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, 1998

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

      For the transition period from ________to________

                         Commission file number: 0-23127

                         EAST/WEST COMMUNICATIONS, INC.
                 (Name of Small Business Issuer 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, including zip code)

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

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

Securities  registered  under Section 12(g) of the Exchange Act:  CLASS A COMMON
STOCK, PAR VALUE $.0001

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, 1998 were $0.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant  was  approximately  $2,238,863 as of March 30, 1999.  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 March 30, 1999 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.

Transitional Small Business Disclosure Format (check one): Yes / /    No /X/



<PAGE>
                                     PART I


ITEM 1. BUSINESS

                                   THE COMPANY

         East/West  Communications,   Inc.  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,  California 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.
80% of the cost of the licenses (or $15.2  million) was financed  over ten years
by the Federal Communications Commission ("FCC"), with only payments of interest
during the first two years. Currently, principal payments are scheduled to begin
on July 31, 1999.

         We  believe  that there are  significant  growth  opportunities  in the
wireless  telecommunications industry and that our PCS licenses have substantial
potential.  According to the Cellular  Telecommunications  Industry Association,
there are 60.8 million  wireless  telephone  subscribers  in the United  States,
representing  an overall  wireless  penetration  rate of 22.4% and a  subscriber
growth rate of 24.9% from June 30, 1997. Paul Kagan Associates,  Inc., a leading
telecommunications  consultant,  estimates  that the number of cellular  and PCS
wireless service  subscribers will reach 98.4 million by 2001. We believe that a
significant  portion of the predicted growth in the consumer market for wireless
telecommunications  will result from  anticipated  declines in costs of service,
increased functional  versatility,  and increased awareness of the productivity,
convenience and privacy  benefits  associated with the services  provided by PCS
providers, which are the first direct wireless competitors of cellular providers
to offer all-digital  mobile networks.  We also believe that the rapid growth of
notebook  computers  and personal  digital  assistants,  combined  with emerging
software  applications  for  delivery  of  electronic  mail,  fax  and  database
searching, will contribute to the growing demand for wireless service.

         We have not yet adopted a business  plan or  determined  how to finance
our  operations,  due in part to  uncertainties  relating  to PCS,  which  makes
evaluation difficult,  including the newness of PCS, financing,  affiliation and
technology issues and the financial  problems of certain C-Block  licensees.  We
have not yet  determined  whether to develop our PCS licenses on our own,  joint
venture our licenses with other PCS or wireless  telephone  licenses  holders or
operators  or  others,  or  sell  some  or all of our  licenses.  We  expect  to
continually  review  these  factors  and to  adopt a plan  once  the  financing,
regulatory  and  market  aspects  of PCS are  less  uncertain.  East/West  stock
involves a substantial degree of risk. See "Risk Factors."

         Our  address  is 350  Stuyvesant  Avenue,  Rye,  New  York  10580.  Our
telephone number is (914) 921-6300.


                                      -2-
<PAGE>

                                  RISK FACTORS

EAST/WEST IS A DEVELOPMENT  STAGE COMPANY WITH  HISTORICAL  AND EXPECTED  FUTURE
OPERATING LOSSES AND CANNOT OFFER ASSURANCE OF FUTURE PROFITABLITY.

          We are at an early  stage  of our  development  and have no  operating
history.  We have incurred  cumulative net losses  through  December 31, 1998 of
$4,238,185.  These losses arose  primarily  from  interest  expense on loans for
organizational  and start-up  activities and  acquisition of PCS licenses in the
F-Block  Auction  and  operating  expenses.  We are  subject to all of the risks
typically  associated  with a start-up  entity.  The  report of our  independent
auditors  with respect to our  financial  statements as of December 31, 1998 and
1997,  for the years ended  December  31, 1998 and 1997 and the period from July
26, 1996  (inception) to December 31, 1998 contains a paragraph  indicating that
substantial  doubt exists as to our ability to continue as a going concern.

          PCS networks have an extremely limited operating history in the United
States and we cannot  assure you that  operation of these  networks  will become
profitable.  There is also  uncertainty as to the extent of customer  demand for
PCS  networks.  We have not had any revenue from  operations  to date and do not
know when, if ever, we may have positive cash flow.  Unless we raise  additional
funds, we cannot meet our interest  obligations on our government  debt. We will
have to raise funds in the near  future in the form of debt or equity  financing
in order to continue to make interest or principal  payments on our current debt
and for working  capital and general  corporate  purposes.  We cannot assure you
that we can raise  sufficient  funds.  In  addition,  if we were to raise  funds
through equity financing,  it could cause  substantial  dilution to the net book
value of our common stock.

