreased 81% from 1998 to $61,000 for
the year ended December 31, 1999 as a result of fewer spectrum system sales
closed during 1999. Dispatch costs and expenses were $2,906,000 for 1999 as
compared with $3,630,000 for 1998, a decrease of 20% or $724,000. The decrease
in dispatch costs is due to reduced tower rent and maintenance as a result of
the sale and removal of non-productive community repeaters. The costs of
equipment sales and service increased to $1,208,000 in 1999 from $841,000 in
1998 for an increase of 44% corresponding to increased gross sales. Radio rental
costs were $26,000 for 1999, an increase from $22,000 for 1998.

           Depreciation and amortization increased to $1,021,000 in 1999 from
$905,000 in 1998. The increase of $116,000, or 13% from 1998 is attributed to
the disposition of rural community repeaters netted with new installation and
acquisition of licenses in the metro markets.

           General and administrative expenses increased $666,000 to $3,410,000
for 1999 from $2,744,000 for 1998. The increase is primarily attributable to
expansion of sales and service in The Woodlands offices, growth in the other
regional offices, expansion of spectrum activities, and outside services for Y2K
compliance.

           The Company incurred a net loss in 1999 of $593,000 on the removal of
repeaters as compared with a net gain of $52,000 for 1998. This net loss is a
result of the removal of non-productive assets outside the metropolitan areas,
which is a phase of the Company's continuing overall business plan to migrate
from the rural community repeater areas to the metropolitan trunked repeaters.
Interest income for 1999 was $39,000 as compared with $12,000 for 1998. Interest
expense for the year ended December 31, 1999 was $103,000, an increase of
$49,000 from interest expense of $54,000 for 1998. This increase in interest
expense is primarily due to increased draws on the Company's line of credit.

           The Company reported a net loss for 1999 of $1,353,000 as compared to
net income of $56,000 for 1998, and a basic and diluted net loss per common
share for 1999 of $0.22 compared with basic and diluted net income per common
share of $0.01 for 1998. The net loss in 1999 is primarily due to loss incurred
from the disposition of the rural community repeaters and to fewer spectrum
sales during the year. As previously

                                       14

<PAGE>   22

discussed the Company made the decision to withdraw from community repeater
communication solutions in favor of the advanced technology of trunked radio
systems in its five chosen markets. Accordingly $593,000 of assets have been
written off during 1999.

           The Company has executed a contract for the sale of its Arizona
licenses, systems and customers with a net book value of approximately $300,000,
which, if approved by the FCC, will result in a capital gain of approximately
$600,000 before income taxes. The Company also has entered into contracts for
the sale of spectrum with projected gross margins before income taxes to be in
excess of $500,000, which, assuming FCC approval will be reflected in future
quarters. These transactions are pending the required FCC consents and
subsequent issuance of the licenses in the transferee's name. However, there can
be no assurance that the FCC will consent to the consummation of these similar
transactions or that license assignments will continue, and factors which could
reduce the Company's ability to generate revenue through such transactions
include the Company's inability to acquire licensed operations on favorable
terms, demand for spectrum, regulatory restraints, competition, and the
Company's inability to negotiate sales on favorable terms.

LIQUIDITY AND CAPITAL RESOURCES

           At December 31, 1999, the Company had cash and cash equivalents of
approximately $376,000.

           The working capital of the Company was a negative $1,200,000 at
December 31, 1999 as compared with a negative $543,000 at December 31, 1998. The
working capital decrease in 1999 is primarily due to the net loss from
operations and to the capital improvements funded from operations.

           Depreciation and amortization comprised $1,021,000 of the $1,353,000
net loss for 1999 while it decreased net income by $905,000 for 1998. Net cash
provided by operating activities was $307,000 for 1999 and provided net cash of
$963,000 for 1998.

           Net cash used in investing activities was $725,000 for 1999 as
compared with $1,195,000 for 1998 reflecting expansion of the Company's
infrastructure to accommodate the planned migration to trunking in the targeted
metropolitan markets.

           Net cash provided by financing activities was $440,000 in 1999 and in
1998 $32,000 was used in financing activities. The Company had an increase in
cash and cash equivalents of $22,000 for 1999 and a decrease of $264,000 to
1998.

           The Company's negative working capital in 1999 reflects the start-up
of various divisions and the subsequent efforts to develop, expand and procure
licensed systems to migrate the operations from the rural areas to the trunked
metropolitan markets targeted by the Company as well as to obtain systems for
resale.

           The Company closed on several sales of licensed systems in the 800
MHz band during 1999. The Company plans to continue to obtain licensed systems
for resale; however, there can be no assurance that these sales will continue in
this manner. Failure to do so could have a material adverse effect on the
Company's cash flows and available working capital.

           During 1999 the Company acquired $615,000 of communications and
related equipment. These capital expenditures were financed in part by borrowing
from commercial financing institutions. As of December 31, 1999, the Company's
current liabilities included $767,000 owed to four commercial lenders and three
individuals with varying repayment terms.



                                       15

<PAGE>   23

NEW ACCOUNTING PRONOUNCEMENTS

           In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). This statement standardizes
the accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, by requiring that an entity recognize
those items as assets or liabilities in the statement of financial position and
measure them at fair value. The statement generally provides for matching the
timing of gain or loss recognition on the hedging instrument with the
recognition of (a) the changes in fair value of hedged asset or liabilities that
are attributable to the hedged risk or (b) the earnings effect of the hedged
forecasted transaction. The statement is effective for all fiscal quarters for
all fiscal years beginning after June 15, 2000, with early application
encouraged, and shall not be applied retroactively to financial statements of
prior periods. Adoption of SFAS 133 is expected to have no effect on the
Company's financial statements.

YEAR 2000

           Many computer systems in use today were designed and developed using
two digits, rather than four, to specify the year. As a result, such systems may
not have correctly recognized the year 2000 causing computer applications to
fail or to create erroneous results. The Company recognized this as a potential
risk and implemented a plan to address the Year 2000 issue. In implementing the
plan, the Company identified, tested and corrected potential Year 2000 problems,
assessed potential impacts from outside parties, and developed contingency plans
for business interruptions after the date rollover.

           Since the date rollover on January 1, 2000 the Company has not
experienced any material adverse impacts due to the Year 2000 issue. While the
primary risk to the Company with respect to the Year 2000 issue continues to be
the inability for third parties to provide goods and services in a timely and
accurate manner, to date, the Company is not aware of any such disruption. As a
result, the Company does not expect any remaining Year 2000 risks to have a
material adverse impact to the Company.

EFFECTS OF INFLATION

           The Company believes that the relatively moderate rate of inflation
over the past few years has not had a significant impact on the Company's
results of operations.

