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                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

       [x]       ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
                   For the fiscal year ended December 31, 2000

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

      For the transition period from ________________ to _________________

                            Commission file 001-15837

                       WORLD WIRELESS COMMUNICATIONS, INC.
                       -----------------------------------

                       (Name of registrant in its charter)

                      Nevada                              87-0549700
         -------------------------------               ----------------
         (State or other jurisdiction of               (I.R.S. Employer
          incorporation or organization)             Identification No.)

5670 Greenwood Plaza Boulevard, Penthouse, Greenwood Village, Colorado  80111
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      (Address of principal executive offices)                        (Zip Code)

             Registrant's telephone number          (303) 221-1944

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

                                      None
                    -----------------------------------------
                                (Title of Class)

     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and
(2)has been subject to such filing requirements for the past 90 days.

                                 Yes [X] No [ ]

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-K, and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ] Not applicable.

     The aggregate market value of the voting stock held by non-affiliates of
the registrant computed by reference to the average of the high and low price at
which the stock was sold, as of March 28, 2001, was $25,133,855.

     As of March 28, 2001 there were 31,222,181 shares of the registrant's
common stock issued and outstanding.

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                                PART I

ITEM 1.   DESCRIPTION OF BUSINESS

BUSINESS

Overview

World Wireless Communications, Inc. (the "Company", "we" or "us")(1) is a
developer of wireless telemetry and communications systems and components of
spread spectrum digital radios. By leveraging our experience during the last
several years in developing low-cost, reliable communications systems, we have
developed the latest generation in web-enabling technology - X-traWeb(TM).

Our X-traWeb solutions and services allow data from a remote wireless radio
frequency system to be accessed via a secure, encrypted Internet connection
using a standard web browser located anywhere. Our technology has applications
across a broad range of industries, for which it can substantially improve the
efficiency and cost of access and manipulation of important data from widely
dispersed equipment.

We have successfully combined all of our technologies into a functional package
that not only collects and transmits data and provides control from remote
locations, but also enables customers to use an ordinary browser to access the
data-gathering and remote-control functions from anywhere in the world through
the Internet where there is Internet access.

By integrating system options that use several of our proprietary wireless
technologies, we have capitalized on approximately two years of development
resources in an attempt to abbreviate our total time-to-market. Through this
period, our management has been engaged principally in developing product
positioning strategies, strategic planning and final development and testing of
our integrated "total technology solution."

Current Status

We have completed development and testing of the core components of our
web-enabled supervisory control and data acquisition ("SCADA") solution, and are
currently engaged in implementing the first phase of our near-term plan - the
introduction of our technology solution to selected customers in major target
markets to establish beta installation testing for a variety of commercial and
industrial applications and the commencement of product sales.

--------
(1) Unless otherwise indicated, all references to and information concerning
"we" or "us" includes World Wireless Communications, Inc. and its wholly-owned
subsidiaries; and historical information, except for the financial statements,
presents the operation of World Wireless Communications, Inc. and its
subsidiaries on a combined basis, unless otherwise indicated.



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While our X-traWeb technology has a wide range of diverse applications, we have
targeted four principal areas to focus our sales at present: (a) vending
machines; (b) facilities management and automatic meter reading; (c) security
systems; and (d) food services equipment.

Our current customers include FreedomPay.com (which sells cashless vending
machines), Enodis Chains PLC (the largest manufacturer of equipment for fast
food vendors), a subsidiary of the U.K.-based Enodis, RealTime Data (a vending
machine operator) and Honeywell Inc. (which sells control systems). Our alliance
partners include Texaco Natural Gas Inc. (for marketing to the natural gas
industry), Co-operative ConNEXTions, LLC, a provider of products and services to
rural distribution cooperatives in the western United States and Audiotel S.p.A.
(which is marketing certain of our X-traWeb products in Italy). We also had
relationships with Kyushu Matsushita Electric Co. Ltd. ("Panasonic"), Motorola,
Inc. and Williams Wireless Inc. dba Williams Telemetry Services, a subsidiary of
the Williams Company ("Williams").

Industry

Commercialization of the Internet began in the mid-1980s, with e-mail providing
the primary means of communication. However, it was the Internet's World Wide
Web, which provided a means to link text and pictures, which led to the
blossoming of e-commerce and sparked the explosive growth of the Internet in the
1990s. Today, millions of people around the world send and receive information,
and purchase products and services through the Internet. The potential of such a
large and still-growing market has led many business analysts to consider
e-commerce as the supreme opportunity of the times. The enormous growth of the
Internet is being driven by:

         o        The increasing familiarity, acceptance, and use of the
                  Internet by governments, businesses, and consumers;

         o        The large and growing number of personal computers ("PCs")
                  installed in homes and offices;

         o        The decreasing cost of PCs and related peripherals;


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         o        The growth and development of web-enabling technologies;

         o        The proliferation of Internet content;

         o        Easier, faster, and less expensive access to the Internet; and

         o        Significant improvements in network infrastructure and
                  bandwidth.

We expect that corporate investment in web-enabling technology will continue to
grow both in the United States and abroad for the foreseeable future despite the
recent reduction of anticipated growth in the telecommunication sector.

X-traWeb "Total Technology Solution"

                  At the heart of our X-traWeb strategy is the promotion of our
         total technology concept.

                  Constituting the "first mile" portion of our proprietary total
         technology solution is our "X-Node(TM)". The X-Node is a miniature web
         server compacted into a one square inch embeddable board, or available
         as firmware requiring less than 2 kilobytes of memory. This miniature
         web server collects information from a remote piece of equipment (e.g.,
         vending machine, gas meter, and the like) and makes that information
         available via the Internet.

                  A critical element in implementing our technology for
         large-scale installations is our X-traWeb proprietary "X-Gate(TM)". The
         X-Gate is an Internet gateway that can collect information from a wired
         or wireless network from a substantial number of X-Nodes (e.g., an
         array of vending machines), and transmit the information to an
         information repository via the Internet. The X-Gate offers distinct
         advantages over the more commonly used gateway - the personal computer
         - in that it requires no human intervention and incorporates advanced
         technologies to ensure performance and reliability.

                  Completing the "last mile" portion of our total technology
         solution is our business-to-business web site. This database-driven
         site collects the operations and transactional data which has been
         transmitted from the customers' remote equipment, then stores it
         securely for delivery to authorized customer personnel in raw form, or
         processed and formatted into standard or customized reports.


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         Competitive Advantages

                  Our technologies offer customers a number of advantages,
         including, without limitation:

                  - Open architecture solutions that do not use proprietary
         protocols, and components that are fully compatible with most important
         Internet protocols (such as TCP/IP, HTTP/UDP/PPP and SLIP);

                  - Use of a standard web browser and Internet tools (such as
         Java) to monitor and control remote equipment and functions from any
         Internet-accessible location;

                  - Wireless technology option that eliminates the need for
         additional (and generally costly) electrical, telephone, or other
         "hardwired" systems at remote locations;

                  - Highly durable components that can operate in a wide range
         of environmental conditions;

                  - Ease of installing, configuring, bringing online, and
         maintaining or replacing components;

                  - Firmware-based technology that allows customized
         configuration of equipment already possessing embedded
         microcontrollers; and

                  - Firmware-based technology that allows automatic updating of
         microcontroller functions from a remote location to reflect changes in
         customer needs and specifications.

         Competitive Adaptability

                  Our open architecture solutions do not use proprietary
         protocols. As a result, our X-traWeb components are fully TCP/IP
         compatible and meet current and emerging international Internet
         communications standards (such as IEEE 802.3), which provide important
         benefits when compared to closed, proprietary solutions.

         Based on our development and engineering experience, we are positioned
         to provide up-to-date technical solutions to customers with remote
         monitoring and control needs.

         Strategic Growth Plan

                  We plan to develop and sell our products and services in three
         separate, but at times overlapping phases.

         Phase One. During Phase One, in which we are currently engaged, we are
         debuting our unique combination of wireless, telemetry, and
         web-enabling technologies through providing selected Fortune 1000 and
         other customers with a "total technology solution" package of products
         and services. During this phase, we are focused on selling the
         wide-ranging capabilities of our unique technological approach by
         working with our customers to design and configure the X-traWeb
         networks that address their specific industrial and web-based service
         needs, while building a database of standardized technology
         configurations that can be used or easily adapted for a variety of
         applications. Throughout the process, we will seek to establish
         ourselves as a recognized "brand" for innovative, technologically
         advanced products and services.

         Phase Two. During Phase Two, which we are currently implementing, we
         are leveraging our brand recognition and the contents of our database
         to expand our market for products and services by offering
         mix-and-match packages for applications in a variety of industries as
         described in Phase One above. The X-Node and X-Gate components will be
         designed to simply plug in and be ready for use or, if necessary, they
         can be easily configured - even by customers. During this phase, we
         plan to develop new applications for our technologies, along with a
         selection of value-added web-based services, to strengthen our ties
         with our established customers and extend our reach into new markets.


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         Phase Three. During Phase Three, we expect to evolve into an
         industry-specialized, customer-only Internet Service Provider. We
         envision such a step as a natural and necessary extension of our "total
         technology solution" in order to ensure uninterrupted 24-hour access to
         operations-critical remote equipment by our customers - something that
         traditional, consumer-oriented ISPs are not geared for, and to provide
         connectivity in those remote areas that are not served by traditional
         ISPs.

         Products and Services

         Our product strategy is to utilize our existing technologies to develop
         innovative solutions that enable users of telemetry technologies to
         leverage the power of the Internet in order to greatly enhance the
         efficiency and cost of controlling and monitoring remotely located
         equipment.

         Our X-traWeb solutions allow standard web browsers, rather than
         customized host system software packages, to monitor and control
         equipment throughout the world using industry-standard Internet tools
         and X-traWeb technology. The result is that, from any
         Internet-accessible location, customers in a variety of industries have
         real-time comprehensive, cost-efficient information available that
         helps them better manage their telemetry requirements.

         X-traWeb Products

         Our existing X-traWeb products which are available for sale are listed
         below. These typically are sold as part of a specifically-designed
         installation for any particular customer.

         The X-Node(TM)

         Our web-enabling solutions rely on the use of our X-Node technology.
         The X-Node is a small (approximately 1 inch by 1 inch and less than 2
         kilobytes of memory), fully functional embedded microcontroller and
         wireless Internet gateway. X-Nodes are highly durable in most
         environmental conditions, have low manufacturing costs, and can be
         attached easily to a wide variety of existing equipment for the
         purposes of remotely monitoring and controlling the equipment over the
         Internet.

         Each X-Node has two serial ports and incorporates AVR Series
         microcontrollers from Atmel Corporation. These microcontrollers allow
         in-circuit programmability and near 1 million instructions per second
         execution speed.

         The in-circuit programmability permits the installation of X-Node
         firmware to be done automatically during the manufacturing process. The
         firmware then allows automated customization of X-Nodes to meet
         specific customer application requirements as part of the manufacturing
         process, eliminating human error. The in-circuit programmability also
         allows us, from a remote location, to quickly, easily, and
         inexpensively update the functions of an X-Node to respond to changes
         in customer needs. X-Node capability is also available as a firmware
         license for use in equipment with an existing embedded controller
         installed.

         X-Nodes can be used singly by connecting one to a piece of equipment
         and adding a modem for Internet connection. In situations with multiple
         devices, where more than one X-Node is required, customers can use our
         X-Gate to link the X-Nodes into an X-traWeb network and manage the
         network. A substantial number of X-Nodes may be networked on a wired or
         wireless basis to a single X-Gate.

         The X-Gate(TM)

         Our X-Gate is a small, rugged, proprietary Internet gateway device that
         replaces the more common gateway: the personal computer. In general,
         the personal computer is not a suitable gateway for use in X-traWeb
         solutions because of its cost and the need for regular human
         intervention. The X-Gate has been developed based upon experience in
         the remote control of critical facilities such as pipelines and
         offshore production facilities.

         Each X-Gate has a microcontroller and four serial ports, allowing it to
         communicate with a substantial number of X-Nodes on a single X-traWeb
         network and collect and send their data through either dial-up or Local
         Area Network ("LAN") connections to the Internet. In the event of a
         power outage or brownout, the unit will automatically reboot and
         continue operation without human interference.

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         Our current X-Gate model incorporates a modem or terminal server,
         lowering overall costs and broadening the range of Internet services we
         can provide our customers. We have developed several different versions
         of our X-Gate which provide different levels of functionality depending
         upon a customer's specific needs.

         X-traWeb Internet Access Servers

         The X-traWeb Internet Access Servers, dedicated to remote monitoring
         and control applications, are available, thus bypassing normal ISP
         services whose focus is on the more typical Internet traffic. Our
         Internet Access Servers incorporate over 20 years of experience in
         providing monitoring and control systems for critical facilities such
         as pipelines. This item is not an ISP; it is an industrial strength
         Internet Access Server.

         MAX

         MAX is a new technology that places observation and control of regular
         household appliances and electronic on the Internet through a
         specialized X-Gate (TM). Each household appliance will have its own web
         page through an X-Node that can be accessed by the household owner.
         Since MAX provides data in standard HTML formation (i.e., hyper text
         mark-up language), any device with Web capabilities can access the
         appliance. MAX can then be used to turn an appliance on or off, to
         monitor the functioning of the appliance, and the need for maintenance
         thereof.

         X-traCam

         The X-traCam is the first true web camera. It is based on X-Node
         technology and captures video images directly and transmits them to a
         standard browser without use of a personal computer. We have developed
         existing prototypes of this product, but the low resolution features
         limits the application of this product. As a result, we are currently
         developing a higher resolution picture for it.

         Connectivity

         The connection between the X-Nodes and X-Gate can be either wireless or
         wired. Equipment that is concentrated in a single location can be
         hardwired directly to the X-Gate. In situations where the equipment is
         impractical to hardwire or spread out over a wide area, X-Nodes can be
         linked together and to an X-Gate through our wireless technologies.

         Wireless - Spread Spectrum Technology

         Spread spectrum radio technology has been around since the 1940s,
         limited mostly to military applications. Recently, an increased
         interest in spread spectrum modulation and its advantages have emerged,
         particularly concerning low-power, high-density personal communication
         devices. Because they are unlicensed, spread spectrum systems usually
         cost much less to install and troubleshoot than narrow band systems. In
         addition, spread spectrum modulation has the advantages of low
         probability of intercept, low probability of detection, low probability
         of interference and resistance to jamming. There are two methods for
         employing spread spectrum, frequency hopping and direct sequence. In
         frequency hopping systems, the carrier frequency of the transmitter
         abruptly changes (or "hops") in accordance with an apparently random
         pattern. This pattern is in fact a pseudo-random code sequence, with
         the order of the frequencies taken from a predetermined set as dictated
         by the code sequence. The receiver employs the same pseudo-random code
         sequence and, once the transmitter and receiver are synchronized, the
         communication is essentially narrow-band on each frequency in the
         sequence.

         In direct sequence systems, the carrier phase of the transmitter
         abruptly changes in accordance with a pseudo-random code sequence. This
         process is generally achieved by multiplying the digital information
         signal with a spreading code, also known as a chip sequence. The chip
         sequence has a much faster data rate than the information signal and so
         expands or spreads the signal bandwidth beyond the original bandwidth
         occupied by just the information signal. The term chips are used to
         distinguish the shorter coded bits from the longer uncoded bits of the
         information signal. At the receiver, the information signal is
         recovered by remultiplying with a locally generated replica of the
         spreading code. By doing so, the receiver effectively compresses the
         spread signal back to its original unspread bandwidth.

         World Wireless Radios

         We offer four radios for sale.

         Our line of 900 MHZ spread spectrum radios includes the 900 SS Hopper,
         an award-winning frequency hopping spread spectrum radio that offers
         reliable communications in a variety of environments. The Hopper
         features transmission speeds of up to 56 kilobytes per second and a
         range of up to 25 miles, line of sight, depending upon conditions and
         antenna selection. This radio received an award as the "best of show"
         in 1999 at a trade show in Baltimore, Maryland.


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         In addition, the 900 SS MicroHopper - a miniature version of the Hopper
         - offers a smaller form-factor and lower power-consumption for short
         range applications. Measuring just 2 1/2 inches by 1 3/4 inches, the
         MicroHopper is suited for applications where size and cost are
         important considerations.

         Both frequency hopping spread spectrum radios employ our proprietary
         Secure-Sync(TM) technology. This coding technology is a major
         innovation in wireless communications, which substantially reduces the
         overhead inherent in other coding methods. It adds security, increases
         throughput efficiency and provides faster effective communications
         speeds at a much lower cost.

         We also offer the 900 SS Direct - a direct sequence transceiver with
         RS-232 connectors, capable of transmitting data up to 40 kilometers,
         line of sight - and the Micropulse - a 2.4 gigahertz ("GHz") frequency
         hopping radio for international applications that transmits data at up
         to 800 Kbps.