EAST/WEST HAS SUBSTANTIAL DEBT OBLIGATIONS TO THE FCC THAT IT MAY NOT BE ABLE TO
REPAY.

           Our leverage is substantial in relation to our equity. As of December
31, 1998, our total  indebtedness was $15.5 million which is owed to the FCC and
certain of our  directors;  we have $7.8 million of preferred  stock  subject to
mandatory redemption under certain  circumstances;  and our stockholders' equity
was approximately  $23,000. We are required to make interest payments to the FCC
on April 29, 1999 in the amount of $388,307  and on May 1, 1999 in the amount of
354,541.  Under FCC rules,  scheduled  payments may be delayed for up to 90 days
upon  payment of a 5% penalty and for 90-180 days upon payment of a 15% penalty.
The  April 29,  1999  payment  may not be  further  delayed  and the May 1, 1999
payment may only be delayed for an additional 90 days. If these payments are not
timely made we will forfeit our licenses.


<PAGE>

           We have executed notes to the FCC documenting our installment payment
obligations and a security agreement creating a first priority security interest
in favor of the FCC in the PCS licenses  (and the proceeds of any sale  thereof)
in the event of our default.  We are required to make interest payments based on
a 6.25% annual  interest rate and to pay interest  only  quarterly for the first
two years of the license and to pay interest and  principal  quarterly  over the
remaining  eight years. In the event that we are unable to repay our debt, or we
(or any of our  affiliates)  are involved in certain  insolvency  or  bankruptcy
proceedings,  or  otherwise  violate  regulations  applicable  to holders of FCC
licenses, the FCC could take a variety of actions, including requiring immediate
repayment of amounts due, repayment of certain bidding credits, revoking our PCS
licenses  and fining us an amount equal to the  difference  between the price at
which we  acquired  the  licenses  and the amount of the  winning  bids at their
reauction,  plus an  additional  penalty  of three  percent of the lesser of the
subsequent  winning bid and our bid amount.  We also may not be able to meet our
obligations to other creditors.

EAST/WEST MAY NEED TO INCUR MORE DEBT IN THE FUTURE.

          If we  determine  to develop and build out the  licenses,  substantial
additional funds will be required.  Any borrowings from third parties are likely
to contain various restrictions which may significantly limit or prohibit future
actions and would allow a lender to accelerate the maturity of such indebtedness
upon a default.  We cannot  assure you that our PCS networks can be completed or
that,  once  completed,  we will generate  sufficient  cash flow from  operating
activities to repay our debt and provide working  capital.  Any failure or delay
in repaying  current or future debt, could have a material adverse effect on our
business, results of operations and financial condition.

          In addition,  we have an obligation  to redeem our preferred  stock on
the earlier of (i) December 1, 2009,  (ii) upon a change of control of our Class
A common stock or Class B common stock or (iii) upon the sale of one or more PCS
licenses  directly  or  indirectly  for cash in an amount  proportional  to that
number of persons  covered by the sale of such  licenses  compared  to the total
persons covered by our five initial PCS licenses, in each case based on the 1996
or most recent subsequent estimate by the United States Bureau of Census.

          Our  ability  to  obtain  any   additional   necessary   financing  or
refinancing  will depend on, among other things,  our financial  condition,  any
restrictions governing our debt and other factors,  including market conditions,
that are beyond our control.  We cannot assure you any such  financing  could be
obtained on favorable  terms,  or at all. In the absence of such  financing,  we
could be forced  to sell  assets  in order to make up for any  shortfall  in the
payments due

                                       -3-

<PAGE>
on our indebtedness under circumstances that might not be favorable to realizing
the highest price for such assets.  A substantial  portion of our assets consist
of intangible assets,  principally PCS licenses granted by the FCC, the value of
which  will  depend  upon a  variety  of  factors.  Such  licenses  may  only be
transferred to other entities that meet the FCC requirements for F-Block license
holders  during the first  five years of the  initial  license  term,  which may
significantly impact our ability to realize the value of such licenses. Further,
transfers to entities not meeting such  requirements in years six through ten of
the  initial  license  term will  subject us to  substantial  unjust  enrichment
penalties.  We cannot  assure you that our assets could be sold, or sold quickly
enough, or for a sufficient amount, to enable us to meet our obligations.