ITEM 7.  FINANCIAL STATEMENTS

         (See Item 13).

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

         NONE



                                       16

<PAGE>   24

                                    PART III


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

           Information concerning Directors and Executive Officers of the
Company is incorporated in reference from the Company's definitive Proxy
Statement and related materials in connection with the annual meeting of
shareholders to be held on June 2, 2000. The incorporated portions consist of
all of the disclosures that appear in that Proxy Statement under the headings
"Nominees for Election as Directors" and "Executive Officers."

ITEM 10.   EXECUTIVE  COMPENSATION

           Information concerning Executive Compensation is incorporated by
reference from the Company's definitive Proxy Statement and related materials in
connection with the annual meeting of shareholders to be held on June 2, 2000.
The incorporated portions consist of all of the disclosures that appear in that
Proxy Statement under the heading "Executive Compensation."

ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

           Information concerning the Security Ownership of Certain Beneficial
Owners and Management is incorporated by reference from the Company's definitive
Proxy Statement and related materials in connection with the annual meeting of
shareholders to be held on June 2, 2000. The incorporated portions consist of
all of the disclosures that appear in that Proxy Statement under the heading
"Security Ownership of Certain Beneficial Owners and Management."

ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

           Information concerning Certain Relationships and Related Transactions
is incorporated by reference from the Company's definitive Proxy Statement and
related materials in connection with the annual meeting of shareholders to be
held on June 2, 2000. The incorporated portions consist of all of the
disclosures that appear in that Proxy Statement under the heading "Certain
Relationships and Related Transactions."


                                       17

<PAGE>   25


ITEM 13.   EXHIBITS AND REPORTS ON FORM 8-K

(a)        Documents filed as part of this report.

<TABLE>
<CAPTION>
                                                                                                      Page
1.         Financial Statements:
<S>                                                                                                  <C>
                  Report of Independent Certified Public Accountants ................................. F-2

                  Balance Sheets, December 31, 1999 and 1998 ......................................... F-3

                  Statements of Operations, Years Ended December 31, 1999 and 1998 ................... F-4

                  Statements of Changes in Stockholders' Equity, Years Ended
                           December 31, 1999 and 1998 ................................................ F-5

                  Statements of Cash Flows, Years Ended December 31, 1999 and 1998 ................... F-6

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





                                       18

<PAGE>   26




2.         Exhibits:

<TABLE>
<CAPTION>
                                                                                 INCORPORATED BY
NUMBER                           DESCRIPTION                                       REFERENCE TO
------                           -----------                                     ---------------
<S>           <C>                                                <C>
3.1           Certificate of Incorporation filed September       Exhibit 3.1 to the Registration Statement on
              29, 1994.                                          Form 10-SB effective February 13, 1997
                                                                 (File No. 0-29032)

3.2           Certificate of Amendment to Certificate of         Exhibit 3.2 to the Registration Statement on
              Incorporation filed January 26, 1996.              Form 10-SB effective February 13, 1997
                                                                 (File No. 0-29032)

3.3           Certificate of Amendment to Certificate of         Exhibit 3.3 to the Registration Statement on
              Incorporation filed April 23, 1996.                Form 10-SB effective February 13, 1997
                                                                 (File No. 0-29032)

3.4           By-laws dated September 29, 1994.                  Exhibit 3.4 to the Registration Statement on
                                                                 Form 10-SB effective February 13, 1997
                                                                 (File No. 0-29032)

4.1           Specimen Common Stock share certificate.           Exhibit 4.1 to the Registration Statement on
                                                                 Form 10-SB effective February 13, 1997
                                                                 (File No. 0-29032)

4.2           Pages from Certificate of Incorporation and        Exhibit 4.2 to the Registration Statement on
              By-laws defining rights of stockholders -          Form 10-SB effective February 13, 1997
              included in Exhibits 3.1, 3.2, 3.3 and 3.4.        (File No. 0-29032)

10.1          [omitted]                                          [omitted]

10.2          [omitted]                                          [omitted]

10.3          [omitted]                                          [omitted]

10.4          [omitted]                                          [omitted]

10.5          [omitted]                                          [omitted]

10.6          [omitted]                                          [omitted]

10.7          [omitted]                                          [omitted]

10.8          [omitted]                                          [omitted]

10.9          [omitted]                                          [omitted]

10.10         [omitted]                                          [omitted]

10.11         [omitted]                                          [omitted]

10.12         [omitted]                                          [omitted]
</TABLE>


                                       19

<PAGE>   27

<TABLE>
<CAPTION>
                                                                                 INCORPORATED BY
NUMBER                           DESCRIPTION                                       REFERENCE TO
------                           -----------                                     ---------------
<S>           <C>                                                <C>
10.13         Radius Communication Products Reseller             Exhibit 10.13 to the Registration Statement on
              Agreement dated September 22, 1994, between        Form 10-SB effective February 13, 1997
              Motorola, Inc. and the Company; Amendment          (File No. 0-29032)
              to Reseller Agreement dated September 22,
              1994; and Master Amendment No. 1 dated
              September 30, 1996.

10.14         Motorola Authorized Two-Way Radio Dealer           Exhibit 10.14 to the Registration Statement on
              Agreement dated September 22, 1994, between        Form 10-SB effective February 13, 1997
              Motorola, Inc. and the Company; Paging             (File No. 0-29032)
              Product Sales to the United States Government
              Amendment dated on or about January 10,
              1996; Amendment dated on or about February
              13, 1996; and Per Unit Administrative
              Processing Charge Amendment dated
              September 30, 1996.

10.15         Motorola Master Radio Service Software             Exhibit 10.15 to the Registration Statement on
              License Agreement dated November 8, 1994,          Form 10-SB effective February 13, 1997
              between Motorola, Inc. and the Company.            (File No. 0-29032)

10.16         Master Dealer Agreement Land Mobile Radio          Exhibit 10.16 to the Registration Statement on
              Products, undated, between Kenwood                 Form 10-SB effective February 13, 1997
              Communications Corporation and the                 (File No. 0-29032)
              Company; Product Addendum dated February
              5, 1996; and Product Addendum, undated.

