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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
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, 2001

[ ] 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 59-3434350
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)

PO Box 5590
Winter Park, Florida 32793-5590
(407) 492-9020
(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 [ ] No [X]

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

The aggregate market value of voting stock held by non-affiliates of the
Registrant was approximately $17,643,587 as of January 31, 2002 which
represents the last date the Company's common stock was traded on the NASDAQ
National Market; and is 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 January 31, 2002 was 35,185,213 shares.

TRITON NETWORK SYSTEMS, INC.

FORM 10-K

INDEX

PAGE
----

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

ITEM 1. Business........................................................................................1
ITEM 2. Properties......................................................................................5
ITEM 3. Legal Proceedings...............................................................................5
ITEM 4. Submission of Matters to a Vote of Security Holders.............................................8

PART II...............................................................................................................9

ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters...........................9
ITEM 6. Selected Financial Data........................................................................10
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..........12
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risks....................................21
ITEM 8. Financial Statements and Supplementary Data....................................................21
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...........21

PART III.............................................................................................................22

ITEM 10. Directors and Officers of the Registrant.......................................................22
ITEM 11. Executive Compensation.........................................................................23
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.................................29
ITEM 13. Certain Relationships and Related Transactions.................................................31

PART IV..............................................................................................................33

ITEM 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K..............................33

PART I

FORWARD LOOKING STATEMENTS

This Form 10-K contains forward-looking statements. These statements relate to
future events or the Company's 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 the Company'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 Company's plan of
liquidation, including its efforts to liquidate assets, pay creditors, satisfy
its obligations, distribute any remaining assets to its stockholders, the
nature and timing of any liquidation distribution to stockholders, the
anticipated outcome of pending and anticipated legal proceedings, and the
recovery, if any, of a portion of any litigation costs from third parties,
including insurance carriers. These and equivalent statements are only
predictions. In evaluating such statements, you should consider various
factors, including the risks contained under the heading "Risk Factors" in this
Form 10-K, as well as identified in the Company's other filings with the
Securities and Exchange Commission, including the Company's Proxy Statement
filed on October 2, 2001. These factors may cause actual events or results to
differ materially from those expressed or implied by any forward-looking
statement. Although the Company believes that the expectations reflected in the
forward-looking statements are reasonable, the Company cannot guarantee future
results, levels of activity, performance or achievements. The Company disclaims
any intention or obligation to update or revise forward-looking statements,
whether as a result of new information, future events or otherwise.

ITEM 1. BUSINESS

INTRODUCTION

Triton Network Systems, Inc. ("the Company") was incorporated in the state of
Delaware on March 5, 1997 and is based in Orlando, Florida. The Company
provided broadband wireless equipment that enabled communications service
providers to deliver high-speed, cost-effective voice, video and data services
to their business customers. Subsequent to the Company's acquisition of IBM's
modem product line in March 2000, the Company also provided modem chips and
engineering design services to a wireline equipment company.

On August 16, 2001, the Company's Board of Directors unanimously
approved, effective August 20, 2001, a Complete Plan of Liquidation and
Dissolution of the Company ("the Plan"). On October 29, 2001, the Company's
stockholders ratified and approved the Plan. On January 31, 2002, the Company
filed its Certificate of Dissolution with the State of Delaware. The Company no
longer conducts business as a going concern, and since August 20, 2001, the
Company's activities have been limited primarily to:

- - Selling remaining assets,

- - Paying creditors,

- - Terminating any remaining commercial agreements, relationships and
outstanding obligations,

- - Continuing to honor certain obligations to customers, and

- - Conserving cash.

In accordance with the Plan, the Company intends, as promptly as possible, to
liquidate its assets and distribute pro rata to its stockholders of record on
January 31, 2002 (the "Final Record Date"), in cash or in-kind, all property
and assets remaining after the Company has satisfied, or created a reserve for,
all of its obligations and liabilities. However the Company does not anticipate
that it will be in a position to make any distributions to stockholders until
all material pending legal proceedings have been resolved. As of June 18, 2002,
three purported class action lawsuits are pending. See "Legal Proceedings".

Under Delaware law, the Company will not be dissolved for three years
subsequent to the filing of the Certificate of Dissolution. Accordingly, the
liquidation is expected to be concluded prior to January 2005, or such later
date as required by Delaware law, by a final liquidating distribution either
directly to the stockholders or to a liquidating trust.

The actual nature, amount and timing of all distributions will be
determined by the Board of Directors, in its sole discretion, and will depend
in part upon the Company's ability to convert its remaining non-cash assets
into cash and pay and settle its remaining liabilities and obligations.
Although there can be no assurance and depending on the outcome of the pending
legal proceedings and any other unknown contingencies, the Company currently
believes the ultimate total distribution to its stockholders should be in the
range of $25.5 million to $27.0 million, or approximately $0.73 to $0.77 per
share. See "Risk Factors."

The Company closed its stock transfer books and discontinued recording
transfers of common stock as of the Final Record Date. Thereafter, certificates
representing the common stock are not assignable or transferable on the books
of the Company except by will, intestate succession or operation of law. The
proportionate interests of all of the stockholders of the Company has been
fixed on the basis of their respective stock holdings at the close of business
on the Final Record Date, except as may be necessary to reflect subsequent
transfers recorded on the books of the Company as result of any assignment by
will, intestate succession or operation law.

A more complete summary of the Plan to liquidate and dissolve the Company can
be found in the Company's October 2, 2001 Proxy Statement filed with the
Securities and Exchange Commission. Also see "Management's Discussion and
Analysis".

CURRENT STATUS OF COMPANY

As of December 31, 2001, the Company had disposed of a significant
portion of its non-cash assets and had reduced the number of its employees to
30, including approximately 20 associated with its broadband modem operation,
which, as discussed below, was subsequently sold in 2002. As of December 31,
2001, the Company's net assets were approximately $29.8 million, including
$34.6 million in cash and marketable securities, and total liabilities of $9.4
million.

In March 2002, the Company completed the sale of the broadband modem
operation to Carriercomm, Inc. ("Carriercomm), a wholly-owned subsidiary of
Moseley Associates. Carriercomm acquired all the assets and assumed certain
liabilities of the broadband modem operation, including facility and equipment
leases and certain employee severance obligations. The Company received
$103,000 in cash and may receive contingent consideration, up to $250,000,
depending on future deliveries of modem chips under an existing customer
contract. Additionally, the Company sold its radio intellectual property and a
number of radios to Carriercomm for $100,000 in cash, which was received in
April 2002. At the end of March 2002, the Company had 7 employees, and the
ongoing expenses included the payroll and related costs of the employees, legal
expenses related to the Plan and ongoing litigation, and continuing costs of
supporting certain customer requirements. In March 2002, the Company extended
its director and officer insurance liability policy for an additional three
years, which cost the Company approximately $1.8 million.

and CAVU/Expedient. The total settlement costs (net of recovery), including
legal expenses, were approximately $3.0 million.

The settlement of the stockholder lawsuit resulted in a cost of
approximately $3.9 million, including legal and associated costs. However, the
Company subsequently reached an agreement with one of its insurance carriers
relating to this settlement. The insurance carrier has agreed to loan the
Company $1,750,000, plus interest, on October 30, 2002. This loan will be
repaid with the proceeds of a lawsuit that the Company intends to file against
the law firm which advised the Company with regard to the stockholder's stock
transfer request, or the loan will be forgiven by the insurance carrier if the
Company is ultimately unsuccessful in the lawsuit against the law firm.
Furthermore, if the Company is ultimately unsuccessful in this lawsuit, the
insurance carrier will pay an additional $750,000, plus interest, to the
Company. The insurance carrier also will pay the legal costs of prosecuting the
action against the law firm.

The settlement of the lawsuit between the Company and XO
Communications cost the Company $1,550,000, including legal expenses. The
settlement of the lawsuit with CAVU/Expedient cost the Company $70,000.

The total costs of the litigation settlements of approximately $5.5
million and a receivable of $2.5 million for recovery associated with the
litigation were recorded in the Consolidated Statement of Net Assets in
Litigation at December 31, 2001.

Recently, the Company was informed that in June, 2002, two new
securities complaints seeking class action status have been filed against past
and present officers and directors of the Company, as well as certain
investment bankers involved in the Company's initial public offering, certain
venture capital firms owning shares in the Company prior to the initial public
offering and the Company's independent auditors. The Company is unable at this
time to determine whether the forgoing lawsuits will have a material negative
impact on its net assets or its plan of liquidation. See "Legal Proceedings"
and "Risk Factors".

BUSINESS OF THE COMPANY PRIOR TO ADOPTION OF THE PLAN

CUSTOMERS AND MARKETS

Prior to the adoption of the Plan, when the Company was operating as
an ongoing business, it provided broadband wireless equipment that enabled
communications service providers to deliver high-speed, cost-effective voice,
video and data services to their business customers. The Company targeted
service providers worldwide that had licensed radio frequency spectrum suitable
for high-speed services or were planning to acquire such a license to deliver
high-speed services to subscribers. The Company's targeted customers were
typically planning medium to large-scale deployments of wireless broadband
equipment during the next two years. The Company also sold and marketed modem
chips and engineering design services to wireline and other markets that did
not compete with it.

In 2001, two customers each constituted in excess of 10% of the
Company's revenues, Kestrel and XO Communications. In 2000, three customers
each constituted in excess of 10% of the Company's revenues, Advanced Radio
Telecom, CAVU and Kestrel Solutions. The Company had three year supply
agreements with Advanced Radio Telecom (ART) and CAVU to supply Invisible Fiber
Internet and SONET products and it shipped to both companies during the first
half of 2000. The Company had been supplying modem chips and providing
engineering services to Kestrel Solutions, a privately held, wireline equipment
company, since the second half of 2000.

SALES AND MARKETING

Prior to implementation of the Plan, the Company sold its products on
a global basis primarily through its direct sales force. Additionally, it had a
global OEM relationship with Nortel Networks and a value-added reseller in
Asia, CommVerge Solutions.

CUSTOMER SERVICE AND SUPPORT

Prior to implementation of the Plan, the Company provided the
documentation and training programs tailored for its customers' needs. Standard
as well as customized training programs were offered in Orlando, Florida and,
at the customer's request, on a remote basis. The Company's sales, network and
field engineering teams supported its customers during network planning,
design, installation commissioning and troubleshooting. The Orlando based
Technical Assistance Center was staffed to support timely responses to customer
inquiries and questions.

The Company's network operations control center gave it and its
customers the capability to remotely monitor the in-network performance of its
products and diagnose and address problems that may arise. The Company assisted
its customers in utilizing its network operations control software within their
own internal network operations control centers.

As part of the Plan, the Company will continue to support its customers' repair
and return and technical assistance requirements as required in its customer
contracts. The Company currently has a staff of 3 employees and 3 contract
personnel located in Orlando, Florida and it believes, the necessary test
equipment to meet its customer contract obligations.

MANUFACTURING AND OPERATIONS

Prior to implementation of the Plan the Company purchased the majority
of the components used in its products from third parties, who manufactured the
components based on the Company's proprietary designs and specifications. The
Company assembled these components at its manufacturing facility in Orlando,
Florida and conducted extensive testing of the finished products. The Company's
proprietary test procedures required skilled technicians and customized
equipment.

The technology underlying the Company's transceiver modules was
developed by Lockheed Martin for use in advanced radar systems. Until the
fourth quarter of 2000, the Company 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, the
Company began producing the transceiver modules in its factory in Orlando. As a
result, the Company early terminated its contract with Lockheed Martin at the
end of 2000. The Company produced 100% of the transceiver modules in 2001. In
the fourth quarter of 2001, the Company disassembled its transceiver
manufacturing operation and its final assembly and test capability in Orlando,
Florida. The majority of the equipment was sold or disposed of by the end of
2001.

RESEARCH AND DEVELOPMENT

During 1999, 2000, and the first nine months of 2001, the Company
expensed $12,631,231, $22,939,352, and $9,822,018, 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 the products that the Company previously
sold.

The rapid technological developments within the broadband wireless
equipment industry result in frequent competitive changes. The principal
competitive factors in this market included:

- - 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.

The Company's broadband wireless solutions also competed 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.

INTELLECTUAL PROPERTY

In March 2002, the Company sold all of its intellectual property
rights related to its broadband modem business. Additionally, the Company sold
all of its intellectual property rights associated with its Invisible Fiber
products. See "Business - Current Status of Company".

EMPLOYEES

As of December 31, 2001, the Company had a total of 30 employees, of
which 20 were associated with its broadband modem business which was sold in
March 2002. At the end of March 2002, the Company had a total of 7 employees,
of which 3 operated its customer support operation in Orlando, Florida. The
Company is not a party to any collective bargaining agreement.

ITEM 2. PROPERTIES

During 2001, the Company terminated two long-term lease agreements for
a total of 112,000 square feet with its landlord in Orlando, Florida, and paid
a lease penalty of approximately $2.4 million including forfeiture of existing
security deposits. In February 2002, the Company entered into a one-year lease,
with an option to renew for an additional 2 years for approximately 2,300
square feet to support its customer support operation in Orlando, Florida.
Since March 2000, the Company has subleased approximately 17,000 square feet of
space located near San Diego for its broadband modem operation. When this
operation was sold in March 2002, the acquirer assumed the sublease obligation.

ITEM 3. LEGAL PROCEEDINGS

The Company is or, during the last year, has been a party to the
following legal proceedings:

investment banking firms that served as managing underwriters of the Company's
initial public offering. The complaint alleges liability under the Securities
Act of 1933 and the Securities Exchange Act of 1934, on the grounds that the
registration statement for the Company's initial public offering did not
disclose that: (1) the underwriters had allegedly agreed to allow certain of
their customers to purchase shares in the offering in exchange for allegedly
excess commissions paid to the underwriters; and (2) the underwriters had
allegedly arranged for certain of their customers to purchase additional shares
in the aftermarket at pre-determined prices under alleged arrangements to
manipulate the price of the stock in aftermarket trading. The Company is aware
that similar allegations have been made in numerous other lawsuits challenging
initial public offerings conducted in 1998, 1999 and 2000. The Company does not
know if a specific amount of damages is claimed in the complaint involving its
initial public offering. The Company intends to contest the claims vigorously.
The Company is unable at this time to determine whether the outcome of the
litigation will have a material impact on its net assets or its plan of
liquidation.

