UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10QSB

/X/      QUARTERLY  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
         EXCHANGE ACT OF 1934

For the quarterly period ended:                JUNE 30, 1998
                               ---------------------------------------------

/ /      TRANSACTION  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES
         EXCHANGE ACT OF 1934

For the transition period from____________________________ to___________________


Commission File Number: 333-41007

                         EAST/WEST COMMUNICATIONS, INC.
                         ------------------------------
             (exact name of registrant as specified in its charter)

DELAWARE                                               13-3964837
--------                                               ----------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

350 Stuyvesant Avenue, New York, New York                 10580
-----------------------------------------                 -----
(Address of principle executive offices)               (Zip Code)

                                 (914) 921-6300
                                 --------------
              (Registrant's telephone number, including area code)


Check  whether the issuer (1) has filed all reports to be filed by section 13 or
15(d) of the Exchange Act during the past 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./X/ Yes / / No

As of August 1, 1998, there were 1,772,198  shares of the  Registrant's  Class A
Common Stock outstanding and 1,779,301 shares of the Registrant's Class B Common
Stock outstanding.


<PAGE>
                                      INDEX

                         EAST/WEST COMMUNICATIONS, INC.


PART I.     FINANCIAL INFORMATION

Item 1.     Financial Statements

            Balance Sheet
            -  June 30, 1998
            -  December 31, 1997 (Audited)

            Statement of Operations
            -  Six months ending June 30, 1998 and 1997
            -  July 26, 1996 (inception) to June 30, 1998

            Statement of Cash Flows
            -  Six months ending June 30, 1998 and 1997
            -  July 26, 1996 (Inception) to June 30, 1998

Item 2.     Management's Discussion and Analysis
            of Financial Condition and Results of
            Operations

PART II.    OTHER INFORMATION


Item 6.     Exhibits and Reports on Form 8-K 


                                       -2-

<PAGE>
                                     PART I

Item 1.   Financial Statements

                         EAST/WEST COMMUNICATIONS, INC.

                    (A DEVELOPMENT STAGE ENTERPRISE, FORMERLY
                        AER FORCE COMMUNICATIONS B, L.P.)

                                 BALANCE SHEETS
<TABLE>
<CAPTION>

FOR THE PERIOD ENDED:                                                           6/30/98                 12/31/97
                                                                          ---------------------------------------
                                                                              (Unaudited)                   (A)
ASSETS
<S>                                                                       <C>                        <C>        
Current Assets
      Cash and cash equivalents                                           $    201,624               $   254,427
      Deposit with FCC                                                               0                         0
                                                                          ------------               -----------
Total current assets                                                           201,624                   254,427

PCS Licenses                                                                18,957,721                18,957,721
Capitalized costs                                                            1,710,482                 1,240,434
                                                                          ============               ===========
Total assets                                                              $ 20,869,827               $20,452,582
                                                                          ============               ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
    Current liabilities:
      Accrued liabilities                                                 $  1,083,420               $   654,853

Long-term debt:
      Loan from FCC                                                         15,166,177                15,166,177
Deferred income taxes                                                          500,000                   500,000

Redeemable preferred  stock,  $100 par value;  5% cumulative
      dividends,  15,000 shares authorized, 7,800 issued and
      outstanding (liquidation value - $7,800,000)                           3,704,222                 3,389,487

Shareholder's equity:
Common stock, Class A, $.0001 par value, 3,600,000 shares
      authorized, 1,772,198 shares issued and outstanding                          177                       177
Common stock, Class B, $.0001 par value, 16,000,000 shares
      authorized, 1,779,301 shares issued and outstanding                          178                       178
Additional paid-in capital                                                   4,949,645                 4,949,645
Shareholder's deficit accumulated during development stage                  (4,533,992)               (4,207,935)

Total shareholder's equity accumulated during the
      development stage                                                        416,008                   742,065
                                                                          ============               ===========
Total liabilities and shareholder's equity                                $ 20,869,827               $20,452,582
                                                                          ============               ============
</TABLE>

(A) The Balance  Sheet at December  31, 1997 has been  derived  from the Audited
Financial  Statements at that date, but does not include all of the  information
and footnotes required by generally accepted accounting  principles for complete
financial statements.

See Accountants' Compilation Report and accompanying notes.

                                       2
<PAGE>
                         EAST/WEST COMMUNICATIONS, INC.

                    (A DEVELOPMENT STAGE ENTERPRISE, FORMERLY
                        AER FORCE COMMUNICATIONS B, L.P.)

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                        JANUARY 1                      JANUARY 1                      JULY 26, 1996
                                                       TO JUNE 30,                    TO JUNE 30,                    (INCEPTION) TO
                                                           1998                          1997                         JUNE 30, 1998
                                                      ------------------------------------------------------------------------------
                                                       (Unaudited)

<S>                                                         <C>                          <C>                            <C>        
Investment income                                              5,734                              0                          6,478
Interest expense including commitment fees                         0                     (1,312,158)                    (3,566,062)
Deferred income tax expense                                        0                              0                       (500,000)
Other expenses                                               (17,056)                       (27,430)                      (105,407)
                                                      -----------------------------------------------------------------------------
          Net loss                                           (11,322)                    (1,339,588)                    (4,164,991)

Dividend requirement on preferred stock                     (314,735)                             0                       (369,001)
                                                      -----------------------------------------------------------------------------
Loss applicable to common shares                            (326,057)                    (1,339,588)                    (4,533,992)
                                                      =============================================================================

Basic and diluted loss per share:
          Net loss                                            (0.092)
                                                      ===============

Number of shares used in computation                       3,551,499
                                                      ===============

Net loss allocated to general partner (1%)                                                  (13,396)
                                                                                       =============

Net loss allocated to limited partner (99%)                                              (1,326,192)
                                                                                       =============
</TABLE>



See Accountants' Compilation Report and accompanying notes.

                                       3

<PAGE>
                         EAST/WEST COMMUNICATIONS, INC.

                    (A DEVELOPMENT STAGE ENTERPRISE, FORMERLY
                        AER FORCE COMMUNICATIONS B, L.P.)

