SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


FORM 10-KSB


[X]Annual report under Section 13 or 15(d)of the Securities Exchange Act of 1934

   For the fiscal year ended December 31, 1998.

[ ]Transition report under section 13 or 15(d) of the Securities Exchange Act
   of 1934, FOR THE TRANSITION PERIOD FROM _______ to ________

                        Commission file number 001-13999

                               HITCOM CORPORATION
        (Exact Name of Small Business Issuer as Specified in Its Charter)

                 Delaware                                 87-0389677
      (State or Other Jurisdiction                      (IRS Employer
     of Incorporation or Organization)                Identification No.)

      700 North Second Street,
     Third Floor, St. Louis, Missouri                          63102
      (Address of Principal Executive Offices)               (Zip Code)

          Issuer's Telephone Number, Including Area Code (314) 231-1000

          Securities registered under Section 12(b)of the Exchange Act:

                                                        Name of Each Exchange
         Title of Each Class                             On Which Registered
                  (None)                                       (None)

         Securities registered under Section 12(g) of the Exchange Act:

                                                     Common Stock
                                                   (Title of Class)
      Check  whether the issuer:  (1) filed all reports  required to be filed by
      Section 13 or 15(d) of the  Exchange Act during the past 12 months (or for
      such  shorter  period  that  the  registrant  was  required  to file  such
      reports),  and (2) has been  subject to such filing  requirements  for the
      past 90 days.

      Yes [ ]                 No [X]


      Check if there is no disclosure  of delinquent  filers in response to Item
      405 of  Regulation  S-B is not  contained in this form,  and no disclosure
      will be contained,  to the best of registerant's  knowledge, in definitive
      proxy or information statements  incorporated by reference in Part III of
      this Form 10-KSB or any amendment to this form 10-KSB  [X]


      State issuer's revenues for its most recent fiscal year:    $3,683,354


      State the  number of shares  outstanding  of each of the  issuer's  common
      equity, as of the latest practicable date: As of April 30, 1999:

                          Class                      Shares Outstanding
                      Common Stock                        12,328,221


      Traditional Small Business Disclosure Format (check one):
      Yes[ ]                  No [X]

<PAGE>

PART I

ITEM 1 -  DESCRIPTION OF BUSINESS

Business Development

HitCom  Corporation  ("Hitcom" or the  "Company")  was  established  in 1993 and
incorporated   in  1995  under  the  laws  of  the  state  of   Missouri  as  an
online/Internet  publisher of city-specific news and information  resources that
combined three areas of traditional local reference:  i) Local Yellow Pages, ii)
Local news and iii) City information.

The Company was acquired by Royal Oak Resources  ("Royal") an OTC Bulletin Board
company in 1995 through a reverse merger.  Royal was incorporated under the laws
of  the  state  of  Utah  in  1982.   Following  the  acquisition,   HitCom  was
reincorporated under the laws of the state of Delaware. The operating activities
of Royal were not material in HitCom's operating activities.

One Plus Marketing Inc.
HitCom  acquired 80% of One Plus  Marketing  Inc.  ("One Plus"),  an interactive
voice response  company,  effective April 1, 1997 for  approximately 5.8 million
shares of common stock. The acquisition was treated for accounting purposes as a
reverse merger,  resulting in One Plus becoming the accounting  acquiror and the
operating activities of the acquiror are presented for historical purposes.

The  remaining  20%  minority  interest  in One  Plus  reverted  back to  HitCom
effective August 1, 1998.

Channel Telecom, Inc.
Effective May 31, 1998,  HitCom  acquired  Channel Telecom Inc.  ("Channel"),  a
prepaid  telecommunication  services  Company based in Canada.  This acquisition
expanded the Company's services and provided access to the Canadian marketplace.
HitCom issued 3,975,570 in shares of Common stock and $37,500 in cash for all of
the outstanding  stock of Channel.  HitCom issued a further 309,240 in shares of
Common Stock and incurred costs of $172,615  relating to  transaction  costs for
the Channel acquisition. HitCom accounted for the acquisition using the purchase
method of accounting.  Accordingly,  the purchased  assets and liabilities  have
been recorded at their estimated fair value at the date of acquisition.  Amounts
in excess of the fair  value of  tangible  assets  acquired  was  attributed  to
goodwill and is being amortized over ten years.  The results of operations of
Channel have been included in the  consolidated  financial  statements since the
effective date of acquisition.

Channel owns a 50% interest in Sussex Service Bureau Inc.,  1218396 Ontario Ltd.
("Sussex"). Sussex provides Channel calling card technical functionality through
the processing of prepaid phone card activity via an offsite telephone switch.


Business of Issuer

Today, the Company is engaged in the following products and services:

- Interactive Voice Response/Voice Processing Services offered through its
  subsidiary One Plus
- Prepaid telecommunication services offered through its subsidiary Channel


Interactive Voice Response (IVR) /Voice Processing Services
Interactive  Voice  Response  (IVR)  includes a variety of voice  processing and
messaging  services.   IVR  allows  a  user  to  access,  store  and  carry  out
transactions by using his voice or the keypad of a touch tone telephone. HitCom,
through it's operating subsidiary One Plus offers the following IVR services:

800Link(TM)
800Link(TM)  is an IVR / Voice  Processing  Platform  for several  Direct  Sales
Organizations  (DSO's) in the United States. DSO's use the Company's 800Link(TM)
to provide advertising support and communication services to their participants.
The basic  service  includes up to a 5 minute  greeting  time,  holding up to 40
messages with a 14 day storage time and personal  security  code for  retrieving
messages.  Each call is time and date  stamped  with caller ID.  Customers  have
online account status with monthly  billing  providing  usage detail and balance
information

For an additional  fee, other  features can be added to an 800Link(TM)  account.
They include calling card capabilities,  call forwarding,  automated  attendant,
extended  greeting time (up to 30 minutes),  group  broadcasting  (broadcast the
same message to a specified group), call rotation (allows one incoming number to
be  rotated  evenly to a group),  fax back,  fax on  demand,  and fax  broadcast
(allows broadcast faxing to a list of fax numbers almost instantly).

GAP Lines
The GAP lines allow  subscribers  to pre-record a message that their clients and
prospects  can access using an 800 number and a Personal  Identification  Number
("PIN") to listen to the message.

Custom IVR Applications
One Plus  develops  custom IVR  application  for virtually  any  situation.  For
instance:
-Automated  online  surveys  (allows a caller to complete a survey using the
  telephone)
-Automated locator service- allows a caller to find the location nearest to them
-Automated payment systems

All of the Company's IVR services are marketed  through One Plus.  The marketing
effort consists of nationally  placed  advertisements  that attract prospects to
obtain the Company's 800Link(TM) services. The majority of new business is still
generated  through referral in the US and Canada.  One Plus markets  800Link(TM)
service to small businesses and DSOs.


Prepaid Telecommunication Services

Overview
Channel  provides  long  distance  services to consumer  through  Prepaid  Cards
("Channel Cards"),  primarily under the following brand names: Phone Cash, Phone
Saver and Phone Pass.  Channel Cards provide  consumers a single point of access
to  convenient,  easy to use,  cost-effective  telecommunications  products  and
services  at a fixed  rate  charge  per  minute  regardless  of the time of day.
Channel Cards enable consumers to place local,  long distance and  international
calls from touch-tone phones,  without the need for cash,  operator  assistance,
collect or other third party billed  calls.  Consumers can use the Channel Cards
to place  international  long distance calls from the US and Canada to more than
200  countries at rates that are  generally  lower than the standard  plan rates
currently charged by the major  telecommunication  carriers such as Bell Canada,
Sprint and AT&T or the rate  charged  for a direct call from a payphone or hotel
room.

Consumers  access the services of the Channel Cards by dialing a local number or
toll-free  number and entering a PIN printed on the back of the card. The system
provides explanation to the services including the time remaining on the card.

Sales and Marketing
Channel  targets retail  markets with  substantial  international  long distance
calling requirements,  such as ethnic communities.  Therefore, Channel's primary
marketing and distribution  focus is to target  independent  convenience  stores
serving ethnic communities and alternative distribution channels, which includes
tour and travel, and vending machines.  Channel is refining its retail sales and
marketing  program  to  increase  penetration  of major  national  and  regional
retailers such as department stores, mass merchandisers,  office superstores and
consumer electronics retailers, which the Company had not aggressively targeted.
The  opportunity  to increase the  penetration  into these retail areas provides
excellent growth opportunities.

Channel  markets its cards  primarily  through  in-house  sale sales  agents and
distributors  to the retail  stores.  Channel  believes  that its Channel  Cards
provide  consumers  with  a  convenient,   attractively  priced  alternative  to
traditional presubscribed long distance services.  Channel Card rates are set to
attract new  customers  and to retain its existing  customers.  While  Channel's
rates to  specific  domestic  and  international  destinations  are  often  more
attractive  to customers  than the rates of the primary  carriers,  Channel does
not,  as a policy,  fix its rates at a  discount  to the  rates  charged  by the
primary  carriers,  or at a discount  to the rates  charged  by other  carriers.
Channel has used its significant retail international  traffic to negotiate very
competitive  rates for  international  termination.  Cards are available in $10,
$20, $30, $50, and $100 denominations.

Channel Card Recharge:
Consumers  can  Recharge  their  Channel  Prepaid Card to increase the number of
minutes  available on the Card without  purchasing a new Channel Card by using a
major credit card.  Recharge  enables Channel to make direct sales to consumers,
and to create brand loyalty.  Currently,  the Channel Card can only be recharged
by calling Channel's customer service department.  In 1999, the Company plans to
introduce an on-line  recharge system whereby the consumer can recharge the card
over the internet or telephone.

Custom Cards:
Channel   has   created   customized   prepaid   phone   cards  for   resale  or
promotional/institutional  use. Custom cards can carry a company image and logo,
product  imaging,  or any custom design or text desired.  Channel can assist and
provide turnkey custom service and advice including market planning, card design
and development,  card  manufacturing,  inventory tracking and fulfillment,  and
production of point-of-sale  marketing  material  available  including  posters,
brochures  and  displays.  Custom  voice  prompts  can be  implemented  so  that
customized  company  or  product  messages  can be used to greet  card users and
additional  options can be  implemented  which allow card users  access to other
information about a company or product.


Internet Connectivity Services

HitCom marketed an Internet  connectivity  service to commercial accounts in the
St. Louis,  Missouri  market until August 1998.  The internet  connectivity  was
provided using Cisco 7513 router and a direct ATM/ fiber optic connection to the
Internet.  The  Company's  internet  services  were  introduced to the St. Louis
market in 1997.

In the third quarter of 1998, HitCom sold the customer list of this business for
$30,000  and is  currently  in the  process  of  selling  the  related  hardware
including  the Cisco 7513  router.  This  segment  is shown on the  consolidated
financial statements as discontinued operations.


HitCom Customer Service

HitCom believes that effective and convenient  customer  service is essential to
attracting  and  retaining  consumers.  HitCom  maintains  two customer  service
centres: i) St.Louis,  Missouri, USA serving the IVR customers; and ii) Toronto,
Ontario,  Canada  serving the  Prepaid  Card  customers.  The  customer  service
departments  are  responsible  for increasing the prepaid amount on the customer
service  through a major credit  card,  assisting  consumers  in using  HitCom's
services,  answering  questions about usage and resolving billing related issues
and any technical  problems.  HitCom provides  on-line  customer support that is
available  24 hours a day,  7 days a week,  at the touch of a  button.  Customer
service  representatives  can access  detailed  usage records  through  HitCom's
systems  in  order  to  answer  efficiently   consumers'  questions  or  resolve
consumers'  concerns.  In  addition,  HitCom can  identify  calling  activity by
originating or destination phone numbers.


Internet Protocol (IP) Telephony Related Services

IP Telephony  represents  the  routing  of voice and data  traffic  through  the
Internet.  IP  telephony  is now in its infancy  but, by all  indications,  will
quickly become a major factor in the  telecommunications  industry. IP telephony
is the convergence of CTI (Computer  Telephony  Integration)  with the Internet.
CTI represents the  integration  of computers and  telecommunication  functions.
Computers with specialized  software and hardware are used to route phone calls,
handle  messages,  etc. The  resulting  products  and services  enhance both the
telephony and computer  environments and also create new hybrid applications.  A
sampling of existing CTI technologies and applications  include intelligent PBXs
(Private Branch Exchanges),  IVR (Interactive  Voice Response),  ACDs (Automatic
Call  Distribution  centers),  fax servers,  voice mail and messaging,  cellular
phone services, modems and ISDN.

The  Company is looking at  expanding  its  technology  platforms  to support an
aggressive internal growth plan and attract additional strategic acquisitions to
offer  new IP  telephony  driven  services.



Industry Overview

Telecommunications Industry Overview
Telecommunications  is  a  complex,   rapidly  evolving  $200  billion  industry
affecting every aspect of our lives. Telecommunications no longer refers only to
local and long distance telephone  communications.  Instead, the industry is now
made up of everything  from cellular and satellite or "wireless"  communications
to interactive voice and voice mail messaging; from data transmission, including
fax,  to  voice  and  video   conferencing;   and  from  Internet  and  intranet
connectivity to cable  television.  That's just today. The industry is currently
experiencing an  unprecedented  introduction  of new and enhanced  communication
technology and services.