In November 2001, a customer, XO Communications, filed a lawsuit in
the Circuit Court of Fairfax County, Virginia that contended the Company would
breach its contract with them when the Company is liquidated. The complaint
asked, among other things, money damages, interest, attorney fees and costs
totaling in excess of $9,000,000 be awarded to the plaintiff. In May 2002, the
Company settled the lawsuit with the payment of $1,500,000 in cash, delivery of
certain available inventory to XO Communications, and termination of the
contract between the Company and XO Communications. As a result, the Company
recorded $1,550,000 as an accrued liability in the Consolidated Statement of
Net Assets in Liquidation at December 31, 2001 for the cost of the settlement,
including legal expenses.

In October 17, 2001, a complaint was filed in the Circuit Court of the
Ninth Judicial Circuit, in and for Orange County, Florida. The complaint was
brought by a customer and alleged the Company had breached a supply agreement
the Company entered into with the plaintiff by announcing the Company's
intention to liquidate and dissolve because it would be unable to perform
certain ongoing maintenance and service obligations under the agreement. The
complaint asked, among other things, money damages, interest and attorneys'
fees and costs be awarded to the plaintiff. In April 2002, the Company settled
the lawsuit with the payment of $50,000, and terminated the contract between
the Company and the customer. The Company recorded an accrued liability of
$70,000 in the Consolidated Statement of Net Assets in Liquidation at December
31, 2001 for the cost of the settlement and associated legal expenses.

On December 21, 2000, a complaint was filed in the Circuit Court of
the Thirteenth Judicial Circuit, in and for Hillsborough County, Florida. The
complaint was brought by a stockholder and alleged, among other things, the
Company improperly failed to permit the sale of unregistered shares of its
common stock, and otherwise prevented plaintiff from selling his shares before
the share price dropped significantly. In March 2002, the Company settled the
lawsuit with the payment of $3,650,000 to the stockholder. However, the Company
subsequently reached an agreement with one of its insurance carriers relating
to this settlement. The insurance carrier has agreed to loan the Company
$1,750,000, plus interest, on October 30, 2002. This loan will be repaid with
the proceeds of a lawsuit that the Company intends to file against the law firm
which advised the Company with regard to the stockholder's stock transfer
request, or the loan will be forgiven by the insurance carrier if the Company
is ultimately unsuccessful in the lawsuit against the law firm. Furthermore, if
the Company is ultimately unsuccessful in this lawsuit, the insurance carrier
will pay an additional $750,000, plus interest, to the Company. The insurance
carrier also will pay the legal costs of prosecuting the action against the law
firm. The Company recorded an accrued liability of $3,900,000, including legal
and associated costs, and a receivable of $2,500,000 on the Consolidated
Statement of Net Assets in Liquidation at December 31, 2001 to reflect the
impact of this matter on the Company's net assets.

and Sections 10b and 20A of the Securities and Exchange Act of 1934 (the
"Exchange Act"), and Rule 10b-5 promulgated thereunder, on the grounds that the
Company's registration statement relating to its initial public offering and
certain of its subsequent Exchange Act reports and press releases contained
untrue statements of material facts, or omitted to state facts necessary to
make the statements made therein not misleading, with regard to the Company's
revenues in fiscal 2000, the nature of its relationship with certain of its
customers, and its financial statement presentation. Plaintiff seeks
compensatory damages in favor of plaintiff and the other class members, as well
as reasonable costs and expenses incurred in connection with this action. No
amounts have been accrued in the Company's Consolidated Statement of Net Assets
in Liquidation at December 31, 2001.

Similarly, on June 17, 2002, another securities complaint seeking
class action status was filed in the United States District Court, Middle
District of Florida, Tampa Division (Case No. 8:02-CV-1070-T-24 TGW), against
past and present officers and directors of the Company, as well as certain
investment bankers involved in the Company's initial public offering, certain
venture capital firms owning shares of the Company prior to the initial public
offering, and the Company's independent auditors. The complaint is brought by
Gary Streeter purportedly on behalf of all persons who purchased the Company's
common stock from July 13, 2000 through August 14, 2001. The factual basis
alleged to underlie the proceeding and the relief sought is similar to that
alleged and contained in the Cox Complaint. No amounts have been accrued in the
Company's Consolidated Statement of Net Assets in Liquidation at December 31,
2001.

While the Company currently has not been named as a defendant in the
two June actions, its past and present officers and directors have
indemnification agreements with the Company, pursuant to which the Company is
required to reimburse those individuals for any liabilities and damages
incurred by, or imposed upon, such individuals in connection with the foregoing
lawsuits, including their attorneys' fees and costs, provided that they acted
in good faith and in a manner they reasonably believed to be in, or not opposed
to, the best interests of the Company. The Company intends to assist its
current and former officers and directors in contesting the claims. The Company
carries director and officer liability insurance (up to a maximum dollar limit)
that may cover the claims against its current and former directors and
officers, but the Company cannot, at the present time, be certain that any
ultimate liability related to the foregoing lawsuits will be reimbursed by its
insurance carriers. As a result, the Company is unable at this time to
determine whether the forgoing lawsuits will have a material negative impact on
its net assets or its plan of liquidation. See "Risk Factors."

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

At a Special Meeting of Stockholders held on October 29, 2001, the
Company submitted the Plan to its stockholders for approval. This Plan was
approved by the margins indicated below. There were 35,072,626 shares of common
stock entitled to vote at the meeting and a total of 22,340,044 shares were
present in person or by proxy.

1. Ratify and approval of the Plan of Complete Liquidation and
Dissolution

NUMBER OF SHARES
-------------------------------------------
IN FAVOR WITHHELD ABSTAIN
--------- -------- -------

22,090,594 245,652 3,798

PART II

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

Until the Company's Certificate of Dissolution was filed on January
31, 2002, the Company's common stock has been quoted on the NASDAQ National
Market under the symbol "TNSI" since its initial public offering in July 2000.
Prior to this time, there was no public market for the stock.

On January 31, 2002, the Company filed a Certificate of Dissolution
with the Secretary of State of Delaware and requested the NASDAQ Stock Market to
voluntarily delist the Company's common stock. On that date, the Company closed
its stock transfer books and discontinued recording transfers of common stock.
Thereafter, certificates representing the common stock are not assignable or
transferable on the books of the Company except by will, intestate succession or
operation of law. The proportionate interests of all of the stockholders of the
Company has been fixed on the basis of their respective stock holdings at the
close of business on the January 31, 2002, the Final Record Date, except as may
be necessary to reflect subsequent transfers recorded on the books of the
Company as result of any assignment by will, intestate succession or operation
law. Currently, there is no established market for the common stock and the
Company does not expect one to develop.

The following table sets forth the high and low closing sales prices
per share of the Company's common stock as reported on the NASDAQ National
Market for the periods indicated. As of January 31, 2002 there were 368 holders
of record of the Company's common stock.

SALE PRICE
---------------------
HIGH LOW
------ ------

FISCAL 2000:
Third Quarter (from July 13, 2000) ........................... $44.69 $11.19
Fourth Quarter................................................ $12.94 $ 1.94

FISCAL 2001:
First Quarter................................................. $ 3.88 $ 1.53
Second Quarter................................................ $ 1.50 $ 0.67
Third Quarter................................................. $ 0.87 $ 0.45
Fourth Quarter................................................ $ 0.76 $ 0.64

On July 17, 2000, the Company completed its initial public offering
(the "IPO") pursuant to a Registration Statement on Form S-1 (File No.
333-31434). In the IPO, the Company 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 used for general corporate
purposes, including working capital and capital expenditures, and will be used
to support the winding down of operations, and the Company's liquidation.

The Company paid no dividends to its stockholders in either 2000 or
2001.

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 the Company's consolidated financial
statements and the notes included elsewhere in this Form 10-K. The consolidated
statement of operations data for the years ended December 31, 1999, and 2000,
and the nine months ended September 30, 2001, the consolidated balance sheet
data as of December 31, 2000 and the consolidated statement of net assets in
liquidation data as of December 31, 2001 were derived from the consolidated
financial statements, which are included elsewhere in this Form 10-K. 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, 1998 and 1999 are derived from the Company's financial statements that
are not included in this Form 10-K. Historical results are not necessarily
indicative of results that may be expected for any future period.

The Company's financial information for 1997, 1998, 1999 and 2000, and
for the nine months ended September 30, 2001 was prepared on a going concern
basis of accounting. The Company adopted the liquidation basis of accounting on
October 1, 2001. See Note 1 to the Consolidated Financial Statements included
elsewhere herein.

PERIOD FROM
MARCH 5, 1997 NINE
(INCEPTION) MONTHS
THROUGH YEAR ENDED DECEMBER 31, ENDED
DECEMBER 31, -------------------------------------------- SEPTEMBER 30,
1997 1998 1999 2000 2001
------------- ------------ ------------ ------------ -------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

CONSOLIDATED STATEMENT OF OPERATIONS DATA
GOING CONCERN BASIS:
Revenues ........................................ $ -- $ -- $ -- $ 26,238 $ 10,334
Cost of revenues:
Provision for estimated excess inventory ..... -- -- -- -- 24,520
Special inventory component write-off ........ -- -- -- 1,190 --
Other ........................................ -- -- -- 25,877 10,184
----------- ------------ ------------ ------------ ------------
Total cost of revenues .................... -- -- -- 27,067 35,704
----------- ------------ ------------ ------------ ------------
Gross loss ...................................... -- -- -- (829) (24,370)
Operating expenses:
Manufacturing and operations ................. -- 2,326 7,990 -- --
Research and development ..................... 1,895 8,494 12,631 22,939 9,822
Selling and marketing ........................ 162 2,445 6,111 12,144 4,462
General and administrative ................... 501 1,748 4,473 7,131 3,331
Provision for doubtful accounts receivables .. -- -- -- -- 2,700
Severance and related costs .................. -- -- -- -- 5,486
Provision for asset write down, primarily
property and equipment .................... -- -- -- -- 13,007
Provision for write down of goodwill ......... -- -- -- -- 28,460
Lease termination costs ...................... -- -- -- -- 2,396
Royalty expense .............................. -- 2,800 -- -- --
Amortization of intangible assets ............ -- -- -- 5,822 3,881
Amortization of deferred compensation ........ -- 292 1,561 1,595 2,327
----------- ------------ ------------ ------------ ------------
Total operating expenses .................. 2,558 18,105 32,766 49,631 75,872
----------- ------------ ------------ ------------ ------------
Loss from operations ............................ (2,558) (18,105) (32,766) (50,460) (100,242)
Other income (expense):
Interest income .............................. 86 1,066 1,337 3,682 2,218
Interest expense ............................. -- (160) (426) (1,005) (966)
Other ........................................ (3) (25) 1 (420) (277)
----------- ------------ ------------ ------------ ------------
Total other income ........................ 83 881 912 2,257 975
----------- ------------ ------------ ------------ ------------
Net loss before extraordinary loss .............. $ (2,475) $ (17,224) $ (31,854) $ (48,203) $ (99,267)

Extraordinary loss on early retirement
of debt ................................... -- -- -- -- (768)
----------- ------------ ------------ ------------ ------------

Net loss ........................................ $ (2,475) $ (17,224) $ (31,854) $ (48,203) $ (100,035)
=========== ============ ============ ============ ============

Loss per share--basic and diluted
Net loss before extraordinary loss ........... $ (1.01) $ (5.07) $ (6.67) $ (2.51) $ (2.86)
Extraordinary loss on early retirement
of debt ................................... -- -- -- -- (.02)
----------- ------------ ------------ ------------ ------------
Net loss .................................. $ (1.01) $ (5.07) $ (6.67) $ (2.51) $ (2.88)
=========== ============ ============ ============ ============
Shares used in per share calculations--
basic and diluted ............................ 2,456,995 3,395,300 4,776,567 19,191,226 34,724,045
=========== ============ ============ ============ ============
Pro forma net loss per share - basic and diluted:
Net loss before extraordinary loss ........... $ (0.74) $ (1.30) $ (1.64) $ (1.61) $ (2.86)
Extraordinary loss on early retirement
of debt ................................... -- -- -- -- (.02)
----------- ------------ ------------ ------------ ------------
Net loss .................................. $ (.74) $ (1.30) $ (1.64) $ (1.61) $ (2.88)
=========== ============ ============ ============ ============
Shares used in per share calculations--
basic and diluted ......................... 3,344,666 13,265,015 19,400,204 29,928,655 34,724,045
=========== ============ ============ ============ ============

AS OF DECEMBER 31,
--------------------------------------------------------------------
1997 1998 1999 2000 2001
------- ------- ------- -------- -------
(IN THOUSANDS)

CONSOLIDATED BALANCE SHEET DATA
GOING CONCERN AND CONSOLIDATED NET ASSETS IN
LIQUIDATION BASIS (DECEMBER 31, 2001):
Cash and short-term investments .................. $12,476 $21,328 $46,130 $ 78,897 $34,604
Working capital .................................. 12,271 18,963 44,180 85,116 --
Intangible assets ................................ -- -- -- 32,989 --
Total assets ..................................... 12,794 24,440 63,700 156,756 39,248
Long-term debt (including current maturities) .... -- 1,899 3,594 10,333 --
Total stockholder's equity ....................... 12,506 20,424 51,333 132,647 --
Net Assets in Liquidation ........................ -- -- -- -- 29,808

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 the Company's financial statements and the related
notes included elsewhere in this Form 10-K.

HISTORICAL OPERATIONS

Prior to adopting the Plan, the Company provided broadband wireless
equipment that enabled communications service providers to deliver high-speed,
cost-effective voice, video and data services to their business customers. The
Company offered two product lines: the Invisible Fiber Internet product line
for Internet service providers and the Invisible Fiber SONET product line for
communications service providers. Subsequent to the Company's acquisition of
the broadband modem product line from IBM at the end of the first quarter of
2000, the Company also supplied modem chips and provided engineering design
services to an existing wireline customer.

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

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

On March 31, 2000, the Company purchased 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 the Company for use in the Company's
products. During 1999, the majority of this unit's sales were to the Company,
with minor sales to one other customer. With the completion of this
transaction, the Company secured intellectual property and engineering
expertise for future modem development, which the Company believed would lower
the cost of manufacturing its 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
consisted of patent and patent application licenses and patent disclosures. If
the transaction had taken place on January 1, 1999, on a pro forma basis, the
Company's 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 would occur in the future. The intangible assets were being
amortized over five years, or approximately $7.8 million per year. As the
result of the Company's Plan to liquidate, the remaining balance of intangible
assets of $28.5 million was written off in 2001.

The Company has incurred significant losses since inception.

