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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                   FORM 10-K/A
                     ANNUAL REPORT UNDER SECTION 13 or 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

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

(MARK ONE)

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 2000

                                    OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                      COMMISSION FILE NUMBER:
                                              ------------

                          TRITON NETWORK SYSTEMS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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

               DELAWARE                                   59-343450
    (STATE OR OTHER JURISDICTION OF                   (I.R.S. EMPLOYER
    INCORPORATION OR ORGANIZATION)                 IDENTIFICATION NUMBER)

                             8529 SOUTH PARK CIRCLE
                             ORLANDO, FLORIDA 32819
                                 (407) 903-0900
        (ADDRESS, INCLUDING ZIP CODE, OR REGISTRANT'S PRINCIPAL EXECUTIVE
               OFFICES AND TELEPHONE NUMBER, INCLUDING AREA CODE)


        SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

       SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON
                            STOCK, $0.001 PAR VALUE


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                             Yes [X]   No [ ]

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

The aggregate market value of voting stock held by non-affiliates of the
Registrant was approximately $41,282,000 as of February 2, 2001 based upon the
closing price on the Nasdaq National Market reported for such date. This
calculation does not reflect a determination that certain persons are affiliates
of the Registrant for any other purpose. The number of shares outstanding of the
Registrant's common stock on March 2, 2001 was 34,999,116 shares.


                       DOCUMENTS INCORPORATED BY REFERENCE


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                          TRITON NETWORK SYSTEMS, INC.

                                   FORM 10-K/A

                                      INDEX



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PART I................................................................................................................1

         ITEM 1.      Business........................................................................................1
         ITEM 2.      Properties.....................................................................................11
         ITEM 3.      Legal Proceedings..............................................................................11
         ITEM 4.      Submission of Matters to a Vote of Security Holders............................................11

PART II..............................................................................................................12

         ITEM 5.      Market for Registrant's Common Equity and Related Stockholder Matters..........................12
         ITEM 6.      Selected Financial Data........................................................................13
         ITEM 7.      Management's Discussion and Analysis of Financial Condition and Results of Operations..........14
         ITEM 7A.     Quantitative and Qualitative Disclosures About Market Risks....................................26
         ITEM 8.      Financial Statements and Supplementary Data....................................................26
         ITEM 9.      Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...........26

PART III.............................................................................................................27

         ITEM 10.     Directors and Officers of the Registrant.......................................................27
         ITEM 11.     Executive Compensation.........................................................................29
         ITEM 12.     Security Ownership of Certain Beneficial Owners and Management.................................36
         ITEM 13.     Certain Relationships and Related Transactions.................................................38

PART IV..............................................................................................................41

         ITEM 14.     Exhibits, Financial Statements, Schedules and Reports on Form 8-K..............................41




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                                     PART I

FORWARD LOOKING STATEMENTS

         This Form 10-K/A contains forward-looking statements. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as may, will,
should, expects, plans, anticipates, believes, estimates, predicts, potential,
continue or the negative of these terms or other comparable terminology. These
statements involve known and unknown risks, uncertainties and other factors that
may cause our or our industry's actual results, levels of activity, performance
or achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by the
forward-looking statements. Examples of these forward-looking statements
include, but are not limited to, statements regarding the following: the
introduction and development of new products; product improvements and new
services; the success of our technologies; increasing demand for broadband
communications; potential future acquisitions; gross margin expectations; growth
in our research and development and general and administrative expenses; and
expectation that our new capital equipment financing, combined with our cash and
cash equivalents, being sufficient to fund our anticipated operating needs for
the next 12 months. These and equivalent statements are only predictions. In
evaluating such statements, you should consider various factors, including the
risks outlined under "Risk Factors" in this Form 10-K/A, as well as identified
in our other filings with the Securities and Exchange Commission. These factors
may cause actual events or results to differ materially from those expressed or
implied by any forward-looking statement. Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements.


ITEM 1.  BUSINESS

INTRODUCTION

         Triton Network Systems, Inc. was incorporated in the state of Delaware
on March 5, 1997 and is based in Orlando, Florida. We provide broadband wireless
equipment that enables communications service providers to deliver high-speed,
cost-effective voice, video and data services to their business customers. Our
Invisible Fiber(R) products combine high transmission speeds and the reliability
of fiber optic networks with the flexibility, low cost and rapid deployment of
wireless technologies. Our products meet the same carrier class standard of
reliability used for fiber optic networks, and can be seamlessly incorporated
into existing fiber optic and wireless networks or used to build new networks.
Our products feature proprietary technologies that enable service providers to
install more units in a service area than would be possible with conventional
broadband wireless technologies, permitting them to serve more users and
generate more revenues.

         We have designed our Invisible Fiber products for deployment in
consecutive point networks. In a consecutive point network, communications
traffic can flow in either direction around a ring of point-to-point wireless
links, creating multiple transmission paths and reducing the risk of service
interruptions. Consecutive point networks are scalable and flexible, allowing a
service provider to quickly reconfigure, divide or expand the ring of wireless
links to address changes in the size or geographic location of the service
provider's customer base. We currently offer two product lines: our Invisible
Fiber Internet product line for Internet service providers and our Invisible
Fiber SONET product line. SONET stands for synchronous optical network, a
standard for transmission of high-volume communications in fiber optic networks.

         Subsequent to our acquisition of IBM's modem product line in March
2000, we have provided modem chips and engineering design services to a wireline
equipment company. We continue to sell modem chips and engineering design
services to our existing customer and expect to offer these products and
services to other companies in 2001.


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         In early 2001, we signed a multi-year agreement with Agilent
Technologies to distribute and resell, on an exclusive basis, a new broadband
wireless product, which operates in the 60 Gigahertz unlicensed frequency. We
expect to sell this product, beginning in late 2001, to companies who do not
have frequency licenses, which could significantly expand our customer base.

TRITON NETWORK SYSTEMS SOLUTION

         We believe that our wireless solution overcomes the limitations and
inefficiencies inherent in other wireless technologies, and provides service
providers with the following key competitive advantages:

         High Speed Network Service. Our products enable the delivery of
symmetrical, high-speed voice, video and data services. Our current Invisible
Fiber Internet product allows Internet service providers to provide their
customers Internet access at Fast Ethernet speed, which is an industry standard
for transmission speeds of 100 Mbps. Such speed allows business users to
download in seconds media-rich files that would require minutes to download
using a dedicated T1 line. Our current Invisible Fiber SONET products transmit
data at 155 Mbps, and offer the same capacity as 84 conventional T1 lines or in
international markets, 63 conventional E-1 lines. We expect to begin delivering
Invisible Fiber SONET products that transmit data at 622 Mpbs in the first half
of 2001.Such high speed facilitates the adoption of emerging on-line business
models such as the use of application service providers.

         High Reliability and Availability of Service. We design our products to
match carrier class reliability standards, including 99.999% availability and
error rates of less than one error per trillion bits transmitted. This enables
our customers to provide their subscribers the same high reliability and
availability offered by incumbent carriers. Our consecutive point networks
transmit communications in both directions around a ring of linked Invisible
Fiber units. If one transmission path is disrupted, signals immediately reroute
in the opposite direction around the ring and no interruption of service occurs.
Other broadband wireless products are more vulnerable to service interruptions
because they have only one transmission path.

         As a result, these transmissions may fail whenever the line of sight
between points in a wireless link is temporarily blocked by moving objects or
adverse weather conditions.

         Rapid Deployment and Potential for Rapid Return on Investment. Service
providers can deploy our products and begin providing their subscribers with
broadband access in significantly less time and at a lower cost than they would
be able to do using fiber optic networks or point-to-point or
point-to-multipoint wireless networks. Service providers can install our
Invisible Fiber products on rooftops or sides of buildings in a matter of hours.
Each of our products uses the same communicating standards and physical
connections used in fiber optic networks so that service providers may easily
integrate our products into their networks. As a result, service providers can
rapidly add subscribers and generate revenue to offset the fixed costs
associated with entering new markets. Our solutions also use radio frequency
efficiently and maximize the reuse of a service provider's licensed radio
frequency. This enables service providers to reach more subscribers with their
licensed radio frequency, generating greater revenue by spreading the fixed cost
of the licensed frequency over a larger subscriber base. Lifecycle costs are
further reduced because carriers can easily redeploy and reuse our products as
customer needs change.

         High Density Deployment. Our products enable service providers to
maximize the number of Invisible Fiber units that may be installed and the
number of subscribers that may be served in the area covered by the service
provider's licensed radio frequency. Our proprietary power control technology
automatically adjusts the power output of each unit to the minimum level
necessary for reliable transmission. In addition, our antenna design ensures
that transmissions between Invisible Fiber units travel along extremely narrow
pathways. These features minimize radio interference among Invisible Fiber units
and other wireless equipment operating in a service area. By minimizing radio
interference, we enable service providers to use their licensed radio
frequencies to support more customers within a service area.


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         We believe that no other broadband wireless products match our power
control capability. In particular, point-to-multipoint systems cannot do so
because the base station must transmit at power levels high enough to
communicate with the most hard-to-reach subscriber unit, which, due to geography
and weather, means the signal may be broadcast further than necessary in other
directions. The excess transmission power increases interference between
wireless links and reduces the number of customers that may be served by a
service provider within the service area covered by its licensed radio
frequencies.

         Highly Flexible. We design our products to enable service providers to
quickly configure, expand and relocate their networks. Our consecutive point
architecture is scalable. Service providers can deploy Invisible Fiber units
incrementally as demand for their services increases, allowing them to match
capital outlays with subscriber growth. Additionally, our consecutive point
network can take any shape, including a ring or a mesh, allowing service
providers to connect both broadly dispersed subscribers as well as those in
dense service areas. If a ring reaches capacity, the service provider can easily
split the ring in two or add a ring by deploying a small number of additional
Invisible Fiber units without interrupting services to existing customers.

THE TRITON NETWORK SYSTEMS STRATEGY

         Our goal is to be a leading worldwide provider of broadband wireless
equipment. We recognized our initial revenues in the first quarter of 2000 and
recorded $26.2 million of revenues in 2000.We plan to achieve this goal by:

INCREASING SALES TO EXISTING CUSTOMERS

         We have supply agreements with a number of domestic and international
customers, including a value-added reseller in Asia and global OEM agreement
with Nortel Networks, an exclusive distribution and value-added reseller
agreement with Agilent Technologies.

         Our sales and engineering personnel work closely with our customers to
ensure they are using our solutions to their maximum benefit, and to promote the
use of our solutions in additional locations and applications. We intend to
build upon the recent acceptance of our initial products and the introduction of
new products to become a leading provider of broadband wireless access equipment
to these and other service providers. We intend to increase our visibility as a
provider of broadband wireless access network solutions and believe that our
increased visibility as a solutions enabler will generate additional sales.

EXPANDING OUR CUSTOMER BASE

         We plan to increase sales of our products to new customers. Our
products provide capabilities not previously available from wireless vendors. We
will continue to inform potential customers about the competitive advantages
offered by our unique consecutive point network solution and our Invisible Fiber
products. We believe it is important to take a targeted approach to the
implementation of our sales strategy, and we have identified a number of key
markets and prospective customers as having the potential for large-scale
deployment of our products. We assign each key opportunity to a single prime
sales manager who is responsible for managing the overall business winning
strategy and prospect/channel/customer relationships. Our sales personnel work
closely with our current and potential customers/channels to coordinate network
design, ensure successful installation and provide continuous customer support.
We also expect to expand our domestic and international customer base through
our existing global OEM and Asian value-added reseller, along with new business
relationships we are considering for 2001. Our recent exclusive distribution and
reseller agreement with Agilent Technologies should enable us to sell to
customers who do not have spectrum licenses.


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MAINTAINING AND EXTENDING PRODUCT AND TECHNOLOGY LEADERSHIP

         We believe that we are currently a technology leader in developing
broadband wireless solutions for consecutive point networks and other
traditional wireless deployment architectures. Our Invisible Fiber Internet and
Invisible Fiber SONET products can achieve fully dedicated 100 Mbps and 155
Mbps/622 Mbps data rates, respectively. No other broadband wireless solution
known to us can achieve comparable data rates across a network, while
maintaining carrier class reliability. We intend to maintain and extend our
technology leadership through continued research and development and, where
appropriate acquisitions of complimentary businesses, products and technologies,
such as our acquisition of broadband modem technology from IBM. We will continue
to develop products that address the competitive demands of service providers
and enable them to deploy differentiated and profitable services to their
subscribers. In this regard, we are enhancing the performance of our existing
products and developing new products that operate at different frequency bands
and higher bandwidths. We will also continue to provide engineering design
services and provide modem chips to wireline companies.

CONTINUING TO PURSUE INTERNATIONAL MARKET OPPORTUNITIES

         We believe that there is a significant market opportunity for our
products in international markets where government authorities have granted or
have indicated they intend to license radio frequency to wireless service
providers. We continue to expand our focused approach in international markets
with a current emphasis on Japan, China and Canada. We have obtained regulatory
approval to deploy our products in Canada and Japan, with a number of other
international country approvals in process. We have formulated a sales and
marketing strategy for each key international market. We have opened a sales
office in Japan; entered into a value-added reseller agreement in Asia; signed a
global OEM agreement with Nortel Networks and in early 2001 signed an exclusive
distribution and value-added reseller agreement with Agilent Technologies. We
may consider additional strategic relationships in the future.

PRODUCTS AND TECHNOLOGY

KEY TECHNICAL FEATURES

         We currently offer two broadband wireless product lines: our Invisible
Fiber Internet product line for Internet service providers and our Invisible
Fiber SONET product line for communications service providers who offer voice
and data services. Both product lines use our proprietary technology. Key
technical features common to our products include:

         -        99.999% Availability at 1 Bit per Trillion Error Rate. We have
                  designed all of our products to maintain a connection between
                  links 99.999% of the time, corresponding to approximately five
                  minutes of down time per year, with bit error rates of one bit
                  per trillion or better, even under adverse weather conditions.
                  This means that only one error bit occurs for every
                  approximately 2.8 hours of operation of our current Invisible
                  Fiber Internet products, and for every approximately 1.7 hours
                  of operation of our current Invisible Fiber SONET products.
                  Bit error rate is a measurement of transmission quality
                  expressed as a ratio of the average number of bits containing
                  errors in the total number of bits transmitted. Our bit error
                  rate performance is equivalent to those typically found in
                  fiber optic networks. Our consecutive point network design
                  allows communications traffic to travel in two directions,
                  which minimizes service interruptions.

         -        High Bandwidth Data Rate. Our current Invisible Fiber SONET
                  products transmit data at speeds of 155 or 622 Mbps and our
                  Invisible Fiber Internet products transmit data at speeds of
                  100 Mbps. This provides service providers the capacity needed
                  to support broadband applications, such as simultaneous voice,
                  video and data services.


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         -        50 Decibels Power Control. Our proprietary power control
                  technology dynamically modifies our products' transmitter
                  output to minimize the power employed while maintaining bit
                  error rates of one bit per trillion or better. Each Invisible
                  Fiber unit in a link constantly measures the signal of the
                  other unit in that link in order to compensate for
                  interference caused by adverse weather conditions and radio
                  frequency sources. Each Invisible Fiber unit automatically
                  reduces its power to the minimum level required for reliable
                  transmission, enabling dense urban deployments of our products
                  and maximizing reuse of the licensed radio frequency of our
                  customers. Our products feature 50 decibels of power control
                  range, which means the maximum power strength is 100,000 times
                  the minimum power strength. This power control range is up to
                  1,000 times greater than is typically found in conventional
                  broadband wireless equipment.

         -        Narrow Beam Transmission Technology. Our products use advanced
                  antennas to transmit signals along extremely narrow, direct
                  pathways. By so confining transmissions, we minimize
                  interference among Invisible Fiber units and are able to
                  deliver a high quality, reliable and secure signal, while
                  significantly extending the distance between transmitters and
                  receivers. This further enables dense urban deployments and
                  flexible network configurations.

         -        High System Gain. Our products can transmit up to two watts of
                  power, while maintaining less than approximately 5 decibels of
                  system noise. These capabilities yield system gain for our
                  products of between 162 and 177 decibels. System gain is a
                  measurement of the overall transmission and reception
                  performance of a radio link. Higher system gain means a better
                  ability to maintain transmission quality and overcome signal
                  loss created by adverse weather conditions or interference
                  from other wireless equipment operating in a service area.

         -        Standard Network Management Protocol Software. We support our
                  products with a full suite of network management tools
                  designed to be easily integrated with our customers' overall
                  network platforms. This allows customers to monitor network
                  performance and troubleshoot difficulties remotely from
                  multiple locations using different industry standard computing
                  platforms.

         -        Single Outdoor Unit. Each Invisible Fiber unit is a single
                  self-contained outdoor unit, not separate indoor and outdoor
                  units connected via coaxial cable, a configuration that is
                  typical of other broadband wireless systems. Because our
                  products do not have an indoor unit, service providers avoid
                  the expense of leasing equipment space inside the buildings
                  they use to install our products. Within a building, fiber
                  optic cable connects our products directly to a customer's
                  network. Fiber is more flexible than coaxial cable and it can
                  be installed and operated over longer distances, making
                  network connections easier and more cost-effective and
                  enabling corporate campuses to use our products to complement
                  existing fiber networks. The use of fiber also eliminates the
                  possibility that a voltage surge caused by lightning striking
                  one of our units will damage a customer's equipment or
                  interrupt service.

         -        Standard Fiber Optic Cable Connection. A standard fiber optic
                  cable connection is imbedded in each of our products. This
                  enables service providers to connect their equipment to our
                  products using standard fiber optic cable and equipment. This
                  capability allows service providers to easily install our
                  equipment in their networks and eliminates the need for
                  expensive connection equipment at each point in their
                  networks.

         -        Innovative External Packaging and Ease of Installation. Our
                  products are designed to blend with the architectural design
                  of the sites to which they are fixed. The antenna and all
                  other components of the radio are packaged inside the unit's
                  compact, streamlined, paint-ready housing. Our patent-pending
                  mounting hardware permits direct mounting of units to a pole
                  or the wall of a building. These design features provide
                  advantages to operators when they pursue roof rights and make
                  installation and maintenance of our products quick and
                  inexpensive.

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INVISIBLE FIBER INTERNET PRODUCT LINE

         Our Invisible Fiber Internet products enable service providers to offer
their subscribers reliable Internet access at higher speeds than all other
technologies except dedicated fiber and at cost levels comparable to or better
than those associated with other technologies. We have designed these products
to support high-bandwidth data applications over the Internet, such as large
file transfers, video conferencing, live video streaming and electronic
commerce, as well as business networking among local area networks, metropolitan
area networks and wide area networks. We currently offer Invisible Fiber
Internet products for the 38 Gigahertz frequency and the 28, 29 and 31 Gigahertz
frequencies and we are developing additional products for other frequencies
above 20 Gigahertz, including an unlicensed frequency 60 Gigahertz product that
we will source from Agilent Technologies, in the second half of 2001.

         We have designed our Invisible Fiber Internet products for deployment
in consecutive point networks in large metropolitan areas. Each Invisible Fiber
Internet unit contains a transmitter, a receiver, a modem and our proprietary
network interface card. Each Invisible Fiber Internet unit forwards data without
regard to content. Our current Invisible Fiber Internet products are able to
examine incoming data from the network to determine if data is addressed to
customers at that location. The unit delivers traffic to the local customers and
inserts traffic from these customers into the transmission stream. Non-local
traffic is switched through the unit and forwarded across the consecutive point
network bypassing the local building where the unit is located. This switching
functionality ensures that only data destined for a specific location will be
transmitted to that location's local network, thereby reducing bandwidth
consumption on the local network and improving response times.

         Our current Invisible Fiber Internet products use a 100 Megahertz
channel pair, consisting of a 50 Megahertz transmit channel and a 50 Megahertz
receive channel, to carry data at a rate of approximately 120 Mbps in each
direction over a link. The user's traffic accounts for 100 Mbps of the total
data rate. Error correction and our proprietary power control and radio network
management technologies account for the remaining 20 Mbps. This is a
differentiating feature of our current Invisible Fiber Internet products, as we
deliver a fully dedicated 100 Mbps for use by service providers.

INVISIBLE FIBER SONET PRODUCT LINE

         Our Invisible Fiber SONET products enable service providers who offer
voice and data services to build and extend networks more quickly and
cost-effectively than they would be able to using fiber. We have designed our
products so that they can be connected directly and transparently to standard
telecommunications equipment. This enables rapid installation of our products
into existing networks. We currently offer Invisible Fiber SONET products for
the 38 Gigahertz frequency and the 28, 29 and 31 Gigahertz frequencies and we
are developing additional products for other frequencies above 20 Gigahertz.

         Each Invisible Fiber SONET unit consists of a transmitter, a receiver,
a modem and our proprietary network interface card. Each unit forwards data
without regard to content. Our Invisible Fiber SONET units utilize proprietary
technology to maintain high-quality synchronization timing signals.
Synchronization ensures lower bit error rates and high availability. Our high
quality synchronization enables more efficient deployment of a large network.
Because our synchronization capabilities are embedded in our Invisible Fiber
SONET units, our customers do not have to rely on costly external
synchronization solutions.

         Our current Invisible Fiber SONET products use a 100 Megahertz channel
pair, consisting of a 50 Megahertz transmit channel and a 50 Megahertz receive
channel, to carry data at a rate of approximately 190 Mbps in each link. The
users network traffic accounts for 155 Mbps of the total data rate. Error
correction and our proprietary power control and radio network management
technologies account for the remaining 35 Mbps. This is a differentiating
feature of our Invisible Fiber SONET products, as we deliver a fully dedicated
155 Mbps for use by service providers.