10.17         [omitted]                                          [omitted]

10.18         [omitted]                                          [omitted]

10.19         [omitted]                                          [omitted]

10.20         [omitted]                                          [omitted]

10.21         Antenna Site License commencing November           Exhibit 10.21 to the Registration Statement on
              1, 1995, for a term of 36 months, between          Form 10-SB effective February 13, 1997
              Motorola, Inc. and the Company.                    (File No. 0-29032)
              (CONFIDENTIAL)

10.22         Antenna Site License commencing November           Exhibit 10.22 to the Registration Statement on
              1, 1995, for a term of 36 months, between          Form 10-SB effective February 13, 1997
              Motorola, Inc. and the Company.                    (File No. 0-29032)
              (CONFIDENTIAL)

10.23         [omitted]                                          [omitted]

10.24         [omitted]                                          [omitted]

10.25         [omitted]                                          [omitted]

10.26         [omitted]                                          [omitted]
</TABLE>


                                       20

<PAGE>   28
<TABLE>
<CAPTION>
                                                                                 INCORPORATED BY
NUMBER                           DESCRIPTION                                       REFERENCE TO
------                           -----------                                     ---------------
<S>           <C>                                                <C>
10.27         Form of Indemnification Agreement between          Exhibit 10.27 to the Registration Statement on
              officers and director of the Company and the       Form 10-SB effective February 13, 1997
              Company.                                           (File No. 0-29032)

10.28         Escrow Agreement dated July 29, 1996               Exhibit 10.28 to the Registration Statement on
              between Albert F. Richmond, David A.               Form 10-SB effective February 13, 1997
              Terman, Equity Transfer Services, Inc. and the     (File No. 0-29032)
              Company.

10.29         [omitted]                                          [omitted]

10.30         Lease Agreement dated January 1, 2000,
              between Woodlands office Equities 95
              Limited and the Company.

24.1          Power of Attorney                                  N/A

27.1          Financial Data Schedule.
</TABLE>

(b)           Reports on Form 8-K.

              None filed during the last quarter of the period.


                                       21

<PAGE>   29




                                   SIGNATURES

           Pursuant to the requirements of Section 13 or 15(d), the Securities
and Exchange Act of 1934, the Registrant has duly caused this Form 10-KSB,
Annual Report, for the year ending December 31, 1999, to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of The Woodlands, and
State of Texas, on the 30th day of March, 2000.

CHAMPION COMMUNICATION  SERVICES, INC.


By:    /s/ Albert F. Richmond
    ---------------------------------
    Albert F. Richmond,
    Chairman of the Board and Chief
    Executive Officer

POWER OF ATTORNEY TO SIGN AMENDMENTS

           KNOW ALL BY THESE PRESENTS, that each person whose signature appears
below does hereby constitute and appoint Albert F. Richmond his true and lawful
attorney-in-fact and agent for him and in his name, place and stead, in any and
all capacities, to sign any or all amendments to the Champion Communication
Services, Inc. Form 10-KSB, Annual Report, for year ending December 31, 1999,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises in order to effectuate the same as fully, to all intents and purposes,
as they or he might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agents, or any of them, may lawfully do or cause
to be done by virtue hereof. This Power of Attorney been signed below by the
following persons in the capacities and on the dates indicated.

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

<TABLE>
<CAPTION>
              SIGNATURE                                   TITLE                                  DATE
              ---------                                   -----                                  ----
<S>                                             <C>                                       <C>
      /s/ Albert F. Richmond                     Chairman of the Board and                  March 30, 2000
-------------------------------------------      Chief Executive Officer
Albert F. Richmond

      /s/ David A. Terman                        President and Director                     March 30, 2000
--------------------------------------------
David A. Terman

     /s/ Pamela R. Cooper                        Chief Financial Officer, Treasurer,        March 30, 2000
--------------------------------------------     and Controller
Pamela R. Cooper

     /s/ Peter F. Dicks                          Director                                   March 30, 2000
--------------------------------------------
Peter F. Dicks

     /s/ Randel R. Young                         Director                                   March 30, 2000
--------------------------------------------
Randel R. Young
</TABLE>


                                       22

<PAGE>   30



<TABLE>
<CAPTION>

                                                                                                      Page
<S>                                                                                                   <C>
Financial Statements:

         Report of Independent Certified Public Accountants............................................F-2

         Balance Sheets, December 31, 1999 and 1998....................................................F-3

         Statements of Operations, Years Ended December 31, 1999 and 1998 .............................F-4

         Statements of Changes in Stockholders' Equity, Years Ended
              December 31, 1999 and 1998...............................................................F-5

         Statements of Cash Flows, Years Ended December 31, 1999 and 1998..............................F-6

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



                                       F-1

<PAGE>   31

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


The Board of Directors
Champion Communication Services, Inc.

We have audited the accompanying balance sheets of Champion Communication
Services, Inc. (the "Company") as of December 31, 1999 and 1998, and the related
statements of operations, stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Champion Communication
Services, Inc. at December 31, 1999 and 1998, and the results of its operations
and its cash flows for the years then ended, in conformity with generally
accepted accounting principles.

/s/ BDO SEIDMAN, LLP
Houston, Texas
March 3, 2000




                                       F-2

<PAGE>   32
                      CHAMPION COMMUNICATION SERVICES, INC.
                                 BALANCE SHEETS
                           December 31, 1999 and 1998

<TABLE>
<CAPTION>
                                                                                    1999                1998
                                                                                -------------      -------------
<S>                                                                             <C>                <C>
                                     ASSETS

Current Assets

     Cash and cash equivalents                                                  $     376,368      $     354,116

     Accounts receivable, net of allowance for doubtful accounts of
     $95,860 and $46,408, respectively                                                837,451            779,582

     Notes receivable                                                                  52,256            122,620

     Inventories                                                                      380,506            526,665

     Prepaid expenses and other                                                       156,792            216,996
                                                                                -------------      -------------

         Total Current Assets                                                       1,803,373          1,999,979
                                                                                -------------      -------------
Communications equipment and related assets, net                                    2,819,207          4,355,347

Notes receivable, long-term                                                           355,389             25,816

Deferred taxes                                                                        196,000               --

Other assets, net of amortization of $505,769 and  $235,089, respectively           1,888,709          1,591,328
                                                                                -------------      -------------
                                                                                $   7,062,678      $   7,972,470
                                                                                =============      =============
                   LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

     Note payable to bank                                                       $     475,000      $      50,000

     Accounts payable                                                                 540,534            733,536

     Accrued expenses                                                                 610,795            708,236

     License sales deposits                                                           660,500             15,000

     Deferred revenue                                                                 424,345            798,207

     Current maturities of notes payable                                              292,390            238,364
                                                                                -------------      -------------
         Total Current Liabilities                                                  3,003,564          2,543,343
                                                                                -------------      -------------
Long-Term Liabilities

     Notes payable                                                                    299,795            339,254

     Customer deposits                                                                  2,558              2,238
                                                                                -------------      -------------
         Total Long-Term Liabilities                                                  302,353            341,492
                                                                                -------------      -------------
Stockholders' Equity

     Common stock, $0.01 par value, 20,000,000 shares authorized,
       6,150,622 shares issued and outstanding at December 31, 1999
       and 6,119,712 shares issued and outstanding at December 31, 1998                61,506             61,197

     Additional paid-in capital                                                     5,201,211          5,179,265

     Accumulated deficit                                                           (1,505,956)          (152,827)
                                                                                -------------      -------------
Total Stockholders' Equity                                                          3,756,761          5,087,635
                                                                                -------------      -------------
                                                                                $   7,062,678      $   7,972,470
                                                                                =============      =============
</TABLE>


 See accompanying notes to financial statements.

