<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K

     _ X _ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT Of 1934
                   For the fiscal year ended December 31, 1998

                                       OR

    _ _ _ 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 1-13732

                       SHARED TECHNOLOGIES CELLULAR, INC.
             (Exact name of registrant as specified in its charter)

                        Delaware                         06-1386411
             (State or other jurisdiction of          (I.R.S. Employer
             incorporation or organization)          Identification No.)

                        100 Great Meadow Road, Suite 104
                         Wethersfield, Connecticut 06109
               (Address of principal executive offices) (Zip Code)

               Registrant's telephone number, including area code:
                                 (860) 258-2500

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01
                                                            par value

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. [X]

The aggregate market value of the registrant's Common Stock held by
nonaffiliates as of March 29, 1999 was approximately $51,060,000 based on the
average of the closing bid and asked prices as reported on such date in the
over-the-counter market.

Indicate the number of shares outstanding of each of the registrant's classes of
Common Stock, as of March 29, 1999

                 7,650,107 shares of Common Stock $.01 par value

The following document is hereby incorporated by reference into Part III of this
Form 10-K: The registrant's Proxy Statement for its Annual Meeting of
Stockholders to be held on May 20, 1999 to be filed with the Securities and
Exchange Commission in definitive form on or before April 30, 1999.
<PAGE>   2
                                     PART I

ITEM 1.

BUSINESS

(a) General Development of Business - Shared Technologies Cellular, Inc. ("STC"
or the "Company"), a Delaware corporation incorporated in 1989, is a national
cellular service provider offering rental, prepaid and activation services in
over 690 of approximately 750 Cellular Geographical Service Areas ("CGSA")
within the United States. The Company rents cellular telephones to business and
leisure travelers and to individuals at sporting events or in government
agencies. As a reseller or agent for cellular and PCS carriers, the Company
offers cellular service to approximately 96% of the U.S. population. STC also
performs nationwide cellular activation services through a variety of retail and
commercial outlets. The Company has expanded the scope of its prepaid (debit)
cellular service to include a national activation, customer service and
collection service operation through major mass merchants.

Through the acquisitions of certain assets from Road and Show Cellular East,
Inc., Road and Show South Ltd. and Road and Show Pennsylvania, Inc.
(collectively "Road and Show"), in December 1993, the Company obtained a
national distribution network, including relationships with national car rental
companies and hotels, which the Company has significantly expanded since that
date. Immediately following the Road and Show acquisitions, the Company had
approximately 1,300 portable cellular telephones available to rent at
approximately 60 distribution outlets. As of December 31, 1998, the Company had
approximately 4,000 cellular telephones available to rent at approximately 300
distribution outlets.

In April 1995, the Company completed its initial public offering. Prior to the
offering, the Company was an approximately 86%-owned subsidiary of Shared
Technologies Fairchild Inc., ("STFI"). The Company sold 950,000 shares of its
common stock, $0.01 par value ("Common Stock") for $5.25 per share, which
generated net proceeds of approximately $3,562,000 after underwriters'
commissions and offering expenses. In conjunction with the Company's initial
public offering, $1,184,000 of the amount due to STFI was contributed to the
Company's capital in excess of par value.

In May 1995, the Company commenced management of, and subsequently acquired the
outstanding capital stock of Cellular Hotline, Inc., ("Hotline"), a cellular
telephone activation service provider. The purchase price was $1,329,000
comprised of $217,000 in cash, the assumption of $712,000 of accounts payable,
the issuance of a promissory note of $150,000 and the balance through the
issuance of 50,000 shares of the Company's Common Stock, valued at $5.00 per
share. At the discretion of the former Hotline stockholders, in September 1995,
STC was required to repurchase all of the Common Stock issued to the former
Hotline stockholders for $5.00 per share. Additionally, at closing, STC issued
options to purchase 50,000 additional shares, exercisable at $7.50 per share for
three years. The options to purchase 50,000 additional shares expired, without
being exercised, in May 1998.

In November 1995, the Company completed its acquisition of substantially all of
the assets of PTC Cellular, Inc. ("PTCC"), one of the largest in-car cellular
telephone providers in the United States. The purchase price was $3,725,000,
comprised of $300,000 in cash, $1,200,000 in assumed accounts payable, a
five-year promissory note in the principal amount of $2,000,000 and the issuance
of 100,000 shares of Common Stock, valued at $2.25 per share.

In December 1995, the Company sold its resale business to SNET Mobility, Inc.
The sale included the Company's customer accounts relating to the resale
business and the corresponding accounts receivable, for approximately $1.1
million in cash.

In December 1995, the Company completed a $3 million private placement of equity
with International Capital Partners, Inc., ("ICP"), a Stamford, Connecticut
based investment firm, two of whose principals are currently directors of the
Company. The $3 million offering proceeds, net of commissions, was used
primarily for the acquisition of certain assets of PTCC and to provide
additional working capital. Under the terms of the offering, STC issued 300,000
<PAGE>   3
shares of its Series A Convertible Preferred Stock, $.01 par value per share
(the "Series A Stock"). Each preferred shareholder was entitled to receive
dividends equal to 10% per annum for the first twelve month period, payable in
additional shares of Series A Stock. In addition, the Company issued to ICP a
five-year warrant to purchase 150,000 shares of the Company's Common Stock at an
exercise price of $2.50. In May 1996, all of the outstanding Series A Stock,
including 11,260 shares received as dividends, were converted into 1,146,450
shares of Common Stock. In August 1996 the Company's' stockholders voted to
cancel the Company's' authority to issue additional shares of the Series A
Stock.

In April 1996, the Company completed its acquisition of substantially all of the
assets of its only franchisee, Summit Assurance Cellular, Inc. and certain other
parties (collectively "Summit") The purchase price was approximately $3,563,000
comprised of $335,000 in cash, the assumption of $669,000 of accounts payable
and $656,000 of notes payable, the issuance of a promissory note for $953,000,
and the issuance of 300,000 shares of Common Stock, valued at $3.125 per share
and three-year warrants each to purchase 100,000 shares of the Company's Common
Stock at prices of $3.00, $4.00 and $5.00 per share, respectively. These
warrants were valued at $13,000. In April 1998, the Company, Summit and Craig
Marlar, who was an officer and director of Summit and was a director of the
Company until his resignation in April 1998, entered into a settlement of
litigation arising out of the acquisition of certain assets of Summit, whereby
the Company received from Summit 100,000 shares of the Company's common stock.
The stock received was in exchange for the assumption by the Company of $150,000
to a vendor on behalf of Summit, a one-year extension of the expiration date of
the warrants issued in connection with the acquisition, the issuance to Summit
of a warrant to purchase 100,000 shares of the Company's common stock at an
exercise price of $5.00 per share, and forgiveness of all amounts due, including
accrued interest, on a note receivable from Summit in the principal amount of
$180,000. The effect of this transaction on the Company's results of operations
was immaterial.

In August 1996, the Company completed a $5 million private placement with ICP
and STFI for 500,000 shares of Series B Preferred Stock, $.01 par value per
share (the "Series B Stock"). The Company received gross proceeds from the
offering of $5 million, including the cancellation of $1,200,000 of preexisting
debt to STFI. A commission of $125,000 was paid to ICP. In August 1997, all of
the outstanding Series B Stock was converted into 1,667,000 shares of the
Company's Common Stock and the shareholders received warrants to purchase an
equal number of Common Stock at an exercise price of $3.00 per share.
Separately, the Company engaged the services of ICP to provide certain financial
advisory services to the Company for a period of one year. In consideration for
such services, the Company issued a five-year Common Stock Warrant to ICP for
the purchase of 240,000 shares of Common Stock at an exercise price of $3.00 per
share and on terms substantially the same as those provided for in the Common
Stock Warrants issued to the purchasers of the Series B Stock.

In December 1996, the Company entered into an agreement (the "Purchase
Agreement") with RHI Holdings, Inc. ("RHI") pursuant to which the Company sold
to RHI 500,000 common stock units ("Units") with each Unit consisting of one
share of Common Stock, and one warrant to purchase an additional share of Common
Stock at $3.00 per share. The Company received proceeds of $1,469,000, net of
certain transactional expenses, from the sale of such Units. The Purchase
Agreement provided for STC to use its best efforts to cause the Board of
Directors of STC to include at least one member designated by RHI so long as RHI
owns capital stock (or the rights to purchase capital stock) comprising 5% or
more of the voting power in STC, and at least two members designated by RHI so
long as RHI owns capital stock (or the rights to purchase capital stock)
comprising 10% or more of the voting power in STC. To date, no RHI-designated
directors have joined the Board of Directors. The Company used the proceeds
received from the sale of the Units for working capital.

In August and September 1997, the Company sold an additional 407,000 Units
through a private placement that included various members of the Company's
management. The sale generated proceeds of $1,220,000.

In April 1998, the Company secured debt financing in the principal amount of
$4,000,000 from four lenders, in connection with which the Company issued
warrants to purchase an aggregate of 400,000 shares of the Company's Common
Stock. Pursuant to credit agreements entered into in April 1998, the Company
borrowed $1,000,000 from Anthony D. Autorino, the Company's Chairman and Chief
Executive Officer; $500,000 from ICP; $2,000,000 from Salomon Brothers Holding
Company Inc. ("Salomon"); and $500,000 from a private investor. The credit
agreements had a maturity date of July 1999 and a floating interest rate of 2.5%
above a rate comparable to the prime rate. The Company used a portion of the
proceeds raised in February 1999 (see below) to repay the $4,000,000 of debt. In
connection with the April 1998 debt financing, the Company issued to Mr.
Autorino, ICP, Salomon and the private 
<PAGE>   4
investor warrants for the purchase of 100,000, 50,000, 200,000 and 50,000 shares
of Common Stock, respectively. The warrants are exercisable at $5.00 per share,
and expire April 15, 2003. The warrants were valued at $100,000. In connection
with the financing, the Company paid a facility fee of $25,000 to ICP
Investments, Inc. with respect to the funding by ICP and the private investor,
and paid a facility fee of $50,000 to Salomon.

In May 1998, the Company issued to nine investors through a nonpublic offering,
5% convertible notes in the aggregate principal amount of $2,400,000 (the
"Notes"). The Company relied on the exemption provided by Regulation D
promulgated under the Act. Purchasers of the Notes included an affiliate of ICP,
International Capital Partners Profit Sharing Trust, which purchased a Note in
the amount of $200,000. The Notes have a term of seven years and are convertible
at any time at the option of the noteholder into shares of the Company's Common
Stock at a rate of $5.00 per share, subject to certain antidilution adjustments.
The Company has the right to force conversion of the Notes after three years, in
the event that the Company's Common Stock trades at or above $10 per share for
at least five consecutive trading days.

         In February 1999, the Company closed a $15 million private placement of
equity with 20 investors, led by Marshall Capital Management, Inc., an affiliate
of Credit Suisse First Boston, and a number of European-based institutional
investors. Oakes, Fitzwilliams & Co. S.A. of London acted as placement agent for
the Company in connection with the sales to the European investors. Pursuant to
a Securities Purchase Agreement entered into between the Company and the
investors (the "Securities Purchase Agreement"), the Company issued an aggregate
of 15,000 shares of a new Series C Convertible Preferred Stock, $.01 per share,
and Warrants to purchase an aggregate of 300,000 shares of Common Stock, $.01
par value, of the Company. Each share of Series C Convertible Preferred Stock is
convertible into Common Stock of the Company (See Item 14, Reports on Form 8-K).


(b) Financial Information about Industry Segments - The Company is engaged in
three industry segments within the telecommunications industry; providing a wide
range of services including, debit cellular phone services, short-term cellular
phone rentals and activation of cellular phones.

(c)  Narrative Description of Business

         (1)(i)  Products and Services

DEBIT SERVICES

The significant revenue growth of the cellular industry has been accompanied by
an equally significant increase in carrier bad debt expense. Carrier response to
this problem has been the imposition of increasingly stringent credit
requirements on potential customers, which have resulted in the rejection of
approximately 35% of those applying for cellular service.

To allow these customers access to cellular communications, STC has developed a
program that allows subscribers an easy, pay-as-you-go option for cellular
service. Debit, or prepaid, cellular service provides a solution to credit
problems and affords businesses more control over their cellular expenses. STC
is pursuing prepaid cellular aggressively, as it represents a substantial and
relatively untapped segment of the cellular marketplace.

STC has entered the prepaid cellular market in a number of ways. First, is
CellEase(R), which makes prepaid service available to customers at select
retailers and electronic shopping networks. Currently, customers can choose one
of several handsets and purchase CellEase(R) airtime usage. The Company's back
office capabilities are comprehensive, providing the tracking, customer service,
collection services, marketing, and reporting functions required to support the
growing customer demand for prepaid cellular service.

In February, 1999, STC signed an agreement appointing MCI WorldCom as a
distribution channel for its prepaid cellular offering. MCI WorldCom will market
STC's prepaid cellular offering to national retail accounts under the MCI
WorldCom name, although promotional materials and airtime usage cards also will
carry the CellEase(R) logo.
<PAGE>   5
STC's other product, It's About Choices(TM), allows customers to choose between
prepaid and postpaid (traditional) cellular service. Sold as a "phone-in-a-box,"
It's About Choices(TM) is a true consumer electronics product with a single SKU
(stock keeping unit) number nationwide. The customer purchases the phone and
usage cards, returns home, charges the battery, and calls STC to initiate
service. Customers electing traditional cellular service must pass a credit
check and sign a one-year service contract before the phone is activated. If the
customer does not meet credit standards, the phone may be activated on a prepaid
basis.

