UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-K

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES AND EXCHANGE ACT
     OF 1934

                   For the fiscal year ended December 31, 1999

[ ]  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 0-22282.

                                   USCI, INC.
             (Exact name of registrant as specified in its charter)

        Delaware                                                 13-3702647
-------------------------------                             --------------------
(State or other jurisdiction of                               (IRS Employer
 incorporation or organization)                              Identification No.)

        Waterford Centre, 5555 Triangle Parkway, Norcross, Georgia 30091
        ----------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code   (678) 268-2300

Securities registered pursuant to Section 12(b) of the Act:

     Title of each class            Name of each exchange on which registered
    ---------------------          -------------------------------------------
           None                                      None

Securities registered pursuant to Section 12(g) of the Act:

                    Common Stock, par value $.0001 per share
                   ------------------------------------------
                                (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 [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. [  ]

     Based on the average of the closing bid and ask price on May 31, 2000,  the
aggregate  market  value of the  voting and  non-voting  common  equity  held by
non-affiliates of the Registrant was approximately $10,000,000.

     At May 31, 2000,  98,025,028  shares of the Registrant's  Common Stock were
outstanding.

                       DOCUMENTS INCORPORATE BY REFERENCE

     None
<PAGE>
                                   USCI, INC.

                                TABLE OF CONTENTS
                                                                            Page
PART I

         Item 1   Business...............................................     1
         Item 2   Properties.............................................     7
         Item 3   Legal Proceedings......................................     7
         Item 4   Submission of Matters to a Vote of Security Holders....     8

PART II

         Item 5   Market for Registrant's Common Equity and Related
                  Stockholder Matters....................................     9
         Item 6   Selected Financial Data................................    10
         Item 7   Management's Discussion and Analysis of Financial
                  Condition and Results of Operations....................    13
         Item 7A  Quantitative And Qualitative Disclosures About Market
                  Risk...................................................    20
         Item 8.  Financial Statements and Supplementary Data............    20
         Item 9.  Changes in and Disagreements with Accountants on
                  Accounting and Financial Disclosure....................    20

PART III

         Item 10. Directors and Executive Officers of the Registrant.....    21
         Item 11. Executive Compensation.................................    23
         Item 12. Security Ownership of Certain Beneficial Owners and
                  Management.............................................    27
         Item 13. Certain Relationships and Related Transactions.........    27

PART IV

         Item 14. Exhibits, Financial Statement Schedules and Reports on
                  Form 8-K...............................................    28

         Signatures......................................................    31

         Index to Financial Statements...................................    32
<PAGE>


                                     PART I

ITEM 1.  BUSINESS

General; Development of Business

     USCI, Inc.  ("USCI") is a holding  company  organized under the laws of the
State of Delaware  with  principal  offices  located at Waterford  Centre,  5555
Triangle  Parkway,  Norcross,  Georgia 30071,  telephone  number (678) 268-2300.
Through our subsidiaries,  we are engaged in the marketing of telecommunications
products and services  with an emphasis on two principal  markets:  (1) Internet
telephony  products and services  ("IP  Telephony"),  and (2) wireless  services
("Wireless Services").

     USCI is the result of a merger, in May 1995,  between U.S.  Communications,
Inc. and Trinity Six, Inc. Since 1996, we have been engaged in wireless services
marketing through our wholly-owned  subsidiary,  Ameritel  Communications,  Inc.
("Ameritel").  As a result of ongoing losses, during 1999, Ameritel restructured
certain loan provisions, converted certain preferred stock into common stock and
filed a voluntary  petition  under  Chapter 11 of the United  States  Bankruptcy
Code.

     In conjunction with the restructuring of Ameritel, during 1998 and 1999, we
restructured  our  management  team and board of directors and adopted a revised
operating  strategy.  See "Ameritel  Bankruptcy and Restructuring" and "Business
Strategy".

     Pursuant to our ongoing efforts to improve operating  results,  in 1999, we
entered  the  IP   Telephony   marketing   business   with  the   formation   of
AmericomOnline.com. ("Americom").

Business Overview

     Since the fourth quarter of 1997, our operations  have consisted  primarily
of the resale of wireless  services in the United States.  We purchase  cellular
telephone access and airtime from  facilities-based  carriers at wholesale rates
and resell  cellular  services to  subscribers at retail rates.  Previously,  we
acted as an agent for major United  States  cellular and paging  carriers in the
sale of cellular and paging services through national distribution channels.

     In 1999 and the first  quarter of 2000,  with the formation of Americom and
the  conclusion of a marketing and  distribution  agreement with  Net2Phone,  we
established a nationwide sales and marketing organization,  and began building a
network of distribution  channels for IP Telephony services and products. We had
not as yet begun  actual  marketing  of those  services and products as of April
2000 but  anticipate  the  commencement  of  online  marketing  efforts  and the
establishment  of  relationships  with  retail  outlets for those  services  and
products  during the second quarter of 2000 and the  commencement of delivery of
those services and products in the second half of 2000.

     We have never operated  profitably since  inception.  In the second half of
1999,  we  substantially   altered  our  operations  in  an  effort  to  achieve
profitability  by late 2000.  These efforts  include  establishing an e-commerce
platform to market services and products, downsizing of staff and facilities and
other cost cutting  efforts to reduce  overhead and adoption of our IP Telephony
initiative.  While we expect that those  efforts  will  position us favorably to
grow revenues, improve operating margins and minimize operating costs, there can
be no assurance that we will be successful in commencing IP Telephony  marketing
services, growing revenues or operating profitably.

Ameritel Bankruptcy and Restructuring

     In order to provide a national footprint for the sale of wireless services,
between  1996 and 1998,  we  negotiated  contracts  with  more than 20  cellular
carriers.  We also  developed  software  systems  and  processes  to permit  our
customers  to  promptly  and  efficiently  process the  subscriber  applications
necessary  to activate  cellular and paging  services  purchased  through  these
national channels of distribution.


                                       1
<PAGE>

     In October 1997, we entered into an agreement with  RadioShack,  a division
of Tandy  Corporation,  under which we were appointed the exclusive  provider of
cellular  communications  services  to  RadioShack's  approximately  250  retail
locations in the greater New York metropolitan area. Subsequently, the agreement
was  amended to cover  Puerto  Rico and the  Virgin  Islands.  In October  1998,
RadioShack  terminated  its agreement  with us and instituted a lawsuit in which
they claim that we owe them $11.2  million in  commissions  and other  fees.  We
filed an  answer  denying  RadioShack's  claims  and also  filed a  counterclaim
against  RadioShack/Tandy  in which we claimed  that,  through their actions and
conduct, we incurred substantial damages in excess of their claims.

     RadioShack's  termination of our contract  contributed  significantly to an
inability on our part to secure financing  necessary to support the servicing of
our cellular  subscriber  base. The termination of our RadioShack  contract also
created  defaults under our loan agreement with Foothill  Capital Corp. In order
to  conserve  our  capital,  we reduced  our  workforce  and  reduced our leased
facilities.  These reductions,  as well as the adverse publicity  resulting from
the termination of the RadioShack  contract,  reduced the  effectiveness  of our
customer service  department  resulting in substantially  higher churn rates and
bad debt writeoffs.

     Although RadioShack  represented our largest retail  distribution  channel,
the costs and risks associated with doing business with them were very high. The
subscriber  acquisition costs were excessive and the cost of servicing  cellular
subscribers  which they  referred to us exceeded  the costs which we incurred in
dealing with other channels of distribution.

     In order to address  financial  difficulties  arising  from our  continuing
losses  and our  dispute  with  RadioShack,  in May  1999,  we  entered  into an
agreement  pursuant  to which we issued  5,000,000  shares of common  stock to a
consultant  as  compensation  for  services  in  connection  with our efforts to
restructure  our credit  facility  with Foothill  Capital and negotiate  payment
schedules for certain other indebtedness.

     On April 14,  1999,  we  entered  into an  Amended  and  Restated  Loan and
Security  Agreement  with Foothill  Capital Corp. in which the original Loan and
Security  Agreement  entered into on June 5, 1998 was amended to restructure the
existing  credit  facility by reducing the total  facility to $17.5 million from
which an  additional  multiple  draw term loan in an amount up to $7 million was
made  available.  The $7 million  was funded  into  escrow by certain  preferred
shareholders and others through a participation  agreement with Foothill and can
only be released  upon  certain  conditions.  We intended to use these funds for
working capital and to settle, where possible, our outstanding  obligations.  At
December 31, 1999, we had borrowed a total of approximately  $4.4 million of the
additional $7 million available.

     Following the closing of the Foothill  Amended Loan  Agreement,  all of the
holders of our  preferred  shares  entered  into an  agreement  under which they
converted $1.5 million stated value of preferred  stock for 75 million shares of
our common stock at $0.02 per share, agreed to waive all future dividends on the
outstanding  preferred  shares,  waived  all  defaults  under  the  terms of the
preferred  shares,  and cancelled all  outstanding  options and warrants held by
them covering 4,485,707 shares of common stock.

     In  conjunction  with  our  ongoing  efforts  to  restructure   outstanding
indebtedness,  in May 1999,  our current  Board of  Directors  resigned and were
replaced by three new  directors.  Mr.  Bruce A. Hahn,  our former  Chairman and
Chief  Executive  Officer,  resigned  as an officer of USCI and  entered  into a
consulting  agreement with  Americom,  effective  December 1, 1999,  pursuant to
which he will provide sales,  marketing and strategic planning services,  and in
July 1999,  Mr. Lee Feist  joined USCI as Chairman of the Board,  President  and
Chief Executive Officer.

     In October 1999,  Ameritel  filed a voluntary  petition under Chapter 11 of
U.S.C.  Title  11 with the  United  States  Bankruptcy  Court  for the  Southern
District  of New York (Case No.  99-11081)(the  "Bankruptcy  Court").  Since the
filing  date,  Ameritel  has  operated  its  business as a  debtor-in-possession
subject to the jurisdiction of the Bankruptcy Court.  Ameritel's  reorganization
plan,  which has not been completed and is subject to approval by the Bankruptcy
Court,  focuses the  Company's  resources on the sale of its  consumer  accounts
receivable and the related  subscriber  contracts.  It is too early to determine
other elements of a proposed plan.

                                       2
<PAGE>


     As of the date of this filing,  we have entered  into,  and the  Bankruptcy
Court has  approved,  a  Compromise  Settlement  Agreement  and  Mutual  Release
Agreement with RadioShack  releasing all parties with no further  obligations or
liability.

Business Strategy

     Beginning in October  1998,  and  continuing  through the first  quarter of
2000,  we adopted a major shift in strategy,  emphasizing  (1) entry into the IP
Telephony market,  (2)  implementation of an e-commerce  platform to supplement,
and reduce costs associated with, our marketing, distribution,  customer service
and related  activities and (3)  implementation of various cost control measures
to improve profitability of our historical Wireless Services.

     Our objective is to (1) become a leading marketer of IP Telephony  products
and  services,  including  prepaid  long  distance  calling  cards  utilizing IP
Telephony technology and related equipment necessary to facilitate IP Telephony,
and (2) improve profitability and subscriber retention rates within our Wireless
Services   business   through   improved   customer   service  and  adoption  of
technologies,  processes and systems designed to reduce  operating costs.  Among
the  specific  steps  taken to date,  or  planned  to be taken,  to  attain  our
objectives are:

     *    the adoption, in October 1998, of a freeze in marketing efforts to add
          new Wireless  Service  subscribers  in order to focus our resources on
          servicing and preserving the existing subscriber base and lowering the
          operating cost of that business.

     *    the sale, in November 1998, subject to certain conditions, of the bulk
          of our paging  services  subscriber  base,  to Metrocall  for $876,000
          representing  the sums due and owing for  paging  services  previously
          purchased from Metrocall.

     *    the   launch,   in  January   2000,   of  our   e-commerce   platform,
          www.AmericomOnline.com, as a principal marketing tool for our products
          and services.

     *    the  execution,  in  April  2000,  of  a  Marketing  and  Distribution
          Agreement with Net2Phone to market IP Telephony  products and services
          of Net2Phone,  including  Internet telephone and prepaid long distance
          calling cards.

     The specific steps taken to date have been supplemented by, and will in the
future be supplemented  by: (1) efforts to expand our electronic  media channels
and link our new internet  e-commerce  site to other strategic sites to increase
site traffic and promote our products and  services,  (2) efforts to expand into
new specialized  distribution  channels, and (3) implementation of a centralized
order  processing  platform and the  development of browser based  technology to
improve customer service and reduce operating costs.

Wireless Services

     Historically  our  core  operations  were  in  the  marketing  of  wireless
services.  From  1992 to 1997,  we acted as an agent  for  major  United  States
cellular and paging carriers in the sale of cellular and paging services through
national  distribution  channels.  Since 1997, our wireless services  operations
have consisted primarily of the resale of wireless services.

     -- Carrier Relationships. We provide cellular services by purchasing access
and airtime  from  facilities-based  carriers at wholesale  rates and  reselling
those  services at retail  rates.  In the past,  we have been able to  negotiate
favorable carrier agreements that provide coverage throughout  substantially all
of the United States and do not require "take-or-pay conditions." These multiple
carrier  agreements  have given us the ability to control the  structure  of our
national  rate  plans  and   distribute   our  services   through  our  national
distribution channels.

                                       3
<PAGE>

     We   presently   have   carrier    agreements   with   four   nonaffiliated
facilities-based  cellular  service  providers  which authorize us to resell the
cellular  service provided by these carriers for our existing  subscribers:  (1)
AT&T Wireless Services,  (2) Puerto Rico Telephone Co., (3) GTE Mobilnet and (4)
Airtouch Cellular.

     -- Marketing and Customer  Support.  Since October 1998, we have undertaken
no marketing  efforts to add Wireless  Service  customers.  We do not  presently
intend  to  commence  any such  marketing  efforts  in the  foreseeable  future.
Instead,  our efforts have been,  and are expected to continue to be, focused on
improving our customer support in order to retain and improve the  profitability
of our  existing  Wireless  Service  subscriber  base.  At  April  2000,  we had
approximately 13,000 Wireless Service subscribers.

Internet Telephony

     In 1999,  we formed  AmericomOnline.com  ("Americom")  for the  purpose  of
commencing  marketing of IP  Telephony  products and services as well as prepaid
communications products and services through our proprietary e-commerce platform
and through mass market general  merchandise  retailers,  grocery  stores,  drug
stores and TV direct response.

     IP Telephony is a service that enables users to make high quality, low-cost
telephone  calls over the  Internet.  In April 2000,  Americom  entered  into an
agreement  with  Net2Phone,  a leading  provider of IP  Telephony  services  and
products,  to be the  exclusive  marketer of  Net2Phone  services  and  products
throughout the United States to selected general  merchandise mass marketers and
to all convenience stores and supermarkets.

     Beginning  in the  second  quarter  of  2000,  we plan to  offer  web-based
telephony  services  which enable  customers to make calls using their  personal
computers as well as basic IP Telephony  devices which enable  customers to make
calls using traditional telephones.  In addition we market long distance calling
cards,  powered by the Net2Phone  Internet  Telephony  Network which may be used
from any private or public phone in the United States.

     --  Development  of IP  Telephony.  IP Telephony  has emerged as a low-cost
alternative to traditional long distance calls.  International  Data Corporation
projects that the IP Telephony market will grow from  approximately $1.1 billion
in 1998 to more than $23.4 billion in 2003.  Internet  telephone  calls are less
expensive than traditional long distance calls primarily because these calls are
carried  over the  Internet  and  therefore  bypass  a  significant  portion  of
traditional  long distance  tariffs.  This is especially true for  international
calls where international long distance tariffs can be significant.

     Historically the communications services industry has transmitted voice and
data over separate  networks using different  technologies.  Traditionally  long
distance  carriers  have built a telephone  network  based on  circuit-switching
technology, which establishes and maintains a dedicated path for each call until
the call is terminated.  Although a  circuit-switch  system  reliably  transmits
voice   communications,   circuit   switching  does  not   efficiently   utilize
transmission capacity.  When a telephone call is placed, a circuit connection is
established, and the circuit remains dedicated for transmission of that call and
is unable to transmit any other call.

     Data  networks  have  typically  been  built   utilizing   packet-switching
technology  which divides  signals into packets that are  simultaneously  routed
over different channels to a final destination where they are reassembled in the
original order in which they were transmitted. Packet-switch technology provides
for a more efficient use of the capacity  because the network does not establish
dedicated  circuits  and does not  require  the same  amount of band width to be
reserved for each transmission.  As a result,  substantially greater traffic can
be transmitted over a packet-switch  system,  such as the Internet,  than over a
circuit-switch network.

     IP  Telephony  uses   packet-switching   technology   whereas   traditional
telecommunications    carriers   have   historically    avoided   the   use   of
packet-switching  for  transmitting  voice  calls  due  to  poor  sound  quality
attributable  to delays and lost packets which  prevent real time  transmission.
However,  recent  improvements  in  packet-switching,  compression  and improved
hardware as well as the use of privately  managed  networks  have  significantly
improved  the  quality of  packet-switched  voice calls  allowing  for real time
transmission.

                                       4
<PAGE>

     As a  result,  packet-switching  technology  is now  allowing  services  to
converge their traditional voice and data networks and more efficiently  utilize
their  networks by carrying  voice,  fax and data traffic over the same network.
These improved  efficiencies in  packet-switching  technologies have resulted in
network  cost savings that can be passed on to the consumer in the form of lower
long distance rates. In addition, international telephone calls carried over the
Internet or private IP networks are less  expensive  than similar  calls carried
over circuit-switched networks, primarily because they by-pass the international
settlement process which represents a significant  portion of international long
distance tariffs.

     International Data Corporation  estimates that, in 1999,  approximately 2.7
billion minutes would be carried over IP networks, generating approximately $0.6
billion in revenue.  They also  estimate  that, by 2004, IP minutes will grow to
135 billion and will  generate in excess of $20 billion in revenue  representing
an estimated compound annual growth rate of 119% and 103% respectively.

     -- Marketing  Agreement with  Net2Phone.  In April 2000, we entered into an
agreement  with  Net2Phone  to market IP  Telephony  services  and  products  of
Net2Phone.  Pursuant to the terms of that  agreement,  Americom was appointed as
exclusive  marketing  representative  for the sale of  Net2Phone's  IP Telephony
products  and  services  to  selected  mass  merchandise  retailers  and  to all
convenience stores and supermarkets.

     -- The Net2Phone  Network.  Through an agreement  with its  affiliate,  IDT
Corporation,  Net2Phone  leases  capacity on an Internet  network  comprised  of
leased  high-speed  fiber optic lines  connecting  eight major cities across the
United States, and leases high-speed fiber optic lines connecting smaller cities
to the network. Net2Phone has a right to use network capacity leased by IDT. The
network  backbone uses  state-of-the-art  hardware  including  Cisco Series 7000
routers and Nortel Passport switches. Their high-speed backbone connects traffic
at four major  public  Internet  exchange  points with other  networks.  Through
peering  arrangements,  Net2Phone  exchanges  Internet  traffic  with  25  other
Internet backbone  providers at these points.  Net2Phone operates IDT's network,
one of the largest  Internet  access  networks,  providing  local dial-up access
through 36 locations.  The IDT network also  includes  more than 700  additional
network access locations owned by local and regional Internet service providers.

     In addition,  Net2Phone  entered into an agreement with AT&T Global Network
Services,  under which AT&T will  provide  managed IP  networking  services  and
collocation  services,  enabling them to extend the international reach of their
dozen other countries under  consideration for future expansion.  AT&T will also
provide collocation services for their servers at AT&T's Local Interface Gateway
locations (or points of presence) in those countries.

     Net2Phone  is able to  provide  service  in  areas  where  they do not have
dial-up  equipment  by  utilizing  call-forwarding  technology  to expand  their
coverage areas by increasing the total number of local access numbers. They have
been closing  multiple  network  access points in a number of states in order to
consolidate  their  equipment into central "Super Point of Presence"  locations.
For  example,  one Super Point of Presence in New Jersey can supply local access
for the entire state of New Jersey.

     Net2Phone  manages its network hardware  remotely.  It is compatible with a
variety of network systems around the world.  They have stated that they believe
that their IP  Telephony  network  can  currently  support  approximately  5,000
simultaneous calls and that their systems are scalable to 10 times their current
capacity through the purchase and installation of certain  additional  hardware.
To date, the highest number of simultaneous  calls serviced by their network has
been represented as 1,975 simultaneous calls made on September 15, 1999.

                                       5
<PAGE>

Marketing and Distribution Channels

     With the changes in our business  strategy  implemented  between the fourth
quarter of 1998 and the first  quarter of 2000,  we have refined our  strategies
and channels  with respect to the  marketing  and  distribution  of products and
services.  Our current  strategy  with  respect to  marketing  and  distribution
channels includes the following:  (1) implementation of a e-commerce platform to
market and distribute products and services from our  www.AmericomOnline.com web
site, (2) establishment of a national sales  organization to sell to retail mass
merchandisers.  All of our marketing  efforts are presently  focused on, and for
the  foreseeable  future are  expected  to  continue  to focus on, IP  Telephony
products and services, and (3) continuation of our current policy of undertaking
no active marketing efforts to add new Wireless Service subscribers.

     --  Internet  Channels.  We plan to  market  and  distribute  IP  Telephony
products and services directly to consumers utilizing the Internet. Our web site
(www.AmericomOnline.com)  will serve to sell,  promote  and serve  customers  24
hours a day 7 days a week.  We intend to undertake  efforts to link our web site
to other strategic sites in order to increase site traffic to targeted consumers
and to promote our site through  specialized  distribution  channels,  which may
include  television,  radio and print  media,  all  intended to increase  public
awareness of our site and the products and services offered. As of May 2000, our
web site was fully operational.

