<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, 1999

                                                     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
<TABLE>
<S>                                                            <C>
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
</TABLE>

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 10, 2000 was approximately $49,565,000 based on the
average of the closing bid and asked prices as reported on such date in the
over-the-counter market.

As of March 10, 2000, there were 8,819,806 shares outstanding of the
registrant's Common Stock, $.01 par value.
<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
telecommunications product and services provider, offering prepaid wireless,
paging, long distance and local services through various national distribution
channels in over 690 of approximately 750 Cellular Geographical Service Areas
("CGSA") within the United States. The Company also rents cellular telephones to
business and leisure travelers and to individuals at sporting events. As a
reseller or agent for cellular and PCS carriers, the Company offers cellular
service to approximately 98% of the U.S. population. STC also performs
nationwide cellular activation services through a variety of retail and
commercial outlets. Under its wholly-owned subsidiary, CellEase.com, Inc.
("CellEase"), the Company has expanded the scope of its prepaid cellular
services. CellEase is primarily a business-to-business information technology
("IT") services company providing back-office service bureau functions, advanced
platform, and integrated e-commerce and direct marketing solutions to the
telecommunications industry. Utilizing proprietary systems developed over
several years, CellEase offers carriers and distribution partners an array of
services including: an universal prepaid redemption platform, interactive voice
response ("IVR") facilities, point-of-sale activation ("POSA") card services,
inter-carrier communications services and one-stop shopping, e-commerce and
direct marketing programs that offer multiple telecommunications services.

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. As of December 31, 1999, the Company had approximately
3,500 cellular telephones available to rent at approximately 300 distribution
outlets.

In April 1995, the Company completed its initial public offering, pursuant to
which the Company sold 950,000 shares of its Common Stock, $.01 par value
("Common Stock"). Prior to the offering, the Company was an approximately
86%-owned subsidiary of Shared Technologies Fairchild Inc. ("STFI").

In May 1995, the Company commenced management of, and subsequently acquired the
outstanding capital stock of The Cellular Hotline, Inc., ("Hotline"), a cellular
telephone activation service provider for a purchase price of $1,329,000.

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 for a purchase price of $3,725,000.

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
shares of its Series A Convertible Preferred Stock, $.01 par value per share
(the "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 outstanding shares of Series A Stock were
converted into 1,146,450 shares of Common Stock. In August 1996, the Company's
stockholders approved the Company's cancellation of the Certificate of
Designations for 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

                                       2
<PAGE>   3
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. 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 August 1997, all outstanding
shares of Series B Stock were 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.

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. In connection with the debt
financing, the Company issued to Mr. Autorino, ICP, Salomon and the private
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. The Company used a portion of the
proceeds raised in February 1999 (see below) to repay the $4,000,000 of debt.

In May 1998, the Company issued to nine investors through a private offering 5%
convertible notes in the aggregate principal amount of $2,400,000 (the "Notes").
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. $1,950,000 of such Notes were converted into 390,000
shares of Common Stock as of March 27, 2000.

In February 1999, the Company completed a $15 million private placement of
15,000 shares of Series C Convertible Preferred Stock ("Series C Shares"). Each
purchaser of the Series C Shares has the right, upon the occurrence of certain
events, to require the Company to redeem all or any part of such purchaser's
Series C Shares. Therefore, the Series C Shares have not been reflected in
Stockholders' Deficit. The number of shares of Common Stock issuable

                                       3
<PAGE>   4
upon the conversion of the Series C Shares includes a premium of 6%, per annum.
The Company accounted for the premium of 6% as a preferred stock dividend. The
Series C private placement also included Warrants to purchase an aggregate of
300,000 shares of Common Stock. The Warrants were valued at $75,000 and the
value was treated as a "discount" to the Series C Shares and such discount is
being accreted as a preferred stock dividend over the five-year term of the
Warrants. In accordance with Emerging Issues Task Force Topic D-60, the Company
recognized a beneficial conversion feature in the amount of $4,018,000 as a
one-time non-cash preferred stock dividend in the first quarter of 1999. The
amount represented the difference between the conversion price of $7 per share
at the date of issuance of the Series C Shares, February 5, 1999, and the $8 7/8
market price of Common Stock on that date. 1,000 of such Series C Shares were
converted into 148,000 shares of Common Stock as of March 27, 2000.

In July 1999 and as amended in March 2000, the Company entered into a $5 million
two-year revolving credit facility with State Street Bank and Trust Company,
which subsequently assigned its interest in such credit facility to Citizens
Bank of Massachusetts (the "Bank"). The availability of the credit facility is
based on a percentage of eligible receivables and includes covenants requiring
certain levels of prepaid lines and operating results over time. Advances under
the loan are to be used for working capital and general corporate purposes. The
loan is secured by substantially all of the Company's assets. As of December 31,
1999, the Company had approximately $2,859,000 available under the terms of the
credit facility, of which none was outstanding and $2,750,000 was committed to
support various letters of credit. In connection with the loan, the Company
issued to the Bank a ten-year warrant for the purchase of 150,000 shares of
Common Stock at an exercise price of $10 per share, subject to certain
adjustments. The warrant is redeemable by the Bank any time after July 7, 2002
for a minimum redemption price of $200,000. The Company accounted for the
$200,000 as additional interest and the amount will be accreted as interest over
the two-year term of the credit facility. On March 28, 2000 the Company received
a waiver effective as of December 31, 1999 with respect to certain covenants as
to which the Company is not in compliance.

In July 1999, the Company completed the acquisition of all of the issued and
outstanding capital stock of Retail Cellular, Inc. ("RCI"), for a purchase price
of 150,000 shares of Common Stock. RCI became a wholly-owned subsidiary of the
Company. The transaction enhanced the Company's sales capabilities, particularly
in connection with the distribution of the Company's prepaid cellular services.
The Company purchased RCI from Retail Distributors, Inc. ("RDI"), the chief
executive officer and a principal stockholder of which is Victor Grillo, Sr.,
who was elected to the Company's Board of Directors on July 7, 1999 at the
annual meeting of the Company's stockholders. As part of the acquisition
transaction, the Company entered into a Services Agreement with RDI, pursuant to
which RDI provides certain services relating to the marketing and distribution
of the Company's prepaid cellular services. Pursuant to terms of the Services
Agreement, which was retroactive to February 8, 1999, the Company paid RDI
approximately $843,000 and issued to RDI 118,194 shares of Common Stock.
Additional compensation, exclusive of expenses, is performance based, payable
through the issuance of Common Stock purchase warrants. As of December 31, 1999,
the Company had issued 250,000 Common Stock purchase warrants to RDI. The Common
Stock purchase warrants were valued at $63,000 and the value was treated as a
sales expense. Also, RCI entered into a Consulting Agreement with RDI, expiring
March 31, 2001, pursuant to which RDI provides certain sales and marketing
services. The Services Agreement and the Consulting Agreement include monthly
payments to RDI through December 2000 that total $1,596,000. These transactions
were all treated as a services agreement, and as such are being expensed over
the two-year life of the Services Agreement.

In October 1999, the Company completed a $6.1 million private placement of 6,100
shares of Series D Convertible Preferred Stock ("Series D Shares"). Each
purchaser of the Series D Shares has the right, upon the occurrence of certain
events, to require the Company to redeem all or any part of such purchaser's
Series D Shares. Therefore, the Series D Shares have not been reflected in
Stockholders' Deficit. The number of shares of Common Stock issuable upon the
conversion of the Series D Shares includes a premium of 6%, per annum. The
Company accounted for the premium of 6% as a preferred stock dividend. The
Series D Shares private placement also included Warrants to purchase an
aggregate of 122,000 shares of Common Stock. The Warrants were valued at $31,000
and the value was treated as a "discount" to the Series D Shares and such
discount is being accreted as a preferred stock dividend over the five-year term
of the Warrants (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. The response to this section of
Item 1 is incorporated by reference to Note 19 of the Notes to the Consolidated
Financial Statements, contained in Item 14 (a) Financial Statements, below.

                                       4
<PAGE>   5
(c)  Narrative Description of Business

         (1) (i)  Products and Services


DEBIT SERVICES

The U.S. prepaid market is robust, and industry analysts predict continued rapid
growth for at least the next five years. According to the Cellular
Telecommunications Industry Association (CTIA), for example, 25 Americans sign
up for postpaid cellular service every minute (36,000 per day). And since these
applicants have been facing a 30% to 40% rejection rate, anywhere from 10,000 to
15,000 potential prepaid cellular customers are created every day. Analysts at
the Yankee Group, a leading telecommunications trade group, see prepaid
subscribers growing by more than 685% in next four years, from 4.3 to 34
million, with prepaid subscribers projected to increase from 5% to 28% of total
wireless subscribers by 2003.

Aside from market demand, there is another reason for STC's commitment to
prepaid. To date, over 70% of all telecommunications services are sold by
specialty outlets (i.e. agents, resellers, carriers). Traditional service
offerings are too complicated for most major retailers. Lengthy sales
transactions requiring credit approval, extensive training requirements,
geographical limitations, and low margins have driven some retailers away from
complex telecommunications service offerings. Prepaid offerings are far simpler,
however, and can be deployed nationwide, similar to any consumer electronics
product, i.e., using a single Stock Keeping Unit (SKU). STC's ability to offer
prepaid services as a consumer electronics product makes it more attractive to
mass merchants.

STC's DIRECT TO RETAIL PROGRAM is marketed directly to retailers, regardless of
their size or scope. This program offers retailers four different prepaid
products - cellular, paging, Internet and long distance. The current programs
include free minutes and do not require the purchase of a usage card to activate
the phone or pager. This is a major benefit because the products become more
attractive to the consumer because no investment beyond the purchase of the
equipment is required. STC has also introduced a new cellular rate plan (with
rates as low as $0.39 per minute) which makes STC's cellular offering one of the
most competitively priced prepaid programs available in the marketplace today.
STC's national carrier contracts also enable customers to purchase this product
from the retailer and activate the phone with a local phone number in any market
they choose - making it an ideal gift offering.

STC's PRIVATE LABEL PROGRAM is primarily designed to meet the needs of various
distribution partners. The program mimics the Direct to Retail programs with
respect to the products and pricing, but allows these partners to promote their
own brand recognition, without investing in the technology, and human resources
necessary to support the prepaid cellular offering.

STC, through its recently formed wholly-owned subsidiary CellEase.com, Inc., is
primarily a business to business IT services company, providing back-office
service bureau functions, advanced platform, and integrated e-commerce and
direct marketing solutions to the telecommunications industry. Utilizing
proprietary systems that were developed over several years, CellEase offers
carriers and distribution partners an array of services, including: a universal
prepaid redemption platform, IVR facilities, point-of-sale activation (POSA)
card services, inter-carrier communications services and one-stop shopping,
e-commerce and direct marketing programs that offer multiple telecommunications
services.

CellEase's universal prepaid redemption platform is the most widely distributed
payment system in the industry today. Offered under private label programs or
under its own "CellEase Compatible" logo, the platform primarily serves cellular
carriers, service providers and resellers. This innovative platform broadens and
enhances their distribution channels for prepaid cellular, paging and other
communications services without the need for additional investments on the part
of the provider, in technology, administration and back room operations.
Participating providers should experience significant reductions in churn by
offering their customer bases thousands of additional outlets for purchasing
prepaid usage cards, thus strengthening their commitment to customer services,
satisfaction and retention.

                                       5
<PAGE>   6
CELLULAR PHONE RENTALS

Responding to the need for individuals to stay in touch while traveling, the
incompatibility of many cellular networks throughout the country, the high cost
of roaming, and the increase in cellular fraud, STC began marketing cellular
telephone rental services, primarily through car rental companies, in 1992.

The Company has agreements with Hertz Corporation ("Hertz"), Budget Rent-a-Car
Corporation, Avis Rent-a-Car Systems, Inc., and Alamo Rent-A-Car Inc., as well
as certain car rental company licensees, to offer its portable cellular
telephones at car rental counters (primarily in airport terminals) in
approximately 70 cities throughout the United States.

Customers typically rent STC phones to avoid the confusion (and cost) of
multiple PINs, authentication, roaming access codes, and the other consequences
of using a cellular phone outside one's home calling area. Added benefits of
renting an STC cellular phone include access to an international calling
platform and simplified billing for expense reimbursement to corporate users.
Car rental companies and the airline industry see the cellular rental program as
a value-added service that generates incremental revenue and provides a
much-needed customer service.

While STC's national service footprint gives the Company a clear competitive
advantage, the growing acceptance of PCS digital phones -- despite the coverage
gaps that accompany them -- must be acknowledged as a potential threat to market
share. Since business travelers represent that segment of the market that
desires features such as paging, voice mail, caller ID, and speaker phone
capabilities, and since most business travelers remain within 60 miles of a
major metropolitan area, STC can strengthen its already dominant position in the
rental market by offering such services directly. Accordingly, STC has become a
national authorized representative for one of the premier providers of digital
cellular services: Nextel Communications.

STC has developed and tested the Nextel digital network program ("Try It, Like
It, Buy It") at car rental locations in the Dallas, Houston, and San Antonio
markets and is in the midst of a nationwide rollout that should be completed by
the end of the first quarter of 2000. Customers rent Nextel's feature-rich
i1000+ or i500+ digital phones (made by Motorola); those who wish to purchase
the phones earn a discount based on prior rental usage, and other incentives are
planned as well.

ACTIVATION SERVICES

With the acquisition of The Cellular Hotline, Inc. in 1995, 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 participating store to purchase a phone with activated cellular
service. In addition to charging a service fee to the 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 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 a new location with just
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, which expires in 2010. The
Company has registered the trademark "CellEase" and is currently using "It's
About Choices", which it is contemplating registering.

                                       6
<PAGE>   7
(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. The Company has experienced an increase in sales of
prepaid cellular phones in the holiday season.

(vi)  WORKING CAPITAL

The Company has incurred cumulative losses of approximately $51,000,000 through
December 31, 1999. The Company has funded its losses through borrowings from
STFI, its former parent, through its initial public offering in April 1995, and
various private placements of debt and equity. 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 18% and 16% of the Company's revenues for 1999 were attributable
to MCI WorldCom and Hertz, respectively. The Company has good relationships with
both MCI WorldCom and Hertz. 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 3,500 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, is 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: national carriers such as
Sprint PCS, BAM, AT&T, and local carriers and resellers. In addition, Topp
Telecom, Inc., an alternative service 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 27, 2000, the Company had 355 employees; 11 in management, 40 in
administration, 86 in sales and service, 201 in clerical and 17 in technical
positions. The Company's employees are not represented by a labor union. The
Company believes its relations with its employees are satisfactory.

                                       7
<PAGE>   8
ITEM 2.  PROPERTIES.

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. The Company leases approximately 16,000 square
feet pursuant to a five-year lease agreement, expiring in 2004, in Missouri for
a call center. The Company pays a monthly rent of approximately $8,000 on this
lease. The Company also leases approximately 12,000 square feet pursuant to a
five-year lease agreement, expiring in 2002, in Connecticut for another call
center. The Company pays a monthly rent of approximately $13,000 on this lease.
In addition, the Company leases an aggregate of approximately 3,000 square feet
in various locations nationwide for the purpose of direct sales by its sales
force, for a total monthly rent of approximately $7,000. 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 TeleServices, Inc.
("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 and
the number and value of claims from unsecured creditors, the amount of any
recovery against SmarTalk is questionable. The Company may have some exposure to
a preference claim with respect to certain payments received by the Company from
SmarTalk prior to its bankruptcy filing, although the Company intends to
aggressively defend against any such claim.