         We expect to begin field trials in the first half of 2001 with our new
higher speed Invisible Fiber SONET product which will carry data at an
approximate rate of 691 Mbps. The core network traffic accounts for 622 Mbps of
the total data rate.


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MODEM CHIPS AND ENGINEERING DESIGN SERVICES

         Subsequent to our acquisition of IBM's modem product line in March
2000, we have provided modem chips and engineering design services to a wireline
equipment company. We continue to sell modem chips and engineering design
services to our existing customer and expect to offer these products and
services to other companies in 2001.

CUSTOMERS AND MARKETS

         We target service providers worldwide that have licensed radio
frequency spectrum suitable for high-speed services or are planning to acquire
such a license to deliver high-speed services to subscribers.

         Our targeted customers are typically planning medium to large scale
deployments of wireless broadband equipment during the next two years. We also
sell and market modem chips and engineering design services to wireline and
other markets that do not compete with us.

         In 2000, three customers each constituted in excess of 10% of our
revenues, Advanced Radio Telecom, CAVU and Kestrel Solutions. We have three year
supply agreements with Advanced Radio Telecom (ART) and CAVU to supply Invisible
Fiber Internet and SONET products and we began shipping to both companies during
the first half of 2000. We have been supplying modem chips and providing
engineering services to Kestrel Solutions, a privately held, wireline equipment
company, since the second half of 2000.

         We also have multi-year supply agreements with XO Communications,
CenturyTel, and Fusion Communications in Japan. Additionally, we have a
multi-year global OEM agreement with Nortel Networks, and a multi-year value
added reseller agreement with CommVerge Solutions in ASIA.

SALES AND MARKETING

         We primarily sell our products on a global basis through our direct
sales force. Additionally, we have a global OEM relationship with Nortel
Networks and a value-added reseller in Asia, CommVerge Solutions.

         As we expand into additional international markets, we expect to
utilize a combination of our direct sales force and current and future OEM and
value-added reseller relationships.

         Key Account Management. We rely on key account management teams to
drive sales to those domestic and international customers who have the greatest
potential for large-scale network deployments of our products. Once we identify
a key account, we organize a key account management team to oversee and
coordinate all aspects of our relationship with the customer. Each key account
management team consists of an account manager, technical support personnel,
including engineers, and a program manager. The account management team focuses
on understanding the customer's business needs and positioning our products as
solutions for those needs, and is responsible for coordinating order flow,
revenue, new market/product penetration and management of competitive risks.

         Marketing Efforts. The principal goal of our marketing program is to
inform existing and potential customers about the capabilities and benefits of
our products, particularly when deployed in consecutive point networks. We are
also committed to developing and enhancing brand awareness of our company and
products. Our marketing efforts include advertising, public relations,
participation in and organization of industry trade shows and conferences, and
our web site.


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CUSTOMER SERVICE AND SUPPORT

         We are committed to providing our customers with high levels of service
and support. We provide the documentation and training programs tailored for our
customers needs. Standard as well as customized training programs are offered in
Orlando, Florida but can also be done remotely at a customer location. Our
sales, network and field engineering teams support our customers during network
planning, design, installation commissioning and troubleshooting. Our Orlando
based Technical Assistance Center is staffed to support timely responses to
customer inquiries and questions.

         Our network operations control center gives us and our customers the
capability to remotely monitor the in-network performance of our products and
diagnose and address problems that may arise. We assist our customers in
utilizing our network operations control software within their own internal
network operations control centers.

MANUFACTURING AND OPERATIONS

         We currently purchase the majority of the components used in our
products from third parties, who manufacture the components based on our
proprietary designs and specifications. We assemble these components at our
manufacturing facility in Orlando, Florida and conduct extensive testing of the
finished products. Our proprietary test procedures require skilled technicians
and customized equipment.

         The technology underlying our transceiver modules was developed by
Lockheed Martin for use in advanced radar systems. Until the fourth quarter of
2000, we purchased transceiver modules from Lockheed Martin on a cost-plus
basis, which means Lockheed Martin's actual cost incurred plus a fixed
percentage fee. Beginning in the fourth quarter of 2000, we began producing the
transceiver modules in our new factory in Orlando. As a result, we early
terminated our contract with Lockheed Martin at the end of 2000. We will produce
100% of the transceiver modules in 2001.

         In addition, we have single source suppliers for synthesizers, housings
and high-powered amplifiers. Additional single or sole source components may be
incorporated into our products in the future. We are however, working with and
developing additional suppliers to secure multiple sources for our components to
mitigate components, modules and sub-assemblies whenever it is economically
feasible while not compromising our proprietary technologies and processes. We
internally produce or control the production of those elements that are
proprietary and can provide us with flexibility, high quality levels and other
advantages in the marketplace.

RESEARCH AND DEVELOPMENT

         We have organized the components used in our products into proprietary
modules that are designed to incorporate the flexibility we will need to develop
future generations of products without significant design changes. Our
proprietary software, which is common to all our products, can be used, with
minor modification, to extend our product lines. We are pursuing several
development projects, including:

         -        adapting our products to additional frequency bands;

         -        increasing data transmission speeds;

         -        continuing to improve our power control technology;

         -        continuing to improve the ease of deployment of our products;

         -        minimizing production costs; and

         -        developing additional software functionality.


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   11

         During 1998, 1999, and 2000, we expensed $8,494,207, $12,631,231, and
$22,939,352, respectively, in research and development expenses.

COMPETITION

         The market for broadband wireless equipment is rapidly evolving,
fragmented, highly competitive and subject to rapid technological change. A
number of large telecommunications equipment suppliers, such as DMC Stratex
Networks, Inc, Harris Corporation and P-Com Inc., as well as a number of smaller
companies, such as Ceragon Networks Ltd., have developed or are developing
products that compete with ours. Some of our competitors are substantially
larger than we are, have longer operating histories and have greater financial,
sales, marketing, distribution, technical, manufacturing and other resources.
Some also have greater name recognition and a larger installed base of customers
than we have. In addition, many of our competitors have well-established
relationships with our current and potential customers and have extensive
knowledge of our target markets. As a result, our competitors may be able to
respond more quickly to evolving industry standards and changes in customer
requirements, or to devote greater resources to the development, promotion and
sale of their products than we can. In addition, current and potential
competitors may make strategic acquisitions or establish cooperative
relationships among themselves or with third parties to increase their ability
to gain market share rapidly. We also expect that industry consolidation could
increase competition. We expect to face increasing competitive pressures from
both current and future competitors. Increased competition could result in
reduced demand for our products, price reductions and reduced gross margins for
our products, any of which could seriously harm our business.

         The rapid technological developments within the broadband wireless
equipment industry result in frequent changes to our group of competitors. The
principal competitive factors in our market include:

         -        product availability;

         -        relationships with network service providers;

         -        product performance, features and inter-operability;

         -        product development and enhancement;

         -        price;

         -        ability to manufacture and distribute products; and

         -        technical support and customer service.

         Although we believe that our products compete favorably on these
factors, our market is relatively new and is developing rapidly. We may not be
able to maintain our competitive position against current and potential
competitors, especially those with significantly greater financial, marketing,
services, technical and other resources.

         Our broadband wireless solutions also compete with other high-speed
solutions such as digital subscriber lines, coaxial cable, fiber optic cable,
satellite and point-to-multipoint and point-to-point wireless technologies. Many
of these alternative technologies utilize existing installed infrastructure and
have achieved significantly greater market acceptance and penetration than
broadband wireless access technologies. We expect to face increasing competitive
pressures from both current and future technologies in the broadband access
market.


                                       9
   12




INTELLECTUAL PROPERTY

         Our success and ability to compete are substantially dependent upon our
internally developed technology and the proprietary technology we license from
Lockheed Martin. To protect our proprietary technology, we generally limit
access to our technology, treat portions of our technology as trade secrets and
obtain confidentiality or non-disclosure agreements from persons with access to
our technology. All of our employees have signed our standard confidentiality
agreement. This agreement prohibits the employees from disclosing our
confidential information, technology developments, and business practices and
from disclosing any confidential information entrusted to us by other parties.
All of our consultants who have access to our confidential information have
signed an agreement requiring them to keep confidential and not disclose our
non-public, confidential information.

         To date, we have filed 35 patents in U.S. and other jurisdictions
around the world. We cannot assure you that any of our patent applications will
result in issued patents or that any patents, if issued, will provide us with
competitive advantages. We have also applied for federal trademark registration
of Triton Network Systems, Invisible Fiber, Consecutive Point and our logo. This
report also contains other trademarks, service marks and trade names that are
the property of other parties. We also claim common law protections for other
marks we use in our business. We cannot assure you that any of our trademark
applications will be granted. If we were to discover that any of our products
violated the intellectual property rights of a third party, we might be unable
to redesign our product to avoid violating their rights, and we might be unable
to obtain a license on commercially reasonable terms to use their intellectual
property. Moreover, we may be prevented from continuing to sell that product,
which could cause us to lose sales.

         Our intellectual property rights, and our ability to enforce those
rights, may be inadequate to prevent others from using our technology or
substantially similar technology they may independently develop. The use of that
technology by others could eliminate any competitive advantage we have, cause us
to lose sales and otherwise harm our business. A significant portion of our
proprietary technology is know-how, and employees with know-how may depart
before transferring their know-how to other employees. Moreover, the laws of
other countries where we market our products may afford even less protection for
our intellectual property. If we resort to legal proceedings to enforce our
intellectual property rights, the proceedings could be burdensome and costly,
even if we were to prevail.

         Our industry is characterized by the existence of a large number of
patents and frequent claims and related litigation regarding patent and other
intellectual property rights. In particular, leading companies in the broadband
access market have extensive patent portfolios with respect to
telecommunications technology. Disputes in this area are frequent and subject to
inherent uncertainties. We cannot assure you that we will not be involved in
such a dispute, nor can we assure you that such a dispute will not result in
litigation or that an adverse result or judgment will not adversely affect our
financial condition.

         From time to time, other third parties, including leading companies,
have asserted against others and may assert against us exclusive patent,
copyright, trademark and other intellectual property rights to technologies and
related standards that are important to us. Third parties may assert claims or
initiate litigation against us or our manufacturers, suppliers or customers
alleging infringement of their proprietary rights with respect to our existing
or future products. Any of these claims, with or without merit, could be
time-consuming, result in costly litigation and diversion of technical and
management personnel, or require us to develop non-infringing technology or
enter into royalty or license agreements. These royalty or license agreements,
if required, may not be available on acceptable terms, if at all. If there is a
successful claim of infringement or if we fail to develop non-infringing
technology or license the proprietary rights on a timely basis, our business
would be harmed.


                                       10
   13






EMPLOYEES

         As of December 31, 2000 we had a total of 283 employees in our
operations, primarily all of whom were based in the United States, including 103
in research and development, 54 in selling and marketing, 87 in manufacturing
and operations and 39 in finance and administration. We are not a party to any
collective bargaining agreement. We believe that our relations with our
employees are good. In January, we announced that we were taking a number of
actions to control expenses and conserve cash, including a 10% reduction in
workforce. As a result, we will provide approximately $500,000 of expenses in
the first quarter of 2001 for costs associated with these actions, including
severance and related costs.


ITEM 2.  PROPERTIES

         Our corporate headquarters are located in Orlando, Florida and comprise
approximately 37,000 square feet. The lease for our headquarters expires in
February 2007. We currently lease approximately 75,000 square feet of
manufacturing and engineering space located in Orlando, Florida. The lease for
this facility expires in February 2007. Additionally, with our acquisition of
IBM's broadband modem product line, we sublease approximately 17,000 square feet
of engineering space located near San Diego. This lease expires in September
2001 and we have an option to renew it for an additional six months thereafter.
We currently lease an office in Tokyo, Japan, which expires in December 2001 and
comprises approximately 1,000 square feet. We believe that our existing
facilities are adequate to meet our current requirements and that suitable
additional space will be available as needed.


ITEM 3.  LEGAL PROCEEDINGS

         From time to time, we may be involved in litigation that arises through
the normal course of business. As of the date of filing of this Form 10-K/A, we
are not a party to any litigation that we believe could reasonably be expected
to materially harm our business or results of operations.


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

         There were no matters submitted to a vote of the security holders
during the fourth quarter of 2000.


                                       11
   14



                                     PART II


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

         Our common stock has been quoted on the Nasdaq National Market under
the symbol "TNSI" since our initial public offering in July 2000. Prior to this
time, there was no public market for our stock. The following table sets forth
the high and low closing sales prices per share of our common stock as reported
on the Nasdaq National Market for the periods indicated. We currently expect to
retain future earnings, if any, for use in the operation and expansion of our
business and do not anticipate paying any cash dividends in the foreseeable
future. As of February 28, 2001 there were 455 holders of record of our common
stock.



                                                                SALE PRICE
                                                       ---------------------------
                                                          HIGH              LOW
                                                       ---------         ---------
                                                                   
FISCAL 2000:
   Third Quarter (from July 13, 2000) .........        $   44.69         $   11.19
   Fourth Quarter..............................        $   12.94         $    1.94


         On July 17, 2000, we completed our initial public offering (the "IPO")
pursuant to a Registration Statement on Form S-1 (File No. 333-31434). In the
IPO, we sold an aggregate of 6,325,000 shares of common stock (including an
over-allotment option of 825,000 shares) at $15 per share. The aggregate net
proceeds to the Company were approximately $86 million, after deducting
underwriting discounts and offering expenses of approximately $9 million. The
proceeds have been and will be used for general corporate purposes, including
working capital and capital expenditures.


                                       12
   15

ITEM 6.  SELECTED FINANCIAL DATA

         You should read the following selected financial data in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Risk Factors" and our consolidated financial statements and the
notes included elsewhere in this Form 10-K/A. The consolidated statement of
operations data for the years ended December 31, 1998, 1999 and 2000 and the
consolidated balance sheet data as of December 31, 1998, 1999 and 2000 were
derived from the consolidated financial statements, which are included elsewhere
in this Form 10-K/A. The consolidated statement of operations data for the
period from inception to December 31, 1997 and the consolidated balance sheet
data as of December 31, 1997 are derived from our financial statements that are
not included in this Form 10-K/A. Historical results are not necessarily
indicative of results that may be expected for any future period.




                                                     PERIOD FROM                               YEAR ENDED
                                                     MARCH 5, 1997                             ----------
                                                 (INCEPTION) THROUGH                          DECEMBER 31,
                                                     DECEMBER 31,                             ------------
                                                         1997                1998                 1999                 2000
                                                     -----------         ------------         ------------         ------------
                                                                  (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

                                                                                                       
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues ......................................      $        --         $         --         $         --              $26,238
Cost of revenues:..............................
   Special inventory component write-off.......               --                   --                   --                1,190
   Other ......................................               --                   --                   --               25,877
                                                     -----------         ------------         ------------         ------------
      Total cost of revenues...................               --                   --                   --               27,067
                                                     -----------         ------------         ------------         ------------
Gross profit (loss)............................               --                   --                   --                 (829)
Operating expenses:
   Manufacturing and operations................               --                2,326                7,990                   --
   Research and development....................            1,895                8,494               12,631               22,939
   Selling and marketing.......................              162                2,445                6,111               12,144
   General and administrative..................              501                1,748                4,473                7,131
   Royalty expense.............................               --                2,800                   --                   --
   Amortization of intangible assets...........               --                   --                   --                5,822
   Amortization of deferred compensation.......               --                  292                1,561                1,595
                                                     -----------         ------------         ------------         ------------
      Total operating expenses.................            2,558               18,105               32,766               49,631
                                                     -----------         ------------         ------------         ------------
Loss from operations...........................           (2,558)             (18,105)             (32,766)             (50,460)
Other income (expense):........................
   Interest income.............................               86                1,066                1,337                3,682
   Interest expense............................               --                 (160)                (426)              (1,005)
   Other ......................................               (3)                 (25)                   1                 (420)
                                                     -----------         ------------         ------------         ------------
      Total other income.......................               83                  881                  912                2,257
                                                     -----------         ------------         ------------         ------------
Net loss ......................................          $(2,475)            $(17,224)            $(31,854)            $(48,203)
                                                     ===========         ============         ============         ============
Net loss per share--basic and diluted..........           $(1.01)              $(5.07)              $(6.67)              $(2.51)
                                                     ===========         ============         ============         ============
Shares used in per share calculations--basic
   and diluted.................................        2,456,995            3,395,300            4,776,567           19,191,226
                                                     ===========         ============         ============         ============
Pro forma net loss per share:
   Net loss per share--basic and diluted.......           $(0.74)              $(1.30)              $(1.64)              $(1.61)
                                                     ===========         ============         ============         ============
   Shares used in per share calculations--basic
      and diluted..............................        3,344,666           13,265,015           19,400,204           29,928,655
                                                     ===========         ============         ============         ============





                                                                         AS OF DECEMBER 31,
                                                                         ------------------
                                                           1997          1998          1999           2000
                                                          ------        ------        ------        -------
                                                                           (IN THOUSANDS)

                                                                                        
CONSOLIDATED BALANCE SHEET DATA:
Cash and short-term investments ..................        12,476        21,328        46,130         78,897
Working capital ..................................        12,271        18,963        44,180         85,116
Intangible assets ................................            --            --            --         32,989
Total assets .....................................        12,794        24,440        63,700        156,756
Long-term debt (including current maturities) ....            --         1,899         3,594         10,333
Total stockholder's equity .......................        12,506        20,424        51,333        132,647



                                       13
   16


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

         The following discussion and analysis should be read in conjunction
with the Risk Factors, and our financial statements and the related notes
included elsewhere in this Form 10-K/A.

OVERVIEW

         We provide broadband wireless equipment that enables communications
service providers to deliver high-speed, cost-effective voice, video and data
services to their business customers. We currently offer two product lines: our
Invisible Fiber Internet product line for Internet service providers and our
Invisible Fiber SONET product line for communications service providers.
Subsequent to our acquisition of the broadband modem product line from IBM at
the end of the first quarter of 2000, we began supplying modem chips and
providing engineering design services to an existing wireline customer.

         From our inception in March 1997 through late 1999, our operations
consisted primarily of start-up activities, including raising capital,
recruiting personnel, conducting research and development, establishing the
market for our initial products and purchasing operating assets. In addition, we
developed our final product assembly and testing capabilities, entered into
manufacturing agreements with third-parties and developed our sales, marketing
and administrative organizations.

         We began supplying our Invisible Fiber products for use in field trials
during the second half of 1999 and recognized our first revenue in the first
quarter of 2000. During 2000, our revenues increased from approximately $3.5
million in the first quarter to approximately $9.5 million in the fourth
quarter, and we signed supply agreements with a number of companies. We sell our
products through our direct sales force to service providers in North America
and Japan who have government licenses to provide wireless services. In
addition, we have a non-exclusive agreement with a value added reseller in Asia
and a non-exclusive global Original Equipment Manufacturer agreement with Nortel
Networks.

         Revenues. We recognize product revenues at the time of shipment
provided no significant obligations remain and collection is probable. We have
supplied products to potential customers for use in several field trials. We do
not recognized revenues from field trials since the customer can typically
return the product with no payment or further obligation to us.

         Cost of Revenues. Cost of revenues consists of component and material
costs, direct labor, manufacturing, customer service and estimated warranty
costs.

         Manufacturing and Operations. Historically, manufacturing and
operations consisted of procurement, assembly and support personnel, product,
technical assistance, training and documentation expenses, less amounts
capitalized as part of inventory. Concurrent with our recognition of revenues
beginning in the first quarter of 2000, we began classifying manufacturing and
operations expenses as cost of revenues.

         Research and Development. Research and development expenses consist
primarily of compensation and related personnel costs, third party engineering
costs and prototype costs related to the design, development, testing and
enhancement of our products. We expense research and development costs as they
are incurred.

         Selling and Marketing. Selling and marketing expenses consist primarily
of salaries and related expenses for personnel engaged in sales, marketing and
related support functions, the costs associated with customer field trials that
we fund and promotional and other marketing expenses.

         General and Administrative. General and administrative expenses consist
primarily of salaries and related expenses for executive, finance, information
systems and human resources personnel, professional fees and other general
corporate expenses.


                                       14
   17

         Deferred Compensation. In connection with the grant of certain stock
options to employees during the years ended December 31, 1998, 1999 and 2000, we
recorded deferred compensation of approximately $5.8 million representing the
difference between the deemed value of the common stock for accounting purposes
and the option exercise price of such options at the date of grant. Such amount
is presented as a reduction of stockholders' equity and amortized as charges to
operations on an accelerated basis over the vesting period consistent with the
method described in Financial Accounting Standards Board Interpretation No. 28.

         Historically, we have incurred significant losses. As of December 31,
2000, we had an accumulated deficit of approximately $99.8 million. We expect to
incur substantial losses for the foreseeable future. We expect to incur
significant research and development, selling, marketing and general and
administrative expenses. As a result, we will need to generate significant
revenues to achieve and maintain profitability. We may never achieve
profitability.

         During 2000, we had three customers that each constituted more than 10%
of our revenue. We expect that in 2001 the majority of our revenue will be
generated from a limited number of customers. As a result, our revenue volume
from one quarter to the next will be dependent on the timing of purchasing
decisions of these few customers. Certain of our customers will require
additional financing in the future to continue to purchase our products and
build out their networks. Should these customers be unable to obtain the
additional financing, our revenue could be significantly negatively impacted.