     -- Retail Mass Merchandise Channels. Until the termination of the agreement
with our  principal  customer,  we utilized the retail mass market  channel as a
major source of Wireless  Service  distribution  and entered  into  distribution
agreements  with several  national and regional  retail  chains.  Following  the
termination  of the  RadioShack  agreement in October  1998, we did not have the
capital to fund the  acquisition  of new  subscribers  and either  terminated or
suspended our agreements with the national chains which we previously serviced.

     We have  resumed  our  marketing  efforts to the retail  mass  merchandiser
market to market products and services that we represent on behalf of Net2Phone.
We are  presently  assembling  a  distribution  network  to offer  IP  Telephony
services and products through retail mass  merchandisers  but, as of April 2000,
had not commenced actual marketing efforts through those channels.  We expect to
begin  such  efforts  in June  2000  with IP  Telephony  services  and  products
anticipated  to be  delivered  through  those  channels  beginning  in the third
quarter of 2000.

Research and Development

     We historically  conducted research and software development  activities to
support our  carriers,  our customers and our  distribution  channels.  With the
shift in our  corporate  strategy,  we did not conduct  during 1999,  and do not
presently plan to conduct, any material research and development activities.  We
will,  however,   continue  to  undertake  efforts  to  upgrade  our  management
information  systems and  customer  support  and related  systems to assure that
those systems meet our needs. We do not have a research and development budget.

Intellectual Property

     We do not own any  patents and have not filed any patent  applications.  We
rely on third party software and technology to support our operations

     On July 28,  1998,  "Ameritel"  became  registered  as a  service  mark for
cellular  telephone and pager services in the U.S. Patent and Trademark  Office.
We have filed trademark applications for "RAP," "Cellular on the Go" and "Family
Link." We expect to file additional trademark  applications from time-to-time in
the future as necessary.

Competition

     --  Wireless  Services.  The  wireless  communications  industry  is highly
competitive  and is  characterized  by  rapidly  changing  technologies.  In the
cellular industry,  our principal  competitors are cellular and PCS carriers and
other resellers who market their services  directly to the public. In every area
where we offer our cellular  services,  we compete with incumbent local cellular
service  providers in the region,  as well as with PCS providers that operate on
both a local and a national basis.  Competition in the Wireless Service business
is based primarily on quality of service, coverage area and price.

                                       6
<PAGE>

     -- IP Telephony. The long distance telephony market and, in particular, the
IP  Telephony  market,  is highly  competitive.  Our  efforts in that market are
highly  dependent  upon the cost,  quality  and  features  of the  products  and
services of Net2Phone.  There are several large and numerous small  competitors,
and we  expect  to face  continuing  competition  based  on  price  and  service
offerings from existing  competitors and new market entrants in the future.  The
principal  competitive factors in the market include price,  quality of service,
breadth of geographic presence, customer service, reliability,  network capacity
and  the  availability  of  enhanced  communications   services.  The  principal
competitors in the IP Telephony  market include AT&T, MCI WorldCom and Sprint in
the United States and foreign telecommunications carriers.

     Many  of  our   competitors,   and  the  competitors  of  Net2Phone,   have
substantially  greater  financial,  technical  and marketing  resources,  larger
customer bases,  longer operating  histories,  greater name recognition and more
established  relationships  in the industry than we have or Net2Phone  has. As a
result,  certain  of  these  competitors  may be able to adopt  more  aggressive
pricing  policies,  which could  hinder our  ability to market the IP  Telephony
products and services of  Net2Phone.  One of the key  competitive  advantages of
Net2Phone  is the ability to route calls  through  Internet  service  providers,
which  allows  Net2Phone  to bypass the  international  settlement  process  and
realize substantial savings compared to traditional  telephone service. A change
in the  regulation  of  Internet  service  providers  could force  Net2Phone  to
increase  prices and offer rates that are  comparable to  traditional  telephone
call providers.

     As consumers and telecommunications  companies have grown to understand the
benefits  that may be obtained  from  transmitting  voice over the  Internet,  a
substantial number of companies have emerged to provide voice over the Internet.
In addition,  companies currently in related markets have begun to provide voice
over the  Internet  services  or adapt their  products to enable  voice over the
Internet services.  These related companies may potentially  migrate into the IP
Telephony market as direct competitors.

Employees

     As of  March  31,  2000,  we  employed  a  total  of 45  people,  including
information  systems  personnel,  customer  service and  collections  personnel,
clerical and  administrative  staff.  None of our employees are represented by a
labor union or is subject to a collective bargaining agreement.  We believe that
our relations with employees are good.

ITEM 2. PROPERTIES

     Our  executive  offices  and other  facilities  are  located  in  Norcross,
Georgia,  a suburb of Atlanta.  The premises,  comprising  approximately  12,000
square feet, are occupied pursuant to a lease with current monthly rent payments
of approximately $8,000 beginning in September 2000. In addition to our offices,
the facility houses our customer service center and computer facilities.

ITEM 3.  LEGAL PROCEEDINGS

     On December  18,  1998,  Tandy  Corporation  filed a suit against us in the
District Court of Tarrant County,  Texas,  67th Judicial  District (Civil Action
No. 067-176523-98),  claiming, among other things, that we owed RadioShack $11.2
million in commissions and other fees for referring cellular  subscribers to us.
We have  been  vigorously  defending  the suit and  filed  answers  denying  the
material  allegations of the  complaint.  We also filed  counterclaims  alleging
substantial  set-offs  to the suit in which we allege that  RadioShack  breached
their  contract with us,  withheld  customer  funds and  deposits,  and referred
fraudulent subscriber  applications to us, as a result of which we have suffered
substantial damages.

     While we believe that our defenses to the RadioShack claims are meritorious
and that our counterclaims are valid and enforceable,  there is no assurance and
no  representation  can be made that we will be successful  in either  defending
this suit or in prevailing in our counterclaims. In the event that RadioShack is
successful  in  obtaining a judgment  against us, we do not  currently  have the
funds to pay any  judgment  and the  failure  to do so could  subject us to both
voluntary or involuntary bankruptcy proceedings.

                                       7
<PAGE>

     As of June 15, 2000,  we had entered  into,  and the  Bankruptcy  Court had
approved,  a Compromise  Settlement  Agreement and Mutual Release Agreement with
RadioShack releasing all parties with no further obligations or liability.

     In October 1999, our wholly-owned  subsidiary,  Ameritel, filed a voluntary
petition under Chapter 11 of U.S.C.  Title 11 with the United States  Bankruptcy
Court for the Southern District of New York (Case No. 99-11081)(the  "Bankruptcy
Court").  Since the  filing  date,  Ameritel  has  operated  its  business  as a
debtor-in-possession  subject to the jurisdiction of the Bankruptcy Court. As of
May 15,  2000,  we had  settled or agreed in  principal  to settle all claims of
secured  creditors of Ameritel  with those  claims  being,  or to be,  released,
assigned to  "friendly"  parties  and/or  converted  into equity in the Company.
Ameritel's reorganization plan with respect to claims of unsecured creditors has
not been completed and is subject to approval by the Bankruptcy Court

     As a result of our lack of capital following the termination our RadioShack
contract,   various  vendors  have  instituted  lawsuits  against  our  inactive
subsidiary, U.S. Communications,  Inc., aggregating approximately $2,700,000 and
we are attempting to negotiate  settlements of these outstanding claims, some of
which have been reduced to judgment.

     Suits  have also  been  instituted  against  our  wholly-owned  subsidiary,
Ameritel Communications,  aggregating  approximately $265,000, not including the
lawsuit by RadioShack.

     Our inactive subsidiary,  Wireless  Communications  Centers,  Inc., has one
lawsuit  for  approximately  $20,000  which has been  reduced  to  judgment.  In
addition, USCI, Inc., our parent corporation,  is the subject of one lawsuit for
approximately $120,000, not including the lawsuit by RadioShack.

     We are currently attempting to negotiate settlements of these suits as well
as settlements of our  outstanding  indebtedness  for which claims have not been
filed. In all other cases, we intend to vigorously defend where appropriate.

     There  is no  assurance  and no  representation  is  made  that  we will be
successful in either  defending or settling these lawsuits or other claims being
asserted by  creditors.  Failure to settle  these  matters  will have a material
adverse effect on our business and could compel us to seek protection  under the
federal bankruptcy system, either voluntarily or involuntarily.

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

     There were no matters submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year ended December 31, 1999.

                                       8
<PAGE>


                                     PART II

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

     (a) The  Company's  Common Stock was quoted on the Nasdaq  National  Market
System ("NNM") under the symbol "USCM" until November 13, 1998, at which time it
was delisted and began trading on the over-the-counter electronic bulletin board
("OTCBB").  The following  table sets forth the range of high and low bid prices
for each quarter during the past two fiscal years.

                                        High              Low
                                       ------            -----
Calendar Year 1999

         Fourth Quarter.............. $0.5469           $0.0938
         Third Quarter...............  0.6250            0.2031
         Second Quarter..............  0.9375            0.0938
         First Quarter...............  0.5000            0.0938

Calendar Year 1998

         Fourth Quarter..............  2.6500            0.0200
         Third Quarter...............  5.2500            3.3750
         Second Quarter..............  5.6500            3.6500
         First Quarter...............  7.0000            4.7500

     The  quotations  reflect   inter-dealer   prices  without  retail  mark-up,
mark-down or commission and may not represent actual transactions.

     At June 14, 2000, the closing bid price of the Common Stock was $0.13.

     As of May 31, 2000, there were 95 holders of record of the Company's Common
Stock. The Company believes there were in excess of 3,000 beneficial  holders of
the Common Stock as of such date.

     The Company has not  declared  any cash  dividends  on its Common Stock and
does not intend to pay cash  dividends on its Common  Stock for the  foreseeable
future.

     (b) Recent Sales of Unregistered Securities

     None

                                       9
<PAGE>


ITEM 6.  SELECTED FINANCIAL DATA

     The following  selected  financial data has been derived from the Company's
consolidated  financial  statements  which have been audited by Arthur  Andersen
LLP, independent public accountants.

     Because our wholly-owned subsidiary,  Ameritel Communications,  Inc., filed
for protection under Chapter 11 of the U.S.  Bankruptcy Code in 1999,  financial
statements for the year ended  December 31, 1999 have been presented  separately
for (1) Ameritel Communications,  Inc. and (2) USCI and subsidiaries, other than
Ameritel.  The  financial  statements  of USCI,  and the  financial  data  which
follows,  reflects  accounting  for the  operations of Ameritel under the equity
method and those operations are not consolidated with USCI.

     The  comparability  of our  operating  results over the past five years has
been materially  impacted by the change in accounting for Ameritel's  operations
to use the equity method instead of  consolidating  those operations with USCI's
other operating results.  For the convenience of readers and ease of comparison,
in addition to the five year  comparison  of results for USCI on a  consolidated
basis,  selected financial data relating to Ameritel for 1999, has been provided
herewith along with pro forma combined financial data of USCI including Ameritel
for 1999.

     The  following  data  should  be read in  conjunction  with  the  financial
statements and related notes appearing elsewhere in this report on Form 10-K.

                                       10
<PAGE>

Statement of Operations Data:
-----------------------------
<TABLE>

                                                                Year Ended December 31,
                                  --------------------------------------------------------------------------------
                                    1999             1998              1997             1996              1995
                                   ------           ------            ------           ------            ------
<S>                              <C>              <C>              <C>              <C>              <C>

Total revenues                  $          0     $ 41,089,160      $ 9,811,890      $ 7,073,167      $ 4,757,149

Operating Expenses:
  Commissions pass-through
  and other direct costs                   0       24,694,501        5,052,205        3,598,952        3,111,946

  Selling, general and
  administrative                     764,088       32,791,669       18,967,189       12,128,111        4,907,527

  Restructuring and other
  charges                          3,431,387                0        1,100,000                -                -

  Subscriber acquisition and
  promotional costs                        0       18,920,271       12,385,662          114,986                -
                                 ------------     -------------   --------------    -------------    ------------
Operating loss                    (4,195,475)     (35,317,281)     (27,692,986)      (8,768,882)      (3,302,226)

Other income (expense):
  Gain on sale of subscribers              0          876,164                0                0                0

  Interest income (expense), net      12,310       (8,053,256)      (1,093,618)          985,169        (139,150)

  Income loss from investment
  in Ameritel                    (10,406,884)               0                0                 0               0
                                 ------------     -------------   --------------    -------------    ------------
Loss before extraordinary
 item                            (14,590,049)     (42,494,373)     (28,786,604)       (7,783,713)      (3,441,376)

Extraordinary item                         0                0                0                 0         (679,178)
                                 ------------     -------------   --------------    -------------    ------------
Net loss                        $(14,590,049)    $(42,494,373)    $(28,786,604)      $(7,783,713)     $(4,120,554)
                                 ============     =============   ==============    =============    ============
Net loss per
common share-diluted                   $(.22)          $(3.90)          $(2.81)           $(0.76)          $(0.74)
                                 ============     =============   ==============    =============    ============
Basic and diluted weighted
average common shares
outstanding                       67,174,007       11,072,905       10,251,402        10,187,909        5,557,120
                                 ============     =============   ==============     ============    ============
</TABLE>

Balance Sheet Data:
<TABLE>

                                                                 Year Ended December 31,
                                 --------------------------------------------------------------------------------
                                     1999             1998             1997            1996              1995
                                    ------           ------           ------          ------            -------
<S>                               <C>             <C>             <C>              <C>               <C>

Working capital (deficit)       $(4,658,208)    $(11,567,863)    $(12,643,491)     $13,177,931      $24,131,288
Total assets                      1,152,491       12,411,881       13,594,047       26,394,982       30,083,295
Long term debt                            0       14,354,096                0                0                0
Investment in Ameritel           30,592,037                0                0                0                0
Total stockholders'
 equity (deficit)              $(35,088,771)    $(22,834,853)     $(6,312,978)     $19,312,420      $18,049,456
</TABLE>


                                       11
<PAGE>


Ameritel and Pro Forma Combined
Statement of Operations Data:
---------------------------------

                                              Year Ended December 31, 1999
                                      ------------------------------------------
                                       Ameritel                   Unaudited Pro
                                       Communications,            Forma Combined
                                       Inc. Financial Data        Financial Data
                                      --------------------        --------------

Total revenues                         $ 15,360,812             $15,360,812

Operating Expenses

  Commission pass-through and
    other direct costs                    7,847,964               7,847,964

  Selling, general & administrative      13,765,016              14,529,104

  Subscriber acquisition and
  promotion costs                         1,617,913               1,617,913

  Restructuring and other charges           395,164               3,826,551
                                       -------------          --------------
Operating loss                           (8,265,245)            (12,460,720)

Interest income (expense)                (2,141,639)             (2,129,329)

Net loss                               $(10,406,884)           $(14,590,049)
                                       ============           ==============

Ameritel and Pro Forma Combined
Balance Sheet Data:
-------------------

Working capital (deficit) (1)          $(30,625,835)             $(35,284,043)
Total assets                             $2,373,951                $3,526,442

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

(1)  Working capital (deficit) of Ameritel,  and on a pro forma basis,  excludes
     amounts owed to USCI and affiliates in the amount of $21,856,306.


                                       12
<PAGE>

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

     This Form 10-K contains  forward-looking  statements  within the meaning of
Section 27A of the  Securities  Act of 1933 and  Section  21E of the  Securities
Exchange Act of 1934. The Company's actual results could differ  materially from
those set forth in the  forward-looking  statements.  Certain factors that might
cause such a difference are discussed herein.

Bankruptcy of Ameritel

     During  1999,   Ameritel   Communications,   Inc.,  our  primary  operating
subsidiary,  substantially  downsized its operations,  restructured certain loan
provisions,  converted  certain  preferred stock into common stock and filed for
protection  under  Chapter 11 of the U.S.  Bankruptcy  Code.  As a result of the
bankruptcy  filing,  operations of Ameritel have been presented under the equity
method and are not included in the  consolidated  financial  statements of USCI.
For the convenience of readers and ease of comparison,  selected  financial data
of Ameritel and pro forma combined financial data of USCI including Ameritel for
1999 has been presented in Selected Financial Data appearing herein.

Overview

     Historically, our revenues have consisted of commissions earned by Ameritel
as an  activation  agent for cellular and paging  carriers  and,  since the last
quarter of 1996, revenues from the resale of cellular and paging services. Since
completion  of our  transition  in 1998 to  becoming  a  reseller,  we have  not
received  material  revenues  from  agency  commissions.   Other  than  revenues
generated  by  Ameritel,  we have  historically  generated  no  other  operating
revenues.

     Ameritel bills its customers for monthly access to the underlying carrier's
cellular  network,  cellular  usage  based on the number,  time and  duration of
calls,  the geographic  location of both the originating  and terminating  phone
numbers, extra service features, and the applicable rate plan in effect.

     The wholesale cost of subscriber  service  includes  monthly access,  usage
(home and roaming, long distance) and special features charges paid by us to the
cellular carriers.

     Subscriber acquisition and promotional costs includes commissions earned by
Ameritel's  channels of distribution (or to equipment suppliers on their behalf)
for  each  activation  by  their  customers  of a  cellular  telephone,  certain
advertising costs incurred by Ameritel or its distribution  channels and reduced
access  and/or  free  airtime  for  a  limited  period  to  Ameritel's  cellular
subscribers. In view of the substantial reduction in Ameritel's subscriber base,
only a small part of these costs may be recoverable  from the long-term  revenue
stream created by the continuation of subscribers  services.  Ameritel's ability
to capture such revenue streams has been substantially  reduced by early service
cancellations, known as churn, and by losses caused by fraudulent use of service
by third persons which are not  recoverable  from  subscribers.  Under  existing
agreements  with the carriers  which provide  Ameritel  with  cellular  service,
Ameritel  has  recovered  access  fraud  in some  instances  and,  although  not
generally  recoverable,  subscriber  fraud  is also  recoverable  under  certain
circumstances. It should be noted that Ameritel has already suffered substantial
losses in subscriber fraud, which materially contributed, to our deficit.

     Selling,  general and administrative  expense include all personnel related
costs of both USCI and Ameritel,  including  Ameritel's costs of providing sales
and support  services for customers,  personnel  required to support  Ameritel's
operations, and commissions to Ameritel's independent sales representatives.  It
also  includes  the  costs  of  the  billing  and  information  systems,   other
administrative expenses, bad debt expense,  facilities related expenses, travel,
professional fees, as well as all depreciation and amortization expenses.

                                       13
<PAGE>

     We,  and  Ameritel,  have  experienced  and  will  continue  to  experience
significant operating and net losses and negative cash flow from operations. The
loss of the  RadioShack  account  in 1998  further  accelerated  our  losses and
negative cash flow. In response to the RadioShack termination,  Ameritel reduced
its workforce from 280 to 115 employees,  which included a substantial number of
customer service and collection personnel and reduced its leased facilities from
23,000 square feet to 18,000 square feet.  Since that time, we have made further
reductions in our leased facilities to approximately  12,000 square feet as well
as personnel  reductions  in which our  executive  staff has been reduced to two
individuals and our employee roster consists of 45 employees.  The reductions in
both  executive and other  personnel have resulted in reduced  effectiveness  of
Ameritel's  customer  service and  collection  departments  causing higher churn
rates.

     In the second half of 1999, we  substantially  altered our operations in an
effort to achieve  profitability,  including establishing an e-commerce platform
to market  services and products,  downsizing of staff and  facilities and other
cost  cutting  efforts  to reduce  overhead  and  adoption  of our IP  Telephony
initiative.  While we expect that those  efforts  will  position us favorably to
grow revenues, improve operating margins and minimize operating costs, there can
be no assurance that we will be successful in commencing IP Telephony  marketing
activities, growing revenues or operating profitably.

Results of Operations

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

Revenues

     Total revenues for the year ended  December 31, 1999  ("1999"),  consisting
primarily of  subscriber  sales of  Ameritel,  were  $15,360,812  as compared to
$41,089,160 for the year ended December 31, 1998 ("1998"). Consolidated revenues
of USCI, excluding Ameritel, were $0 during 1999.

     The decreased  revenues for 1999 are attributable to decreased sales of our
branded cellular services due to a loss of cellular subscribers during the year.

     Between January 1, 1999 and December 31, 1999, Ameritel did not add any new
subscribers   and  its  active   cellular   subscriber  base  was  reduced  from
approximately 60,000 to approximately 15,000.

Cost of Sales

     Costs of subscriber services, which consist of direct charges from cellular
carriers for access,  airtime and  services  resold to  Ameritel's  subscribers,
amounted to $7,847,964  and  $24,683,121  for 1999 and 1998,  respectively.  The
gross margin for subscriber  sales was $7,512,848 or 49% and  $16,391,114 or 40%
for 1999 and 1998,  respectively.  The  increase in gross margin  percentage  is
attributable  to  better  wholesale  rates  experiences  in the  areas  Ameritel
serviced during 1999. Excluding Ameritel,  USCI reported no cost of sales and no
gross profits on a consolidated basis during 1999.

Operating Expenses

     Subscriber  Acquisition and Promotional Costs.  Subscriber  acquisition and
promotional  costs  represent  expenses  incurred  by  Ameritel  to acquire  new
subscribers  for  its  cellular  services.  These  costs  consist  primarily  of
commissions  paid to retailers  and outside  sales  representatives,  below cost
discounts  (ie.  reduced  monthly  access  charges or free  minutes)  granted to
subscribers when purchasing cellular services, rebates issued to subscribers and
certain advertising costs. Subscriber acquisition and promotional costs amounted
to $1,617,913 and $18,920,271 for 1999 and 1998,  respectively.  The decrease in
these costs in 1999 is also  attributable to lower  promotional costs due to the
termination of promotions during a subscribers term. These costs are expected to
decrease since Ameritel is not adding new subscribers and the promotional  costs
associated with current  subscribers  continues to decline.  Excluding Ameritel,
USCI reported no subscriber  acquisition and promotional costs on a consolidated
basis during 1999.