         Customer Support and Services

         We support our customers with a range of services designed to help
         integrate our products into our customers' systems. This support
         includes engineering consultation with every developer kit purchase,
         customer satisfaction and quality control programs, and in some cases
         complete turn-key solutions for large projects.

         Sales and Marketing

         We believe we are positioned to capitalize on trends in many targeted
         segments of the telemetry market (including, without limitation, fast
         food services equipment, facilities management, asset management and
         security systems) through our ability to penetrate and establish a
         market presence with products and services designed to meet
         industry-specific needs. Our marketing strategy hinges on our
         establishing a strong reputation as a provider of reliable and
         technologically superior wireless Internet-based telemetry services to
         a diverse customer base. To achieve our goals of substantial growth and
         penetration of our target markets, we have developed a strategic
         marketing plan that provides for the development and expansion of
         long-term sales channels through which we can sell our X-traWeb
         solutions well into the future.

         Our marketing strategy involves a combination of in-house sales and
         marketing experts, authorized agents, strategic marketing alliances,
         joint-ventures and direct sales. These will be enhanced and supported
         by secondary direct marketing, advertising, promotions and public
         relations efforts.

         Direct Sales Organization

         During the early launch stages of our sales efforts, our senior
         management is directly participating, as well as providing overall
         management for, in the sale of our X-traWeb solutions. A target market
         oriented, direct sales management organization has been established to
         manage separate marketing teams which have responsibility for specific
         industry sectors. The core team will also manage the activities of
         outside marketing partners, including value-added resellers and
         information technology consultants. We also engaged independent
         commission agents to market our products in the energy and other
         targeted markets.

         As we expand our operations, we plan to hire additional sales
         personnel, or engage additional independent commission agents, to cover
         new markets and augment the services of sales and marketing personnel
         in certain larger markets.


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         Strategic Marketing Alliances


         As an integral part of our marketing program, we are establishing
         strategic marketing alliances with outside companies that have strong
         influence within the respective target markets for our X-traWeb
         solutions. We will seek to align ourself with partners that are capable
         of substantially accelerating our penetration of a target market or of
         adding material value to our marketing program through the reduction of
         costs, managerial infrastructure, and other economic advantages. We
         have formulated a sales plan to target and pursue prospective customers
         through organizations such as: management consulting firms, computer
         networking consultants and value-added resellers.

         We are in discussions to form marketing alliances in the residential
         security, facilities management and Internet sectors. Moreover, we have
         formed several such alliances to date in the natural gas and energy
         sectors. Our staff is currently working with Texaco Natural Gas Inc. to
         market our X-traWeb products to customers in the natural gas field. We
         are also working with Cooperative ConNEXTions, LLC to market our
         X-traWeb products and services to rural electrical utilities operating
         in approximately 16 states west of the Mississippi River.

         Our technology offers these co-marketing partners a value-added
         component to the services already being provided to their existing
         customers. These co-marketing partners provide us with a credible
         avenue of introduction to other potential customers for our products
         and services.

         Advertising and Promotions

         An integral part of our long-term marketing plan is the generation of
         awareness within the target markets for our products and services. We
         allocate a portion of our gross revenues toward ongoing advertising,
         promotions, and public relations activities, including direct mail,
         trade print media advertising, trade show participation and sales
         personnel incentives. To reach an even wider audience as we continue to
         develop widespread awareness of our portal and proprietary telemetry
         solutions, we plan to implement an advertising and promotional support
         program designed to:

                  * Establish X-traWeb as a recognized "brand name" that is
         especially familiar to decision-makers within our target markets, and
         synonymous with premier-quality technology and products, highly
         effective services and tangible cost efficiencies;

                  * Enhance our branding efforts through the use of industry
         experts to promote our product and services;

                  * Position our technological capabilities, management,
         products, services and level of support as an industry standard.

                  We also plan to implement advertising in trade publications on
         a regular basis.

         We have appointed a public relations firm, with substantial expertise
         in the information technology industry, to assist us in the development
         and execution of periodic public relations campaigns, including
         campaigns coordinated with new product introductions in existing
         markets and expanded introductions to new markets. We also will
         continue to highlight our activities through editorial inclusion in
         trade publications and national business newspapers.

         We have also allocated promotional funds in our advertising budget for
         our participation in regional, national and international trade shows
         that are conducted for industries that comprise our target markets,
         including telemetry and Internet technology industry trade shows (such
         as the annual CeBit trade show in Hannover, Germany and Comdex in Las
         Vegas, Nevada). We intend to maintain a regular presence at key trade
         shows throughout our development, and use its presence to not only
         attract "typical" customers, but also generate follow-on marketing
         opportunities.

         Research and Development

         We invest significantly in research and development activities. These
         activities consist of proprietary development on our spread spectrum
         radios and X-traWeb solutions.

         We will continue to engage in research and development activities for
         our own products. Current and future projects include new spread
         spectrum transceivers in the 2.4GHz band, improving X-traWeb to enable
         plug-and-play developer kits, improved X-traWeb components such as the
         X-traCam, and similar projects.

         Manufacturing

         Until December 31, 1999, we also performed manufacturing services for
         other manufacturers and vendors of medical, communications, computer
         graphics and consumer electronic products at our Salt Lake City
         manufacturing facility, and sold antennas from our Gonic, New Hampshire
         facility.

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         We discontinued our direct manufacturing operations effective as of
         December 31, 1999, and now conduct our manufacturing activities for our
         own products through third parties (except antennas which we
         manufacture directly).

         Contract Design and Development

         General

         At the present time, we are not seeking design and development service
         contracts except in "partnering" situations in which we would have an
         ownership interest in the products and/or technology which are the
         subject of the contract and which promote the sale of our proprietary
         products, such as our X-traWeb products. For example, we typically
         provide certain engineering services for the application of our
         X-traWeb products for use in a specific application or applications
         desired by a vending machine manufacturer or a manufacturer of
         fast-food restaurant equipment or for installation in the monitoring of
         a gas pipeline or the control system in a refrigeration storage unit or
         office management system.

         Formerly, we were engaged in providing engineering, design and
         development services to client specifications on a fee for services
         basis. Under one significant contract, we developed a low-cost spread
         spectrum technology for use in certain products sold by Kyushu
         Matsushita Electric Co., Ltd. ("KME," which is also known as Panasonic)
         which is more fully described below. We also developed devices for use
         in the automatic meter reading field for Williams Wireless, Inc., a
         wholly owned subsidiary of the Williams Companies. During 1999, we also
         engaged in development work on an asset tracking system for Eagle Eye
         Technologies, a privately-held California based corporation, a
         point-of-sale device for supermarkets for Klever Marketing, Inc., a
         Salt Lake City based publicly held corporation and a remote-controlled
         spa for Len Gordon, Inc.

         Kyushu Matsushita Electric Co. Ltd. (Panasonic) Contract

         In April 1997, we acquired a corporation (by merger in 1997), which
         entered into a contract with Kyushu Matsushita Electric Co., Ltd. to
         develop low cost spread spectrum radio technology for use in certain
         Panasonic products. As part of our development contract with KME, we
         granted KME a world-wide, non-exclusive license to use or authorize the
         use of any patents, copyrights, technical know-how and other
         intellectual property rights embodied in our LCSSR technology in the
         manufacture of KME products, and agreed not to license others to use
         technology which is developed under our contract with KME in connection
         with any telephone-related products for a period of two years from the
         first shipment of KME products using the technology. In consideration
         for these rights and our services, KME agreed to pay royalties to us on
         sales of KME products using the technology above a prescribed minimum
         amount of sales for a period of two years from the initial shipments of
         any such products. No royalty is paid on sales of the first 600,000
         units of product using the technology. A royalty of $1.00 per unit of
         product sold is payable on sales of units 600,001 through 1,000,000.
         Thereafter, the royalty is $.50 per unit on all units sold until the
         second anniversary of the date of the first sale of products using the
         technology.

         During 2000, we recognized $447,049 of royalty income under this
         contract and will not receive any further royalties therefrom since
         such contract expired in September, 2000.

         In 1998, we also entered into an agreement with KME to develop a key
         wireless RF transmitter/receiver utilized in KME's new 5.7GHz
         MicroCast(TM). The MicroCast is a convergence appliance that allows
         home personal computers to distribute and control personal computer -
         based interactive media and Internet content using a standard TV set.
         The MicroCast enables consumers to control their personal computer
         remotely using a keyboard, joystick, and/or mouse from other rooms in
         the home. Two of the three-piece system use our designs for the video
         and audio baseband and the 5.7GHz RF technology, the newest and highest
         performance RF technology available to consumers today.

         Under our MicroCast contract with KME, we received a development fee of
         $50,000, of which the entire amount was paid in 1998, and will receive
         royalty payments for a two-year period commencing on the first
         shipment, which has not yet occurred. A royalty of $1.50 per unit of
         product sold is payable on each unit sold. We do not believe any
         products will be shipped pursuant to this contract and, thus, we do not
         expect to receive any royalties from this source.


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         Competition

         We have a number of current competitors in all aspects of our business,
         many of which have substantially greater financial, marketing and
         technological resources than us, and which include such industrial
         giants as Panasonic, Motorola, Sony and AT&T. We intend to compete in
         our industry by concentrating on certain product or service niches
         within the overall market. However, most of our competitors offer
         products which have one or more features or functions similar to those
         offered by us, and many have the resources available to develop
         products with features and functions, competitive with or superior to
         those offered by us. We cannot assure you that such competitors will
         not develop superior features or functions in their products or that
         the we will be able to maintain a lower cost advantage for our
         products.

         A key element of our competitive strategy is to align ourself with
         major manufacturers by developing proprietary products or technology or
         market leaders that can be incorporated into its "partner
         manufacturers" products. We currently have a marketing alliance with
         Texaco Natural Gas Inc., Cooperative ConNEXTions, LLC to market our
         X-traWeb products in the United States and with Audiotel S.p.A. for
         marketing such products in Italy. We previously licensed low-cost
         spread spectrum technology for use in certain products sold by
         Panasonic (which agreement expired in September, 2000) and entered into
         a VAR Agreement with Motorola, Inc. to sell its MOSCAD Remote Terminal
         Units. We also believe that our agreements with KME (i.e., Panasonic),
         and Motorola, illustrate the manner in which we can "partner" with much
         larger, established companies to access mass markets for our
         proprietary wireless communications products and technology.

         Our management has identified three primary competitors offering either
         telemetry-related products and services or web-enabled technologies:

                  * Spyglass, Inc. which develops software and firmware,
         including web-enabling firmware for embedded microcontrollers;

                  * emWare, a provider of distributed embedded device networking
         software that provides Internet connectivity for any device that scales
         from 8-bit microcontrollers to 32-bit microprocessors; and

                  * Connect One, a developer and manufacturer of Internet
         connectivity solutions that enable devices to connect to the Internet
         without requiring a PC.

                  While each of these companies offers products and/or services
         that have some parallels to those provided by X-traWeb, none currently
         provides, to our knowledge, the type of cost-effective, total solution
         approach that we do. In addition, we believe we combine successfully
         all of the necessary technical elements with the additional capability
         for wireless system integration and communications.

         Employees

         As of December 31, 2000 we had 48 employees. Of these employees, 3 were
         classified as executive, 18 as administrative personnel, 20 as
         engineering, and 7 as sales and marketing. Our employees do not belong
         to a collective bargaining unit, and we are not aware of any labor
         union organizing activity.

         Patents and Intellectual Property

         We believe that reliance upon trade secrets, copyrights and unpatented
         proprietary know-how in conjunction with the development of new
         products is at least as important as patent protection in our business
         since most patents provide fairly narrow protection, and are of limited
         value in areas of rapid technological change. Further, patents require
         public disclosure of information which may otherwise be subject to
         trade secret protection. We presently own two United States patents
         covering antenna technology, and have a United States patent which
         covers "spread spectrum" demodulation technology. "Spread spectrum"
         communication is a method for transmitting and receiving coded
         information which is resistant to interference due to the fact that the
         transmission is spread over a large bandwidth. This method requires,
         however, that both the transmitter and the receiver have the same
         spreading code (i.e., a pre-determined, fixed pattern) used to spread
         the information over the larger bandwidth. The purpose of the
         technology covered by our spread spectrum patent is to recover and
         remove the spreading code from a transmission signal, and thus obtain
         the original information, in a simpler, less expensive manner.


                                       11
<PAGE>   12

         Under the terms of a litigation settlement entered into with a former
         co-venturer, we agreed that our former co-venturer is entitled to full
         and equal ownership with us, of the spread spectrum demodulation
         technology covered by the patent application, including the right to
         incorporate, develop, utilize and exploit the technology. Any uses or
         products developed or derived from such technology, however, shall be
         the sole property of the party which develops or derives such uses or
         products. In addition, if one of the parties elects to prosecute the
         patent application prior to final acceptance or rejection by the U.S.
         Patent Office, failure by the other party to contribute equally to the
         costs of prosecuting the application will result in the loss of its
         rights to the technology. At this time, we do not have any plans to
         prosecute this patent application, and are unaware of any plans by our
         former co-venturer to prosecute the application.

         In addition, during 1998 we filed a United States patent application
         for each of two separate software codes. Furthermore, during 2000, we
         filed at least four U.S. patent applications on various operating
         aspects of the X-traWeb system, although we cannot assure you that any
         patents will be issued to us.

         Williams Wireless, Inc. raised a claim that we violated the
         non-competition provisions of their agreements by allegedly marketing
         X-traWeb(TM) products in the telemetry meter reading applications. We,
         in turn, claimed that Williams Wireless, Inc. failed to satisfy all of
         its duties under its various agreements with us. While we believed that
         Williams' claim was properly disputable, the parties orally agreed to
         enter into a settlement agreement and mutual release. On March 8, 2000,
         before such settlement agreement was concluded, Williams sold
         substantially all of its assets and business, including its agreements
         with us, to an unrelated party, Internet, and thereafter we resolved
         this dispute amicably.

         We and Internet entered into a settlement agreement and mutual release
         dated as of August 7, 2000, which contained the following key elements:

         (a) each party released the other of any claims under the Williams'
         agreements with us, and the parties terminated such agreements in all
         respects;

         (b) we agreed to grant Internet a perpetual, non-exclusive irrevocable
         royalty-free worldwide license to manufacture, use and sell our
         MicroHopper radio, as configured on the date of our agreement, as a
         component of Internet's telemetry systems or products, and to
         manufacture, use and sell such radio only when incorporated into
         Internet's telemetry systems or products;

         (c) each party agreed to allow the other party to resell the other's
         products pursuant to a standard resellers agreement adopted by such
         party; and

         (d) each party agreed to indemnify the other from any claims arising
         under such agreement. We believe that this agreement will have no
         material adverse effect on our business.

         We have not filed any patent applications in foreign countries.

         History

         For a description of our history, our subsidiaries, and predecessors,
         see the prospectus dated February 18, 1998, filed with the Securities
         and Exchange Commission. We formed X-traWeb Inc. as our wholly-owned
         Delaware subsidiary in May 1999.

         ITEM 2.   PROPERTIES

         As of December 31, 2000, our executive offices and principal
         administrative offices are located at 5670 Greenwood Plaza Boulevard,
         Greenwood Village, Colorado in approximately 10,441 square feet of
         space at which is leased at a monthly cost of $18,594 for base rental
         and allocable common area maintenance charges. We also pay for certain
         utility expenses. The five-year lease for these premises expires on
         December 31, 2005.

         We also maintain small leased offices in Overland Park, Kansas of
         approximately 2,850 square feet at a monthly rent of $3,444 and in
         Gonic, New Hampshire of approximately 5,000 square feet at a monthly
         rent of $1,700.

         We believe that our facilities are satisfactory for our present scale
         of operations.

         We have obligations under various equipment leases which are not
         material.

                                       12

<PAGE>   13

         ITEM 3.   LEGAL PROCEEDINGS

         On February 20, 2001 certain parties filed a lawsuit against us with
respect to the purchase of a total of 230,000 shares of our common stock at
$3.00 per share in a private placement transaction in February 2000. The
plaintiffs seek rescission of the transaction and/or damages, including treble
damages, which they allege arise out of our failure to file a registration
statement on or before December 31, 2000. We believe that we have meritorious
defenses to such action and intend to prosecute our defense of the action
vigorously, but there can be no assurance as to the outcome thereof.

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

         No matters were put to a vote of security holders during the fourth
quarter of 2000.

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

         Common Stock

         Our shares of Common Stock are traded on the American Stock Exchange
         under the symbol "XWC". The high and low per share price of the shares
         of our Common Stock and the dividends that were paid thereon for 1999
         and 2000 were as follows:

<TABLE>
<CAPTION>
                          1999                         2000
                ------------------------    ---------------------------
       Quarter  High      Low   Dividend    High        Low    Dividend
       -------  ----     -----  --------    -----      -----   --------
<S>             <C>      <C>    <C>         <C>        <C>     <C>
       1st      2.06      1.75    $0        7.875      2.875      $0
       2nd      1.88      1.50     0        5.25       2.50        0
       3rd      1.69      1.00     0        4.375      2.625       0
       4th      4.31      1.44     0        3.75       1.375       0
</TABLE>

         At December 31, 2000 we had approximately 350 beneficial owners of our
         shares of Common Stock.