         In early 2001, we agreed on a number of actions to further control
expenses and conserve cash. These actions, which included a 10% reduction in
workforce, should reduce operating expenses, before goodwill and deferred
compensation amortization, by approximately 10% from the fourth quarter of 2000.
We will provide approximately $500,000 of expenses in the first quarter of 2001
for costs associated with these actions, including severance and related costs.

RECENT ACQUISITION

         On March 31, 2000, we completed our transaction with IBM to purchase
IBM's broadband modem product line in exchange for 2.75 million shares of series
C preferred stock. This IBM unit developed and sold custom modems to us for use
in our products. During 1999, the majority of this unit's sales were to us, with
minor sales to one other customer. With the completion of this transaction, we
have secured intellectual property and engineering expertise for future modem
development, and we believe we will lower the cost of manufacturing our
products.

         The total value of the consideration for the transaction was
approximately $41.3 million, with approximately $2.3 million being allocated to
net assets and approximately $39.0 million to intangible assets, which consist
of patent and patent application licenses and patent disclosures. If the
transaction had taken place on January 1, 1999, on a pro forma basis, our
revenue and net loss for 1999 would have increased by approximately $0.3 million
and $11.2 million or $2.34 per share, respectively. The pro forma revenue and
net loss does not purport to indicate what would have occurred if the purchase
had actually occurred on January 1, 1999 or to indicate the results that may
occur in the future. We plan to focus on further development of the modem
technology we have acquired from IBM to improve and enhance our products.
Additionally, we now believe that we can utilize a portion of the employees of
this operation to provide engineering design services and sell modem chips to
existing and future wireline customers. We believe that future research and
development expenses of the broadband modem products group subsequent to our
acquisition of the IBM unit will be significantly higher than the pro forma
amount for 1999. Additionally, the intangible assets will be amortized over five
years, or approximately $7.8 million per year.


                                       15
   18


RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2000 AND 1999

         Revenues. Revenues were $26.2 million for the year ended December 31,
2000, the first year we recognized revenues. Three customers each accounted for
more than 10% of our revenues for 2000, including a wireline customer who took
delivery of modem chips and paid us for modem engineering design services.

         Cost of Revenues. Concurrent with the recognition of revenues in 2000,
we began classifying manufacturing and operations costs as cost of revenues.

         Gross Margin. Excluding a special non-cash inventory charge of $1.2
million recorded in the fourth quarter of 2000, gross margin as a percentage of
revenues for 2000 was approximately 1.4%. Gross margin steadily improved during
2000 with gross margin exceeding 14% of revenues in the fourth quarter of 2000.
This improvement was due primarily to the higher volume of product shipments and
component part cost reductions, and revenues from higher margin modem chips in
the last half of 2000. At the end of 2000, management decided not to utilize
certain prior generation components in the company's current generation product.
As a result, a $1.2 million special non-cash inventory write down was recorded
in the fourth quarter of 2000. We expect gross margin as a percentage of
revenues to improve in 2001 as our business volumes increase, various cost
reduction actions are implemented and as we transition to producing our own
receiver and transmitter vs. relying on a subcontractor.

         Manufacturing and Operations. Manufacturing and operations expenses for
the year ended December 31, 1999 of $8.0 million, consisted primarily of
personnel costs related to the commencement of our final assembly and testing
manufacturing efforts and the establishment of our technical assistance center.
In addition, the remaining amounts were attributable to facilities, depreciation
and production costs related to our manufacturing facility and recently
developed production process. Concurrent with our recognition of revenues in the
quarter ended March 31, 2000, we began classifying manufacturing and operations
expenses as cost of revenues.

         Research and Development. Research and development expenses of $22.9
million for 2000 were $10.3 million higher than in 1999. Nine months of
development expenses of the broadband product line acquired at the end of March
2000 accounted for approximately 45% of the increase, while personnel and other
related costs, and depreciation associated with development equipment purchases
represented approximately 26% and 19%, respectively.

         Selling and Marketing. Selling and marketing expenses of $12.1 million
for the year 2000 were $6.0 million higher than for the year 1999. The increase
was due to the further establishment of a core sales and marketing group, a
customer service group and costs associated with supporting several customer
field trials. Personnel costs related to the sales and marketing group accounted
for approximately 55% of the expense increase. Additionally, 19% of the increase
is due to costs associated with the customer service group and 17% related to
supporting customer field trials.

         General and Administrative. General and administrative expenses of
$7.1 million for the year 2000 were $2.6 million higher than 1999. The increase
was due primarily to the development of the finance, human resources and
information technology groups, and, in the third quarter of 1999, the hiring of
our chief executive officer. Personnel related costs accounted for approximately
60% of the increase. Depreciation and professional service costs represented
approximately 28% of the increase.

         Amortization of intangibles and deferred compensation. Amortization of
intangibles of $5.8 million in the year 2000 relates to the acquisition of the
IBM broadband modem product line at the end of March 2000. The annual
amortization will be $7.8 million. The amortization of deferred compensation was
$1.6 million in both the years 2000 and 1999. This expense relates to the
granting of stock options to employees prior to our initial public offering at
exercises prices deemed to be lower than the fair market value at the date of
grant.


                                       16
   19

         Interest Income. Interest income of $3.7 million for the year 2000 was
$1.3 million higher than for the year 1999. This increase was due primarily to a
significantly higher level of cash available for investment in 2000. Net
proceeds of our initial public offering in July 2000 were approximately $86
million.

         Interest Expense. Interest expense of $1.0 million for the year 2000
was approximately $0.6 million higher than in 1999 due to a higher level of note
and lease financing in 2000.

YEARS ENDED DECEMBER 31, 1999 AND 1998

         Revenues.  We recognized no revenues through December 31, 1999.

         Manufacturing and Operations. Manufacturing and operations expenses
increased $5.7 million in 1999 from $2.3 million in 1998 to $8.0 million in
1999. Approximately 52% of the increase was due to higher personnel costs
related to the commencement of our final assembly and testing manufacturing
efforts and the establishment of our technical assistance center. Approximately
25% of the remaining increase was attributable to facilities, depreciation and
production costs related to our manufacturing facility and recently developed
production process. The remainder of the increase was attributable to increases
in travel, supplies and professional and other service expenses.

         Research and Development. Research and development expenses increased
$4.1 million in 1999 from $8.5 million in 1998 to $12.6 million in 1999. The
increase was due to an increase in the number of engineering personnel and
significant third party contract engineering costs during 1999. Personnel
related costs and third party contract engineering expenses represented 30% and
47% of the increase in 1999, respectively.

         Selling and Marketing. Selling and marketing expenses increased $3.7
million in 1999 from $2.4 million in 1998 to $6.1 million in 1999. The increase
was due to the establishment of a core sales and marketing group and the
increase of advertising, marketing and other costs associated with sales and
support activities. Personnel costs related to the establishment of the sales
and marketing group and advertising, marketing and other costs accounted for 43%
and 41% of the expense increase in 1999, respectively.

         General and Administrative. General and administrative expenses
increased $2.8 million in 1999 from $1.7 million in 1998 to $4.5 million in
1999. The increase was due to the development of the finance, human resources
and information technology groups, and the hiring of our chief executive
officer. Personnel related costs accounted for 57% of the increase in 1999 and
29% of the remaining increase consists of depreciation and amortization of fixed
assets and legal and accounting costs.

         Royalty Expense. In 1998, we issued a shareholder 1,600,000 shares of
common stock in satisfaction of an existing royalty agreement. As a result, we
recorded $2.8 million in royalty expenses in 1998, representing the fair market
value of the common stock at that time.

LIQUIDITY AND CAPITAL RESOURCES

         At December 31, 2000, we had approximately $78.9 million of cash and
short-term investments compared to $46.1 million at the end of 1999. In July
2000, we received net proceeds of approximately $86 million from the sale of 6.3
million common shares in an initial public offering. In addition, all
outstanding convertible preferred shares were converted into 21,556,469 shares
of common stock. The net proceeds from the public offering were initially
invested in short-term and long-term securities. Until our initial public
offering, we had financed our operations primarily through private sales of
approximately $97.7 million of convertible preferred stock as well as through
capital leases for capital equipment, furniture and software.

         For the year ended December 31, 2000, we used approximately $46.8
million of cash from operations primarily due to our loss, before depreciation
and amortization, of $36.3 million and growth of receivables and inventory of
$14.7 million, partially offset by a $4.9 million increase in accounts payable
and accrued expenses. For the year ended December 31, 1999, we used
approximately $31.5 million of cash from operations primarily due to our net
loss, before depreciation and amortization, of $28.9 million.


                                       17
   20

         Our investing activities in 2000 and 1999 included capital additions of
approximately $11.0 million and $4.5 million, respectively. This increase was
primarily due to the purchase of equipment to complete the transceiver module
production factory as well as other factory production and research and
development equipment. Our investing activities in 2000 also included the
purchase of approximately $30.4 million short-term investments, compared to the
sale of approximately $11.0 million of short-term investments in 1999. We
currently believe our capital equipment requirements for 2001 will be in the
range of $6.0 million to $8.0 million. However, the timing and extent of any
future capital expenditures is dependent upon future business growth.

         In addition to the proceeds from our initial public offering, our
financing activities in 2000 included net borrowings of $4.4 million under loans
for capital equipment. For the 1999 period, financing activities included
proceeds from the sale of approximately 7.1 million shares of convertible
preferred stock for $61 million.

         On February 25, 2000, we entered into an agreement with a financial
institution to borrow up to $9.0 million in 2000 for capital equipment
purchases, furniture and software. During 2000, we borrowed approximately $8.9
million under this agreement, of which $8.2 million was outstanding at December
31, 2000. Of the amount borrowed, approximately $5.9 million is repayable over
four years and bears interest at an annual rate of 13% and the balance is
repayable over three years and has an annual interest rate of 14%. The agreement
includes no financial covenants and borrowings are secured with the specific
equipment, furniture and software purchased with the loans. Under the agreement,
we issued 26,667 warrants to purchase our common stock with an exercise price of
$13.50. The availability of borrowings under this agreement expired in December
2000.

         In March 2001, we entered into a loan agreement with a lending
institution to borrow up to $3.0 million of capital purchases in 2001. The loan
terms include payments over 3 years and interest at an annual rate of 12%. The
agreement includes a minimum cash balance financial covenant.

         Long term debt and capital lease maturities for the next four years are
$4.0 million in 2001, $3.1 million in 2002, $2.5 million in 2003 and $1.5
million in 2004.

         We are obligated to make lease payments of approximately $8.6 million
over the lease periods of our operating leases, with $2.2 million due over the
next 12 months. The lease obligations include approximately $6.1 million for a
seven-year lease for our new manufacturing and office space we occupied in the
first quarter of 2000. In conjunction with this lease agreement, we secured a
$1.1 million letter of credit in favor of the landlord with cash.

         We expect that we will have substantial cash requirements to support
our anticipated business growth during the next 12 months. We will continue our
research and development efforts and support our customers on a global basis. We
anticipate that our revenue will grow and our gross margins will improve as the
year 2001 progresses, but we do expect to have a significant net loss in 2001.
Additionally, as our business volumes grow we anticipate additional cash will be
required to support working capital growth. The amount and timing of cash
requirements will depend on market acceptance and customer demand for our
products, and the resources we devote to researching and developing, marketing,
selling and supporting our products. We believe that our current cash and cash
equivalents and investments on hand and availability under our capital equipment
financing lines should be sufficient to fund our operations for more than the
next 12 months.

OTHER

         On March 30, 2001, the Company became aware that one of its customers
intends to file for bankruptcy. At December 31, 2000, the Company had an
outstanding accounts receivable balance of approximately $2.7 million from this
customer. No allowance has been provided on this accounts receivable balance at
December 31, 2000. At this time, management is unable to obtain sufficient
information, due to the timing of this event, to make a reasonable estimate of
the loss, if any, to be incurred. Management plans to obtain sufficient evidence
prior to the Company's release of its first quarter results for 2001 and to
provide for the loss, if any, at that time.


                                       18
   21

RECENT ACCOUNTING PRONOUNCEMENT

         In June 1998, the Financial Accounting Standard Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133). SFAS No. 133 establishes
accounting and reporting standards requiring that every derivative instrument be
recorded in the balance sheet as either an asset or liability measured at its
fair value. SFAS No. 133, as recently amended, is effective for fiscal years
beginning after June 15, 2000. The Company adopted this statement effective
January 1, 2001. The adoption of SFAS No. 133 did not have a material effect on
our financial position or results of operations.

RISK FACTORS

         In addition to the other information in this Report, the following
factors should be considered carefully in evaluating the Company's business and
prospects:

                     RISKS RELATED TO OUR FINANCIAL RESULTS

WE HAVE A HISTORY OF LOSSES, EXPECT FUTURE LOSSES AND MAY NEVER ACHIEVE
PROFITABILITY

         As of December 31, 2000, we had an accumulated deficit of $99.8
million, and we expect to continue to incur net losses in 2001. We anticipate
continuing to incur significant expenses for research and development, and
selling, marketing and general and administrative expenses and, as a result, we
will need to generate significantly higher revenues to achieve and sustain
profitability. In 2000, we had revenues of $26.2 million and a net loss of
$(48.2) million.

DUE TO OUR LIMITED OPERATING HISTORY, THE FACT THAT WE COMPETE IN A NEW AND
RAPIDLY GROWING MARKET, AND THE FACT THAT A SIGNIFICANT PERCENTAGE OF OUR
EXPENSES ARE FIXED AND DO NOT VARY WITH REVENUES, OUR QUARTERLY OPERATING
RESULTS AND STOCK PRICE MAY FLUCTUATE.

         We may not be able to forecast our quarterly shipments due to a variety
of factors, including our limited operating history and the fact that our
customers are not required to purchase specified numbers of Invisible Fiber
units on a quarterly basis. Accordingly, it is difficult to predict the
quarterly revenues that we will recognize. A significant percentage of our
expenses, particularly salaries and rent, do not vary with our revenues. If we
experience a shortfall in revenues in relation to our expenses, we may be unable
to reduce our expenses quickly enough to avoid lower than anticipated quarterly
operating results. In addition, our expenses have increased, and will continue
to increase, with the anticipated growth in our business. We do not know whether
our revenues will grow rapidly enough to absorb these costs. As a result, our
quarterly operating results could fluctuate, and such fluctuation could cause
the market price of our common stock to decline. We do not believe that
period-to-period comparisons of our revenues and operating results are
necessarily meaningful. You should not rely on the results of any one quarter as
an indication of future performance.

WE CURRENTLY DEPEND ON A LIMITED NUMBER OF CUSTOMERS FOR SUBSTANTIALLY ALL OF
OUR SALES AND THE LOSS OF ONE OR MORE OF THEM, OR ANY FUTURE CUSTOMER ON WHOM WE
MAY DEPEND FOR A SIGNIFICANT PORTION OF OUR SALES, COULD SIGNIFICANTLY REDUCE
OUR REVENUES.

         In 2000, three customers each accounted for more than 10% of our
revenue. Also, we currently depend on eight key customers for substantially all
of our sales. Moreover, because we focus our sales efforts on selected service
providers, we anticipate our operating results will continue to depend on sales
to a small number of key customers for the foreseeable future. The loss of one
or more of our current customers, a reduction in sales to them or the failure to
sell our products to additional service providers would significantly reduce our
future revenues.


                                       19
   22


SOME OF OUR CUSTOMERS ARE DEPENDENT ON ADDITIONAL FINANCING TO CONTINUE THEIR
NETWORK DEPLOYMENTS AND PURCHASE ADDITIONAL PRODUCT FROM US.

         Certain of our current and potential customers will require additional
financing to fund their future wireless network deployments. Should these
companies be unable to obtain adequate financing, they would be unable to
purchase or pay for our products in the future, which could have a significant
adverse impact on our revenue, gross margins and net loss.

IF WE FAIL TO FORECAST DEMAND FOR OUR PRODUCTS ACCURATELY, WE COULD LOSE SALES
AND INCUR INVENTORY LOSSES.

         We have long lead times for many of the components we use, which often
requires that we order components based on our sales forecasts, rather than
actual customer orders. However, because our sales history is limited and
because our sales cycles have been long and varying, we may not be able to make
accurate sales forecasts. If we forecast incorrectly and overestimate our
component requirements, we may have excess inventory, which would increase our
costs and subject us to increased risk of obsolescence. If we underestimate our
component requirements, we may have inadequate inventory, which could interrupt
our manufacturing, delay delivery of our products to our customers and cause us
to lose sales.

WE EXPECT TO RELY ON SALES OF OUR CURRENT INVISIBLE FIBER PRODUCTS FOR A
SIGNIFICANT PORTION OF OUR REVENUES, AND IF THESE PRODUCTS FAIL TO ACHIEVE
MARKET ACCEPTANCE WE MAY NEVER ACHIEVE PROFITABILITY.

         If we are unable to sell sufficient quantities of our products at
acceptable prices, we may not achieve or maintain profitability. We expect to
derive a significant portion of our revenues for the foreseeable future from
sales of our 38 Gigahertz and the 28, 29 and 31 Gigahertz, or Local Multipoint
Distribution Service frequencies, Invisible Fiber Internet and SONET products.
The following factors, some of which are beyond our control, could affect demand
for, or pricing or market acceptance of these products:

         -        the adoption of broadband wireless solutions over competing
                  technologies;

         -        the growth and changing requirements of the market for
                  broadband wireless equipment;

         -        the successful development of our relationships with service
                  providers;

         -        the ability of service providers to obtain the financing,
                  licensed radio frequency and roof rights needed to deploy
                  their networks;

         -        the performance, quality, price and total cost of ownership of
                  our products; and

         -        the performance, quality, price, total cost of ownership and
                  availability of competing products.

IF WE ARE NOT SUCCESSFUL IN DEVELOPING AND MARKETING NEW AND ENHANCED BROADBAND
WIRELESS PRODUCTS THAT KEEP PACE WITH TECHNOLOGY AND OUR CUSTOMERS' NEEDS, OUR
FUTURE SALES MAY SUFFER.

         We may not be successful in developing and marketing, on a timely and
cost-effective basis, either enhancements to our products or new products that
respond to technological advances and satisfy increasingly sophisticated
customer needs. If we fail to introduce new products or to enhance existing
products, we may not be able to retain our current customers or sell our
products to new customers. In addition, if new industry standards emerge that we
do not anticipate or adapt to, our products could be rendered obsolete. The
market for our products is new and emerging, and is characterized by rapid
technological advances, changing customer needs, evolving industry standards and
a high degree of competition.

         We are seeking to develop new versions of our products to support
additional frequency bands and higher transmission speeds and to develop
enhancements to our existing products. Developing new products and product
enhancements requires significant additional expenditures and research and
development resources.


                                       20
   23

LONG SALES CYCLES MAY CONSTRAIN REVENUE GROWTH.

         Long sales cycles may restrict our ability to generate revenue growth.
We do not have enough historical experience selling our products to determine
how our sales cycle will affect our revenues. In obtaining the majority of our
current customers, we experienced sales cycles ranging from four to twelve
months, and we expect that our sales cycles will continue to be long and
unpredictable. Because of the cost and complexity of our products, most
potential customers will need substantial time to understand our technology and
the benefits offered by our products, including time for testing and evaluation.
In addition, we believe a typical customer is likely to initially purchase a
small number of units and then incrementally increase the size of the
installation over time. A number of factors affect the length of time the
customer needs before it selects us as a vendor or begins placing orders for
shipment. These factors include:

         -        the customer's ability to obtain the financing and licensed
                  radio frequency needed to deploy its networks;

         -        the type and size of the customer and the nature of its
                  internal decision processes;

         -        the length of the customer's product testing and evaluation
                  period;

         -        the time required by the customer to plan its network
                  development;

         -        the time required by the customer to deploy its network, which
                  may be affected by the customer's ability to secure suitable
                  roof rights;

         -        the size, breadth and configuration of the customer's network;
                  and

         -        the customer's ability to obtain subscribers for its services.

A FAILURE TO ESTABLISH AND EXPAND RESELLER DISTRIBUTION CHANNELS AND TO CONTINUE
PROVIDING HIGH QUALITY CUSTOMER SUPPORT COULD RESTRICT GROWTH.

         Our inability to effectively establish and expand our indirect
distribution channels could harm our ability to grow and increase revenue. Some
prospective customers may prefer to work with vendors that can supply all of the
customer's network needs, including not only broadband wireless solutions but
also wireline solutions and related equipment for the customer premise and the
carrier's central office. As our competitors forge relationships with large
resellers that offer more comprehensive product and service offerings, we may
need to do the same. If we are unable to develop relationships with significant
resellers, or if these resellers are not successful in their sales efforts,
sales of our products could decrease.

         We may need to increase our customer service and support staff to
support new and existing customers and resellers. The design and installation of
networking products can be complex and our customers, particularly our Internet
service provider customers, may require a high level of sophisticated support
and services. Hiring highly trained customer service and support personnel is
very competitive in our industry due to the limited number of people available
with the necessary technical skills and understanding of our products. If we are
not successful in attracting and retaining such personnel it would be difficult
for us to execute our business plan effectively.