                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                                       JULY 26, 1996
                                                                     JANUARY 1        JANUARY 1        (INCEPTION) TO
                                                                     TO JUNE 30,      TO JUNE 30,          JUNE 30,
                                                                        1998            1997                 1998
                                                                   ---------------------------------------------------
                                                                    (Unaudited)
Cash Flows from Operating Activities:
<S>                                                                <C>              <C>                 <C>           
      Net Loss                                                     $   (11,322)     $   (1,339,588)     $  (4,164,991)
      Adjustments to reconcile net income to net
            cash used by operating activities:
            Deferred income taxes                                                                             500,000
            Changes  in  operating  assets and liabilities:
                 Increase in accrued expenses                          (41,481)             27,430             19,438
                 Increase in accrued interest                                            1,312,158          3,566,064
                                                                   --------------------------------------------------
Net Cash Provided (Used) by Operating Activities                       (52,803)                  0            (79,489)

Cash Flows from Investing Activities:
      Deposits with FCC                                                                 10,104,228         (1,895,772)
      Purchase of PCS licenses                                                          (1,012,272)        (1,895,772)
      Other                                                                                                   (11,617)
                                                                   --------------------------------------------------
Net Cash Provided (Used) by Investing Activities                             0           9,091,956         (3,803,161)

Cash Flows from Financing Activities:
      Proceeds from the issuance of loans from the                           0
            Limited Partner                                                              1,012,272         13,738,502
      Repayment of loans from the Limited Partner                                      (10,104,228)       (10,104,228)
      Capital contributions                                                  0                   0            450,000
                                                                   --------------------------------------------------
Net Cash Provided (Used) by Financing Activities                             0          (9,091,956)         4,084,274

Increase (Decrease) in Cash                                            (52,803)                  0            201,624

Cash, beginning of period                                              254,427                   0                  0
                                                                   --------------------------------------------------

Cash, end of period                                                $   201,624      $            0      $     201,624
                                                                   ===================================================
</TABLE>


See Accountants' Compilation Report and accompanying notes.

                                       4
<PAGE>
                         EAST/WEST COMMUNICATIONS, INC.

                    (A DEVELOPMENT STAGE ENTERPRISE, FORMERLY
                        AER FORCE COMMUNICATIONS B, L.P.)

                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 1998


NOTE 1   ACCOUNTING POLICIES:

         DESCRIPTION OF BUSINESS:
         East/West  Communications,  Inc. ("the  Company") was  incorporated  on
         August 13, 1997, to succeed to the rights and  obligations of Aer Force
         Communications B, L.P. ("the Partnership").  The Partnership was formed
         in July  1996,  to bid for  personal  communications  services  ("PCS")
         licenses in the Federal  Communications  Commission's  ("FCC")  F-Block
         auction.  PCS is a second generation digital wireless service utilizing
         voice,  video or data  devices  that  allow  people to  communicate  at
         anytime and  virtually  anywhere.  Over the past three  years,  the FCC
         auctioned  off PCS  licenses,  a total of 120 MHZ of spectrum,  falling
         within six separate  frequency  blocks  labeled A through F.  Frequency
         blocks C and F were designated by the FCC as "entrepreneurial  blocks."
         Certain  qualifying  small  businesses  including the Partnership  were
         afforded  bidding  credits  in  the  auctions  as  well  as  government
         financing of the licenses  acquired.  The Partnership won five licenses
         in 1997 to  provide  personal  communications  services  over  10Mhz of
         spectrum to a population  of  approximately  21 million,  including Los
         Angeles and  Washington,  D.C. Aer Force  Communications,  Inc. was the
         General Partner of the Partnership with a 50.1% equity interest.  Lynch
         FCS  Corporation F ("Lynch PCS F"), a wholly-owned  subsidiary of Lynch
         Corporation ("Lynch"), a publicly held company, was the Limited Partner
         of the Partnership with a 49.9% equity interest.

         On  December  4,  1997,  the  Company   succeeded  to  the  assets  and
         liabilities of the  Partnership  under a plan where the General Partner
         received  50.1% of the Common Stock of the Company (in the form of 100%
         of the Company's  Class B Common Stock) and Lynch PCS F received  49.9%
         of the  Common  Stock  of the  Company  (in  the  form  of  100% of the
         Company's  Class A Common  Stock).  Just prior to the  succession,  the
         Partners made cash  contributions  totaling  $250,000 (in proportion to
         their respective  equity  interests) to the Partnership and the Limited
         Partner  contributed  $4.5  million  of  its  outstanding  loan  to the
         Partnership's capital.


                                       5
<PAGE>
                         EAST/WEST COMMUNICATIONS, INC.

                    (A DEVELOPMENT STAGE ENTERPRISE, FORMERLY
                        AER FORCE COMMUNICATIONS B, L.P.)

                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 1998

NOTE 1   DESCRIPTION OF BUSINESS (CON'T):
         Immediately  thereafter,  Lynch PCS F  dividended  39.9% of the  Common
         Stock of the Company to Lynch which, in turn,  dividended this interest
         to its shareholders. In addition, Lynch PCS F transferred the remaining
         10% of Common Stock of the Company held by it to Gabelli  Funds,  Inc.,
         an affiliate of the Chairman  and CEO of Lynch,  in  satisfaction  of a
         previously  incurred  obligation.  Also  at  that  time,  Lynch  PCS  F
         converted the remaining principal amount of its loan to the Partnership
         of $3,335,221  (after the capital  contribution  of $4,500,000)  into a
         redeemable preferred stock of the Company (see Note 5). Under the terms
         of this  conversion  the Limited  Partner's  prior  obligation  to make
         further loans to the Partnership was terminated.

         BASIS OF PRESENTATION:
         The  financial  statements  are prepared in conformity  with  generally
         accepted  accounting  principles  applicable  to  a  development  stage
         enterprise.

         The  Company's  financial  statements  have  been  prepared  on a going
         concern  basis which  contemplates  the  realization  of assets and the
         satisfaction of liabilities in the normal course of business and do not
         include any  adjustments to reflect the possible  future effects on the
         recoverability   and  classification  of  assets  and  the  amount  and
         classification  of  liabilities  that  may  result  from  the  possible
         inability of the Company to continue as a going concern.

