<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
 
                            WASHINGTON, D.C. 20549
 
     ------------------------------------------------------------------- 
 
 
                               ADMENDMENT NO. 1
 
                                 FORM 10--Q/A
 
 
              QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
 
 
              FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997.
                        COMMISSION FILE NUMBER 0-21225
 
 
                       U.S. DIGITAL COMMUNICATIONS, INC.
 
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 

              NEVADA                                   52-2124492
      (STATE OF INCORPORATION)                   (I.R.S. EMPLOYER ID NO.)
 
 
          2 Wisconsin Circle, Suite 700, Chevy Chase, Maryland 20815
              (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
 
                                (301) 961-1540
               (REGISTRANT'S PHONE NUMBER, INCLUDING AREA CODE)
 
       SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                         COMMON STOCK, $0.01 PAR VALUE
                               (TITLE OF 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                  No     X
                                      ----------          ----------
 
THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUERS CLASSES OF COMMON STOCK
WAS 16,395,800 SHARES OF COMMON STOCK, PAR VALUE $0.01, OUTSTANDING AS OF
SEPTEMBER 30, 1997
<PAGE>
 
PART I:     FINANCIAL INFORMATION
 
ITEM I:     FINANCIAL STATEMENTS

<TABLE> 
<CAPTION> 
 
                       U.S. DIGITAL COMMUNICATIONS, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (UNAUDITED)

 
                                        ASSETS
 
                                                                        September 30,               December 31,
                                                                            1997                        1996
                                                                   ---------------------      -----------------------
<S>                                                             <C>                          <C> 
Current assets:
     Cash and cash equivalents                                     $              47,623      $                 8,654
     Trade accounts receivable, net                                              169,257                            -
     Inventory                                                                   227,843                            -
     Other receivable                                                             75,000                       20,000
     Shareholder receivables                                                       5,400                            -
     Prepaid expenses                                                             53,962                       30,478
                                                                   ---------------------      -----------------------
             Total current assets                                                579,085                       59,132
 
     Investments                                                                  34,450                            -
 
     Property and equipment, net                                                 135,069                       90,789
 
     Intangible assets, net                                                    1,033,898                       86,628
 
     Other noncurrent assets                                                      31,684                        5,753
                                                                   ---------------------      -----------------------
 
     Total assets                                                  $           1,814,186      $               242,302
                                                                   =====================      =======================
 
                   LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 
Current liabilities:
     Accounts payable and accrued expenses                                     1,791,340                    1,572,011
     Deferred revenue                                                            157,329                            -
     Dividends payable                                                            67,966                            -
     Stockholder loans                                                           644,385                      624,386
     Accrued interest on stockholder loans                                        29,523                       34,649
     Notes payable                                                               113,527                      110,755
     Minimum royalty obligation                                                  450,000                      450,000
     Due to former officers and stockholders                                     469,522                      203,522
                                                                   ---------------------      -----------------------
     Total current liabilities                                                 3,723,592                    2,995,323
 
Notes payable (net of current portion)                                            19,669                       29,865
                                                                   ---------------------      -----------------------
 
     Total liabilities                                                         3,743,261                    3,025,188
                                                                   ---------------------      -----------------------
 
Commitments and contingencies
 
Stockholders' equity (deficit):
     Preferred stock -- $0.01 par, 10,000,000 shares authorized;
       2,031,832 issued and outstanding at September 30, 1997                     20,318                            -
     Common stock -- $0.01 par, 50,000,000 shares authorized;
       22,298,000 issued and 16,395,800 outstanding at 
       September 30, 1997; 22,128,000 issued and outstanding at 
       December 31, 1996                                                         222,980                      221,280
     Additional paid-in capital                                               15,021,617                   15,096,123
     Common stock warrants                                                     1,249,577                            -
     Accumulated other comprehensive loss                                         (6,500)                           -
     Treasury stock (5,902,200 shares of common stock, at cost)                      (10)                           -
     Deferred compensation                                                             -                   (3,713,542)
     Shares to be issued (including additional paid in capital)                  389,583                            -
     Stockholders' receivable                                                   (200,000)                           -
     Accumulated deficit                                                     (18,626,640)                 (14,386,747)
                                                                   ---------------------      -----------------------
 
             Total stockholders' equity (deficit)                               (1,929,075)                  (2,782,886)
                                                                   ---------------------      -----------------------
 
             Total liabilities and stockholders' equity 
               (deficit)                                           $           1,814,186      $               242,302
                                                                   =====================      =======================
 
 
     See accompanying notes to condensed consolidated financial statements
</TABLE>
<PAGE>
 
<TABLE>
<CAPTION>
                       U.S. DIGITAL COMMUNICATIONS, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
 
 
                                      Three Months Ended September 30,        Nine Months Ended September 30,
                                    ------------------------------------    ------------------------------------
                                          1997               1996                 1997               1996
                                    ---------------    -----------------    ---------------    -----------------
<S>                                 <C>                <C>                  <C>                <C>
Sales:                                                                                            
   Equipment                        $        95,702    $               -    $        95,702    $               -
   Services                                  46,983                    -             46,983                    -
                                     --------------    -----------------    ---------------    -----------------
     Total sales                           142,685                     -            142,685                    -
                                                                                                  
Cost of goods sold                          127,102                    -            127,102                    -
                                     --------------    -----------------    ---------------    -----------------
     Gross margin                            15,583                    -             15,583                    -
                                     --------------    -----------------    ---------------    -----------------
                                                                                                  
Operating expenses:                                                                               
    Sales and marketing                     39,414                    -             39,414                    -
                                                                                                  
    General and administrative              572,442            1,173,591          1,846,004            3,265,139
                                                                                                  
    Stock option compensation               395,832                    -          1,052,573                    -
                                                                                                  
                                     --------------    -----------------    ---------------    -----------------
       Total operating expenses           1,007,688            1,173,591          2,937,991            3,265,139
                                     --------------    -----------------    ---------------    -----------------
Loss from operations                       (992,105)          (1,173,591)        (2,922,408)          (3,265,139)
                                     --------------    -----------------    ---------------    -----------------
                                                                                                  