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, 1999.


                                     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. The
Company's Common Stock is currently traded on the Nasdaq National Market. During
1999 and 1998, the quarterly high and low closing prices were as follows:

<TABLE>
<CAPTION>
                       1999         1999        1998      1998
                      ------       ------      -----     -----
                       High          Low       High       Low
<S>                   <C>          <C>         <C>       <C>
First Quarter         $9 3/8       $6 1/8      $5        $3 1/4
Second Quarter            13        7 1/2      8 1/8      4 1/4
Third Quarter         11 1/2            8      7 3/8      5 1/8
Fourth Quarter        9 7/16        7 1/8       7         3 3/4
</TABLE>

                                       8
<PAGE>   9
The number of beneficial holders of the Company's Common Stock as of March 27,
2000 was approximately 1,800.

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 1996 and 1995 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>
                                          1999           1998            1997            1996            1995
                                          ----           ----            ----            ----            ----
<S>                                   <C>              <C>             <C>             <C>             <C>
Statement of Operations-Data:
Revenues                               $ 28,271        $ 28,200        $ 24,198        $ 20,914        $ 13,613
Gross margin                              6,344           7,941          10,667           6,305           5,026
Total operating expenses                 22,628          18,629          14,120          14,173           8,015
Loss from operations                    (16,284)        (10,688)         (3,453)         (7,868)         (2,989)
Gain on sale of division                   --              --              --              --               689
Loss on discontinued affiliate             --              --              --              --              (364)
Interest expense, net                       574             952             232             906             136

Net loss before income
   Taxes                                (16,858)        (11,640)         (3,685)          (8,774)        (2,800)
Income taxes                                 (7)             (6)            (10)            (22)            (48)
Net loss                                (16,865)        (11,646)         (3,695)          (8,796)        (2,848)
Preferred stock dividends                (5,786)           --              --               (112)          --
Net loss applicable to
   common stock                        $(22,651)       $(11,646)       $ (3,695)       $ (8,908)       $ (2,848)
Net loss per common
   share, basic and diluted            $  (2.84)       $  (1.58)       $  (0.63)       $  (2.18)       $  (1.04)
Weighted average number of
  shares outstanding                      7,985           7,375           5,900           4,082            2,748

Balance Sheet Data:
Working Capital Deficit                $ (8,248)       $(16,099)       $ (6,955)       $ (8,975)       $ (1,851)
Total assets                             21,585          13,487          11,536          14,262          14,378
Notes payable (including current
  portion)                                3,027           7,331           1,487           2,578           2,000
Other liabilities                        20,180          14,840           7,832           8,768           6,290
Indebtedness to STFI                       --             1,411           1,052              59             985
Series C and D Shares                    20,861            --              --              --              --
Accumulated deficit                     (51,005)        (28,354)        (16,708)        (13,013)         (4,105)
Stockholders' equity (deficit)         $(22,483)       $(10,095)       $  1,165        $  2,857        $  5,102
</TABLE>

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

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

Revenues for 1999 were $28,271,000, compared to $28,200,000 for 1998, an
increase of $71,000. The net loss applicable to Common Stock for 1999 was
$22,651,000, compared to $11,646,000 for 1998. The net loss applicable to Common
Stock for 1999 included a one-time non-cash preferred stock dividend of
$4,018,000, $0.50 per share, attributable to the beneficial conversion feature
in connection with the Company's issuance of its Series C Convertible

                                       9
<PAGE>   10
Preferred Stock, in February 1999. The net loss per Common Stock was $2.84 for
1999, which included such one-time charge, compared to a net loss per Common
Stock of $1.58 for 1998.

Revenues

Debit, or prepaid, operations had revenues of $14,280,000 for 1999, compared to
$12,737,000 for 1998. The increase in revenues of $1,543,000 (12%) was due to
growth of the private label program, which is co-branded with MCI WorldCom and
the Company's CellEase brand name. The private label program, introduced in
April 1998, generated most of the 1999 debit revenues, compared to revenues of
$9,127,000 for 1998. The balance of the 1998 debit revenues ($3,610,000) were
primarily from a major distributor which discontinued its prepaid cellular phone
business and transitioned a small portion of its customers to the Company's
end-user program in the fourth quarter of 1998.

The growth of the prepaid program was assisted by two major developments during
fiscal 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. In July 1999, the Company purchased Retail Cellular,
Inc. ("RCI") from Retail Distributors, Inc. ("RDI") and entered into a Services
Agreement with RDI for support in the marketing, sale and distribution of the
Company's debit cellular services. The 1998 debit revenues from the CellEase
program of $9,127,000 were primarily attributable to SmarTalk TeleServices, Inc.
("SmarTalk"). In December 1998, the Company terminated its relationship with
SmarTalk and, subsequently the Company filed a lawsuit against SmarTalk (see
"Legal Proceedings").

The Company's cellular phone rental operations had revenues of $12,939,000 for
1999, compared to $14,037,000 for 1998. The decrease of $1,098,000 (8%) was
mostly attributable to a 15% drop in the average revenue per customer rental
agreement to $115 for 1999. Such decrease in revenue per rental was due to a
drop in minutes of usage per rental by 11%, to 58 minutes, as well as to price
discounts offered in connection with market testing of the price elasticity of
the Company's product offering. During 1999, the Company ran various special
promotions, such as "first 10 minutes free". Such promotions were primarily
responsible for the number of rental agreements increasing by 3%, to 106,000 for
1999.

The Company's cellular activation operations had revenues of $1,052,000 for
1999, compared to $1,426,000 for 1998. The decrease of $374,000 (26%) was mainly
attributable to $263,000 in revenues in 1998 related to a test program with a
national retailer that was terminated in September 1998. The balance of the
decrease was due to the Connecticut activation location generating lower
revenues due to a cutback in the sales staff. Due to a reduction in the
activation commission offered by the local cellular carrier, the Company closed
the Connecticut activation location in November 1999.

Gross Margin

Gross margin was 22% of revenues for 1999, compared to 28% for 1998. The
decrease in gross margin was primarily due to the deterioration of gross margin
for the debit operations. The following table summarizes the change in the
revenues mix and the corresponding gross margins for the two periods:

<TABLE>
<CAPTION>
                  1999            1999            1998           1998
                  ----            ----            ----           ----
                Revenues      Gross Margin      Revenues     Gross Margin
<S>             <C>           <C>               <C>          <C>
Debit             46%            (14)%            45%              4%
Rental            50%             62%             50%             48%
Activation         4%             32%              5%             45%
                 ---             ---             ---             ---
                 100%             22%            100%             28%
</TABLE>

As anticipated, gross margin for debit operations for 1999 was disappointing due
to problems associated with SmarTalk. Prior to STC's termination of its
relationship with SmarTalk in December 1998, the

                                       10
<PAGE>   11
Company was anticipating an increase in volume in the fourth quarter of 1998. By
the middle of the fourth quarter of 1998, the Company had approximately 63,000
active customers and was experiencing a growth rate of over 15% per month. To
help facilitate the rapid growth, the Company maintained a reserve of
approximately one month's line requirement. As a result of the termination of
the SmarTalk relationship, the Company did not maintain its growth rate and, in
addition, the Company's customer base began to deteriorate due to the lack of
availability of prepaid usage cards needed for existing customers to maintain
service. Consequently, a significant gap was created between active lines with
customers, as compared to committed lines with carriers. In January 1999, the
Company signed a letter of intent with MCI WorldCom for the retail distribution
of the Company's prepaid cellular service. As a result, the Company made the
decision to maintain many of its existing lines with carriers, in an effort to
minimize line termination fees and expense, in anticipation of the launch of the
MCI WorldCom program in the second quarter of 1999. Throughout most of fiscal
1999, the Company worked to reduce the significant gap between active lines and
committed lines by adding new customers and returning some excess lines to
carriers. By year-end, the gap between active and committed lines was within an
acceptable range. The cost of maintaining these excess lines for fiscal 1999 was
approximately $3,000,000.

Gross margin for cellular phone rental operations increased by 18% in 1999,
compared to 1998. The Company took various steps during the year to improve
gross margin. The Company worked with its cellular carriers to reduce monthly
line access charges as well as per minute usage charges. The Company also
increased the utilization of its cellular phone inventory by working more
closely with its field personnel to minimize excess inventory. In addition, the
Company improved its gross margin by passing on certain charges it was
previously incurring.

Gross margin for activation operations decreased in 1999 as a result of two
factors. The Connecticut activation program had a lower gross margin as a result
of the local carrier reducing the activation commission that it was paying to
STC, as previously discussed. In addition, with the closing of the Connecticut
activation program, the national MOVE program made up a larger portion of
activation revenues. The MOVE program historically has had lower gross margins
than the Connecticut activation program. The MOVE program provides cellular
service activations for customers who move from one cellular market to another.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") were $21,411,000 for 1999,
compared to $15,075,000 for 1998, an increase of $6,336,000 (42%). As a
percentage of revenues, SG&A increased to 76% for 1999, compared to 53% for
1998. The increase was attributable to several factors. The Company incurred
additional corporate overhead 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 expenses
included payroll for certain employees of STFI who had not previously received
direct compensation from the Company. The increase in SG&A in 1999, compared to
1998, related to the sale of STFI was approximately $300,000. To assist in the
growth of the prepaid program, the Company increased its IT department by six
programmers; hired several salesmen and program managers; established a
high-speed telephone link between the corporate office and the two call centers;
and leased additional office space. The increase in corporate SG&A related to
the growth in the prepaid program was approximately $800,000 in 1999. Field
SG&A, as a percentage of revenues, increased significantly to 56% for 1999,
compared to 41% for 1998. During the fourth quarter of 1998, the Company added a
new call center in Hartford and expanded its existing call center in St. Louis
in anticipation of the significant growth the Company expected from debit
operations, which did not occur, as previously discussed. The increase in SG&A
related to the two call centers was approximately $2,535,000 in 1999. Also, in
February 1999, the Company signed a letter of intent with RDI for support in the
marketing, sale and distribution of the Company's debit cellular services. The
Company had incurred expenses in anticipation of its entry into a services
agreement with RDI, which agreement was signed in July 1999. The Company
incurred $1,480,000 in field SG&A related to the services agreement in 1999.

Bad Debt Expense

Bad debt expense was $1,217,000 for 1999, compared to $3,554,000 for 1998, a
decrease of $2,337,000 (66%). As a percentage of revenues, bad debt expense was
approximately 4% for 1999, compared to 13% for 1998. The 1998 amount included a
write-off of $1,975,000 that was due from SmarTalk. The additional decrease in
bad debt expense for 1999, compared to 1998, was due to an improvement in
collection procedures in the Rental Division. The predominant amounts of these
sales are paid by credit card. Historically, the Company has experienced an
amount of credit card charges that it is not able to collect. In addition, the
Company receives some customer requests for amounts charged to be reversed for a
variety of reasons. The Company diligently investigates these occurrences.
However, the

                                       11
<PAGE>   12
Company still experiences a percentage of bad debt write-offs, as it continues
to make efforts to address this problem. The Company therefore maintains an
allowance for doubtful accounts against its receivable balance, representing the
unpaid accounts under investigation, and upon final resolution of the account,
the amount is either collected or written off against the allowance. The
investigation process is time consuming; documentation (typically itemized call
detail for the rental period) must be generated and provided to the credit card
processing company prior to the reversal of the claim. The Company regularly
reviews the allowance for the amounts that are deemed truly uncollectable and
writes them off against the allowance. The allowance represents only those
receivables generated within the current operating cycle and does not have any
amounts that are aged in excess of a 6-month period.

The Company records an allowance for uncollectible receivables from revenues
related to third parties generated through the ordinary course of business. The
Company regularly reviews uncollected receivables and writes off any that are
deemed uncollectible against the allowance.

Interest Expense

Interest expense, net of interest income, was $574,000 for 1999, compared to
$952,000 for 1998. Interest expense was mainly due to debt from acquisitions
made in prior years, debt to STFI, debt financing completed in May 1998 and the
revolving credit facility with State Street Bank and Trust Company established
in July 1999, which was subsequently assigned to Citizens Bank of Massachusetts.
In February 1999, the Company used a portion of the $15 million private equity
placement proceeds to repay $1,411,000 of the STFI debt and $4 million of the
May 1998 debt.

Preferred Stock Dividend

In February 1999, the Company completed a $15 million private placement of
15,000 shares of Series C Convertible Preferred Stock ("Series C Shares"). The
number of shares of Common Stock issuable upon the conversion of the Series C
Shares included a premium of 6%, per annum, payable in cash or shares of Common
Stock at the option of the Company. The Company accounted for the premium of 6%
as a non-cash preferred stock dividend. The non-cash preferred stock dividend
was $797,000 for fiscal 1999. The Series C Shares also included Warrants to
purchase an aggregate of 300,000 shares of Common Stock. The Warrants were
valued at $75,000 and the value was treated as a "discount" to the Series C
Shares and such discount is being accreted as a preferred stock dividend over
the five-year term of the Warrants. The amount accreted as a preferred stock
dividend was $14,000 for fiscal 1999. The Company incurred $537,000 in placement
and legal fees related to the completion of this private placement. These fees
were also treated as a preferred stock dividend in fiscal 1999. In accordance
with Emerging Issues Task Force Topic D-60, the Company recognized a beneficial
conversion feature in the amount of $4,018,000 as a one-time non-cash preferred
stock dividend in 1999. The amount represented the difference between the
conversion price of $7 per share at the date of the issuance of the Series C
Shares, February 5, 1999, and the $8 7/8 market price of the Common Stock at
that date.

In October 1999, the Company completed a $6.1 million private placement of 6,100
shares of Series D Convertible Preferred Stock ("Series D Shares"). The number
of shares of Common Stock issuable upon the conversion of the Series D Shares
included a premium of 6%, per annum, payable in cash or shares of Common Stock
at the option of the Company. The Company accounted for the premium of 6% as a
non-cash preferred stock dividend. The non-cash preferred stock dividend was
$92,000 for fiscal 1999. The Series D Shares also included Warrants to purchase
an aggregate of 122,000 shares of Common Stock. The Warrants were valued at
$31,000 and the value was treated as a "discount" to the Series D Shares and
such discount is being accreted as a preferred stock dividend over the five-year
term of the Warrants. The amount accreted as a preferred stock dividend was
$2,000 for fiscal 1999. The Company incurred $326,000 in placement and legal
fees related to the completion of this private placement. These fees were also
treated as a preferred stock dividend in fiscal 1999.

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 debit
services, which grew by over 100%. The net loss for 1998 was $11,646,000,
compared to a net loss of $3,695,000 for 1997. Included in the net loss for 1998
was approximately $6,494,000 of expenses related to the termination of the
Company's relationship with SmarTalk TeleServices, Inc. The basic and diluted
loss per Common Share was $1.58 for 1998, compared to $0.63 for 1997.

Revenues

                                       12
<PAGE>   13
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 private label program co-branded under the CellEase brand name. The Company
experienced significant revenue growth from private label program beginning in
April 1998. The increase in the private label 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 private
label program. In addition, during the fourth quarter of 1998, the distributor
transitioned its prepaid cellular phone business customers to the Company's
CellEase end-user program, which negatively impacted revenues.

