<PAGE>

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

                                 FORM 10-K/A
                                Amendment No. 1

(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
    of 1934.

                     For the year ended December 31, 2000

                                      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 ( 000-25865 )

                        Copper Mountain Networks, Inc.
            (Exact name of registrant as specified in its charter)

          Delaware                                             33-0702004
(State or other jurisdiction of                            (I.R.S.  Employer
 incorporation or organization)                            Identification No.)


               1850 Embarcadero Way, Palo Alto, California 94303
                                (650) 687-3300
 (Address, including zip code, and telephone number, including area code, of
                         principal executive offices)

          Securities registered pursuant to Section 12(b) of the Act:
                                     None

          Securities registered pursuant to Section 12(g) of the Act:
                         Common Stock, $.001 par value

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

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

     The aggregate market value of the voting stock held by non-affiliates of
the registrant, as of January 31, 2001 was approximately $435,419,000 (based on
the closing price for shares of the registrant's Common Stock as reported by the
Nasdaq National Market for the last trading day prior to that date). Shares of
Common Stock held by each officer, director and holder of 5% or more of the
outstanding Common Stock have been excluded in that such persons may be deemed
affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.

The number of shares outstanding of the registrant's Common Stock, $.001 par
value, as of February 28, 2001 was 52,653,768.
<PAGE>


                               Explanatory Note


     This amendment No. 1 on Form 10-K/A amends Item 7A and Item 14 of the
Registrant's Annual Report on Form 10-K for the year ended December 31, 2000
filed with the Securities and Exchange Commission on March 7, 2001.

<PAGE>

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

      We are exposed to changes in interest rates primarily from our long-term
debt arrangements and our investments in certain held-to-maturity securities.
Under our current policies, we do not use interest rate derivative instruments
to manage exposure to interest rate changes. A hypothetical 100 basis point
adverse move in interest rates along the entire interest rate yield curve, which
represents the Company's expectation for a reasonably possible near-term change
in such rates, would not materially affect the fair value of interest sensitive
financial instruments at December 31, 2000.

     At December 31, 2000, the Company held an investment in commercial paper
issued by Southern California Edison Company. The investment is included in
short-term marketable investments at a carrying value of approximately $3.4
million which matured in February 2001 and is currently in default. Management
believes that the fair value of this investment has declined since the balance
sheet date,

                                      41
<PAGE>

however, the ultimate amount of the decline and the net realizable value of this
investment is not currently practicably determinable.

                                      42
<PAGE>

                                     PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

<TABLE>
<CAPTION>
                                                                                  Page
                                                                                 Number
                                                                                 ------
          <S>                                                                    <C>
          (a)  Documents filed as part of the report:
               (1)       Report of Ernst & Young LLP,  Independent Auditors        F-1
                         Balance Sheets at December 31, 2000 and 1999              F-2
                         Statements of Operations for 2000, 1999 and 1998          F-3
                         Statements of Stockholders' Equity for 2000, 1999 and
                         1998                                                      F-4
                         Statements of Cash Flows for 2000, 1999 and 1998          F-6
                         Notes to Financial Statements                             F-7
                         Schedule II Valuation and Qualifying Accounts            II-1
</TABLE>

          All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable and therefore have been
omitted.

               (2)   Exhibits

Exhibit
Number                              Description of Document
------                              -----------------------
  2.1        Agreement and Plan of Merger and Reorganization among the Company,
             Copper Mountain Acquisition Corp. and OnPREM Networks Corporation
             dated January 25, 2000.(4)

  3.1        Bylaws of the Company.(1)

  3.2        Amended and Restated Certificate of Incorporation of the
             Company.(1) (6)

  4.1        Reference is made to Exhibits 3.1 and 3.2.

  4.2        Specimen Stock Certificate.(1)

 10.1        Amended and Restated 1996 Equity Incentive Plan (the
             1996 Plan").(6)

 10.2        Form of Stock Option Agreement pursuant to the 1996 Plan.(1)

 10.3        1999 Employee Stock Purchase Plan and related offering
             documents.(1)

 10.4        Employment Agreement between the Company and Steve Hunt, dated July
             31, 1996.(1)

 10.5        Employment Agreement between the Company and Richard Gilbert, dated
             March 22, 1998.(1)

 10.6        Master Equipment Lease between the Company and Comdisco, Inc.,
             dated September 30, 1997.(1)

 10.7        Loan and Security Agreement between the Company and Silicon Valley
             Bank, dated August 14, 1998.(1)

 10.8        Loan and Security Agreement between the Company and Silicon Valley
             Bank and MMC/GATX Partnership No. 1, dated October 4, 1996.(1)

 10.9        Office Lease between the Company and Public Storage Properties
             XVIII, Inc., dated June 14, 1996.(1)

 10.10       Office Lease between the Company and R.G. Harris & Company, dated
             August 12, 1997.(1)

 10.11       Office Sublease between the Company and Stuart Leeb and Associates,
             dated May 1, 1998.(1)

 10.12       Office Lease between the Company and Palomar Enterprises, Inc.,
             dated July 20, 1998.(1)

 10.13       Warrant Agreement between the Company and MMC/GATX Partnership No.
             1, dated October 4, 1996.(1)

 10.14       Warrant Agreement between the Company and Silicon Valley Bank,
             dated October 4, 1996.(1)

 10.15       Warrant Agreement between the Company and Intel Corporation, dated
             January 14, 1997.(1)

                                      43
<PAGE>

Exhibit
Number                              Description of Document
------                              -----------------------

+10.16       General Agreement for the Procurement of Products and Services and
             the Licensing of Software between the Company and Lucent
             Technologies Inc., dated November 17, 1998.(1)

+10.17       OEM Purchase and Development Agreement between the Company an 3COM
             Corporation, dated November 24, 1998.(1)

+10.18       Development, Manufacturing and Supply Agreement between the Company
             and Netopia, Inc., dated May 19, 1998.(1)

10.19        1999 Non-Employee Directors' Stock Option Plan.(1)

10.20        Form of Nonqualified Stock Option for use with 1999 Non-Employee
             Directors' Stock Option Plan.(1)

10.21        Form of Indemnification Agreement(1)

+10.22       Equipment Purchase Agreement between the Company and NorthPoint
             Communications, Inc. dated April 8, 1999.(1)

+10.23       Standard Full Service Gross Office Lease among the Company, Pacific
             Sorrento Mesa Holdings, L.P., and Pacific Stonecrest Holdings,
             L.P., dated March 31, 1999.(1)

+10.24       Equipment Purchase Agreement between the Company and NorthPoint
             Communications, Inc. dated July 21, 1999.(2)

+10.25       Equipment Purchase Agreement between the Company and Rhythms
             NetConnections, Inc. dated December 10, 1999.(3)

10.26        Software License Agreement between the Company and Rhythms
             NetConnections, Inc. dated December 10, 1999.(3)

+10.27       Customer Technical Support Services Agreement between the Company
             and Rhythms NetConnections, Inc. dated December 10, 1999.(3)

10.28        Employment Agreement between the Company and Joseph D. Markee,
             dated March 12, 1999.(1)

10.29        OnPREM Networks Corporation 1998 Stock Option Plan(3).

10.30        Form of Stock Option Agreement pursuant to the OnPREM Networks
             Corporation 1998 Stock Option Plan.(3)

10.31        Employment Agreement between the Company and Wilson O. Cochran, II,
             dated February 29, 2000.(5)

10.32        Non-Competition Agreement between the Company and Wilson O.
             Cochran, II, dated February 29, 2000.(5)

10.33        2000 Nonstatutory Stock Option Plan.(7)

10.34        Form of Stock Option Agreement and Form of Stock Option Grant
             Notice used in connection with the 2000 Nonstatutory Stock Option
             Plan.(7)

23.1         Consent of Ernst & Young LLP, Independent Auditors.*

24.1         Power of Attorney. Reference is made to page 47 of the Registrant's
             Annual Report on Form 10-K for the year ended December 31, 2000
             filed with the Securities and Exchange Commission on March 7, 2001.

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

     (1)     Filed as an exhibit to the Registrant's Registration Statement on
             Form S-1 filed with the Securities and Exchange Commission (the
             "Commission") on March 1, 1999 (File No. 333-73153), as amended by
             Amendment No. 1 filed with the Commission on April 13, 1999,
             Amendment No. 2 filed with the Commission on April 26, 1999, and
             Amendment No. 3 filed with the Commission on May 11, 1999.

     (2)     Filed as an exhibit to the Registrant's Quarterly Report on Form
             10-Q for the quarter ended September 30, 1999.

     (3)     Filed as an exhibit to the Registrant's Annual Report on Form 10-K
             for the year ended December 31, 1999.

     (4)     Filed as an exhibit to the Registrant's Current Report on Form 8-K
             filed with the Commission on March 15, 2000.

     (5)     Filed as an exhibit to the Registration Statement on Form S-1 filed
             with the Commission on March 20, 2000 (File No. 333-32846), as
             amended by Amendment No. 1 filed with the Commission on

                                      44
<PAGE>

          April 27, 2000 and Amendment No. 2 filed with the Commission on April
          28, 2000, and amended post-effectively on June 8, 2000 to convert to a
          Registration Statement on Form S-3.

     (6)  Filed as an exhibit to the Registrant's Notice of Annual Meeting and
          Definitive Proxy Statement for the 2000 Annual Meeting of Stockholders
          filed with the Commission on April 10, 2000.

     (7)  Filed as an exhibit to the Registrant's Registration Statement on Form
          S-8 filed with the Commission on June 7, 2000 (File No. 333-38798).

     *    Filed Herewith

     +    Confidential treatment has been granted with respect to certain
          portions of this exhibit. Omitted portions have been filed separately
          with the Securities and Exchange Commission.


                                      45
<PAGE>

                                  SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Date:    April 25, 2001


                                               Copper Mountain Networks, Inc.

