UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB
(Mark one)
/ X /    Annual  report  pursuant  to  Section  13 or  15(d)  of the  Securities
         Exchange Act of 1934

For the Fiscal Year Ended December 31, 1997

                                       OR

/   /    Transition  report  pursuant  to Section 13 or 15(d) of the  Securities
         Exchange Act of 1934

For the transition period from ________to________

                        Commission file number: 333-41007

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

           Delaware                                    13-3964837
    (State of incorporation)            (I.R.S. Employer identification number)

                   350 STUYVESANT AVENUE, RYE, NEW YORK 10580
                    (Address of principal executive offices)

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

Securities registered under Section 12(b) of the Exchange Act:  NONE

Securities registered under Section 12(g) of the Exchange Act:  NONE


Check  whether  the  registrant  (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 /X /    No  / /

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-K contained in this form, and no disclosure  will be contained,  to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB.  /X/

The Issuer's revenues for the fiscal year ended December 31, 1997 were $0.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant   (consisting  only  of  Class  A  Common  Stock)  was  approximately
$1,090,000,  as of April 1, 1998.  Solely for the purposes of this  calculation,
shares held by directors and officers of the Registrant have been excluded. Such
exclusion  should  not be deemed a  determination  by the  Registrant  that such
individuals are, in fact, "affiliates" of the Registrant.

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


<PAGE>
                                     PART I


ITEM 1. BUSINESS

The Company was incorporated in Delaware in August,  1997, as a successor to Aer
Force  Communications  B,  L.P.,  a  partnership  which was  formed in 1996 by a
subsidiary of Lynch  Corporation  ("Lynch") and an FCC- qualified small business
to  acquire  F-Block  PCS  licenses  in  an  FCC  auction.  In  December,  1997,
shareholders of Lynch received 39.9% of the then outstanding Common Stock of the
Company through pro-rata  dividend of one share of Class A Common Stock for each
one share of Lynch  common  stock (the "Spin  Off").  The Company  holds five 10
megahertz  personal   communications   services  ("PCS")  licenses  to  serve  a
population of  approximately  21 million,  including two of the top ten markets,
Los Angeles and Washington D.C., plus Sarasota,  Florida, Reno, Nevada and Santa
Barbara,  California.  The total cost of these  licenses was  approximately  $19
million,  after a 25% bidding  credit  provided  by the  Federal  Communications
Commission  ("FCC").  80% of the cost of the  licenses  (or $15.2  million)  was
financed over ten years by the U.S.  government  (the  "Government  Financing"),
with only  payments  of  interest  during  the first  two years  initially  with
interest payments due starting in part on July 28, 1997 and in part on September
27, 1997.  Interest  payments have been suspended  until July 1998 at which time
the Company will be required to commence interest payments.

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

         The demand for wireless  communications  services in the United  States
has grown  dramatically  during  the last five  years.  The  number of  cellular
subscribers  has grown from 5.3 million at December  31, 1990 to 44.0 million at
December 31, 1996,  representing a compound  annual growth rate of 42%. Over the
same time  period,  the  wireless  telephone  penetration  rate has  grown  from
approximately 3% to approximately  17%, and is forecasted by Kagan Associates to
reach approximately 47% by 2006.

         The Company's  address is 350 Stuyvesant  Avenue,  Rye, New York 10580.
Its telephone number is (914) 921-6300.

LICENSES

         The Company has five 10 megahertz F-Block PCS licenses as follows:

<TABLE>
<CAPTION>

                                                                                        Population          Cost (after 25%
     BTA No.         BTA Name                                    1996 POPS           Growth Rates (1)       Bidding Credit)
---------------      ---------------------------------      ------------------     ------------------     ------------------

<S>    <C>           <C>                                           <C>                    <C>                    <C>       
       262           Los Angeles, CA                               15,513,588             1.07%                  $4,473,750

       461           Washington, D.C.                               4,476,304             1.48%                  $8,835,000

       408           Sarasota-Bradenton, FL                           554,056             1.28%                  $1,653,000

       372           Reno, NV                                         465,782             3.10%                  $1,787,250

       406           Santa Barbara-Santa Maria, CA                    385,573             0.71%                  $2,208,721
</TABLE>


                                       -2-

<PAGE>
-----------------
(1)      Average  compounded  annual  growth rates in  populations  between 1990
         through  1996,  based  upon the 1990  U.S.  Census  and the  Population
         Estimate  Program,  U.S.  Bureau of the Census,  Release date March 20,
         1997.

SPIN OFF

         The  Company has two classes of Common  Stock  authorized:  the Class A
Common  Stock  and the Class B Common  Stock.  The  1,417,048  shares of Class A
Common  Stock  were  distributed  in the  Spin  Off  representing  39.9%  of the
outstanding Common Stock through a dividend of one share of Class A Common Stock
for  each  share of  Lynch  Common  Stock,  payable  on  December  5,  1997,  to
shareholders  of record on  December  4, 1997 (the  "Spin  Off").  In  addition,
355,150  shares of Class A Common  Stock  were  transferred  by Lynch to Gabelli
Funds,  Inc.  ("GFI")  in  satisfaction  of the  interest  which  GFI had in the
partnership interest of Lynch's subsidiary in the Company's  predecessor.  Lynch
currently owns all of the issued and  outstanding  shares of Preferred  Stock of
the Company,  represented  by 7,800 shares with a par and  liquidation  value of
$1,000 per share.

