AT TRACK COMMUNICATIONS INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

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

For the transition period from to

COMMISSION FILE NUMBER 0-26140

@TRACK COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)

DELAWARE 51-0352879
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)

1155 KAS DRIVE
RICHARDSON, TEXAS 75081
(Address of principal executive offices, including zip code)

(Registrant's telephone number, including area code) (972) 301-2000

Securities Registered Pursuant to Section 12(b) of the Act: NONE

Securities Registered Pursuant to Section 12(g) of the Act:

COMMON STOCK, $.01 PAR VALUE
(Title of each Class)

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

YES X NO .
--- ---

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

The aggregate market value of the common equity held by non-affiliates
of the Registrant as of February 20, 2001 was $8,885,047.*

The number of shares outstanding of Registrant's Common Stock was
25,326,829 as of February 20, 2001.

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DOCUMENTS INCORPORATED BY REFERENCE

Portions of Registrant's definitive Proxy Statement to be filed with
the Securities and Exchange Commission pursuant to Regulation 14A in connection
with the 2001 annual meeting of stockholders are incorporated herein by
reference into Part III of this Report. Such proxy statement will be filed with
the Securities and Exchange Commission not later than 120 days after the
Registrant's fiscal year ended December 31, 2000.

Certain exhibits filed with the Registrant's Registration Statement on
Form S-1 (Registration No. 33-91486), as amended, the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995, the Registrant's Form
10-Q Quarterly Report for the quarterly period ended June 30, 1996, the
Registrant's Current Report on Form 8-K filed on October 7, 1996, the
Registrant's Annual Report on Form 10-K for the fiscal year ended December 31,
1996, the Registrant's Form 10-Q Quarterly Report for the quarterly period ended
March 31, 1997, the Registrant's Form 10-Q Quarterly Report for the quarterly
period ended June 30, 1997, the Registrant's Registration Statement on S-3
(Registration No. 333-57281), as amended, the Registrant's Registration
Statement on Form S-4 (Registration No. 333-38361), as amended, the Registrant's
Form 10-Q Quarterly Report for the quarterly period ended September 30, 1997,
the Registrant's Annual Report on Form 10-K for the fiscal year ended December
31, 1997, the Registrant's Form 10-Q Quarterly Report for the quarterly period
ended March 31, 1998, the Registrant's Form 10-Q Quarterly Report for the
quarterly period ended June 30, 1998, the Registrant's Form 10-Q Quarterly
Report for the quarterly period ended September 30, 1998, the Registrant's
Current Report on Form 8-K on September 4, 1998, the Registrant's Current Report
on Form 8-K on September 17, 1998, the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1998, the Registrant's Form 10-Q
Quarterly Report for the quarterly period ended March 31, 1999, the Registrant's
Form 10-Q Quarterly Report for the quarterly period ended June 30, 1999, the
Registrant's Form 10-Q Quarterly Report for the quarterly period ended September
30, 1999, and the Registrant's Current Report on Form 8-K on October 20, 1999,
the Registrant's Annual Report on Form 10-K for the fiscal year ended December
31, 1999, the Registrant's Form 10-Q Quarterly Report for the quarterly period
ended March 30, 2000, the Registrant's Form 10-Q Quarterly Report for the
quarterly period ended June 30, 2000, the Registrant's Form 10-Q Quarterly
Report for the quarterly period ended September 30, 2000, and the Registrant's
Current Report on Form 8-K on January 16, 2001 are incorporated herein by
reference into Part IV of this Report.

- ----------

*Excludes the Common Stock held by executive officers, directors and by
stockholders whose ownership exceeds 5% of the Common Stock outstanding at
February 20, 2000. Exclusion of such shares should not be construed to indicate
that any such person possesses the power, direct or indirect, to direct or cause
the direction of the management or policies of the Registrant or that such
person is controlled by or under common control with the Registrant.

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@Track Communications, Inc.

FORM 10-K
For the Fiscal Year Ended December 31, 2000

INDEX

Page
----

PART I.......................................................................
ITEM 1. BUSINESS..................................................... 1
ITEM 2. PROPERTIES................................................... 23
ITEM 3. LEGAL PROCEEDINGS............................................ 23
ITEM 4. SUBMISSIONS OF MATTERS TO VOTE OF SECURITY HOLDERS........... 23

PART II......................................................................
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS..................................... 24
ITEM 6. SELECTED FINANCIAL DATA...................................... 26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS..................... 27
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK... 30
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................. 30
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE..................... 30

PART III.....................................................................
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT........... 31
ITEM 11. EXECUTIVE COMPENSATION....................................... 31
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.......................................... 31
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............... 31

PART IV......................................................................
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K............................................. 32

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PART I

ITEM 1. BUSINESS

GENERAL

The following discussion is qualified in its entirety by the more
detailed information and financial statements (including the notes thereto)
appearing elsewhere in this Annual Report on Form 10-K. Stockholders should
carefully consider the information presented under "Risk Factors" below.

HISTORICAL BACKGROUND

@Track Communications, Inc., a Delaware Corporation, (the "Company" or
"@Track") develops and implements mobile communications solutions for long-haul
truck fleets, service vehicle fleets and other mobile-asset fleets, including
integrated voice, data and position location services. The Company provides
mobile communications services through a wireless enhanced services network,
which utilizes patented technology developed and owned by the Company, to
integrate various transmission, long-distance, switching, tracking and other
services provided through contracts with certain telecommunications companies
and 66 cellular carriers. Through its agreements with cellular carriers, the
Company is able to capitalize on the more than $76.6 billion which cellular
carriers have invested to establish and expand cellular coverage in the United
States. The Company's communications network covers 98% of the available
cellular service areas in the United States and 100% of the available A-side
coverage in Canada. Call processing and related functions for the Company's
network are provided through the Company's Network Services Center (the "NSC").
The Company holds 35 United States and 7 foreign patents that cover certain key
features of its network that are used in locating and communicating with
vehicles using the existing cellular infrastructure.

The Company was organized on April 24, 1992 as By-Word Joint Venture
L.P., a Delaware limited partnership with one general partner, By-Word
Technologies, Inc. and one limited partner, the FBR Eighteen Corporation
("FBR"). FBR was wholly owned by the Eighteen Wheeler Corporation ("Eighteen
Wheeler"). On April 27, 1992, By-Word Joint Venture L. P. changed its name to
HighwayMaster, L. P.

On February 4, 1994, HighwayMaster, L. P. was recapitalized, resulting
in the creation of HM Holding Corporation with Eighteen Wheeler becoming a
wholly owned subsidiary of HM Holding Corporation. FBR and HighwayMaster, L. P.
were merged with and into Eighteen Wheeler, and the name of the surviving
corporation was changed to HighwayMaster Corporation. By virtue of the merger,
HighwayMaster Corporation became the successor in interest to HighwayMaster, L.
P. In February 1995, HM Holding Corporation changed its name to HighwayMaster
Communications, Inc.

On December 31, 1999, the Company's wholly owned subsidiary,
HighwayMaster Corporation, a Delaware corporation, merged with and into the
Company. Following the consummation of the merger, the Company was the sole
surviving and operating entity. The merger was undertaken primarily to eliminate
an unnecessary corporate layer, and thus, reduce administrative expenses
associated with maintaining the separate existence of HighwayMaster Corporation.
When the merger became effective, all assets, obligations and liabilities of
HighwayMaster Corporation became the assets, obligations and liabilities of the
Company by operation of law. In connection with the merger, the Company obtained
consents to the assignment of third party contracts from HighwayMaster
Corporation to the Company, and other consents deemed necessary or advisable by
the Company.

Effective April 10, 2000, the Company amended its Certificate of
Incorporation to change its corporate name to @Track Communications, Inc.

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PRODUCTS AND SERVICES

The Company's products and services can be classified into three major
categories: truck fleet mobile communications, service-vehicle management and
mobile asset tracking.

TRUCK FLEET MOBILE COMMUNICATIONS

The initial application for the Company's wireless enhanced services
network has been developed for, and is currently being marketed and sold to,
companies that operate mobile fleets in the long-haul trucking market. The
Company provides long-haul trucking customers with a total communications
solution (HighwayMaster(R) Series 5000) that combines voice and data
communications services with satellite-based GPS location technology. The
Company also provides engine monitoring, scanning, mapping and dispatch
management applications. The Series 5000 solutions enable trucking companies of
all sizes to maximize their efficiency as they manage trucks that are often
dispersed across the country.

The HighwayMaster Series 5000 mobile communications and information
system from @Track is fully integrated with the AS/400, UNIX, and Windows(R)
fleet management software solutions from 18 key industry suppliers. Integration
partners include Creative Systems, Innovative Transportation Systems (ITS),
Maddocks Systems' TruckMate(R) for Windows, ProMiles, TMW Truck Systems and Tom
McLeod LoadMaster(TM) Software. Full system integration provides an end-to-end
communications solution by combining the on-road communications, data collection
and tracking capabilities of the Series 5000 with vendor dispatch software,
enabling fleet operators to improve customer service, manage their dispatch
operations more effectively and, ultimately, increase revenue miles per truck.

@Track also maintains value-added assembly line installation programs
with seven major heavy truck Original Equipment Manufacturers for the
HighwayMaster Series 5000 mobile communications and information system.
Prewire programs, designed to preinstall system cabling and mounting brackets at
the factory, exist with Freightliner, International, Kenworth, Mack, Peterbilt,
Sterling and Volvo. Full system installations are also available through
Freightliner, Mack and Sterling. Each of these programs enables fleets to reduce
their "new vehicle receipt -to- new vehicle revenue generation" cycle times by
reducing new vehicle `make-ready' times.

In addition to the hardware device and network connectivity, @Track
also operates a national network of service and repair centers. The home office
in Richardson, Texas also houses over 35 customer service representatives
providing Level I and II technical support to its customers 24X7.

@Track also offers a complete end-to-end service bureau solution for
long-haul trucking customers with its Platinum Service. The data center, located
in Joplin, Missouri, integrates mobile platform data with business functions
including general ledger, accounts payable, EDI, customer service, driver
management, route optimization, and fuel processing. Benefits of the platform
include, providing all of the aforementioned services on a single database,
ability to support multiple business units, and extensive reporting
capabilities.

@Track also possesses the capability to support the largest premier
companies in this market such as Wal*Mart and Contract Freighters, Inc., with a
solution implementation capability that allows for necessary customization that
large customers require.

SERVICE VEHICLE MANAGEMENT

@Track's initial product application was modified to assist the member
companies of SBC Communications, Inc. (the "SBC Companies") in maximizing the
productivity of their service vehicle fleets. The units installed are Series
5005S Mobile Units and are based on the Series 5000 platform with customized
proprietary hardware and software. Integral to this development effort was the
ability to interface with the GSM/digital network.

In addition to fleet monitoring and voice and data communications
capabilities, the Series 5005S features alarm-monitoring functionality. This
product feature provides the driver the ability to summon emergency

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assistance by pressing a panic alarm button on a key fob when away from, but in
close proximity to, the service vehicle. The panic alarm signal is intelligently
routed to a third party alarm-monitoring center under contract with @Track that
confirms the validity of the alarm with the technician and then summons the
appropriate safety agency. The GPS data is also transmitted to the monitoring
center to pinpoint the location of the vehicle for the most efficient dispatch
of the safety personnel.

@Track has developed an extensive multi-state installation and service
network to support the SBC product offering. The Company provides 48-hour
turn-around time on service requests entered into the @Track automated case
tracking system.

As of December 31, 2000, the SBC Companies have purchased and installed
approximately 34,000 Series 5005S mobile units. The Company currently
anticipates installation of approximately 9,000 units during the first half of
2001. It is anticipated that approximately 43,000 HM5005S units will be
activated on @Track's network following completion of the installation of the
additional 9,000 HM5005S units for the SBC Companies.

MOBILE ASSET TRACKING

The Company entered the mobile-asset-tracking market in October 1999
with the introduction of its trailer-tracking product, TrackWare(TM). The new
TrackWare product combines the technologies of GPS and control channel messaging
to report location details and specific trailer events, such as connection and
non-connection to a tractor. The TrackWare Remote Unit ("TrackWare Unit") comes
equipped with a GPS satellite receiver, a Cellemetry-enabled cellular
transceiver, microprocessor, antenna, battery and cables. It is pre-configured
to report the data requested by the specific fleet customer and shipped ready
for a 30-minute installation.

We believe that TrackWare offers the dry-van trailer market a cost
effective, reliable way to track a fleet of trailers that may be in various
locations all over the country and trucking companies now have a powerful tool
available to them that we expect may increase the utilization of their trailers,
resulting in lower trailer operation and management expenses and higher trailer
revenue miles.

TrackWare is being marketed to trucking companies, which the Company
believes represent a potential market of approximately 2.5 million dry-van
trailers currently operating in the U.S. This translates into approximately
three trailers for every tractor. At any point in time, the Company believes the
location of 10-15 percent of these trailers is unknown to the companies who own
them. As a result, the Company believes that between $5.0-$7.5 billion in
dry-van assets are idle, delivering no value to their owners. The Company
expects TrackWare to provide the visibility to trucking company asset managers
that will enable them to better utilize their trailer fleets.

COMPETITION

TRUCK MOBILE COMMUNICATIONS -

Qualcomm and @Track rank number one and two respectively in terms of
market share of the truck mobile communications market with Qualcomm having over
50% market share.

o QUALCOMM - As Qualcomm launched its mobile communications product several
years before @Track, Qualcomm was able to capture the number one position
in the marketplace. Today, Qualcomm equipment is installed in 37 of the top
40 truckload carriers. Qualcomm continues to aggressively target and market
to the transportation marketplace.

o MOTIENT/AETHER - Motient has been in the marketplace for several years
using satellite and Ardis networks as a foundation for its products.
Motient's MobileMax and Mobile Messaging Service were sold to Aether
Systems in 2000. Aether is aggressively developing and implementing
wireless solutions targeting the transportation and logistics industries.
We believe that Aether is third in the marketplace behind @Track and
Qualcomm with approximately 15,000 subscribers.

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o TERION - Terion's products and services utilize both digital cellular and
FM radio transmission to send data. Terion products utilizes 8-12 foot-high
frequency towers distributed throughout the United States to transmit
return data. As a very late entrant to this market, @Track believes Terion
has several thousand units in operation.

o PEOPLENET COMMUNICATIONS, INC. - PeopleNet offers an analog cellular-based
solution that includes positioning, messaging and voice. Since PeopleNet
has only recently entered this market, the Company believes that PeopleNet
has added few long-haul customers to date.

SERVICE VEHICLE MANAGEMENT

@Track believes that it possesses the largest single customer in the
service vehicle category with the SBC Companies. The Company estimates that it
will have approximately 43,000 units in service by mid 2001. The service vehicle
marketplace is made up of a significant number of small competitors. @Track
believes that it is uniquely positioned to become the dominant player in the
industry given its national presence. However, there are other companies vying
for leadership in this market that may possess the size and scalability
necessary to present significant competition to @Track.

@Track believes that its primary competitors include:

o TELETRAC - Teletrac is currently managing the transition of customers
from their private radio network to the AT&T Wireless' proprietary
Compact Digital Packet Data ("CDPD") network. The Company believes that
Teletrac currently has approximately 3,200 customers representing
70,000 vehicles in trucking and service vehicles.

o @ROAD - @Road currently sells an Internet-based solution using AT&T
Wireless' proprietary CDPD network. The Company believes that @Road has
been aggressively marketing its product to the low end of the Automatic
Vehicle Location ("AVL") segment. The Company believes that @Road has
approximately 35,000 customers as of the end of 2000.

o OTHER REGIONAL COMPETITORS - There are numerous smaller regional
companies vying for a local presence.

MOBILE ASSET TRACKING

Dry-van trailers are the first target market for @Track and several
other competitors. The Company believes that this market is in its infancy with
very few units installed by any competitor to-date. There are many trucking
companies currently testing @Track's product as well as the other competitive
products, to prove both the functionality of the product and the payback of the
solution.

@Track believes that its primary competitors include:

o TERION - Terion is aggressively pursuing this market space. In January
of 2000, Terion introduced a mobile unit which utilizes the existing
analog network to send data over a voice channel. @Track believes that
using an analog cellular voice channel to send small amounts of data is
more costly than alternative overhead control channel networks, such as
Cellemetry(R).

o AIRINC - Airinc initially targeted the refrigerated van market with a
high-end product which utilized the Orbcomm LEO satellite
constellation. The Company believes that Airinc is currently in the
process of transitioning from the Orbcomm satellite product to a TMI
satellite product. Airinc has recently expanded its focus to target the
dry-van market segment.

o QUALCOMM, INC. - Qualcomm is currently testing an untethered tracking
product with several of their current customers. Qualcomm announced
commercial launch into this market in January 2001. We believe that the
Qualcomm tracking product works with their in-cab product when the
trailer is connected to the tractor and utilizes the Aeris.net
terrestrial network when not connected. @Track believes that Qualcomm
is aggressively targeting its existing customer base for sale of its
tracking product in this market segment.

o VISTAR DATACOM - Vistar Datacom, a subsidiary of Bell Mobility,
utilizes the Motient satellite, which provides ubiquitous coverage
across North America. Vistar Datacom currently has a strong sensor
suite which also supports the refrigerated van market.

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INDUSTRY SEGMENTS

The Company considers its operations to be classified into one industry
segment: Cellular and Other Wireless Communications.

EMPLOYEES

At December 31, 2000, the Company had 282 employees. The Company's
employees are not represented by a collective bargaining agreement.

INFRASTRUCTURE AND OPERATIONS

Networks. The Company uses wireless data and/or voice technologies,
combined with GPS satellite technology, for all of its products. The Company's
strategy is to select and use wireless networks that provide the "best fit" for
each product and application or specific customer need.

Series 5000 Mobile Units. These units use circuit switched analog
cellular technology for transmitting location, as well as information, to the
Company's Network Services Center ("NSC"). The NSC then routes the data to the
appropriate destination, which may be a customer's dispatcher workstation for
data or any other telephone for voice communication. In addition, these units
take advantage of the Company's patented Advanced Cellular Transmission
Technology ("ACTT"). ACTT is a one-way data communication technology from the
mobile unit back to the NSC. ACTT takes advantage of unused fields in the
cellular control channel to provide very short data bursts suitable for
providing status updates of vehicle location information. The primary benefit of
ACTT is reduced cost to the customer and the Company. The Company believes that
analog cellular technology provides the best ubiquitous coverage for
over-the-road vehicles that travel across the United States. As digital
technologies further penetrate existing cellular infrastructure, digital
cellular networks may become a viable alternative for over-the-road vehicles.

Series 5005S Mobile Units. For service vehicles, as part of the
Company's "best fit" strategy, these units also may be integrated with a global
system for mobile communications ("GSM") telephone utilizing the 1900 MHz
frequency, where required. GSM is a digital technology developed in Europe and
has been adapted for North America. GSM is by far the most widely used digital
standard in the world. Since service vehicles primarily operate in urban areas,
these digital networks provide appropriate coverage.

TrackWare Product. The TrackWare Remote Unit uses proprietary
overhead control channel technology to provide short two-way data messages on a
national basis. This network is provided by a third party provider, Cellemetry
LLC, and the Company's NSC which has been adapted to integrate with the
Cellemetry network.

Network Services Center. The Company's NSC provides switching services
among each Series 5000 and 5005S Mobile Unit (hereinafter collectively referred
to as "Mobile Unit" or "Mobile Units"), the nationwide network of cellular
providers, the customer's dispatcher workstation and the nationwide landline
telephone network. The NSC is capable of processing, storing and transmitting
data and provides a gateway for the Cellemetry network to enable transmission of
data to customers. Additionally, voice communications are routed from each
Series 5000 Mobile Unit through @Track's nationwide enhanced-services network to
the NSC, which automatically completes the call through the public telephone
network to the end user. Voice communications from the customer's dispatcher or
personal calls for the driver are routed through a toll-free telephone number to
the NSC, which completes the call through the appropriate wireless cellular
system for the region in which the truck is operating. Data packets from the
host or a Mobile Unit are stored in the NSC, then transmitted in cost-effective
batches. Time-critical information, as configured by the customer, is
immediately transmitted to the receiving party. The NSC records data from each
transmission, generates a call record and processes the information into
customer billing records.

Call Routing. Each time a Mobile Unit travels into a new cellular
metropolitan statistical area ("MSA") or rural statistical area ("RSA"), it
automatically registers with the cellular carrier under contract with the
Company. The cellular carrier routes the message to GTE-TSI. Pursuant to a
contract with the Company, GTE-TSI provides the

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NSC with call delivery information utilized by the NSC to deliver calls to the
Mobile Unit as it travels through a new MSA or RSA.

Navigation Technology. Global Positioning System technology allows
customers to identify the location of any asset at any time via satellite. GPS
is operated by the United States government and broadcasts navigational
information from a network of dedicated satellites orbiting the earth. GPS
navigational receivers interpret signals from multiple satellites to determine
the receiver's geographical coordinates, elevation and velocity. GPS
navigational signals can be received worldwide, without adaptation of the
receiver unit to foreign standards. @Track believes that the network of GPS
navigational satellites will be maintained by the United States Defense
Department in an operational status for the foreseeable future. Although
stand-alone GPS units are available for purchase by any consumer at relatively
low cost, the Company believes that raw navigational information is of little
use in tracking assets unless the GPS receiver is integrated with a computer
system, such as a Mobile Unit or TrackWare Unit, to record routes traveled
relative to mapped roadways or to transmit position reports to a central
dispatcher.

@Track believes that its use of government-operated GPS satellites
differs substantially from competitors' use of satellites for two-way
communications. GPS satellites send one-way signals to mobile receivers,
allowing the Company's products to plot their geographical coordinates. GPS
satellites are not capable of two-way communication, and no charges are assessed
to users of the GPS services. For two-way mobile communications, the Company
relies exclusively on terrestrial wireless systems. The Company's primary
competitor utilizes leased or owned communication satellites for two-way data
communications, incurring costs associated with ownership or leasing of
satellite communication capacity.

Wireless Infrastructure. The FCC has provided for a two-operator
duopoly in each cellular market. Only two licenses were awarded to provide
cellular service in any specific cellular MSA or RSA. One of the two licenses in
each market was initially awarded to a company or group that was affiliated with
a local landline telephone carrier in the market (the "Wireline" or "B-Side"
license) and the other license in each market was initially awarded to a
company, individual or group not affiliated with any landline telephone carrier
(the "Non-Wireline" or "A-Side" license). However, once a license was awarded,
the license holder could sell the license to another qualified entity, including
the sale of "B-Side" licenses to groups not affiliated with the landline
telephone carrier, and the sale of "A-Side" licenses to a landline telephone
carrier. @Track's system utilizes both the A-Side and B-Side carriers in its
coverage areas, and has agreements with both A-Side and B-Side carriers in
approximately 75% of its markets, allowing system redundancy and greater
flexibility. In addition to cellular licenses, the FCC has issued up to six
licenses in each market for the 1.9 megahertz ("PCS") spectrum. PCS is generally
available in certain metropolitan markets and surrounding areas. See "Risk
Factors -- Competition and Technological Change."