         Dividend Policy

         We have not paid any dividends on our shares of Common Stock to date
         and do not anticipate paying any dividends in the foreseeable future.

         Sale of Securities

         We did not sell any shares of our Common Stock during the fourth
         quarter of 2000.

                                       13

<PAGE>   14

ITEM 6.   SELECTED FINANCIAL AND OTHER DATA

         The following table sets forth selected financial and other data of the
Company and should be read in conjunction with the more detailed financial
statements included elsewhere in this Report. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition."

<TABLE>
<CAPTION>
                                                                         December 31,
                                       -----------------------------------------------------------------------------
                                           2000            1999             1998             1997            1996
                                       -----------     -----------      -----------      -----------     -----------
<S>                                    <C>             <C>              <C>              <C>             <C>
Current Assets                         $ 4,151,263     $ 1,960,930      $ 1,725,770      $ 1,529,804     $   328,551

Net Equipment                              575,476         192,252        1,038,645        1,133,263         327,022

Other Assets                               243,149         425,032        1,372,175        7,469,957           7,469
                                       -----------     -----------      -----------      -----------     -----------
Total Assets                           $ 4,969,887     $ 2,578,214      $ 4,136,590      $10,133,024     $   663,042
                                       ===========     ===========      ===========      ===========     ===========
Current Liabilities                    $   944,499     $ 6,087,067      $ 5,053,628      $ 1,815,903     $   203,351

Long-Term Liabilities                        9,633          21,459           84,968           24,275          44,808

Mandatorily Redeemable
 Preferred Stock                                --         950,000               --               --              --

Stockholders' Equity
(Deficit)                                4,015,755      (4,480,312)      (1,002,006)       8,292,846         414,883
                                       -----------     -----------      -----------      -----------     -----------
Total Liabilities and
 Stockholders' Equity
 (Deficit)                             $ 4,969,887     $ 2,578,214      $ 4,136,590      $10,133,024     $   663,042
                                       ===========     ===========      ===========      ===========     ===========
</TABLE>


<TABLE>
<CAPTION>
                                                                For the Years Ended December 31,
                                       ----------------------------------------------------------------------------
                                           2000            1999            1998            1997            1996
                                       ------------    ------------    ------------    ------------    ------------
<S>                                    <C>             <C>             <C>             <C>             <C>
Sales                                  $  1,714,833    $  3,566,307    $  4,309,691    $  2,913,429    $    618,505
Cost of Sales                             1,213,427       2,926,459       3,751,607       2,116,934         662,184
                                       ------------    ------------    ------------    ------------    ------------
Gross Profit (Loss)                         501,406         639,848         558,084         796,495         (43,679)
                                       ------------    ------------    ------------    ------------    ------------

Total Operating Expenses                  5,873,104       9,434,208      14,131,872       8,571,898       1,882,836
                                       ------------    ------------    ------------    ------------    ------------

Net Loss From Operations                 (5,371,698)     (8,794,360)    (13,573,788)     (7,775,403)     (1,926,515)

  Interest expense                         (132,586)     (3,556,097)     (1,813,208)        (43,779)     (1,310,142)
  Other income                              351,227          26,662         343,625           9,692              --
                                       ------------    ------------    ------------    ------------    ------------
Net Loss                                 (5,153,057)    (12,323,795)    (15,043,371)     (7,809,490)     (3,236,657)

Preferred Dividends                           6,400       1,000,658              --              --              --
                                       ------------    ------------    ------------    ------------    ------------

Net Loss Applicable to
 Common Shareholders                   $ (5,159,457)   $(13,324,453)   $(15,043,371)   $ (7,809,490)   $ (3,236,657)
                                       ============    ============    ============    ============    ============


Basic and Diluted Loss
 Per Common Share                      $      (0.18)   $      (0.77)   $      (1.34)   $      (0.85)   $      (1.03)
                                       ============    ============    ============    ============    ============
Weighted Average
 Number of Common
 Shares Used in Per
 Share Calculation                       29,447,488      17,308,258      11,189,603       9,217,158       3,141,613
                                       ============    ============    ============    ============    ============
</TABLE>

                                       14
<PAGE>   15


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

                  When used in this discussion, the words "expect(s)",
"feel(s)", "believe(s)", "will", "may", "anticipate(s)" and similar expressions
are intended to identify forward-looking statements. Such statements are subject
to certain risks and uncertainties, which could cause actual results to differ
materially from those projected. Readers are cautioned not to place undue
reliance on these forward-looking statements, and are urged to carefully review
and consider the various disclosures elsewhere in this Report which discuss
factors which affect our business.

                  The following discussion should be read in conjunction with
our Consolidated Financial Statements and respective notes thereto, and Selected
Consolidated Pro Forma and Historical Financial Data.

RESULTS OF OPERATIONS

2000 to 1999

         We incurred a net loss of $5,159,457 for 2000, or a $.18 loss per
share, compared to a net loss of $13,324,453 or a $.77 loss per share, for 1999.
This represents an improvement in 2000 of $8,164,996, or 61.3%, over 1999
financial results.

         Sales for 2000 totaled $1,714,833 compared to $3,566,307 during 1999,
or a decrease of $1,851,474 or 52%. During the comparative years of 2000 and
1999, we derived our revenue as follows:

<TABLE>
<CAPTION>
                                  For the Year Ended December 31,
                                  -------------------------------
Summary of Revenue by Segment:          2000         1999
                                     ----------   ----------
<S>                                  <C>          <C>
X-traWeb(TM)                         $  450,604   $       --
Radio products                        1,147,571    1,329,242
Corporate                               116,658    2,237,065
                                     ----------   ----------
         Total Revenue               $1,714,833   $3,566,307
                                     ==========   ==========
</TABLE>



         During 2000, we continued to implement our strategic plan to focus our
efforts on the X-traWeb(TM) product line, and abandoned our contract and
in-house manufacturing activities. Of the $450,604 in revenue derived from the
X-traWeb(TM) product line, $243,730 resulted from engineering revenue related to
proof-of-concept and similar development activities. In addition, contract
manufacturing revenue decreased by $2,120,407 or 94.8% as the result of our exit
from this activity.

         Our business strategy continues to include revenue from the production
of radio products, which totaled $690,377 for 2000, compared to $789,167 for
1999, a decrease of $98,790 or 12.5%. Finally, royalties contributed $457,194 of
the $1,147,571 in radio product revenue during 2000, compared to $540,075 for
1999, a decrease of $82,881 or 15%. Since the license agreement with our primary
customer expired by its terms in September, 2000, royalty income dropped sharply
during the fourth quarter of 2000.


                                       15
<PAGE>   16

         During June, 2000, we formed a new operating subsidiary, X-traWeb
Europe S.p.A., based in Milan, Italy. This subsidiary is responsible for the
development and sale of X-traWeb(TM) products through European markets,
commencing with the country of Italy. Only $9,574 in sales had been realized
from the European operation as of December 31, 2000. In addition, we formed two
additional operating subsidiaries, X-traWeb Services Corp. and X-traWeb
Financial Corp. in June 2000, which are designed to offer various services of
X-traWeb products and to provide financing capability of sales of X-traWeb
products or services, respectively, although neither entity derived any revenues
as of December 31, 2000.

         Our cost of sales for 2000 compared to 1999 declined to $1,213,427 in
2000 from a total of $2,926,459 in 1999, or a reduction of $1,713,032 or 58.5%.
The resulting gross profit was $501,406, or 29% of sales, for 2000 compared to
$639,848, or 17.9%, for 1999. This represents an improvement of 11.1% in gross
profit margin percentage for the comparable periods. This improvement is
expected to continue to increase as we shift towards higher profit margin
business.

         Our research and development expenses increased to $1,483,365 from
$1,318,963, or by $164,402, or 12.5%, for the comparable twelve month periods
ended December 31, 2000 versus December 31, 1999. These costs continue to relate
to the ongoing application development of the X-traWeb(TM) propriety technology
in 2000.

         Our total selling, general, and administrative expenses amounted to
$5,895,975 for 2000 compared to $4,657,680 for 1999, representing an increase of
$1,238,295, or 26.6%. Selling and marketing expenses increased by $877,960, or
74%, during 2000 over 1999 and represents a significant increase in advertising,
promotion, and sales related travel to market our X-traWeb((TM)) products as
discussed above. Total general and administrative expenses for the comparable
December 31, 2000 and December 31, 1999 period increased by $360,335, or 10.4%,
and resulted from (1) a decrease in depreciation of $445,472, or 77.7%, and (2)
a savings of $183,000,or 53.7%, in facilities rent due to the termination of the
Salt Lake City lease. These expense savings were substantially offset by (1) an
increase in corporate travel related expenses of $366,460 for promotion of
X-traWeb(TM) products, the opening of the X-traWeb Europe offices, and other
international business opportunities, and (2) increases of $865,864 in
compensation and benefits, new stock exchange fees expense for the American
Stock Exchange of $35,167, and an increase in the provision for doubtful
accounts receivable of $84,339.

         Expenses for 2000 were reduced by $1,677,668 as the result of the
reversal of previously accrued manufacturing exit costs. The favorable
settlement of the lease obligation on our Salt Lake City, Utah manufacturing and
office facilities resulted in a recovery of $1,598,342. An additional $79,326
was recovered as the result of the sale of manufacturing equipment to a third
party. Total manufacturing exit costs recognized in 1999 were $2,615,489.

         Our interest income for 2000 was $337,618 compared to $33,748 for 1999,
with the increase directly attributable to increased available funds in
overnight interest bearing accounts provided by the $13.6 million private
placement of shares of our Common Stock we sold in the first quarter of 2000.
Interest expense declined to $132,586 during 2000 compared to $3,556,097 for
1999, and represents a decrease of $3,423,511, or 96.3%. This expense reduction
is directly related to our retirement of substantially all of our debt, and
related debt discount amortization, in the first quarter of 2000.

1999 Compared to 1998

                  We incurred a net loss of $12,323,795 for 1999 or $.77 loss
per share, compared to a net loss of $15,043,371 or a $1.34 loss per share, for
1998. This represented an improvement in 1999.

                  Sales for 1999 totaled $3,566,307 compared to $4,309,691 of
sales during 1998, or a decrease of $743,384 or 17.2%. During the comparative
years for 1999 and 1998, we derived our revenue as follows:

                                       16
<PAGE>   17


<TABLE>
<CAPTION>
                                        For the Year Ended December 31,
                                        -------------------------------
Summary of Revenue by Segment:                1999         1998
                                          ----------   ----------
<S>                                       <C>          <C>
Radio products                            $1,329,242   $  586,000
Contract and Cable Manufacturing           2,237,065    3,723,691
                                          ----------   ----------
         Total Revenue                    $3,566,307   $4,309,691
                                          ==========   ==========
</TABLE>

                  In 1999, our principal source of resources was from our
contract and cable manufacturing activities, while in 1998 our principal source
of resources was a design and development contract with Williams Telemetry, a
Williams company, in the amount of $2,664,000.

                  Gross profit in 1999 was $639,848 compared to $558,084 during
the comparable period during 1998, which represents 18% and 13% of sales
respectively.

                  We reduced our research and development costs by $1,860,594
from $3,179,557 in 1998 to $1,318,963 in 1999, primarily by reducing the number
of our employees and related expenses. Similarly, we reduced our general and
administrative expenses, including sales and marketing, from $4,975,307 in 1998
to $4,657,680 in 1999, as a result of a reduction in the number of our employees
and related expenses.

                  During the fourth quarter of 1999, we executed a plan to focus
our efforts on the X-traWeb(TM) product line and abandon our contract and
in-house manufacturing activities. As a result of this decision, we recognized
$2,615,489 in manufacturing activity exit costs. These costs consisted of the
impairment of all assets used in the manufacturing process and the remaining
rent obligation of the abandoned Salt Lake City facility. In addition, the
related patents and goodwill associated with our manufacturing activities were
impaired. We terminated our liability for the Salt Lake City facility in the
first quarter of 2000, as discussed above.

                  The amortization of goodwill decreased from $5,977,008 for
1998 to $842,076 for 1999. The decrease was due to the $4,722,425 impairment of
goodwill related to our February 1997 acquisition of Digital Radio
Communications Corporation recognized in the third quarter of 1998, compared to
$641,679 impairment of goodwill related to the October 1997 acquisition of TWC
Ltd., recognized in the fourth quarter of 1999.

                  Our increased interest expense in 1999 was due primarily to
the issuance of the warrants and common stock in connection with our obtaining
the waivers of defaults on the notes payable we issued in 1999.

                  Our interest income resulted from our investing available cash
in overnight interest bearing accounts.

                  During 1999, we issued 950 shares of senior liquidating
mandatorily redeemable 10% preferred stock with a liquidation preference of
$1,000 per share and detachable five-year warrants to purchase 4,750,000 common
shares at $0.25 per share. The issuance of preferred stock with warrants was
accounted for as the granting of a favorable conversion feature to the preferred
stockholders. The value assigned to the warrants was based on the their
intrinsic value but limited to the cash proceeds and the amount of the notes
converted. Since the warrants were immediately exercisable, the resulting
discount to the preferred stock of $950,000 was immediately recognized as a
preferred divided. Additionally, we accrued dividends in the amount of $50,658
as of December 31, 1999.

Liquidity and Capital Resources

                  Our liquidity at December 31, 2000 consisting of cash and cash
equivalents was $3,097,624, which represents an increase of $2,203,775 over our
cash and cash equivalents of $893,849 as of December 31, 1999. Our current
assets were


                                       17
<PAGE>   18

$4,151,263 as of December 31, 2000, an increase of $2,190,333 from our current
assets of $1,960,930 as of December 31, 1999.

                  During the first quarter of 2000, we raised $13,646,000 of new
capital from the sale of shares of our common stock in a private placement
transaction of 45 accredited investors at $3.00 per share. The proceeds of this
offering, net of $1,434,222 in placement fees, amounted to $12,211,778. We also
paid a total of $78,560 in placement fees related to 1999 offerings during this
period. The net proceeds from issuance of the shares of our common stock were
$12,133,218.

                  In March, 2000, we also issued common stock related to the
exercise of warrants to purchase 5,393,690 shares of common stock at $.25 per
share. Proceeds of $401,220 were received in cash and $947,203 was recorded as
capital related to the cashless exercise of warrants by the deemed payment of
principal by reduction of the 1999 notes issued by us. The warrants exercised
totaled $1,348,423.

                  With the proceeds of the $13,646,000 private placement, we
redeemed all of our shares of mandatorily redeemable 10% preferred stock in the
amount of $950,000 plus accrued dividends of $57,378 during the first quarter
of 2000. In addition, we paid off the 1999 notes outstanding with cash in the
amount of $2,377,624 and the cashless exercise of warrants by deemed payment of
principal in the amount of $947,203, as discussed above, and accrued interest
of $35,059, thereby discharging such debt in full.

                  Our liquidity increased slightly due to changes in operating
assets and liabilities during the course of the year 2000. For the year ended
December 31, 2000, the net change in operating assets and liabilities generated
net cash flow of $16,623 compared to a net decrease of cash for the year ended
December 31, 1999 of $1,347,892. The primary reasons for the net increase in
cash flow during 2000 were decreases in accounts receivable levels of $194,978,
which were offset in part by cash flow used to increase inventory by $58,951,
increase pre-paid expenses and other assets by $50,516, and reduce other accrued
liabilities (net of accrued lease obligation terminated during 1999) of $62,129.
For the year ended December 31, 1999 accounts receivable increased and accounts
payable decreased by $413,384 and $434,528, respectively, resulting in total net
cash flow used of $847,912.

SUMMARY

                  During 2000, we implemented our redirection efforts to focus
on the growth of our X-traWeb(TM) business segment and proprietary radio
products. We raised $13,646,000 million in new equity capital, paid off
substantially all outstanding debt, redeemed all mandatorily redeemable
preferred stock outstanding, relocated our corporate headquarters to the Denver,
Colorado area, and exited from all in-house manufacturing activities, including
termination of our lease obligation for facilities in Utah.

                  Also, we realized revenues from the sales of our X-traWeb
products for the first time during 2000 and also signed various marketing
alliance agreements during the year. While we believe that (i) a number of our
pending proposals for projects or products will be accepted in whole or in part,
(ii) we will develop additional sources of sales in the United States, Italy and
other foreign countries and (iii) will derive substantial revenues therefrom in
2001 and thereafter, we cannot assure you that any such sales will be made or
the amount thereof, although we anticipate that X-traWeb(TM) product sales will
constitute the bulk of our revenues during the year 2001 and thereafter. We also
believe that we will derive significant revenues from the sale of our
proprietary radio products in the future, but we cannot assure you as to the
amount of such sales or when such sales will occur. We do not expect the sales
of our antenna products to contribute materially to our consolidated net sales
or income in the foreseeable future.