The way these  services are  purchased  is changing as well.  Not that long ago,
only  select  groups  were  able  to  benefit  from  the  latest   communication
advancements  and  conveniences  available.  Today,  people  from  every  social
economic  background  are familiar with local and  international  communications
services and technologies.  As a result,  prepaid phone cards,  prepaid cellular
and even prepaid dial tone have witnessed explosive acceptance and growth.

In the decade since the mid-1980's, divestiture,  deregulation and the advent of
computer  telephony  integration  (CTI) have "reopened" a virtually  monopolized
industry to promote unparalleled competition and expansion.  Now, in addition to
the major  players - AT&T,  MCI,  Sprint and  WorldCom - other  companies,  like
HitCom,  are  able  to  successfully   compete  and  thrive  by  developing  new
technologies and pursuing niche markets and opportunities.

By focusing and building  upon the  products and services  that employ  computer
telephony,  the Company has been able to take  advantage of the enormous  demand
for alternative and specialized providers and services.


Prepaid Phone Cards Market Overview
The growth of the prepaid phone card market has been extraordinary. According to
industry  research,  the US market was about  $500,000  in 1992 and grew to $500
million by 1994. In 1996,  the U.S.  prepaid  calling card market  surpassed the
billion-dollar  mark,  exceeding all  expectations  of industry and analysts.  A
report released in early 1997 by  Atlantic-ACM,  a Boston-based  market research
firm that tracks the telecommunications industry, predicted the sales of prepaid
cards  would  reach  $2.5  billion  by the  millenium.  Later  in  1997,  due to
unanticipated sales growth within the retail segment, Atlantic-ACM increased its
long-term  forecast by more than 50%. The research  firm now  estimates  overall
revenues  for  prepaid  phone cards to be $4.3  billion by 2001.  The shift from
promotional  use to retail as well as the  changing  user  demographics  clearly
indicates  that phone cards are now a well  established  and  accepted  consumer
product in North America.

There are primarily two types of prepaid card issuers.  Switch-based,  those who
have their own  platforms and  non-switch-based,  those who market the cards and
outsource  their network needs to  switch-based  companies  that resell  prepaid
phone card network  services  through its own service  bureau.  The Company is a
switch-based card issuer.


Telecommunication Regulation
Canada  is  going   through   the   final   phases   of   deregulation   in  the
telecommunications  industry. There are two specific areas of deregulation which
occurred in 1998 and have created new  opportunities in the phone card industry:
swipe access  functionality  and elimination of Teleglobe's  (Canada's  licensed
company with  exclusivity  to carry  international  voice  traffic)  monopoly on
overseas long distance  services.  Until late 1997,  Bell Canada and the Stentor
Alliance had a monopoly on "swipe" access.  Channel obtained swipe functionality
on its cards in 1998,  allowing  the  Channel  Cards to be swiped on any of Bell
Canada's pay phones (approximately  70,000) eliminating the user having to enter
the  1-800#  and  their  PIN#.  As per  the  CRTC  (Canada's  governing  telecom
regulator)  ruling in 1998,  Teleglobe's  monopoly  on  overseas  long  distance
services  was  eliminated.  This is  driving  down the  price of  overseas  long
distance in Canada to be more in line with the U.S.  Lower pricing will increase
volume and create short-term arbitrage opportunities for companies.  The Company
expects to be  positioned  to take full  marketing  advantage  during  this time
period.

The  Company's  IVR  services  in  USA  is  not  subject  to  specific  industry
regulation.

Switch Platform Services

As the  telecommunications  industry and product offerings have changed, so have
the networks that process the communication.  Until recently,  telecommunication
companies used massive switch networks that could perform the more routine,  and
most needed  services  predominantly  connecting one caller with another caller.
However,   with  the  influx  of  new  services  -  voice,   data,  fax,  video,
conferencing,  etc. - more  sophisticated and flexible  switching  technology is
required.

HitCom's  services are delivered  through  PC-based  switching,  application and
database access software running on Company owned call-switching  platforms.  At
December 31, 1998,  the Company was  operating on PC based  switches  only.  The
Company has two Excel(R)  switches,  an LNX 2000 and EXS-1000 which are expected
to be activated in 1999.  The Excel(R) LNX 2000 switch is expected to go live in
second  quarter  1999  providing  voice  conferencing   services  for  One  Plus
customers.  The Excel(R) EXS-1000 will be used for the prepaid card services and
is also expected to be live in second quarter 1999. The new EXS-1000 switch will
provide  significant  increase in call volume capacity over the current PC-based
switch.  However, of greater significance,  the new switch has the capability to
utilize  significantly  more long distance carriers thereby resulting in greater
choice in optimizing least cost routing which should decrease the Company's cost
of services and correspondingly increase gross margin.


Personnel

Currently,  the  Company,  including  Channel  employs  approximately  35 people
including managerial, administration, technical and sales personnel.


Competition

The Company's strategy is to seek to gain a competitive  advantage by continuing
to develop unique and innovative services for its subscribers.

The market for the  Company's  services is  intensely  competitive.  Many of the
Company's  competitors in this market are substantially  larger and have greater
financial,  technical,  engineering,  personnel and marketing resources,  longer
operating histories, greater name recognition and larger customer bases than the
Company.  Competitors include Premiere Technologies Inc., Smartalk Teleservices,
RSL Telecom,  Teleglobe  Canada and Bell Canada.  The Company has  developed and
continues to expand its own distribution network to gain a competitive advantage
by ensuring the development of its product line and the growth of brand loyalty.

The Company expects that the telecommunication  services market will continue to
attract new  competitors and new  technologies,  possibly  offering  alternative
technologies  that are more  sophisticated and cost effective than the Company's
current  technology.  The Company  intends to minimize the likelihood of this by
devoting resources to develop new, more efficient and cost-effective services.

In general, the Company does not have the right,  contractually or otherwise, to
prevent its subscribers from changing to a competing service  provider,  and the
Company's subscribers may terminate their service with the Company at will.


Risk Factors

Risks Relating to the Prepaid Card Business
The Prepaid Card business in general has a number of inherent  risks,  which can
be summarized to include the following:  (a) the increased  penetration into the
market  by  competitive   Prepaid  Card  vendors,   including   those  that  are
substantially  larger than HitCom,  (b) the relatively low barriers to entry for
Prepaid  Card  operators,  (c) the  price-sensitive  nature of  consumer  demand
resulting in relative lack of customer  loyalty to any  particular  Prepaid Card
company.  These inherent  risks could place  downward  pressure on industry wide
Prepaid Card pricing.

Rapid Technological Change in the Telecommunication Market
The telecommunication market is characterized by rapid technological change, new
product and service  introduction,  new sales  channels  and  evolving  industry
standards.  HitCom's success will depend,  in significant part, upon its ability
to make timely and  cost-effective  enhancements and additions to its technology
and to introduce new products and services that meet  customer  demands.  HitCom
expects new  products  and  services to be  developed  and  introduced  by other
companies that compete with its products and services.  The proliferation of new
telecommunications  technology,   including  personal  and  voice  communication
services  over the  Internet,  may  reduce  demand for long  distance  services,
including  Prepaid  Cards.  There  can  be no  assurance  that  HitCom  will  be
successful  in  responding  to these or other  technological  changes,  evolving
industry  standards or to new products and services  offered by HitCom's current
and future  competitors.  The  inability  of HitCom to respond to these  changes
could  have a  material  adverse  effect on the  Company's  business,  financial
condition or results of operations.

Risks Associated with Foreign Currency Fluctuations.
HitCom's reporting currency is the U.S. dollar, however,  Channel derives almost
all of its revenues, approximately 50% of its cost of services and almost all of
its operating  expenses in Canadian  Dollars.  Accordingly,  changes in currency
exchange rates may have a significant  effect on HitCom's results of operations.
HitCom may choose to limit its exposure to foreign currency  fluctuations in the
future by purchasing  forward  foreign  exchange  contracts or engaging in other
similar hedging  strategies  although to date it has not done so. The failure by
HitCom to hedge its foreign  currency  exchange  exposure  may result in foreign
exchange losses to HitCom from Channel's operations.  In addition,  there can be
no assurance that any currency  hedging  strategy that HitCom decides to employ,
if any, would be successful in avoiding currency exchange-related losses.


Risks of Network Failure; Dependence on Facilities and Third Parties
Any system or network failure that causes  interruptions in HitCom's  operations
could have a material  adverse  effect on the business,  financial  condition or
results of operations.  HitCom's operations also are dependent on its ability to
protect its hardware and other equipment from damage from natural disasters such
as fires, floods, hurricanes and earthquakes,  other catastrophic events such as
civil   unrest,   terrorism  and  war  and  other  sources  of  power  loss  and
telecommunications  failures.  Although  HitCom  has  taken a number of steps to
prevent their  network from being  affected by natural  disasters,  fire and the
like,  such as  building  redundant  systems for power  supply to the  switching
equipment, there can be no assurance that any such systems will prevent HitCom's
switches from becoming  disabled in the event of an earthquake,  power outage or
otherwise.  The  failure of  HitCom's  network,  or a  significant  decrease  in
telephone  traffic  resulting  from  effects of a natural or man-made  disaster,
could  have a  material  adverse  effect on  HitCom's  relationships  with their
customers and their business, operating results and financial condition.

Need for Additional Capital to Finance Growth and Capital Requirements
HitCom  believes  that it must  continue  to enhance  and expand its network and
build out its telecommunications network infrastructure in order to maintain its
competitive  position  and continue to meet the  increasing  demands for service
quality,  capacity and competitive pricing. HitCom's ability to grow depends, in
part, on its ability to expand its operations  through the ownership and leasing
of network capacity,  which requires significant capital expenditures,  that are
often incurred prior to HitCom's receipt of the related revenue.

HitCom believes that, based upon its present business plan and its existing cash
resources and expected  cash flow from  operating  activities;  HitCom will have
sufficient  cash to meet its currently  anticipated  working capital and capital
expenditure  requirements for at least twelve months. If HitCom's growth exceeds
current expectations,  if HitCom obtains one or more attractive opportunities to
purchase the  business or assets of another  company,  or if HitCom's  cash flow
from operations after the end of such period is insufficient to meet its working
capital  and  capital  expenditure  requirements,  HitCom  will  need  to  raise
additional  capital from equity or debt sources.  There can be no assurance that
HitCom  will be able to raise such  capital  on  favorable  terms or at all.  If
HitCom is unable to obtain such  additional  capital,  HitCom may be required to
reduce  the scope of its  anticipated  expansion,  which  could  have a material
adverse  effect  on  HitCom's  business,   financial  condition  or  results  of
operations.


Control of HitCom by Named Officers and Directors
On a fully-diluted  basis,  executive  officers and directors of HitCom,  in the
aggregate beneficially own approximately 70% of the outstanding shares of HitCom
Common  Stock.  These  stockholders  may be able to  exercise  control  over all
matters requiring stockholder approval,  including the election of directors and
approval of significant corporate transactions.

<PAGE>

ITEM 2 - Description of Property

The Company  operates its One Plus business through its Corporate head office in
St. Louis, Missouri, USA. The 5,910 square foot office is leased through to June
30, 2000 at rental rates ranging from $4,344 to $4,789 per month.

The  Prepaid  Card  business is  operated  out of offices at  Toronto,  Ontario,
Canada.  The 2,990 square foot office is leased  through to February 28, 2003 at
rental  rates  ranging  from $1,250 to $2,200 per month.  Channel also has a 330
square foot sales office in Vancouver, British Columbia which is being rented on
a month to month lease for $300 per month.

The Company believes its facilities have generally been well maintained,  are in
good   operating   condition  and  are  adequate  for  the   Company's   current
requirements.


ITEM 3 - Legal Proceedings

The  Company is not  involved  in legal  proceedings  that would have a material
adverse effect on the Company's  financial condition or results of operations if
determined adversely.


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

No matters were  submitted to a vote of security  holders  during the  Company's
fourth quarter.


PART II

ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's  Common Stock is quoted on the OTC Bulletin Board  (OTCBB).  As of
December 31, 1998,  there were  approximately  110 shareholders of record of the
Company's  Common  Stock.  The  following  table sets forth the high and low bid
information for the Common Stock for the periods  indicated,  as reported by the
OTCBB:

                                            HIGH              LOW
Calendar Year 1997
4th Quarter                                 2.13              0.88
3rd Quarter                                 2.44              0.88
2nd Quarter                                 3.38              1.13

Calendar Year 1998
4th Quarter                                 2.25              0.38
3rd Quarter                                 1.13              0.69
2nd Quarter                                 2.50              1.13
1st Quarter                                 2.69              0.78

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

DIVIDENDS
No dividends on the Company's  Common Stock was declared  during fiscal 1998 and
1997. It is not  anticipated  that cash  dividends will be paid on shares of the
Company's Common stock in the foreseeable future.
<PAGE>

ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

Overview
The Company principally derives its revenues through two operating subsidiaries:

One Plus Marketing Inc. (One Plus)
One Plus derives its revenues from the sale of interactive voice  response/voice
processing  services to the  independent  agents of Direct  Sales  Organizations
(DSO).  Therefore,  One Plus is dependent upon the DSOs to provide  referrals of
their  sales  agents  to  use  the  services.   The  Company  offers  customized
interactive  voice-processing  systems  allowing  each  member of a national  or
international  sales  organization  a method by which the response  from a large
advertising  campaign can be handled 24 hours a day and pertinent  data reported
to their  participants  almost  instantly.  The revenues of One Plus are derived
primarily in the United States.