For the fourth quarter of 1998, revenues from the private label 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"). Conflicting directives
confused retailers, 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-emphasizing 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 28% of revenues for 1998, compared to 44% of revenues for 1997.
The decrease in gross margin was mainly due to expenses related to the problems
with SmarTalk and 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>
                  1999            1999            1998           1998
                  ----            ----            ----           ----
                Revenues      Gross Margin      Revenues     Gross Margin
<S>             <C>           <C>               <C>          <C>
Debit             45%               4%            26%             43%
Rental            50%              48%            63%             46%
Activation         5%              45%            11%             37%
                 ---              ---            ---             ---
                 100%              28%           100%             44%
</TABLE>

Gross margin for debit operations decreased in 1998 mainly due to two factors.
In December 1998, the Company terminated its relationship with SmarTalk and
filed a lawsuit against SmarTalk. SmarTalk subsequently filed for bankruptcy
protection. As a result, the Company wrote off approximately $2,246,000 that
pertained to the unamortized portion of a subsidy the Company paid SmarTalk for
cellular phone sales they made to retailers. The Company paid SmarTalk $30 per
phone shipped to a retailer and an additional $20 when the phone was sold to a
customer. A portion of this subsidy was refundable under certain circumstances.
A deferred charge was recorded at the time of payment, since the "cost" of the
phone was to benefit future periods and revenue streams, thereby matching the
cost with the associated revenues. As a result of the termination of the
Company's relationship with SmarTalk, the Company determined that future
revenues would not justify the amount capitalized and the amount was
written-off. In addition, the Company purchased several thousand new cellular
lines in anticipation of an increase in volume related to the SmarTalk contract.
With the termination of the SmarTalk relationship, the Company did not maintain
its growth rate and, in addition, the Company's customer base began to
deteriorate. Consequently, a significant gap was created between active lines
with customers and lines under contract with carriers. Most of the new lines
required significant minimum commitment periods and had early termination
penalties. As a result, during the fourth quarter of 1998, the

                                       13
<PAGE>   14
Company incurred $648,000 in monthly access fees on the excess carrier lines.
The other factors that resulted in a decrease to the gross margin of the debit
operations was 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 were $15,075,000 for 1998, compared
to $10,742,000 for 1997, an increase of $4,333,000. As a percentage of revenues,
SG&A increased to 54% for 1998, compared to 44% for 1997. Revenues increased by
$4,002,000 from fiscal 1997 to fiscal 1998. SG&A, as a percentage of such
revenues, would have remained constant at 44%, but for two significant factors
in 1998. The Company incurred $1,625,000 in expenses in 1998 related to the
termination of the SmarTalk agreement. These expenses included the write-off of
$875,000 of unamortized advance commissions made to SmarTalk against future
revenues. The Company and SmarTalk agreed in November 1998 to these advance
commissions in exchange for a waiver of all future commissions. As a result of
the termination of the Company's relationship with SmarTalk, the Company
determined that future revenues would not justify the amount capitalized and the
amount was written-off. Another $412,000 relates to expenses incurred in the
fourth quarter of 1998 for the addition of a new call center in Hartford and the
expansion of the existing call center in St. Louis to handle the anticipated
increase in volume from the SmarTalk agreement that did not occur. The balance
of the expenses incurred in 1998 that relate to the termination of the Smartalk
agreement relate to computer programming, legal and other ancillary costs. The
Company also incurred expenses of approximately $800,000 as a result of the
acquisition of Shared Technologies Fairchild Inc. ("STFI"), the former parent of
the Company, by Intermedia Communications, Inc., and the subsequent termination
of a management agreement with STFI. STFI had been providing certain support and
management services to the Company under this management agreement. Such
additional expenses included payroll for certain former employees of STFI who
had not previously received direct compensation from the Company. Therefore, of
the $4,332,000 increase in SG&A, approximately $1,907,000 represented the amount
of SG&A increase unrelated to the termination of the SmarTalk agreement and the
STFI transaction. The majority of the $1,907,000 increase was in field SG&A,
which, as a percentage of revenues, increased slightly to 35% in 1998, compared
to 34% in 1997. As previously discussed, the Company did not achieve the
anticipated fourth quarter 1998 debit revenues, even though the Company
increased its field SG&A in anticipation of the additional revenues.

Bad Debt Expense

Bad debt expense was $3,554,000 for 1998, compared to $1,341,000 for 1997, an
increase of $2,213,000. As a percentage of revenues, bad debt expense was 13%
for 1998, compared to 6% for 1997. This increase in the percentage of bad debts
was due to the write-off of $1,975,000 (7%) that was due from SmarTalk. In
December 1998 the Company terminated its relationship with SmarTalk and filed a
lawsuit against SmarTalk, which filed for bankruptcy protection in January 1999.

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.


LIQUIDITY AND CAPITAL RESOURCES

The Company had a working capital deficit of $8,248,000 at December 31, 1999,
compared to a deficit of $16,099,000 at December 31, 1998. Stockholders' deficit
at December 31, 1999 was $22,483,000, compared to stockholders' deficit of
$10,095,000 at December 31, 1998. Stockholder's deficit at December 31, 1999 did
not include $20,861,000 related to the Series C and D Convertible Preferred
Stock, since each shareholder of the Series C and D Shares has the right, upon
the occurrence of certain events, to require the Company to redeem all or any
part of such purchaser's Series C or D Shares.

                                       14
<PAGE>   15
Net cash used in operations for the year ended December 31, 1999 was
$14,175,000. This was mainly attributable to the net loss for the period, offset
by the non-cash depreciation and amortization expense. The Company experienced a
significant increase in receivables at year-end, compared to prior year, as a
result of the prepaid program. At December 31, 1999, the Company had
approximately $3,554,000 of debit receivables, of which $2,396,000 was due from
MCI WorldCom, compared to an insignificant amount of debit receivables at
December 31, 1998. The December 31, 1998 debit receivables were written-off due
to SmarTalk filing for bankruptcy in January 1999. In the fourth quarter of
1999, the Company purchased $2,000,000 of debit cellular phones and accessories
from DTR Associates Limited Partnership, (see Part III, Item 13, "Certain
Relationships and Related Transactions"). The Company used a portion of its
revolving credit facility to secure the purchase. Most of the phones and the
corresponding liability existed at year-end. Deferred revenues increased
significantly due to the debit program. The Company recognizes debit card
revenues over the estimated period in which the Company provides debit, or
prepaid services to its customers. Customers purchase debit cellular service by
buying debit cards at retailers throughout the nation and calling the Company to
activate, or redeem, the debit cards. Customers may also call the Company
directly to purchase debit cellular service. The Company gives the customer a
series of numeric codes that are input into their phone that allows it to be
activated for a specific number of minutes and days. A typical $30 debit card
expires after approximately 38 minutes of local usage or 60 days after
activation, whichever comes first. However, most of the airtime is used within
the first 30 days of activation. Consequently, the deferred revenue at December
31, 1999 consisted of the unused portion of the debit cards activated plus the
debit cards sold but not yet activated. Carrier commissions receivable pertain
to commissions the Company was entitled to receive for carrier lines the Company
activated. During fiscal 1998, the Company activated over 60,000 new carrier
lines and was entitled to a commission on a small portion of those new lines.
The Company recorded approximately $2.2 million of carrier commissions in fiscal
1998, of which approximately $1.4 million was collected as of December 31, 1998,
and the balance was collected in fiscal 1999. The Company elected to forgo
commissions on new lines in 1999 in lieu of lower monthly access fees; thus the
Company recorded minimal amounts of carrier commissions receivable in fiscal
1999. The Company deferred the recognition of the carrier commissions over a
12-month period, the expected customer life. As of December 31, 1999, the
Company had recognized all of such carrier commissions.

Net cash used in investing activities for the year ended December 31, 1999 was
$513,000. This was mainly attributable to the purchase of computers and office
equipment to support the prepaid programs. During the year ended December 31,
1999, the Company raised $14,466,000, net of expenses, in a private equity
placement of Series C Shares and related Common Stock purchase warrants. The
Company also raised $5,774,000, net of expenses, in a private placement of
Series D Shares and related Common Stock purchase warrants. In addition,
approximately 380,000 unrelated warrants and options were exercised, raising an
additional $1,792,000. The Company used a portion of these proceeds to repay
$1,411,000 of debt owed to its former parent, STFI, and $4,000,000 of debt
financing raised in May 1998. The Company continued to make required payments on
its existing debt. During the year ended December 31, 1998, the Company received
$6,400,000 of debt financing completed in April and May 1998. The Company will
require additional funds in order to satisfy existing obligations, and to fund
current expansion plans. Management believes that, based on certain assumptions,
ongoing operations, in conjunction with the existing credit facility, should
provide the Company with sufficient funds to finance operations and planned
expansion for the next 12 months, although long-term liquidity will depend on
the Company's ability to attain profitable operations. Certain of the
assumptions underlying management's projected liquidity requirements include
factors relating to the success of the Company's CellEase Universal Prepaid
Platform, which currently is in the process of development and implementation.
No assurances can be made as to the actual success of such program once fully
implemented. Accordingly, in the event that such assumptions are incorrect, the
Company will require additional sources of liquidity within the next 12 months
to fund the Company's operations.


2000 COMPANY OUTLOOK

The Company expects to show revenue growth in both its prepaid and rental
operations in 2000. 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 prepaid cellular, have been launched. The Company
believes it is positioned to take advantage of these opportunities; offering
travelers throughout the United States communications devices, offering prepaid
services through national retailers and direct marketing firms such as HSN and
various Internet sites and working with telecom carriers to offer them an array
of platform and distribution management services.

                                       15
<PAGE>   16
Debit operations are expected to show continued revenue growth in 2000. This
growth is expected to come primarily from three of the Company's programs; its
Total Communications, Private Label Agent and CellEase Universal Platform
Programs. The Company's Total Communications program allows retailers to promote
wireless, paging, Internet and long distance under a single advertising
campaign. All of these services operate off of a single CellEase compatible
card. STC's "One Card Does It All(TM)" approach allows customers to allocate
their dollars to various services and maintain a single master account.

STC recently opened up its Private Label Program to new distribution partners.
In addition to MCI WorldCom, the Company now has signed agreements with US South
Communications and Qcomm International, Inc., both of whom are prepaid long
distance providers with established retail distribution channels. The Company is
focused on this distribution model for its prepaid cellular program, which
should account for most of its growth in 2000.

Leveraging the distribution outlets and platform from the programs described
above, the Company's CellEase Universal Platform services has gained recognition
in the industry as an alternative card distribution and platform system for
multiple service providers. The Company is offering these services under its
CellEase Compatible logo, as well as under a Private Label offering.

Cellular phone rental operations are expected to have moderate revenue growth in
2000. The Company is in the process of replacing the older cellular Motorola
flip phones with the new digital Nextel cellular phones. STC also is continuing
to work with its car rental partners 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).

"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 AND ITS CELLEASE.COM,
INC. OPERATIONS.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The following financial statements and supplementary data are attached.

Report of Independent Public Accountants

Consolidated Balance Sheets as of December 31, 1999 and 1998.

Consolidated Statements of Operations for the years ended December 31, 1999,
1998 and 1997.

Consolidated Statements of Stockholders' Equity (Deficiency) for the years ended
December 31, 1999, 1998 and 1997.

Consolidated Statements of Cash Flows for the years ended December 31, 1999,
1998 and 1997.

Notes to Consolidated Financial Statements.

Financial Statement Schedules Schedule II.

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

None

                                       16
<PAGE>   17
              SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARIES

        INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE (ITEM 8)

<TABLE>
<CAPTION>
                                                                                                                          Page
                                                                                                                          ----
<S>                                                                                                                       <C>
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-8-21

FINANCIAL STATEMENT SCHEDULE (a):
     Schedule II - Valuation and Qualifying Accounts for the
      Years Ended December 31, 1999, 1998 and 1997                                                                         S-1
</TABLE>

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>   18
                          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 Subsidiaries as of December 31, 1999 and 1998,
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, 1999. 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 Subsidiaries as of December 31, 1999 and 1998,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1999, 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.

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 3 to the
consolidated financial statements, the Company has a stockholders' deficiency
a working capital deficit and an accumulated deficit, which raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 3. The consolidated financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.


                                                 ROTHSTEIN, KASS & COMPANY, P.C.




Roseland, New Jersey
March 3, 2000, except for Note 9 which
 is as of March 28, 2000

                                      F-2
<PAGE>   19
               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                           December 31, 1999 and 1998


<TABLE>
<CAPTION>
                                                                                           1999                 1998
                                                                                        ------------        ------------
<S>                                                                                     <C>                 <C>
                                                          ASSETS

CURRENT ASSETS:
Cash                                                                                    $  1,635,000        $    229,000
Accounts receivable, less allowance for doubtful
 accounts of $495,000 in 1999 and $896,000 in 1998                                         3,612,000           1,169,000
Carrier commissions receivable, net                                                          178,000             992,000
Inventories                                                                                2,316,000             234,000
Prepaid expenses and other current assets                                                  4,526,000           2,030,000
                                                                                        ------------        ------------

Total current assets                                                                      12,267,000           4,654,000
                                                                                        ------------        ------------

TELECOMMUNICATIONS AND OFFICE EQUIPMENT, net                                               1,514,000           1,125,000
                                                                                        ------------        ------------

OTHER ASSETS:
Intangible assets, net                                                                     6,289,000           6,993,000
Deposits and other                                                                         1,515,000             715,000
                                                                                        ------------        ------------

                                                                                           7,804,000           7,708,000
                                                                                        ------------        ------------

                                                                                        $ 21,585,000        $ 13,487,000
                                                                                        ============        ============

                                         LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES:
Current portion of long-term debt                                                       $    535,000        $  5,913,000
Accounts payable                                                                           8,580,000           7,439,000
Accrued expenses and other current liabilities                                             7,045,000           6,153,000
Deferred revenues                                                                          4,355,000           1,248,000
                                                                                        ------------        ------------

Total current liabilities                                                                 20,515,000          20,753,000
                                                                                        ------------        ------------

LONG-TERM DEBT, less current portion                                                       2,492,000           2,829,000
                                                                                        ------------        ------------

REDEEMABLE PUT WARRANT                                                                       200,000
                                                                                        ------------        ------------

SERIES C AND D REDEEMABLE PREFERRED STOCK, issued
and outstanding 20,100 shares in 1999                                                     20,861,000
                                                                                        ------------        ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' 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 8,452,000 shares in
 1999 and 7,567,000 shares in 1998                                                            85,000              76,000
Capital in excess of par value                                                            28,437,000          18,183,000
Accumulated deficit                                                                      (51,005,000)        (28,354,000)
                                                                                        ------------        ------------

Total stockholders' deficiency                                                           (22,483,000)        (10,095,000)
                                                                                        ------------        ------------

                                                                                        $ 21,585,000        $ 13,487,000
                                                                                        ============        ============
</TABLE>

          See accompanying notes to consolidated financial statements

                                      F-3
<PAGE>   20
               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  Years Ended December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
                                                  1999                1998               1997
                                              ------------        ------------        ------------
<S>                                           <C>                 <C>                 <C>
REVENUES                                      $ 28,271,000        $ 28,200,000        $ 24,198,000

COST OF REVENUES                                21,927,000          20,259,000          13,531,000
                                              ------------        ------------        ------------

GROSS MARGIN                                     6,344,000           7,941,000          10,667,000
                                              ------------        ------------        ------------

SELLING, GENERAL AND ADMINISTRATIVE
 EXPENSES                                       21,411,000          15,075,000          10,742,000

BAD DEBT EXPENSE                                 1,217,000           3,554,000           1,341,000

LOSS ON DISCONTINUED PRODUCT LINE                                                        2,037,000
                                              ------------        ------------        ------------

                                                22,628,000          18,629,000          14,120,000
                                              ------------        ------------        ------------