                  While we recently hired additional engineering personnel, we
believe that the potential growth of current products will require additional
engineering personnel for our X-traWeb(TM) business in advance of the receipt
of substantial revenues from such source. As a result, we will continue to
recruit such personnel actively and expend funds for such purpose.

                                       18
<PAGE>   19

                  Based on our current cash position and our plans for 2001, we
believe that additional capital will be required by May 2001. We have obtained a
financing commitment letter totaling $4,000,000, to be provided as private
equity placements, which management believes will be adequate to fund our
operations in 2001.

                  In summary, while we are optimistic about our future, we are
fully aware that anticipated revenue increases from sales of our X-traWeb(TM)
products and our proprietary radios are by no means assured, and that our
requirements for capital are substantial. If significant revenues with adequate
margins are not generated to supplement the additional financing, we have a
contingency plan to reduce overhead and other operating costs so as to remain a
going concern. These contingency plans, however, would require reductions in
product development and marketing costs, which could impact the timing and
ultimate amount of future revenues.

Statement Regarding Forward-Looking Disclosure

                  This report includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act
which represent our expectations or beliefs concerning future events that
involve risks and uncertainties, including, without limitation, (i) those
associated with our ability to obtain financing for our current and future
operations, to manufacture (or arrange for the manufacturing of) our products,
to market and sell our products, and our ability to establish and maintain our
sales of X-traWeb(TM) products, (ii) general economic conditions and (iii)
technological developments by us, our competitors and others. All statements
other than statements of historical facts included in this Report including,
without limitation, the statements under "Management's Discussion and Analysis
of Results of Operations and Financial Condition" and "Business" and elsewhere
herein, are forward-looking statements. Although we believe that the
expectations reflected in such forward-looking statements are reasonable, we
cannot assure you that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from our
expectations ("Cautionary Statements") are disclosed in this Report, including,
without limitation, in connection with the forward-looking statements included
in this report. All subsequent written and oral forward-looking statements
attributable to us or persons acting on our behalf are expressly qualified in
their entirety by the Cautionary Statements.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

               See Index to Financial Statements, Page F-1

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

               Subsequent to the year ended December 31, 1999, on May 01, 2000,
we appointed Deloitte & Touche LLP to replace Hansen, Barnett & Maxwell as our
independent auditors for the fiscal year ended December 31, 2000.

               The report of Hansen, Barnett & Maxwell on our consolidated
financial statements as of December 31, 1999 and for each of the two years in
the period ended December 31, 1999 contained no adverse opinion or disclaimer
of opinion and was not qualified or modified as to uncertainty, audit scope or
accounting principle.

               The decision to engage Deloitte & Touche LLP as our independent
auditors was approved by our board of directors, and by the Audit Committee.

               In connection with the audit for the year ended December 31,
1999, and through May 1, 2000, we have had no disagreements with Hansen,
Barnett & Maxwell on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of Hansen, Barnett & Maxwell
would have caused it to make reference thereto in its report on the
consolidated financial statements for such year.

                                       19
<PAGE>   20

                                  PART III.

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

                  Our executive officers and directors at December 31, 2000 were
as follows:

<TABLE>
<CAPTION>
   Name                Age                     Position
   ----                ---                     --------
<S>                     <C>       <C>
David D. Singer         51        Chairman of the Board of Directors,
                                  President, Chief Executive Officer
                                  and a Director

Charles Taylor          51        Director

Malcolm P. Thomas       50        Director


Donald I. Wallace       56        Director, Executive Vice President
                                  and President of X-traWeb, Inc.

M. Robert Carr          57        Director

Roger D. Leclerc        50        Vice President and Chief Financial Officer(2)
</TABLE>

         David D. Singer - Mr. Singer was appointed our President in November
1996, and became one of our Directors in February 1997. From 1977 to 1983, Mr.
Singer was President of CSL Energy Controls, Inc., a company specializing in
third party energy conservation. From 1983 to 1985, Mr. Singer was a special
consultant to the General President of the Sheetmetal Workers Association. From
1985 to 1988, Mr. Singer was Vice President First Municipal Division, Bank One
Leasing Corporation. From 1989 to 1994, Mr. Singer was President of Highland
Energy Group. From 1991 to 1996, Mr. Singer was employed by Navtech Industries,
Inc., an electronic assembly company, as Vice President Sales and Marketing from
February 1994 to July 1995, and as President and Chief Operating Officer from
July 1995 to July 1996.

         Charles Taylor - Mr. Taylor was elected one of our Directors in July,
1999 and was elected as a member of our Audit, Compensation and Stock Option
Committees on November 11, 1999. During the period from 1995 through December
31, 2000, Mr. Taylor was a senior investment advisor with Amerindo Investment
Advisors based in New York City and is a senior member of a team that manages
approximately $4 billion in growth portfolios, including the Amerindo Technology
Fund. Prior to such period, Mr. Taylor served as a technology analyst with
several major investment banking firm. Mr Taylor is now self-employed.

         Donald I. Wallace - Mr. Wallace was appointed our Executive Vice
President -- Telemetry and SCADA (i.e., Systems Control and Data Access)
Division in January 1998, became the President of our subsidiary X-traWeb, Inc.,
in May, 1999 and was elected as a Director in April, 1999. Prior to his
employment by us, Mr. Wallace was employed from December 1995 as President of
PrimeLink, Inc., a Lenexa, Kansas company, which Mr. Wallace founded to engage
in the development and marketing of wireless telemetry products for remote meter
reading. Between September 1991 and November 1995, Mr. Wallace was employed as
the President of Arcom Control Services, Inc., which developed and marketed
computer-based monitoring and control products for the oil and gas industry.

         Malcolm P. Thomas - Mr. Thomas was elected one of our Directors
effective September 2, 1999 and was elected as a member of our Audit Committee
on November 11, 1999 and of our Compensation and Stock Option Committees on
January 20, 2000. During the period from 1991 to December 31, 2000, Mr. Thomas
was the Director of Operations and Marketing at Fluor Global Services, Inc., a
wholly-owned subsidiary of Fluor Corporation (a New York Stock Exchange
company), having been promoted from Manager of Marketing Services and operation
in the Western United States for his corporation. Commencing in January, 2001,
Mr Thomas has been the Executive Vice President and General Manager of Building
Technology Engineers, a joint venture subsidiary of EMCOR Group and CB Richard
Ellis.

         M. Robert Carr - Mr. Carr was elected one our Directors on April 26,
2000 and was elected as a member of our Audit Committee on such date. During the
period

---------
(1) Mr. Leclerc resigned from us as an officer and employee in March, 2001. We
named Robert Hathaway as Vice-President-Finance and Chief Financial Officer on
February 23, 2001.

                                       20
<PAGE>   21


from 1995 to the present, Mr. Carr has served as a principal of the Carr
Company, a management and policy consulting from based in Washington, D.C.
Mr. Carr's current clients include General Motors Corp. and United Airlines.
Previously Mr. Carr served as a United States Congressman from the State of
Michigan during the period from 1975 to 1993. There he served as Chairman of the
House Transportation Subcommittee. He also served on the House Armed Services,
Judiciary and Interior and Insular Affairs Committees.

         Roger D. Leclerc - Mr. Leclerc joined the Company in February 2000 and
was appointed our Vice President and Chief Financial Officer on April 21, 2000.
Prior to joining us and since 1992, Mr. Leclerc served as the Manager of
Development and Asset Disposition, Western Region for United Artist Theater
Circuit, Inc., where he was responsible for evaluating and developing new
theater projects and developed and implemented exit strategies for
non-performing theater projects. Mr. Leclerc has 20 years of diverse experience
in project management and finance administration, including consulting for
diverse corporations. He continues to serve as a director and adviser on the
board of directors of two public companies and as treasurer of the Black Hawk
Gaming Association. Mr. Leclerc has also served on numerous local government
organizations as an adviser and director. Mr. Leclerc resigned as an officer and
employee in March, 2001.


ITEM 11.  EXECUTIVE COMPENSATION

                  The table below sets forth information concerning compensation
paid in 1998, 1999 and 2000 to David D. Singer, our Chairman, President and
Chief Executive Officer, and Donald I. Wallace, our Executive Vice President,
Telemetry and SCADA and the President of X-traWeb, Inc., a wholly owned
subsidiary. Except as set forth in the table, none of our executive officers
received compensation of $100,000 or more in 2000.


                           Summary Compensation Table
<TABLE>
<CAPTION>
                                      Annual Compensation             Long-Term Compensation
                                  -----------------------------  --------------------------------
                                                                       Awards            Payouts
                                                                 ---------------------  ---------
                                                      Other      Restricted                             All
Name and                                              Annual        Stock     Options     LTIP         Other
Principal Position         Year    Salary   Bonus  Compensation   Awards ($)  /SARs(#)  Payouts($)  Compensation
------------------         ----   --------  -----  ------------  -----------  --------  ----------  ------------
<S>                        <C>    <C>       <C>    <C>           <C>          <C>       <C>         <C>
David D. Singer(1)(2)      2000   $205,571    --        --            --            --      --
President                  1999    151,653    --        --            --       400,000      --
                           1998    143,530    --        --            --            --      --

Donald I. Wallace(1)(2)    2000    148,052    --        --            --            --      --
President, X-traWeb, Inc.  1999    127,993    --        --            --       220,000      --
                           1998    124,809    --        --            --            --      --
</TABLE>


---------

(1) Neither Mr. Singer nor Mr. Wallace received compensation reportable as
"Other Annual Compensation" which exceeded 10% of his salary in 2000.

(2) Mr. Singer is the Chairman and Mr. Wallace is the President of X-traWeb,
Inc., our wholly-owned Delaware subsidiary formed in 1999.


                                       21
<PAGE>   22

         The following table sets forth certain information regarding options
owned by Messrs. Singer and Wallace at December 31, 2000:

             Aggregated Option\SAR Exercises in Last Fiscal Year and
                            Options\SAR Values
<TABLE>
<CAPTION>
                                                       Number of Securities Underlying
                                                        Unexercised Options\SARs at          Value of Unexercised
                                                                Fiscal Year-End             In-The-Money Options/SARs
                   Shares Acquired                                    (#)                    At Fiscal Year End ($)
Name               on Exercise (#)  Value Realized($)  Unexercisable       Exercisable    Unexercisable   Exercisable
----               ---------------  -----------------  -------------       -----------    -------------   -----------
<S>                <C>              <C>                <C>                 <C>            <C>             <C>
David D. Singer          --                --            240,000(1)         210,000(2)      $     --            --
Donald I. Wallace        --                --            152,000(3)          68,000(4)      $ 20,000         5,000
</TABLE>


         For the purpose of computing the value of "in-the-money" options at
December 31, 2000 in the above table, the fair market value of a share of our
Common Stock at December 31, 2000 is deemed to be $1.91 per share, which was the
average of the high and low prices of such shares on the American Stock Exchange
on such date.

----------

(1) The stock options are exercisable as follows: 80,000 shares on November 11,
2001, 80,000 shares on November 11, 2002, and 80,000 shares on November 11,
2003.

(2) Options to purchase 50,000 were exercisable as of December 31, 1998 and an
additional 160,000 were exercisable as of December 31, 2000.

(3) One stock option is exercisable as follows: 24,000 shares on November 11,
2001, 24,000 shares on November 11, 2002, and 24,000 shares on November 11,
2003. In addition, another stock option is exercisable as follows: 20,000 on
April 22, 2001, 20,000 on April 22, 2002, 20,000 on April 22, 2003 and 20,000
shares on April 22, 2004.

(4) Options to purchase 68,000 were exercisable as of December 31, 2000.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         (a) Set forth below is information as of December 31, 2000 pertaining
to ownership of the Company's Common Stock, determined in accordance with Rule
13(d)(3) under the Securities and Exchange Act of 1934, by persons known to us
who own more than 5% of our shares of Common Stock:

                                       22
<PAGE>   23

<TABLE>
<CAPTION>
Name and Address of
Beneficial Owner             Number of Shares(1)     Percent of Class(2)
-------------------          -------------------     -------------------
<S>                          <C>                     <C>
Michael Lauer                   7,534,453(3)                23.8
375 Park Avenue
Suite 2006
New York, NY 10022

Lancer Offshore Inc.            4,880,662(4)                15.4
375 Park Avenue
Suite 2006
New York, NY 10022

Lancer Partners LLC               500,000(4)                 1.6
375 Park Avenue
Suite 2006
New York, NY 10022

Lancer Partners, LP             1,805,650(4)                 5.7
375 Park Avenue
Suite 2006
New York, NY 10022

Lancer Voyager                    238,600(4)                   *
375 Park Avenue
Suite 2006
New York, NY 10022

Orbiter Fund Ltd.                 109,600(4)                   *
375 Park Avenue
Suite 2006
New York, NY 10022

RUSP Holdings S.A.              2,500,000(5)                 9.3
C.So. Dante, Turin, Italy

Elkron International S.p.A.       650,000(5)                 2.1
Via Carducci
Turin, Italy

Tanalux S.A.                      350,000(5)                 1.1
5 Rue Emil
Bian L-1235
Luxembourg

Pensionskassee Der Siemens      1,697,994                    5.4
Gesellschaften
c/o Lintheschergasse
Zurich, Switzerland 8001
</TABLE>

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

* Less than one percent.

(1) Unless otherwise indicated, this column reflects shares owned beneficially
and of record and as to which the named party has sole voting power and sole
investment power. This column also includes shares issuable upon the exercise of
options or similar rights which are exercisable within 60 days after December
31, 2000.

(2) In computing the percentage of shares beneficially owned by any person,
shares which the person has the right to acquire upon the exercise of options or
other rights held by such person within 60 days after December 31, 2000 are
deemed outstanding. Such shares are not deemed to be outstanding in computing
the percentage ownership of any other person.

                                       23
<PAGE>   24

(3) Of these shares, none is owned by Mr. Lauer in street name; 2,630,662 are
held directly and of record by Lancer Offshore, Inc., plus 2,250,000 issued as a
result of the exercise of warrants to purchase the same in March, 2000;
1,305,650 are held directly and of record by Lancer Partners, LP, plus 500,000
issued as a result of the exercise of warrants to purchase the same in March,
2000; 500,000 are held directly and of record by Lancer Partners LLC; 238,600
are held directly and of record by Lancer Voyager; and 109,541 are held directly
and of record by The Orbiter Fund Ltd. Mr. Lauer is believed to control the
voting and disposition of these shares and warrants by virtue of being the
investment manager for these entities. He is also the general partner of Lancer
Partners LP and the Manager of Lancer Partners LLC.

(4) Michael Lauer is deemed to be an indirect beneficial owner of these shares.

(5) These three foreign corporations are affiliates of each other.

         (b) Set forth below is information as of December 31, 2000 pertaining
to ownership of our shares of Common Stock by all of our directors and executive
officers:

<TABLE>
<CAPTION>
(i)  Name and Address of                 Number of
     Beneficial Owner                    Shares(1)        Percent of Class(2)
------------------------                 ---------        ------------------
<S>                                      <C>              <C>
David D. Singer, President, Chief        439,500(3)              1.4
Executive Officer and Director
World Wireless Communications, Inc.
5670 Greenwood Plaza Boulevard
Suite 340
Englewood, Colorado   80111

Donald I. Wallace, Executive Vice         92,000                   *
President --Telemetry and SCADA
4412 Orofino Place
Castle Rock, CO 80104

Charles Taylor                            10,000(4)                *
World Wireless Communications, Inc.
5670 Greenwood Plaza Boulevard
Suite 340
Englewood, Colorado 80111

Malcolm P. Thomas                         12,000(4)                *
Building Technology Engineers
1560 Brookhollow Drive
Suite 220
Santa Ana, CA 92705

M. Robert Carr                             9,000(5)
815 Connecticut Avenue, N.W.
Washington D.C. 20006

(ii) All Directors and
     Executive Officers as
     a Group                             562,500                 1.8
</TABLE>


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

         (1) Unless otherwise indicated, this column reflects shares owned
beneficially and


                                       24
<PAGE>   25

of record and as to which the named party has sole voting power and sole
investment power. This column also includes shares issuable upon the exercise of
options or similar rights which are exercisable within 60 days after December
31, 2000.

         (2) In computing the percentage of shares beneficially owned by any
person, shares which the person has the right to acquire upon the exercise of
options or other rights held by such person within 60 days after December 31,
2000 are deemed outstanding. Such shares are not deemed to be outstanding in
computing the percentage ownership of any other person.