                                       F-3

<PAGE>   33
                      CHAMPION COMMUNICATION SERVICES, INC.
                            STATEMENTS OF OPERATIONS
                     Years ended December 31, 1999 and 1998

<TABLE>
<CAPTION>

                                                              1999               1998
                                                         -------------      -------------
<S>                                                      <C>                <C>
Revenues                                                 $   7,897,105      $   8,610,256
                                                         -------------      -------------
Operating Expenses:

     Cost of Sales                                           4,202,099          4,825,986

     Provision for doubtful accounts                           127,000             72,000

     Depreciation and amortization                           1,021,246            905,245

     General and administrative expenses                     3,410,269          2,743,894
                                                         -------------      -------------
         Total Operating Expenses                            8,760,614          8,547,125
                                                         -------------      -------------
         Operating Income (loss)                              (863,509)            63,131
                                                         -------------      -------------
Other income (expenses):

     Net gain (loss) on disposal of fixed assets              (592,757)            51,550

     Interest income                                            38,888             12,408

     Interest expense                                         (103,281)           (53,710)
                                                         -------------      -------------
Income (loss) before income taxes                           (1,520,659)            73,379

Income tax (expense) benefit                                   167,530            (17,561)
                                                         -------------      -------------
Net income (loss)                                        $  (1,353,129)     $      55,818
                                                         =============      =============
Weighted average common shares and common stock
equivalents outstanding                                      6,140,460          6,115,916
                                                         =============      =============
Basic and diluted net income (loss) per common share     $       (0.22)     $        0.01
                                                         =============      =============
</TABLE>


See accompanying notes to financial statements.



                                       F-4

<PAGE>   34




                      CHAMPION COMMUNICATION SERVICES, INC.
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                     Years ended December 31, 1999 and 1998

<TABLE>
<CAPTION>
                                    Common                        Additional                        Total
                                     stock         Common          paid-in       Accumulated     Stockholders'
                                    shares          stock          capital         deficit          Equity
                                   ---------     -----------     -----------     -----------     -------------
<S>                                <C>           <C>             <C>             <C>              <C>
Balance at December 31, 1997       6,103,412     $    61,034     $ 5,166,184     $  (208,645)     $ 5,018,573

Issuance of common stock for
services                              16,300             163          13,081              --           13,244

Net income for 1998                       --              --              --          55,818           55,818
                                   ---------     -----------     -----------     -----------      -----------
Balance at December 31, 1998       6,119,712          61,197       5,179,265        (152,827)       5,087,635

Contribution of common stock
to Company 401(k) Plan                30,910             309          21,946              --           22,255

Net loss for 1999                         --              --              --      (1,353,129)      (1,353,129)
                                   ---------     -----------     -----------     -----------      -----------
Balance at December 31, 1999       6,150,622     $    61,506     $ 5,201,211     $(1,505,956)     $ 3,756,761
                                   =========     ===========     ===========     ===========      ===========
</TABLE>




See accompanying notes to financial statements.



                                      F-5

<PAGE>   35




                      CHAMPION COMMUNICATION SERVICES, INC.
                            STATEMENTS OF CASH FLOWS
                     Years ended December 31, 1999 and 1998

<TABLE>
<CAPTION>
                                                                                         1999             1998
                                                                                      -----------      -----------
<S>                                                                                   <C>              <C>
Cash flows from operating activities:
     Net income (loss)                                                                $(1,353,129)     $    55,818
     Adjustments to reconcile net income (loss) to net cash provided by
      operating activities:
         Depreciation and amortization                                                  1,021,246          905,245
         Bad debt expense                                                                 127,000           72,000
         Common stock issued for services                                                  22,255           13,244
         Loss (gain) on disposal/sale of fixed assets                                     592,757          (51,550)
         Changes in assets and liabilities:
              Accounts receivable                                                        (184,869)         207,063
              Inventories                                                                 236,447           77,856
              Prepaid expenses                                                             60,204          (36,252)
              Accounts payable                                                           (192,682)         185,541
              Accrued expenses                                                            (97,441)         115,531
              License sales deposits                                                      645,500         (170,023)
              Deferred taxes                                                             (196,000)           3,673
              Deferred revenue                                                           (373,862)        (415,494)
                                                                                      -----------      -----------

                  Net cash provided by operating activities                               307,426          962,652
                                                                                      -----------      -----------

Cash flows from investing activities:
     Issuance of notes receivable                                                        (400,000)        (100,217)
     Collections of notes receivable                                                      140,791           32,391
     Additions to property and equipment                                                 (615,051)      (1,009,783)
     Proceeds from sale of fixed assets                                                   825,678          451,243
     Additions to other assets                                                           (676,159)        (568,281)
                                                                                      -----------      -----------

                  Net cash used in investing activities                                  (724,741)      (1,194,647)
                                                                                      -----------      -----------
Cash flows from financing activities:
     Proceeds from issuance of notes payable                                              945,150          443,464
     Repayment of notes payable                                                          (505,583)        (475,688)
                                                                                      -----------      -----------
                 Net cash provided by (used in) financing activities                      439,567          (32,224)
                                                                                      -----------      -----------
Net increase (decrease) in cash and cash equivalents                                       22,252         (264,219)
Cash and cash equivalents, at beginning of year                                           354,116          618,335
                                                                                      -----------      -----------
Cash and cash equivalents, at end of year                                             $   376,368      $   354,116
                                                                                      ===========      ===========
Supplemental disclosure of cash flow information:
     Cash paid during the year for:

              Taxes                                                                   $    31,903      $    65,115

              Interest                                                                $   102,273      $    48,147
</TABLE>


See accompanying notes to financial statements.


                                       F-6

<PAGE>   36




                      CHAMPION COMMUNICATION SERVICES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 1999 and 1998


(1)   Summary of Significant Accounting Policies

      (a) Description of Business

               Champion Communication Services, Inc. (the Company) is a provider
          of high powered community repeater dispatch services operating within
          the 450 - 512 MHz and 800 MHz frequency band in the United States. The
          Company's customers consist primarily of business and government
          agencies located in both metropolitan and rural geographic regions.
          The Company provides customers with equipment sales and service, and
          radio rentals.