         Collectively,  the shares of Class A Common  Stock  represent  not more
than 49.9% of the Company's voting  interest,  with each share of Class A Common
Stock  issued and  outstanding  having one vote per share  (subject  to downward
adjustment  if  necessary  to comply with the 49.9%  maximum  class vote) on all
matters  except the election of  directors or as otherwise  provided by law. The
holders of the Class A Common Stock as a class are entitled to elect  members to
the  Company's  Board of Directors  (the "Class A Directors")  who  collectively
represent  two of the five votes of the  Company's  Board of  Directors.  At the
present  time,  the  holders of the Class A Common  Stock will elect two Class A
Directors who will have one vote each.

         Collectively,  the shares of Class B Common  Stock  represent  at least
50.1% of the Company's voting interest,  with each share of Class A Common Stock
issued and outstanding  having 5 votes per share (subject to upward  adjustment,
if  necessary,  to comply with the 50.1%  minimum  class  vote),  on all matters
except the election of directors or as otherwise  provided by law.  With respect
to the election of  directors,  the Class B Common Stock,  voting  together as a
class,  may elect up to three members of the Company's  Board of Directors  (the
"Class B Directors").  The Class B Directors shall  collectively have three full
votes on each matter submitted to a vote of the Board of Directors.

         The Class B Common  Stock  cannot  be  transferred,  sold or  otherwise
disposed of to any third  party,  directly or  indirectly,  except (i) to family
members,  or by will or by operation of the laws of descent and devise (in which
case the transferees will continue to be bound by these restrictions), (ii) such
number  of  shares  which  does  not  exceed  10% of the  Class B  Common  Stock
outstanding  as of the spin off, or (iii) pursuant to a transaction or series of
transactions on terms and conditions  which are  substantially  identical in the
opinion of the Company's  counsel to the terms and conditions  made available to
all  holders of the Class A Common  Stock,  including  form,  type and amount of
consideration  per share, the availability of such  consideration and the timing
of  payment.  To the extent it deems  necessary,  such  counsel  may rely on the
opinion of a nationally  recognized  investment  banking firm in evaluating  the
terms of any securities or other consideration being offered.

         The Company has outstanding  7,800 shares of Preferred Stock, par value
$1,000 per share. The Preferred Stock (i) is entitled to preferred  dividends at
an annual rate of 5 shares of  additional  Preferred  Stock for each one hundred
shares of  Preferred  Stock  outstanding,  (ii) has no voting  rights  except as
provided by law,  and (iii) is entitled to be redeemed at $1,000 per share (plus
accrued and unpaid  dividends) on the earlier of (i) December 1, 2009, (ii) upon
a change of  control  of the Class A or Class B Common  Stock or (iii)  upon the
sale  of one or  more  PCS  licenses  for  cash  or a  non-cash  sale  which  is
subsequently  converted into or redeemed for cash in an amount  proportional  to
that number of persons  covered by the sale of such  licenses for cash,  or that
portion of a non-cash  sale  subsequently  converted  into or redeemed for cash,
compared  to the  total  persons  covered  by the  Company's  five  initial  PCS
licenses,  in each case based on the 1996 or most recent subsequent  estimate by
the United States  Bureau of Census.  Therefore,  the number of shares  redeemed
shall be computed by dividing  (i) the number of persons  covered by the sale by
(ii) the total number of persons  covered by the five initial PCS licenses owned
by the Corporation.

                                       -3-

<PAGE>
         The Company has no current  plan to list or register the Class A Common
Stock on any national securities exchange or on the NASDAQ market.  Accordingly,
there can be no assurance  that a trading  market will  continue for the Class A
Common Stock,  and the ability to buy or sell shares of Class A Common Stock may
continue to be limited.

POTENTIAL FUTURE ARRANGEMENTS WITH RIVGAM

         Rivgam Communicators,  LLC ("Rivgam"), is an entity indirectly owned by
GFI, of which Mario J. Gabelli is the Chairman and Chief  Executive  Officer and
the  principal  shareholder.  Rivgam  holds 10 MHz D - and E-Block PCS  Licenses
including a license serving Washington,  DC where the Company also holds F-Block
PCS  licenses.  Rivgam did not  qualify for or receive  bidding  credits or U.S.
government  financing.  Rivgam  also  holds 10 MHz D - or  E-Block  licenses  in
Baltimore,  Maryland,  Philadelphia,  Pennsylvania,  Buffalo, New York, Atlantic
City, New Jersey and Las Cruces, New Mexico.

         Rivgam's  controlling  shareholder  GFI and Mr. Gabelli are substantial
holders of the Company's Class A Common Stock. In addition,  Mr. Gabelli and his
son are directors of the Company.  For various reasons,  including possibly more
favorable  terms or  requirements  for raising  capital,  it may be necessary or
advisable  for the Company to enter into joint venture  and/or  working or other
arrangements  (collectively  "Arrangements")  with holders of  additional 10 MHz
licenses.  Rivgam  would be a  logical  party  with  which to  enter  into  such
arrangements,  which may cover BTAs other than where  there is an  overlap.  The
ability of the Company to enter into any arrangements with Rivgam may be limited
by law or FCC  regulations,  and there can be no assurance that the Company will
be able to enter into such arrangements on terms which are favorable to it or at
all.

ITEM 2. PROPERTIES

         The Company has no properties except for as described above.

ITEM 3. LEGAL PROCEEDINGS

There are no material legal  proceedings  which are currently pending or, to the
Company's knowledge, contemplated against the Company or to which it is a party,
except for a United  States  Department  of Justice  investigation  to determine
whether there has been bid rigging and market allocation for license auctions by
the FCC for PCS. The Company,  together  with various  other  bidders in the PCS
auctions, has received a civil investigative demand ("CID") requesting documents
and information relating to bidding, and in May  1997, the Company complied with
the CID.  The Company  does not know what  further  action,  if any, the Justice
Department or the FCC may take.