PLAN OF LIQUIDATION AND DISSOLUTION

Early in 2001 there was a rapid deterioration in the market for fixed
broadband wireless access equipment, particularly in the U.S. By the second
quarter, three of the four major fixed wireless CLEC's in the

U.S. had filed for bankruptcy protection. The Company's revenue had declined
from $9.5 million in the fourth quarter of 2000 to $1.9 million in the second
quarter of 2001, and the net loss for the first half of 2001 was $(40.6)
million. Based on these conditions, the Company significantly downsized its
operations to reduce costs and conserve cash, while reviewing alternative
business strategies.

In January 2001, the Company engaged Broadview International to assist
in identifying and evaluating strategic alternatives, including the sale or
merger of the Company. Broadview contacted a large number of prospective
acquirers or merger partners, both domestic and international. Discussions were
held with a number of companies. After a careful review, the Board of Directors
concluded in August 2001 that none of the acquisition or merger opportunities
available to the Company would be likely to provide stockholders with as much
liquidity or value as could be achieved through a liquidation and dissolution.

The Board of Directors also considered whether to continue the current
strategy of maintaining operations, managing expenses and waiting for a market
recovery. There were a number of risks associated with such a strategy. Timing
of a market recovery remained uncertain, and it appeared likely that there
would be a protracted period of weak demand for the Company's products.
Immediately prior to the adoption of the Plan, the Company had a minimal
backlog of customer orders, and prospects for material revenue over the next
few quarters was limited. Although the Company had the financial resources to
weather a lengthy market downturn, significant amounts of cash would be
required to continue operations and remain competitive, including significant
expenditures to develop international sales channels and to support research
and development activities needed to enhance existing products and develop new
products. Furthermore, employee retention would continue to become increasingly
difficult. In light of these risks, there was a substantial possibility that a
strategy of waiting for a market recovery would cause a continued erosion of
the Company's cash, asset value and employee base, thus reducing stockholder
value without any assurance of a future recovery. In addition, the Company's
stock was trading below the anticipated cash liquidation value of the shares.
For these reasons, the Board of Directors concluded that liquidation and
dissolution of the Company would have the highest probability of returning the
greatest value to the stockholders.

Accordingly, on August 16, 2001, the Company's Board of Directors
unanimously approved, effective August 20, 2001, a complete plan of liquidation
and dissolution of the Company ("the Plan"). On October 29, 2001, the Company's
stockholders ratified and approved the Plan. On January 31, 2002, the Company
filed its Certificate of Dissolution with the State of Delaware. The Company no
longer conducts business as a going concern, and since August 20, 2001, the
Company's activities have been limited primarily to:

- - Selling remaining assets,

- - Paying creditors,

- - Terminating any remaining commercial agreements, relationships and
outstanding obligations,

- - Continuing to honor certain obligations to customers, and

- - Conserving cash.

In accordance with the Plan, the Company intends, as promptly as
possible, to liquidate its assets and distribute pro rata to its stockholders
of record on January 31, 2002, the Final Record Date, in cash or in-kind, all
property and assets remaining after the Company has satisfied, or created a
reserve for, all of its obligations and liabilities. However, the Company does
not anticipate that it will be in a position to make any distributions to
stockholders until all material pending legal proceedings have been resolved.
As of June 18, 2002, three purported class action lawsuits are pending. See
"Legal Proceedings."

such later date as required by Delaware law, by a final liquidating
distribution either directly to the stockholders or to a liquidating trust. See
"Business."

CURRENT STATUS OF COMPANY

In March 2002, the Company completed the sale of the broadband modem
operation to Carriercomm, Inc. ("Carriercomm"), a wholly owned subsidiary of
Moseley Associates. Carriercomm acquired all the assets and assumed certain
liabilities of the broadband modem operation, including facility and equipment
leases and certain employee severance obligations. The Company received
$103,000 in cash and may receive contingent consideration, up to $250,000,
depending on future deliveries of modem chips under an existing customer
contract. Additionally, the Company sold its radio intellectual property and a
number of radios to Carriercomm for $100,000 in cash, which was received in
April 2002. At the end of March 2002, the Company had 7 employees and its
ongoing expenses included the payroll and related costs of the employees, legal
expenses related to the Plan and ongoing litigation, and continuing costs of
supporting certain customer requirements. In March 2002, the Company extended
its director and officer insurance liability policy for an additional three
years, which cost the Company approximately $1.8 million.

In the early part of 2002, three outstanding lawsuits against the
Company were settled. These included a previously reported stockholder lawsuit
and the outstanding lawsuits with two customers, XO Communications and
CAVU/Expedient. The total settlement costs (net of recovery), including legal
expenses, were approximately $3.0 million.

The settlement of the stockholder lawsuit resulted in a cost of
approximately $3.9 million, including legal and associated costs. However, the
Company subsequently reached an agreement with one of its insurance carriers
relating to this settlement. The insurance carrier has agreed to loan the
Company $1,750,000, plus interest, on October 30, 2002. This loan will be
repaid with the proceeds of a lawsuit that the Company intends to file against
the law firm which advised the Company with regard to the shareholder's stock
transfer request, or the loan will be forgiven by the insurance carrier if the
Company is ultimately unsuccessful in the lawsuit against the law firm.
Furthermore, if the Company is ultimately unsuccessful in this lawsuit, the
insurance carrier will pay an additional $750,000, plus interest, to the
Company. The insurance carrier also will pay the legal costs of prosecuting the
action against the law firm.

The total costs of the litigation settlements of approximately $5.5
million and a receivable of $2.5 million for recovery associated with the
litigation were recorded in the Statement of Net Assets in Liquidation at the
end of December 31, 2001. See "Legal Proceedings."

Recently, the Company was informed that in June, 2002, two new
securities complaints seeking class action status have been filed against past
and present officers and directors of the Company, as well as certain
investment bankers involved in the Company's initial public offering, certain
venture capital firms owning shares of the Company prior to the initial public
offering, and the Company's independent auditors. The Company is unable at this
time to determine whether the forgoing lawsuits will have a material negative
impact on its net assets or its plan of liquidation. See "Legal Proceedings"
and "Risk Factors".

The Company expects that claims, liabilities and future expenses for
operations (including salaries, payroll and local taxes, professional fees and
miscellaneous office expenses), although currently declining in the aggregate,
will continue to be incurred with execution of the Plan. These costs will
reduce the amount of assets available for ultimate distribution to
stockholders. See "Legal Proceedings" and "Risk Factors".

SUMMARY OF HISTORICAL ACCOUNTING POLICIES

Revenues. Prior to the implementation of the Plan, the Company
recognized product revenues at the time of shipment provided no significant
obligations remain and collection was probable. The Company has supplied
products to potential customers for use in several field trials. The Company
did not recognized revenues from field trials since the customer could
typically return the product with no payment or further obligation.

Cost of Revenues. Cost of revenues consisted 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 the Company's recognition of
revenues beginning in the first quarter of 2000, the Company began classifying
manufacturing and operations expenses as cost of revenues.

Research and Development. Research and development expenses consisted
primarily of compensation and related personnel costs, third party engineering
costs and prototype costs related to the design, development, testing and
enhancement of the Company's products. The Company expensed research and
development costs as they were incurred.

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

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

Deferred Compensation. In connection with the grant of certain stock
options to employees during the years ended December 31, 1999 and 2000, the
Company recorded deferred compensation of approximately $3.4 million
representing the difference between the deemed value of the common stock for
accounting purposes and the 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.

LIQUIDATION BASIS OF ACCOUNTING

In connection with the adoption of the Plan, the Company elected the
liquidation basis of accounting effective October 1, 2001, whereby assets are
valued at their estimated net realizable cash values and liabilities

are stated at their estimated settlement amounts. See Note 1 to the
Consolidated Financial Statements included elsewhere herein.

RESULTS OF OPERATIONS

Nine Months Ended September 30, 2001 (the last period in which the Company had
operations)

Subsequent to the implementation of the Plan, the business activities
of the Company have been to sell assets, pay off liabilities and conserve cash.
The non-cash assets have been written down to estimated liquidation values and
liabilities have been adjusted to their anticipated settlement amounts.
Additionally, a substantial number of liabilities and purchase commitments were
settled, resulting in penalties to the Company.

Revenues. Revenues were $10.3 million for the nine months ended
September 30, 2001. In the first nine months of 2001, approximately 68% of
revenues were from the shipment of Invisible Fiber Units and delivery of modem
chips and 32% was from ASIC engineering services.

Cost of revenues. Excluding inventory provisions of $24.5 million,
cost of revenues approximately equaled revenues in the first nine months of
2001.

Operating expenses. Operating expenses include a write down of
property and equipment and other assets of $13.0 million, and the write off of
intangible assets and amortization of deferred compensation of $32.3 million
and $2.3 million, respectively. Additionally, provisions for severance and
related costs, facility lease termination costs and doubtful accounts
receivable were $5.5 million, $2.4 million and $2.7 million, respectively. The
provision for doubtful accounts receivable was recorded in the first quarter of
2001 when a customer filed for bankruptcy. See Notes to Consolidated Financial
Statements included elsewhere herein for further information.

Research and Development. Research and development expenses were $9.8
million for the nine months of 2001 and consisted mainly of personnel related
costs.

Selling, General and Administrative. Selling, general and
administrative expenses were $7.8 million for the first nine months of 2001,
and consisted of mainly personnel related costs, and rent as the actions taken
by management throughout 2001 included reductions in outside professional
services, advertising and marketing activities and customer field trials.

Extraordinary Loss from Retirement of Debt. The Company incurred
approximately $0.8 million of contractual penalties for early retirement of
notes payable and capital lease obligations.

YEARS ENDED DECEMBER 31, 2000 AND 1999

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

Cost of Revenues. Concurrent with the recognition of revenues in 2000,
the Company 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.

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 the Company's final assembly and
testing manufacturing efforts and the establishment of its technical assistance
center. In addition, the remaining amounts were attributable to facilities,
depreciation and production costs related to the Company's manufacturing
facility and recently developed production process. Concurrent with the
Company's recognition of revenues in the quarter ended March 31, 2000, the
Company 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
the Company's 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 the Company's initial public
offering at exercises prices deemed to be lower than the fair market value at
the date of grant.

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 the Company's 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.

LIQUIDITY AND CAPITAL RESOURCES

Nine Months Ended September 30, 2001 (the last period in which the Company had
operations)

As of September 30, 2001, the Company had approximately $37.0 million
of cash and marketable securities, compared to $78.9 million at the end of
2000.

For the nine months ended September 30, 2001, the Company used
approximately $31.3 million of cash from operations. This cash use included the
Company's net loss, before non-cash asset write downs, provisions and
amortization, of $21.3 million, a $7.1 million reduction in payables and
accrued liabilities and a $4.5 million increase in inventory. The payable and
accrual reduction reflects the settlement of a significant portion of the

Company's outstanding obligations consistent with the liquidation plan. For the
nine months ended September 30, 2001, the Company's investing activities
included the purchase of approximately $1.2 million of property and equipment.

Subsequent to the Board of Directors approval in August 2001 to
liquidate the Company, the Company repaid approximately $9.2 million of
outstanding notes payable and capital lease obligations and incurred
contractual early payment penalties of $0.8 million. Earlier in 2001, the
Company had borrowings of $1.1 million and scheduled repayments of $1.5
million.

Changes in Net Assets from October 1, 2001 through December 31, 2001 (period of
liquidation)

At December 31, 2001, the Company had net assets of approximately
$29.8 million compared to $35.7 million on October 1, 2001. The net assets at
December 31, 2001 included cash and marketable securities of approximately
$34.6 million; receivables of $3.6 million (including $2.5 million associated
with the settlement of litigation); prepaid expenses of $0.5 million; and other
assets of $0.5 million and total liabilities of approximately $9.4 million. The
liabilities include approximately $5.5 million related to litigation settled
and paid in the first five months of 2002.

The net assets reduction from October 1, 2001 through December 31,
2001 was approximately $5.9 million. This decline was due primarily to the
recording of litigation costs, net of recovery, of $3.0 million, ongoing costs
of $2.0 million, and an adjustment to the estimated fair value of assets and
liabilities of approximately $1.0 million, partially offset by interest income.

The Board of Directors of the Company is currently unable to estimate
when and if there will be a distribution to its stockholders due to the class
action lawsuits pending against the Company (see "Legal Proceedings"). The
Company will continue to incur costs and expenses until the dissolution has
occurred. During the first five months of 2002, the Company incurred expenses
including costs of the broadband modem group which was sold at the end of March
2002, continuing customer support and administrative costs, and certain legal
costs. In March 2002, the Company extended its director and officer insurance
liability policy for an additional three years, which cost the Company
approximately $1.8 million. The Company expects to incur certain customer
support, legal and administrative costs for a significant period of time in the
future.

Although there can be no assurance and depending on the outcome of the
pending legal proceedings and any other unknown contingencies, the Company
currently believes the ultimate distribution to its stockholders should be in
the range of $25.5 million to $27.0 million, or approximately $0.73 to $0.77
per share.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In October 2001, the Financial Accounting Standards Board ("FASB")
issued Statement No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of", but retains many of the fundamental provisions of
SFAS No. 121. SFAS No. 144 also supersedes APB Opinion No. 30, "Reporting the
Results of Operations, Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions". SFAS No. 144 retains the requirement in Opinion No. 30 to report
separately discontinued operations and extends this reporting requirement to a
component of an entity that either has been disposed of or is classified as
held for sale. SFAS No. 144 is effective for fiscal years beginning after
December 15, 2001, and interim periods within those fiscal years. Early
application is permitted. As a result of the Company's stockholders approval to
liquidate and dissolve the Company, the Company has written all of its assets
down to net realizable value during 2001.

In July 2001, the FASB issued Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS No. 142). SFAS
No. 142 requires that goodwill no longer be amortized to earnings, but instead
be reviewed for impairment. As a result of the Company's stockholders approval
to liquidate and dissolve the Company, the Company has written off the
remaining value of its intangible assets during 2001.

In January 2001, the Company adopted FASB Statement No. 133 (SFAS No.
133), "Accounting for Derivative Instruments and Hedging Activities", as
amended. SFAS No. 133 requires companies to recognize all their derivative
instruments as either assets or liabilities at fair value in the statement of
position. The adoption of this policy had no impact on the Company's operating
results or financial position in 2001.