         The Company believes that its PCS licenses have substantial  potential.
         However,  the Company has not yet adopted a business plan or determined
         how to finance its operations because of uncertainties relating to PCS.
         Therefore,  the Company has not yet  determined  whether to develop its
         PCS licenses on its own, to joint  venture its licenses  with other PCS
         or wireless telephone licensees or operators, or to sell some or all of
         its licenses. The Company expects to continually evaluate these factors
         and adopt a business  plan once the  financing,  regulatory  and market
         aspects of the PCS are less uncertain.

         The Company has incurred losses since inception and will need to obtain
         capital  in order  to fund its  interest  payment  obligations  and for
         working  capital  and  general  corporate  purposes.  There  can  be no
         assurance  that the  Company can raise  sufficient  capital to fund its
         obligations and finance the construction of its networks.  Accordingly,
         the lack of  funding  creates  substantial  doubt  about the  Company's
         ability to continue as a going concern.


                                       6
<PAGE>
                         EAST/WEST COMMUNICATIONS, INC.

                    (A DEVELOPMENT STAGE ENTERPRISE, FORMERLY
                        AER FORCE COMMUNICATIONS B, L.P.)

                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 1998


NOTE 1   CASH AND CASH EQUIVALENTS:
         Cash and cash  equivalents for which the carrying  amount  approximates
         fair value include highly liquid  investments  with a maturity of three
         months or less at the time of purchase.

         ADMINISTRATIVE SERVICES:
         The Company and the Partnership has never had any paid employees. Lynch
         PCS F provided the Partnership,  at its request,  with certain services
         in connection  with the  Partnership's  bidding for PCS licenses in the
         FCC auction in late 1996  through  early 1997.  Aside from that matter,
         neither the General Partner nor Lynch PCS F provided the Partnership or
         the Company  with a  substantial  amount of services.  Neither  partner
         charged the  Partnership or the Company for the services  provided,  as
         such amounts are not significant.

         USE OF ESTIMATES:
         The  preparation of financial  statements in conformity  with generally
         accepted  accounting  principles  requires management to make estimates
         and  assumptions  that  affect  the  carrying  amounts  of  assets  and
         liabilities and disclosures at the date of the financial statements and
         the reported  amounts of expenses during the reporting  period.  Actual
         results could differ from those estimates.

         CAPITALIZED COSTS:
         Interest  charges  including  commitment  fees  incurred  prior  to the
         granting of the licenses have been expensed.  Subsequent to the license
         grant dates,  and until operations  commence,  all interest charges and
         commitment fees on outstanding loan balances will be capitalized. These
         costs amounting to $1,710,250 will be amortized over the remaining life
         of the  respective  loan when the  Company  commences  operations.  The
         capitalized costs included  $1,367,311 of capitalized  interest at June
         30, 1998.  Total interest  charges  amounted to $470,047,  $221,845 and
         $2,287,324  respectively,  for the six months  ended June 30,  1998 and
         1997 and for the  period  from July 26,  1996  (inception)  to June 30,
         1998.

         The PCS licenses will be amortized over a period,  consistent  with the
         industry  standard,  not to exceed  40 years,  which  will  begin  when
         operations commence.

                                       7
<PAGE>
                         EAST/WEST COMMUNICATIONS, INC.

                    (A DEVELOPMENT STAGE ENTERPRISE, FORMERLY
                        AER FORCE COMMUNICATIONS B, L.P.)

                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 1998


NOTE 1   CAPITALIZED COSTS (CON'T):
         Pursuant to FCC  regulations,  license holders are required to commence
         providing  service to  one-third or the  population  within the license
         area  within  five years from the date of award and  two-thirds  of the
         population within ten years from the date of award.

         LOSS PER SHARE:
         In 1997, the Financial  Accounting Standards Board issued SFAS No. 128,
         "Earnings per Share," which was adopted by the Company in 1997 upon the
         issuance of its common  stock.  Basic loss per share is  calculated  by
         dividing net loss by the weighted average number of Class A and Class B
         common shares outstanding during the period. The Basic and diluted loss
         per share  for the year  ended  December  31,  1997 give  effect to the
         issuance of the common stock of the Company as if the issuance occurred
         on January  1, 1997,  and there is no change in the number of shares at
         June 30, 1998.

         INCOME TAXES:
         Prior to December 4, 1997,  no  provision  for income taxes was made in
         the financial  statements as the partners were required to report their
         respective  share of  income  or loss on their  respective  income  tax
         returns.  Beginning  December 4, 1997, the Company  accounts for income
         taxes  pursuant  to the  provisions  of SFAS No. 109,  "Accounting  for
         Income Taxes." Under SFAS No. 109, deferred taxes result from temporary
         differences in the  recognition of revenues and expenses for income tax
         and financial  reporting  purposes.  At December 31, 1997,  and at June
         30,1998  defined tax  liabilities  represent  the tax effect of taxable
         temporary  differences  (pertaining to capitalized costs) which existed
         at the date the Partnership converted to a C-Corporation.

NOTE 2   RELATED PARTIES:
         Due to Limited Partner represents  amounts due for interest,  including
         commitment  fees,  on the  loan  outstanding  which  was  to be  repaid
         according to the terms of the loan (See Note 4).

NOTE 3   PARTNERSHIP AGREEMENT:
         The  Partnership was formed in July 1996 to bid for PCS licenses in the
         "F-Block" auction. The General Partner originally  contributed $100,200
         to the  Partnership for a 50.1% equity interest and the Limited Partner
         contributed  $99,800 to the  Partnership  for a 49.9% equity  interest.


                                       8
<PAGE>
                         EAST/WEST COMMUNICATIONS, INC.

                    (A DEVELOPMENT STAGE ENTERPRISE, FORMERLY
                        AER FORCE COMMUNICATIONS B, L.P.)