STC also makes its prepaid offering available on a private-label basis. Dealers
interested in entering the fast-growing prepaid cellular market need only to
contract with STC to obtain nationwide service and the necessary back office
systems. Customers face no credit checks, security deposits, monthly access
fees, or long-term contracts when they obtain this service.

CELLULAR PHONE RENTALS

The Company markets its cellular telephone rental services principally through
car rental agencies, international airlines and hotels. The Company has
agreements with the Hertz Corporation ("Hertz"), National Car Rental System,
Inc., ("National"), Budget Rent-A-Car Corporation ("Budget"), Avis Rent-A-Car
Systems, Inc. ("Avis"), and Alamo Rent-A-Car, Inc. ("Alamo"), as well as car
rental company licensees, to offer its portable cellular telephones at
designated car rental locations. The Company's phones are located primarily in
airport terminals (rental car locations) in approximately 70 cities throughout
the United States.

In addition, the Company markets its cellular telephone services at conventions
and sporting events. For example, the Company has rented cellular telephones at
the NCAA basketball tournament for the last four years, the 1996 Summer Olympics
in Atlanta, and the 1996 and 1995 New York Marathon. The Company also rents
cellular telephones on site following emergency and disaster situations through
arrangements with telecommunications carriers, the Federal Emergency Management
Agency and other governmental agencies.

ACTIVATION SERVICES

With the acquisition of Hotline, STC became one of the largest providers of
nationwide cellular phone activation services. The Company acts as an agent
linking retail points of sale to more than 690 cellular markets, using its 1,200
individual carrier contracts nationwide. The Company maintains contracts and
relationships with most cellular carriers in the United States, and can provide
the necessary administrative services to permit a customer in a store within the
United States to purchase a phone with activated cellular service. In addition
to charging a service fee to the national distribution partner, the Company also
derives revenues from the cellular carrier in the form of commissions, residual
payments, and other revenue sharing.

The Company offers its activation services to the cellular carriers under its
"MOVE/Customer Retention Program". This program is a nationwide subscriber
retention/relocation program which offers a carrier's customers the ability to
exit from existing contracts and establish service at the new location with one
phone call. The old carrier benefits as it receives a portion of the activation
fee from the new cellular carrier via the Company, while the customer is allowed
to terminate its existing contract without paying the contract's early
cancellation fee.

(iv) PATENTS, TRADEMARKS, LICENSES, FRANCHISES, CONCESSIONS

The Company, through its wholly-owned subsidiary, The Cellular Hotline, Inc.,
holds a patent for point-of-sale programming of cellular phones that is utilized
in connection with phone activations. In addition, the Company has certain
technology licenses, including agreements with Telemac Corporation, US
Intellicom, Boston Communications Group, and JRC International. "Shared
Technologies Cellular" is a registered trademark that is owned by STFI. STC has
a royalty-free license to use such mark for 15 years. The Company has registered
the trademark "CellEase" and is currently using "It's About Choices", which it
is contemplating registering.
<PAGE>   6
(v) SEASONALITY

The Company has experienced a reduction of revenues from phone rentals in the
winter months due to the reduction in business travel during the holiday season
and inclement weather.

(vi) WORKING CAPITAL

Since its inception as a subsidiary of STFI, and through its initial public
offering in April 1995, the Company's losses were substantially funded by STFI
and private placements of debt and equity. In addition, STFI funded the purchase
price paid for the Company's Road and Show acquisitions. In January 1997 and in
April 1996, STFI contributed to the Company's capital in excess of par value
approximately $1,700,000 and $1,184,000, respectively, of the Company's
indebtedness to STFI. See Item 1(a) - "General Development of Business",
"Management's Discussion and Analysis of Financial Condition and Results of
Operation" and "Notes to Consolidated Financial Statements" herein.

(vii) DEPENDENCE ON CERTAIN CUSTOMERS

Approximately 24%, 12%, 19% and 10% of the Company's revenues for 1998 were
attributable to SmarTalk TeleServices, Inc. ("SmarTalk"), Thorn Americas, Inc.,
Hertz and Avis, respectively. The Company's relationship with SmarTalk was
terminated in the fourth quarter of 1998 (See "Legal Proceedings"). STC's
distributor relationship with Thorn Americas, Inc. ended in November 1998. The
Company has enjoyed its relationship with Hertz and Avis for several years.
Nevertheless, the longevity of these relationships is generally subject to
contractual termination provisions that are effective upon relatively short
notice.

(viii) BACKLOG

At any given time the Company maintains approximately 4,000 portable cellular
telephones available for short-term rentals. Due to the varying utilization of
the telephones, backlog information for the portable rental business cannot be
quantified.

(ix) GOVERNMENT REGULATION

From time to time, legislation and regulations that could potentially affect the
Company, either beneficially or adversely, have been proposed by federal and
state legislators and regulators. Management is not aware of any current pending
or proposed legislation or regulations which, if adopted, would have a material
adverse impact on the Company's operations.

(x) COMPETITION

The telecommunications industry in general, and the cellular telephone industry
in particular, are highly competitive. Competitive factors include price,
customer service, geographical coverage and the ability to increase revenues
through marketing. The Company's short-term portable service competes with
local, regional and national cellular service companies, some of which have
substantially more experience and greater financial, technical and other
resources than the Company.

Other cellular providers in the debit market include: Boston Communications
Group, USCI, Inc., national carriers such as MCI, GTE, AT&T, and local
resellers. In addition, Topp Telecom, Inc., an alternative technology provider,
offers a turnkey solution similar to the STC CellEase program. In the activation
business, the Company faces competition mainly from other resellers, mass
merchants, carriers and agents, many of which may have substantially more
experience and greater financial, marketing, technical and other resources than
the Company.

(xiii) EMPLOYEES

As of March 26, 1999, the Company had 312 employees; 10 in management, 21 in
administration, 268 in sales and service and 13 in technical positions. The
Company's employees are not represented by a labor union. The Company believes
its relations with its employees are satisfactory.
<PAGE>   7
ITEM 2.

PROPERTY

The Company does not own any real estate and has no present plans to purchase
any real estate. The Company's principal executive office is leased and is
located at 100 Great Meadow Road, Suite 104, Wethersfield, Connecticut 06109.

The Company's executive office currently occupies approximately 23,000 square
feet pursuant to a five-year lease agreement, as amended in July 1998, expiring
in 2001 (the "Term"). The Company pays a monthly rent of approximately $35,000
during the remainder of the Term. In addition, the Company leases an aggregate
of approximately 26,000 square feet in various locations nationwide for the
purpose of direct sales by its sales force, for a total monthly rent of
approximately $25,000. Each of the leased properties is, in management's
opinion, generally well maintained and is suitable to support the Company's
business.

ITEM 3.

LEGAL PROCEEDINGS

In January 1999, the Company filed a lawsuit against SmarTalk and certain
individuals in the U.S. District Court for the District of Connecticut. The
Company's complaint includes allegations of breach of contract and fraud in
connection with various agreements between SmarTalk and the Company. SmarTalk
subsequently filed for federal bankruptcy protection. The Company's complaint
seeks recovery of $25 million in damages, and the Company has filed a proof of
claim with the bankruptcy court (U.S. Bankruptcy Court, District of Delaware)
for $14.4 million. The Company intends to aggressively prosecute its claim,
although due to SmarTalk's impaired financial condition, the amount of any
recovery against SmarTalk is questionable.

The Company is not involved in any other litigation which, individually or in
the aggregate, if resolved against the Company, would be likely to have a
material adverse effect on the Company's financial condition, results of
operations or cash flows.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Company's security holders during the
fiscal quarter ended December 31, 1998.

                                     PART II

ITEM 5.

MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The Company's shares of common stock (trading symbol: STCL) have been quoted and
traded in the over-the-counter market since April 21, 1995. Over-the-counter
market quotations reflect interdealer prices, without retail mark-up, mark-down
or commission and may not necessarily represent actual transactions. During 1998
and 1997, the quarterly high and low closing prices were as follows:

<TABLE>
<CAPTION>
                                        1998    1998         1997         1997
                                       -----   -----       -------       -------
                                       High     Low         High          Low
<S>                                    <C>     <C>         <C>           <C>
First Quarter                          5       3 1/4       2 21/32       1 3/8
Second Quarter                         8 1/8   4 1/4       2 3/8         1 3/16
Third Quarter                          7 3/8   5 1/8       6 1/4         1 15/16
Fourth Quarter                         7       3 3/4       5 3/4         3 1/8
</TABLE>

<PAGE>   8
Number of beneficial holders of the Company's common stock as of March 15, 1999
was 677.

ITEM 6.

SELECTED FINANCIAL DATA

The following table sets forth the selected financial data of the Company for
each of the last five years. Financial statements for 1995 and 1994 are not
presented in this filing. Such selected financial data were derived from audited
financial statements not included herein. The selected financial data of the
Company should be read in conjunction with the Consolidated Financial Statements
and related notes appearing elsewhere in this Form 10-K. All amounts, except per
share amounts, are in thousands.

<TABLE>
<CAPTION>
                                       1998        1997        1996        1995        1994
                                       ----        ----        ----        ----        ----
<S>                                  <C>         <C>         <C>         <C>         <C>     
     Statement of Operations-Data:
Revenues                             $ 28,200    $ 24,198    $ 20,914    $ 13,613    $ 10,217
Gross margin                           10,835      10,667       7,285       5,026       4,923
Total operating expenses               21,523      14,120      14,173       8,015       4,272
Income (loss) from operations         (10,688)     (3,453)     (6,888)     (2,989)        651
Gain on sale of division                   --          --          --         689          --
Loss on discontinued affiliate             --          --          --        (364)         --
Loss on contract cancellation              --          --        (980)         --          --
Interest expense, net                     952         232         906         136          49
Net income (loss) before income
   taxes                              (11,640)     (3,685)     (8,774)     (2,800)        602
Income taxes                               (6)        (10)        (22)        (48)         --
Net income (loss)                     (11,646)     (3,695)     (8,796)     (2,848)        602
Preferred stock dividends                  --          --        (112)         --          --
Net income (loss) applicable to
   common stock                      $(11,646)   $ (3,695)   $ (8,908)   $ (2,848)   $    602
Net income (loss) per common
   share, basic and diluted          $  (1.58)   $  (0.63)   $  (2.18)   $  (1.04)   $   0.28
Weighted average number of
  shares outstanding                    7,375       5,900       4,082       2,748       2,185
Balance Sheet Data:
Working deficit                      $(16,099)   $ (6,955)   $ (8,975)   $ (1,851)   $   (920)
Total assets                           13,487      11,536      14,262      14,378       5,452
Notes payable (including current
  portion)                              7,331       1,487       2,578       2,000          --
Other liabilities                      14,840       7,832       8,768       6,290       2,449
Indebtedness to STFI                    1,411       1,052          59         985       2,434
Accumulated deficit                   (28,354)    (16,708)    (13,013)     (4,105)     (1,256)
Stockholders' equity (deficit)       $(10,095)   $  1,165    $  2,857    $  5,102    $    569
</TABLE>
<PAGE>   9
ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION:

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

Revenues for 1998 were $28,200,000, compared to $24,198,000 for 1997, an
increase of $4,002,000 (17%). This increase was due to the expansion of the
debit (prepaid) services, which grew by over 100%. The loss from operations,
excluding non-recurring charges, was $4,194,000 in 1998 and $1,416,000 in 1997.
The net loss for 1998 was $11,646,000, compared to a net loss of $3,695,000 for
1997. The basic and diluted loss per common share was $1.58 for 1998, compared
to $0.63 for 1997.

Revenues

Debit, or prepaid, operations had revenues of $12,737,000 for 1998, compared to
$6,299,000 for 1997. The increase in revenues of $6,438,000 (102%) was due to a
new end-user program being marketed under the CellEase brand name. The Company
experienced significant revenue growth from CellEase beginning in April 1998.
The increase in the CellEase program was partially offset by a $2,796,000
reduction in revenues from a major distributor due to a price reduction given in
order to keep the distributor competitive with the CellEase program. In
addition, during the fourth quarter of 1998, the distributor transitioned its
prepaid cellular phone business customers over to the Company's CellEase
end-user program, which negatively impacted revenues.

For the fourth quarter of 1998, revenues from the CellEase program were below
Company expectations. This was a direct result of the deterioration of the
Company's relationship with its main distributor, SmarTalk TeleServices, Inc.
("SmarTalk"). In the fourth quarter, SmarTalk introduced a new prepaid cellular
phone to retailers that did not utilize the Company's' cellular service, which
the Company has alleged in a lawsuit against SmarTalk was in violation of
SmarTalk's contract with STC (see "Legal Proceedings"). Retailers were confused
by conflicting directives, resulting in significant lost revenues to the
Company, which was particularly detrimental to the Company's sales for the
year-end holiday period. In January 1999, SmarTalk filed for bankruptcy.

Cellular telephone rental operations had revenues of $14,037,000 for 1998,
compared to $15,242,000 for 1997. The decrease in revenues of $1,205,000 (8%)
was attributable to the Company de-emphazising the Special Events and Airlines
programs due to local competition and the high costs to generate revenues from
such operations. Revenues from the car rental companies were flat for the two
years. However, during the second half of 1998, the Company changed its emphasis
to be more of a sales-oriented business and less of a service-oriented business.
As a result, revenues from the car rental companies for the last six months of
1998, compared to the last six months of 1997, increased 6%.