                                       21
   24


WE RELY ON THE SERVICES OF OUR EXECUTIVE OFFICERS AND KEY ENGINEERING AND SALES
AND MARKETING PERSONNEL, NONE OF WHOM ARE BOUND BY EMPLOYMENT AGREEMENTS. THE
LOSS OF ANY OF THESE PERSONS COULD RESULT IN DELAYS IN PRODUCT DEVELOPMENT, LOSS
OF CUSTOMERS AND SALES AND DIVERSION OF MANAGEMENT RESOURCES, AND CAUSE OUR
BUSINESS TO SUFFER.

         Our ability to implement our business strategy and our future success
depends largely on the continued services of our executive officers and other
key engineering, sales, marketing and support personnel who have critical
industry or customer experience and relationships. None of our key personnel is
bound by an employment agreement. We have no key man life insurance. The loss of
the technical knowledge and management and industry expertise of any of these
key personnel could result in delays in product development, loss of customers
and sales and diversion of management resources, which could produce lower than
anticipated operating results.

               RISKS RELATED TO MARKET ACCEPTANCE OF OUR PRODUCTS

THE RATE OF MARKET ADOPTION OF OUR CONSECUTIVE BROADBAND WIRELESS TECHNOLOGY MAY
BE LIMITED BY LACK OF MARKET AWARENESS AND OTHER FACTORS.

         Our consecutive point broadband wireless solutions compete with other
high-speed solutions such as digital subscriber lines, coaxial cable, fiber
optic cable, satellite and point-to-point and point-to-multipoint wireless
technologies. Many of these alternative technologies can take advantage of
existing installed infrastructure and have achieved significantly greater market
acceptance and penetration than broadband wireless technologies, including our
consecutive point broadband wireless technology. By comparison, since we are the
first company to offer a consecutive point wireless solution, we must undertake
substantial marketing efforts to make prospective customers aware of our
products and to persuade their engineering organizations to accept a new
technological approach. Moreover, current broadband wireless technology,
including our consecutive point broadband wireless technology, has inherent
technical limitations that may inhibit its widespread adoption in many areas,
including reduced communication distance in bad weather and the need for
line-of-sight installation. We expect broadband wireless technologies, including
our consecutive point broadband wireless technology, to face increasing
competitive pressures from both current and future alternative technologies. In
light of these factors, many service providers may be reluctant to invest
heavily in consecutive point broadband wireless solutions and, accordingly, the
market for these solutions may fail to develop or may develop more slowly than
we expect. Either outcome would limit our sales opportunities and make it
difficult for us to achieve profitability.

THE BROADBAND WIRELESS INDUSTRY IS INTENSELY COMPETITIVE, AND OUR FAILURE TO
COMPETE EFFECTIVELY COULD HURT OUR SALES AND GROSS MARGINS.

         The market for broadband wireless equipment is rapidly evolving,
fragmented, highly competitive and subject to rapid technological change. A
number of large telecommunications equipment suppliers, such as Digital
Microwave Corporation, Harris Corporation and P-Com, Inc., as well as a number
of smaller companies have developed or are developing products that compete with
ours. Some of our competitors are substantially larger than we are, have longer
operating histories and have greater financial, sales, marketing, distribution,
technical, manufacturing and other resources. Some also have greater name
recognition and a larger installed base of customers than we have. In addition,
many of our competitors have well-established relationships with our current and
potential customers and have extensive knowledge of our target markets. As a
result, our competitors may be able to respond more quickly to evolving industry
standards and changes in customer requirements, or to devote greater resources
to the development, promotion and sale of their products than we can. In
addition, current and potential competitors may make strategic acquisitions or
establish cooperative relationships among themselves or with third parties to
increase their ability to gain market share rapidly. We also expect that
industry consolidation could increase competition. We expect to face increasing
competitive pressures from both current and future competitors. Increased
competition could result in reduced demand for our products, price reductions
and reduced gross margins for our products.


                                       22
   25

AS OUR CUSTOMERS ENTER NEW MARKETS, WE SOMETIMES HAVE TO ADAPT OUR PRODUCTS
RAPIDLY TO THE LICENSED FREQUENCY BANDS AND REGULATORY REQUIREMENTS THAT EXIST
IN THOSE MARKETS, AND WE MAY INCUR SIGNIFICANT COSTS MAKING THE NECESSARY
MODIFICATIONS.

         Each of our products is designed for a specific range of frequency
bands. Because different governments license different portions of available
radio frequency for the broadband wireless market, and because service providers
license specific frequency bands, we sometimes have to adapt our products
rapidly to use different frequency bands. This design process can be difficult
and time-consuming, and could therefore increase our costs and cause delays in
the delivery of products to our customers.

                   RISKS RELATED TO OUR PRODUCT MANUFACTURING

IF WE ARE UNABLE TO MANUFACTURE SUFFICIENT QUANTITIES TO MEET EXISTING AND
FUTURE CUSTOMER DEMAND, WE MAY LOSE SALES AND OUR CUSTOMER RELATIONSHIPS MAY
SUFFER.

         We currently rely on third party manufacturers to produce some
components used in our products and our own manufacturing capabilities for final
assembly and testing of our products. We do not have long term contracts with
any of our third party manufacturers. We have experienced and may in the future
experience delays in shipments from our manufacturers, which could in turn delay
product shipments to our customers. We may in the future experience other
manufacturing problems, such as inferior quality and insufficient quantities of
components or finished product. Such delays, quality problems and shortages
could cause us to lose sales and customers, and thereby harm our business and
operating results. We intend to introduce new products and product enhancements
regularly, which will require us to achieve volume production rapidly by
coordinating our efforts with those of our third party component manufacturers.
We may need to find one or more new manufacturers that can manufacture the
components used in our products in higher volumes and at lower costs. We may be
unable to secure contract manufacturers that meet our needs. Additionally,
qualifying new manufacturers and commencing volume production is expensive and
time consuming. If we are required or choose to change manufacturers, we may
lose sales and our customer relationships may suffer.

BECAUSE WE DEPEND ON SINGLE SOURCE AND LIMITED SOURCE SUPPLIERS OF COMPONENTS OF
OUR PRODUCTS INCLUDING SYNTHESIZERS AND HIGH-POWER AMPLIFIERS, WE ARE
SUSCEPTIBLE TO SUPPLY SHORTAGES FOR THESE COMPONENTS THAT COULD ADVERSELY AFFECT
OUR ABILITY TO MEET EXISTING AND FUTURE CUSTOMER DEMAND FOR OUR PRODUCTS AND
CAUSE US TO MAKE FEWER SHIPMENTS AND GENERATE LOWER THAN ANTICIPATED REVENUES.

         If we encounter shortages or delays in obtaining components for our
products in sufficient quantities when required, delivery of our products could
be delayed, resulting in customer dissatisfaction and decreased revenues. In
addition, our suppliers may enter into exclusive arrangements with our
competitors, stop selling their products or components to us at commercially
reasonable prices or refuse to sell their products or components to us at any
price, which could harm our results of operations. We currently purchase several
key components used in our products from single or limited sources and depend on
supply from these sources to meet our needs. We acquire these key components
through purchase orders and have no long-term commitments regarding supply or
price from these suppliers. We have single source suppliers for synthesizers,
high-powered amplifier and housings. Additional single or limited source
components may be incorporated in our products in the future.


                                       23
   26


                          RISKS RELATED TO OUR PRODUCTS

OUR PRODUCTS CONSIST OF SEVERAL HIGHLY TECHNICAL COMPONENTS, ANY OF WHICH COULD
CONTAIN DEFECTS WHICH INTERFERE WITH THE PERFORMANCE OF OUR PRODUCTS.

         Despite testing by us and our customers, errors may be found in our
products after commencement of commercial shipments. We and our customers have
from time to time discovered errors in our products. In the future, there may be
additional errors and defects in our products. If errors are discovered, we may
not be able to successfully correct them in a timely manner or at all. Errors
and failures in our products could result in network outages for our customers,
a loss of or delay in market acceptance and damage to our reputation and our
ability to convince service providers of the benefits of our products. In
addition, we may need to make significant expenditures of capital resources in
order to eliminate errors and failures. Moreover, because our products are used
in critical communications networks, we may receive significant liability claims
if any products do not work properly. Our insurance policies and the limitations
on liability in our agreements with customers may not adequately limit our
exposure to such claims.

IF INTERFERENCE FROM OTHER RADIOS OPERATING IN A SERVICE AREA OR ADVERSE WEATHER
CONDITIONS CAUSE OUR PRODUCTS TO MALFUNCTION, OUR REPUTATION COULD BE HARMED AND
OUR SALES MAY DECREASE.

         Many of our customers will provide service in large, densely populated
metropolitan areas where wireless traffic is heavy. If multiple wireless systems
are operating in these service areas concurrently with our products, the radio
frequency on which our products operate could become saturated, resulting in
signal interference. If that occurred, the quality or availability of our
customers' transmissions could decrease or our products could fail, causing
service delays and interruptions. Interference caused by severe weather
conditions could lead to similar failures. The ability of our products to
provide our customers with high quality and reliable transmissions at all times
and under a variety of adverse conditions is key to our success. If our products
fail we may suffer:

         -        the loss of or delay in market acceptance and sales of our
                  products;

         -        cancellation of orders;

         -        diversion of development resources;

         -        injury to our reputation; and

         -        increased maintenance and warranty costs.

LINE OF SITE RESTRICTIONS INHERENT IN OUR PRODUCTS COULD LIMIT DEPLOYMENT
OPTIONS AND HAVE A NEGATIVE IMPACT ON OUR REVENUES.

         Our products require a direct line of sight, potentially limiting the
ability of service providers to deploy them in a cost-effective manner. Because
of line of sight limitations, service providers will often install broadband
wireless equipment on the rooftops of buildings and on other tall structures.
Service providers must generally secure roof rights from the owners of each
building or other structure on which the equipment is to be installed. The
inability to obtain roof rights easily and cost-effectively may cause potential
customers to choose not to install broadband wireless equipment, resulting in
fewer sales of our products and lower than expected revenues.


                                       24
   27


                 RISKS RELATED TO THE EXPANSION OF OUR BUSINESS

FUTURE EXPANSION OF OUR INTERNATIONAL OPERATIONS WILL REQUIRE SIGNIFICANT
MANAGEMENT ATTENTION AND FINANCIAL RESOURCES, AND OUR EFFORTS TO EXPAND
INTERNATIONALLY MAY NOT SUCCEED.

         We plan to increase our international sales activities significantly,
but we have limited experience in developing foreign language materials to
support our products and little direct experience marketing and distributing our
products internationally. We currently have a sales and service group in Japan
and conduct limited, targeted sales activities in Canada, Australia and Japan.
To successfully expand international sales, we must expand our international
operations, recruit additional international sales and support personnel, and
expand our international distribution channels. This expansion will require
significant management attention and financial resources, and may not be
successful. Our success in international markets may also depend on our ability
to modify our existing products and develop new products supporting frequency
bands that are different from those used by service providers in the United
States.

COMPETITION FOR QUALIFIED ENGINEERING PERSONNEL WITH RADIO FREQUENCY EXPERTISE,
AS WELL AS SALES, MARKETING AND CUSTOMER SUPPORT PERSONNEL WITH SIGNIFICANT
TELECOMMUNICATIONS EQUIPMENT INDUSTRY EXPERIENCE, IS INTENSE, AND IF WE ARE NOT
SUCCESSFUL IN ATTRACTING AND RETAINING PERSONNEL, OUR ABILITY TO GROW OUR
BUSINESS MAY BE HARMED.

         Our future performance depends on our ability to attract and retain
highly qualified sales, engineering personnel with radio frequency expertise, as
well as sales, marketing and customer support personnel with significant
telecommunications equipment industry experience. Competition for qualified
personnel in the telecommunications equipment industry is intense, and we may
not be successful in attracting and retaining such personnel. We are actively
searching for research and development engineers, sales and marketing and
customer service and support personnel, all of whom are in short supply. If we
do not succeed in retaining our personnel or in attracting new employees, our
business could suffer.

         Competitors and others have in the past, and may in the future, attempt
to recruit our employees. We have in the past and may in the future attempt to
recruit employees from our competitors. Companies whose employees accept
positions with competitors frequently claim that the competitors have engaged in
unfair hiring practices. We have received such complaints in the past, and may
receive such complaints in the future as we seek to hire qualified personnel.
These complaints may result in material litigation and related disruption to our
operations.

OUR OFFICERS, DIRECTORS AND PERSONS OR ENTITIES AFFILIATED WITH OUR DIRECTORS
RETAIN SIGNIFICANT CONTROL OVER US, WHICH MAY LEAD TO CONFLICTS WITH OTHER
STOCKHOLDERS OVER CORPORATE GOVERNANCE ISSUES.

         As of December 31, 2000, officers, directors and individuals or
entities affiliated with our directors will beneficially own approximately 38%
of our outstanding common stock as a group. Acting together, these stockholders
would be able to significantly influence all matters that our stockholders vote
upon, including the election of directors and the approval of significant
corporate transactions. This concentration of ownership may also delay, deter or
prevent a change in our control and may make some transactions more difficult or
impossible to complete without the support of these stockholders.

AT DECEMBER 31, 2000, 34,937,299 SHARES OF OUR COMMON STOCK WAS OUTSTANDING AND
FUTURE SALES OF THESE SHARES OF COMMON STOCK BY OUR EXISTING STOCKHOLDERS COULD
CAUSE OUR STOCK PRICE TO FALL.

         If our stockholders sell substantial amounts of common stock in the
public market, the market price of our common stock could fall. The perception
among investors that these sales will occur could produce the same effect. As of
December 31, 2000 we had 34,937,299 shares of common stock outstanding.


                                       25
   28




ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

         The primary objective of our investment activities is to preserve
principal while at the same time maximizing the income we receive from our
investments without significantly increasing risk. Some of the securities that
we may invest in may be subject to market risk. This means that a change in
prevailing interest rates may cause the principal amount of the investment to
fluctuate. For example, if we hold a security that was issued with a fixed
interest rate at the then-prevailing rate and the prevailing interest rate later
rises, the principal amount of our investment will probably decline. To minimize
this risk, we maintain our portfolio of cash equivalents and investments in a
variety of securities, including commercial paper, money market funds,
government and investment grade non-government debt securities. These securities
are of a short-term nature with an immaterial portion invested in long-term
securities. As a result, we do not believe that near-term changes in interest
rates will have a material effect on our future results of operations.



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          INDEX TO FINANCIAL STATEMENTS




                                                                                                                    PAGE
                                                                                                                    ----



                                                                                                                  
         Report of Independent Auditors........................................................................      F-2

         Consolidated Balance Sheets at December 31, 1999 and 2000.............................................      F-3

         Consolidated Statements of Operations for the years ended December 31, 1998, 1999 and 2000............      F-4

         Consolidated Statements of Stockholders' Equity for the years ended December 31, 1998, 1999 and 2000..      F-5

         Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1999 and 2000............      F-6

         Notes to Consolidated Financial Statements............................................................      F-8



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

         None.


                                       26
   29



                                    PART III

ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT

         The following table sets forth for all directors and executive officers
of the Company, their ages and present positions with the Company as of March
31, 2001.



NAME                                  AGE    POSITION
- ----                                  ---    --------
                                       
Howard "Skip" Speaks...........       53     President, Chief Executive Officer and Director
Kenneth R. Vines...............       56     Senior Vice President and Chief Financial Officer
Michael A. Clark...............       40     Vice President of Engineering
Douglas R.B. Campbell..........       44     Vice President of Sales and Marketing
Philip C. Gulliford............       42     Vice President of Advanced Technology
Mark I. Johnson................       47     Chief Operating Officer
Robert P. Goodman..............       40     Chairman of the Board
Stanley R. Arthur..............       65     Director
Bandel L. Carano...............       39     Director
James F. Gibbons...............       69     Director
Arjun Gupta....................       40     Director
James Wei......................       33     Director


         Howard "Skip" Speaks has served as our President and Chief Executive
Officer and as a member of our board of directors since September 1999. Prior to
joining us he held various positions at Ericsson, a telecommunications company,
from August 1986 through September 1999, most recently as Executive Vice
President and General Manager of the network operators group. Mr. Speaks
received his B.S. degree in civil engineering from the West Virginia Institute
of Technology.

         Kenneth R. Vines has served as our Senior Vice President and Chief
Financial Officer since October 1998. Prior to joining us he was Vice President
of Finance for DSC Communications, a telecommunications equipment and software
development company, from July 1986 through September 1998. Mr. Vines received
his B.B.A. degree from the University of Texas at Arlington and his M.B.A.
degree from North Texas State University.

         Michael A. Clark, one of our founders, has served as our Vice President
of Engineering since April 1997. Prior to joining us he was a Hardware
Engineering Manager at Texas Instruments, a semiconductor company, from June
1983 through March 1997. Mr. Clark received his B.S. degree in electrical
engineering from the Lawrence Institute of Technology and his M.S. degree in
electrical engineering from the University of Texas at Arlington.

         Douglas R.B. Campbell has served as our Vice President of Sales and
Marketing since March 1999. Prior to joining us he was employed at Nortel
Networks, a provider of communications products and services, as Vice President,
Account Management (Asia) from April 1997 through March 1999 and as Assistant
Vice President, Broadband Networks Business from December 1994 through April
1997. Mr. Campbell received his Bachelor of Engineering Physics degree from the
Royal Military College of Canada and his M.B.A. degree from the University of
Lausanne.

         Philip C. Gulliford, one of our founders, has served as Vice President
of Advanced Technology since April 1997. Prior to joining us he was Director of
Engineering at Phoenix Wireless Group, a wireless local loop company, from April
1993 through February 1997. Mr. Gulliford received his B.S. degree in physics
and electronics from Brunel University in London.


                                       27
   30


         Mark I. Johnson has served as our Chief Operating Officer since June
2000. Prior to joining us he was Vice President of Manufacturing at ADC
Telecommunications, a provider of telecommunications equipment, software and
integration services, from June 1993 through May 2000. Mr. Johnson received his
B.S. degree in Information Technology and his M.S. degree in Operations
Management from Connecticut State University. Mr. Johnson also completed the
Advanced Management program at Harvard Business School.

         Robert P. Goodman is Chairman of the board of directors and has served
as a director since January 1998. He is a general partner at Bessemer Venture
Partners, a venture capital firm. Prior to joining Bessemer he was a managing
member of Cove Road Associates, a venture capital firm, from March 1998 through
December 1999. Prior to that, he was Chairman and Chief Executive Officer of
Celcore, a developer and supplier of cellular telephone switching and
infrastructure equipment, from June 1993 through December 1997. Mr. Goodman
received his B.A. degree in Latin American studies from Brown University and his
M.B.A. degree from Columbia University.

         Stanley R. Arthur has served on our board of directors since March
2000. He has been President of Lockheed Martin Missiles and Fire
Control-Orlando, a defense contractor, since July 1999. Prior to that, Mr.
Arthur was Vice President for Washington Operations for the Lockheed Martin
Electronics Sector from September 1996 through July 1999. From July 1995 to
September 1996 Mr. Arthur was Vice President for Naval Systems for Lockheed
Martin Tactical Systems. From 1957 to 1995 Mr. Arthur held a number of commands
with the U.S. Navy, most recently as Vice Chief of Naval Operations. Mr. Arthur
received his B.S. degree in Aeronautics from Miami University. Mr. Arthur also
earned his B.S. degree in aeronautical engineering from the U.S. Navy
Postgraduate School, and received his masters degree in administration from
George Washington University.

         Bandel L. Carano has served on our board of directors since November
1997. He has been a general partner of Oak Investment Partners, a venture
capital firm, since 1985. Mr. Carano serves as a member of the investment
advisory board of the Stanford University Engineering Venture Fund. Mr. Carano
received his B.S. and M.S. degrees from Stanford University. Mr. Carano also
serves as a director of Advanced Radio Telecom, Metawave Communications,
Repeater Technologies, Virata and WFI.

         James F. Gibbons, Ph.D. has served on our board of directors since
November 1997. He has been a professor of electrical engineering since 1957 and
Special Counsel to the President for Industry Relations at Stanford University
since July 1996. Dr. Gibbons was Dean of the School of Engineering at Stanford
University from September 1984 to June 1996. Dr. Gibbons received his B.S.
degree in electrical engineering from Northwestern University and his M.S. and
Ph.D. degrees in electrical engineering from Stanford University. He currently
serves as a director of Cisco Systems, Lockheed Martin and El Paso Energy.

         Arjun Gupta has served on our board of directors since May 1998. He has
been the managing partner of TeleSoft Partners, a venture capital firm, since
January 1997. From August 1994 to December 1996 Mr. Gupta was a Vice President
of The Chatterjee Group, an investment advisory company. Mr. Gupta received his
B.A. degree in economics from St. Stephen's College, Delhi University, his B.S.
and M.S. degrees in computer science from Washington State University and an
M.B.A. degree from Stanford University.

         James Wei has served on our board of directors since November 1997. He
has been a general partner at Worldview Technology Partners, a venture capital
firm, since April 1996. Prior to that, Mr. Wei was a Fund Manager at JAFCO Co.,
Ltd., a venture capital firm, from October 1991 through April 1996. Mr. Wei
received his B.S. degree in systems design engineering from the University of
Waterloo in Ontario, Canada.


                                       28
   31




         Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's Executive Officers and Directors and
persons who own more than ten percent (10%) of a registered class of the
Company's equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "Commission") and the
National Association of Securities Dealers, Inc. Executive Officers, Directors
and greater than ten percent (10%) stockholders are required by Commission
regulation to furnish the Company with copies of all Section 16(a) forms they
file. The Company believes that all Executive Officers and Directors of the
Company complied with all applicable filing requirements during the fiscal year
ended December 31, 2000.