Other income (expense):                                                                           
    Interest expense                        (39,897)             (11,124)          (107,822)             (17,126)
    Interest and other income                 5,339                  841             21,413                6,321
    Income (loss) on repayment                                                                    
     of debt                                      -                    -                  -                    -
    Loss on investments                           -                    -             (9,050)                   -
                                                                                                  
                                     --------------    -----------------    ---------------    -----------------
        Total income                                                                              
         (expense), net                     (34,558)             (10,283)           (95,459)             (10,805)
                                     --------------    -----------------    ---------------    -----------------
                                                                                                  
Net loss                                 (1,026,663)          (1,183,874)        (3,017,867)          (3,275,944)
                                                                                                  
Dividends on preferred stock               (416,149)                   -         (1,248,447)                   -
                                     --------------    -----------------    ---------------    -----------------
                                                                                                  
Net loss available to common                                                                      
 stockholders                        $   (1,442,812)   $      (1,183,874)   $    (4,266,314)   $      (3,275,944)  
                                     ==============    =================    ===============    =================
                                                                                                  
Net loss per common share:                                                                        
             Basic                   $        (0.07)    $          (0.05)   $         (0.19)   $           (0.15)
                                                                                                  
             Diluted                 $        (0.07)    $          (0.05)   $         (0.19)   $           (0.15)
                                                                                                  
             Weighted average                                                                     
               sharesof common                                                                    
               stock outstanding         21,904,079           22,128,000         22,097,082           21,841,571
             
             
 
 
     See accompanying notes to condensed consolidated financial statements
</TABLE>
<PAGE>
 
                       U.S. DIGITAL COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                   Preferred Stock              Common Stock         
                                                      Series A                   Par Value          
                                              -----------------------    --------------------------- 
                                                                                                     
                                                 Shares       Amount        Shares          Amount   
                                              -----------    --------    -------------     ----------
<S>                                             <C>          <C>         <C>               <C>       
BALANCE, DECEMBER 31, 1996                              -     $     -       22,128,000      $221,280 
                                                                                                     
Sale of Series A Preferred Shares and           2,031,832      20,318                -             - 
 Warrants for cash                                                                                   
Sale of Common Stock                                    -           -          170,000         1,700
Repurchase of Common Stock                              -           -                -             -
Cancellation of options                                 -           -                -             -
Stock issued in legal settlement                        -           -                -             - 
Preferred dividends and beneficial conversion           -           -                -             - 
 feature                                                                                             
Deferred compensation related to grant of               -           -                -             - 
 stock options                                                                                       
Amortization of deferred compensation                   -           -                -             - 
Other comprehensive income                              -           -                -             - 
Shareholders' receivable                                -           -                -             -
Shares to be issued (including additional-   
 paid-in capital)                                       -           -                -             -
Stock issuance cost                                     -           -                -             - 
Net Loss                                                -           -                -             - 
                                                ---------    --------    -------------     --------- 
                                                                                                     
BALANCE, SEPTEMBER 30, 1997                     2,031,832     $20,318     $ 22,298,000      $222,980 
                                               ==========     =======     ============      =========
                                                                                                     
</TABLE> 

<TABLE>
<CAPTION>
                                                                          Accumulated
                                               Additional     Common         Other
                                                Paid-In        Stock      Comprehensive
                                                Capital      Warrants     Income (Loss) 
                                              -----------    --------    -------------  
<S>                                           <C>           <C>          <C>            
BALANCE, DECEMBER 31, 1996                    $15,096,123   $     -       $          -

Sale of Series A Preferred Shares and           1,777,853    1,249,577               -
 Warrants for cash                           
Sale of Common Stock                              107,900
Repurchase of Common Stock                              -
Cancellation of options                        (3,320,833)
Stock issued in legal settlement                        -
Preferred dividends and beneficial conversion   1,057,212          -                 -
 feature                                     
Deferred compensation related to grant of         659,864          -                 -
 stock options                               
Amortization of deferred compensation                   -          -                 -
Other comprehensive income                              -          -            (6,500)
Shareholders' receivable                     
Shares to be issued (including additional-              -          -                 -  
 paid-in capital)                            
Stock issuance cost                              (356,503)
Net Loss                                                -          -                 - 
                                              -----------   ----------    -------------  
BALANCE, SEPTEMBER 30, 1997                   $15,021,616   $1,249,577    $     (6,500)
                                              ===========   ==========    =============

</TABLE> 

<TABLE> 
<CAPTION>                                                                                            
                                                                                                     
                                                   Treasury Stock                           Shares   
                                              -----------------------      Deferred          to be   
                                                 Shares        Cost      Compensation       Issued   
                                              -----------    --------    ------------      ----------
<S>                                             <C>          <C>         <C>               <C>       
BALANCE, DECEMBER 31, 1996                              -     $     -     $(3,713,542)      $      - 
                                                                                                     
Sale of Series A Preferred Shares and                   -           -                -             - 
 Warrants for cash                                                                                   
Sael of Common Stock                                    -           -                -             -
Repurchase of Common Stock                     (5,902,200)        (10)               -             -
Cancellation of options                                 -           -                -             -
Stock issued in legal settlement                        -           -                -             - 
Preferred dividends and beneficial conversion           -           -                -             - 
 feature                                                                                             
Deferred compensation related to grant of               -           -         (659,864)            - 
 stock options                                                                                       
Amortization of deferred compensation                   -           -        1,052,573             - 
Other comprehensive income                              -           -                -             - 
Shareholders' receivable                                -           -                -             -
Shares to be issued (including additional-              -           -                -       389,583 
 paid-in capital)               
Stock issuance cost                                     -           -                -             - 
Net Loss                                                -           -                -             - 
                                               ----------    --------     ------------     ---------- 
                                                                                                     
BALANCE, SEPTEMBER 30, 1997                    (5,902,200)    $   (10)    $          -     $  389,583
                                               ==========    ========     ============     ==========
 

</TABLE> 

<TABLE> 
<CAPTION>
                                                                                Total
                                              Stockholders'  Accumulated    Stockholders'
                                               Receivable      Decifit         Equity    
                                              -----------   -------------  -------------  
<S>                                           <C>           <C>            <C>            
BALANCE, DECEMBER 31, 1996                    $         -   $(14,386,747)  $(2,782,886)