Activation operations had revenues of $1,426,000 for 1998, compared to
$2,657,000 for 1997. The decrease of $1,231,000 (46%) was mainly attributable to
the discontinuance of operations at military bases in late 1997. In addition,
the Company closed its Texas activation location in November 1997.

Gross Margin

Gross margin was 38% of revenues for 1998, compared to 44% of revenues for 1997.
The decrease in gross margin was mainly due to a change in the revenue mix. The
following table summarizes the change in the revenue mix and the corresponding
gross margin for the two years:

<TABLE>
<CAPTION>
                           1998                       1997
                  Revenues     Gross margin   Revenues     Gross margin
<S>               <C>          <C>            <C>          <C>
Debit                45%           27%           26%           43%
Rental               50%           48%           63%           46%
Activation            5%           45%           11%           37%
                    100%           38%          100%           44%
</TABLE>
<PAGE>   10
The gross margin for the debit operations decreased as a result of a price
reduction given to a major distributor and due to the end-user CellEase program
having a lower margin than the distributor program. The distributor program
accounted for most of the 1997 debit revenues. The gross margin for portable
cellular rental operations improved slightly due to a slight reduction in
carrier costs. The gross margin for the activation operations improved
significantly due to a change in the product mix to more retail activations,
which generally provided higher commissions to the Company than activations
performed at the military bases.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("S,G&A") were $15,029,000 for
1998, compared to $12,083,000 for 1997, an increase of $2,946,000. As a
percentage of revenues, S,G&A increased to 53% for 1998, compared to 50% for
1997. The percentage increase was attributable to additional corporate overhead
incurred following the March 1998 acquisition of Shared Technologies Fairchild
Inc. ("STFI") by Intermedia Communications, Inc. STFI, the former parent of the
Company, had been providing certain support and management services to the
Company under a management agreement. Such additional expenses included payroll
for certain former employees of STFI who had not previously received direct
compensation from the Company. Field S,G&A, as a percentage of revenues,
decreased slightly to 41% in 1998, compared to 42% in 1997. As previously
discussed, the Company did not achieve the anticipated fourth quarter 1998
CellEase revenues, even though the Company increased its S,G&A in anticipation
of the additional revenues.

Loss on Distributor Contract

In December 1998 the Company terminated its relationship with SmarTalk and filed
a lawsuit against SmarTalk (see "Legal Proceedings"). SmarTalk subsequently
filed for bankruptcy protection. As a result, the Company recognized a one-time
$6,494,000 charge related to the termination of its agreement with SmarTalk. The
charge included approximately $1,975,000 of receivables owed by SmarTalk. An
additional $3,121,000 pertains to the unamortized portion of prepaid assets
relating to a subsidy the Company paid SmarTalk for cellular phone sales to
retailers. The Company had been amortizing the subsidy against future revenues
generated from end users. An additional $1,398,000 related to expenses incurred
by the Company in the fourth quarter of 1998 in connection with the Company's
contract with SmarTalk, including the addition of a new call center in Hartford
and expansion of the existing call center in St. Louis. In addition, the Company
purchased several thousand new cellular lines in anticipation of an increase in
volume. Most of the new lines required significant minimum commitment periods.
The Company also incurred losses from the cost of lines for existing customers
that could not purchase airtime as a result of the problems with SmarTalk.

Interest Expense

Interest expense was $952,000 for 1998, compared to $232,000 for 1997. Interest
expense was mainly due to debt from acquisitions made in prior years, debt to
STFI, and debt financing completed in May 1998.


YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

Revenues for 1997 were $24,198,000, an increase of $3,284,000 (16%) over
revenues for 1996. This increase was primarily due to the expansion of the debit
business and the April 1996 purchase of the operations of the Company's sole
franchisee, both of which were partially offset by the elimination of the in-car
cellular rental operations. The loss from operations, excluding non-recurring
charges, was $1,416,000 in 1997 and $6,888,000 in 1996. The net loss for 1997
was $3,695,000, compared to a net loss of $8,796,000 for 1996. The improvement
was a result of the change in the revenue mix to more profitable lines of
business and a reduction in operating expenses. The basic and diluted loss per
common share was $0.63 for 1997, compared to $2.18 for 1996.

Revenues

The cellular telephone rental operations had revenues of $15,242,000 for 1997,
compared to $16,339,000 for 1996. The decrease of $1,097,000 (7%) was
attributable to two non-recurring sources of revenue in 1996. In 1996, the
in-car operation generated revenues of $3,143,000; such line of business was
discontinued in 1997. In the third quarter of 1996, the Company generated
revenues of $1,434,000 from the summer's Olympic Games. These decreases for 1997
<PAGE>   11
were offset by $2,259,000 in additional revenues in 1997 from the Summit
acquisition. The remaining balance of the increase was mainly due to the
addition of Avis, which allowed the Company to increase its penetration within
existing portable cellular rental market areas.

The debit operations had revenues of $6,299,000 for 1997, compared to $1,516,000
for 1996. This significant increase was due to the rapid expansion into the
debit business in the first quarter of 1997. The Company increased the number of
cellular prepaid lines with Rent A Center from 5,000 to 15,000 during that
period.

The activation operations had revenues of $2,657,000 for 1997, compared to
$3,059,000 for 1996. This decrease was mainly due to a reduction in activation
revenues by the Company's Texas location that was closed in November 1997. In
addition, several national retailers ceased to offer cellular telephone
activations through the Company in 1996. These revenue losses were offset by
activations done at various retail locations.

Gross Margin

Gross margin increased to 44% of revenues for 1997, from 35% of revenues for
1996. This improvement was mainly due to significant changes in revenue mix. The
in-car operations represented 15% of 1996 revenues but had no gross margin,
compared to no revenues in 1997. As previously discussed, the in-car operations
were discontinued in 1997. The gross margin for both the portable cellular
rental and the debit operations improved due to a reduction in carrier costs as
a result of better line management and lower carrier usage costs. As a
percentage of revenue, the debit business increased from 7% in 1996 to 26% in
1997. The activation operations had a small reduction in gross margin due to
lower activation commissions received from carriers.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") decreased $2,090,000
(15%), to $12,083,000 for 1997 from $14,173,000 for 1996. As a percentage of
revenues, SG&A decreased to 50% for 1997, compared to 68% for 1996. This
decrease was due to several factors. In the latter part of fiscal year 1996, the
Company made a concerted effort to reduce its operating expenses. The Company
consolidated its Special Events operation into its portable rental business, it
transitioned its in-car cellular telephone rental operation to its portable
cellular telephone rental business, and implemented other cost-cutting measures,
such as staff reductions, office closings and travel restrictions that resulted
in an overall decrease in SG&A. The Company was also able to include the
revenues from the Summit acquisition with minimal amounts of additional SG&A,
which helped to reduce SG&A as a percentage of revenues.

Loss on Discontinued Product Line

During 1997, the Company completed the transition of its in-car rental accounts
to portable rentals. In conjunction with this transition, the Company attempted
to develop alternate uses for the in-car cellular telephones, as well as the
capitalized software development costs associated with the in-car cellular
rental business. Although management believes that there are viable uses for
such assets, the probability that such usage will be successful is not known. As
a result, the Company recognized a $2,037,000 writedown to reduce the in-car
cellular phones and the capitalized software development costs to net realizable
value and classified them on the balance sheet as assets held for disposition.

Interest Expense

Interest expense was $232,000 for 1997, compared to $906,000 for 1996. Interest
expense in 1997 was mainly due to debt relating to the PTCC acquisition in
November 1995 and the Summit acquisition in April 1996.

LIQUIDITY AND CAPITAL RESOURCES:

The Company had a working capital deficit of $16,099,000 at December 31, 1998,
compared to a deficit of $6,955,000 at December 31, 1997. Stockholders' deficit
at December 31, 1998 was $10,095,000, compared to stockholders' equity of
$1,165,000 at December 31, 1997.
<PAGE>   12
Net cash used in operations for the year ended December 31, 1998 was $4,941,000.
This was mainly due to the operating loss for the period, offset by delayed
payments to carriers and other vendors.

Net cash used in investing activities for the year ended December 31, 1998 was
$1,133,000. This was mainly attributable to the purchase of cellular phones for
rental operations, computer and office equipment to support the CellEase
program, and deposit requirements by carriers for additional lines.

During the year ended December 31, 1998, the Company received $6,400,000 of debt
financing, as previously discussed. The Company continued to make required
payments on its existing debt.

The Company will require additional funds in order to satisfy existing
obligations arising from completed acquisitions, and to fund current expansion
plans. In February 1999, the Company closed on a $15 million private placement
of equity with 20 investors (See Item 14, Reports on Form 8-K). Also, in March
1999, the Company signed a letter of intent with a financial institution the
Company currently does business with to establish a $10 million credit facility,
subject to the financial institution's satisfactory completion of a due
diligence review of the Company. Management believes that ongoing operations,
together with the equity financing and the credit facility, will provide the
Company with sufficient funds to finance operations and planned expansion for at
least the next 12 months, and long-term liquidity will depend on the Company's
ability to attain profitable operations.

YEAR 2000 COMPLIANCE:

The Company has conducted a review of its computer systems and believes that the
majority of its systems are properly adapted to avoid a Year 2000 problem. The
Company believes that all its computer systems will be Year 2000 compliant by
the end of the second quarter of 1999. The Company further intends to conduct
extensive testing of its systems to assure that it is Year 2000 compliant by the
end of the second quarter. The expense incurred by the Company to achieve
compliance has not been material. The Company is currently working with outside
vendors to obtain assurances that they are Year 2000 compliant. However, there
can be no assurance that all of the Company's vendors, including carriers, will
achieve compliance on a timely basis. In the event of any such noncompliance by
vendors, a material adverse effect to the Company's operations and financial
results could occur. The Company has not developed any contingency plan to
address the possibility of vendor-related Year 2000 problems.

1999 COMPANY OUTLOOK

The Company expects to show revenue growth in each of its operations in 1999.
The wireless industry continues to diversify and expand with abundant
opportunities. PCS, GSM and other wireless carriers are now entering the
marketplace. Subscription growth continues to be double-digit as new products
and services, such as pre-paid cellular, have been launched. The Company
believes it is positioned to take advantage of these opportunities; offering
travelers a communication device throughout the United States, offering pre-paid
cellular and activation services through national retailers, and working with
wireless carriers to offer their customers, who are relocating, a more
economical activation process.

The debit operations are expected to show considerable revenue growth in 1999.
In February 1999, the Company signed an agreement with MCI WorldCom for the
retail distribution of the Company's prepaid cellular services under the MCI
WorldCom brand name, utilizing MCI WorldCom's extensive network of retail
distribution locations.

The cellular phone rental operations are expected to have moderate revenue
growth in 1999. To achieve this, STC intends to refocus the car rental partner's
efforts in soliciting more customers through training and improved policies and
procedures, by improving awareness through marketing programs, and by
penetrating the premiere traveler programs (e.g. Avis Preferred, Hertz Gold). In
addition, the Company is in the process of analyzing a new product (handset),
pricing structure and partner contribution in the solicitation of the cellular
rental program.

The activation operations are expected to have moderate revenue growth. The
Company is working with various carriers to implement its MOVE/Customer
Retention Program, which provides activation services for carriers' customers
who are in the process of relocating. The Company has automated the activation
process by establishing an activation Internet site, which should make the
Program more attractive to carriers.
<PAGE>   13
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: THE MANAGEMENT'S DISCUSSION AND ANALYSIS MAY INCLUDE FORWARD-LOOKING
STATEMENTS WITH RESPECT TO THE COMPANY'S FUTURE FINANCIAL PERFORMANCE. THESE
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN ANY
FORWARD-LOOKING STATEMENT. SUCH RISKS AND UNCERTAINTIES MAY INCLUDE, WITHOUT
LIMITATION, TECHNOLOGICAL OBSOLESCENCE, PRICE AND INDUSTRY COMPETITION,
FINANCING CAPABILITIES, DEPENDENCE ON MAJOR CUSTOMERS AND RELATIONSHIPS,
DEPENDENCE ON RELATIONSHIPS WITH TECHNOLOGY LICENSORS AND TELECOMMUNICATIONS
CARRIERS, AND THE COMPANY'S ABILITY TO EFFECTIVELY EXECUTE ITS BUSINESS PLAN
WITH RESPECT TO SIGNIFICANT PROJECTED GROWTH IN ITS DEBIT SERVICES DIVISION, IN
PARTICULAR, WITH RESPECT TO ITS VENTURE WITH MCI WORLDCOM.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 

Attached.

ITEM 9.

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

None
<PAGE>   14
                SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY

        INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE (ITEM 8)

                                                                            Page

FINANCIAL STATEMENTS:
     Independent Auditors' Report                                           F-2

     Consolidated Balance Sheets                                            F-3

     Consolidated Statements of Operations                                  F-4

     Consolidated Statements of Stockholders' Equity (Deficiency)           F-5

     Consolidated Statements of Cash Flows                                F-6-7

     Notes to Consolidated Financial Statements                          F-8-20

FINANCIAL STATEMENT SCHEDULE (A):
     Schedule II - Valuation and Qualifying Accounts for the
      Years Ended December 31, 1998, 1997 and 1996                          S-1

NOTE:

(a)      All other schedules are not submitted because they are either not
         applicable, not required or the required information is included in the
         consolidated financial statements or notes thereto.