Effective April 1, 1997, the Company  acquired 80% of the  outstanding  stock of
One Plus (the "Acquisition") for 5,837,503 shares of the Company's common stock.
The  Acquisition  was accounted for as a reverse  acquisition in accordance with
APB No.  16  "Business  Combinations."  As  such,  One  Plus is  considered  the
accounting acquiror. The historical financial  statements prior to April 1, 1997
are those of One Plus.

Effective August 1, 1998, HitCom's major shareholder  contributed to capital the
remaining 20% minority interest of One Plus. The cumulative Minority Interest as
at July 31, 1998 totaling  $186,439  reverted back to HitCom and is reflected as
an adjustment to Additional Paid in Capital.

Channel Telecom Inc. (Channel)
Channel is a provider of long  distance  services to retail  customers.  Channel
currently  provides its retail  services by marketing  Prepaid Cards,  primarily
under the Phone Cash and Phone Saver brand name, through an extensive network of
independent  retail outlets (through  independent sales agents) and distributors
throughout Canada. Channel targets retail markets with substantial international
long distance calling  requirements,  such as ethnic  communities,  and believes
that its Prepaid Cards provide consumers with a convenient,  attractively priced
alternative to traditional  presubscribed long distance  services.  Channel sets
its  Prepaid  Card rates to attract  new  customers  and to retain its  existing
customers.  Channel has used its  significant  retail  international  traffic to
negotiate very competitive  rates for international  termination.  Channel sells
its Prepaid Cards to retail stores and  distributors at a discount to their face
values of $5,  $10,  $20,  $25,  $50 and $100,  and records the sale as deferred
revenue until the card user utilizes the calling time.

HitCom acquired Channel  effective May 31, 1998. This  acquisition  expanded the
Company's  services and  provided  access to the  Canadian  marketplace.  HitCom
issued  3,975,570  in shares of Common  stock and $37,500 in cash for all of the
outstanding  stock of  Channel.  HitCom  issued a further  309,240  in shares of
Common Stock and incurred costs of $172,615  relating to  transaction  costs for
the Channel acquisition. HitCom accounted for the acquisition using the purchase
method of accounting.  Accordingly,  the purchased  assets and liabilities  have
been recorded at their estimated fair value at the date of acquisition.  Amounts
in excess of the fair  value of  tangible  assets  acquired  was  attributed  to
Goodwill and is being amortized over ten years.  The results of operations of
Channel have been included in the  consolidated  financial  statements since the
date of acquisition.

<PAGE>

Selected Financial Data
Consolidated Statements of Operations
For the Year Ended December 31,1998 and Nine-Month Period Ended December 31,1997
--------------------------------------------------------------------------------
                                                                  (9 months)
                                                  1998               1997
                                             ----------------   ----------------
  Net Revenues
  IVR - One Plus                            $2,381,357    65%   $2,651,208  100%
  Prepaid Card - Channel                     1,301,997    35%        -        -
--------------------------------------------------------------------------------
                                             3,683,354   100%    2,651,208  100%
--------------------------------------------------------------------------------

Cost of Services
  IVR - One Plus                               995,954    27%    1,399,280   53%
  Prepaid Card - Channel                     1,153,508    31%        -        -
--------------------------------------------------------------------------------
                                             2,149,462    58%    1,399,280   53%
--------------------------------------------------------------------------------

Gross Margin
  IVR - OPM                                  1,385,403    38%    1,251,928   47%
  Prepaid Card - Channel                       148,489     4%        -        -
--------------------------------------------------------------------------------
                                             1,533,892    42%    1,251,928   47%
--------------------------------------------------------------------------------

Operating expenses:
     Selling, general and administrative     1,265,919    34%      960,635   36%
     Amortization of goodwill                  233,199     6%        -        -
     Depreciation of property & equipment      102,758     3%       57,487    2%
--------------------------------------------------------------------------------
     Total operating expenses                1,601,876    43%    1,018,122   38%
--------------------------------------------------------------------------------

Operating Income (loss)                        (67,984)   (1%)     233,806    9%
Other expenses (income)
   Net interest expense (income)                33,199     1%       (2,788)    -
--------------------------------------------------------------------------------
Income (loss) before taxes and minority
   interest                                   (101,183)   (2%)     236,594    9%
Provision for income taxes                        -                  -
Minority interest                               20,332     1%       64,257    2%
--------------------------------------------------------------------------------
Income (loss) from Continuing Operations      (121,515)   (3%)     172,337    7%

Loss from discontinued operations              457,212    12%      241,798    9%
--------------------------------------------------------------------------------

Net loss                                    $ (578,727)  (15%)  $  (69,461) (2%)
================================================================================

OTHER FINANCIAL DATA
EBITDA from Continuing Operations           $  267,973     7%   $  291,293   11%

Cash used in operating activities             (306,086)           (521,348)
Cash used in investing activities             (257,936)            (42,378)
Cash provided by(used in)financing activities  715,706             (11,680)
================================================================================

EBITDA  is  operating  income  before  interest,  income  taxes,   depreciation,
amortization  and  minority  interest.  The  Company  has  included  information
concerning  EBITDA because it believes that EBITDA is used by certain  investors
as one measure of an issuer's  historical ability to service debt. EBITDA is not
a measurement  determined in accordance  with GAAP,  should not be considered in
isolation or as a substitute  for measures of  performance  based in  accordance
with GAAP.
<PAGE>
Results of Operation:

Fiscal Year Ended December 31, 1998 Compared to Nine-Month Period Ended December
31, 1997


Net revenues
Net revenue in 1998  increased by $1,032,146 or 39% to $3,683,354  compared with
net revenue of $2,651,208 for the nine-month period in 1997. The increase in net
sales is due to the Channel  acquisition.  Channel provided HitCom $1,301,997 in
revenue in seven  months in 1998.  Channel has  experienced  significant  growth
during the year due to increased  usage of the Channel  card, an increase in the
number of retail  storefronts in which the Company's  products are  distributed,
and greater brand awareness.

Revenue  for One Plus in 1998  declined  over the  nine-month  period in 1997 by
$269,851.  The decline in One Plus revenue was  attributable  to lower  referral
activities  by the DSOs.  The Company  believes  the decline in One Plus revenue
will  continue in 1999 due to continued  decrease in referral  activities by the
DSOs.


Cost of Services:
Cost of services  primarily includes payments to other carriers for origination,
transport and termination of international  and domestic long distance  traffic.
Cost of  services  increased  to 58% of  sales in 1998  from  53% in  1997.  The
increase  in cost of  services  is  primarily  due to the  Channel  acquisition.
Channel's  business  has a  higher  cost  of  services  than  One  Plus  due  to
significant  international  long distance  traffic as compared to the traffic of
One Plus which is only in North America. The international long-distance traffic
is intensely  competitive and therefore  placing downward pressure on the prices
Channel can sell its  services.  Cost of services for Channel was 89% in 1998 as
compared to One Plus which was 42% in 1998 and 53% in 1997. The decrease in cost
of  services  for One Plus was  primarily  attributable  to  decrease in carrier
charges.

In late  1998,  the  Company  purchased  a second  switch for the  Prepaid  Card
division  which  will be  implemented  in the Second  Quarter  of 1999.  The new
Excel(R) EXS-1000 switch is far superior to the PC based switch that the Company
currently  operates.  The new switch will provide  significant  increase in call
volume capacity over the current switch.  However, of greater significance,  the
new  switch  has the  capability  to utilize  significantly  more long  distance
carriers  thereby  resulting in greater choice in optimizing  least cost routing
which  should  decrease  the  Company's  cost of  services  and  correspondingly
increase gross margin.


Selling General & Administrative (SG&A):
SG&A expenses  increased to $1,265,919 (34% of sales) in 1998 from $960,635 (36%
of sales) in  nine-month  period in 1997.  The  increase  in dollar  amount  was
primarily attributable to the Channel acquisition and the twelve-month period in
1998 as compared to the nine-month period in 1997.


Depreciation of property and equipment
Depreciation  increased to $102,758 in 1998 from $57,487 in nine-month period in
1997.  The increase in dollar  amount was  primarily  attributable  to increased
capital  expenditures  for property  and  equipment to support the growth of the
business resulting in increased depreciation expense, acquisition of Channel and
the twelve-month period in 1998 as compared to the nine-month period in 1997.


Goodwill Amortization
Goodwill  represents  the  excess  of cost  over  the fair  value of net  assets
acquired  for the  Channel  acquisition  effective  May 31,  1998  and is  being
amortized on a  straight-line  basis over a ten year period  beginning  from the
date of acquisition. Amortization expense was $233,199 in 1998.

The Company  significantly  increased  its goodwill  resulting  from the Channel
Acquisition in the fourth quarter to $3,997,700  from $91,647 as was reported in
the  Company's  10-QSB's for the quarters  ended June 30, 1998 and September 30,
1998. The increase in goodwill led to the restatement of the Company's  goodwill
amortization for the second and third quarters of 1998. Revised  10-QSB  will be
filed separately for those corresponding periods.


Operating Loss / Income
Operating  loss in 1998 was  $67,984  as  compared  to  income  of  $233,806  in
nine-month period in 1997.  Decrease in operating income is primarily due to the
goodwill  amortization  of  $233,199,  and  decrease in One Plus  revenue  which
provides higher gross margin than Channel's business.


Net Interest Expense (income):
Net interest  expense was $33,199 in 1998 as compared to net interest  income of
$2,788 for the nine-month  period in 1997.  This was  attributable  to increased
bank borrowings and issuance of the convertible debentures in 1998.


Minority Interest
Effective August 1, 1998, HitCom acquired the remaining 20% minority interest of
One Plus from HitCom's major  shareholder for $1. Minority interest from January
1, 1998 to  July 31, 1998 totaled $20,332.  The cumulative  Minority Interest as
at July 31,  1998  totaling  $186,439  reverted  back to HitCom and was added to
additional paid in capital.


Discontinued  Operations
In August 1998,  HitCom  completed the sale of the customer  accounts related to
the  Internet  Service  division  (ISP)  segment for  $30,000.  This segment had
focused on providing  various levels of Internet  access to customers in the St.
Louis,  Missouri  area.  The  disposal  of  the  ISP  segment  is  reflected  as
discontinued  operations.  The direct expenses and associated overhead costs net
of revenue earned from these operations,  were $426,922 in 1998 and $241,798 for
the nine-month  period in 1997. In addition,  HitCom recorded a loss on disposal
of the ISP  segmnet of $30,290,  consisting  of $60,290  writedown  on the fixed
assets of the ISP segment that are currently being held for resale,  netted with
the  $30,000  received  for the sale of the  customer  accounts.  The total loss
recorded for the discontinued ISP segment in 1998 was $457,212.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash  equivalents  at December  31,  1998  increased  to $340,484  from
$188,800 at December 31, 1997. The Company's liquidity requirements were largely
used  by  working  capital  needs  and  investment   needs   including   capital
expenditures  and the Channel  acquisition.  These  requirements  were funded by
issuance of  convertible  debentures  through a private  placement and increased
bank borrowings.

Cash used by operating activities in 1998 decreased to $306,086 from $521,348 in
nine month period in 1997.  Significant changes included net loss in the year as
compared  to net income in 1997 and cash used by  account  payable  and  accrued
expenses.

Cash  used for  capital  expenditures  and  acquisitions  in 1998  increased  to
$257,936  from $42,378 in  nine-month  period in 1997.  This was  primarily as a
result of significant new capital expenditures of $102,745 to enhance and expand
the Company's network facilities.  The Channel acquisition and its related costs
net of cash acquired utilized the remaining $155,191 in investing activities.

The Company's total committed capital expenditures for the deployment of the new
EXS-1000  switch in second  quarter 1999 is $75,000.  At December 31, 1998,  the
Company is not committed to completing any acquisition,  however, the Company is
continually  looking for further  acquisitions  which will expand the  Company's
product lines and competitive position.  Any potential acquisitions in 1999 will
be funded either through stock issuance,  new equity  financing and/or increased
bank borrowings.

Cash proceeds from financing activities in 1998 were $715,706 as compared to net
repayments  of  $11,680  in  nine-month  period  in 1997.  Financing  activities
proceeds  consisted  primarily of issuance of convertible  debentures  through a
private placement and new commercial bank term loan facilities.