                                       14
<PAGE>

     Selling,  General and Administrative  Expense.  Pro forma combined selling,
general and administrative  expenses aggregated $14,529,104 for 1999 as compared
to  $32,791,669  for 1998,  reflecting  staff  reductions and reduction of other
operating  expenses at both USCI and  Ameritel due to reduced  activity.  Of the
total pro forma selling,  general and  administrative  expense  reported  during
1999,  $764,088 was  attributable to USCI and  $13,765,016  was  attributable to
Ameritel.   Salaries  and  related  employee   benefits   decreased  by  52%  to
approximately   $4,474,000  for  1999  from  $9,384,000  for  1998,   reflecting
significant workforce reductions that began in the fourth quarter of 1998 due to
the  termination of the contract with  RadioShack.  This reduction  included the
termination  of sales,  activation  and field  personnel due to reduced sales as
well as customer  service,  collections and other personnel.  Telecommunications
and facilities expense decreased by 63% to $801,000 for 1999 from $2,189,000 for
1998 and billing and credit review services  decreased by 53% to $1,274,000 from
$2,686,000 in 1998 due, in substantial part, to decreased activity. Professional
and other  increased to  approximately  $2,972,000 from $1,165,000 due to legal,
consulting  and other fees incurred in  connection  with the  restructuring  and
reorganization.  Depreciation and amortization for 1999 was $970,252 as compared
to $2,664,476  for 1998 due in part to losses  realized as a result of the write
down of certain long lived assets of U.S. Communications, Inc.

     Provisions  for losses on accounts  receivable  decreased to  $7,300,000 in
1999  from  $11,500,000  in 1998  due to  write  off of  uncollectible  accounts
resulting  from age,  lack of  resources  and  damage  caused by the  RadioShack
termination offset by reduction on losses suffered from fraud.

Restructuring and Other Charges

     During 1999, USCI and Ameritel reported pro forma restructuring and related
charges of $3,826,551,  of which  $3,431,387  were reported on the  consolidated
financial statements of USCI and $395,164 were reported by Ameritel.

     During 1999 USCI issued common shares or options to purchase  common shares
below market value to various individuals for either services or for replacement
of shares  previously  used as  collateral.  Valuation for the shares issued for
services amounted to approximately $1,720,000 for the year ended 1999.

     As a  result  of a  review  of  the  certain  long  lived  assets  of  U.S.
Communications, Inc., USCI recognized a loss due to impairment of such assets in
the approximate amount of $1,712,000 for the year ended 1999.

     Reorganization  costs  totaling  $395,164 were recorded by Ameritel  during
1999.  Those costs  consisted  of certain  deferred  financing  costs which were
written off in accordance  with Statement of Position 90-7  governing  financial
reporting of entities in bankruptcy.

Other Income (Expense)

     Consolidated  other  income  (expense)  consists  of  net  interest  income
(expense),  a one  time  gain  on the  sale of  subscribers  and  income  (loss)
attributable to Ameritel.

     During  1998,  we  recorded  other  income  resulting  from the sale of our
subscriber  base of  approximately  22,000 paging  subscribers  to Metrocall for
$876,000  representing  the sums we owed to Metrocall.  That sale was a one time
event and no similar gain was recorded during 1999.

     Consolidated interest income, net of interest expense,  excluding Ameritel,
aggregated  $12,310 in 1999 as compared to net  expense of  $8,053,256  in 1998.
Ameritel  reported net interest  expense of  $2,141,639.  Pro forma combined net
interest expense for 1999, totaled $2,129,329.  The decrease in interest expense
during  1999 is  related to a  reduction  in 1999 of non cash  interest  charges
attributable to the fair value of warrants offset by higher loan levels in 1999.
See "Liquidity and Capital Resources."

     On a  consolidated  basis,  USCI reported as other income  (expense) a loss
attributable to its investment in Ameritel of $10,406,884.

     We incurred net losses of $14,590,049  and  $42,494,373  for 1999 and 1998,
respectively.

                                       15
<PAGE>


Year Ended  December 31, 1998 Compared to Year Ended December 31, 1997

Revenues

     Total revenues for the year ended  December 31, 1998  ("1998"),  consisting
primarily of subscriber  sales,  were  $41,089,160 as compared to $9,811,890 for
the year ended December 31, 1997 ("1997").

     The increased  revenues for 1998 are attributable to increased sales of our
branded cellular and paging services.  Cellular and paging  subscriber  revenues
amounted to $41,074,235 for 1998 compared to $6,281,825 for 1997.

     As an  agent,  we  received  activation  commissions  from  other  wireless
carriers in 1997. However, we completed our transition from agent to reseller in
1998 and agency  activation  commissions in 1998 were  immaterial as compared to
1997 agency commissions of $2,993,483.

Cost of Sales

     Costs of subscriber services, which consist of direct charges from cellular
and paging carriers for access,  airtime and services resold to our subscribers,
amounted to  $24,683,121  and $3,375,004  for 1998 and 1997,  respectively.  The
gross margin for subscriber sales was $16,391,114 or 40% and $2,906,821 or 46.3%
for 1998 and 1997, respectively. The decrease in gross margin resulted, in part,
from the renegotiation of amounts due under certain carrier agreements.

     Following the  completion  of our  transition  from agent to reseller,  our
agency commission expenses were immaterial in 1998 and amounted to $1,357,121 in
1997.  Such expenses  consist  primarily of commissions  paid to our mass market
distribution channels.

Operating Expenses

     Subscriber  Acquisition and Promotional Costs.  Subscriber  acquisition and
promotional  costs represent  expenses incurred by us to acquire new subscribers
for  our  cellular  and  paging  services.  These  costs  consist  primarily  of
commissions  paid to retailers  and outside  sales  representatives,  below cost
discounts  granted to subscribers  when purchasing  cellular or paging services,
rebates  issued  to  subscribers  and  certain  advertising  costs.   Subscriber
acquisition  and  promotional  costs amounted to $18,920,271 and $12,385,662 for
1998 and 1997, respectively.

     Restructuring and Other Costs. Restructuring and other charges include $1.1
million  recorded  by us in 1997,  due to the  impairment  of certain  assets in
connection with our transition from agent to reseller.

     Selling,   General  and  Administrative  Expense.   Selling,   general  and
administrative  expenses for 1998 aggregated $32,791,669 for 1998 as compared to
$18,967,189  for 1997,  reflecting  our growth.  Salaries  and related  employee
benefits  increased by 4% to  approximately  $9,384,000 for 1998 from $9,041,000
for 1997, reflecting our hiring of executive,  managerial,  customer service and
information  systems  personnel to support growth.  We were able to control this
increase from 1997 due to significant  workforce reductions in the first quarter
of 1998 while attempting to support  substantially  increased revenues.  We also
were  compelled to  substantially  reduce our workforce in the fourth quarter of
1998 due to the  termination  of our contract with  RadioShack.  This  reduction
included the termination of sales, activation and field personnel due to reduced
fourth  quarter  sales  as well  as  customer  service,  collections  and  other
personnel.  Telecommunications  and  facilities  expense  increased  by  16%  to
$2,189,000  for 1998 from  $1,883,000  for 1997 and  billing  and credit  review
services  increased  by  600% to  $2,686,000  from  $384,000  in  1997  due,  in
substantial  part,  to increased  activity and growth of the reseller  business.
Professional and other fees increased to approximately  $1,165,000 from $835,000
due to  legal,  consulting  and  other  fees  incurred  in  connection  with the
restructuring  and  reorganization.  Depreciation  and amortization for 1998 was
$2,664,476 as compared to $2,404,065 for 1997 as we incurred additional software
development   costs  and   purchased   and  placed   into   service   additional
communications  devices,  cellular  and  paging  displays,  computers,  computer
peripherals  and other  capital  equipment.

                                       16
<PAGE>

     Provisions  for losses on accounts  receivable  increased to $11,500,000 in
1998  from  $1,000,000  in 1997  due to a  significant  increase  in  subscriber
revenue, increased bad debt, unrecovered cloning fraud and substantial increased
losses resulting from subscription  fraud. As a result of the termination of our
contract with  RadioShack in October  1998, we were  compelled to  significantly
reduce our workforce in most areas,  including collections and customer service.
This workforce  reduction  caused an immediate  negative  impact on our customer
service  levels  and  collection   activity  as  well  as  our  increased  churn
experience.  Industry  experience  illustrates  many  customers  will end  their
service  at the end of their one year  agreement  with us and will not  continue
their service or will switch to another service they feel will better meet their
needs on a going forward basis. We would normally  experience a reduction in our
subscriber base at the end of a subscriber's first year with us. We believe that
the number of  subscribers we service has been reduced  significantly  more than
industry  average,  and our  expectations as a result of adverse reaction to the
RadioShack  termination and the reduction of our operations and customer service
workforce by approximately  65%, and the difficulty of making the billing system
adjustments due to higher than normally expected  subscriber  cancellations.  We
are  experiencing  increased  difficulty in collecting the balances due from our
subscribers  and  have  referred  many of our  subscriber  accounts  to  outside
collection agencies. As a result of the elements described above, a large number
of our  subscriber  accounts  receivable  have been deemed less  collectible  or
uncollectable and written off.

     Subscriber fraud is generally  controlled through procedures set up for the
purpose of  screening  a customer  during the  purchase  at the store  level for
proper  identification  and  signature   verification  and  the  completion  and
remittance of a cellular service agreement  required at the time a subscriber is
enrolled.  Discovery of subscriber  fraud can occur months after the  fraudulent
subscriber  has activated a cellular  phone as the  uncollected  telephone  bill
becomes  apparent and an  investigation  by our fraud  department  is completed.
Based upon our investigations,  we believe that a significant number of cellular
subscribers  added in 1998 and 1997  purchased  cellular  phones  without proper
procedural  screening and customer  verification  resulting in an unusually high
number of  fraudulent  transactions  which was  discovered  mostly in the fourth
quarter of 1998. As a result of the  significant  increase in  subscriber  fraud
activity,  it was necessary  for us to expand our fraud  department to deal with
the  voluminous  fraud  cases  arising  primarily  from  RadioShack   subscriber
referrals.  We anticipate  that  additional  subscriber  fraud will be uncovered
during 1999.

Other Income (Expense)

     During  1998,  we  recorded  other  income  resulting  from the sale of our
subscriber  base of  approximately  22,000 paging  subscribers  to Metrocall for
$876,000 representing the sums we owed to Metrocall.

     Interest  expense  (net  of  income)  aggregated  $8,053,256  in  1998  and
$1,093,618 in 1997.  The increase in interest  expense during 1998 is related to
increased  levels of borrowing needed to fund increased  operating  expenses and
capital expenditures discussed above, and approximately $6.4 million of interest
expense attributable to the fair value of warrants issued in connection with two
financings. See "Liquidity and Capital Resources."

     We incurred net losses of $42,494,373  and  $28,786,604  for 1998 and 1997,
respectively.

Liquidity and Capital Resources

     Pro forma working  capital  deficiency at December 31, 1999 was $35,284,043
compared to $11,567,863 at December 31, 1998.  USCI had a reported  consolidated
working  capital  deficiency  of $4,658,208  and Ameritel had a working  capital
deficiency of $30,625,835,  excluding  amounts due to USCI and  affiliates.  Pro
forma cash and cash equivalents at December 31, 1999 totaled  $604,161  compared
to $754,758 at December 31,  1998(of which  $350,500 and $454,124 was restricted
at December 31, 1999 and 1998 respectively). USCI had a cash balance at December
31, 1999 of $300,000  and  Ameritel  had a cash  balance of  $304,161,  of which
$300,000 and $50,500 were  restricted,  respectively.  The increase in pro forma
working  capital  deficiency  is primarily  due to losses  suffered in 1999.  We
expect to continue to  experience  monthly  losses and  negative  cash flow from
operations.

                                       17
<PAGE>

     We  currently  require  substantial  amounts  of  capital  to fund  current
operations,  for the  settlement  and payment of past due  obligations,  and the
deployment  of  our  new  business  strategy.   Due  to  recurring  losses  from
operations,  an accumulated  deficit,  stockholders'  deficit,  negative working
capital,  being in default  under the terms of our  letters of credit  advances,
having significant  litigation  instituted against us, and our inability to date
to obtain  sufficient  financing to support  current and  anticipated  levels of
operations,  our independent  public  accountant audit opinion states that these
matters  raise  substantial  doubt  about our  ability  to  continue  as a going
concern.

     To date, we have funded  operations and growth primarily  through financing
activities.  As a consequence of a merger in May 1995, we received cash and cash
equivalents of  approximately  $9,750,000 of which  $3,450,000 was used to repay
debt to  private  lenders.  In  November  1995,  we  received  net  proceeds  of
approximately  $21,850,000 from the exercise,  following a notice of redemption,
of outstanding common stock purchase warrants.

     In the fourth  quarter of 1997 and the first  quarter of 1998,  we obtained
letter of credit financing in the amount of approximately  $3.1 million from our
former  investment  banker,  and short term loans  totaling  $6.0  million  from
private  individuals  (the short term loans have been repaid).  In addition,  we
raised  approximately $2.5 million from the private sale of Common Stock and $19
million from the private sale of Convertible  Preferred  Stock in 1998 which was
in part funded  through the  conversion of debt into shares of Preferred  Stock.
The $3.1 million letter of credit financing was collateralized by 544,545 shares
of Company  Common Stock pledged by certain of our current and former  officers,
directors and other  stockholders.  We were  required to provide the  investment
banker with replacement  collateral in January 1998, which we failed to do. As a
result,  the investment banker has recently exercised its rights to transfer the
shares  deposited  as  collateral  into its name and we have issued  replacement
shares  (totaling   520,045)  to  the  pledgors.   From  the  letter  of  credit
availability,  a letter of credit for $2.5 million was issued to RadioShack  and
we have asserted in our counterclaims in the RadioShack  lawsuit that RadioShack
improperly drew down the $2.5 million letter of credit.

     On June 5, 1998, we entered into a four-year $20 million  revolving  credit
and term loan facility with Foothill  Capital Corp.  ("Foothill").  The Foothill
credit  facility  provides for term loans,  which will  amortize  equally over a
30-month  period and revolving  credit  borrowings.  Availability  is based on a
number of factors,  including eligible accounts receivable and eligible cellular
subscribers.  Term loan  borrowings  bear  interest at the bank's base rate plus
2.5% and revolving  credit  borrowings bear interest at the base rate plus 1.5%.
Concurrent with the closing of the credit facility, we received proceeds of $6.1
million  under a term  loan  borrowing,  of  which  $3  million  was used to pay
RadioShack.

     On April 14,  1999,  we  entered  into an  Amended  and  Restated  Loan and
Security  Agreement  with  Foothill  in which  the  original  Loan and  Security
Agreement  entered into on June 5, 1998 was amended to restructure  the existing
credit  facility by reducing the total facility to $17.5 million.  Additionally,
certain of our  preferred  shareholders  and certain  other persons have entered
into  a   Participation   Agreement   with  Foothill  in  connection   with  the
restructuring  of the outstanding $20 million credit facility with Foothill.  An
aggregate of $7 million was made available by the  participants  in the Foothill
facility as term loans.  Although  the limit of the credit  facility was reduced
from $20 million to $17.5 million,  the $7 million allocated for term loans will
be available  for working  capital upon certain  conditions.  As of December 31,
1999,  approximately  $4.4 million had been  advanced.  The balance of the $10.5
million  limit has been  structured  as part  revolver,  part term loan and part
letters of credit.  Additionally,  the  financial  covenants in the June 5, 1998
Agreement were replaced with revenue,  subscriber and cash receipt covenants. At
December 31, 1999,  we were not in compliance  with certain  financial and other
covenants.  As  a  result,  we  reclassified  all  long  term  debt  to  current
liabilities.   Foothill  had  not  declared  the  Company  in  default  and  the
obligations had not been accelerated.  Subsequent to December 31, 1999, on April
28,  2000,  a Release of Guaranty  and  Termination  of Security  Interests  was
reached  between  Tranche B, Inc.  and  Foothill.  Tranche B, Inc.  is owned and
controlled  by  shareholders  that hold a  controlling  interest in the Company.
Under the terms of the agreement,  Foothill agreed to sell,  transfer and assign
without recourse,  all rights,  title and interest in and to claims of Ameritel,
including any and all security interests against Ameritel and guarantees against
the Company,  together  with their right to receive cash,  instruments  or other
property  issued  in  connection  with  the  proceedings  in the  United  States
Bankruptcy  Court.  In  addition,  the  transaction  included the release of all
guarantees of that  indebtedness  by the Company and its  affiliates  other than
Ameritel.  As consideration for the release and termination,  the secured lender
received  4,000,000  shares of common  stock of the Company.  On the  eighteenth
month anniversary of the agreement date,  Tranche B, Inc. shall also transfer to
the secured  lender,  such  additional  shares of common stock of the Company to
make the aggregate fair market value of the shares in the initial transfer equal
to $4,000,000, based on an agreed upon weighted average formula.

                                       18
<PAGE>

     As of March 31, 2000, lawsuits  aggregating  approximately  $14,200,000 had
been filed  against  the  Company and its  wholly-owned  subsidiaries,  Ameritel
Communications,    Inc.   ("Ameritel"),   U.S.   Communications,   Inc.   ("U.S.
Communications") and Wireless  Communications  Centers, Inc. ("WCCI").  Lawsuits
aggregating approximately $600,000 have been reduced to judgment. If the Company
does not  obtain  the  funding  necessary  to pay  legal  fees to  defend  these
lawsuits, or reach satisfactory settlements of these lawsuits, of which there is
no  assurance,  additional  judgments  will be filed against the Company and its
subsidiaries,  which may require the Company and its remaining  subsidiaries  to
join Ameritel in filing for  protection  under the U.S.  Bankruptcy  statutes or
otherwise cease operating and wind up their business  affairs.  See "Litigation"
under Part II, Item 1 of this Report.

     On  October  29,  1999,  Ameritel  Communications,  Inc.,  a  wholly  owned
subsidiary of the Company ("Ameritel"), filed a voluntary petition under Chapter
11 of U.S.C.  Title 11 with the United States  Bankruptcy Court for the Southern
District  of New York (Case No.  99-11081)(the  "Bankruptcy  Court").  Since the
filing  date,  Ameritel  has  operated  its  business as a  debtor-in-possession
subject to the  jurisdiction  of the Bankruptcy  Court.  In connection  with its
Chapter 11  bankruptcy  filing on October 29, 1999,  the Company  obtained  cash
collateral financing from Foothill. This financing, which has since been assumed
by Tranche B, Inc.,  after several  extensions  expires on August 25, 2000.  All
claims against  Ameritel in existence prior to the Chapter 11 filing are subject
to payment only when and as provided for by an order of the Bankruptcy Court.

     Ameritel's reorganization plan, which has not been completed and is subject
to approval by the Bankruptcy Court, focuses the Company's resources on the sale
of its consumer accounts receivable and the related subscriber contracts.  It is
too early to determine  other elements of a proposed plan.  However,  when other
elements are determined, they may result in additional restructuring charges, as
well  as the  impairment  of  certain  assets.  The  plan or  sale  will  have a
significant effect upon the value of certain assets and liabilities  included in
these  financial  statements.  Subject to completion and approval of the plan or
sale,  the Company is unable to predict the potential  financial  impact of this
matter.

     The amounts  available from  operating cash flows and funds  available from
its cash collateral  financing with Tranche B pursuant to its acquisition of the
position of Foothill will not be sufficient to meet our expected operating needs
through the end of 2000. The Company is seeking an expansion of the current cash
collateral  financing and  restructuring  of certain debt.  The Company does not
have any  commitments  with regard to additional  sources of financing and there
can  be no  assurance  that  any  such  commitments  will  be  obtained  in  the
foreseeable future.

     The financial  statements as of and for the year ended December 31, 1999 do
not include any effect of the bankruptcy  which was filed on October 29, 1999 or
the proposed sale or reorganization plan.

     There is no assurance that we will be able to effect a sale of the Ameritel
Assets  on a  timely  basis or that we will be able to use  cash  collateral  as
scheduled for in a Bankruptcy approved budget,  obtain an extension or expansion
of the cash collateral order, obtain  Debtor-in-Possession  ("DIP") financing or
restructure  certain debt. In the event that we are not  successful in obtaining
the   aforementioned   financing,   sale  of  the  Ameritel   Assets,   or  debt
restructuring, we may be required to convert the Ameritel Chapter 11 filing to a
liquidation under Chapter 7 of the U.S.  Bankruptcy Code or move for a dismissal
of the case, and the Company and all of its subsidiaries may also be required to
join Ameritel in filing for  protection  under the U.S.  Bankruptcy  statutes or
otherwise cease operating and wind up their business affairs.

     Because the cost of implementing our new e-commerce strategies, which began
in the fourth  quarter of 1999 with  immaterial  operations  will  depend upon a
variety of factors (including our ability to negotiate  additional  distribution
agreements,  our ability to negotiate  favorable wholesale prices with carriers,
the number of new  customers and services for which they  subscribe,  the nature
and penetration of services that we may offer, regulatory changes and changes in
technology), actual costs and revenues will vary from expected amounts, possibly
to a material  degree,  and such  variations  will  affect  our  future  capital
requirements.

Inflation

     To date, inflation has not had any significant impact on our business.

                                       19
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     None

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Reference is made to the  Consolidated  Financial  Statements for the Years
Ended  December  31,  1999,  1998,  and 1997 and  Notes  thereto  together  with
Auditors' Report comprising a portion of this Annual Report on Form 10-K.