                                      F-1
<PAGE>   15
                          INDEPENDENT AUDITORS' REPORT

To the Stockholders and Board of Directors of
Shared Technologies Cellular, Inc.

We have audited the accompanying consolidated balance sheets of Shared
Technologies Cellular, Inc. and Subsidiary as of December 31, 1998 and 1997, and
the related consolidated statements of operations, stockholders' equity
(deficiency) and cash flows and financial statement schedule for each of the
three years in the period ended December 31, 1998. These consolidated financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Shared
Technologies Cellular, Inc. and Subsidiary as of December 31, 1998 and 1997, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. Also in our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.

                                                 ROTHSTEIN, KASS & COMPANY, P.C.

Roseland, New Jersey
March 5, 1999


                                      F-2
<PAGE>   16
                SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS
                           December 31, 1998 and 1997

<TABLE>
<CAPTION>
                                                           1998            1997
                                                        ------------    ------------
<S>                                                     <C>             <C>
                                     ASSETS
CURRENT ASSETS:
Cash                                                    $    229,000    $    294,000
Accounts receivable, less allowance for doubtful
 accounts of $896,000 in 1998 and $991,000 in 1997         1,169,000       1,637,000
Carrier commissions receivable, less unearned income         992,000         163,000
Inventories                                                  234,000         131,000
Current portion of note receivable                                           107,000
Prepaid expenses and other current assets                  2,030,000         127,000
                                                        ------------    ------------
Total current assets                                       4,654,000       2,459,000
                                                        ------------    ------------
TELECOMMUNICATIONS AND OFFICE EQUIPMENT, net               1,125,000         985,000
                                                        ------------    ------------
OTHER ASSETS:
Intangible assets, net                                     6,993,000       7,551,000
Deposits                                                     715,000         326,000
Note receivable, less current portion                                         62,000
Assets held for disposition                                                  153,000
                                                        ------------    ------------
                                                           7,708,000       8,092,000
                                                        ------------    ------------
                                                        $ 13,487,000    $ 11,536,000
                                                        ============    ============

               LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

CURRENT LIABILITIES:
Current portion of notes payable                        $  5,913,000    $    530,000
Accounts payable                                           7,439,000       3,876,000
Accrued expenses and other current liabilities             6,153,000       3,912,000
Deferred revenues                                          1,248,000          44,000
Due to former parent                                                       1,052,000
                                                        ------------    ------------
Total current liabilities                                 20,753,000       9,414,000
                                                        ------------    ------------
NOTES PAYABLE, less current portion                        2,829,000         957,000
                                                        ------------    ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred stock, $.01 par value, authorized 5,000,000
 shares, no shares issued or outstanding
Common stock, $.01 par value, authorized 20,000,000
 shares, issued and outstanding 7,567,000 shares in
 1998 and 7,216,000 shares in 1997                            76,000          72,000
Capital in excess of par value                            18,183,000      17,801,000
Accumulated deficit                                      (28,354,000)    (16,708,000)
                                                        ------------    ------------
Total stockholders' equity (deficiency)                  (10,095,000)      1,165,000
                                                        ------------    ------------
                                                        $ 13,487,000    $ 11,536,000
                                                        ============    ============
</TABLE>

          See accompanying notes to consolidated financial statements

                                      F-3
<PAGE>   17
                SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  Years Ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>
                                             1998             1997            1996
                                          ------------    ------------    ------------
<S>                                       <C>             <C>             <C>
REVENUES                                  $ 28,200,000    $ 24,198,000    $ 20,914,000
COST OF REVENUES                            17,365,000      13,531,000      13,629,000
                                          ------------    ------------    ------------
GROSS MARGIN                                10,835,000      10,667,000       7,285,000
                                          ------------    ------------    ------------
SELLING, GENERAL AND ADMINISTRATIVE
 EXPENSES                                   15,029,000      12,083,000      14,173,000
LOSS ON DISCONTINUED PRODUCT LINE                            2,037,000
LOSS ON DISTRIBUTOR CONTRACT                 6,494,000
                                          ------------    ------------    ------------
                                            21,523,000      14,120,000      14,173,000
                                          ------------    ------------    ------------
LOSS FROM OPERATIONS                       (10,688,000)     (3,453,000)     (6,888,000)
                                          ------------    ------------    ------------
OTHER EXPENSE:
  Interest expense                            (952,000)       (232,000)       (906,000)
  Loss on contract cancellation                                               (980,000)
                                          ------------    ------------    ------------
                                              (952,000)       (232,000)     (1,886,000)
                                          ------------    ------------    ------------
LOSS BEFORE INCOME TAXES
                                           (11,640,000)     (3,685,000)     (8,774,000)
INCOME TAXES
                                                (6,000)        (10,000)        (22,000)
                                          ------------    ------------    ------------
NET LOSS
                                           (11,646,000)     (3,695,000)     (8,796,000)
PREFERRED STOCK DIVIDENDS
                                                                              (112,000)
                                          ------------    ------------    ------------
NET LOSS APPLICABLE TO COMMON STOCK       $(11,646,000)   $ (3,695,000)   $ (8,908,000)
                                          ============    ============    ============
BASIC AND DILUTED LOSS PER COMMON SHARE   $      (1.58)   $       (.63)   $      (2.18)
                                          ============    ============    ============
WEIGHTED AVERAGE NUMBER OF
 COMMON SHARES OUTSTANDING                   7,375,000       5,900,000       4,082,000
                                          ============    ============    ============
</TABLE>

          See accompanying notes to consolidated financial statements

                                      F-4
<PAGE>   18
                SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY

          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                  Years Ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>

                                                            Series A                        Series B
                                                        Preferred Stock                 Preferred Stock
                                                  -----------------------------  -------------------------------
                                                     Shares          Amount          Shares          Amount
                                                  --------------  -------------  ---------------  --------------
<S>                                               <C>             <C>            <C>              <C>
BALANCES, January 1, 1996                               300,000          3,000                -   $           -
ISSUANCE OF COMMON STOCK
ISSUANCE OF PREFERRED STOCK                                                             500,000           5,000
PREFERRED STOCK DIVIDEND                                 11,000
CONVERSION OF PREFERRED STOCK                         (311,000)        (3,000)
ISSUANCE OF COMMON STOCK FOR ACQUISITIONS
COMMON STOCK SUBSCRIPTION
NET LOSS
                                                  --------------  -------------  ---------------  --------------
BALANCES, December 31, 1996                                   -              -          500,000           5,000
ISSUANCE OF COMMON STOCK
CONVERSION OF PREFERRED STOCK                                                         (500,000)         (5,000)
NET LOSS
                                                  --------------  -------------  ---------------  --------------
BALANCES, December 31, 1997                                   -              -                -               -
ISSUANCES OF COMMON STOCK AND WARRANTS

EXERCISE OF WARRANTS AND OPTIONS

CANCELLATION OF COMMON STOCK
NET LOSS
                                                  --------------  -------------  ---------------  --------------
BALANCES, December 31, 1998                                   -              -                -   $           -
                                                  ==============  =============  ===============  ==============
</TABLE>

<TABLE>
<CAPTION>

                                                                                     
                                                          Common Stock               Common         Capital in
                                                 -------------------------------     Stock          Excess of
                                                     Shares          Amount       Subscription      Par Value
                                                 ---------------  --------------  -------------  -----------------
<S>                                              <C>              <C>             <C>            <C>
BALANCES, January 1, 1996                             3,089,000   $      31,000   $      5,000   $      9,173,000
ISSUANCE OF COMMON STOCK                                264,000           3,000                           760,000
ISSUANCE OF PREFERRED STOCK                                                                             4,828,000
PREFERRED STOCK DIVIDEND                                                                                  112,000
CONVERSION OF PREFERRED STOCK                         1,147,000          11,000                           (8,000)
ISSUANCE OF COMMON STOCK FOR ACQUISITIONS               300,000           3,000                           947,000
COMMON STOCK SUBSCRIPTION                                63,000           1,000        (5,000)              4,000
NET LOSS
                                                 ---------------  --------------  -------------  -----------------
BALANCES, December 31, 1996                           4,863,000          49,000              -         15,816,000
ISSUANCE OF COMMON STOCK                                686,000           7,000                         1,996,000
CONVERSION OF PREFERRED STOCK                         1,667,000          16,000                          (11,000)
NET LOSS
                                                 ---------------  --------------  -------------  -----------------
BALANCES, December 31, 1997                           7,216,000          72,000              -         17,801,000
ISSUANCES OF COMMON STOCK AND WARRANTS
                                                        271,000           3,000                           201,000
EXERCISE OF WARRANTS AND OPTIONS
                                                        180,000           2,000                           547,000
CANCELLATION OF COMMON STOCK                          (100,000)         (1,000)                         (366,000)
NET LOSS
                                                 ---------------  --------------  -------------  -----------------
BALANCES, December 31, 1998                           7,567,000   $      76,000   $          -   $     18,183,000
                                                 ===============  ==============  =============  =================
</TABLE>

<TABLE>
<CAPTION>
                                                                                         Total
                                                                                     Stockholders'
                                                   Accumulated          Note             Equity
                                                     Deficit         Receivable       (Deficiency)
                                                 -----------------  --------------  ----------------
<S>                                              <C>                <C>             <C>
BALANCES, January 1, 1996                        $    (4,105,000)   $     (5,000)   $     5,102,000
ISSUANCE OF COMMON STOCK                                                                    763,000
ISSUANCE OF PREFERRED STOCK                                                               4,833,000
PREFERRED STOCK DIVIDEND                                (112,000)                                 -
CONVERSION OF PREFERRED STOCK                                                                     -
ISSUANCE OF COMMON STOCK FOR ACQUISITIONS                                                   950,000
COMMON STOCK SUBSCRIPTION                                                   5,000             5,000
NET LOSS                                              (8,796,000)                       (8,796,000)
                                                 -----------------  --------------  ----------------
BALANCES, December 31, 1996                          (13,013,000)               -         2,857,000
ISSUANCE OF COMMON STOCK                                                                  2,003,000
CONVERSION OF PREFERRED STOCK                                                                     -
NET LOSS                                              (3,695,000)                       (3,695,000)
                                                 -----------------  --------------  ----------------
BALANCES, December 31, 1997                          (16,708,000)               -         1,165,000
ISSUANCES OF COMMON STOCK AND WARRANTS                                                      204,000

EXERCISE OF WARRANTS AND OPTIONS                                                            549,000

CANCELLATION OF COMMON STOCK                                                              (367,000)
NET LOSS                                             (11,646,000)                      (11,646,000)
                                                 -----------------  --------------  ----------------
BALANCES, December 31, 1998                      $   (28,354,000)   $           -   $  (10,095,000)
                                                 =================  ==============  ================
</TABLE>

          See accompanying notes to consolidated financial statements

                                      F-5
<PAGE>   19
                SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Years Ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>
                                                                         1998            1997            1996
                                                                     ------------    ------------    ------------
<S>                                                                  <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                             $(11,646,000)   $ (3,695,000)   $ (8,796,000)
Adjustments to reconcile net loss to net cash
 used in operating activities:
 Accretion of interest on notes payable                                    75,000                          30,000
 Write-off of assets held for disposition                                 153,000       2,037,000
 Depreciation and amortization                                          1,332,000       1,292,000       1,684,000
 Common stock issued for compensation
  and services                                                            104,000          71,000          40,000
Accrued interest, note receivable                                                         (11,000)
Changes in assets and liabilities, net of effects of acquisitions:
 Accounts receivable                                                      468,000         (16,000)       (429,000)
 Carrier commissions receivable                                          (829,000)       (110,000)        400,000
 Inventories                                                             (103,000)        (51,000)        (31,000)
 Prepaid expenses and other current assets                             (1,903,000)          6,000         339,000
 Accounts payable and other current liabilities                         6,204,000        (980,000)      2,124,000
 Deferred revenues                                                      1,204,000          44,000        (404,000)
                                                                     ------------    ------------    ------------
NET CASH USED IN OPERATING ACTIVITIES:                                 (4,941,000)     (1,413,000)     (5,043,000)
                                                                     ------------    ------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Acquisitions of businesses                                                                              (336,000)
 Purchases of equipment                                                  (744,000)       (318,000)       (953,000)
 Payments for intangible assets                                                                          (514,000)
 (Increase) decrease in deposits                                         (389,000)         47,000        (231,000)
 Collection of receivable from sale of assets                                                           1,078,000
 Collections of note receivable                                                                            45,000
                                                                     ------------    ------------    ------------
NET CASH USED IN INVESTING ACTIVITIES                                  (1,133,000)       (271,000)       (911,000)
                                                                     ------------    ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from issuance of notes payable                                6,400,000
 Payments for debt issuance costs                                        (171,000)
 Payments on notes payable                                               (530,000)     (1,091,000)     (1,080,000)
 Advances from (payments to) former parent                               (239,000)        993,000         274,000
 Issuance of common and preferred stock                                                 1,932,000       4,362,000
 Exercise of warrants and options                                         549,000
                                                                     ------------    ------------    ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                               6,009,000       1,834,000       3,556,000
                                                                     ------------    ------------    ------------
NET INCREASE (DECREASE) IN CASH                                           (65,000)        150,000      (2,398,000)
CASH, beginning of year                                                   294,000         144,000       2,542,000
                                                                     ------------    ------------    ------------
CASH, end of year                                                    $    229,000    $    294,000    $    144,000
                                                                     ============    ============    ============
</TABLE>