Increased demand for wireless service is driving investment in wireless
networks and improving service coverage. Cumulative capital investment within
the wireless industry has reached $76.6 billion as of June 2000, up from
approximately $66.8 billion in June 1999. The total number of cellular tower
sites increased to 95,733 in June 2000, up from 74,157 in June 1999. Total
wireless customers reached more than 97 million in June 2000.

A number of cellular carriers are in the process of upgrading from
existing analog cellular systems to enhanced systems utilizing digital
technology. However, the Company believes that the large number of analog
telephones already owned by cellular subscribers will ensure that cellular
telephone operators continue to offer services to existing analog users
concurrently with digital users over an extended phase-in period that exceeds
the expected useful life of the current analog Mobile Units. See "Risk Factors
- -- Dependence on Cellular Infrastructure."

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STRATEGIC SERVICE ALLIANCES OF THE COMPANY

Wireless Carriers. The Company has established a network for the United
States that offers mobile communication coverage in 98% of the available
wireless service areas in the United States (which covers approximately 95% of
the United States interstate highway system) and 100% of the A-Side coverage in
Canada. The Company has agreements in place with 66 wireless carriers, including
all the regional Bell operating companies, AT&T Wireless Inc. and Rogers Cantel,
Inc., in 706 markets in the United States and Canada. The Company has entered
into contracts with both A-side and B-side carriers in approximately 75% of
United States wireless coverage regions. In most cases, current terms of
contracts between the Company and each of its cellular carriers are generally
for one year, with automatic one-year successive renewal terms unless either
party elects to terminate the contract upon 30-day notice prior to the end of
the term. The Company has recently executed new contracts with certain of its
wireless carriers that are substantially similar to the existing contracts
except that they provide for an initial three-year term. The Company's
agreements with wireless carriers provide that the Company will not be required
to reimburse carriers for fraudulent usage unless the carriers have fully
implemented the Company's protocol. Although the Company's protocol has been
effective in preventing fraud to date, there can be no assurance that this will
be the case in the future. See "Risk Factors -- Dependence on Cellular
Infrastructure."

Certain of the Company's contracts with wireless carriers only permit
the Company to utilize their cellular networks to provide mobile communications
services to vehicles engaged in long-haul transportation and certain
recreational uses so long as such vehicles travel outside of their home areas
for specified periods of time.

GTE-TSI. GTE-TSI provides clearinghouse functions to the cellular
industry, creating the data link between a foreign network and a traveling
vehicle's home cellular service area, performing credit checking functions and
facilitating roamer incoming call delivery functions. The Company's contract
with GTE-TSI covers certain functions that are critical to the Company's ability
to instantly deliver calls nationwide. It covers an initial term of three years
that began on May 3, 1999. The Company is guaranteed the right to renew the
contract for up to 10 one-year periods beyond the initial term, at a reasonable
rate to be determined by GTE-TSI. See "Risk Factors -- Dependence on
Clearinghouse Services."

Tekelec. Tekelec, formerly IEX Corp., designed, tested and constructed
the NSC. The NSC constitutes a critical link in providing certain enhanced call
processing and data management services and is necessary for the Company to
receive, store and route voice and data transmissions to and from its customers.
The Company currently has a software maintenance and support agreement with
Tekelec that expires on December 31, 2003. See "Risk Factors -- Company
Operation of NSC."

Southwestern Bell Mobile Systems, Inc. On March 30, 1999, the Company
and Southwestern Bell Mobile Systems, Inc. ("SBMS") executed an Administrative
Carrier Agreement under which SBMS provides to the Company clearinghouse
services and cellular service previously provided by GTE Wireless.

Alarm Monitoring Services. On May 25, 2000, the Company and Criticom
International Corporation entered into a Monitoring Services Agreement pursuant
to which CIC provides certain panic alarm monitoring services for the Company in
connection with the Company's obligations to the SBC Companies. See "Risk
Factors -- Dependence on Third Party Alarm Monitoring Service Provider."

Key Suppliers. The Company does not manufacture or assemble its
products. The Company has an agreement with K-Tec Electronics Corporation
("K-Tec") for the assembly of the Mobile Units and TrackWare(TM) Units. Because
the Company is dependent on a single supplier to manufacture and assemble the
Mobile Units and the TrackWare(TM) Units, the possibility exists that problems
experienced by the supplier could adversely affect the Company. Additionally,
the Company subcontracts for the manufacture of various components for the
Mobile Units from various suppliers. All transceivers for the Mobile Units are
manufactured by Motorola, and the Company believes that there is a limited
number of suppliers who are capable of manufacturing transceivers that meet the
Company's requirements. See "Risk Factors -- No Long-Term Product Supply
Arrangements."

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PATENTS AND PROPRIETARY TECHNOLOGY

The Company has obtained 35 United States Patents and 7 foreign patents
and has applied for additional United States and foreign patents. In general,
the Company's existing patents cover the Company's innovative and novel
utilization of the existing wireless infrastructure as well as the particular
operational features and functionality of the Company's products and services.
The Company's software is also protected under patents, federal and state trade
secret law and federal copyright law. See "Risk Factors -- Uncertainty Regarding
Patents and Proprietary Rights."

REGULATION

The Company's products and services are subject to various regulations
promulgated by the Federal Communications Commission that apply to the wireless
communications industry generally. The Company's Mobile Units and its
TrackWare(TM) Units must meet certain radio frequency emission standards so as
to avoid interfering with other devices. The Company relies on the manufacturer
of the cellular transceiver components of the Mobile Units and the TrackWare(TM)
Units to carry out appropriate testing and regulatory compliance procedures
regarding the radio emissions of the cellular transceiver component.

The FCC also controls several other aspects of the wireless industry
that affect the Company's ability to provide services. The FCC controls the
amount of radio spectrum available to cellular carriers, which could eventually
limit growth in cellular carrier capacity.

The FCC also regulates telecommunications service providers or common
carriers, requiring approval for entry into the marketplace and regulating the
service rates offered through tariff filing requirements. Additionally, most
state regulatory commissions regulate rate and entry for telecommunications
service providers. In order to encourage growth within the information services
segment of the telecommunications industry, the FCC issued an order creating the
enhanced services exemption from regulation. In general, providers of enhanced
services are not subject to regulation by the FCC or the various state
regulatory agencies. Services qualify as enhanced services if data is
transmitted between the provider and customer so that the customer is able to
interact with or manipulate the data regardless of whether the services provided
include telecommunications transmission components, such as wireless or long
distance services. The Company believes that the services it provides to its
customers in connection with the Mobile Units and TrackWare(TM) Units qualify as
enhanced services and are exempt from both FCC and state regulation.
Alternatively, the Company believes that its services may be characterized as a
private network not offered to the public at large but offered to specific group
of users, which management believes should also serve to exempt the Company from
FCC and state regulation.

The wireless telecommunications industry currently is experiencing
significant regulatory changes that may require a re-examination of laws and
regulations applicable to the Company's operations. The Company's services may
be characterized by the FCC as Commercial Mobile Radio Services ("CMRS"). If the
Company's services are classified as CMRS, the Company may be subject to FCC
regulation as a telecommunications service provider. However, the FCC has
decided to forbear from most regulation of the CMRS marketplace, including
regulation of the rates and terms of entry for interstate services offered by
CMRS providers. In addition, Congress has preempted state regulation of CMRS
entry and rates. FCC decisions thus far have enhanced the development of CMRS,
including requiring local telephone companies to offer interconnection and
access to their networks to CMRS providers and to establish reciprocal
compensation arrangements with CMRS providers for the transportation and
termination of calls at prices that are cost-based and just and reasonable.

If any services offered by the Company are determined to be
telecommunications services by the FCC, the revenues generated from these
services would be subject to the required contribution to the federal universal
service fund. At this time, revenues generated from the Company's services that
meet the definition of enhanced services are not subject to FCC-mandated
universal service fund contribution. However, based on a conservative
interpretation, the Company has reported certain revenues generated by the
personal calling plan service offered by the Company as a telecommunications
service for purposes of federal universal service fund contribution filings.
Various states have instituted their own universal service fund mechanisms which
may or may not follow the federal statutes in exempting revenues generated by
enhanced services. The Company cannot predict the impact of any requirement to
contribute to state and federal universal service mechanisms. See "Risk Factors
- -- Uncertainty of Government Regulations."

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Long-distance providers face regulatory schemes similar to cellular
carriers, with greater state involvement in requiring posting of bonds as
security against customer deposits and in other matters. The Company believes
current long-distance regulations apply to those companies providing
long-distance services directly to its customers, without long-distance
regulatory involvement by the Company.

MERGER

Effective December 31, 1999, the Company's wholly owned subsidiary,
HighwayMaster Corporation, a Delaware corporation, merged with and into the
Company. Following the consummation of the merger, the Company was the sole
surviving and operating entity. The merger was undertaken primarily to eliminate
an unnecessary corporate layer, and thus, reduce administrative expenses
associated with maintaining the separate existence of HighwayMaster Corporation.
When the merger became effective, all assets, obligations and liabilities of
HighwayMaster Corporation became the assets, obligations and liabilities of the
Company by operation of law. In connection with the merger, the Company obtained
consents to the assignment of third party contracts from HighwayMaster
Corporation to the Company, and other consents deemed necessary or advisable by
the Company.

CORPORATE NAME CHANGE

Effective April 10, 2000, the Company amended its Certificate of
Incorporation to change its corporate name to @Track Communications, Inc.

RISK FACTORS

Forward-Looking Statements

This Annual Report on Form 10-K ("Form 10-K") contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
that are based upon management's current beliefs and projections, as well as
assumptions made by and information currently available to management. When used
in this Form 10-K, the words "anticipate," "believe," "estimate," "expect" and
similar expressions are intended to identify forward-looking statements. Any
statement or conclusion concerning future events is a forward-looking statement,
and should not be interpreted as a promise or conclusion that the event will
occur. The Company's actual operating results or the actual occurrence of any
such event could differ materially from those projected in the forward-looking
statements. Factors that could cause or contribute to such differences include
those discussed in this section, as well as those discussed elsewhere in this
Form 10-K or in the documents incorporated herein by reference.

Operating History: Significant Losses

The Company has incurred significant operating losses since inception
and has a stockholders' deficit of approximately $58.3 million at December 31,
2000. Beginning March 15, 2001, the Company is obligated to begin paying
substantial semi-annual cash interest payments on its 13.75% Senior Notes which
were issued in September 1997. Interest payments due on the Senior Notes through
September 15, 2000, had previously been funded through an escrow arrangement
created upon closing of the Senior Notes. The Company currently believes it will
have the cash resources available to make the March 15, 2001 interest payment,
but absent the pending equity and debt transactions described in Note 2 to the
Consolidated Financial Statements (which are contingent upon a number of factors
also described in Note 2), the Company has limited financial resources available
to support its ongoing operations, fund its product development program to
develop and market new competitive tracking technology, and pay its obligations
as they become due, including the maturities of the Senior Notes and associated
interest payments.

The factors noted in the above paragraph raise substantial doubt
concerning the ability of the Company to continue as a going concern. The
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern. The ability of the Company to continue as a going
concern is dependent upon the ongoing support of its stockholders, creditors,
and certain key customers, the consummation of the pending equity and debt
transactions (or the closing of similar debt or equity transactions), and/or
its ability to

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successfully develop and market its tracking products and technology at
economically feasible levels in the highly competitive and rapidly changing
telecommunications industry.

As discussed in Note 2 to the Consolidated Financial Statements, the
Company has pending equity and debt transactions which the Company believes, if
consummated, will provide adequate financial resources to support the Company
until it is able to achieve a successful level of operations. The Company also
believes acquisition of the licensing rights associated with the pending equity
transaction will provide the Company significant marketing potential of the
licensed tracking technology, enhancing future results of operations and
reducing the need for capital resources to develop similar tracking technology.
There is no assurance, however, that the Company will be able to close the
pending debt and equity transactions or that such financial resources provided
by the pending transactions, if closed, will be sufficient to support the
Company until it reaches a successful level of operations. There is also no
assurance that the Company would be able to successfully develop a market for
the acquired licensed tracking technology to achieve a successful level of
future operations. If the Company is unable to close the pending equity and debt
transactions, it is likely that it will be unable to maintain its current Nasdaq
listing (see Note 3 to the Consolidated Financial Statements). If the Company
cannot maintain its Nasdaq listing, its ability to obtain the required levels of
equity or debt financing from other sources to support its operations and fund
payments of its obligations as they become due will be significantly reduced and
it may have a material adverse effect on the business, financial condition and
results of operations of the Company. See "Item 6 -- Selected Financial Data,"
and "Item 7 -- Management's Discussion and Analysis of Financial Condition and
Results of Operations."

Limitations Due to Debt

The Indenture imposes significant operating and financial limitations
on the Company. Such limitations will affect, and in many respects significantly
restrict or prohibit, among other things, the ability of the Company to pay
dividends, make investments and incur additional indebtedness. These
restrictions, in combination with the Company's substantial leverage, could
limit the ability of the Company to effect future financings or otherwise
restrict the nature and scope of its activities. The degree to which the Company
is leveraged could have important consequences to Company's stockholders and to
the holders of the Senior Notes, including: (i) the impairment of the Company's
ability to obtain additional financing in the future; (ii) the reduction of
funds available to the Company for its operations or for capital expenditures as
a result of the dedication of a substantial portion of the Company's net cash
flow from operations to the payment of principal and interest on the Senior
Notes; (iii) the possibility of an event of default under covenants contained in
the Indenture, which could have a material adverse effect on the business,
financial condition and results of operations of the Company; (iv) the placement
of the Company at a relative competitive disadvantage as compared to competitors
who are not as highly leveraged as the Company; and (v) vulnerability in the
event of a downturn in general economic conditions or its business because of
the Company's reduced financial flexibility. In addition, to the extent that the
Company enters into a bank credit agreement in the future as permitted by and
defined in the Indenture, such agreement is likely to impose additional
operating and financial restrictions on the Company, which may be more
restrictive than those provided for in the Indenture. See "Selected Financial
Data," and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

No Remote Disaster Recovery System

Currently, the Company's disaster recovery systems focus on internal
redundancy and diverse routing around and within the NSC operated by the
Company. The Company does not currently have access to a remote back-up complex
that would enable it to continue to provide mobile communications services to
customers in the event of a natural disaster or other occurrence that rendered
the NSC unavailable. Accordingly, the Company's business is subject to the risk
that such a disaster or other occurrence could hinder or prevent the Company
from continuing to provide services to some or all of its customers. See
"Business -- Infrastructure and Operations."

Company Operation of NSC

The Company operates and maintains the NSC that was previously operated
and maintained by Tekelec. The Company has limited experience maintaining and
supporting the NSC and its software and hardware systems. Although the Company
has successfully hired the former Tekelec switch technicians, the Company has
limited abilities to provide software maintenance and support for the NSC. On
December 28, 2000, the Company entered into a three year term software
maintenance and support agreement with Tekelec. If the Company is unable to

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renew the software maintenance and support agreement with Tekelec, and any
significant performance or other operational problems occur with the NSC, the
Company may be unable to resolve such issues and such failure may have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business - Infrastructure and Operations."

Uncertainty Regarding Patents and Proprietary Rights

The Company's success depends upon its technology and the scope and
limitations of its proprietary rights therein. In order to protect its
technology, the Company relies on a combination of patents, copyrights and trade
secret laws, as well as certain customer licensing agreements, employee and
third-party confidentiality and non-disclosure agreements, and other similar
arrangements. If the Company's assertion of proprietary rights is held to be
invalid or if another party's use of the Company's technology were to occur to
any substantial degree, the Company's business, financial condition and results
of operations could be materially adversely affected.

The patents and other intellectual property rights of the Company
cannot prevent competitors from developing competing systems using other
terrestrial wireless communications systems or using the cellular system through
a different method. While the Company believes that the nature and scope of the
Company's communications system, including the Company's strategic business and
technological relationships, would be difficult for a competitor to duplicate,
there can be no assurance that a competitor would consider these hindrances to
be material in light of the market potential. A competitor could invest time and
resources in an attempt to duplicate certain key features of the Company's
products and services, which could result in increased competition and have a
material adverse effect on the Company's business.

Several of the Company's competitors have obtained and can be expected
to obtain patents that cover products or services directly or indirectly related
to those offered by the Company. There can be no assurance that the Company is
aware of all patents containing claims that may pose a risk of infringement by
its products or services. In addition, patent applications in the United States
are confidential until a patent is issued and, accordingly, the Company cannot
evaluate the extent to which its products or services may infringe on future
patent rights held by others. In general, if it were determined that any of the
Company's products, services or planned enhancements infringed valid patent
rights held by others, the Company would be required to obtain licenses (which
might require the payment of royalties) to develop and market such products,
services or enhancements from the holders of the patents, to redesign such
products or services to avoid infringement, or cease marketing such products or
services or developing such enhancements. In such event, the Company also might
be required to pay past royalties or other damages. There can be no assurance
that the Company would be able to obtain licenses on commercially reasonable
terms, or that it would be able to design and incorporate alternative
technologies, without a material adverse effect on its business, financial
condition and results of operations.

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Dependence on SBC Regional Service Vehicle Contract

In August 1998, the SBC Companies entered into a one-year agreement for
the purchase of Series 5005S mobile units and accompanying support and network
management services that was extended to a three-year term in January 1999 (the
"SBC Contract"). The SBC Contract's minimum three-year term expires in December
31, 2001. As of December 31, 2000, the SBC Companies have purchased and
installed approximately 34,000 Series 5005S Mobile Units pursuant to the SBC
Contract. In February 2000, the Company announced that it has been chosen to
provide Ameritech and other SBC Companies an additional 28,000 HighwayMaster
Series 5005S mobile units pursuant to the SBC Contract. The Company expects to
install approximately 9,000 additional Series 5005S mobile units to complete
implementation of the SBC Contract in 2001. Upon completion, the Company will
have installed approximately 43,000 Series 5005S mobile units for the SBC
Companies. The non-installation of the additional 9,000 units in 2001 could
have a material adverse effect on the Company's business, financial condition
and results of operations.

Dependence on Third-Party Alarm Monitoring Services Provider

The Company relies on CIC to provide certain alarm monitoring services
to the SBC Companies as required by the SBC Contract. The contract has an
initial term of three years and automatically renews for successive two year
terms unless terminated by either party on 120 days notice. If the Company is
unable to renew its Monitoring Services Agreement with CIC, the Company may be
required to either develop its own alarm monitoring center, including obtaining
the required licenses, or execute an agreement with another alarm monitoring
services provider. If the Company is unable to develop its own monitoring
services center or execute an agreement with another alarm monitoring services
company, this could have a material adverse effect on the Company's business,
financial condition and results of operations.

Dependence on Cellular Infrastructure

The Company utilizes the existing cellular telephone infrastructure,
with certain enhancements, as the wireless segment of the @Track network. In
most cases, current terms of contracts between the Company and each of its
cellular carriers are for one year, with automatic one-year successive renewal
terms, unless either party elects to terminate the contract upon 30 days notice
prior to the end of the term. The Company has recently executed new contracts
with certain of its cellular carriers that are substantially similar to the
existing contracts, except that they provide for an initial three-year term. In
order to continue to provide mobile communications services to its customers,
the Company must continue to renew its agreements with individual cellular
carriers. If the Company is unable to renew or replace its contracts with
cellular carriers at competitive rates, the Company may be forced to absorb the
costs of increased cellular air time rates, or increase rates to customers where
allowed by individual contracts. In general, a failure on the part of the
Company to renew or replace its contracts with cellular carriers on favorable
terms could have a material adverse effect on its business, financial condition
and results of operations.

The @Track network relies on continued technical compatibility among
its cellular service providers. Currently, cellular carriers utilize analog
technology, with digital technology offered in addition to analog in various
service areas. If, in the future, cellular carriers discontinue all service to
analog telephones, the Company would be required to dedicate financial resources
and engineering staff to integrate a digital cellular telephone transceiver into
its products. Although cellular providers have historically cooperated to
maintain technical compatibility between markets, if substantial changes to the
methods of interconnection utilized by cellular carriers occur, such as a
discontinuance of the existing out-of-area call clearing system or a decision by
cellular carriers to eliminate analog service and employ several diverse digital
technologies rather than a common digital technology, the Company may be
required to undertake costly system redesign or may encounter difficulty in
providing nationwide coverage. See "Business -- Infrastructure and Operations."

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Dependence on Clearinghouse Services

GTE-TSI provides clearinghouse functions to the cellular industry,
creating the data link between a foreign network and a traveling vehicle's home
cellular service area, performing credit checking functions and facilitating
roamer incoming call delivery functions. The Company's contract with GTE-TSI
covers certain functions that are critical to the Company's ability to instantly
deliver calls nationwide. It covers an initial term of three years that began on
May 3, 1999. The Company is guaranteed the right to renew the contract for up to
10 one-year periods beyond the initial term, at a reasonable rate to be
determined by GTE-TSI.

If the Company is unable to renew its agreements with GTE-TSI, the
Company may be required to make substantial and costly design changes to the
@Track network in order to ensure continued availability of the Company's
services. Because of the unique position of GTE-TSI as industry-wide
clearinghouses and the difficulty associated with their replacement, there can
be no assurance that full functionality of the @Track system could be maintained
if such a redesign were necessary.

Southwestern Bell Mobile Systems, Inc.

On March 30, 1999, the Company and SBMS executed an Administrative
Carrier Agreement whereby SBMS provides clearinghouse services to the Company,
including the direct payment of the Company's cellular service providers for
cellular airtime through the cellular clearinghouse process. The Agreement
provides for an initial term of three years that automatically renews for five
additional consecutive one-year terms. The failure to renew this contract and
continue existing arrangements for payment to the Company's cellular service
providers could require the Company to post security deposits or provide other
financial assurances, which could have a material adverse effect on its
business, financial condition or results of operations. SBMS also provides the
Company's customers with analog cellular service as per a Cellular Service
Agreement originally entered into on June 7, 1993 and last amended on May 7,
1999 for a three year term with automatic renewal for successive one year terms
unless either party provides a minimum of 90 days written notice of intent to
terminate. See "Business -- Infrastructure and Operations."