EAST/WEST  HAS NOT YET DECIDED HOW BEST TO UTILIZE ITS PCS  LICENSES,  AND THERE
EXIST  INHERENT RISKS IF EAST/WEST  CHOOSES TO SELL,  JOINT VENTURE OR OTHERWISE
BUILD OUT ITS LICENSES.

          We have not yet  determined  what to do with our PCS  licenses.  If we
decide to sell our PCS licenses,  there are various FCC restrictions that may be
applicable.  Under FCC  regulations,  a sale of our licenses  may cause  certain
payment penalties to be imposed or cause our outstanding  indebtedness  incurred
in connection  with the purchase of our PCS licenses to become  immediately  due
and  payable  depending  on the size of the  acquiring  party and its ability to
assume such debt. See "Legislation  and Governmental  Regulations." In addition,
if a license is sold for cash, we will need to redeem a corresponding proportion
of our preferred stock.

          Many of the risks relating to the development of PCS licenses may also
apply if we decide to joint venture our PCS licenses. In addition, certain joint
venturers  or  purchasers  may  already  operate  wireless  telephone  or  other
telecommunications  operations  or have greater  background  and  experience  in
developing  wireless  telephony and possess greater  organizational,  management
and/or  financial  resources.  If we decide to joint venture our PCS licenses or
sell our  licenses  other than for cash,  we may be at risk with  respect to the
other operations of the joint venturer or purchaser.

          If we decide to develop our PCS licenses, we would have to develop and
implement a business plan, which may require attracting and retaining  qualified
individuals as managers and employees and developing a business  infrastructure.
We cannot  assure you as to the timing and extent of revenues and  expenses,  or
our ability to successfully  manage all the tasks associated with developing and
maintaining  a successful  enterprise.  Any failure by  management  to guide and
control  growth  effectively,  which  includes  implementing  adequate  systems,
procedures and controls in a timely manner, could have a material adverse effect
on our business,  financial condition and results of operations. In addition, we
will incur  significant  operating  losses and generate  negative cash flow from
operating  activities  during the next  several  years if we seek to develop and
construct our PCS networks and build a customer base.  These losses and negative
cash flows could be  substantial  and increase  during the initial  years of the
build-out and  operation of our PCS  networks.  We cannot assure you that we can
successfully   launch  our  services,   or  that  we  will  achieve  or  sustain
profitability or positive cash flow from operating  activities in the future. If
we cannot achieve  operating  profitability or positive cash flow from operating
activities,  we may not be able to meet  our debt  service  or  working  capital
requirements and,  consequently,  the Class A common stock may have little or no
value.

          Should we determine to develop or joint venture our PCS  licenses,  we
will likely  rely  significantly  upon third  parties to provide  equipment  and
services  to  distribute  our  products  and  services  and to  provide  certain
functions such as customer billing. We cannot assure you that such third parties
will provide acceptable equipment and services on a timely basis and any failure
to do so will have a  material  adverse  effect  upon our  business,  results of
operations and financial condition.

IF EAST/WEST  DECIDES TO DEVELOP ITS PCS NETWORK,  OUR SUCCESS WILL BE DEPENDENT
ON OUR ABILITY TO IMPLEMENT OUR PLANS, AS WELL AS OUR ABILITY TO MEET REGULATORY
REQUIREMENTS,  THE FAILURE OF ANY OF WHICH COULD HAVE A MATERIAL  ADVERSE AFFECT
ON OUR BUSINESS AND OPERATIONS.

          If we develop the PCS licenses, the construction and implementation of
our PCS networks would involve a high degree of risk including,  but not limited
to, network design, site selection and acquisition, equipment availability

                                       -4-

<PAGE>
and microwave relocation.  We cannot assure you that we can successfully develop
and  implement  our PCS  networks.  Any  failure  to do so would have a material
adverse effect on our business, results of operations and financial condition.

          In addition, each of our PCS licenses is subject to an FCC requirement
that we  construct  PCS  networks  that  provide  adequate  service  to at least
one-third  of the  population  in each such PCS market  within five years of the
date on which the license was granted or make a showing of  substantial  service
in a licensed  area within five years of the license  grant date and  two-thirds
within ten years from the  license  grant date.  We cannot  assure you that this
required  coverage will be achieved in  accordance  with FCC  requirements,  and
failure to comply with these  requirements in any market could cause  revocation
of our PCS licenses or the imposition of fines or other sanctions by the FCC.