                                               By: /s/ RICHARD S. GILBERT
                                                   ----------------------
                                                   Richard S.  Gilbert
                                                   President, Chief Executive
                                                   Officer and Chairman of the
                                                   Board

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

<TABLE>
<CAPTION>
              Signature                                       Title                         Date
              ---------                                       -----                         ----
<S>                                                  <C>                                <C>
/s/ RICHARD S.  GILBERT                             President, Chief Executive          April 25, 2001
--------------------------------------------
Richard S.  Gilbert                                 Officer and Chairman of the
                                                    Board (Principal Executive
                                                    Officer)

/s/ Michael O. Staiger                              Chief Financial Officer and         April 25, 2001
--------------------------------------------        Secretary (Principal Financial
                                                    Officer and Principal
Michael O. Staiger                                  Accounting Officer)



/s/                *                                Director                            April 25, 2001
--------------------------------------------
Joseph D. Markee

/s/                *                                Director                            April 25, 2001
--------------------------------------------
Robert L.  Bailey

/s/                *                                Director                            April 25, 2001
--------------------------------------------
Tench Coxe

/s/                *                                Director                            April 25, 2001
--------------------------------------------
Roger Evans

/s/                *                                Director                            April 25, 2001
--------------------------------------------
Richard H.  Kimball

/s/                *                                Director                            April 25, 2001
--------------------------------------------
Raymond V.  Thomas

/s/                *                                Director                            April 25, 2001
--------------------------------------------
Andrew W.  Verhalen

*By /s/ Richard S. Gilbert
   -----------------------------------------
  Richard S. Gilbert
</TABLE>

<PAGE>

               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Copper Mountain Networks, Inc.

We have audited the accompanying balance sheets of Copper Mountain Networks,
Inc. as of December 31, 2000 and 1999, and the related statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 2000. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Copper Mountain Networks, Inc.
at December 31, 2000 and 1999, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2000, in
conformity with accounting principles generally accepted in the United States.



                                                           ERNST & YOUNG LLP

San Diego, California
January 30, 2001

                                      F-1
<PAGE>

                        COPPER MOUNTAIN NETWORKS, INC.

                                BALANCE SHEETS
                     (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                             December 31,
                                                                       2000                1999
                                                                  -------------       -------------
ASSETS
------
<S>                                                               <C>                 <C>
Current assets:
 Cash and cash equivalents                                        $      65,838       $      25,405
 Short-term marketable investments                                       96,778              91,764
 Accounts receivable, net                                                19,496              18,992
 Inventory                                                               26,405              12,801
 Other current assets                                                     7,961               1,530
                                                                  -------------       -------------
Total current assets                                                    216,478             150,492
Marketable investments                                                    6,161               5,139
Property and equipment, net                                              24,961               8,825
Other assets                                                             11,126               1,319
Purchased intangibles                                                    46,159                 ---
                                                                  -------------       -------------
Total assets                                                      $     304,885       $     165,775
                                                                  =============       =============

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
 Accounts payable                                                 $      23,963       $       7,887
 Adverse purchase commitment                                             28,600                ----
 Accrued liabilities                                                     17,351               8,800
 Current portion of obligations under capital leases
   and equipment notes payable                                            3,177               1,618
                                                                  -------------       -------------
Total current liabilities                                                73,091              18,305
Obligations under capital leases and equipment
  notes payable, less current portion                                     6,654               4,044
Other accrued                                                               314                 105
Stockholders' equity:
  Preferred stock, $.001 par value, 5,000 shares authorized,
   none issued and outstanding                                             ----                ----
  Common stock, $.001 par value, 100,000 shares
   authorized, 52,053 and 47,662 shares issued and
   outstanding at December 31, 2000 and 1999,
   respectively                                                              52                  48
  Additional paid in capital                                            236,675             159,149
  Deferred compensation                                                  (2,283)             (4,565)
  Accumulated deficit                                                    (9,618)            (11,311)
                                                                  --------------      -------------
Total stockholders' equity                                              224,826             143,321
                                                                  -------------       -------------
Total liabilities and stockholders' equity                        $     304,885       $     165,775
                                                                  =============       =============
</TABLE>

                See accompanying notes to financial statements

                                      F-2
<PAGE>

aaAGE>

                        COPPER MOUNTAIN NETWORKS, INC.

                           STATEMENTS OF OPERATIONS
                     (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                            Year Ended
                                                                            December 31,
                                                         ----------------------------------------------------
                                                               2000              1999               1998
                                                         ---------------   ---------------    ---------------
<S>                                                      <C>               <C>                <C>
   Net revenue                                            $     281,576     $     112,723      $      21,821
   Cost of revenue                                              165,128            53,002             12,400
                                                          -------------     -------------      -------------
     Gross margin                                               116,448            59,721              9,421
   Operating expenses:
     Research and development                                    37,494            15,523              7,225
     Sales and marketing                                         34,868            16,158              5,363
     General and administrative                                  21,823             5,998              3,428
     Amortization of purchased intangibles                       17,753              ----               ----
     Amortization of deferred stock compensation*                 3,664             5,431              3,929
     Write-off of in-process research and development             6,300              ----               ----
                                                          -------------     -------------      -------------
         Total operating expenses                               121,902            43,110             19,945
                                                          -------------     -------------      -------------

   Income (loss) from operations                                 (5,454)           16,611            (10,524)

   Other income (expense):
        Interest and other income                                 9,618             4,385                406
        Interest expense                                           (611)             (289)              (213)
                                                          -------------     -------------      --------------
   Income (loss) before income taxes                              3,553            20,707            (10,331)
   Provision for income taxes                                     1,860             8,490               ----
                                                          -------------     -------------      -------------
   Net income (loss)                                      $       1,693     $      12,217      $     (10,331)
                                                          =============     =============      =============


   Basic net income (loss) per share                      $        0.03     $        0.39      $       (3.87)
                                                          =============     =============      =============

   Diluted net income (loss) per share                    $        0.03     $        0.23      $       (3.87)
                                                          =============     =============      =============


   Basic common equivalent shares                                50,584            31,289              2,666
                                                          =============     =============      =============

   Diluted common equivalent shares                              58,217            52,282              2,666
                                                          =============     =============      =============
</TABLE>

* The following table shows how the Company's amortization of deferred stock
compensation would be allocated to cost of revenue and the respective expense
categories:

<TABLE>
<S>                                                            <C>                <C>                <C>
Cost of revenue                                                 $   163           $   432            $   153
Research and development                                          1,284             1,257              1,013
Sales and marketing                                                 611             1,639              1,290
General and administrative                                        1,606             2,103              1,473
                                                                -------           -------            -------
                                                                $ 3,664           $ 5,431            $ 3,929
</TABLE>

                See accompanying notes to financial statements

                                      F-3
<PAGE>

                        COPPER MOUNTAIN NETWORKS, INC.
                      STATEMENTS OF STOCKHOLDERS' EQUITY
                     (in thousands, except per share data)

<TABLE>
<CAPTION>


                                                         Preferred Stock              Common Stock           Notes
                                                         ---------------              ------------         Receivable
                                                     Number of                   Number of                    From
                                                      Shares        Amount        Shares       Amount      Stockholders
                                                   -----------   -------------  -----------  -----------   ------------
<S>                                                <C>           <C>            <C>          <C>           <C>
Balance at December 31, 1997                             6,997    $     20,425        4,461   $        4    $       (69)
Exercise of options to purchase common stock              ----            ----        1,030            1           ----
Stock grants for consulting services                      ----            ----           19         ----           ----
Deferred compensation related to the grant of
   stock options                                          ----            ----         ----         ----           ----
Amortization related to deferred stock
   Compensation                                           ----            ----         ----         ----           ----
Stock forfeited by employee                               ----            ----         (476)        ----             16
Repayment of note receivable from stockholder             ----            ----         ----         ----             12
Issuance of Series C convertible preferred
   stock warrants in connection with a
   financing agreement                                    ----            ----         ----         ----           ----
Issuance of Series D convertible preferred
   stock at $7.75 per share for cash, net                3,226          24,077         ----         ----           ----
Net loss                                                  ----            ----         ----         ----           ----
                                                    ----------    ------------   ----------   -----------   -----------
Balance at December 31, 1998                            10,223          44,502        5,034            5            (41)
Conversion of preferred to common stock                (10,223)        (44,502)      30,670           31           ----
Issuance of common stock, net                             ----            ----        9,200            9           ----
Stock grants for consulting services                      ----            ----            1         ----           ----
Repayment of notes receivable from
   Stockholders                                           ----            ----         ----         ----             41
Deferred compensation related to the grant of
   stock options                                          ----            ----         ----         ----           ----
Amortization related to deferred stock
   compensation                                           ----            ----         ----         ----           ----
Net exercise of warrant to purchase common
   Stock                                                  ----            ----          235         ----           ----
Tax benefit from the exercise of stock options            ----            ----         ----         ----           ----
Exercise of options to purchase common stock              ----            ----        2,522            3           ----
Net income                                                ----            ----         ----         ----           ----
                                                    ----------    ------------   ----------   ----------    -----------

Balance at December 31, 1999                              ----   $        ----       47,662   $       48    $      ----
                                                    ==========   =============   ==========   ==========    ===========

<CAPTION>
                                                      Additional                                        Total
                                                       Paid in         Deferred       Accumulated    Stockholders'
                                                       Capital       Compensation       Deficit         Equity
                                                    --------------   ------------   --------------   -------------
<S>                                                 <C>              <C>            <C>              <C>
Balance at December 31, 1997                         $       4,469    $    (2,563)   $     (13,197)   $    9,069
Exercise of options to purchase common stock                    60           ----             ----            61
Stock grants for consulting services                             5           ----             ----             5
Deferred compensation related to the grant of
   stock options                                            11,128        (11,128)            ----          ----
Amortization related to deferred stock
   Compensation                                               ----          3,929             ----         3,929
Stock forfeited by employee                                    (16)          ----             ----          ----
Repayment of note receivable from stockholder                 ----           ----             ----            12
Issuance of Series C convertible preferred
   stock warrants in connection with a
   financing agreement                                          21           ----             ----            21
Issuance of Series D convertible preferred
   stock at $7.75 per share for cash, net                     ----           ----             ----        24,077
Net loss                                                      ----           ----          (10,331)      (10,331)
                                                     -------------   ------------    --------------   ------------
Balance at December 31, 1998                                15,667         (9,762)         (23,528)       26,843
Conversion of preferred to common stock                     44,471           ----             ----          ----
Issuance of common stock, net                               88,664           ----             ----        88,673
Stock grants for consulting services                             7           ----             ----             7
Repayment of notes receivable from
   Stockholders                                               ----           ----             ----            41
Deferred compensation related to the grant of
   stock options                                               234           (234)            ----          ----
Amortization related to deferred stock
   compensation                                               ----          5,431             ----         5,431
Net exercise of warrant to purchase common
   Stock                                                      ----           ----             ----          ----
Tax benefit from the exercise of stock options               9,389           ----             ----         9,389
Exercise of options to purchase common stock                   717           ----             ----           720
Net income                                                    ----           ----           12,217        12,217
                                                     -------------   ------------    -------------    ----------