No Long-Term Product Supply Arrangements

The Company does not manufacture or assemble its products. Because the
Company is dependent on a single supplier to manufacture and assemble the Mobile
Units and the TrackWare Units, the possibility exists that problems experienced
by the suppliers could adversely affect the Company. The Company has an
agreement with K-TEC for the assembly of the Mobile Units and TrackWare Units.
Additionally, the Company subcontracts for the manufacture of various components
for the Mobile Units from various suppliers. All transceivers for the Mobile
Units are manufactured by Motorola, and the Company believes that there is a
limited number of suppliers who are capable of manufacturing transceivers that
meet the Company's requirements. In general, the failure to maintain or
establish satisfactory arrangements for the production and assembly of Mobile
Units or the TrackWare Units could have a material adverse effect on the
Company's business, financial condition and results of operations.

Control of the Company

The Company, Southwestern Bell Wireless Holdings, Inc. now known as
Cingular Wireless ("CW"), the Erin Mills Stockholders, the Carlyle Stockholders,
the By-Word Stockholders and certain other persons are parties to an Amended and
Restated Stockholders' Agreement, dated as of September 27, 1996 (the "Amended
Stockholders' Agreement") which amends and restates in its entirety the
Stockholders' Agreement dated February 4, 1994. The parties to the Amended
Stockholders' Agreement, which have not waived the right to designate directors
under the Amended Stockholder's Agreement, own an aggregate of 10,214,885 shares
of common stock, representing approximately 40% of the voting shares outstanding
as of December 31, 2000.

The Amended Stockholders' Agreement contains provisions relating to,
among other things, the election of members of the Company's Board of Directors.
In particular, this agreement provides that the parties will take all action
(including the voting of shares of Common Stock owned by them) necessary to
ensure that the Board of Directors of the Company consists of: (i) two directors
designated by the Erin Mills Stockholders; (ii) one director

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designated by the Carlyle Stockholders; (iii) two directors designated by the
By-Word Stockholders; and (iv) two independent directors. No Stockholder under
the Amended Stockholders' Agreement shall be entitled to designate any director
if the percentage of common stock beneficially owned by such Stockholder falls
below 5% (or with respect to the Erin Mills Stockholders and the ByWord
Stockholders, 20% for the right to designate two directors and 5% for the right
to designate one director) on a Fully Diluted Basis. For purposes of the Amended
Stockholders' Agreement, "on a Fully Diluted Basis" is determined by taking into
account the number of shares of common stock which are issued and outstanding
plus the number of shares of common stock: (a) issuable upon conversion of any
outstanding Series D Preferred Stock, and if authorized and issued, Class B
common stock; and (b) issuable pursuant to outstanding options, warrants, rights
or obligations to purchase or subscribe for shares of common stock or securities
of the Company which are exchangeable or exercisable into shares of common stock
of the Company. However, excluded from the determination of "on a Fully Diluted
Basis" are (a) the Warrants issued to CW; (b) options, warrants, rights or
obligations to acquire common stock of the Company issued by any person or
entity other than the Company; and (c) the number of shares of common stock
issuable pursuant to options granted to employees of the Company to acquire
common stock of the Company.

Prior to the receipt of regulatory relief ("Regulatory Relief")
permitting CW to provide landline, interLATA long-distance service pursuant to
the Communications Act of 1934, as amended by the Telecommunications Act of
1996, CW was not entitled to designate a director, but did have the right to
designate a non-voting delegate to attend all meetings of the Board of Directors
and receive all materials distributed to directors of the Company. In July,
2000, Regulatory Relief was obtained and CW now is entitled to designate one
director. CW has not designated a director.

At this time, the Erin Mills Stockholders have designated Gerry C.
Quinn and Stephen L. Greaves to serve as directors. The Carlyle Stockholders
have irrevocably waived their rights to designate directors. The Byword
Stockholders as a result of certain members of the Byword Stockholders selling
their holdings of @Track common stock and irrevocably waiving their rights to
designate directors under the Amended Stockholders' Agreement are no longer
entitled to designate directors. John T. Stupka and William P. Osborne serve as
independent directors.

Repurchase of Senior Notes Upon Change of Control

Under the terms of the Senior Notes, upon the occurrence of a change of
control, the Company will be required to offer to repurchase all of the
outstanding Senior Notes at a price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest and liquidated damages, if any, to the
repurchase date. There can be no assurance that the Company would have
sufficient resources to repurchase the Senior Notes upon the occurrence of a
change of control. The failure to repurchase all of the Senior Notes tendered to
the Company would constitute an event of default under the Indenture.
Furthermore, the repurchase of the Senior Notes by the Company upon a change of
control might result in a default on the part of the Company in respect of other
future indebtedness of the Company, as a result of the financial effect of such
repurchase on the Company or otherwise. The change of control repurchase feature
of the Senior Notes may have anti-takeover effects and may delay, defer or
prevent a merger, tender offer or other takeover attempt.

Competition and Technological Change

The Company faces competition from numerous other suppliers of mobile
communications services. Currently, the Company's primary competitors in the
long-haul trucking market offer data-only, two-way communications via satellite.
Other companies that compete or are planning to compete with the Company in its
target markets also offer or plan to offer satellite-based voice and data
communication systems. The primary advantage of satellite-based communication
over the Company's cellular-based system is that satellite coverage is available
in certain remote areas and foreign countries that have not developed cellular
networks, enabling data transmissions in areas not served by cellular systems.
In addition, satellite-based communication systems generally utilize a less
complicated infrastructure than the Company's network and may be able to make
updates and changes to their system more quickly than the Company.

Certain technological advances and future product offerings could
substantially change the nature of the Company's competition. For example,
geo-stationary orbit, MEO and LEO satellite systems are expected to offer voice
and data communications that could compete directly with existing cellular-based
services, including the Company's system. Networks of MEO and LEO satellites are
in the early implementation stage, funded by

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consortiums of companies that intend to provide worldwide voice communication
capability. The addition of voice capability to satellite systems may reduce the
Company's competitive advantage over certain of its competitors, and it is
possible that satellite owners may, at least on a temporary basis, offer rates
at or below the Company's rates.

Certain conventional mobile radio and Enhanced SMR providers offer
digital services that are competitive with current cellular services, including
the Company's system. If Enhanced SMR providers expand coverage and establish a
significant degree of uniformity, through use of proprietary digital technology
or otherwise, Enhanced SMR providers could eventually develop an integrated
network to allow nationwide roaming. Enhanced SMR operators also offer
dispatching services, data transmission and other services through their
expanding networks that could compete with the Company's services. One
telecommunications company already has implemented a system of nationwide
roaming limited to densely populated urban areas where it has built out its
network. Several other cellular and PCS carriers are currently in various stages
of implementing similar systems.

The wireless industry has developed a uniform standard for incoming
call delivery at a reduced cost. This inexpensive autonomous-registration
incoming call delivery system for cellular roamers reduces the competitive
advantages of the Company's system. Moreover, if cellular carriers were to
develop additional standard protocol and hardware for inexpensive data
transmission and fraud control, or if the cost of roaming services were to
decline further, other competitive advantages of the Company's system would be
significantly reduced or lost.

In general, technology in the wireless communications industry is in a
rapid and continuing state of change as new technologies and enhancements to
existing technologies continue to be introduced. The Company believes that its
future success will depend upon its ability to develop and market products and
services that meet changing customer needs and that anticipate or respond to
technological changes on a timely and cost-effective basis. There can be no
assurance that the Company will be able to keep pace with technological
developments.

Certain of the Company's competitors, including Qualcomm, have
significantly greater name recognition, financial and other resources than the
Company. Among other things, it appears that certain of these resources have
been or are being used by Qualcomm and other competitors of the Company to
subsidize initial hardware purchases and provide extended periods of free
services in an attempt to achieve rapid penetration of certain of the Company's
target markets. See "Business -- Competition."

The failure of the Company to develop and market products and services
that meet changing customer needs and that anticipate or respond to
technological changes on a timely and cost-effective basis could have a material
adverse effect on the Company's business, financial condition and results of
operations.

The future success of the Company is dependent upon its ability to
profitably develop and market its current and next-generation products and
services in the highly competitive and rapidly changing automatic vehicle
location industry and the support of its creditors, stockholders and customers.

Uncertainty of Government Regulation

The Company believes that the nature of its services does not require
the Company to be classified as a common carrier for either wireless or
long-distance regulatory purposes. This conclusion is based on several
alternative regulatory interpretations. Specifically, the FCC regulates
telecommunications service providers or common carriers requiring approval for
entry into the marketplace and regulating the service rates offered through
tariff filing requirements. Additionally, most state regulatory commissions
regulate rate and entry for telecommunications service providers. In order to
encourage growth within the information services segment of the
telecommunications industry, the FCC issued an order creating the enhanced
services exemption from regulation. Basically, providers of enhanced services
are not subject to regulation by the FCC or the various state regulatory
agencies. Generally, services qualify as enhanced services if data is
transmitted between the provider and customer so that the customer is able to
interact with or manipulate the data regardless of whether the services provided
include telecommunications transmission components such as cellular or
long-distance services. The Company believes that the services it provides to
its customers in connection with the Mobile Units and TrackWare(TM) Units
qualify as enhanced services and are exempt from both FCC and state regulation.
Alternatively, the Company believes that its services may be characterized as a
private network not offered to the public at large, but offered to a specific
group of users, which also exempts the Company from FCC and state regulation.
The Company relies on its

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long-distance providers and wireless providers to comply with any regulatory
requirements. The reclassification of the Company's services as
telecommunications services could have a material adverse effect on the
Company's business, financial condition and results of operations.

The wireless telecommunications industry currently is experiencing
significant regulatory changes that may require a re-examination of laws and
regulations applicable to the Company's operations. The Company's services may
be characterized by the FCC as CMRS. If the Company's services are classified as
CMRS, the Company may be subject to FCC regulation as a telecommunications
service provider. However, the FCC has decided to forbear from most regulation
of the CMRS marketplace, including regulation of the rates and terms of entry
for interstate services offered by CMRS providers. In addition, Congress has
preempted state regulation of CMRS entry and rates. FCC decisions thus far have
enhanced the development of CMRS, including requiring local telephone companies
to offer interconnection and access to their networks to CMRS providers and to
establish reciprocal compensation arrangements with CMRS providers for the
transportation and termination of calls at prices that are cost-based and just
and reasonable.

If any services offered by the Company are determined to be
telecommunications services by the FCC, the revenues generated from these
services would be subject to the required contribution to the federal universal
service fund. At this time, revenues generated from the Company's services that
meet the definition of enhanced services are not subject to FCC mandated
universal service fund contribution. However, based on a conservative
interpretation, the Company has reported certain revenues generated by the
personal calling plan service offered by the Company as a telecommunications
service for purposes of federal universal service fund contribution filings.
Various states have instituted their own universal service fund mechanisms that
may or may not follow the federal statutes in exempting revenues generated by
enhanced services. The Company cannot predict the impact of any requirement to
contribute to state and federal universal service mechanisms.

Long-distance providers face regulatory schemes similar to cellular
carriers, with greater state involvement in requiring posting of bonds as
security against customer deposits and in other matters. The Company believes
current long-distance regulations apply to the companies providing long-distance
services directly to Company customers, without long-distance regulatory
involvement by the Company. The reclassification of the Company's services as
long distance services could have a material adverse effect on the Company's
business, financial condition and results of operations.

In February 1996, the Telecommunications Act of 1996 was signed into
law. This is the most comprehensive set of telecommunications laws to be enacted
since the original Communications Act of 1934 was passed. The Telecommunications
Act encourages competition in virtually every arena of communications and
eliminates many regulatory barriers to new competitors by, in some instances,
preempting state and local restrictions. The Telecommunications Act requires the
FCC to extensively revise many of the rules and regulations under which the
telecommunications industry has been operating. To that end, the FCC has
completed approximately 80 different proceedings in connection with the
Telecommunications Act. At this time, it is unclear how the Telecommunications
Act will affect the activities of the Company, its strategic business
relationships with other communications companies, or its customers. There can
be no assurance that the relaxing of barriers to competition in the industry
will not hinder the Company's growth and viability in the marketplace.

Dependence on Key Personnel

The Company is dependent on the efforts of Jana Bell, President and
Chief Executive Officer; Michael Smith, Executive Vice President and Chief
Financial Officer; Todd Felker, Senior Vice President - Sales & Marketing;
Marshall Lamm, Senior Vice President - Operations; Pierre Parent, Chief
Technology Officer; Robert LaMere, Senior Vice President Transportation Systems,
J. Raymond Bilbao, General Counsel and Secretary, and a group of employees with
technical knowledge regarding the Company's systems. The Company had one year
term employment agreements with Ms. Bell, and Messrs. Smith, Felker, Lamm,
Parent, LaMere and Bilbao. The initial one year term of these employment
agreements expired on December 31, 2000. These employment agreements are
currently on a month to month basis and can be terminated by either the Company
or the employee upon 30 days written notice. The loss of services of one or more
of these individuals could materially and adversely affect the

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business of the Company and its future prospects. The Company does not maintain
key-man life insurance on any of the Company's officers or employees. The
Company's future success will also depend on its ability to attract and retain
additional management and technical personnel required in connection with the
growth and development of its business.

Expansion Risk

To the extent that the Company is successful in implementing its
business strategy, the Company may experience periods of rapid expansion in the
future. In order to manage growth effectively in the complex environment in
which it operates, the Company will need to maintain and improve its operating
and financial systems and expand, train and manage its employee base. In
addition, the Company must carefully manage production and inventory levels to
meet product demand and facilitate new product introductions. Inaccuracies in
demand forecasts could result in insufficient or excessive inventories and
disproportionate overhead expenses. The Company must also expand the capacity of
its sales, distribution and installation networks in order to achieve continued
growth in its existing and future markets. In general, the failure to manage
growth effectively could have a material adverse effect on the Company's
business, financial condition and results of operations.

Customer Concentration

The SBC Companies, Wal-Mart Stores East, Inc. and its affiliated
companies, and Contract Freighters, Inc. collectively account for approximately
63% of the Company's installed base of mobile units as of December 31, 2000. The
loss of any of these customers, or any event, occurrence or development which
adversely affects the relationship between the Company and any of these
customers, could have a material adverse effect upon the Company's business,
financial condition and results of operations.

The Company's ability to generate positive cash flow from operations is
dependent upon the continued retention of certain key customers. The Company's
ability to retain key long-haul trucking customers is dependent upon its ability
to develop next-generation products and services with lower transmission costs
and additional features and functionality. The loss of any such customer would
reduce the Company's ability to generate sufficient cash flow to fund the
interest payments on the Senior Notes beginning March 15, 2001. See "Selected
Financial Data," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

Product Liability

Testing, manufacturing and use of the Company's products entail the
risk of product liability. Although management believes its Mobile Units offer
safety advantages over conventional cellular telephones, it is possible that
operation of the product may give rise to product liability claims. Product
liability claims present a risk of protracted litigation, substantial money
damages, attorney's fees, costs and expenses, and diversion of management
attention. In addition, as the Company expands its business to include the
provision of alarm monitoring services in connection with the SBC Contract, the
Company is exposed to an increased risk of litigation regarding various safety,
performance and other matters. Product liability claims that exceed policy
limits applicable to the Company's liability insurance or that are excluded from
the policy coverage could have a material adverse effect on the business or
financial condition of the Company.

Common Stock Available for Purchase by CW

Pursuant to a Purchase Agreement dated September 27, 1996 (the
"Purchase Agreement"), and certain agreements and instruments related thereto,
the Company issued to CW (i) 1,000 shares of Series D Preferred Stock and (ii)
Warrants. The Warrants generally entitle CW to purchase from the Company (i)
3,000,000 shares of Common Stock at an exercise price of $14.00 per share and
(ii) 2,000,000 shares of Common Stock at an exercise price of $18.00 per share,
in each case subject to adjustment to prevent dilution. If all of the shares of
Class B common stock were converted into common stock and all the Warrants were
exercised by CW, CW would hold approximately 20.7%% of the outstanding shares of
Common Stock (based on the total number of shares of Common Stock outstanding as
of December 31, 2000).

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Effective July 11, 2000, SBC Communications, Inc. ("SBC") received
final approval from the Federal Communications Commission to provide long
distance service in the State of Texas. SBC previously received the approval of
the Texas Public Utilities Commission and the United States Justice Department
to provide long distance service in Texas. Pursuant to the Purchase Agreement by
and between the Company as Issuer and Southwestern Bell Wireless Holdings, Inc.
now known as Cingular Wireless ("SBC") as Investor, dated September 27, 1996
(the "Purchase Agreement"), certain events are triggered with respect to SBC's
Series D Participating Convertible Preferred Stock upon the occurrence of
"Regulatory Relief." "Regulatory Relief" is defined in the Purchase Agreement
as the date that SBC Communications, Inc. or its Affiliates in their sole
judgment, have obtained all the necessary federal and state regulatory
approvals to provide landline, interLATA long distance service pursuant to the
Communications Act of 1934, as amended by the Telecommunications Act of 1996.

On July 13, 2000, the Company provided written notice to SBC requesting
confirmation as to whether SBC had determined that it had received Regulatory
Relief. On September 18, 2000, the Company received written confirmation from
SBC that it had received Regulatory Relief.

Accordingly, SBC's 1,000 shares of Series D Participating Convertible
Preferred Stock has converted to 1,000 shares of Class B Common Stock, with each
share of Class B Common Stock having the voting power of 1,600 shares of Common
Stock; (2) SBC's right to a non-voting board delegate has terminated; and (3)
the Company and SBC are required to enter into an agreement in substantially the
same form as the Voice and Data Agreement attached to the Purchase Agreement for
the provision of long distance service by SBC.

Additionally, SBC as the sole holder of Class B Common Stock shall have
the following rights: (1) SBC has the right to elect a voting Board Member; (2)
SBC has the right to elect two Board members if SBC owns more than 20% of the
outstanding common stock of the Company, including the Common Stock issuable
upon conversion of Class B Common Stock or other convertible securities or the
exercise of warrants or options, but excluding the warrants issued to SBC as
part of the Purchase Agreement and options, warrants, rights and obligations
issued by any other person or entity other than the Company; (3) SBC has the
right to dividends and distributions from the Company in the same amount as if
SBC's 1,000 shares of Class B Common Stock were equal to 1,600,000 shares of
Common Stock (as adjusted for stock dividends or stock splits occurring after
September 27, 1996); (4) SBC has the right to appoint at least one director to
the Compensation Committee and the Nominating Committee of the Board of
Directors of the Company; (5) SBC has the right to convert each share of their
Class B Common Stock into 1,600 shares of Common Stock; and (6) SBC has the
right to approve: (i) any annual budget or business plan of the Company; (ii)
the issuance of any equity securities (other than employee stock options); (iii)
the Company incurring any debt greater than $5,000,000; (iv) the hiring or
termination of the Company's chief executive officer, chief operating officer or
chief financial officer; (v) the Company's entering into any line of business
other than its existing line of business; (vi) the Company's exiting its
existing line of business or disposing of assets (other than assets sold in the
ordinary course of business) in any year with a value in excess of $500,000;
(vii) the adoption of any anti-takeover provision; (viii) the taking of any
corporate action which would reduce the number of common shares issuable upon
the conversion of Class B Common Shares below 1,600 shares of Common Stock per
share of Class B Common Stock.

Additionally, as per the Company's September 27, 1996 Amended and
Restated Stockholders' Agreement, if following the receipt of Regulatory Relief,
SBC does not hold any Class B Common Stock but owns at least 1,600,000 shares of
Common Stock including Common Stock issuable upon conversion of outstanding
securities or upon exercise of outstanding options, warrants, rights or
obligations (but excluding the warrants issued to SBC as part of the Purchase
Agreement and options, warrants, rights and obligations issued by any other
person or entity other than the Company) on a Fully Diluted Basis, SBC shall
retain only the following approval rights previously held as a Class B Common
Stock Holder: (i) the right to approve any annual budget or business plan of the
Company; (ii) the right to approve the issuance of any equity securities (other
than employee stock options); (iii) the right to approve the Company incurring
any debt greater than $5,000,000; (iv) the right to approve the hiring or
termination of the Company's chief executive officer, chief operating officer or
chief financial officer; (v) the right to approve the Company's entering into
any line of business other than its existing line of business; (vi) the right to
approve the Company's exiting its existing line of business or disposing of
assets (other than assets sold in the ordinary course of business) in any year
with a value in excess of $500,000; (vii) the adoption of any anti-takeover
provision; and (viii) the right to approve the taking of any corporate action
which would reduce the number of Common Shares held by SBC to fewer than
1,600,000.

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"On a Fully Diluted Basis" means taking into account the number of
shares of Common Stock which are issued and outstanding plus: (a) the number of
shares of Common Stock issuable upon conversion of any outstanding Class B
Common Stock; and (b) the number of shares of Common Stock issuable pursuant to
outstanding options, warrants, rights or obligations to purchase or subscribe
for shares of Common Stock or securities of the Company which are exchangeable
or exercisable into shares of Common Stock of the Company. However, excluded
from the term "on a Fully Diluted Basis" are (a) the warrants issued to SBC as
part of the Purchase Agreement; (b) any options, warrants, rights or obligations
to acquire Common Stock of the Company issued by any person or entity other than
the Company; and (c) the number of shares of Common Stock issuable pursuant to
options granted to employees of the Company to acquire Common Stock of the
Company.

Dividend Policy

The Company has never paid cash dividends on its Common Stock and has
no plans to do so in the foreseeable future. The Company intends to retain
earnings, if any, to develop and expand its business.

Shares Eligible for Future Sale

At December 31, 2000. the Company had 25,326,829 shares of Common Stock
outstanding, of which approximately 15,111,994 shares of Common Stock are freely
tradable without restrictions or further registration under the Securities Act.
The remaining shares are deemed "restricted securities" within the meaning of
the Securities Act as a result of the issuance thereof in private transactions
prior to the Company's initial public offering in June 1995 and pursuant to the
Recapitalization Agreement entered into at the time of the CW transaction. These
"restricted securities" may be publicly sold only if registered under the
Securities Act or sold in accordance with an applicable exemption from
registration, such as those provided by Rules 144 and 144A promulgated under the
Securities Act.

The Amended Stockholder's Agreement provides for certain demand,
piggyback or other registration rights to the stockholders who are parties to
it. In particular, the agreement provides that, with respect to an aggregate of
1,818,018 shares of Common Stock issued to the Erin Mills Stockholders and
certain of the Carlyle Stockholders in connection with the Recapitalization
Transactions, the Company would register one-half each of such shares under the
Securities Act, for sale during the three-month periods beginning March 31, 1997
and September 27, 1997. The Erin Mills Stockholders have waived the right to
cause the Company to register such shares, although they have reserved the right
to revoke such waiver at any time. The Carlyle Stockholders executed a waiver
similar to the Erin Mills Stockholders' waiver; however, they then exercised
their piggyback rights in connection with the registration of warrants and
warrant shares that were issued in connection with the 1997 sale of Senior
Notes. The Carlyle Shareholders offered all 2,723,468 shares beneficially owned
by them to the public under the warrant registration statement filed on
September 18, 1998. During 2000, none of the Company's Common Stock held by the
Carlyle Stockholders' was purchased pursuant to the offering. See "Part II, Item
5. Market for Registrant's Common Equity and Related Stockholder Matters."