ITEM 11. EXECUTIVE COMPENSATION

         The following table sets forth all compensation accrued during fiscal
years 1998, 1999 and 2000 to the Company's President and Chief Executive
Officer, and each of the Company's five other most highly compensated executive
officers whose annual compensation exceeded $100,000 for fiscal year 2000.

                           SUMMARY COMPENSATION TABLE



                                                                                                      Long-Term
                                                                                                    Compensation
                                                                                                    -------------     ------------
                                                            Annual Compensation($)                   Securities
                                                 ---------------------------------------------        Underlying        All Other
Name and Principal Positions                     Year         Salary        Bonus       Other         Options(#)      Compensation
- ----------------------------                     ----        --------      -------    --------      -------------     ------------
                                                                                                    
Howard "Skip" Speaks(1)...................       1998        $     --      $    --    $     --              --              --
   President and Chief Executive Officer         1999          92,273       60,000     274,050         625,000              --
                                                 2000         290,000       50,000          --         200,000              --
Mark I. Johnson(2)........................       1998              --           --          --              --              --
   Chief Operating Officer                       1999              --           --          --              --              --
                                                 2000         105,000       23,496      65,090         247,500              --
Kenneth R. Vines(3).......................       1998          33,558           --          --         150,000              --
   Senior Vice President and Chief Financial     1999         150,000        6,000      72,951(5)       50,000              --
   Officer                                       2000         175,000       43,875          --          90,000              --
Douglas R.B. Campbell(4)..................       1998              --           --          --              --              --
   Vice President of Sales and Marketing         1999         106,250        3,000      39,855(5)      150,000              --
                                                 2000         163,462       38,250          --          75,000              --
Michael A. Clark(3).......................       1998         125,000       15,000          --          62,500              --
   Vice President of Engineering                 1999         140,625        5,000          --          50,000              --
                                                 2000         175,000       43,875          --         110,000              --
Philip C. Gulliford(4)....................       1998         125,000       15,000          --              --              --
   Vice President of Advanced Technology         1999         130,000        5,000          --              --              --
                                                 2000         155,385       38,250          --          40,000              --


(1)      Mr. Speaks joined us in September 1999. His annual salary is $290,000.
         Other annual compensation listed includes a signing bonus Mr. Speaks
         earned in 1999 in the amount of $250,000, reimbursement for relocation
         expenses and temporary housing expenses for which we reimbursed Mr.
         Speaks in 1999.
(2)      Mr. Johnson joined us in June 2000. His annual salary is $195,000.
         Other annual compensation listed includes a signing bonus Mr. Johnson
         earned in 2000 in the amount of $25,000, reimbursement for relocation
         expenses and temporary housing expenses for which we reimbursed Mr.
         Johnson in 2000.
(3)      In July 2000, Mr. Vines' and Mr. Clark's annual salary increased to
         $195,000.
(4)      In July 2000, Mr. Campbell's and Mr. Gulliford's annual salary
         increased to $170,000.
(5)      Represents reimbursement for relocation expenses.


                                       29
   32



OPTION GRANTS IN 2000

         The following table sets forth information concerning grants of stock
options to each of the executive officers named in the table above during 2000.
All options granted to these executive officers in 2000 were granted under the
1997 Stock Plan. The options vest as indicated in the table below. Options
granted to these executive officers may be exercised prior to vesting if the
individual exercising options enters into a restricted stock purchase agreement
providing that the shares acquired may be repurchased by us in the event that
the individual ceases to be employed by us. We will pay per share repurchase
option at the same times and in the same amounts as shares would have become
vested and exercisable under the provisions of the individual's option agreement
with us. The percent of the total options granted figures set forth below are
based on an aggregate of 3,241,935 options granted to employees during 2000. All
options were granted at fair market value.

         Potential realizable value represents hypothetical gains that could be
achieved for the options if exercised at the end of the option term assuming
that the fair market value at the date of grant of our common stock appreciates
at a rate 5% and 10% over the option term. The assumed 5% and 10% rates of stock
price appreciation are provided in accordance with rules of the Securities and
Exchange Commission and do not represent our estimate or projection of our
future common stock price.



                                                         INDIVIDUAL GRANTS
                                                   ------------------------------
                                                       PERCENT OF
                                                         TOTAL
                                                        OPTIONS                                      POTENTIAL REALIZABLE VALUE
                                     NUMBER OF         GRANTED TO                                      AT ASSUMED ANNUAL RATES OF
                                    SECURITIES          EMPLOYEES       EXERCISE                         STOCK APPRECIATION FOR
                                    UNDERLYING           DURING        PRICE PER    EXPIRATION               OPTION TERM ($)
               NAME              OPTIONS GRANTED        PERIOD (%)      SHARE ($)      DATE              5%                 10%
- ---------------------------      ---------------   -----------------   ----------   ----------       ------------    ------------
                                                                                                   

Howard "Skip" Speaks .....          100,000(1)              3.1            2.13       12/22/10         134,000            340,000
                                    100,000(3)              3.1            3.65       11/28/10         230,000            582,000
Mark I. Johnson ..........          110,000(2)              3.4            3.65       11/28/10         253,000            640,200
                                     12,500(1)              0.4           15.00       07/12/10         118,000            298,875
                                    125,000(1)              3.9           11.00       06/15/10         865,000          2,191,250
Kenneth R. Vines .........           90,000(3)              2.8            3.65       11/28/10         207,000            523,800
Douglas R. B. Campbell ...           75,000(2)              2.3            3.65       11/28/10         172,500            436,500
Michael A. Clark .........          110,000(2)              3.4            3.65       11/28/10         253,000            640,200
Philip C. Gulliford ......           30,000(2)              0.9            3.65       11/28/10          69,000            174,600
                                     10,000(1)              0.3           15.00       07/12/10          94,400            239,100


- ---------------
(1)      One-quarter of the shares subject to each option vests and becomes
         exercisable on the first anniversary of the vesting commencement date,
         and an additional one-forty-eighth of the shares subject to each option
         vest each month thereafter.
(2)      100% vesting five years subsequent to the vesting commencement date, or
         sooner if certain performance criteria are met.
(3)      25% vest annually over a four-year period or sooner if certain
         performance criteria are met.



AGGREGATE OPTION EXERCISES IN 2000 AND VALUES AT DECEMBER 31, 2000

         The following table sets forth information concerning stock options
held by the executive officers named in the summary compensation table at
December 31, 2000. All stock options have been reported as exercisable because
our 1997 Stock Plan allows options to be exercised prior to vesting if the
individual exercising options enters into a restricted stock purchase agreement.
The value realized upon exercise and the value of unexercised in-the-money
options is based on an estimated fair market value per share minus the actual
exercise prices. All options were granted under our 1997 Stock Plan. The options
vest over periods of


                                       30
   33

four to five years and for some grants sooner if certain performance criteria
are met and otherwise generally conform to the terms of our 1997 Stock Plan.




                                                                    NUMBER OF SECURITIES
                                                                   UNDERLYING UNEXERCISED        VALUE OF UNEXERCISED
                                       SHARES                            OPTIONS AT             IN-THE-MONEY OPTIONS AT
                                      ACQUIRED        VALUE         DECEMBER 31, 2000 (#)        DECEMBER 31, 2000 ($)
               NAME                 ON EXERCISE   REALIZED ($)    EXERCISABLE   UNEXERCISABLE  EXERCISABLE   UNEXERCISABLE
               ----                 -----------   ------------    -----------   -------------  -----------   -------------
                                                                                           
Howard "Skip" Speaks..........              --            --        825,000             --         100,000           --
Mark I. Johnson...............              --            --        247,500             --              --           --
Kenneth R. Vines..............              --            --        140,000             --              --           --
Douglas R. B. Campbell........              --            --         75,000             --              --           --
Michael A. Clark..............              --                      222,500             --         164,375           --
Philip C. Gulliford...........              --            --         40,000             --              --           --


EMPLOYMENT AND SEVERANCE AGREEMENTS

         In August 1999, we issued an employment offer letter to Mr. Speaks that
provides that if he is terminated without cause or involuntarily terminated by
us he will receive twelve months salary and benefits and six months of
accelerated vesting of his stock options. These severance benefits will cease if
Mr. Speaks is employed by another company within twelve months of his
termination. Additionally, if Mr. Speaks is terminated without cause or
involuntarily terminated by us, dies or becomes disabled within six months of
the commencement of his employment, a total of 50,000 options shall become
immediately vested.

         Also, we have entered into stock option agreements under our 1997
Stock Plan with Mr. Speaks that include a provision providing that 625,000
options granted thereunder will accelerate and become fully vested in the event
of our merger with or into another corporation or a sale of substantially all of
our assets, a change of control. Additionally, Mr. Speaks' remaining 200,000
options will accelerate and become fully vested upon change of control, unless
the successor corporation assumes the options or substitutes equivalent
securities for them. Additionally, these agreements provide that if Mr. Speaks
is terminated without cause within twelve months of a change of control, all
assumed or substituted options will accelerate and become fully vested. Mr.
Speaks has agreed that for one year after a change of control he will not
directly or indirectly engage in the financing, operation, management or control
of any business that competes with us.

         In September 1998, we issued an employment offer letter to Mr. Vines
that provides that in the event that he is terminated without cause he will
receive six months salary and 25% of his annual bonus. Mr. Vines' options and
shares of restricted stock will continue to vest during this six month period.
These severance benefits will cease if Mr. Vines is employed by another company
within six months of his termination. Also, Mr. Vines would receive six months
salary, benefits and bonus in the event that he is terminated without cause
within one year of a change in control. We have entered into stock option
agreements under our 1997 Stock Plan with Mr. Vines that include a provision
providing that 150,000 shares of restricted stock granted pursuant to the terms
of the 1997 Stock Plan will accelerate and become fully vested upon a change of
control. Additionally, Mr. Vines' 140,000 options will accelerate and become
fully vested upon a change of control, unless the successor corporation assumes
the options or substitutes equivalent securities for them. Also, these
agreements provide that if Mr. Vines is terminated without cause within twelve
months of a change of control, all assumed or substituted options will
accelerate and become fully vested.


                                       31
   34

         We have entered into stock option agreements under our 1997 Stock Plan
with each of Mr. Campbell, Mr. Clark and Mr. Gulliford for 75,000, 110,000 and
30,000 options, respectively, that include a provision providing that these
options granted thereunder will accelerate and become fully vested upon a change
of control. Additionally, for Mr. Campbell's 150,000 shares of restricted stock
granted pursuant to the terms of the 1997 Stock Plan and Mr. Clark's and
Mr. Gulliford's remaining options of 112,500 and 10,000, respectively, will
accelerate and become fully vested upon change of control, unless the successor
corporation assumes the options or substitutes equivalent securities for them.
Additionally, these agreements provide that if Mr. Campbell, Mr. Clark or Mr.
Gulliford is terminated without cause within twelve months of a change of
control, all assumed or substituted options and shares of restricted stock will
accelerate and become fully vested.
        Mr. Campbell's and Mr. Clark's employment letter provide that in the
event of their termination without cause they will receive six months salary
and 25% of their annual bonus. The options and shares of restricted stock
held by Mr. Campbell and Mr. Clark will continue to vest during this six month
period. These severance benefits will cease if they are employed by another
company within six months of their termination. Also, Mr.Campbell and Mr. Clark
would receive six months salary, benefits and bonus in the event that they are
terminated without cause within one year of a change in control.

         In May 2000, we issued an employment offer letter to Mr. Johnson that
provides if he is terminated without cause by Triton at any time, or by
Triton or a successor within the twelve months following a change of control, he
will receive six months salary, enhanced monthly severance payments based on 25%
of his then annual target bonus, and a prorated portion of such bonus. Mr.
Johnson's stock options will continue to vest during the severance period. We
have entered into stock option agreements under our 1997 Stock Plan with Mr.
Johnson that include a provision providing that 110,000 options granted
thereunder will accelerate and become fully vested upon a change of control.
Additionally, Mr. Johnson's remaining 137,500 options will accelerate and become
fully vested upon change of control, unless the successor corporation assumes
the options or substitutes equivalent securities for them. Additionally, these
agreements provide that if Mr. Johnson is terminated without cause within twelve
months of a change of control, all assumed or substituted options will
accelerate and become fully vested.

DIRECTOR COMPENSATION

         The Company reimburses its directors who are not officers or employees
for expenses incurred in attending any Board of Directors or committee meeting.
Directors who are also the Company's officers or employees are not reimbursed
for expenses incurred in attending Board of Directors or committee meetings.

         In September 1999, we granted options to purchase 50,000 shares of
common stock to Mr. Goodman in consideration of his services as a member of our
Board of Directors. In October 1999, our stockholders approved grants of options
to purchase 10,000 shares of common stock vesting annually in equal installments
over four years to each of our non-employee directors. In October 1999, the
stockholders also approved guidelines for future grants of stock options. These
guidelines provide that non-employee directors would receive 10,000 shares
vesting annually in equal installments over four years, granted in conjunction
with the completion of our initial public offering in July 2000. In addition,
all non-employee directors will receive 5,000 shares vesting annually in equal
installments over four years which are to be granted on the date of each annual
meeting of stockholders.

         Employee directors who meet the eligibility requirements may
participate in the Company's 1997 Stock Plan.

         The Company will renew its directors and officers indemnification
insurance coverage when the current policy expires in July 2001.


                      REPORT OF THE COMPENSATION COMMITTEE
                            OF THE BOARD OF DIRECTORS

         The following is the report of the Compensation Committee of the Board
of Directors with respect to the compensation paid to the Company's executive
officers during the fiscal year ended December 31, 2000. Actual compensation
earned during fiscal 2000 by the named executive officers is shown in the
Summary Compensation Table above under "Executive Compensation."


                                       32
   35

INTRODUCTION

         The Compensation Committee of the Board of Directors establishes the
general compensation policies of the Company, and establishes the compensation
plans and specific compensation levels for executive officers. The Committee
strives to ensure that the Company's executive compensation programs will enable
the Company to attract and retain key people and motivate them to achieve or
exceed certain key objectives of the Company by making individual compensation
directly dependent on the Company's achievement of certain financial goals, such
as profitability and asset management and by providing rewards for exceeding
those goals.

COMPENSATION PROGRAMS

         Base Salary. The Committee establishes base salaries for executive
officers. Base pay increases vary according to individual contributions to the
Company's success and comparisons to similar positions within the Company and at
other comparable companies.

         Bonuses. Each executive officer is evaluated individually to determine
a bonus for the fiscal year based on performance criteria given to each
executive officer prior to the fiscal year. These criteria include milestones in
such executive's area of responsibility as well as with respect to the Company's
financial performance generally.

         Stock Options. The Committee believes that stock options provide
additional incentive to officers to work towards maximizing stockholder value.
The Committee views stock options as one of the more important components of the
Company's long-term, performance-based compensation philosophy. These options
are provided through initial grants at or near the date of hire and through
subsequent periodic grants. The Company generally grants options become
exercisable over four to five year periods, and in some cases sooner if certain
performance criteria are met, as a means of encouraging executives and other
employees to remain with the Company and to promote its success. Options granted
by the Company to its executive officers and other employees have exercise
prices equal to the fair market value at the time of grant. This approach is
designed to focus executives on the enhancement of stockholder value over the
long term and encourage equity ownership in the Company. Options vest and become
exercisable at such time as determined by the Board. The initial option grant is
designed to be competitive with those of comparable companies for the level of
the job that the executive holds and motivate the executive to make the kind of
decisions and implement strategies and programs that will contribute to an
increase in the Company's stock price over time. Periodic additional stock
options within the comparable range for the job are granted to reflect the
executives' ongoing contributions to the Company, to create an incentive to
remain at the Company and to provide a long-term incentive to achieve or exceed
the Company's financial goals.

         Other. In addition to the foregoing, officers participate in
compensation plans available to all employees, such as participation in both the
Company's 401(k) Savings Plan and Employee Stock Purchase Plan. The Company has
not made matching contributions to either the 401(k) or Employee Stock Purchase
Plans.


                                       33
   36



COMPENSATION LIMITATIONS

         The Company has considered the potential future effects of Section
162(m) of the Internal Revenue Code on the compensation paid to the Company's
executive officers. Under Section 162(m) of the Internal Revenue Code, adopted
in August 1993, and regulations adopted thereunder by the Internal Revenue
Service, publicly-held companies may be precluded from deducting certain
compensation paid to an executive officer in excess of $1.0 million in a year.
The regulations exclude from this limit performance-based compensation and stock
options provided certain requirements, such as stockholder approval, are
satisfied. The Company plans to take actions, as necessary, to ensure that its
stock option plans and executive annual cash bonus plans qualify for exclusion.

COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER

         Howard "Skip" Speaks is the Chief Executive Officer, President and a
director of the Company. The Committee's criteria for determining Mr. Speaks'
compensation are driven by several factors: the competitive marketplace, the
Company's position in the rapidly evolving technology sector in which it
operates, his relative ownership interest in the Company and, most importantly,
his performance.

         The Committee believes that Mr. Speaks' performance throughout fiscal
year 2000 was outstanding. He continues to demonstrate highly effective
leadership and vision in a marketplace of unique complexity and rapid change.
During the last fiscal year, Mr. Speaks was instrumental in the completion of
the acquisition by the Company of the broadband modem product line from IBM in
March 2000, led the Company through its successful initial public offering and
presided over successive rapid increases in revenue for each quarter following
the offering, which resulted in improved financial results in each quarter.

                                           Respectfully Submitted By:

                                           MEMBERS OF THE COMPENSATION COMMITTEE

                                           Bandel L. Carano

                                           Robert P. Goodman

                                           Arjun Gupta

Dated:  April 17, 2001


                                       34
   37


                                PERFORMANCE GRAPH

         Set forth below is a line graph comparing the percentage change in the
cumulative return to the stockholders of the Company's Common Stock with the
cumulative return of the Nasdaq Index and of the Nasdaq Telecommunications Index
for the period commencing July 13, 2000 and ending on December 31, 2000. Returns
for the indices are weighted based on market capitalization at the beginning of
each measurement point.


         COMPARISON OF HISTORICAL CUMULATIVE TOTAL RETURN (*) AMONG TRITON
NETWORK SYSTEMS, INC., THE NASDAQ COMPOSITE INDEX AND THE NASDAQ
TELECOMMUNICATIONS INDEX

                                    [GRAPH]

          (*) The graph assumes that $100 was invested on July 13, 2000, in the
Company's Common Stock, at the offering price of $15.00 per share, and $100 was
invested on June 30, 2000, in the Nasdaq Composite Index and the Nasdaq
Telecommunications Index, and that all dividends were reinvested. The Company
has not declared or paid any dividends on the Company's Common Stock.
Stockholder returns over the indicated period should not be considered
indicative of future stockholder returns.

                     CUMULATIVE TOTAL RETURN AT PERIOD ENDED



                                       7/13/00       9/30/00       12/31/00
                                       -------       -------       --------
                                                          
Triton Network Systems, Inc.            100.00         87.53         20.87
NASDAQ Composite Index                  100.00         91.10         62.30
NASDAQ Telecommunications Index         100.00         83.83         53.23



                                       35
   38

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth as of February 28, 2001, certain
information with respect to the beneficial ownership of the Company's Common
Stock by (i) any person (including any group as that term is used in Section
13(d)(3) of the Exchange Act), known by the Company to be the beneficial owner
of more than 5% of the Company's voting securities, (ii) each director and each
nominee for director to the Company, (iii) each of the executive officers named
in the Summary Compensation Table appearing herein, and (iv) all current
executive officers and directors of the Company as a group. The number and
percentage of shares beneficially owned are based on the aggregate of 34,999,116
shares of Common Stock outstanding as of February 28, 2001. The Company does not
know of any arrangements, including any pledge by any person of securities of
the Company, the operation of which may at a subsequent date result in a change
of control of the Company.