EAST/WEST'S COMPETITORS HAVE SUBSTANTIALLY GREATER ACCESS TO CAPITAL, FINANCIAL,
TECHNICAL,  MARKETING,  SALES AND DISTRIBUTION  RESOURCES AND SIGNIFICANTLY MORE
EXPERIENCE THAN US IN PROVIDING WIRELESS SERVICES.

          PCS is a new  technology  and service and, as a result,  the level and
timing of  development  of a customer  base for PCS  applications,  on which our
future revenues depend  significantly,  is uncertain.  In the development of the
PCS market, we will be competing with the more established cellular industry, as
well as other wireless  communications  technologies,  existing and future, with
similar service offerings.  Many of our PCS and cellular telephone  competitors,
have  substantially  greater  access to capital than us,  substantially  greater
financial, technical, marketing, sales and distribution resources than ours, and
significantly more experience than us in providing wireless services. Several of
our  competitors  are able to market other  services,  such as cable  television
service,  landline  telephone  service and internet  access with their  wireless
communications   service  offerings.   In  addition,   several  competitors  are
operating,  or planning to operate,  independently or through joint ventures and
affiliation  arrangements,  wireless  communications networks that cover most of
the United States.

          Assuming  that we  determine  to  develop  our PCS  licenses,  we will
compete  directly  with up to five other PCS  providers  in each of our  markets
including  providers  holding the A- and B-Block  licenses which were granted on
June 23, 1995,  providers holding C-Block licenses awarded in September 1996 and
January  1997 and  providers  holding  D, E and  F-Block  licenses  subsequently
granted.  PCS licensees in our license areas include Cox  Enterprises,  American
Personal   Communications,   Pacific  Telesis,   Nextwave,  AT&T,  Inc.,  Rivgam
Communicators L.L.C.,  OPCSE-Galloway Consolidated,  Aerial Communications,  PCS
Prime Co., Sprint COM, Inc.,  BellSouth  Wireless,  Inc.,  Sprint Spectrum,  PCS
2000,  L.P.,  Alpine PCS,  Inc. and  Entertainment  Unlimited.  The FCC recently
modified its rules to permit the  partitioning and  disaggregation  of broadband
PCS licenses  into licenses to serve smaller  service  areas,  which could allow
other new entrants to enter wireless markets. Additionally, we will compete with
existing cellular providers, most of which have infrastructure in place, have an
established  brand  identity,  have  generated  positive cash flow and have been
operational  for as many as ten  years or more.  We expect  that  many  cellular
operators will upgrade their networks to provide  comparable digital services in
competition with us. Cellular  operators in our license areas include BellSouth,
Bell Atlantic NYNEX Mobile, Air Touch and GTE Mobilenet.

          The success of our PCS service  business  will depend upon our ability
to  compete,  especially  with  respect to  pricing,  service,  reliability  and
availability  of features,  such as data and voice  transmission,  call waiting,
call forwarding and short messaging capability.  In addition to PCS and cellular
operators,  we may also face  competition  from  other  existing  communications
technologies, such as conventional mobile telephone services, specialized mobile
radio ("SMR") service, enhanced SMR ("ESMR") service, paging services (including
two-way  digital  paging),  and domestic  and global  mobile  satellite  service
("MSS").  Nextel is providing  competitive  wireless  communications  on an ESMR
system. In the future,  cellular and PCS service will also compete more directly
with traditional landline telephone service operators,  energy utilities,  local
multipoint distribution service ("LMDS") providers, and cable and wireless cable
operators seeking to offer communications  services by leveraging their existing
infrastructure. In the spring of 1997, the FCC also auctioned 30 MHZ of spectrum
in the 2.3 GHz band for wireless  communications  services ("WCS").  The FCC has
proposed that WCS providers be permitted to offer a broad range of fixed, mobile
radio  location  and  satellite  broadcast  services,  some of which could be in
competition  with our service  offerings.  The FCC has auctioned  1300 megahertz
("MHZ") of  spectrum  in the 27.5 - 29.5 GHZ and 31.0 - 31.3 GHz bands for LMDS.
The FCC contemplates

                                       -5-

<PAGE>

that the LMDS spectrum would provide very high  subscriber  capacity for two-way
video  telecommunications.  We may  also  face  competition  from  other  as yet
unidentified technologies.