          See accompanying notes to consolidated financial statements


                                      F-6
<PAGE>   20
                SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                  Years Ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>
                                                        1998        1997         1996
                                                      ---------   ---------   ----------
<S>                                                   <C>         <C>         <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
 INFORMATION:
Cash paid during the year for:
 Interest                                             $ 863,000   $ 379,000   $  280,000
                                                      =========   =========   ==========
 Income taxes                                         $   6,000   $  10,000   $   20,000
                                                      =========   =========   ==========
SUPPLEMENTAL SCHEDULES OF NONCASH
 INVESTING AND FINANCING ACTIVITIES:
 Cost of intangible assets included in accounts
  payable                                             $      --   $      --   $   88,000
                                                      =========   =========   ==========
Issuance of common stock for acquisitions             $      --   $      --   $  950,000
                                                      =========   =========   ==========
Note payable incurred for acquisition of assets       $      --   $      --   $1,139,000
                                                      =========   =========   ==========
Issuance of Series B Convertible Preferred Stock in
 exchange for amount due to parent                    $      --   $      --   $1,200,000
                                                      =========   =========   ==========
Preferred stock issued for preferred stock dividend   $      --   $      --   $  112,000
                                                      =========   =========   ==========
Cancellation of common stock to settle
 outstanding receivable                               $ 367,000   $      --   $       --
                                                      =========   =========   ==========
Issuance of warrants in connection with certain
 promissory notes                                     $ 100,000   $      --   $       --
                                                      =========   =========   ==========
</TABLE>

          See accompanying notes to consolidated financial statements


                                      F-7
<PAGE>   21

               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY
                   
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 -      NATURE OF OPERATIONS

              Shared Technologies Cellular, Inc. (STC) together with its
              subsidiary (collectively the "Company") is a nationwide provider
              of short-term cellular telephone services, activation services and
              debit telephone services in the United States.

              The Company's operations are subject to regulation by the Federal
              Communications Commission (FCC), which has generally preempted the
              regulatory jurisdiction of state agencies with respect to the
              business in which the Company is engaged.

NOTE 2 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

              Principles of Consolidation

              The consolidated financial statements include the accounts of STC
              and its wholly-owned subsidiary. All material intercompany
              accounts and transactions have been eliminated in consolidation.

              Cash

              The Company maintains its cash in bank deposit accounts which at
              times may exceed federally insured limits. The Company has not
              experienced any losses in such accounts and believes it is not
              subject to any significant credit risk on cash.

              Fair Value of Financial Instruments

              The fair value of the Company's assets and liabilities which
              qualify as financial instruments under Statement of Financial
              Accounting Standards No. 107 approximates the carrying amounts
              presented in the consolidated balance sheets.

              Carrier Commissions Receivable

              Carrier commissions receivable are due from cellular carriers for
              new cellular telephone line activations done by the Company. The
              commissions are earned only after the cellular telephone user has
              remained on the cellular telephone network for a specified period
              of time (vesting period). The Company records an allowance, as a
              reduction to carrier commissions receivable, for estimated
              cancellations of cellular service by the user prior to the end of
              the aforementioned vesting period. Although there is a short-term
              vesting period for which the Company must wait in order to receive
              its commission, the Company believes that the revenue process has
              been completed and recognizes the revenue over the estimated life
              of the phone line, typically twelve months.


                                      F-8
<PAGE>   22

               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

              Inventories

              Inventories, consisting of telecommunications equipment and parts
              expected to be sold to customers, are valued at the lower of cost,
              on the first-in, first-out (FIFO) method, or market.

              Impairment of Long-Lived Assets

              The Company reviews its long-lived assets, such as
              telecommunications and office equipment, identifiable intangibles
              and goodwill, for impairment whenever events or changes in
              circumstances indicate that the carrying amount of the assets may
              not be fully recoverable. To determine the recoverability of its
              long-lived assets, the Company evaluates the probability that
              future undiscounted net cash flows will be less than the carrying
              amount of the assets. Impairment is the amount by which the
              carrying value of the asset exceeds its fair value.

              Telecommunications and Office Equipment

              Telecommunications and office equipment are stated at cost. The
              Company records depreciation on the straight-line method over the
              estimated useful lives of the assets as follows:

              Telecommunications equipment  2-5 years
              Office equipment              3-5 years

              Intangible Assets

              Goodwill represents the excess of cost over the fair market value
              of net assets of acquired businesses and is amortized over periods
              ranging from 15 to 20 years from the respective acquisition dates.
              The Company monitors the cash flows of the acquired operations to
              assess whether any impairment of recorded goodwill has occurred.

              The Company amortizes the cost to obtain exclusive agreements to
              provide cellular telephone rentals at specific locations on the
              straight-line basis over the life of the respective agreements,
              generally five to six years.

              Debt Issuance Costs

              Costs incurred relating to the issuance of debt are deferred and
              are being amortized over the life of the related debt. The
              amortization of debt issuance costs included in interest expense
              was $83,000, nil and nil in 1998, 1997 and 1996, respectively.

              Revenue Recognition

              Revenues related to providing cellular telephone services are
              recognized as the service is provided. Debit card revenue is
              recognized over the estimated period in which the Company provides
              debit telephone service to its customers.


                                      F-9
<PAGE>   23

               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

              Advertising Costs
              The Company expenses costs of advertising and promotions as
              incurred. Advertising expenses included in selling, general and
              administrative expenses for the years ended December 31, 1998,
              1997 and 1996 were approximately $308,000, $132,000 and $153,000,
              respectively.

              Income Taxes
              The Company filed its federal income tax returns on a consolidated
              basis with its former parent through April 1996, the date of its
              initial public offering ("IPO"). Subsequent to April 1996, the
              Company's income tax returns are being filed separately.

              The Company complies with Statement of Financial Accounting
              Standards No. 109 (SFAS No. 109), "Accounting for Income Taxes",
              which requires an asset and liability approach to financial
              reporting for income taxes. Deferred income tax assets and
              liabilities are computed for differences between the financial
              statement and tax bases of assets and liabilities that will result
              in taxable or deductible amounts in the future, based on enacted
              tax laws and rates applicable to the periods in which the
              differences are expected to affect taxable income. Valuation
              allowances are established, when necessary, to reduce the deferred
              tax assets to the amount expected to be realized.

              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 reported amounts of
              assets and liabilities and disclosure of contingent assets and
              liabilities at the date of the financial statements and the
              reported amounts of revenues and expenses during the reporting
              period. Actual results could differ from those estimates.

              Loss Per Common Share
              Effective December 31, 1997, the Company adopted Statement of
              Financial Accounting Standards No. 128 (SFAS No. 128), "Earnings
              Per Share". SFAS No. 128 requires dual presentation of basic and
              diluted earnings per share for all periods presented. Basic
              earnings per share excludes dilution and is computed by dividing
              loss applicable to common stockholders by the weighted average
              number of common shares outstanding for the period. Diluted
              earnings per share reflects the potential dilution that could
              occur if securities or other contracts to issue common stock were
              exercised or converted into common stock or resulted in the
              issuance of common stock that then shared in the earnings of the
              entity. Prior period loss information has been restated as
              required by SFAS No. 128. Diluted loss per common share is the
              same as basic loss per common share for the years ended December
              31, 1998, 1997 and 1996. Unexercised stock options to purchase
              699,000, 365,000 and 281,000 shares of the Company's common stock
              as of December 31, 1998, 1997 and 1996, respectively, were not
              included in the computations of diluted earnings per share because
              their effect would have been antidilutive as a result of the
              Company's losses.


                                      F-10
<PAGE>   24

               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 -      LIQUIDITY

              The Company has incurred cumulative net losses of approximately
              $28,350,000 through December 31, 1998 and has a working capital
              deficit of approximately $16,100,000 at December 31, 1998. In
              February 1999, the Company completed a $15,000,000 private
              placement of equity issuing an aggregate of 15,000 shares of
              Series C Convertible Preferred Stock (Note 19). Long-term
              liquidity is dependent on the Company's ability to attain
              profitable operations.

NOTE 4 -      ACQUISITIONS

              In April 1996, the Company completed its acquisition of
              substantially all of the assets of its only franchisee, Summit
              Assurance Cellular Inc. and its subsidiaries and affiliates
              (Summit). The purchase price was $3,563,000, comprised of $335,000
              in cash, the assumption of $669,000 of accounts payable and
              $656,000 of notes payable, the issuance of a promissory note for
              $953,000, the issuance of 300,000 shares of the Company's common
              stock valued at fair market value of $3.125 per share and warrants
              to purchase an aggregate of 300,000 shares of the Company's common
              stock at prices of $3.00, $4.00 and $5.00 per share, respectively,
              for each 100,000 shares. These warrants were valued at $13,000,
              which represents the excess of the fair market value of the common
              stock over the exercise price on the date of issuance. The
              warrants vested immediately and expire in 2000.

              In 1998, the Company received 100,000 shares of its common stock
              which was issued in the Summit acquisition and assumed a $150,000
              liability of Summit, in payment for the remaining balance of the
              note receivable from Summit. In addition, the Company issued to
              Summit a warrant for the purchase of 100,000 shares exercisable at
              $5 per share and expiring in 2001.

              The following unaudited pro forma condensed consolidated statement
              of operations for 1996 gives effect to the acquisition of Summit
              as if it had occurred on January 1, 1996:

<TABLE>
<S>                                                                <C>       
Revenues                                                           $ 21,784,000
                                                                   ============
Net loss                                                           $ (9,269,000)
                                                                   ============
Net loss applicable to common stockholders                         $ (9,382,000)
                                                                   ============
Basic and diluted loss per common share                            $      (2.25)
                                                                   ============
</TABLE>

NOTE 5 -      PREPAID EXPENSES AND OTHER CURRENT ASSETS

              Prepaid expenses and other current asset consist of the following
              at December 31, 1998 and 1997:

<TABLE>
<CAPTION>
                                                       1998              1997
<S>                                                 <C>               <C>        
Prepaid telephone line charges                      $  732,000        $   88,000
Prepaid access fees                                    878,000            33,000
Marketable securities                                  408,000
Other                                                   12,000             6,000
                                                    ----------        ----------
                                                    $2,030,000        $  127,000
                                                    ==========        ==========
</TABLE>


                                      F-11
<PAGE>   25

               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6 -      TELECOMMUNICATIONS AND OFFICE EQUIPMENT

              Telecommunications and office equipment consist of the following
              at December 31, 1998 and 1997:
<TABLE>
<CAPTION>

                                                       1998             1997
<S>                                                 <C>               <C>
Telecommunications equipment                        $2,504,000        $2,341,000
Office equipment                                     1,411,000           835,000
                                                    ----------        ----------
                                                     3,915,000         3,176,000
Accumulated depreciation                             2,790,000         2,191,000
                                                    ----------        ----------
                                                    $1,125,000        $  985,000
                                                    ==========        ==========
</TABLE>

              Depreciation expense for the years ended December 31, 1998, 1997
              and 1996 was $604,000, $650,000 and $902,000, respectively.

NOTE 7 -      INTANGIBLE ASSETS

              Intangible assets consist of the following at December 31, 1998
              and 1997:

<TABLE>
<CAPTION>
                                                      1998               1997
<S>                                                <C>                <C>             
Goodwill                                           $8,426,000         $8,426,000
Covenant not to compete                               142,000            142,000
Rental car agreement                                  520,000            520,000
Debt issuance costs                                   171,000
                                                   ----------         ----------
                                                    9,259,000          9,088,000
Accumulated amortization                            2,266,000          1,537,000
                                                   ----------         ----------
                                                   $6,993,000         $7,551,000
                                                   ==========         ==========
</TABLE>

              Amortization expense for the years ended December 31, 1998, 1997
              and 1996 was $619,000, $642,000 and $782,000, respectively.