         (3) Include 50,000 shares and 160,000 shares issuable upon presently
exercisable and fully vested option granted under our 1997 and 1998 stock option
plans, respectively, but excludes 237,500 shares which he transferred to his
wife in 1999 as part of a divorce settlement.

         (4) Includes 10,000 shares issuable upon the exercise of options
granted in January, 2000, in recognition of services as a director.

         (5) Includes 5,000 shares issuable upon the exercise of options granted
in November, 2000, in recognition of services as a director.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

                  None.



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

a.1.   Consolidated Financial Statements of World Wireless Communications, Inc.
       and Subsidiaries: -- See Index to Consolidated Financial Statements on
       Page F-1.

  2.   Financial Statement Schedules: All schedules are omitted because they
       are not applicable or the required information is shown in the
       consolidated financial statements or notes thereto.

  3.   Exhibits:

         See the Exhibit Index attached hereto.

  b.   Reports on Form 8-K

         None.


                                       25
<PAGE>   26


                                   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.

                                           WORLD WIRELESS
                                           COMMUNICATIONS, INC.
                                           (Registrant)

Dated: April 16, 2001                      By: /s/ David D. Singer
                                               -----------------------------
                                                David D. Singer, Chairman of
                                                the Board of Directors,
                                                President and Chief Executive
                                                Officer

         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>
            Name                        Title                           Date
            ----                        -----                           ----
<S>                              <C>                                <C>
   /s/ David D. Singer           Chairman of the Board              April 16, 2001
   ----------------------        of Directors, President,
      David D. Singer            Chief Executive Officer,
                                 and Director

   /s/ M. Robert Carr            Director                           April 16, 2001
   ----------------------
       M. Robert Carr

   /s/ Charles Taylor            Director                           April 16, 2001
  ----------------------
       Charles Taylor

  /s/ Malcolm P. Thomas          Director                           April 16, 2001
  ----------------------
      Malcolm P. Thomas

  /s/ Donald I. Wallace          Director                           April 16, 2001
  ----------------------
      Donald I. Wallace

  /s/ Robert Hathaway            Vice President - Finance and
  -----------------------        Chief Financial Officer,           April 16, 2001
      Robert Hathaway            (Principal Financial Officer
                                 and Principal Accounting Officer)
</TABLE>

<PAGE>   27


                  WORLD WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARIES

                                    TABLE OF CONTENTS



<TABLE>
<CAPTION>
                                                                           PAGE
                                                                           ----
<S>                                                                        <C>
Report of Independent Auditors                                              F-2

Report of Independent Certified Public Accountants                          F-3

Consolidated Balance Sheets - December 31, 2000 and 1999                    F-4

Consolidated Statements of Operations for the Years Ended
December 31, 2000, 1999, and 1998                                           F-5

Consolidated Statements of Stockholders' Equity (Deficit) for
the Years Ended December 31, 1998, 1999 and 2000                            F-6

Consolidated Statements of Cash Flows for the Years Ended
December 31, 2000, 1999, and 1998                                           F-7

Notes to Consolidated Financial Statements                                  F-8
</TABLE>


<PAGE>   28


INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
World Wireless Communications, Inc.
Greenwood Village, Colorado

We have audited the accompanying consolidated balance sheet of World Wireless
Communications, Inc. (the Company) and subsidiaries as of December 31, 2000, and
the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for the year 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 audit.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of World Wireless Communications, Inc.
and subsidiaries as of December 31, 2000, and the results of their operations
and their cash flows for the year ended December 31, 2000, in conformity with
accounting principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP
Denver, Colorado
April 9, 2001


                                       F-2


<PAGE>   29


    HANSEN, BARNETT & MAXWELL
   A Professional Corporation
  CERTIFIED PUBLIC ACCOUNTANTS



                                                         (801) 532-2200
      Member of AICPA Division of Firms              Fax (801) 532-7944
             Member of SECPS                    345 East Broadway, Suite 200
 Member of Summit International Associates     Salt Lake City, Utah 84111-2693
                                                        www.hbmcpas.com

          REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


          To the Board of Directors and the Stockholders
          World Wireless Communications, Inc.

          We have audited the accompanying consolidated balance sheet of World
          Wireless Communications, Inc. and subsidiaries ("the Company") as of
          December 31, 1999, and the related consolidated statements of
          operations, stockholders' equity (deficit), and cash flows for each of
          the two years in the period ended December 31, 1999. 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 audits to obtain reasonable assurance about
          whether the financial statements are free of material misstatement. An
          audit includes examining, on a test basis, evidence supporting the
          amounts and disclosures in the financial statements. An audit also
          includes assessing the accounting principles used and significant
          estimates made by management, as well as evaluating the overall
          financial statement presentation. We believe that our audits provide a
          reasonable basis for our opinion.

          In our opinion, the consolidated financial statements referred to
          above present fairly, in all material respects, the financial position
          of World Wireless Communications, Inc. and subsidiaries as of December
          31, 1999, and the results of their operations and their cash flows for
          each of the two years in the period ended December 31, 1999, in
          conformity with accounting principles generally accepted in the United
          States.

                                       HANSEN, BARNETT & MAXWELL

          Salt Lake City, Utah
          March 15, 2000


                                F-3

<PAGE>   30
              WORLD WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                            December 31,
                                                    ----------------------------
                                                         2000            1999
                                                    ------------    ------------
<S>                                                 <C>             <C>
                                     ASSETS
  Current Assets
    Cash                                            $  3,097,624    $    893,849
    Investment in securities available for sale           19,109         130,403
    Trade receivables, net of allowance for
     doubtful accounts                                   347,218         723,355
    Other receivables                                     57,345             584
    Inventory                                            558,076         201,815
    Prepaid expenses                                      71,891          10,924
                                                    ------------    ------------
     Total Current Assets                              4,151,263       1,960,930
                                                    ------------    ------------
  Equipment, net of accumulated depreciation             575,475         192,252
                                                    ------------    ------------
  Goodwill, net of accumulated amortization              214,286         385,718
                                                    ------------    ------------
  Other Assets, net of accumulated amortization           28,863          39,314
                                                    ------------    ------------
  Total Assets                                      $  4,969,887    $  2,578,214
                                                    ============    ============

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

  Current Liabilities
    Trade accounts payable                          $    540,899    $    547,978
    Accrued liabilities                                  371,149         338,112
    Other liabilities                                     13,077              --
    Accrued lease obligation on abandoned
     office and manufacturing facility                        --       1,756,924
    Notes payable                                             --       3,324,827
    Obligations under capital lease -
     current portion                                      19,374         119,226
                                                    ------------    ------------
     Total Current Liabilities                           944,499       6,087,067
                                                    ------------    ------------
  Long-Term Obligations Under Capital Lease                9,633          21,459
                                                    ------------    ------------
  Mandatorily Redeemable 10% Preferred Stock -
   $0.001 par value; 1,000,000 shares authorized;
   950 shares designated mandatorily redeemable;
   0 and 950 shares issued and outstanding;
   liquidation preference of $1,000,658                       --         950,000
                                                    ------------    ------------
  Stockholders' Equity (Deficit)
  Common stock - $0.001 par value; 50,000,000
    shares authorized; issued and outstanding:
    31,208,847 shares in 2000 and 21,250,015
    shares in 1999                                        31,209          21,250

   Additional paid-in capital                         48,901,546      35,242,864
   Unearned compensation                                 (16,072)        (48,294)
   Receivable from shareholders                               --         (66,828)
   Accumulated deficit                               (44,844,164)    (39,684,707)
   Accumulated other comprehensive income (loss)         (56,764)         55,403
                                                    ------------    ------------
     Total Stockholders' Equity (Deficit)              4,015,755      (4,480,312)
                                                    ------------    ------------
  Total Liabilities and Stockholders' Equity
                                                    $  4,969,887    $  2,578,214
                                                    ============    ============
</TABLE>

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


                                       F-4
<PAGE>   31



              WORLD WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS



<TABLE>
<CAPTION>
                                              For the Years Ended December 31,
                                       --------------------------------------------
                                            2000            1999            1998
                                       ------------    ------------    ------------
<S>                                    <C>             <C>             <C>
Revenues from Services                 $    360,388    $    867,451    $  3,009,416

Sales of Products                         1,354,445       2,698,856       1,300,275
                                       ------------    ------------    ------------
Total Sales                               1,714,833       3,566,307       4,309,691

Cost of Sales                             1,213,427       2,926,459       3,751,607
                                       ------------    ------------    ------------
Gross Profit                                501,406         639,848         558,084

Operating Expenses
 Research and development                 1,483,365       1,318,963       3,179,557
 General and administrative               5,895,975       4,657,680       4,975,307
 Manufacturing activity exit costs       (1,677,668)      2,615,489              --
 Impairment of goodwill and patents              --         641,679       4,722,425
 Amortization of goodwill                   171,432         200,397       1,254,583
                                       ------------    ------------    ------------
   Total Operating Expenses               5,873,104       9,434,208      14,131,872
                                       ------------    ------------    ------------
Loss From Operations                     (5,371,698)     (8,794,360)    (13,573,788)

Other Income (Expense)
 Interest expense                          (132,586)     (3,556,097)     (1,813,208)
 Other income                               351,227          26,662         343,625
                                       ------------    ------------    ------------
Net Loss                                 (5,153,057)    (12,323,795)    (15,043,371)

Preferred Dividends                           6,400       1,000,658              --
                                       ------------    ------------    ------------
Loss Applicable to Common Shares       $ (5,159,457)   $(13,324,453)   $(15,043,371)
                                       ============    ============    ============
Basic and Diluted Loss Per
Common Share                           $      (0.18)   $      (0.77)   $      (1.34)
                                       ============    ============    ============
Weighted Average Number of Common

Shares Used in Per Share Calculation     29,447,488      17,308,258      11,189,603
                                       ============    ============    ============
</TABLE>


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


                                     F-5

<PAGE>   32


              WORLD WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
                                                                               Unearned                                  Total
                                             Common Stock       Additional   Compensation                  Other      Stockholders'
                                         ---------------------    Paid-In        and       Accumulated  Comprehensive    Equity
                                           Shares      Amount     Capital     Receivable      Deficit      Income      (Deficit)
                                         ----------  ---------  -----------  ------------  -----------  ------------- -------------
<S>                                      <C>         <C>        <C>          <C>           <C>          <C>           <C>
Balance - December 31, 1997              10,225,260     10,225   20,915,068   (1,428,918)  (11,316,883)    113,354       8,292,846
                                                                                                                       -----------
Comprehensive Loss:
 Net loss                                        --         --           --           --   (15,043,371)         --     (15,043,371)

 Decrease in unrealized gain
  on securities                                  --         --           --           --            --     (50,706)        (50,706)
                                                                                                                       -----------
   Comprehensive Loss for the Year                                                                                     (15,094,077)
                                                                                                                       -----------
Compensation related to grant of
 stock options                                   --         --      463,180     (463,180)           --          --              --
Repurchase of stock options                      --         --     (903,619)     903,619            --          --              --
Amortization of unearned compensation            --         --           --      899,553            --          --         899,553

Shares issued for cash                    2,721,258      2,721    2,410,353           --            --          --       2,413,074

Beneficial conversion feature of
 notes payable                                   --         --      374,172           --            --          --         374,172

Exercise of stock options for cash and
 a promissory note                          435,051        435      191,307      (48,420)           --          --         143,322

Shares issued for services                  443,831        444      404,587           --            --          --         405,031

Acquisition of technology                    65,000         65      324,935           --            --          --         325,000

Shares and warrants issued for interest      30,000         30    1,239,043           --            --          --       1,239,073
                                         ----------     ------  -----------   ----------  ------------    --------     -----------
Balance - December 31, 1998              13,920,400     13,920   25,419,026     (137,346)  (26,360,254)     62,648      (1,002,006)
                                                                                                                       -----------
Comprehensive Loss:
 Net loss                                        --         --           --           --   (12,323,795)         --     (12,323,795)
 Decrease in unrealized gain
   on securities                                 --         --           --           --            --      (7,245)         (7,245)
                                                                                                                       -----------
   Comprehensive Loss for the Year                                                                                     (12,331,040)
                                                                                                                       -----------
Compensation relating to the grant of
 stock options                                   --         --       86,388       22,224            --          --         108,612

Shares issued for cash                    5,612,000      5,612    5,018,661           --            --          --       5,024,273

Conversion of note payable and
 accrued interest                           893,698        894      892,804           --            --          --         893,698

Beneficial conversion feature of
 note payable                                    --         --       81,517           --            --          --          81,517

Shares issued for services                  120,841        121      231,265           --            --          --         231,386

Shares and warrants issued for defaults
 and interest on notes payable              450,000        450    2,075,032           --            --          --       2,075,482

Warrants issued for services                     --         --      425,155           --            --          --         425,155

Exercise of warrants for cash               253,077        253       63,016           --            --          --          63,269

Preferred dividends                              --         --           --           --    (1,000,658)         --      (1,000,658)
Warrants granted on issuance of
 preferred stock                                 --         --      950,000           --            --          --         950,000
                                         ----------     ------  -----------   ----------  ------------    --------     -----------
Balance - December 31, 1999              21,250,016     21,250   35,242,864     (115,122)  (39,684,707)     55,403      (4,480,312)

Comprehensive Loss:
 Net loss                                        --         --           --           --    (5,153,057)         --      (5,153,057)

 Decrease in unrealized gain
   on securities                                 --         --           --           --            --     (102,236)      (102,236)

 Adjustment from foreign currency
  translation                                    --         --           --           --            --       (9,931)        (9,931)
                                                                                                                       -----------
   Comprehensive Loss for the Year                                                                                      (5,265,224)
                                                                                                                       -----------
Compensation relating to the grant of
 stock options                                   --         --      163,968           --            --          --         163,968

Shares issued for cash, net of placement
 fees of $1,512,782                       4,548,667      4,549   12,128,669           --            --          --      12,133,218

Exercise of warrants                      5,393,690      5,394    1,343,029           --            --          --       1,348,423

Cashless exercise of stock options           16,474         16       23,016           --            --          --          23,032

Preferred dividends                              --         --           --           --        (6,400)         --          (6,400)

Amortization of unearned compensation
  and write-off of receivable of $66,828         --         --           --       99,050            --          --          99,050
                                         ----------     ------  -----------   ----------  ------------    --------     -----------
Balance - December 31, 2000              31,208,847    $31,209  $48,901,546   $  (16,072) $(44,844,164)   $(56,764)    $ 4,015,755
</TABLE>

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

                                       F-6

<PAGE>   33


              WORLD WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                         FOR THE YEARS ENDED DECEMBER 31,
                                                   --------------------------------------------
                                                        2000            1999            1998
                                                   ------------    ------------    ------------
<S>                                                 <C>            <C>             <C>
Cash Flows From Operating Activities
  Net loss                                          $(5,153,057)   $(12,323,795)   $(15,043,371)
  Adjustments to reconcile net loss to net
   cash used by operating activities:
    Amortization of goodwill                            171,432         200,397       1,254,583
    Impairment of goodwill and patent                        --         641,679       4,722,425
    Depreciation and amortization                       127,813         874,400         686,121
    Manufacturing activity exit costs                (1,974,978)      2,615,489              --
    Amortization of debt discount and financing              --              --         542,408
    Interest paid with stock and stock warrants              --       2,582,154         331,827
    Purchased research and development                       --              --         325,000
    Stock issued for services                           163,968         231,386         397,292
    Compensation from stock options granted              32,222         108,612         899,552
    Compensation from exercise of options                23,032              --              --
    Realized gain on securities held for sale            (7,007)             --              --
    Write-off of receivable from shareholder             66,828              --              --
    Provision for doubtful accounts receivable          124,397          42,772         295,504
    Beneficial conversion feature granted                    --              --         413,563
    Gain on sale of business assets                          --              --        (332,751)
    Changes in operating assets and liabilities:
     Accounts receivable                                194,978        (413,384)       (332,314)
     Inventory                                          (58,951)        (57,042)       (109,182)
     Accounts payable                                    (6,759)       (434,528)        509,631
     Accrued liabilities                                (62,129)       (580,008)        467,140
     Other                                              (50,516)        137,070         261,441
                                                   ------------    ------------    ------------
    Net Cash and Cash Equivalents Used By
     Operating Activities                            (6,408,727)     (6,374,798)     (4,711,131)
                                                   ------------    ------------    ------------
Cash Flows From Investing Activities
  Payments for the purchase of property
   and equipment                                       (526,265)       (128,461)       (247,457)
  Proceeds from sale of business assets
   and property                                          94,875           4,359         394,499
  Proceeds from sale of marketable
   securities                                            16,065              --              --
                                                   ------------    ------------    ------------
    Net Cash and Cash Equivalents (Used By)
     Provided By Investing Activities                  (415,325)       (124,102)        147,042
                                                   ------------    ------------    ------------
Cash Flows From Financing Activities
  Proceeds from issuance of common stock             12,133,218       5,024,273       2,564,137
  Proceeds from borrowings, net of discount                  --       2,480,000       2,900,000
  Proceeds from issuance of mandatorily
   redeemable preferred stock                                --         700,000              --
  Redemption of preferred stock                        (950,000)             --              --
  Payment of preferred dividends                        (57,378)             --              --
  Proceeds from exercise of warrants                    401,220          63,269              --
  Principal payments on obligation under
   capital lease                                       (111,678)       (159,909)       (108,088)
  Principal payments on notes payable                (2,377,624)     (1,329,781)       (395,297)
                                                   ------------    ------------    ------------
    Net Cash and Cash Equivalents Provided
     By Financing Activities                          9,037,758       6,777,852       4,960,752
                                                   ------------    ------------    ------------
Effect of Exchange Rate on Cash and
 Cash Equivalents                                        (9,931)             --              --
                                                   ------------    ------------    ------------
Net Increase In Cash and Cash Equivalents             2,203,775         278,952         396,663

Cash and Cash Equivalents - Beginning of Year           893,849         614,897         218,234
                                                   ------------    ------------    ------------
Cash and Cash Equivalents  - End of Year           $  3,097,624    $    893,849    $    614,897
                                                   ============    ============    ============
</TABLE>

   Supplemental cash flow information and non-cash investing and
   financing activities - Note 8

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


                                       F-7

<PAGE>   34

              WORLD WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT

                               ACCOUNTING POLICIES

ORGANIZATION AND NATURE OF BUSINESS - World Wireless Communications, Inc. and
its subsidiaries (collectively, "the Company") design and develop wired and
wireless communications technology, systems and products. The Company has
developed a web-enabling technology known as X-traWeb(TM). The Company's primary
efforts are on marketing and further enhancing X-traWeb. Through December 1999,
the Company also provided contract manufacturing services to the electronics
wireless communications industry, as well as engineering and products related to
supervisory control and data acquisition (commonly known as SCADA) technologies.
During the fourth quarter of 1999 the Company executed a plan to exit activities
related to contract and in-house manufacturing.