                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 1998


NOTE 3   PARTNERSHIP AGREEMENT (CON'T):
         Under  the  terms of the  Partnership  Agreement  all  deductions  with
         respect to interest  expense and commitment  fees were allocated 99% to
         the Limited Partner and 1% to the General  Partner.  All profits of the
         Partnership  were  allocated  99% to the Limited  Partner and 1% to the
         General Partner until all the aggregate amount of all profits allocated
         to the Limited  Partner and General  Partner equal the deductions  with
         respect to interest  expense and  commitment  fees.  Subsequently,  all
         profits and losses  were to be  allocated  to the  Limited  Partner and
         General Partner in proportion to their respective interests,  49.9% and
         50.1%,   respectively.   On  December  4,  1997,  the  Partnership  was
         terminated.

NOTE 4   LONG TERM DEBT:

         Long term debt as of June 30, 1998 and December 31, 1997 consists of :

         PCC  financing of PCS  licenses  awarded in the  following  markets and
         maturing in 2007:

             Los Angeles, CA                 $    3,579,000
             Washington, D.C.                     7,068,000
             Sarasota, FL                         1,322,400
             Reno, NV                             1,429,800
             Santa Barbara, CA                    1,766,977
                                              -------------
                                                $15,166,177

         In  connection  with  the PCS  "F-Block"  auction,  $12.0  million  was
         deposited  with the FCC of which $11.8  million was borrowed from Lynch
         PCS F under a line of credit  which was due and  payable in five years.
         The  interest  rate on the  outstanding  borrowings  under the line was
         fixed at 15%;  additionally,  a  commitment  fee of 20% per  annum  was
         charged on the total line of credit.  On December 4, 1997,  the balance
         of such loan was $7,835,221,  including accrued interest and commitment
         fees. On such date,  $4.5 million was  contributed to the equity of the
         Partnership and the remaining  balance of $3,335,221 was converted into
         7,800 shares of redeemable  preferred stock (see note 6). At that time,
         the line of credit was terminated.

         All of the FCC financing  bears interest at 6.25% per annum.  Quarterly
         interest  payments of $236,972 were required for the first two years of
         the license

                                       9
<PAGE>
                         EAST/WEST COMMUNICATIONS, INC.

                    (A DEVELOPMENT STAGE ENTERPRISE, FORMERLY
                        AER FORCE COMMUNICATIONS B, L.P.)

                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 1998

NOTE 4   LONG TERM DEBT (CON'T):
         (1997 and 1998) and  quarterly  payments of  principle  and interest of
         $605,879 are  required  over the  remaining  eight years of the license
         term. These loans are secured by the licenses  granted.  In April 1997,
         the FCC  suspended  the interest  payments on the debt through June 30,
         1998. On March 24, 1998, the FCC indicated that such interest  payments
         will be resumed not earlier that 90 days  subsequent to  publication in
         the  Federal  Register of its "Order on  Reconsideration  of the Second
         Report and Order." Such order was published on April 8, 1998, requiring
         the suspended payments (aggregating  approximately $801,000) to be made
         in eight quarterly  installments beginning on July 31, 1998 in addition
         to regular interest payments.  Also on that date, accrued interest from
         March 31, 1998 to July 31, 1998 of $318,000 will be due.

         There was no cash payments for interest for the periods ended March 31,
         1998 and December 31, 1997.

         Aggregate  principle  maturities of long-term debt for each of the next
         five years are as  follows:  1998--$0  million,  1999--$0.743  million,
         2000--$1.558 million, 2001--$1.658 million and 2002--$1.764 million.

 NOTE 5  COMMON STOCK :
         The Company has two classes or Common Stock authorized:  Class A Common
         Stock and Class B Common  Stock.  The  authorized  capital stock of the
         Company  consists  of  3,600,000  shares  of Class A Common  Stock  and
         16,000,000  shares of Class B Common Stock. The holders of Common Stock
         are  entitled  to receive  ratably  such  dividends,  if any, as may be
         declared  from  time to time by the  Board  of  Directors  out of funds
         legally   available   therefor.   In  the  event  of  the  liquidation,
         dissolution  or winding up of the Company,  the holders of Common Stock
         are entitled to share ratably in all assets  remaining after payment of
         liabilities, if any, then outstanding.

         Collectively,  the shares of Class A Common  Stock  represent  not more
         than 49.9% of the Company's voting interest, with each share of Class A
         Common  Stock issued and  outstanding  having one vote per share on all
         matters  except the election of  directors or as otherwise  provided by
         law.  The  holders  of the  Class A  Common  Stock  as a class  will be
         entitled to elect members to the

                                       10
<PAGE>
                         EAST/WEST COMMUNICATIONS, INC.

                    (A DEVELOPMENT STAGE ENTERPRISE, FORMERLY
                        AER FORCE COMMUNICATIONS B, L.P.)

                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 1998


NOTE 5   COMMON STOCK (CON'T):
         Company's Board of Directors who collectively will represent two of the
         five votes of the Company's Board of Directors.

         Collectively,  the shares of Class B Common  Stock  represent  at least
         50.1% of the  Company's  voting  interest,  with each shares of Class B
         Common  Stock  issued and  outstanding  having 5 votes per share on all
         matters  except the election of  directors or as otherwise  provided by
         law.  With  respect to the  election of  directors,  the Class B Common
         Stock, voting together as a class, may elect up to three members of the
         Company's Board of Directors.

 NOTE 6  REDEEMABLE PREFERRED STOCK :
         The Company is authorized to issue 15,000 shares of Preferred Stock and
         at December 31, 1997 has outstanding  7,800 shares of Preferred  Stock,
         par value  $1,000 per share.  The  Preferred  Stock (I) is  entitled to
         preferred  dividends at an annual rate of five (5) shares of additional
         Preferred  Stock  for  each  one  hundred  shares  of  Preferred  Stock
         outstanding,  (ii) has no voting  rights except as provided by law, and
         (iii) is entitled to be redeemed at $1,000 per share (plus  accrued and
         unpaid  dividends)  on the earlier of (i) October 1, 2009,  (ii) upon a
         change of control of the Class A or Class B Common  Stock or (iii) upon
         the sale of one or more PCS licenses for cash or a non-cash  sale under
         certain  circumstances.  The difference  between the book value of such
         shares  (which  approximates  fair value) and the  redemption  price is
         being  amortized  using the  effective  interest  method to November 1,
         2009.  Accrued  dividends  and  accretion  on the  preferred  stock are
         included in the preferred stock accounts in the balance sheet.