Sale of Series A Preferred Shares and                   -              -     3,047,748
 Warrants for cash                           
Sale of Common Stock                                    -              -       109,600 
Repurchase of Common Stock                              -              -           (10)
Cancellation of options                                 -              -             -
Stock issued in legal settlement                        -              -             -
Preferred dividends and beneficial conversion           -     (1,248,447)     (191,235)   
 feature                                     
Deferred compensation related to grant of               -              -             -
 stock options                               
Amortization of deferred compensation                   -              -     1,052,573
Other comprehensive income                              -              -        (6,500)
Shareholders' receivable                         (200,000)             -      (200,000)
Shares to be issued (including additional-              -              -       389,583      
 paid-in capital)                            
Stock issuance cost                                     -              -      (356,503)
Net Loss                                                -     (2,901,357)   (2,901,357)
                                              -----------   -------------  -------------  
BALANCE, SEPTEMBER 30, 1997                   $  (200,000)  $(18,536,551) $ (1,838,987)
                                              ===========   ============= =============

</TABLE> 

     See accompanying notes to condensed consolidated financial statements



<PAGE>
 
<TABLE>
<CAPTION>
                                   U.S. DIGITAL COMMUNICATIONS, INC.
                           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                          (UNAUDITED)
                                                                                        Nine Months Ended        
                                                                                           September 30,             
                                                                                               1997               
                                                                                       -------------------    
<S>                                                                                 <C>  
Cash flows from operating activities:                                                                        
       Net loss                                                                        $        (3,017,867)   
                                                                                       -------------------    

       Adjustments to reconcile net loss to net cash                                                         
        used in operating activities--                                                                      
       Depreciation and amortization                                                               123,405      
       Stock option compensation                                                                 1,052,573  
       Loss on investment                                                                            9,050  
       Loss on repayment of debt                                                                         -  
       Loss on settlement of litigation/claims                                                           -
       Changes in assets and liabilities:                                                                   
          Decrease in trade accounts receivable, net                                               (21,446)       
          Decrease in inventory                                                                    (76,526)             
          Decrease (increase) in prepaid expenses                                                  (25,436)    
          (Increase) Decrease in other noncurrent                                                             
            assets                                                                                 (27,052)            
          (Decrease) increase in accounts payable and                                                         
            accrued expenses                                                                      (577,865)             
          Decrease in deferred revenue                                                             (20,338)      
          Increase in accrued interest on stockholder loans                                         29,523          
          Increase in in due to former officers and                                                            
            stockholder                                                                            266,000            
                                                                                       -------------------    
                                                                                                     
                 Total adjustments                                                                 731,888
                                                                                       -------------------    
                                                                                                 
                 Net cash used in operating activities                                          (2,285,979)    
                                                                                       -------------------    
                                                                                                    
Cash flows from investing activities:                                                            
       Advances to non-affiliates                                                                        - 
       Purchase of investments                                                                    (125,000)  
       Advances to Skysite prior to acquisition                                                   (198,481)  
       Capital expenditures                                                                        (63,396)  
                                                                                       -------------------    
                                                                                                    
                 Net cash used in investing activities                                            (386,877)  
                                                                                       -------------------    
                                                                                                    
Cash flows from financing activities:                                                               
       Borrowings from stockholders                                                                170,000      
       Principal payments under notes payable                                                       (7,425) 
       Proceeds from issuance of preferred stock                                                  
         and warrants                                                                            3,069,648    
       Proceeds from issuance of common stock                                                          100     
       Purchase of treasury stock                                                                      (10)    
       Payment of dividends on preferred stock                                                    (113,985)   
       Payment of stock issuance costs                                                            (356,503)   
       Repayment of stockholder borrowings                                                         (50,000)   
                                                                                       -------------------    
                                                                                                                   
                 Net cash provided by financing activities                                       2,711,825     
                                                                                       -------------------        
Net change in cash and cash equivalents                                                             38,969    
Cash and cash equivalents, beginning of period                                                       8,654    
                                                                                       -------------------       
Cash and cash equivalents, end of period                                               $            47,623             
                                                                                       ===================
Supplemental disclosures of cash transactions:                                                                
       Cash paid for interest                                                          $            27,641 
                                                                                       ===================
Supplemental disclosures of non-cash transactions:                       
       Common stock issues in satisfication of                                                  
       stockholder loan                                                                $                 -                    
                                                                                       ===================
       Cancelation of stock and shareholders'                                                        
       loans in settlement                                                             $                 -                 
                                                                                       ===================
       Common stock and warrants issued as consideration                                                          
       for placement fees                                                              $                 -        
                                                                                       ===================
       Unrealized loss on investment                                                   $                 - 
                                                                                       ===================
       Beneficial conversion feature on preferred stock                                $         1,057,212        
                                                                                       ===================
</TABLE> 
                                                                             
     See accompanying notes to condensed consolidated financial statements   
                                                                             
<PAGE>
 
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

(1)      BASIS OF PRESENTATION

  The condensed consolidated balance sheets of U.S. Digital Communications, Inc.
(the "Company") as of September 30, 1997 and December 31, 1996, and the related
condensed consolidated statements of operations for the three and nine month
periods ended September 30, 1997 and 1996, condensed consolidated statement of
cash flows for the nine month period ended September 30, 1997 and condensed
consolidated statement of changes in stockholders' equity (deficit) for the nine
month period ended September 30, 1997  presented in this Form 10-Q are
unaudited.  In the opinion of management, all adjustments necessary for a fair
presentation of such financial statements have been included.  Such adjustments
consist only of normal recurring items.  Interim results are not necessarily
indicative of results for a full year.  Certain amounts have been reclassified
to conform to the current year presentation.

  Certain notes and other information have been condensed or omitted from these
interim financial statements.