                                                                         SHARES BENEFICIALLY
NAME OR GROUP OF BENEFICIAL OWNERS                                              OWNED                PERCENT OF TOTAL
- ----------------------------------                                       -------------------         ----------------
                                                                                               
Bandel L. Carano (1).............................................               3,950,285                   11.3%
Entities affiliated with Oak Investment Partners (2).............               3,930,285                   11.2
   525 University Avenue, Suite 1300
   Palo Alto, CA 94301
International Business Machines Corporation......................               2,750,000                    7.9
   North Castle Drive
   Armonk, NY 10504
James Wei (3)....................................................               2,528,170                    7.2
Entities affiliated with Worldview Technology Partners (4).......               2,508,170                    7.2
   435 Tasso Street, Suite 120
   Palo Alto, CA 94301
Entities affiliated with Advent International Corporation (5)....               2,165,142                    6.2
   75 State Street
   Boston, MA 02109
James F. Gibbons (6).............................................                 120,000                     (*)
Lockheed Martin Corporation......................................               2,000,000                    5.7
   5600 Sand Lake Road
   Orlando, FL 32819
Entities affiliated with MeriTech Capital Partners (7)...........               1,946,963                    5.6
   90 Middlefield Road, Suite 201
   Menlo Park, CA 94025
Entities affiliated with Bessemer Venture Partners (8)...........               1,947,489                    5.5
   1400 Old County Road
   West Bury, NY 11590
Arjun Gupta (9)..................................................               1,585,714                    4.5
Entities affiliated with TeleSoft Partners (10)..................               1,565,714                    4.5
   1450 Fashion Island Boulevard, Suite 610
   San Mateo, CA 94404
Howard "Skip" Speaks (11)........................................                 825,625                    2.3
Robert P. Goodman (12)...........................................                 440,000                    1.3
Michael A. Clark (13)............................................                 409,124                    1.2
Kenneth R. Vines (14)............................................                 297,125                     (*)
Mark I. Johnson (15).............................................                 248,125                     (*)
Philip C. Gulliford (16).........................................                 180,622                     (*)
Douglas R.B Campbell (17)........................................                 225,625                     (*)
Stanley R. Arthur................................................                      --                      --
All directors and executive officers as a group
   (12 persons)..................................................              10,810,415                   29.5


*Less than 1% of outstanding shares of common stock

- ---------------
(1)      Includes 3,930,285 shares held by the entities listed in note 2 below.
         Mr. Carano is a general partner of the entities listed in note 2


                                       36
   39

         below. Mr. Carano disclaims beneficial ownership of the shares held by
         the entities listed in note 2 below except to the extent of his direct
         pecuniary interest in these shares. Includes 20,000 shares issuable
         upon the exercise of options exercisable within sixty days of February
         28, 2001; all of which are subject to our right of repurchase which
         lapses over time.
(2)      Includes 3,833,993 shares held by Oak Investment Partners VII, Limited
         Partnership and 96,292 shares held by Oak VII Affiliates Fund, Limited
         Partnership.
(3)      Includes 2,508,174 shares held by the entities listed in note 4 below.
         Mr. Wei is a general partner of the general partner of the entities
         listed in note 4 below. Mr. Wei disclaims beneficial ownership of the
         shares held by the entities listed in note 4 below except to the extent
         of his direct pecuniary interest in these shares. Includes 20,000
         shares issuable upon the exercise of options exercisable within sixty
         days of February 28, 2001; all of which are subject to our right of
         repurchase which lapses over time.
(4)      Includes 1,394,528 shares held by Worldview Technology Partners I,
         L.P., 543,524 shares held by Worldview Technology International I,
         L.P., 120,119 shares held by Worldview Strategic Partners I, L.P.,
         333,686 shares held by Worldview Technology Partners II, L.P., 102,149
         shares held by Worldview Technology International II, L.P. and 14,164
         shares held by Worldview Strategic Partners II, L.P.
(5)      Includes 1,014,518 shares held by Digital Media and Communications LP,
         460,359 shares held by Adtel LP, 246,532 shares held by Tel Advent LP,
         171,532 shares held by Adtec LP, 94,300 shares held by Digital Media
         and Communications II LP, 70,600 shares held by Envirotech LP, 54,901
         shares held by Advent Partners LP and 52,400 shares held by Advent
         Crown Fund II C.V.
(6)      Does not include 2,000,000 shares held by Lockheed Martin Corporation
         of which Mr. Gibbons is a director and disclaims beneficial ownership.
         Includes 20,000 shares issuable upon the exercise of options
         exercisable within sixty days of February 28, 2001; all of which are
         subject to our right of repurchase which lapses over time.
(7)      Includes 31,152 shares held by MeriTech Capital Affiliates L.P. and
         1,915,811 shares held by MeriTech Capital Partners L.P.
(8)      Includes 164,750 shares held by Bessemer Venture Investors L.P.,
         700,265 shares held by Bessemer Venture Partners IV, L.P., 700,267
         shares held by Bessec Ventures IV L.P. and 65,548 shares held by BVP IV
         Special Situations L.P. Also includes 316,659 shares beneficially held
         by individuals, or entities affiliated with these individuals, that are
         affiliated with Bessemer. In specified circumstances, Bessemer can
         direct the voting for 73,117 of these shares.
(9)      Includes 1,565,714 shares held by the entities listed in note 10 below.
         Mr. Gupta is the President of the general partner of TeleSoft Partners
         IA, L.P. and the Executive Manager of TeleSoft Partners, L.P.'s general
         partner, which has the power to direct the voting of the shares held by
         Deutsche Bank Securities Inc. and the Goel Family Partnership, pursuant
         to a management agreement Mr. Gupta disclaims beneficial ownership of
         the shares held by the entities listed in note 10 below except to the
         extent of his direct pecuniary interest in these shares. Includes
         20,000 shares issuable upon the exercise of options exercisable within
         sixty days of February 28, 2001; all of which are subject to our right
         of repurchase which lapses over time.
(10)     Includes 1,165,714 shares held by TeleSoft Partners IA, L.P., 200,000
         shares held by TeleSoft Partners, L.P., 53,500 shares held by Deutsche
         Bank Securities Inc., 66,500 shares held by TeleSoft Coinvestments,
         L.P. and 80,000 shares held by Goel Family Partnership.
(11)     Includes 825,000 shares issuable upon the exercise of options
         exercisable within sixty days of February 28, 2001; all of which are
         subject to our right of repurchase which lapses over time.
(12)     Mr. Goodman is a member of the management company that manages the
         entities listed in note 8 above. However, Mr. Goodman is not listed as
         the beneficial owner of the shares held by the entities listed in note
         8 above because he has no pecuniary or voting interest in the shares as
         they are held by entities established prior to his becoming affiliated
         with Bessemer. Includes 10,000 shares issuable upon the exercise of
         options exercisable within 60 days of February 28, 2001; all of which
         are subject to our right of repurchase which lapses over time. Includes
         50,000 shares held by trust entities established for the benefit of Mr.
         Goodman's children. Mr. Goodman disclaims beneficial ownership of these
         shares. 114,585 of these shares are subject to our right of repurchase,
         which lapses over time.
(13)     Includes 222,500 shares of common stock issuable upon the exercise of
         options exercisable within 60 days of February 28, 2001; all of which
         are subject to our right of repurchase which lapses over time.
(14)     Includes 56,500 shares held by entities affiliated with Mr. Vines.
         Includes 62,500 shares subject to our right of repurchase, which lapses
         over time. Includes 140,000 shares of common stock issuable upon the
         exercise of options exercisable within sixty days of February 28, 2001;
         all of these shares are subject to our right of repurchase which lapses
         over time.
(15)     Includes 247,500 shares issuable upon the exercise of options
         exercisable within 60 days of February 28, 2001; all of which are
         subject to our right of repurchase which lapses over time.


                                       37
   40

(16)     Includes 40,000 shares issuable upon the exercise of options
         exercisable within 60 days of February 28, 2001; all of which are
         subject to our right of repurchase which lapses over time.
(17)     Includes 76,647 shares subject to our right of repurchase, which lapses
         over time. Includes 75,000 shares issuable upon the exercise of options
         exercisable within 60 days of February 28, 2001; all of which are
         subject to our right of repurchase which lapses over time.



ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

                         CERTAIN BUSINESS RELATIONSHIPS

         Since our inception, and during the last fiscal year, Wilson, Sonsini,
Goodrich & Rosati, Professional Corporation, has provided legal services to us.
Wilson, Sonsini, Goodrich & Rosati, Professional Corporation, in addition to
individual members of and persons associated with Wilson, Sonsini, Goodrich &
Rosati, Professional Corporation, beneficially owns an aggregate of 53,441
shares of the Company's Common Stock.

                           RELATED PARTY TRANSACTIONS

         In the Company's last fiscal year, there has not been nor is there
currently proposed any transaction or series of similar transactions to which
the Company was or is to be a party in which the amount involved exceeds $60,000
and in which any director, executive officer, holder of more than 5% of the
Common Stock of the Company or any member of the immediate family of any of the
foregoing persons had or will have a direct or indirect material interest other
than (1) compensation agreements and other arrangements, which are described
where required in "Employment and Severance Agreements" and (2) the transactions
described below.

STOCK OPTION GRANTS TO OFFICERS AND DIRECTORS

         During fiscal 2000, the Company granted the following options to
purchase the Company's Common Stock to its officers, directors and stockholders
who beneficially own 5% or more of its Common Stock.



                                                                        EXERCISE PRICE
              NAME                       DATE OF GRANT      OPTIONS       PER SHARE
              ----                       -------------      -------       ---------
                                                               
Bandel L. Carano...................          7/12/00         10,000         15.00
James Wei..........................          7/12/00         10,000         15.00
James F. Gibbons...................          7/12/00         10,000         15.00
Arjun Gupta........................          7/12/00         10,000         15.00
Howard "Skip" Speaks...............         11/28/00        100,000          3.65
                                            12/22/00        100,000          2.13
Robert P. Goodman..................          7/12/00         10,000         15.00
Michael A. Clark...................         11/28/00        110,000          3.65
Kenneth R. Vines...................         11/28/00         90,000          3.65
Mark I. Johnson....................          6/15/00        125,000         11.00
                                             7/12/00         12,500         15.00
                                            11/28/00        110,000          3.65
Philip C. Gulliford................          7/12/00         10,000         15.00
                                            11/28/00         30,000          3.65
Douglas R.B. Campbell..............         11/28/00         75,000          3.65


INDEMNIFICATION AGREEMENTS

         The Company has entered into indemnification agreements with each of
its directors and officers. Such indemnification agreements will require the
Company to indemnify its directors and officers to the fullest extent permitted
by Delaware law. These agreements, among other things, indemnify our directors
and executive officers for certain expenses including attorneys' fees,
judgments, fines and settlement amounts incurred by any director or executive
officer in any action or proceeding, including any action by or in our right
arising out


                                       38
   41

of that person's services as a director, officer, employee, agent or fiduciary
for us, any subsidiary of ours or any other company or enterprise to which the
person provides services at our request. The agreements do not provide for
indemnification in cases where

         -        the claim is brought by the indemnified party;

         -        the indemnified party has not acted in good faith;

         -        the expenses have been paid directly to the indemnified party
                  under a policy of officers' and directors' insurance
                  maintained by us; or

         -        the claim arises under Section 16(b) of the Exchange Act.

         We believe that these provisions and agreements are necessary to
attract and retain qualified persons as directors and executive officers. It is
the position of the SEC that indemnification for liabilities arising under
federal or state securities laws is against public policy and not enforceable.

         At present, there is no pending litigation or proceeding involving any
of our directors or officers in which indemnification is required or permitted,
and we are not aware of any threatened litigation or proceeding that may result
in a claim for such indemnification.

INVESTOR RIGHTS AGREEMENT

         Pursuant to a registration rights agreement we entered into with
holders of 24,397,414 shares of our common stock, and the holders of all
outstanding warrants, the holders of these shares are entitled to registration
rights regarding these shares. The registration rights provide that if we
propose to register any securities under the Securities Act, either for our own
account or for the account of other security holders exercising registration
rights, they are entitled to notice of the registration and are entitled to
include shares of their common stock in the registration. This right is subject
to conditions and limitations, including the right of the underwriters in an
offering to limit the number of shares included in the registration. The holders
of these shares may also require us to file up to two registration statements
under the Securities Act at our expense with respect to their shares of common
stock. We are required to use our best efforts to effect this registration,
subject to conditions and limitations. Furthermore, the holders of these shares
may require us to file additional registration statements on Form S-3, subject
to conditions and limitations. These rights terminate on the earlier of five
years after the effective date of this offering, the date on which all
securities holding registration rights have been sold, or when a holder is able
to sell all its shares pursuant to Rule 144 under the Securities Act in any
90-day period.

OTHER MATERIAL TRANSACTIONS

         We entered into agreements with Lockheed Martin relating to the design
and development of the MMIC technology and transceiver module in our products.
Under these agreements we paid Lockheed Martin on a cost reimbursable basis,
including its fee, for production services performed thereunder. Additionally,
we paid Lockheed Martin for specified costs related to the continued development
of our products. In 2000, the value of these payments to Lockheed Martin was
approximately $9,600,000. Lockheed Martin is a holder of more than 5% of our
capital stock. James Gibbons, one of our directors is a director of Lockheed
Martin. Stanley Arthur, one of our directors, is an officer of Lockheed Martin
Missiles and Fire Control -- Orlando, a division of Lockheed Martin. These
agreements were terminated at the end of 2000.

         In December 1999, we entered into a supply agreement with Advanced
Radio Telecom under which Advanced Radio Telecom purchased products in excess of
10% of our revenue for 2000. Entities associated with Oak Investment Partners,
of which Bandel Carano, one of our directors, is a general partner, Worldview
Technology Partners, of which James Wei, one of our directors, is a general
partner, and other stockholders of ours own stock of Advanced Radio Telecom. Mr.
Carano, one of our directors, is a director of Advanced Radio Telecom.


                                       39
   42

         In February 2000, we entered into a value added reseller agreement with
CommVerge Solutions. Investors in CommVerge Solutions include entities
associated with Oak Investment Partners, of which Bandel Carano, one of our
directors, is a general partner and Worldview Technology Partners, of which
James Wei, one of our directors, is a general partner. Mr. Wei, one of our
directors, is also a director of CommVerge Solutions. During 2000 we supplied
CommVerge Solutions with products in excess of 10% of our revenue under this
agreement.

         During 2000, we supplied modem chips and engineering design services in
an amount in excess of 10% of our revenue to Kestrel Solutions. Investors in
Kestrel Solutions include entities associated with Worldview Technology
Partners, of which James Wei, one of our directors, is a general partner.



INDEBTEDNESS OF MANAGEMENT

         In October 1999, we made an interest free loan in the principal amount
of $300,000 to Mr. Speaks, our President and Chief Executive Officer, which is
secured by Mr. Speaks' options and specified real estate. The loan is payable on
September 30, 2004 or within one year of the termination of his employment with
us, and is to be payable prior to this date on a dollar for dollar basis out of
any proceeds received by Mr. Speaks as a result of sale of shares of common
stock by him.

         In June 1999, we made two separate loans in the principal amounts of
$62,500 and $25,000, respectively, to Mr. Campbell, one of our executive
officers, each of which accrues interest at a rate equal to 5.1% per annum
compounded annually. Each loan is secured by shares of our restricted stock
purchased by Mr. Campbell using the proceeds of the loans. The loans are payable
on June 30, 2004, or, at our option, within thirty days of the termination of
his employment with us.

         In January 1999, we made a loan in the principal amount of $18,750 to
Mr. Goodman, the Chairman of our board of directors. In December 1999, we made a
second loan to Mr. Goodman in the principal amount of $150,000. Both loans
accrue interest at a rate equal to 5.1% per annum compounded annually and each
of which is secured by shares of our restricted stock purchased by Mr. Goodman
using the proceeds of the loans. The loan made in January 1999 is payable on
January 31, 2004, or, at our option, within thirty days of his ceasing to be
Chairman of our board of directors. The loan made in December 1999 is payable in
December 31, 2004, or, at our option, within thirty days of his ceasing to
provide services to us.

         We believe that all of the transactions set forth above were made on
terms no less favorable to us than could have been obtained from unaffiliated
third parties. We intend that all future transactions between us and our
officers, directors, principal shareholders and their affiliates will be
approved by a majority of the board of directors, including a majority of the
independent, disinterested outside directors on the board of directors, and will
be on terms no less favorable to us than could be obtained from unaffiliated
third parties.


                                       40
   43



PART IV

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

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

         (1)      Financial Statements:

                  The financial statements and notes thereto listed in the Index
         to Consolidated Financial Statements are included in Item 8 of Part II
         of this Form 10-K/A

          (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:


                                       41
   44



          NUMBER                       DESCRIPTION OF DOCUMENT
          ------                       -----------------------
                 

          3.1**     Form of Amended and Restated Certificate of Incorporation of
                    the Registrant

          3.2**     Form of Amended and Restated Bylaws of the Registrant

          4.1**     Form of stock certificate

          10.1**    Amended and Restated 1997 Stock Plan

          10.2**    2000 Employee Stock Purchase Plan

          10.3**    Restated Investor Rights Agreement, dated October 18, 1999,
                    between the Registrant and certain stockholders

          10.4**    Lease by and between Gran Central Corporation and Triton
                    Network Systems, dated March 26, 1998

          10.5**    Lease by and between Gran Central Corporation and Triton
                    Network Systems, dated May 5, 1998

          10.5.1**  Lease by and between Gran Central Corporation and Triton
                    Network Systems, dated September 16, 1999

          10.6+**   License Agreement with Lockheed Martin Corporation dated
                    June 12, 1997

          10.6.1**  Agreement to Purchase Additional Shares with Lockheed Martin
                    Corporation

          10.7**    Acquisition and License Agreement between International
                    Business Machines Corporation and Triton Network Systems,
                    Inc. dated as of February 29, 2000

          10.8**    Form of Indemnification Agreement between the Registrant and
                    each of its directors and officers

          10.9+**   Supply Agreement with CenturyTel dated December 7, 1999

          10.10+**  Supply Agreement with Advanced Radio Telecom dated December
                    23, 1999

          10.11**   Employment offer letter for Skip Speaks dated August 16,
                    1999

          10.12**   Employment offer letter for Brian Andrew dated September 9,
                    1999

          10.13**   Employment offer letter for Ken Vines dated September 22,
                    1998

          10.14**   Employment offer letter for Doug Campbell dated December 18,
                    1998

          10.14.1** Amended Employment offer letter for Doug Campbell dated July
                    20, 1999

          10.15**   Employment offer letter for Mike Clark dated February 27,
                    1997

          10.15.1** Amended Employment offer letter for Mike Clark dated July
                    20, 1999

          10.16**   Employment offer letter for Philip Gulliford dated march 20,
                    1997.

          10.17**   Common Stock Purchase Warrant Agreement with FINOVA Capital
                    Corporation dated February 25, 2000

          10.18**   Common Stock Purchase Warrant Agreement with FINOVA Capital
                    Corporation dated February 25, 2000

          10.19**   Loan and Lease Commitment Letter with FINOVA Capital
                    Corporation dated January 15, 2000

          10.20**   Master Lease Agreement with FINOVA Capital Corporation dated
                    January 27, 2000

          10.21**   Master Loan and Security Agreement with FINOVA Capital
                    Corporation dated January 27, 2000



                                       42
   45




       NUMBER                          DESCRIPTION OF DOCUMENT
       ------                          -----------------------
                 

      10.22+**      Supply Agreement with CAVU dated April 15, 2000

      10.23**       Employment off letter for Mark Johnson dated May 22, 2000

        21.1        List of subsidiaries of the Registrant

        23.1        Consent of Ernst & Young LLP, Independent Certified Public
                    Accountants

        24.1        Power of Attorney (see page 44 of this filing)



+    Triton has requested and been granted confidential treatment with respect
     to certain portions of this Exhibit. The omitted portions have been
     separately filed with the Commission.
**   Incorporated by reference from our registration statement on Form S-1,
     registration number 333-31434, declared effective by the Securities and
     Exchange Commission on July 12, 2000.

         b)       Reports on Form 8-K

         None.


                                       43
   46


                                   SIGNATURES

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

                                     TRITON NETWORK SYSTEMS, INC.

                                     By: /s/ KENNETH R. VINES
                                         -------------------------------------
                                         Kenneth R. Vines
                                         Senior Vice President and Chief
                                         Financial Officer

Dated:  April 30, 2001

                                POWER OF ATTORNEY

         KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Kenneth R. Vines and Howard "Skip" Speaks
and each of them, his true and lawful attorneys-in-fact, each with full power of
substitution, for him in any and all capacities, to sign any amendments to this
report on Form 10-K/A and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact or their
substitute or substitutes may do or cause to be done by virtue hereof.

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



      SIGNATURE                                         TITLE                                DATE
- -------------------------            -----------------------------------------          --------------
                                                                                  

/s/ HOWARD "SKIP" SPEAKS             President and Chief Executive Officer
- -------------------------            Director (Principal Executive Officer)             April 30, 2001
 Howard "Skip" Speaks

                                     Senior Vice President and Chief Financial
/s/ KENNETH R. VINES                 Officer (Principal Financial and                   April 30, 2001
- -------------------------            Accounting Officer)
   Kenneth R. Vines

/s/ STANLEY R. ARTHUR                Director                                           April 30, 2001
- -------------------------
  Stanley R. Arthur

/s/ BANDEL R. CARANO                 Director                                           April 30, 2001
- -------------------------
   Bandel R. Carano

/s/ JAMES F. GIBBONS                 Director                                           April 30, 2001
- -------------------------
   James F. Gibbons

/s/ ROBERT P. GOODMAN                Director                                           April 30, 2001
- -------------------------
  Robert P. Goodman

/s/ ARJUN GUPTA                      Director                                           April 30, 2001
- -------------------------
     Arjun Gupta

/s/ JAMES WEI
- -------------------------
      James Wei                      Director                                           April 30, 2001



                                       44

   47


                          TRITON NETWORK SYSTEMS, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



                                                                                                                    PAGE
                                                                                                                    ----

                                                                                                                 
Report of Independent Auditors.................................................................................      F-2
Consolidated Balance Sheets at December 31, 1999 and 2000......................................................      F-3
Consolidated Statements of Operations for the years ended December 31, 1998, 1999 and 2000.....................      F-4
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1998, 1999 and 2000...........      F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1999 and 2000.....................      F-6
Notes to Consolidated Financial Statements.....................................................................      F-8



                                      F-1
   48






                         REPORT OF INDEPENDENT AUDITORS



The Board of Directors
Triton Network Systems, Inc.



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

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

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

                                             /s/ Ernst & Young LLP



Orlando, Florida
January 25, 2001, except for note 12,
as to which the date is March 30, 2001


                                      F-2
   49

                          TRITON NETWORK SYSTEMS, INC.