 NOTE 7  LEGAL MATTERS :
         The United States  Department of Justice has initiated an investigation
         to determine  whether there has been bid rigging and market  allocation
         for licenses  auctioned by the FCC for PCS. The Company,  together with
         various  other  bidders  in the  PCS  auctions,  has  received  a civil
         investigative  demand  ("CID")  requesting  documents  and  information
         relating to bidding,  and in May 1997,  the Company  complied  with the
         CID.  The  Company is not aware of what  further  action,  if any,  the
         Justice  Department  or the  FCC  may  take  and  cannot  estimate  its
         exposure, if any, at this time.


                                       11
<PAGE>
                         EAST/WEST COMMUNICATIONS, INC.

                    (A DEVELOPMENT STAGE ENTERPRISE, FORMERLY
                        AER FORCE COMMUNICATIONS B, L.P.)

                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 1998


NOTE 8   YEAR 2000 (UNAUDITED):
         The Company  believes its  information  systems are in compliance  with
         year 2000 information technology requirements.

NOTE 9   SUBSEQUENT EVENT:
         Management  has elected to defer  payment of  interest  due on July 31,
         1998 in the amount of $420,282.  The automatic  60-day  non-delinquency
         period  is  extended  to 90 days.  Payments  made  within  this  90-day
         non-deliquency  period will be assessed a 5 percent  late  payment fee.
         The  Corporation  continues to address various means of raising capital
         including,   but  not  limited   to,  a  right   offering  to  existing
         shareholders,  loans  from  institutions  or other  lenders  or sale of
         assets or stocks.


                                       12
<PAGE>
Item 2.  Management's Discussion and Analysis

            The  Company is a  development  stage  company  with no  significant
results of  operations  to date.  The Company  holds five 10 megahertz  personal
communications  services ("PCS") licenses to serve a population of approximately
21 million,  including  two of the top ten markets,  Los Angeles and  Washington
D.C., plus Sarasota,  Florida, Reno, Nevada and Santa Barbara,  California.  The
total cost of these licenses was approximately $19 million,  after a 25% bidding
credit provided by the Federal  Communications  Commission  ("FCC").  80% of the
cost of the licenses (or $15.2  million) was financed over ten years by the U.S.
government (the "Government  Financing"),  with only payments of interest during
the first two years after award of the licenses.

            The  Company   believes  that  its  PCS  licenses  have  substantial
potential.  However,  the  Company  has  not  yet  adopted  a  business  plan or
determined how to finance its operations  because of  uncertainties  relating to
PCS, which makes evaluation difficult,  including without limitation the newness
of PCS, financing,  affiliation and technology issues and the financial problems
of certain C-Block licensees.  Therefore, Company has not yet determined whether
to develop its PCS licenses on its own,  joint  venture its licenses  with other
PCS or wireless  telephone licenses holders or operators or others, or sell some
or all of its  licenses.  The  Company  expects to  continually  evaluate  these
factors and to adopt a plan or plans once the  financing,  regulatory and market
aspects of PCS are less  uncertain.The  Company's  principal expense to date has
been interest (including commitment fees) plus minor administrative expenses.

            Unless the Company sells its PCS business or joint  ventures its PCS
licenses with an entity that has the capacity to provide  substantial funds, the
Company will need to raise substantial capital to fund its installment  payments
to the  U.S.  Government  and the  build  out of its  PCS  licenses.  Under  the
originally agreed to Government  Financing,  the Company has to make payments of
approximately  $948,000  in each of the  first  two  years  after  award  of the
licenses,  and  $2,424,000  in each of years three  through  ten.  The  interest
payments have been  suspended,  however,  until July 31, 1998, at which time the
Company will be required to make suspended  interest payments in eight quarterly
installments,  in addition to regular  interest  payments.  The Company does not
have a reliable  estimate  of the cost to build out its PCS  licenses  but it is
likely to be substantial.

            The  Company  will  have to  raise  funds  shortly  in order to make
interest  payments  on the  Government  Financing  and for  working  capital and
general corporate  purposes.  The report of the Company's  independent  auditors
with respect to the  financial  statements of the Company as of and for the year
ended December 31, 1997,  the period from July 26, 1996  (inception) to December
31,  1996 and the period  from July 26, 1996  (inception)  to December  31, 1997
contains a paragraph as to the Company's ability to continue as a going concern.
Among the factors cited by the auditors as raising  substantial  doubt as to the
Company's  ability to continue as a going  concern is that,  with respect to the
periods covered, the Company has incurred losses since inception and has not yet
adopted a business plan or  determined  how to finance its  operations  and will
need to obtain capital in order to fund its interest payment obligations and for
working capital and general corporate purposes.


<PAGE>
Liquidity and Capital Resources

            The  principal  amount  of  debt  (excluding  accrued  interest)  on
December 31, 1997 was $15,166,177,  compared to shareholders equity of $588,924.
During the period from July 26, 1996  (inception)  to June 30, 1998, the Company
had no revenues or  operating  profits and cannot  predict  when it may have any
revenues or operating profits.

            The debt of the Company to the Limited  Partner  (including  accrued
interest and commitment fees) was $7,835,221 at December 4, 1997. Of that amount
$4,500,000  was  contributed  as equity  to the  partnership  and the  remaining
$3,335,221  was  converted  into  7,800  shares of $1,000  par value  redeemable
preferred  stock of the  Registrant.  The  redeemable  preferred  stock  accrues
payment  in-kind  dividends at 5% per annum and is  redeemable at par value plus
including  accrued  dividends  on  November  1,  2009 or  earlier  upon  certain
circumstances.