LOSS FROM OPERATIONS                           (16,284,000)        (10,688,000)         (3,453,000)
                                              ------------        ------------        ------------

INTEREST EXPENSE, NET                             (574,000)           (952,000)           (232,000)
                                              ------------        ------------        ------------

LOSS BEFORE INCOME TAXES                       (16,858,000)        (11,640,000)         (3,685,000)

INCOME TAXES                                        (7,000)             (6,000)            (10,000)
                                              ------------        ------------        ------------

NET LOSS                                       (16,865,000)        (11,646,000)         (3,695,000)

PREFERRED STOCK DIVIDENDS                       (5,786,000)
                                              ------------        ------------        ------------

NET LOSS APPLICABLE TO COMMON STOCK           $(22,651,000)       $(11,646,000)       $ (3,695,000)
                                              ============        ============        ============

BASIC AND DILUTED LOSS PER COMMON SHARE
                                              $      (2.84)       $      (1.58)       $       (.63)
                                              ============        ============        ============

WEIGHTED AVERAGE NUMBER OF
 COMMON SHARES OUTSTANDING                       7,985,000           7,375,000           5,900,000
                                              ============        ============        ============
</TABLE>

          See accompanying notes to consolidated financial statements

                                      F-4
<PAGE>   21
               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARIES

          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                  Years Ended December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>

                                                                     Series B
                                                                 Preferred Stock                   Common Stock
                                                          -------------------------------  ------------------------------
                                                              Shares          Amount          Shares          Amount
                                                          ---------------  --------------  --------------  --------------
<S>                                                       <C>              <C>             <C>             <C>
Balances, January 1, 1997                                       500,000   $       5,000        4,863,000   $      49,000

Issuance of common stock                                                                         686,000           7,000

Conversion of preferred stock                                  (500,000)         (5,000)       1,667,000          16,000

Net loss
                                                          ---------------  --------------  --------------  --------------

Balances, December 31, 1997                                           --             --        7,216,000          72,000

Issuances of common stock and warrants                                                           271,000           3,000

Exercise of warrants and options                                                                 180,000           2,000

Cancellation of common stock                                                                    (100,000)         (1,000)

Net loss

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

Balances, December 31, 1998                                           --             --        7,567,000          76,000

Issuances of common stock and warrants
                                                                                                 337,000           3,000

Preferred stock dividend


Conversion of redeemable preferred stock
                                                                                                 149,000           2,000

Exercise of warrants and options
                                                                                                 399,000           4,000

Net loss
                                                          ---------------  --------------  --------------  --------------

Balances, December 31, 1999                                           --  $          --        8,452,000   $      85,000
                                                          ===============  ==============  ==============  ==============
</TABLE>


<TABLE>
<CAPTION>
                                                                                                     Total
                                                            Capital in                           Stockholders'
                                                             Excess of         Accumulated           Equity
                                                             Par Value           Deficit          (Deficiency)
                                                          ----------------  ------------------  ----------------
<S>                                                       <C>               <C>                 <C>
Balances, January 1, 1997                                 $    15,816,000   $    (13,013,000)   $     2,857,000

Issuance of common stock                                        1,996,000                             2,003,000

Conversion of preferred stock                                     (11,000)                                   --

Net loss                                                                          (3,695,000)        (3,695,000)
                                                          ----------------  ------------------  ----------------

Balances, December 31, 1997                                    17,801,000        (16,708,000)         1,165,000

Issuances of common stock and warrants                            201,000                               204,000

Exercise of warrants and options                                  547,000                               549,000

Cancellation of common stock                                     (366,000)                             (367,000)

Net loss                                                                         (11,646,000)       (11,646,000)

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

Balances, December 31, 1998                                    18,183,000        (28,354,000)       (10,095,000)

Issuances of common stock and warrants                                                                3,413,000
                                                                3,410,000

Preferred stock dividend                                                                             (1,768,000)
                                                                4,018,000         (5,786,000)

Conversion of redeemable preferred stock                                                              1,040,000
                                                                1,038,000

Exercise of warrants and options                                                                      1,792,000
                                                                1,788,000

Net loss                                                                         (16,865,000)       (16,865,000)
                                                          ----------------  ------------------  ----------------

Balances, December 31, 1999                               $    28,437,000   $    (51,005,000)   $  (22,483,000)
                                                          ================  ==================  ================
</TABLE>



          See accompanying notes to consolidated financial statements


                                      F-5
<PAGE>   22
               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Years Ended December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
                                                             1999               1998                1997
                                                         ------------        ------------        ------------
<S>                                                      <C>                 <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                                $(16,865,000)       $(11,646,000)       $ (3,695,000)
 Adjustments to reconcile net loss to net cash
 used in operating activities:
  Accretion of interest on notes payable                      107,000              75,000
  Write-off of assets held for disposition                                        153,000           2,037,000
  Depreciation and amortization                             1,473,000           1,332,000           1,292,000
  Provision for doubtful accounts                           1,217,000           3,554,000           1,341,000
  Common stock issued for compensation
  and services                                                646,000             104,000              71,000
  Accrued interest, note receivable                                                                   (11,000)
  Changes in assets and liabilities:
    Accounts receivable                                    (3,933,000)         (3,086,000)         (1,357,000)
    Carrier commissions receivable                            814,000            (829,000)           (110,000)
    Inventories                                            (2,082,000)           (103,000)            (51,000)
    Prepaid expenses and other current assets                (692,000)         (1,903,000)              6,000
    Accounts payable and other current liabilities          2,033,000           6,204,000            (980,000)
    Deferred revenues                                       3,107,000           1,204,000              44,000
                                                         ------------        ------------        ------------

NET CASH USED IN OPERATING ACTIVITIES                     (14,175,000)         (4,941,000)         (1,413,000)
                                                         ------------        ------------        ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchases of equipment                                      (486,000)           (744,000)           (318,000)
 (Increase) decrease in deposits                              (27,000)           (389,000)             47,000
                                                         ------------        ------------        ------------

NET CASH USED IN INVESTING ACTIVITIES                        (513,000)         (1,133,000)           (271,000)
                                                         ------------        ------------        ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from issuance of notes payable                                        6,400,000
 Payments for debt issuance costs                                                (171,000)
 Payments on long-term debt                                (4,527,000)           (530,000)         (1,091,000)
 Advances from (payments of note to) former parent         (1,411,000)           (239,000)            993,000
 Issuance of common and redeemable preferred stock         20,240,000                               1,932,000
 Exercise of warrants and options                           1,792,000             549,000
                                                         ------------        ------------        ------------

NET CASH PROVIDED BY FINANCING ACTIVITIES                  16,094,000           6,009,000           1,834,000
                                                         ------------        ------------        ------------

NET INCREASE (DECREASE) IN CASH                             1,406,000             (65,000)            150,000

CASH, beginning of year                                       229,000             294,000             144,000
                                                         ------------        ------------        ------------

CASH, end of year                                        $  1,635,000        $    229,000        $    294,000
                                                         ============        ============        ============
</TABLE>

          See accompanying notes to consolidated financial statements

                                      F-6
<PAGE>   23
               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                  Years Ended December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
                                                                     1999                 1998                  1997
                                                              -------------------   ------------------    ------------------
<S>                                                           <C>                   <C>                   <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
 INFORMATION:
 Cash paid during the year for:
  Interest                                                    $           640,000   $          863,000    $          379,000
                                                              ===================   ==================    ==================

  Income taxes                                                $             7,000   $            6,000    $           10,000
                                                              ===================   ==================    ==================

SUPPLEMENTAL SCHEDULES OF NONCASH
 INVESTING AND FINANCING ACTIVITIES:

  Cancellation of common stock to settle
   outstanding receivable
                                                              $               --    $          367,000    $               --
                                                              ===================   ==================    ==================

  Issuance of warrants in connection with certain
   debt instruments and preferred stock.
                                                              $           306,000   $          100,000    $               --
                                                              ===================   ==================    ==================

  Issuance of common stock in connection with
   Services Agreement                                         $         2,832,000   $               --    $               --
                                                              ===================   ==================    ==================

  Redeemable preferred stock issued as preferred
   stock dividends                                            $           891,000   $               --    $               --
                                                              ===================   ==================    ==================

  Conversion of redeemable preferred stock
  and convertible notes into common stock                     $         1,290,000   $               --    $               --
                                                              ===================   ==================    ==================


  Capital lease obligation incurred for lease of
   equipment
                                                              $           672,000   $               --    $               --
                                                              ===================   ==================    ==================
</TABLE>

          See accompanying notes to consolidated financial statements

                                      F-7
<PAGE>   24
               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 -      NATURE OF OPERATIONS

              Shared Technologies Cellular, Inc. (STC) together with its
              subsidiaries (collectively the "Company") is a national cellular
              service provider offering rental, prepaid and activation services
              in substantially all of the Cellular Geographical Service Areas
              within the United States. The Company rents cellular telephones to
              business and leisure travelers and to individuals at sporting
              events. As a reseller or agent for cellular and PCS carriers, the
              Company offers cellular service throughout the United States. 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 by offering
              carrier and distribution partners an array of services including:
              a universal prepaid redemption platform, Interactive Voice
              Response, (IVR), point-of-sale activation (POSA) card services,
              inter-carrier communications services and one-stop shopping,
              e-commerce and direct marketing programs that offer multiple
              telecommunications services.

              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 subsidiaries. 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.

              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.

                                      F-8
<PAGE>   25
               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

              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 $58,000, $83,000 and nil in 1999, 1998 and 1997, respectively.

              Revenue Recognition

              Revenues related to providing short-term cellular phone rental
              services are recognized as the service is provided. Debit card
              revenues are recognized over the estimated period in which the
              Company provides debit, or prepaid, cellular service to its
              customers. Customers purchase debit cellular service by buying
              debit cards at retail locations throughout the United States and
              calling the Company to activate, or redeem, the debit cards.
              Customers may also call the Company directly to purchase debit
              cellular service. The Company gives the customer a series of
              numeric codes that are input into their phone that allow it to be
              activated for a specific number of minutes and days. The actual
              number of minutes will vary based upon the denomination of the
              card and the type of calls made (local or roaming). A typical $30
              debit card expires after approximately 38 minutes of usage or 60
              days, whichever occurs first. However, most of the airtime is used
              within the first 30 days of redemption. Carrier commissions
              related to activation revenues are due from cellular carriers for
              new cellular telephone line activations performed 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.

              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, 1999,
              1998 and 1997 were approximately $265,000, $308,000 and $132,000,
              respectively.

                                      F-9
<PAGE>   26
               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

              Income Taxes
              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
              The Company complies with 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. Diluted loss per common
              share was the same as basic loss per common share for the years
              ended December 31, 1999, 1998 and 1997. Unexercised stock options
              to purchase 1,222,000, 699,000 and 365,000 shares of the Company's
              common stock and unexercised warrant options to purchase
              3,758,000, 3,316,000 and 3,518,000 shares of the Company's common
              stock as of December 31, 1999, 1998 and 1997, respectively, in
              addition to shares of common stock from the conversion of
              convertible debentures and preferred stock of 3,236,000 and
              480,000 as of December 31, 1999 and 1998, 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.


NOTE 3 -      UNCERTAINTY - ABILITY TO CONTINUE AS A GOING CONCERN

              The accompanying consolidated financial statements have
              been presented on the basis that it is a going concern, which
              contemplates the realization of assets and the satisfaction of
              liabilities in the normal course of business. The Company has
              sustained a cumulative net loss of approximately $51,000,000
              through December 31, 1999, had a working capital deficit of
              approximately $8,200,000 at December 31, 1999 and a stockholders'
              deficiency of approximately $22,500,000 at December 31, 1999. The
              consolidated financial statements do not include any adjustments
              that might result from the outcome of this uncertainty.

              Management's plans include the expansion of the Company's customer
              base of its prepaid cellular services through the anticipated
              spin-off of its CellEase.com subsidiary, improved operating
              results in its rental division and additional expansion of
              services to third parties. CellEase.com is primarily a business to
              business information technology company, providing back- office
              service bureau functions,

                                      F-10
<PAGE>   27
               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 -      UNCERTAINTY - ABILITY TO CONTINUE AS A GOING CONCERN (CONTINUED)

              advanced platform and integrated e-commerce and direct marketing
              solutions to the telecommunications industry.

              Continuation of the Company as a going concern is dependent on its
              ability to obtain profitable operations through the CellEase.com
              subsidiary in addition to the current operations in the prepaid
              and short-term rental of cellular phones throughout the United
              States. In addition, the Company is pursuring additional equity or
              debt financing in an effort to improve  working capital.

NOTE 4 -      PREPAID EXPENSES AND OTHER CURRENT ASSETS

              Prepaid expenses and other current assets consist of the following
              at December 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                        1999             1998
                                     ----------       ----------
<S>                                  <C>              <C>
Prepaid consulting agreement          2,492,000             --
Prepaid telephone line charges          695,000          732,000
Prepaid access fees                     672,000          878,000
Marketable securities                      --            408,000
Note receivable                         500,000             --
Other                                   167,000           12,000
                                     ----------       ----------

                                     $4,526,000       $2,030,000
                                     ==========       ==========
</TABLE>

              In July 1999, the Company entered into a consulting agreement (the
              "Agreement") with Retail Distributor, Inc. ("RDI"), expiring in
              March 2001 pursuant to which RDI provides certain services
              relating to the marketing, sale and distribution of the Company's
              prepaid cellular services. The Agreement was entered into in
              connection with the Company's acquisition, in July 1999, of all of
              the outstanding capital stock of Retail Cellular Inc. (RCI) for
              150,000 shares of the Company's common stock valued at a fair
              market value of $10.56 per share. Pursuant to the terms of the
              Agreement, the Company also paid RDI approximately $843,000 in
              cash, issued 118,194 shares of the Company's common stock valued
              at $10.56 per share, will make monthly payments over the term of
              the Agreement aggregating approximately $1,596,000, of which
              approximately $996,000 was paid during 1999. All amounts payable
              under the Agreement are being expensed over the services period
              expiring in March 2001. During the term of the Agreement, RDI
              shall be paid certain additional amounts based upon performance
              set forth in the agreement. These payments will be in the form of
              cash and warrants for the purchase of shares of STC common stock.
              As of December 31, 1999 the Company issued 250,000 warrants to
              purchase shares of the Company's common stock. The Company loaned
              RDI $500,000, bearing interest at 9.5% per annum, which is due on
              demand.

NOTE 5 -      TELECOMMUNICATIONS AND OFFICE EQUIPMENT

              Telecommunications and office equipment consist of the following
at December 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                      1999             1998
                                   ----------       ----------
<S>                                <C>              <C>
Telecommunications equipment       $  400,000       $2,504,000
Office equipment                    2,141,000        1,411,000
                                   ----------       ----------
                                    2,541,000        3,915,000
Accumulated depreciation            1,027,000        2,790,000
                                   ----------       ----------

                                   $1,514,000       $1,125,000
                                   ==========       ==========
</TABLE>

                                      F-11
<PAGE>   28
               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 5 -      TELECOMMUNICATIONS AND OFFICE EQUIPMENT (CONTINUED)

              Depreciation expense for the years ended December 31, 1999, 1998
              and 1997 was $769,000, $604,000 and $650,000, respectively.