      (b) Organization and Basis of Presentation

               The Company has raised equity capital through the issuance of
          common stock and warrants, which expired during 1998, to the public
          sector in the United States and Canada. Accordingly, its securities
          are registered with the Securities and Exchange Commission in the U.S.
          and with the Canadian Dealing Network.

               The accompanying financial statements have been prepared in
          accordance with accounting principles generally accepted in the U.S.
          The differences between accounting principles generally accepted in
          the U.S. and Canada would not have a material impact on the
          accompanying financial statements.

      (c) Cash and Cash Equivalents

               For purposes of the statements of cash flows, the Company
          considers all highly liquid financial instruments purchased with an
          original maturity of three months or less to be cash equivalents.

      (d) Inventory

               The Company's inventory consists primarily of two-way radios,
          parts and accessories. The Company uses the average cost method of
          accounting for inventory. The balance recorded at December 31, 1999
          and 1998 is the lower of average cost or market.

      (e) Communications Equipment and Related Assets

               Communications equipment and related assets are recorded at cost.
          Depreciation is computed on a straight-line basis over the estimated
          useful lives of the assets ranging from two to five years for other
          fixed assets and five to ten years for base station and related
          equipment.

      (f) Other Assets

               Fees associated with obtaining Federal Communication Commission
          licenses for 450-470 MHz, 470-512 MHz and 800 MHz are capitalized as
          part of the cost of the licenses. Upon disposition of the licenses,
          such costs are relieved based upon an average cost basis. Licenses
          that are used by the Company are capitalized and amortized under the
          straight line method for five years.

      (g) Impairment of Long-Lived Assets and Long-Lived Assets to Be
          Disposed Of

               Management reviews long-lived assets and intangible assets for
          impairment whenever events or changes in circumstances indicate that
          the carrying amount of an asset may not be recoverable. Recoverability
          of assets to be held and used is measured by a comparison of the
          carrying amount of an asset to future net cash flows expected to be
          generated by the asset. If such assets are considered to be impaired,
          the impairment to be recognized is measured by the amount by which the
          carrying amount of the assets exceeds the fair value of the assets
          which considers the discounted future net cash flows. Assets to be
          disposed of are reported at the lower of the carrying amount or the
          fair value less costs of disposal. This analysis of the asset values
          as of December 31, 1999 and 1998 indicated there was no impairment to
          these assets carrying values.


                                       F-7

<PAGE>   37
                      CHAMPION COMMUNICATION SERVICES, INC.
                          NOTES TO FINANCIAL STATEMENTS



(1)   Summary of Significant Accounting Policies, (continued)

      (h) Accrued Expenses

               Accrued expenses consist primarily of accrued tower rents
          totaling $360,000 and $470,000 at December 31, 1999 and 1998,
          respectively.

      (i) Income Taxes

               In accordance with U.S. generally accepted accounting principles,
          deferred tax assets and liabilities are recognized for the future tax
          consequences attributable to differences between the financial
          statement carrying amounts of existing assets and liabilities and
          their respective tax basis. Deferred tax assets and liabilities are
          measured using enacted tax rates expected to apply to taxable income
          in the years which those temporary differences are expected to be
          recovered or settled. 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.

      (j) Fair Value of Financial Instruments

               Fair value estimates are made at discrete points in time based on
          relevant market information. These estimates may be subjective in
          nature and involve uncertainties and matters of significant judgment
          and therefore cannot be determined with precision.

               The Company believes that the carrying amounts of its current
          assets and current liabilities approximate the fair value of such
          items due to their short-term nature. The carrying amount of long-term
          debt approximates its fair value because the interest rates
          approximate market and there has been no significant change in the
          credit risk of the Company.

      (k) Stock Option Plan

               Statement of Financial Accounting Standards (SFAS) No. 123,
          "Accounting for Stock-Based Compensation," effective January 1, 1996,
          permits entities to recognize as expense over the vesting period the
          fair value of all stock-based awards on the date of grant.
          Alternatively, SFAS No. 123 also allows entities to continue to apply
          the provisions of Accounting Principles Board (APB) Opinion No. 25,
          "Accounting for Stock Issued to Employees," and provide pro forma net
          income and pro forma earnings per share disclosures for employee stock
          option grants made in 1995 and future years as if the fair-value-based
          method defined in SFAS No. 123 had been applied. The Company has
          elected to continue to apply the provisions of APB Opinion No. 25, in
          which no compensation expense is recognized for employee stock option
          if there is no intrinsic value at the date of the grant, and to
          provide the pro forma disclosure provisions of SFAS No. 123.

      (l) Revenue Recognition

               The billing cycle for radio dispatch service is sometimes for
          three, six and twelve month intervals. The Company defers amounts
          billed in advance and recognizes revenue as the related services are
          provided.

      (m) Net Income (Loss) Per Common Share

               For the years ended December 31, 1999 and 1998, the weighted
          average number of common shares outstanding was 6,140,460 and
          6,115,916, respectively. In calculating EPS for the year ended in
          1999, options to purchase 388,000 shares of common stock, at exercise
          prices ranging from $.50 to $2.75 were not included in the computation
          of diluted EPS because the potential shares were considered
          antidilutive due to the Company's reported loss in 1999. For the year
          ended in 1998, options to purchase 326,000 shares of common stock at
          exercise prices ranging from $1.00 to $2.75 were excluded from the
          computation of dilutive EPS because the options' exercise price was
          greater than the average market price of the Company's common shares.



                                       F-8

<PAGE>   38



                      CHAMPION COMMUNICATION SERVICES, INC.
                          NOTES TO FINANCIAL STATEMENTS



(1)   Summary of Significant Accounting Policies, (continued)

      (n) Use of Estimates

               Management of the Company has made a number of estimates and
          assumptions relating to the reporting of assets and liabilities and
          the disclosure of contingent assets and liabilities to prepare these
          financial statements in conformity with generally accepted accounting
          principles. Actual results could differ from those estimates.

      (o) Reclassifications

               Certain reclassifications have been made to conform with current
          reporting practices.

      (p) Differences Between Generally Accepted Accounting Principles in the
          United States and Canada

               The Company prepares its financial statements in accordance with
          generally accepted accounting principles (GAAP) in the United States.
          There are no significant differences between the United States and
          Canadian GAAP effecting the Company's financial statements.