(2)  SUBSEQUENT EVENTS

  On June 20, 1997, the Company entered into an Agreement and Plan of
Reorganization (the "Agreement") with Skysite Communications Corporation
("Skysite").  Under the Agreement, the Company was to issue 750,000 shares of
its common stock to the shareholders of Skysite, as well as options to purchase
an additional 500,000 shares of its common stock at an exercise price of $.40
per share.

  The stock of Skysite was transferred to the Company on August 26, 1997.
Subsequent to the acquisition, disputes arose between the Company and the former
President of Skysite related to the value of Skysite at the time of the
acquisition. As a result of this dispute, the Company withheld its shares. The
Company entered into an amended agreement with the shareholders of Skysite,
except for the former President (who was allocated 240,000 shares). Under the
terms of this amended agreement, the other shareholders' shares and options will
be placed in an escrow account. The shareholders will have all rights
attributable to these escrowed shares; however, they have agreed that at such
time when they elect to sell these shares, the first $200,000 of related
proceeds will be paid to the Company, and the remaining shares and options will
be released to the shareholders. The 240,000 shares due to the former President
remain unissued, and the Company does not intend to issue such shares. The
shares and options for the other shareholders were placed in escrow by the
Company during October 1998.

  The Company has recognized the Skysite acquisition as a purchase for
accounting purposes.  The Company has valued the consideration to be given to
the shareholders of Skysite using the 510,000 shares to be placed in escrow and
the related options, less the $200,000 to be received from escrow when these
shares are sold.  This $200,000 has been recognized by the Company as a
reduction of stockholders' equity.  Since the Company does not intend to issue
the 240,000 shares to Skysite's former President, the value for these shares
($304,000) has not been included in the consideration to be given.  If the
Company is required to distribute such shares in the future, the equity and
related goodwill accounts will be increased.

  Also in August of 1998, the Company entered into a take or pay minute of use 
commitment for three million minutes with Iridium North America ("INA"). The 
minutes must be takeover or paid within the fifteen months following the 
commercial launch of the Iridium system.

  In January 1999 the Company acquired asset tracking, real-time single-frame
video wireless communications applications, Personal Digital Assistant
technology and other assets from two unrelated entities as additional components
of the Company's value-added services for satellite platforms.
<PAGE>
 
The Company may from time to time make written or oral forward-looking
statements.  Written forward-looking statements may appear in documents filed
with the Securities and Exchange Commission (the "Commission"), in press
releases, and in reports to shareholders.  The Private Securities Litigation
Reform Act of 1995 contains a safe harbor for forward-looking statements on
which the Company relies in making such disclosures.  Forward-looking statements
can be identified by the use of words such as "believes," "anticipates,"
"plans," "expects," "may," "will," "intends," "estimates" and the negatives
thereof and similar expressions.  In connection with this "safe harbor," the
Company has identified in this report and in its report filed December 31, 1998
on Form 10-K/A for the fiscal year ending December 31, 1997 important factors
that could cause actual results to differ materially from those contained in any
forward-looking statements made by or on behalf of the Company.  Any such
statement is qualified by reference to these cautionary factors.


ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS


General

  The Company filed a report on Form 10-Q for the third quarter of fiscal year
1997, due on November 14, 1997 on or about November 14, 1997.  This report on
Form 10-Q/A for the third quarter of fiscal year 1997 ("September 10-Q"),  is
being filed on or about February 26, 1999.  The Company filed a report on Form
10-K for the fiscal year ending December 31, 1997 ("1997 10-K"), due on March
30, 1998, on October 7, 1998 and subsequently filed a report on Form 10-K/A for
the fiscal year ending December 31, 1997 ("1997 10-K/A") on October 20, 1998.
Both the 1997 10-K and 1997 10-K/A contained financial statements and
accompanying notes that had not been audited by an independent accountant.  The
Company filed a report on Form 10-K/A Amendment No. 2  ("1997 10-K/A No. 2") for
the fiscal year ending December 31, 1997 on December 31, 1998 which contained
financial statements and accompanying notes that have been audited by an
independent accountant.  The Company filed a report on Form 10-Q for the first
quarter of fiscal year 1998 ("March 10-Q"), due May 15, 1998, on or about
November 19, 1998 and subsequently filed a report on Form 10-Q/A for the first
quarter of fiscal year 1998 on January 14, 1999.  The Company filed a report due
on Form 10-Q for the second quarter of fiscal year 1998 ("June 10-Q"), due on
August 14, 1998, on or about November 20, 1998 and subsequently filed a report
on Form 10-Q/A for the second quarter of fiscal year 1998 on January 14, 1999.
The Company filed a report on Form 10-Q for the third quarter of fiscal year
1998 on or about December 7, 1998. This filing does not necessarily address and
should be read in conjunction with the more extensive information provided in
the Company's 1997 10-K/A No. 2 for fiscal year 1997 concerning that year and
subsequent events in fiscal year 1998.

  The delays and, in the case of the 1997 10-K and 1997 10-K/A, absence of the
required audit were associated with substantial changes in the Company's
management and operations.  In the first half of 1997, the Company discontinued
its principal business activity  the development of the Universal Internet
Television Interface and Electronic Device technologies  and acquired Skysite
Communications Corporation, Inc.  The Company filed a report on Form 10-K for
the year ended December 31, 1996 on May 15, 1997 that describes the discontinued
development program.  The Company filed a report on Form 8-K on July 2, 1997
that reported these changes in its operations and is filing a report on Form 8-
K/A on or about February 26, 1999 that more fully reports on these changes.  In
July 1998, the Company created U.S Digital Satellite, Inc. ("Insat") to oversee
its satellite communications operations and transferred the common stock of
Skysite to Insat and incorporated Project 77 Corp. ("Project 77") as Insat's
other wholly-owned subsidiary.  As a result, the Company's business presently
consists primarily of the operations of its wholly owned subsidiary that is
engaged in the satellite based telecommunications business. During the Spring of
1998, the Company relocated its headquarters from Burbank, California to Chevy
Chase, Maryland and replaced its two principal officers in order to more
effectively pursue its new opportunities. As of the date of this report, the
Company believes it has become current in meeting the filing requirements of the
Securities Exchange Act of 1934 as the amendments required on its 1997 and 1998
reports on Form 10-Q and 8-K have been filed.
<PAGE>
 