                           CONSOLIDATED BALANCE SHEETS




                                                                          DECEMBER 31,
                                                          -------------------------------------------
                                                                 1999                     2000
                                                          ------------------      ------------------
                                                                            
ASSETS
Current assets:
    Cash and cash equivalents..........................   $       46,130,279      $       48,524,616
    Short-term investments.............................                   --              30,372,228
    Trade receivables..................................                   --               4,772,193
    Inventory..........................................            7,244,874              17,750,902
    Other current assets...............................            1,017,565               1,048,114
                                                          ------------------      ------------------
         Total current assets..........................           54,392,718             102,468,053
Property and equipment, net............................            7,970,374              19,213,463
Restricted cash........................................              650,000               1,143,315
Intangible assets......................................                   --              32,989,431
Other non-current assets...............................              687,353                 941,444
                                                          ------------------      ------------------
         Total assets..................................   $       63,700,445      $      156,755,706
                                                          ==================      ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable...................................   $        5,207,524      $        5,838,337
    Accrued compensation...............................            1,338,156               2,507,091
    Other accrued expenses.............................            2,227,802               5,430,818
    Current portion of capital leases..................            1,279,862               2,170,768
    Current portion of notes payable...................              159,140               1,404,555
                                                          ------------------      ------------------
         Total current liabilities.....................           10,212,484              17,351,569
    Capital leases, net of current portion.............            1,967,690               2,103,802
    Notes payable, net of current portion..............              187,440               4,653,764
Commitments and contingencies
Stockholders' equity:
    Preferred stock, $.001 par value; 10,000,000
       shares authorized, none issued and outstanding
       at December 31, 2000............................                                           --
    Convertible preferred stock, $.001 par value;
       21,602,500 shares authorized, 18,804,469 issued
       and outstanding at December 31, 1999
       and none issued and outstanding
       at December 31, 2000............................               37,613                      --
    Common stock, $.001 par value; 120,000,000
       shares authorized, 6,795,832 shares issued and
       outstanding at December 31, 1999 and
       34,937,299 issued and outstanding at
       December 31, 2000...............................               13,592                  63,225
    Additional paid-in capital.........................          105,366,954             235,097,372
    Notes receivable from stockholders.................             (606,624)               (431,624)
    Deferred compensation..............................           (1,925,998)             (2,326,855)
    Accumulated deficit................................          (51,552,706)            (99,755,547)
                                                          ------------------      ------------------
         Total stockholders' equity....................           51,332,831             132,646,571
                                                          ------------------      ------------------
         Total liabilities and stockholders' equity....   $       63,700,445      $      156,755,706
                                                          ==================      ==================



See accompanying notes.


                                      F-3
   50


                          TRITON NETWORK SYSTEMS, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS







                                                                        YEAR ENDED DECEMBER 31,
                                                      ----------------------------------------------------------
                                                          1998                   1999                   2000
                                                      ------------           ------------           ------------
                                                                                           
Revenues ...................................          $         --           $         --           $ 26,237,741
Cost of revenues
   Other ...................................                    --                     --             25,877,457
   Special inventory component write-off ...                    --                     --              1,189,634
                                                      ------------           ------------           ------------
   Total cost of revenues ..................                    --                     --             27,067,091
                                                      ------------           ------------           ------------
Gross profit (loss) ........................                    --                     --               (829,350)
Operating expenses:
   Manufacturing and operations ............             2,325,681              7,989,575                     --
   Research and development ................             8,494,207             12,631,231             22,939,352
   Selling and marketing ...................             2,444,802              6,111,074             12,144,100
   General and administrative ..............             1,747,956              4,473,094              7,130,728
   Royalty expense .........................             2,800,000                     --                     --
   Amortization of intangible assets .......                    --                     --              5,821,666
   Amortization of deferred compensation ...               292,353              1,560,877              1,594,493
                                                      ------------           ------------           ------------
   Total operating expenses ................            18,104,999             32,765,851             49,630,339
                                                      ------------           ------------           ------------
Loss from operations .......................           (18,104,999)           (32,765,851)           (50,459,689)
Other income (expenses):
   Interest income .........................             1,065,805              1,336,744              3,681,540
   Interest expense ........................              (160,363)              (425,905)            (1,004,575)
   Other ...................................               (24,511)                 1,075               (420,117)
                                                      ------------           ------------           ------------
   Total other income ......................               880,931                911,914              2,256,848
                                                      ------------           ------------           ------------
Net loss ...................................          $(17,224,068)          $(31,853,937)          $(48,202,841)
                                                      ============           ============           ============
Net loss per share--basic and diluted ......          $      (5.07)          $      (6.67)          $      (2.51)
                                                      ============           ============           ============
Shares used in per share calculations--
   basic and diluted .......................             3,395,300              4,776,567             19,191,226
                                                      ============           ============           ============
Pro forma net loss per common share
   (unaudited):
   Net loss per share--basic and diluted ...          $      (1.30)          $      (1.64)          $      (1.61)
                                                      ============           ============           ============
   Shares used in per share calculations--
     basic and diluted .....................            13,265,015             19,400,204             29,928,655
                                                      ============           ============           ============


See accompanying notes.


                                      F-4
   51


                          TRITON NETWORK SYSTEMS, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY




                                               CONVERTIBLE
                                             PREFERRED STOCK                  COMMON STOCK
                                       ----------------------------     ------------------------       ADDITIONAL
                                         SHARES             PAR           SHARES          PAR           PAID-IN          DEFERRED
                                       OUTSTANDING         VALUE        OUTSTANDING      VALUE          CAPITAL        COMPENSATION
                                       -----------     ------------     -----------     --------     -------------     ------------
                                                                                                     

Balances at January 1, 1998 .......      7,200,000           14,400       4,249,986        8,500        15,095,803
  Issuance of Series B preferred
    stock, net of expenses ........      4,463,000            8,926              --           --        21,726,116
  Issuance of common stock ........             --               --         800,000        1,600         2,798,400
  Issuance of common stock upon
    exercise of stock options .....             --               --       1,191,063        2,382           374,949
  Deferred compensation related
    to stock option grants ........                                                                      2,407,188      (2,407,188)
  Amortization of deferred
    compensation ..................                                                                                        292,353
  Net loss ........................             --               --              --           --                --
                                       -----------     ------------     -----------     --------     -------------     -----------
Balances at December 31, 1998 .....     11,663,000           23,326       6,241,049       12,482        42,402,456      (2,114,835)
  Issuance of Series B preferred
    stock, net of expenses ........      2,090,969            4,182              --           --        10,427,407
  Issuance of Series C preferred
    stock, net of expenses ........      5,052,500           10,105              --           --        50,464,895
  Issuance of common stock upon
    exercise of stock options .....             --               --         682,575        1,365           764,947
  Repurchase of common stock ......             --               --        (127,792)        (255)          (64,791)
  Deferred compensation related
    to stock option grants ........                                                                      1,372,040      (1,372,040)
  Amortization of deferred
    compensation ..................                                                                                      1,560,877
  Net loss ........................             --               --              --           --                --
                                       -----------     ------------     -----------     --------     -------------     -----------
Balances at December 31, 1999 .....     18,806,469           37,613       6,795,832       13,592       105,366,954      (1,925,998)
  Issuance of Series C preferred
    stock .........................      2,750,000            5,500              --           --        41,244,500
  Conversion of preferred stock
    to common stock ...............    (21,556,469)         (43,113)     21,556,469       43,113                --              --
  Issuance of common stock ........             --               --       6,640,888        6,609        86,212,289
  Issuance of common stock upon
    exercise of stock options .....             --               --          63,290           88            62,736
  Repurchase of common stock ......             --               --        (119,180)        (177)          (49,741)
  Other ...........................             --               --              --           --           265,284
  Deferred compensation related
    to stock option grants ........             --               --              --           --         1,995,350      (1,995,350)
  Amortization of deferred
    compensation ..................                                                                                      1,594,493
  Net loss ........................
                                       -----------     ------------     -----------     --------     -------------     -----------
Balance at December 31, 2000 ......             --     $         --      34,937,299     $ 63,225     $ 235,097,372     $(2,326,855)
                                       ===========     ============     ===========     ========     =============     ===========



                                               NOTES
                                            RECEIVABLE
                                               FROM         ACCUMULATED
                                           STOCKHOLDERS       DEFICIT           TOTAL
                                           ------------    ------------    -------------
                                                                  

Balances at January 1, 1998 .......           (137,974)      (2,474,701)      12,506,028
  Issuance of Series B preferred
    stock, net of expenses ........                 --               --       21,735,042
  Issuance of common stock ........                 --               --        2,800,000
  Issuance of common stock upon
    exercise of stock options .....            (62,500)              --          314,831
  Deferred compensation related
    to stock option grants ........                                                   --
  Amortization of deferred
    compensation ..................                                              292,353
  Net loss ........................                 --      (17,224,068)     (17,224,068)
                                           -----------     ------------    -------------
Balances at December 31, 1998 .....           (200,474)     (19,698,769)      20,424,186
  Issuance of Series B preferred
    stock, net of expenses ........                 --               --       10,431,589
  Issuance of Series C preferred
    stock, net of expenses ........                 --               --       50,475,000
  Issuance of common stock upon
    exercise of stock options .....           (441,150)              --          325,162
  Repurchase of common stock ......             35,000               --          (30,046)
  Deferred compensation related
    to stock option grants ........
  Amortization of deferred
    compensation ..................                                            1,560,877
  Net loss ........................                 --      (31,853,937)     (31,853,937)
                                           -----------     ------------     ------------
Balances at December 31, 1999 .....           (606,624)     (51,552,706)      51,332,831
  Issuance of Series C preferred
    stock .........................                 --               --       41,250,000
  Conversion of preferred stock
    to common stock ...............                 --               --               --
  Issuance of common stock ........                 --               --       86,218,898
  Issuance of common stock upon
    exercise of stock options .....                 --               --           62,824
  Repurchase of common stock ......            175,000               --          125,082
  Other ...........................                 --               --          265,284
  Deferred compensation related
    to stock option grants ........                 --               --               --
  Amortization of deferred
    compensation ..................                                            1,594,493
  Net loss ........................                         (48,202,841)     (48,202,841)
                                           -----------     ------------     ------------
Balance at December 31, 2000 ......        $  (431,624)    $(99,755,547)    $132,646,571
                                           ===========     ============     ============


See accompanying notes.


                                      F-5
   52



                          TRITON NETWORK SYSTEMS, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS




                                                                   YEAR ENDED DECEMBER 31,
                                                     --------------------------------------------------
                                                         1998               1999               2000
                                                     ------------       ------------       ------------


                                                                                  
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss ...................................      $(17,224,068)      $(31,853,937)      $(48,202,841)
Adjustments to reconcile net loss to
   net cash used in operating activities:
   Depreciation and amortization ..............           454,733          1,444,608          4,510,086
   Extinguishment of royalty agreement ........         2,800,000                 --                 --
   Amortization of intangible assets ..........                --                 --          5,821,666
   Amortization of deferred compensation ......           292,353          1,560,877          1,594,493
   Other ......................................                --                 --            323,629
   Changes in operating assets and
     liabilities, net of effects of
     acquisition in 2000:
     Increase in trade receivables ............                --                 --         (4,772,193)
     Increase in inventory ....................                --         (7,244,874)        (9,916,719)
     Increase in other current assets .........          (111,184)          (823,344)          (248,248)
     Increase in restricted cash ..............                --           (650,000)          (493,315)
     Increase in other non-current assets .....          (163,844)          (565,266)          (388,752)
     Increase in accounts payable, accrued
       compensation and other accrued
       expenses ...............................         1,828,155          6,656,892          4,923,631
                                                     ------------       ------------       ------------
Net cash used in operating
       activities .............................       (12,123,855)       (31,475,044)       (46,848,563)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital additions .............................        (1,042,529)        (4,501,112)       (11,021,899)
Sales (purchases) of short-term investments ...       (11,003,876)        11,003,876        (30,372,228)
                                                     ------------       ------------       ------------
Net cash provided by (used in) investing
   activities .................................       (12,046,405)         6,502,764        (41,394,127)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of preferred
   and common stock ...........................        22,049,873         61,201,706         86,231,804
Proceeds from notes payable ...................                --            461,789          6,576,133
Payments on capital leases and
   notes payable ..............................           (31,890)          (884,694)        (2,170,910)
                                                     ------------       ------------       ------------
Net cash provided by financing
   activities .................................        22,017,983         60,778,801         90,637,027
Net increase (decrease) in cash and cash
   equivalents ................................        (2,152,277)        35,806,521          2,394,337
Cash and cash equivalents at beginning
   of period ..................................        12,476,035         10,323,758         46,130,279
                                                     ------------       ------------       ------------
Cash and cash equivalents at end of
   period .....................................      $ 10,323,758       $ 46,130,279       $ 48,524,616
                                                     ============       ============       ============



                                      F-6
   53


                          TRITON NETWORK SYSTEMS, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS






                                                                  YEAR ENDED DECEMBER 31,
                                                     -----------------------------------------------
                                                        1998               1999              2000
                                                     ----------      ---------------      ----------


                                                                                 
SUPPLEMENTAL CASH FLOWS INFORMATION
Interest paid .................................      $  160,363      $       425,905      $1,004,575
                                                     ==========      ===============      ==========
NON-CASH FINANCING AND INVESTING ACTIVITIES
Fixed assets acquired under capital
   lease obligations ..........................      $1,931,043      $     2,117,842      $2,483,534
                                                     ==========      ===============      ==========
Common stock issued in connection
   with extinguishment of royalty
   agreement ..................................      $2,800,000      $            --      $       --
                                                     ==========      ===============      ==========
Common stock issued for notes
   receivable from stockholders ...............      $   62,500      $       441,150      $       --
                                                     ==========      ===============      ==========
Common stock warrants issued in
   connection with lease and credit
   agreements .................................      $   87,500      $            --      $  360,000
                                                     ==========      ===============      ==========



See accompanying notes.


                                      F-7
   54

                          TRITON NETWORK SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.       SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

         Triton Network Systems, Inc., a Delaware corporation (the Company), was
incorporated on March 5, 1997 and is based in Orlando, Florida. The Company
operates in one business segment as defined by Statement of Financial Accounting
Standards No. 131, Disclosures about Segments of an Enterprise, and provides
broadband wireless equipment that enables communications service providers to
deliver voice, video and data services to their business customers. Through
December 31, 1998, the Company was in the development stage. The Company emerged
from the development stage in 1999 when it began to produce its products for
commercial sales principally in North America and Asia.

         The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, TNS Finance Company, Inc. and Triton
Network Systems - Japan. All intercompany transactions have been eliminated.

CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

         The Company considers all highly liquid instruments with a maturity of
three months or less at the date of purchase to be cash equivalents. Short-term
investments generally mature between 3-12 months from the purchase date. All
cash equivalents and short-term investments are classified as held to maturity
and are recorded at amortized cost, which approximates market. Restricted cash
exclusively secures letters of credit obtained by the Company.

         The cost of debt securities is adjusted for amortization of premiums
and accretion of discounts to maturity. Such amortization is included in
interest income.

PROPERTY AND EQUIPMENT

         Property and equipment are recorded at cost and depreciated on a
straight-line basis over their estimated useful lives as follows:


                                                                    
         Manufacturing, development, and test equipment.........       3-7 years

         Computer equipment and software........................       3-5 years

         Leasehold improvements.................................         5 years

         Office furniture and other.............................       3-7 years


REVENUE RECOGNITION

         The Company recognizes revenue upon shipment, provided no significant
obligations remain and collection is probable. The Company does not recognize
revenue on the shipment of product for field trials where the customer has the
option of returning the equipment at no cost. Revenue from service and support
arrangements is recognized ratably over the service period. Three customers each
accounted for more than 10% of the Company's revenue for the year ended December
31, 2000.

         WARRANTY COSTS

         The Company provides for estimated future warranty costs at the time
revenue is recognized.


                                      F-8
   55



                          TRITON NETWORK SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.       SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INVENTORY

         Inventory is stated at the lower of cost, determined based on an
average cost basis, or market. Inventories consist of the following:



                                                         DECEMBER 31,
                                                ----------------------------
                                                    1999             2000
                                                -----------      -----------
                                                           
                Raw materials ............      $ 3,347,540      $10,843,597
                Work in process ..........        1,535,916        3,933,818
                Finished goods ...........        2,361,418        2,973,487
                                                -----------      -----------
                                                $ 7,244,874      $17,750,902
                                                ===========      ===========


         At the end of 2000, management decided not to utilize certain prior
generation components in the Company's generation product. The components will
be scrapped in 2001. As a result, a $1,189,634 inventory component write-off was
recorded in the fourth quarter of 2000.

RESEARCH AND DEVELOPMENT EXPENDITURES

         Expenditures for research and development are expensed as incurred.

INCOME TAXES

         Deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.

LONG-LIVED ASSETS

         The Company periodically evaluates the recoverability of its long-lived
assets based on expected undiscounted cash flows and will recognize impairment
of the carrying value of long-lived assets, if any is indicated, based on the
fair value of such assets.

FAIR VALUE OF FINANCIAL INSTRUMENTS

         The fair value of the Company's cash and cash equivalents, short-term
investments, accounts receivables, accounts payable and accrued expenses
approximate their carrying values due to their short-term nature. The fair value
of the Company's capital lease and note payable obligations approximates their
carrying value based on interest rates currently available for instruments with
similar terms.

         EMPLOYEE STOCK-BASED COMPENSATION

         The Company accounts for employee stock-based compensation under the
provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB 25) and related interpretations and complies with the
disclosure provisions of Statement of Financial Accounting Standards No. 123,
Accounting for Stock Based Compensation (FAS 123). Accounting for the issuance
of stock options under the provisions of APB 25 and related interpretations does
not result in compensation expense for the Company when the exercise price of
options granted equals the fair value of the Company's common stock on the date
of award, however compensation expense is recognized for issuance of stock
options when the exercise price is less than the fair value of the Company's
common stock on the date of award.


                                      F-9
   56




                          TRITON NETWORK SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.       SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

EARNINGS PER SHARE

         Basic income (loss) per share is computed by dividing net income (loss)
available to common stockholders by the weighted average common shares
outstanding for the period. Diluted income (loss) per share is computed giving
effect to all potentially dilutive common shares. Potentially dilutive common
shares may consist of incremental shares issuable upon the exercise of stock
options, adjusted for the assumed repurchase of the Company's common stock, at
the average market price, from the exercise proceeds and also may include
incremental shares issuable in connection with convertible securities. In
periods in which a net loss has been incurred, all potentially dilutive common
shares are considered antidilutive and thus are excluded from the calculation.
See Note 8 for the computation of net loss per share data and Note 7 for the
number of common shares subject to repurchase that are not included in the
calculation of basic and diluted loss per share.

DERIVATIVES

         The Financial Accounting Standards Board Statement No. 133, Accounting
for Derivative Instruments and Hedging Activities (FAS 133), as amended, is
effective for financial statements for all fiscal years beginning after June 15,
2000. FAS 133 requires the recognition of all derivatives in the consolidated
balance sheet as either assets or liabilities measured at fair value. The
Company adopted this statement effective January 1, 2001. The adoption of FAS
133 did not have a material impact on results of operations, cash flows, or
financial position of the Company.

COMPREHENSIVE INCOME

         As of January 1, 1998, the Company adopted Financial Accounting
Standards Board Statement No. 130, Reporting Comprehensive Income (FAS 130). FAS
130 establishes new rules for the reporting and display of comprehensive income
and its components; however, the adoption of this Statement had no impact on the
Company's net loss or stockholders' equity. The Company had no items of
comprehensive income other than net loss.

SOFTWARE

         The Company capitalizes software purchased for internal use as property
and equipment and amortizes the cost over the estimated useful life.

USE OF ESTIMATES

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

2.       ACQUISITION

         On March 31, 2000, the Company completed the purchase of the broadband
modem product line from International Business Machines for 2.75 million shares
of series C preferred stock, which was valued at approximately $41,300,000. The
purchase price was allocated to net assets in the amount of approximately
$2,300,000 and intangible assets, which consist of patent and patent application
licenses and patent disclosures, in the amount of approximately $39,000,000. The
purchase price was based on the fair value of the series C preferred stock using
the Company's initial public offering price of $15.00 per share. The intangible
assets are being amortized over five years.


                                      F-10
   57



                          TRITON NETWORK SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



3.       CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

         The Company's financial instruments that are exposed to concentrations
of credit risk consist of cash, cash equivalents and short-term securities. The
Company places its cash, cash equivalents and short-term securities with high
credit quality institutions. Securities held at these institutions may exceed
the amount of insurance provided for such securities.