Balance at December 31, 1999                         $     159,149   $     (4,565)   $     (11,311)   $  143,321
                                                     =============   ============    =============    ==========
</TABLE>

                                      F-4
<PAGE>

                        COPPER MOUNTAIN NETWORKS, INC.
                  STATEMENTS OF STOCKHOLDERS' EQUITY (CON'T)
                     (in thousands, except per share data)


<TABLE>
<CAPTION>

                                                Preferred   Stock             Common  Stock            Notes
                                            ---------------------------   -----------------------    Receivable     Additional
                                              Number of                    Number of                    from         Paid in
                                               Shares         Amount        Shares       Amount     Stockholders      Capital
                                            -----------    ------------   ----------   ----------   ------------   -------------
<S>                                         <C>            <C>            <C>          <C>          <C>            <C>
Common stock issued for acquisition of
   OnPREM                                          ----    $       ----        1,142   $         1   $      ----   $      70,158
Deferred compensation related to the
acquisition
    of OnPREM                                      ----            ----         ----          ----          ----            ----
Amortization related to deferred stock
    compensation                                   ----            ----         ----          ----          ----            ----
Common stock issued under Employee
  Stock Purchase Plan                              ----            ----          143          ----          ----           1,429
Exercise of options to purchase common
stock                                              ----            ----        3,106             3          ----           5,939
Net income                                         ----            ----         ----          ----          ----            ----
                                             ----------    ------------   ----------   -----------   -----------   -------------

Balance at December 31, 2000                       ----    $       ----       52,053   $        52   $      ----   $     236,675
                                             ==========    ============   ==========   ===========   ===========   =============


<CAPTION>
                                                                                  Total
                                                Deferred       Accumulated    Stockholders'
                                              Compensation        Deficit       Equity
                                              ------------   --------------   -----------
<S>                                          <C>             <C>              <C>
Common stock issued for acquisition of
   OnPREM                                    $        ----   $         ----   $      70,159
Deferred compensation related to the
acquisition
    of OnPREM                                       (1,382)            ----          (1,382)
Amortization related to deferred stock
    compensation                                     3,664             ----           3,664
Common stock issued under Employee
  Stock Purchase Plan                                 ----             ----           1,429
Exercise of options to purchase common
stock                                                 ----             ----           5,942
Net income                                            ----            1,693           1,693
                                             -------------    -------------    ------------

Balance at December 31, 2000                 $      (2,283)   $      (9,618)   $    224,826
                                             =============    =============    ============
</TABLE>


                 See accompanying notes to financial statements

                                      F-5
<PAGE>

                        COPPER MOUNTAIN NETWORKS, INC.
                           STATEMENTS OF CASH FLOWS
                                (in thousands)

<TABLE>
<CAPTION>
                                                                                      Year Ended
                                                                                     December 31,
                                                              --------------------------------------------------------
                                                                   2000                   1999               1998
                                                              ---------------       --------------      --------------
<S>                                                           <C>                   <C>                 <C>
Cash flows from operating activities:
  Net income (loss)                                           $         1,693       $      12,217       $      (10,331)
  Adjustments to reconcile net income (loss)
     to net cash provided by (used in) operating activities:
       Depreciation and amortization                                   25,158               3,089                1,231
       Non-cash compensation                                            3,664               5,438                3,934
       Write-off of in-process research and development                 6,300                ----                 ----
       Loss on disposal of equipment                                     ----                 193                 ----
       Tax benefit from the sale of stock options                        ----               9,389                 ----
       Changes in operating assets and liabilities:
          Accounts receivable                                            (504)            (10,966)              (7,843)
          Inventory                                                   (13,604)             (8,133)              (4,285)
          Other current assets and other assets                       (14,710)             (1,095)              (1,469)
          Accounts payable and accrued liabilities                     49,244              10,174                4,435
                                                              ---------------       -------------       --------------

Net cash provided by (used in) operating activities                    57,241              20,306              (14,328)
                                                              ---------------       -------------       --------------

Cash flows from investing activities:
  Purchases of marketable investments                                 (97,800)           (113,416)             (11,140)
  Maturities of  marketable investments                                91,764              27,411                  242
  Purchases of property and equipment                                 (17,143)             (6,572)              (1,171)
  Cash received in the purchase of OnPREM                                 844                ----                 ----
                                                              ---------------       -------------       --------------

Net cash used in investing activities                                 (22,335)            (92,577)             (12,069)
                                                              ---------------       --------------      --------------

Cash flows from financing activities:
  Proceeds from issuance of equipment notes payable                      ----               2,464                  921
  Payments on capital lease obligations                                (1,170)               (429)                (293)
  Payments on equipment notes payable                                    (674)             (1,424)                (267)
  Proceeds from issuance of preferred stock                              ----                ----               24,077
  Repayment of shareholders notes receivable                             ----                  41                 ----
  Proceeds from issuance of common stock                                7,371              89,393                   73
                                                              ---------------       -------------       --------------

Net cash provided by financing activities                               5,527              90,045               24,511
                                                              ---------------       -------------       --------------

Net increase (decrease) in cash and cash equivalents                   40,433              17,774               (1,886)

Cash and cash equivalents at beginning of year                         25,405               7,631                9,517
                                                              ---------------       -------------       --------------

Cash and cash equivalents at end of year                      $        65,838       $      25,405       $        7,631
                                                              ===============       =============       ==============

Supplemental information:
  Interest paid                                               $           611       $         289       $          150
                                                              ===============       =============       ==============
  Common stock issued for acquisition of OnPREM               $        70,159       $        ----       $         ----
                                                              ===============       =============       ==============
  Equipment acquired under capital lease obligations and
     notes                                                    $         6,013       $       2,303       $        1,307
                                                              ===============       =============       ==============
  Stock forfeited for notes receivable                        $          ----       $        ----       $          (16)
                                                              ===============       =============       ==============
  Issuance of convertible preferred stock warrants            $          ----       $        ----       $           21
                                                              ===============       =============       ==============
  Issuance of stock for consulting services                   $          ----       $           7       $            5
                                                              ===============       =============       ==============
</TABLE>

                See accompanying notes to financial statements

                                      F-6
<PAGE>

                        COPPER MOUNTAIN NETWORKS, INC.

                         NOTES TO FINANCIAL STATEMENTS


1.   Organization and Summary of Significant Accounting Policies


Organization and Business Activity

     Copper Mountain Networks, Inc. (the "Company" or "Copper Mountain"), a
Delaware corporation, is a supplier of high-speed DSL-based communication
solutions for the broadband access market. The Company's solutions enable
telecommunication service providers to provide high-speed, cost-effective
connectivity over the existing copper wire infrastructure to the business,
multiple tenant unit and residential markets.

     The Company operates in one business segment, developing, marketing and
supporting advanced communications products which enable high-speed data access
to business, multi-tenant unit and residential users. The markets for high-speed
data access products are characterized by rapid technological developments,
frequent new product introductions, changes in end user requirements and
evolving industry standards. The Company's future success will depend on its
ability to develop, introduce and market enhancements to its existing products,
to introduce new products in a timely manner which meet customer requirements
and to respond to competitive pressures and technological advances. Further, the
emergence of new industry standards, whether through adoption by official
standards committees or widespread use by telephone companies or other
telecommunications service providers, could require the Company to redesign its
products.

Basis of Presentation

     The accompanying financial statements include the accounts of the Company
and its branch offices in Singapore and in the Netherlands. Activities performed
by the branches are a direct and integral extension of the Company's primary
business and are accounted for within the Company's corporate records without
consolidation. Accordingly, no foreign currency translation is reflected in the
accompanying financial statements as management considers the functional
currency of each branch to be that of the United States dollar.

Management Estimates and Assumptions

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and reported amounts of revenues and expenses
during the reporting period. Examples include provisions for returns, bad debts,
excess inventory and adverse purchase commitments; the ultimate realizability of
investments and intangible assets and the ultimate outcome of litigation. Actual
results could differ from those estimates.

Cash and Cash Equivalents

     Cash and cash equivalents consist of cash, money market funds, and other
highly liquid investments with maturities of three months or less when
purchased. The carrying value of these instruments approximates fair value. The
Company generally invests its excess cash in debt instruments of the U.S.
Treasury, government agencies and corporations with strong credit ratings. Such
investments are made in accordance with the Company's investment policy, which
establishes guidelines relative to diversification and maturities designed to
maintain safety and liquidity. These guidelines are periodically reviewed and
modified to take advantage of trends in yields and interest rates. The Company
has not experienced any significant losses on its cash and cash equivalents.

                                      F-7
<PAGE>

Fair Value of Financial Instruments

     The carrying value of cash, cash equivalents, marketable investments,
accounts receivable, accounts payable, accrued liabilities, obligations under
capital leases and notes payable approximates fair value, unless the fair value
is not practicably determinable.

Investments

     At December 31, 2000, the Company held investments in investment grade debt
securities with various maturities through January 2002. Management determines
the appropriate classification of its investments in debt securities at the time
of purchase and reevaluates such designation as of each balance sheet date. The
Company's total investments in these securities as of December 31, 2000 totaled
$157.0 million. The Company has included $54.0 million of these securities in
cash and cash equivalents, as of December 31, 2000, as they have original
maturities of less than 90 days. The remaining debt securities totaling $96.8
million and $6.2 million as of December 31, 2000 have been classified as
short-term and long-term marketable investments, respectively. The Company has
designated all of its investments as held to maturity.