Issuance of Convertible Subordinated Debentures
During the year the Company had received net proceeds of $528,000  from issuance
of Convertible Subordinated Debentures. The debentures were issued on October 1,
1998 and are due on October 1, 2003,  bearing interest at 8% per annum,  payable
semi-annually  commencing on April 1, 1999.  The  debentures may be converted at
the option of the holder into  fully-paid  and  non-assessable  shares of Common
Stock of  HitCom at a  conversion  price of $0.50  per  share  (equivalent  to a
conversion rate of 2000 shares per $1,000 principal amount of debenture).  After
September 1, 2000, the Company may force the conversion of all debentures if the
Company's  common stock closes at a price of $2.00 or higher on each trading day
during any 90 consecutive  calendar days.  After October 1, 2000, the debentures
are  subject to  redemption  upon  payment of the  principal  amount and accrued
interest, at the election of the Corporation. The debentures were issued through
a private placement.


New Commercial Bank Credit Facilities
The  Company  also  restructured  its  existing  credit  facilities  with  a new
commercial bank which provided for net increased credit  facilities of $435,000.
The new credit  facilities  consists  of: o Revolving  working  capital  line of
credit of $150,000 which  replaced its prior facility of $100,000.  The new line
bears interest  at prime plus 0.5%.  As at  December  31,  1998 , $30,000 of the
$150,000  operating  line  facility  was used by the  Company.  o Term  loan for
$385,000 with a commercial bank due on May 1, 2001,  bearing  interest at 9% per
annum, payable monthly.

Repayment  is at $8,000 per month  inclusive  of  interest  and  principal.
Proceeds  from the term  loan were  used to pay out the  existing  $100,000
operating  facility,  Channel acquisition cash requirements and for general
working capital purposes. The balance on this facility at December 31, 1998
was $290,638.

The new credit  facilities are secured by a security  agreement  covering all of
the assets of the  Company  and  personal  guarantee  from the  Company's  major
shareholder.

Subsequent  to December 31, 1998,  Channel  obtained a new  revolving  operating
credit  facility from a commercial  bank in Canada for  approximately  $100,000,
bearing interest at Bank Canadian prime plus 1.75% which was 8.0% as at december
31,  1998.  The  facility is due on demand and is secured by a general  security
agreement on Channel,  $50,000 Guaranteed  Investment  Certificate and corporate
guarantees from HitCom.


Need for Additional Capital to Finance Growth and Capital Requirements
HitCom  believes  that it must  continue  to enhance  and expand its network and
build out its telecommunications network infrastructure in order to maintain its
competitive  position  and continue to meet the  increasing  demands for service
quality,  capacity and competitive pricing. HitCom's ability to grow depends, in
part, on its ability to expand its operations  through the ownership and leasing
of network capacity,  which requires significant capital expenditures,  that are
often incurred prior to HitCom's receipt of the related revenue.

HitCom believes that, based upon its present business plan and its existing cash
resources  and  expected  cash  flow  from  operating  activities;  it will have
sufficient  liquidity to support  operations at current  levels through 1999. If
HitCom's growth exceeds current  expectations,  or if HitCom obtains one or more
attractive  opportunities to purchase the business or assets of another company,
or if  HitCom's  cash  flow  from  operations  after  the end of such  period is
insufficient to meet its working capital and capital  expenditure  requirements,
HitCom will need to raise additional capital from equity or debt sources.


YEAR 2000 COMPUTER PROGRAM FAILURE

A significant  percentage of the software that runs most of the computers relies
on two-digit date codes to perform  computations and decision-making  functions.
Commencing  on  January  1,  2000,  these  computer  programs  may fail  from an
inability to interpret  date codes  properly,  misinterpreting  "00" as the year
1900 rather than 2000.  HitCom is in the process of evaluating and  implementing
Year 2000 compliance programs to ensure that its software, systems and equipment
are Year 2000  compliant and to ensure that the software and technology of their
third party vendors and customers are also Year 2000 compliant.  The Company has
not incurred  any Year 2000 costs as at December 31, 1998 and has  preliminarily
determined  that  it will  not  experience  any  material  Year  2000  risks  or
expenditures to bring its systems  compliant with Year 2000 issues.

In addition to assessing its own systems,  the Company is conducting an external
review  of its  suppliers,  and any  other  third  parties  with  which  it does
business, including equipment and systems providers and other telecommunications
service  providers,  to determine their  vulnerability to Year 2000 problems and
any potential  impact on the Company.  In particular  the Company may experience
problems  to the extent  that  telecommunications  carriers to which the Company
sends traffic for termination are not Year 2000 compliant. The Company's ability
to determine  the ability of these third parties to address  issues  relating to
the Year 2000  problem is  necessarily  limited.  To the  extent  that a limited
number of carriers experience  disruption in service due to the Year 2000 issue,
the  Company  believes  that it will be able to obtain  service  from  alternate
carriers.  However,  the  Company's  ability  to  provide  certain  services  to
customers in selected geographic locations may be limited.

The Company believes it will complete its evaluation of Year 2000 issues by June
30, 1999 and all necessary actions will be implemented by September 30, 1999.

The  Company   currently   anticipates  that  its  information   technology  and
non-information technology systems will be Year 2000 compliant before January 1,
2000,  though no assurances  can be given that its  compliance  testing will not
detect  unanticipated Year 2000 compliance  problems.  HitCom does not currently
have contingency plans to prepare for a Year 2000 failure, however, it does plan
to develop  one by  September  30,  1998.  There can be no  assurance  that such
contingency plans will be adequate.  If either HitCom's and/or third parties are
not Year  2000  compliant  as of such  date and if such  contingency  plans  are
inadequate  or fail to  address a  particular  Year  2000  risk,  HitCom  may be
required to incur unanticipated  costs, change relationships with third parties,
forego revenues or be subjected to other material adverse effects.


NEW ACCOUNTING STANDARDS

Accounting for derivatives and hedging activities
In June 1998,  the FASB  issued SFAS No. 133  "Accounting  for  derivatives  and
hedging  activities," which establishes  accounting and reporting  standards for
derivative  instruments,  including certain derivative  instruments  embedded in
other  contracts,  (collectively  referred  to as  derivatives)  and for hedging
activities.  SFAS No. 133 is effective for years  beginning  after June 15, 1999
and requires  comparative  information  for all fiscal  quarters of fiscal years
beginning  after June 15, 1999. The Company does not expect the adoption of this
statement to have  significant  impact on the Company's  results of  operations,
financial position or cash flows.

SOP 98-5 Reporting on the Costs of Start-up Activities
SOP 98-5  "Reporting  on the Costs of Start-up  Activities,"  requires  that the
costs,  be expensed as  incurred.  This  statement is  effective  for  financial
statements issued for fiscal years beginning after December 15, 1998. Management
believes  that the  adoption  of SOP 98-5  will have no  material  effect on its
financial statements.

<PAGE>
ITEM 7--FINANCIAL STATEMENTS

HITCOM CORPORATION
Consolidated Balance Sheet
December 31, 1998
--------------------------------------------------------------------------------
                                ASSETS
                                                               1998

 Current Assets:
   Cash and cash equivalents                               $  340,484
   Accounts receivable, net of allowance for
     doubtful accounts of $50,900                             489,060
   Inventory                                                   27,208
   Prepaid expenses                                            11,252
--------------------------------------------------------------------------------
     Total current assets                                     868,004
--------------------------------------------------------------------------------
 Property and equipment, net                                  341,812
 Goodwill, net of amortization of $233,199                  3,764,501
 Investment in service bureau                                  23,083
--------------------------------------------------------------------------------
                                                           $4,997,400
================================================================================

                LIABILITIES AND SHAREHOLDERS' EQUITY

 Current Liabilities:
   Revolving line of credit                                $   30,000
   Accounts payable                                           767,149
   Accrued liabilities                                        205,710
   Deferred revenue                                           390,081
   Due to officers and directors                               58,503
   Current portion of long-term debt                           72,255
   Current portion of obligations under capital lease          11,068
   Net liability for discontinued segment                      39,224
--------------------------------------------------------------------------------
      Total current liabilities                             1,573,990
--------------------------------------------------------------------------------
 Long term debt                                               746,383
 Obligations under capital lease                                2,962
--------------------------------------------------------------------------------
 Total liabilities                                          2,323,335
--------------------------------------------------------------------------------
 Commitments & contingencies

 Shareholders' equity
   Convertible preferred stock $.001 par value,
     liquidation preference of $0.80 per share
     ($858,702 aggregate liquidation preference),
     convertible into 0.25 shares  of  common  stock;
     5,000,000 authorized; 1,073,377 issued and outstanding     1,074
   Common stock $.004 par value, 25,000,000 authorized;
     12,293,355 issued; 12,286,105 outstanding                 49,173
   Additional paid in capital                               2,901,726
   Accumulated deficit                                       (264,298)
   Cumulative foreign currency translation adjustment           6,186
   Treasury stock - at cost; 7,250 common stock               (19,796)
--------------------------------------------------------------------------------
                                                            2,674,065
--------------------------------------------------------------------------------

                                                            4,997,400
================================================================================

    The accompanying notes are an integral part of these financial statements

<PAGE>

HITCOM CORPORATION
Consolidated Statements of Operations
For the Year Ended December 31,1998 and Nine-Month Period Ended December 31,1997
--------------------------------------------------------------------------------
                                                                      (9 months)
                                                         1998            1997
                                                       ---------       ---------

Net service revenues                                  $3,683,354     $2,651,208
Cost of services                                       2,149,462      1,399,280
--------------------------------------------------------------------------------
     Gross margin                                      1,533,892      1,251,928
--------------------------------------------------------------------------------
Operating expenses:
     Selling, general and administrative               1,265,919        960,635
     Amortization of goodwill                            233,199           -
     Depreciation of property and equipment              102,758         57,487
--------------------------------------------------------------------------------
     Total operating expenses                          1,601,876      1,018,122
--------------------------------------------------------------------------------
Operating income (loss)                                  (67,984)       233,806

Other income (expense)
     Interest expense                                    (44,319)       (13,134)
     Interest income                                      11,120         15,922
--------------------------------------------------------------------------------
 Total other income (expense)                            (33,199)         2,788
--------------------------------------------------------------------------------
Income (loss) before taxes and minority interest        (101,183)       236,594

Provision for income taxes                                  -              -
Minority interest                                         20,332         64,257
--------------------------------------------------------------------------------
Income (loss) from continuing operations                (121,515)       172,337

Loss from discontinued segment:
     Operations                                          426,922        241,798
     Loss on disposal                                     30,290           -
--------------------------------------------------------------------------------
                                                         457,212        241,798
--------------------------------------------------------------------------------

Net loss                                              $ (578,727)    $  (69,461)
================================================================================

Dividends on convertible preferred stock                 (58,080)    $  (67,280)
--------------------------------------------------------------------------------
Net loss available to common shareholders             $ (636,807)    $ (136,741)
================================================================================

Basic and diluted earnings (loss) per share
    Income (loss) from continuing operations          $ (0.02)       $  0.01
    Loss from discontinued segment                    $ (0.04)       $ (0.03)
--------------------------------------------------------------------------------
    Net loss                                          $ (0.06)       $ (0.02)
================================================================================

Weighted average shares - basic                       10,442,292      7,921,458
Weighted average shares - diluted                     10,442,292      8,313,969

 The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>

HITCOM CORPORATION
Consolidated Statement of Shareholders' Equity
For the Year Ended December 31,1998 and Nine-Month Period Ended December 31,1997
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>


                                                                                         Cumulative
                                                                                         Foreign
                                                                    Additional Retained  Currency                         Other
                               Preferred Stock      Common Stock     Paid in   Earnings/ Translation  Treaury          Comprehensive
                               Shares   Amount   Shares      Amount  Capital   (Deficit) Adjustment    Stock     Total     loss
                               ---------------   ------------------ ---------- --------- ----------- --------- ---------  ----------
<S>                            <C>      <C>      <C>       <C>     <C>        <C>        <C>         <C>      <C>          <C>
Balance, April 1, 1997             -    $  -           100 $ -     $    -     $ 509,250  $  -        $   -    $   509,250

Net loss                                                                        (69,461)                          (69,461)  (69,461)
Issuance of common stock in                                                                                                 ========
  stock acquisition of One Plus                  5,837,503  23,350    (23,350)                                       -
Recapitalization adjustment                          (100)                                                           -
Acquired deficit in stock
  acquisition of HitCom Corp   1,072,543  1,073  2,074,537   8,298 (1,205,399)                        (10,084) (1,206,112)
Conversion of preferred stock    (12,500)   (13)     3,125      13                                                   -
Preferred stock dividends         84,100     84       -        -       67,196    (67,280)                            -
Common stock issued                                 17,500      70     21,649                                      21,719
Common stock canceled                               (1,776)     (7)                                                    (7)
Stock options exercised                                125                                                           -
Repurchase of common stock                                                                             (9,712)     (9,712)
------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997     1,144,143  1,144  7,931,014  31,724 (1,139,904) $ 372,509     -        (19,796)   (754,323)
====================================================================================================================================