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

None.
                                     PART II

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

                                       -4-

<PAGE>
(A) MARKET INFORMATION

The  Company's  Class A Common  Stock is not traded on any  national  securities
exchange or on the NASDAQ market, but is traded on the  over-the-counter  market
("OTC"). The high and low bids for the Company in the first quarter of 1998 (the
first quarter in which the Class A Common stock was traded) were as follows:

                  HIGH          LOW
                  ----          ---
                  1 1/4         1/2

The  Company's  Class B Common  Stock is not traded on any  national  securities
exchange or on the NASDAQ market.

(B) HOLDERS
At April 1, 1998,  the records of the Company's  transfer  agent  indicated that
there were 996 holders of record of the Company's Class A Common Stock.

At April 1,  1998,  all of the  Company's  Class B Common  Stock was held by Aer
Force  Communications,  Inc.  ("AFC")  all of  whose  capital  stock is owned by
Victoria Kane.

(C) DIVIDENDS
The Company has never  declared or paid any cash  dividends on its Common Stock,
and does not expect to pay cash dividends on either class of its Common Stock in
the  foreseeable  future.  To the extent the Company  obtains  financing  in the
future, such funding sources may prohibit the payment of dividends.  The Company
currently intends to retain its earnings, if any, for use in its business.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS

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

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

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

         The Company will have to raise funds  shortly in order to make interest
payments  on the  Government  Financing  and for  working  capital  and  general
corporate  purposes.  The  report of the  Company's  independent  auditors


                                       -5-

<PAGE>
with respect to the  financial  statements of the Company as of and for the year
ended December 31, 1997,  the period from July 26, 1996  (inception) to December
31,  1996,  the six months ended June 30, 1997 and the period from July 26, 1996
(inception)  to December  31,  1997  contains a  paragraph  as to the  Company's
ability to continue as a going concern.  Among the factors cited by the auditors
as raising  substantial doubt as to the Company's ability to continue as a going
concern is that, with respect to the periods  covered,  the Company has incurred
losses since inception and has not yet adopted a business plan or determined how
to finance its  operations  and will need to obtain capital in order to fund its
interest  payment  obligations  and for working  capital  and general  corporate
purposes.

LIQUIDITY AND CAPITAL RESOURCES

The principal amount of debt (excluding  accrued  interest) on December 31, 1997
was $15,166,177,  compared to shareholders equity of $742,065. During the period
from July 26, 1996 (inception) to December 31, 1997, the Company had no revenues
or  operating  profits  and  cannot  predict  when it may have any  revenues  or
operating profits.

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

         In April 1997,  the FCC suspended  interest  payments on the government
financing.  On March 24, 1998,  the FCC  indicated  that such  interest  will be
resumed not earlier than 90 days  subsequent to the  publication  in the Federal
Register of the Order on Reconsideration.  Such publication was made on April 8,
1998  requiring  cumulative  suspended  interest  payments  to be made in  eight
quarterly  installments  beginning at least 90 days  thereafter,  in addition to
scheduled  principal and interest payments of $947,886,  interest only, per year
in each of the first two years after the award license and $2,423,517,  interest
and principal  amortization,  per year beginning in 1999 for years three through
ten  after  the award of the  license.  In  addition,  once the  payment  of the
suspended  interest  resumes  the Company  will be  required to make  additional
interest  payments of approximately  $480,000 per year. The Company will have to
raise funds in order to make these cash commitments and there is no assurance it
will be able to do so.

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

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

RISK FACTORS: FORWARD LOOKING STATEMENTS

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

Government Regulation

         The   spectrum   licensing,    construction,    operation,   sale   and
interconnection  arrangements of wireless  communications networks are regulated
to varying degrees by state regulatory agencies,  the FCC, Congress,  the courts
and  other  governmental  bodies.  There can be no  assurance  that any of these
governmental  bodies  having  jurisdiction  over the  Company  will not adopt or
change regulations or take other actions that would adversely affect

                                       -6-

<PAGE>
the Company's business,  financial condition or results of operations.  Although
the FCC has issued  rules  regarding  the  F-Block  Auction and  numerous  other
matters,  not all of them have been  subject to FCC or judicial  interpretation.
Accordingly,  for  certain  matters  (such  as the  structure  of its  Board  of
Directors and management), the Company is relying on public and private informal
interpretation  of the rules from the staff of the FCC.  The FCC is not bound by
such informal interpretation of FCC staff and there can be no assurance that the
FCC or the  courts  will agree with the  staff's  interpretation.  Many of these
rules  also  require  ongoing  compliance  that the  Company  may not be able to
satisfy  despite  diligent  efforts.  A failure to comply  with FCC rules  could
subject the Company to serious penalties and have a material adverse effect upon
the Company's  business,  results of  operations  and  financial  condition.  In
addition, although the Company's PCS licenses are renewable after the expiration
of their 10-year terms,  there can be no assurance  that the Company's  licenses
will be renewed.

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

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

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

Personal Communications Services ("PCS")

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

F-BLOCK LICENSE REQUIREMENTS

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

         The FCC has determined that  Entrepreneurs that qualify as a Very Small
Business  and win PCS  licenses  are  eligible  to  receive a loan from the U.S.
Government  for 80% of the dollar  amount of their  winning  bids in the 

                                       -7-

<PAGE>
F-Block Auction (a "F-Block  Loan").  The Government  Financing  provided to the
Company is F-Block Loans. In order to ensure  continued  compliance with the FCC
rules,  the FCC has announced its intention to conduct  random audits during the
initial  10-year PCS license  terms.  There can be no assurance that the Company
will  continue  to satisfy  any of the  F-Block  license  requirements,  and the
failure to do so would have a material adverse effect on the Company.