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

     None

                                       20
<PAGE>

                                    PART III

ITEM 10.  DIRECTORS,   EXECUTIVE   OFFICERS,   PROMOTERS  AND  CONTROL  PERSONS;
          COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Information Regarding Executive Officers and Directors

     The following  table sets forth the names,  ages and offices of the present
executive  officers and directors of the Company.  The periods during which such
persons  have served in such  capacities  are  indicated in the  description  of
business experience of such persons below.

   Name                  Age                       Position
-----------             -----               ----------------------

Lee Feist                57      Chairman of the Board; Chief Executive Officer

Robert J. Kostrinsky     41      Executive Vice President; Treasurer;
                                 Chief Financial Officer

Joshua Berkowitz         62      Director

Bryan Finkel             37      Director

Henry Reinhold           55      Director

     On  May  11,  1999,  the  previous   Board  of  Directors   resigned  their
directorships and Messrs. Joshua Berkowitz, Bryan Finkel and Henry Reinhold were
elected  directors  in their place and stead.  Mr.  Bruce Hahn also  resigned as
Chief Executive Officer of USCI, Inc. and all of its subsidiaries, but continues
as consultant to  Americomonline.com,  Inc.  focusing his attention on the sales
and marketing of our new prepaid wireless and e-commerce strategies.

     Mr. Kostrinsky has tendered his resignation effective June 14, 2000.

     Lee Feist, Chairman of the Board and Chief Executive Officer. Mr. Feist has
been Chairman the Board and Chief  Executive  Officer of the Company since July,
1999. From 1990 until June 1999, Mr. Feist served as Chief Executive  Officer of
LifeSavers  International,  a privately held turnaround and start-up  management
company,   where  he  filled  various  senior   management   roles  for  various
organizations.

     Robert  J.  Kostrinsky,  Executive  Vice  President,  Treasurer  and  Chief
Financial  Officer.  Mr.  Kostrinsky  has  been   Secretary-Treasurer   of  U.S.
Communications,  Inc. since  November 1991 and Executive  Vice  President  since
November 1994. He has been Executive Vice President and Treasurer of the Company
since May 1995,  was Secretary of the Company from May 1995 until July 1996, and
became Chief  Financial  Officer in April 1996. Mr.  Kostrinsky has tendered his
resignation effective June 14, 2000.

     Joshua  Berkowitz,  Director.  Mr.  Berkowitz  has been a  director  of the
Company since May 11, 1999. Mr. Berkowitz is a private investor.

     Bryan Finkel, Director. Mr. Finkel has been a director of Company since May
11, 1999.  Since  January 1996,  Mr.  Finkel has served as Managing  Director of
Technology   Venture   Management  an  operating  and  financial  advisory  firm
specializing  in  the  information   technology  industry.   Prior  to  founding
Technology  Venture  Management,  from  1992 to 1996,  Mr.  Finkel  was a Senior
Associate  at  Broadview  Associates,  an  information  technology  mergers  and
acquisitions advisory firm.

     Henry Reinhold, Director. Mr. Reinhold has been a director of Company since
May 11, 1999. For the past five years,  Mr. Reinhold has been engaged in private
practice as a certified  public  accountant  and as Controller of American Stock
Transfer & Trust Co. which serves as the Company's transfer agent.

                                       21
<PAGE>

Compliance With Section 16(a) of Exchange Act

     Under the securities  laws of the United States,  the Company's  directors,
its  executive  officers,  and any persons  holding more than ten percent of the
Company's  Common Stock are required to report  their  initial  ownership of the
Company's  Common  Stock and any  subsequent  changes in that  ownership  to the
Securities  and Exchange  Commission.  Specific due dates for these reports have
been  established  and the  Company is  required  to disclose in this report any
failure to file by these dates during 1999.  During 1999, the following  reports
were either not filed,  or were filed on a non-timely  basis:  Bryan  Finkel,  a
director  of  the  Company,  failed  to  file a Form  3  reporting  his  initial
appointment as a director and his initial  holdings.  Except as otherwise  noted
above,  all  reports  required  to be filed  during  1999 were filed on a timely
basis.  In making these  disclosures,  the Company has relied  solely on written
statements of its directors,  executive  officers and shareholders and copies of
the reports that they filed with the Commission.

Committees and Attendance of the Board of Directors

     In order to facilitate the various functions of the Board of Directors, the
Board  has  created a  standing  Audit  Committee  and a  standing  Compensation
Committee.

     The functions of the Company's  Audit Committee are to review the Company's
financial statements with the Company's  independent  auditors; to determine the
effectiveness  of the audit effort through  regular  periodic  meetings with the
Company's  independent  auditors;  to  determine  through  discussion  with  the
Company's independent auditors that no unreasonable  restrictions were placed on
the  scope  or  implementation  of  their  examinations;  to  inquire  into  the
effectiveness of the Company's  financial and accounting  functions and internal
controls  through  discussions  with  the  Company's  independent  auditors  and
officers  of the  Company;  to  recommend  to the full  Board of  Directors  the
engagement or discharge of the  Company's  independent  auditors;  and to review
with the independent  auditors the plans and results of the auditing engagement.
The members of the Audit Committee are Mr. Finkel,  Chairman,  Mr. Berkowitz and
Mr. Reinhold.

     The functions of the Company's Compensation Committee include reviewing the
existing  compensation  arrangements  with officers and employees,  periodically
reviewing the overall  compensation  program of the Company and  recommending to
the Board modifications of such program which, in the view of the development of
the  Company  and  its  business,   the  Committee   believes  are  appropriate,
recommending to the full Board of Directors the  compensation  arrangements  for
senior management and directors, and recommending to the full Board of Directors
the adoption of compensation  plans in which officers and directors are eligible
to participate  and granting  options or other  benefits  under such plans.  The
members of the Compensation  Committee are Mr. Berkowitz,  Chairman,  Mr. Finkel
and Mr. Reinhold.

     The Board of Directors does not have a standing  nominating  committee or a
committee performing similar functions.

     During the year ended  December 31, 1999, the Board of Directors held eight
formal meetings,  including  telephonic  meetings,  and acted through  unanimous
written consent on other occasions, the Audit Committee held no meetings and the
Compensation  Committee  held no meetings.  Each director  (during the period in
which each such director  served)  attended at least 75% of the aggregate of (i)
the total  number of  meetings  of the Board of  Directors,  plus (ii) the total
number of meetings held by all committees of the Board of Directors on which the
director served.

                                       22
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

     The following summary compensation table sets forth information  concerning
compensation for services in all capacities awarded to, earned by or paid to the
Chief Executive  Officer of the Company and the other  executive  officers whose
compensation  exceeded $100,000 ("named  executive  officers") during the fiscal
year ended December 31, 1999.
<TABLE>

                                    Summary Compensation Table
                                  ----------------------------------------------

                                                     Annual Compensation                      Long Term
Name and                                                                    Other Annual    Compensation
Principal Position                  Year       Salary($)       Bonus($)    Compensation($)  Stock Options(#)
-------------------                ------     -----------     ----------  ----------------- ----------------
<S>                                <C>        <C>             <C>         <C>               <C>


Lee Feist (1)                       1999       132,212          -0-              (3)            798,156
  Chairman and Chief                1998          -              -                -                   -
  Executive Officer                 1997          -              -                -                   -

Bruce A. Hahn (2)                   1999       215,281          -0-              (3)                  -
  Chairman and Chief                1998       250,000          -0-              (3)                  -
  Executive Officer                 1997       245,819          -0-              (3)             35,000

Robert J. Kostrinsky                1999       155,000          -0-              (3)            400,000
  Executive Vice                    1998       155,000          -0-              (3)                  -
  President, Chief                  1997       145,819          -0-              (3)              5,250
  Financial Officer
</TABLE>

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

(1)  Mr.  Feist was hired as  Chairman  and Chief  Executive  Officer on July 6,
     1999.
(2)  Salary payments include  commissions paid pursuant to Mr. Hahn's employment
     agreement. Such commissions totaled $45,819 for the year ended December 31,
     1997.  Mr. Hahn  resigned as Chairman and Chief  Executive  Officer in May,
     1999.
(3)  Although the officers  receive certain  perquisites such as auto allowances
     and company provided life insurance,  the value of such perquisites did not
     exceed the lesser of $50,000 or 10% of the officer's salary and bonus.

Compensation of Directors

     Non-employee  directors  currently  receive  reimbursement of out-of-pocket
expenses,  for  attendance  at  each  meeting  of the  Company's  Board  and any
committee  meeting  thereof not held in conjunction  with a Board Meeting.  Each
non-employee  director  also  receives an annual  grant of  non-qualified  stock
options  to  acquire  shares of the  Company's  Common  Stock in an amount to be
determined  each year by the  entire  Board of  Directors.  In May,  1999,  each
non-employee director received 100,000 common shares of USCI, Inc.

Stock Option Grants

     The following  table sets forth  information  concerning the grant of stock
options made during 1999 to each named executive officer:
<TABLE>


                                                   Percent of                                 Potential Realizable Value
                                                 Total Options                                  at Assumed Annual Rates
                                                  Granted to                                 of Stock Price Appreciation
                                   Options       Employees in       Price       Expiration        For Option Term
         Name                     Granted (1)     Fiscal Year    Per Share (1)     Date          5%             10%
-------------------------         -----------   ---------------  -------------  -----------    -----          ------
<S>                              <C>            <C>              <C>            <C>            <C>            <C>

Lee Feist ......................    798,156          48%             $.0001      07/06/09      $675,978   $1,076,430
Bruce Hahn......................         -0-          -                   -             -             -            -
Robert Kostrinsky...............    400,000          24%             $  .32      08/19/05       $43,432      $98,760

</TABLE>

                                       23
<PAGE>

Stock Option Exercises

     The following table sets forth information concerning the exercise of stock
options during 1999 by each named executive  officer and the number and value of
unexercised options held by the named officers at the end of 1999:
<TABLE>

                                                            Number of Unexercised         Value of Unexercised
                                Shares                           Options at                In-the Money Options
                              Acquired on       Value           at FY-End (#)                at FY-End ($)(1)
         Name                 Exercise (#)   Realized ($)  Exercisable Unexercisable    Exercisable      Unexercisable
---------------------        --------------  ------------  ----------- -------------    -----------      -------------
<S>                          <C>             <C>           <C>         <C>              <C>              <C>

Lee Feist ..................... 798,156       159,551                0         -0-           -0-            -0-
Bruce Hahn.....................       0             0          153,473         -0-           -0-            -0-
Robert Kostrinsky..............       0             0          100,000     300,000           -0-            -0-
---------------------------
</TABLE>

(1)  Based on the fair market  value per share of the Common  Stock at year end,
     minus the exercise price of "in-the-money"  options.  The closing price for
     our Common Stock on December 31, 1999 on the OTC Bulletin Board was $.3438.

Employment   Contracts,   Termination   of  Employment  and  Change  in  Control
Arrangements

     Effective  July 6, 1999, we entered into an employment  agreement  with Lee
Feist pursuant to which Mr. Feist was hired as Chief Executive Officer.

     Pursuant  to such  agreement,  Mr.  Feist  receives  a base  salary  of (1)
$275,000  during the first year of  employment,  (2) $295,000  during the second
year, (3) 315,000  during the third year,  (4) $335,000  during the fourth year,
and (5)  $355,000  during the fifth year.  In addition to his base  salary,  Mr.
Feist  is  entitled  to (1) a  $75,000  bonus  at the end of his  first  year of
employment,  (2) incentive  compensation  equal to 5% of the first $4 million of
earnings before depreciation, interest, amortization and taxes ("EBITDA") and 2%
of EBITDA in excess of $4 million for each year, (3) use of a leased automobile,
(4) reimbursement of certain  relocation  expenses,  and (5) insurance and other
benefits  customarily  provided  to senior  management  personnel.  Mr.  Feist's
employment agreement also provides for the grant of the following stock options:
(1) ten  year  non-qualified  stock  options  to be  granted  on the date of the
employment agreement and on the second and third anniversaries of the employment
agreement, each grant to be in an amount equal to 0.5% of the outstanding shares
on a fully diluted basis on the date of grant and exercisable at par value,  (2)
ten year  incentive  stock  options to be granted on the date of the  employment
agreement and on the second,  third and fourth  anniversaries  of the employment
agreement, each grant to be in an amount equal to 0.5% of the outstanding shares
on a fully  diluted  basis and  exercisable  at fair market value on the date of
grant, and (3) ten year stock options to purchase  1,500,000 shares at $1.50 per
share and  exercisable  if the common stock is traded on an exchange,  Nasdaq or
the pink-sheets and the closing price or closing bid price has equaled or exceed
$1.50  for 25  consecutive  trading  days.  The  obligations  of USCI  under the
employment are secured by a $300,000 letter of credit in favor of Mr. Feist.

     The employment  agreement with Mr. Feist is for a term of five years and is
subject to automatic  renewal for  additional  two year terms  unless  notice of
non-renewal is provided.

     The employment  agreement  prohibits Mr. Feist from competing,  directly or
indirectly,  with  USCI  for a  period  of one  year  following  termination  of
employment  or  disclosing  confidential  matters with respect to USCI for three
years after termination of employment.

     In the event of the termination of Mr. Feist's employment within 90 days of
the  occurrence of various change in control  events,  USCI must pay Mr. Feist's
salary and continue to provide  certain  insurance  coverage for a period of one
year  following  such  termination  of  employment.  As used  in the  employment
agreement of Mr.  Feist,  a "change in control" is defined to be (1) a merger or
consolidation pursuant to which USCI is not the surviving corporation and USCI's
stockholders  do  not  have  the  same  proportionate  ownership  following  the
transaction,   (2)  a  sale,  lease,  exchange  or  other  transfer  of  all  or
substantially  all of the assets of USCI, (3) approval by the  stockholders of a
plan for  liquidation  or  dissolution  of USCI, or (4) the  acquisition  by any
person or group of 51% of USCI's common stock.

                                       24
<PAGE>

     USCI  has no  other  employment  agreements  with  any  other  officers  or
employees.

Compensation Report

     General. The Compensation  Committee of the Board of Directors  establishes
the general compensation  policies of the Company and the compensation plans and
specific compensation levels for executive officers.

     The Committee believes that the Company is best served by a program that is
designed  to  motivate,  reward and retain the  management  team to achieve  the
objectives  of the  Company.  To this end, the  Committee  has adopted a program
designed to focus on the Company's long-term goals.  Accordingly,  a significant
portion of the senior  executive  compensation is dependent upon achieving these
long-term goals.

     The philosophical basis of the Committee is to compensate  executives based
on  performance  and on the level of  responsibility  of the  executive.  Salary
ranges are  established  based on such criteria.  Salaries of key executives are
set by measuring performances against the benchmark and by determining the value
of the  executive's  contribution  towards the  Company's  long-term  goals.  In
addition,  consideration  is  given  to the  individual's  experience  and  past
performance  because the Committee also believes that any program must recognize
performance and encourage initiative.

     The Committee also reviews  management's  response to the changing business
environment in which the Company  operates.  A timely and effective  response by
management  to changing  business  conditions  while  continuing to focus on the
long-term  objectives is considered  essential by the  Committee.  Management is
also  evaluated  on its ability to evaluate  and adjust the  long-term  goals in
response to the evolving business climate.

     Base Salary. For fiscal 1999, the base salary of executive officers,  other
than  the  Chief  Executive  Officer  whose  base  salary  is  determined  by an
employment  agreement,  were set  based  upon  the  results  of the  executive's
performance  review.  Each executive is reviewed annually by the Chief Executive
Officer and Chairman and given specific objectives,  with the objectives varying
based  upon the  executive's  position  and  responsibilities  and the  specific
objectives for that position. At the next annual review, the performance of each
executive is reviewed  versus the objectives  established for each executive and
the Company's overall  performance.  The results of the review are then reported
to the Committee along with senior management's compensation recommendation. The
Committee  then  determines  whether the base salary  should be adjusted for the
coming year.

     Long-Term Incentive Compensation. Each executive officer of the Company was
granted  options at the time of the  initial  adoption  of the  Company's  stock
option plans or at the time the officer joined the Company.  The Committee makes
option  grants to executive  officers on a  case-by-case  basis  relative to the
annual performance reviews and the recommendations of senior management.  Grants
of options are designed to align the interests of executive  officers with those
of stockholders.  The size of these grants is generally set at a level which the
Committee  feels  is in  proportion  with the  role  and  responsibility  of the
executive,   as  well  as  his  or  her  opportunity  to  effect  the  Company's
performance,  while  also being  sufficient  to  attract  and  retain  qualified
executives.

     Chief Executive Officer  Compensation.  With respect to the compensation of
the Chief Executive  Officer,  compensation is fixed pursuant to the terms of an
employment agreement.  Given the difficult financial condition of the Company at
the time Mr. Feist was hired as Chief Executive  Officer,  the Committee felt it
both necessary and appropriate to provide an attractive compensation arrangement
with substantial  performance based  compensation in order to attract and retain
Mr.  Feist's  services.  Based  on that  criteria,  the  Committee  agreed  to a
compensation   arrangement   with  an  initial  base  salary  of  $275,000  with
predetermined  annual  increases  and a first year bonus and annual  performance
bonuses  based on EBITDA as well as a package of stock  options.  The  Committee
believed that such a  compensation  package was essential to attract a qualified
CEO in the Company's efforts to achieve profitability.

                                       25
<PAGE>

     The Committee believes these executive  compensation  policies and programs
serve the interests of stockholders and the Company effectively. The various pay
vehicles offered are appropriately  balanced to provide increased motivation for
senior executives to contribute to the Company's overall future success, thereby
enhancing the value of the Company for the stockholder's benefit.

                                                    Compensation Committee

                                                    JOSHUA BERKOWITZ, Chairman
                                                    BRYAN FINKEL
                                                    HENRY REINHOLD

Company Performance

     The following  graph compares the cumulative  total investor  return on the
Company's  Common Stock for the period from May 15, 1995, the date the Company's
initial public offering closed, to December 31, 1999 with an index consisting of
returns from a peer group of companies,  consisting of the Nasdaq  Non-Financial
Index (the "Nasdaq  Non-Financial  Index"), and The Nasdaq US Index (the "Nasdaq
US Index").

     The graph  displayed  below is presented in accordance  with Securities and
Exchange Commission requirements. Shareholders are cautioned against drawing any
conclusions from the data contained  herein, as past results are not necessarily
indicative  of future  performance.  This graph in no way reflects the Company's
forecast of future financial performance.




   (graph appears at this location depicting the following stock performance)





                                                December 31,
                            ----------------------------------------------------
                            1994    1995      1996     1997       1998      1999
                            ----    ----      ----     ----       ----      ----
USCI, Inc.                   100   213.51    116.22   151.35      1.08      7.57
Nasdaq US Index              100   141.33    173.89   213.07    300.25    542.43
Nasdaq Non-Financial Index   100   139.26    169.16   198.09    290.32    559.35

                                       26
<PAGE>


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following  table sets forth  information  as of May 31, 2000,  based on
information  obtained  from  the  persons  named  below,  with  respect  to  the
beneficial  ownership of shares of the  Company's  Common Stock held by (i) each
person  known by the Company to be the owner of more than 5% of the  outstanding
shares of the  Company's  Common  Stock,  (ii) each  director,  (iii) each named
executive officer, and (iv) all executive officers and directors as a group:

Name and Address                        Number of Shares         Percentage
of Beneficial Owner                   Beneficially Owned (1)     of Class (2)
----------------------               ------------------------  -----------------
JNC Opportunity Fund Ltd.               197,073,319     (3)           74.1%
   c/o Olympia Capital Cayman Ltd.
   20 Reid St, Hamilton HM 11
   Bermuda 19102
Lee Feist                                   798,156                       *
Bruce A. Hahn                               693,000                       *
Robert J. Kostrinsky                        158,750     (4)               *
Joshua Berkowitz                            100,000                       *
Bryan Finkel                                100,000                       *
Henry Reinhold                              135,500                       *
All directors and executive officers
  as a group (five persons)               1,292,506     (5)            1.3%
-----------------------

*    Less than 1%.

(1)  Unless otherwise indicated,  each beneficial owner has both sole voting and
     sole investment power with respect to the shares beneficially owned by such
     person,  entity or group. The number of shares shown as beneficially  owned
     include all  options,  warrants  and  convertible  securities  held by such
     person, entity or group which are exercisable or convertible within 60 days
     of May 1, 2000.

(2)  The percentages of beneficial ownership as to each person,  entity or group
     assume the exercise or conversion of all options,  warrants and convertible
     securities  held by such person,  entity or group which are  exercisable or
     convertible  within 60 days, but not the exercise or conversion of options,
     warrants and convertible securities held by others shown in the table.

(3)  Includes   172,073,137   shares  issuable  to  JNC  Opportunity  Fund  upon
     conversion of (a) 385 shares of Series A Convertible  Preferred  Stock, (b)
     500  shares of Series B  Convertible  Preferred  Stock,  (c) 500  shares of
     Series C Convertible  Preferred Stock held by JNC Opportunity  Fund and (d)
     350 shares of Series D Convertible  Preferred Stock. The Series A Preferred
     Stock,  Series B Preferred  Stock and Series C Preferred  Stock,  each in a
     face  amount of $10,000  per share,  is  convertible,  at the option of JNC
     Opportunity  Fund,  at a conversion  price equal to the lesser of $1.00 per
     share or 85% of the average closing bid price of the Company's common stock
     over the five trading  days  preceding  conversion.  The Series D Preferred
     Stock is convertible into common stock of the Company.  Since the number of
     shares that are issuable upon conversion of the Preferred Shares is derived
     from a  conversion  formula  described  in an  agreement  of April 26, 1999
     between JNC, the Company and certain other  preferred  stockholders,  which
     formula  is based in part upon the market  price of the  shares  prior to a
     conversion  of a Preferred  Shares,  the actual  number of shares that will
     actually be issued upon a conversion of the Preferred Shares (and therefore
     beneficially owned by JNC) cannot accurately be determined at this time.