In June 2001, the FASB issued Statement No. 143, "Accounting for Asset
Retirement Obligations" which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. The standard applies to legal
obligations associated with the retirement of long-lived assets that result
from the acquisition, construction, development, and (or) normal use of the
asset. The Company believes that the adoption of Statement No. 143 will not
have a material effect in its 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:

The Company's plan is to continue to conclude the business activities
of the Company and distribute its assets to stockholders pursuant to the Plan.
The timing of and completion of these objectives are subject to a number of
risks and uncertainties, including those set forth in the Company's Proxy
Statement filed with the SEC on October 2, 2001 and those set forth below.

Pursuant to Delaware law the Company will continue to exist for three
years after the dissolution becomes effective or for such longer period as the
Delaware Court of Chancery shall direct, for the purpose of prosecuting and
defending suits against it and enabling the Company gradually to close its
business, to dispose of its property, to discharge its liabilities and to
distribute to its stockholders any remaining assets. Under Delaware law, in the
event the Company fails to create an adequate contingency reserve for payment
of its expenses and liabilities during this three-year period, each stockholder
could be held liable for payment to the Company's creditors of such
stockholder's pro rata share of amounts owed to creditors in excess of the
contingency reserve. However, the liability of any stockholder would be limited
to the amounts previously received by such stockholder from the Company (and
from any liquidating trust or trusts) in the dissolution. Accordingly, in such
event a stockholder could be required to return all distributions previously
made to such stockholder. In such event, a stockholder could receive nothing
from the Company under the Plan. Moreover, in the event a stockholder has paid
taxes on amounts previously received, a repayment of all or a portion of such
amount could result in a stockholder incurring a net tax cost if the
stockholder's repayment of an amount previously distributed does not cause a
commensurate reduction in taxes payable. There can be no assurance that any
contingency reserves established by the Company will be adequate to cover its
expenses and liabilities. The methods used by the Board and management in
estimating the value of the Company's net assets do not result in an exact
determination of value nor are they intended to indicate definitely the amount
of cash a stockholder will receive in liquidation. Some of the Company's assets
may be difficult to convert into cash, and the Company cannot assure you that
it will receive any material amounts for those assets. The distribution to
stockholders may be reduced by the Company's failure to achieve significant
value for its non-cash assets.

Furthermore, while the Company has established reserves for known and
unknown liabilities and will continue to review the adequacy of those reserves,
uncertainties as to the ultimate amount of its liabilities, including the
ongoing class action lawsuits, make it impracticable to predict the aggregate
net value that may ultimately be distributable to stockholders. Claims,
liabilities and future expenses for operations (including salaries, payroll and
local taxes, professional fees and miscellaneous office expenses), although
currently declining in the aggregate, will continue to be incurred with
execution of the Plan. These costs will reduce the amount of assets available
for ultimate distribution to stockholders. The distribution to stockholders may
further be reduced by additional liabilities that the Company may incur in
winding down the business. The Company cannot assure stockholders that the
amount stockholders will receive during liquidation will equal or exceed the
price or prices set forth in the Company's estimated liquidation range. See
"Legal Proceedings".

If the Company fails to retain the services of current key personnel,
the Plan may not succeed. The success of the Plan depends in large part upon
the Company's ability to retain the services of its Chief Executive Officer,
Kenneth R. Vines. The retention of Mr. Vines and certain other qualified
personnel is particularly difficult under the Company's current circumstances.
For this reason and others discussed below, the Company has entered into a
retention agreement with Mr. Vines, the Chief Executive Officer. In May 2002,
Mr. Vines, accepted a position with EXE Technologies. Mr. Vines has agreed to
stay on the Company's Board of Directors and continue to act in the capacity of
CEO through the Company's liquidation. No assurance can be made, however, as to
Mr. Vines' ability to continue to oversee the liquidation process, especially
in light of his new position with EXE Technologies.

The Company closed its stock transfer books and discontinued recording
transfers of common stock at the close of business on January 31, 2002, the
Final Record Date fixed by the Board of Directors for filing the Certificate of
Dissolution. Thereafter, certificates representing the common stock are not
assignable or transferable on the books of the Company except by will,
intestate succession or operation of law. The proportionate interests of all of
the stockholders of the Company has been fixed on the basis of their respective
stock holdings at the close of business on the Final Record Date, and, after
the Final Record Date, any distributions made by the Company will be made
solely to the stockholders of record at the close of business on the Final
Record Date, except as may be necessary to reflect subsequent transfers
recorded on the books of the Company as a result of any assignment by will,
intestate succession or operation of law. After the Final record Date, the
Company will not issue any new stock certificates, other than replacement
certificates. It is anticipated that no further trading of the Company's shares
will occur on or after the Final Record Date.

Under the Plan, the Board of Directors may modify, amend or abandon
the Plan, notwithstanding stockholder ratification and approval, to the extent
permitted by Delaware law. The Company will not Amend or modify the Plan under
circumstances that would require additional stockholder solicitations under
Delaware law or the Federal securities laws without complying with Delaware law
and the Federal securities laws.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The primary objective of the Company's investment activities is to
preserve principal while at the same time maximizing the income the Company
receives from its investments without significantly increasing risk. Some of
the securities that the Company 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 the Company holds 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 its
investment will probably decline. To minimize this risk, the Company maintains
its 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, the
Company does not believe that near-term changes in interest rates will have a
material effect on its future results of operations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

PAGE
----

Report of Independent Auditors................................................................................. F-2
Consolidated Statement of Net Assets in Liquidation at December 31, 2001....................................... F-3
Consolidated Balance Sheet at December 31, 2000................................................................ F-4
Consolidated Statement of Changes in Net Assets in Liquidation
for the Three Months Ended December 31, 2001............................................................. F-5
Consolidated Statements of Operations for the years ended December 31, 1999, 2000 and
for the Nine Months Ended September 30, 2001 (Going Concern Basis)....................................... F-6
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1999, 2000
and Nine Months Ended September 30, 2001 (Going Concern Basis)........................................... F-7
Consolidated Statements of Cash Flows for the years ended December 31, 1999, 2000 and for
the Nine Months Ended September 30, 2001 (Going Concern Basis)........................................... F-8
Notes to Consolidated Financial Statements..................................................................... F-10
10

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

None.

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, 2002.

NAME AGE POSITION
- ---- --- --------

Howard "Skip" Speaks........................ 54 Chairman of the Board
Kenneth R. Vines............................ 57 Chief Executive Officer, Chief Financial Officer and Director
Stanley R. Arthur........................... 66 Director

In January 2002, all other members of the Board of Directors, with the
exception of those noted above, resigned from the Board in connection with the
Plan of liquidation.

Howard "Skip" Speaks served as the Company's President and Chief
Executive Officer and as a member of the Company's Board of Directors from
September 1999 until August 2001. In August 2001, Mr. Speaks resigned as an
officer of the Company but remained on the Company's Board. Prior to joining
the Company, he held various positions at Ericsson, a telecommunications
company, from August 1986 through September 1999. Mr. Speaks received his B.S.
degree in civil engineering from the West Virginia Institute of Technology.

Kenneth R. Vines was named Chief Executive Officer and a member of the
Board of Directors in August 2001. Prior to August 2001, Mr. Vines served as
the Company's Senior Vice President and Chief Financial Officer since October
1998. Prior to joining the Company, 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. In May 2002, Mr. Vines accepted a position as
Senior Vice President and Chief Financial Officer of EXE Technologies. Mr.
Vines has agreed to stay on the Company's Board of Directors and act in the
capacity of Chief Executive Officer through the Company's liquidation and
distribution process.

Stanley R. Arthur has served on the Company's 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.

SECTION 16 (A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

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. To the Company's knowledge, based solely on a review of the
form, reports and certificates filed with it by Executive Officers and

Directors of the Company, it believes it has complied with all applicable
filing requirements during the fiscal year ended December 31, 2001.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth all compensation accrued during fiscal
years 1999, 2000 and 2001 to the Company's Chief Executive Officers, and each
of the Company's other highly compensated executive officers whose annual
compensation exceeded $100,000 for fiscal year 2001.

SUMMARY COMPENSATION TABLE

Long-Term
Compensation All
Annual Compensation($) Securities Other
------------------------------------ Underlying Compen-
Name and Principal Positions Year Salary Bonus Other Options(#) sation
- ---------------------------- ---- -------- ------- -------- ------------ ------

Howard "Skip" Speaks(1)(3)................ 1999 $ 92,273 $60,000 $274,050 625,000 $ --
Former President and Chief Executive 2000 290,000 50,000 386,605 200,000 --
Officer 2001 221,538 -- 300,000

Mark I. Johnson(2)(4)..................... 1999 -- -- -- -- --
Former Chief Operating Officer 2000 105,000 23,496 65,090 247,500 --
2001 126,000 -- 120,237 --

Kenneth R. Vines(6)....................... 1999 150,000 6,000 72,951(8) 50,000 --
Chief Executive Officer and 2000 175,000 43,875 -- 90,000 --
Chief Financial Officer 2001 195,000 386,829
37,000(7)
Douglas R.B. Campbell(5).................. 1999 106,250 3,000 39,855(8) 150,000 --
Former Vice President of Sales and 2000 163,462 36,250 -- 75,000 --
Marketing 2001 170,000 -- 191,529 82,500(7)

Michael A. Clark(4)....................... 1999 140,625 5,000 -- 50,000 --
Vice President of Engineering 2000 175,000 43,875 -- 110,000 --
2001 126,000 -- 152,469 23,945(7)

Philip C. Gulliford(4).................... 1999 130,000 5,000 -- -- --
Former Vice President of Advanced 2000 153,385 38,250 -- 40,000 --
Technology 2001 109,846 -- 110,580 17,627(7)

(1) Mr. Speaks joined us in September 1999. His annual salary was
initially $290,000. In January 2001, Mr. Speaks annual compensation
was increased to $350,000. 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 the Company reimbursed Mr. Speaks in 1999.

(2) Mr. Johnson joined us in June 2000. His annual salary was $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 the Company
reimbursed Mr. Johnson in 2000.

(3) On August 20, 2001, the date the Company's Plan of Liquidation and
Dissolution was approved, Mr. Speaks resigned as an officer. Mr.
Speaks remains on the Company's Board. Annual salary for 2001 includes
Mr. Speaks salary paid through the date of resignation, and other
annual compensation for 2001 includes Mr. Speaks severance payments of
twelve months salary and benefits. All other compensation includes a
$300,000 note payable by Mr. Speaks to the Company that was forgiven
by the Board of Directors at the date of Mr. Speaks resignation.

(4) On August 20, 2001, the date the Company's Plan of Liquidation and
Dissolution was approved, Mr. Johnson, Mr. Clark and Mr. Gulliford
resigned as officers of the Company. Annual salary for 2001 includes
salary paid to these three officers through the date of resignation.
Other annual compensation for 2001 includes severance payments of six
months salary and benefits and 25% of their annual bonus.

(5) Mr. Campbell was terminated on December 31, 2001. Other annual
compensation includes severance payments of six months annual salary
and benefits and 25% of annual bonus paid to Mr. Campbell in 2002.
Additionally, other annual compensation includes payments made to Mr.
Campbell in 2002 of $34,000 under a retention bonus plan and $40,000
under a retention incentive plan.

(6) Other annual compensation for Mr. Vines includes six months salary and
benefits, a retention bonus of $150,000 and a retention incentive
bonus of $100,000, which was paid to Mr. Vines in January 2002.

(7) Mr. Vines, Mr. Campbell, Mr. Clark and Mr. Gulliford had outstanding
notes payable to the Company for a portion of the cost of stock
options they had exercised. In August 2001, the Board of Directors
approved the forgiveness of the outstanding notes.

(8) Represents reimbursement for relocation expenses.

OPTION GRANTS IN 2001

The Company did not grant any stock options to executive officers in
2001.

AGGREGATE OPTION EXERCISES IN 2001 AND VALUES AT DECEMBER 31, 2001

The following table sets forth information concerning stock options
held by the executive officers named in the summary compensation table at
December 31, 2001. All stock options have been reported as exercisable because
the Company's 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 the Company's 1997
Stock Plan. The options vest over periods of four to five years and for some
grants sooner if certain performance criteria are met and otherwise generally
conform to the terms of the Company's 1997 Stock Plan.

NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE DECEMBER 31, 2001 (#) DECEMBER 31, 2001 ($)
NAME ON EXERCISE REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------ ----------- ------------- ----------- -------------

Howard "Skip" Speaks.......... -- -- 825,000 -- -- --
Mark I. Johnson............... -- -- 247,500 -- -- --
Kenneth R. Vines.............. -- -- 140,000 -- -- --
Douglas R. B. Campbell........ -- -- 75,000 -- -- --
Michael A. Clark.............. -- 222,500 -- $42,500 --
Philip C. Gulliford........... -- -- 40,000 -- -- --

EMPLOYMENT AND SEVERANCE AGREEMENTS

In August 1999, the Company issued an employment offer letter to Mr.
Speaks that provided that if he was terminated without cause or involuntarily
terminated by us he would receive twelve months salary and benefits and six
months of accelerated vesting of his stock options. Per the offer letter, these
severance benefits are to cease if Mr. Speaks is employed by another company
within twelve months of his termination. In August 2001, Mr. Speaks resigned
and, pursuant to the offer letter, the Company paid Mr. Speaks twelve months
salary and benefits. Mr. Speaks agreed to remain on the Board of Directors

Also, the Company has entered into stock option agreements under the
Company's 1997 Stock Plan with Mr. Speaks that include a provision providing
that the 825,000 options granted to Mr. Speaks thereunder will accelerate and
become fully vested in the event of the Company's merger with or into another
corporation or a sale of substantially all of the Company's assets (a "change
of control"). Since sale of the Company's assets, as contemplated by the Plan,
qualifies as a change of control, Mr. Speaks options have now become fully
vested. Mr. Speaks has further 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 the Company.

In September 1998, the Company 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.

The Company also have entered into stock option agreements under the
Company's 1997 Stock Plan with Mr. Vines that include a provision providing
that the 150,000 shares of restricted stock and the 140,000 options granted to
Mr. Vines pursuant to the terms of the 1997 Stock Plan will accelerate and
become fully vested upon a change in control. Since sale of the Company's
assets, as contemplated by the Plan, qualifies as a change of control, Mr.
Vines options and restricted shares have now become fully vested. The Company
agreed

to loan Mr. Vines 50% of the money required to exercise the option pursuant to
which he was granted his restricted shares, which loan has now been forgiven.
See "Related Party Transactions."