THE LIMITED CAPACITY OF OUR LICENSES MAY PUT EAST/WEST AT A DISADVANTAGE.

          Cellular  telephone  licenses  are  for 25 MHZ of  spectrum  each  and
certain of the PCS  licenses in the A, B and C-Blocks are for 30 MHZ of spectrum
each.  The D, E and  F-Block  licenses,  which  have  only  10MHz  of  spectrum,
therefore have less capacity with which to provide wireless  telephone  service.
This may eventually limit growth opportunities as demand increases in the future
for mobile PCS services. In addition, the cost to build out a digital mobile PCS
system to an equivalent  standard may be greater with a 10 MHZ license than with
either a 25 MHZ  cellular  or 30 MHZ PCS  license.  Potential  lenders  may also
require that 10 MHZ licensees have  arrangements for additional  spectrum.  As a
result,  we may either  initially,  or at a later time, have to joint venture or
make other arrangements with holders of additional  spectrum in order to provide
the amount or breadth of service to be or remain  competitive,  or may  consider
the provision of telephone services other than mobile PCS such as fixed wireless
local  loop,  data or  internet  access.  Our  ability  to  enter  into  certain
arrangements  is limited by FCC  regulations,  and we cannot  assure you that we
will be able to enter into such arrangements on favorable terms or at all.

EAST/WEST'S  LICENSES  ONLY  OFFER  LIMITED  TERRITORY  COVERAGE  AND  SCOPE  OF
SERVICES.

          If we were to develop our PCS licenses, our areas of services would be
relatively  limited,  and it would be necessary to enter into joint  ventures or
other  affiliation  arrangements  with  other  service  providers  to  give  our
customers a broader area of service  coverage,  as well as a broader spectrum of
services, and would require those other providers to have compatible technology.
We may be unable to enter  into such joint  ventures  or other  arrangements  on
favorable  terms or at all,  which would have a material  adverse  affect on our
ability to develop our licenses.

IF EAST/WEST DOES NOT CHOOSE THE APPROPRIATE TECHNOLOGY IT COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS.

          If we were to develop the PCS licenses, we would be required to choose
from among several competing digital  technologies in order to build and operate
a PCS system.  To some extent,  the choice of  technology  may be  substantially
influenced by what other PCS licensees have chosen in our areas, and whether our
technology  is  compatible,  or whether we may be able to compete  with  similar
technologies.  We  cannot  assure  you  that  we  will  choose  the  appropriate
technology or that the technology chosen will be successful.  The selection of a
particular protocol technology could materially  adversely affect our ability to
successfully offer PCS service. See "Wireless Communications Industry."

IF  EAST/WEST  DEVELOPS  ITS PCS  LICENSES,  ITS  ABILITY  TO HIRE AN  EFFECTIVE
MANAGEMENT  TEAM  WILL  HAVE  A  LARGE  IMPACT  ON ITS  ABILITY  TO  MANAGE  ITS
OPERATIONS.

          If  we  develop  our  PCS  licenses,   such  development  would  place
substantial  demands  on  executive  resources.  We have no  employees,  and our
directors and officers only provide a limited amount of time to our affairs.  If
we are to develop the  licenses,  we will need to hire a  significant  number of
employees.  We cannot assure you that such employees will be able to effectively
manage the  development  of our  operations  and  facilities,  fully exploit our
wireless  communications  assets.  Any  inability to manage  growth could have a
material  adverse  effect on our business,  results of operations  and financial
condition.

 EAST/WEST  IS  SUBJECT  TO  SUBSTANTIAL   GOVERNMENT   REGULATION  WHICH  COULD
MATERIALLY ADVERSELY AFFECT OUR BUSINESS.