NOTE 8 -      ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

              Accrued expenses and other current liabilities consist of the
              following at December 31, 1998 and 1997:

<TABLE>
<CAPTION>
                                                     1998                1997

<S>                                                <C>                <C>
Sales and other taxes                              $4,428,000         $3,174,000
Payroll and payroll taxes                             124,000            137,000
Commissions                                           222,000            166,000
Other                                               1,379,000            435,000
                                                   ----------         ----------
                                                   $6,153,000         $3,912,000
                                                   ==========         ==========
</TABLE>


                                      F-12
<PAGE>   26

               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 9 -      NOTES PAYABLE

              Notes payable consist of the following at December 31, 1998 and
              1997:

<TABLE>
<CAPTION>
                                                                               1998                  1997
<S>                                                                       <C>                  <C>
Promissory note bearing interest at 8% per annum and
 payable in semi-annual principal installments of
 $225,000 through May 2000. The note is collateralized by
 certain of the Company's assets.                                           $  675,000           $ 1,125,000

Promissory notes bearing interest at 10%
 per annum and payable in monthly installments
 of $8,500 through March 2002.                                                 281,000               362,000

Promissory notes bearing interest at prime rate (7.75%
 at December 31, 1998) plus 2.50% per annum and payable
 on or before July 1, 1999. The notes include
 warrants to purchase 400,000 shares of the Company's common
 stock at $5.00 per share through April 2003.                                3,975,000

Convertible debt bearing interest at 5% per annum.
 Interest is payable quarterly, with principal, due
 in May 2005. The debt may be converted into
 shares of the Company's common
 stock, at $5.00 per share.                                                  2,400,000

Promissory note, to former parent, bearing interest at
 Prime (7.75% at December 31, 1998) plus 2% per annum
 payable quarterly, with principal, due in November 1999.                     1,411,000                   --
                                                                     ------------------   -------------------
                                                                             8,742,000             1,487,000
Less current portion                                                         5,913,000               530,000
                                                                     ------------------   -------------------
                                                                           $ 2,829,000            $  957,000
                                                                     ==================   ===================
</TABLE>


                                      F-13
<PAGE>   27

               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 -      NOTES PAYABLE (CONTINUED)

              Aggregate future principal payments are as follows:

Year Ending December 31,
1999                                                 $ 5,913,000
2000                                                     310,000
2001                                                      94,000
2002                                                      25,000
2003
Thereafter                                             2,400,000
                                              -------------------
                                                     $ 8,742,000
                                              ===================

NOTE 10 -     STOCKHOLDERS' EQUITY (DEFICIENCY)

              The Company has reserved for issuance 3,316,000 shares of its
              common stock relating to common stock purchase warrants
              outstanding as of December 31, 1998, at prices ranging from $2.50
              to $7.09 per share.

              In August and September 1997, the Company sold an aggregate of
              407,000 units, at $3.00 per unit, through a private placement that
              included various members of the Company's management. Each unit
              consists of one share of common stock and one warrant to purchase
              one share of common stock at $3.00 per share. During December
              1996, the Company entered into an agreement to sell an aggregate
              of 500,000 units, at $3.00 per unit, through a private placement.
              In December 1996, 250,000 units were sold, and the remaining
              250,000 units were sold in January 1997.

              In August 1996, the Company sold 500,000 shares of Series B
              Convertible Preferred Stock (Series B) for $10 per share through a
              private placement, including 250,000 shares purchased by its
              former parent, Shared Technologies Fairchild Inc. (STFI). Each
              share of Series B, which pays no dividends was convertible into a
              minimum of 2.50 shares and a maximum of 3.33 shares of the
              Company's common stock, subject to certain adjustments. In
              addition, in 1996, the Company paid $125,000 and issued warrants
              to purchase 240,000 shares of common stock, at an exercise price
              of $3.00 per share, to a firm which provided advisory services to
              the Company. This advisory firm in which two of its principals are
              directors of the Company, was a party to the sale of 250,000
              shares of Series B. During 1997, the Series B stockholders
              converted their shares into an aggregate of 1,667,000 shares of
              the Company's common stock. Upon conversion of the Series B
              shares, the holders received one warrant per common share to
              purchase an additional share of the Company's common stock at an
              exercise price of $3.00 per share.


                                      F-14
<PAGE>   28

               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 -     STOCK OPTION PLANS

              The Board of Directors adopted, and the Company's stockholders
              approved, as amended, a stock option plan (the Plan) pursuant to
              which 825,000 shares of the Company's common stock are reserved
              for issuance upon the exercise of options granted to officers,
              employees, consultants and directors of the Company. Options
              issued under the Plan are nonqualified stock options (NSO's) and
              the Board of Directors (Committee) will grant NSO's at an exercise
              price which is not less than the fair market value on the date
              such options are granted. The Plan further provides that the
              maximum period in which stock options may be exercised will be
              determined by the Committee, except that they may not be
              exercisable after ten years from the date of grant. At December
              31, 1998, options to purchase 657,000 shares of common stock were
              outstanding.

              The Board of Directors adopted, and the stockholders approved, the
              Company's 1994 Director Option Plan (the Director Plan), as
              amended, pursuant to which 100,000 shares of the Company's common
              stock are reserved for issuance upon the exercise of options to be
              granted to non-employee directors of the Company. Under the
              Director Plan, an eligible director will automatically receive, at
              the commencement of the Director's one-year term, nonstatutory
              options to purchase 4,000 shares of the Company's common stock at
              an exercise price equal to the fair market value of such shares at
              the time of grant. Each such option vests ratably over a one-year
              period following the grant and is exercisable within the ten years
              from the date of grant, but generally may not be exercised more
              than 90 days after the date the director ceases to serve as a
              director of the Company. At December 31, 1998, options to purchase
              42,000 shares of the Company's common stock were outstanding under
              the Director Plan.

              The activity in the Plan and the Director Plan are as follows:

<TABLE>
<CAPTION>
                                                                   Exercise Price Per Share
                                                       Number of                             Weighted
                                                        Options             Range            Average
                                                     ---------------   -----------------   -------------
<S>                                                  <C>               <C>                 <C>
Balance outstanding, January 1, 1996                        231,000     $     1.63-5.00         $  3.45
Granted                                                      55,000           2.75-4.75            3.69
Expired                                                     (5,000)                3.68            3.68
                                                     ---------------   -----------------   -------------
Balance outstanding, December 31, 1996                      281,000           1.63-5.00            3.33
Granted                                                      93,000           2.13-2.50            2.15
Expired                                                     (9,000)           3.68-5.00            4.22
                                                     ---------------   -----------------   -------------
Balance outstanding, December 31, 1997                      365,000           1.63-4.75            3.01
Granted                                                     380,000           5.56-7.13            5.60
Exercised                                                 (28,000)           2.13-4.75            2.75
Expired                                                    (18,000)           2.13-6.50            4.10
                                                     ---------------   -----------------   -------------
Balance outstanding, December 31, 1998                      699,000    $      1.63-7.13         $  4.38
                                                     ===============   =================   =============
Exercisable, December 31, 1998                              292,000    $      1.63-7.13         $  3.36
                                                     ===============   =================   =============
</TABLE>


                                      F-15
<PAGE>   29

               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 -     STOCK OPTION PLANS (CONTINUED)

              The Company has adopted the disclosure requirements of Statement
              of Financial Accounting Standards No. 123 (SFAS No. 123),
              "Accounting for Stock-Based Compensation". The Company applies
              Accounting Principles Board Opinion No. 25 and related
              interpretations in accounting for its plans. Had compensation cost
              for the Company's stock-based compensation plans been determined
              based on the fair value at the grant dates, consistent with SFAS
              No. 123, the Company's net loss and net loss per share would have
              been adjusted to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                             1998              1997                1996
<S>                                                    <C>               <C>               <C>
Net loss applicable to common stockholders:
As reported                                            $  (11,646,000)   $   (3,695,000)   $   (8,908,000)
Pro forma                                                 (12,009,000)       (3,770,000)       (8,920,000)
Net loss per share applicable to common stockholders:
As reported                                                     (1.58)             (.63)            (2.18)
Pro forma                                                       (1.63)             (.64)            (2.19)
</TABLE>

              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 in 1998,
              1997 and 1996, respectively: risk-free interest rate of 5%, 6% and
              6%, respectively; no dividend yield; expected lives of 3 to 10
              years; and expected volatility of 91%, 64% and 62%, respectively.

NOTE 12 -     LOSS ON DISCONTINUED PRODUCT LINE

              During 1997, the Company completed the transition of the existing
              in-car rental accounts to portable rentals. In conjunction with
              this transition, the Company attempted to develop alternate uses
              for the in-car cellular telephones as well as the capitalized
              software associated with the in-car cellular rental business.
              Although management believes that there are viable uses for such
              assets, the probability that such uses will be successful is not
              known. As a result, the Company reduced the in-car cellular phones
              and the capitalized software to net realizable value and
              classified them on the balance sheet as assets held for
              disposition. The company wrote-off the balance of the in-car
              cellular phones during the year ended December 31, 1998.

NOTE 13 -     SAVINGS AND RETIREMENT PLAN

              In June 1996, the Company formed a savings and retirement plan
              (the Plan) which covers substantially all eligible employees.
              Participants in the Plan may elect to make contributions up to a
              maximum of 20% of their compensation. For each participant, the
              Company will make a matching contribution of one-half of the
              participant's contributions, up to 5% of the participant's
              compensation. Matching contributions may be made in the form of
              the Company's common stock and are vested at the rate of 33% per
              year based on years of employment. Prior to the formation of the
              Plan, the Company participated in a plan maintained by its former
              parent STFI. Matching contributions in STFI's plan were made in
              STFI common stock. For the years ended December 31, 1998, 1997 and
              1996, the Company's matching contributions were $104,000, $71,000
              and $40,000, respectively.


                                      F-16
<PAGE>   30

               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 -     INCOME TAXES

              A reconciliation of income tax benefit, to the federal statutory
              rate follows:

<TABLE>
<CAPTION>
                                                        Years Ended December 31,
                                                        ------------------------
                                                        1998     1997     1996
                                                        ----     ----     ----
<S>                                                     <C>      <C>      <C>
Income tax benefit on reported pretax
 loss at federal statutory rate                         (34.0)%  (34.0)%  (34.0)%
State net operating losses                              (6.0)     (6.0)    (6.0)
Net operating loss carryforward not recognized          40.0      40.0     40.0
                                                        ----      ----     ----
Income taxes                                             0.0%      0.0%     0.0%
                                                        ====      ====     ====
</TABLE>

              At December 31, 1998 and 1997, the Company recorded net deferred
              tax assets of approximately $9,702,000 and $5,511,000,
              respectively, and valuation allowances in the same amounts. The
              valuation allowances were increased by $4,191,000, $1,111,000 and
              $3,296,000, respectively, for the years ended December 31, 1998,
              1997 and 1996, respectively. SFAS No. 109 requires that the
              Company record a valuation allowance when it is "more likely than
              not that some portion or all of the deferred tax asset will not be
              realized". The ultimate realization of the deferred tax asset
              depends on the Company's ability to generate sufficient taxable
              income.

              The net deferred tax assets and liabilities as of December 31,
              1998 and 1997 are as follows:

                                                         1998            1997

Deferred tax assets:
Net operating loss carryforwards                     $ 9,289,000    $ 5,164,000
Allowance for doubtful accounts                          367,000        390,000
Asset basis difference, intangible assets                 57,000
                                                     -----------    -----------
                                                       9,713,000      5,554,000
                                                     -----------    -----------
Deferred tax liabilities, asset basis
 difference for equipment and intangible assets          (11,000)       (43,000)
                                                     -----------    -----------
Deferred tax asset, net                                9,702,000      5,511,000
Valuation allowance for deferred tax asset            (9,702,000)    (5,511,000)
                                                     -----------    -----------
                                                     $        --    $        --
                                                     ===========    ===========

              At December 31, 1998, the Company has federal net operating loss
              carryforwards of approximately $23,223,000, which can be utilized
              against future taxable income and expire through the year 2018.
              Net operating losses available for state income tax purposes are
              less than those for federal purposes and generally expire earlier.


                                      F-17
<PAGE>   31

               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 -     COMMITMENTS AND CONTINGENCIES

              The Company has leases for office facilities and equipment, which
              expire in various years through December 2002. Future aggregate
              minimum annual rental payments as of December 31, 1998 are as
              follows:

<TABLE>
<CAPTION>
Year ending December 31
     <S>                                               <C>
           1999                                            $       696,000
           2000                                                    688,000
           2001                                                    662,000
           2002                                                    112,000
</TABLE>

              Rent expense for the years ended December 31, 1998, 1997 and 1996
              was approximately $558,000, $352,000 and $418,000, respectively.
              Leased equipment expense for the year ended December 31, 1998 was
              approximately $61,000.

              The Company, in the ordinary course of business, is a party to
              various legal actions, the outcome of which, in the opinion of
              management, will not have a material adverse effect on results of
              operations, cash flows or financial position of the Company.

              In connection with a vendor's requirement, the Company has a
              standby letter of credit with a bank in the amount of $400,000.
              This letter of credit expires March 29, 1999 and is collateralized
              by certain assets of the Company.

NOTE 16 -     DEPENDENCE UPON KEY RELATIONSHIPS AND MAJOR CUSTOMERS

              Approximately 24% and 12%, related to the debit segment, and 19%
              and 10%, related to the rental segment, of the Company's revenues
              for 1998 were attributable to four customers. Approximately 26%,
              related to the debit segment, and 24%, 13% and 11%, related to the
              rental segment, of the Company's revenues for 1997 were
              attributable to four customers. Approximately 21%, 16%, and 13%,
              related to the rental segment of the Company's revenues for 1996
              were attributable to three customers. The agreements with these
              companies are terminable with cause and require written
              notification, typically effective upon relatively short notice.
              The termination of any one of these agreements would have a
              material adverse effect on the Company. In 1998, certain of the
              agreements relating to 36% and 26% of the Company's revenues in
              1998 and 1997, respectively, were terminated.

NOTE 17 -     LOSS ON CONTRACT CANCELLATION

              In 1996, in connection with the transition of the in-car cellular
              phone service to portable rentals, the Company recognized a loss
              of approximately $980,000 relating to the cancellation of a
              contract for the production of certain in-car telecommunications
              equipment.