The Company's independent accountant in fiscal year 1996, Blackman, Kallick
Bartelstein, LLP, declined to stand for reelection as the Company's auditors,
effecting its decision through a letter dated September 24, 1997. The Company
filed a report on Form 8-K on December 3, 1997 that discloses the declination.
Arthur Andersen LLP was engaged on June 1, 1998 to perform an audit of the
Company's consolidated balance sheet and related financial statements for the
fiscal year ended December 31, 1997.  On September 30, 1998, Arthur Andersen LLP
resigned as the Company's auditors.  The Company filed reports on Form 8-K on
June 5, 1998 and October 7, 1998 that announced these events.  On October 15,
1998, the Company engaged Reznick Fedder and Silverman P.C. to perform an audit
of the Company's consolidated balance sheet and related financial statements for
the fiscal year ended December 31, 1997. The Company filed a report on Form 8-K
on October 20, 1998 that disclosed the engagement. The audit was completed in
December 1998.

  The Company's primary activities were in transition in 1996 and 1997.  The
Company had continued  pursuing the development of an electronic device capable
of adding modem, video data and telephone features to an ordinary television
receiver over a telephone line ("Initial Products") during 1996.  But in early
1997, the Company concluded that these Initial Products would not produce
adequate revenues or profits if brought to market.  A new interim President was
hired and specifically charged with developing a business plan that would
utilize the Company's assets more effectively than would continuing with its
original strategy.

  In May 1997, U.S. Digital became involved in operating Skysite Communications
Corporation. Skysite was initially created to market a new satellite-based
telecommunications system called Mobilesat, or MSAT (MSAT is a trademark term
used as an abbreviation by the American Mobile Satellite Corporation in the
United States).

  On June 20, 1997, the Company entered into an Agreement and Plan of
Reorganization with Intercontinental Technologies Group, Tom D. Soumas, Jr.,
Cochran Ranch Golf and Tennis Resort, Sinai Administrative Trust, Carol
Anderson, Howard Garber, George Straayer (the "Selling Shareholders") and
Skysite. Under the Agreement, the Company was to issue 750,000 shares of its
common stock to the shareholders of Skysite, as well as options to purchase an
additional 500,000 shares of its common stock at an exercise price of $.40 per
share, in exchange for 100% of the outstanding shares of common stock of
Skysite.

  The stock of Skysite was transferred to the Company on August 26, 1997.
Subsequent to the acquisition, disputes arose between the Company and the former
President of Skysite, Tom D. Soumas, related to the value of Skysite at the time
of the acquisition. As a result of the dispute, the Company withheld its shares.
On May 28, 1998, the Company entered into an amended agreement with the Selling
Shareholders, except for Tom D. Soumas. Under the terms of the amended
agreement, the other shareholders' shares and options were placed in an escrow
account in October 1998. The shareholders will have all rights attributable to
these escrowed shares, however, they have agreed that at such time when they
elect to sell these shares, the first $200,000 of related proceeds will be paid
to the Company, and the remaining shares and options will be released to the
other Shareholders. The 240,000 shares due to Mr. Soumas under the original
agreement remain unissued, and the Company does not intend to issue such shares.

  On June 20, 1997, Jerome Greenberg agreed to contribute to the Company's
treasury 5,902,200 shares of Common Stock that he beneficially owned in exchange
for $10 and an agreement by the Company to use 6% of the funds raised from the
sale of its Series A Preferred Stock to repay outstanding notes payable owed to
Mr. Greenberg. As a result of this contribution, Mr. Greenberg retained 655,800
shares (plus options to purchase an aggregate of 100,000 shares of Common
Stock).

  In August 1998, the Company and Mr. Greenberg agreed to a restructuring of the
Company's debt of approximately $1,028,457 to the shareholder.  The parties
agreed that the Company would pay $750,000 in 
<PAGE>
 
cash per a payment schedule and issue 200,000 shares of the Company's common
stock. An initial payment of $250,000 was made in September 1998.

Risk Factors

The Company has incurred significant operating losses in every fiscal period
since inception. In August 1997, in connection with the acquisition of Skysite,
the Company terminated its production of the UITI and ED technologies and
concentrated its business on the global satellite communications market. Skysite
was incorporated in August 1995 and has only limited operating history. The
Company is thus subject to the risks inherent in the establishment and growth of
a new business enterprise. The likelihood of success of the Company must be
considered in light of the problems, expenses, difficulties and delays
frequently encountered in connection with a new business, including, but not
limited to, a continually evolving industry subject to rapid technological and
price changes, acceptance of the products that Skysite markets and an increasing
number of market competitors and a continuing need for additional capital. The
Company is filing a report on Form 8-K on the date of this filing that discusses
the Company's immediate capital needs. For the year ended December 31, 1997, the
Company's operating loss was $4,685,185. The Company has incurred substantial
quarterly operating losses through the first three quarters of 1998 and expects
a loss for the full year and possibly longer. The Company has discussed risk
factors in its report on Form 10-K/A Amendment No. 2 for fiscal year 1997 filed
on December 31, 1998.


Results Of Operations

Three Months Ended September 30, 1997 Compared to Three Months Ended September
30, 1996.

  Sales were $142,685 in the third quarter of 1997 as compared to no sales in
the comparable prior year period.  These sales reflect approximately one month
of revenue from the company's subsidiary Skysite Communications, Inc.

  Cost of goods sold was $127,102 in the third quarter of 1997 or 89.1% of
sales.

  Sales and marketing expense was $39,414 in the third quarter of 1997 as
compared to no such expense in the comparable prior year period.  These expenses
reflect approximately one month of such expense from the company's subsidiary
Skysite Communications, Inc.

  General and administrative expense was $572,442 in the third quarter of 1997
as compared to $1,173,591 in the comparable prior year period.  This reduction
of $601,149 is  due to the overall reduction in the number of employees, the
discontinuation of the development of the ED and UITI devices as well as a
tightened travel policy begun by management. General and administrative expense
attributable to Skysite is included for only one month in the 1997 period.