NOTE 6 -      INTANGIBLE ASSETS

              Intangible assets consist of the following at December 31, 1999
              and 1998:

<TABLE>
<CAPTION>
                                  1999             1998
                               ----------       ----------
<S>                            <C>              <C>
Goodwill                       $8,426,000       $8,426,000
Covenant not to compete              --            142,000
Rental car agreement              520,000          520,000
Debt issuance costs               171,000          171,000
                               ----------       ----------

                                9,117,000        9,259,000
Accumulated amortization        2,828,000        2,266,000
                               ----------       ----------

                               $6,289,000       $6,993,000
                               ==========       ==========
</TABLE>

              Amortization expense for the years ended December 31, 1999, 1998
              and 1997 was $704,000, $619,000 and $642,000, respectively.

NOTE 7 -      ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

              Accrued expenses and other current liabilities consist of the
              following at December 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                   1999             1998
                                ----------       ----------
<S>                             <C>              <C>
Sales and other taxes           $5,512,000       $4,428,000
Payroll and payroll taxes          200,000          124,000
Commissions                        178,000          222,000
Other                            1,155,000        1,379,000
                                ----------       ----------

                                $7,045,000       $6,153,000
                                ==========       ==========
</TABLE>

                                      F-12
<PAGE>   29
               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 8 -      LONG-TERM DEBT

              Long-term debt consists of the following at December 31, 1999 and
              1998:

<TABLE>
<CAPTION>
                                                                      1999             1998
                                                                   ----------       ----------
<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.               $  225,000       $  675,000

Promissory notes bearing interest at 10%
 per annum and payable in monthly installments
 of $8,500 through March 2002.                                        204,000          281,000

Promissory notes bearing interest at prime
 rate (7.75% at December 31, 1998)
 plus 2.50% per annum, 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.          2,150,000        2,400,000

Promissory note, to former parent, bearing interest
 at prime rate plus 2% per annum, due in November 1999.                  --          1,411,000

Capital lease obligation bearing interest
 at 8% per annum payable monthly, with
 principal, due in November 2001.  The lease
 is payable to an affiliate of the Company
                                                                      448,000             --
                                                                   ----------       ----------

                                                                    3,027,000        8,742,000
Less current portion                                                  535,000        5,913,000
                                                                   ----------       ----------

                                                                   $2,492,000       $2,829,000
                                                                   ==========       ==========
</TABLE>

                                      F-13
<PAGE>   30
               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 8 -      NOTES PAYABLE (CONTINUED)

              Aggregate future principal payments are as follows:

<TABLE>
<CAPTION>
                                            Long-Term        Capital Lease
Year Ending December 31,                       Debt           Obligation
                                            ----------       -------------
<S>                                         <C>              <C>
2000                                        $  310,000       $  253,000
2001                                            94,000          232,000
2002                                            25,000
2003                                              --
2004                                              --
Thereafter                                   2,150,000
                                            ----------       ----------
                                            $2,579,000       $  485,000
                                            ==========
Less amount representing interest                                37,000
                                                             ----------

Present value of future payments,
including current portion of $225,000                           448,000
                                                             ==========
</TABLE>

              Telecommunications and office furniture includes assets under
              capital leases with a net book value of approximately $605,000 as
              of December 31, 1999.


NOTE 9 - REVOLVING CREDIT FACILITY

              In July 1999, as amended in March 2000, the Company entered into a
              $5 million two-year revolving credit facility with a bank. The
              availability of the credit facility is based on a percentage of
              eligible receivables and includes covenants requiring certain
              levels of active debit/prepaid customers and operating results
              through the term of the agreement. Advances under the facility
              bear interest at the prime rate and are to be used for working
              capital and general corporate purposes. The facility is
              collateralized by substantially all of the Company's assets. In
              connection with the facility, the Company issued to the bank a
              ten-year warrant for the purchase of 150,000 shares of its Common
              Stock at an exercise price of $10 per share, subject to certain
              adjustments. The warrant is redeemable by the bank any time after
              the third anniversary for a minimum redemption price of $200,000.
              The Company will account for the warrant as additional interest
              related to the facility over a two year period. At December 31,
              1999 the Company had no direct borrowings outstanding under the
              facility. The Company is currently in default on certain of the
              covenants within the facility. On March 28, 2000 the Company
              received a waiver, as of December 31, 1999, for the default of the
              covenants. The Company remains in default after December 31, 1999.

              In connection with the credit facility, the Company had standby
              letters of credit to certain vendors in the aggregate of
              $2,750,000. These letters of credit expire on various dates from
              February 2, 2000 through September 1, 2000 and are collateralized
              by certain assets of the Company.


NOTE 10 - CONVERTIBLE REDEEMABLE PREFERRED STOCK

              In February 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. Each
              share of Series C Convertible Preferred Stock is convertible into
              common stock of the Company based upon certain formulas and
              limitations.

                                      F-14
<PAGE>   31
               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - CONVERTIBLE REDEEMABLE PREFERRED STOCK (CONTINUED)

              The Series C Convertible Preferred Stock contains a dividend of
              6%, payable upon conversion, in either cash or the Company's
              common stock, at the Company's option (subject to certain
              conditions). The warrants are exercisable at $9 per share and
              expire in February 2004 and are subject to mandatory exercise,
              subject to certain conditions. The Warrants were valued at $75,000
              and the value was treated as a "discount" to the Series C Shares
              and such discount is being accreted as a preferred stock dividend
              over the five-year term of the Warrants. In accordance with
              Emerging Issues Task Force Topic D-60, the Company recognized a
              beneficial conversion feature in the amount of $4,018,000 as a
              one-time non-cash preferred stock dividend in the first quarter of
              1999. The amount represented the difference between the conversion
              price of $7 per share on the date of issuance of the Series C
              Shares, February 5, 1999, and the $8 7/8 market price of Common
              Stock at that date. 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 specified events as defined. During 1999, holders of 1,000
              shares of Series C Preferred Stock converted their stock into an
              aggregate of approximately 149,000 shares of the Company's common
              stock.

              In October 1999, the Company completed a $6.1 million private
              placement, issuing an aggregate of 6,100 shares of a new Series D
              Convertible Preferred Stock, $.01 par value, and warrants to
              purchase an aggregate of 122,000 shares of common stock. Each
              share of Series D Convertible Preferred Stock is convertible into
              common stock of the Company at a conversion price of $8.875. The
              Series D Convertible Preferred Stock contains a dividend of 6%,
              accruing from the date of issuance of the Series D Convertible
              Preferred Stock through and including the date of conversion. The
              premium is payable upon conversion, in the Company's common stock
              or cash, at the Company's option (subject to certain conditions),
              The warrants are exercisable at $11.09 per share, expire in
              October 2004 and are subject to mandatory exercise, subject to
              certain conditions. The Warrants were valued at $31,000 and the
              value was treated as a "discount" to the Series D Shares and such
              discount is being accreted as a preferred stock dividend over the
              five-year term of the Warrants. The Company has the right to
              require conversion of all of the outstanding shares of Series D
              Convertible Preferred Stock at any time after October 1, 2000, if
              the closing bid price for the Company's common stock is greater
              than $18 for fifteen consecutive trading days. The Series D
              Convertible Preferred Stock may be redeemed by the holder upon
              certain specified events as defined.

NOTE 11 -     STOCKHOLDERS' DEFICIENCY

              The Company has reserved for issuance 3,758,000 shares of its
              common stock relating to common stock purchase warrants
              outstanding as of December 31, 1999, at prices ranging from $2.50
              to $11.09 per share.

              In 1998, the Company received 100,000 shares of its common stock
              that were issued in connection with 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 of common stock, exercisable at $5 per share and expiring
              in 2001.

              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.

                                      F-15
<PAGE>   32
               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 12 -     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 1,325,000 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 seventy percent of 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, 1999, options to purchase 1,120,000 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 200,000 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 three-year term, nonstatutory
              options to purchase 15,000 shares of the Company's common stock.
              For directors elected to less than a three-year term, such
              directors shall receive an option to purchase 5,000 shares per
              year to be served as a director, with vesting pro rated on a
              monthly basis. The option exercise price per share shall be equal
              to the fair market value of such shares at the time of grant. All
              options granted under the Plan vest ratably over the director's
              term and are exercisable within 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, 1999, options to purchase 102,000 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, 1997                        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

Granted                                                     590,000          6.13-12.00            9.85
Exercised                                                  (35,000)           2.13-6.50            3.27
Expired                                                    (32,000)          2.13-12.00            8.08
                                                     ---------------   -----------------   -------------

Balance outstanding, December 31, 1999                    1,222,000    $     1.63-12.00          $ 6.95
                                                     ===============   =================   =============

Exercisable, December 31, 1999                              431,000    $     1.63-12.00          $ 4.16
                                                     ===============   =================   =============
</TABLE>

                                      F-16
<PAGE>   33
               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 12 -     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 applicable to common stockholder's
              and net loss per share applicable to common stockholder's would
              have been adjusted to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                        1999                1998                 1997
                                                        ----                ----                 ----
<S>                                           <C>                   <C>                   <C>
Net loss applicable to common stockholders:
As reported                                   $  (22,651,000)       $  (11,646,000)       $   (3,695,000)
Pro forma                                        (23,735,000)          (12,024,000)           (3,770,000)

Net loss per share applicable to common
  stockholders:
As reported                                   $        (2.84)       $        (1.58)       $        (0.63)
Pro forma
                                                       (2.98)                (1.63)                (0.64)
</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 1999,
              1998 and 1997, respectively: risk-free interest rate of 5.5%, 5%
              and 6%, respectively; no dividend yield; expected lives of 3 to 10
              years; and expected volatility of 81%, 91% and 64%, respectively.

NOTE 13 -     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.

NOTE 14 -     SAVINGS AND RETIREMENT PLAN

              In June 1996, the Company formed a savings and retirement plan
              (the Plan) which covers 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. For the years ended December 31, 1999, 1998
              and 1997, the Company's matching contributions were $165,000,
              $104,000 and $71,000, respectively.

                                      F-17
<PAGE>   34
               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 15 -         Income Taxes

              A reconciliation of income tax benefit, to the federal statutory
rate for the years ended December 31, 1999, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
                                                          1999             1998        1997
                                                          ----             ----        ----
<S>                                                      <C>               <C>        <C>
Income tax benefit on reported pretax
 loss at federal statutory rate                          (35.0)%           (35.0)%    (34.0)%
State net operating losses                                (6.0)             (6.0)      (6.0)
Net operating loss carryforward not recognized            41.0              41.0       40.0
                                                       --------         --------   --------

Income taxes                                               0.0%              0.0%       0.0%
                                                       ========         ========   ========
</TABLE>

              At December 31, 1999 and 1998, the Company recorded net deferred
              tax assets of approximately $16,835,000 and $9,702,000,
              respectively, and valuation allowances in the same amounts. The
              valuation allowances were increased by $7,133,000, $4,191,000 and
              $1,111,000, respectively, for the years ended December 31, 1999,
              1998 and 1997, 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 future
              taxable income.

              The net deferred tax assets and liabilities as of December 31,
              1999 and 1998 are as follows:


<TABLE>
<CAPTION>
                                                                          1999                 1998
                                                                    -----------------   ------------------
<S>                                                                 <C>                 <C>
Deferred tax assets:
Net operating loss carryforwards                                    $      16,510,000   $       9,289,000
Allowance for doubtful accounts                                               237,000             367,000
Asset basis difference, intangible assets                                      88,000              57,000
                                                                    -----------------   ------------------
                                                                           16,835,000           9,713,000
                                                                    -----------------   ------------------

Deferred tax liabilities, asset basis
 difference for equipment and intangible assets                                    --            (11,000)
                                                                    -----------------   ------------------

Deferred tax asset, net                                                    16,835,000           9,702,000
Valuation allowance on deferred tax asset                                (16,835,000)         (9,702,000)
                                                                    -----------------   ------------------

                                                                    $              --   $               --
                                                                    =================   ==================
</TABLE>


              At December 31, 1999, the Company has federal net operating loss
              carryforwards of approximately $40,000,000, which can be utilized
              against future taxable income and expire through the year 2019.
              Net operating losses available for state income tax purposes are
              less than those for federal purposes and generally expire earlier.

                                      F-18
<PAGE>   35
               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 16 -     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, 1999 are as
              follows:

<TABLE>
<S>                                                                                                          <C>
                     Year ending December 31
                                2000                                                                         $       798,000
                                2001                                                                                 753,000
                                2002                                                                                 138,000
</TABLE>


              Rent expense for the years ended December 31, 1999, 1998 and 1997
              was approximately $815,000, $558,000 and $352,000, respectively.
              Leased equipment expense for the year ended December 31, 1999 was
              approximately $55,000.

              In January 1999, the Company brought an action against SmarTalk
              TeleServices, Inc. ("SmarTalk"), a former party to an agreement in
              which the Company was to provide prepaid cellular services, for
              fraud and breach of contract. SmarTalk subsequently filed for
              bankruptcy, leading the Company to file a proof of claim with the
              bankruptcy court in the amount of approximately $14,400,000 in
              March 1999. SmarTalk has since disclosed approximately $847,000 in
              preference payments that it claims the bankrupt estate is entitled
              to recover from the Company. The Company intends to prosecute its
              claim against SmarTalk and to vigorously contest any preference
              action brought by the bankrupt estate.

              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.


NOTE 17 -     RELATED PARTY TRANSACTIONS

              The Company sub-leases certain office space to affiliates,
              expiring January 6, 2000 through December 31 , 2004. As of
              December 31, 1999, aggregate monthly rental payments are
              approximately $15,000, plus operating expenses, property taxes and
              rent escalations.

              In November 1999, the Company purchased $2,000,000 of debit
              cellular phones from a company whose member is a director of the
              Company.

              During 1999 the Company entered into a capitalized lease
              obligation with an affiliate, expiring in November 2001. Aggregate
              monthly payments are approximately $21,000.

                                      F-19
<PAGE>   36
               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 18 -     DEPENDENCE UPON KEY RELATIONSHIPS AND MAJOR CUSTOMERS

              Approximately 18%, related to the debit segment, and 16%, related
              to the rental segment, of the Company's revenues for 1999 were
              attributable to two 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.
              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 19 -     SEGMENT INFORMATION

              The Company complies with Statement of Financial Accounting
              Standards No. 131 (SFAS 131), "Disclosures about Segments of an
              Enterprise and Related Information." 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 or services, 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 for or used by the
              CODM.