      (q) New Accounting Pronouncements

                   In June 1998, the Financial Accounting Standards Board issued
          Statement of Financial Accounting Standard No. 133, "Accounting for
          Derivative Instruments and Hedging Activities" ("SFAS 133"). This
          statement standardizes the accounting for derivative instruments,
          including certain derivative instruments embedded in other contracts,
          by requiring that an entity recognize those items as assets or
          liabilities in the statement of financial position and measure them at
          fair value. The statement generally provides for matching the timing
          of gain or loss recognition on the hedging instrument with the
          recognition of (a) the changes in fair value of hedged asset or
          liabilities that are attributable to the hedged risk or (b) the
          earnings effect of the hedged forecasted transaction. The statement is
          effective for all fiscal quarters for all fiscal years beginning after
          June 15, 2000, with early application encouraged, and shall not be
          applied retroactively to financial statements of prior periods.
          Adoption of SFAS 133 is expected to have no effect on the Company's
          financial statements.

(2)   Communication Equipment and Related Assets

          Communication equipment and related assets at December 31, 1999 and
1998 are comprised of the following:

<TABLE>
<CAPTION>
                                                                                  December 31, 1999
                                                                      -----------------------------------------
                                                     Asset                          Accumulated         Net
                                                      Life               Cost       depreciation       Balance
                                                      ----            ----------    ------------       --------
<S>                                                 <C>               <C>            <C>             <C>
      Base station and related equipment            5 - 10 years      $3,367,648     $  980,188      $2,387,460
      Rental radio equipment                        2 -  5 years         635,890        430,375         205,515
      Other Furniture, data processing and
        communications equipment                    2 -  5 years         684,144        457,912         226,232
                                                                      ----------     ----------      ----------

                                                                      $4,687,682     $1,868,475      $2,819,207
                                                                      ==========     ==========      ==========
</TABLE>


                                       F-9

<PAGE>   39



                      CHAMPION COMMUNICATION SERVICES, INC.
                          NOTES TO FINANCIAL STATEMENTS



(2)   Communication Equipment and Related Assets, (continued)

          Communication equipment assets with a net book value of $608,550 were
      sold resulting in a gain of $209,300, and equipment with a net book value
      of approximately $802,300 was written-off during the year resulting in a
      net loss of approximately $593,000 for the year.

<TABLE>
<CAPTION>
                                                                                December 31, 1998
                                                                      -----------------------------------------
                                                        Asset                      Accumulated           Net
                                                        Life             Cost      depreciation        Balance
                                                        ----          ----------   ------------       ---------
<S>                                                 <C>               <C>            <C>             <C>
      Base station and related equipment            5 - 10 years      $5,535,213     $1,702,564      $3,832,649
      Rental radio equipment                        2 -  5 years         619,737        326,996         292,741
      Other Furniture, data processing and
        communications equipment                    2 -  5 years         548,833        318,876         229,957
                                                                      ----------     ----------      ----------

                                                                      $6,703,783     $2,348,436      $4,355,347
                                                                      ==========     ==========      ==========
</TABLE>


(3)   Notes Payable

          At December 31, 1999 and 1998, the total balance outstanding related
      to the installment notes payable was $467,185 and $452,600, respectively.
      The notes are payable in monthly installments and mature from 2000 to
      2003. The notes bear interest at rates ranging from 6.0% to 10.9% per year
      and are secured by communications equipment.

          During 1999, the Company incurred installment notes payable of
      $200,500 collateralized by rental radios and accounts receivable.

          During 1999, the Company renegotiated a revolving note payable with a
      maximum credit line of $700,000, bearing interest at the prime rate plus
      three-fourths of one percent per annum (9.25% at December 31, 1999) due
      June 30, 2000. At December 31, 1999, the outstanding balance on the credit
      line was $475,000. The note payable is secured by all accounts receivable,
      inventory and other property as described in the security agreement. The
      note agreement requires the Company to maintain a tangible net worth as
      defined in the agreement. As of December 31, 1999, the Company was not in
      compliance with this covenant and has obtained a waiver from the bank.

          On April 1, 1999, in exchange for a promissory note totaling $50,000,
      the Company acquired inventory, parts, Crs, and communication assets in
      Conroe, Texas. The note bears interest at 8% per annum payable quarterly
      on the unpaid principal until maturing on March 31, 2000.

          The combined aggregate maturities of the notes payable for each of the
      five years following December 31, 1999 are as follows:

<TABLE>
<CAPTION>
                 Years Ended                              Amount
                 -----------                           ----------
<S>                                                    <C>
                    2000                               $  767,390
                    2001                                  151,457
                    2002                                  121,225
                    2003                                   27,113
                                                       ----------

                                                       $1,067,185
                                                       ==========
</TABLE>



                                      F-10

<PAGE>   40
                      CHAMPION COMMUNICATION SERVICES, INC.
                          NOTES TO FINANCIAL STATEMENTS



(4)   Income Taxes

          During 1999, the Company recorded state income tax expense of $2,393,
      federal income tax expense of $29,750 and a deferred tax benefit of
      $199,673. For the years ended December 31, 1999 and 1998, the Company's
      effective income tax rate differed from the statutory tax rate as follows:

<TABLE>
<CAPTION>
                                                         1999        1998
                                                         -----       -----
<S>                                                      <C>         <C>
Federal statutory tax rate                                 (34)%        34%
State income taxes, net of federal income tax effect        --           8
Non-deductible expenses                                      1          10
Alternative minimum tax                                     --          11
Change in valuation allowance on net
   operating loss carryforwards                              5         (39)
Book losses greater than that allowed for
   tax purposes                                             14          --
Book depreciation and amortization in excess of
  that allowed for tax purposes                              3          --
                                                         -----       -----

Effective tax rate                                         (11)%        24%
                                                         -----       -----
</TABLE>


      As of December 31, 1999 and 1998, deferred tax assets and liabilities were
as follows:

<TABLE>
<CAPTION>
                                            1999              1998
                                        ------------      ------------
<S>                                     <C>               <C>
Communications equipment                $    357,458      $    372,912
                                        ------------      ------------
    Total deferred tax liabilities           357,458           372,912
                                        ------------      ------------

Minimum tax credit carryforward               70,590            55,840
Net operating loss carryforward              647,263           297,620
Allowance for doubtful accounts               33,118            15,779
                                        ------------      ------------

    Total deferred tax assets                750,971           369,239
                                        ------------      ------------

Valuation allowance                         (197,513)               --
                                        ------------      ------------

Net deferred tax assets (liability)     $    196,000      $     (3,673)
                                        ------------      ------------
</TABLE>


          In assessing the realizability of deferred tax assets, management
      considers whether it is more likely than not that some portion or all of
      the deferred tax assets will not be realized and a valuation allowance is
      recorded. The valuation allowance increased $197,513 and decreased $83,189
      during the years ended December 31, 1999 and 1998, respectively.

          The December 31, 1999 net operating loss carryforward of approximately
      $1,904,000 will be available to offset future taxable income and expires
      through 2012. The Company has $70,590 in alternative minimum tax
      carryforwards available to use indefinitely in the future.