The Company also issued employment letters to Messrs. Campbell, Clark
and Gulliford, which letters provide that in the event of their termination
without cause they will receive six months salary and 25% of their annual
bonus. These severance benefits will cease if they are employed by another
company within six months of their termination. Also, Mr. Campbell and Mr.
Clark will receive six months salary, benefits and bonus in the event that they
are terminated without cause within one year of a change in control. Mr. Clark
and Mr. Gulliford resigned in August 2001 and the Company paid these
individuals six months salary and benefits and 25% of their annual salaries.
Mr. Campbell was terminated at the end of 2001, and the Company paid him six
months salary and benefits and 25% of his annual salary.

In addition, the Company has entered into stock option agreements
under the Company's 1997 Stock Plan with each of Messrs. Campbell, Clark and
Gulliford for 75,000, 222,500 and 40,000 options, respectively, that include a
provision providing that these options will accelerate and become fully vested
upon a change in control. Similarly, the 150,000 shares of restricted stock
granted pursuant to Mr. Campbell under the Company's 1997 Stock Plan will also
accelerate and become fully vested upon change of control. Since sale of the
Company's assets, as contemplated by the Plan, qualifies as a change of
control, all of these options and restricted shares have now become fully
vested.

In May 2000, the Company has issued an employment offer letter to Mr.
Johnson that provides that if he is terminated without cause by the Company at
any time, or by the Company 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 was resigned in August 2001, and the Company
paid him six months salary and benefits and 25% of his annual salary

The Company also has entered into stock option agreements under the
Company's 1997 Stock Plan with Mr. Johnson that include a provision providing
that the 247,500 options granted to Mr. Johnson thereunder will accelerate and
become fully vested upon a change in control. Since sale of the Company's
assets, as contemplated by the Plan, qualifies as a change of control, Mr.
Johnson options and restricted shares have now become fully vested. Mr. Johnson
did not exercise any vested stock options subsequent to his resignation.

In August 2001, the Board of Directors authorized the Company to enter
into a retention agreement with Mr. Vines to provide him with incentives to
remain with the Company and maximize the value of the Company's business and
its assets in the event of a change of control or the liquidation, dissolution
or winding up of the Company. Pursuant to his retention agreement, Mr. Vines is
entitled to a retention bonus of $150,000 in addition to the severance payments
provided in his employment offer letter. Half of the retention bonus was paid
to Mr. Vines upon his assuming the position of Chief Executive Officer of the
Company in August 2001 and the remaining $75,000 payable to him upon a change
of control or dissolution of the Company.

The Company also entered into a retention agreement with Mr. Campbell,
providing a retention bonus of $34,000 upon a change of control in or
dissolution of the Company, in addition to his severance payments provided in
his employment offer letter.

In order to provide additional incentives to Mr. Vines, Mr. Campbell
and eight other employees of the Company to maximize proceeds to be distributed
to the Company's stockholders in event of a liquidation and dissolution or in
the event of a change of control, the Board also approved a bonus pool based on
the projected total per share distribution to stockholders to be determined at
the time of the initial distribution or the per share value to the stockholders
in a change of control. Mr. Vines is entitled to receive 25% and Mr. Campbell
15% of the cash set aside in this bonus pool. The remainder of the cash in the
bonus pool will be distributed among the remaining Company employees.

Mr. Campbell was terminated at the end of 2001, and the Company paid
him his retention bonus and a retention incentive of $40,000, in addition to
six-months salary and benefits and 25% of his annual bonus in 2002.

In January 2002, the Board approved a new compensation plan for Mr.
Vines for 2002. Since it is expected that the CEO requirements for the Company
in 2002 will diminish during the liquidation process, the new compensation plan
reduces Mr. Vines required availability throughout 2002 and, accordingly, Mr.
Vines' compensation declines throughout the year. Mr. Vines' total salary for
2002 will be $133,000, and he will receive no benefits. The Company also agreed
to pay Mr. Vines in January 2002 the severance payments described in his
employment offer letter dated in October 1998, the remaining $75,000 owed to
Mr. Vines under a retention bonus agreement and $100,000 under a retention
incentive plan approved by the Board in 2001. In May 2002, Mr. Vines accepted a
position as Senior Vice President and Chief Financial Officer of EXE
Technologies. Mr. Vines has agreed to stay on the Company's Board of Directors
and continue to act in the capacity of Chief Executive Officer through the
Company's liquidation and distribution process.

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
October 1999, the Company's stockholders approved grants of options to purchase
10,000 shares of common stock vesting annually in equal installments over four
years to each of the Company's 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 the Company's 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. No stock options were granted for
directors during 2001.

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

The Company renewed its directors and officers indemnification
insurance coverage and extended the coverage for the additional 3 years on
January 31, 2002.

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, 2001. Actual compensation
earned during fiscal 2001 by the named executive officers is shown in the
Summary Compensation Table above under "Executive Compensation."

INTRODUCTION

Prior to adoption of the Plan, the Compensation Committee of the Board
of Directors established the general compensation policies of the Company, and
established the compensation plans and specific compensation levels for
executive officers. The Committee strived to ensure that the Company's
executive compensation programs would 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. Since adoption
of the Plan, the Board of Directors has taken over the duties of the
Compensation Committee.

COMPENSATION PROGRAMS

Base Salary. Prior to the Adoption of the Plan, the Committee
established base salaries for executive officers. Base pay increases varied
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 was 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 included
milestones in such executive's area of responsibility as well as with respect
to the Company's financial performance generally.

Stock Options. The Committee believed that stock options provide
additional incentive to officers to work towards maximizing stockholder value.
Prior to the Plan adoption, these options were provided through initial grants
at or near the date of hire and through subsequent periodic grants. Generally,
options become exercisable over four to five year periods, and in some cases
sooner if certain performance criteria are met, 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 was 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 were 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, prior to the Plan adoption ,
officers participated in compensation plans available to all employees, such as
participation in both the Company's 401(k) Savings Plan and Employee Stock
Purchase Plan.

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 AFTER THE ADOPTION OF THE PLAN
Since the adoption of the Plan, the Board has attempted to compensate
Mr. Vines, the Chief Executive Officer, in a manner that will maximize the
distribution to be paid to stockholders in liquidation.

Respectfully Submitted By:

BOARD OF DIRECTORS

Howard Speaks

Stan Arthur

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth as of January 31, 2002, 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
35,185,213 shares of Common Stock outstanding as of January 31, 2002. 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 11.2%
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 7.8
North Castle Drive
Armonk, NY 10504
James Wei (3).................................................... 2,528,170 7.2
Entities affiliated with Worldview Technology Partners (4)....... 2,508,170 7.1
435 Tasso Street, Suite 120
Palo Alto, CA 94301
Double Play Partners Limited Partnership......................... 2,254,900 6.4
1391 Main St.
Springfield, MA 01103
James F. Gibbons (5)............................................. 120,000 (*)
Lockheed Martin Corporation...................................... 2,000,000 5.7
5600 Sand Lake Road
Orlando, FL 32819
Entities affiliated with Bessemer Venture Partners (6)........... 950,850 2.7
1400 Old County Road
West Bury, NY 11590
Arjun Gupta (7).................................................. 1,505,714 4.3
Entities affiliated with TeleSoft Partners (8)................... 1,485,714 4.2
1450 Fashion Island Boulevard, Suite 610
San Mateo, CA 94404
Howard "Skip" Speaks (9)......................................... 825,625 2.3
Robert P. Goodman (10)........................................... 10,000 (*)
Michael A. Clark (11)............................................ 409,124 1.2
Kenneth R. Vines (12)............................................ 297,125 (*)
Mark I. Johnson (13)............................................. 248,125 (*)
Philip C. Gulliford (14)......................................... 41,000 (*)
Douglas R.B Campbell (15)........................................ 95,000 (*)
Stanley R. Arthur................................................ -- --
All directors and executive officers as a group
(12 persons).................................................. 10,030,168 31.2
*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
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 January
31, 2002.

(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 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 January
31, 2002.

(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) 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 January 31, 2002.

(6) Includes 114,240 shares held by Bessemer Venture Investors L.P.,
305,569 shares held by Bessemer Venture Partners IV, L.P., 485,570
shares held by Bessec Ventures IV L.P. and 45,451 shares held by BVP
IV Special Situations L.P.

(7) Includes 1,485,714 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. , 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 January 31, 2002.

(8) 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., and 66,500 shares held by TeleSoft
Coinvestments, L.P.

(9) Includes 825,000 shares issuable upon the exercise of options
exercisable within sixty days of January 31, 2002.

(10) 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 January 31, 2002.

(11) Includes 160,162 shares of common stock issuable upon the exercise of
options exercisable within 60 days of January 31, 2002.

(12) Includes 56,500 shares held by entities affiliated with Mr. Vines.
Includes 140,000 shares of common stock issuable upon the exercise of
options exercisable within sixty days of January 31, 2002.

(13) Includes 247,500 shares issuable upon the exercise of options
exercisable within 60 days of January 31, 2002.

(14) Includes 40,000 shares issuable upon the exercise of options
exercisable within 60 days of January 31, 2002.

(15) Includes 75,000 shares issuable upon the exercise of options
exercisable within 60 days of January 31, 2002.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

CERTAIN BUSINESS RELATIONSHIPS

Since the Company's 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 2001, the Company did not grant any options to purchase
the Company's Common Stock to its officers, directors or stockholders who
beneficially own 5% or more of its Common Stock.

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 its 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 its right
arising out of that person's services as a director, officer, employee, agent
or fiduciary for the Company, any subsidiary of the Company or any other
company or enterprise to which the person provides services at the Company's
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 the Company; or

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

The Company believes 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.

INVESTOR RIGHTS AGREEMENT

Pursuant to a registration rights agreement the Company entered into
with holders of 24,397,414 shares of the Company's 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 the Company propose to register any securities under the Securities
Act, either for the Company's 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 the
Company's expense with respect to their shares of common stock. The Company is
required to use the Company's 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 the Company's initial periodic 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

The Company entered into agreements with Lockheed Martin relating to
the design and development of the MMIC technology and transceiver module in the
Company's products. Under these agreements the Company paid Lockheed Martin on
a cost reimbursable basis, including its fee, for production services performed
thereunder. Additionally, the Company paid Lockheed Martin for specified costs
related to the continued development of the Company's 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 the Company's capital stock.
James Gibbons, who was one of the Company's former directors in 2001, is a
director of Lockheed Martin. Stanley Arthur, one of the Company's 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, the Company entered into a supply agreement with
Advanced Radio Telecom under which Advanced Radio Telecom (ART) purchased
products in excess of 10% of the Company's revenue for 2000. ART declared
bankruptcy in the first quarter of 2001 and the Company wrote off $2.7 million
of unpaid receivables during 2001. Entities associated with Oak Investment
Partners, of which Bandel Carano, one of the Company's former directors, is a
general partner, Worldview Technology Partners, of which James Wei, one of the
Company's former directors, is a general partner, and other stockholders of the
Company own stock of Advanced Radio Telecom. Mr. Carano, one of the Company's
former directors, is a director of Advanced Radio Telecom.

In February 2000, the Company 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 the Company's former directors, is a general partner and Worldview
Technology Partners, of which James Wei, one of the Company's former directors,
is a general partner. Mr. Wei, one of the Company's former directors, is also a
director of CommVerge Solutions. During 2000 the Company supplied CommVerge
Solutions with products in excess of 10% of the Company's revenue under this
agreement.

During 2000 and 2001, the Company supplied modem chips and engineering
design services in an amount in excess of 10% of the Company's revenue to
Kestrel Solutions. Investors in Kestrel Solutions include entities associated
with Worldview Technology Partners, of which James Wei, one of the Company's
former directors, is a general partner.

INDEBTEDNESS OF MANAGEMENT

In October 1999, the Company made an interest free loan in the
principal amount of $300,000 to Mr. Speaks, the Company's President and Chief
Executive Officer, which was secured by Mr. Speaks' options and

specified real estate. The loan was payable on September 30, 2004 or within one
year of the termination of his employment with the Company, and was to be paid
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. The Board
approved the forgiveness in August 2001.

In June 1999, the Company made two separate loans in the principal
amounts of $62,500 and $25,000, respectively, to Mr. Campbell, one of the
Company's executive officers, each of which accrued interest at a rate equal to
5.1% per annum compounded annually. Each loan was secured by shares of the
Company's restricted stock purchased by Mr. Campbell using the proceeds of the
loans. The loans were payable on June 30, 2004, or, at the Company's option,
within thirty days of the termination of his employment with the Company. The
Board approved the forgiveness of the note payable by Mr. Campbell in August
2001.

In January 1999, the Company made a loan in the principal amount of
$18,750 to Mr. Goodman, the former Chairman of the Company's Board of
Directors. In December 1999, the Company made a second loan to Mr. Goodman in
the principal amount of $150,000. Both loans accrued interest at a rate equal
to 5.1% per annum compounded annually and each of which was secured by shares
of the Company's restricted stock purchased by Mr. Goodman using the proceeds
of the loans. The loan made in January 1999 was payable on January 31, 2004,
or, at the Company's option, within thirty days of his ceasing to be Chairman
of the Company's Board of Directors. The loan made in December 1999 was payable
in December 31, 2004, or, at the Company's option, within thirty days of his
ceasing to provide services to the Company. The Board approved the forgiveness
of the note payable by Mr. Goodman in August 2001.

Additionally, in August 2001, the Board approved the forgiveness of
notes payable to the Company by Mr. Vines, Mr. Clark and Mr. Gulliford of
$37,500, $23,945 and $17,627 respectively.

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:

(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

(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:

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

2.1** Plan of Liquidation

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

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

10.24*** Asset Purchase Agreement with CarrierComm, Inc. dated March 15, 2002

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 43 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 the Company's registration statement on
Form S-1, registration number 333-31434, declared effective by the
Securities and Exchange Commission on July 12, 2000.

*** Incorporated by reference from the Company's Form 8-K, filed
separately with the Commission on March 29, 2002.

b) Reports on Form 8-K

None.

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
Chief Executive Officer and
Chief Financial Officer

Dated: July 3, 2002

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 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 Chairman of the Board of Directors July 3, 2002
- ---------------------------
Howard "Skip" Speaks

/s/ KENNETH R. VINES Chief Executive Officer (Principal July 3, 2002
- --------------------------- Executive Officer)
Kenneth R. Vines

/s/ STANLEY R. ARTHUR Director July 3, 2002
- ---------------------------
Stanley R. Arthur

TRITON NETWORK SYSTEMS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page
----

Report of Independent Auditors................................................................................. F-2
Consolidated Statement of Net Assets in Liquidation at December 31, 2001....................................... F-3
Consolidated Balance Sheet at December 31, 2000 ............................................................... F-4
Consolidated Statement of Changes in Net Assets in Liquidation
for the Three Months Ended December 31, 2001............................................................. F-5
Consolidated Statements of Operations for the years ended December 31, 1999, 2000 and
for the Nine Months Ended September 30, 2001 (Going Concern Basis)....................................... F-6
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1999, 2000 and
for the Nine Months Ended September 30, 2001 (Going Concern Basis)....................................... F-7
Consolidated Statements of Cash Flows for the years ended December 31, 1999, 2000 and
for the Nine Months Ended September 30, 2001 (Going Concern Basis)....................................... F-8
Notes to Consolidated Financial Statements..................................................................... F-10

F-1

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors and Stockholders

Triton Network Systems, Inc.