Net loss                                                                        (578,727)                        (578,727) (578,727)
Foreign currency translation adjustment                                                     6,186                   6,186     6,186
Comprehensive income                                                                                                        --------
                                                                                                                           (572,541)
Issuance of common stock in acquisition of                                                                                  ========
  Channel Telecom Inc.                           3,975,570  15,902     3,462,598                                3,478,500
Issuance of common stock for acquisition
     related costs of Channel Telecom Inc.         309,240   1,237       269,348                                  270,585
Minority Interest repurchase                                             186,439                                  186,439
Conversion of preferred stock   (143,366)  (143)    35,842     143                                                   -
Preferred stock dividends         72,600     73                           58,007 (58,080)                            -
Common stock issued                                 41,689     167        40,038                                   40,205
Issuance of warrants                                                      25,200                                   25,200
------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998     1,073,377 $1,074 12,293,355 $49,173  $  2,901,726 $(264,298) $6,186   $(19,796) $2,674,065
====================================================================================================================================

</TABLE>
<PAGE>

HITCOM CORPORATION
Consolidated Statement of Cash Flows
For the Year Ended December 31,1998 and Nine-Month Period Ended December 31,1997
--------------------------------------------------------------------------------
                                                             1998        1997

Operating activities:
  Net loss                                                $(578,727)  $ (69,461)
  Adjustments to reconcile net loss to net cash used
   in operating activities:
    Goodwill amortization                                   233,199        -
    Depreciation                                            102,758      57,487
    Writedown on assets held for resale -
      discontinued operations                                60,290        -
    Minority interest in earnings of subsidiary              20,332      64,257
    Issuance of common shares for services                   24,205        -
    Issuance of warrants for services                        25,200        -
    Loss on sale of property & equipment                      6,171        -
    Equity in loss of affiliated Company                      2,804        -
    Deferred tax benefit                                        885        (885)
    Changes in assets and liabilities, excluding acquisition:
      Accounts receivable--net                              (42,661)    130,002
      Inventory                                             (10,651)       -
      Other assets                                           46,855     (25,703)
      Accounts payable and accrued expenses                 (70,130)   (672,295)
      Deferred revenue                                     (126,616)     (4,750)
--------------------------------------------------------------------------------
    Net cash used in operating activities                  (306,086)   (521,348)
--------------------------------------------------------------------------------

Investing activities:
  Purchases of property and equipment                      (102,745)    (43,430)
  Acquisition of Channel Telecom, net of cash acquired     (155,191)         -
  Cash acquired in reverse acquisition                       -            1,052
--------------------------------------------------------------------------------
    Net cash used in investing activities                  (257,936)    (42,378)
--------------------------------------------------------------------------------

Financing activities:
  Proceeds from the issuance of convertible debentures      528,000         -
  Proceeds from bank term loan                              385,000         -
  Repayment of bank term loan                               (94,365)        -
  Repayment of capital leases                               (14,108)     (1,961)
  Repayment of notes payable                                (33,000)        -
  Proceeds from due to officers and directors                14,179         -
  Repayment on line of credit                               (70,000)        -
  Purchase of stock for treasury                               -         (9,712)
  Common stock canceled                                        -             (7)
--------------------------------------------------------------------------------
  Net cash provided (used) in financing activities          715,706     (11,680)
--------------------------------------------------------------------------------

Net increase (decrease) in cash and cash equivalents        151,684    (575,406)
Cash and cash equivalents at beginning of period            188,800     764,206
--------------------------------------------------------------------------------
Cash and cash equivalents at end of period               $  340,484   $ 188,800
================================================================================

Supplemental disclosure of cash flow information
 Cash paid for interest during the period                $   40,204   $  10,276
 Cash paid for income taxes during the period                  -           -
 Non cash investing and financing activities:
  Common shares issued for acquisition and related
    costs of Channel Telecom Inc.                         3,749,085        -
  Reversion of minority interest                            186,439        -
  Property & Equipment acquired through proceeds from
    capital lease                                           105,224      15,035
  Preferred dividend paid through issuance of preferred
    shares                                                   58,080      67,280
  Repayment of notes payable through issuance of common
    stock                                                    16,000        -
  Capital assets disposed of by settlement of capital lease    5,838       -
  Conversion of preferred shares into common shares      $       143  $      13

    The accompanying notes are an integral part of these financial statements

<PAGE>

HITCOM CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998 and  1997
--------------------------------------------------------------------------------

1. NATURE OF BUSINESS

HitCom Corporation and its subsidiaries (collectively referred to as "Hitcom" or
the "Company") is a  telecommunication  Company providing two principal services
for businesses and individuals:
 i. Enhanced  communication  including 800-based services,  voice and data
    messaging  which the  Company  delivers  through  its network.

ii. Prepaid telecommunication services through its switching platforms.

The Company's  customers are located within North America  without a significant
geographic concentration. The Company extends unsecured credit to its customers.
The Company's  800-based services business depends on Direct Sales Organizations
(DSO)  referring  their  independent  agents  to  become  customers  and use the
Company's services.  One DSO referred customers that accounted for approximately
$1,555,000  (42% of total  revenue)  and  $1,625,000  (61% of total  revenue) in
revenue for the year ended  December 31, 1998 and nine months ended December 31,
1997 respectively.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation
The consolidated  financial  statements  include the accounts of the Company and
its  wholly-owned  subsidiaries.   All  significant  intercompany  accounts  and
transactions  have been eliminated in  consolidation.  Investment in a 50% owned
affiliate has been accounted for on the equity method.

Use of Estimates in Preparation of Financial Statements
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
reported  amounts of  revenues  and  expenses  during the  reported  period with
consideration  given to  materiality.  Actual  results  could  differ from those
estimates.

Revenue Recognition and Deferred Revenue
The Company recognizes revenue as services are rendered as follows:

800-based services
The Company  generally  requires  its  customers to  establish  minimum  account
balances prior to receiving  services.  Revenues consists of usage fees based on
per minute  rates and  monthly  fees.  Account  balances  in excess of  services
rendered are recorded as deferred  revenue.  Revenue for unused account balances
is  recognized  when there has been no  activity  for six months.

Prepaid  card services
The  Company's  revenue  originates  from  customer  usage  of (i)  Company  and
cobranded  prepaid  calling  cards sold  through  retailers,  (ii)  recharges of
existing  calling  cards,  and  (iii)  cards  sold  for  promotional   marketing
campaigns.  The Company sells cards to  distributors  and retailers  with normal
credit terms. When the distributor or retailer is invoiced,  deferred revenue is
recognized.  The Company  recognizes revenue in accordance with the terms of the
card as the ultimate card users utilize calling time and service fees. The terms
of the card  refer to the  rates,  fees and  expiration  dates of the card.  All
prepaid cards sold by the Company  expire upon either six or twelve months after
first usage.  Upon  expiration and  cancellation  of the prepaid phone card, the
Company recognizes the related deferred amount as revenue.

Goodwill
Goodwill  represents  the  excess  of cost  over  the fair  value of net  assets
acquired for the Channel  Telecom  acquisition  effective  May 31, 1998,  and is
being amortized on a straight-line  basis over a ten year period  beginning from
the  date of  acquisition.  Amortization  expense  was  $233,199  in  1998.  For
additional information related to the acquisition see Note 3, "Acquisitions."

Cash and Cash Equivalents
For financial statement presentation purposes, cash and cash equivalents include
deposits  with initial  maturities of less than three  months,  including  money
market accounts with investments in marketable securities.

Comprehensive Income
The Company has implemented the provisions of Statement of Financial  Accounting
Standards ("SFAS") No. 130,  "Reporting  Comprehensive  Income".  Under SFAS No.
130,  the Company is required to report  comprehensive  income in the  financial
statements,  in addition to net income. For the Company,  the primary difference
between net income and comprehensive income is from foreign currency translation
adjustments.

Concentration of Credit Risk
Financial  instruments which potentially subject the Company to concentration of
credit risk consists principally of account receivable from customers. This risk
is mitigated by the large number of  customers in the  Company's  customer  base
resulting in small amounts from each  individual  customer,  net of an allowance
for uncollectable accounts.

Earnings/Loss Per Common Share
Basic  earnings per share is calculated by dividing net income or loss available
for common shareholders for the period by the weighted-average  number of shares
of common stock  outstanding  during the period.  The assumed  exercise of stock
options,  warrants,  convertible  preferred stock and convertible  debentures is
included in the calculation of diluted earnings per share, if dilutive.

SFAS No.  128,  "Earnings  per  Share"  was  adopted  in  fiscal  1997  with all
prior-period  earnings  per share  data  restated.  SFAS No. 128  requires  dual
presentation  of basic  and  diluted  earnings  per  share  on the  Consolidated
Statements of Operations and other computational  changes.  The adoption of SFAS
No. 128 did not have a  material  effect on  previously  reported  earnings  per
share.

Fair Values of Financial Instruments
Management  believes  that the  carrying  values  of all  financial  instruments
approximate their fair values.

Foreign Currency Translations
Financial  statements of the Company's  international  subsidiary are translated
into US dollars  using the exchange  rate at each balance  sheet date for assets
and  liabilities  and an average  exchange  rate for the  revenues  and expenses
reported in each fiscal period.  The gain of $6,186 is included in shareholders'
equity.

Income Taxes
Deferred  tax  assets  and   liabilities  are  recognized  for  the  future  tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases  and  operating  loss  and  tax  credit  carry-forwards,   to  the  extent
realizable.  Deferred tax assets and  liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those  temporary
differences are expected to be recovered or settled.  The effect on deferred tax
assets and  liabilities  of a change in tax rates is recognized in income in the
period that includes the enactment date.

Inventory
Inventory  consists  of costs of  external  production  of unsold  phone  cards.
Inventory is valued using the lower of  average-cost or market and is charged to
cost of services when the cards are sold.  Provision for potentially obsolete or
slow moving inventory is made based on management's analysis of inventory levels
and future sales forecasts.

Long-Lived Assets
The Company  evaluates  whether  events and  circumstances  have  occurred  that
indicate the  remaining  estimated  useful life of long lived assets may warrant
revision or that the remaining  balance of an asset may not be recoverable.  The
measurement  of  possible  impairment  is based on the  ability to  recover  the
balance of assets from expected  future  operating cash flows on an undiscounted
basis or the estimated fair value of assets held for resale less disposal costs.
In the opinion of management,  no such impairment exists at December 31, 1998 or
December 31, 1997.

Property and Equipment
Property and  equipment  are recorded at cost.  Depreciation  is computed  using
principally  the  straight-line  method over the  estimated  useful lives of the
related assets,  ranging from five to seven years.  Expenditures for maintenance
and repairs are charged against earnings as incurred.

Operating Segments
The Company has implemented the provisions of SFAS No. 131,  "Disclosures  about
Segments of an Enterprise  and Related  Information."  SFAS No. 131  establishes
standards  for the way public  business  enterprises  report  information  about
operating  segments  in annual  financial  statements  and  requires  that those
enterprises  report selected  information  about  operating  segments in interim
financial  reports issued to  stockholders.  SFAS No. 131 need not be applied to
interim  financial  statements  in the  initial  year  of its  application.  The
adoption  of SFAS  No.  131 did not  have an  effect  on the  Company's  primary
financial  statements,  but did affect  the  disclosure  of segment  information
contained in Note 17.

Stock-Based Compensation Plans
The  Company  grants  stock  options  for a fixed  number of shares to  eligible
employees  and  consultants  of the Company  with an exercise  price equal to or
greater  than the quoted  market  price of the shares at the date of grant.  The
Company  accounts for stock options in  accordance  with  Accounting  Principles
Board Opinion No. 25 (APB No. 25)  "Accounting  for Stock Issued to  Employees."
The Opinion requires that  compensation cost related to fixed stock option plans
be  recognized  only to the extent that the quoted market price of the shares at
the date of grant exceeds the exercise price. Accordingly the Company recognizes
no compensation expense for its stock option grants.

In October  1995,  the FASB  issued SFAS No. 123,  "Accounting  for  Stock-Based
Compensation."  SFAS No. 123 allows  companies  to continue to account for their
stock option plans in accordance with APB No. 25, but encourages the adoption of
a new accounting  method based on the estimated  quoted market price of employee
stock options.  The Company will continue to apply the intrinsic value method of
APB No. 25 for financial reporting purposes. See Note 12 Employee Benefits.

Reclassifications
Certain  reclassifications  have been made to the amounts  presented for 1997 to
conform to the presentation for 1998

Accounting for derivatives and hedging activities
In June 1998,  the FASB  issued SFAS No. 133  "Accounting  for  derivatives  and
hedging  activities," which establishes  accounting and reporting  standards for
derivative  instruments,  including certain derivative  instruments  embedded in
other  contracts,  (collectively  referred  to as  derivatives)  and for hedging
activities.  SFAS No. 133 is effective for years  beginning  after June 15, 1999
and requires  comparative  information  for all fiscal  quarters of fiscal years
beginning  after June 15, 1999. The Company does not expect the adoption of this
statement to have significant  impact on the Company's  consolidated  results of
operations, financial position or cash flows.

SOP 98-5 Reporting on the Costs of Start-up Activities
SOP 98-5  "Reporting  on the Costs of Start-up  Activities,"  requires  that the
costs,  be expensed as  incurred.  This  statement is  effective  for  financial
statements issued for fiscal years beginning after December 15, 1998. Management
believes  that the  adoption  of SOP 98-5  will have no  material  effect on its
consolidated financial statements.