     At December 31, 2000, the Company held an investment in commercial paper
issued by Southern California Edison Company. The investment is included in
short-term marketable investments at a carrying value of approximately $3.4
million which matured in February 2001 and is currently in default. Management
believes that the fair value of this investment has declined since the balance
sheet date, however, the ultimate amount of the decline and the net realizable
value of this investment is not practicably determinable.


Concentration of Credit Risk

     A relatively small number of customers account for a significant percentage
of the Company's revenues. The Company expects that the sale of its products to
a limited number of customers may continue to account for a high percentage of
revenues for the foreseeable future. The Company's revenues for the year ended
December 31, 2000 include sales to four significant customers totaling $62.2
million or 22% of net revenue, $53.5 million or 19% of net revenue, $47.6
million or 17% of net revenue and $27.3 million or 10% of net revenue. The
Company's revenues for the year ended December 31, 1999 include sales to three
significant customers totaling $42.2 million or 37% of net revenue, $32.0
million or 28% of net revenue and $25.4 million or 23% of net revenue. The
Company's revenues for the year ended December 31, 1998 include sales to two
significant customers totaling $13.2 million or 61% of net revenue and $4.0
million or 18% of net revenue.

     The Company performs ongoing credit evaluations of its customers and
generally requires no collateral. The Company had significant accounts
receivable balances due from two customers individually representing 35% and 15%
of total accounts receivable at December 31, 2000.

     In January 2001, Northpoint Communications, Inc. ("Northpoint"), a
significant customer of the Company, filed a petition for Chapter 11 protection
with the U.S. Bankruptcy Court. Net revenue for the year ended December 31, 2000
does not reflect shipments of approximately $9.2 million to Northpoint. The net
impact on the Company's results from operations for the year ended December 31,
2000 was $4.9 million as a result of the insolvency of Northpoint.

     The Company from time to time maintains a substantial portion of its cash
and cash equivalents in money market accounts with one financial institution.
The Company invests its excess cash in debt instruments of the U.S. Treasury,
governmental agencies and corporations with strong credit ratings. The Company
has established guidelines relative to diversification and maturities that
attempt to maintain safety and liquidity. The Company has not realized any
significant losses on its cash equivalents or marketable investments.


Inventory

                                      F-8
<PAGE>

     Inventory is stated at the lower of cost, principally standard costs, which
approximates actual costs on a first-in, first-out basis, or market. During the
fourth quarter of 2000, the Company recorded a charge of $35 million of which
$28.6 million relates to future inventory purchase commitments of finished
products and raw materials in excess of anticipated requirements and $6.4
million relates to excess inventory on hand at December 31, 2000. Reductions in
the value of the inventory are generally due to the discontinuance of certain
products, which is a result of the development and introduction of new products.
In the aggregate, the Company recorded charges to reduce the carrying costs of
inventory totaling $13.3 million, $750,000 and $504,000 for the years ended
December 31, 2000, 1999 and 1998, respectively. All such reductions to inventory
value and losses on purchase commitments for the years ended December 31, 2000,
1999 and 1998 are included in cost of revenues.


Property and Equipment

     Property and equipment is stated at cost and depreciated using the
straight-line method over the estimated useful lives of the assets, ranging from
two to five years, or lease terms, if shorter, for leasehold improvements. For
the years ended December 31, 2000, 1999 and 1998, depreciation expense,
including amortization of property and equipment acquired under capital lease
obligations, was $7.4 million, $3.0 million and $1.2 million, respectively.


Revenue Recognition

     The Company recognizes revenue pursuant to Staff Accounting Bulletin No.
101 "Revenue Recognition in Financial Statements." Accordingly, revenue is
recognized when all four of the following criteria are met: (i) persuasive
evidence that an arrangement exists; (ii) delivery of the products and/or
services has occurred; (iii) the selling price is fixed or determinable and;
(iv) collectibility is reasonably assured. Sales returns are estimated based on
historical experience and management's expectations and are recorded at the time
product revenue is recognized. In addition, the Company leases equipment to
customers under non-cancelable sales-type leases with terms of generally three
to four years.

     Annual service and support arrangements can be purchased by customers for
products no longer under warranty and are generally billed quarterly. Revenue
from service and support arrangements is recognized ratably as services are
performed.

     The Company may extend limited stock rotation, product return and price
protection rights to certain distributors and resellers. The Company may not be
able to estimate product returns if the relationship with the distributor is new
or if there is limited historical basis to determine product returns. Deferred
revenue, which is included in accrued liabilities, represents the margin on
shipments of products to distributors or resellers that will be recognized when
the Company can reasonably estimate product returns, at which time the Company
records the revenue and cost of revenue.


Research and Development Costs

     Costs incurred in connection with research and development are charged to
operations as incurred. Costs of equipment for research and development that
have alternative future uses are capitalized when purchased and depreciated
using the straight-line method over the estimated useful lives of the assets,
ranging from two to five years.


Advertising Costs

     The cost of advertising is expensed as incurred. For the years ended
December 31, 2000, 1999 and 1998, the Company incurred advertising expense of
$4.5 million, $1.2 million and $320,000, respectively.


Software Costs

                                      F-9
<PAGE>

     Software product development costs incurred from the time technological
feasibility is reached until the product is available for general release to
customers are capitalized and reported at the lower of cost or net realizable
value. There have been no such costs capitalized to date as the costs incurred
subsequent to reaching technological feasibility have not been significant.


Impairment of Long-Lived Assets

     The Company assesses potential impairments to its long-lived assets when
there is evidence that events or changes in circumstances have made recovery of
the asset's carrying value unlikely. An impairment loss would be recognized when
the sum of the expected future undiscounted net cash flows is less than the
carrying amount of the asset. Should an impairment exist, the impairment loss
would be measured based on the excess of the carrying amount of the asset over
the asset's fair value. The Company has identified no such impairment losses.
Substantially all of the Company's long-lived assets are located in the United
States.


Warranty Reserves

     The Company provides limited warranties on certain of its products for
periods of up to one year. The Company recognizes warranty reserves when
products are shipped based upon an estimate of total warranty costs, and such
reserves are included in accrued liabilities.


Income Taxes

     Deferred income taxes result primarily from temporary differences between
financial and tax reporting. Deferred tax assets and liabilities are determined
based on the difference between the financial statement bases and the tax bases
of assets and liabilities using enacted tax rates. A valuation allowance is
established to reduce a deferred tax asset to the amount that is expected more
likely than not to be realized.


Stock Based Compensation

     The Company measures compensation expense for its stock-based employee
compensation plans using the intrinsic value method and provides pro forma
disclosures of net income (loss) and net income (loss) per share as if the fair
value method had been applied in measuring compensation expense (See Note 8).

     Deferred compensation for options granted to non-employees has been
determined in accordance with SFAS No. 123 and EITF 96-18 as the fair value of
the consideration received or the fair value of the equity instruments issued,
whichever is more reliably measured. Deferred charges for options granted to
non-employees are periodically remeasured as the underlying options vest.


Comprehensive Income

         The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income," which requires that all
components of comprehensive income, including net income, be reported in the
financial statements in the period in which they are recognized. Comprehensive
income is defined as the change in equity during a period from transactions and
other events and circumstances from non-owner sources. Net income (loss) and
other comprehensive income, including foreign currency translation adjustments
and unrealized gains and losses on investments, shall be reported, net of their
related tax effect, to arrive at comprehensive income (loss). Comprehensive
income (loss) for the years ended December 31, 2000, 1999 and 1998 did not
differ from reported net income (loss).


Net Income (Loss) Per Share

                                      F-10
<PAGE>

     Basic and diluted net income (loss) per share has been computed in
accordance with SFAS No. 128, "Earnings Per Share," using the weighted-average
number of shares of common stock outstanding and common stock equivalents during
the period.


     A reconciliation of shares used in the calculation of basic and diluted net
loss per share attributable to common shareholders is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                           December 31,
                                                                ------------------------------
                                                                  2000       1999       1998
                                                                -------     -------    -------
     <S>                                                        <C>         <C>        <C>
     Weighted average common shares outstanding                  50,584      31,289      2,666
     Dilutive effect of preferred shares                           ----      11,091       ----
     Dilutive effect of stock options                             7,140       8,585       ----
     Dilutive effect of restricted shares                            29         708       ----
     Dilutive effect of warrants                                    464         609       ----
                                                                 ------     -------      -----
     Shares used in computing diluted net income (loss) per
        common share                                             58,217      52,282      2,666
                                                                 ======     =======      =====
</TABLE>

     Dilutive securities include options, warrants, preferred stock as if
converted and restricted stock subject to vesting. Potentially dilutive
securities totaling 1.7 million and 40.9 million for the years ended December
31, 2000 and 1998, respectively, were excluded from basic and diluted earnings
per share because of their anti-dilutive effect.


Recapitalization

     In April 1999, the Company reincorporated as a Delaware corporation. The
authorized shares of the Company were set at 100 million shares of common stock
($.001 par value) and 5 million shares of preferred stock ($.001 par value).
Under the restated certificate, the Company's board of directors has the
authority, without further action by stockholders, to issue up to 5 million
shares of preferred stock in one or more series and to fix the rights,
preferences, privileges, qualifications and restrictions granted to or imposed
upon such preferred stock. The issuance of preferred stock could adversely
affect the voting power of holders of common stock. All common share data in the
accompanying financial statements have been adjusted retroactively to give
effect to the reincorporation.

     In November 1999, the Company's Board of Directors declared a two-for-one
stock split of the Company's common stock in the form of a stock dividend. The
stock dividend was distributed on December 10, 1999 to stockholders of record on
November 24, 1999. All references in the financial statements and notes to
number of shares and per share amounts have been restated to reflect this stock
split.


New Accounting Standards

     In June 1998, the FASB issued SFAS No. 133 ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities," as amended in June 2000 by SFAS
No. 138 ("SFAS 138"), "Accounting for Certain Derivative Instruments and Certain
Hedging Activities," which requires companies to recognize all derivatives as
either assets or liabilities in the balance sheet and measure such instruments
at fair value. As amended by SFAS No. 137 ("SFAS 137"), "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133," the provisions of SFAS 133 will require adoption no
later than the beginning of the Company's fiscal year ending December 31, 2001.
Adoption of SFAS 133, as amended by SFAS 138, is not expected to have a material
impact on the Company's financial statements.