The sale of a substantial number of shares of Common Stock or the
availability of a substantial number of shares for sale may adversely affect the
market price of the Common Stock and could impair the Company's ability to raise
additional capital through the sale of its equity securities.

Nasdaq SmallCap Market Listing Status

In a letter, dated December 6, 2000, from Mr. Michael S. Emen, Vice
President, Listing Qualifications, of The Nasdaq Stock Market, Inc. ("Nasdaq")
to Mr. Michael Smith, Executive Vice President and Chief Financial Officer of
the Company, Mr. Emen informed the Company that it was no longer in compliance
with the net tangible asset/market capitalization/net income requirement for
continued listing on the Nasdaq SmallCap Market as set forth in Marketplace Rule
4310(c)(2)(B). Mr. Emen further informed the Company that the Company's
securities would be delisted at the opening of business on December 15, 2000, if
it failed to seek further procedural remedies by December 13, 2000.

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23

In a letter dated December 7, 2000, the Company filed a Request for
Oral Hearing and to Stay the December 15, 2000 Delisting and for other relief
under Marketplace Rules 4415(b) and 4815(b) seeking an oral hearing before a
Nasdaq Listings Qualification Panel to review the proposed termination of the
designation of the Company's common stock as a Nasdaq SmallCap Market security.
In a letter dated December 8, 2000, the Chief Counsel for The Nasdaq Stock
Market, Inc. granted the Company's request for an oral hearing which stayed the
delisting until the decision of the Panel was rendered on or following the
hearing scheduled for January 11, 2001.

On January 11, 2001, Jana Ahlfinger Bell, President and Chief Executive
Officer, W. Michael Smith, Executive Vice President and Chief Financial Officer
and J. Raymond Bilbao, General Counsel and Secretary along with outside counsel
appeared before the Panel seeking an extension of time to comply with the Nasdaq
minimum listing requirements to complete the transactions with Minorplanet and
MackayShields. The Company argued that if the transactions were completed, that
the Company would satisfy the net tangible assets minimum listing requirement
necessary to maintain is listing on The Nasdaq SmallCap Market due to the
extinguishments of the Senior Notes as part of the transactions with Minorplanet
and MackayShields, the Company's majority noteholder.

On February 12, 2001, the Company received a written determination from
the Nasdaq Listing Qualifications Hearings Panel (the "Panel") determining that
the Company's securities shall be allowed to remain listed on The Nasdaq
SmallCap Market provided that the Company satisfy the following conditions:

(a) On or before February 23, 2001, the Company must:

(1) provide documentation to Nasdaq evidencing that it has
executed Definitive Documents with Minorplanet and
MackayShields;

(2) file a Preliminary Proxy Statement with the SEC and Nasdaq
including proposals to obtain shareholder approval for:
(i) the Minorplanet transaction; (ii) the conversion of
the Senior Notes held by MackayShields; and (iii) a
reverse stock split;

(b) On or before April 23, 2001, the Company must:

(1) provide documentation to Nasdaq that the Minorplanet and
MackayShields transactions have been consummated; and

(2) make a public filing with the SEC and Nasdaq evidencing
net tangible assets of at least $12 million. The filing
must contain a balance sheet no older than 45 days, with
proforma adjustments for any significant events or
transactions occurring on or before the filing date.

The Panel subsequently extended the February 23, 2001 deadlines to
February 27, 2001. The Company has fully complied with the February 27, 2001
deadline. The Company was also informed that the Company's trading symbol will
changed from ATRK to ATRKC to evidence the conditional listing.

The minimum requirements for continued listing on the Nasdaq Small Cap
Market include both quantitative and qualitative requirements. The quantitative
requirements for continued listing on the Nasdaq SmallCap Market are set forth
in Marketplace Rule 4310 include the following:

o Net tangible assets of $2 million (Net tangible assets equals Total
Assets minus Total Liabilities minus Goodwill minus Redeemable
Securities); or

o Minimum Market Capitalization of $35 million based on the high
inside closing bid price; or

o Net Income of at least $500,000 (in latest fiscal year or 2 of the
last 3 fiscal years

and

o Public Float of at least 500,000 shares

o Minimum market value of public float of $1 million

o Minimum bid price of $1 per share

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24

o Minimum of 300 round lot holders (a round lot holder is a
shareholder which hold at least 100 shares or more)

o Minimum of 2 market makers

The qualitative requirements for continued listing on the Nasdaq
SmallCap Market are set forth in Marketplace Rule 4350 as follows:

o Corporate Governance requirements including timely filing of annual
report with audited financials with SEC, Nasdaq and distribution to
shareholders

o Provision of SEC reports including Form 10-k and Form 10-Q with
Nasdaq

o A minimum of three independent directors (Must be satisfied by June
2001)

o Audit Committee must have three independent members (Must be
satisfied by June 2001)

o Company shall issue proxy solicitations to garner shareholder votes
for all shareholders meetings and file with Nasdaq

o Company shall review conflict of interest issues and related party
transactions on ongoing basis through use of Audit Committee or
comparable body of Board of Directors.

o Company shall be audited by independent public accountants.

If the market price for the Company's common stock remains below $1.00
per share for 30 consecutive days and the Company's securities are no longer
listed on the Nasdaq SmallCap Market, the Company's common stock may be deemed
to be penny stock. If the Company's common stock is considered penny stock, it
would be subject to rules that impose additional sales practices on
broker-dealers who sell the Company's securities. For example, broker-dealers
must make a special suitability determination for the purchaser and have
received the purchaser's written consent to the transaction prior to sale. Also,
a disclosure schedule must be prepared before any transaction involving a penny
stock, and disclosure is required about (1) sales commissions payable to both
the broker-dealer and the registered representative and (2) current quotations
for the securities. Monthly statements are also required to be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stock. Because of these additional obligations,
some brokers may not effect transactions in penny stocks. This could have an
adverse effect on the liquidity of the Company's common stock.

The board of directors, as part of the transactions with Minorplanet
and Mackay Shields has authorized a 1 for 5 reverse stock split. The Company
currently believes that the reverse stock split is likely to result in the bid
price of the Company's common stock increasing over the $1.00 minimum bid price
requirement, thereby permitting the continued listing of the Company's common
stock on the Nasdaq SmallCap Market. However, there can be no assurance that the
market price of the Company's common stock will rise in proportion to the
reduction in the number of outstanding shares resulting from the reverse stock
split or that the market price of the Company's common stock will remain above
$1.00 after the split. See "Item 7 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations - Subsequent Events."

The Company currently expects to meet these continued listing
requirements and the conditional listing requirements set forth in the February
12, 2001 written determination by the Panel. However, there can be no assurances
that the Company will be able to maintain its listing on the Nasdaq SmallCap
Market and the failure of the Company to maintain its listing on the Nasdaq
SmallCap Market may have a material adverse effect on the business, financial
conditions and results of operations of the Company. . See "Item 7 --
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Subsequent Events."

If the Company's securities are delisted from the Nasdaq SmallCap, the
Company may subsequently apply for inclusion in the Nasdaq SmallCap market if it
satisfies the following initial inclusion requirements. The initial requirements
for listing on the Nasdaq Small Cap Market include both quantitative and
qualitative requirements. The quantitative requirements for initial listing on
the Nasdaq SmallCap Market are set forth in Marketplace Rule 4310 and include
the following:

o Net tangible assets of $4 million (Net tangible assets equals Total
Assets minus Total Liabilities minus Goodwill minus Redeemable
Securities); or

o Minimum Market Capitalization of $50 million based on the high
inside closing bid price; or

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o Net Income of at least $750,000 (in latest fiscal year or 2 of the
last 3 fiscal years

and

o Public Float of at least 1 million shares

o Minimum market value of public float of $5 million

o Minimum bid price of $4 per share

o Minimum of 300 round lot holders (a round lot holder is a
shareholder which hold at least 100 shares or more)

o 1 year operating history or $50 million market capitalization

o Minimum of 3 market Makers in stock

The qualitative requirements for initial listing on the Nasdaq SmallCap
Market are the same as the continued listing requirements set forth above in
Marketplace Rule 4350.

If the Company's securities are delisted from the Nasdaq SmallCap
Market, there can be no assurances that the Company will be able to satisfy the
initial inclusion requirements for listing on the Nasdaq SmallCap Market and its
failure to do so will material adverse effect on the business, financial
conditions and results of operations of the Company. The Company currently
believes that the Company's securities will be delisted from The Nasdaq SmallCap
Market if the Company fails to finally consummate the transactions with
Minorplanet and MackayShields on or before April 23, 2001 and otherwise comply
with the other conditions contained in the February 12, 2001 Nasdaq letter
determination. There can be no assurances that the Company will be able to
finally consummate the transactions with Minorplanet and MackayShields and
satisfy the other conditions to continued listing imposed upon the Company by
Nasdaq on or before April 23, 2001 and the Company believes that its failure to
do so, may have a material adverse effect on the business, financial conditions
and results of operations of the Company. See "Item 7 -- Management's Discussion
and Analysis of Financial Condition and Results of Operations - Subsequent
Events."

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Volatility of Stock Price

Historically, the market prices for securities of emerging companies in
the telecommunications industry have been highly volatile. Future announcements
concerning the Company or its competitors, including results of technological
innovations, new commercial products, financial transactions, government
regulations, proprietary rights or product or patent litigation, may have a
significant impact on the market price of the Company's common stock. The
Company's stock price has been highly volatile in recent periods.

ITEM 2. PROPERTIES

REAL PROPERTY AND LEASES

The Company does not own any real property. The Company leases
approximately 73,400 square feet of office space for its corporate headquarters
in Richardson, Texas, of which approximately 18,600 square feet is sub-leased to
another company. In addition, the Company leases approximately 25,000 square
feet of warehouse and office space in Plano, Texas.

ITEM 3. LEGAL PROCEEDINGS

LEGAL PROCEEDINGS

The Company is involved in various claims and lawsuits incidental to
its business, primarily collections lawsuits in which the Company is seeking
payment of amounts owed to it by customers. In connection with the Company's
efforts to collect payments from a small number of former customers, such former
customers have on occasion alleged breaches of contractual obligations under
service agreements with the Company. The Company does not believe that these
claims and lawsuits will have a material adverse affect on the Company's
business, financial condition and results of operations.

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

No matters were submitted to a vote of security holders during the
fourth quarter of the year 2000 covered by this report through the solicitation
of proxies or otherwise.

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PART II

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

The Company's Common Stock was initially offered to the public on
June 22, 1995, and was quoted on the Nasdaq National Market ("Nasdaq NMS")
through close of business on February 1, 1999, after which time it began trading
on the Nasdaq SmallCap Market ("Nasdaq SmallCap") under the symbol "HWYM". The
Company's securities currently trade under the symbol "ATRKC." The following
table sets forth the range of high and low trading prices on the Nasdaq SmallCap
Market, as applicable, for the Common Stock for the periods indicated. Such
price quotations represent inter-dealer prices without retail markup, markdown
or commission and may not necessarily represent actual transactions.

BID PRICES
HIGH LOW
-------- --------

1999
First Quarter $ 2.19 $ 1.22
Second Quarter $ 1.88 $ 1.25
Third Quarter $ 1.66 $ 1.06
Fourth Quarter $ 2.94 $ 1.31

2000
First Quarter $ 11.80 $ 0.03
Second Quarter $ 6.00 $ 1.72
Third Quarter $ 2.41 $ 0.75
Fourth Quarter $ 1.69 $ 0.03

There were 120 registered holders of common stock and 3600
broker/dealers who beneficially hold common stock on behalf of shareholders as
of February 20, 2001. The last sales price for the Company's Common Stock as
reported on February 20, 2001 was $0.66. The Company did not pay dividends on
its Common Stock for the year ended December 31, 2000 and has no plans to do so
in the foreseeable future.

On September 18, 1998, under the Securities Act of 1933, as
amended, the Securities and Exchange Commission ("SEC") declared effective the
Company's registration statement on Form S-3, as amended (the "Registration
Statement"). The Company registered warrants and warrant shares as required
pursuant to the Warrant Registration Rights Agreement entered into as part of
the Company's 1997 Debt Offering. Under the terms of the Warrant Registration
Rights Agreement, the Company is obligated to use its best efforts to keep the
Registration Statement continuously effective until the earlier of (i) the
expiration of the warrants or (ii) the time when all warrants have been
exercised; provided, however, that during any consecutive 365-day period, the
Company may suspend the effectiveness of the Registration Statement on up to two
occasions for a period of not more than 45 consecutive days in connection with a
possible acquisition, business combination or other development affecting the
Company if the Board of Directors determines that disclosure thereof would not
be in the best interests of the Company. The Company will not receive any
proceeds from the sale of the warrants by the selling warrant holders. To the
extent that any warrants are exercised, the Company will receive the exercise
price for the warrant shares. During 2000, no warrants were sold and no warrant
shares were exercised.

Additionally, the Company registered shares required pursuant to the
Amended Stockholders' Agreement (the "Stockholders' Agreement"). The
Stockholders' Agreement grants piggyback registration rights to certain
stockholders who are parties thereto. Accordingly, whenever the Company proposes
to register any shares of Common Stock (or securities convertible into or
exchangeable for, or options, warrants or other rights to acquire Common Stock)
under the Securities Act of 1933 (other than registrations on Form S-4 or Form
S-8), the eligible parties to the Stockholders' Agreement have the right to
include shares of Common Stock held by them in any such registration. However,
if the inclusion of shares of Common Stock pursuant to the piggyback
registration provisions is reasonably determined by the managing underwriter or
underwriters to materially adversely affect the success of the proposed
offering, the Company may exclude certain shares from the offering. All eligible
parties under the

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Stockholders' Agreement were given notice of their opportunity to piggyback the
offering of their Company Common Stock holdings on the Registration Statement.
The Carlyle Stockholders were the only eligible parties who exercised their
piggyback rights in connection with the registration of warrants and warrant
shares under the Registration Statement. The Carlyle Shareholders offered all
2,723,468 shares beneficially owned by them to the public under the Registration
Statement. During 2000, none of the Carlyle Stockholders' Company Common Stock
was purchased pursuant to the offering.

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ITEM 6. SELECTED FINANCIAL DATA

SELECTED FINANCIAL DATA

The selected financial data set forth for each of the years 1996, 1997,
1998, 1999 and 2000 have been derived from audited financial statements,
including the balance sheets at December 31, 2000 and 1999 and the related
statements of operations, of cash flows and of changes in stockholders' equity
(deficit) for each of the three years in the period ended December 31, 2000 and
notes thereto appearing elsewhere herein. As a result of the adoption of SEC
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements," as a cumulative effect change in accounting principle in 2000,
results for 2000 are not comparable to prior years.

Year ended December 31, 2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
(In thousands, except per share and operating data)

STATEMENT OF OPERATIONS DATA
Revenues:
Product $ 41,971 $ 43,018 $ 16,950 $ 27,187 $ 14,645
Ratable product 12,093 -- -- -- --
Service 48,066 52,655 46,463 27,445 16,056
--------- --------- --------- --------- ---------
Total revenues 102,130 95,673 63,413 54,632 30,701
--------- --------- --------- --------- ---------
Cost of revenues:
Product 30,031 34,752 13,222 22,133 15,099
Ratable product 10,006 -- -- -- --
Service 30,636 26,724 32,419 21,397 11,489
Writedown of inventory -- -- -- -- 1,943
--------- --------- --------- --------- ---------
Total cost of revenues 70,673 61,476 45,641 43,530 28,531
--------- --------- --------- --------- ---------

Gross profit 31,457 34,197 17,772 11,102 2,170
--------- --------- --------- --------- ---------

Expenses:
General and administrative 12,478 14,706 22,875 11,872 7,997
Customer service 7,146 7,770 10,604 11,493 8,089
Sales and marketing 4,980 4,091 7,372 7,723 9,139
Engineering 4,345 2,685 5,399 4,604 3,487
Network services center 1,512 1,437 1,992 1,416 607
Severance and AutoLink termination costs -- (189) 5,357 -- --
Depreciation and amortization 5,907 6,551 5,829 2,684 1,482
--------- --------- --------- --------- ---------
36,368 37,051 59,428 39,792 30,801
--------- --------- --------- --------- ---------

Operating loss (4,911) (2,854) (41,656) (28,690) (28,631)

Interest income 1,371 2,037 4,827 2,500 809
Interest expense (13,368) (13,422) (17,099) (4,857) (1,691)
Other income (expense) 1,569 2,715 -- -- (230)
--------- --------- --------- --------- ---------
Loss before income taxes, extraordinary item
and cumulative effect of accounting change (15,339) (11,524) (53,928) (31,047) (29,743)
Income tax provision -- -- -- -- --
--------- --------- --------- --------- ---------
Loss before extraordinary item and
cumulative effect of accounting change (15,339) (11,524) (53,928) (31,047) (29,743)
Extraordinary item -- -- 18,867 -- (317)
Cumulative effect of accounting change (5,206) -- -- -- --
--------- --------- --------- --------- ---------
Net loss $ (20,545) $ (11,524) $ (35,061) $ (31,047) $ (30,060)
========= ========= ========= ========= =========

Basic and diluted loss per share:
Loss before extraordinary item and cumulative
effect of accounting change $ (0.61) $ (0.46) $ (2.17) $ (1.25) $ (1.39)
Extraordinary item -- -- 0.76 -- (0.01)
Cumulative effect of accounting change (0.20) -- -- -- --
--------- --------- --------- --------- ---------
Net loss $ (0.81) $ (0.46) $ (1.41) $ (1.25) $ (1.40)
========= ========= ========= ========= =========

Weighted average number of shares outstanding 25,291 24,974 24,899 24,864 22,763
========= ========= ========= ========= =========

OTHER FINANCIAL AND OPERATING DATA (unaudited)
Units installed at December 31, 67,336 50,825 47,657 33,122 20,354
Average monthly service revenue per unit ("ARPU") $ 70.08 $ 82.54 $ 99.56 $ 85.54 $ 76.23

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December 31, 2000 1999 1998 1997 1996
-------- -------- --------- -------- -------

BALANCE SHEET DATA

Cash and short-term investments $ 20,641 $ 17,768 $ 26,169 $ 46,486 $19,725
Working capital 20,825 35,660 29,143 64,729 24,605
Network, equipment and software, net 12,851 15,703 20,649 15,482 8,629
Total assets 81,044 74,073 103,126 146,473 42,929
Notes payable 92,484 92,090 91,697 120,956 --
Stockholders' equity (deficit) (58,341) (38,051) (26,791) 8,270 34,664
Capital expenditures $ 2,600 $3,103 $ 10,520 $ 9,499 $ 5,139

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

GENERAL

The Company develops and implements mobile communications solutions, including
integrated voice, data and position location services. The initial application
for the Company's wireless enhanced services has been developed for, and is
marketed and sold to, companies that operate in the long-haul trucking market.
The Company provides long-haul trucking companies with a comprehensive package
of mobile communications and management information services, thereby enabling
its trucking customers to effectively monitor the operations and improve the
performance of their fleets. The initial product application was customized and
has been sold to and installed in the service vehicle fleets of the member
companies of SBC Communications, Inc., pursuant to the service vehicle contract
(the "Service Vehicle Contract" or "Contract"). During the fourth quarter of
1999, the Company entered the mobile asset tracking market with the introduction
of its trailer-tracking product, Trackware. Trackware is currently being tested
by prospective customers. There were no significant revenues from Trackware
during 2000.

The Company earns revenues from service contracts and from related products sold
to customers (for which title generally passes on shipment). In accordance with
previously existing generally accepted accounting principles, the Company
generally recognized revenues from product sales and licensing of product
software at the time the mobile units were shipped to customers. During 2000, as
a result of new interpretations of generally accepted accounting principles by
the Securities and Exchange Commission (the "SEC"), through issuance of SEC
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101") the Company was required to change its accounting policy for product
revenue recognition.

The Company sells mobile communications systems and related enhanced mobile
communications and management information services that are provided though the
Company's proprietary network. With respect to the Series 5000 mobile units sold
to the Company's long-haul trucking customers, these units function only when
used in conjunction with the Company's proprietary network. Accordingly, in
accordance with these new interpretations, the Company has changed its product
revenue recognition policy for sales to long-haul trucking customers, to defer
product revenue previously recognized upon shipment and instead recognize such
revenue ratably over the longer of the term of the service contract or the
estimated life of the customer relationship. Such terms range from three to ten
years. The product costs associated with these revenues are also deferred and
amortized over such period. The product revenues and related costs are portrayed
in the accompanying Consolidated Statements of Operations as "Ratable Product
Revenues" and "Ratable Product Costs," respectively.

Product revenues from sales of mobile units pursuant to the "Service Vehicle
Contract", are recognized currently, after a brief acceptance period, because
these mobile units have different functionality that permit their use on other
than the Company's proprietary network.

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As a result of the change in accounting principle described above, for which
restatement of prior years is not permitted, the Company's 2000 revenues and
cost of revenues are not directly comparable to prior years.

During the third quarter of 1998 the Company announced that it was: (i) halting
the development of its AutoLink(R) service, and (ii) implementing a number of
key management and structural changes designed to more closely align the
Company's expenditures with its revenues. As a result of these announcements,
the Company reduced its workforce by approximately 25% and recorded charges of
$2,481,000 for obligations under employment contracts and severance payments to
terminated employees, and $2,431,000 to recognize asset impairments and record
estimated amounts to be incurred to extinguish contractual obligations
associated with the AutoLink(R) program.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2000, COMPARED TO YEAR ENDED DECEMBER 31, 1999

Total revenues increased 6.7% to $102.1 million in 2000 from $95.7 million in
1999. Comparison of product revenues year over year is not meaningful because of
the accounting principle change discussed under "General" above. Product
revenues in 2000 include only Service Vehicle Contract revenues while 1999
includes all revenues from the sale of mobile units. "Ratable Product Revenue"
in 2000 reflects the current year recognition of revenues from units shipped in
prior years. In accordance with the new accounting principle for product revenue
mandated in 2000, such revenues are deferred upon product shipment and
recognized ratably over the greater of the term of the service agreement or the
estimated life of the customer relationship. Service revenues decreased 8.7%
from $52.7 million in 1999 to $48.1 million in 2000, due primarily to lower
average monthly revenue per mobile unit. While the average installed base of
mobile units increased 7.9% from 1999 to 2000, the average monthly revenue per
mobile unit decreased 15.1% to $70.08 in 2000 from $82.54 in 1999, primarily due
to the increasing proportion of service vehicles in the installed base and
reduced personal calling revenue. Average revenue for service vehicles is
significantly less than that of long-haul trucking because of different product
functionality. The installed base of mobile units increased to 67,336 at
December 31, 2000 from 50,825 at December 31, 1999. The increase in the
installed base reflects additional units installed under the Service Vehicle
Contract more than offsetting a reduction in the installed base for long-haul
trucking. The reduction in the installed base for long-haul trucking is
primarily due to one customer, with an aggregate installed base of
approximately 2,000 units, that was deinstalled due to its inability to pay
amounts owed to the Company.