            In April 1997, the FCC suspended interest payments on the government
financing through March 31, 1998. On March 24, 1998, the FCC indicated that such
interest will be resumed not earlier than 90 days  subsequent to the publication
in the Federal  Register of the Order on  Reconsideration.  Such publication was
made on April 8, 1998 requiring  cumulative  suspended  interest  payments to be
made in eight  quarterly  installments  of $104,000  each  beginning on July 31,
1998,  also on that date,  the accrued  interest  of $316,000  from the date the
interest  suspension  ended,  March 31, 1998, until July 31, 1998.  Accordingly,
during the remainder of 1998, the Registrant will be required to make additional
scheduled  interest payments  totalling $311,000 plus suspended interest payment
of $104,000.  Total interest payments require for year 1998 amounts to $835,000.
Interest payments for 1999 are projected to be $907,000.

            Management has elected to defer payments of interest due on July 31,
1998 in the amount of $420,282. The automatic 90-day non-delinquency period will
result in a 5 percent late payment  fee.  The  Corporation  continues to address
various means of raising capital including, but not limited to, a right offering
to existing  shareholders,  loan from  institutions  or other lenders or sale of
assets or stocks.

Year 2000 Compliance

The Company  believes its  information  systems are in compliance with year 2000
information technology requirements.

Seasonality

The Company  believes  that its  operations  are not  significantly  effected by
seasonality.

Risk Factors: Forward Looking Statements

            The management  discussion and analysis and the information provided
elsewhere in this Form 10-QSB contain forward looking  statements  regarding the
Company's future plans,  objectives and expected  performance.  Those statements
are based on  assumptions  that the Company  believes  are  reasonable,  but are
subject  to a wide  range of risks and  uncertainties,  and a number of  factors
could  cause the  Company's  actual  results  to differ  materially  from  those
expressed in the forward looking statements referred to above.


<PAGE>
Government Regulation

            The   spectrum   licensing,   construction,   operation,   sale  and
interconnection  arrangements of wireless  communications networks are regulated
to varying degrees by state regulatory agencies,  the FCC, Congress,  the courts
and  other  governmental  bodies.  There can be no  assurance  that any of these
governmental  bodies  having  jurisdiction  over the  Company  will not adopt or
change  regulations  or take  other  actions  that  would  adversely  affect the
Company's business,  financial condition or results of operations.  Although the
FCC has issued rules  regarding the F-Block  Auction and numerous other matters,
not  all  of  them  have  been  subject  to  FCC  or  judicial   interpretation.
Accordingly,  for  certain  matters  (such  as the  structure  of its  Board  of
Directors and management), the Company is relying on public and private informal
interpretation  of the rules from the staff of the FCC.  The FCC is not bound by
such informal interpretation of FCC staff and there can be no assurance that the
FCC or the  courts  will agree with the  staff's  interpretation.  Many of these
rules  also  require  ongoing  compliance  that the  Company  may not be able to
satisfy  despite  diligent  efforts.  A failure to comply  with FCC rules  could
subject the Company to serious penalties and have a material adverse effect upon
the Company's  business,  results of  operations  and  financial  condition.  In
addition, although the Company's PCS licenses are renewable after the expiration
of their 10-year terms,  there can be no assurance  that the Company's  licenses
will be renewed.

            The  Telecommunications  Act  of  1996  (the  "1996  Act")  mandates
significant  changes in existing regulation of the  telecommunications  industry
that are intended by Congress to promote competitive  development of new service
offerings,  to expand public availability of telecommunications  services and to
streamline   regulation  of  the  industry.   Included  in  these  mandates  are
requirements  that local  exchange  carriers  ("LECs")  must:  (i) permit  other
competitive carriers,  which may include PCS licensees, to interconnect to their
networks;  (ii) establish  reciprocal  compensation  agreements with competitive
carriers to terminate traffic on each other's networks and (iii) offer resale of
their telecommunications  services. In addition,  incumbent LECs are required to
offer  interconnection  and access to unbundled  network  elements at cost-based
rates (plus a reasonable profit),  as well as significant resale discounts.  The
implementation  of these mandates by the FCC and state  authorities  potentially
involves numerous changes in established rules and policies that could adversely
affect the Company's business, financial condition and results of operations.

            In March 1997, CAI Wireless Systems, Inc. (and certain subsidiaries)
("CAI") filed petitions to deny various D, E and F-Block PCS licenses, including
the  Company's  license  for  Washington,  D.C.,  because  it  feared  that  PCS
operations might cause  interference with petitioners'  wireless cable services.
In June 1997 the FCC  dismissed  all of those  petitions on the grounds that CAI
failed  to  establish  standing  because  it failed  to  allege  specific  facts
supported  by  affidavit   demonstrating   that   applicants   would  cause  CAI
interference  if their  applications  were granted.  It is possible that CAI, or
others similarly situated, might attempt to raise this issue at a later date.

            The FCC  has  proceedings  in  process  that  could  open  up  other
frequency bands for wireless telecommunications and PCS-like services. There can
be no assurance that these proceedings will not adversely affect the Company and
the Company's ability to offer a full range of PCS services.

Personal Communications Services ("PCS")

            Victoria G. Kane, a director of the Company and the sole shareholder
of the Class B Common Stock,  is the majority  stockholder of Fortunet  Wireless
Communications Corporation,  which is the General Partner and 50.1% equity owner
in Fortunet Communications, L.P. ("Fortunet"). Fortunet is the successor to five
partnerships that won 30 megahertz personal  communications services licenses in
the FCC's C-Block  auction  (restricted  to small  businesses  and certain other
qualifying  bidders),  which  concluded in 1996.  Fortunet won 31 licenses in 17
states covering a population of approximately 7 million people. The licenses had
an aggregate purchase price of $216 million after a 25% bidding credit.

F-Block License Requirements

            When the FCC  allocated  spectrum  to  public  auction  for PCS,  it
designated the F-Block as an  "Entrepreneurs'  Block." FCC rules require F-Block
applicants  and  licensees  (collectively,   "Entrepreneurs")  to  meet  various
qualifications.