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

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

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

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

         Control  Group  Requirements.  If  an  F-Block  licensee  maintains  an
organizational  structure  in which at least 25% of its total  equity on a fully
diluted  basis is held by a control  group  (the  "Control  Group")  that  meets
certain  requirements  (the  "Control  Group  Requirements"),  the FCC  excludes
certain  assets and revenues  from such  licensee's

                                       -8-

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

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

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

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

         Transfer Restrictions. In addition, the FCC prohibits F-Block licensees
from assigning or  transferring  control of any of their F-Block  licenses for a
period of at least  five years from the  License  Grant Date to any entity  that
fails to satisfy the Entrepreneurs  Requirements  during such period.  After the
fifth  year,  all  transfers  and  

                                       -9-

<PAGE>
assignments  remain subject to the Unjust  Enrichment  Penalties.  The effect of
this  prohibition will likely deter or delay  unsolicited  changes in control of
the Company.

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

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

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

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See index to Financial Statements on Page F-1.


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
           AND FINANCIAL DISCLOSURE
         None.


                                      -10-

<PAGE>
                                    PART III

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

                                   MANAGEMENT

                        EXECUTIVE OFFICERS AND DIRECTORS

         The executive officers and directors of the Company,  and their ages as
of April 1, 1998 are as follows:

NAME                         AGE                  POSITION*
----                         ---                  -------- 

Victoria G. Kane(1)           49           Class B Director and Chairman
T. Gibbs Kane, Jr.(1)         50           Class B Director
Mario J. Gabelli(2)           55           Class A Director
Marc J. Gabelli(2)(3)         30           Class A Director
Robert E. Dolan               46           Assistant Secretary

----------------------
*   Each of the Class B Directors  shall have one and one-half votes and each of
    the Class A Directors shall have one vote.

(1) T. Gibbs Kane,  Jr. and Victoria G. Kane are husband and wife.
(2) Mario J. Gabelli and Marc J. Gabelli are father and son.
(3) Marc J. Gabelli resigned as a director of the Company as of April 15, 1998.

         VICTORIA G. KANE,  Entrepreneur  and investor.  Owner and instructor of
dance studio (from 1986 to 1996).

         T. GIBBS KANE, JR.,  President,  Sound Shore Management (since 1978), a
registered investment advisor; Director, Sound Shore Fund (since 1985), a mutual
fund.

         MARIO J. GABELLI,  Chairman and Chief Executive Officer of Lynch (since
1986);  Chairman and Chief  Executive  Officer of Gabelli  Funds,  Inc.,  (since
1980),  an investment  adviser and holding company for  subsidiaries  engaged in
various aspects of the securities business  (including GAMCO Investors,  Inc. of
which he is Chief Executive Officer); Director/Trustee and/or officer of Gabelli
International Growth Fund, Inc. (since 1995), Gabelli Capital Series Funds, Inc.
(since 1994),  Gabelli Global  Multimedia Trust Inc. (since 1994),  Gabelli Gold
Fund,  Inc.  (since 1994),  The Gabelli Global Series Funds,  Inc. (since 1993),
Gabelli  Investor Funds,  Inc. (since 1993),  Gabelli Equity Series Funds,  Inc.
(since 1991), The Gabelli Value Fund Inc. (since 1989), The Gabelli  Convertible
Securities  Fund, Inc. (since 1989), The Gabelli Equity Trust Inc. (since 1986),
The Gabelli  Money  Market Funds (since  1992),  The Gabelli  Growth Fund (since
1987) and The Gabelli  Asset Fund (since 1986);  Governor of The American  Stock
Exchange (since 1995).

         MARC J. GABELLI,  Portfolio  Manager of GAMCO  Investors,  Inc.  (since
1993), an investment  advisor;  Vice President of Research of Gabelli & Company,
Inc. (since 1993), a  broker-dealer;  Managing  Director of Gabelli Funds,  Inc.
(since 1996), an investment adviser and holding company for subsidiaries engaged
in various aspects of the securities  business;  President of Gemini  Management
Limited (since 1995), an advisor to an offshore  investment  company;  Portfolio
Manager of The Gabelli  Global  Interactive  Couch Potato Fund (since 1993),  an
investment  company.  Previously  employed at Lehman Brothers in equity research
and arbitrage (1989-1993).  Mr. Gabelli resigned as a director of the Company as
of April 15, 1998.

         ROBERT E. DOLAN, Chief Financial Officer of Lynch (since February 1992)
and Controller (since May 1990).

                                      -11-

<PAGE>
ITEM 10. EXECUTIVE COMPENSATION

COMPENSATION OF DIRECTORS

         The Company is not  compensating  its  directors  at the present  time,
although  it may do so in the  future.  The  Company  does  indemnify  directors
pursuant to Delaware law and may reimburse them for certain  out-of-pocket costs
in connection with serving as directors.

EXECUTIVE COMPENSATION

         The Company  has no  employees  and has paid no  employee or  executive
compensation, although it may do so in the future.