<PAGE>

3. ACQUISITIONS

Channel Telecom Inc. ("Channel")
Effective May 31, 1998,  HitCom acquired  Channel,  a prepaid  telecommunication
services  company  based in Canada.  This  acquisition  expanded  the  Company's
services  and  provided  access  to  the  Canadian  marketplace.  Hitcom  issued
3,975,570  in  shares  of  Common  stock  and  $37,500  in  cash  for all of the
outstanding  stock of  Channel.  Hitcom  issued a further  309,240  in shares of
Common Stock and incurred costs of $172,615  relating to  transaction  costs for
the Channel acquisition. Hitcom accounted for the acquisition using the purchase
method of accounting.  Accordingly,  the purchased  assets and liabilities  have
been recorded at their estimated fair value at the date of acquisition.  Amounts
in excess of the fair  value of  tangible  assets  acquired  was  attributed  to
goodwill and is being amortized over ten years.  The  results  of  operations of
Channel have been included in the  consolidated  financial  statements since May
31, 1998.

Total Consideration Paid:
     Issuance of Common Stock                           $3,478,500
     Cash payment                                           37,500
--------------------------------------------------------------------------------
                                                        $3,516,000

Acquisition related transaction costs:
     Issuance of Common Stock                              270,585
     Cash payments for costs                               172,615
--------------------------------------------------------------------------------
                                                           443,200

Total Cost of Acquisition                               $3,959,200
--------------------------------------------------------------------------------

Less net assets acquired:
   Assets acquired:
         Cash                                           $   54,924
         Account receivable                                336,200
         Inventory                                          16,550
         Property and equipment                             37,920
         Other assets                                       26,240
--------------------------------------------------------------------------------
                                                           471,834
--------------------------------------------------------------------------------

   Liabilities assumed:
         Account payable and accrued expenses              370,154
         Deferred Revenue                                   87,300
         Other liabilities                                  52,880
--------------------------------------------------------------------------------
                                                           510,334
--------------------------------------------------------------------------------

Net liabilities assumed                                 $   38,500
--------------------------------------------------------------------------------

Goodwill                                                $3,997,700
================================================================================


The  following  unaudited  pro forma  summary  presents the  Company's  combined
results  as if the  acquisition  of Channel  occurred  at the  beginning  of the
respective  periods,  after  giving  effect  to  certain  adjustments  including
goodwill  amortization,  depreciation  and  interest  expense.  These  pro forma
results are not necessarily indicative of those that would have occurred had the
acquisition  occurred at the  beginning of the year ended  December 31, 1998 and
the nine-month period ended December 31, 1997.
                                                                    (unaudited)
                                                (unaudited)        (nine-months)
                                                   1998                 1997
                                                 ---------            ---------
Net service revenues                            $4,220,100           $3,488,700
Cost of services                                 2,471,000            2,011,400
--------------------------------------------------------------------------------
  Gross margin                                   1,749,100            1,477,300
================================================================================

Net loss                                        $ (745,298)          $ (368,120)
================================================================================

Net loss available to common shareholders       $ (803,378)          $ (435,400)
================================================================================

Basic and diluted loss per share                $   (0.07)           $  (0.04)
================================================================================

One Plus Marketing Inc. ("One Plus").
Effective  August 1, 1998,  Hitcom acquired the remaining 20% of the outstanding
common stock of One Plus from Hitcom's major  shareholder for $1. The cumulative
Minority  Interest as at July 31, 1998 totaling $186,439 reverted back to Hitcom
and is reflected as an adjustment to Additional Paid in Capital.

Effective  April 1, 1997,  the Company  acquired 80% of the  outstanding  common
stock of One Plus  Marketing,  Inc.  ("One  Plus") for  5,837,503  shares of the
Company's  common stock.  For  accounting  purposes,  the  acquisition  has been
treated  as a  recapitalization  of One Plus  with  One  Plus as the  accounting
acquiror in accordance with APB No. 16 "Business  Combinations." The acquisition
was  accounted for using the purchase  method of  accounting.  Accordingly,  the
purchased  assets and  liabilities  of the Company  have been  recorded at their
estimated fair value at the date of acquisition.

A summary of net liabilities assumed is as follows:

Assets acquired:
     Current assets                                    $     2,602
     Property and equipment and other assets                91,246
--------------------------------------------------------------------------------
                                                            93,848
--------------------------------------------------------------------------------

Liabilities assumed:
     Debt obligations                                      149,000
     Account payable and accrued expenses                1,150,960
--------------------------------------------------------------------------------
                                                         1,299,960
--------------------------------------------------------------------------------

Net liabilities assumed                                $ 1,206,112
================================================================================


4. PROPERTY AND EQUIPMENT                                  1998
                                                        ----------
Computer equipment and software                         $  259,251
Telephone switching equipment                              193,950
Office equipment and furniture                              90,087
Vending Equipment                                           15,735
--------------------------------------------------------------------------------
                                                           559,023
Accumulated depreciation                                  (217,211)
--------------------------------------------------------------------------------
                                                        $  341,812
================================================================================

Depreciation expense was $102,758 and $57,487 in 1998 and 1997, respectively.


5. GOODWILL                                                1998
                                                        ----------
Goodwill                                                $3,997,700
Accumulated Amortization                                  (233,199)
--------------------------------------------------------------------------------
                                                        $3,764,501
================================================================================

6. REVOLVING LINE OF CREDIT

In May 1998 the Company  negotiated a $150,000 revolving working capital line of
credit with a commercial  bank to replace its prior  facility.  The  outstanding
balance on the line of credit was  $30,000 at  December  31,  1998.  The line of
credit  bears  interest  at the  Bank's  prime  rate plus 0.5% which was 8.5% at
December 31, 1998 and is secured by a general  security  agreement  covering all
the assets of the Company and personal guarantees from a major shareholder.  The
average  outstanding  balance  on the line of credit was  approximately  $44,000
during the year with an average interest rate of 8.25%.

The new credit facility matures on May 1, 1999 and is renewable at the option of
the Bank.


7. ACCRUED LIABILITIES                                      1998
                                                        ----------
Salaries, commission and benefits                       $   82,138
Interest                                                    10,600
Professional fees                                           26,978
Sales Taxes                                                 22,934
Other                                                       63,060
--------------------------------------------------------------------------------
                                                        $  205,710
================================================================================


8. DUE TO OFFICERS AND DIRECTORS

Due to Officers and  Directors  are due to three  officers and  directors of the
Company, are non-interest bearing and due on demand.


9. LONG TERM DEBT

Long Term Debt consists of the following:
                                                           1998
                                                        ----------
Convertible subordinated debentures                     $  528,000
Bank Term Loan                                             290,638
--------------------------------------------------------------------------------
                                                           818,638
Less: current portion                                       72,255
--------------------------------------------------------------------------------
Long-term portion                                       $  746,383
================================================================================

Convertible Subordinated Debenture
The  debentures  were  issued on October 1, 1998 and are due on October 1, 2003,
bearing interest at 8% per annum, payable  semi-annually  commencing on April 1,
1999.  They  are  unsecured  general   obligations  of  the  Company  which  are
subordinated  in right of payment.  The debenture may be converted at the option
of the holder into fully-paid and  non-assessable  shares of Common Stock of the
Company at a  conversion  price of $0.50 per share  (equivalent  to a conversion
rate of 2000 shares per $1,000 principal  amount of debenture).  After September
1, 2000, the Company may force the conversion of all Debentures if the Company's
common stock closes at a price of $2.00 or higher on each trading day during any
90 consecutive  calendar days. After October 1, 2001, the debentures are subject
to redemption in whole or in part, substantially pro rata prior to maturity,  on
the first day of any  calendar  month upon payment of the  principal  amount and
accrued interest, at the election of the Corporation. The debentures were issued
through a private placement.

Bank Term Loan
In May 1998 the Company  negotiated a new  $385,000  term loan with a commercial
bank due on May 1, 2001,  bearing  interest  at 9% per annum,  payable  monthly.
Repayment is at $8,000 per month  inclusive of interest and principal,  with the
remaining  outstanding balance due on May 1, 2001. The term loan is secured by a
general  security  agreement  covering  all of the  assets  of the  Company  and
personal guarantees from a major shareholder.

As of December 31, 1998, the maturities of long-term debt were as follows:

Year Ended December 31,                                     Amount
--------------------------------------------------------------------------------
1999                                                     $  72,255
2000                                                        79,032
2001                                                       139,351
2002                                                          -
2003                                                       528,000
--------------------------------------------------------------------------------
                                                         $ 818,638
================================================================================

Interest  expense on  long-term  debt was $29,026  and $3,500  during the year
ended  December  31, 1998 and  nine-month  period  ended December 31, 1997,
respectively.


10. SHAREHOLDERS' EQUITY

Preferred Stock
In May 1996, the Company's stockholders approved an amendment and restatement of
the  certificate  of  incorporation  that  authorized  the  future  issuance  of
1,500,000  shares of 8% convertible  preferred  stock (the  "Preferred  Stock"),
$.001 par value,  with rights and  preferences to be determined by the Company's
Board of Directors.  The Preferred  Stock is  convertible  at four shares of the
Preferred Stock for one share of Common Stock and is callable at $0.85 per share
upon 30 days written  notice if the  Preferred  Stock is not converted to Common
Stock.  The  Preferred  Stock is  entitled  to an $0.80  liquidation  preference
subject to certain  adjustments  that coincide with the  conversion  price.  The
Preferred  Stock  accrues  dividends  at 8% per annum and may be paid in cash or
like  kind.  Like kind  dividends  of 72,600 and 84,100  preferred  shares  were
declared  and  paid in 1998  and  1997  and are  reflected  in the  accompanying
consolidated statement of shareholders' equity.

Common Stock
On  January  20,  1997,  the Board of  Directors  of the  Company  authorized  a
four-for-one  reverse stock split.  The split was effected by  distributing  one
share of new common stock for every four shares of old common stock outstanding.
All shares of old common stock were canceled.  All share data was  retroactively
adjusted. Cash was paid in lieu of fractional shares.

No dividends have been declared or paid relating to common stock during 1998 and
1997.

Common Stock Disputed
The  Company  is  vigorously  disputing  150,000  shares  of common  stock  (the
"Disputed  Shares")  issued in January 1997 to a former  officer and director of
the  Company.  The Company  asserts  that the former  officer and  director  was
erroneously  issued the Disputed  Shares  without  appropriately  fulfilling the
conditions for issuance of the Disputed Shares. Furthermore, the Company asserts
that the  issuance  of the  disputed  shares was  not  authorized  by a properly
elected and functioning Board of Directors. As a result of repeated unsuccessful
attempts to recover the Disputed Shares, the Company has filed a lawsuit seeking
cancellation  of the  Disputed  Shares.  Management  believes  that the Disputed
Shares will be ultimately returned and canceled without a material affect on the
consolidated  financial  position of the Company.  The Company has not reflected
the Disputed  Shares as issued or outstanding in the  accompanying  consolidated
financial statements.

Warrants
The Company has warrants  outstanding  to purchase  155,000 shares of its common
stock at a weighted  average  exercise price of $3.15 per share to the Company's
financial  advisors.  The 100,000 warrants issued in 1998 were valued at $25,200
using the Black-Scholes pricing model. The $25,200 was charged to operations and
additional paid in capital. The warrants expire at various dates between January
2000 and October 2000.

Convertible Subordinated Debenture
The  debentures  were  issued on October 1, 1998 and are due on October 1, 2003,
bearing interest at 8% per annum, payable  semi-annually  commencing on April 1,
1999.  At any time while the  debenture is  outstanding,  the  debenture  may be
converted at the option of the holder into fully-paid and non-assessable  shares
of  Common  Stock of the  Company  at a  conversion  price of  $0.50  per  share
(equivalent to a conversion rate of 2000 shares per $1,000  principal  amount of
debenture). For further reference see Note 9, "Long Term Debt."

Treasury Stock
During  1997,  the Company  repurchased  5,250  common  stock shares on the open
market at prices  ranging  from $1.69 to $1.88 per share.  At December 31, 1998,
the  Company  holds in  treasury  stock  7,250  shares of common  stock which is
reflected in the accompanying consolidated statement of shareholders' equity.


11. EQUITY TRANSACTIONS

In connection  with the purchase of Channel  effective May 31, 1998, the Company
issued  3,975,570  shares of common stock to the former  shareholders of Channel
and 309,240  shares of common stock to  consultants  who provided  services with
regards to the closing of the acquisition.  All of the issued shares were valued
at $0.875 per share which was the closing  price of HitCom's  common stock share
price  on  December  22,  1997,  the  date  of the  public  announcement  of the
acquisition. For further reference see Note 3, "Acquisitions"

During 1998 and 1997,  143,366  and 12,500  shares of the  Preferred  Stock were
converted to 35,842 and 3,125  shares of common  stock and are  reflected in the
accompanying consolidated statement of stockholders' equity.