     In March 2000, the FASB issued FASB Interpretation No. 44, "Accounting for
Certain Transactions involving Stock Compensation, an interpretation of APB
Opinion No. 25." The Interpretation requires that stock options that

                                      F-11
<PAGE>

have been modified to effectively reduce the exercise price generally be
accounted for as variable. The Company adopted the Interpretation prospectively
as of July 1, 2000. The adoption of the Interpretation has not had a significant
impact on the Company's financial statements.


Reclassifications

     Certain prior period amounts and balances have been reclassified to conform
with the current period presentation.


2.   Acquisition

     On February 29, 2000, the Company completed its acquisition of
privately-held OnPREM Networks Corporation ("OnPREM") of Fremont, California.
OnPREM is a developer of highly integrated DSL solutions for the small and
medium building Multi-Tenant Unit ("MTU") market. Under the terms of the
agreement, Copper Mountain acquired OnPREM in exchange for the issuance of
approximately 1.1 million shares of Copper Mountain common stock and the
assumption of options outstanding under the OnPREM 1998 Stock Plan.

     The purchase price of the OnPREM acquisition, excluding acquisition costs,
was $70.1 million based on the average closing price of the Company's common
stock for each of the ten consecutive trading days in the period that ended two
days immediately preceding the date of the acquisition agreement. The
acquisition was accounted for as a purchase. On the date of acquisition the
purchase price was allocated as follows (in thousands):

          Goodwill                                 $     61,560
          Existing Technology                             3,100
          Assembled workforce                               700
          In-process research and development             6,300
          Current assets                                  1,000
          Non-current assets                                372
          Current liabilities                              (488)
          Accrued acquisition costs                      (3,700)
          Deferred compensation                           1,286
                                                   ------------
                                                   $     70,130
                                                   ============

     In connection with the acquisition of OnPREM, the Company wrote-off the
purchased in-process research and development of $6.3 million, which was charged
to operations upon completion of the acquisition. The purchased in-process
research and development is solely related to the second version of OnPREM's DSL
concentrator system. The first release of OnPREM's DSL concentrator system was
introduced in March 2000. OnPREM's low-density integrated DSL concentrator
complements the Company's existing line of high-density and mid-density DSL
concentrators to create a complete solution aimed at meeting the needs of multi-
tenant service providers who manage portfolios of buildings of all sizes ranging
from small buildings requiring low-cost, low-density solution, to large
buildings with higher-density and capability requirements. Based on time spent
on the second version of OnPREM's DSL concentrator system and costs incurred,
this project was estimated to be approximately 28% complete as of the
acquisition date. At the date of acquisition, the total cost to complete the
project was estimated to be approximately $233,000, primarily consisting of
engineering salaries and the project was expected to be completed during the
second quarter of 2000. The estimated fair value of the project was estimated
utilizing a discounted cash flow model which was based on estimates of
operating results and capital expenditures for the period from February 29, 2000
to December 31, 2003 and a risk adjusted discount rate of 19%. Since the
acquisition date, the scope of the project has been reconsidered. As of December
31, 2000, the project has not yet been finalized, which has delayed anticipated
revenues and may further reduce or delay anticipated revenues. Anticipated
revenues for the period from February 29, 2000 to December 31, 2000 were not
significant. Since the date of the assessment of the value of the purchased in-
process research and development, there has been a substantial decline in the
overall economic environment that has led many of the Company's customers,
including multi-tenant service providers to delay or reduce capital spending.
The purchased intangibles are being amortized over their estimated useful life
of three years. The estimated useful life of three years was determined based on
an analysis, as of the acquisition date, of conditions in, and the economic
outlook for the high-speed internet access industry and the history, current
state and future operations of OnPREM.

     Subsequent to the acquisition, OnPREM was merged with the Company. OnPREM's
results from operations have been included in the Company's results from
operations since February 29, 2000. If the OnPREM acquisition would have
occurred on January 1, 1999, pro forma financial information would have been as
follows (in thousands, except per share data):


                                                 December 31,
                                       -------------------------------
                                            2000              1999
                                       --------------      -----------
                                                   (Unaudited)
Net revenue                            $   281,576         $ 112,723
Net loss                                    (3,042)          (18,270)
Basic and diluted net loss per share         (0.06)            (0.56)


3.   Completion of Initial Public Offering

     On May 13, 1999, the Company completed its initial public offering for the
sale of 9.2 million shares on a split-adjusted basis of common stock at a price
to the public of $10.50 per share, which resulted in net proceeds to the Company
of $89.8 million after payment of the underwriters' commissions but before
offering expenses. Simultaneously with the closing of the initial public
offering, all of the Company's convertible preferred stock was automatically
converted into an aggregate of 30.7 million shares of common stock.

                                      F-12
<PAGE>

4.    Composition of Certain Balance Sheet Captions

<TABLE>
<CAPTION>

                                                                   December 31,
                                                         ------------------------------
                                                              2000            1999
                                                         -------------     ------------
                                                                  (in thousands)
     <S>                                                 <C>               <C>
     Accounts receivable:
       Trade receivables                                   $    23,426      $    19,132
       Allowance for doubtful accounts                          (3,930)            (140)
                                                           ------------     ------------
                                                           $    19,496      $    18,992
                                                           ===========      ===========

     Inventory:
       Raw materials                                       $    22,635      $     6,003
       Work in process                                           1,529            3,148
       Finished goods                                           14,569            4,478
       Allowance for excess and obsolescence                   (12,328)            (828)
                                                           ------------     ------------
                                                           $    26,405      $    12,801
                                                           ===========      ===========

     Property and equipment:
       Laboratory equipment and software                   $    18,438      $     8,029
       Computer equipment and software                           6,885            3,294
       Office furniture and fixtures                             4,273            1,313
       Leasehold improvements                                    3,366              356
       Construction in progress                                  4,120              561
                                                         -------------      -----------
                                                                37,082           13,553
       Less accumulated depreciation and amortization          (12,121)          (4,728)
                                                           -----------      -----------
                                                           $    24,961      $     8,825
                                                           ===========      ===========

     Accrued liabilities:
       Accrued compensation                                $     4,126      $     2,293
       Accrued warranty                                          3,714            1,930
       Accrued vacation                                          2,203            1,385
       Deferred revenue                                          2,554              275
       Other                                                     4,754            2,917
                                                           -----------      -----------
                                                           $    17,351      $     8,800
                                                           ===========      ===========
</TABLE>

5.   Investments

     At December 31, 2000 and 1999, investments consisted of the following (in
thousands):

<TABLE>
<CAPTION>
                                                     Current                       Noncurrent
                                            ---------------------------     --------------------------
                                                   December 31,                    December 31,
                                            ---------------------------     --------------------------
                                                2000          1999              2000         1999
                                            ------------  -------------     ------------  ------------
      <S>                                   <C>           <C>               <C>           <C>
      Held to maturity:
        Commercial paper                    $    44,962     $    31,856     $      ----    $      ----
        U.S. government securities                3,078          33,514            ----           ----
        Corporate medium-term notes              48,738          26,394           6,161          5,139
                                            -----------     -----------     -----------    -----------
                                            $    96,778     $    91,764     $     6,161    $     5,139
                                            ===========     ===========     ===========    ===========
</TABLE>

     At December 31, 2000, non-current held-to-maturity debt securities of $6.2
million had maturities of less than fourteen months.

                                      F-13
<PAGE>

6.   Short-Term Bank Borrowings

     In August 1998, the Company entered into a $4.0 million line of credit
agreement with a bank which allows it to borrow an amount equal to 80% of
eligible accounts receivable plus the lesser of 25% of the Company's eligible
inventory or $500,000. Interest accrued at the bank's prime rate plus .25% (8.0%
at December 31, 1998). There were no borrowings outstanding as of December 31,
1999 and the line of credit expired on August 13, 1999.

     In connection with this financing agreement, the Company granted warrants
to the bank to purchase an aggregate of 25,000 shares of Series C convertible
preferred stock at $4.75 per share. The warrants are exercisable for five years
from the date of issuance. The estimated fair value of the warrants was
approximately $21,000, which has been capitalized as debt issuance costs and was
amortized over the life of the financing agreement. These warrants were
exercised in 1999 and converted into 75,000 shares of common stock.


7.    Notes Payable and Capital Lease Obligations

     In August 2000, the Company entered into an $800,000 credit facility with a
financing company for the purchase of equipment under a capital lease agreement.
As of December 31, 2000, the full amount of funds available under this credit
facility had been utilized. The borrowings under the capital lease agreement are
to be repaid in 48 equal monthly installments and accrue interest at 9.85% per
annum. The obligation is secured by the related equipment.

     In June 2000, the Company secured a $5.0 million credit facility with a
financing company for the purchase of equipment under a capital lease agreement.
As of December 31, 2000, $100,000 of this credit facility was available for
future borrowings. The borrowings under the capital lease agreement are to be
repaid in 36 equal monthly installments and accrue interest at 10.8% per annum.
The obligation is secured by the related equipment.

     In August 1999, the Company entered into a credit facility with a bank for
the purchase of equipment. The credit facility includes $2.4 million in
equipment loans and $2.6 million in commitments for the purchase of equipment
under a capital lease agreement. During the year ended December 31, 1999, the
full amount of funds available under the equipment loan had been utilized. As of
December 31, 2000, the full amount of funds available under the capital lease
agreement had been utilized. The borrowings under the equipment loans and the
capital lease agreement are to be repaid in 48 equal monthly installments and
accrue interest at 10.8% per annum. Both obligations are secured by the related
equipment.

     In August 1998, the Company entered into an equipment line of credit with a
bank that allows the Company to borrow up to $1.0 million for the purchase of
equipment. The Company used a portion of the equipment loans entered into in
August 1999 to repay all amounts outstanding under this equipment line.

     In 1996, the Company entered into an equipment financing agreement with a
bank and leasing company that allows the Company to borrow up to $1.0 million
for purchases of equipment. The notes are secured by the related equipment. As
of December 31, 2000 and 1999 the full amount of funds available under the
equipment financing agreement was utilized.