          The   spectrum   licensing,   construction,    operation,   sale   and
interconnection   arrangements  of  our  wireless  communications  networks  are
regulated to varying degrees by state regulatory  agencies,  the FCC,  Congress,
the courts and other governmental bodies. We cannot assure you that any of these
governmental  bodies  having  jurisdiction  over us will  not  adopt  or  change
regulations  or take other actions that would  materially  adversely  affect our
business,  financial  condition or results of  operations.  Although the FCC has
issued rules regarding the F-Block Auction and

                                       -6-

<PAGE>
numerous  other  matters,  not all of them have been  subject to FCC or judicial
interpretation.  Accordingly,  for certain matters, such as the structure of our
Board of Directors and management, we are relying on public and private informal
interpretation of the rules from the staff of the FCC and other sources. 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.
A failure to comply with FCC rules  could  subject us to serious  penalties  and
have a material  adverse  effect upon our business,  results of  operations  and
financial condition. In addition,  although our PCS licenses are renewable after
the  expiration  of their  10-year  terms,  there can be no  assurance  that our
licenses will be renewed.

          In  addition,  in general,  as a provider of  commercial  mobile radio
service,  we are subject to numerous pending and future FCC rulemaking and other
proceedings  that could adversely affect our business,  financial  condition and
results of operations.

          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  has been
challenged in numerous respects in various Federal courts and has involved,  and
may continue to involve, numerous changes in established rules and policies that
could  adversely  affect  our  business,  financial  condition  and  results  of
operations.

EAST/WEST IS SUBJECT TO VARIOUS F-BLOCK LICENSE REQUIREMENTS WHICH COULD SUBJECT
US TO SERIOUS PENALTIES IF NOT MET.

          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 various qualifications include:

          o Entrepreneurs Requirements.

          o Very Small Business Requirements.

          o Control Group Requirements.

          o Asset and Revenue Calculation.

          o Transfer Restrictions.

          We (i)  believe  that we have  structured  ourselves  to  satisfy  the
Entrepreneurs  Requirements,  (ii) intend to diligently  pursue and maintain our
qualification  as a Very Small  Business and (iii) have  structured  our Class A
common stock and Class B common stock in a manner intended to ensure  compliance
with  the  applicable  FCC  Rules.  We have  relied  on  representations  of our
investors to determine our compliance with the FCC's rules applicable to F-Block
licensees. We cannot assure you that our investors or ourselves will continue to
satisfy these requirements during the term of any PCS license or that we will be
able to successfully  implement  divestiture or other mechanisms included in our
certificate of  incorporation  which are designed to ensure  compliance with FCC
rules. Any non-compliance  with FCC rules could subject us to serious penalties,
including revocation of our 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.
We have not  begun any build  out of our  licenses.  There are also  substantial
restrictions  on the  transfer  of control of C-and  F-Block PCS  licenses.  See
"Legislation and Government Regulation."

                                       -7-

<PAGE>

THERE ARE POTENTIAL HEALTH RISKS INVOLVED WITH WIRELESS HANDSETS.

          Media reports have  suggested that certain radio  frequency  emissions
from  wireless  handsets  may be linked to various  health  concerns,  including
cancer,  and may interfere with various  electronic  medical devices,  including
hearing aids and pacemakers.  Although  management does not believe RF emissions
raise  health  concerns,  concerns  over RF  emissions  may have the  effect  of
discouraging the use of wireless handsets or exposing us to potential litigation
which could have an adverse  effect on our  financial  condition  and results of
operations.

IF EAST/WEST IS REQUIRED TO RELOCATE ITS  LICENSEES,  A DELAY IN AND/OR THE COST
OF SUCH RELOCATION MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.

          For a period of up to five years after the grant of a PCS license, PCS
licensees  may be required  to share  spectrum  with  existing  fixed  microwave
licensees  operating on the F-Block  spectrum.  To secure a sufficient amount of
unencumbered  spectrum to operate our PCS networks  efficiently,  we may need to
pay to relocate  existing  microwave  paths to alternate  spectrum  locations or
transmission  technologies.  In an  effort to  balance  competing  interests  of
existing microwave users and newly authorized PCS licensees, the FCC has adopted
(i) a transition  plan to relocate  such  microwave  incumbents  and (ii) a cost
sharing plan so that if the  relocation  of an incumbent  benefits more than one
PCS license,  the  benefitting  PCS licensees are required to share the costs of
the  relocation.  The transition and cost sharing plans expire on April 4, 2005,
at  which  time  remaining  microwave  incumbents  in the PCS  spectrum  will be
responsible  for their costs to relocate to  alternate  spectrum  locations.  We
cannot  assure you that we will be able to reach timely  agreements  to relocate
these  incumbents  or that we could afford the shared costs of such  relocation.
Any delay in the relocation of such  licensees may adversely  affect our ability
to commence timely commercial operation. Furthermore,  depending on the terms of
such  agreements,  our ability to operate  our PCS  networks  profitably  may be
materially adversely affected. See "Legislation and Government Regulation."