We have audited the accompanying consolidated balance sheet of Triton Network
Systems, Inc. and subsidiaries as of December 31, 2000, the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
two years in the period ended December 31, 2000, and the consolidated statements
of operations, stockholders' equity and cash flows for the nine month period
ended September 30, 2001. In addition, we have audited the consolidated
statement of net assets in liquidation as of December 31, 2001 and the related
consolidated statement of changes in net assets in liquidation for the three
month period ended December 31, 2001. 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.

As described in Note 1 to the consolidated financial statements, the
stockholders of Triton Network Systems, Inc. approved a plan of complete
liquidation and dissolution of the Company. As a result, the Company has changed
its basis of accounting for periods subsequent to September 30, 2001 from the
going-concern basis to a liquidation basis.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Triton
Network Systems, Inc. and subsidiaries as of December 31, 2000, the consolidated
results of its operations and its cash flows for each of the two years in the
period ended December 31, 2000 and for the nine month period ended September 30,
2001, its consolidated net assets in liquidation as of December 31, 2001 and the
consolidated changes in net assets in liquidation for the three month period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States applied on the basis described in the preceding
paragraph.

Orlando, Florida
June 24, 2002

F-2

TRITON NETWORK SYSTEMS, INC.

CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION

DECEMBER 31, 2001

ASSETS
Cash and cash equivalents.................. $ 18,913,364
Short-term investments..................... 15,690,415
Receivables................................ 3,597,746
Prepaid expenses........................... 525,073
Other assets............................... 521,350
------------------
Total assets.......................... 39,247,948
LIABILITIES
Accounts payable........................... $ 1,307,940
Accrued compensation....................... 1,246,698
Other accrued expenses..................... 885,571
Accrued vendor settlement costs............ 500,000
Accrued litigation costs................... 5,500,000
------------------
Total liabilities..................... 9,440,209

NET ASSETS IN LIQUIDATION...................... $ 29,807,739
==================

See accompanying notes.

F-3

TRITON NETWORK SYSTEMS, INC.

CONSOLIDATED BALANCE SHEET

DECEMBER 31, 2000

ASSETS
Current assets:
Cash and cash equivalents.......................... $ 48,524,616
Short-term investments............................. 30,372,228
Receivables........................................ 5,262,893
Inventory.......................................... 17,750,902
Other current assets............................... 557,414
------------------
Total current assets.......................... 102,468,053
Property and equipment, net............................ 19,213,463
Restricted cash........................................ 1,143,315
Intangible assets...................................... 32,989,431
Other non-current assets............................... 941,444
------------------
Total assets.................................. $ 156,755,706
==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................... $ 5,838,337
Accrued compensation............................... 2,507,091
Other accrued expenses............................. 5,430,818
Current portion of capital leases.................. 2,170,768
Current portion of notes payable................... 1,404,555
------------------
Total current liabilities..................... 17,351,569
Capital leases, net of current portion................. 2,103,802
Notes payable, net of current portion.................. 4,653,764

Stockholders' equity:
Common stock, $.001 par value; 120,000,000
shares authorized, 34,937,299 shares issued
and outstanding at December 31, 2000............ 63,225
Additional paid-in capital......................... 235,097,372
Notes receivable from stockholders................. (431,624)
Deferred compensation.............................. (2,326,855)
Accumulated deficit................................ (99,755,547)
-------------------
Total stockholders' equity.................... 132,646,571
------------------
Total liabilities and stockholders'
equity...................................... $ 156,755,706
==================

See accompanying notes

F-4

TRITON NETWORK SYSTEMS, INC.

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION

PERIOD FROM OCTOBER 1, 2001 THROUGH DECEMBER 31, 2001

Net assets in liquidation as of October 1, 2001........ $ 35,665,434

Changes in net assets in liquidation:
Litigation settlement costs, net of recovery ...... (3,020,000)
Ongoing costs incurred during liquidation ......... (2,036,403)
Interest income.................................... 194,922
Adjust assets and liabilities to fair value........ (996,214)
-------------------

Total changes in net assets in liquidation......... (5,857,695)
-------------------

Net assets in liquidation as of December 31, 2001...... $ 29,807,739
==================

See accompanying notes.

F-5

TRITON NETWORK SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
1999 2000 2001
------------ ------------ -------------

Revenues:
Products ................................................ $ -- $ 24,719,511 $ 7,025,879
Services ................................................ -- 1,518,230 3,307,676
------------ ------------ -------------
Total revenues ..................................... -- 26,237,741 10,333,555
Cost of revenues:
Provision for estimated excess inventory ................ -- -- 24,520,253
Special inventory component write-off ................... -- 1,189,634 --
Other ................................................... -- 25,877,457 10,184,099
------------ ------------ -------------
Total cost of revenues ............................. -- 27,067,091 34,704,352
------------ ------------ -------------
Gross profit (loss) ........................................ -- (829,350) (24,370,797)
Operating expenses:
Manufacturing and operations ............................ 7,989,575 -- --
Research and development ................................ 12,631,231 22,939,352 9,822,018
Selling and marketing ................................... 6,111,074 12,144,100 4,461,434
General and administrative .............................. 4,473,094 7,130,728 3,331,362
Provision for doubtful accounts receivable .............. -- -- 2,700,000
Severance and related costs ............................. -- -- 5,485,788
Provision for asset impairment losses, primarily
property and equipment ................................ -- -- 13,006,976
Impairment losses and amortization of goodwill ......... -- -- 32,341,431
Lease termination costs ................................ -- -- 2,396,255
Amortization of deferred compensation ................... 1,560,877 1,594,493 2,326,855
------------ ------------ -------------
Total operating expenses ........................... 32,765,851 49,630,339 (75,872,116)
------------ ------------ -------------

Loss from operations ....................................... (32,765,851) (50,459,689) (100,242,913)
Other income (expenses):
Interest income ......................................... 1,336,744 3,681,540 2,217,996
Interest and other expense .............................. (424,830) (1,424,692) (1,243,090)
------------ ------------ -------------
Total other income ................................. 911,914 2,256,848 974,906
------------ ------------ -------------
Net loss before extraordinary loss ......................... (31,853,937) (48,202,841) (99,268,007)
Extraordinary loss on early retirement of debt ............. -- -- (768,012)
------------ ------------ -------------
Net loss ................................................... $(31,853,937) $(48,202,841) $(100,036,019)
============ ============ =============

Net loss per share--basic and diluted
Net loss before extraordinary loss ...................... $ (6.67) $ (2.51) $ (2.86)
Extraordinary loss on early retirement of debt .......... -- -- (.02)
------------ ------------ -------------
Net loss .............................................. $ (6.67) $ (2.51) $ (2.88)
============ ============ =============
Shares used in per share calculations--
basic and diluted ....................................... 4,776,567 19,191,226 34,724,045
============ ============ =============

Pro forma net loss per common share - basic and diluted:
Net loss before extraordinary loss ...................... $ (1.64) $ (1.61) $ (2.86)
Extraordinary loss on early retirement of debt .......... -- -- (.02)
------------ ------------ -------------
Net loss .............................................. $ (1.64) $ (1.61) $ (2.88)
============ ============ =============
Shares used in per share calculations--
basic and diluted ..................................... 19,400,204 29,928,655 34,724,045
============ ============ =============

See accompanying notes.

F-6

TRITON NETWORK SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

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

Balances at January 1, 1999 ....... 11,663,000 23,326 6,241,049 12,482 42,402,456
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
Amortization of deferred
compensation ...................
Net loss ......................... -- -- -- -- --
----------- ------------ ----------- -------- -------------
Balances at December 31, 1999 ..... 18,806,469 37,613 6,795,832 13,592 105,366,954
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
Amortization of deferred
compensation ...................
Net loss .........................
----------- ------------ ----------- -------- -------------
Balance at December 31, 2000 ...... -- $ -- 34,937,299 $ 63,225 $ 235,097,372
Issuance of common stock under
Employee Stock Purchase Plan ... -- -- 113,048 113 196,258
Issuance of common stock upon
exercise of stock options ...... -- -- 55,468 55 27,365
Repurchase of common stock ....... -- -- (33,189) (66) (17,322)
Other ............................ -- -- -- -- 90,000
Repayment of notes receivables ... -- -- -- -- --
Forgiveness of notes receivables . -- -- -- -- --
Amortization of deferred
compensation ................... -- -- -- -- --
Net loss ......................... -- --
----------- ------------ ----------- -------- -------------
Balance at September 30, 2001 ..... -- $ -- 35,072,626 $ 63,327 $ 235,393,673
=========== ============ =========== ======== =============

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

Balances at January 1, 1999 ....... (2,114,835) (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 ......... (1,372,040)
Amortization of deferred
compensation ................... 1,560,877 1,560,877
Net loss ......................... -- -- (31,853,937) (31,853,937)
------------- ------------ ------------- -------------
Balances at December 31, 1999 ..... (1,925,998) (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 ......... (1,995,350) -- -- --
Amortization of deferred
compensation ................... 1,594,493 1,594,493
Net loss ......................... (48,202,841) (48,202,841)
------------- ------------ ------------- -------------
Balance at December 31, 2000 ...... $ (2,326,855) $ (431,624) $ (99,755,547) $ 132,646,571
Issuance of common stock under
Employee Stock Purchase Plan ... -- -- -- 196,371
Issuance of common stock upon
exercise of stock options ...... -- -- -- 27,420
Repurchase of common stock ....... -- -- -- (17,388)
Other ............................ -- -- -- 90,000
Repayment of notes receivables ... -- 6,318 -- 6,318
Forgiveness of notes receivables . -- 425,306 -- 425,306
Amortization of deferred
compensation ................... 2,326,855 -- -- 2,326,855
Net loss ......................... -- -- (100,036,019) (100,036,019)
------------- ------------ ------------- -------------
Balance at September 30, 2001 ..... $ -- $ -- $(199,791,566) $ 35,665,434
============= ============ ============= =============

See accompanying notes.

F-7

TRITON NETWORK SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
1999 2000 2001
------------ ------------ -------------

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ........................................ $(31,853,937) $(48,202,841) $(100,036,019)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization ................... 1,444,608 4,510,086 4,598,642
Write down of assets ............................ -- -- 14,062,945
Write down and amortization of
intangible assets ............................. -- 5,821,666 32,989,431
Amortization of deferred
compensation .................................. 1,560,877 1,594,493 2,326,855
Forgiveness of debt ............................. -- -- 425,306
Inventory provision ............................. -- -- 21,620,253
Provision for doubtful accounts
receivable .................................... -- -- 2,700,000
Other ........................................... -- 323,629 --
Changes in operating assets and
liabilities, net of effects of
acquisition in 2000:
(Increase) Decrease in trade and other
receivables ................................. -- (5,262,893) 512,636
Increase in inventory ......................... (7,244,874) (9,916,719) (4,469,351)
(Increase) Decrease in other current assets ... (823,344) 242,452 (652,096)
(Increase) Decrease in restricted cash
and other non-current assets ................ (1,215,266) (882,067) 1,775,192
Increase (Decrease) in accounts payable,
accrued compensation and other
accrued expenses ............................ 6,656,892 4,923,631 (7,115,248)
------------ ------------ -------------
Net cash used in operating
activities .................................. (31,475,044) (46,848,563) (31,261,454)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of capital assets ....................... (4,501,112) (11,021,899) (1,156,557)
Sales (purchases) of short-term investments ........ (11,003,876) (30,372,228) 1,253,702
------------ ------------ -------------
Net cash provided by (used in) investing
activities ...................................... 6,502,764 (41,394,127) 97,145
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of preferred
and common stock ................................ 61,201,706 86,231,804 296,403
Proceeds from notes payable ........................ 461,789 6,576,133 1,090,354
Proceeds from stockholder .......................... -- -- 6,318
Payments on capital leases and
notes payable ................................... (884,694) (2,170,910) (10,841,416)
------------ ------------ -------------
Net cash provided by (used in) financing
activities ...................................... 60,778,801 90,637,027 (9,448,341)
Net increase (decrease) in cash and cash
equivalents ..................................... 35,806,521 2,394,337 (40,612,650)
Cash and cash equivalents at beginning
of period ....................................... 10,323,758 46,130,279 48,524,616
------------ ------------ -------------
Cash and cash equivalents at end of
period .......................................... $ 46,130,279 $ 48,524,616 $ 7,911,966
============ ============ =============

F-8

TRITON NETWORK SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
1999 2000 2001
--------------- --------------- --------

SUPPLEMENTAL CASH FLOWS INFORMATION
Interest paid and incurred .................... $ 425,905 $ 1,004,575 $966,400
=============== =============== ========
NON-CASH FINANCING AND INVESTING ACTIVITIES
Fixed assets acquired under capital
lease obligations .......................... $ 2,117,842 $ 2,483,534 $ --
=============== =============== ========
Common stock issued for notes
receivable from stockholders ............... $ 441,150 $ -- $ --
=============== =============== ========
Common stock warrants issued in
connection with lease and credit
agreements ................................. $ -- $ 360,000 $ --
=============== =============== ========

See accompanying notes.

F-9

TRITON NETWORK SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

1. SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND PLAN OF LIQUIDATION AND DISSOLUTION

Triton Network Systems, Inc., a Delaware corporation ("the Company")
was incorporated on March 5, 1997 and is based in Orlando, Florida. The Company
has operated in one business segment as defined by Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise", and
provided broadband wireless equipment that enables communications service
providers to deliver voice, video and data services to their business customers.
On August 16, 2001, the Company's Board of Directors unanimously approved,
effective August 20, 2001, a Complete Plan of Liquidation and Dissolution of the
Company ("the Plan"). On October 29, 2001, the Company's stockholders ratified
and approved the Plan. Subsequent to August 20, 2001, the Company's activities
have been limited primarily to:

- Selling remaining assets,

- Paying creditors,

- Terminating any remaining commercial agreements, relationships
and outstanding obligations,

- Continuing to honor certain obligations to customers, and

- Conserving cash.