     In connection with the 1996 equipment financing agreement, the Company
agreed to make a final payment equal to 12.5% of the equipment financed at the
end of the amortization period. Additionally, the Company granted warrants to
the bank and leasing company to purchase an aggregate of 50,000 shares of Series
A convertible preferred stock at $1.00 per share of which warrants for the
purchase of 40,000 shares were exercised in 1999 and converted into 120,000
shares of common stock. The warrants are exercisable for the longer of ten years
from the date of issuance or five years after an initial public offering. The
estimated fair value of the warrants was approximately $18,000, which was
capitalized as debt issuance costs and is being amortized over the life of the
equipment financing agreement.

                                      F-14
<PAGE>

A summary of the notes payable is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                         December 31,
                                                                                  -----------------------
                                                                                     2000         1999
                                                                                  ---------    ----------
     <S>                                                                          <C>          <C>
     Bank installment loan, with various maturity dates through October 2003,
          total monthly payments of $57,000, bearing interest at
          10.8%, collateralized by equipment                                      $   1,793    $    2,254
     Bank and leasing company installment loans, with various maturity
        dates through December 2000, total monthly payments of $27,000 with
        interest rates ranging between 8.99% and 9.76%, collateralized
        by equipment                                                                   ----           212
                                                                                  ---------    ----------
                                                                                      1,793         2,466
     Less current portion                                                              (513)         (753)
                                                                                  ---------    ----------
                                                                                  $   1,280    $    1,713
                                                                                  =========    ==========
</TABLE>

     At December 31, 2000, future aggregate annual principal payments on the
notes payable are $513,000, $571,000, and $709,000 for 2001, 2002, and 2003,
respectively.


8.   Stockholders' Equity

Preferred Stock

     At December 31, 1998, the Company had 10.2 million shares of its
convertible preferred stock outstanding. On May 18, 1999, the Company completed
its initial public offering which resulted in the conversion of all of the
outstanding convertible preferred stock into 30.7 million shares of common
stock. Following the conversion, and upon the Company's reincorporation in
Delaware, the Company's certificate of incorporation was amended and restated to
delete all references to such shares of preferred stock. Under the restated
certificate, the Board has the authority, without further action by
stockholders, to issue up to 5.0 million shares of preferred stock in one or
more series and to fix the rights, preferences, privileges, qualifications and
restrictions granted to or imposed upon such preferred stock, including dividend
rights, conversion rights, voting rights, rights and terms of redemption,
liquidation preference and sinking fund terms, any or all of which may be
greater than the rights of the common stock.


Common Stock

     The Company has issued 3.9 million shares of common stock to the founders
of the Company at prices ranging from $.02 to $.04 per share in exchange for
promissory notes bearing interest at rates ranging from 5.5% to 10% that matured
March 12, 2000. The Company had the option to repurchase, at the original issue
price, unvested shares in the event of termination of employment. In 1998,
476,000 unvested common shares were forfeited upon the termination of one of the
founders. As of December 31, 1999 all amounts outstanding under the remaining
promissory notes had been repaid by the founders.

                                      F-15
<PAGE>

Stock Option Cancel and Re-grant Program

     In November 2000, the Company allowed employees holding options to purchase
the Company's common stock to cancel certain stock option grants in exchange for
a commitment that options to purchase the same number of common shares will be
granted in May 2001 with an exercise price equal to fair value on the date of
the new grant, provided that the participant has not terminated employment prior
to such time (the "Cancel and Re-grant Program"). Options granted under the
Cancel and Re-grant Program will vest ratably over a period of 36 months. All
other terms of options granted under the Cancel and Re-grant Program will be
substantially the same as the cancelled options. Options to purchase 4.8 million
shares of common stock were cancelled under the Cancel and Re-grant Program. At
December 31, 2000, the Company is committed to grant options to purchase
4.7 million shares of common stock in May 2001.


1996 Equity Incentive Plan

     In August 1996, the Company adopted the 1996 Equity Incentive Plan (the
"1996 Plan"). At December 31, 2000, a total of 13.7 million shares of common
stock are reserved for issuance pursuant to the 1996 Plan. In addition, the 1996
Plan provides for automatic annual increases in the number of shares reserved
for issuance thereunder (beginning in 2000) equal to the lesser of: (i) 4% of
Copper Mountain's outstanding shares on a fully diluted basis taking into
account stock options and warrants and (ii) a lesser amount determined by the
board of directors.

     The 1996 Plan provides for the grant of options to the Company's directors,
officers, key employees, consultants and certain advisors. The 1996 Plan
provides for the grant of incentive and nonstatutory stock options, stock
bonuses and rights to purchase stock to employees, directors or consultants of
the Company. The 1996 Plan provides that incentive stock options will be granted
only to employees at no less than the fair market value of the Company's common
stock (no less than 85% of the fair market value for nonstatutory stock
options). Options generally vest 25% one year from date of grant and ratably
each month thereafter for a period of 36 months, and are exercisable up to ten
years from date of grant.

     Certain option grants under the 1996 Plan are subject to an early exercise
provision. Common shares obtained on early exercise of unvested options are
subject to repurchase by the Company at the original issue price and will vest
according to the respective option agreement. At December 31, 2000 and 1999,
there are no shares subject to repurchase by the Company.


Non-Employee Directors' Stock Option Plan

     In March 1999, the Company adopted the 1999 Non-Employee Directors' Stock
Option Plan ("Directors Plan") to provide for the automatic grant of options to
purchase shares of common stock to our non-employee directors. The Directors
Plan is administered by the board, unless the board delegates administration to
a committee of at least two disinterested directors. A total of 720,000 shares
of common stock has been reserved for issuance under the Directors Plan.

     On the effective date of the Directors Plan, each person who was then a
non-employee director was granted an option to purchase 60,000 shares of common
stock. Each person who, after the effective date of the plan, for the first time
becomes a non-employee director automatically will be granted, upon the date of
his or her initial appointment or election to be a non-employee director, a one-
time option to purchase 60,000 shares of common stock. On the date of each
annual meeting of our stockholders commencing with the 2000 annual meeting of
stockholders, each person who is initially elected or appointed to be a non-
employee director at least six months prior to the date of such annual meeting
automatically will be granted an option to purchase 20,000 shares of common
stock.

                                      F-16
<PAGE>

     Options granted under the Directors Plan shall be fully vested and
exercisable on the date of grant and must be exercised within five years from
the date they are granted. The exercise price of options under the Directors
Plan will equal 100% of the fair market value of the common stock on the date of
grant. Unless otherwise terminated by the board of directors, the Directors Plan
automatically terminates when all of our common stock reserved for issuance
under the Directors Plan has been issued. As of December 31, 2000, 480,000 stock
options have been granted under the Directors Plan.


Nonstatutory Stock Option Plan

     In March 2000, the Board adopted the Company's 2000 Nonstatutory Stock
Option Plan (the "NSO Plan"). A total of 600,000 shares of common stock are
reserved for issuance pursuant to the NSO Plan. The NSO Plan provides for the
grant of options to the Company's employees (other than officers), consultants
and certain advisors. The NSO Plan is a broad based plan and its adoption or
amendment is not required to be approved by the Company's stockholders. The NSO
Plan was adopted by the Board to address an expected shortfall in the number of
shares of Common Stock available for issuance under the Company's 1996 Equity
Incentive Plan prior to the date of the 2000 annual meeting of stockholders.
Such shortfall was expected to occur as a result of the Company's rapid growth
and, in particular, as a result of the additional options granted to attract and
retain former employees of OnPREM Networks Corporation following Copper
Mountain's acquisition of that company. As of December 31, 2000, 600,000 options
had been granted under the NSO Plan and 589,500 were cancelled and are available
for grant.

     The NSO Plan permits the granting of nonstatutory options, which are not
intended to qualify as incentive stock options within the meaning of Section 422
of the Internal Revenue Code, to employees (other than officers), consultants
and certain advisors. Officers and directors of the Company are not eligible to
be granted options under the NSO Plan. No person is eligible to be granted
options covering more than 500,000 shares of common stock in any calendar year.

     The NSO Plan is administered by the Board or a committee appointed by the
Board. Subject to the limitations set forth in the NSO Plan, the Board or any
such committee has the authority to select the eligible persons to whom grants
are to be made, to designate the number of shares to be covered by each stock
option grant, to establish vesting schedules, to specify the option exercise
price and the type of consideration to be paid upon exercise and, subject to
certain restrictions, to specify other terms of options granted under the plan.

         The maximum term of options granted under the NSO Plan is ten years.
Options granted under the plan are generally transferable and generally expire
three months after the termination of an optionee's service. In general, if an
optionee is permanently disabled or dies during his or her service, such
person's options may be exercised up to 12 months following such disability or
18 months following such death.

         The exercise price of options granted under the NSO Plan is determined
by the Board or a committee thereof in accordance with the guidelines set forth
in the NSO Plan, however, the exercise price is generally expected to be equal
to 100% of the fair market value of the Company's Common Stock on the date of
the grant. Options granted under the NSO Plan vest at the rate specified in the
option agreement, generally over a four year period. Pursuant to the NSO Plan,
shares subject to stock options that have expired or otherwise terminated
without having been exercised in full again become available for grant, but
exercised shares that the Company repurchases pursuant to a right of repurchase
will not again become available for grant.

     Upon certain changes in control, all outstanding stock options under the
NSO Plan must either be assumed or substituted by the surviving entity. In the
event the surviving entity does not assume or substitute such stock options,
such stock options will be terminated to the extent not exercised prior to such
change in control.


OnPREM 1998 Stock Option Plan

     In connection with the acquisition of OnPREM Networks Corporation in
February 2000, the Company assumed the 1998 Stock Option Plan of OnPREM and all
outstanding options to purchase common stock of OnPREM under such plan. By
virtue of the acquisition, the OnPREM options were proportionally adjusted with
respect to exercise prices and the number of shares subject to each option based
on the exchange ratio used in the acquisition. All other terms of the OnPREM
options, such as vesting schedules, remained unchanged. As of February 29, 2000,
the assumed options were exercisable for a total of 131,000 shares of the
Company's common stock with exercise prices ranging from $0.39 to $2.34 per
share. The Company will not make future grants under the 1998 Stock Plan of
OnPREM.