  The Company granted stock options to various employees and other individuals
during the third quarter of fiscal 1997.  In connection with the granting of
these options, the Company recorded a stock option compensation expense in the
amount of $395,832. The amount recorded represents the difference between the
exercise price and the fair market value of the Company's Common Stock, as
determined by reference to the publicly traded value of the stock, as of the
date the options were granted.
<PAGE>
 
Nine months Ended September 30, 1997 Compared to Nine months Ended September 30,
1996.

  Sales were $142,685 in the first three quarters of 1997 as compared to no
sales in the comparable prior year period.  These sales reflect approximately
one month of revenue from the company's subsidiary Skysite Communications, Inc.

  Cost of goods sold was $127,102 in the first three quarters of 1997 or 89.1%
of sales.

  Sales and marketing expense was $39,414 in the first three quarters of 1997 as
compared to no such expense in the comparable prior year period.  These expenses
reflect approximately one month of such expense from the company's subsidiary
Skysite Communications, Inc.

  General and administrative expense was $1,846,004 in the first three quarters
of 1997 as compared to $3,265,139 in the comparable prior year period.  This
reduction of $1,419,133 is  due to the overall reduction in the number of
employees, the discontinuation of the development of the ED and UITI devices as
well as a tightened travel policy begun by management.  General and
administrative expense attributable to Skysite is included for only one month in
the 1997 period.

  The Company granted stock options to various employees and other individuals
during the first three quarters of fiscal 1997.  In connection with the granting
of these options, the Company recorded a stock option compensation expense in
the amount of $1,052,573. The amount recorded represents the difference between
the exercise price and the fair market value of the Company's Common Stock, as
determined by reference to the publicly traded value of the stock, as of the
date the options were granted.

Liquidity and Capital Resources

  The Company began the third quarter of 1997 with $436,154 in cash.  At
September 31, 1997, its cash available was $47,623.  Cash used for operations
was $455,988.  This requirement would have been greater if the Company had not
experienced an increase of $202,819 in its accounts payable and accrued
expenses. The Company was able to maintain a positive cash balance only by
obtaining a loan for $100,000.

  Without additional financing, the Company would be unable to continue its
operations.  Management has been seeking additional sources of debt and equity
financing.  In August, 1997, the Company entered into an agreement with a
placement agent to raise equity financing solely from non-U.S. persons as
defined in Regulation S promulgated by the U.S. Securities and Exchange
Commission through a second private offering of the Company's 8% cumulative
convertible preferred stock ("Series A"), $0.01 par value per share. The Company
offered a minimum of 300,000 and a maximum of 5,066,666 shares of the 8%
preferred stock for consideration of between $450,000 and $7,599,999. The
Series A preferred stock is nonvoting.  The Company had received subscriptions
for 60,000 shares prior to September 30, 1997.  However the funds from these
intended purchasers remained in escrow and might never be available to the
Company in the event that the minimum subscription requirement is not met.
There can be no assurance that the offering will produce any funds.

  For the first nine months of 1997, the Company used $2,285,979 in cash in its
operations. The Company will continue to require additional capital at least
until it can substantially increase its revenues. In the absence of improved
sales, even if sufficient funds can be obtained to continue operations, the
Company can be expected to continue in its pattern of the first nine months of
1997 requiring at least $500,000 to $750,000 in financing quarterly. There is no
assurance that such funds would be available and that the Company will continue
to operate.
<PAGE>
 
PART II  OTHER INFORMATION

     ITEM 1. LEGAL PROCEEDINGS

  William H. Buck v. Viscorp & Visual Information Services Corp.  On or about
  -------------------------------------------------------------              
June 2, 1997, the Company filed a complaint against William H. Buck, the
Company's former Chief Executive Officer and Director, in the United States
District Court, Northern District of Illinois, Eastern Division, Case No. 97 C
3390, entitled Viscorp and Visual Information Services Corp. v. William H. Buck,
               ---------------------------------------------------------------- 
alleging breach of fiduciary duty, breach of employment agreement, accounting as
to severance agreement and conspiracy to defraud arising out of Mr. Buck's
conduct as Chief Executive Officer of the Company.   On June 23 1997, Mr. Buck
filed a complaint against Viscorp, et. al., in the United States District Court,
Northern District of Illinois, Eastern Division, Case No. 97 C 4480.  Mr. Buck
sought a declaratory judgment permitting him to sell 220,000 shares of Common
Stock of the Company.  On September 19, 1997, Mr. Buck filed a counterclaim
against the Company, alleging partial rescission of his severance agreement,
dated January 8, 1997, breach of severance agreement, rescission of lock-up
agreement, breach of lock-up agreement and tortious interference with economic
advantage.  On November 12, 1997, Raquel Velasco filed a complaint against the
Company, in the United States District Court, Northern District of Illinois,
Eastern Division, Case Number 97-C-7897, entitled Raquel Velasco v. Viscorp
                                                  -------------------------
seeking $220,000 in damages and expenses from alleged rescission for breach of
written severance agreement, or in the alternative, breach of severance
agreement.  On June 9, 1998, the Company filed a counterclaim against Ms.
Velasco relating to her alleged employment agreement with the Company.  The
aforementioned matters were consolidated for purposes of discovery.  On August
31, 1998, the Company entered into settlement agreements with Mr. Buck and Ms.
Velasco.  Pursuant to the Company's settlement agreement with Mr. Buck, Mr. Buck
is permitted to sell 350,000 shares of the Company's common stock that he
already owns, pursuant to a tradeability schedule.  Mr. Buck returned all other
shares to the Company for cancellation. Mr. Buck's stock options have been
canceled. Pursuant to the Company's settlement agreement with Ms. Velasco, Ms.
Velasco received 350,000 shares of the Company's common stock, formerly held by
Mr. Buck, also subject to a tradeability schedule. Ms. Velasco has also been
granted an option to purchase certain property from the Company, including the
ED and UITI technologies, for $50,000 which she exercised in November 1998.