EAST/WEST  MAY SEEK TO ACQUIRE OR  OTHERWISE  ENTER  INTO  JOINT  VENTURES  WITH
CERTAIN INDIRECTLY RELATED ENTITIES IN THE FUTURE.

          Fortunet Communications, L.P. ("Fortunet"), is an entity controlled by
Victoria Kane, the Chairman and Chief Executive Officer of the Company. Fortunet
holds 15 MHZ C-Block PCS Licenses covering approximately 784,991 POPs based upon
1990 census figures) in 3 BTAs, Tallahassee, Panama City and Ocala, Florida. Mr.
Gabelli,  a director of the Company and,  with related  parties,  a  substantial
holder of the  Company's  Class A common  stock,  is also is the Chairman of the
Board and Chief Executive Officer and a major stockholder of Lynch  Corporation,
which is a 49.9%  limited  partner  of  Fortunet  and owns the $7.8  million  of
Preferred Stock of the Company.  Rivgam  Communicators,  LLC  ("Rivgam"),  is an
entity  indirectly  owned by Gabelli  Funds,  Inc.  ("GFI"),  of which  Mario J.
Gabelli  is  the  Chairman  and  Chief  Executive   Officer  and  the  principal
stockholder.   Rivgam  holds  10  MHZ  D-  and  E-Block  PCS  Licenses  covering
approximately  14 million  POPs in BTAs,  including  markets in  Washington,  DC
(where  the  Company  also  holds  an  F-Block  PCS  license),   Baltimore,  MD,
Philadelphia, PA, Buffalo, NY and Atlantic City, NJ.

          For various  reasons we might decide to acquire  Fortunet for stock or
other  securities  (though  probably not cash) or enter into other  arrangements
with them. In addition,  or various reasons,  including  possibly more favorable
terms or requirements for raising capital,  it may be necessary or advisable for
us to enter into joint venture and/or working or other arrangements with Rivgam.
Our  ability to acquire or enter into any other  arrangements  with  Fortunet or
Rivgam may be limited by law or FCC  regulations,  and there can be no assurance
that we will be  able to  enter  into  such  arrangements  on  terms  which  are
favorable  to us or at all.  In  addition,  a  subsidiary  of Lynch  and GFI are
investors  in entities  bidding in the FCC's  reauction  of certain PCS licenses
which began in March 1999, and together with affiliates may participate directly
or  indirectly  in  other  spectrum  auctions  or  in  other  telecommunications
investments

                                       -8-

<PAGE>

THE CONTROL BY AER FORCE  COMMUNICATIONS,  INC. ("AFC") OF EAST/WEST COULD LIMIT
POTENTIAL ACQUISITIONS OF EAST/WEST.

          AFC has at least 50.1% of the voting power of the  outstanding  equity
and is entitled to elect up to three  members (the "Class B  Directors")  to the
Board,  who have votes  comprising  a total of three full votes.  It also has to
have  actual  control  of the  Company.  The  remaining  members of the Board of
Directors,  as  elected  by the  holders  of Class A common  stock,  have  votes
comprising a total of two full votes.  We cannot  assure you that we have met or
will be able to  continue  to meet the  Control  Group  Requirements.  See "Risk
Factors."

          Control by AFC has the effect of deterring  and  delaying  unsolicited
changes  in  control.  In  addition,  other  provisions  of our  certificate  of
incorporation and bylaws as well as provisions under Delaware law may discourage
potential acquisition proposals.

                      THE WIRELESS COMMUNICATIONS INDUSTRY

GROWING DEMAND FOR WIRELESS SERVICES

          Demand for  wireless  communications  has grown  rapidly over the past
decade  and  has  been  driven  by  technological   advancements  and  increased
competition.  Wireless  communication  products and  services  have evolved from
basic tone-only paging services to mass-market  cellular technology services and
are now  entering  the next  generation  of  development  with the  evolution of
wireless communication technology. Each new generation of wireless communication
products and services  has  generally  been  characterized  by improved  product
quality, broader service offerings and enhanced features.