         During the year ended December 31, 2000, the Company used approximately
$6.4 million of cash in operations, as it exited from in-house manufacturing
activities, relocated to the Denver, Colorado area, and redirected its efforts
to focus on the X-traWeb business opportunity and proprietary radio products.
The Company had its initial revenues from the X-traWeb product in 2000 and cash
will not be required for manufacturing exit costs in 2001. However, the Company
believes that additional capital will be required by May 2001 to finance
operating cash deficits until significant revenues which generate adequate
margins are realized. The Company has obtained a financing commitment totaling
$4 million, to be provided as private equity placements. If significant
revenues with adequate margins are not generated to supplement the additional
financing, the Company has a contingency plan to reduce overhead and other
operating costs so as to remain a going concern. These contingency plans,
however, would require reductions in the product development and marketing
costs, which could impact the timing and ultimate amount of future revenues.

         The Company was formed on November 15, 1995 as a Nevada Corporation.
Its name was changed during January 1998, from Data Security Corporation, to
World Wireless Communications, Inc. During February 1997, the Company acquired
Digital Radio Communications Corp. ("Digital Radio"), and thereby gained wired
and wireless communication technology engineering, design, assembly and
manufacturing capabilities. The results of operations for Digital Radio have
been included in the consolidated operations since February 12, 1997. During
October and November 1997, the Company acquired the Delaware company, TWC Ltd.,
operating under the name Austin Antenna, and the Kansas company, XARC
Corporation. Effective January 1, 1998, all of the subsidiaries of the Company
at that date, except TWC Ltd., were merged into World Wireless Communications,
Inc. During 1998, the Company sold business assets and products relating to a
line of personal computer security products known as SecuriKey. Sales from the
security products were insignificant during 1998 and 1997.

         During June, 2000 we formed a new operating subsidiary, X-traWeb
Europe S.p.A., based in Milan, Italy. This subsidiary is responsible for the
development and sale of X-traWeb(TM) products through European markets. In
addition, we formed two additional operating subsidiaries, X-traWeb Services
Corp. and X-traWeb Financial Corp. in June 2000, which are designed to offer
various services of X-traWeb products and to provide financing capability of
sales of X-traWeb products or services, respectively.

PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of World Wireless Communications, Inc. and its wholly owned
subsidiaries. Intercompany accounts and transactions have been eliminated in
consolidation.

USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts in these financial statements
and accompanying notes. Actual results could differ from those estimates.

CONCENTRATION OF RISK AND SEGMENT INFORMATION - The Company operates solely in
the electronics industry and has assets primarily within the United States. The
concentration of business in one industry subjects the Company to a
concentration of credit risk relating to trade accounts receivable. The Company
generally does not require collateral from its customers with respect to trade
receivables.

                                      F-8

<PAGE>   35

FINANCIAL INSTRUMENTS - The Company has a concentration of risk from cash in
banks in excess of insured limits. The amounts reported as cash, investments in
securities available-for-sale, other receivables, trade accounts payable,
accrued liabilities, accrued lease obligation on abandoned office and
manufacturing facility, notes payable and obligations under capital lease are
considered to be reasonable approximations of their fair values. The fair value
estimates presented herein were based on market information available to
management at the time of the preparation of the financial statements.

TRADE ACCOUNTS RECEIVABLE AND SIGNIFICANT CUSTOMERS - Sales to significant
customers are defined as sales to any one customer which exceeded 10% of total
sales in any of the three reporting years. Sales to significant customers
represented 56%, 52%, and 75% of total net revenue for the years ended December
31, 2000, 1999, and 1998 respectively. Sales to the five significant customers
during each of the years presented were as follows: Customer "A" - $724,083,
$463,041, and $322,387; Customer "B" - $0, $601,606, and $2,739,375; Customer
"C" - $0, $423,090, $148,765; Customer "D" - $0, $363,120,and $0; and Customer
"E" - $240,915, $0, and $0. Sales to significant customers subject the Company
to the risk that the Company may not be able to continue the current level of
sales if there were a loss of a significant customer.

         At December 31, 2000 and 1999, an allowance for doubtful accounts of
$47,179 and $190,328, respectively, was provided against trade and other
receivables. The Company recorded net charge offs of $267,546 for the year ended
December 31, 2000. The charge offs were in settlement of outstanding issues that
had been evaluated in determining the allowance for doubtful accounts as of
December 31, 1999. For the years ended December 31, 2000 and 1999, provisions
for doubtful accounts charged to expense totaled $124,397 and $42,772,
respectively. Trade receivables and the allowance for doubtful accounts are
reviewed periodically and adjusted, accordingly.

INVENTORY - Inventory is stated at the lower of cost or market. Cost is
determined using the first-in, first-out method. In connection with the exit
from contract and in-house manufacturing, the Company recognized a write-down of
inventory of $405,466 to its estimated liquidation value. The write-down was
charged to operations during the year ended December 31, 1999 and is included in
manufacturing activity exit costs. In 2000, $297,310 of the write-down was
reversed following the favorable disposition of the related, impaired inventory
assets at prices higher than originally estimated.

RESEARCH AND DEVELOPMENT EXPENSE - Current operations are charged with all
research, engineering and product development expenses.

GOODWILL AND LONG-LIVED ASSETS - Goodwill and other long-lived assets are
evaluated periodically for impairment when indicators of impairment are present
and undiscounted cash flows estimated to be generated by those assets are less
than their carrying amounts. Goodwill is included along with other assets
acquired as a group when evaluating their recoverability. Impairment losses are
recognized to the extent estimated discounted net future cash flows expected to
be generated from those assets are less than their carrying amounts. Goodwill is
further evaluated separately and impairment losses are recognized for the excess
of the carrying amount of goodwill over management's estimation of the value and
future benefits expected to be realized from the goodwill. In both of these
analyses, significant management judgement is required to evaluate the capacity
of the assets or the acquired business to perform within projections.

         The original amortization periods for goodwill and other intangible
assets are evaluated periodically to determine whether later events and
circumstances warrant revised estimates of their useful lives. If estimated
useful lives are changed, the unamortized cost is allocated to the remaining
periods in the revised useful lives. The Company determines the useful life of
goodwill based upon an analysis of all relevant factors.

         The Company evaluated the recoverability of the long-lived assets and
goodwill recognized in connection with the Digital Radio acquisition during 1998
and with the TWC Ltd. acquisition during the fourth quarter of 1999, and
determined that circumstances indicate an inability to recover their carrying
amount. Accordingly, an impairment loss of $641,679 and $4,722,425 was
recognized during 1999 and 1998, respectively, to adjust the carrying amount of
the long-lived assets and goodwill to their estimated expected discounted net
future cash flows. Based on future expected

                                      F-9

<PAGE>   36

discounted cash flows from the technology acquired from Digital Radio, the value
of the asset group, including goodwill, was reduced at December 31, 1998 to
approximately $900,000 with goodwill comprising $600,000 of that amount. The TWC
Ltd. goodwill was reduced to zero at December 31, 1999.

         The remaining balance of goodwill arose from the acquisitions of
Digital Radio, and is being amortized over a 5-year period from the original
acquisition dates, on a straight-line basis. Amortization expense was $171,432,
$200,397, and $1,254,583 during the years ended December 31, 2000, 1999 and
1998, respectively.

EQUIPMENT - Equipment is stated at cost. Depreciation, including amortization of
leased assets, is computed using the straight-line method over the estimated
useful lives of the equipment, which are three to seven years. Leased equipment
is amortized over the shorter of the useful life of the equipment or the term of
the lease. Depreciation expense was $127,813, $573,285, and $613,240, for of the
years ended December 31, 2000, 1999 and 1998, respectively. Maintenance and
repair of equipment are charged to operations and major improvements are
capitalized. Upon retirement, sale, or other disposition of equipment, the cost
of the equipment and accumulated depreciation are eliminated from the accounts
and gain or loss is included in operations. The cost of equipment was reduced,
as of December 31, 1999, by a $359,822 write-down reserve attributable to the
exit from manufacturing activities.

INVESTMENTS - At December 31, 2000, investment in securities consisted of common
stock of customers classified as available-for-sale and stated at quoted fair
value of $19,109, compared to $130,403 in 1999. The cost of the securities was
$65,938 and $75,000 for 2000 and 1999 respectively. The unrealized loss as of
December 31, 2000 was $46,833 which is shown as a separate component of
stockholders' equity. The change in net unrealized gains on securities during
2000 was a decrease in the holding gain of $102,236. The changes in net
unrealized gains on the securities during the years ended December 31, 1999 and
1998 was $(7,245) and $(50,706), respectively.

SALES RECOGNITION - Sales are recognized upon delivery of products or services
and acceptance by the customer. As a result of design and technology contracts,
the Company has a right to receive royalties which will be recognized upon the
related sales by customers.

STOCK-BASED COMPENSATION - Stock-based compensation to employees is measured by
the intrinsic value method. This method recognizes compensation expense related
to stock options granted to employees based on the difference between the fair
value of the underlying common stock and the exercise price of the stock option
on the date granted. Stock-based compensation to non-employees is measured by
the fair value of the stock options and warrants on the grant date as determined
by the Black-Scholes option pricing model.

INCOME TAXES - The Company provides for income taxes on an assets and
liabilities approach. Deferred tax assets and liabilities are recognized for the
future tax consequences of differences between the carrying amounts of assets
and liabilities in the financial statements and their respective tax bases, and
for net operating loss carryforwards. Valuation allowances are provided for
deferred tax assets if realization is not more likely than not.

LOSS PER SHARE - Basic loss per common share is computed by dividing net loss by
the weighted-average number of common shares outstanding during the period.
Diluted loss per share reflects potential dilution which could occur if all
potentially issuable common shares from stock purchase warrants and options or
convertible notes payable and preferred stock resulted in the issuance of common
stock. For all years presented, diluted loss per share is the same as basic loss
per share because the inclusion of 2,474,729, 7,415,260, and 641,922 potentially
issuable common shares at December 31, 2000, 1999 and 1998, respectively, would
have decreased the loss per share and have been excluded from the calculation.

COMPREHENSIVE INCOME/(LOSS) - Comprehensive income/(loss) provides a measure of
overall Company performance that includes all changes in equity resulting from
transactions and events other than capital transactions.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - The Securities and Exchange
Commission issued Staff Accounting Bulletin No. 101, Revenue Recognition in
Financial Statements on December 3, 1999. This bulletin requires the application
of specific criteria in determination of the timing of revenue recognition in
financial statements and is

                                      F-10

<PAGE>   37

effective for all fiscal years beginning after December 16, 1999. The Company
believes revenue for the year ending December 31, 2000 is recognized in a manner
consistent with the criteria specified in the bulletin.

         The Financial Accounting Standards Board issued FASB No. 133-Accounting
for Derivative Instruments and Hedging Activities which, as amended, is
effective for all fiscal years beginning after June 15, 2000. The statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. The adoption of FASB No. 133 did not have a material impact
on the Company's financial condition or operations.

RECLASSIFICATIONS - Certain prior year amounts have been reclassified to conform
to the current year presentation.

                   NOTE 2--EXIT FROM MANUFACTURING ACTIVITIES

         During the fourth quarter of 1999, the Company executed a plan to focus
its efforts primarily on enhancing and marketing its X-traWeb(TM) products
whereby all contract manufacturing was discontinued, all in-house production
would be outsourced and the Company would move its executive offices to the
Denver, Colorado area. The plan also involved liquidating the Company's raw
materials and work in process inventory and selling all equipment used in
production and contract manufacturing. The Company recognized as exit costs the
related non-cancelable obligation under a lease agreement for office and
manufacturing facilities in Salt Lake City, Utah through 2005. Future minimum
lease payments of $1,756,924 under the lease were charged to operations during
the year ended December 31, 1999.

         The Company completed its relocation to the Denver, Colorado area in
March, 2000. Pursuant to a Lease Termination Agreement, dated May 1, 2000, the
Company paid a $75,000 settlement payment and transferred its security deposit
in the amount of $27,742 to the benefit of a new tenant in the Salt Lake City,
Utah manufacturing and office facilities and the lease agreement was terminated
as of the May 1, 2000 date. Incident to the lease termination, the settlement
funds described above were charged to the outstanding lease liability on the
Company's balance sheet resulting in a remaining liability balance of
$1,598,342. This balance was reversed and credited to operations as
manufacturing exit recoveries income during the six months ended June 30, 2000.

                  NOTE 3--BUSINESS COMBINATION AND ACQUISITIONS

         On November 11, 1997 the Company acquired all of the issued and
outstanding stock of XARC Corporation, a Kansas corporation primarily engaged in
development and sales of wireless technology, by issuing 10,000 shares of
restricted common stock valued at $103,000. XARC had no assets or liabilities
prior to the acquisition. The acquisition was accounted for under the purchase
method of accounting with the purchase price allocated to purchased research and
development and charged against operations at the acquisition date. Results of
operations for XARC are included in the consolidated financial statements from
the date of acquisition.

                                NOTE 4--INVENTORY

         Inventory consisted of the following:

<TABLE>
<CAPTION>
                        December 31,
                    -------------------
                        2000       1999
                    --------   --------
<S>                 <C>        <C>
Materials           $297,147   $     --
Finished goods       260,929    201,815
                    --------   --------
Total               $558,076   $201,815
                    ========   ========
</TABLE>

                                      F-11

<PAGE>   38


                                NOTE 5--EQUIPMENT

         Equipment consisted of the following:


<TABLE>
<CAPTION>
                                  December 31,
                           ---------------------------
                               2000           1999
                           -----------    -----------
<S>                        <C>            <C>
Computer equipment         $ 1,098,980    $   390,047
Manufacturing equipment         22,920        837,099
Office furniture               350,050        204,946
Software                       171,119        151,403
Leasehold improvements          15,000        192,360
                           -----------    -----------
Total                        1,658,069      1,775,855

Accumulated depreciation    (1,082,594)    (1,583,603)
                           -----------    -----------

Net Equipment              $   575,475    $   192,252
                           ===========    ===========
</TABLE>


                              NOTE 6--NOTES PAYABLE

<TABLE>
<CAPTION>
                                          December 31,
                                    -----------------------
                                       2000         1999
                                    ----------   ----------
<S>                                 <C>          <C>
16% senior secured notes payable;
interest payable quarterly;
due May 14, 2000; secured by all
assets                                      --    3,324,827
                                    ----------   ----------
Total Notes Payable                 $       --   $3,324,827
                                    ==========   ==========
</TABLE>


         On May 14, 1999 the Company issued $2,600,000 of senior secured 16%
notes payable which were to mature in one year. The notes were issued for
$2,600,000 consisting of $1,600,000 in cash and the deemed payment of $1,000,000
of principal of the 1998 bridge loan notes. On August 27, 1999, the Company
issued an additional $480,000 of senior secured 16% notes payable for cash in
the amount of $480,000, and on October 11, 1999, the Company issued an
additional $400,000 of senior secured 16% notes payable for cash in the amount
of $400,000 (collectively the "1999 Notes"). The Company paid $155,173 of the
notes during 1999.