(4)  Includes 100,000 shares issuable upon the exercise of currently exercisable
     options  and  5,250  shares   issuable   upon  the  exercise  of  currently
     exercisable warrants held by Mr. Kostrinsky.

(5)  Includes 100,000 shares issuable upon the exercise of currently exercisable
     options held by officers and directors of the Company.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     None

                                       27
<PAGE>

                                     PART IV

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

     (a)(1) Financial Statements

     See Index to Financial  Statements  on page 32 of this report for financial
statements and supplementary data filed as part of this report.

     (a)(2) Financial Statement Schedules

     All  financial  statement  schedules  are omitted  because  the  conditions
requiring  their  filing do not exist or the  information  required  thereby  is
included in the financial statements filed, including the notes thereto.

     (b) Reports on Form 8-K

     On November 1, 1999, the  Registrant  filed a report on Form 8-K disclosing
under Item 5 that its  wholly-owned  subsidiary,  Ameritel  Communications,  had
filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code.

     (c) Exhibits
<TABLE>

        Number                      Description of Exhibit
      -----------                 ---------------------------
        <S>       <C>

         3.1      Certificate of Incorporation of Trinity Six Inc.(1)
         3.2      Certificate of Amendment of Certificate of Incorporation of Trinity Six Inc. (4)
         3.2A     Certificate of Designation for Series A Convertible Preferred Stock (11)
         3.3      By-Laws of Registrant (1).
         4.1      Form of Certificate evidencing shares of Common Stock (5).
         4.4      Form of Representative's Warrant between the Registrant and Gaines, Berland, Inc. (1)
         10.1     Amended and Restated 1992 Stock Option Plan (6).
         10.1A    1997 Stock Option Plan. (7)
         10.2+    Employment Agreement, dated as of January 1, 1995, between U.S. Communications, Inc. and Bruce
                  A. Hahn (3).
         10.2A+   Amendment No. 1 to Employment Agreement, dated as of January 1, 1996, between U.S.
                  Communications, Inc. and Bruce A. Hahn (7).
         10.3+    Employment Agreement, dated as of January 1, 1995, between U.S. Communications, Inc. and Robert
                  J. Kostrinsky (3)
         10.3A+   Amendment No. 1 to Employment Agreement, dated as of January 1, 1996, between U.S.
                  Communications, Inc. and Robert J. Kostrinsky (7).
         10.4+    Employment Agreement dated August 1997 between the Registrant and Mario Martinez (11)
         10.28    Agreement dated October 1996 between Ameritel Communications, Inc. and GTE Mobilenet Service
                  Corp. (7)
         10.35    Stock Option Agreements dated as of October 30, 1997 with certain stockholders of the
                  Registrant.(9)
         10.36    Warrant Agreement dated October 30, 1997 between the Registrant and PaineWebber.(9)
         10.37    Shareholder Collateral Agreement dated as of October 30, 1997. (9)
         10.38    Warrant issued by the Registrant to Alan R. Dresher.(9)
         10.40    Warrant issued by the Registrant to Decameron Partners.(9)
         10.42    Warrant issued by the Registrant to Alan Baron. (9)
         10.43    Warrant dated February 2, 1998 issued by the Registrant to Decameron Partners, Inc.(10)
         10.44    Warrant dated February 2, 1998 issued by the Registrant to Alan R. Dresher.(10)
         10.45    Warrant dated February 2, 1998 issued by the Registrant to Alan Baron.(10)

</TABLE>


                                       28
<PAGE>
<TABLE>
         <S>      <C>

         10.46    Private Placement Purchase Agreement dated February 24, 1998 among the Registrant, George
                  Karfunkel, Michael Karfunkel, Huberfeld Bodner Family Foundation, Inc., Laura Huberfeld/Naomi
                  Bodner Partnership and Ace Foundation, Inc.(10)
         10.47    Convertible Restated Note dated February 24, 1998 issued by the Registrant in favor of George
                  Karfunkel.(10)
         10.48    Convertible Restated Note dated February 24, 1998 issued by the Registrant in favor of Michael
                  Karfunkel.(10)
         10.49    Convertible Restated Note dated February 24, 1998 issued by the Registrant in favor of Laura
                  Huberfeld/Naomi Bodner Partnership.(10)
         10.50    Convertible Restated Note dated February 24, 1998 issued by the Registrant in favor of
                  Huberfeld Bodner Family Foundation, Inc.(10)
         10.51    Warrant dated February 24, 1998 issued by the Registrant to George Karfunkel.(10)
         10.52    Warrant dated February 24, 1998 issued by the Registrant to Michael Karfunkel.(10)
         10.53    Warrant dated February 24, 1998 issued by the Registrant to Laura Huberfeld/Naomi Bodner
                  Partnership.(10)
         10.54    Warrant dated February 24, 1998 issued by the Registrant to Huberfeld Bodner Family Foundation,
                  Inc.(10)
         10.55    Convertible Note dated February 24, 1998 issued by the Registrant in favor of George
                  Karfunkel.(10)
         10.56    Convertible Note dated February 24, 1998 issued by the Registrant in favor of Ace
                  Foundation.(10)
         10.57    Warrant dated March 5, 1998 issued by the Registrant to Alan R. Dresher.(10)
         10.58    Warrant dated March 5, 1998 issued by the Registrant to Bulldog Capital Management.(10)
         10.59    Warrant dated March 5, 1998 issued by the Registrant to Alan Baron. (10)
         10.60    Convertible Preferred Stock Purchase Agreement between the Registrant and JNC Opportunity Fund
                  Ltd. dated March 24, 1998(11).
         10.61    Registration Rights Agreement dated March 24, 1998 between the Registrant and JNC Opportunity
                  Fund, Ltd. (11)
         10.62    Escrow Agreement dated March 24, 1998 among the Registrant, JNC Opportunity Fund, Ltd. and
                  Robinson Silverman Pearce Aronsohn & Berman LLP (11)
         10.63    Warrant dated March 24, 1998 granted by the Registrant to JNC Opportunity Fund Ltd. (11)
         10.64    Warrant dated March 24, 1998 granted by the Registrant to Wharton Capital Partners, Ltd. (11)
         10.65    Amended and Restated Loan and Security Agreement dated as of April 14, 1999 (11)
         10.66    Preferred Stockholders Conversion Agreement dated as of April 26, 1999 (11)
         10.67    Consulting Agreement dated as of May 1, 1999 between the Registrant and Howard Zuckerman (12)
         10.68+   Employment Agreement dated as of July 6, 1999 between the Registrant and Lee Feist (13)
         10.69*   Sublease dated February 24, 2000 between Factory Mutual Insurance Company and
                  Americomonline.com, Inc.
         10.70*   Marketing and Distribution Agreement dated April 3, 2000 between Net2Phone, Inc. and
                  Americomonline.com, Inc.
         10.71*   Purchase and Assignment of Claim dated April 28, 2000 between Foothill Capital Corporation,
                  Tranche B, Inc. and USCI, Inc.
         21.1     Subsidiaries of Registrant (11)
         23.1*    Consent of Arthur Andersen LLP
         27.1*    Financial Data Schedule - USCI
         27.2*    Financial Data Schedule - Ameritel Communications
</TABLE>

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

*    Filed herewith.

+    Compensatory plan or management agreement.

(1)  Incorporated  by  reference  to an  Exhibit  filed  as  part  of  Trinity's
     Registration Statement on Form S-1 (File No. 33-64489).

(2)  Incorporated  by reference to Exhibit C of Trinity's  Proxy Statement dated
     April 17, 1995.

(3)  Incorporated  by reference to an Exhibit filed as part of the  Registrant's
     Registration Statement on Form S-1 on Form S-4 (File No. 33-88828).

                                       29
<PAGE>

(4)  Incorporated  by  reference  to an Exhibit to the  Registrant's  Transition
     Report on Form 10-K for the  Transition  Period from October 1, 1994 to May
     14, 1995.

(5)  Incorporated  by  reference to an Exhibit  filed as part of  Post-Effective
     Amendment No. 1 on Form S-3 to the Registrant's  Registration  Statement on
     Form S-1 on Form S-4 (File No. 33-88828).

(6)  Incorporated  by reference to an Exhibit filed as part of the  Registrant's
     Registration Statement on Form S-8 (File No. 333-16291).

(7)  Incorporated  by reference to an Exhibit filed as part of the  Registrant's
     Registration Statement on Form S-8 (File No. 333-37329).

(8)  Incorporated  by reference to an Exhibit filed as part of the  Registrant's
     Form 10-K for the period ended December 31, 1996.

(9)  Incorporated  by reference to an Exhibit filed as part of the  Registrant's
     Form 8-K dated and filed on January 13, 1998.

(10) Incorporated  by reference to an Exhibit filed as part of the  Registrant's
     Form 8-K dated and filed on March 12, 1998.

(11) Incorporated  by reference to an Exhibit filed as part of the  Registrant's
     Form 10-K for the year ended December 31, 1999.

(12) Incorporated  by reference to an Exhibit filed as part of the  Registrant's
     Form 10-Q for the quarter ended March 31, 1999.

(13) Incorporated  by reference to an Exhibit filed as part of the  Registrant's
     Form 10-Q for the quarter ended June 30, 1999.


                                       30
<PAGE>

                                   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
behalf by the undersigned thereunto duly authorized.

                                    USCI, INC.

                                    By: /s/ Lee Feist
                                        Lee Feist, Chief Executive Officer

Dated: June 15, 2000

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the date indicated.

     Signature                            Title                       Date

 /s/ Lee Feist                 Chairman of the Board, Chief        June 15, 2000
------------------------       Executive Officer and Director
Lee Feist                      (Principal Executive Officer
                               and Principal Financial and
                               Accounting Officer)



 /s/ Joshua Berkowitz           Director                           June 15, 2000
------------------------
Joshua Berkowitz


------------------------        Director                           June __, 2000
Bryan Finkel


/s/ Henry Reinhold              Director                           June 15, 2000
------------------------
Henry Reinhold


                                       31
<PAGE>

                          INDEX TO FINANCIAL STATEMENTS

                                                                           Page
                                                                          ------

USCI, Inc. and Subsidiaries

         Report of Independent Public Accountants........................... F-1
         Consolidated Balance Sheets as of December 31, 1998 and 1999....... F-2
         Consolidated Statements of Operations for the Years Ended
            December 31, 1997, 1998 and 1999................................ F-3
         Consolidated Statements of Stockholders' Deficit for the Years
            Ended December 31, 1997, 1998 and 1999.......................... F-4
         Consolidated Statements of Cash Flows for the Years Ended
            December 31, 1997, 1998 and 1999................................ F-5
         Notes to Consolidated Financial Statements......................... F-6

Ameritel Communications, Inc.

         Report of Independent Public Accountants...........................F-22
         Balance Sheet as of December 31, 1999..............................F-23
         Statements of Operations for the Year Ended December 31, 1999......F-24
         Statement of Stockholders' Deficit for the Year Ended December 31,
         1999...............................................................F-25
         Statement of Cash Flows for the Years Ended December 31, 1999......F-26
         Notes to Financial Statements......................................F-27


                                       32
<PAGE>


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To USCI, Inc.:


We have audited the  accompanying  consolidated  balance sheets of USCI, INC. (a
Delaware corporation) AND SUBSIDIARIES as of December 31,  1998 and 1999 and the
related consolidated  statements of operations,  stockholders' deficit, and cash
flows for each of the three years in the period ended  December 31,  1999. These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of USCI, Inc. and subsidiaries as
of December 31, 1998 and 1999 and the results of their operations and their cash
flows for each of the  three  years in the  period  ended  December 31,  1999 in
conformity with accounting principles generally accepted in the United States.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a going  concern.  As  discussed  in  Note 1  to the
financial statements, the Company has suffered recurring losses from operations,
has an accumulated  deficit,  has a stockholders'  deficit, has negative working
capital,   has   triggered   default   provisions   under   the   terms  of  its
letters-of-credit,  has uncertainties related to significant litigation, and has
not yet  obtained  sufficient  financing  commitments  to support the current or
anticipated  level of  operations.  In addition,  on October 29, 1999,  Ameritel
Communications, Inc., a wholly-owned subsidiary of the Company filed a voluntary
petition under Chapter 11 of U.S.C.  Title 11 with the United States  Bankruptcy
Court.  These matters  raise  substantial  doubt about the Company's  ability to
continue as a going concern.  Management's  plans in regard to these matters are
also  described  in  Note 1.  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.


ARTHUR ANDERSEN LLP


Atlanta, Georgia
April 14, 2000  (except  with  respect to the second  paragraph of Note 8, as to
which the date is April 28, 2000.)
                                      F-1
<PAGE>
                           USCI, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>

                                     ASSETS

                                                                                            December 31
                                                                                     ------------------------
                                                                                       1998             1999
                                                                                     -------           ------
<S>                                                                             <C>                 <C>

CURRENT ASSETS:
    Cash and cash equivalents, including restricted cash of $454,124 in         $     754,758   $
    Accounts receivable--trade, net of allowance of $8,200,000 in 1998              8,212,484                 0
    Accounts receivable - other                                                        47,533                 0
    Prepaid expenses and other                                                        310,000           691,017
                                                                                   -----------     -------------
              Total current assets                                                  9,324,775           991,017
PROPERTY AND EQUIPMENT, net                                                         1,555,366           155,000
OTHER ASSETS                                                                        1,531,740             6,474
                                                                                   -----------     -------------
                Total assets                                                     $ 12,411,881    $    1,152,491
                                                                                   ===========     =============


                      LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
                                                                                 $  6,310,980   $
   Letter-of-credit advances                                                        2,700,000         2,491,982
   Accounts payable and bank overdraft                                              7,449,315         2,612,152
   Commissions payable                                                                362,416           225,571
   Accrued expenses                                                                 4,069,927           319,520
                                                                                   -----------     -------------
            Total current liabilities                                              20,892,638         5,649,225
   Long-term debt, net of current portion                                          14,354,096                 0
                                                                                   -----------     -------------
            Total liabilities                                                      35,246,734         5,649,225
                                                                                   -----------     -------------
COMMITMENTS AND CONTINGENCIES (Notes 3 and 6)
                                                                                            0        30,592,037
   Convertible Preferred Stock, $.01 par value; 5,000 shares authorized,                   19                18
   Common stock, $.0001 par value; 100,000,000 shares authorized;                       1,201             9,398
   Additional paid-in capital                                                      63,453,345        66,131,173
   Accumulated deficit                                                            (86,261,368)     (101,201,310)
   Treasury stock, at cost, 5,500 shares in 1998 and 1999                             (28,050)          (28,050)
                                                                                   -----------     -------------
            Total stockholders' deficit                                           (22,834,853)      (35,088,771)
                                                                                   -----------     -------------
                Total liabilities and stockholders' deficit                       $12,411,881    $    1,152,491
                                                                                   ===========     =============

</TABLE>

        The accompanying notes are an integral part of these consolidated
                                 balance sheets.

                                      F-2
<PAGE>

                           USCI, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>

                                                                  For the Years Ended December 31
                                                            ---------------------------------------------
                                                             1997               1998               1999
                                                            -------            ------             -------
<S>                                                       <C>               <C>                  <C>

REVENUES:
    Subscriber sales                                   $   6,281,825       $ 41,074,235   $
    Activation commissions                                 2,993,483             14,925                  0
    Other operating revenue                                  536,582                  0                  0
                                                          -----------       ------------        -----------
              Total revenues                               9,811,890         41,089,160                  0
                                                          -----------       ------------        -----------
COST OF SALES:
    Cost of subscriber sales                               3,375,004         24,683,121                  0
    Cost of agency commissions                             1,357,121             11,380                  0
    Cost of other operating revenue                          319,900                  0                  0
                                                          -----------       ------------        -----------
              Total cost of sales                          5,052,025         24,694,501                  0
                                                          -----------       ------------        -----------
GROSS MARGIN                                               4,759,865         16,394,659                  0
SELLING, GENERAL, AND ADMINISTRATIVE, NET                 18,967,189         32,791,669            764,088
STOCK  COMPENSATION EXPENSE                                        0                  0          1,719,464
SUBSCRIBER ACQUISITION AND PROMOTIONAL COSTS              12,385,662         18,920,271                  0
RESTRUCTURING AND OTHER CHARGES (Note 5)                   1,100,000                  0          1,711,923
                                                          -----------       ------------        -----------
OPERATING LOSS                                           (27,692,986)       (35,317,281)        (4,195,475)
                                                          -----------       ------------        -----------
OTHER (EXPENSE) INCOME:
    Gain on sale of subscribers                                    0            876,164                  0
    Interest income                                          353,187             86,601             12,310
    Interest expense and amortization of debt             (1,446,805)        (8,139,857)                 0
    Loss from investment in Ameritel                               0                  0        (10,406,884)
                                                          -----------       ------------        -----------
              Total other expense                         (1,093,618)        (7,177,092)       (10,394,574)
                                                          -----------       ------------        -----------
NET LOSS                                                $(28,786,604)      $(42,494,373)     $ (14,590,049)
                                                          ===========       ============        ===========
BASIC AND DILUTED LOSS PER SHARE                              $(2.81)            $(3.90)            $(0.22)
                                                          ===========       ============        ===========
BASIC AND DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING     10,251,402         11,072,905         67,174,007
                                                          ===========       ============        ===========

</TABLE>


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

                                      F-3
<PAGE>

                           USCI, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>

                                                                                 Additional
                                         Preferred Stock       Common Stock       paid in      Accumulated    Treasury
                                         Shares    Amount   Shares       Amount   Capital        Deficit       Stock       Total
                                         ------    ------   ------       ------  -----------   ------------   ---------   ------
<S>                                      <C>       <C>      <C>          <C>     <C>           <C>            <C>         <C>

BALANCE, December 1, 1996                    0     $  0   10,225,746    $1,023  $33,675,423   $(14,335,976)  $(28,050)  $19,312,420
   Exercise of stock options                 0        0       41,563         4       39,202              0          0        39,206
   Warrants issued in connection
   with  letter-of-credit                    0        0            0              1,243,000              0          0     1,243,000
   Warrants issued in connection with
   debt financings                           0        0            0         0    1,879,000              0          0     1,879,000
   Net loss                                  0        0            0         0            0    (28,786,604)         0   (28,786,604)
                                        -------   ------ ------------   ------- ------------  -------------- --------- -------------
BALANCE, December 31, 1997                   0        0   10,267,309     1,027   36,836,625    (43,122,580)   (28,050)   (6,312,978)
   Issuance of Convertible Preferred
   Stock                                 1,500       15            0         0   13,384,497              0          0    13,384,512
   Sale of common stock                      0        0      423,913        43    2,258,354              0          0     2,258,397
   Exercise of stock options                 0        0        3,043         0        5,221              0          0         5,221
   Exercise of warrants                      0        0          987         0        3,751              0          0         3,751
   Warrants issued in connection with
   debt financings                           0        0            0         0    4,647,000              0          0     4,647,000
   Dividends on Convertible Preferred
   Stock                                     0        0            0         0      644,415       (644,415)         0             0
   Common stock issued in lieu of
   interest                                  0        0       34,000         3      135,317              0          0       135,320
   Conversion of preferred stock to
   common  stock                           (90)      (1)     814,939        82       (4,350)             0          0        (4,269)
   Conversion of notes payable to
   common  stock                             0        0      462,637        46    1,542,520              0          0     1,542,566
   Conversion of notes payable to
   preferred stock                         500        5            0         0    3,999,995              0          0     4,000,000
   Net loss                                  0        0            0         0            0    (42,494,373)         0   (42,494,373)
                                        -------   ------ ------------   ------- ------------  -------------- --------- -------------
BALANCE, December 31, 1998               1,910       19   12,006,828     1,201   63,453,345    (86,261,368)   (28,050)  (22,834,853)
   Issuance of common stock (Note 4)         0        0    6,170,045       617    2,167,901              0          0     2,168,518
   Dividends on Convertible Preferred
   Stock                                     0        0            0         0      349,893       (349,893)         0             0
   Exercise of stock options                 0        0      798,156        80      167,533              0          0       167,613
   Conversion of preferred stock to
   common stock                           (175)      (1)  75,000,000     7,500       (7,499)             0          0             0
   Net loss                                  0        0            0         0            0    (14,590,049)         0   (14,590,049)
                                        -------   ------ ------------   ------- ------------  -------------- --------- -------------
BALANCE, December 31, 1999               1,735    $  18   93,975,029   $ 9,398  $66,131,173 $(101,201,310) $  (28,050)$ (35,088,771)
                                        =======   ====== ============   ======= ============  ============== ========= =============

</TABLE>


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

                                      F-4
<PAGE>

                           USCI, INC. AND SUBSIDIARIES


                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>

                                                                             For the Years Ended December 31
                                                                           ------------------------------------
                                                                            1997           1998          1999
                                                                           ------         ------        -------
<S>                                                                     <C>              <C>           <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                             $(28,786,604) $(42,494,373)  $(14,590,049)
   Adjustments to reconcile net loss to net cash used in operating
      Depreciation and amortization                                        2,404,065     2,664,476        732,685
      Amortization of discount on notes payable                            1,184,000     5,342,000              0
      Amortization of deferred financing costs                               207,000     1,124,509              0
      Provision for losses on accounts receivable                            950,351    10,539,141         12,166
      Gain from sale of subscribers                                                0      (876,164)             0
      Stock compensation expense                                                   0             0      1,719,464
      Loss from investment in subsidiary                                           0             0     10,406,884
      Restructuring and other special charges                              1,100,000             0      1,711,923
      Changes in operating assets and liabilities:
         Accounts receivable:
            Trade                                                         (3,777,701)  (17,131,129)             0
            Other                                                            441,028     1,091,551         35,366
         Prepaid expenses and other                                          422,219       361,005        230,650
         Commissions payable                                               4,871,864      (874,561)       (17,607)
         Accounts payable and accrued expenses                             4,302,018    10,923,310        745,328
         Promotional deposits                                                295,581      (642,668)    (1,053,387)
                                                                        -------------  ------------   -------------
            Total adjustments                                             12,400,425    13,521,470     14,523,472
                                                                        -------------  ------------   -------------
            Net cash used by operating activities                        (16,386,179)  (28,972,903)       (66,577)
                                                                        -------------  ------------   -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures, including capitalized and purchased              (2,128,741)     (601,427)             0
                                                                        -------------  ------------   -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from notes payable, long-term debt and Credit Facility         4,000,000    26,631,199              0
   Payments received from Ameritel                                                 0             0        366,577
   Repayment of notes payable and Credit Facility                                  0   (12,642,631)             0
   Exercise of stock options                                                  39,206         8,972              0
   Issuance of Convertible Preferred Stock                                         0    15,000,000              0
   Sale of common stock                                                            0     2,489,999              0
   Costs associated with debt offerings                                            0      (416,891)             0
   Costs associated with equity offerings                                          0    (1,847,090)             0
                                                                         -------------  ------------   -------------
            Net cash provided by (used in) financing activities            4,039,206    29,223,558        366,577
                                                                         -------------  ------------   -------------
NET INCREASE (DECREASE) IN CASH                                          (14,475,714)     (350,772)       300,000
CASH AND CASH EQUIVALENTS, beginning of year                              15,581,244     1,105,530              0
                                                                         -------------  ------------   -------------
CASH AND CASH EQUIVALENTS, end of year                                  $  1,105,530  $    754,758     $        0
                                                                         =============  ============   =============
SUPPLEMENTAL INFORMATION:
   Interest paid                                                        $          0  $    796,067     $        0
                                                                         =============  ============   =============
   Noncash financing activities:
      Warrants issued in connection with letter-of-credit               $   1,243,000 $          0      $        0
                                                                         =============  ============   =============
      Warrants issued in connection with debt financings                $   1,879,000 $  4,467,000      $        0
                                                                         =============  ============   =============
      Conversion of notes payable                                       $           0 $  5,542,566      $        0
                                                                         =============  ============   =============
</TABLE>


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

                                      F-5
<PAGE>
                           USCI, INC. AND SUBSIDIARIES

                            DECEMBER 31,1998 AND 1999

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.   OPERATIONS

USCI,  Inc.  (the  "Company")  is a reseller of cellular and paging  services to
subscribers  via reselling  agreements  with carriers  through its  wholly-owned
subsidiary, Ameritel Communications,  Inc. ("Ameritel"). Prior to November 1996,
before  becoming a reseller,  the Company was a nationwide  agent for  companies
providing   cellular  and  paging   communication   services   through  national
distribution channels.