12. EMPLOYEE BENEFITS

Stock Option Plans
In  September  1998,  the Board of  Directors  adopted a stock  option plan (the
"1998"  plan)  under  which  options  to  purchase  2,000,000  shares  have been
authorized.  The options may be incentive stock options or  non-qualified  stock
options.  As of December 31, 1998,  there were no options granted under the 1998
plan.

Prior to the 1998 plan,  the Company had various  stock option  agreements  that
allowed eligible employees, directors and consultants of the Company to purchase
the  Company's  common  stock at fair  market  value at the date the  option  is
granted.  The  options  expired  up to ten  years  from the date the  option  is
granted. There were 351,967 options granted in 1998 under these various plans.

The  following  table  summarizes  stock  option  activity  for the years  ended
December 31:
                                           1998                    1997
                                     -----------------       -----------------
                                              Weighted                Weighted
                                     Number   Average        Number   Average
                                       of     Exercise         of     Exercise
                                     Shares   Price          Shares   Price

Outstanding - beginning of period    45,700     $0.49        45,825    $0.49
Exercised                              -          -            (125)    0.40
Granted                             351,967      0.98          -         -
Expired                              (4,750)     1.00          -         -
--------------------------------------------------------------------------------
Outstanding at end of period        392,917     $0.91        45,700    $0.49
================================================================================

The weighted  average  significant  assumptions  used to determine  those values
using the Black-Scholes option pricing model for 1998 were:  volatility of 0.70;
dividend yield of 0%;  risk-free  interest rate of return of 5.19%; and expected
option lives of 3.4 years.

The following table summarizes information about stock options outstanding as at

                       December 31, 1998              December 31, 1997
                       ---------------------          ---------------------
                       Number       Weighted          Number       Weighted
                       Outstanding  Average           Outstanding  Average
                       and          Years             and          Years
                       Exercisable  Remaining         Exercisable  Remaining

$0.40                    40,950        8                 45,700        9
$0.63                    30,000        2                   -
$1.00                   321,967        4                   -
--------------------------------------------------------------------------------
                        392,917                          45,700
================================================================================

The  weighted  average  fair  value of  options  granted  during  the year ended
December 31, 1998 was $0.66 per share option.  The pro-forma  effect on earnings
for the year ended December 31, 1998 of the method  consistent with SFAS No. 123
would  be  to  increase  reported  net  loss  by  approximately   $213,845,   to
approximately  $792,572. The pro-forma effect on earnings per share for the year
ended  December 31, 1998 of this method would be to increase  reported basic and
diluted net loss by $0.02 per share, to $0.08 per share.

Stock Options Disputed
The Company is vigorously  disputing  options to purchase  625,000 shares of its
common  stock  (the  "Disputed  Stock  Options")  held by a former  officer  and
director  of the  Company.  The  Company  asserts  that the former  officer  and
director's Disputed Stock Options are invalid because the Disputed Stock Options
were not  properly  approved by the  Company's  Board of  Directors  and certain
conditions were not fulfilled.  The Company considers the Disputed Stock Options
invalid and  believes the matter will be resolved  without a material  affect on
the  financial  position  of the  Company.  The Company  has not  reflected  the
Disputed Stock Options as outstanding in the table above or in the  accompanying
consolidated financial statements.

Health and Medical Insurance Plan
The  Company  contributes  to health  and  medical  insurance  programs  for its
employees.   Expenses   related  to  the  program   charged  to  operations  was
approximately  $27,600 and $20,416  during the year ended  December 31, 1998 and
nine-month period ended December 31, 1997, respectively.


13. EARNINGS PER SHARE

The following  table sets forth the  computation  of basic and diluted  earnings
(loss) per share:
                                                      1998               1997
                                                   ----------         ----------
Numerator:
Net loss available to common shareholders          $( 636,807)       $( 136,741)
================================================================================

Denominator:
Denominator for basic earnings (loss) per share -
  Weighted-average shares                          10,442,292         7,921,458

Effect of dilutive securities:
  Employee stock options, convertible preferred
    stock and warrants                                 -                392,511
--------------------------------------------------------------------------------
Dilutive potential common shares -
  Adjusted weighted-average shares and assumed
  conversions                                      10,442,292         8,313,969
================================================================================

Basic and diluted earnings (loss) per share          $(0.06)            $(0.02)
================================================================================

Employee  stock options to purchase  392,917 common shares at December 31, 1998,
are not presented  because these options are  anti-dilutive  due to the net loss
available to common shareholders.
Preferred stock convertible into 268,344 common shares at December 31, 1998, are
not presented because these convertible preferred stock are anti-dilutive due to
the net loss available to common shareholders.
Debentures  convertible  into 1,056,000  common shares at December 31, 1998, are
not presented because these convertible  debentures are anti-dilutive due to the
net loss available to common shareholders.
Warrants  to  purchase  155,000  common  shares at December  31,  1998,  are not
presented because these warrants are anti-dilutive due to the net loss available
to common shareholders.


14. DISCONTINUED SEGMENT

In August 1998, the Company  completed the sale of the customer accounts related
to the Internet Service Provide (ISP) segment for $30,000.  This segment focused
on providing  various  levels of Internet  access to customers in the St. Louis,
Missouri  area.  The disposal of the ISP segment is  reflected  as  discontinued
operations in the accompanying  consolidated financial statements.  A summary of
discontinued  operations  for the year ended  December  31, 1998 and  nine-month
period ended December 31, 1997, is as follows:
                                                                      (9 months)
                                                      1998               1997
                                                    ---------          ---------

ISP monthly fee revenue                              115,943             81,169
================================================================================


Operating loss, net of ISP monthly fee revenue     ( 426,922)         ( 241,798)
Loss on disposal                                   (  30,290)              -
--------------------------------------------------------------------------------
Loss before income taxes                           ( 457,212)         ( 241,798)
Income tax benefit                                      -                  -
--------------------------------------------------------------------------------

Loss from discontinued operations                 $( 457,212)        $( 241,798)
================================================================================

Loss on disposal of $30,290,  consists of writedown on assets held for resale of
$60,290 netted with $30,000 sale of the ISP customer accounts

The following assets and liabilities  relating to the ISP business remain on the
Consolidated Balance Sheet as at December 31, 1998:

Assets:
  Assets held for resale from discontinued operations        $  66,000
--------------------------------------------------------------------------------

Liability
  Obligations under capital leases                             105,224
--------------------------------------------------------------------------------

Net liability for discontinued operations                    $  39,224
================================================================================


15.      INCOME TAXES

The tax  benefit for income  taxes  consists  of the following for periods ended
December 31:
                                               Year Ended            (9 months)
                                                  1998                   1997
                                                ---------             ----------

Current:
   Federal income tax                           $     -               $     -
   State Income tax                                   -                     -
--------------------------------------------------------------------------------
                                                      -                     -
Deferred                                              885                  (885)
--------------------------------------------------------------------------------
Total                                           $     885             $    (885)
================================================================================

The net deferred tax asset consists of the following:
Gross assets                                    $ 858,270             $ 617,534
Gross liabilities                                    -                 (112,481)
--------------------------------------------------------------------------------
Gross deferred tax asset                          858,270               505,053
Less: valuation allowance                        (858,270)             (504,168)
--------------------------------------------------------------------------------
Net deferred tax asset                          $    -               $      885
================================================================================

Management  of the Company  believes  more likely than not that the deferred tax
assets  will not be realized  and,  therefore  a  valuation  allowance  has been
recorded at December 31, 1998 and 1997.

The tax effect of significant temporary differences representing deferred tax
assets and liabilities are as follows:

                                           1998                     1997
                                   Current    Non-Current   Current  Non-Current
                                   ---------------------------------------------

Net operating loss carryforwards    $    -     $  835,284   $    -   $  575,466
Other                                  22,986                           (70,413)
--------------------------------------------------------------------------------
Gross deferred tax asset               22,986     835,284        -      505,053
Valuation allowance                   (22,986)   (835,284)       -     (504,168)
--------------------------------------------------------------------------------
Net deferred taxes                  $    -     $     -       $   -   $     885
================================================================================

The  provision  for taxes on income as reported  differs from the tax  provision
computed by applying the statutory federal income tax rate of 34% as follows for
periods ended December 31:
                                               Year Ended           (9 months)
                                                  1998                 1997
                                               ------------         ------------

  Federal income tax benefit on loss at
     Statutory rates of 34%                    $ (196,767)          $    (2,070)
  State tax benefit, net of federal benefit       (23,873)                 (241)
  Valuation allowance                             354,102                  -
  Other                                          (132,577)                1,426
--------------------------------------------------------------------------------
  Income tax (benefit) expense                        885                  (885)
================================================================================

The Company has net operating loss  carryforwards of  approximately  $2,190,910.
Utilization of these net operating loss  carryforwards is  restricted by certain
Internal Revenue Code sections and regulations, and expire through 2018.


16. RELATED PARTY TRANSACTIONS

The Company  made  purchases  of  approximately  $940,000  in 1998,  from Sussex
Service  Bureau Inc., a 50% owned  affiliate,  of which  approximately  $353,000
remains in account payable at December 31, 1998. Rent expense paid to an officer
and stockholder for office  facilities were $27,000 and $14,180 during the year
ended  December  31,  1998  and  nine-month  period  ended  December  31,  1997,
respectively.


17. OPERATING SEGMENTS

The Company has adopted SFAS No. 131,  "Disclosures  about  segments and related
information." The Company operates in two separate operating segments:
One Plus  provides - 800-based  services -  principally  in the United States of
America Channel Telecom - prepaid card services - principally in Canada.
                                                                    Total,
                                                                    Year Ended
                                         One Plus       Channel     Dec 31, 1998
                                         ---------     ---------     -----------
Sales to external customers             $2,381,357    $1,301,997     $3,683,354
Cost of services                           995,954     1,153,508      2,149,462
--------------------------------------------------------------------------------
Gross margin                             1,385,403       148,489      1,533,892
--------------------------------------------------------------------------------

Selling general and administrative       1,023,812       242,107      1,265,919
Amortization of Goodwill                      -          233,199        233,199
Depreciation of property and equipment      90,637        12,121        102,758
Net interest expense                        35,541        (2,342)        33,199
--------------------------------------------------------------------------------
Income (loss) from continuing segment      235,413      (336,596)      (101,183)
Provision for income taxes                    -                -              -
Minority Interest                           20,332          -            20,332
--------------------------------------------------------------------------------

Net income (loss) per continuing segment $ 215,081    $ (503,167)    $ (121,515)

Reconciling items to net loss per Company:
Loss from discontinued operations                                    $( 457,212)
--------------------------------------------------------------------------------
Net loss                                                             $( 578,727)
================================================================================

ASSETS
Total assets for reportable segments     $ 643,966    $  588,933     $1,232,899
Goodwill                                               3,764,501      3,764,501
--------------------------------------------------------------------------------
Consolidated total                       $ 643,966    $4,353,434     $4,997,400
================================================================================


18. LITIGATION

The Company has filed a lawsuit seeking cancellation of 150,000 shares of common
stock (the  "Disputed  Shares")  issued in January 1997 to a former  officer and
director  of  the  Company.   The  former  officer  and  director   submitted  a
counterclaim for unpaid consulting fees relating to services in 1996 and 1997 in
the amount of $25,000.  Management  believes  that the  Disputed  Shares will be
ultimately  returned and canceled  without a material affect on the consolidated
financial  position of the Company.  The Company has not  reflected the Disputed
Shares as issued  or  outstanding  in the  accompanying  consolidated  financial
statements.  Any amount that the  Company may be required to pay for  consulting
fees  will not have a  material  adverse  effect on its  consolidated  financial
position.


19. SIGNIFICANT FOURTH QUARTER ADJUSTMENTS

In the fourth quarter of 1998, the Company  recorded  adjustments that increased
its  net  loss  by  approximately   $245,000.   These  adjustments  included  an
approximately  $220,000 increase in goodwill amortization due to the revision of
the  goodwill  amount  resulting  from the  Channel  acquisition;  approximately
$60,000  writedown  on assets  held for  resale for the ISP  business  which was
discontinued  in the third  quarter of 1998;  an increase in account  receivable
allowance for doubtful  accounts by  approximately  $45,000;  and  approximately
$80,000 reversal of accrued liabilities established at December 31, 1997, due to
changes in facts that no longer requires the accruals at December 31, 1998.


20. LEASES

The Company  leases both office space and equipment  used in its  operations and
classifies  those leases as either  operating or capital  leases  following  the
provisions of SFAS No. 13, "Accounting for Leases.". These leases expire through
February  2003.  Obligations  under  capital  leases  have been  recorded in the
accompanying  consolidated  financial  statements at the present value of future
minimum lease payments, discounted at interest rates ranging from 14% to 15%.