  Visual Information Service Corp. v. Interactive Video Publishing, Inc.  On
  ---------------------------------------------------------------------     
July 25, 1996, the Company filed a lawsuit in the United States District Court
for the Northern District of California, San Jose Division, case number C 96-
20593 RMW (EAI), against Interactive Video Publishing, Inc., David Serlin, Steve
Owens and Kaori Kuwata ("Defendants") for injunctive relief and damages of
approximately $7 million for misappropriation of trade secrets, conversion and
breach of fiduciary duty.  Defendants filed counterclaims for declaratory
relief, intentional interference with economic advantage, breach of contract and
unfair competition claiming damages yet to be determined.  On November 20, 1996,
David Serlin and Marvin Lerch filed suit against the Company and its former
officer, Jerome Greenberg, in the United States District Court, Northern
District of California, San Jose Division.  The case is captioned  Serlin v.
                                                                   ---------
Visual Information Service Corp., case number C 96-21073. David Serlin and
-------------------------------                                           
Marvin Lerch claimed damages in excess of $6.5 million in connection with the
alleged breach of their employment contracts, alleging breach of employment
contracts, breach of the implied covenant of good faith and fair dealing, fraud,
deceit and negligent misrepresentation among several causes of action. On June
25, 1997, a settlement conference was held in Visual Information Service Corp v.
                                              ----------------------------------
Interactive Video Publishing, Inc. and Serlin v. Visual Information Service
---------------------------------     -------------------------------------
Corp. and a settlement was reached with all parties in both actions. On
September 26, 1997, Messrs. Serlin and Lerch entered into a settlement agreement
with the Company whereby the Company agreed to pay Messrs. Serlin and Lerch
$25,000 each, and granted each 400,000 stock options with an exercise price of
$1.50.  The Company is currently unable to comply with terms of the settlement
agreement because the shares underlying the stock options have not yet been
registered.  This in ability has raised questions about the validity of the
agreement and could result in consequential damages assessed against the
Company.  The parties are attempting to reach a settlement of the issues 
outstanding. At this time, management is unable to estimate the likelihood or
amount of any such damages.

  Donald Gilbreath v. USDI, Viscorp and Corporate Stock Transfer, Inc.  On
  -------------------------------------------------------------------     
December 19, 1997, Donald Gilbreath, a former director of the Company, filed a
complaint against the Company in the United States 
<PAGE>
 
District Court, District of Colorado, Case No. 97-WY-2667-CB, alleging a claim
against the Company for failing to remove restrictive legends on shares owned by
Mr. Gilbreath. Mr. Gilbreath requested that the Court hold that he was the
lawful owner of 1,000,000 unrestricted shares of Common Stock of the Company,
and 237,800 unrestricted options to acquire common shares. On July 2, 1998, the
Company entered into a settlement agreement with Mr. Gilbreath, whereby 500,000
of Mr. Gilbreath's shares in the Company will be unrestricted, and Mr. Gilbreath
will retain 75,000 options, which must be exercised by January 1, 1999. As of
December 31, 1998 75,000 of those options have been exercised. Pursuant to the
settlement agreement, the remaining 500,000 shares have been canceled. Further,
Mr. Gilbreath is permitted to sell his shares pursuant to a tradeability
schedule.

  Roger and Bonnie Remillard v. U.S. Digital Communications, Inc. f/k/a Viscorp
  -----------------------------------------------------------------------------
and Corporate Stock Transfer, Inc.  On or about June 1, 1998, Roger and Bonnie
---------------------------------                                             
Remillard filed a complaint in the United States District Court, District of
Colorado, Case No. 98-WY-1217-CH, alleging that the Company failed to remove
restrictive legends from the Remillards' shares in the Company, in violation of
Nevada Revised Statute 104.8401.  Pursuant to a settlement agreement, dated July
2, 1998, the Remillards retained 820,000 shares of the Company's Common Stock.
Further, the Remillards retained 200,000 out of 288,000 stock options, which
must be exercised before January 1, 1999.  As of December 28, 1998 150,000 of
those options have been exercised.  The Company has placed the remaining 50,000
options in escrow pending resolution of a dispute over the ownership.  These
options may be exercised in the future.  The Remillards are permitted to sell
their shares pursuant to a tradeability schedule.

  James Goodnow v. Viscorp.  On February 9, 1998, James Goodnow filed a
  ------------------------                                             
complaint in the Nevada County Superior Court, State of California, against the
Company, alleging breach of contract, fraud, unfair business practices and money
on open book account, based on the alleged breach of a software consulting
agreement dated July 17, 1997. Mr. Goodnow sought damages in the amount of
$20,219.40.  In June 1998, the Company and Mr. Goodnow entered into a settlement
agreement whereby the Company agreed to pay Mr. Goodnow $16,000, which was
subsequently paid.

  Cochran Ranch, ITG and Rubin Kitay v. U.S. Digital Communications Inc. and
  --------------------------------------------------------------------------
Larry Siegel.  In January 1998, plaintiffs, former shareholders of Skysite,
------------                                                               
filed a request for mediation and demand for arbitration with the American
Arbitration Association in Los Angeles, California, case number 72 174 00098 98
GS, requesting mediation and arbitration in connection with the Company's
alleged breach of the Agreement and Plan of Reorganization, dated June 20, 1997,
whereby the Company acquired Skysite.   Plaintiffs alleged that the Company
failed to issue shares in consideration of the acquisition.  On May 28, 1998,
plaintiffs and the Company settled this dispute pursuant to the amendment to
agreement and plan of reorganization.  See "Notes to Condensed Consolidated
Financial Statements (Unaudited)  (2) Acquisition."

  Nolan Bushnell v. Viscorp.  On December 13, 1994, Nolan Bushnell filed a
  -------------------------                                               
complaint against the Company, in San Mateo Superior Court, case number 390474,
alleging breach of fiduciary duties, breach of contract, wrongful termination
and other causes of action in connection with Mr. Bushnell's employment with
Company.  On February 3, 1998, the Company and Nolan and Nancy Bushnell entered
into a settlement, the terms of which, by agreement of the parties thereto, are
confidential.  The Company believes that the terms of such settlement agreement
would not have a material adverse effect on the Company.