Service gross profit margin was 36.3% in 2000 compared to 49.2% in 1999. As more
fully described in Note 7 to the accompanying consolidated financial statements,
during 1999 the Company recorded $4.4 million of credits due from cellular
carriers related to prior years. Excluding the effect of these credits, the 1999
service gross profit margin would have been 40.9%. The decrease in service gross
profit margin from 40.9% in 1999 to 36.3% in 2000 is primarily the result of (i)
the significant increase during 2000 of post-sale support and maintenance
activity and (ii) the negative impact in 2000 of a temporary increase in
long-distance airtime rates during the transition period to a new contract.

Product gross profit margin, excluding "Ratable Product" was 28.4% in 2000,
compared to 19.2% in 1999, which includes a $3.5 million warranty provision that
is discussed in more detail in Note 7 to the accompanying consolidated financial
statements. Excluding the effect of this $3.5 million charge, 1999 margin would
have been 27.4%.

Operating expenses decreased 1.8% to $36.4 million in 2000 from $37.1 million in
1999. This decrease is primarily due to a $2.8 million decrease in bad debt
expense, offset by increases in sales and marketing expenses related to
TrackWare, and increased research and development expenditures. Bad debt expense
in 1999 was unusually high as a result of bad debt provisions recorded for
former customers. Bad debt expense in 2000 was unusually low as a result of
adjustments made to reduce the reserve for bad debts in recognition of the
improved credit profile of the customer base.

Interest income was $1.4 million in 2000, compared to $2.0 million in 1999,
reflecting the lower average outstanding balances during 2000 in cash,
short-term investments, and pledged securities.

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32

Other income in 2000 primarily consists of the proceeds from the settlement of
litigation, net of related expenses. Other income in 1999 reflects the gain from
the settlement of a customer contract, and the proceeds from settlement of
litigation, net of related expenses.

YEAR ENDED DECEMBER 31, 1999, COMPARED TO YEAR ENDED DECEMBER 31, 1998

Total revenues increased 50.9% to $95.7 million in 1999 from $63.4 million in
1998. Product revenues increased 153.8% to $43.0 million in 1999 from $16.9
million in 1998. The increase in product revenues is a result of recognizing
$29.7 million of revenues on the service vehicle contract entered into during
1998 that required delivery of mobile units coupled with development and
delivery of additional features over the term of the installation period.
Service revenues increased 13.3% to $52.7 million in 1999 from $46.5 million in
1998 due to the increased installed base of mobile units. The average installed
base of mobile units during 1999 increased 35.4% from the 1998 average installed
base. Average monthly revenue per mobile unit decreased 17.1% to $82.54 in 1999
from $99.56 in 1998. The decrease was attributable to: (i) the decision in the
second quarter of 1998 to cancel the personal calling accounts promotion and
strengthen credit policies related to personal calling accounts, thereby
reducing personal calling revenues; and (ii) the increasing proportion of
service vehicles in the installed base. Average revenue for service vehicles is
less than that of long-haul trucking because of different product functionality.

Product gross profit margin was 19.2% in 1999, compared to 22.0% in 1998 because
of the $3.5 million warranty provision that is discussed in more detail in Note
7 to the accompanying financial statements. Excluding the effect of this $3.5
million charge, 1999 product gross profit margin would have been 27.4%.

Service gross profit margin was 49.2% in 1999, compared to 30.2% in 1998. As
more fully described in Note 7 to the accompanying financial statements, during
1999 the Company recorded $4.4 million of credits related to a contract
settlement. Excluding the effect of these credits, service gross profit margin
would have been 40.9%. The increase in service margin from 30.2% to 40.9% is
primarily a result of: (i) the additional access fees generated by the 35.4%
increase in the average installed base of mobile units; (ii) the effect of a
new, lower-cost contract with one of the Company's major vendors; and (iii) the
effect of technical adjustments and modifications implemented to reduce the
amount of airtime costs incurred that are not billable to customers.

Operating expenses decreased 37.7% to $37.1 million in 1999 from $59.4 million
in 1998. This decrease is primarily as a result of: (i) the restructuring of
operations implemented in the second and third quarters of 1998; and (ii) 1998
expenses being unusually high as the result of charges aggregating $11.0 million
for bad debt expense, sales tax liability, and severance and AutoLink(R)
termination costs. Excluding these charges from 1998, the decrease in operating
expenses from 1998 would have been 23.5%. The average number of employees
decreased 25.0% in 1999 from 1998. Sales and marketing expense and engineering
expense decreased significantly because 1998 included significant advertising
and development costs associated with products that were discontinued in the
third quarter of 1998.

Interest income was $2.0 million in 1999 compared to $4.8 million in 1998.
Interest expense was $13.4 million in 1999 compared to $17.1 million in 1998.
The change in these relationships reflects the lower average outstanding
balances during 1999 in cash and short-term investments, pledged securities and
Senior Notes payable.

Other income in 1999 reflects the gain from the settlement of a customer
contract, and the proceeds from the settlement of litigation , net of related
expenses, as more fully described in Note 7 to the accompanying Consolidated
Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

The Company has incurred significant operating losses since inception and has a
stockholders' deficit of approximately $58.3 million at December 31, 2000.
Beginning March 15, 2001, the Company is obligated to begin paying substantial
semi-annual cash interest payments on its 13.75% Senior Notes which were issued
in September 1997. Interest payments due on the Senior Notes through September
15, 2000, had previously been funded through an escrow arrangement created upon
closing of the Senior Notes. The Company currently believes it will have the
cash resources available to make the March 15, 2001 interest payment, but absent
the pending equity and debt

29
33

transactions described in Note 2 to the Consolidated Financial Statements (which
are contingent upon a number of factors also described in Note 2), the Company
has limited financial resources available to support its ongoing operations,
fund its product development program to develop and market new competitive
tracking technology, and pay its obligations as they become due, including the
maturities of the Senior Notes and associated interest payments.

The factors noted in the above paragraph raise substantial doubt concerning the
ability of the Company to continue as a going concern. The financial statements
do not include any adjustments relating to the recoverability and classification
of asset carrying amounts or the amount and classification of liabilities that
might result should the Company be unable to continue as a going concern. The
ability of the Company to continue as a going concern is dependent upon the
ongoing support of its stockholders, creditors, and certain key customers, the
consummation of the pending equity and debt transactions (or the closing of
similar debt or equity transactions), and its ability to successfully develop
and market its tracking products and technology at economically feasible levels
in the highly competitive and rapidly changing telecommunications industry.

As discussed in Note 2 to the Consolidated Financial Statements, the Company has
pending equity and debt transactions which the Company believes, if consummated,
will provide adequate financial resources to support the Company until it is
able to achieve a successful level of operations. The Company also believes
acquisition of the licensing rights associated with the pending equity
transaction will provide the Company significant marketing potential of the
licensed tracking technology, enhancing future results of operations and
reducing the need for capital resources to develop similar tracking technology.
There is no assurance, however, that the Company will be able to close the
pending debt and equity transactions or that such financial resources provided
by the pending transactions, if closed, will be sufficient to support the
Company until it reaches a successful level of operations. There is also no
assurance that the Company would be able to successfully develop a market for
the acquired licensed tracking technology to achieve a successful level of
future operations. If the Company is unable to close the pending equity and debt
transactions, it is likely that it will be unable to maintain its current NASDAQ
listing (see Note 3 to the Consolidated Financial Statements). If the Company
cannot maintain its NASDAQ listing, its ability to obtain the required levels of
equity or debt financing from other sources to support its operations and fund
payments of its obligations as they become due will be significantly reduced
and it may have a material adverse effect on the business, financial condition
and results of operations of the Company.

ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company does not have any material exposure to market risk associated with
its cash and short-term investments. The Company's Senior Notes payable are at a
fixed rate and, thus, are not exposed to interest rate risk.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company's financial statements, Schedule II - Valuation and Qualifying
Accounts, and reports of independent public accountants, are included on pages
F-1 through F-20 and pages S-1 through S-2.

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

None.

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding Directors and Executive Officers is incorporated
by reference to the section entitled "Election of Directors" in the Registrant's
definitive Proxy Statement to be filed with the Securities and Exchange
Commission in connection with the Annual Meeting of Stockholders to be currently
anticipated to be held on April 2, 2001 (the "Proxy Statement").

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference from
the Proxy Statement under the heading "Executive Compensation."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is incorporated by reference from
the Proxy Statement under the heading "Security Ownership of Certain Beneficial
Owners and Management."

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated by reference from
the Proxy Statement under the heading "Certain Transactions."

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35

PART IV

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

Page Number

(a) Documents filed as part of the report:

(1) Reports of Independent Public Accountants ...................................... F-1-2

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

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

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

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

Notes to Consolidated Financial Statements ..................................... F-7

(2) Financial Statement Schedules

Reports of Independent Public Accountants on Financial Statement Schedules ..... S-1

Schedule II-Valuation and Qualifying Accounts .................................. S-2

Financial statement schedules other than those listed above have been omitted
because they are either not required, not applicable or the information is
otherwise included.

(3) Exhibits

INDEX TO EXHIBITS

EXHIBIT
NUMBER TITLE

3.1 - Certificate of Incorporation of the Company, as amended.(1)(9)

3.2 - Amended and Restated By-Laws of the Company.(13)

4.1 - Specimen of certificate representing Common Stock, $.01 par
value, of the Company.(1)

4.2 - Warrant Certificate, dated September 27, 1996, issued to SBW.(7)

4.3 - Recapitalization Agreement, dated September 27, 1996, by and
among the Company, the Erin Mills Stockholders, the Carlyle
Stockholders and the other persons named therein.(7)

4.4 - Amended and Restated Stockholders Agreement, dated September 27,
1996, by and among the Company, SBW, the Erin Mills Stockholders,
the Carlyle Stockholders, the By-Word Stockholders and the other
persons named therein.(7)

4.5 - Indenture dated September 23, 1997 by and among the Company,
HighwayMaster Corporation and Texas Commerce Bank, National
Association.(12)

4.6 - Pledge Agreement dated September 23, 1997, by and among the
Company, Bear, Stearns & Co. Inc. and Smith Barney Inc.(12)

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4.7 - Registration Rights Agreement dated September 23, 1997, by and
among the Company, HighwayMaster Corporation, Bear, Stearns & Co.
Inc. and Smith Barney Inc.(12)

4.8 - Warrant Agreement dated September 23, 1997, by and among the
Company, Bear, Stearns & Co. Inc. and Smith Barney Inc.(12)

4.9 - Warrant Registration Rights Agreement dated September 23, 1997,
by and among the Company, Bear, Stearns & Co. Inc. and Smith
Barney, Inc.(12)

10.1 - License Agreement, dated April 23, 1992, by and between Voice
Control Systems and the Company (as successor to By-Word
Technologies, Inc.)(1)

10.2 - Second Amendment to Employment Agreement, dated September 1,
1998, by and between HighwayMaster Corporation and William C.
Saunders.(16)

10.3 - Agreement and General Release, dated September 30, 1998, by and
between HighwayMaster Corporation and William C. Kennedy, Jr.(15)

10.4 - Release of HighwayMaster Communications, Inc. and HighwayMaster
Corporation by William C. Saunders, dated December 15, 1998.(16)

10.5 - Release of William C. Saunders by HighwayMaster Communications,
Inc. and HighwayMaster Corporation, dated December 15, 1998.(16)

10.6 - Amended and Restated 1994 Stock Option Plan of the Company, dated
February 4, 1994, as amended.(1)(5)(6)

10.7 - Purchase Agreement, dated September 27, 1996, between the Company
and SBW.(7)

10.8 - Mobile Communications (Voice and Data) Services Agreement, dated
as of July 15, 1993, between the Company and EDS Personal
Communications Corporation.(1)(2)

10.9 - Stock Option Agreement, dated June 22, 1998, by and between the
Company and John Stupka.(16)

10.10 - Services Agreement, dated March 20, 1996, between the Company and
GTE-Mobile Communications Service Corporation.(3)(4)

10.11 - Acknowledgment by William C. Saunders dated December 15, 1998.
(16)

10.12 - Amendment dated November 16, 1995 to that certain Mobile
Communications (Voice and Data) Services Agreement, dated as of
July 15, 1993, between the Company and EDS Personal
Communications Corporation.(3)(4)

10.13 - Mutual Separation and Release, dated December 22, 1998, by and
between HighwayMaster Corporation and Gordon D. Quick.(16)

10.14 - Product Development Agreement, dated December 21, 1995, between
HighwayMaster Corporation and IEX Corporation.(3)(4)

10.15 - Technical Services Agreement, dated September 27, 1996, between
HighwayMaster Corporation and Southwestern Bell Wireless
Holdings, Inc.(7)

10.16 - Letter Agreement, dated February 19, 1996, between HighwayMaster
Corporation and IEX Corporation.(3)

10.17 - Form of Adoption Agreement, Regional Prototype Cash or Deferred
Profit-Sharing Plan and Trust Sponsored by McKay Hochman Co.,
Inc., relating to the HighwayMaster Corporation 401(k) Plan.(1)

10.18 - February 27, 1997 Addendum to Original Employment Letter, dated
September 19, 1997 by and between the HighwayMaster Corporation
and Robert LaMere.(16)

10.19 - Software Transfer Agreement, dated April 25, 1997, between
HighwayMaster Corporation and Burlington Motor Carriers,
Inc.(9)(10)

10.20 - Employment Agreement, dated June 3, 1998, by and between
HighwayMaster Corporation and Todd A. Felker.(16)

10.21 - Employment Agreement, dated June 3, 1998, by and between
HighwayMaster Corporation and William McCausland.(16)

10.22 - Employment Agreement, dated May 29, 1998, by and between
HighwayMaster Corporation and Jana Ahlfinger Bell.(14)

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37

10.23 - Lease Agreement, dated March 20, 1998, between HighwayMaster
Corporation and Cardinal Collins Tech Center, Inc.(15)

10.24 - First Amendment to Employment Agreement, dated September 15,
1998, by and between HighwayMaster Corporation and Jana A.
Bell.(16)

10.25 - Employment Agreement, dated November 24, 1998, by and between
HighwayMaster Corporation and Michael Smith.(16)

10.26 - September 18, 1998 Amended and Restated Stock Option Agreement of
May 29, 1998 by and between the Company and Jana Ahlfinger
Bell.(16)

10.27 - Stock Option Agreement, dated August 12, 1998, by and between the
Company and Jana Ahlfinger Bell.(16)

10.28 - Stock Option Agreement, dated September 18, 1998, by and between
the Company and Jana Ahlfinger Bell.(16)

10.29 - September 18, 1998 Amended and Restated Stock Option Agreement of
February 29, 1996, by and between the Company and William H.
McCausland.(16)

10.30 - Stock Option Agreement, dated September 18, 1998, by and between
the Company and William H. McCausland.(16)

10.31 - September 18, 1998 Amended and Restated Stock Option Agreement of
April 25, 1997, by and between the Company and Robert LaMere.(16)

10.32 - September 18, 1998 Amended and Restated Stock Option Agreement of
June 3, 1998, by and between the Company and Todd A. Felker.(16)

10.33 - Stock Option Agreement dated November 24, 1998, by and between
the Company and Michael Smith.(16)

10.34 - Stock Option Agreement, dated April 4, 1995, by and between the
Company and Terry Parker.(16)

10.35 - Agreement No. 980427 between Southwestern Bell Telephone Company,
Pacific Bell, Nevada Bell, Southern New England Telephone and
HighwayMaster Corporation executed on January 13, 1999.(17)(18)

10.36 - Administrative Carrier Agreement entered into between
HighwayMaster Corporation and Southwestern Bell Mobile Systems,
Inc. on March 30, 1999.(17)(18)

10.37 - Addendum to Agreement entered into between HighwayMaster
Corporation and International Telecommunications Data Systems,
Inc. on February 4, 1999.(17)(18)

10.38 - Second Addendum to Agreement entered into between HighwayMaster
Corporation and International Telecommunication Data Systems,
Inc. on February 4, 1999.(17)(18)

10.39 - Manufacturing and Equipment Purchase Agreement entered into
between HighwayMaster Corporation and Wireless Link Corporation
on March 9, 1999.(17)(18)

10.40 - Agreement entered into between HighwayMaster Corporation and
Cellemetry LLC on January 19, 1999.(17)(18)

10.41 - Agreement entered into between HighwayMaster Corporation and
Cellemetry LLC on January 19, 1999.(17)(18)

10.42 - Agreement entered into between HighwayMaster Corporation and
Cellemetry LLC on January 19, 1999.(17)(18)

10.43 - Agreement entered into between HighwayMaster Corporation and
Cellemetry LLC on January 7, 1999.(17)(18)

10.44 - Stock Option Agreement dated June 24, 1999, by and between the
Company and J. Raymond Bilbao.(19)

10.45 - Stock Option Agreement dated June 24, 1999, by and between the
Company and Marshall Lamm.(19)

10.46 - Stock Option Agreement dated June 14, 1999, by and between the
Company and Marc A. Bringman.(19)

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38
10.47 - Transition Agreement entered into between GTE Wireless Services
Corporation and HighwayMaster Corporation on April 30,
1999.(19)(20)

10.48 - Fleet-on-Track Services Agreement entered into between GTE
Telecommunications Services Incorporated and HighwayMaster
Corporation on May 3, 1999.(19)(20)

10.49 - Confidential Memorandum of Understanding entered into between
Criticom International Corp. and HighwayMaster Corporation on
April 16, 1999.(19)(20)

10.50 - Stock Option Agreement dated September 3, 1999, by and between
the Company and J. Raymond Bilbao.(21)

10.51 - Stock Option Agreement dated September 3, 1999, by and between
the Company and Todd Felker.(21)

10.52 - Stock Option Agreement dated September 3, 1999, by and between
the Company and C. Marshall Lamm.(21)

10.53 - Stock Option Agreement dated September 3, 1999, by and between
the Company and William H. McCausland.(21)

10.54 - Stock Option Agreement dated September 3, 1999, by and between
the Company and Pierre H. Parent.(21)

10.55 - Stock Option Agreement dated September 3, 1999, by and between
the Company and W. Michael Smith.(21)

10.56 - Stock Option Agreement dated September 3, 1999, by and between
the Company and Robert W. LaMere.(21)

10.57 - Stock Option Agreement dated September 3, 1999 by and between the
Company and Stephen P. Tacke.(21)

10.58 - Employment Agreement, dated March 13, 2000, by and between the
Company and W. Michael Smith.(22)

10.59 - Employment Agreement, dated March 13, 2000, by and between the
Company and J. Raymond Bilbao.(22)

10.60 - Employment Agreement, dated March 13, 2000, by and between the
Company and Todd A. Felker.(22)

10.61 - Employment Agreement, dated March 13, 2000, by and between the
Company and Marshall Lamm.(22)

10.62 - Employment Agreement, dated March 13, 2000, by and between the
Company and Pierre Parent.(22)

10.63 - Limited Liability Company Agreement of HighwayMaster of Canada,
LLC executed March 3, 2000.(22)

10.64 - Investor Relations Services Agreement, dated March 31, 2000, by
and between the Company and N.D. Hamilton Associates, Inc.(22)

10.65 - Employment Agreement, dated May 31, 2000, by and between the
Company and Jana A. Bell.(24)

10.66 - Employment Agreement, dated June 6, 2000, by and between the
Company and Robert W. LaMere.(24)

10.67 - Monitoring Services Agreement dated May 25, 2000, by and between
the Company and Criticom International Corporation.(23)(24)

10.68 - Commercial Lease Agreement dated April 26, 2000 by and between
the Company and 10th Street Business Park, Ltd.(24)

10.69 - Special Customer Arrangement for MCI WORLDCOM On-Net Services
dated October 23, 2000 by and between the Company and MCI
WORLDCOM.(25)(26)

23.1 - Consent of Arthur Andersen LLP(26)

23.2 - Consent of PricewaterhouseCoopers LLP(26)

- ----------

35

39

(1) Filed in connection with the Company's Registration Statement on Form
S-1, as amended (No. 33-91486), effective June 22, 1995.

(2) Certain confidential portions deleted pursuant to Order Granting
Application for Confidential Treatment issued in connection with
Registration Statement on Form S-1 (No. 33-91486) effective June 22,
1995.

(3) Filed in connection with the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995.

(4) Certain confidential portions deleted pursuant to Application for
Confidential Treatment filed in connection with the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995.

(5) Indicates management or compensatory plan or arrangement required to be
identified pursuant to Item 14(a)(4).

(6) Filed in connection with the Company's Form 10-Q Quarterly Report for the
quarterly period ended June 30, 1996.

(7) Filed in connection with the Company's Current Report on Form 8-K filed
on October 7, 1996.

(8) Filed in connection with the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996.

(9) Filed in connection with the Company's Form 10-Q Quarterly Report for the
quarterly period ended March 31, 1997.

(10) Certain confidential portions deleted pursuant to Order Granting
Application for Confidential Treatment issued in connection with the
Company's Form 10-Q Quarterly Report for the quarterly period ended March
31, 1997.

(11) Filed in connection with the Company's Form 10-Q Quarterly Report for the
quarterly period ended June 30, 1997.

(12) Filed in connection with the Company's Registration Statement on Form
S-4, as amended (No. 333-38361).

(13) Filed in connection with the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997.

(14) Filed in connection with the Company's Form 10-Q Quarterly Report for the
quarterly period ended June 30, 1998.

(15) Filed in connection with the Company's Form 10-Q Quarterly Report for the
quarterly period ended September 30, 1998.

(16) Filed in connection with the Company's Form 10-K fiscal year ended
December 31, 1998.

(17) Filed in connection with the Company's Form 10-Q Quarterly Report for the
quarterly period ended March 31, 1999.

(18) Certain confidential portions deleted pursuant to Order Granting
Application for Confidential Treatment issued June 22, 1999 in connection
with the Company's Form 10-Q Quarterly Report for the quarterly period
ended March 31, 1999.

(19) Filed in connection with the Company's Form 10-Q Quarterly Report for the
quarterly period ended June 30, 1999.

(20) Certain confidential portions deleted pursuant to letter granting
application for confidential treatment issued October 10, 1999 in
connection with the Company's Form 10-Q Quarterly Report for the
quarterly period ended June 30, 1999.

(21) Filed in connection with the Company's Form 10-Q Quarterly Report for the
quarterly period ended September 30, 1999.