                                      F-18
<PAGE>   32

               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 18 -     LOSS ON DISTRIBUTOR CONTRACT

              During 1998, the Company entered into an agreement with SmarTalk
              TeleServices, Inc. ("SmarTalk") which designated the Company as
              the exclusive nationwide cellular service provider for SmarTalk's
              prepaid cellular phone program with respect to certain retail
              distributor channels, including nationwide retail stores and
              television infomercials. The agreement required SmarTalk to
              provide the cellular phone to the customer and the Company to
              provide all services relating to the activation of the phone,
              including, but not limited to, the maintenance of all individual
              phone lines. Subsequent to the inception of the nationwide
              program, SmarTalk incurred financial difficulties and eventually
              filed for bankruptcy protection. Prior to the filing, STC entered
              into a new agreement (the "Transition Agreement") pursuant to
              which the Company and SmarTalk agreed to terminate their
              relationship through a brief transition period.

              Subsequent to signing of the Transition Agreement, SmarTalk failed
              to pay to the Company all amounts due under such agreement. As a
              result of its problems with SmarTalk, the Company elected to take
              a write-off of certain assets in 1998. In addition, the Company
              reclassified expenses incurred during the fourth quarter of 1998,
              in connection with the SmarTalk problems.

NOTE 19 -     SUBSEQUENT EVENT

              On February 5, 1999, the Company completed a $15 million private
              placement, issuing an aggregate of 15,000 shares of a new Series C
              Convertible Preferred Stock, $.01 par value, and warrants to
              purchase an aggregate of 300,000 shares of common stock, at $9 per
              share. Each share of Series C Convertible Preferred Stock is
              convertible into common stock of the Company based upon certain
              formulas and limitations. The warrants expire in February 2004 and
              are subject to mandatory exercise, subject to certain conditions.
              The Company has the right to require conversion of all of the
              outstanding shares of Series C Convertible Preferred Stock at any
              time after February 5, 2000, if the closing bid price for the
              Company's common stock is greater than $15 for fifteen consecutive
              trading days. The Series C Convertible Preferred Stock may be
              redeemed by the holder upon certain events.

NOTE 20 -     SEGMENT INFORMATION

              The Company adopted Statement of Financial Accounting Standards
              No. 131 (SFAS 131), "Disclosures about Segments of an Enterprise
              and Related Information," effective January 1, 1998. SFAS 131
              requires disclosures of segment information on the basis that is
              used internally for evaluating segment performance and deciding
              how to allocate resources to segments.

              Segment information listed below reflects the three principal
              business units of the Company (as described in Note 1). Each
              segment is managed according to the products which are provided to
              the respective customers and information is reported on the basis
              of reporting to the Company's Chief Operating Decision Maker
              (CODM). The Company's CODM uses segment information relating to
              the operations of each segment, however, segment balance sheet
              data is not prepared or used by the CODM.


                                      F-19
<PAGE>   33

               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 20 -     SEGMENT INFORMATION (CONTINUED)

              Operating segment information for 1998, 1997, and 1996 is
              summarized as follows:

<TABLE>
<CAPTION>
                             RENTAL           DEBIT        ACTIVATION      CORPORATE      CONSOLIDATED
<S>                       <C>             <C>             <C>             <C>             <C>
1998
 Revenues                 $ 14,037,000    $ 12,737,000    $  1,426,000    $         --    $ 28,200,000
                          ============    ============    ============    ============    ============
 Operating loss           $   (777,000)   $ (5,942,000)   $   (365,000)   $ (3,604,000)   $(10,688,000)
 Interest expense                                                              (952,000)       (952,000)
                          ------------    ------------    ------------    ------------    ------------
 Loss before
  income taxes            $   (777,000)   $ (5,942,000)   $   (365,000)   $ (4,556,000)   $(11,640,000)
                          ============    ============    ============    ============    ============

                             RENTAL           DEBIT        ACTIVATION      CORPORATE      CONSOLIDATED

1997
 Revenues                 $ 15,242,000    $  6,299,000    $  2,657,000    $         --    $ 24,198,000
                          ============    ============    ============    ============    ============
 Operating income (loss)  $   (965,000)   $  1,471,000    $     86,000    $ (4,045,000)   $ (3,453,000)
 Interest expense                                                             (232,000)       (232,000)
                          ------------    ------------    ------------    ------------    ------------
 Income (loss) before
  income taxes            $   (965,000)   $  1,471,000    $     86,000    $ (4,277,000)   $ (3,685,000)
                          ============    ============    ============    ============    ============

                             RENTAL           DEBIT        ACTIVATION      CORPORATE      CONSOLIDATED

1996
 Revenues                 $ 16,339,000    $  1,516,000    $  3,059,000    $         --    $ 20,914,000
                          ============    ============    ============    ============    ============
 Operating loss           $ (2,920,000)   $    (96,000)   $   (160,000)   $ (3,712,000)   $ (6,888,000)
 Interest expense                                                             (906,000)       (906,000)
 Other expense                (980,000)                                                       (980,000)
                          ------------    ------------    ------------    ------------    ------------
 Loss before
  income taxes            $ (3,900,000)   $    (96,000)   $   (160,000)   $ (4,618,000)   $ (8,774,000)
                          ============    ============    ============    ============    ============
</TABLE>


                                      F-20
<PAGE>   34
                SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARY

                                   SCHEDULE II
                        VALUATION AND QUALIFYING ACCOUNTS
                  Years Ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>
                                                      Balance at         Charged to                            Balance at
                                                      Beginning          Costs and                                End
          Description                                  of Year            Expenses        Deductions (1)        of Year
          -----------                               ---------------    ---------------    ---------------    ---------------
<S>                                                 <C>                <C>                <C>                <C>
YEAR ENDED DECEMBER 31, 1998:
Allowance for doubtful accounts                     $      991,000     $    1,579,000     $    1,674,000     $      896,000
                                                    ===============    ===============    ===============    ===============
YEAR ENDED DECEMBER 31, 1997:
Allowance for doubtful accounts                     $    1,392,000     $    1,341,000     $    1,742,000     $      991,000
                                                    ===============    ===============    ===============    ===============
YEAR ENDED DECEMBER 31, 1996:
Allowance for doubtful accounts                     $      685,000     $    1,772,000     $    1,065,000     $    1,392,000
                                                    ===============    ===============    ===============    ===============
</TABLE>

(1) Represents write off of uncollectible accounts, net of recoveries.


                                       S-1
<PAGE>   35
                                    PART III
ITEM 10

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

ITEM 11

EXECUTIVE COMPENSATION

ITEM 12

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The Company incorporates by reference items 10, 11, 12, and 13 in its Proxy
Statement for its Annual Meeting of Stockholders to be held on May 20, 1999 (to
be filed with the Securities and Exchange Commission on or before April 30,
1999).

                                     PART IV

ITEM 14

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

(a) FINANCIAL STATEMENTS

Report of Independent Public Accountants

Consolidated Balance Sheets as of December 31, 1998 and 1997.

Consolidated Statements of Operations for the years ended December 31, 1998,
1997 and 1996.

Consolidated Statements of Stockholders' Equity (Deficiency) for the years ended
December 31, 1998, 1997 and 1996.

Consolidated Statements of Cash Flows for the years ended December 31, 1998,
1997 and 1996.

Notes to Consolidated Financial Statements.

Financial Statement Schedules: Schedule II.

(b) REPORTS ON FORM 8-K

     On February 12, 1999, the Company filed a report on Form 8-K, Item 5,
detailing that the Company entered into an agreement on February 5, 1999 to
close on a $15 million private placement of equity with 20 investors, led by
Marshall Capital Management, Inc., an affiliate of Credit Suisse First Boston,
and a number of European-based institutional investors. Oakes, Fitzwilliams &
Co. S.A. of London acted as placement agent for the Company in connection with
the sales to the European investors.

     Pursuant to a Securities Purchase Agreement entered into between the
Company and the investors (the "Securities Purchase Agreement"), the Company
issued an aggregate of 15,000 shares of a new Series C Convertible 
<PAGE>   36
Preferred Stock, $.01 per share, and Warrants to purchase an aggregate of
300,000 shares of Common Stock, $.01 par value, of the Company. Each share of
Series C Convertible Preferred Stock is convertible into Common Stock of the
Company in accordance with the formula described below. The Company intends to
use the proceeds from the offering to repay approximately $5.5 million of
outstanding indebtedness and for general corporate purposes.

     Description of Series C Convertible Preferred Stock. The following
description of the rights and preferences of the Series C Convertible Preferred
Stock is a summary, and is qualified in its entirety by reference to the entire
text of the Certificate of Designations, Preferences and Rights of the Series C
Convertible Preferred Stock (the "Certificate of Designation"), which is
attached as an exhibit to this Current Report on Form 8-K.

          Voting. The holders of shares of Series C Convertible Preferred Stock
are not entitled to vote with respect to the business, management or affairs of
the Company.

          For so long as any shares of Series C Convertible Preferred Stock are
outstanding, the following matters, however, will require the approval of the
holders of at least two-thirds of the then-outstanding shares of Series C
Convertible Preferred Stock:

               (i) altering, changing, modifying or amending the terms of the
          Series C Convertible Preferred Stock or the terms of any other stock
          of the Company so as to adversely affect the Series C Convertible
          Preferred Stock;

               (ii) creating any new class or series of capital stock having a
          preference over or ranking pari passu with the Series C Convertible
          Preferred Stock as to redemption or distribution of assets upon a
          Liquidation Event (as defined in the Certificate of Designation) or
          any other liquidation, dissolution or winding up of the Company;

               (iii) increasing the authorized number of shares of Series C
          Convertible Preferred Stock;

               (iv) reissuing any shares of Series C Convertible Preferred Stock
          which have been converted or redeemed in accordance with the terms of
          the Certificate of Designation;

               (v) issuing any Pari Passu Securities or Senior Securities (each
          as defined in the Certificate of Designation) (other than
          non-convertible debt securities or debt securities which are
          convertible into or exchangeable for Common Stock of the Company or
          any other equity or convertible security of the Company junior to the
          Series C Convertible Preferred Stock);

               (vi) redeeming, declaring, paying or making any provision for any
          dividend or distribution with respect to the Common Stock of the
          Company or any other capital stock of the Company ranking junior to
          the Series C Convertible Preferred Stock as to the distribution of
          assets upon liquidation, dissolution or winding up of the Company; and

               (vii) issuing any Series C Convertible Preferred Stock except
          pursuant to the terms of the Securities Purchase Agreement, a copy of
          which is filed as an exhibit to this Current Report on Form 8-K.

          Dividends. The Series C Convertible Preferred Stock will not bear
dividends.

          Liquidation. Upon the liquidation, dissolution or winding up of the
Company, the holders of Series C Convertible Preferred Stock, before any
distribution to the holders of Junior Securities (as defined in the Certificate
of Designation) but after payment to holders of Senior Securities, will be
entitled to receive an amount equal to the Stated Value (defined below) plus the
Premium (defined below) accrued on its Series C Convertible Preferred Stock in
accordance with the terms of the Certificate of Designation (the "Liquidation
Preference").

          Conversion. Each share of Series C Convertible Preferred Stock is
convertible into shares of Common Stock of the Company in accordance with the
following formula:
<PAGE>   37
         Number of Shares of       Stated Value plus accrued Premium
                               =  ----------------------------------- 
         Common Stock Issuable             Conversion Price

The "Stated Value" is equal to $1,000 per share. The "Premium" is equal to 6%,
payable in Common Stock or cash, at the Company's option (subject to certain
conditions), upon conversion. The "Conversion Price" is equal to the lesser of
$7 and the Variable Conversion Price. The "Variable Conversion Price" is equal
to the average of the lowest Closing Bid Prices (as defined in the Certificate
of Designation) for the Common Stock of the Company on any five (5) consecutive
trading days during the period of fifteen (15) trading days immediately prior to
the conversion date. If the Company's Common Stock trades above $11 per share
(subject to adjustment upon the occurrence of certain events, including but not
limited to a stock split or dividend or a merger or consolidation of the
Company) for ten (10) consecutive days, and if at all times during such period,
certain conditions set forth in the Certificate of Designation are satisfied,
the Conversion Price will be equal to $7 thereafter.

          If, following conversion, the Company fails to deliver shares of its
Common Stock to an investor in accordance with the Certificate of Designation,
it may incur monetary and other penalties (including, in certain circumstances,
mandatory redemption of the Series C Convertible Preferred Stock).

          On February 5, 2004, all shares of Series C Convertible Preferred
Stock then outstanding will be automatically converted into shares of Common
Stock at the then-prevailing Conversion Price.

          Conversion Limitations. The number of shares of Common Stock issued
upon conversion of all outstanding shares of Series C Convertible Preferred
Stock may not exceed the following amounts during the periods specified (each, a
"Conversion Limit Amount"):

<TABLE>
<CAPTION>
                                                                     Conversion
                           Period                                   Limit Amount
<S>                                                                  <C>
         During the 1st Year Following the Issue Date                3,975,000
         During the 2nd Year Following the Issue Date                4,200,000
         During the 3rd Year Following the Issue Date                4,425,000
         During the 4th Year Following the Issue Date                4,650,000
         Following the 4th Anniversary of the Issue Date             4,875,000
</TABLE>

The Conversion Limit Amount is subject to adjustment in accordance with the
terms of the Certificate of Designation. In addition, until the Company obtains
the approval of the holders of a majority of the Company's outstanding Common
Stock, the number of shares of Common Stock issued upon conversion of Series C
Convertible Preferred Stock or exercise of the Warrants may not exceed 19.99% of
the number of shares of Common Stock outstanding on February 5, 1999, or
1,512,661 shares. The Company has agreed to seek such stockholder approval (the
"Stockholder Approval") at a meeting of stockholders to be held no later than
May 31, 1999. As of the date of this Current Report, but for the limitation
described in the second preceding sentence, the 15,000 shares of Series C
Convertible Preferred Stock would be convertible into approximately 2,142,857
shares of Common Stock of the Company, or 28% of the total number of shares of
Common Stock issued and outstanding on February 5, 1999. Further, the total
number of shares of Common Stock issuable upon conversion of the Series C
Convertible Preferred Stock and exercise of the Warrants as of the date of this
Current Report, but for the aforementioned limitation, would be approximately
2,442,857 shares, or 32% of the total number of shares of Common Stock issued
and outstanding on February 5, 1999.