                                      F-17
<PAGE>

All stock option transactions are summarized as follows (in thousands, except
per share data):

<TABLE>
<CAPTION>
                                                                                    Weighted
                                                                                    Average
                                                                  Number of         Exercise
                                                                    Shares            Price
                                                                  ---------         --------
                       <S>                                        <C>               <C>
                       Balance at December 31, 1997                   3,753         $    .08

                          Granted                                     6,173         $    .33
                          Exercised                                  (1,029)        $    .06
                          Cancelled                                    (366)        $    .12
                                                                  ---------
                       Balance at December 31, 1998                   8,531         $    .26

                          Granted                                     4,829         $  18.09
                          Exercised                                  (2,522)        $    .28
                          Cancelled                                     (82)        $   1.97
                                                                  ---------
                       Balance at December 31, 1999                  10,756         $   8.25

                          Granted                                     7,388         $  46.61
                          Assumed in acquisition of OnPREM              131         $   1.35
                          Exercised                                  (3,106)        $   2.05
                          Cancelled                                  (5,810)        $  52.97
                                                                  ---------
                       Balance at December 31, 2000                   9,359         $  12.73
                                                                  =========
</TABLE>


     As of December 31, 2000, 1999, and 1998 there were options to purchase 2.3
million shares, 1.9 million shares and 1.3 million shares, respectively, vested
at weighted average exercise prices per share of $8.75, $1.22 and $.08,
respectively.

                                      F-18
<PAGE>

     The following table summarizes all options outstanding and exercisable by
price range as of December 31, 2000:

<TABLE>
<CAPTION>
                                 Options Outstanding                               Options Exercisable
       -------------------------------------------------------------------   -----------------------------
                                              Weighted
                                               Average          Weighted                        Weighted
                                 Number       Remaining         Average           Number         Average
               Range of        of Shares     Contractual        Exercise        of Shares        Exercise
           Exercise Prices    (thousands)     Life-Years         Price         (thousands)        Price
        -------------------  ------------  ---------------  --------------   --------------  --------------
        <S>                  <C>           <C>              <C>              <C>             <C>
        $   0.03  -  0.11             402         6.3       $     0.09                278    $     0.05
            0.16  -  0.16           2,265         7.4             0.16                750          0.16
            0.27  -  3.50           1,247         7.9             1.80                339          0.38
            4.25  - 10.50           3,915         8.6             7.90                707          6.62
           10.94  - 58.69           1,119         9.2            45.99                151         79.73
           70.50  - 99.94             411         7.8            82.88                120         72.00
                             ------------                                     -----------
        $   0.03  - 99.94           9,359         8.2       $    12.73              2,345    $     8.75
                             ============                                    ============
</TABLE>

Stock Based Compensation

     The Company has elected to follow APB Opinion No. 25, "Accounting for Stock
Issued to Employees" to account for their employee stock option plans. Under APB
No. 25, when the exercise price of the Company's employee stock options equals
the fair value price of the underlying stock on the date of grant, no
compensation expense is recognized in the Company's financial statements. In
previously issued financial statements the Company estimated the deemed fair
value of its common stock in connection with the accounting for stock options
granted during the three fiscal years ended December 31, 1998, which resulted in
the Company recording deferred compensation of $1.1 million, with respect to
certain options granted during 1998. During April 1999, in conjunction with the
Company's initial public offering registration statement, the Company revised
the estimates of the deemed fair value of its common stock at various dates and
has recognized additional deferred compensation of $1.8 million, $2.4 million,
$11.1 million and $234,000 during the four fiscal years ended December 31, 1999.
In connection with the acquisition of OnPREM, the Company recorded deferred
compensation of $1.4 million. The deferred compensation is being amortized to
expense in accordance with FASB Interpretation No. 28 over the vesting period of
the individual options, generally four years.

     Had compensation cost for the Company's stock-based compensation plans been
determined consistent with SFAS No. 123, the Company's pro forma amounts would
have been as indicated below (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                                             Year Ended
                                                                             December 31,
                                                             -----------------------------------------
                                                                   2000          1999          1998
                                                             -------------   -----------   -----------
          <S>                                                <C>             <C>           <C>
          Net income (loss) as reported                      $    1,693      $  12,217     $ (10,331)
          Pro forma net loss under SFAS No. 123                 (32,852)        (2,064)      (10,884)
          Pro forma basic and diluted net loss per share
               under SFAS No. 123                                 (0.65)         (0.07)        (4.08)
</TABLE>

      The fair value of each option grant for the year ended December 31, 2000
was estimated on the date of grant using a Black-Scholes option pricing model
with the following weighted-average assumptions: no dividend yield; volatility
factor of 100.0%; risk free interest rate of 6.0%; and expected life for the
option of three and a half years.

      The fair value of each option grant from the Company's initial public
offering in May 1999 to December 31, 1999 was estimated on the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions: no dividend yield; volatility factor of 76.0%; risk free interest
rate of 6.0%; and expected life for the option of five years.

      The fair value of each option grant prior to the Company's initial public
offering in May 1999 was estimated on the date of grant using the minimum value
method with the following weighted-average assumptions: no dividend yield; risk
free interest rate of 5.7% to 6.5%; and expected life for the option of five
years.

                                      F-19
<PAGE>

     The weighted-average estimated fair value of employee stock options granted
during 2000, 1999 and 1998 was $31.87, $14.01 and $0.08 per share, respectively.
For purposes of pro forma disclosures, the estimated fair value of options is
amortized to expense over the vesting period.


Employee Stock Purchase Plan

     In February 1999, the Company adopted the 1999 Employee Stock Purchase Plan
(the "ESPP"). A total of 600,000 shares of common stock has been reserved for
issuance under the ESPP. The ESPP is intended to qualify as an employee stock
purchase plan within the meaning of Section 423 of the Internal Revenue Code.
Under the ESPP, the Board of Directors may authorize participation by eligible
employees, including officers, in periodic offerings following the commencement
of the ESPP. During the year ended December 31, 2000, the ESPP purchased 143,000
shares of the Company's common stock. As of December 31, 2000, 457,000 shares
are reserved for future purchases. On January 31, 2001, 80,000 shares were
purchased by the ESPP.

     Unless otherwise determined by the Board, employees are eligible to
participate in the purchase plan only if they are employed by us for at least 20
hours per week and are customarily employed for at least five months per
calendar year. Employees who participate in an offering may have up to 10% of
their earnings withheld pursuant to the purchase plan. The amount withheld is
then used to purchase shares of common stock on specified dates determined by
the Board of Directors. The price of common stock purchased under the purchase
plan will be equal to 85% of the lower of the fair market value of the common
stock at the commencement date of each offering period or the relevant purchase
date. Employees may end their participation in the offering at any time during
the offering period, and participation ends automatically on termination of
employment.


Warrants

     In January 1997, the Company entered into an agreement with a corporate
partner, whereby the two companies exchanged certain technology and services. In
addition, the Company issued a warrant to such corporate partner to purchase
147,401 shares of Series B convertible preferred stock at a price of $3.39 per
share. The warrant is exercisable for four years following the date of issuance.
The estimated fair value of the warrant was $88,000, which was capitalized as an
intangible asset and amortized over the two-year term of the agreement. The
warrant was convertible into 442,202 shares of common stock. In January 2001,
the warrant was net exercised. There were no cash proceeds as a result of the
exercise and the Company issued a net of 354,729 shares of its common stock.


Common Shares Reserved for Future Issuance

     The following table presents shares reserved for future issuance under the
Company's stock option plans, ESPP and pursuant to warrants as of December 31,
2000 (in thousands):


             1996 Equity Incentive Plan                            13,698
             Non-Employee Directors' Stock Option Plan                657
             Nonstatutory Stock Option Plan                           600
             OnPREM 1998 Stock Option Plan                             83
             Stock options issued outside the Company's
                 stock option plans                                   380
             Employee Stock Purchase Plan                             457
             Cancel and Re-grant Program                            4,714
             Warrants                                                 472
                                                              -----------
                                                                   21,061



9.   Commitments

                                      F-20
<PAGE>

     The Company leases its facilities under noncancelable operating leases
expiring on various dates through 2007. The leases contain renewal options and
are subject to cost increases. Rent expense totaled $4.6 million, $1.6 million
and $501,000 for the years ended December 31, 2000, 1999 and 1998, respectively.

     Future minimum payments under the noncancelable operating leases and
equipment under capital leases consist of the following at December 31, 2000 (in
thousands):

<TABLE>
<CAPTION>
                                                             Operating            Capital
                                                               Leases              Leases
                                                           -------------        ------------
          <S>                                              <C>                  <C>
          Year ending December 31,
               2001                                        $    7,384           $    3,355
               2002                                             7,079                3,024
               2003                                             6,899                2,827
               2004                                             7,060                  172
               2005                                             5,374                 ----
               Thereafter                                       2,987                 ----
                                                           ----------           ----------
          Total minimum lease payments                     $   36,783                9,378
                                                           ==========
                  Less amount representing interest                                 (1,348)
                                                                                ----------
                  Total present value of minimum payments                            8,030
                  Less current portion                                              (2,664)
                                                                                ----------
                  Non-current portion                                           $    5,374
                                                                                ==========
</TABLE>


     During September 1997, the Company entered into a capital lease agreement,
which allows for the Company to borrow up to $1,750,000 to finance capital
expenditures. As of December 31, 2000 and 1999, the Company had borrowed all of
the available funds under this agreement.

     In conjunction with the capital lease agreement, the Company issued a
warrant to the lessor to purchase 14,737 shares of Series C convertible
preferred stock at a price of $4.75 per share all of which were exercised in
1999 and converted into 40,000 shares of common stock. The estimated fair value
of the warrant was $25,000, which was capitalized as debt issuance costs and is
being amortized over the life of the financing agreement.

      Equipment held under the capital leases totaled $10.1 million and $4.1
million and the related accumulated amortization totaled $3.8 million and $1.4
million at December 31, 2000 and 1999, respectively. The obligations under the
capital leases are secured by the related equipment.