                                      F-11

<PAGE>   41



                      CHAMPION COMMUNICATION SERVICES, INC.
                          NOTES TO FINANCIAL STATEMENTS

(5)   Stockholders' Equity

          Upon the completion of the initial public offering in September 1996,
      a third party was granted options, in conjunction with the special warrant
      offering, to purchase 60,000 common shares during the period of three
      years from September 25, 1996 at a price of CDN $3.70 per share. Both the
      granted options and unexercised public warrants issued under the offering
      have expired.

          Of the 6,150,622 issued and outstanding shares of common stock at
      December 31, 1999, 3,087,720 shares owned by the chief executive officer
      and president of the Company were placed in escrow, in connection with the
      Company's initial public offering in Canada in 1996. Fifty percent of the
      securities were released from escrow during the period 1997 through 1999,
      and the remaining fifty percent are to be released as follows: 20% on
      April 29, 2000 and 30% on April 29, 2001.

          During 1999, 30,910 shares were issued for $.72 per share as the
      Company contribution to match employee's participation in the Company
      401(k) Plan.


(6)   Stock Options

          In 1996, the Company adopted the "1996 Incentive Plan" (the Plan) to
      provide incentive options, nonstatutory options, restricted stock awards
      and stock appreciation rights to certain key employees, non-employee
      directors and other persons. The Plan authorizes grants of options to
      purchase up to 500,000 shares of common stock. Stock options are granted
      with an exercise price equal to the stock's fair market value at the date
      of grant. All stock options issued under the Plan have 10-year terms.
      Options granted to employees vest and become fully exercisable after a
      range of two to six years from the date of grant. Options granted to
      non-employee directors vest and become exercisable immediately upon
      issuance. At December 31, 1999 and 1998, there were 112,000 and 234,000
      additional shares, respectively, available for grant under the Plan.

          During 1999 and 1998, the Company granted options to purchase 128,000
      and 106,000 shares of common stock, respectively, to employees and
      non-employee directors of the Company. The per share weighted-average
      value of stock options granted during 1999 and 1998 was $0.71 and $.80,
      respectively, on the date of grant, using the Black Scholes option model
      with the following assumptions: weighted-average risk-free interest rate
      of 5.76% and 5.39%, respectively, weighted-average expected life of ten
      years, weighted-average expected volatility of 74.72% and 120.52%,
      respectively, and no expected dividend yield.

          The Company applies APB Opinion No. 25 in accounting for its Plan and
      no compensation cost has been recognized for its stock options in the
      financial statements for the years ended December 31, 1999 and 1998. Had
      the Company determined compensation cost based on the fair value at the
      grant date for its stock options under SFAS No. 123, the Company's net
      income (loss) would have been reduced to the pro forma amounts indicated
      below:

<TABLE>
<CAPTION>

                               1999            1998
                            ----------      ----------
<S>                         <C>             <C>
Net income (loss)
         As reported        $(1,353,129)    $   55,818
         Pro forma          $(1,444,389)    $  (16,972)

Income (Loss) per share
         As reported        $      (.22)    $      .01
         Pro forma          $      (.24)    $      .00
</TABLE>




                                      F-12

<PAGE>   42



                      CHAMPION COMMUNICATION SERVICES, INC.
                          NOTES TO FINANCIAL STATEMENTS



(6)   Stock Options, (continued)

          The following table summarizes the information about the stock options
as of December 31, 1999:


<TABLE>
<CAPTION>

                                                                 Weighted
                                                                 Average
                              Number         Weighted           Remaining             Number       Weighted
       Range of            Outstanding       Average            Contracted          Exercisable    Average
       Exercise                 at           Exercise              Life                 at         Exercise
        Price              December 31        Price              (Years)            December 31     Price
      ----------           -----------      ---------           ----------          ------------   --------
<S>                       <C>               <C>                <C>                 <C>            <C>
           $0.50                 3,000        $0.50               10.00                3,000         $0.50
           $0.88               125,000        $0.88                9.38                   --         $0.88
           $1.00                58,000        $1.00                8.89               23,000         $1.00
           $1.16                15,000        $1.16                8.29                   --         $1.16
           $1.25                33,000        $1.25                8.49                3,000         $1.25
           $2.00                69,000        $2.00                6.13               32,250         $2.00
           $2.22                75,000        $2.22                7.10                7,500         $2.22
           $2.75                10,000        $2.75                7.00                3,700         $2.75
  --------------           -----------        -----             -------             --------         -----
  $0.50  - $2.75               388,000        $1.44                8.10               72,450         $1.65
</TABLE>

<TABLE>
<CAPTION>

                                                     Number of                 Weighted-average
                                                      Options                   exercise price
                                                     ---------                 ----------------
<S>                                                  <C>                       <C>
          Balance at December 1997                    263,000                       $2.32
                   Granted                            106,000                       $1.09
                   Forfeited                         (103,000)                      $2.13
                                                     --------                       -----

          Balance at December 1998                    266,000                       $1.73
                                                     --------                       -----
                   Granted                            128,000                       $0.87
                   Forfeited                           (6,000)                      $1.16
                                                     --------                       -----

          Balance at December 1999                    388,000                       $1.44
                                                     ========                       =====
</TABLE>


          At December 31, 1999 and 1998, the number of options exercisable under
      the Plan was 72,450 and 53,900, respectively, and the weighted-average
      exercise price of these options was $1.65 and $1.57, respectively.


                                      F-13

<PAGE>   43
                     CHAMPION COMMUNICATION SERVICES, INC.
                         NOTES TO FINANCIAL STATEMENTS


(7)   401(k) Plan

          In January 1996, the Company adopted a 401(k) Plan (the "401(k) Plan")
      under which all employees of the Company who have completed three months
      of service are eligible to participate. Participants may elect to defer
      the receipt of up to 15% of their annual compensation (up to a maximum
      dollar amount established in accordance with Section 401(k) of the
      Internal Revenue Code) and have such deferred amounts contributed to the
      401(k) Plan. The Company may, in its discretion, make matching
      contributions to the extent it deems appropriate. The Board of Directors
      at the February 9, 2000 Board meeting elected to match 1999 contributions
      by 50%.


(8)   Statement of Cash Flows

            During 1999 and 1998, the Company received a $400,000 and an
      $100,000 note receivable, respectively, for the sale of certain
      communication equipment and licenses. The 1999 note receivable is due on
      March 1, 2003 and the 1998 note receivable matured on November 1, 1999.
      The 1999 note receivable bears interest at the rate of 10% per annum
      payable in forty-eight monthly instalments of $5,286 and a last payment of
      $285,333.