                                      -12-

<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
             AND MANAGEMENT
<TABLE>
<CAPTION>

                                                                    As of March 1, 1998
                           ---------------------------------------------------------------------------------------------------------

                                  Class A Beneficially            Class B Beneficially Owned          Total Beneficially Owned
                                          Owned
                           -------------------------------    --------------------------------    ---------------------------------

                               Shares          Percent             Shares            Percent          Shares               Percent
                           --------------   --------------    ----------------    ------------    -------------       -------------

<S>                          <C>                <C>               <C>                <C>             <C>                    <C>  
AFC(1)                            --              --             1,779,301           100%            1,779,301              50.1%
Victoria G. Kane (1)              --              --             1,779,301           100%            1,779,301              50.1%
T. Gibbs Kane, Jr. (1)            --              --             1,779,301           100%            1,779,301              50.1%
Gabelli Funds, Inc.(2)       355,150            20.0%                   --            --               355,150              10.0%
Mario J. Gabelli (3)         682,576            38.5%                   --            --               682,576              19.2%
Marc J. Gabelli                 --                --                    --            --                    --                --
Robert E. Dolan (4)              235              --                    --            --                   235                --
All Directors and            682,811            38.5%            1,779,301           100%            2,462,112              69.3%
Executive Officers as a
Group (5 in total)
</TABLE>



(1)      Victoria G. Kane is the sole  shareholder  of AFC and therefore  shares
         owned by AFC are set forth in this table as owned by  Victoria G. Kane.
         T. Gibbs Kane,  Jr. is the husband of Victoria G. Kane,  and  therefore
         shares  owned by  Victoria  G.  Kane are also set  forth as owned by T.
         Gibbs Kane, Jr. T. Gibbs Kane, Jr.  disclaims  ownership of the shares.
         The  address of AFC,  Victoria  G. Kane and T. Gibbs  Kane,  Jr. is 350
         Stuyvesant Avenue, Rye, New York 10580.

(2)      Mario J. Gabelli is the Chairman and Chief Executive  Officer,  and the
         principal stockholder of Gabelli Funds, Inc.

(3)      Includes 255,426 shares owned directly by Mr. Gabelli  (including 3,512
         shares held for the benefit of Mr.  Gabelli in the Lynch 401(k) Savings
         Plan),  355,150  shares held by GFI, 2,000 shares owned by a charitable
         foundation of which Mr. Gabelli is a trustee and 70,000 shares owned by
         a limited  partnership in which Mr. Gabelli is the general  partner and
         has a 20% interest.  Mr. Gabelli  disclaims the ownership of the shares
         owned by the foundation,  by GFI to the extent of the minority interest
         in GFI held by third parties, and by the partnership except for his 20%
         interest  therein.  The address of GFI and Mr.  Gabelli is 555 Theodore
         Fremd Avenue, Corporate Center at Rye, Rye, NY 10580.

(4)      Includes 35 shares  registered in the name of Mr. Dolan's children with
         respect to which Mr. Dolan has voting and investment power.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

                              CERTAIN TRANSACTIONS

         AFC and Lynch PCS Corporation F ("LPCS"), a subsidiary of Lynch, formed
a limited  partnership,  Aer Force Communications B, L.P. (the "Partnership") in
July 1996 for the  purpose of bidding for PCS  licenses in the F-Block  Auction.
AFC, the general  partner,  contributed  $100,200 to the Partnership for a 50.1%
equity  interest  and LPCS,  the  limited  partner,  contributed  $99,800 to the
Partnership for a 49.9% equity interest. LPCS also

                                      -13-

<PAGE>
loaned the Partnership an additional $11.8 million,  primarily for down-payments
and to service instalment payments on PCS licenses won in the auction.

         On August 13,  1997,  the Company was  incorporated  and on December 4,
1997, the Company succeeded to the rights and obligations of the Partnership. At
that time, AFC received  1,779,301 shares of Class B Common Stock of the Company
and LPCS  received  1,772,198  shares  of Class A Common  Stock of the  Company.
Concurrently  with the Spin Off, LPCS  transferred  1,417,048  shares of Class A
Common Stock to Lynch shareholders and 355,150 shares of Class A Common Stock to
GFI in satisfaction of LPCS's  obligation to share a profits  interest in LPCS's
partnership interest.

         As a part of the  reorganization  creating  the  Company,  AFC and LPCS
contributed an additional $125,250 and $124,750,  respectively, as equity to the
Company.  A portion ($4.5  million) of the Company's  existing  indebtedness  to
LPCS,  including accrued interest and commitment fees (totalling $7.8 million at
December  1, 1997) was  contributed  to the  Partnership  as a  contribution  to
capital; and the remaining portion was converted into $7.8 million of redeemable
Preferred  Stock  and the  obligation  of LPCS to make  additional  loans to the
Company terminated.

ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
             ON FORM 8-K


(A) DOCUMENTS FILED AS PART OF THIS REPORT

         (1) Financial Information
                  See index to Financial Statements on Page F-1

         (2) Financial Statement Schedules
                  Supplemental  schedules  are  omitted  because  they  are  not
         required,  inapplicable  or the  required  information  is shown in the
         financial statements or notes thereto.

         (3) Exhibits *
                  3.1      Articles    of     Incorporation     of     East/West
                           Communications,  Inc.  (Exhibit  3.1 to  Registrant's
                           Form S-1 filed November 25, 1997).
                  3.2      By-Laws of East/West  Communications,  Inc.  (Exhibit
                           3.2 to  Registrant's  Form  S-1  filed  November  25,
                           1997).
                  27       Financial   Data   Schedule,   which   is   submitted
                           electronically   to  the   Securities   and  Exchange
                           Commission  for  information  purposes  only  and not
                           filed.

_______________
 * - Except as noted, all exhibits have been previously filed.


(B) REPORTS ON FORM 8-K

         None



                                      -14-

<PAGE>
                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934,  the  Registrant  has caused this report to be signed this
14th  day of  April,  1998 on its  behalf  by the  undersigned,  thereunto  duly
authorized.

                                   EAST/WEST COMMUNICATIONS, INC.



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


                                POWER OF ATTORNEY

         East/West  Communications,  Inc. and each of the  undersigned do hereby
appoint  Victoria Kane, its or his true and lawful attorney to execute on behalf
of East/West Communications,  Inc. and the undersigned any and all amendments to
this Annual Report on Form 10-KSB and to file the same with all exhibits thereto
and other  documents in connection  therewith,  with the Securities and Exchange
Commission; each of such attorneys shall have the power to act hereunder with or
without the other.