         The 1999 Notes were secured by substantially all the Company's assets.
Interest on the notes was payable quarterly. A mandatory pre-payment of
principal equal to 25% of the gross proceeds from any issuance of the Company's
securities was due upon the closing of the issuance. The terms of the notes
stated that the notes would be in default if the reported loss before interest,
depreciation, amortization and taxes exceeded $1,000,000 for the quarter ended
June 30, 1999, or if income as computed above was less than $250,000 or
$1,000,000 for the quarters ended September 30, 1999 or December 31, 1999,
respectively. The notes also would have been in default if the Company failed to
make a mandatory pre-payment of principal from the issuance of the Company's
securities. If the notes were determined to be in default for a quarter the
Company could be required to issue five-year warrants to purchase 300,000 shares
of common stock at $0.25 per share as compensation for the default with respect
to such quarter. The Company was not in compliance with the terms of the notes,
accordingly, for the quarters ended June 30, and September 30, 1999, the Company
accrued $279,555 and $397,647 of interest expense respectively, for such
non-compliance. The interest accrual was valued based upon the value of the
warrants had they been issued on June 30, and September 30, 1999, respectively.
The Company also issued 200,000 shares of common stock as compensation to the
holders of the notes as consideration of extending the interest payment on the
notes to December 31, 1999. The Company recognized $512,000 of interest expense
for the issuance of the 200,000 shares.

                                      F-12

<PAGE>   39

         In March, 2000 the Company paid off the 1999 Notes outstanding with
cash in the amount of $2,377,624 and with the deemed proceeds from the exercise
of warrants to purchase 3,788,813 common shares at $.25 per share. The portion
of the 1999 Notes paid by the exercise of warrants was $947,203. The warrants
exercised are included in the total warrants issued during the three months
ended March 31, 2000 as discussed in Note 11.

                              NOTE 7--INCOME TAXES

         The net loss for 1999 resulted entirely from operations within the
United States. 2000 results include a net operating loss of $229,000 relating to
operations in Italy. There was no provision for or benefit from income tax for
any period, as it is considered to be more likely than not that any benefit
would not be realized during the next fiscal year. The components of the net
deferred tax asset are shown below:

<TABLE>
<CAPTION>
                                    2000            1999
                                ------------    ------------
<S>                             <C>             <C>
Operating loss carryforwards    $ 10,455,000    $  8,018,000
Accrued liabilities and other         43,000         827,000
                                ------------    ------------
Total Deferred Tax Assets         10,498,000       8,845,000
Valuation Allowance              (10,498,000)     (8,845,000)
                                ------------    ------------
Net Deferred Tax Asset          $         --    $         --
                                ============    ============
</TABLE>

         For tax reporting purposes, the Company has net operating loss
carryforwards of approximately $28,000,000 which will expire beginning in the
year 2012. Of this amount, $1,246,871 was from Digital Radio prior to its
acquisition, and the availability of this amount to offset future taxable income
is limited.

         The following is a reconciliation of the amount of tax (benefit) that
would result from applying the federal statutory rate to pretax loss with the
provision for income taxes.

<TABLE>
<CAPTION>
                                   For the Years Ended December 31,
                                -----------------------------------------
                                    2000           1999           1998
                                -----------    -----------    -----------
<S>                             <C>            <C>            <C>
Tax at statutory rate (34%)     $(1,752,000)   $(4,190,000)   $(5,091,000)
Other differences, net              269,000        228,000        288,000
Change in valuation allowance     1,653,000      4,369,000      5,299,000
State tax benefit, net of
 federal tax effect                (170,000)      (407,000)      (496,000)
                                -----------    -----------    -----------
   Net Income Taxes             $        --    $        --    $        --
                                ===========    ===========    ===========
</TABLE>


             NOTE 8--SUPPLEMENTAL CASH FLOW INFORMATION AND NONCASH
                       INVESTING AND FINANCING ACTIVITIES

                      SUPPLEMENTAL CASH FLOW INFORMATION -

<TABLE>
<CAPTION>
                          For the Years Ended December 31,
                          --------------------------------
                            2000        1999       1998
                          --------    --------    --------
<S>                        <C>        <C>         <C>
Interest Paid              209,186    $424,620    $531,247
</TABLE>


                  NONCASH INVESTING AND FINANCING ACTIVITIES -

         In March, 2000 the Company recorded $947,203 related to the cashless
exercise of warrants as a deemed payment of the principal of the 1999 Notes, as
defined in Note 6 - Notes Payable.

                                      F-13

<PAGE>   40

         The Company acquired equipment and incurred obligations under capital
lease agreements during 1999 for equipment acquired valued at $18,000. Two notes
payable totaling $800,000 along with $93,698 of accrued interest were converted
into 893,698 shares of common stock during 1999.

         The Company converted $1,000,000 of its 1998 bridge loan notes into the
16% senior secured notes payable. In addition, $250,000 of the 1998 bridge loan
notes were converted into mandatorily redeemable preferred stock. During 1999,
the Company also canceled $8,449 of the remaining balance of a note issued to an
employee, and returned to the employee the equipment previously purchased from
the employee.

         During 1998, the Company issued stock for notes payable to three
individuals. The total of the notes was $72,852. Interest expense in the amount
of $10,567 was charged on one of these notes. The Company acquired equipment and
incurred obligations under capital lease agreements during 1998 for equipment
valued at $900,993. The Company also purchased equipment for a note in the
amount of $4,278. During 1998, the Company repurchased stock options from
employees and eliminated $903,619 of unamortized compensation relating to the
repurchased unvested stock options. The Company also incurred $392,662 in
compensation expense and $70,518 in unearned compensation by issuing stock
options during 1998.

         The Company sold business assets relating to its SecuriKey products
during 1998. The Company realized proceeds on the sale of $372,499 and
recognized a gain of $319,528. The Company also sold other assets to various
parties during the year. The book value of the assets sold was $16,940. The
Company realized proceeds on the sale of $8,636 resulting in a loss upon
disposal of $13,223.

           NOTE 9--MANDATORILY REDEEMABLE PREFERRED STOCK AND WARRANTS

         On May 14, 1999 the Company authorized 950 shares of senior liquidating
mandatorily redeemable 10% preferred stock with a liquidation preference of
$1,000 per share and detachable five-year warrants to purchase 4,750,000 common
shares at $0.25 per share, and issued such 950 shares of preferred stock and the
related warrants between May 15, 1999 and October 5, 1999. By their terms, the
preferred shares had to be redeemed within one year at their par value plus
accrued dividends. The preferred stock cash dividend requirement was $95,000
annually. The preferred stock was issued for proceeds of $950,000 consisting of
$700,000 cash and the deemed payment of $250,000 principal amount of 1998 bridge
loan notes.

         On February 25, 2000, the Company redeemed the mandatorily redeemable
preferred stock for cash of $950,000 for the principal balance and $57,378 for
the preferred dividends accrued to date.

                             NOTE 10--STOCK WARRANTS

         During 1998, the Company issued warrants to purchase 250,000 common
shares of stock at $3.00 per share to holders of the 1998 bridge loan notes. The
warrants were subsequently repriced to $0.25 per share. An additional 83,333
warrants were issued to the note holders during 1998. The value of the warrants
was estimated on the dates issued and on the dates the warrants were modified
using the Black-Scholes option-pricing model. The Company recognized $1,199,683
of interest expense on the issuance and repricing of the warrants. In addition,
the Company issued 398,000 warrants to purchase common shares at $1.75 to $5.00
per share as financing fees in connection with the issuance of the 1998 bridge
loan notes. Interest expense of $425,155 was recognized on the issuance of the
warrants. During 1999, the Company issued warrants to purchase 4,750,000 shares
of common stock to the purchasers of the Company's preferred stock. The warrants
were valued at $950,000.

         The Company issued warrants to purchase 1,050,000 common shares to the
holders of the 1998 bridge loan notes and the 16% senior secured notes as
satisfaction for the potential defaults on the notes throughout 1999. The
Company recognized $1,313,195 of interest for the warrants issued.

         During the year ended December 31, 1999, 253,077 warrants were
exercised for services rendered to the Company valued at $63,269 or $0.25 per
share.

                                      F-14

<PAGE>   41

         At December 31, 2000, following the exercise of warrants as described
in Note 11 - Stockholder's Equity, warrants to purchase 1,284,570 shares of
common stock were outstanding.

                          NOTE 11--STOCKHOLDERS' EQUITY

         During 1998, the Company issued 502,000 restricted common shares in a
private placement to the major shareholders of the Company for cash in the
amount of $907,767, net of $96,233 in accumulated offering costs, or $2.00 per
share before offering costs. There were no unstated rights or privileges
received with respect to this issuance. The Company issued 2,219,258 shares of
common stock from October 1998 through December 1998 in private placement
offerings for $1,436,047.

         The Company issued 10,000 common shares in conjunction with the
execution of a manufacturing contract during February 1998. The shares were
valued at $75,000 or $7.50 per share, which was the quoted market trading price
on the date of issuance and was considered a preliminary cost of obtaining the
contract. The cost was amortized over the fulfillment of the contract. The
Company also issued 234,283 shares of common stock for legal and consulting
services. An additional 199,546 shares were issued as finders fees and
commissions.

         In May 1998, the Company acquired proprietary intellectual property
rights in and to spread spectrum radio technology which has been accounted for
as purchased research and development. The acquisition of this technology
provided the Company with the ability to modify and update the technology for
use in its radio products and engineering contracts. The purchase price was
$305,651, of which $300,000 was paid by the issuance of 60,000 common shares
valued at $5.00 per share, with the balance being paid in cash for closing and
related costs. Additionally, the Company loaned $66,975 to the seller, of which
$41,975 was paid in cash and carries interest at 10%. The balance of $25,000 was
advanced through the issuance of 5,000 common shares, valued at $5.00 per share,
to two creditors of the seller. The seller executed an unsecured promissory note
which was subsequently written off in June, 2000.

         During 1998, the Company issued 435,051 shares of common stock upon the
exercise of stock options. Proceeds from the issuance were $143,323 and a
promissory note from a shareholder of $48,419. $10,000 of the note has been
received and the Company has charged the shareholder interest of $10,567 on the
note.

         In November 1998, the Company converted $15,123 of accrued interest to
30,000 shares of common stock. This interest was converted to shares at a rate
that was below the market value for the stock. An additional $24,267 of interest
expense was recognized on the conversion of the interest. In association with
the bridge loans discussed in Note 6, $867,856 of interest expense was
recognized and recorded as additional paid-in capital. As a result of obtaining
waivers of default on the bridge loans, additional warrants were issued and the
existing warrants were repriced. This resulted in an additional $184,720 of
interest that was recognized as additional paid-in capital. The total amount of
interest expense that was recorded as additional paid-in capital is $1,091,966.

         During February 1999, the Company issued 2,040,000 common shares for
cash in the amount of $2,040,000 received in a private placement offering. In
connection with the offering, the Company granted options to purchase 200,000
common shares at $1.75 per share within 5 years and issued 8,000 shares of
common stock as a finder's fee. The Company paid $163,200 as a finder's fee in
connection with the private placement. The Company issued 3,538,000 common
shares for cash in the amount of $3,538,000 received in other various private
placement offerings throughout the year. In connection with the offerings, the
Company paid $390,527 and issued 26,000 shares of common stock as finders' fees.

         During March 1999, note holders converted two unsecured promissory
notes totaling $800,000, together with accrued interest, into 893,698 common
shares at $1.00 per share under the terms of a conversion privilege granted to
the note holders in December 1998. At the date of the conversion, the Company
recognized a beneficial conversion feature of $81,517 relating to the conversion
of accrued interest into common stock at a favorable conversion rate.

         During 1999, the Company issued 120,841 restricted common shares for
services valued at $231,386, or $1.91 per share.

                                      F-15

<PAGE>   42

         During 1999, the Company issued 253,077 common shares upon exercise of
warrants for cash in the amount of $63,269 or $0.25 per share and, during August
1999, the Company issued 250,000 common shares to holders of bridge loan notes
in satisfaction of the waivers of default on the notes. The value of the shares
issued on the waiver of default of the bridge loan was $250,000, or $1.00 per
share. During November 1999, the Company issued 200,000 shares of common stock
in satisfaction of the waiver of default and the interest payment. The stock was
valued at $512,000 or $2.56 per share.

         During 1999, Company issued warrants to the holders of the 16% senior
secured loan notes as satisfaction of a waiver of default on the notes. The
Company issued 300,000 warrants on June 30 and again on September 30, 1999, and
recognized $279,555, and $397,647 of interest expense, respectively, from the
issuance of the warrants.

         During April 1999, the Company granted warrants to purchase 100,000
shares of common stock to the holders of the 1998 bridge loan notes. The Company
recognized $170,774 of interest expense from the issuance of the warrants. Also,
on October 1, 1999, the Company granted warrants to purchase 398,000 shares of
common stock to two shareholders for services to the Company. The Company
recognized an expense relating to these services of $425,155 at the date of the
grant.

         During the first quarter of 2000, the Company issued 4,548,667 common
shares for gross cash proceeds of $13,646,000 received from 45 accredited
investors in a private placement offering, at $3.00 per share. These securities
are exempt from registration under the Act. In connection with the offering, a
total of $1,512,782 was incurred as placement costs.

         During March, 2000, the Company issued a total 5,393,690 common shares
related to the exercise of warrants to purchase common stock at $.25 per share.
The Company received $401,220 in cash and recorded $947,203 related to the
cashless exercise of warrants as a deemed payment of the principal of the 1999
Notes, as defined in Note 6 - Notes Payable. The warrants exercised totaled
$1,348,423.

         In March, 2000, the Company issued 16,474 shares of common stock upon
the cashless exercise of 18,333 stock options.

                             NOTE 12--STOCK OPTIONS

         The Company has granted stock options under stock option plans and has
granted other individual options to employees, directors and consultants.

         Under the 1997 Stock Option Plan (the 1997 Plan), options to purchase a
maximum of 1,500,000 common shares were authorized for issuance to officers and
employees. Options to purchase 937,044 common shares were granted under the 1997
Plan on December 18, 1997 with a weighted-average exercise price of $6.50 per
share. The options become exercisable from the date granted through November 10,
1999. The unexercised options were to expire on December 17, 2002. Compensation
relating to the options of $2,108,349, or $2.25 per share, was to be recognized
over the period the options vest, of which $697,840 was recognized during the
fourth quarter of 1997. In April 1998, the Board of Directors approved the
repurchase of 638,236 unvested options under the 1997 Plan for $6,382, or $0.01
per share. The Company recognized compensation expense relating to these options
of $506,890 during 1998. The remaining unearned compensation relative to the
options repurchased was reversed.

         The Company adopted the 1998 Employee Incentive Stock Option Plan and
the 1998 Non-Qualified Stock Option Plan during December 1998. The plans were
ratified by the shareholders in April 1999. Options to purchase up to 2,200,000
and 1,000,000 shares of the Company's common shares are authorized under the
1998 Employee Incentive Stock Option Plan and 1998 Non-Qualified Stock Option
Plan respectively. Options under the plans may be granted to key employees of
the Company including officers, directors and employees. Options granted under
the 1998 Employee Incentive Stock Option Plan are exercisable at the fair value
of the common stock on the date granted (110% of fair value if granted to a
shareholder who owns 10% or more of the total combined voting power of all
classes of stock of the Company). Options may be exercised by payment of cash or
by shares of common stock of the Company. Options granted under the plans are
generally exercisable over three to five years and expire five years from the
date of grant.

                                      F-16

<PAGE>   43

         During 1999, the Company granted 30,000 5-year and 30,000 4-year
options to purchase 60,000 shares of common stock at $1.94 and $2.04 per share,
respectively to Directors. The options were valued at their fair value, which
was $96,214 on the date of the grant. Compensation expense of $51,532 was
recognized on the issuance of the options and $44,682 is being recognized over
the remaining vesting period of the options. The Company also issued 150,000
warrants to purchase common stock to holders of the bridge loan notes for
services rendered. Interest expense of $130,385 was recognized on the issuance
of the warrants.