(22) Filed in connection with the Company's Form 10-Q Quarterly Report for the
quarterly period ended March 31, 2000.

(23) Certain confidential portions deleted pursuant to Order Granting
Application for Confidential Treatment issued December 5, 2000 in
connection with the Company's Form 10-Q Quarterly Report for the
quarterly period ended June 30, 2000.

(24) Filed in connection with the Company's Form 10-Q Quarterly Report for the
quarterly period ended June 30, 2000.

(25) Certain confidential portions deleted pursuant to Application for
Confidential Treatment filed on February 27, 2001.

(26) Filed herewith.

36

40

SIGNATURES

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

February 27, 2001

@TRACK COMMUNICATIONS, INC.

By: /s/ JANA AHLFINGER BELL
-------------------------------------
Jana Ahlfinger Bell,
President and Chief Executive Officer

37
41

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report on Form 10-K for the fiscal year ended December 31, 2000, has been
signed below by the following persons on behalf of the Registrant in the
capacities and on the dates indicated.

Signature Title Date

/s/ Jana Ahlfinger Bell President, Chief Executive Officer, and February 27, 2001
- ---------------------------------------- Director (Principal Executive Officer)
Jana Ahlfinger Bell

Executive Vice President and February 27, 2001
/s/ W. Michael Smith Chief Financial Officer
- ---------------------------------------- (Principal Financial Officer)
W. Michael Smith

Vice President and Controller February 27, 2001
/s/ Stephen P. Tacke (Principal Accounting Officer)
- ----------------------------------------
Stephen P. Tacke

/s/ Stephen L. Greaves Director February 27, 2001
- ----------------------------------------
Stephen L. Greaves

/s/ Gerry C. Quinn Director February 27, 2001
- ----------------------------------------
Gerry C. Quinn

/s/ John T. Stupka Director February 27, 2001
- ----------------------------------------
John T. Stupka

/s/ Dr. William P. Osborne Director February 27, 2001
- ----------------------------------------
Dr. William P. Osborne

38

42
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
@Track Communications, Inc.:

We have audited the accompanying consolidated balance sheets of @Track
Communications, Inc. (formerly HighwayMaster Communications, Inc.) and its
subsidiary (a Delaware corporation, the "Company") as of December 31, 2000 and
1999, and the related consolidated statements of operations, cash flows, and
stockholders' equity (deficit) for the years then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of @Track
Communications, Inc. and its subsidiary as of December 31, 2000 and 1999, and
the results of their operations and cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States.

Effective January 1, 2000, the Company adopted Staff Accounting Bulletin No.
101, "Revenue Recognition in Financial Statements," as described in Note 5.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As reflected in the
accompanying consolidated financial statements, the Company has incurred net
losses for the years ended December 31, 2000, 1999, and 1998, has a
stockholders' deficit of $58.3 million at December 31, 2000, and has substantial
semi-annual cash interest payments due beginning March 15, 2001. These factors,
among others, as discussed in Note 4, raise substantial doubt concerning the
ability of the Company to continue as a going concern. Management's plans in
regard to these matters, including a description of certain pending equity and
debt transactions, are described in Note 2. The consolidated financial
statements do not include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount and classification of
liabilities that might result should the Company be unable to continue as a
going concern.

ARTHUR ANDERSEN LLP

Dallas, Texas
February 22, 2001

F-1

43

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
@Track Communications, Inc.

In our opinion, the accompanying consolidated statements of operations, cash
flows and changes in stockholders' equity (deficit) for the year ended December
31, 1998 present fairly, in all material respects, the results of operations and
cash flows of @Track Communications, Inc. (formerly HighwayMaster
Communications, Inc.) and its subsidiary (the "Company") for the year ended
December 13, 1998, in conformity with accounting principles generally accepted
in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with auditing standards generally accepted in
the United States of America which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion. We have not audited the
consolidated financial statements of @Track Communications, Inc. for any period
subsequent to December 31, 1998.

PRICEWATERHOUSECOOPERS LLP
Dallas, Texas
February 16, 1999

F-2
44

@TRACK COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(in thousands, except share information)

December 31, December 31,
2000 1999
------------ ------------

ASSETS
Current assets:
Cash and short-term investments $ 20,641 $ 17,768
Accounts receivable, net of allowance for doubtful accounts
of $7,305 and $7,448, respectively 12,738 13,341
Inventories 13,216 9,292
Pledged securities -- 12,705
Deferred product costs - current portion 7,406 --
Other current assets 1,759 2,588
------------ ------------
Total current assets 55,760 55,694
Network, equipment and software, net of accumulated depreciation
and amortization of $19,295 and $13,842, respectively 12,851 15,703
Deferred product costs - non-current portion 9,770 --
Other assets, net of accumulated amortization
of $1,469 and $1,017, respectively 2,663 2,676
------------ ------------
Total assets $ 81,044 $ 74,073
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 7,992 $ 2,431
Telecommunications costs payable 5,358 4,462
Accrued interest payable 3,784 3,784
Deferred product revenues - current portion 8,975 --
Other current liabilities 8,826 9,357
------------ ------------
Total current liabilities 34,935 20,034
Deferred product revenues - non-current portion 11,966 --
Senior notes payable 92,484 92,090
------------ ------------
Total liabilities 139,385 112,124
------------ ------------

Commitments and contingencies (Note 17)

Stockholders' equity (deficit):
Series D preferred stock, $0.01 par value, 1,000 shares authorized; 1,000
shares issued and outstanding at December 31, 1999 -- --
Common stock, $0.01 par value, 50,000,000 shares authorized;
25,638,826 and 25,432,210 shares issued; 25,326,829 and 25,120,213
shares outstanding at December 31, 2000 and 1999, respectively 256 255
Common stock - Class B, $0.01 par value, 1,000 shares authorized;
1,000 shares issued and outstanding at December 31, 2000 -- --
Additional paid-in capital 149,996 149,742
Accumulated deficit (208,046) (187,501)
Treasury stock, 311,997 shares, at cost (547) (547)
------------ ------------
Total stockholders' equity (deficit) (58,341) (38,051)
------------ ------------
Total liabilities and stockholders' equity (deficit) $ 81,044 $ 74,073
============ ============

See accompanying notes to financial statements.

F-3

45

@TRACK COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share)

Year ended December 31,
--------------------------------------------------
2000 1999 1998
------------ ------------ ------------

Revenues (Note 5):
Product $ 41,971 $ 43,018 $ 16,950
Ratable product 12,093 -- --
Service 48,066 52,655 46,463
------------ ------------ ------------
Total revenues 102,130 95,673 63,413
------------ ------------ ------------
Cost of revenues (Notes 5 and 7):
Product 30,031 34,752 13,222
Ratable product 10,006 -- --
Service 30,636 26,724 32,419
------------ ------------ ------------
Total cost of revenues 70,673 61,476 45,641
------------ ------------ ------------

Gross profit 31,457 34,197 17,772
------------ ------------ ------------

Expenses:
General and administrative 12,478 14,706 22,875
Customer service 7,146 7,770 10,604
Sales and marketing 4,980 4,091 7,372
Engineering 4,345 2,685 5,399
Network services center 1,512 1,437 1,992
Severance and AutoLink(R) termination cost -- (189) 5,357
Depreciation and amortization 5,907 6,551 5,829
------------ ------------ ------------
36,368 37,051 59,428
------------ ------------ ------------

Operating loss (4,911) (2,854) (41,656)

Interest income 1,371 2,037 4,827
Interest expense (13,368) (13,422) (17,099)
Other income (Note 7) 1,569 2,715 --
------------ ------------ ------------
Loss before income taxes, extraordinary item and
cumulative effect of accounting change (15,339) (11,524) (53,928)
Income tax provision -- -- --
------------ ------------ ------------
Loss before extraordinary item and
cumulative effect of accounting change (15,339) (11,524) (53,928)
Extraordinary item -- -- 18,867
Cumulative effect of accounting change (5,206) -- --
------------ ------------ ------------
Net loss $ (20,545) $ (11,524) $ (35,061)
============ ============ ============

Basic and diluted loss per share:
Loss before extraordinary item and cumulative
effect of accounting change $ (0.61) $ (0.46) $ (2.17)
Extraordinary item -- -- 0.76
Cumulative effect of accounting change (0.20) -- --
------------ ------------ ------------
Net loss $ (0.81) $ (0.46) $ (1.41)
============ ============ ============

Weighted average number of shares outstanding
Basic 25,291 24,974 24,899
============ ============ ============
Diluted 25,291 24,974 24,899
============ ============ ============

See accompanying notes to financial statements.

F-4

46

@TRACK COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

Year ended December 31,
--------------------------------------------------
2000 1999 1998
------------ ------------ ------------

Cash flows from operating activities:
Net loss $ (20,545) $ (11,524) $ (35,061)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization 5,907 6,551 5,829
Amortization of discount on notes payable 394 393 503
Extraordinary item -- -- (18,867)
Provision for bad debts 1,477 4,294 6,650
(Increase) in accounts receivable (874) (3,050) (7,272)
(Increase) decrease in inventory (3,924) 3,629 (9,776)
(Increase) decrease in deferred product costs (17,176) -- --
Increase (decrease) in accounts payable 5,561 (8,931) 5,100
Increase (decrease) in deferred product revenues 20,941 -- --
Increase (decrease) in accrued expenses and other current liabilities 365 (9,255) 15,873
Net book value of equipment retired -- 1,950 --
Other 387 (1,702) 1,409
------------ ------------ ------------
Net cash used in operating activities (7,487) (17,645) (35,612)
------------ ------------ ------------

Cash flows from investing activities:
Additions to network and equipment (1,581) (2,329) (9,202)
Additions to capitalized software (1,019) (774) (1,318)
Liquidation of pledged securities 12,705 12,083 14,553
Decrease in temporary investments -- -- 13,626
(Increase) decrease in short-term investments 12,601 (2,893) 10,001
------------ ------------ ------------
Net cash provided by investing activities 22,706 6,087 27,660
------------ ------------ ------------

Cash flows from financing activities:
Purchase of senior notes -- -- (10,427)
Release of pledged securities allocable to retired senior notes -- -- 8,063
Proceeds from exercise of stock options 255 264 --
------------ ------------ ------------
Net cash provided by (used in) financing activities 255 264 (2,364)
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents 15,474 (11,294) (10,316)
Cash and cash equivalents, beginning of year 5,167 16,461 26,777
------------ ------------ ------------
Cash and cash equivalents, end of year 20,641 5,167 16,461
Short-term investments -- 12,601 9,708
------------ ------------ ------------
Cash and short-term investments $ 20,641 $ 17,768 $ 26,169
============ ============ ============

Supplemental cash flow information:
Interest paid $ 12,974 $ 12,974 $ 16,806
============ ============ ============

See accompanying notes to financial statements.

F-5

47

@TRACK COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands, except share information)

Preferred Stock Common Stock
--------------------------- --------------------------
Shares Amount Shares Amount
---------- ---------- ---------- ----------

Stockholders' equity (deficit) at December 31, 1997 1,000 $ -- 25,210,983 $ 252
Net loss for year
---------- ---------- ---------- ----------
Stockholders' equity (deficit) at December 31, 1998 1,000 -- 25,210,983 252
Exercise of stock options 221,227 3
Net loss for year
---------- ---------- ---------- ----------
Stockholders' equity (deficit) at December 31, 1999 1,000 -- 25,432,210 255
Exercise of stock options 206,616 1
Conversion of Series D Preferred Stock to
Class B Common Stock (1,000) --
Net loss for year
---------- ---------- ---------- ----------
Stockholders' equity (deficit) at December 31, 2000 -- $ -- 25,638,826 $ 256
========== ========== ========== ==========

Common Stock - Class B Additional Treasury Stock
-------------------------- Paid-in --------------------------
Shares Amount Capital Shares Amount
---------- ---------- ---------- ---------- ----------

Stockholders' equity (deficit) at December 31, 1997 -- $ -- $ 149,481 311,997 $ (547)
Net loss for year
---------- ---------- ---------- ---------- ----------
Stockholders' equity (deficit) at December 31, 1998 -- -- 149,481 311,997 (547)
Exercise of stock options 261
Net loss for year
---------- ---------- ---------- ---------- ----------
Stockholders' equity (deficit) at December 31, 1999 -- -- 149,742 311,997 (547)
Exercise of stock options 254
Conversion of Series D Preferred Stock to
Class B Common Stock 1,000 --
Net loss for year
---------- ---------- ---------- ---------- ----------
Stockholders' equity (deficit) at December 31, 2000 1,000 $ -- $ 149,996 311,997 $ (547)
========== ========== ========== ========== ==========

Accumulated
Deficit Total
----------- ----------

Stockholders' equity (deficit) at December 31, 1997 $ (140,916) $ 8,270
Net loss for year (35,061) (35,061)
---------- ----------
Stockholders' equity (deficit) at December 31, 1998 (175,977) (26,791)
Exercise of stock options 264
Net loss for year (11,524) (11,524)
---------- ----------
Stockholders' equity (deficit) at December 31, 1999 (187,501) (38,051)
Exercise of stock options 255
Conversion of Series D Preferred Stock to
Class B Common Stock
Net loss for year (20,545) (20,545)
---------- ----------
Stockholders' equity (deficit) at December 31, 2000 $ (208,046) $ (58,341)
========== ==========

F-6

48

@TRACK COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS

1. BUSINESS OVERVIEW

The Company develops and implements mobile communications solutions,
including integrated voice, data and position location services. The initial
application for the Company's wireless enhanced services has been developed for,
and is marketed and sold to, companies that operate in the long-haul trucking
market. The Company provides long-haul trucking companies with a comprehensive
package of mobile communications and management information services, thereby
enabling its trucking customers to effectively monitor the operations and
improve the performance of their fleets. The initial product application was
customized and has been sold to and installed in the service vehicle fleets of
the member companies of SBC Communications, Inc., pursuant to the service
vehicle contract (the "Service Vehicle Contract" or "Contract"). During the
fourth quarter of 1999, the Company entered the mobile asset tracking market
with the introduction of its trailer-tracking product, Trackware. Trackware is
currently being tested by prospective customers. There were no significant
revenues from Trackware during 2000.

2. SUBSEQUENT EVENT

On February 14, 2001, the Company executed a stock purchase and
exchange agreement (the "Agreement") with Minorplanet Systems PLC, ("Minor-
planet") a leading worldwide producer and distributor of telemetric-based
vehicle management information systems (VMI(TM)), and with the majority holder
of the Company's Senior Notes.

Under the terms of the Agreement, Minorplanet is to acquire 10 million
shares of the Company's common stock for $10 million and receive an additional
140 million shares of the Company's common stock in exchange for an exclusive
ninety-nine year license to market, distribute and operate Minorplanet's VMI
technologies in the United States, Canada and Mexico. Additionally, a majority
in interest of the Company's 13 3/4% Senior Notes due 2005, which parties in the
aggregate hold approximately 75 percent of the Senior Notes, have agreed to (i)
exchange their Senior Notes for approximately 56.2 million shares of the
Company's common stock, (ii) accept payment of all interest on the Senior Notes
accrued through December 15, 2000, and (iii) waive payment of the balance of any
interest accrued thereafter.

As contemplated by the Agreement, the Company also intends to begin an
exchange offer to the remaining holders of the Senior Notes, offering to
exchange Senior Notes for the Company's common stock on substantially the same
terms as that agreed to by the majority noteholder. Assuming conversion of all
of the Senior Notes to common stock, the holders thereof would hold common stock
representing approximately 30 percent of Company, and Minorplanet would hold
approximately 59 percent.

Consummation of the transaction is subject to a number of conditions
including, but not limited to, approval by Company's common stockholders, the
holders of not less than 90 percent in principal amount of the Senior Notes
accepting the offer to exchange their Senior Notes for common stock of the
Company as a condition to the closing by the Company, approval by the Company's
Class B common stockholder, the Company's continued listing on The Nasdaq Small
Cap Market, and other contractual, governmental and regulatory approvals.

In the event these transactions are consummated as contemplated, the
Company will have significantly reduced its indebtedness and related interest
expense. In addition, the Company will immediately commence distribution of the
Minorplanet product in the United States. The Company currently believes that
consummation of these transactions will substantially mitigate the
uncertainties described in Note 4 to the consolidated financial statements.
Consumation of this transaction is also a condition of the Company maintaining
its listing on the Nasdaq Small Cap Market. See Note 3.

3. NON-COMPLIANCE WITH NASDAQ LISTING REQUIREMENTS

In December 2000, the Company was notified by letter from the Nasdaq
Stock Market, Inc. ("Nasdaq"), that it was no longer in compliance with the (i)
net tangible asset, (ii) market capitalization, and (iii) net income requirement
for continued listing on the Nasdaq Small Cap Market.

F-7
49
Subsequent to an oral hearing before the Nasdaq Listings Qualification
Panel (the "Panel") the Company received written determination from the Panel on
February 12, 2001 that it would be allowed to remain listed provided that by
February 23, 2001 (deadline subsequently extended to February 27, 2001), it
satisfied certain conditions, including the provision to the Panel of executed
definitive documents for the transactions with Minorplanet and the majority
noteholder (see Note 2) and the filing of a Preliminary Proxy Statement with the
SEC and Nasdaq including a proposal to obtain shareholder approval for the (i)
Minorplanet transaction, (ii) the conversion of the Senior Notes held by the
majority noteholder, and (iii) a reverse stock split; and by April 23, 2001,
that the Company provide documentation to Nasdaq that (i) the Minorplanet and
majority noteholder transactions have been consummated, and (2) make a public
filing with the SEC and Nasdaq evidencing net tangible assets of at least
$12,000,000.

There are a number of minimum requirements for continued listing on the
Nasdaq Small Cap Market which include both quantitative and qualitative
requirements. The Company currently expects to meet these continued listing
requirements and the conditional listing requirements set forth in the February
12, 2001 written determination by the Panel. However, there can be no assurances
that the Company will be able to maintain its listing on the Nasdaq SmallCap
Market and the failure of the Company to maintain its listing on the Nasdaq
SmallCap Market may have a material adverse effect on the business, financial
conditions and results of operations of the Company.

If the Company's securities are delisted from the Nasdaq SmallCap
Market, the Company may subsequently apply for inclusion in The Nasdaq SmallCap
Market if it satisfies the initial inclusion requirements. If the Company's
securities are delisted from The Nasdaq SmallCap Market, there can be no
assurances that the Company will be able to satisfy the initial inclusion
requirements for listing on the Nasdaq SmallCap Market and its failure to do so
may have a material adverse effect on the business, financial condition and
results of operations of the Company. The Company currently believes that the
Company's securities will be delisted from The Nasdaq SmallCap Market if the
Company fails to finally consummate the transactions with Minorplanet and
majority noteholder on or before April 23, 2001 and otherwise comply with the
other conditions contained in the February 12, 2001 Nasdaq determination letter.
There can be no assurances that the Company will be able to finally consummate
the transactions with Minorplanet and the majority noteholder and satisfy the
other conditions to continued listing imposed upon the Company by Nasdaq on or
before April 23, 2001 and the Company believes that its failure to do so, may
have a material adverse effect on the business, financial conditions and results
of operations of the Company.

4. FUTURE OPERATIONS AND GOING CONCERN UNCERTAINTY

The consolidated financial statements of the Company have been prepared
on the basis of accounting principles applicable to a going concern, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. At December 31, 2000, the Company had a
stockholders' deficit of $58.3 million, and had incurred net losses of
approximately $20.5 million, $11.5 million, and $35.1 million for the years
ended December 31, 2000, 1999, and 1998, respectively. Beginning March 15, 2001,
the Company is obligated to begin paying substantial semi-annual cash interest
payments on its 13.75% Senior Notes which were issued in September 1997.
Interest payments due on the Senior Notes through September 15, 2000, had
previously been funded through an escrow arrangement created upon closing of the
Senior Notes. Absent the pending equity and debt transactions described in Note
2 (which are contingent upon a number of factors also described in Note 2), the
Company has limited financial resources available to support its ongoing
operations, fund its product development program to develop and market new
competitive tracking technology, and pay its obligations as they become due,
including the maturities of the Senior Notes and associated interest payments.

The factors noted in the above paragraph raise substantial doubt
concerning the ability of the Company to continue as a going concern. The
consolidated financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern. The ability of the Company to continue as a going
concern is dependent upon the ongoing support of its stockholders, creditors,
and certain key customers, the consummation of the pending equity and debt
transactions (or the closing of similar debt or equity transactions), and/or its
ability to successfully develop and market its tracking products and technology
at economically feasible levels in the highly competitive and rapidly changing
telecommunications industry.

F-8
50

As discussed in Note 2, the Company has pending equity and debt
transactions which the Company believes, if consummated, will provide adequate
financial resources to support the Company until it is able to achieve a
successful level of operations. The Company also believes acquisition of the
licensing rights associated with the pending equity transaction will provide the
Company significant marketing potential of the licensed tracking technology,
enhancing future results of operations and reducing the need for capital
resources to develop similar tracking technology. There is no assurance,
however, that the Company will be able to close the pending debt and equity
transactions or that such financial resources provided by the pending
transactions, if closed, will be sufficient to support the Company until it
reaches a successful level of operations. There is also no assurance that the
Company would be able to successfully develop a market for the acquired licensed
tracking technology to achieve a successful level of future operations. If the
Company is unable to close the pending equity and debt transactions, it is
likely that it will be unable to maintain its current Nasdaq listing (see Note
3). If the Company cannot maintain its Nasdaq listing, its ability to obtain the
required levels of equity or debt financing from other sources to support its
operations and fund payments of its obligations as they become due will be
significantly reduced and it may have a material adverse effect on the business,
financial condition and results of operations of the Company.

5. CHANGE IN ACCOUNTING PRINCIPLE

The Company earns revenues from service contracts, and from related
products sold to customers (for which title generally passes on shipment). In
accordance with previously existing generally accepted accounting principles,
the Company recognized revenues from product sales and licensing of product
software at the time the mobile units were shipped to customers, or upon
customer acceptance of the product if acceptance was required by the sales
contract. During 2000, as a result of new interpretations of generally accepted
accounting principles by the Securities and Exchange Commission (the "SEC"),
through issuance of SEC Staff Accounting Bulletin No. 101, "Revenue Recognition
in Financial Statements" ("SAB 101"), the Company was required to change its
accounting policy for product revenue recognition during the fourth quarter of
2000, effective January 1, 2000.