              Operating segment information for 1999, 1998, and 1997 is
              summarized as follows:

                                      F-20
<PAGE>   37
               SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 19 -     SEGMENT INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
                                              Rental              Debit          Activation       Corporate        Consolidated
                                              ------              -----          ----------       ---------        ------------
<S>                         <C>             <C>                <C>               <C>              <C>              <C>
Revenues                    1999            $12,939,000        $14,280,000       $1,052,000                         $28,271,000
                            1998             14,037,000         12,737,000        1,426,000                          28,200,000
                            1997             15,242,000          6,299,000        2,657,000                          24,198,000

Depreciation
  and amortization          1999                326,000            280,000           22,000          845,000          1,473,000
                            1998                429,000            101,000           10,000          792,000          1,332,000
                            1997                495,000                              14,000          783,000          1,292,000

Bad debts                   1999                883,000            306,000           28,000                           1,217,000
                            1998              1,441,000          2,097,000           16,000                           3,554,000
                            1997              1,309,000              8,000           24,000                           1,341,000

Operating income (loss)     1999              1,034,000        (10,964,000)         (20,000)      (6,334,000)       (16,284,000)
                            1998               (777,000)        (5,942,000)        (365,000)      (3,604,000)       (10,688,000)
                            1997               (965,000)         1,471,000           86,000       (4,045,000)        (3,453,000)

Interest expense, net       1999                                                                    (574,000)          (574,000)
                            1998                                                                    (952,000)          (952,000)
                            1997                                                                    (232,000)          (232,000)

Income (loss) before
  income taxes              1999              1,034,000        (10,964,000)         (20,000)      (6,908,000)       (16,858,000)
                            1998               (777,000)        (5,942,000)        (365,000)      (4,556,000)       (11,640,000)
                            1997               (965,000)         1,471,000           86,000       (4,277,000)        (3,685,000)
</TABLE>

                                      F-21
<PAGE>   38
              SHARED TECHNOLOGIES CELLULAR, INC. AND SUBSIDIARIES

                                  SCHEDULE II
                       VALUATION AND QUALIFYING ACCOUNTS
                  Years Ended December 31, 1999, 1998 and 1997

<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, 1999:
  Allowance for doubtful accounts                   $      896,000     $    1,217,000     $    1,618,000     $      495,000
                                                    ===============    ===============    ===============    ===============

YEAR ENDED DECEMBER 31, 1998:
  Allowance for doubtful accounts                   $      991,000     $    3,554,000     $    3,649,000     $      896,000
                                                    ===============    ===============    ===============    ===============

YEAR ENDED DECEMBER 31, 1997:
  Allowance for doubtful accounts                   $    1,392,000     $    1,341,000     $    1,742,000     $      991,000
                                                    ===============    ===============    ===============    ===============
</TABLE>

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


                                      S-1
<PAGE>   39
                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

DIRECTORS

The following table sets forth certain information concerning the directors and
executive officers of the Company who are also directors. Pursuant to the
Company's Second Restated Certificate of Incorporation and Amended Bylaws, the
Company has a classified Board of Directors, whereby directors are elected to
three-year terms, with one-third of the directors coming up for election each
year at the Company's annual meeting of stockholders.

<TABLE>
<CAPTION>
          Director           Age   Director Since    Year Term            Position with the Company
          --------           ---   --------------     Expires             --------------------------
                                                      --------
<S>                          <C>   <C>               <C>          <C>
Anthony D. Autorino          61       1989             2002       Chairman, Chief Executive Officer and
                                                                  Director
Bruce Carswell               70       1998             2000       Director
Thomas H. Decker             59       1994             2002       Director
William A. DiBella           57       1993             2001       Director
Vincent DiVincenzo           50       1993             2001       Senior Vice President, Chief Financial
                                                                  Officer, Treasurer and Director
Victor Grillo, Sr.           59       1999             2001       Director
Ajit G. Hutheesing           64       1995             2002       Director
Nicholas E. Sinacori         55       1996             2000       Director
</TABLE>

    ANTHONY D. AUTORINO has been Chairman, President and Chief Executive Officer
of the Company since its formation in 1989. Mr. Autorino is a principal of CMD
Ventures LLC, a private real estate management and development company. From
January 1986 to March 1998, he was Chairman and Chief Executive Officer of
Shared Technologies Fairchild Inc. ("STFI"), the former parent of the Company,
and he was President of STFI from January 1986 to March 1996. From January, 1985
to January, 1986, he was Chairman and Chief Executive Officer of ShareTech, a
joint venture between United Technologies Corporation and AT&T. He was President
of United Technologies Building System Company from 1981 to 1984 and was its
Chairman and Chief Executive Officer from 1984 to 1985. Mr. Autorino joined the
Hamilton Standard Division of United Technologies in 1960, holding the positions
of Vice President, Executive Vice President and President of the Division. Mr.
Autorino was Chairman of the firearms manufacturer Colt's Manufacturing Company,
Inc. and of its parent company, CF Holding Corp. from March, 1990 to March,
1992. Mr. Autorino serves on the board of directors of the Connecticut
Children's Medical Center. He also serves on the boards of trustees of The
Bushnell Memorial Theater in Hartford, Connecticut, and St. Joseph's College in
West Hartford, Connecticut. Mr. Autorino is chairman of Global Interactive
Communications Corporation, a private telecommunications services company.

    BRUCE CARSWELL was appointed a director of the Company in July 1998. Mr.
Carswell has been a consultant to GTE Corporation since 1995, and has been a
principal in the Cabot Advisory Group, a human resource firm, since June, 1998.
In 1995, he retired from GTE, having served in various capacities, including as
Executive Director of the Office of the Chairman, as Senior Vice President of
Human Resources and Administration, and as a member of the Board of Directors.
He chaired one joint-venture Board of GTE, continues to serve as a director of
another such Board, and provides consulting services to GTE. Mr. Carswell is a
noted authority on human resource issues and labor law, with experience that
includes congressional appointments to various commissions concerning business
and labor. Mr. Carswell received a bachelor's degree from Colby College and a
law degree from Cornell University.

    THOMAS H. DECKER has been a director of the Company since September, 1994.
Since March, 2000, Mr. Decker has been a Senior Vice President and Financial
Advisor at Morgan Stanley Dean Witter. From September, 1992 to March, 2000, Mr.
Decker was a Senior Vice President - Investments of Prudential Securities. From
1981 to September, 1992, he served as a Senior Vice President at Tucker Anthony
Incorporated.

                                       17
<PAGE>   40
    WILLIAM A. DIBELLA has been a director of the Company since September, 1994.
Mr. DiBella is currently a lobbyist and is a principal of CMD Ventures LLC., a
private real estate management and development company. From 1981 to 1997, Mr.
DiBella served as a Connecticut State Senator, including serving as Senate
Majority Leader and Chairman of the Finance, Revenue and Bonding Committee. Mr.
DiBella was a member of the Hartford City Council from 1971 to 1979 and Deputy
Mayor from 1975 to 1977.

    VINCENT DIVINCENZO has been Treasurer of the Company since March, 1989,
Chief Financial Officer of the Company since February, 1994, Senior Vice
President of the Company since March, 1998, and a director of the Company since
March, 1993. He is a principal of CMD Ventures LLC, a private real estate
management and development company. From 1988 to 1998, Mr. DiVincenzo served
STFI in many capacities, including as its Vice President - Finance from 1988
until 1993, its Senior Vice President - Administration and Finance from 1993 to
March, 1998, its Treasurer and Chief Financial Officer 1988 to March, 1998, and
as a director of STFI from 1992 to March, 1998. From 1987 to 1988, Mr.
DiVincenzo was Controller of KCR Technology, Inc., a research and development
firm. From 1982 to 1986 he was employed by Lorlin Test Systems, formerly Eaton
Corporation, last serving as Controller. Mr. DiVincenzo is a director of Global
Interactive Corporation.

    VICTOR GRILLO, SR. has been a director of the Company since July, 1999.
Since 1997, Mr. Grillo has been Chief Executive Officer of the corporate general
partner of DTR Associates Limited Partnership ("DTR"), a limited partnership
engaged in the business of developing, marketing and distributing consumer
products through direct response and retail distribution channels. From 1991 to
1997, Mr. Grillo was President of DTR. Mr. Grillo is a member of Retail
Distributors, LLC, formerly Retail Distributors, Inc., which provides certain
marketing support services to the Company.

    AJIT G. HUTHEESING has been a director of the Company since December, 1995.
Mr. Hutheesing is the founder, Chairman and Chief Executive Officer of
International Capital Partners, Inc. ("ICP"), a private investment management
firm. Prior to starting ICP in 1988, he was Chairman of the Board and Director
of Corporate Finance of The Sherwood Group. Before joining Sherwood, Mr.
Hutheesing was with the J. Henry Schroder Corporation from 1975 to 1985 and held
the position of Vice Chairman from 1982 to 1985. Prior to that time, Mr.
Hutheesing spent ten years with the International Finance Corporation, a private
sector investment banking arm of the World Bank. He also serves as a Director of
Counsel Corporation and Officeland, Inc.

    NICHOLAS E. SINACORI has been a director of the Company since August, 1996.
He has served as Managing Partner of ICP since 1990. From 1985 to 1990, Mr.
Sinacori was President of Westport Management, Inc., a private real estate
investment company. From 1974 to 1985, he was Vice President and Treasurer of
U.S. Industries, an international conglomerate. Mr. Sinacori also serves as a
director of Ralin, Inc., Cambric Corporation, Beverage Marketing Technologies,
Inc., Arrow Corporation and Tickets.com.

EXECUTIVE OFFICERS

The following table sets forth certain information concerning the executive
officers of the Company who are not also directors. The executive officers are
elected by the Board of Directors and serve at the discretion of the Board.

<TABLE>
<CAPTION>
                  OFFICER                  AGE                  POSITION WITH COMPANY
                  -------                  ---                  ---------------------
<S>                                        <C>     <C>
                  Kenneth M. Dorros        40      Senior Vice President, General Counsel and Secretary
                  Sean P. Hayes            35      Executive Vice President
                  John Lovkay              62      Vice President - Debit Division Operations
                  Ismael G. Pinho          41      Vice President and Controller
</TABLE>

    KENNETH M. DORROS has been Senior Vice President, General Counsel and
Secretary of the Company since June, 1998. Previously, he served the Company as
Counsel from October, 1997 to June, 1998. From March, 1989 to October, 1997, Mr.
Dorros served as Vice President, General Counsel and Secretary of the Company.
Mr. Dorros served as General Counsel and Secretary of Shared Technologies
Fairchild Inc. ("STFI") from June, 1986 to March, 1998, where he was also a
Senior Vice President from April, 1996 to March, 1998. Mr. Dorros received a
bachelor's degree from Lehigh University and a Juris doctor from the Fordham
University School of Law.

                                       18
<PAGE>   41
    SEAN P. HAYES has been an Executive Vice President of the Company since
March, 1993. Between December, 1992 and March, 1993, he served as the Company's
Director of Operations. From March, 1993 to August, 1996, Mr. Hayes served on
the Company's Board of Directors. Prior to joining the Company, Mr. Hayes was
employed by STFI, serving as director of STFI's Data Division from 1990 to 1992
and as a Regional Business Manager from 1988 to 1990. He received a B.A. degree
in business administration and computer information systems from New Hampshire
College.

    JOHN LOVKAY has been Vice President - Operations of the Company's Debit
Division since December, 1999. From February, 1999 to December, 1999 he had been
President of the Debit Division. Prior to that, he served as Senior Vice
President - Corporate Operations from October, 1996 to February, 1999. From
April, 1995 to October, 1996, Mr. Lovkay held the position of Vice President -
Operations Support. Prior to joining the Company, Mr. Lovkay was employed by
STFI in the position of Senior Vice President - Operations Analysis from August,
1994 to April, 1995. From December of 1992 to August of 1994, he was a software
consultant, which position included work for Integrated Management Systems and
DeSai Consulting Group. Mr. Lovkay was Executive Vice President and Chief
Operating Officer of STFI from January of 1987 to December of 1992. He also
served as President of the Hamilton Standard Division of United Technologies
Corporation from 1984 to 1986. Mr. Lovkay holds a B.S. in electrical engineering
from the Massachusetts Institute of Technology and a M.S. from the University of
Connecticut.

    ISMAEL G. PINHO joined the Company as its Controller in May, 1995. Since
December, 1999 he has held the position of Vice President and Controller. From
October, 1990 to May, 1995, he was Controller of F.L. Roberts & Company, Inc. a
retailer and distributor of petroleum products. Mr. Pinho was Controller of
Shapiro Equipment, Inc., a construction equipment company, from 1986 to 1990.
Mr. Pinho holds a B.A. degree in accounting from the University of Connecticut.

             SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

    Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors, and
persons who own more than 10% of the Company's outstanding shares of Common
Stock, to file reports of ownership and changes in ownership with the SEC and
NASDAQ. executive officers, directors and persons holding greater than ten
percent of the Company's outstanding shares of Common Stock are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.

    The Company knows of no delinquent filings under Section 16(a) of the
Exchange Act during the fiscal year ended December 31, 1999.

ITEM 11. EXECUTIVE COMPENSATION.

                           SUMMARY COMPENSATION TABLE

    The following table sets forth the annual and long-term compensation awarded
or paid to or earned by the Company's Chief Executive Officer, as well as to
each of the Company's other most highly paid executive officers who received
compensation in excess of $100,000 for the fiscal year ended 1999 (of which
there were only four such other executive officers). Collectively, the Chief
Executive Officer and such other executive officers are referred to herein as
the "Named Executive Officers."

<TABLE>
<CAPTION>
                                                                            LONG-TERM
                                                                       COMPENSATION AWARDS
                                               ANNUAL COMPENSATION          SECURITIES        ALL OTHER
                                                                            UNDERLYING
NAME AND PRINCIPAL POSITION           YEAR     SALARY        BONUS         OPTIONS (#)      COMPENSATION
---------------------------           ----     ------        -----         -----------      ------------
<S>                                   <C>      <C>           <C>           <C>              <C>
Anthony D. Autorino
    Chairman and Chief Executive
      Officer                          1999      $312,500       $8,500        100,000         $54,890 (a)
                                       1998      $156,250           --        150,000         $55,020 (b)
                                       1997           (c)           --                             --
Vincent DiVincenzo                     1999      $162,500       $8,500         55,000         $ 9,900 (d)
    Senior Vice President,
    Treasurer and Chief
    Financial Officer
</TABLE>

                                       19
<PAGE>   42
<TABLE>
<S>                                    <C>       <C>            <C>            <C>            <C>
Sean P. Hayes                          1999      $125,000       $5,000         30,000         $ 3,654 (e)
    Executive Vice President           1998      $106,458           --         25,000         $ 3,644 (f)
                                       1997      $102,084           --             --         $ 3,207 (g)
Kenneth M. Dorros                      1999      $105,000       $4,000         10,000         $ 1,535 (h)
    Senior Vice President, General
    Counsel and Secretary
</TABLE>


(a)      Includes life insurance premiums of $47,844 and disability insurance
         premiums of $7,046.

(b)      Includes life insurance premiums of $47,974 and disability insurance
         premiums of $7,046.

(c)      Until April 1998, the Chief Executive Officer, Anthony D. Autorino, was
         paid by Shared Technologies Fairchild Inc., of which Mr. Autorino was
         Chairman and Chief Executive Officer, in accordance with a Management
         Agreement that is no longer in effect.

(d)      Includes life insurance premiums of $4,460, disability insurance
         premiums of $1,815 and automobile expense allowance of $3,625. Until
         April 1998, the Senior Vice President, Treasurer and Chief Financial
         Officer, Vincent DiVincenzo, was paid by Shared Technologies Fairchild
         Inc., of which he was Senior Vice President, Treasurer and Chief
         Financial Officer, in accordance with a Management Agreement that is no
         longer in effect.

(e)      Includes life insurance premiums of $1,573, disability insurance
         premiums of $423 and automobile expense allocation of $1,658.

(f)      Includes life insurance premiums of $1,579, disability insurance
         premiums of $407 and automobile expense allowance $1,658.

(g)      Includes life insurance premiums of $1,579, disability insurance
         premiums of $392 and automobile expense allowance of $1,236.

(h)      Includes life insurance premiums of $865 and disability insurance
         premiums of $670.


                        OPTION GRANTS IN LAST FISCAL YEAR

    The following table sets forth information on options granted during the
fiscal year ended December 31, 1999 to the Named Executive Officers.