The Plan provides for a pro rata cash, or in kind, distribution to
stockholders once the remaining assets are sold and liabilities are paid.

On January 31, 2002, the Company filed a Certificate of Dissolution
with the Secretary of State of Delaware. Simultaneous with the filing of the
Certificate of Dissolution, the Company requested the Nasdaq Stock Market to
voluntarily delist the Company's common stock, requested the stock transfer
books be closed and recording of stock transfers of common stock be
discontinued. Under Delaware law, the Company will not be dissolved for three
years subsequent to the filing of the Certificate of Dissolution.

The consolidated financial statements for fiscal 1999 and 2000 and for
the nine months ended September 30, 2001 were prepared on the going concern
basis of accounting, which contemplates realization of assets and satisfaction
of liabilities in the normal course of business. As a result of the adoption of
the Plan and the imminent nature of the liquidation, the Company adopted the
liquidation basis of accounting effective October 1, 2001. This basis of
accounting is considered appropriate when, among other things, liquidation of a
company is probable and the net realizable value of assets are reasonably
determinable. In order to convert assets at estimated net realizable value and
liabilities at estimated settlement amounts under liquidation basis of
accounting, the Company recorded the following adjustments to record its assets
and liabilities to net reliazable value during the period October 1, 2001 to
December 31, 2001:

Adjust assets and liabilities to fair value:
Write down of receivables $ (200,290)
Write down of inventory (242,756)
Write down of property and equipment (128,686)
Vendor settlement costs (500,000)
Other 75,518
----------
$ 996,214
==========

The estimated net realizable value of assets represents management's
best estimate of the recoverable value of the assets, net of selling expenses,
and without consideration for the effect that the settlement of any pending
litigation may have on the value of the assets. The assets are held at their net
realizable value until they are sold or liquidated. There can be no assurance,
however, that the Company will be successful in selling the assets at the net
realizable value. Operating expenses, legal and other expenses that may be
incurred in defending future litigation and other expenses expected to be
incurred during the liquidation wind down period have not been recorded in the
consolidated statement of net assets in liquidation as of December 31, 2001.

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.
Certain reclassifications have been made in prior years for consistency with
2001 amounts.

F-10

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

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
was used exclusively to secure 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.

RECEIVABLES

Receivables, net of any allowance for doubtful receivables, consist of
the following:

DECEMBER 31,
2000 2001
------------- -------------

Trade.................................... $ 4,772,193 $ 33,765
Other.................................... 490,700 3,563,981
------------- -------------
$ 5,262,893 $ 3,597,746
============= =============

A provision of $2,700,000 was recorded in the nine month period ended
September 30, 2001. No provision was recorded for years ended December 31, 1999
and 2000.

PROPERTY AND EQUIPMENT

At December 31, 2001, property and equipment was recorded at
management's estimate of net realizable value. Prior to approval of the Plan,
property and equipment was 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 recognized revenue on a going concern basis, 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 and two customers each accounted
for more than 10% of the Company's revenue for the nine months ended September
30, 2001. Shipping and handling costs are classified as a component of cost of
revenues in the Consolidated Statements of Operations.

WARRANTY COSTS

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

INVENTORY

At December 31, 2001, inventory was recorded at management's estimate
of net realizable value. Prior to approval of the Plan, inventory was stated at
the lower of cost, determined based on an average cost basis, or market.
Inventories consist of the following:

DECEMBER 31,
2000 2001
------------- ----------

Raw materials.................................. $ 10,843,597 $ --
Work in process................................ 3,933,818 --
Finished goods................................. 2,973,487 156,064
------------- ----------
$ 17,750,902 $ 156,064
============= ==========

During the nine months ended September 30,2001, inventory provisions
totaling $24,520,253 were recorded in cost of revenues. These provisions
included a write down of inventory to management's estimate of net realizable
value, considering both the current depressed market for the Company's products
and the limited ability to sell inventory during a short term liquidation
process. Additionally, approximately $2,900,000 representing the estimated cost
of settling any outstanding non-cancelable inventory purchase commitments has
been included in the inventory valuation provision for the nine months ended
September 30, 2001, while no amounts were recorded for the years ended December
31, 1999 and 2000.

F-11

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

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

The allowance for obsolete and slow moving inventory is as follows:

NINE
MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
1999 2000 2001
------------- ----------- ------------

Balance beginning of period ....... $ -- $ -- $ 1,189,634
Charges to Cost of revenues ....... -- 1,189,634 24,520,253
Amounts written off ............... -- (1,348,852)
------------- ----------- ------------
Balance at end of period .......... $ -- $ 1,189,634 $ 24,361,035
============= =========== ============

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. As a result of the Plan, the Company recorded the
following write downs in 2001:

Property and equipment and other assets

Property and equipment and certain other assets were written down by a
total of $13,006,973 during the nine months ended September 31, 2001. During the
third and fourth quarter of 2001, the Company sold a substantial portion of its
property and equipment. The write down includes the loss on the sale of the
property and equipment and a write down of the remaining property and equipment
and certain other assets to management's estimate of net realizable value.

Intangible assets

The intangible assets relate to an acquisition in March 2000 of the
broadband modem product line, and were being amortized over the estimated life
of five years. The Company evaluated the long-term recoverability of the
intangible assets and concluded that the full balance of the intangible assets,
$28,460,319, should be written off during the nine months ended September 30,
2001.

DEFERRED COMPENSATION

At the end of June 2001, the Company had $1,477,776 of deferred
compensation included the Consolidated Balance Sheet, which was being amortized
over the vesting period of the stock options granted to certain employees. In
conjunction with the Plan, the remaining balance of unamortized deferred
compensation was written off during the nine months ended September 30,2001.

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 approximated 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

F-12

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

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.

LOSS 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 11 for the computation of net loss per share data and 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.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In October 2001, the Financial Accounting Standards Board ("FASB")
issued Statement No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets", which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of", but retains many of the fundamental provisions of
SFAS No. 121. SFAS No. 144 also supersedes APB Opinion No. 30, "Reporting the
Results of Operations, Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions". SFAS No. 144 retains the requirement in Opinion No. 30 to report
separately discontinued operations and extends this reporting requirement to a
component of an entity that either has been disposed of or is classified as held
for sale. SFAS No. 144 is effective for fiscal years beginning after December
15, 2001, and interim periods within those fiscal years. Early application is
permitted. As a result of the Company's stockholders approval to liquidate and
dissolve the Company, the Company has written all of its assets down to net
realizable value during 2001.

In July 2001, the FASB issued Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS No. 142). SFAS
No. 142 requires that goodwill no longer be amortized to earnings, but instead
be reviewed for impairment. All of the Company's intangible assets were written
off during the nine months ended September 30, 2001.

F-13

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

In June 2001, the FASB issued Statement No. 143, "Accounting for Asset
Retirement Obligations" which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. The standard applies to legal obligations
associated with the retirement of long-lived assets that result from the
acquisition, construction, development, and (or) normal use of the asset. The
Company believes that the adoption of Statement No. 143 will not have a material
effect in its financial position or results of operations.

2. PROVISION FOR DOUBTFUL ACCOUNTS RECEIVABLE

During the first quarter of 2001, there was a rapid and unexpected
decline in the U.S. CLEC market for the Company's products as several existing
and potential customers had difficulty finding additional funding for network
buildouts. As a result of this rapid deterioration in market conditions for the
Company's products, a provision for doubtful accounts receivable of $2,700,000
was made during the first quarter of 2001. The provision for doubtful accounts
was for the outstanding receivable balance from Advanced Radio Telecom, which
filed for bankruptcy protection earlier this year.

3. SEVERANCE AND RELATED COSTS

As a result of the decline in business levels and the stockholders'
approval of the Plan, the Company significantly reduced the number of employees
to 30 by December 31, 2001, and as a result, incurred severance and related
costs associated with the employee reductions. Provisions totaling $5,485,788
were recorded during the nine months ended September 30, 2001 for severance and
related costs. The provision included severance costs for the President and
Chief Executive Officer and three other officers who resigned August 2001.
Additionally, the charge includes retention incentives payable to two officers,
and forgiveness of notes receivable from certain officers and a director
totaling approximately $520,000.

The components and use of the severance and related reserves are
summarized below:

Reserve
Original Use of Reserve Balance at
Reserve Cash Non-Cash December 31, 2001
---------- ---------- -------- -----------------

Severance benefits $4,983,907 $4,348,585 $635,322 $731,000
Equipment write-offs 115,000 -- 115,000 --
Office shutdown, moving and other costs 386,881 386,881 -- --
---------- ---------- -------- --------
$5,485,788 $4,735,466 $750,322 $731,000
========== ========== ======== ========

4. LEASE TERMINATION COSTS

The Company occupied space in two facilities in Orlando, Florida. The
facilities were leased under long term agreements with approximately six years
remaining under the leases. The Company signed termination agreements for both
of the facility leases in the nine months ended September 30, 2001 and incurred
lease termination costs of $2,396,255.

The Company had restricted cash, in the form of certificate of
deposits, totaling $1,143,315 at December 31, 2000. The certificate of deposits
collateralized outstanding letters of credit, which were security deposits for
the Company's leased facilities. When the leases were terminated in 2001, the
letters of credit were cancelled and the certificates of deposit were no longer
restricted.

5. 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 had been amortized over five years.

F-14

6. 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,
2000 2001
----------- -----------

Cash and cash equivalents:
Cash ...................... $ 3,744,749 $ 1,460,409
Money market funds ........ 21,865,494 12,474,602
Commercial paper .......... 12,942,555 2,978,353
Government Securities ..... 9,971,818 2,000,000
----------- -----------
$48,524,616 $18,913,364
=========== ===========
Short-term investments:
Commercial paper .......... $17,397,575 $ 2,937,155
Government securities ..... 12,974,653 12,753,260
----------- -----------
$30,372,228 $15,690,415
=========== ===========

7. PROPERTY AND EQUIPMENT

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

DECEMBER 31,
2000 2001
------------ --------

Manufacturing, development, and test equipment ... $ 17,135,997 $105,520
Computer equipment and software .................. 3,906,692 --
Leasehold improvements ........................... 1,696,461 --
Office furniture and other ....................... 2,718,650 --
------------ --------
25,457,800 105,520
Less accumulated depreciation and amortization ... (6,244,337) --
------------ --------
$ 19,213,463 $105,520
============ ========

Depreciation of capital lease assets is included in depreciation
expense. The total cost and accumulated depreciation related to capital lease
purchases were $6,386,298 and $2,269,704 respectively for 2000. There were no
assets held under capital leases as of December 31, 2001.

8. DEBT

In March 2001, the Company entered into a loan agreement with a
financial institution to borrow up to $3,000,000 to finance capital equipment
purchases during 2001. Approximately $1,100,000 was borrowed under this
facility. The loans, which are repayable over a three-year period, bear interest
at an annual rate of 12% and are secured by the specific capital purchases.

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%. At 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 to purchase the Company's common stock. These warrants are currently
exercisable and have an exercise price of $13.50.

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. At December 31, 2000, the remaining principal payments on this
note payable was approximately $147,000.

F-15

8. DEBT (CONTINUED)

During 1998, the Company entered into four lease agreements which
provided up to $8,000,000 to finance manufacturing, development, and test
equipment and furniture purchases during 1998 and 1999. At December 31, 2000,
$1,969,022, was outstanding under the lease agreements.

During 2001, the Company paid off all of its outstanding notes payable
and capital lease obligations. As a result of the early retirement of the notes
payable and capital lease obligations in 2001, the Company recorded an
extraordinary loss from early retirement of debt for contractual penalties of
approximately $768,000.

9. INCOME TAXES

The Company did not have a current or deferred tax provision or benefit
for the years ended December 31, 1999, 2000 and for the nine month period ended
September 30, 2001 due to its losses.

In accordance with Statement of Financial Accounting Standards Board
Statement No. 109, "Accounting for Income Taxes", a valuation allowance of
$77,890,135 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 $37,810,441. At December 31, 2001, the Company has available net
operating loss carryforwards of $134,332,609 which begin to expire in 2012
through 2016. 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-16

9. INCOME TAXES (continued)

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

NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------- SEPTEMBER 30,
1999 2000 2001
------------ ------------ ------------

Income tax benefits computed at the federal
statutory rate of 34% ............................ $(10,830,339) $(16,388,966) $(34,012,246)
State income tax benefits, net of federal benefit ... (1,156,298) (1,746,333) (3,598,789)
Nondeductible items ................................. 45,723 32,127 304,583
Increase in valuation allowance ..................... 11,940,914 18,826,038 37,810,441
Other ............................................... (722,866) (503,989)
------------ ------------ ------------
Total ............................................... $ -- $ -- $ --
============ ============ ============

The components of the deferred tax balances are as follows:

DECEMBER 31,
-------------------------------
2000 2001
------------ ------------

Deferred tax assets:
NOL carryforward .................... $ 24,102,138 $ 50,549,361
Start-up costs ...................... 7,823,474 6,607,798
Depreciation/amortization expense ... 2,124,449 14,725,794
Stock based compensation ............ 1,187,366 --
Inventory reserve ................... 1,372,538 3,066,500
Tax credits ......................... 889,013 1,205,013
Accrued compensation ................ 328,125 --
Accrued expenses .................... 287,161 2,398,206
Other ............................... 95,877 55,020
------------ ------------
Deferred tax assets .......................... $ 38,210,141 $ 78,607,692

Deferred tax liability:
Other ............................... (48,627) (717,557)
------------ ------------

Net deferred tax assets ...................... $ 38,161,514 $ 77,890,135
Net valuation allowance ...................... (38,161,514) (77,890,135)
------------ ------------

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

F-17

10. 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, 2001, the Company has
two stock option 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 stock
option 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 stock option 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. Prior to the adoption of the Plan, the Company repurchased 26,690 shares
of restricted common stock during 2001. Subsequent to this adoption, the Company
elected to not repurchase any remaining restricted stock, and issued
unrestricted certificates for the balance of then restricted stock. At December
31, 1999 and 2000 the Company had the right to repurchase 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), were 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), were 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.

In conjunction with the plan to liquidate the Company and resulting
management terminations, the Company agreed to forgive all the outstanding notes
receivable from stockholders totaling $425,306.