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



/s/ Victoria Kane          Chairman of the Board               April 14, 1998
------------------------   and Director
Victoria Kane


/s/ T. Gibbs Kane, Jr.
------------------------   Director                            April 14, 1998
T. Gibbs Kane, Jr.



------------------------   Director                            April   , 1998
Mario J. Gabelli




                                      -15-

<PAGE>










                          Audited Financial Statements

                         East/West Communications, Inc.


                        (A Development Stage Enterprise,
                   formerly Aer Force Communications B, L.P.)

                     For the year ending December 31, 1997,
                   the period from July 26, 1996 (inception)
                             to December 31, 1996,
                 and the period from July 26, 1996 (inception)
                              to December 31, 1997
                      with Report of Independent Auditors


<PAGE>
                         East/West Communications, Inc.

                    (A Development Stage Enterprise, formerly
                        Aer Force Communications B, L.P.)



                                    CONTENTS


Report of Independent Auditors.............................................F-2
Audited Financial Statements
Balance Sheets at December 31, 1997 and December 31, 1996..................F-3
Statements of Operations for the Year Ended December 31, 1997,
   the Period from July 26, 1996 (Inception) to December 31, 1996, and the
   Period from July 26, 1996 (Inception) to December 31, 1997..............F-4
Statements of Changes in Shareholder's Equity (Deficit) for
   the Period from July 26, 1996 (Inception) to December 31, 1997..........F-5
Statements of Cash Flows for the Year Ended December 31, 1997,
   the Period from July 26, 1996 (Inception) to December 31, 1996, and the
   Period from July 26, 1996 (Inception) to December 31, 1997..............F-6
Notes to Financial Statements..............................................F-7


                                      F-1

<PAGE>
                         Report of Independent Auditors


Shareholders and Board of Directors
East/West Communications, Inc.

We have audited the  accompanying  balance  sheets of East/West  Communications,
Inc.  (the  "Company")  a  development  stage  enterprise,  formerly  Aer  Force
Communications  B, L.P.,  as of  December  31,  1997 and 1996,  and the  related
statements of operations,  changes in shareholder's  equity (deficit),  and cash
flows for the year  ended  December  31,  1997,  the period  from July 26,  1996
(inception)  to  December  31,  1996,  and for the  period  from  July 26,  1996
(inception)  to  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 audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the  financial  position of the Company at December 31,
1997 and 1996, and the results of its operations and its cash flows for the year
ended December 31, 1997,  the period from July 26, 1996  (inception) to December
31, 1996, and the period from July 26, 1996 (inception) to December 31, 1997, in
conformity with generally accepted accounting principles.

The  accompanying  financial  statements have been prepared  assuming  East/West
Communications,  Inc. will continue as a going concern.  As more fully described
in Note 1, the Company  has  incurred  losses  since  inception  and has not yet
adopted a business plan or  determined  how to finance its  operations  and will
need to obtain capital in order to fund its interest payment obligations and for
working  capital  and  general  corporate   purposes.   These  conditions  raise
substantial  doubt about the Company's  ability to continue as a going  concern.
The financial  statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and  classification  of  liabilities  that may result  from the  outcome of this
uncertainty.


                                                           /s/ Ernst & Young LLP

Stamford, Connecticut
April 14, 1998

                                      F-2

<PAGE>
                         East/West Communications, Inc.

                    (A Development Stage Enterprise, formerly
                        Aer Force Communications B, L.P.)

                                 Balance Sheets

<TABLE>
<CAPTION>
                                                                                          DECEMBER 31,
                                                                                      1997           1996
                                                                                ==============================
ASSETS
Current assets
<S>                                                                              <C>             <C>       
   Cash and cash equivalents                                                     $    254,427    $       --
   Deposit with FCC                                                                      --        12,000,000
                                                                                 ------------    ------------
Total current assets                                                                  254,427      12,000,000

PCS Licenses                                                                       18,957,721            --
Capitalized costs                                                                   1,240,434            --
                                                                                 ============    ============
Total assets                                                                     $ 20,452,852    $ 12,000,000
                                                                                 ============    ============

LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current liabilities:
   Accrued liabilities                                                           $    654,853    $       --

Due to Limited Partner                                                                   --         1,578,500
Long-term debt:
     Loan from Limited Partner                                                           --        11,800,000
     Loan from FCC                                                                 15,166,177            --
Deferred income taxes                                                                 500,000            --

Redeemable  preferred  stock, $1000 par value; 5% cumulative  dividends,
   15,000 shares authorized, 7,800 issued and outstanding (liquidation
   value - $7,800,000)                                                              3,389,487            --

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

General Partner's equity accumulated during the development stage                        --            84,415
Limited Partner's deficit accumulated during the development stage                       --        (1,462,915)
                                                                                 ------------    ------------
Total shareholder's equity (deficit) accumulated during the development
   stage                                                                              742,065      (1,378,500)
                                                                                 ------------    ------------
Total liabilities and shareholder's equity (deficit)                             $ 20,452,852    $ 12,000,000
                                                                                 ============    ============
</TABLE>

                            See accompanying notes.

                                      F-3

<PAGE>
                         East/West Communications, Inc.

                    (A Development Stage Enterprise, formerly
                        Aer Force Communications B, L.P.)