10.  Litigation

     Since October 2000, approximately twenty-four complaints have been filed in
the United States District Court for the Northern District of California against
the Company and two of its officers, along with one related derivative action
against the Company and its directors in Delaware, alleging violations of the
federal securities laws arising out of recent declines in the Company's stock
price. Specifically, the complaints allege claims in connection with various
alleged statements and omissions to the public and to the securities markets. No
assurances can be made that we will be successful in our defense of such claims.
If we are not successful in our defense of such claims, we could be forced to
make significant payments to our stockholders and their lawyers, and such
payments could have a material adverse effect on our business, financial
condition and results of operations if not covered by our insurance carrier.
Even if such claims are not successful, the litigation could result in
substantial costs and divert management's attention and resources, which could
adversely affect our business, results of operations and financial position.

11.  Leased Equipment

                                      F-21
<PAGE>

         During the year ended December 31, 2000, the Company entered into a
$10.0 million credit facility with a customer for the purchase of the Company's
equipment under a capital lease agreement. As of December 31, 2000, the customer
had utilized all of the funds available under this credit facility. The
borrowings under the capital lease agreement are to be repaid in 16 equal
quarterly installments and accrue interest at 12.0% per annum. The lease is
being accounted for as a sales-type capital lease. The obligation is secured by
the related equipment. As of December 31, 2000, $2.4 million and $6.2 million of
the net lease receivable were classified in the Company's balance sheet as other
current assets and other assets, respectively.

         During the year ended December 31, 2000, the Company entered into a
$8.6 million credit facility with a customer for the purchase of the Company's
equipment under a capital lease agreement. As of December 31, 2000, the customer
had utilized all of the funds available under this credit facility. The
borrowings under the capital lease agreement are to be repaid in monthly
installments and accrue interest at 10.5% per annum. The lease is being
accounted for as a sales-type capital lease. The obligation is secured by the
related equipment. As of December 31, 2000, $1.9 million and $2.8 million of the
net lease receivable were classified in the Company's balance sheet as other
current assets and other assets, respectively.

         Future minimum amounts due under sales-type capital lease receivables
as of December 31, 2000 are as follows (in thousands):

              Year ending December 31,
                   2001                                       $     5,823
                   2002                                             6,073
                   2003                                             6,073
                   2004                                             2,106
                                                              -----------
              Total minimum lease payments                         20,075
              Less amount representing unearned interest           (3,442)
                                                              -----------
              Total present value of minimum payments              16,633
              Less current portion                                 (4,258)
              Less allowance for collectibility                    (3,375)
                                                              -----------
              Non-current portion                             $     9,000
                                                              ===========

12.  Income Taxes

     Significant components of the provision for income taxes are as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                             Year Ended
                                                                             December 31,
                                                                      -------------------------
                                                                          2000         1999
                                                                      -----------  ------------
              <S>                                                     <C>          <C>
              Current provision:
                   Federal                                            $      ----  $       ----
                   State                                                     ----          ----
                                                                      -----------  ------------
              Total current:                                                 ----          ----

              Deferred provision:
                   Federal                                                 30,272           822
                   State                                                    7,244           329
                                                                      -----------  ------------
              Total deferred:                                              37,516         1,151
              Benefit of net operating loss and credit carryforwards      (27,872)       (2,050)
              Benefit of reversal of valuation allowance                   (7,784)         ----
              Stock options - benefit to additional paid in capital          ----         9,389
                                                                      -----------  ------------
                                                                      $     1,860  $      8,490
                                                                      ===========  ============
</TABLE>

                                      F-22
<PAGE>

     The following is a reconciliation from the expected statutory federal
income tax expense to the Company's actual income tax expense (in thousands):

<TABLE>
<CAPTION>
                                                                    Year Ended
                                                                   December 31,
                                                             ----------------------
                                                                2000         1999
                                                             ---------    ---------
               <S>                                           <C>          <C>
               Tax at U.S. statutory rate                    $   1,244    $   7,237
               Amortization of intangible assets                 8,419         ----
               State income taxes, net of federal benefit          264        1,190
               Net change in valuation allowance and other      (8,067)          63
                                                             ---------    ---------
                                                             $   1,860    $   8,490
                                                             =========    =========
</TABLE>

     Significant components of the Company's deferred tax assets and
liabilities as of December 31, 2000 and 1999 are shown below (in thousands):

<TABLE>
<CAPTION>
                                                                   December 31,
                                                            ------------------------
                                                                 2000        1999
                                                            -----------  -----------
                    <S>                                     <C>          <C>
                    Deferred tax assets:
                         Net operating loss carryforwards   $    23,936  $     5,562
                         Tax credit carryforwards                 9,393        2,993
                         Accruals and reserves                   23,422        2,884
                         Deferred compensation                      930        1,747
                         Other, net                                 569          153
                                                            -----------  -----------
                    Total deferred tax assets                    58,280       13,339
                    Valuation allowance                         (58,280)     (13,339)
                                                            -----------  -----------
                    Net deferred tax assets                 $      ----  $      ----
                                                            ===========  ===========
</TABLE>

     A valuation allowance of $58.3 million has been recorded at December 31,
2000 to offset the net deferred tax assets as realization is uncertain due to
the expectation that deductions from employee stock option exercises will exceed
future taxable income. When recognized, the tax benefit of these deferred assets
will be accounted for as a credit to shareholders' equity rather than as a
reduction of the income tax provision.

     The Company had federal and California tax net operating loss carryforwards
at December 31, 2000 of approximately $57.2 million and $60.0 million,
respectively. The federal and California tax loss carryforwards will begin to
expire in 2011 and 2004, respectively, unless previously utilized. Included in
the net operating loss carryforwards are stock option deductions of
approximately $40.8 million. The benefit of these net operating loss
carryforwards will be credited to equity when realized. The Company also has
federal and California research tax credit carryforwards of approximately $6.6
million and $2.8 million, respectively, which will begin to expire in 2011
unless previously utilized.

     Pursuant to Internal Revenue Service Code Sections 382 and 383, use of a
portion of the Company's net operating loss and credit carryforwards are limited
because of a cumulative change in ownership of more than 50% which occurred in
prior years. However, the Company does not believe such limitations have a
material impact on the Company's ability to use these carryforwards.

                                      F-23
<PAGE>

13.  Employee Savings Plan

     The Company has a 401(k) plan, which allows participating employees to
contribute up to 20% of their salary, subject to annual limits. The Company may,
at its sole discretion, approve Company contributions. The Company has approved
a match of 50% of the first 4% of salary deferred by employees during the year
ended December 31, 2000. The Board has not approved any previous matching
contributions. During the year ended December 31, 2000, matching contributions
were $429,000.


14.  Related Party Transactions

     At December 31, 2000, the Company had a note receivable from an officer
with a face value of $1.0 million included in other assets. This note was issued
in connection with the officer's employment and relocation agreement. The note
bears no interest, is secured by the officer's residence and is due at the
earlier of March 30, 2003, or 15 days from the date the officer ceases to be an
employee of the Company.

                                      F-24
<PAGE>

                                                                     Schedule II


                        COPPER MOUNTAIN NETWORKS, INC.

                       Valuation and Qualifying Accounts


<TABLE>
<CAPTION>
                                                                     Additions
                                                                  ----------------
                                                    Balance at       Charged to                       Balance at
                                                     Beginning       Costs and                           End of
Allowance for Doubtful Accounts:                      of Year         Expenses        Deductions          Year
                                                  -------------   ----------------   ------------   ----------------
<S>                                               <C>             <C>                <C>            <C>
Year ended December 31, 1999 ....................    $   -----             140,000           -----     $     140,000

Year ended December 31, 2000 ....................    $ 140,000           7,180,000       3,930,000     $   3,390,000
</TABLE>

          NOTE: The Company had no activity in allowance for doubtful accounts
                prior to 1999.


<TABLE>
<CAPTION>
                                                                     Additions
                                                                  ----------------
                                                    Balance at       Charged to                       Balance at
                                                     Beginning        Costs and                         End of
Inventory Reserves:                                   of Year         Expenses        Deductions         Year
                                                  --------------  ----------------  --------------  ---------------
<S>                                               <C>             <C>               <C>             <C>
Year ended December 31, 1998 ...................     $   897,000           504,000         229,000     $   1,172,000

Year ended December 31, 1999 ...................     $ 1,172,000           750,000       1,094,000     $     828,000

Year ended December 31, 2000 ...................     $   828,000        13,324,000       1,824,000     $  12,328,000
</TABLE>

<TABLE>
<CAPTION>
                                                                     Additions
                                                                  ---------------
                                                    Balance at       Charged to                       Balance at
                                                     Beginning        Costs and                         End of
Accrued Warranty:                                     of Year         Expenses        Deductions         Year
                                                  --------------  ---------------- ---------------  ----------------
<S>                                               <C>             <C>              <C>              <C>
Year ended December 31, 1998....................     $     2,000          426,000           10,000     $     418,000

Year ended December 31, 1999 ...................     $   418,000        1,779,000          267,000     $   1,930,000

Year ended December 31, 2000 ...................     $ 1,930,000        2,942,000        1,158,000     $   3,714,000
</TABLE>

                                     II-1
<PAGE>

<TABLE>
<CAPTION>
                                                                      Additions
                                                                  ----------------
                                                    Balance at      Charged to                       Balance at
                                                     Beginning       Costs and                         End of
Adverse Purchase Commitments:                         of Year        Expenses        Deductions         Year
                                                 ---------------- ---------------- --------------- ----------------
<S>                                              <C>              <C>              <C>             <C>
Year ended December 31, 1998 ...................    $    582,000            ----          582,000    $       ----

Year ended December 31, 1999 ...................    $       ----            ----             ----    $       ----

Year ended December 31, 2000 ...................    $       ----      28,600,000             ----    $ 28,600,000
</TABLE>


<TABLE>
<CAPTION>
                                                                     Additions
                                                                  ----------------
                                                   Balance at       Charged to                       Balance at
                                                    Beginning        Costs and                         End of
Deferred Tax Asset Valuation Allowance:              of Year         Expenses        Deductions         Year
                                                 ---------------- ---------------- --------------- --------------
<S>                                              <C>              <C>              <C>             <C>
Year ended December 31, 1998 ...................    $  5,006,000       2,787,000             ----    $  7,793,000

Year ended December 31, 1999 ...................    $  7,793,000       5,546,000             ----    $ 13,339,000

Year ended December 31, 2000 ...................    $ 13,339,000      52,725,000        7,784,000    $ 58,280,000
</TABLE>

                                     II-2