<PAGE>
            The FCC has  determined  that  Entrepreneurs  that qualify as a Very
Small Business and win PCS licenses are eligible to receive a loan from the U.S.
Government  for 80% of the dollar  amount of their  winning  bids in the F-Block
Auction (a "F-Block Loan"). The Government  Financing provided to the Company is
F-Block Loans. In order to ensure  continued  compliance with the FCC rules, the
FCC has  announced  its  intention to conduct  random  audits during the initial
10-year PCS  license  terms.  There can be no  assurance  that the Company  will
continue to satisfy any of the F-Block license requirements,  and the failure to
do so would have a material adverse effect on the Company.

            Entrepreneurs  Requirements.  In order to hold a F-Block license, an
entity  must  have:   (i)  less  than  $125  million  in  gross   revenues  (the
"Entrepreneurs Revenues Limit") for the two years preceding the auction and (ii)
less than $500 million in total assets (excluding the value of C-Block licenses)
(the "Entrepreneurs  Asset Limit" and, together with the Entrepreneurs  Revenues
Limit, the "Entrepreneurs Requirements"). To qualify for the F-Block Auction, an
entity  had to have met the  Entrepreneurs  Revenues  Limit  for each of the two
years  prior to the  auction  and the  Entrepreneurs  Asset Limit at the time it
filed its  application  to qualify for the F-Block  Auction on FCC Form 175 (the
"Short Form").  For at least five years after  obtaining an F-Block  license,  a
licensee  must  continue  to meet  the  Entrepreneurs  Requirements,  which  are
modified for such five-year  period to exclude  certain assets and revenues from
being  counted  toward  the  Entrepreneurs  Asset  Limit  and the  Entrepreneurs
Revenues Limit,  respectively.  Additional  amounts are excluded if the licensee
maintains  an   organizational   structure  that  satisfies  the  Control  Group
Requirements  described  below.  In calculating a licensee's  gross revenues for
purposes of the Entrepreneurs Requirements,  the FCC includes the gross revenues
of the licensee's  affiliates,  those persons or entities that hold interests in
the licensee, and the affiliates of such persons or entities.

            By claiming status as an Entrepreneur, the Company qualified for the
F-Block  Auction.  If the FCC were to determine that the Company did not satisfy
the  Entrepreneurs  Requirements  at the  time it  participated  in the  F-Block
Auction  or  that  the  Company   fails  to  meet  the   ongoing   Entrepreneurs
Requirements,  the FCC could revoke the Company's PCS licenses, fine the Company
or take other  enforcement  actions,  including  imposing the Unjust  Enrichment
Penalties  described  below.  Although  the  Company  believes  it has  met  the
Entrepreneurs  Requirements,  there can be no assurance that it will continue to
meet  such  requirements  or  that,  if  it  fails  to  continue  to  meet  such
requirements,  the FCC will not take  action  against the  Company,  which could
include revocation of its PCS licenses.

            Very  Small  Business   Requirements.   An  entity  that  meets  the
Entrepreneurs  Requirements  may also  apply  to  receive  certain  preferential
financing terms if it meets certain  requirements to qualify as a Small Business
or a Very Small  Business  (the  "Small  Business  Requirements"  or "Very Small
Business  Requirements").  The  preferential  financing  terms  for  Very  Small
Businesses,  include a 25% bidding credit (the "Bidding Credit") and the ability
to make quarterly  interest-only  payments on its F-Block Loan for the first two
years of the  license  term.  To meet the Very Small  Business  Requirements,  a
licensee  must  have had  annual  average  gross  revenues  of not more than $15
million for the three calendar years preceding the date it filed its Short Form.
In  calculating  a  licensee's  gross  revenues  for  purposes of the Very Small
Business  Requirements,  the FCC includes the gross  revenues of the  licensee's
affiliates,  those persons or entities that hold interests in the licensee,  and
the affiliates of such persons or entities.

            By claiming status as a Very Small Business,  the Company  qualified
for the 25% Bidding Credit and the most favorable  installment payment terms. If
the FCC were to  determine  that the  Company  does not  qualify as a Very Small
Business, the Company could, at a minimum, be forced to give up any benefits for
which it was not  eligible.  Further,  the FCC could  revoke the  Company's  PCS
licenses, fine the Company or take other enforcement actions, including imposing
the Unjust Enrichment  Penalties.  Although the Company has structured itself to
meet the Very Small  Business  Requirements,  there can be no assurance  that it
will  remain in  compliance  with  these  requirements  or that,  if it fails to
continue to meet such  requirements,  the FCC will not take  action  against the
Company, which could include revocation of its PCS licenses.


<PAGE>
            Control  Group  Requirements.  If an F-Block  licensee  maintains an
organizational  structure  in which at least 25% of its total  equity on a fully
diluted  basis is held by a control  group  (the  "Control  Group")  that  meets
certain  requirements  (the  "Control  Group  Requirements"),  the FCC  excludes
certain  assets and revenues  from such  licensee's  total  revenues and assets,
thereby making it easier for the licensee to meet the Entrepreneurs Requirements
and the Very Small Business Requirements. The Control Group Requirements mandate
that the Control Group,  among other things,  have both actual and legal control
of the licensee. Further, the FCC permits licensees to qualify under the Control
Group Requirements pursuant to an alternative structural option (the "Qualifying
Investor  Option"),  in which:  (i) an  established  group of investors  meeting
certain financial  qualifications (the "Qualifying Investors") that own at least
15% of the  equity  interest  on a fully  diluted  basis and 50.1% of the voting
power in the F-Block licensee and (ii) additional members  ("Additional  Control
Group  Members") that hold at least 10%, on a fully diluted basis, of the equity
interest in the F-Block  licensee.  Additional  Control  Group  Members  must be
either:  (a) the same Qualifying  Investors of the Control Group, (b) members of
the  licensee's  management  or  (c)  non-controlling  institutional  investors,
including  venture  capital  firms.  To take  advantage of the FCC's  Qualifying
Investor Option, a F-Block licensee must have met the Qualifying Investor Option
requirements  at the time it filed its Short Form and must  continue to meet the
Qualifying  Investor Option  requirements  for three years following the License
Grant Date.  Commencing  the fourth year of the license term,  the FCC rules (i)
eliminate the requirement that the Additional Control Group Members meet certain
qualifications and (ii) allow the licensee to reduce the minimum required equity
interest held by the Control Group's Qualifying Investors from 15% to 10%.