                            Statements of Operations

<TABLE>
<CAPTION>

                                                                                   JULY 26, 1996              JULY 26, 1996
                                                        YEAR ENDED                (INCEPTION) TO              (INCEPTION) TO
                                                        DECEMBER 31,               DECEMBER 31,                DECEMBER 31,
                                                           1997                        1996                        1997
                                                        ======================================================================


<S>                                                         <C>                     <C>                        <C>
  Interest expense including commitment fees                $(1,987,562)            $(1,578,500)               $(3,566,062)
  Deferred income tax expense                                  (500,000)                      -                   (500,000)
  Other expenses                                                (87,607)                      -                    (87,607)
                                                        -------------------------------------------------------------------
            Net loss                                         (2,575,169)             (1,578,500)                (4,153,669)

Dividend requirement on preferred stock                         (54,266)                      -                    (54,266)
                                                        -------------------------------------------------------------------
Loss applicable to common shares                            $(2,629,435)            $(1,578,500)               $(4,207,935)
                                                        ===================================================================

Basic and diluted loss per share:
            Net loss                                              $(.74)
                                                        ===============

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

Net loss allocated to general partner (1%)                                          $   (15,785)
                                                                                    =============

Net loss allocated to limited partner (99%)                                         $(1,562,715)
                                                                                    =============
</TABLE>

                            See accompanying notes.

                                      F-4

<PAGE>
                         East/West Communications, Inc.

                    (A Development Stage Enterprise, formerly
                        Aer Force Communications B, L.P.)

             Statements of Changes in Shareholder's Equity/(Deficit)

       For the period from July 26, 1996 (inception) to December 31, 1997

<TABLE>
<CAPTION>

                                                                                                 Limited              Total
                                                     Additional                      General     Partmers           Shareholder's
                                       Common         Paid in        Accumulated     Partner's   Equity               Equity
                                        Stock         Capital          Deficit        Equity     (Deficit            (Deficit)
                                       ------------------------------------------------------------------------------------------
<S>                                    <C>          <C>            <C>              <C>          <C>            <C>
Balance at July 26, 1996 (inception)   $     -      $        -     $         -      $         -  $                $       -
Capital contributions                        -               -               -          100,200       99,800          200,000
    Net loss                                 -               -               -          (15,785)  (1,562,715)      (1,578,500)
                                       ---------------------------------------------------------------------------------------
Balance at December 31, 1996                 -               -               -           84,415   (1,462,915)      (1,378,500)

Capital contributions                        -               -               -          125,250    4,624,750        4,750,000
Issuance of 3,551,499 shares of
 Common Stock, $.0001 par value
 (1,772,198-Class
  A; 1,779,301-Class B)                    355       4,949,645      (1,578,500)     $  (209,665)  (3,161,835)               -
      Net loss                               -               -      (2,575,169)               -            -      $(2,575,169)
Preferred dividends                          -               -         (54,266)               -            -          (54,266)
                                       ---------------------------------------------------------------------------------------
Balance at December 31, 1997              $355      $4,949,645     $(4,207,935)     $         -   $        -      $  742,065
                                       =======================================================================================
</TABLE>


                            See accompanying notes.

                                      F-5

<PAGE>
                         East/West Communications, Inc.

                    (A Development Stage Enterprise, formerly
                        Aer Force Communications B, L.P.)

                            Statements of Cash Flows

<TABLE>
<CAPTION>

                                                                                       JULY 26, 1996             JULY 26, 1996
                                                              YEAR ENDED               (INCEPTION) TO            (INCEPTION) TO
                                                             DECEMBER 31,               DECEMBER 31,              DECEMBER 31,
                                                                 1997                       1996                      1997
                                                            -------------------------------------------------------------------

OPERATING ACTIVITIES
<S>                                                          <C>                       <C>                       <C>         
Net loss                                                     $(2,575,169)              $ (1,578,500)             $(4,153,669)
Adjustments to reconcile net loss to net cash used in
  operating activities:
    Deferred income taxes                                        500,000                          -                  500,000
Changes in operating assets and liabilities:
    Accrued liabilities                                           60,920                          -                   60,920
Interest accrued, including commitment fees                    1,987,563                  1,578,500                3,566,063
                                                            -------------------------------------------------------------------
Net cash used in operating activities                            (26,686)                         -                  (26,686)

INVESTING ACTIVITIES
(Deposits with) refunds from the FCC                          10,104,228                (12,000,000)              (1,895,772)
Purchase of PCS licenses                                      (1,895,772)                         -               (1,895,772)
Other                                                            (11,617)                         -                  (11,617)
                                                            -------------------------------------------------------------------
Net cash (used in) provided by investing activities            8,196,839                (12,000,000)              (3,803,161)

FINANCING ACTIVITIES
Proceeds from the issuance of loans from the Limited
  Partner
                                                               1,938,502                 11,800,000               13,738,502
Repayment of loans from the Limited Partner                  (10,104,228)                         -              (10,104,228)
Capital contributions                                            250,000                    200,000                  450,000
                                                            -------------------------------------------------------------------
Net cash provided by (used in) financing activities           (7,915,726)                12,000,000                4,084,274

Net change in cash and cash equivalents                          254,427                          -                  254,427
Cash and cash equivalents at beginning of period                       -                          -                        -
                                                            -------------------------------------------------------------------
Cash and cash equivalents at end of period                   $   254,427               $          -              $   254,427
                                                            ===================================================================
</TABLE>

                            See accompanying notes.

                                      F-6


<PAGE>
                         East/West Communications, Inc.

                    (A Development Stage Enterprise, formerly
                        Aer Force Communications B, L.P.)