The Company sells mobile communications systems and related enhanced
mobile communications and management information services that are provided
through the Company's proprietary network. With respect to the Series 5000
mobile units sold to the Company's long-haul trucking customers, these units
function only when used in conjunction with the Company's proprietary network.
Accordingly, in accordance with SAB 101, the Company has changed its product
revenue recognition policy for sales to long-haul trucking customers, to defer
product revenue previously recognized upon shipment and instead recognize such
revenue ratably over the longer of the term of the service contract or the
estimated life of the customer relationship. Such terms range from three to ten
years. Product costs are also deferred and amortized over such period. The
product revenues and related costs are portrayed in the accompanying
Consolidated Statements of Operations as "Ratable Product Revenues" and "Ratable
Product Costs," respectively.

The effect of the adoption of SAB 101 in 2000 was to increase income
before extraordinary item by approximately $1,441,000 or $0.06 per share. SAB
101 has been adopted as the cumulative effect of a change in accounting
principle, effective January 1, 2000. The cumulative effect of the change as of
such date resulted in an increase to the net loss recognized in 2000 of
approximately $5,206,000. This has been reported as "Cumulative effect of
accounting change" in the accompanying Consolidated Statement of Operations for
the year ended December 31, 2000.

Pro forma amounts assuming the new revenue recognition method is
applied retroactively are as follows:

1999 1998
----------------------------- ----------------------------
As Reported Pro forma As Reported Pro forma
------------ ---------- ----------- -----------

Loss before extraordinary item $ (11,524) $ (12,293) $ (53,928) $ (55,180)
Basic and diluted loss per share before extraordinary item $ (0.46) $ (0.49) $ (2.17) $ (2.22)

Net loss $ (11,524) $ (12,293) $ (35,061) $ (36,313)
Basic and diluted net loss per share $ (0.46) $ (0.49) $ (1.41) $ (1.46)

F-9

51

6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Effective April 10, 2000, HighwayMaster Communications, Inc. changed
its corporate name to @Track Communications, Inc. The consolidated financial
statements include those of @Track Communications, Inc. and its wholly owned
subsidiary, HighwayMaster of Canada, LLC. All significant intercompany accounts
and transactions have been eliminated in consolidation.

Estimates Inherent in the Preparation of Financial Statements

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities 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.

Revenue Recognition

The Company recognizes revenue under the provisions of SAB 101. Under
SAB 101, initial sale proceeds received under multiple-element sales
arrangements which require the Company to deliver products or services over a
period of time and which are not determined by the Company to meet certain
criteria are deferred. These criteria include requirements for a separate
earnings process, fair value determinations, and that the delivery of future
products or services under the arrangement are not required for the delivered
items to serve their intended purpose. Sales proceeds related to delivered
products that are deferred are recognized over the greater of the contract life
or the life of the estimated customer relationship. The Company has estimated
such periods to range from three to ten years. Sales proceeds recognized under
this method are portrayed in the accompanying Consolidated Statement of
Operations as "Ratable Product Revenues." If the customer relationship is
terminated prior to the end of the estimated customer relationship period, such
deferred sales proceeds are recognized as revenue in the period of termination.
The Company will periodically review its estimates of the customer relationship
period as compared to historical results and adjust its estimates prospectively.
Sales arrangements for which revenues are deferred pursuant to SAB 101 relate
primarily to the Company's sales of its mobile units to long-haul trucking
customers.

Under sales arrangements which meet the three criteria described above,
revenues are recognized upon shipment of the products or upon customer
acceptance of the delivered products, if terms of the sales arrangement gives
the customer right of acceptance. Sales arrangements recognized under this
method relate primarily to products delivered under the Service Vehicle
Contract. Pending acceptance, mobile units shipped under the Contract are
reflected in inventory as "equipment shipped not yet accepted."

Service revenue generally commences upon product installation and is
recognized ratably over the minimum service contract period as such services are
provided.

Prior to 2000, revenues from product sales and licensing of product
software were generally recognized at the time the mobile units were shipped to
customers unless the sales arrangement required specific product acceptance by
the customer, in which case revenues were recognized upon the receipt by the
Company of such acceptance. During 1998, the Company entered into the initial
Service Vehicle Contract for delivery of mobile units coupled with development
and delivery of additional features over the term of the installation period.
The earning process on the Contract was not complete until all of the additional
features had been delivered and accepted by the customer. Accordingly, revenue
was not recognized for the mobile units shipped in connection with the Contract
during 1998. The earning process on the initial Service Vehicle Contract was
completed during 1999, and revenue was recognized.

F-10
52

Deferred Product Costs

The Company defers certain product costs (generally consisting of the
direct cost of product sold, installation, activation and warranty) for its
sales contracts determined to require deferral accounting under the provisions
of SAB 101. Such costs are recognized over the longer of the term of the service
contract or the estimated life of the customer relationship and are portrayed in
the accompanying Consolidated Statements of Operations as "Ratable Product
Costs." Such terms range from three to ten years. If the customer relationship
is terminated prior to the end of the estimated customer relationship period,
such costs are recognized in the period of termination. The Company will
periodically review its estimates of the customer relationship period as
compared to historical results and adjust its estimates prospectively.

Financial Instruments

The Company considers all liquid interest-bearing investments with a
maturity of three months or less at the date of purchase to be cash equivalents.
Short-term investments generally mature between three months and two years from
the purchase date. All cash and short-term investments are classified as
available for sale. Cost approximates market for all classifications of cash and
short-term investments; realized and unrealized gains and losses were not
material.

Pledged securities consisted of a portfolio of U. S. Government
securities, including interest earned thereon, which provided funds sufficient
to pay in full when due the interest payments on the Senior Notes through
September 15, 2000. These securities were classified as held to maturity.
Amortized cost of pledged securities approximated market; realized and
unrealized gains and losses were not material.

The carrying amount of cash and short-term investments, pledged
securities, accounts receivable, accounts payable and accrued liabilities
approximates fair value because of their short-term maturity.

Business and Credit Concentrations

Accounts receivable generated from equipment sales are generally
secured by the respective mobile units shipped to the customer. Allowances have
been provided for amounts that may eventually become uncollectible and to
provide for any disputed charges. During 2000 and 1999, one customer accounted
for approximately 45% and 37%, respectively, of total revenues. During 1998, no
customer accounted for more than 10% of total revenues.

Inventories

Inventories consist primarily of component parts and finished products
that are valued at the lower of cost or market. Cost is determined using the
first-in, first-out (FIFO) method.

Network, Equipment and Software

Network, equipment and software are stated at cost and are depreciated
on a straight-line basis over the estimated useful lives of the various classes
of assets, which generally range from three to five years. Maintenance and
repairs are charged to operations, while renewals or betterments are
capitalized.

Research and Development Costs

The Company expenses research and development costs as incurred. During
2000, 1999 and 1998, the Company expensed $2,181,000, $1,241,000 and $2,286,000,
respectively, in research and development costs for hardware and software that
are reflected in "Engineering Expenses" in the Consolidated Statements of
Operations. The 1998 amount is net of $324,000 of research and development
expenditures reimbursed by a third party.

Software Development Costs

Costs related to the research, design and development of computer
software are charged to research and development expense as incurred. During
2000, 1999 and 1998, the Company expensed $1,419,000, $546,000 and

F-11

53
$1,236,000, respectively, in research and development costs that are reflected
in "Engineering Expenses" in the Consolidated Statements of Operations. The 1998
amount is net of $284,000 of research and development expenditures reimbursed by
a third party. Software development costs that meet the capitalization
requirements of Statement of Financial Accounting Standards ("SFAS") No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed," are capitalized. Software development costs are amortized using the
straight-line method over 18 months or the estimated economic life of the
product, whichever is less.

Advertising Costs

Advertising costs are expensed as incurred. During 2000, 1999 and 1998,
the Company expensed $962,000, $554,000 and $1,692,000, respectively, in
advertising costs that are reflected in "Sales and Marketing Expenses" in the
Consolidated Statements of Operations.

Income Taxes

The Company accounts for income taxes pursuant to SFAS No. 109,
"Accounting For Income Taxes." Deferred income taxes are calculated using an
asset and liability approach wherein deferred taxes are provided for the tax
effects of basis differences for assets and liabilities arising from differing
treatments for financial and income tax reporting purposes. Valuation allowances
against deferred tax assets are provided where appropriate.

Earnings Per Share

The Company computes earnings per share in accordance SFAS No. 128,
"Earnings Per Share." Net loss per share was computed by dividing the net loss
by the weighted average number of shares outstanding during the year. The
Company's potentially dilutive securities, consisting of the Class B Common
Stock, options and warrants, have been excluded from the weighted average number
of shares outstanding since their effect would be anti-dilutive.

New Accounting Standards

SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", is required to be adopted effective January 1, 2001. Adoption of
this Standard will have no effect on the Company as it currently operates.

Reclassifications

The Company provides post-sale support and maintenance on the installed
base of mobile units. Historically, revenues and cost of revenues related to
support and maintenance activities have been reported as a component of "product
revenues" and "cost of product revenues," respectively. The Company believes
this activity directly relates to the realization of the recurring stream of
"service revenue." Accordingly, in 2000, the Company has classified the revenues
and cost of revenues related to support and maintenance activities with "service
revenues" and "cost of service revenues," respectively. Amounts for prior years
have been reclassified for consistent presentation.

During the fourth quarter of 2000, the Company adopted Emerging Issues
Task Force -- Issue 00-10, "Accounting for Shipping and Handling Fees and Costs"
which requires the presentation of amounts billed to customers for shipping and
handling, and the related costs incurred for shipping and handling to be
recognized as components of "Product Revenues" and "Cost of Product Revenues,"
respectively. Previously these amounts had been reflected "net" in "Operating
Expenses." Amounts for prior years have been reclassified for consistent
presentation.

F-12
54

7. UNUSUAL ITEMS

"Other Income" in 2000 primarily consists of the proceeds from the
settlement of litigation, net of related expenses.

During 1999, the Company recorded the benefit of credits due from
cellular carriers related to 1997 and 1998 based on a settlement agreement
reached with GTE Wireless, Inc. and GTE Telecommunications Incorporated. These
credits had not been previously recognized because of significant uncertainty as
to their ultimate collectibility. The effect of these credits was to increase
income by $4,533,000, of which $4,389,000 is reflected as a reduction in "Cost
of Service Revenue" in the accompanying Consolidated Statements of Operations.

During 1997, the Company entered into a contract with a customer for a
new generation of mobile unit. Pending delivery of the contracted units, the
customer installed current-generation mobile units. In 1999, the Company and the
customer negotiated a settlement agreement, the terms of which included
termination of the contract and the return of approximately 2,900 mobile units
to the Company that had been installed by the customer. "Other Income" in 1999
includes a gain of approximately $800,000 related to this settlement.

The remaining balance of "Other Income" in 1999 primarily consists of
the proceeds from the settlement of litigation, net of related expenses.

During 1999, the earning process was culminated and the Company
recognized product revenues of $29.7 million on the mobile units delivered under
the Service Vehicle Contract. Included in 1999 "Cost of Product Revenues" in the
accompanying Consolidated Statements of Operations is a warranty provision of
$3.5 million, that is the estimated cost to be incurred to remediate a defective
subcomponent in the mobile units. The related liability is included in "Other
Current Liabilities" in the accompanying Consolidated Balance Sheet at December
31, 1999.

8. SEVERANCE AND AUTOLINK(R) TERMINATION COSTS

During the third quarter of 1998, the Company announced that it was
halting the development of its AutoLink(R) service. As a consequence, the
Company recorded a charge of $2,431,000 to recognize asset impairments and
record estimated amounts to be incurred to extinguish contractual obligations
associated with the AutoLink(R) program.

During 1998, the Company recorded $2,926,000 in severance costs related
to two reorganizations. Severance costs of $445,000 relate to a reduction in the
number of employees, announced in the second quarter of 1998, primarily
reflecting the elimination of redundancies that had been necessary as a result
of having customers served by both the AT&T Complex and the NSC. During the
third quarter of 1998, the Company announced a number of key management and
structural changes designed to more closely align the Company's expenditures
with its revenues. As a result of this announcement and the AutoLink(R)
announcement, the Company reduced its workforce by approximately 25% and
recorded charges of $2,481,000 for obligations under employment contracts and
severance payments to terminated employees.

The following is a summary of activity relating to Severance and
AutoLink(R) termination costs payable:

Balance at December 31, 1997 $ --
1998 Activity:
Accrued Severance and AutoLink termination costs $ 5,357,000
Cash payments for severance and contractual obligations (2,895,000)
Asset write-offs (434,000)
------------
Balance at December 31, 1998 2,028,000
1999 Activity:
Cash payments for severance and contractual obligations (1,839,000)
Restored to income (189,000)
------------
Balance at December 31, 1999 $ --
============

F-13
55

9. CASH AND SHORT-TERM INVESTMENTS

Cash and short-term investments consist of the following:

December 31, 2000 1999
----------- -----------

Cash and commercial paper $11,196,000 $ 2,533,000
Money market accounts 9,445,000 2,634,000
----------- -----------
Cash and cash equivalents 20,641,000 5,167,000
----------- -----------

Corporate notes and bonds -- 3,065,000
State, Municipal and Agency securities -- 1,015,000
Commercial Paper -- 8,521,000
----------- -----------
Short-term investments -- 12,601,000
----------- -----------
Total cash and short-term investments $20,641,000 $17,768,000
=========== ===========

10. INVENTORIES

Inventories consist of the following:

December 31, 2000 1999
----------- -----------

Complete systems $ 3,240,000 $ 6,576,000
Component parts 5,919,000 2,302,000
Equipment shipped not yet accepted 4,057,000 414,000
----------- -----------
$13,216,000 $ 9,292,000
=========== ===========

11. NETWORK, EQUIPMENT AND SOFTWARE

Network, equipment and software consist of the following:

December 31, 2000 1999
------------ ------------

Network service center $ 15,031,000 $ 14,945,000
Computers and office equipment 7,308,000 6,026,000
Machinery and equipment 3,123,000 2,909,000
Software 6,684,000 5,665,000
------------ ------------
32,146,000 29,545,000
Less: accumulated depreciation and amortization (19,295,000) (13,842,000)
------------ ------------
$ 12,851,000 $ 15,703,000
============ ============

Total depreciation and amortization expense charged to operations
during 2000, 1999 and 1998 was $5,455,000, $6,099,000 and $4,753,000,
respectively.

As of December 31, 2000 and 1999, the unamortized portion of software
costs was $2,144,000 and $2,314,000, respectively. Amortization of such costs
charged to expense during 2000, 1999 and 1998 was $1,191,000, $1,487,000 and
$584,000, respectively.

F-14
56

12. OTHER ASSETS

Other assets consist primarily of debt issue costs related to the
issuance of the Senior Notes, net of accumulated amortization. Such costs are
amortized over the term of the related debt.

13. OTHER CURRENT LIABILITIES

Other current liabilities consist of the following:

December 31, 2000 1999
---------- ----------

Accrued warranty costs $2,822,000 $4,482,000
Other 6,004,000 4,875,000
---------- ----------
$8,826,000 $9,357,000
========== ==========

14. SENIOR NOTES PAYABLE

On September 23, 1997, the Company issued 125,000 Units comprised of
$125,000,000 of 13.75% Senior Notes due September 15, 2005 and warrants to
purchase 820,750 shares of common stock at $9.625 per share. Of the gross
proceeds, $120,814,000 was allocated to the Senior Notes and $4,186,000 was
allocated to the warrants. Interest is payable on the Senior Notes semi-annually
on March 15 and September 15. The Company used a portion of the proceeds from
the issuance of the Units to purchase a portfolio of U. S. Government securities
that provided funds sufficient to pay in full when due the scheduled interest
payments on the Senior Notes through September 15, 2000. This amount, including
interest earned thereon, is reflected in the accompanying Consolidated Balance
Sheets under the caption "Pledged Securities."

The Indenture for the Senior Notes contains certain covenants that,
among other things, limit the ability of the Company to incur additional
indebtedness, pay dividends or make other distributions, repurchase any capital
stock or subordinated indebtedness, make certain investments, create certain
liens, enter into certain transactions with affiliates, sell assets, enter into
certain mergers and consolidations, or enter into sale and leaseback
transactions. The Company was in compliance with all covenants at December 31,
2000. The Indenture does allow the Company to incur additional indebtedness in
the event certain conditions are satisfied.

The Senior Notes are redeemable at any time on or after September 15,
2001 at redemption prices declining annually from 110.313% of principal amount
in 2001 to 100.000% of principal amount in 2004, plus accrued and unpaid
interest. Prior to September 15, 2001, the Company may redeem up to 35% in the
aggregate principal amount of the Senior Notes at a redemption price of 113.75%
of the principal amount thereof, plus accrued and unpaid interest with the net
proceeds of a qualifying equity offering (as defined).

In 1998, the Company purchased and subsequently retired $30,645,000
principal amount of its Senior Notes on the open market for $9,885,000 plus
accrued interest thereon, resulting in a gain on extinguishment of debt of
$18,867,000 after the write-off of associated debt discount and debt issuance
costs. The gain is reported as an "Extraordinary Item" in the accompanying
Consolidated Statements of Operations. Upon the retirement of the Senior Notes,
the allocable portion of the Pledged Securities related thereto, in the amount
of $8,063,000, was released to the Company.

F-15
57

At December 31, 2000, the $94,355,000 of Senior Notes outstanding was
recorded at the accreted value of $92,484,000. The Senior Notes have an
effective interest rate of 14.1%.

The fair value of the Senior Notes is less than their carrying amount
at December 31, 2000 and 1999. The principal amount of the Senior Notes is
$1,000 per individual Senior Note. The Senior Notes are publicly traded but
purchases and sales of the Senior Notes are infrequent. At December 31, 2000,
the market value per individual Senior Note approximated $400.

15. INCOME TAXES

The components of the Company's net deferred tax asset are as follows:

December 31, 2000 1999
------------ ------------

Deferred tax assets
Step-up of tax basis in assets $ 1,390,000 $ 1,390,000
Research and development credit 205,000 206,000
Recapitalization costs 167,000 158,000
Deferred Revenue 1,280,000 --
Allowance for doubtful accounts 2,484,000 2,576,000
Accrued interest 332,000 332,000
Other accrued liabilities 1,360,000 1,827,000
Inventory 408,000 283,000
Net operating loss carryforwards 62,177,000 55,312,000
------------ ------------
Gross deferred tax assets 69,803,000 62,084,000
Valuation allowance (67,256,000) (60,405,000)
------------ ------------
Net deferred tax assets 2,547,000 1,679,000
Deferred tax liability
Depreciation (2,160,000) (1,100,000)
Other (387,000) (579,000)
------------ ------------
Net deferred tax asset $ -- $ --
============ ============

The following is a reconciliation of the provision for income taxes at
the U.S. federal income tax rate to the income taxes reflected in the
Consolidated Statements of Operations:

December 31, 2000 1999 1998
------------ ------------ ------------

Income tax at Federal statutory rate $ (6,985,000) $ (3,918,000) $(11,921,000)
Net operating losses not benefited 6,851,000 3,904,000 11,860,000
Other 134,000 14,000 61,000
------------ ------------ ------------
Income tax benefit $ -- $ -- $ --
============ ============ ============

At December 31, 2000, the Company had net operating loss carryforwards
aggregating approximately $182.9 million that expire in various years between
2007 and 2020. Due to the issuance of certain notes payable during 1994, there
was a change in ownership under the Internal Revenue Code, which limits the
annual utilization of approximately $18.0 million of these carryforwards and
will cause some amount of the carryforwards to expire unutilized. Any additional
changes in ownership, including the pending equity and debt transactions, could
also result in additional limitations of loss carryforwards.

F-16
58

16. STOCKHOLDERS' EQUITY INSTRUMENTS AND RELATED MATTERS

Conversion of Series D Preferred Stock to Series B Common Stock

Southwestern Bell Wireless Holdings, Inc., now known as Cingular
Wireless, a subsidiary of SBC Communications Inc., ("SBC") owned all of the
outstanding shares of Series D Participating Convertible Preferred Stock
("Series D Preferred Stock").

Pursuant to the purchase agreement by and between the Company as Issuer
and SBC as Investor, dated September 27, 1996, certain events are triggered with
respect to the Company's Series D Preferred Stock owned by SBC upon the
occurrence of "Regulatory Relief." Effective July 11, 2000, SBC received final
approval from the Federal Communications Commission to provide long distance
service in the State of Texas, and, accordingly, "Regulatory Relief" occurred,
as confirmed by SBC on September 18, 2000. As a result of the occurrence of
"Regulatory Relief", the 1,000 shares of Series D Preferred Stock automatically
converted into 1,000 shares of Class B Common Stock.

Each outstanding share of Class B Common Stock is convertible into
1,600 shares of Common Stock at the option of SBC. The Class B Common Stock is
entitled to receive dividends and liquidating distributions in an amount equal
to the dividends and liquidating distributions payable on or in respect of the
number of shares of Common Stock into which such shares of Class B Common Stock
are then convertible. The holders of Common Stock and Class B Common Stock
generally have identical voting rights, with the holders of Class B Common Stock
being entitled to a number of votes equal to the number of shares of Common
Stock into which the shares of Class B Common Stock held by them are then
convertible. In addition, the holders of Class B Common Stock will be entitled
to elect one director of the Company (or two directors if SBC and its affiliates
beneficially own at least 20% of the outstanding shares of Common Stock on a
fully diluted basis) and will have the right to approve certain actions on the
part of the Company.

SBC holds warrants that entitle SBC to purchase (i) 3,000,000 shares of
Common Stock at an exercise price of $14.00 per share and (ii) 2,000,000 shares
of Common Stock at an exercise price of $18.00 per share. The warrants will
expire on September 27, 2001.

Incentive Plan and Other

Pursuant to a 1994 Stock Option Plan, as amended (the "Plan"), options
may be granted to employees for the purchase of an aggregate of up to 2,474,463
shares of the Company's common stock. The Plan requires that the exercise price
for each stock option be not less than 100% of the fair market value of common
stock at the time the option is granted. Both nonqualified stock options and
incentive stock options, as defined by the Internal Revenue Code, may be granted
under the Plan. Generally, options granted under the Plan vest 20% on the date
of grant and 20% on each of the following four anniversary dates of the date of
grants and expire six years from the date of grant.