On October 29, 1999,  Ameritel  filed a voluntary  petition  for  reorganization
under Chapter 11 of U.S.C.  Title 11 with the United States Bankruptcy Court for
the Southern District of New York (Case No. 99-11081) (the "Bankruptcy  Court").
Under Chapter 11,  certain  claims  against  Ameritel in existence  prior to the
filing of the petitions for relief under the federal  bankruptcy laws are stayed
while Ameritel continues business operations as a debtor-in-possession.

The Company has never  operated at a profit since its  inception in 1991 and had
losses  of  $28,786,604,  $42,494,373,  and  $14,590,049  for  the  years  ended
December 31,  1997, 1998, and 1999, respectively.  Additionally, at December 31,
1999, the Company had an accumulated  deficit of  $101,201,310,  a stockholders'
deficit of  $35,088,711,  and a working  capital  deficiency of $4,658,208.  The
Company will require  substantial  financing for working capital for a period of
time until profitability is achieved, if ever.

In the second half of 1999,  the Company  altered its operations in an effort to
achieve future profitability,  including  establishing an e-commerce platform to
market services and products,  downsizing of staff and facilities and other cost
cutting  efforts to reduce  overhead  and  adoption  of its  internet  telephony
initiative.  While the Company  believes  that these  efforts will position them
favorably to grow revenues,  improve  operating  margins and minimize  operating
costs,  there  can be no  assurance  that  the  Company  will be  successful  in
commencing internet telephony marketing services,  growing revenues or operating
profitably.

These factors,  discussed in the note above and the uncertainties  regarding the
ultimate  outcome of pending  litigation and claims discussed in Note 6 and Note
8, raise  substantial  doubt  about the  ability of the Company to continue as a
going concern.  The  accompanying  consolidated  financial  statements have been
prepared  assuming  that the Company  will  continue as a going  concern,  which
contemplates the realization of assets and the liquidation of liabilities in the
normal course of business.  The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

                                      F-6
<PAGE>

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The  accompanying  consolidated  financial  statements  of the  Company  and its
subsidiaries  include  the assets,  liabilities,  revenues  and  expenses of all
majority-owned  subsidiaries over which the Company exercises  control,  and for
which control is other than temporary.  Intercompany  transactions  and balances
are eliminated in consolidation.  The Company's subsidiary,  Ameritel, filed for
reorganization  under Chapter 11 in October 1999, and effectively the Company no
longer exercises  control over this subsidiary.  Investments in  nonconsolidated
affiliates  (wholly-owned  subsidiaries over which the Company does not exercise
control) are accounted for on the equity basis.  Accordingly,  due to Ameritel's
filing for  reorganization  under Chapter 11 in October 1999,  the Company began
accounting  for its investment in Ameritel under the equity method of accounting
retroactively, as of January 1, 1999.

Revenue Recognition

The Company's  revenues are derived solely from its  wholly-owned  subsidiaries.
For the two years ended December 31, 1997 and 1998,  Ameritel accounted for 100%
of the Company's  revenues.  There were no revenues reflected for the year ended
December 31, 1999 due to the  deconsolidation  of Ameritel discussed above as of
January 1, 1999.

The Company  recognizes an activation  commission  pursuant to the activation of
cellular and paging devices with a contracted carrier at a contracted amount per
activation.   The  Company   simultaneously   recognizes  a  related  commission
pass-through expense at a contracted amount per activation. The Company reserves
a portion of these commission revenues for estimated  chargebacks to the Company
arising from  deactivations  of cellular and paging devices by customers  during
specified contract periods.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original  maturities of
three  months  or  less to be  cash  equivalents.  Included  in  cash  and  cash
equivalents   at   December 31,   1998  and  1999  was  $454,124  and  $300,000,
respectively,  of certificates of deposit restricted to cover  letters-of-credit
required as security by cellular  carriers and for an employment  agreement with
an officer of the Company.

Property and Equipment

Property  and  equipment   are  stated  at  cost  except  as  discussed   below.
Depreciation  is provided  using the  straight-line  method  over the  estimated
useful  lives of the  assets.  The  estimated  useful  lives are five  years for
equipment and furniture and fixtures and the shorter of the useful life or lease
term for leasehold improvements. Property and equipment, at cost, consist of the
following at December 31, 1998 and 1999:

                                      F-7
<PAGE>
                                                          1998           1999
                                                         ------         -------
          Equipment                                    $3,461,243    $
          Furniture and fixtures                          213,573              0
          Leasehold improvements                          674,845              0
                                                       -----------    ----------
                                                        4,349,661        155,000
          Less accumulated depreciation                (2,794,295)             0
                                                       -----------    ----------
                         Property and equipment, net   $1,555,366    $   155,000
                                                       ===========    ==========

The  Company has pledged all of its fixed  assets as of  December 31,  1999,  in
connection with the Ameritel's credit facility agreement.

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be disposed of," the Company  evaluates  whether events and  circumstances  have
occurred that indicate possible  impairment (Note 5). As a result of this review
and based upon an independent  third party  valuation,  the Company  recorded an
impairment loss of $801,590 related to certain equipment in 1999. The impairment
loss for these  assets to be held and used was  included  in  restructuring  and
other charges within the statement of operations.

Other Assets

Other assets at December 31, 1998 and 1999 consisted of the following:

                                                                 1998     1999
                                                                ------   ------
     Systems development costs and purchased software, net  $1,284,880      $ 0
     Deferred financing costs                                  214,878        0
     Deposits                                                   31,982    5,374
     Other                                                           0    1,100
                                                             ---------    ------
                                                            $1,531,740   $6,474
                                                             =========    ======

Systems  development  costs include  capitalized  costs of internally  developed
software for internal use relating to the Company's  cellular  activation system
network  projects.  The capitalized  amounts consist of costs incurred after the
design  phases  of  the  software   projects  are  complete  and   technological
feasibility  has been  determined  based on a detailed  system  design.  Systems
development costs and purchased software are amortized on a straight-line  basis
over the  estimated  remaining  economic  life of the  software  of five  years.
Amortization  expense was  $386,522,  $482,503,  and $139,473 in 1997,  1998 and
1999,  respectively.  As of  December 31,  1999,  accumulated  amortization  was
$1,615,320.

During 1999,  the Company  reviewed  certain of its  long-lived  assets (Note 5)
including its capitalized system development costs and purchased software.  As a
result of this review and based upon an independent  third party valuation,  the
Company  recorded an impairment  loss related to systems  development  costs and
purchased  software of $910,333.  This amount is included in  restructuring  and
other charges within the statement of operations.

                                      F-8
<PAGE>

Investment in Ameritel

As discussed  above, due to the Chapter 11 bankruptcy  filing by Ameritel,  USCI
began  accounting  for its  investment  in Ameritel  under the equity  method of
accounting as of January 1, 1999.  Summarized financial  information of Ameritel
as of and for the years ended December 31, 1999 and 1998 were as follows:

December 31,                                    1998               1999
                                               ------             ------
Total assets                             $   9,470,878       $   2,373,951
Total liabilities                           51,512,437          54,822,294
Stockholder's deficit                      (42,041,459)        (52,448,343)

                                      F-9
<PAGE>

For the Year Ended December 31,                     1998               1999
                                                   ------             ------
Revenues                                     $  41,074,235       $  15,360,812
Costs                                           62,253,905          25,767,696
Loss before income taxes                     $ (21,179,670)      $ (10,406,884)


Total liabilities include intercompany payables to USCI, Inc. of $22,222,883 and
$21,856,306  at December  31, 1998 and 1999,  respectively.  The  Investment  in
Ameritel is shown in the accompanying Consolidated Balance Sheets as of December
31, 1999 as a liability  and  consists of the  intercompany  amounts due to USCI
offset by the Stockholder's  deficit of Ameritel.  No adjustments have been made
to this  Investment  in Ameritel to reflect the impact that would  result if any
adjustments of Ameritel's  assets or liabilities are made as part of its Chapter
11 reorganization case. Therefore,  this Investment in Ameritel does not purport
to  represent  the net  liability  of USCI in  connection  with  the  Bankruptcy
proceedings.

Subscriber Acquisition and Promotional Costs

Subscriber  acquisition  costs and  promotional  costs include costs incurred to
acquire  subscribers,  including  commissions,  discounts given to consumers for
reduced airtime and other promotions, and advertising.

Other Income

In November 1998, the Company agreed to sell its paging services subscriber base
of approximately 22,000 subscribers to a paging vendor for $876,164 representing
all of the sums due and  owing  to the  vendor.  In  connection  therewith,  the
Company recognized a gain of $876,164.

Net Loss Per Share

The  Company  calculates  and  presents  net loss per share in  accordance  with
Statement of Financial  Accounting  Standards  ("SFAS")  No. 128,  "Earnings Per
Share."  Basic  earnings per share are based on the weighted  average  number of
shares  outstanding.  For 1996, weighted average shares include shares that were
subject to  rescission  (Note 5).  Diluted  earnings  per share are based on the
weighted  average  number  of  shares  outstanding  and the  dilutive  effect of
outstanding  stock options and warrants  (using the treasury stock method).  For
all periods presented,  outstanding options and warrants have been excluded from
diluted weighted average shares outstanding, as their impact was antidilutive.

Net loss  attributable to common  stockholders for the years ended  December 31,
1998  and  1999,  as  adjusted  by  dividend  requirements,   on  the  Company's
convertible preferred stock was $43,138,788 and $14,939,942, respectively.

Use of Estimates

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

                                      F-10
<PAGE>

Long-Lived Assets

The Company periodically evaluates the carrying values of its long-lived assets,
such as property  and  equipment  and systems  development  costs,  to determine
whether  any  impairments  are other than  temporary.  Management  believes  the
long-lived  assets in the accompanying  balance sheets as adjusted in Note 5 are
appropriately valued after the impairment charges discussed above.

Significant Concentrations

For the years ended December 31,  1998,  approximately 75% of subscriber revenue
was attributable to one merchandiser's  activations with the Company. In October
1998, the Company's  relationship with the merchandiser was terminated (Note 6).
Furthermore,  a substantial portion of the Company's  subscribers are located in
one  metropolitan  area. At December 31,  1998,  receivables from subscribers in
that metropolitan area approximated 72% of total trade receivables. During 1997,
one customer  accounted for 57% of  activation  commission  revenues,  or 17% of
total revenues.

New Accounting Pronouncements

In March 1998, the American  Institute of Certified  Public  Accountants  issued
Statement  of  Position  ("SOP")  98-1,  "Accounting  for the Costs of  Computer
Software  Developed  or Obtained  for Internal  Use." Under  SOP 98-1,  computer
software  costs  incurred  in the  preliminary  project  stage are  expensed  as
incurred. Additionally,  specified upgrades and enhancements may be capitalized;
however,  external  costs  related to  maintenance,  unspecified  upgrades,  and
enhancements  should be  recognized  as expense  over the  contract  period on a
systematic basis.  Internal costs incurred for maintenance should be expensed as
incurred.  SOP 98-1  was adopted  effective  January 1,  1999.  The  adoption of
SOP 98-1 did not have a material effect on the Company.

Reclassifications

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

3.   LONG-TERM DEBT, LETTER-OF-CREDIT ADVANCES, AND NOTES PAYABLE

Amounts  included in long-term  debt consists of the  following at  December 31,
1998 and 1999:

                                                            1998         1999
                                                           ------       ------
          Credit Facility                                 9,788,568           0
          Vendor note payable                            10,876,508           0
                                                         20,665,076           0
          Less current maturities                         6,310,980           0
                                                       $ 14,354,096      $    0
                                      F-11
<PAGE>

Credit Facility

On June 5, 1998, Ameritel, entered into a four-year $20,000,000 revolving credit
and term loan  facility (the "Credit  Facility")  with its secured  lender.  The
Credit  Facility has been  guaranteed by the Company and its  subsidiaries.  The
Credit Facility  provides term loans up to $15,000,000,  which amortize  equally
over a 30-month period, and revolving credit  borrowings.  Availability is based
on a number of factors,  including  eligible  accounts  receivables and eligible
cellular  subscribers.   At  December 31,   1998,  a  total  of  $9,788,568  was
outstanding  under the facility,  of which  $5,393,720  was related to term loan
borrowings  and $4,394,848  related to revolving  credit  borrowings.  Term loan
borrowings  bear interest at the greater of 7% or the bank's base rate plus 2.5%
and  revolving  credit  borrowings  bear interest at a greater of 7% or the base
rate plus 1.5%. The Credit  Facility is secured by  substantially  all assets of
the Company.

On April 14,  1999, the Company  entered into an amended  credit  facility which
reduced  the total  facility to  $17,500,000.  Additionally,  certain  preferred
shareholders and other persons have entered into an agreement with the lender to
make available to the Company up to $7,000,000  under an amendment to the Credit
Facility  (the  "Amended  Credit  Facility")  in a multiple  draw-term  loan for
working capital under certain  conditions.  The Amended Credit Facility requires
the  Company  to meet  certain  budgeted  items,  including  revenues,  accounts
receivable collections, and number of subscribers.

Additionally,  in connection with the closing of the Amended Credit Facility and
the conversion of preferred  stock,  pursuant to the preferred  stock  agreement
(Note 4), the Company issued a consultant 5,000,000 shares of common stock.

Vendor Note Payable

In April 1999, Ameritel,  entered into a note payable agreement with its largest
vendor,  which allows for the payment of $12,376,995  in equal monthly  payments
through  April  2003.  Interest  is  payable  monthly  at  6%.  Pursuant  to the
agreement,  the  Company is required to make  current  payments  for its monthly
airtime usage and to secure a standby letter-of-credit  totaling $1,000,000.  As
of December  31, 1999 the Ameritel had made only one payment to the vendor under
the terms of the agreement.

Letter-of-Credit Advances

On October 30,  1997, the Company and Ameritel  entered into a  letter-of-credit
agreement (the "LOC  Agreement")  with an investment  banking firm,  pursuant to
which the  investment  banking  firm  agreed to  establish  irrevocable  standby
letters-of-credit of up to $3,750,000 for the purpose of enabling the Company to
satisfy its security obligations under certain client and carrier  arrangements.
Under the LOC  Agreement,  the  Company  was  required  to pledge  shares of the
Company's common stock which, at that time, equaled 125% of the principal amount
of each letter-of-credit to be issued.

To provide the shares of common stock required to be pledged as collateral under
the LOC  Agreement,  the Company  entered into an agreement  with certain of the
Company's  officers,  directors,  and other  stockholders (the  "Stockholders"),
under which the Stockholders  agreed to deposit with the Company an aggregate of
545,045  shares  of the  Company's  common  stock.  As  consideration  for  this
agreement, the Company agreed to issue to the Stockholders  nonqualified options
to purchase an aggregate of 54,505  shares of the  Company's  common stock at $6
per share.

                                      F-12
<PAGE>

As   consideration   to  the   investment   banking  firm  for   providing   the
letter-of-credit  financing,  the Company issued a five-year warrant to purchase
up to 600,000 shares of the Company's common stock at a purchase price of $6 per
share.

In October 1998,  two vendors of the Company  requested and received  $2,700,000
under the  letter-of-credit.  The investment bank has made a demand to repay the
amounts paid under the letters-of-credit. The Company has not repaid the amounts
advanced under the letters-of-credit in full and the Company is in default under
the terms of this  agreement.  In connection  with the draw, the investment bank
took control of the Company's  common stock held as collateral.  No interest has
been accrued related to these advances and at December 31, 1998 and 1999 amounts
outstanding  under  these  letter-of-credit   advances  totaled  $2,700,000  and
$2,491,982, respectively.

Notes Payable Issued in Fiscal 1997

On  November 18,  1997, the Company  obtained an unsecured loan in the amount of
$4,000,000 from two individuals, both of whom are also company stockholders. The
loan bears interest at 8.5% per annum and was payable on  December 31,  1997. As
additional consideration for the loan, the Company issued to each of the lenders
a five-year warrant exercisable to purchase up to 400,000 shares of common stock
at an exercise price of $6 per share. On  December 30,  1997, the Company issued
to each of the  lenders an  additional  five-year  warrant to  purchase  200,000
shares  of  common  stock  at $6 per  share  in  consideration  of the  lenders'
extension of the due date of the loans until January 31,  1998. The Company also
agreed that for each share of common  stock  acquired  upon the  exercise of the
warrants  ("Primary  Warrants"),  the Company would issue an additional  warrant
("Secondary  Warrants")  to  purchase  one share of common  stock at an exercise
price equal to (a) the conversion price of the Company's  convertible  preferred
stock then being offered in a pending private placement or (b) $7 if the private
placement was not been completed. The Company further agreed to issue additional
warrants  to  purchase  400,000  shares of common  stock on these same terms and
conditions for each month or portion  thereof in which the  indebtedness  to the
lenders remained unpaid after January 31, 1998.

The values of the warrants  issued in November and December 1997 were determined
to be $1,184,000 and $695,000, respectively, based on the relative fair value of
the warrants to the debt. A  corresponding  amount of the proceeds that has been
allocated to the warrants has been accounted for as a debt discount and is being
amortized over the life of the related debt. At December 31,  1998 and 1999, the
unamortized debt discount amounted to $0.

Notes Payable Issued in Fiscal 1998

On January 31,  1998, pursuant to the terms of the above agreement,  the Company
issued  warrants to purchase an additional  400,000  shares of common stock.  On
February 24,  1998, the 1,600,000  warrants  issued in November  1997,  December
1997,  and January  1998  together  with the  $4,000,000  in notes  payable were
canceled and rescinded.  Concurrently, the Company issued $4,000,000 in restated
notes ("Restated  Notes"),  along with 1,600,000 Primary and Secondary Warrants,
each  with an  exercise  price  of $5 per  share.  The  Restated  Notes  matured
August 1,  1998  ("Maturity")  and bore interest at 8%, payable at Maturity.  In
addition,  the Company  sold  additional  notes  ("New  Notes") in the amount of
$1,500,000. The New Notes also matured August 1, 1998, but bore interest at 10%.
The Restated  Notes and the New Notes are hereafter  referred to as the "Notes."
In the event the Notes were not paid in full by Maturity,  the Notes would begin
accruing  interest at 15% and become  convertible  into shares of the  Company's
common stock at the lesser of $5 per share or 80% of the average  closing  price
during the five days of trading prior to the conversion.