          Mandatory Conversion. The Company has the right to require conversion
of all of the outstanding shares of Series C Convertible Preferred Stock at any
time after February 5, 2000 if the Closing Bid Price for the Company's Common
Stock is greater than $15.00 for fifteen (15) consecutive trading days, subject
to satisfaction of certain conditions set forth in the Certificate of
Designation.

          Mandatory Redemption. Each purchaser of Series C Convertible Preferred
Stock will have the right upon the occurrence of a Mandatory Redemption Event
(as such term is defined in the Certificate of Designation, which term includes,
among other things, failure to receive the Stockholder Approval by May 31, 1999
), to require the Company to redeem all or any part of such purchaser's Series C
Convertible Preferred Stock for a price (the
<PAGE>   38
"Mandatory Redemption Price") equal to the greater of (a) the Liquidation
Preference of the shares being redeemed multiplied by 115% and (b) an amount
calculated on the basis of the applicable Conversion Price and the price at
which the Common Stock of the Company is then trading.

          If the Corporation fails to pay the Mandatory Redemption Price within
ten (10) business days of the mandatory redemption date, the holder of Series C
Convertible Preferred Stock shall have the right to regain its rights as such a
holder and, upon written notice to such effect from the holder, the Company
shall return to such holder the certificates representing the Series C
Convertible Preferred Stock delivered to the Company in connection with the
mandatory redemption. In such event, the Conversion Price otherwise applicable
to future conversions of the Series C Convertible Preferred Stock shall be
reduced by one percent for each day beyond such tenth business day in which the
failure to pay continued, until the date of such notice, but the maximum
reduction of the Conversion Price shall be fifty percent.

          Optional Redemption. The Company will have the right, upon the
satisfaction of certain Optional Redemption Conditions (as defined in the
Certificate of Designation), to redeem any Series C Convertible Preferred Stock
submitted for conversion at a Conversion Price that is less than $7 (subject to
adjustment upon the occurrence of certain events set forth in the Certificate of
Designation) for a price equal to an amount representing an annualized return of
110% on the Stated Value of the Series C Convertible Preferred Stock being
redeemed, plus accrued Premium.

          Preemptive Rights. Pursuant to the Securities Purchase Agreement, each
purchaser of the Series C Convertible Preferred Stock will have the right, upon
the issuance of certain equity securities by the Company, to either purchase a
pro rata share of such securities or, at the option of such purchaser, to
exchange all or any part of such purchaser's shares of Series C Convertible
Preferred Stock for an equal amount of such securities.

          Description of the Warrants. Pursuant to the Securities Purchase
Agreement, each investor received a Warrant for the purchase of 20,000 shares of
Common Stock of the Company for each $1 million of Series C Convertible
Preferred Stock issued. The Warrants are exercisable at $9 per share (subject to
adjustment upon the occurrence of certain events set forth in the Warrants). The
Warrants will expire five (5) years after the date of issuance, and are subject
to mandatory exercise, subject to certain conditions set forth therein, if the
Company's Common Stock trades at or above $18 per share (subject to adjustment
upon the occurrence of certain events set forth in the Warrants) for five (5)
consecutive trading days. Cashless exercise is permitted under the terms of the
Warrants and is required for any exercise after February 5, 2001.

          If, following exercise of the Warrants, the Company fails to deliver
shares of its Common Stock to an investor in accordance with the terms of the
Warrants, it may incur monetary and other penalties.

     Description of the Registration Rights Agreement. In accordance with the
Securities Purchase Agreement, the Company entered into a Registration Rights
Agreement with the investors, pursuant to which the Company is required, within
thirty (30) days after February 5, 1999, to file with the Securities and
Exchange Commission a registration statement on Form S-3 covering the resale of
the Common Stock issuable upon conversion of the Series C Convertible Preferred
Stock and exercise of the Warrants. The Company may incur monetary and other
penalties (including in certain circumstances mandatory redemption of the Series
C Convertible Preferred Stock) in the event that such registration statement is
not filed within such 30-day period or declared effective in accordance with the
terms of the Registration Rights Agreement, or if such registration statement
becomes unavailable for the resale of shares of Common Stock of the Company and
such unavailability continues for a period set forth in the Registration Rights
Agreement.

The Company included exhibits 4.1, 4.2, 4.3 and 4.4, in accordance with form
8-K, item 5. The exhibits included the Certificate of Designations, Preferences
and Rights of the Series C Convertible Preferred Stock, the Securities Purchase
Agreement, the Registration Rights Agreement and the Form of Warrant to Purchase
Common Stock of the Company, all dated January 28, 1999.
<PAGE>   39
(c) EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NO.                DESCRIPTION OF EXHIBIT
-----------                ----------------------
<S>       <C>
3.(i)     Second Restated Certificate of Incorporation, dated June 25, 1998.

3.(ii)    Restated By-laws. Incorporated by reference from Exhibit 3.(ii) to the
          Company's Quarterly Report on Form 10-Q dated May 15, 1998.

4.1       Specimen of Common Stock Certificate. Incorporated by reference from
          exhibit 4.2 to the Company's Registration Statement of Form SB-2 filed
          with Amendment No. 3 to such Registration Statement dated January 27,
          1995.

4.2       Certificate of Designations, Preferences and Rights of Series B
          Convertible Preferred Stock of Shared Technologies Cellular, Inc.
          dated August 19, 1996. Incorporated by Reference from Exhibit 4.1 to
          the Company's Form 8-K dated August 19, 1996 and filed September 5,
          1996.

4.3       Series B Convertible Preferred Stock Purchase Agreement by and between
          International Capital Partners, Inc. and the Company dated August 19,
          1996 (agreement between STFI and the Company is substantially the
          same), including form of Common Stock Warrant. Incorporated by
          Reference from Exhibit 4.2 to the Company's Form 8-K dated August 19,
          1996 and filed September 15, 1996.

4.4       Equity Holders Agreement by and among International Capital Partners,
          Inc., Zeisiger Capital Group, LLC and Shared Technologies Fairchild
          Inc. dated August 19, 1996. Incorporated by Reference from Exhibit 4.3
          to the Company's Form 8-K dated August 19, 1996 and filed September
          15, 1996.

4.5       Purchase Agreement, Common Stock Warrant Certificate and Option
          Agreement by and among RHI Holdings, Inc., and the Company dated
          December 27, 1996. Incorporated by Reference from Exhibit 4.1, 4.2,
          4.3 respectively to the Company's Form 8-K dated December 27, 1996,
          and filed January 22, 1997.

4.6       Pledge Agreement, dated as of April 15, 1998, by and between Shared
          Technologies Cellular, Inc., as Pledgor, Anthony D. Autorino and
          Salomon Brothers Holding Company Inc. as Lenders and Salomon Brothers
          Holding Company Inc. as Collateral Agent. Incorporated by Reference
          from Exhibit 4.3 to the Company's Quarterly Report on Form 10-Q dated
          May 15, 1998.

4.7       Form of Registration Rights Agreement dated as of April 15, 1998,
          between Shared Technologies Cellular, Inc., and Salomon Brothers
          Holding Company Inc. Incorporated by Reference from Exhibit 4.4 to the
          Company's Quarterly Report on Form 10-Q dated May 15, 1998.

4.8       Form of Warrant Purchase Agreement, dated as of April 15, 1998,
          between Shared Technologies Cellular, Inc., and Salomon Brothers
          Holding Company Inc. Incorporated by Reference from Exhibit 4.5 to the
          Company's Quarterly Report on Form 10-Q dated May 15, 1998.

4.9       Form of Shared Technologies Cellular, Inc., Common Stock Purchase
          Warrant, dated April 15, 1998, in favor of Salomon Brothers Holding
          Company Inc. or its registered assigns. Incorporated by Reference from
          Exhibit 4.6 to the Company's Quarterly Report on Form 10-Q dated May
          15, 1998.

4.10      Form of Subscription Agreement dated May 1998 between Shared
          Technologies Cellular, Inc., and the Purchasers (as defined therein),
          including form of Convertible Note. Incorporated by Reference from
          Exhibit 4.7 to the Company's Quarterly Report on Form 10-Q dated May
          15, 1998.

4.11      Certificate of Designations, Preferences and Rights of the Series C
          Convertible Preferred Stock of Shared Technologies Cellular, Inc.
          dated January 28, 1999. Incorporated by Reference from Exhibit 4.1 to
          the Company's Form 8-K dated February 5, 1999 and filed February 12,
          1999.
</TABLE>
<PAGE>   40
<TABLE>
<S>       <C>
4.12      Securities Purchase Agreement among the Company and the Purchasers
          dated as of January 28, 1999. Incorporated by Reference from Exhibit
          4.2 to the Company's Form 8-K dated February 5, 1999 and filed
          February 12, 1999.

4.13      Registration Rights Agreement among the Company and the Purchasers
          dated as of January 28, 1999. Incorporated by Reference from Exhibit
          4.3 to the Company's Form 8-K dated February 5, 1999 and filed
          February 12, 1999.

4.14      Form of Warrant to Purchase Common Stock of the Company issued to the
          Purchasers. Incorporated by Reference from Exhibit 4.4 to the
          Company's Form 8-K dated February 5, 1999 and filed February 12, 1999.

10.1      Agreement by and between the Hertz Corporation and the Company dated
          October 1, 1996. Incorporated by reference from Exhibit 10.1 to the
          Company's Form 10-K dated March 27, 1997.

10.2      Agreement by and between National Car Rental System, Inc. and the
          Company dated July 1, 1996. Incorporated by reference from Exhibit
          10.2 to the Company's Form 10-K dated March 27, 1997.

10.3      Lease Agreement by and between Putnam Park Associated and the Company
          dated January 1, 1995. Incorporated by reference from Exhibit 10.10 to
          the Company's Registration Statement on Form SB-2 filed with Amendment
          No. 1 to such Registration Statement dated January 4, 1995.

10.4      Sample Customer Service Agreement. Incorporated by reference from
          Exhibit 10.15 to the Company's Registration Statement on Form SB-2
          filed with Amendment No. 1 to such Registration Statement dated
          January 4, 1995.

10.5      Sample Customer Service Agreement. Incorporated by reference from
          Exhibit 10.16 to the Company's Registration Statement on Form SB-2
          filed with Amendment No. 1 to such Registration Statement dated
          January 4, 1995.

10.6      Shared Technologies Cellular, Inc. Savings and Retirement Plan,
          Effective as of April 1, 1996. Incorporated by reference from Exhibit
          10.15 to the Company's Form 10-K dated March 27, 1997.

10.7      Agreement by and between Budget Rent A Car Corporation and the Company
          dated July 28, 1997. Incorporated by reference form Exhibit 10.16 to
          the Company's Form 10-K dated March 31, 1998.

10.8      Agreement by and between Thorn Americas, Inc. and the Company dated
          December 1, 1996. Incorporated by reference form Exhibit 10.17 to the
          Company's Form 10-K dated March 31, 1998.

10.9      1994 Stock Option Plan, as amended, November 11, 1998.

10.10     1994 Director Option Plan, as amended, November 11, 1998.

10.11*    Prepaid Cellular Reseller Agreement by and between the Company and MCI
          Telecommunications Corporation and WorldCom Technologies, Inc. dated
          February 19, 1999.

21        List of subsidiary of the registrant.

27        Financial Data Schedule
</TABLE>

---------- 
*         Confidential treatment as to certain portions has been
          requested until April 1, 2004. The copy filed as an exhibit omits the
          information subject to the confidentiality treatment.

<PAGE>   41
                                   SIGNATURES


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

                         SHARED TECHNOLOGIES CELLULAR, INC.
                         (Registrant)
          By
                         \s\ Anthony D. Autorino
                         Anthony D. Autorino
                         Chief Executive Officer and Director
                         Date:  March 30, 1999
          By
                         \s\ Vincent DiVencenzo
                         Vincent DiVincenzo
                         Chief Financial Officer and Director
                         Date:  March 30, 1999

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 dates indicated.

By: /s/ Anthony D. Autorino                 By: /s/ William A. DiBella
Anthony D. Autorino                         William A. DiBella
Chief Executive Officer                     Director
and Director                                Date:  March 30, 1999
Date: March 30, 1999

By: /s/ Ajit G. Hutheesing                  By: /s/ Thomas H. Decker
Ajit G. Huthessing                          Thomas H. Decker
Director                                    Director
Date: March 29,1999                         Date:  March 29, 1999

By: /s/ Vincent DiVincenzo                  By: /s/ Nicholas E. Sinacori
Vincent DiVincenzo                          Nicholas E. Sinacori
Chief Financial Officer                     Director
and Director                                Date: March 29, 1999
Date: March 30,1999

By: /s/ Bruce Carswell
Bruce Carswell
Director
Date: March 29, 1999