As at December 31, 1998,  future  minimum annual  payments under  non-cancelable
leases are as follows:
                                               Continuing        Discontinued
                                               Operations        Operations
                                               Capital Lease     Capital Lease
Year Ended December 31,  Operating Leases      Obligations       Obligations
--------------------------------------------------------------------------------
1999                       $   85,106           $  13,752         $  34,872
2000                           60,179               4,980            34,872
2001                           33,394                -               41,866
2002                           32,686                -                 -
2003                            4,389                -                 -

--------------------------------------------------------------------------------
Total                      $  215,755           $  18,732         $ 111,610
===============================================---------------------------------

Less: interest                                      4,702             6,386
                                                --------------------------------
Total capital lease obligations                    14,030         $ 105,224
Less: current portion of capital lease obligations 11,068         ==============
                                                ---------------
Long-term portion of capital lease obligations  $   2,962
                                                ===============

Total rent expense were $94,774 and $60,076  during the year ended  December 31,
1998 and nine-month period ended December 31, 1997, respectively.


21. SUBSEQUENT EVENT

Subsequent  to December 31, 1998,  Channel  obtained a new  revolving  operating
credit  facility from a commercial  bank in Canada for  approximately  $100,000,
bearing interest at Bank Canadian prime plus 1.75% which was 8.0% as at december
31,  1998.  The  facility is due on demand and is secured by a general  security
agreement on Channel,  $50,000 Guaranteed  Investment  Certificate and corporate
guarantees from HitCom.
<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Board of Directors of HitCom Corporation


We  have  audited  the  accompanying   consolidated   balance  sheet  of  HitCom
Corporation (a Delaware  Corporation)  and subsidiaries as of December 31, 1998,
and the related consolidated statements of operations, shareholders' equity, and
cash flows for the year ended December 31, 1998.  These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audit.

We conducted our audit 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 audit provides 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 HitCom
Corporation and subsidiaries at December 31, 1998, and the consolidated  results
of their operations  and cash flows for the year then ended in  conformity  with
generally accepted accounting principles.




/s/ BDO Seidman LLP
St. Louis, Missouri
March 19, 1999
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Board of Directors of HitCom Corporation


We have  audited  the  accompanying  consolidated  balance  sheet   of    HitCom
Corporation (a Delaware  Corporation)  and subsidiaries as of December 31, 1997,
and the related consolidated statement of operations,  shareholders' equity, and
cash flows for the nine-month  period ended December 31, 1997.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial position of HitCom Corporation
and  subsidiaries  as of December 31, 1997, and the results of their  operations
and  their  cash  flows  for the  nine-month  period  ended December 31, 1997,
in accordance with generally accepted accounting principles.



/s/ Moore Stephens Smith Wallace, LLC
St. Louis, Missouri
February 17, 1998

<PAGE>

ITEM 8--CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE


As of February  11,  1999,  the Board of Directors  have  unanimously  agreed to
engage BDO Seidman,  LLP of St. Louis Missouri to be the Company's new principal
accountant.

At no time during the past two fiscal  years or any  subsequent  period prior to
engagement as principal auditor did the Registrant consult with BDO Seidman, LLP
regarding  either  the  application  of  accounting  principles  to a  specified
transaction or type of audit opinion which might be rendered on the Registrant's
financial statements or any other matter.


                                    PART III


ITEM 9--DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
        COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Scott A. Beil    30  Chairman of the Board, Chief Operating Officer and Director
Rajan Arora      34  President and Chief Executive Officer and Director
Jeffrey Shier    37  Executive Vice President and Director
John Nashmi      31  Chief Financial Officer and Corporate Secretary
Ronald K. Mann   48  Director


RAJAN ARORA
Rajan Arora has been  President and Chief  Executive  Officer and Director since
April  1998.  He joined  in April 1998 through Hitcom's acquisition of
Channel. He co-founded Channel Telecom Inc. with Mr. Jeffrey Shier in 1994. From
1990 to 1993,  Mr.  Arora was Vice  President  of  Finance  for  Madison  Avenue
Partners,  Ltd.,  a sports and  promotional  marketing  company.  Mr. Arora is a
Chartered Accountant and spent four years with  PriceWaterhouseCoopers in public
accounting.


SCOTT A. BEIL
Scott A. Beil has been HitCom's  Chairman since April 1997 when HitCom  acquired
One Plus from Mr. Beil which he founded in 1991.  In April 1997, he also assumed
the position of Chief  Executive.  With the  acquisition of Channel in 1998, Mr.
Beil  remained as Chairman  but  resigned as the  Company's  CEO and assumed the
position of Chief  Operating  Officer.  Mr. Beil earned his  Bachelor of Science
degree in Electrical Engineering from the University of Illinois.


JEFFREY SHIER
Jeffrey  Shier has been  Executive  Vice  President and Director of HitCom since
April  1998.  He joined  HitCom  in April 1998 through Hitcom's acuisition of
Channel. He co-founded Channel Telecom, Inc. with Rajan Arora in 1994. From 1990
to 1994, Mr. Shier was involved in the sports marketing and high-end memorabilia
and  collectibles  business.  From  1988 to 1990,  Mr.  Shier  was  Director  of
Arbitrage at Counsel Capital Corporation in Toronto.


JOHN NASHMI
John Nashmi became the Company's Chief Financial Officer and Corporate Secretary
in January 1999.  Prior to joining  HitCom,  Mr. Nashmi was Senior Manager at TD
Capital - Merchant  Banking,  which provided  mezzanine  financing to mid-market
businesses for acquisitions,  expansion and turn-around opportunities. From 1996
to 1998, Mr. Nashmi was Vice President  Finance with Next  Generation  Solutions
Inc., a software Value Added Reseller  (VAR).  From 1994 to 1996, Mr. Nashmi was
with Canadian  Imperial Bank of Commerce (CIBC) in their  Corporate  Lending and
Internal audit groups. Mr. Nashmi is a Chartered Accountant and spent four years
with Deloitte & Touche in public accounting.


RONALD MANN
Ronald Mann has been a Director of HitCom  since April 1998,  he has acted as an
investment  banking  consultant for Channel  Telecom Inc. since its inception in
1994.  Mr. Mann resides in New York and is involved in  investment  and merchant
banking.  From 1987 to 1989, Mr. Mann was Assistant General Manager of Corporate
Finance  for the  Canadian  Imperial  Bank of  Commerce  in  Toronto,  and Chief
Financial  Officer and Director of CIBC Securities,  Inc., in Toronto.  Mr. Mann
earned his Bachelor of Law degree from the University of Toronto.
In fiscal year ending  December  31,  1998,  the Company did not pay any fees or
other compensation to its directors.
<PAGE>
<TABLE>

ITEM 10--EXECUTIVE COMPENSATION

The  following  table  sets  forth  certain  information   concerning  executive
compensation of the Company:
<CAPTION>
----------------------- ------ ------------ ---------- --------------- ------------- ----------- ---------- --------------
                                                                                     Securities
Name                                                   Other           Restricted    Underlying
And                                                    Annual          Stock         Options/    LTIP       All     Other
Principal                     Salary       Bonus      Compensation    Award(s)      SARs        Payouts    Compensation
Position                Year    ($)         ($)        ($)             ($            (#)         ($)         ($)
(a)                     (b)    (c)          (d)        (e)             )             (g)         (h)         (i)
                                                                       (f)
----------------------- ------ ------------ ---------- --------------- ------------- ----------- ---------- --------------
<S>                     <C>    <C>          <C>        <C>             <C>           <C>         <C>        <C>
Scott Beil
Chairman and COO        1998   $49,222      $     --   $         --    $        --   $       --  $     --   $          --
----------------------- ------ ------------ ---------- --------------- ------------- ----------- ---------- --------------

                        1997   $42,005      $     --   $         --    $        --   $       --  $     --   $          --
----------------------- ------ ------------ ---------- --------------- ------------- ----------- ---------- --------------

                        1996   $28,000      $     --   $         --    $        --   $       --  $     --   $          --
----------------------- ------ ------------ ---------- --------------- ------------- ----------- ---------- --------------
Rajan Arora
President & CEO         1998   $38,770      $     --   $         --    $        --   $       --  $     --   $          --
----------------------- ------ ------------ ---------- --------------- ------------- ----------- ---------- --------------
Jeffrey          Shier
Executive VP            1998   $38,770      $     --   $         --    $        --   $       --  $     --   $          --
----------------------- ------ ------------ ---------- --------------- ------------- ----------- ---------- --------------
David Parks
Chief        Financial  1998   $72,481      $     --   $         --    $        --   $       --  $     --   $
Officer                                                                                                     --
----------------------- ------ ------------ ---------- --------------- ------------- ----------- ---------- --------------

</TABLE>


ITEM 11--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  following  table sets forth the  number of shares of the  Company's  Common
Stock owned by each person who, as of April 30,  1999,  was known by the Company
to own  beneficially  more  than  5% of its  outstanding  Common  Stock  and the
ownership of all Executive  Officers and Directors of the Company,  individually
and as a group.

--------------------------------------------------------------------------------
                                                    Number of Shares    Percent
Name and Address of Beneficial Owner                  Beneficially        of
                                                       Owned (1)         Class
--------------------------------------------------------------------------------
Scott A.  Beil,  700  North  Second  Street  Third
Floor, St. Louis, Missouri 63102                     5,837,503            47.5%
--------------------------------------------------------------------------------
Rajan Arora, 85 Scarsdale Road, North
York, Ontario, Canada                                1,987,785            16.2%
--------------------------------------------------------------------------------
Jeff Shier, 85 Scarsdale Road, North
York, Ontario, Canada                                1,987,785            16.2%
--------------------------------------------------------------------------------
Ronald Mann, 100 Wall Street, 2nd Floor
New York, New York, USA 10010                          184,240 (2)         1.5%
--------------------------------------------------------------------------------

Officers and Directors as a Group                    9,997,313            81.4%
================================================================================

(1) As of April 30, 1999, the Company had 12,328,221 shares of Common Stock
    outstanding.
(2) The shares are held indirectly through a holding company controlled by
    Mr. Mann
<PAGE>

ITEM 12--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.


ITEM 13--EXHIBITS AND REPORTS ON FORM 8-K


A. Exhibits


3.1*     Certificate of Incorporation, as amended
3.2*     Bylaws
4.1*     Certificate of Designation for 8% Convertible Preferred Stock
10.1*    Share Exchange Agreement Between HitCom Corporation and Scott Beil
         dated April 14, 1997
10.2*    Stock  Purchase   Agreement   Between  HitCom   Corporation  and  Rajan
         Arora/Jeffrey  Shier and The  Jeffrey  Samuel  Shier  Family  Trust For
         Purchase  of All  Outstanding  Stock  of  Channel  Telecom  Inc.  dated
         February 18, 1998
10.4**   Letter  agreement  between the  registrant,  Rajan  Arora and Jeffrey
         Shier dated June 30,  1998  regarding  forgiveness of indebtedness.
10.5**   Stock Purchase  Agreement  between Scott A. Beil and registrant dated
         August 10, 1998 regarding 20% minority  interest in One Plus Marketing,
         Inc.
10.6**   Letter agreement between registrant and Scott A. Beil dated August 11,
         1998 regarding voting of stock in registrant.
21.1     List of Subsidiaries of Registrant
23.1     Consent of Independent Accountants BDO Seidman LLP
27.0     Financial  Data Schedule

*        Filed as exhibit to the Company's Registration Statement on Form 10-SB
**       Filed as Exhibit to the Company's Quarterly Report on Form 10-QSB for
         the quarter ended September 30, 1998


B. Form 8-K filings

The  Registrant  did not file a Form 8-K during the last  quarter of the period
covered by this report.

SIGNATURES

In  accordance  with  Section 13 or 15(d) of the Exchange  Act,  the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


             HITCOM CORPORATION
             (Registrant)


By          /s/ Rajan Arora
            Rajan Arora, President, CEO and Director

Date        May 28, 1999


In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on and behalf of the registerant and in the capacities and on
the dates indicated.

By          /s/ Scott A. Beil
            Scott A. Beil Chairman of the Board and COO
Date        May 28, 1999


By          /s/ Jeffrey Shier
            Jeffrey Shier, Executive Vice President and Director
Date        May 28, 1999


By          /s/ Ronald Mann
            Ronald Mann, Director
Date        May 28, 1999


By          /s/ John Nashmi
            John Nashmi, Chief Financial Officer and Corporate Secretary
Date        May 28, 1999


<PAGE>


Consent of Independent Certified Public Accountants



Hitcom Corporation
St. Louis, Missouri

We  hereby  consent  to the  incorporation  by  reference  in  the  Registration
Statement on Form S-8 (File No.  333-65651)  of our report dated March 19, 1999,
relating  to  the  consolidated   financial  statements  of  Hitcom  Corporation
appearing  in the  Company's  Annual  Report on Form  10-KSB  for the year ended
December 31, 1998.



/s/ BDO Seidman LLP
St. Louis, Missouri
May 28, 1999



<PAGE>


Consent of Independent Certified Public Accountants



Hitcom Corporation
St. Louis, Missouri

We  hereby  consent  to the  incorporation  by  reference  in  the  Registration
Statement  on Form S-8 (File No.  333-65651)  of our report  dated  February 17,
1998,  relating to the consolidated  financial  statements of Hitcom Corporation
appearing  in the  Company's  Annual  Report on Form  10-KSB  for the year ended
December 31, 1998.


/s/ Moore Stephens Smith Wallace L.L.C.
St. Louis, Missouri
May 28, 1999