                                      F-13
<PAGE>

In addition to the  1,600,000  Primary and  Secondary  Warrants  issued with the
Restated Notes, the Company has agreed, for each month or portion thereof,  from
March 1,  1998 until all principal and interest due under the Restated Notes are
paid in full, to issue 100,000 Primary  Warrants for each  $1,000,000  principal
amount  outstanding under the Restated Notes. The Company also agreed to include
the shares of common stock  issuable  upon the exercise of the Primary  Warrants
and Secondary  Warrants and upon conversion of the Notes (in the event the Notes
are not paid by  Maturity)  in a  registration  statement  to be  filed  for the
purpose of permitting the resale of such shares.

On June 23,  1998,  the Company  issued  343,356 shares of common stock upon the
conversion of $1,150,000  principal  amount and accrued  interest thereon of 10%
New Notes issued in February  1998. On July 16,  1998,  the  remaining  $350,000
principal  amount and accrued  interest,  thereon,  was  converted  into 119,281
shares of common stock.

On July 28,  1998,  the Company  issued 34,000 shares of common stock as payment
for  $136,000 in accrued  interest on the 8% Restated  Notes  issued in February
1998.  On  July 29,  1998,  the  holders of the  Restated  Notes  exchanged  the
$4,000,000 principal balance of the Restated Notes for 500 shares of convertible
preferred stock (Note 4).

On  January 2,  1998 and  January 5,  1998,  the Company  obtained two unsecured
loans, each in the amount of $250,000.  Each loan bore interest at 10% per annum
and was payable upon the earlier to occur of February 28, 1998 or the completion
of a pending  private  placement of convertible  preferred  stock. In connection
with the  issuance  of the loans,  the  Company  issued to each party  five-year
warrants to purchase 75,000 shares of common stock at $6 per share. In addition,
the Company issued five-year  warrants to purchase 25,000 shares of common stock
to a related  party as a finder's  fee.  Additionally,  the lender of one of the
$250,000 loans is a related party.  On February 2,  1998, the Company issued two
additional  five-year  warrants to purchase  50,000 shares of common stock at $6
per  share  in  consideration  of the  lenders'  extension  of the due  dates to
February 28.  The loans were paid in full with the proceeds of the March 5, 1998
equity  offering  (Note 4).  The  Company  also  issued a  five-year  warrant to
purchase  25,000  shares of common  stock at $6 per share to a related  party as
consideration for assistance in obtaining the extension of the loans.

Pursuant to the above debt  agreements,  the Company issued warrants to purchase
2,700,000  shares of common stock during the year ended  December 31,  1998. The
value of these  warrants was  determined to be $4,647,000  based on the relative
fair value of the warrants to the debt. At December 31,  1998, the debt discount
amounted to $0.

4.   STOCKHOLDERS' DEFICIT

Common Stock

On March 5, 1998, the Company, in two private transactions,  sold 423,913 shares
of common  stock at a  purchase  price of $5.75 per share and  issued  five-year
warrants to purchase 42,391 shares of common stock at an exercise price of $7.19
per share. As consideration  for these  transactions,  the Company agreed to pay
$170,625 and issue a five-year warrant to purchase 42,391 shares of common stock
at $7.19  per share to a  related  party as a  finder's  fee.  A portion  of the
proceeds were used to pay $500,000 in notes payable issued  January 2,  1998 and
January 5, 1998 (Note 3).

                                      F-14
<PAGE>

During 1999, the Company issued  6,170,045  shares of common stock.  The Company
issued  5,000,000 shares to an independent  consultant  pursuant to a consulting
agreement,  300,000 common shares to the new Board of Directors  (100,000 shares
per member), 350,000 shares to a then current employee and an additional 520,045
shares to current  employees and  directors  for the shares  utilized in October
1997 as collateral for a  letter-of-credit  issued by an investment  banker. The
value of these  issuances  totaled  $2,168,518,  of which  $691,017  remained in
prepaid expenses at December 31, 1999.

Preferred Stock

On  March 24,  1998,  the  Company  entered  into an  agreement  for the private
placement of up to $15,000,000 in Series A, B, and C Convertible Preferred Stock
(the "Convertible  Preferred Stock").  The Convertible  Preferred Stock provides
for dividends at a rate of 6% per annum, payable quarterly in cash or registered
common stock. All outstanding  principal and accrued  dividends may be converted
into the  Company's  common  stock at the lower of 120% of the  average  closing
price for five days  immediately  preceding the conversion  notice or 85% of the
average  of the  three  lowest  closing  prices of the  common  stock for the 25
trading days preceding the conversion notice,  and automatically  converts three
years from issuance.  The Convertible Preferred Stock is mandatorily  redeemable
by the Company upon the  occurrence of certain  events.  The Company has filed a
registration statement which was declared effective on June 2, 1998 covering the
shares of common stock  issuable upon  conversion of the  Convertible  Preferred
Stock and exercise of certain outstanding options and warrants.

On March 24,  1998,  the initial  $5,000,000  was approved to the Company  which
issued 500 shares of Series A Convertible Preferred Stock and five-year warrants
to the preferred  stockholder  to purchase up to 149,522 shares of the Company's
common  stock at an  exercise  price of $6.89  per  share.  The  Company  paid a
finder's fee of $500,000 and issued five-year warrants to the finder to purchase
62,500 shares of common stock at an exercise price of $6.89 per share.

On May 7,  1998,  the second  tranche of $5,000,000  was provided to the Company
which issued 500 shares of Series B  Convertible  Preferred  Stock and five-year
warrants to purchase up to 203,749  shares of the  Company's  common stock at an
exercise  price of $5.85 per share.  The Company paid a finder's fee of $500,000
and issued five-year  warrants to the finder to purchase 62,500 shares of common
stock at an exercise price of $5.85 per share.

On July 31,  1998,  the third tranche of $5,000,000  was provided to the Company
which issued 500 shares of Series C  Convertible  Preferred  Stock and five-year
warrants to purchase up to 332,246  shares of the  Company's  common stock at an
exercise  price of $5.31 per share.  The Company paid a finder's fee of $500,000
and issued five-year  warrants to the finder to purchase 62,500 shares of common
stock at an exercise price of $5.85 per share.

During 1998, an aggregate of 65 shares of Series A  Convertible  Preferred Stock
and accrued dividends were converted into 226,748 shares of common stock.

On July 29,  1998,  the Company issued an aggregate of 500 shares of 6% Series D
Convertible  Preferred  Stock in exchange for an aggregate of  $4,000,000  of 8%
Restated Notes. The Series D preferred stock is entitled to a dividend of 6% per
annum,  payable  quarterly in arrears and is convertible,  together with accrued
dividends,  at a conversion price equal to 120% of the average closing bid price
for five  trading  days  immediately  preceding  the closing  date or 85% of the
average of the three lowest  closing prices per share of common stock for the 25
trading days preceding the conversion  notice,  with a floor of not less that $4
per share and  ceiling of not more than $6 per  share.  The  Series D  preferred
stock has a liquidation value of $8,000 per share. The Series D  preferred stock
is redeemable at the Company's option at the then applicable  conversion  price.
Since the  Company  did not  complete  a  private  offering  of equity  and debt
securities by October 1998, the shares of Series D  Convertible  Preferred Stock
are convertible  into shares of common stock at a conversion  price equal to the
lesser  of $5 per  share  or  80% of the  average  closing  sales  price  of the
Company's common stock during the last five trading days prior to conversion.

                                      F-15
<PAGE>

During 1998, an aggregate of 25 shares of Series D  preferred  stock and accrued
dividends were converted into 588,191 shares of common stock.

On  April 26,  1999,  pursuant  to an  agreement  between  the  Company  and its
preferred shareholders ("Preferred  Agreement"),  the holders of the Convertible
Preferred Stock converted $1,500,000 stated value of Convertible Preferred Stock
into  75,000,000  shares of common stock at $.02 per share,  agreed to waive all
future  dividends on the outstanding  Convertible  Preferred Stock, and canceled
all outstanding  options and warrants held by them covering  4,485,707 shares of
common stock.

Stock Options

The Company's 1992 Stock Option Plan (the "1992 Plan"), as amended, provides for
the issuance of up to 750,000  incentive and  nonqualified  stock options to key
employees and nonemployee directors. In March 1997, the Company adopted the 1997
Stock Option Plan (the "1997 Plan"),  which also provides for the issuance of up
to 750,000 incentive and nonqualified stock options.  The 1992 Plan and the 1997
Plan are hereafter referred to as the "Option Plans."

Options are  granted at an  exercise  price which is not less than fair value as
estimated by the Board of Directors and become  exercisable as determined by the
Board of  Directors,  generally  over a period  of four to five  years.  Options
granted  under the Option  Plans  expire  ten years  from the date of grant.  At
December 31,  1999,  options to purchase  3,440,016  shares of common stock were
available for future grant under the Option Plans.

Additionally,  the  Company  grants  options  outside  of the  Option  Plans  to
nonemployee directors,  employees, and consultants. During 1997, 1998, and 1999,
the Company granted 54,505,  0 and 0 options,  respectively,  outside the Option
Plans.

                                      F-16
<PAGE>

Transactions  related to stock options for each of the three years in the period
ended December 31, 1999 are as follows:

                                                           Shares       Weighted
                                                          --------      --------
           Options outstanding at December 31, 1996        982,944       $5.58
               Granted                                     701,005        4.46
               Forfeited                                  (117,200)       6.45
               Exercised                                   (40,579)       1.00
                                                        ------------
           Options outstanding at December 31, 1997      1,526,170        5.13
               Granted                                     377,500        5.55
               Forfeited                                  (240,879)       6.34
               Exercised                                    (3,043)       1.72
                                                        ------------
           Options outstanding at December 31, 1998      1,659,748        4.99
               Granted                                   1,680,156        0.32
               Forfeited                                  (981,764)       4.55
               Exercised                                  (798,156)       0.21
                                                        -------------
           Options outstanding at December 31, 1999      1,559,984        2.68
                                                        =============
           Exercisable at December 31, 1999                904,664        4.26
                                                        =============

The following table summarizes  information  about stock options  outstanding at
December 31, 1999:
<TABLE>

                                        Options Outstanding          Options Exercisable
                         --------------------------------------   -------------------------
                                   Weighted     Weighted                         Weighted
       Range of                    Average      Average                          Average
       Exercise        Number      Exercise     Remaining          Number        Exercise
       Prices        of shares      Price       Contractual Life   of shares     Price
    -------------  -----------    -----------   ----------------  -----------    ----------
   <S>             <C>            <C>           <C>               <C>            <C>

    $0.32-$  3.00     882,000      $  0.32           3.8           260,480        $  0.32
    $3.01-$  4.50     109,000         4.23           2.3           105,200           4.24
    $4.51-$  6.75     528,984         5.84           2.3           488,984           5.95
    $6.76-$  8.50      50,000         8.25           1.3            50,000           8.25
                   -----------                                    ---------
                    1,559,984         2.68                         904,664           4.26
                   ===========                                    =========
</TABLE>

The  Company  accounts  for the stock  purchase  and stock  option  plans  under
Accounting  Principles Board ("APB") Opinion No. 25, which requires compensation
costs to be recognized  only when the option price differs from the market price
at the grant date.  SFAS No. 123  allows a company to follow APB Opinion  No. 25
with additional disclosure that shows what the Company's net income and earnings
per share would have been using the compensation model under SFAS No. 123.

                                      F-17
<PAGE>

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:

                                        1997          1998          1999
                                       ------        ------        ------
          Risk-free interest rate       6.18%         5.9%          6.0%
          Expected dividend yield       0.00          0.00          0.00
          Expected lives                Five years    Five years    Five years
          Expected volatility           50%           50%           50%

The total  values of the options  granted  during the years  ended  December 31,
1997, 1998, and 1999 were computed as approximately $1,346,000,  $1,138,000, and
$282,240,  respectively, which would be amortized over the vesting period of the
options.  If the Company had accounted  for these plans in accordance  with SFAS
No. 123,  the  Company's  reported pro forma net loss and pro forma net loss per
share for the years ended  December 31,  1997, 1998, and 1999 would have been as
follows:

                                        1997           1998           1999
                                       ------         ------         ------
Net loss:
    As reported                     $(28,786,604)  $(42,494,373)  $(14,590,049)
    Pro forma                        (30,128,120)   (43,141,051)   (14,730,789)
Basic and diluted loss per share:
    As reported                           $(2.81)        $(3.90)
    Pro forma                              (2.94)         (3.95)         (0.22)

Because the SFAS No. 123  method of  accounting  has not been applied to options
granted prior to January 1,  1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.

Outstanding Warrants

At  December 31,1999,  the  Company  had issued  1,172,282  warrants to purchase
common stock at a weighted average exercise price of $6.12.

5.   RESTRUCTURING AND OTHER CHARGES

During 1997, the Company  implemented its change in business strategy from being
a cellular  activation  agent to a  nonfacilities-based  cellular  provider.  In
connection with the change in business strategy, the Company reviewed all assets
associated with the agency business for possible  impairment.  Accordingly,  the
Company has recorded  restructuring and other nonrecurring charges of $1,100,000
in the year ended  December 31,  1997.  This  charge  included a  write-down  of
displays to estimated fair value,  shutdown costs associated with the closing of
its Interactive  Display  Technologies,  Inc.  subsidiary,  and a write-off of a
portion of agency receivables which has been deemed uncollectable.

During 1999,  the Company  conducted a review of certain long lived assets owned
by the Company's wholly-owned subsidiary,  U.S.  Communications,  Inc.(the "U.S.
Communications  Assets").  As a result of this review, based upon an independent
third party valuation, the Company recorded a loss on the impairment of the U.S.
Communications Assets in the amount of $1,711,923 (See Note 2).

                                      F-18
<PAGE>

6.   COMMITMENTS AND CONTINGENCIES

Operating Lease Commitments

The Company and subsidiaries  lease certain office space and  telecommunications
and office equipment under noncancellable  operating leases. The operating lease
expenses incurred by the Company and subsidiaries  totaled $317,138 and $433,185
for the  years  ended  December  31,  1997 and  1998,  respectively.  Due to the
deconsolidation  of Ameritel  effective  January 1, 1999,  total operating lease
expenses  for 1999 of  $156,600  were  included  in  "Loss  from  investment  in
Ameritel" in the accompanying Consolidated Statements of Operations.

Employee Benefits

The Company does not provide  postretirement or  postemployment  benefits to its
employees,  nor does the  Company  offer  company-sponsored  savings  or pension
plans.

Contract Termination and Litigation

In October 1997, the Company entered into an agreement with RadioShack to be the
exclusive  provider of analog cellular  communications  services to RadioShack's
approximately  250 retail locations in the greater New York  metropolitan  area.
Ameritel is party to the contract and is guaranteed  by the Company.  During the
next  12  months,  the  Company  experienced  rapid  growth  and  as  a  result,
experienced  negative  operating  cash  flows.  The Company was unable to obtain
sufficient  financing  to  fund  the  rapid  growth  and was  unable  to pay its
principal  vendors on a timely basis.  In October 1998,  the Company's  contract
with RadioShack, a division of Tandy Corporation, was terminated. RadioShack has
demanded payments of claimed amounts due and advised the Company that because of
purported  defaults  in  agreements  between the  Company  and  RadioShack,  the
Cellular  Service  Agreement with  RadioShack was terminated.  As a result,  the
Company is no longer  activating new subscribers  referred by RadioShack.  In an
effort to collect  part of amounts  claimed  as due,  RadioShack  has drawn down
$2,500,000 against a Standby Letter-of-Credit  provided for by the Company under
the terms of the original  Cellular  Service  Agreement dated  October 30,  1997
(Note 3). In December 1998, Tandy initiated legal action against the Company. In
its suit,  Tandy claims to have suffered  damages in the  approximate  amount of
$11,200,000,  plus late payment  penalties,  interest,  and attorney's fees. The
Company also filed a  counterclaim  for the monies it contends Tandy owes to it.
This counterclaim  alleged substantial set-offs to the suit in which the Company
alleged that  RadioShack  breached their  contract with the Company,  unlawfully
withheld customer funds and deposits,  referred  fraudulent  applications to the
Company,  and as a result, the Company suffered  substantial damages. In January
2000 both parties  agreed to a mutual  release of all claims against each other.
However, the settlement has not yet been approved by the Bankruptcy Court.

In addition to the RadioShack  claim,  various vendors have instituted  lawsuits
against the Company  demanding  payment of amounts owed  totaling  approximately
$800,000.  The Company is attempting to negotiate settlements of the outstanding
claims, some of which have been reduced to judgement.

There is no  assurance  that the Company  will be  successful  in  defending  or
settling  these  lawsuits or prevail in the Company's  counterclaim.  Failure to
favorably  resolve  these  matters  will have a material  adverse  effect on the
Company  and could  compel the  Company  to seek  protection  under the  federal
bankruptcy system, either voluntarily or involuntarily.  The ultimate outcome of
these matters cannot be determined at this time.

                                      F-19
<PAGE>

Employee Contracts

During  1999,  the  Company  entered  into an  employee  contract  with a senior
executive  for a term  expiring  2005.  The contract  provides for annual salary
ranging  from  $275,000 to  $355,000.  In  addition,  the employee is to receive
incentives  based on performance,  a guaranteed bonus of $75,000 after the first
year of  employment  and stock  options  dependent  on certain  conditions.  The
contract  also  includes a lump sum cash  severance  payment of  $600,000 in the
event the contract is terminated for certain reasons.  The employee contract has
been secured by a $300,000 letter-of-credit.

7.   INCOME TAXES

The Company has  incurred  net  operating  losses  ("NOLs") for the last several
years.  As of  December 31,  1998 and 1999,  the Company had net operating  loss
carryforwards  of $68,404,859  and  $92,384,725,  respectively,  which expire at
various  times  beginning in 2006.  Due to the  recurring  operating  losses,  a
valuation  allowance  has been  provided  against  the entire  amount of its net
deferred  tax  assets.  A portion of the net  operating  loss  carryforwards  is
subject to  substantial  limitation  due to the  change of control in 1995.  The
effective  income tax rate of 0.0% for the years ended  December 31, 1997,  1998
and 1999 differs from the U.S. statutory rate due to the valuation allowance.

Components of deferred tax assets are as follows at December 31, 1998 and 1999:

                                                     1998               1999
                                                    ------             -------
Deferred tax assets:
    Accrued expenses                           $  1,428,570    $            0
    Net operating loss carryforwards             26,677,895        36,030,043
    Allowance for doubtful accounts               4,597,142         3,529,432
    Capitalized software costs                     (501,103)                0
                                                -----------       ------------
                                                 32,202,504        39,559,475
Valuation allowance                             (32,202,504)      (39,559,475)
                                                -----------       ------------
Deferred tax assets                            $          0     $           0
                                                ===========       ============


8.   SUBSEQUENT EVENTS

On April 7,  2000,  a motion  was filed by the  United  States  Trustee  for the
Southern District of New York. This motion,  which was originally to be heard on
May 11, 2000 but which was  adjourned  until June 13, 2000, in the United Stated
Bankruptcy Court,  claims Ameritel's  inability to reorganize  constitutes cause
for  dismissal  or  conversion  of the Chapter 11 case to a Chapter 7 case.  The
basis  for the  claim  identified  that  Ameritel  did  not  appear  capable  of
generating  enough  funds  to  make  a  distribution  to  unsecured   creditors;
Ameritel's   financial   affairs  were  not  consistent  with  Ameritel's  early
representations  in the case regarding the  possibility of  reorganization;  and
Ameritel's  inability  to meet  administrative  obligations  as they  came  due.
Management  of  Ameritel  refutes  the filed  claims  and plans to defend  their
petition  for  reorganization.  There has been no  decision  rendered to date in
connection with the bankruptcy proceedings.

                                      F-20
<PAGE>

On April 28, 2000, a Release of Guaranty and  Termination of Security  Interests
was reached between Tranche B, Inc. and the secured lender  providing the Credit
Facility to Ameritel.  Tranche B, Inc. is owned and  controlled by  shareholders
that  hold a  controlling  interest  in the  Company.  Under  the  terms  of the
agreement,  the  secured  lender  agreed to sell,  transfer  and assign  without
recourse, all rights, title and interest in and to claims of Ameritel, including
any and all  security  interests  against  Ameritel and  guarantees  against the
Company,  together  with  their  right to  receive  cash,  instruments  or other
property  issued  in  connection  with  the  proceedings  in the  United  States
Bankruptcy  Court  of the  Southern  District  of New  York.  In  addition,  the
transaction  included the release of all guarantees of that  indebtedness by the
Company and its affiliates other than Ameritel. As consideration for the release
and termination, the secured lender received 4,000,000 shares of common stock of
the Company.  On the eighteenth month anniversary of the agreement date, Tranche
B, Inc. shall also transfer to the secured  lender,  such  additional  shares of
common  stock of the  Company to make the  aggregate  fair  market  value of the
shares in the  initial  transfer  equal to  $4,000,000,  based on an agreed upon
weighted average formula.

                                      F-21
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To USCI, Inc.:


We have audited the accompanying balance sheet of Ameritel Communications,  Inc.
(a  debtor-in-possession  and a  wholly-owned  subsidiary of USCI,  Inc.,) as of
December 31,  1999  and the  related  statements  of  operations,  stockholder's
deficit,  and cash flows for the year ended  December 31,  1999. These financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

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

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a going  concern.  As  discussed  in  Note 1  to the
financial statements,  the Company filed a voluntary petition for reorganization
under Chapter 11 of U.S.C.  Title 11 with the United States  Bankruptcy Court on
October 29, 1999. The Chapter 11 filing was a result of the  substantial  losses
sustained by the Company and the Company's  inability to raise capital  required
to  support  its  existing  business.  The  Company  has also  violated  certain
restrictive  covenants  under  certain  letters  of  credit  due to its  reduced
subscriber  base,  reduced  revenue  levels and net loss.  These  matters  raise
substantial  doubt about the Company's  ability to continue as a going  concern.
Although the Company is currently operating as a debtor-in-possession  under the
jurisdiction  of the Bankruptcy  Court,  the  continuation  of the business as a
going  concern  is  contingent  upon,  among  other  things,  the  approval  and
confirmation by the creditors and Bankruptcy Court of the aforementioned plan of
reorganization, the success of future operations, and the ability to recover the
carrying amount of assets and/or the amount and  classification  of liabilities.
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.