         Cash, cash equivalents and short-term investments are composed of the
following:



                                                                                             DECEMBER 31,
                                                                                ---------------------------------------
                                                                                       1999                 2000
                                                                                -----------------    ------------------
                                                                                               
         Cash and cash equivalents:
            Cash...........................................................     $         543,690    $        3,744,749
            Money market funds.............................................            45,586,589            21,865,494
            Commercial paper...............................................                    --            12,942,555
            Government Securities..........................................                    --             9,971,818
                                                                                -----------------    ------------------
                                                                                $      46,130,279    $       48,524,616
                                                                                =================    ==================
         Short-term investments:
            Commercial paper...............................................     $              --    $       17,397,575
            Government securities..........................................                    --            12,974,653
                                                                                -----------------    ------------------
                                                                                $              --    $       30,372,228
                                                                                =================    ==================


4.       PROPERTY AND EQUIPMENT

         The Company's property and equipment consists of the following:



                                                                                             DECEMBER 31,
                                                                                ---------------------------------------
                                                                                       1999                 2000
                                                                                -----------------    ------------------
                                                                                               
         Manufacturing, development, and test equipment....................     $       4,997,206    $       17,135,997
         Computer equipment and software...................................             2,439,256             3,906,692
         Leasehold improvements............................................               473,078             1,696,461
         Office furniture and other........................................             1,929,745             2,718,650
                                                                                -----------------    ------------------
                                                                                        9,839,285            25,457,800
         Less accumulated depreciation and amortization....................            (1,868,911)           (6,244,337)
                                                                                -----------------    ------------------
                                                                                $       7,970,374    $       19,213,463
                                                                                =================    ==================


         Depreciation of capital lease assets is included in depreciation
expense. The total cost and accumulated depreciation related to capital lease
purchases were $4,048,885 and $1,060,125 respectively for 1999 and $6,386,298
and $2,269,704, respectively for 2000.

5.       DEBT

         In February 2000, the Company entered into an agreement with a
financial institution to borrow up to $9,000,000 in 2000 for capital equipment
purchases, furniture and software. During 2000, the Company borrowed
approximately $8,900,000 under this agreement with approximately $6,400,000
(structured as a note) repayable over four years and bears interest at an annual
rate of 13% and approximately $2,500,000 (structured as a capital lease)
repayable over three years with an annual rate of interest of 14%. As of
December 31, 2000, the Company had outstanding borrowings under this agreement
of approximately $8,200,000. The Company issued 26,667 warrants to the financial
institution purchase the Company's common stock that are currently exercisable
and have an exercise price of $13.50. The agreement includes no financial
covenants and borrowings are secured with the specific equipment, furniture and
software purchased.


                                      F-11
   58









                          TRITON NETWORK SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



5.       DEBT (CONTINUED)

         In 1999, the Company entered into a note payable with a third party in
the amount of $379,500. The note bears interest at 11% per annum and is payable
over 36 months. As of December 31, 2000, the remaining principal payments on
this note payable were approximately $147,000.

         During 1998, the Company entered into four lease agreements which
provide up to $8,000,000 to finance manufacturing, development, and test
equipment and furniture purchases during 1998 and 1999. At December 31, 1999 and
2000, $3,247,552 and $1,969,022, respectively, were outstanding under the lease
agreements. The agreements include no financial covenants and borrowings are
secured with the specific equipment, furniture and software purchased.

         Scheduled principal payments for long-term debt are as follows:



                                                                                                       DECEMBER 31, 2000
                                                                                                       -----------------

                                                                                                    
                 2001.............................................................................      $     1,404,555
                 2002.............................................................................            1,498,052
                 2003.............................................................................            1,700,345
                 2004.............................................................................            1,455,367
                                                                                                        ---------------
                                                                                                              6,058,319
                 Less current portion.............................................................           (1,404,555)
                                                                                                        ----------------
                 Long-term debt...................................................................      $     4,653,764
                                                                                                        ===============


            Future minimum lease payments under capital leases were as follows:



                                                                                                       DECEMBER 31, 2000
                                                                                                       -----------------

                                                                                                    
                 2001.............................................................................      $     2,617,817
                 2002.............................................................................            1,581,812
                 2003.............................................................................              754,742
                                                                                                        ---------------
                 Total minimum lease payments.....................................................            4,954,371
                 Less imputed interest............................................................             (679,801)
                                                                                                        ---------------
                 Present value of lease payments..................................................            4,274,570
                 Less current portion.............................................................           (2,170,768)
                                                                                                        ---------------
                 Long-term capital lease obligations..............................................      $     2,103,802
                                                                                                        ===============


         During 1999 and 2000, a bank issued letters of credit as security
deposits for the Company's leased facilities. The outstanding letters of credit,
which are fully collateralized with a certificate of deposit held in escrow,
were $650,000 at December 31, 1999 and $1,143,315 at December 31, 2000.

6.        INCOME TAXES

         The Company did not have a current or deferred tax provision or benefit
for the years ended December 31, 1998, 1999 and 2000 due to its losses.

         In accordance with Statement of Financial Accounting Standards Board
Statement No. 109, Accounting for Income Taxes, a valuation allowance of
$38,161,514 has been recorded to reduce the deferred tax assets to zero, as the
Company is presently not able to conclude that it is probable that the deferred
tax assets will be realized. The change in the valuation allowance for the
current year is $18,826,038. At December 31, 2000, the Company has available net
operating loss carryforwards of $64,050,000 which begin to expire in 2012
through 2020. As a result of equity transactions that have occurred since the
Company's inception, an "ownership change" as defined under Section 382 of the
Internal Revenue Code may have occurred which may limit the use of the Company's
net operating loss carryforwards and deductions for capitalized start-up costs
in the future. Management has not completed the complex analysis to determine
the amounts subject to limitation and the amount of the limitation.


                                      F-12
   59


                          TRITON NETWORK SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


6.  INCOME TAXES (CONTINUED)

         A reconciliation of income tax computed at the U.S. federal statutory
rates to income tax benefit is as follows:




                                                                                      YEAR ENDED DECEMBER 31,
                                                                      --------------------------------------------------
                                                                          1998             1999                2000
                                                                      -------------    --------------    ---------------
                                                                                                
Income tax benefits computed at the federal
   statutory rate of 34%..........................................    $  (5,856,183)   $  (10,830,339)   $   (16,388,966)
State income tax benefits, net of federal benefit.................         (623,679)       (1,156,298)        (1,746,333)
Nondeductible items...............................................           14,561            45,723             32,127
Increase in valuation allowance...................................        6,465,301        11,940,914         18,826,038
Other.............................................................                                              (722,866)
                                                                      -------------    --------------    ---------------
Total.............................................................    $          --    $           --    $            --
                                                                      =============    ==============    ===============



         The components of the deferred tax balances are as follows:



                                                                                                   DECEMBER 31,
                                                                                       ---------------------------------
                                                                                             1999               2000
                                                                                       --------------    ---------------
                                                                                                   
Deferred tax assets:
         NOL carryforward..........................................................    $    8,050,066    $    24,102,138
         Start-up costs............................................................        11,285,410          7,823,474
         Depreciation/amortization expense.........................................                --          2,124,449
         Stock based compensation..................................................                --          1,187,366
         Inventory reserve.........................................................                --          1,372,538
         Tax credits...............................................................                --            889,013
         Accrued compensation......................................................                --            328,125
         Accrued expenses..........................................................                --            287,161
         Other.....................................................................                --             95,877
                                                                                       --------------    ---------------
Deferred tax assets................................................................    $   19,335,476    $    38,210,141

Deferred tax liability:
         Other.....................................................................                --            (48,627)
                                                                                       --------------    ----------------

Net deferred tax assets............................................................    $   19,335,476    $    38,161,514
Net valuation allowance............................................................       (19,335,476)       (38,161,514)
                                                                                       ---------------   ----------------

Total net deferred taxes...........................................................    $           --    $            --
                                                                                       ==============    ===============




                                      F-13
   60





                          TRITON NETWORK SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



7.  STOCKHOLDERS' EQUITY

INITIAL PUBLIC OFFERING

         On July 17, 2000, the Company completed an initial public offering in
which it sold 6,325,000 shares of common stock (including the underwriters
overallotment exercise of 825,000 shares) at $15.00 per share resulting in
proceeds of approximately $86,000,000, net of underwriting discounts and
estimated offering expenses. Upon the completion of the offering, all the
Company's convertible preferred stock converted into 21,556,469 shares of common
stock. In February 2000, the Company's stockholders approved an increase in
authorized shares when the initial public offering was completed. As a result,
in July 2000, the Company's authorized capital was increased to 120,000,000
shares of common stock, $0.001 par value, and 10,000,000 shares of preferred
stock, $0.001 par value.

         In June 2000, in contemplation of the initial public offering, the
Company's stockholders approved a one-for-two reverse stock split of all
outstanding shares, which became effective on July 10, 2000. All share and per
share information included in these consolidated financial statements have been
retroactively adjusted to reflect this stock split.

PREFERRED STOCK ISSUANCES

         In November 1997, the Company sold 7,200,000 shares of Series A
convertible preferred stock at a price of $2.00 per share for an aggregate of
$14,400,000. In May and July 1998, the Company sold 4,463,000 shares of Series B
convertible preferred stock at a price of $5.00 per share for an aggregate of
$22,315,000. In January 1999, the Company sold 2,090,969 shares of Series B
convertible preferred stock at a price of $5.00 per share for an aggregate of
$10,455,000. In October 1999, the Company sold 5,052,500 shares of Series C
convertible preferred stock at a price of $10.00 per share for an aggregate of
$50,525,000.

STOCK OPTIONS

         During November 2000, the board of directors approved a new stock
option plan that provides for the issuance of up to 1,500,000 non-qualified
stock options to non-officer employees. At December 31, 2000, the Company has
two stock option plans (Plans), as amended, that provide for the issuance of up
to 6,770,000 shares of common stock to employees and directors. The Company's
Plans provide for the issuance of both incentive stock options and nonqualified
stock options exercisable for a period of 10 years. The exercise prices of stock
options have generally been granted at the fair value of the Company's common
stock at the date of grant. The options vest over periods from two to five
years. The Plans provide for the issue of restricted stock if options are
exercised prior to their vesting date. In the event of discontinuation of
service by option holders, the Company has a right, at its option, to repurchase
any unvested restricted shares at their original purchase price. During 1999,
the Company repurchased 127,792 shares of restricted common stock. At December
31, 1998, 1999 and 2000 the Company had the right to repurchase 2,584,246,
1,553,623 and 580,726 shares of outstanding common stock, respectively.

         In 1998, two members of management exercised stock options to purchase
250,000 restricted shares of the Company's common stock at the exercise price of
$0.50 per share, for an aggregate purchase price of $125,000 which was paid by
cash of $62,500 and delivery of promissory notes for $62,500. The notes, along
with accrued interest (5.1% per annum), are due the earlier of December 31, 2003
or within 30 days of termination of employment from the Company.

         In 1999, three members of management exercised stock options to
purchase 415,000 restricted shares of the Company's common stock at exercise
prices ranging from $0.50 to $6.00 per share, for an aggregate purchase price of
$582,500 which was paid by cash of $141,350 and delivery of promissory notes of
$441,150. The notes, along with accrued interest (5.1% per annum), are due at
various dates in 2004 or within 30 days of termination of employment from the
Company. A promissory note in the amount of $35,000 was repaid in conjunction
with the repurchase by the Company of 127,792 shares of restricted common stock
associated with a management resignation.


                                      F-14
   61


                          TRITON NETWORK SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


7.  STOCKHOLDERS' EQUITY (CONTINUED)

         Outstanding options are summarized as follows:



                                                                                                             WEIGHTED-
                                                                                         NUMBER OF            AVERAGE
                                                                                          OPTIONS         EXERCISE PRICE
                                                                                     ----------------     --------------
                                                                                                    
Balance at January 1, 1998......................................................              257,500        $  0.20
   Granted......................................................................            1,833,438           0.40
   Forfeited....................................................................              (11,500)          0.50
   Exercised....................................................................           (1,191,063)          0.32
                                                                                     ----------------
Balance at December 31, 1998....................................................              888,375           0.48
   Granted......................................................................            1,491,575           5.12
   Cancelled....................................................................             (125,613)          0.52
   Exercised....................................................................             (682,575)          1.12
                                                                                     ----------------
Balance at December 31, 1999....................................................            1,571,762           4.58
   Granted .....................................................................            3,241,935           9.85
   Cancelled ...................................................................             (179,699)         10.02
   Exercised ...................................................................              (63,290)          0.99
                                                                                     ----------------
Balance at December 31, 2000 ...................................................            4,570,708        $  8.15
                                                                                     ================




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



                                                        WEIGHTED-AVERAGE
           RANGE OF                                   REMAINING CONTRACTUAL           WEIGHTED-AVERAGE
        EXERCISE PRICES      NUMBER OUTSTANDING           LIFE IN YEARS                EXERCISE PRICE
        ---------------      ------------------           -------------                --------------
                                                                             

         $ 0.20 - $ 3.65          2,030,850                    9.86                       $   3.17
         $ 5.00 - $11.00          1,530,310                    8.96                       $   6.49
         $12.31 - $24.00          1,009,548                    9.25                       $  20.69


         FAS 123 requires disclosure of pro forma information which provides the
effects on net loss and loss per share as if the Company had accounted for its
employee stock awards under the fair value method. The fair value of the
Company's employee stock awards was estimated using a Black-Scholes option
pricing model with the following weighted-average assumptions for 1997, 1998 and
1999: risk-free interest rates of 4.68%-5.89%; stock price volatility factors of
69%-100%, and expected option lives of 3-10 years. The Company does not have a
history of paying dividends, and none have been assumed in estimating the fair
value of the options. The weighted-average fair value per share of options
granted in 1998, 1999 and 2000 was $0.40, $3.30 and $6.85, respectively. The pro
forma effect on net loss is as follows:



                                                                                YEAR ENDED DECEMBER 31,
                                                                 -------------------------------------------------------
                                                                     1998                 1999                 2000
                                                                 --------------     ---------------     ----------------

                                                                                               
Net Loss:
   As reported...............................................    $  (17,224,068)    $   (31,853,937)    $   (48,202,841)
   Pro forma.................................................    $  (17,265,751)    $   (32,558,976)    $   (52,598,693)
Net loss per share:
   As reported--basic and diluted............................    $        (5.07)    $         (6.67)    $         (2.51)
   Pro forma--basic and diluted..............................    $        (5.09)    $         (6.82)    $         (2.74)


         Because the fair value of accounting for options applies only to
options granted subsequent to March 5, 1997, the pro forma effect will not be
fully reflected until 2001.


                                      F-15
   62


                          TRITON NETWORK SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



7.  STOCKHOLDERS' EQUITY (CONTINUED)

RESERVED STOCK

         Common stock has been reserved for the following purposes:



                                                                                          DECEMBER 31,
                                                                            ---------------------------------------
                                                                               1998           1999           2000
                                                                            ---------      ---------      ---------
                                                                                                 
Number of warrants outstanding .......................................        337,500        337,500         26,667
Number of options outstanding ........................................        888,375      1,571,762      4,570,708
Number of options available for grant under the stock option plans ...        940,563        452,393        509,335
Number of shares available for grant under the stock purchase plan ...             --             --        250,000
                                                                            ---------      ---------      ---------
                                                                            2,166,438      2,361,655      5,356,710
                                                                            =========      =========      =========


DEFERRED COMPENSATION

         In connection with the grant of certain stock options to employees
during the years ended December 31, 1998, 1999 and 2000 the Company recorded
deferred compensation of approximately $5,800,000 representing the difference
between the deemed value of the common stock for accounting purposes and the
stock option exercise price of such stock options at the date of grant. Such
amount is presented as a reduction of stockholders' equity and amortized as
charges to operations on an accelerated basis over the vesting period (generally
four years) consistent with the method described in Financial Accounting
Standards Board Interpretation No. 28. Amortization was approximately $292,000,
$1,561,000 and $1,594,000 for the years ended December 31, 1998, 1999 and 2000,
respectively.

2000 EMPLOYEE STOCK PURCHASE PLAN

         In February 2000, the board of directors and stockholders approved the
Company's 2000 employee stock purchase plan (the "Plan"). A total of 250,000
shares of common stock have been reserved for the Plan. The Plan permits
eligible participants to purchase common stock at 85% of the fair market value
at the beginning or end of the offering period (whichever is lower), through
payroll deductions of up to 10% of the participant's compensation. The offering
periods commence on February 1 and August 1. The first offering period ended on
February 1, 2001 and approximately 75,000 shares were issued to participants.

8.  LOSS PER COMMON SHARE

         The following table sets forth the computation of basic and diluted
loss per common share:




                                                                              YEAR ENDED DECEMBER 31,
                                                                  -----------------------------------------------
                                                                      1998              1999              2000
                                                                  -----------       -----------       -----------
                                                                                             
Numerator:
Net loss ...................................................      (17,224,068)      (31,853,953)      (48,202,841)
Denominator for basic and diluted loss per common share:
Weighted - average shares outstanding ......................        3,395,300         4,776,567        19,191,226
                                                                  -----------       -----------       -----------
Net loss per common share ..................................            (5.07)            (6.67)            (2.51)
                                                                  ===========       ===========       ===========



         The weighted-average shares outstanding include all common stock
issued. Restricted shares issued are not included in basic or diluted loss per
share in accordance with Statement of Financial Accounting Standards Board
Statement No. 128, Earnings Per Share. In computing diluted loss per share,
outstanding preferred stock, stock options and common stock warrants in the
amount of 12,888,875, 20,715,731, and 4,597,375 for the years ended December 31,
1998, 1999 and 2000, respectively, were excluded from the diluted loss per share
computation because their effects would have been anti-dilutive.


                                      F-16
   63


                          TRITON NETWORK SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


8.  LOSS PER COMMON SHARE (CONTINUED)

PRO FORMA NET LOSS PER SHARE (UNAUDITED)

         Pro forma net loss per share for the years ended December 31, 1998,
1999 and 2000 is computed using the weighted-average number of common shares
outstanding, including the pro forma effects of the automatic conversion of the
Company's Series A, B and C preferred stock into shares of the Company's common
stock effective upon the closing of the Company's initial public offering as if
such conversion occurred at the date of original issuance. The resulting pro
forma adjustment includes an increase in the weighted-average shares used to
compute basic and diluted net loss per share of 9,869,715, 14,623,637 and
10,737,429 for the years ended December 31, 1998, 1999 and 2000, respectively.

9. RELATED PARTY TRANSACTIONS

         During 1998, 1999, and 2000, the Company entered into several contracts
with a stockholder to provide engineering services and manufacturing of
component parts to be used in the Company's products. The Company pays the
stockholder on a cost reimbursable basis plus a fee. Through December 31, 1998,
1999 and 2000 the Company expensed as research and development expenses of
approximately $3,813,000, $3,175,000 and $3,215,000 respectively, under the
contracts. In addition, the Company purchased approximately $2,311,000 and
$6,312,000 in manufacturing labor and component parts during 1999 and 2000.
Amounts payable to the stockholder at December 31, 1999 and 2000, were
approximately, $1,122,000 and $1,017,000, respectively. In December 2000, the
Company terminated the manufacturing contract with this stockholder.

         In 1997, the Company entered into a royalty agreement with the
stockholder, which provided for payments of royalty for a five-year period
starting at the date of the first sale. In 1998, the Company issued 800,000
shares of common stock to the Stockholder in satisfaction of the existing
royalty agreement, whereby the Stockholder relinquished all rights to future
income streams. The Company expensed $2,800,000 in 1998 based on the termination
of the royalty agreement.

         During 1999, the Company loaned a member of management $300,000 in
exchange for a promissory note payable, which is secured by certain real estate.
The note is payable on September 30, 2004, or earlier if certain events occur.

         Three venture investment funds that each held less than 12% of the
outstanding shares of the Company's common stock also have equity investments in
a customer that constituted more than 10% of the Company's revenues for 2000.
The representatives of two of the venture funds were on the Company's board of
directors and one of these representatives was also on the board of directors of
that customer. The Company also sold products, which were over 10% of the
Company's revenues for 2000, to a customer who had an officer that owned
approximately 2% of the outstanding shares of the Company's common stock.
Additionally, a venture investment fund that owned less than 10% of the
outstanding shares of the Company's common stock and had a representative that
was on the Company's board of directors, was an investor in a customer that took
delivery of products and services that was in excess of 10% of the Company's
revenue in 2000.

         The Company believes that all related party transactions were
transacted at arms length terms.


                                      F-17
   64


                          TRITON NETWORK SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



10.      COMMITMENTS

         The Company leases certain facilities and equipment under operating
leases, which require future rental payments. These rental arrangements do not
impose any financing or dividend restrictions on the Company or contain
contingent rental provisions. Certain of these leases have renewal and purchase
options generally at the fair value at the renewal or purchase option date. Rent
expense under operating leases was approximately $406,000, $1,005,000 and
$2,008,000 during 1998, 1999 and 2000, respectively.

         Future minimum lease payments under operating leases are as follows:



                 YEAR ENDING DECEMBER 31
                                                          
                 2001....................................      2,184,549
                 2002....................................      1,832,343
                 2003....................................      1,424,325
                 2004....................................      1,002,800
                 2005....................................      1,027,636
                 Thereafter..............................      1,146,673
                                                             -----------
                                                             $ 8,618,325
                                                             ===========


11.      EXPENSE REDUCTION ACTIONS (UNAUDITED)

         In early 2001, the Company agreed on a number of actions to further
control expenses and conserve cash. These actions included a 10% reduction in
workforce as well as other spending reductions. The Company will incur
approximately $500,000 of expenses in the first quarter of 2001 for costs
associated with these actions, including severance and related costs.

12.      SUBSEQUENT EVENT

         On March 30, 2001, the Company became aware that one of its customers
intends to file for bankruptcy. At December 31, 2000, the Company had an
outstanding accounts receivable balance of approximately $2,700,000 from this
customer. No allowance has been provided on this accounts receivable balance at
December 31, 2000. At this time, management is unable to obtain sufficient
information, due to the timing of this event, to make a reasonable estimate of
the loss, if any, to be incurred. Management plans to obtain sufficient evidence
prior to the Company's release of its first quarter results for 2001 and to
provide for the loss, if any, at that time.


                                      F-18