         A summary of the status of the Company's stock options as of December
31, 2000, 1999 and 1998, and changes during the years then ended are presented
below:

<TABLE>
<CAPTION>
                                           2000                  1999                      1998
                                  --------------------    ------------------       --------------------
                                               Weighted                Weighted                 Weighted
                                               Average                 Average                  Average
                                               Exercise                Exercise                 Exercise
                                  Shares       Price       Shares      Price        Shares      Price
                                  ---------    -------    ---------    --------    ----------   ---------
<S>                               <C>            <C>      <C>          <C>         <C>          <C>
Outstanding at beginning of year  1,020,650      $2.89      641,922    $4.22        1,521,846    $4.33
Granted                             279,659       3.20      837,000     1.98          595,678     5.03
Exercised                           (20,833)      1.41           --       --         (435,051)    0.44
Forfeited or canceled               (89,317)      2.67     (458,272)    3.08       (1,040,551)    6.32
                                  ---------               ---------               ----------
Outstanding at end of year        1,190,159       2.92    1,020,650     2.89          641,922     4.22
                                  =========               =========                ==========
Options exercisable at
 year-end                           555,471       3.73      352,649     4.52          417,900     4.60
                                  =========               =========                ==========
Weighted-average fair value
 of options granted during
 the year                         $    2.71               $    1.55                $    3.86
                                  =========               =========                ==========
</TABLE>

         The following table summarizes information about stock options
         outstanding at December 31, 2000:


<TABLE>
<CAPTION>
                                     Options Outstanding         Options Exercisable
                            ------------------------------------ -------------------
                                                       Weighted-         Weighted-
                                          Average       Average          Average
            Range of                    Contractual     Exercise          Exercise
             Prices           Shares        Life         Price    Shares   Price
         ---------------    ---------   ----------     --------  ------- --------
<S>                         <C>         <C>            <C>       <C>     <C>
         $ 1.31 - $ 1.75      160,000   3.21 years      $ 1.70   106,656  $ 1.70
         $ 2.09 - $ 2.81      642,184   4.51 years        2.20   183,315    2.09
         $ 3.00 - $ 3.40      182,475   4.16 years        3.21    60,000    3.40
         $ 4.00 - $ 4.00       57,500   3.27 years        4.00    57,500    4.00
         $ 6.50 - $ 6.50      128,000   1.15 years        6.50   128,000    6.50
         $12.00 - $12.00       20,000   2.03 years       12.00    20,000   12.00
                            ---------                            -------
         $ 1.31 - $12.00    1,190,159   3.78 years        2.92   555,471    3.73
                            =========                            =======
</TABLE>

         The Company measures compensation under stock-based options and plans
using the intrinsic value method prescribed in Accounting Principles Board
Opinion 25, Accounting for Stock Issued to Employees, and related
interpretations, for stock options granted to employees, and determines
compensation cost granted to non-employees based on the fair value at the grant
dates consistent with the alternative method set forth under Statement of
Financial Accounting Standards No. 123, (SFAS 123) Accounting for Stock-Based
Compensation. Stock-based compensation charged to operations was $219,222,
$108,612, and $899,553, for the years ended December 31, 2000, 1999 and 1998,
respectively. Had compensation cost for all of the Company's options been
determined based upon SFAS 123, net loss and loss per share would have increased
to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                     For the Years Ended December 31,
                                ----------------------------------------
                                     2000         1999          1998
                                -----------   ------------  ------------
<S>                             <C>           <C>           <C>
      Net loss:
           As reported          $(5,153,057)  $(12,323,795) $(15,332,635)
           Pro forma             (5,611,499)   (12,766,433)  (17,506,009)
      Basic and diluted loss
       per common share:
           As reported          $     (0.18)  $      (0.77) $      (1.34)
           Pro forma                  (0.19)         (0.80)        (1.56)
</TABLE>

                                      F-17

<PAGE>   44

         The fair value of each option granted was estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in 2000, 1999, and 1998,
respectively: dividend yield of 0.0% for all years; expected volatility of 143%,
166%, and 105%; risk-free interest rate of 6.0%, 5.6%, and 5.2%; and expected
lives of the options of 4.8 years, 2.0 years, and 4.1 years.

                    NOTE 13 -- BUSINESS SEGMENT INFORMATION

         As of December 31, 2000, the Company's operations are classified into
two reportable business segments: X-traWeb products and radio products.
Corporate in 1999 and 1998 represents primarily contract manufacturing.

         The Company's business was conducted primarily in the United States
during 2000, 1999 and 1998. In 2000 the Company established a European
subsidiary to facilitate international expansion. Less than $10,000 of revenue
was realized from European operations in 2000.

         Segment operating income is total segment revenue reduced by operating
expenses identifiable with or allocable to that business segment. Corporate
includes general corporate assets and assets of business activities no longer
being pursued.

         The Company evaluates performance of its segments based on revenues and
operating income. The accounting policies of the reportable segment are the same
as those described in the summary of significant accounting policies. There are
no intersegment sales.

<TABLE>
<CAPTION>
                              2000            1999           1998
<S>                      <C>             <C>             <C>
Revenues:
X-traWeb                 $    450,604    $         --    $         --
Radio products              1,147,571       1,329,242         586,000
Corporate                     116,658       2,237,065       3,723,691
Total sales              $  1,714,833    $  3,566,307    $  4,309,691

Operating loss:
X-traWeb                 $ (3,593,924)   $   (387,464)   $         --
Radio products             (1,441,430)     (1,358,626)     (1,845,664)
Corporate                    (336,344)     (7,048,270)    (11,728,124)
Total operating loss     $ (5,371,698)   $ (8,794,360)   $(13,573,788)

Assets:
X-traWeb                 $  1,324,821    $         --    $         --
Radio products                642,595         631,627         621,695
Corporate                   3,002,471       1,946,587       3,514,895
Total assets             $  4,969,887    $  2,578,214    $  4,136,590
</TABLE>


                       NOTE 14--RELATED PARTY TRANSACTIONS

         In 2000, the Company deemed a $66,828 receivable from a shareholder to
be uncollectible, and the balance was written off.

                                      F-18

<PAGE>   45

         During 1998, the Company paid outstanding loans to shareholders. The
amount paid on these loans totaled $369,807. In addition, a shareholder and an
employee of the Company made a short-term loan to the Company for $40,000. This
loan was also repaid in 1998.

                     NOTE 15--COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS - The Company leases office facilities and equipment under
agreements accounted for as operating leases. Lease expense attributable to the
years ended December 31, 2000, 1999, and 1998 was $310,338, $342,051, and
$483,456 respectively. Lease expense recognized during 1999 for abandonment of
property with a non-cancelable lease with a lease term ending in August 2005,
was $1,756,924. During 1999 the Company entered into an agreement to lease new
facilities in connection with its new location in the Denver area with the lease
term ending December 2005. The Company also leases engineering and office
equipment under capital leases with interest rates from 8 to 24 percent, with a
weighted average interest rate of 10.16%. The following is a schedule by years
of the future minimum lease payments required under operating and capital leases
together with the present value of net minimum lease payments as of December 31,
2000:

<TABLE>
<CAPTION>
                                              Capital           Operating
            Years Ending December 31,:         Leases             Leases
            --------------------------        --------          ----------
<S>                                           <C>               <C>
                   2001                         21,134             282,732
                   2002                          5,076             242,117
                   2003                          5,076             238,637
                   2004                            423             242,786
                   Thereafter                       --             251,002
                                              --------          ----------
         Total Minimum Lease Payments           31,709          $1,257,274
                                                                ==========
         Less amount representing interest       2,702
                                              --------
         Present Value of Net Minimum Lease
          Payments                              29,007
         Less Current Portion                   19,374
                                             ---------
         Long-Term Obligations Under Capital
          Lease                              $   9,633
                                             =========
</TABLE>

LEGAL MATTERS - During 1999 the Company settled a claim from a software vendor
for a $100,000 cash payment. The claim arose when the Company returned leased
software and requested cancellation of the lease and technical support
agreement. During 1999, the Company also settled a lawsuit brought by an
investment banker and paid $145,000 as settlement expense.

         Williams Wireless, Inc. raised a claim that the Company violated the
         non-competition provisions of their agreements by allegedly marketing
         X-traWeb (TM) products in the telemetry meter reading applications. The
         Company, in turn, claimed that Williams Wireless, Inc. failed to
         satisfy all of its duties under its various agreements with the
         Company. While the Company believed that Williams' claim was properly
         disputable, the parties orally agreed to enter into a settlement
         agreement and mutual release. On March 8, 2000, before such settlement
         agreement was concluded, Williams sold substantially all of its assets
         and business, including its agreements with the Company, to an
         unrelated party, Internet, and thereafter the claims were amicably
         resolved.

         The Company and Internet entered into a settlement agreement and mutual
         release dated as of August 7, 2000, which contained the following key
         elements:

         (a)   each party released the other of any claims under the Williams'
         agreements, and the parties terminated such agreements in all respects;

         (b)   the Company agreed to grant Internet a perpetual, non-exclusive
         irrevocable royalty-free worldwide license to manufacture, use and sell
         the Company's MicroHopper radio, as configured on the date of the
         settlement agreement, as a component of Internet's telemetry systems or
         products, and to manufacture, use and sell such radio only when
         incorporated into Internet's telemetry systems or products;

         (c)   each party agreed to allow the other party to resell the other's
         products pursuant to a standard resellers agreement adopted by such
         party; and

         (d)   each party agreed to indemnify the other from any claims arising
         under such agreement. The Company believes that this agreement will
         have no material adverse effect on our business.

         On February 20, 2001 certain parties filed a lawsuit against the
Company with respect to the purchase of a total of 230,000 shares of common
stock of the Company at $3.00 per share in a private placement transaction in
February 2000.


                                      F-19

<PAGE>   46


The plaintiffs seek rescission of the transaction and/or damages, including
treble damages, which they allege arise out of the Company's failure to file a
registration statement on or before December 31, 2000. The Company believes that
it has meritorious defenses to such action and intends to prosecute its defense
of the action vigorously, but there can be no assurance as to the outcome
thereof.

401K PROFIT SHARING PLAN - The Company sponsors a 401K profit sharing plan but
has no commitment to match employees' contributions to the plan, nor has the
Company made any contributions to the plan to date.

            NOTE 16 -- SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)


<TABLE>
<CAPTION>
                                                 Quarter

                                 1               2              3                4             Year
<S>                       <C>             <C>             <C>                  <C>        <C>
Fiscal 2000
Net sales                 $    510,815    $    455,425    $    376,885         371,708    $  1,714,833
Gross profit                    82,709         185,454         117,775         115,468         501,406
Net income (loss)           (1,297,585)         92,503      (1,578,807)     (2,375,568)     (5,159,457)
Basic earnings (loss)
 per share                       (0.05)           0.00           (0.05)          (0.07)          (0.18)
Diluted earnings (loss)
 per share                       (0.05)           0.00           (0.05)          (0.07)          (0.18)

Fiscal 1999
Net sales                 $  1,033,375    $    639,624    $  1,044,511    $    848,797    $  3,566,307
Gross profit                   211,690          80,038         153,078         195,042         639,848
Net loss                    (1,682,544)     (2,857,212)     (2,280,065)     (6,504,632)    (13,324,453)
Basic loss per share             (0.10)          (0.17)          (0.13)          (0.37)          (0.77)
Diluted loss per share           (0.10)          (0.17)          (0.13)          (0.37)          (0.77)
</TABLE>

                                      F-20
<PAGE>   47


                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
         No.      Description
         ---      -----------
<S>               <C>
         3.1      Articles of Incorporation of the Company and all amendments
                  thereto*

         3.2      Bylaws of the Company*

         4.1      Form of Common Stock Certificate*

         4.2      Form of Subscription Agreement used in private financing
                  providing for registration rights*

         5.       Opinion of Connolly Epstein Chicco Foxman Engelmyer & Ewing
                  regarding the legality of securities being registered*

         10.1     1997 Stock Option Plan*

         10.2     DRCC Omnibus Stock Option Plan*

         10.3     Development and License Agreement dated April 4, 1997, between
                  DRCC and Kyushu Matsushita Electric Co., Ltd.*
</TABLE>


<PAGE>   48


<TABLE>
<CAPTION>
         No.      Description
         ---      -----------
<S>               <C>

         10.4     Amended and restated Technical Development and Marketing
                  Alliance Agreement dated September 15, 1997, between the
                  Company and Williams Telemetry Services, Inc.*

         10.5     Lease Agreement dated May 17, 1995, between DRCC and Pracvest
                  Partnership relating to the Company's American Fork City
                  offices and facility*

         10.6     Lease Agreement dated February 12, 1996, between the Company
                  the Green/Praver, et al., relating to the Company's Salt Lake
                  City offices*

         10.7     Shareholders Agreement dated May 21, 1997 between the Company,
                  DRCC, Philip A. Bunker and William E. Chipman, Sr.*

         10.8     Asset Purchase Agreement dated October 31, 1997, between the
                  Company and Austin Antenna, Ltd.*

         10.9     Stock Exchange Agreement dated October 31, 1997, between the
                  Company, TWC, Ltd. and the shareholders of TWC, Ltd.*

         10.10    Settlement Agreement, Mutual Waiver and Release of All Claims
                  dated November 11, 1997 between Digital Radio Communications
                  Corp. and Digital Scientific, Inc.*

         10.11    Agreement (undated) between the Company, Xarc Corporation and
                  Donald J. Wallace relating to the Company's acquisition of
                  Xarc Corporation*

         10.12    Promissory Note dated December 4, 1997, by the Company,
                  payable to William E. Chipman, Sr. in the principal amount of
                  $125,000*

         10.13    Promissory Note dated November 13, 1997, by the Company,
                  payable to T. Kent Rainey in the principal amount of $200,000*

         10.14    Investment Banking Services Agreement dated November 19, 1997,
                  between the Company and PaineWebber Incorporated*

         10.15    $400,000 Promissory Note dated December 24, 1997, payable to
                  Electronic Assembly Corporation*

         10.16    $400,000 Promissory Note dated January 8, 1998, payable to
                  Tiverton Holdings Ltd.*

         10.17    Loan Agreement by and among the Registrant and the Bridge
                  Noteholders * dated as of May 15, 1998*

         10.18    Amendment and Waiver Agreement by and among the Registrant and
                  the Bridge Noteholders dated August 7, 1998*

         10.19    Amendment and Waiver Agreement by and among the Registrant and
                  the Bridge Noteholders dated September 11, 1998*
</TABLE>

<PAGE>   49


<TABLE>
<CAPTION>
         No.      Description
         ---      -----------
<S>               <C>

         10.20    Loan Agreement by and among the Registrant and the Bridge
                  Noteholders dated as of May 15, 1998 (Previously filed),
                  together with the Notes, Pledge/Security Agreement,
                  Pledgee/Representative Agreement, Subordination, and
                  Registration Rights Agreement*

         10.21    Separation and Mutual Release Agreement between the Registrant
                  and William E. Chipman, Sr. dated as of May 26, 1998*

         10.22    Registration Rights Agreement by and among the Registrant and
                  the purchasers of common stock issued pursuant to the
                  Registrants Confidential Private Placement Memorandum dated
                  September 9, 1998, as amended*

         10.23    Employment Agreement between the Registrant and James
                  O'Callaghan dated May 20, 1998*

         10.24    Lease agreement between the Registrant and NP#2 dated as of
                  July 29, 1998 relating to the premises at 2441 South 3850
                  West, West Valley City, Utah 84120*

         10.25    Agreement between KME and the Registrant dated October 19,
                  1998 relating to the Registrant's providing of technical
                  assistance and development relating to the Gigarange
                  telephone*

         10.26    Agreement between KME and the Registrant dated as of March 1,
                  1998 relating to the Panasonic MicroCast System*

         10.27    General and Mutual Release Agreement between the Registrant
                  and Phil Acton dated November 2, 1998*

         10.28    Agreement and Waiver Agreement by and among the Registrant and
                  the Bridge Noteholders dated November 25, 1998*

         10.29    1998 Employee Incentive Stock Option Plan*

         10.30    1998 Non-qualified Stock Option Plan*

         10.31    Amendment of Agreement by and among the Registrant and the
                  Bridge Noteholders dated as of March 26, 1999*

         10.32    Loan Agreement by and among the Registrant and the Senior
                  Secured Noteholders dated as of May 14, 1999, together with
                  the Notes, Pledge/Security Agreement, Pledgee Representative
                  Agreement, Subordination and Registration Rights Agreement*

         10.33    Two separate Agreements by and among the Registrant and the
                  1999 Bridge Noteholders dated August 19, 1999*

         10.34    Waiver Agreement by and among the Registrant and the Bridge
                  Noteholders dated as of December 7, 1999*

         10.35    Registration Rights Agreement by and among the Registrant and
                  the purchasers of common stock issued pursuant to the
                  Registrant's Confidential Private Placement Memorandum dated
                  January 12, 2000 as amended*
</TABLE>

<PAGE>   50

<TABLE>
<CAPTION>
         No.      Description
         ---      -----------
<S>               <C>
         10.36    Settlement Agreement and Mutual Release between Internet
                  Telemetry Corp. and the Registrant, dated as of August 7,
                  2000.*

         10.37    Financing Commitment Letter between the Registrant and Insight
                  Capital LLC dated April 2, 2001.**

         16.1     Letter from Hansen, Barnett & Maxwell regarding change in
                  Certifying Accountant.*

</TABLE>

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

*   Filed previously

**  Filed herewith.

+   Management contract or compensatory plan or arrangement filed previously.