<TABLE>
<CAPTION>
                                         INDIVIDUAL GRANTS                  POTENTIAL REALIZED VALUE
                                     % OF TOTAL                                AT ASSUMED RATES OF
                                       OPTIONS     EXERCISE                STOCK PRICE APPRECIATION
                                     GRANTED TO     OR BASE                     FOR OPTION TERM
                          OPTIONS   EMPLOYEES IN     PRICE     EXPIRATION
NAME                    GRANTED(#)      1999        ($/SH)        DATE        5%($)        10%($)
----                    ----------  ------------  -----------  ----------- ------------  ---------
<S>                       <C>       <C>           <C>          <C>         <C>           <C>
Anthony D. Autorino       100,000        18.9%       (1)          3/20/09    $607,931     $1,540,618
Vincent DiVincenzo         50,000         9.4%       (1)          3/20/09    $303,966     $  770,309
Sean P. Hayes              20,000         3.8%       $6.125       1/04/09    $ 77,040     $  195,233
                           10,000         1.9%       (1)          3/20/09    $ 60,793     $  154,062
Kenneth M. Dorros          10,000         1.9%       (1)          3/20/09    $ 60,793     $  154,062
</TABLE>

(1) One-third exercisable at $9.00, $10.00 and $12.00 per share, respectively.




                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                        AND FISCAL YEAR END OPTION VALUES

    The following table sets forth information concerning outstanding options to
purchase the Company's Common Stock as of December 31, 1999. No stock options
were exercised during the fiscal year ended December 31, 1999 by

                                       20
<PAGE>   43
the Named Executive Officers.

<TABLE>
<CAPTION>
                                                       NUMBER OF SECURITIES   VALUE OF UNEXERCISED
                                                            UNDERLYING            IN-THE-MONEY
                                                            UNEXERCISED         OPTIONS AT FISCAL
                                                         OPTIONS AT FISCAL         YEAR END($)
                                                            YEAR END(#)

                                                           EXERCISABLE/          EXERCISABLE/
                                                           UNEXERCISABLE         UNEXERCISABLE
                                                           -------------         -------------
<S>                                                       <C>                   <C>
                                Anthony D. Autorino       158,333/100,000       $463,665 / 91,667
                                Vincent DiVincenzo         71,667/50,000        $193,435 / 45,833
                                Sean P. Hayes              61,666/36,667         $238,707/70,350
                                Kenneth M. Dorros          31,166/6,667            $139,732/0
</TABLE>

COMPENSATION OF DIRECTORS

Directors who are not employees of the Company or its subsidiaries receive cash
compensation of $750 per board meeting attended ($400 if attended by
teleconference) and $500 for each committee meeting attended ($400 if attended
by teleconference), plus reimbursement of out-of-pocket expenses for attendance
at each such meeting. Each non-employee director also receives an annual fee of
$10,000, payable quarterly in arrears.

In addition, pursuant to the 1994 Director Option Plan, each non-employee
director receives an option, at the beginning of each three-year term to which
he is elected, to purchase 15,000 shares of the Company's Common Stock. Such
options have an exercise price equal to the fair market value of the Company's
Common Stock at the time of their grant, and vest at the rate of one-third per
year from the date of issuance, for so long as the option holder continues to
serve as a director of the Company.


EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

    The Company has employment agreements currently in effect with 10 of its
employees, including each of the Named Executive Officers.

As of October 1, 1999, the Company entered into employment agreements with
certain members of management, including each of the Named Executive Officers.
Each agreement has a term of one year, and is automatically renewable for
successive one-year terms, subject to termination provisions. The agreements
provide for base salaries for Messrs. Autorino, DiVincenzo, Hayes and Dorros of
$375,000, 175,000, 130,000 and $110,000, respectively. Each agreement contains
certain termination and change-of-control payments, payable under certain
circumstances. In the case of Messrs. Autorino, DiVincenzo and Hayes, in the
event of termination of employment without cause or in the event of non-renewal
by the Company, each would receive a severance payment equal to one year's base
salary plus one year's target bonus (which is 50% for Messrs. Autorino and
DiVincenzo and 40% for Mr. Hayes), plus 20% to account for the loss of benefits.
Under such circumstances, Mr. Dorros' agreement provides for severance of six
month's base salary and target bonus (25%), plus a 20% fringe factor.

In the event of a change of control of the Company, Messrs. Autorino, DiVincenzo
and Hayes would receive an additional payment in an amount equal to 18 months'
base salary and target bonus. Such payment for Mr. Dorros would be in an amount
equal to six months' base salary and target bonus.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

    The current members of the Compensation Committee of the Board of Directors
are Messrs. Decker, DiBella and Hutheesing. Messrs. Autorino and DiVincenzo,
executive officers of the Company, and Mr. DiBella are each managing directors
of CMD Ventures, LLC, a private real estate management and development company.
Mr. Hutheesing is a director and executive officer of International Capital
Partners, Inc. and a trustee of International Capital Partners Profit Sharing
Trust, each of which participated in financing transactions with the Company in
1998 and 1999, which are described in greater detail below under the caption
(See Item 13, "Certain Relationships and Related Transactions").

1.  REPORT OF THE COMPENSATION COMMITTEE

                                       21
<PAGE>   44
    The Compensation Committee of the Board of Directors is responsible for
establishing the compensation, including bonus and incentive arrangements, of
the Company's Chief Executive Officer and for reviewing the compensation of
other executive officers of the Company, as established by the Chief Executive
Officer. Until April of 1998, the Chief Executive Officer received no cash
compensation from the Company, but was instead paid by Shared Technologies
Fairchild Inc. ("STFI"), which was acquired by Intermedia Communications, Inc.
in March of 1998. Previously, STFI provided certain management services to the
Company pursuant to a management agreement that expired in 1997.

    The Compensation Committee makes appropriate recommendations concerning
executive compensation, and it reports to the Company's Board of Directors.
Under the supervision, approval and review of the Compensation Committee, the
Company's compensation policies and programs are intended to motivate, retain
and attract management with incentives linked to the financial performance of
the Company and the value that is delivered to its stockholders. Specifically,
the Company's policies and programs endeavor to (i) link executive compensation
to sustainable increases in the financial performance of the Company, where
possible, and where not possible, preservation or realization of stockholder
value; (ii) provide rewards contingent upon Company performance; (iii)
differentiate compensation based upon individual contributions; (iv) promote
teamwork among executives and other Company employees; and (v) encourage the
retention of a sound management team.

    Cash compensation at the Company consists of two components: (i) a base
salary that is competitive with that of other companies paying at the median
level of the market, and (ii) an annual incentive opportunity that is variable
and is reflective of the financial performance of the Company and the individual
performance of the executive officer. When high levels of performance are
achieved, the level of cash compensation may exceed the median of the market.
Conversely, when the Company or the individual falls short of the predetermined
goals, the level of cash compensation may be substantially below the market
median. The objective of this mix is to deliver total annual cash compensation
competitive with compensation offered at other companies facing similar
challenges for similar positions, while simultaneously linking the payment of
the annual cash incentive to the achievement of specific objectives in the
Company's annual operating plan as approved by the Board of Directors.

    The award and size of any performance bonus is based upon (i) the executive
officer's performance against individual goals, and (ii) the performance of the
Company against Company goals. Goals vary from year to year. The Compensation
Committee also occasionally awards special bonuses in connection with
extraordinary transactions by the Company. The bonuses generally are awarded to
individuals who make significant contributions toward consummation of the
transactions.

    The Compensation Committee believes that stock option grants serve as a
desirable, long-term method of compensation because they closely ally the
interests of management with the preservation, enhancement and realization of
stockholder value and serve as an additional incentive to promote the success of
the Company.

    The Compensation Committee believes that the total compensation program for
executives of the Company is on a level with the compensation programs provided
by other companies facing similar challenges.

    In establishing compensation for the Chief Executive Officer for 1999, the
Compensation Committee employed the same criteria as it used to set compensation
for other executive officers. The Compensation Committee believes that Mr.
Autorino's compensation is competitive with salary levels for chief executive
officers with similar experience and ability and recognizes Mr. Autorino's
individual performance and contributions to the Company's development, including
his leadership in positioning the Company as a more significant competitor
within the prepaid wireless market.

                                               Respectfully submitted,

                                               THOMAS H. DECKER
                                               WILLIAM A. DIBELLA
                                               AJIT G. HUTHEESING



2.  RECOMMENDATIONS OF THE CHIEF EXECUTIVE OFFICER

                                       22
<PAGE>   45
    The Chief Executive Officer recommends to the Compensation Committee the
proposed compensation (other than his own) of each executive officer of the
Company.

    In evaluating the performance of an executive officer and in formulating his
recommendation to the Compensation Committee, the Chief Executive Officer
adheres generally to the criteria and principles enunciated in the Compensation
Committee's report set forth above, yet he relies most heavily on the following
criteria employed by the Compensation Committee:

         (a) the executive officer's influence on the performance of the Company
through his or her management skills;

         (b) the executive officer's skill in long range planning for the
Company's future growth and activities; and

         (c) the manner in which the executive officer positions the Company to
succeed in the future.

                                      Respectfully submitted,

                                      ANTHONY D. AUTORINO
                                      Chairman and Chief Executive Officer

                          CUMULATIVE STOCKHOLDER RETURN

    The following graph and chart compare the cumulative annual stockholder
return on the Company's Common Stock over the period commencing April 21, 1995
(the date of the Company's initial public offering and the date that the
Company's Common Stock commenced trading on Nasdaq) through December 31, 1999 to
that of the total return Index for the Nasdaq Stock Market ("Nasdaq") and the
total return Index for the Standard Industrial Classification Codes 4810-4819
Telephone Communications ("SIC Code Index") assuming the investment of $100 on
April 21, 1995. The total return Index for the Company and the SIC Code Index
were computed using the Compustat database. The first partial year of the Nasdaq
total return Index was computed using Bloomberg, and the subsequent years were
calculated based upon the Center for Research of Securities Prices Total Return
Indices data. In calculating total annual return, reinvestment of dividends is
assumed. The stock performance graph and chart below are not necessarily
indicative of future price performance.

                                  [LINE GRAPH]
<TABLE>
<CAPTION>
         Company Name/Index                       4/21/95   12/31/95  12/31/96  12/31/97  12/31/98  12/31/99
<S>                                               <C>       <C>       <C>       <C>       <C>       <C>
         SHARED TECHNOLOGIES CELLULAR             $100.00   $33.70    $30.40    $59.80    $107.67   $147.80
         NASDAQ                                    100.00   128.90    158.60    194.30     274.00    507.10
         SIC CODE INDEX                            100.00   123.90    145.20    193.10     340.30    559.00
</TABLE>

                                       23
<PAGE>   46
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

    The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 10, 2000 by (i) each of the
Company's directors and nominees, (ii) the Named Executive Officers, (iii) all
directors and executive officers of the Company as a group, and (iv) each person
known by the Company to own beneficially more than five percent of the
outstanding shares of the Company's Common Stock.

<TABLE>
<CAPTION>
                                                                                 PERCENTAGE OF
                 NAME AND ADDRESS (1)                      NUMBER OF SHARES       COMMON STOCK
           DIRECTORS AND EXECUTIVE OFFICERS             BENEFICIALLY OWNED (2)     OUTSTANDING
--------------------------------------------------------------------------------------------------
<S>                                                               <C>                       <C>
Anthony D. Autorino                                               1,036,882 (a)             11.4%
         Chief Executive Officer and Director
Bruce Carswell                                                        8,467 (b)                 *
         Director
Thomas H. Decker                                                    135,500 (c)              1.5%
         Director
William A. DiBella                                                  240,833 (d)              2.7%
         Director
Vincent DiVincenzo                                                  314,144 (e)              3.5%
         Senior Vice President, Chief Financial
         Officer,
         Treasurer and Director
Victor Grillo, Sr.                                                  422,361 (f)              4.7%
         Director
Sean P. Hayes                                                       143,134 (g)              1.6%
         Executive Vice President
Ajit G. Hutheesing                                                  961,063 (h)             10.0%
         Director
Nicholas E. Sinacori                                                948,714 (I)              9.8%
         Director
Kenneth M. Dorros                                                   107,973 (j)              1.2%
         Senior Vice President, General Counsel and
         Secretary

All directors and officers as a group (12 persons)                3,482,294 (k)             33.1%

FIVE PERCENT STOCKHOLDERS
George W. Mauerman                                                  838,541 (l)              9.4%
         6585 S. Yale, Suite 500
         Tulsa, OK 74136
George S. Mauerman                                                  593,166 (m)              6.7%
         6585 S. Yale, Suite 500
         Tulsa, OK 74136
The Fairchild Corporation and Banner Aerospace, Inc.                750,519 (n)              8.5%
         45025 Aviation Drive, Suite 400
         Dulles, VA 20177
International Capital Partners, Inc.                                961,063 (o)             10.0%
         300 First Stamford Place
         Stamford, CT 06902
Zesiger Capital Group LLC                                         1,562,242 (p)             16.4%
         320 Park Avenue
         New York, NY 10022
Dulville Limited                                                    500,587 (q)              5.6%
         9 Avenue d'Ostende
         MC-98000, Monaco
</TABLE>

                                       24
<PAGE>   47
<TABLE>
<S>                                                                <C>                       <C>
Marshall Capital Management, Inc.                                  830,802  (r)              8.6%
         11 Madison Avenue
         New York, NY 10010
SIB Investment Holdings Limited                                     578,383 (s)              6.2%
         380 Madison Avenue
         New York, NY 10017
Rayflex Limited                                                     833,333 (t)              8.6%
         PO Box 3136
         Road Town, Tortola
         British Virgin Islands
</TABLE>

  * Less than 1%

(1) The mailing address of each of the Company's directors and executive
    officers is c/o the Company, 100 Great Meadow Road, Wethersfield, CT 06109.

(2) Except as otherwise specifically noted, the number of shares stated as being
    owned beneficially includes shares held beneficially by spouses and minor
    children. The inclusion herein of any shares deemed beneficially owned does
    not constitute an admission of beneficial ownership of those shares. Each
    stockholder possesses sole voting and investment power with respect to the
    shares listed opposite such stockholder's name, except as otherwise
    indicated.

    (a) Includes 158,333 shares currently issuable upon exercise of options by
        Mr. Autorino. Also includes 134,666 shares that are owned beneficially
        by the estate of Mr. Autorino's late spouse, as to which Mr. Autorino
        disclaims beneficial ownership. Also includes 100,000 shares issuable
        upon exercise of other warrants held by Mr. Autorino, and 1,019 shares
        beneficially owned through the Company's Savings and Retirement Plan.

    (b) Includes 8,167 shares issuable upon exercise of options by Mr. Carswell.

    (c) Includes 14,167 shares currently issuable upon exercise of options by
        Mr. Decker. Also includes 33,333 shares issuable upon exercise of
        warrants.

    (d) Includes 14,167 shares currently issuable upon exercise of options by
        Mr. DiBella. Also includes 168,333 shares and 58,333 shares issuable
        upon exercise of warrants, all of which shares and warrants are
        beneficially owned by Mr. DiBella's spouse, as to which he disclaims
        beneficial ownership.

    (e) Includes 71,667 shares currently issuable upon exercise of options by
        Mr. DiVincenzo. Also includes 16,667 shares issuable upon exercise of
        warrants and 762 shares beneficially owned through the Company's Savings
        and Retirement Plan.

    (f) Includes 4,167 shares currently issuable upon exercise of options by Mr.
        Grillo. Also includes 168,194 shares of Common Stock and 250,000 shares
        currently issuable upon exercise of warrants held by Retail
        Distributors, Inc., of which Mr. Grillo is the CEO and a principal
        stockholder.

    (g) Includes 63,333 shares currently issuable upon exercise of options by
        Mr. Hayes. Also includes 6,667 shares issuable upon exercise of
        warrants, and 4,086 shares owned through the Company's Savings and
        Retirement Plan.