F-18

10. STOCKHOLDERS' EQUITY (CONTINUED)

Stock option activity is summarized as follows:

WEIGHTED-
NUMBER OF AVERAGE
OPTIONS EXERCISE PRICE
--------- --------------

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
Granted ........................... -- --
Cancelled ......................... (2,024,675) 9.58
Exercised ......................... (99,218) 0.36
-----------
Balance at December 31, 2001 ......... 2,446,815 $ 7.28
===========

The following table summarizes information about stock options outstanding and
exercisable at December 31, 2001:

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

$ 0.20 - $ 3.65 1,054,475 8.35 $ 3.30
$ 5.00 - $ 11.00 1,042,240 8.24 $ 6.46
$ 12.31 - $ 24.00 350,100 8.30 $ 21.70

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 1999, 2000 and
2001: 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 1999 and 2000 was $3.30 and $6.85 respectively. There were no options
granted in 2001. The pro forma effect on net loss is as follows:

NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
1999 2000 2001
-------------- -------------- ---------------

Net Loss:
As reported ..................... $ (31,853,937) $ (48,202,841) $ (100,036,019)
Pro forma ....................... $ (32,558,976) $ (52,598,693) $ (100,154,225)
Net loss per share:
As reported--basic and diluted .. $ (6.67) $ (2.51) $ (2.88)
Pro forma--basic and diluted .... $ (6.82) $ (2.74) $ (2.88)

F-19

10. STOCKHOLDERS' EQUITY (CONTINUED)

RESERVED STOCK

Common stock has been reserved for the following purposes:

DECEMBER 31,
---------------------------------------
1999 2000 2001
--------- --------- ---------

Number of warrants outstanding ...................................... 337,500 26,667 26,667
Number of options outstanding ....................................... 1,571,762 4,570,708 2,446,815
Number of options available for grant under the
stock option plans ................................................ 452,393 509,335 2,560,700
Number of shares available for grant under the stock purchase plan .. -- 250,000 --
--------- --------- ---------
2,361,655 5,356,710 5,034,182
========= ========= =========

DEFERRED COMPENSATION

In connection with the grant of certain stock options to employees
during the years ended December 31, 1999 and 2000 the Company recorded deferred
compensation of approximately $3,400,000 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 $1,561,000,
$1,594,000 and $2,326,855 for the years ended December 31, 1999 and 2000 and for
the nine months ended September 30, 2001, respectively. No options were granted
in 2001.

2000 EMPLOYEE STOCK PURCHASE PLAN

In February 2000, the board of directors and stockholders approved the
Company's 2000 employee stock purchase plan (the "ESPP"). A total of 250,000
shares of common stock have been reserved for the ESPP. The ESPP 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. During 2001, 113,048 shares of
common stock were purchased by employees under the ESPP in 2001 at an average
purchase price of $1.42 per share. The ESPP was terminated in 2001.

11. LOSS PER COMMON SHARE

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

NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
1999 2000 2001
----------- ----------- ------------

Numerator:
Net loss ................................................... (31,853,953) (48,202,841) (100,036,019)
Denominator for basic and diluted loss per common share:
Weighted - average shares outstanding ...................... 4,776,567 19,191,226 34,724,045
----------- ----------- ------------
Net loss per common share .................................. (6.67) (2.51) (2.88)
=========== =========== ============

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 20,715,731, 4,597,375, and 2,473,482 for the years ended December 31,
1999, 2000 and for the nine months ended September 30, 2001, respectively, were
excluded from the diluted loss per share computation because their effects would
have been anti-dilutive.

F-20

11. LOSS PER COMMON SHARE (CONTINUED)

PRO FORMA NET LOSS PER SHARE

Pro forma net loss per share for the years ended December 31, 1999 and 2000 and
for the nine months ended September 30, 2001 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 14,623,637 and 10,737,429 for the years ended December 31, 1999 and 2000,
respectively. No adjustment for 2001 is necessary.

12. RELATED PARTY TRANSACTIONS

During 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, 1999 and 2000 the Company
expensed as research and development expenses of approximately $3,175,000 and
$3,215,000 respectively, under the contracts. None was expensed during 2001. In
addition, the Company purchased approximately $2,311,000 and $6,312,000 in
manufacturing labor and component parts during 1999 and 2000. None were
purchased during 2001. Amounts payable to the stockholder at December 31, 1999,
2000 and 2001 were approximately $1,122,000, $1,017,000 and $510,000,
respectively. In December 2000, the Company terminated the manufacturing
contract with this stockholder.

During 1999, the Company loaned a member of management $300,000 in
exchange for a promissory note payable, which was secured by certain real
estate. The note was payable on September 30, 2004, or earlier if certain events
occurred. The note was forgiven by the Company during 2001 and the outstanding
balance was charged against operating results, and reflected as severance and
related costs.

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. No
products or services were sold to these two companies in 2001. 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 and
2001.

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

13. COMMITMENTS

The Company is or has been a party to the following legal proceedings:

On November 13, 2001, a securities class action complaint seeking class
action status was filed in the United States District Court for the Southern
District of New York. The complaint was brought on behalf of all persons who
purchased the Company's common stock from July 12, 2000 through December 6,
2000. The complaint names as defendants the Company, a former officer and a
current officer of the Company, and several investment banking firms that served
as managing underwriters of the Company's initial public offering. The complaint
alleges liability under the Securities Act of 1933 and the Securities Exchange
Act of 1934, on the grounds that the registration statement for the Company's
initial public offering did not disclose that: (1) the underwriters had
allegedly agreed to allow certain of their customers to purchase shares in the
offering in exchange for allegedly excess commissions paid to the underwriters;
and (2) the underwriters had allegedly arranged for certain of their customers
to purchase additional shares in the aftermarket at pre-determined prices under
alleged arrangements to manipulate the price of the stock in aftermarket
trading. The Company is aware that similar allegations have been made in
numerous other lawsuits challenging initial public offerings conducted in 1998,
1999 and 2000. The Company does not know if a specific amount of damages is
claimed in the complaint involving its initial public offering. The Company
intends to contest the claims vigorously. The Company is unable at this time to
determine whether the outcome of the litigation will have a material impact on
its net assets or its plan of liquidation.

F-21

13. COMMITMENTS (CONTINUED)

In November 2001, a customer, XO Communications, filed a lawsuit in the
Circuit Court of Fairfax County, Virginia that contended the Company would
breach its contract with them when the Company is liquidated. The complaint
asked, among other things, money damages, interest, attorney fees and costs
totaling in excess of $9,000,000 be awarded to the plaintiff. In May 2002, the
Company settled the lawsuit with the payment of $1,500,000 in cash, delivery of
certain available inventory to XO Communications, and termination of the
contract between the Company and XO Communications. As a result, the Company
recorded $1,550,000 as an accrued liability in the Consolidated Statement of Net
Assets in Liquidation at December 31, 2001 for the cost of the settlement,
including legal expenses.

In October 17, 2001, a complaint was filed in the Circuit Court of the
Ninth Judicial Circuit, in and for Orange County, Florida. The complaint was
brought by a customer and alleged the Company had breached a supply agreement
the Company entered into with the plaintiff by announcing the Company's
intention to liquidate and dissolve because it would be unable to perform
certain ongoing maintenance and service obligations under the agreement. The
complaint asked, among other things, money damages, interest and attorneys' fees
and costs be awarded to the plaintiff. In April 2002, the Company settled the
lawsuit with the payment of $50,000, and terminated the contract between the
Company and the customer. The Company recorded an accrued liability of $70,000
in the Consolidated Statement of Net Assets in Liquidation at December 31, 2001
for the cost of the settlement and associated legal expenses.

On December 21, 2000, a complaint was filed in the Circuit Court of the
Thirteenth Judicial Circuit, in and for Hillsborough County, Florida. The
complaint was brought by a stockholder and alleged, among other things, the
Company improperly failed to permit the sale of unregistered shares of its
common stock, and otherwise prevented plaintiff from selling his shares before
the share price dropped significantly. In March 2002, the Company settled the
lawsuit with the payment of $3,650,000 to the stockholder. However, the Company
subsequently reached an agreement with one of its insurance carriers relating to
this settlement. The insurance carrier has agreed to loan the Company
$1,750,000, plus interest, on October 30, 2002. This loan will be repaid with
the proceeds of a lawsuit that the Company intends to file against the law firm
which advised the Company with regard to the stockholder's stock transfer
request, or the loan will be forgiven by the insurance carrier if the Company is
ultimately unsuccessful in the lawsuit against the law firm. Furthermore, if the
Company is ultimately unsuccessful in this lawsuit, the insurance carrier will
pay an additional $750,000, plus interest, to the Company. The insurance carrier
also will pay the legal costs of prosecuting the action against the law firm.
The Company recorded an accrued liability of $3,900,000, including legal and
associated costs, and a receivable of $2,500,000 on the Consolidated Statement
of Net Assets in Liquidation at December 31, 2001 to reflect the impact of this
matter on the Company's net assets.

On June 11, 2002, a securities complaint seeking class action status
was filed in the United States District Court, Middle District of Florida, Tampa
Division (Case No. 8:02-CV-1041-T-27 MAP), by Delano Cox (the "Cox Complaint"),
against past and present officers and directors of the Company, as well as
certain investment bankers involved in the Company's initial public offering,
certain venture capital firms owning shares of the Company prior to the initial
public offering, and the Company's independent auditors. The complaint is
brought purportedly on behalf of all persons who purchased the Company's common
stock from July 13, 2000 through August 14, 2001. The complaint alleges
violations of Sections 11 and 15 of the Securities Act of 1933 and Sections 10b
and 20A of the Securities and Exchange Act of 1934 (the "Exchange Act"), and
Rule 10b-5 promulgated thereunder, on the grounds that the Company's
registration statement relating to its initial public offering and certain of it
subsequent Exchange Act reports and press releases contained untrue statements
of material facts, or omitted to state facts necessary to make the statements
made therein not misleading, with regard to the Company's revenues in fiscal
2000, the nature of its relationship with certain of its customers, and its
financial statement presentation. Plaintiff seeks compensatory damages in favor
of plaintiff and the other class members, as well as reasonable costs and
expenses incurred in connection with this action. No amounts have been accrued
in the Company's Consolidated Statement of Net Assets in Liquidation at December
31, 2001.

Similarly, on June 17, 2002, another securities complaint seeking class
action status was filed in the United States District Court, Middle District of
Florida, Tampa Division (Case No. 8:02-CV-1070-T-24 TGW), against past and
present officers and directors of the Company, as well as certain investment
bankers involved in the Company's initial public offering, certain venture
capital firms owning shares of the Company prior to the initial public offering,
and the Company's independent auditors. The complaint is brought by Gary
Streeter purportedly on behalf of all persons who purchased the Company's common
stock from July 13, 2000 through August 14, 2001. The factual basis alleged to
underlie the proceeding and the relief sought is similar to that alleged and
contained in the Cox Complaint. No amounts have been accrued in the Company's
Consolidated Statement of Net Assets in Liquidation at December 31, 2001.

F-22

13. COMMITMENTS (CONTINUED)

While the Company currently has not been named as a defendant in the
two June actions, its past and present officers and directors have
indemnification agreements with the Company, pursuant to which the Company is
required to reimburse those individuals for any liabilities and damages incurred
by, or imposed upon, such individuals in connection with the foregoing lawsuits,
including their attorneys' fees and costs, provided that they acted in good
faith and in a manner they reasonably believed to be in, or not opposed to, the
best interests of the Company. The Company intends to assist its current and
former officers and directors in contesting the claims. The Company carries
director and officer liability insurance (up to a maximum dollar limit) that may
cover the claims against its current and former directors and officers, but the
Company cannot, at the present time, be certain that any ultimate liability
related to the foregoing lawsuits will be reimbursed by its insurance carriers.
As a result, the Company is unable at this time to determine whether the
forgoing lawsuits will have a material negative impact on its net assets or its
plan of liquidation.

14. SUBSEQUENT EVENTS

In March 2002, the Company completed the sale of the broadband modem
operation to Carriercomm, Inc. ("Carriercomm), a wholly-owed subsidiary of
Moseley Associates. Carriercomm acquired all the assets and assumed certain
liabilities of the broadband modem operation, including facility and equipment
leases and certain employee severance obligations. The Company received $103,000
in cash and may receive contingent consideration, up to $250,000, depending on
future deliveries of modem chips under an existing customer contract.
Additionally, the Company conditionally sold its radio intellectual property and
a number of radios to Carriercomm for $100,000 in cash, which was received in
April 2002. The amounts of sale proceeds approximated the net book values as of
December 31, 2001.

15. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
QUARTER ENDED 2001 2001 2001 2001
- ------------------------------------------------------------------------------------------------------------------------

Sales $ 7,528,192 $ 1,865,008 $ 940,355 $ --
Gross profit (loss) (5,289,207) (10,508,839) (8,572,751) --
Net loss before extraordinary item (19,004,567) (21,626,448) (58,636,992) --
Extraordinary loss on early
retirement of debt -- -- (768,012) --
Net loss (19,004,567) (21,626,448) (59,405,005) --
Per share (basic and diluted):
Net loss before extraordinary loss (0.55) (0.62) (1.68) --
Extraordinary loss on early
retirement of debt -- -- (0.02) --
Net loss (0.55) (0.62) (1.70) --

MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
QUARTER ENDED 2000 2000 2000 2000
- ------------------------------------------------------------------------------------------------------------------------

Sales $ 3,496,939 $ 5,199,746 $ 8,031,876 $9,509,180
Gross profit (loss) (1,665,449) 1,058,028 (385,325) 163,396
Net loss (10,934,763) (13,188,840) (11,231,771) (12,847,467)
Per share (basic and diluted):
Net loss (2.02) (2.31) (0.36) (0.37)
Proforma per share (basic and diluted):
Net loss (0.45) (0.48) (0.34) (0.34)

F-23

15. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)(CONTINUED)

The quarterly results include certain inventory provisions in the amount of $1.2
million, $6.5 million, $10.0 million and $8.0 million for the quarters ended
December 31, 2000, March 31, 2001, June 30, 2001 and September 30, 2001,
respectively. Also, the quarterly results include certain provisions for
severance and related costs in the amount of $.5 million, $1.6 million, and $3.4
million for the quarters ended March 30, 2001, June 30, 2001 and September 30 ,
2001, respectively; in addition to provisions for lease termination costs in the
amounts of $.8 million and $1.6 million for the quarters ended June 30, 2001 and
September 20, 2001, respectively. Additional provisions are included in
quarterly results for the quarter ended September 30, 2001 for the write down of
assets, and write offs of intangibles and deferred compensation balances in the
amount of $13.0 million, $28.5 million and $1.5 million, respectively. Refer to
the footnotes contained herein for further details regarding these provisions.

F-24