(9)   Commitments and Contingencies

          At December 31, 1999 the Company has commitments under noncancellable
      operating lease agreements primarily for the rental of office space.
      Future minimum rental payments due under the leases are:

<TABLE>

<S>                                                 <C>
                     2000                           $149,165
                     2001                            117,320
                     2002                             94,325
                                                    --------
                                                    $360,810
                                                    ========
</TABLE>

          During the year ended December 31, 1999 and 1998, the Company incurred
      $163,281 and $144,148 in rental expense, respectively.

          The Company has executed a contract to sell the assets located in
      Arizona with a net book value of approximately $300,000, which, if
      approved by the FCC, will result in a capital gain of approximately
      $600,000.

(10)  Major Suppliers

          The Company has entered into reseller agreements with two principal
      communication equipment suppliers. Both dealer agreements may be
      terminated at any time by the suppliers or the Company without cost.
      Termination of either of these agreements would have a materially adverse
      effect on the Company.



                                      F-14

<PAGE>   44

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>

EXHIBIT                                                                          INCORPORATED BY
NUMBER                           DESCRIPTION                                       REFERENCE TO
-------                          -----------                                     ---------------
<S>           <C>                                                <C>
3.1           Certificate of Incorporation filed September       Exhibit 3.1 to the Registration Statement on
              29, 1994.                                          Form 10-SB effective February 13, 1997
                                                                 (File No. 0-29032)

3.2           Certificate of Amendment to Certificate of         Exhibit 3.2 to the Registration Statement on
              Incorporation filed January 26, 1996.              Form 10-SB effective February 13, 1997
                                                                 (File No. 0-29032)

3.3           Certificate of Amendment to Certificate of         Exhibit 3.3 to the Registration Statement on
              Incorporation filed April 23, 1996.                Form 10-SB effective February 13, 1997
                                                                 (File No. 0-29032)

3.4           By-laws dated September 29, 1994.                  Exhibit 3.4 to the Registration Statement on
                                                                 Form 10-SB effective February 13, 1997
                                                                 (File No. 0-29032)

4.1           Specimen Common Stock share certificate.           Exhibit 4.1 to the Registration Statement on
                                                                 Form 10-SB effective February 13, 1997
                                                                 (File No. 0-29032)

4.2           Pages from Certificate of Incorporation and        Exhibit 4.2 to the Registration Statement on
              By-laws defining rights of stockholders -          Form 10-SB effective February 13, 1997
              included in Exhibits 3.1, 3.2, 3.3 and 3.4.        (File No. 0-29032)

10.1          [omitted]                                          [omitted]

10.2          [omitted]                                          [omitted]

10.3          [omitted]                                          [omitted]

10.4          [omitted]                                          [omitted]

10.5          [omitted]                                          [omitted]

10.6          [omitted]                                          [omitted]

10.7          [omitted]                                          [omitted]

10.8          [omitted]                                          [omitted]

10.9          [omitted                                           [omitted]

10.10         [omitted]                                          [omitted]

10.11         [omitted]                                          [omitted]

10.12         [omitted]                                          [omitted]
</TABLE>



<PAGE>   45

<TABLE>
<CAPTION>

EXHIBIT                                                                          INCORPORATED BY
NUMBER                           DESCRIPTION                                       REFERENCE TO
-------                          -----------                                     ---------------
<S>           <C>                                                <C>
10.13         Radius Communication Products Reseller             Exhibit 10.13 to the Registration Statement on
              Agreement dated September 22, 1994, between        Form 10-SB effective February 13, 1997
              Motorola, Inc. and the Company; Amendment          (File No. 0-29032)
              to Reseller Agreement dated September 22,
              1994; and Master Amendment No. 1 dated
              September 30, 1996.

10.14         Motorola Authorized Two-Way Radio Dealer           Exhibit 10.14 to the Registration Statement on
              Agreement dated September 22, 1994, between        Form 10-SB effective February 13, 1997
              Motorola, Inc. and the Company; Paging             (File No. 0-29032)
              Product Sales to the United States Government
              Amendment dated on or about January 10,
              1996; Amendment dated on or about February
              13, 1996; and Per Unit Administrative
              Processing Charge Amendment dated
              September 30, 1996.

10.15         Motorola Master Radio Service Software             Exhibit 10.15 to the Registration Statement on
              License Agreement dated November 8, 1994,          Form 10-SB effective February 13, 1997
              between Motorola, Inc. and the Company.            (File No. 0-29032)

10.16         Master Dealer Agreement Land Mobile Radio          Exhibit 10.16 to the Registration Statement on
              Products, undated, between Kenwood                 Form 10-SB effective February 13, 1997
              Communications Corporation and the                 (File No. 0-29032)
              Company; Product Addendum dated February
              5, 1996; and Product Addendum, undated.

10.17         [omitted]                                          [omitted]

10.18         [omitted]                                          [omitted]

10.19         [omitted]                                          [omitted]

10.20         [omitted]                                          [omitted]

10.21         Antenna Site License commencing November           Exhibit 10.21 to the Registration Statement on
              1, 1995, for a term of 36 months, between          Form 10-SB effective February 13, 1997
              Motorola, Inc. and the Company.                    (File No. 0-29032)
              (CONFIDENTIAL)

10.22         Antenna Site License commencing November           Exhibit 10.22 to the Registration Statement on
              1, 1995, for a term of 36 months, between          Form 10-SB effective February 13, 1997
              Motorola, Inc. and the Company.                    (File No. 0-29032)
              (CONFIDENTIAL)

10.23         [omitted]                                          [omitted]

10.24         [omitted]                                          [omitted]

10.25         [omitted]                                          [omitted]

10.26         [omitted]                                          [omitted]
</TABLE>



<PAGE>   46
<TABLE>
<CAPTION>

EXHIBIT                                                                          INCORPORATED BY
NUMBER                           DESCRIPTION                                       REFERENCE TO
-------                          -----------                                     ---------------
<S>           <C>                                                <C>
10.27         Form of Indemnification Agreement between          Exhibit 10.27 to the Registration Statement on
              officers and director of the Company and the       Form 10-SB effective February 13, 1997
              Company.                                           (File No. 0-29032)

10.28         Escrow Agreement dated July 29, 1996               Exhibit 10.28 to the Registration Statement on
              between Albert F. Richmond, David A.               Form 10-SB effective February 13, 1997
              Terman, Equity Transfer Services, Inc. and the     (File No. 0-29032)
              Company.

10.29         [omitted]                                          [omitted]

10.30         Lease Agreement dated January 1, 2000,
              between Woodlands office Equities 95
              Limited and the Company.

24.1          Power of Attorney                                  N/A

27.1          Financial Data Schedule.
</TABLE>