The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for the Plan. Accordingly,
no compensation cost has been recognized for options issued under the Plan. Had
compensation cost been determined based on the fair value of the options as of
the grant dates for awards under the Plan consistent with the method provided by
SFAS No 123, "Accounting for Stock-Based Compensation," the Company's net loss
and net loss per share would have been increased to the pro forma amounts
indicated below:

For the Year Ended December 31,
--------------------------------------------------------
2000 1999 1998
-------------- -------------- --------------

Net loss As Reported $ (20,545,000) $ (11,524,000) $ (35,061,000)
Pro Forma $ (21,188,000) $ (12,222,000) $ (36,007,000)

Net loss per share As Reported $ (0.81) $ (0.46) $ (1.41)
Pro Forma $ (0.84) $ (0.49) $ (1.45)

F-17
59

The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants during the years as follows:

For the Year Ended December 31,
-----------------------------------
2000 1999 1998
----------- ----------- -----------

Dividend -- -- --
Expected volatility 92.31% 83.83% 59.83%
Risk free rate of return 5.89% 6.05% 4.96%
Expected life in years 6.0 6.0 4.9

A summary of the status of the Company's Plan as of December 31, 2000,
1999 and 1998, and changes during the years ended on those dates, is presented
below:

2000 1999 1998
------------------------- ------------------------- -------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
---------- ---------- ---------- ---------- ---------- ----------

Outstanding at beginning of year 1,707,319 $ 1.36 1,946,590 $ 3.50 2,157,309 $ 7.82
Granted 319,500 1.51 790,242 1.60 1,481,490 1.34
Exercised (206,616) 1.23 (221,227) 1.19 -- --
Forfeited (165,582) 1.58 (808,286) 6.82 (1,692,209) 7.12
---------- ---------- ---------- ---------- ---------- ----------
Outstanding at end of year 1,654,621 $ 1.38 1,707,319 $ 1.36 1,946,590 $ 3.50
========== ========== ========== ========== ========== ==========
Options exercisable at end of year 765,945 $ 1.32 560,376 $ 1.29 1,056,676 $ 5.12
========== ========== ========== ========== ========== ==========

Weighted average fair value of
options granted during the year $ 1.18 $ 1.60 $ 0.74
========== ========== ==========

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

Options Outstanding Options Exercisable
------------------------------------------------------------------------------------
Number of Weighted Average Weighted Average Number of Weighted Average
Range of Option Price Options Remaining Life Exercise Price Options Exercise Price
- --------------------- ------------ ---------------- ---------------- ------------ ----------------

$1.00 to $1.19 599,067 3.3 $ 1.07 383,359 $ 1.07
$1.41 to $1.78 963,554 4.9 1.50 345,786 1.50
$2.03 to $2.19 92,000 4.3 2.15 36,800 2.15
------------ ------------ ------------ ------------ ------------

1,654,621 4.3 $ 1.38 765,945 $ 1.32
============ ============ ============ ============ ============

A director of the Company holds options granted outside of the Plan to
purchase 3,798 shares of common stock of the Company at a price of $2.50 per
share. All of these options are exercisable at December 31, 2000.

Warrants for the purchase of 8,000 shares of common stock at a price of
$5.63 per share were granted during 2000. All of these warrants are exercisable
at December 31, 2000.

Retirement Plan

The Company sponsors a 401(k) Retirement Investment Profit-Sharing Plan
covering substantially all employees. In order to attract and retain employees,
during 2000, the Company amended the Plan to include a mandatory employer
matching and made a matching contribution of $220,000. The Company did not make
matching contributions to the Plan in either 1999 or 1998.

F-18
60
17. COMMITMENTS AND CONTINGENCIES

Litigation

The Company is involved in litigation matters that arise in the normal
course of conducting its business. These matters are not considered to be of a
material nature, nor are they expected to have a material effect on the
financial position or results of operations of the Company.

Leases

The Company leases certain office facilities and furniture and
equipment under non-cancelable operating leases, with expirations through 2008.
The future minimum lease payments associated with such leases were as follows as
of December 31, 2000:

2001 $ 1,422,000
2002 1,376,000
2003 1,279,000
2004 1,297,000
2005 1,186,000
Thereafter 2,977,000
-----------
$ 9,537,000
===========

During 2000, 1999 and 1998, total rent expense charged to operating
expenses was approximately $1,322,000, $1,413,000 and $1,606,000, respectively.

18. RELATED PARTY TRANSACTIONS

During 2000, 1999 and 1998, the Company recognized total revenues from
sales to member companies of one of the Company's shareholders, SBC
Communications, Inc., of $47,713,000, $35,785,000, and $547,000, respectively.

During 1998, the Company paid $1,105,000 for advertising services
pursuant to an "Agency Agreement." The Agency Agreement was terminated effective
December 31, 1998. A former officer of the Company was a principal stockholder
and officer of the Agency until January 1, 1997, at which time his equity
interest was sold. The former officer continued to participate in the revenues
of the Agency until certain contractual obligations from the sale of the
officer's equity interest in the Agency were discharged. The former officer
resigned from the Company in December 1998.

The Company leased office space from an affiliate of a stockholder
until September 30, 1998. Total rent paid under this agreement during 1998 was
approximately $729,000.

The Company had a management consulting arrangement with a member of
its Board of Directors. During 1998, the Company paid approximately $69,000
under this consulting arrangement, which amount includes reimbursed expenses.

F-19
61
19. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

Unaudited quarterly results of operations for 2000 and 1999 are as
follows (in thousands, except per share amounts):

First Second Third Fourth
Quarter Quarter Quarter Quarter
----------- ----------- ----------- -----------

2000
Total revenues $ 16,312 $ 26,257 $ 29,780 $ 29,781
Gross profit 5,944 8,955 9,461 7,097
Operating income (loss) (1,793) (27) 492 (3,583)
Loss before cumulative effect of accounting change (4,466) (3,003) (2,588) (5,282)
Cumulative effect of accounting change (5,206) -- -- --
Net loss (9,672) (3,003) (2,588) (5,282)
Loss per share:
Before cumulative effect $ (0.18) $ (0.12) $ (0.10) $ (0.21)
Cumulative effect of accounting change $ (0.20) -- -- --
Basic and diluted loss $ (0.38) $ (0.12) $ (0.10) $ (0.21)
Weighted average shares outstanding 25,189 25,322 25,327 25,327

1999
Total revenues $ 17,081 $ 33,198 $ 29,104 $ 16,290
Gross profit 10,660 11,945 5,467 6,125
Operating income (loss) 1,849 2,349 (3,991) (3,061)
Net income (loss) 390 188 (6,156) (5,946)
Income (loss) per share:
Basic and diluted income (loss) $ 0.02 $ 0.01 $ (0.25) $ (0.24)
Weighted average shares outstanding
Basic 24,993 24,981 24,987 25,015
Diluted 25,444 25,308 24,987 25,015

F-20
62

REPORTS OF INDEPENDENT PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENTS SCHEDULES

To the Board of Directors and Stockholders of @Track Communications, Inc.:

We have audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheets of @Track
Communications, Inc. (formerly HighwayMaster Communications, Inc.) and its
subsidiary (the "Company") as of December 31, 2000 and 1999, and the related
consolidated statements of operations, cash flows and stockholder's equity
(deficit) for the years then ended, included in the Annual Report on Form
10-K, and have issued our report thereon dated February 22, 2001, which
contains an explanatory paragraph with respect to the Company's ability to
continue as a going concern. These consolidated financial statements and the
schedule referred to below are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits.

Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. Schedule II -- Valuation and
Qualifying Accounts for years ended December 31, 2000 and 1999, is not a
required part of the basic consolidated financial statements but is
supplementary information required by the Securities and Exchange Commission.
This information has been subjected to the auditing procedures applied in our
audits of the basic consolidated financial statements and, in our opinion, is
fairly stated in all material respects in relation to the basic consolidated
financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Dallas, Texas
February 22, 2001

To the Board of Directors and Stockholders of @Track Communications, Inc.:

Our audits of the consolidated financial statements referred to in our report
dated February 16, 1999 appearing on page F-2 of this Annual Report on Form 10-K
also included an audit of the financial statement schedule for the year ended
December 31, 1998. In our opinion, the financial statement schedule presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.

PRICEWATERHOUSECOOPERS LLP

Dallas, Texas
February 16, 1999

S-1
63

SCHEDULE II

@TRACK COMMUNICATIONS INC.
VALUATION AND QUALIFYING ACCOUNTS

Additions
Balance at Charged to
Beginning of Costs and Balance at
Description Period Expenses Deductions Other End of Period
- ----------------------------------- ------------ ----------- ----------- ----------- -------------

Year ended December 31, 1998
Allowance for doubtful accounts
Accounts receivable 2,148,000 6,650,000 (38,000) 768,000 9,528,000
Other receivable 900,000 -- (900,000) -- --
Inventory reserves 1,209,000 332,000 (234,000) -- 1,307,000
Severance and AutoLink
termination costs payable -- 5,357,000 (3,329,000) -- 2,028,000
Valuation allowance against
deferred tax asset 45,304,000 11,197,000 -- -- 56,501,000

Year ended December 31, 1999
Allowance for doubtful accounts
Accounts receivable 9,528,000 4,294,000 (6,374,000) 7,448,000
Inventory reserves 1,307,000 245,000 (719,000) -- 833,000
Severance and AutoLink
termination costs payable 2,028,000 (189,000) (1,839,000) -- --
Valuation allowance against
deferred tax asset 56,501,000 3,904,000 -- -- 60,405,000

Year ended December 31, 2000
Allowance for doubtful accounts
Accounts receivable 7,448,000 1,477,000 (1,620,000) 7,305,000
Inventory reserves 833,000 749,000 (383,000) -- 1,199,000
Valuation allowance against
deferred tax asset 60,405,000 6,851,000 -- -- 67,256,000

S-2

64

INDEX TO EXHIBITS

EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

3.1 - Certificate of Incorporation of the Company, as amended.(1)(9)

3.2 - Amended and Restated By-Laws of the Company.(13)

4.1 - Specimen of certificate representing Common Stock, $.01 par
value, of the Company.(1)

4.2 - Warrant Certificate, dated September 27, 1996, issued to SBW.(7)

4.3 - Recapitalization Agreement, dated September 27, 1996, by and
among the Company, the Erin Mills Stockholders, the Carlyle
Stockholders and the other persons named therein.(7)

4.4 - Amended and Restated Stockholders Agreement, dated September 27,
1996, by and among the Company, SBW, the Erin Mills Stockholders,
the Carlyle Stockholders, the By-Word Stockholders and the other
persons named therein.(7)

4.5 - Indenture dated September 23, 1997 by and among the Company,
HighwayMaster Corporation and Texas Commerce Bank, National
Association.(12)

4.6 - Pledge Agreement dated September 23, 1997, by and among the
Company, Bear, Stearns & Co. Inc. and Smith Barney Inc.(12)

65

4.7 - Registration Rights Agreement dated September 23, 1997, by and
among the Company, HighwayMaster Corporation, Bear, Stearns & Co.
Inc. and Smith Barney Inc.(12)

4.8 - Warrant Agreement dated September 23, 1997, by and among the
Company, Bear, Stearns & Co. Inc. and Smith Barney Inc.(12)

4.9 - Warrant Registration Rights Agreement dated September 23, 1997,
by and among the Company, Bear, Stearns & Co. Inc. and Smith
Barney, Inc.(12)

10.1 - License Agreement, dated April 23, 1992, by and between Voice
Control Systems and the Company (as successor to By-Word
Technologies, Inc.)(1)

10.2 - Second Amendment to Employment Agreement, dated September 1,
1998, by and between HighwayMaster Corporation and William C.
Saunders.(16)

10.3 - Agreement and General Release, dated September 30, 1998, by and
between HighwayMaster Corporation and William C. Kennedy, Jr.(15)

10.4 - Release of HighwayMaster Communications, Inc. and HighwayMaster
Corporation by William C. Saunders, dated December 15, 1998.(16)

10.5 - Release of William C. Saunders by HighwayMaster Communications,
Inc. and HighwayMaster Corporation, dated December 15, 1998.(16)

10.6 - Amended and Restated 1994 Stock Option Plan of the Company, dated
February 4, 1994, as amended.(1)(5)(6)

10.7 - Purchase Agreement, dated September 27, 1996, between the Company
and SBW.(7)

10.8 - Mobile Communications (Voice and Data) Services Agreement, dated
as of July 15, 1993, between the Company and EDS Personal
Communications Corporation.(1)(2)

10.9 - Stock Option Agreement, dated June 22, 1998, by and between the
Company and John Stupka.(16)

10.10 - Services Agreement, dated March 20, 1996, between the Company and
GTE-Mobile Communications Service Corporation.(3)(4)

10.11 - Acknowledgment by William C. Saunders dated December 15,
1998.(16)

10.12 - Amendment dated November 16, 1995 to that certain Mobile
Communications (Voice and Data) Services Agreement, dated as of
July 15, 1993, between the Company and EDS Personal
Communications Corporation.(3)(4)

10.13 - Mutual Separation and Release, dated December 22, 1998, by and
between HighwayMaster Corporation and Gordon D. Quick.(16)

10.14 - Product Development Agreement, dated December 21, 1995, between
HighwayMaster Corporation and IEX Corporation.(3)(4)

10.15 - Technical Services Agreement, dated September 27, 1996, between
HighwayMaster Corporation and Southwestern Bell Wireless
Holdings, Inc.(7)

10.16 - Letter Agreement, dated February 19, 1996, between HighwayMaster
Corporation and IEX Corporation.(3)

10.17 - Form of Adoption Agreement, Regional Prototype Cash or Deferred
Profit-Sharing Plan and Trust Sponsored by McKay Hochman Co.,
Inc., relating to the HighwayMaster Corporation 401(k) Plan.(1)

10.18 - February 27, 1997 Addendum to Original Employment Letter, dated
September 19, 1997 by and between the HighwayMaster Corporation
and Robert LaMere.(16)

10.19 - Software Transfer Agreement, dated April 25, 1997, between
HighwayMaster Corporation and Burlington Motor Carriers,
Inc.(9)(10)

10.20 - Employment Agreement, dated June 3, 1998, by and between
HighwayMaster Corporation and Todd A. Felker.(16)

10.21 - Employment Agreement, dated June 3, 1998, by and between
HighwayMaster Corporation and William McCausland.(16)

10.22 - Employment Agreement, dated May 29, 1998, by and between
HighwayMaster Corporation and Jana Ahlfinger Bell.(14)

66

10.23 - Lease Agreement, dated March 20, 1998, between HighwayMaster
Corporation and Cardinal Collins Tech Center, Inc.(15)

10.24 - First Amendment to Employment Agreement, dated September 15,
1998, by and between HighwayMaster Corporation and Jana A.
Bell.(16)

10.25 - Employment Agreement, dated November 24, 1998, by and between
HighwayMaster Corporation and Michael Smith.(16)

10.26 - September 18, 1998 Amended and Restated Stock Option Agreement of
May 29, 1998 by and between the Company and Jana Ahlfinger
Bell.(16)

10.27 - Stock Option Agreement, dated August 12, 1998, by and between the
Company and Jana Ahlfinger Bell.(16)

10.28 - Stock Option Agreement, dated September 18, 1998, by and between
the Company and Jana Ahlfinger Bell.(16)

10.29 - September 18, 1998 Amended and Restated Stock Option Agreement of
February 29, 1996, by and between the Company and William H.
McCausland.(16)

10.30 - Stock Option Agreement, dated September 18, 1998, by and between
the Company and William H. McCausland.(16)

10.31 - September 18, 1998 Amended and Restated Stock Option Agreement of
April 25, 1997, by and between the Company and Robert LaMere.(16)

10.32 - September 18, 1998 Amended and Restated Stock Option Agreement of
June 3, 1998, by and between the Company and Todd A. Felker.(16)

10.33 - Stock Option Agreement dated November 24, 1998, by and between
the Company and Michael Smith.(16)

10.34 - Stock Option Agreement, dated April 4, 1995, by and between the
Company and Terry Parker.(16)

10.35 - Agreement No. 980427 between Southwestern Bell Telephone Company,
Pacific Bell, Nevada Bell, Southern New England Telephone and
HighwayMaster Corporation executed on January 13, 1999(17)(18)

10.36 - Administrative Carrier Agreement entered into between
HighwayMaster Corporation and Southwestern Bell Mobile Systems,
Inc. on March 30, 1999(17)(18)

10.37 - Addendum to Agreement entered into between HighwayMaster
Corporation and International Telecommunications Data Systems,
Inc. on February 4, 1999(17)(18)

10.38 - Second Addendum to Agreement entered into between HighwayMaster
Corporation and International Telecommunication Data Systems,
Inc. on February 4, 1999(17)(18)

10.39 - Manufacturing and Equipment Purchase Agreement entered into
between HighwayMaster Corporation and Wireless Link Corporation
on March 9, 1999(17)(18)

10.40 - Agreement entered into between HighwayMaster Corporation and
Cellemetry LLC on January 19, 1999(17)(18)

10.41 - Agreement entered into between HighwayMaster Corporation and
Cellemetry LLC on January 19, 1999(17)(18)

10.42 - Agreement entered into between HighwayMaster Corporation and
Cellemetry LLC on January 19, 1999(17)(18)

10.43 - Agreement entered into between HighwayMaster Corporation and
Cellemetry LLC on January 7, 1999(17)(18)

10.44 - Stock Option Agreement dated June 24, 1999, by and between the
Company and J. Raymond Bilbao(19)

10.45 - Stock Option Agreement dated June 24, 1999, by and between the
Company and Marshall Lamm(19)

10.46 - Stock Option Agreement dated June 14, 1999, by and between the
Company and Marc A. Bringman(19)

67

10.47 - Transition Agreement entered into between GTE Wireless Services
Corporation and HighwayMaster Corporation on April 30,
1999(19)(20)

10.48 - Fleet-on-Track Services Agreement entered into between GTE
Telecommunications Services Incorporated and HighwayMaster
Corporation on May 3, 1999(19)(20)

10.49 - Confidential Memorandum of Understanding entered into between
Criticom International Corp. and HighwayMaster Corporation on
April 16, 1999(19)(20)

10.50 - Stock Option Agreement dated September 3, 1999, by and between
the Company and J. Raymond Bilbao(21)

10.51 - Stock Option Agreement dated September 3, 1999, by and between
the Company and Todd Felker(21)

10.52 - Stock Option Agreement dated September 3, 1999, by and between
the Company and C. Marshall Lamm(21)

10.53 - Stock Option Agreement dated September 3, 1999, by and between
the Company and William H. McCausland(21)

10.54 - Stock Option Agreement dated September 3, 1999, by and between
the Company and Pierre H. Parent(21)

10.55 - Stock Option Agreement dated September 3, 1999, by and between
the Company and W. Michael Smith(21)

10.56 - Stock Option Agreement dated September 3, 1999, by and between
the Company and Robert W. LaMere(21)

10.57 - Stock Option Agreement dated September 3, 1999 by and between the
Company and Stephen P. Tacke(21)

10.58 - Employment Agreement, dated March 13, 2000, by and between the
Company and W. Michael Smith.(22)

10.59 - Employment Agreement, dated March 13, 2000, by and between the
Company and J. Raymond Bilbao.(22)

10.60 - Employment Agreement, dated March 13, 2000, by and between the
Company and Todd A. Felker.(22)

10.61 - Employment Agreement, dated March 13, 2000, by and between the
Company and Marshall Lamm.(22)

10.62 - Employment Agreement, dated March 13, 2000, by and between the
Company and Pierre Parent.(22)

10.63 - Limited Liability Company Agreement of HighwayMaster of Canada,
LLC executed March 3, 2000.(22)

10.64 - Investor Relations Services Agreement, dated March 31, 2000, by
and between the Company and N.D. Hamilton Associates, Inc.(22)

10.65 - Employment Agreement, dated May 31, 2000, by and between the
Company and Jana A. Bell(24)

10.66 - Employment Agreement, dated June 6, 2000, by and between the
Company and Robert W. LaMere(24)

10.67 - Monitoring Services Agreement dated May 25, 2000, by and between
the Company and Criticom International Corporation(23)(24)

10.68 - Commercial Lease Agreement dated April 26, 2000 by and between
the Company and 10th Street Business Park, Ltd.(24)

10.69 - Special Customer Arrangement for MCI WORLDCOM On-Net Services
dated October 23, 2000 by and between the Company and MCI
WORLDCOM(25)(26)

23.1 - Consent of Arthur Andersen LLP(26)

23.2 - Consent of PricewaterhouseCoopers LLP(26)

- ----------

68

(1) Filed in connection with the Company's Registration Statement on Form
S-1, as amended (No. 33-91486), effective June 22, 1995.

(2) Certain confidential portions deleted pursuant to Order Granting
Application for Confidential Treatment issued in connection with
Registration Statement on Form S-1 (No. 33-91486) effective June 22,
1995.

(3) Filed in connection with the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995.

(4) Certain confidential portions deleted pursuant to Application for
Confidential Treatment filed in connection with the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995.

(5) Indicates management or compensatory plan or arrangement required to be
identified pursuant to Item 14(a)(4).

(6) Filed in connection with the Company's Form 10-Q Quarterly Report for the
quarterly period ended June 30, 1996.

(7) Filed in connection with the Company's Current Report on Form 8-K filed
on October 7, 1996.

(8) Filed in connection with the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996.

(9) Filed in connection with the Company's Form 10-Q Quarterly Report for the
quarterly period ended March 31, 1997.

(10) Certain confidential portions deleted pursuant to Order Granting
Application for Confidential Treatment issued in connection with the
Company's Form 10-Q Quarterly Report for the quarterly period ended March
31, 1997.

(11) Filed in connection with the Company's Form 10-Q Quarterly Report for the
quarterly period ended June 30, 1997.

(12) Filed in connection with the Company's Registration Statement on Form
S-4, as amended (No. 333-38361).

(13) Filed in connection with the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997.

(14) Filed in connection with the Company's Form 10-Q Quarterly Report for the
quarterly period ended June 30, 1998.

(15) Filed in connection with the Company's Form 10-Q Quarterly Report for the
quarterly period ended September 30, 1998.

(16) Filed in connection with the Company's Form 10-K fiscal year ended
December 31, 1998.

(17) Filed in connection with the Company's Form 10-Q Quarterly Report for the
quarterly period ended March 31, 1999.

(18) Certain confidential portions deleted pursuant to Order Granting
Application for Confidential Treatment issued June 22, 1999 in connection
with the Company's Form 10-Q Quarterly Report for the quarterly period
ended March 31, 1999.

(19) Filed in connection with the Company's Form 10-Q Quarterly Report for the
quarterly period ended June 30, 1999.

(20) Certain confidential portions deleted pursuant to letter granting
application for confidential treatment issued October 10, 1999 in
connection with the Company's Form 10-Q Quarterly Report for the
quarterly period ended June 30, 1999.

(21) Filed in connection with the Company's Form 10-Q Quarterly Report for the
quarterly period ended September 30, 1999.

(22) Filed in connection with the Company's Form 10-Q Quarterly Report for the
quarterly period ended March 31, 2000.

(23) Certain confidential portions deleted pursuant to Order Granting
Application for Confidential Treatment issued December 5, 2000 in connec-
tion with the Company's Form 10-Q Quarterly Report for the quarterly
period ended June 30, 2000.

(24) Filed in connection with the Company's Form 10-Q Quarterly Report for the
quarterly period ended June 30, 2000.

(25) Certain confidential portions deleted pursuant to Application for
Confidential Treatment filed on February 27, 2001.

(26) Filed herewith.