  David Rosen v. U.S. Digital Communications, Inc.  On July 27, 1998, David
  -----------------------------------------------                          
Rosen, a former employee and consultant of the Company, filed a complaint
against the Company in the California Superior Court, County of San Francisco,
case number 996762, in connection with his alleged employment contract and his
employment termination. Mr. Rosen alleged breach of contract, breach of the
covenant of good faith and fair dealing, violation of California Labor Code
Sections 201, 226 and 227, and conversion. Mr. Rosen seeks severance pay and
other damages in excess of $100,000. Discovery has not yet begun.

  CBS (formerly Westinghouse) v. Skysite.  On April 1, 1998, CBS filed a
  ---------------------------------------                               
complaint, in Los Angeles County Superior Court, case number 188569, alleging
that Skysite breached a distribution agreement with CBS dated December 21, 1996,
and a subsequent settlement agreement between CBS and Skysite, dated March 6,
1997, seeking monies allegedly owed under the distribution agreement. In June
1998, CBS and 
<PAGE>
 
the Company entered into a settlement agreement whereby Skysite agreed to pay
CBS $430,000, which was paid soon thereafter.

  Witter Publishing v. Skysite.  On February 6, 1997, Witter Publishing filed a
  ----------------------------                                                 
complaint in Los Angeles Municipal Court, case number 97K02741, alleging open
book account and account stated, and seeking money damages. On December 12,
1997, Witter Publishing and Skysite entered a stipulation for entry of judgment
whereby Skysite agreed to pay Witter Publishing $19,038 between December 20,
1997 and November 20, 1998.

  PR Newswire Association, Inc. v. Skysite.  On November 12, 1997, PR Newswire
  ----------------------------------------                                    
filed a complaint against Skysite in New Jersey Superior Court, Hudson County,
docket number DC - 10873 - 97, alleging a breach of contract and seeking damages
of $6,590. In January 1998, Skysite agreed to pay PR Newswire payments totaling
$5,044, and the case has been dismissed.

  Tom Soumas v. Skysite.  On October 6, 1997, Tom Soumas, a former employee of
  ---------------------                                                       
Skysite, filed a complaint with the Labor Commissioner of the State of
California, seeking damages for vacation pay and wellness days he alleges he was
due upon termination, in the amount of $9,300. A hearing on Mr. Soumas' claim
was held on June 2, 1998, pursuant to which the Labor Commissioner issued a
decision in favor or Mr. Soumas in the amount of $2,500.

  Penwell Publishing v. Skysite.  On March 5, 1997, plaintiff filed a complaint
  -----------------------------                                                
in the Tulsa County, Oklahoma District Court, Case Number CJ 9701105, alleging
actions for open account and breach of contract resulting from the Company's
alleged obligation to place certain advertisements in Penwell Publications.
Plaintiff seeks damages of $36,217. In October 1998, the Company agreed to pay
Penwell Publishing $10,000 and the case was dismissed.

  Intelligent Data Systems, Inc.  On August 4, 1998, counsel for Intelligent
  -----------------------------                                             
Date Systems, Inc. ("IDS") made a demand on the Company for (i) rescission of a
technology licensing agreement dated January 1, 1995 and (ii) return of
consideration to IDS, in the amount of $968,750. No complaint has been filed.

  Tom Soumas.  In a letter dated August 31, 1998, counsel for Tom Soumas made a
  ----------                                                                   
demand on the Company in connection with the Company's acquisition of Skysite.
On January 29, 1999, Tom Soumas filed a complaint against the Company and others
in Los Angeles County Superior Court, case number BC204576, alleging breach of
contract; fraud and deceit; negligent representation; specific performance;
conversion; trespass; and seeking money damages and that the Company perform its
obligations under the agreement to acquire Skysite by issuing and delivering to
plaintiff shares and options to purchase shares of common stock of the Company.
The Company is unable to express an opinion as to the outcome of this matter and
the Company has made no independent investigation of potential claims, defense
and counterclaims. The Company intends to vigorously defend itself against this
action.
<PAGE>
 
ITEM 6  EXHIBITS AND REPORTS ON FORM 8-K


  The Company filed Form 8-K on February 19, 1998 to announce that the Company
had decided in fiscal year 1997 to discontinue the development of the Universal
Internet Television Interface and Electronic Device technologies described under
the section entitled "Business" in the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1996. As a result, the Registrant's business
presently consists solely of the operation of its wholly owned subsidiary
Skysite Communications Corporation. The filing also reported that the Company
had not yet replaced its prior auditor.

  The Company filed Form 8-K on June 5, 1998 to announce that it had engaged
Arthur Andersen LLP to perform an audit of its consolidated balance sheet for
the fiscal year ended December 31, 1997.

  The Company filed Form 8-K on July 8, 1998 to announce that Jerome Greenberg
resigned from his position as a director of the Company.

  The Company filed Form 8-K on August 20, 1998 to report developments in its
negotiations with EuroTelecomm Communications, Inc. on its possible acquisition
of that company, to disclose sales of Series A Preferred Stock, to disassociate
itself from unauthorized projections of its earnings and to make further
disclosure of its engagement of Arthur Andersen LLP to perform an audit of its
consolidated balance sheet for the fiscal year ended December 31, 1997.

  The Company filed Form 8-K on October 7, 1998 to announce that Arthur Andersen
LLP had resigned as its auditor.

  The Company filed a Form 8-K on October 20, 1998 to announce that it had
engaged Reznick Fedder and Silverman P.C. to perform an audit of the its
financial statements for the fiscal year ended December 31, 1997.

  The Company filed a Form 8-K on December 11, 1998 to report the correction to
a press release reporting the Company's financial results for the third quarter
of 1998.
<PAGE>
 
                                   SIGNATURES

Pursuant to the requirements 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.

     U.S. Digital Communications, Inc.



Date: February 25, 1999                    /s/ ROBERT J. WUSSLER
      -----------------                    ------------------------------------
      Robert J. Wussler                    (President, Chief Executive Officer
                                           and Director (Principal Executive
                                           Officer))


Date: February 25, 1999                    /s/ EDWARD J. KOPF
      -----------------                    ------------------------------------
      Edward J. Kopf                       (Executive Vice President and Chief
                                           Operating Officer (Principal 
                                           Financial and Accounting Officer))