ARTHUR ANDERSEN LLP


Atlanta, Georgia
April 14,  2000 (except  with  respect to the second  paragraph of Note 6, as to
which the date is April 28, 2000.)

                                      F-22
<PAGE>

                         AMERITEL COMMMUNICATIONS, INC.
                             (DEBTOR-IN-POSSESSION)
                     (WHOLLY OWNED SUBSIDIARY OF USCI, INC.)

                                  BALANCE SHEET

                                DECEMBER 31, 1999


                                     ASSETS

CURRENT ASSETS:
    Cash and cash equivalents -- $50,500 restricted                    $304,161
    Accounts receivable--trade, net of allowances of  $2,855,535      2,006,003
    Prepaid expenses and other                                           29,989
                                                                     ----------
              Total current assets                                    2,340,153
COMPUTER EQUIPMENT, net of accumulated depreciation of $4,296            15,664
OTHER ASSETS                                                             18,134
                                                                     ----------
              Total assets                                           $2,373,951
                                                                     ----------

                      LIABILITIES AND STOCKHOLDER'S DEFICIT

Liabilities Not Subject to Compromise:
   Current Liabilities:
      Accrued expenses                                                  138,561
      Accounts payable                                                  467,148
                                                                     ----------
            Total current liabilities                                   605,709

Liabilities Subject to Compromise (Note 3):                          54,216,585
                                                                     ----------
            Total liabilities                                        54,822,294
                                                                     ----------
COMMITMENTS AND CONTINGENCIES (Note 4)

STOCKHOLDER'S DEFICIT:
   Common stock, no par value, 2,000 shares authorized and issued           100
   Accumulated deficit                                              (52,448,443)
                                                                     ----------
            Total stockholder's deficit                             (52,448,343)
                                                                     ----------
              Total liabilities and stockholder's deficit            $2,373,951
                                                                     ==========



       The accompanying notes are an integral part of this balance sheet.

                                      F-23
<PAGE>
                         AMERITEL COMMMUNICATIONS, INC.
                             (DEBTOR-IN-POSSESSION)
                     (WHOLLY OWNED SUBSIDIARY OF USCI, INC.)

                             STATEMENT OF OPERATIONS

                      FOR THE YEAR ENDED DECEMBER 31, 1999




REVENUES                                                            $15,360,812
                                                                    -----------
COST OF SALES                                                         7,847,964
                                                                    -----------
GROSS MARGIN                                                          7,512,848
SELLING, GENERAL, AND ADMINISTRATIVE                                 13,765,016
SUBSCRIBER ACQUISITION AND PROMOTIONAL COSTS                          1,617,913
REORGANIZATION ITEM                                                     395,164
                                                                    -----------
OPERATING LOSS                                                       (8,265,245)
                                                                    -----------
OTHER (EXPENSE) INCOME:
    Interest income                                                      10,163
    Interest expense                                                 (2,151,802)
                                                                    -----------
              Total other expense                                    (2,141,639)
                                                                    -----------
NET LOSS                                                           $(10,406,884)
                                                                    ===========



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

                                      F-24
<PAGE>


                         AMERITEL COMMMUNICATIONS, INC.
                             (DEBTOR-IN-POSSESSION)
                     (WHOLLY OWNED SUBSIDIARY OF USCI, INC.)

                       STATEMENT OF STOCKHOLDER'S DEFICIT

                      FOR THE YEAR ENDED DECEMBER 31, 1999


                                    Common Stock      Accumulated
                                  Shares      Amount    Deficit        Total
                                 --------    -------- ------------    -------
BALANCE, December 31, 1998         2,000        100  (42,041,559)   (42,041,459)
   Net loss                                          (10,406,884)   (10,406,884)
                                  -------    ------  ------------- -------------
BALANCE, December 31, 1999         2,000       $100 $(52,448,443)  $(52,448,343)
                                  =======    ======  ============= =============


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

                                      F-25
<PAGE>
                         AMERITEL COMMMUNICATIONS, INC.
                             (DEBTOR-IN-POSSESSION)
                     (WHOLLY OWNED SUBSIDIARY OF USCI, INC.)

                             STATEMENT OF CASH FLOWS

                      FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S>                                                                                <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                                         $(10,406,884)
   Adjustments to reconcile net loss to net cash used in operating activities:
      Depreciation and amortization                                                        2,455
      Provision for losses on accounts receivable                                      6,460,375
      Reorganization item                                                                395,164
      Changes in operating assets and liabilities:
         Accounts receivable -- trade                                                   (251,896)
         Prepaid expenses and other                                                       37,172
         Commissions payable                                                              (2,375)
         Accounts payable and accrued expenses                                       (10,594,685)
         Promotional deposits and other liabilities                                      (80,492)
                                                                                    --------------
            Total adjustments                                                         (4,034,282)
                                                                                    --------------
            Net cash used in operating activities                                    (14,441,166)
                                                                                    --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures, including capitalized and purchased software                    (12,595)
                                                                                    --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds and draws from notes payable, long-term debt and Credit Facility          20,059,719
   Repayment of notes payable and Credit Facility                                     (5,705,733)
   Payments to Parent Company                                                           (366,577)
                                                                                    --------------
            Net cash provided by financing activities                                 13,987,409
                                                                                    --------------
NET DECREASE IN CASH                                                                    (466,352)
CASH AND CASH EQUIVALENTS, beginning of year                                             770,513
                                                                                    --------------
CASH AND CASH EQUIVALENTS, end of year                                              $    304,161
                                                                                    ==============
SUPPLEMENTAL INFORMATION:
   Interest paid                                                                    $  2,151,802
                                                                                    ==============

</TABLE>

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

                                      F-26
<PAGE>

                         AMERITEL COMMMUNICATIONS, INC.
                             (DEBTOR-IN-POSSESSION)
                     (WHOLLY OWNED SUBSIDIARY OF USCI, INC.)

                                DECEMBER 31, 1999

                          NOTES TO FINANCIAL STATEMENTS



1.   CHAPTER 11 REORGANIZATION PROCEEDINGS

Ameritel  Communications,  Inc.(the "Company"),  is a wholly owned subsidiary of
USCI,  Inc.  (the  "Parent  Company").  The  Company is a reseller  of  cellular
services to  subscribers  via  reselling  agreements  with  carriers.  Effective
October 1998, the Company ceased the active acquisition of new subscribers.

On October 29, 1999, the Company filed a voluntary  petition for  reorganization
under Chapter 11 of U.S.C.  Title 11 with the United States Bankruptcy Court for
the Southern District of New York (Case No. 99-11081) (the "Bankruptcy  Court").
Under Chapter 11, certain  claims against the Company in existence  prior to the
filing of the petitions for relief under the federal  bankruptcy laws are stayed
while the Company continues business operations as a Debtor-in-possession. These
claims are  reflected in the December  31, 1999  balance  sheet as  "liabilities
subject to compromise."  Additional claims  (liabilities  subject to compromise)
may arise  subsequent to the filing date  resulting  from rejection of executory
contracts,  including leases, and from the determination by the Bankruptcy Court
for relief from the stay.  Secured claims are secured by liens on  substantially
all of the Company's assets.

The Company's  reorganization  plan, which has not been completed and is subject
to approval by the Bankruptcy Court, focuses the Company's resources on the sale
of its consumer accounts receivable and the related subscriber contracts.  It is
too early to determine  the other  elements of a proposed  plan.  However,  when
other  elements are  determined,  they may result in  additional  reorganization
charges,  as well as impairment of certain  assets  included in these  financial
statements.

Entering a  reorganization,  although a significant  event,  does not ordinarily
affect or change the application of accounting principles followed by a company.
The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern in accordance  with the AICPA Statement
of Position  ("SOP") 90-7,  "Financial  Reporting by Entities in  Reorganization
under the Bankruptcy Code." As such, asset and liability carrying amounts do not
purport to represent  realizable or  settlement  values as  contemplated  by the
Bankruptcy  Code.  Specifically,  the  financial  statements  do not present the
amounts that will  ultimately be paid to settle  liabilities  and  contingencies
which may be allowed in the Chapter 11 reorganization  case or the effect of any
changes which may be made in connection  with the  Company's  capitalization  or
operations resulting from a plan of reorganization.

                                      F-27
<PAGE>

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The  accompanying  financial  statements  are  presented on the accrual basis of
accounting.  All significant  transactions  and balances between the Company and
the Parent Company and its other subsidiaries have been separately  disclosed on
the face of the financial statements.

Revenue Recognition

Revenues from subscriber sales are recorded for charges to customers for monthly
access,  cellular  and  paging  airtime,  roaming,  and long  distance,  as such
services are rendered.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original  maturities of
three  months  or  less to be  cash  equivalents.  Included  in  cash  and  cash
equivalents  at  December 31,  1999  was  $50,500  of  certificates  of  deposit
restricted to cover letters of credit required as security by cellular carriers.

Computer Equipment

Computer  equipment  is  stated  at cost.  Depreciation  is  provided  using the
straight-line  method over the estimated useful lives of the computer equipment,
which is 3 to 5 years.

Subscriber Acquisition and Promotional Costs

Subscriber  acquisition  costs and  promotional  costs include costs incurred to
acquire  subscribers,  including  commissions,  discounts given to consumers for
reduced airtime and other promotions, and advertising.

Reorganization Item

In accordance with SOP 90-7, and the reorganization of the Company under Chapter
11 of the U.S Bankruptcy Code, the Company wrote off certain deferred  financing
costs.  The related  expense of $395,164 has been  included in the  statement of
operations as a reorganization item.

Use of Estimates

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

Significant Concentration of Credit Risk

Receivables from subscribers in one metropolitan  area approximated 72% of total
trade receivables as of December 31, 1999.

                                      F-28
<PAGE>

New Accounting Pronouncements

In February 1999, the  Securities and Exchange  Commission  ("SEC") issued their
Staff  Accounting  Bulletin ("SAB") No. 101,  "Revenue  Recognition in Financial
Statements."  The bulletin  establishes  the accounting and reporting  standards
requiring the Company to recognize  revenues  related to the initial set-up fees
on a deferred  basis over the  estimated  life of the contract  terms and in the
case of certain cancellation clauses and/or return guarantee period is expired.

The  adoption of SAB No.  101,  has not had a material  effect on the  financial
statements, as the Company has ceased in the activation of new subscribers as of
October 1998 and the related initial set-up fee charged.

In June 1999, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 137,  which amended SFAS No. 133,
"Accounting for Derivative  Instruments and Hedging  Activities."  The statement
establishes  accounting and reporting  standards requiring that every derivative
instrument   (including  certain  derivative   instruments   embedded  in  other
contracts)  be  recorded on the  balance  sheet as either an asset or  liability
measured  at  its  fair  value.  The  statement  requires  that  changes  in the
derivative's  fair value be  recognized  currently in earnings  unless  specific
hedge accounting criteria are met.

The adoption of SFAS No. 137,  which  amended SFAS  No. 133,  is not expected to
have a material impact on the Company's financial statements.

3.   LIABILITIES SUBJECT TO COMPROMISE

At December 31, 1999  "liabilities  subject to compromise " was comprised of the
following:

                                Item                         Amount
                           ---------------                 ----------
       Secured liabilities                                 $12,524,772
       Due to parent and affiliates                         21,856,306
       Unsecured priority claims                             1,337,225
       Unsecured nonpriority claims                         18,498,282
                Total Liabilities Subject to Compromise    $54,216,585


Secured Liabilities

Secured   liabilities   consists  of  amounts   outstanding  under  a  four-year
$20,000,000 revolving credit and term loan facility (the "Credit Facility"). The
Company  has filed for  reorganization  under  Chapter 11 of the U.S  Bankruptcy
Court, and as a result the term loan is no longer available to the Company.  The
Company has been limited to borrowing under the revolving credit facility, based
on a cash collateral and extensions  allowed by the U.S.  Bankruptcy  Court. The
Credit Facility  provided term loans up to $15,000,000,  which amortized equally
over a 30-month period, and revolving credit borrowings.  Availability was based
on a number of factors,  including  eligible  account  receivables  and eligible
cellular subscribers. Term loan borrowings bear interest at 10.25% and revolving
credit  borrowings  bear interest at 9.25%.  The Credit  Facility was secured by
substantially all assets of the Company and its Parent. At December 31,  1999, a
total of $12,524,772,  of which  $11,424,107 was related to term loan borrowings
and $1,100,665  related to revolving credit  borrowings,  has been classified as
liabilities subject to compromise.

                                      F-29
<PAGE>

In  connection  with the credit  facility  discussed  above,  certain  preferred
shareholders  of the Parent  Company  and other  persons  have  entered  into an
agreement  with the lender to make  available  to the  Company up to  $7,000,000
under an amendment to the Credit Facility (the "Amended  Credit  Facility") in a
multiple  draw-term  loan for working  capital  under  certain  conditions.  The
Amended Credit  Facility  requires the Company to meet certain  budgeted  items,
including revenues, accounts receivable collections, and number of subscribers.

The Company is in default in the performance of its obligations  under the terms
of the Credit  Facility  by  failing  to pay  amounts  due and  payable  thereby
creating  an  over-advance   and  by  failing  to  comply  with  other  material
obligations and financial covenants.

Unsecured Priority Claims

Unsecured  priority  claims  consists of taxes and  certain  other debts owed to
governmental units. A significant portion of these claims represent amounts owed
to various government authorities for taxes.

Unsecured NonPriority Claims

Unsecured  nonpriority  claims consist of accounts  payable,  a note payable and
other  accrued  expenses  incurred in the normal  course of  business.  The note
payable is a $12,376,995 note payable to the Company's  largest vendor,  entered
into April 1999.  Under the terms of the original  agreement  the Company was to
repay the balance in equal  monthly  payments  through  April 2003.  Interest is
payable  monthly at 6%.  Pursuant to the  agreement,  the Company is required to
make  current  payments  for its monthly  airtime  usage and to secure a standby
letter of credit  totaling  $1,000,000.  As of December 31, 1999 the Company had
made only one payment to the vendor under the terms of the agreement.

4.   COMMITMENTS AND CONTINGENCIES

Operating Lease Commitments

The  Company  leases  certain  office  space and  telecommunications  and office
equipment under  noncancellable  operating leases. At December 31,  1999, future
minimum lease payments under noncancellable operating leases are as follows:

                             2000                            $       45,983
                             Thereafter
                                                             $            0
                                                                 -----------
                                                             $       45,983
                                                                 ===========

The expenses for operating leases were $156,600 for the year ended  December 31,
1999.

                                      F-30
<PAGE>

Employee Benefits

The Company does not provide  postretirement or  postemployment  benefits to its
employees,  nor does the  Company  offer  company-sponsored  savings  or pension
plans.

Contract Termination and Litigation

In October 1997, the Company entered into an agreement with RadioShack to be the
exclusive  provider of analog cellular  communications  services to RadioShack's
approximately  250 retail locations in the greater New York  metropolitan  area.
The Company is party to the  contract  and is  guaranteed  by the Parent and the
Company.  During the next 12 months, the Company experienced rapid growth and as
a result,  experienced  negative operating cash flows. The Company was unable to
obtain  sufficient  financing to fund the rapid growth and was unable to pay its
principal  vendors on a timely basis.  In October 1998,  the Company's  contract
with RadioShack, a division of Tandy Corporation was terminated.  RadioShack has
demanded payments of claimed amounts due and advised the Company that because of
purported  defaults  in  agreements  between the  Company  and  RadioShack,  the
Cellular  Service  Agreement with  RadioShack was terminated.  As a result,  the
Company is no longer  activating new subscribers  referred by RadioShack.  In an
effort to collect  part of amounts  claimed  as due,  RadioShack  has drawn down
$2,500,000 against a Standby Letter of Credit provided for by the Parent and the
Company  under  the  terms of the  original  Cellular  Service  Agreement  dated
October 30,  1997. In December 1998,  Tandy  initiated  legal action against the
Company  and the Parent  Company.  In its suit,  Tandy  claims to have  suffered
damages in the approximate  amount of $11,200,000,  plus late payment penalties,
interest,  and attorney's  fees. The Company and the Parent Company also filed a
counterclaim  for the monies it  contends  Tandy owes to it.  This  counterclaim
alleged  substantial  offsets  to the suit in which  the  Company  alleged  that
RadioShack  breached  their  contract  with  the  Company,  unlawfully  withheld
customer funds and deposits,  referred  fraudulent  applications to the Company,
and as a result, the Company suffered substantial damages. In January 2000, both
parties agreed to a mutual  release of all claims  against each other.  However,
the settlement has not yet been approved by the Bankruptcy Court.

On October 30,  1997, the Parent and the Company entered into a letter-of-credit
agreement (the "LOC  Agreement")  with an investment  banking firm,  pursuant to
which the  investment  banking  firm  agreed to  establish  irrevocable  standby
letters of credit of up to $3,750,000 for the purpose of enabling the Company to
satisfy its security obligations under certain client and carrier  arrangements.
The Company is a co-debtor of the letter of credit,  which is currently  held by
the Parent. Under the LOC Agreement, the Parent was required to pledge shares of
the Parent's  common stock which,  at that time,  equaled 125% of the  principal
amount of each letter of credit to be issued.

To provide the shares of common stock required to be pledged as collateral under
the LOC  Agreement,  the Parent  entered into an  agreement  with certain of the
Company's  officers,  directors,  and other  stockholders (the  "Stockholders"),
under which the  Stockholders  agreed to deposit with the Parent an aggregate of
545,045  shares  of  the  Parent's  common  stock.  As  consideration  for  this
agreement,  the Parent agreed to issue to the Stockholders  nonqualified options
to purchase an aggregate of 54,505 shares of the Parent's common stock at $6 per
share.

As   consideration   to  the   investment   banking  firm  for   providing   the
letter-of-credit financing, the Parent issued a five-year warrant to purchase up
to 600,000  shares of the Parent's  common  stock at a purchase  price of $6 per
share.

                                      F-31
<PAGE>

In October 1998,  two vendors of the Company  requested and received  $2,700,000
under the  letter-of-credit.  The investment bank has made a demand to repay the
amounts  paid under the  letters of credit.  The Parent and the  Company has not
repaid  the  amounts  advanced  under the  letters  of credit and the Parent and
Company are in default under the terms of this agreement. In connection with the
draw,  the  investment  bank took control of the  Parent's  common stock held as
collateral.

There is no  assurance  that the Company  will be  successful  in  defending  or
settling these lawsuits  therefore the ultimate  outcome of these matters cannot
be determined at this time.

The  Company is involved in various  legal  proceedings  that have arisen in the
ordinary course of business.  While it is not possible to predict the outcome of
such  proceedings  with  certainty,  in the  opinion  of the  Company,  all such
proceedings  are either  adequately  covered by insurance  or, if not so covered
should not ultimately result in any liability which would have a material effect
on the financial position, liquidity or results of operations of the Company.

5.   INCOME TAXES

For each of the three years ended December 31, 1999, the Company's  results were
included in the federal and state income tax returns of the Parent. For purposes
of these financial statements, the income tax provision has been determined on a
basis as if the Company were a separate  taxpayer.  Due to the history of losses
incurred by the Company,  the net deferred tax asset  resulting  from  temporary
differences is not considered probable of realization and therefore is offset in
all periods presented by a valuation allowance.

6.   SUBSEQUENT EVENT

On April 7,  2000,  a motion  was filed by the  United  States  Trustee  for the
Southern District of New York. This motion,  which was originally to be heard on
May 11, 2000 but which was  adjourned  until June 13, 2000, in the United Stated
Bankruptcy Court, claims the Company's inability to reorganize constitutes cause
for  dismissal  or  conversion  of the Chapter 11 case to a Chapter 7 case.  The
basis for the claim  identified  that the  Company  did not  appear  capable  of
generating  enough  funds to make a  distribution  to unsecured  creditors;  the
Company's  financial  affairs  were  not  consistent  with the  Company's  early
representations in the case regarding the possibility of reorganization; and the
Company's  inability  to  meet  administrative  obligations  as they  came  due.
Management  of the Company  refutes the filed  claims and plans to defend  their
petition  for  reorganization.  There has been no  decision  rendered to date in
connection with the bankruptcy proceedings.

On April 28, 2000, a Release of Guaranty and  Termination of Security  Interests
was reached between Tranche B, Inc. and the secured lender  providing the Credit
Facility to the Company. Tranche B, Inc. is owned and controlled by shareholders
that  hold a  controlling  interest  in  the  Parent.  Under  the  terms  of the
agreement,  the  secured  lender  agreed to sell,  transfer  and assign  without
recourse,  all  rights,  title and  interest  in and to  claims of the  Company,
including  any and all  security  interests  against the Company and  guarantees
against the Parent,  together with their right to receive cash,  instruments  or
other property  issued in connection  with the  proceedings in the United States
Bankruptcy  Court  of the  Southern  District  of New  York.  In  addition,  the
transaction  included the release of all guarantees of that  indebtedness by the
Parent and its  affiliates  other than the  Company.  As  consideration  for the
release and termination,  the secured lender received 4,000,000 shares of common
stock of the Parent.  On the eighteenth month anniversary of the agreement date,
Tranche B, Inc.  shall also  transfer to the  secured  lender,  such  additional
shares of common stock of the Parent to make the aggregate  fair market value of
the shares in the initial transfer equal to $4,000,000,  based on an agreed upon
weighted average formula.

                                      F-32