                          Notes to Financial Statements

                                December 31, 1997

1. ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

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

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

Immediately thereafter,  Lynch PCS F dividended 39.9% of the Common Stock of the
Company to Lynch which, in turn,  dividended this interest to its  shareholders.
In addition,  Lynch PCS F  transferred  the remaining 10% of Common Stock of the
Company held by it to Gabelli Funds,  Inc., an affiliate of the Chairman and CEO
of Lynch,  in  satisfaction of a previously  incurred  obligation.  Also at that
time,  Lynch PCS F converted the remaining  principal  amount of its loan to the
Partnership of $3,335,221 (after the capital  contribution of $4,500,000) into a
redeemable  preferred stock of the Company (see Note 6). Under the terms of this
conversion the Limited  Partner's prior  obligation to make further loans to the
Partnership was terminated.

BASIS OF PRESENTATION

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

                                      F-7

<PAGE>
                         East/West Communications, Inc.

                    (A Development Stage Enterprise, formerly
                        Aer Force Communications B, L.P.)

                    Notes to Financial Statements (continued)

1. ACCOUNTING POLICIES (CONTINUED)

BASIS OF PRESENTATION (CONTINUED)

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

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

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

CASH AND CASH EQUIVALENTS

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

ADMINISTRATIVE SERVICES

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

USE OF ESTIMATES

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

                                      F-8

<PAGE>
                         East/West Communications, Inc.

                    (A Development Stage Enterprise, formerly
                        Aer Force Communications B, L.P.)

                    Notes to Financial Statements (continued)

1. ACCOUNTING POLICIES (CONTINUED)

CAPITALIZED COSTS

Interest charges including commitment fees incurred prior to the granting of the
licenses have been  expensed.  Subsequent to the license grant dates,  and until
operations  commence,  all interest  charges and commitment  fees on outstanding
loan  balances  will be  capitalized.  These  costs will be  amortized  over the
remaining life of the  respective  loan when the Company  commences  operations.
Capitalized  interest,  included in capitalized  costs,  amounted to $897,267 at
December 31, 1997. Total interest  charges amounted to $1,119,111,  $698,166 and
$1,817,277,  respectively, for the year ended December 31, 1997, the period from
July 26, 1996 (inception) to December 31, 1996, and for the period from July 26,
1996 (inception) to December 31, 1997.

The FCC licenses will be amortized over a period,  consistent  with the industry
standard,  not to exceed 40 years,  which will begin when  operations  commence.
Pursuant to FCC regulations,  license holders are required to commence providing
service to  one-third of the  population  within the license area within 5 years
from the date of award and  two-thirds of the  population  within ten years from
the date of award.

LOSS PER SHARE

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

INCOME TAXES

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

2. RELATED PARTIES

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

                                      F-9

<PAGE>
                         East/West Communications, Inc.

                    (A Development Stage Enterprise, formerly
                        Aer Force Communications B, L.P.)

                    Notes to Financial Statements (continued)

3. PARTNERSHIP AGREEMENT

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

Under the terms of the  Partnership  Agreement  all  deductions  with respect to
interest  expense and commitment  fees were allocated 99% to the Limited Partner
and 1% to the General Partner. All profits of the Partnership were allocated 99%
to the Limited Partner and 1% to the General Partner until the aggregate  amount
of all profits  allocated to the Limited  Partner and General  Partner equal the
deductions with respect to interest expense and commitment  fees.  Subsequently,
all profits and losses were to be allocated  to the Limited  Partner and General
Partner  in  proportion  to  their  respective   interests,   49.9%  and  50.1%,
respectively. On December 4, 1997, the Partnership was terminated.

4. LONG-TERM DEBT

Long-term debt consists of:
<TABLE>
<CAPTION>

                                                                                               DECEMBER 31,
                                                                                          1997                    1996
                                                                                      ---------------------------------

<S>                                                                                   <C>                  <C>
   Limited Partner loan at a fixed rate of 15% due in 2001                                                 $11,800,000

   FCC financing of PCS licenses awarded in the following  markets and maturing in
     2007:
            Los Angeles, CA                                                           $  3,579,000                   -
            Washington, D.C.                                                             7,068,000                   -
            Sarasota, FL                                                                 1,322,400                   -
            Reno, NV                                                                     1,429,800                   -
            Santa Barbara, CA                                                            1,766,977                   -
                                                                                      ---------------------------------
                                                                                        15,166,177                   -
                                                                                      =================================
                                                                                       $15,166,177         $11,800,000
                                                                                      =================================
</TABLE>

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

                                      F-10

<PAGE>
                         East/West Communications, Inc.

                    (A Development Stage Enterprise, formerly
                        Aer Force Communications B, L.P.)

                    Notes to Financial Statements (continued)

4. LONG-TERM DEBT (CONTINUED)

All of the FCC financing bears interest at 6.25% per annum.  Quarterly  interest
payments of $236,972  were required for the first two years of the license (1997
and 1998) and  quarterly  payments of  principal  and  interest of $605,879  are
required  over the remaining  eight years of the license  term.  These loans are
secured by the licenses  granted.  In April 1997, the FCC suspended the interest
payments on the debt. On March 24, 1998,  the FCC  indicated  that such interest
payments will be resumed not earlier than 90 days  subsequent to  publication in
the Federal Register of its "Order on  Reconsideration  of the Second Report and
Order."  Such order was  published  on April 8, 1998,  requiring  the  suspended
payments  (aggregating  approximately  $1,000,000) to be made in eight quarterly
installments beginning in July 1998 in addition to regular interest payments.

There were no cash payments for interest for the periods ended December 31, 1997
and December 31, 1996.

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

5. COMMON STOCK

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

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

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

                                      F-11

<PAGE>
                         East/West Communications, Inc.

                    (A Development Stage Enterprise, formerly
                        Aer Force Communications B, L.P.)

                    Notes to Financial Statements (continued)



6. REDEEMABLE PREFERRED STOCK

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

7. LEGAL MATTERS

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

                                      F-12