            In order to meet  the  Control  Group  Requirements,  the  Company's
Certificate of  Incorporation  provides that the Company's Class B Common Stock,
as a class, must constitute 50.1% of the voting power of the Company.  There can
be no  assurance  that the Company  will remain in  compliance  with the Control
Group Requirements or, if it fails to continue to meet such  requirements,  that
the FCC will not take action against the Company, which could include revocation
of its PCS  licenses.  Although  the  Company has taken these and other steps to
meet the Control Group Requirements,  there can be no assurance that the Company
has or will continue to meet the Control Group Requirements,  and the failure to
meet such requirements would have a material adverse effect on the Company.

            Asset and  Revenue  Calculation.  In  determining  whether an entity
qualifies as an Entrepreneur and/or as a Very Small Business, the FCC counts the
gross  revenues and assets of the  entity's  "financial  affiliates"  toward the
entity's total gross revenues and total assets.  Financial affiliation can arise
from  common  investments,   familial  or  spousal  relationships,   contractual
relationships,  voting trusts, joint venture agreements,  stock ownership, stock
options,   convertible  debentures  and  agreements  to  merge.   Affiliates  of
noncontrolling  investors  with  ownership  interests  that  do not  exceed  the
applicable FCC nonattributable  investor ownership thresholds are not attributed
to  F-Block  licensees  for  purposes  of  determining  whether  such  licensees
financially  qualify  for  the  applicable  F-Block  Auction  preferences.   The
Entrepreneurs  Requirements  and the Very Small  Business  Requirements  provide
that, to qualify as a nonattributable  investor, an entity may not own more than
25% of the  Company's  total equity on a fully  diluted  basis.  There can be no
assurance  that the Company will not exceed  these  passive  investor  limits or
otherwise violate the Entrepreneur  Requirements  and/or the Very Small Business
Requirements.

            In  addition,  if an  entity  makes  bona  fide  loans to a  F-Block
licensee, the assets and revenues of the creditor would not be attributed to the
licensee  unless the creditor is otherwise  deemed an affiliate of the licensee,
or the loan (including the redeemable  Preferred Stock) is treated by the FCC as
an equity  investment and such treatment  would cause the  creditor/investor  to
exceed the applicable  ownership  interest  thresholds (for purposes of both the
financial  affiliation and foreign ownership rules).  Although the FCC permits a
creditor/investor  to use standard  terms to protect its  investment  in F-Block
licensees, such as covenants,  rights of first refusal and super-majority voting
rights on  specified  extraordinary  issues,  the FCC has stated that it will be
guided,  but not bound,  by criteria  used by the  Internal  Revenue  Service to
determine  whether a debt investment is bona fide debt. The FCC's application of
its  financial  affiliation  rules  is  largely  untested  and  there  can be no
assurance  that the FCC or the courts  will not treat  certain of the  company's
lenders or investors as financial affiliates of the Company.


<PAGE>
            Transfer  Restrictions.  In  addition,  the  FCC  prohibits  F-Block
licensees  from  assigning  or  transferring  control  of any of  their  F-Block
licenses for a period of at least five years from the License  Grant Date to any
entity that fails to satisfy the Entrepreneurs  Requirements during such period.
After the fifth year, all transfers and assignments remain subject to the Unjust
Enrichment Penalties.  The effect of this prohibition will likely deter or delay
unsolicited changes in control of the Company.

            The Company (i) believes  that it has  structured  itself to satisfy
the Entrepreneurs  Requirements,  (ii) intends to diligently pursue and maintain
its  qualification as a Very Small Business and (iii) has structured the Class A
and Class B Common  Stock in a manner  intended  to ensure  compliance  with the
applicable FCC Rules. The Company has relied on representations of its investors
to  determine  its  compliance  with  the  FCC's  rules  applicable  to  F-Block
licensees.  There can be no assurance,  however, that the Company's investors or
the Company itself will continue to satisfy these  requirements  during the term
of any PCS license  granted to the  Company or that the Company  will be able to
successfully implement divestiture or other mechanisms included in the Company's
Certificate of  Incorporation  which are designed to ensure  compliance with FCC
rules.  Any  non-compliance  with FCC rules could subject the Company to serious
penalties, including revocation of its PCS licenses.

            FCC rules impose build-out  requirements  that require PCS licensees
to provide  adequate  service to at least  one-third  of the  population  in the
licensed area within five years from the date of grant and two-thirds within ten
years.  The Company has not begun any build out of its licenses.  There are also
substantial  restrictions  on the  transfer  of  control  of C and F  Block  PCS
licenses.

            There  are  many  risks  relating  to PCS  communications  including
without  limitation,  the high cost of PCS  licenses,  the fact that it involves
start-up  businesses,  raising  the  substantial  funds  required to pay for the
licenses and the buildout,  determining the best way to develop the licenses and
which  technology to utilize,  the small size and limited  resources the Company
compared  to other  potential  competitors,  existing  and  changing  regulatory
requirements,  additional auctions of wireless  telecommunications  spectrum and
actually  building  out and  operating  new  businesses  profitably  in a highly
competitive   environment  (including  already  established  cellular  telephone
operators  and five  new PCS  licensees).  There  can be no  assurance  that any
licenses  granted  to the  Company  can be  successfully  sold  or  financed  or
developed.

Item 6.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

         (A)   Documents files as part of the Report

               (3)  Exhibits

                    27     Financial   Data   Schedule,   which   is   submitted
                           electronically   to  the   Securities   and  Exchange
                           Commission  for  information  purposes  only  and not
                           filed.

         (B)   Report on Form 8-K

               None

<PAGE>

                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                EAST/WEST COMMUNICATIONS, INC.



                                By: /s/ Victoria Kane
                                    ---------------------------------
                                   Victoria Kane
                                   Chairman of the Board
                                   (Chief Executive Officer and Chief Financial
                                   Officer)

Dated:  August 14, 1998



                                       -3-