    (h) Includes 131,667 shares owned by International Capital Partners, Inc.
        ("ICP"), of which Mr. Hutheesing is the Chairman, Chief Executive
        Officer and a stockholder. Also includes 26,333 shares currently
        issuable upon exercise of options by ICP, 710,000 shares issuable upon
        exercise of warrants held by ICP, 38,063 shares issuable upon conversion
        of Series C Convertible Preferred Stock held by the ICP Profit Sharing
        Plan and 5,000 shares issuable upon exercise of warrants held by the ICP
        Profit Sharing Trust. Also includes 40,000 shares issuable upon
        conversion of a convertible promissory note held by ICP Profit Sharing
        Trust.

    (i) Includes 131,667 shares owned by ICP, of which Mr. Sinacori is Managing
        Director. Also includes 26,333 shares currently issuable upon exercise
        of options by ICP, 710,000 shares issuable upon exercise of warrants
        held by ICP, 38,063 shares issuable upon conversion of Series C
        Convertible Preferred Stock held by the ICP Profit Sharing plan and
        5,000 shares issuable upon exercise of warrants held by the ICP Profit
        Sharing Trust.
                                       25
<PAGE>   48
        Also includes 40,000 shares issuable upon conversion of a
        convertible promissory note held by ICP Profit Sharing Trust.

    (j) Includes 31,166 shares currently issuable upon exercise of options by
        Mr. Dorros. Also includes 5,000 shares issuable upon exercise of
        warrants, and 702 shares owned through the Company's Savings and
        Retirement Plan.

    (k) Includes a total of 442,666 shares currently issuable upon exercise of
        options by the Company's directors and executive officers. Also includes
        a total of 1,194,667 shares currently issuable upon exercise of warrants
        by such directors and executive officers, 13,340 shares owned through
        the Company's Savings and Retirement Plan, and 38,063 shares issuable
        upon conversion of Series C Convertible Preferred Stock and 40,000
        shares issuable upon conversion of a convertible promissory note
        beneficially owned by certain of such directors.

    (l) Includes 83,333 shares currently issuable upon exercise of warrants by
        George W. Mauerman. Also includes the shares and warrants reported by
        George S. Mauerman, discussed in note (m) below.

    (m) Includes 58,333 shares currently issuable upon exercise of warrants by
        George S. Mauerman.

    (n) Owned by Banner Aerospace, Inc. a wholly-owned subsidiary of The
        Fairchild Corporation.

    (o) Includes 26,333 shares currently issuable upon exercise of options held
        by ICP. Also includes 710,000 shares issuable upon exercise of warrants
        held by ICP, 38,063 shares issuable upon conversion of Series C
        Convertible Preferred Stock held by the ICP Profit Sharing Trust and
        5,000 shares issuable upon exercise of warrants held by the ICP Profit
        Sharing Trust, 40,000 shares issuable upon conversion of a convertible
        promissory note held by the ICP Profit Sharing Trust and 10,000 shares
        owned by Mr. Hutheesing. (See notes (h) and (i) with respect to
        beneficial ownership attributable to Messrs. Hutheesing and Sinacori.)

    (p) Includes 690,000 shares currently issuable upon exercise of warrants
        owned beneficially by Zesiger Capital Group.

    (q) Includes 46,893 shares currently issuable upon conversion of Series C
        Convertible Stock and 16,000 shares issuable upon exercise of warrants
        by Dulville Limited.

    (r) Includes 100,000 shares currently issuable upon exercise of warrants and
        730,802 shares issuable upon conversion of Series C Convertible
        Preferred Stock.

    (s) Includes 578,383 shares issuable upon conversion of Series D Convertible
        Preferred Stock.

    (t) Includes 833,333 shares currently issuable upon exercise of warrants by
        Rayflex Limited.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Effective December 1, 1999, the Company entered into a consulting agreement with
CMD Ventures, LLC ("CMD") for certain financial analysis and advisory services.
The agreement, which is on a month-to-month basis, provides for a monthly fee to
CMD of $10,000, provided however that no such fees shall be payable until such
time as the Company generates positive cash flow of at least $50,000 per month.
Until such time, the Company will accrue, but not pay, such fees. Members of CMD
include Anthony D. Autorino, the Company's Chairman and Chief Executive Officer;
Vincent DiVincenzo, the Company's Senior Vice President, Chief Financial Officer
and Treasurer; and William A. DiBella, who is a director of the Company.

The Company subleased certain office space to CMD on the first floor of the
Company's corporate offices in Wethersfield, CT from April 1, 1998 to January 6,
2000 at a monthly rate of $4,003. Since January 7, 2000, the Company has
subleased space to CMD on the fourth floor of the Company's Wethersfield
location. This sublease, which expires December 31, 2004, is at a monthly rate
of $10,874. In addition to rent, CMD is obligated to pay all operating expenses,
property taxes, rent escalations and other surcharges or increases applicable to
such subleaseholds.

                                       26
<PAGE>   49
Since December 1, 1998, CMD has leased to the Company substantially all of the
furniture used by the Company at its call center located at Constitution Plaza,
Hartford, CT at a rate of $21,062 per month. Such agreement will expire November
30, 2001, at which time the Company shall have the right to acquire all such
furniture at a cost of $1.00.

On November 2, 1999 the Company purchased $2,000,000 of debit cellular phones
and accessories from DTR Associates Limited Partnership ("DTR") which assets had
been purchased by DTR from the bankruptcy estate of SmarTalk TeleServices, Inc.
Due to the financing constraints, the Company was unable to directly bid on
these assets. DTR realized a profit of $197,969 in the resale of such assets to
the Company. Victor Grillo, Sr., a director of the Company, is CEO of the
general partner of DTR.

On July 1, 1998, the Company entered into a month-to-month agreement to sublease
a portion of its Wethersfield offices to NRG Solutions, LLC ("NRG") at a rate of
$1,325 per month. CMD has a minority ownership interest in NRG.

In July 1999, the Company entered into certain transactions with Retail
Distributors, Inc. ("RDI"), of which Victor Grillo, Sr, a director of the
Company, is chief executive officer and a principal stockholder. The
transactions included the Company's entry into an agreement, expiring March 31,
2001, to retain the services of RDI to bolster the Company's capabilities with
respect to the marketing and distribution of its prepaid programs, pursuant to
which the Company paid RDI approximately $843,000 and issued to RDI 118,194
shares of Common Stock. The agreement also required the Company to pay RDI a
monthly fee of $90,000 from February 8, 1999 to September 30, 1999; $65,000 from
October 1, 1999 to December 31, 1999; and $40,000 from January 1, 2000 to
December 31, 2000. Additional performance-based compensation, exclusive of
expenses, was provided for through the conditional issuance of Common Stock
purchase warrants, of which warrants to purchase 250,000 shares of Common Stock
had been issued as of March 27, 2000. Concurrently the Company acquired from RDI
all of the outstanding capital stock of Retail Cellular, Inc. ("RCI"), in
connection with which the Company issued 150,000 shares of Common Stock to RDI.
In addition, RCI entered into an agreement, expiring March 31, 2001, to obtain
certain sales and marketing services from RDI, for a monthly fee of $10,000.
(See also, Management's Discussion and Analysis of Financial Condition and
Results of Operation, " Selling, General and Administrative Expenses"). In
connection with and in anticipation of such transactions, in February 1999 the
Company provided a loan to RDI in the principal amount of $500,000, which
accrues interest at the rate of prime plus one percent and had a maturity date
of September 30, 1999. The loan was intended as a prepayment of expense
reimbursement for RDI, as RDI had started to provide significant services for
the Company at such time. As of March 27, 2000, the Company had not made a
demand for repayment of the loan, but rather had deferred such demand in view of
RDI's expense requirements. However, interest has continued to accrue on the
loan, which is subject to call at any time.

In February 1999, the Company completed a private placement of 15,000 shares of
Series C Convertible Preferred Stock ("Series C Shares") and Warrants to
purchase 300,000 shares of Common Stock for an aggregate consideration of
$15,000,000. International Capital Partners, Inc. Profit Sharing Trust purchased
250 shares of Series C Shares and received Warrants to purchase 5,000 shares of
Common Stock for an aggregate consideration of $250,000. In addition, ICP
received a commission in the amount of $50,000 in connection with the
transaction as a finder's fee. Messrs. Ajit G. Hutheesing and Nicholas E.
Sinacori, directors of the Company, also serve as principals of ICP and trustees
of the ICP Profit Sharing Trust.

In February 1999, the Company used a portion of the proceeds from the Series C
Shares to repay the $4,000,000 debt financing secured in April 1998, of which
$1,000,000 was borrowed from Anthony D. Autorino, the Company's Chairman and
Chief Executive Officer, and $500,000 which was borrowed from ICP. Messrs. Ajit
G. Hutheesing and Nicholas E. Sinacori, directors of the Company, also serve as
principals of ICP. The Company also used a portion of the Series C Shares to
prepay $1,411,000, the outstanding balance of a promissory note, to STFI, the
former parent of the Company which beneficially owned approximately 23% of the
Company's Common Stock at the time.

In October 1999, the Company completed a private placement of 6,100 shares of
Series D Convertible Preferred Stock ("Series D Shares") for an aggregate
consideration of $6,100,000. In consideration for their placement services, ICP
received a cash commission in the amount of $300,000 and a five-year warrant to
purchase 120,000 shares of the Company's Common Stock at an exercise price of
$11.09 per share, which price was 25% greater than the Conversion Price of the
Series D Shares. Messrs. Ajit G. Hutheesing and Nicholas E. Sinacori, directors
of the Company, also serve as principals of ICP.

                                       27
<PAGE>   50
                                    PART IV

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

(a)  FINANCIAL STATEMENTS

See Part II, Item 8 hereof.

(b)  REPORTS ON FORM 8-K


         On October 12, 1999, the Company filed with the Securities and Exchange
Commission a report on Form 8-K, pursuant to Item 5 thereof, detailing the
Company's entry into an agreement on October 1, 1999 to close on a $6.1 million
private placement of equity with three investors, led by SIB Investment Holdings
Limited, a wholly owned subsidiary of Saudi International Bank. International
Capital Partners, LLC of Stamford, Connecticut and Oakes, Fitzwilliams & Co.
S.A. of London acted as placement agents for the Company in connection with this
private placement.

         Pursuant to a Securities Purchase Agreement entered into between the
Company and the investors (the "Securities Purchase Agreement"), the Company
issued an aggregate of 6,100 shares of a new Series D Convertible Preferred
Stock, $.01 per share. Each share of Series D Convertible Preferred Stock is
convertible into Common Stock of the Company.

The Company included exhibits 4.1, 4.2, 4.3, 4.4 and 4.5, in accordance with
Form 8-K, Item 5. The exhibits included the Certificate of Designations,
Preferences and Rights of the Series D 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 October 1, 1999.



(c)      EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NO.                DESCRIPTION OF EXHIBIT
-----------                ----------------------
<S>               <C>
3. (i)            Second Restated Certificate of Incorporation, dated February 29, 2000.

3. (ii)           Amended and Restated By-laws, dated July 7, 1999.

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               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.

4.3               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.
</TABLE>

                                       28
<PAGE>   51
<TABLE>
<S>               <C>
4.4               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, and 4.3 respectively to the Company's Form 8-K dated December 27, 1996, and filed January
                  22, 1997.

4.5               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.

4.6               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.

4.7               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.

4.8               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.

4.9               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.

4.10              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.

4.11              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.

4.12              Certificate of Designations, Preferences and Rights of the Series D Convertible Preferred Stock of
                  Shared Technologies Cellular, Inc. dated October 1, 1999.  Incorporated by Reference from Exhibit
                  4.1 to the Company's Form 8-K dated October 1, 1999 and filed October 12, 1999.

4.13              Securities Purchase Agreement among the Company and the Purchasers dated as of October 1, 1999.
                  Incorporated by Reference from Exhibit 4.2 to the Company's Form 8-K dated October 1, 1999 and filed
                  October 12, 1999.

4.14              Registration Rights Agreement among the Company and the Purchasers dated as of October 1, 1999.
                  Incorporated by Reference from Exhibit 4.3 to the Company's Form 8-K dated October 1, 1999 and
                  filed October 12, 1999.

4.15              Form of Warrant to Purchase Common Stock of the Company issued to International Capital Partners,
                  LLC.  Incorporated by Reference from Exhibit 4.4 to the Company's Form 8-K dated October 1, 1999
                  and filed October 12, 1999.

4.16              Form of Warrant to Purchase Common Stock of the Company issued to Oakes, Fitzwilliams & Co., S.A.
                  Incorporated by Reference from Exhibit 4.5 to the Company's Form 8-K dated October 1, 1999 and
                  filed October 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.
</TABLE>

                                       29
<PAGE>   52
<TABLE>
<S>               <C>
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 from 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
                  from 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. Incorporated by reference from Exhibit 10.9
                  to the Company's Form 10-K dated March 30, 1999.

10.10             1994 Director Option Plan, as amended, November 11, 1998. Incorporated by reference from Exhibit
                  10.10 to the Company's Form 10-K dated March 30, 1999.

10.11*            Prepaid Cellular Reseller Agreement by and between the Company and MCI Telecommunications
                  Corporation and WorldCom Technologies, Inc. dated February 19, 1999.  Incorporated by reference
                  from Exhibit 10.11 to the Company's Form 10-K dated March 30, 1999.

10.12             Employment Agreement by and between Anthony D. Autorino and the Company, effective October 1, 1999.

10.13             Employment Agreement by and between Vincent DiVincenzo and the Company, effective October 1, 1999.

10.14             Employment Agreement by and between Sean P. Hayes and the Company, effective October 1, 1999.

10.15             Employment Agreement by and between Kenneth M. Dorros and the Company, effective October 1, 1999.

21                List of subsidiaries 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.

                                       30
<PAGE>   53
                                   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)

                                    \ s\ Anthony D. Autorino
                                    --------------------------------------------
                   By               Anthony D. Autorino
                                    Chief Executive Officer and Director
                                    Date:  March 27, 2000

                                    \ s\ Vincent DiVincenzo
                                    --------------------------------------------
                   By               Vincent DiVincenzo
                                    Chief Financial Officer and Director
                                    Date:  March 27, 2000

                                POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints Anthony D.
Autorino and Vincent DiVincenzo, and each of them (with full power to each of
them to act alone), his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities to sign on his behalf individually and in each
capacity stated below any amendment, including post-effective amendments, to
this Registration Statement under the Securities Act of 1933, as amended, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.

    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.

<TABLE>
<CAPTION>
<S>                                         <C>                                 <C>
By: /s/Anthony D. Autorino                  By: /s/ William A. DiBella          By: /s/Bruce Carswell
Anthony D. Autorino                         William A. DiBella                  Bruce Carswell
Chief Executive Officer                     Director                            Director
and Director                                Date:  March 27,2000                Date:  March 27, 2000
Date:  March 27, 2000

By: /s/ Ajit G. Hutheesing                  By: /s/ Thomas H. Decker            By: /s/ Victor Grillo, Sr.
Ajit G. Huthessing                          Thomas H. Decker                    Victor Grillo, Sr.
Director                                    Director                            Director
Date:  March 27, 2000                       Date:  March 27, 2000               Date:  March 27, 2000

By: /s/ Vincent DiVincenzo                  By: /s/ Nicholas E. Sinacori
Vincent DiVincenzo                          Nicholas E. Sinacori
Chief Financial Officer                     Director
and Director                                Date:  March 27, 2000
Date:  March 27, 2000
</TABLE>

* By: /s/ Anthony D. Autorino
Anthony D. Autorino
Attorney-in-fact