          As of June 30,  1998,  according  to the  Cellular  Telecommunications
Industry Association,  there were 60.8 million wireless telephone subscribers in
the United States,  representing an overall  wireless  penetration rate of 22.4%
and a subscriber growth rate of 24.9% from June 30, 1997. Paul Kagan Associates,
a leading telecommunications  consultant,  estimates that the number of cellular
and PCS  wireless  service  subscribers  will  reach 98.4  million by 2001.  The
Company  believes  that a  significant  portion of the  predicted  growth in the
consumer  market for wireless  telecommunications  will result from  anticipated
declines in costs of service,  increased functional  versatility,  and increased
awareness of the productivity,  convenience and privacy benefits associated with
the services  provided by PCS  providers,  which are the first  direct  wireless
competitors of cellular  providers to offer  all-digital  mobile  networks.  The
Company also believes  that the rapid growth of notebook  computers and personal
digital assistants, combined with emerging software applications for delivery of
electronic  mail,  fax and database  searching,  will  contribute to the growing
demand for wireless service.


                                       -9-

<PAGE>
INDUSTRY OVERVIEW

          General.  Wireless  communications  networks  use a  variety  of radio
frequencies  to  transmit  voice  and  data  signals.   Wireless  communications
technologies  include  one-way  radio  applications,  such as  paging  or beeper
services,  and  two-way  radio  applications,  such as cellular  telephone,  SMR
networks  and PCS  services as well as  emerging  WCS,  LMDS and other  wireless
services.  Each  application  operates on a distinct  portion of radio frequency
spectrum.  Although the principal  wireless  voice  application to date has been
cellular telephony, PCS is developing rapidly.

          Cellular.  The cellular  telephone industry commenced in 1983 when the
FCC began granting two 20 MHZ licenses per market  throughout the United States.
In 1986, the FCC granted an additional 5 MHZ of spectrum per cellular license to
provide  a total of 25 MHZ for each  cellular  operator.  Today,  there  are two
cellular operators in each market.

          PCS. In order to  increase  competition  in  wireless  communications,
promote  improved  quality and service,  and make available the widest  possible
range of wireless services to U.S. consumers, Federal legislation was enacted in
1993  directing  the  FCC  to  allocate  radio  frequency  spectrum  for  PCS by
competitive  bidding. The FCC established PCS service areas in the United States
based upon Rand  McNally & Co.'s market  definition  of 51 major  trading  areas
("MTAs")  and 493  basic  trading  areas  ("BTAs"),  which  are  the  geographic
territories for which PCS licenses have been or will be auctioned.

          PCS licenses  differ from  existing  cellular  licenses in three basic
ways:  location of the licensed  frequencies  on the radio  spectrum,  amount of
spectrum  allocated  per license and  geographic  area  licensed.  PCS  networks
operate at higher  frequencies  (120 MHZ in the 1850-1990  MHZ  frequency  band)
compared to cellular  frequencies  (50 MHZ in the 800-900 MHZ  frequency  band).
Also, PCS licenses  permit the use of spectrum  blocks of 30 MHZ or 10 MHZ (like
those  held by the  Company)  versus  spectrum  blocks  of 25 MHZ  for  cellular
licenses. Finally, the geographic areas for PCS licenses are divided differently
than for cellular  licenses.  PCS is segmented  among 51 MTAs for A- and B-Block
licenses and 493 BTAs for other PCS licenses,  including  F-Block  licenses,  as
opposed to cellular's 306 metropolitan  statistical  areas and 428 rural service
areas.

          In March 1995, the FCC awarded two 30 MHZ licenses (the A- and B-Block
PCS  licenses) in each of the MTAs.  In May 1996,  the FCC completed the C-Block
auction, resulting in the award of one license for 30 MHZ of spectrum in each of
the BTAs. In July 1996,  the FCC  reauctioned 18 C- Block licenses for which the
high bidders failed to make initial  post-auction  down payments.  In September,
1997,  the FCC gave  C-Block  licensees  several  restructuring  options,  which
included  the right to turn  back to the FCC 15 MHZ of their 30 MHZ of  spectrum
for a reduction of debt.  Any such spectrum  returned would be  reauctioned.  In
January 1997,  the FCC  completed  the auction of D-, E- and F- Block  licenses,
which are for licenses of only 10 MHZ of spectrum in each of the BTAs.  Although
the  F-Block  licenses  were  reserved  for  Entrepreneurs,  the D- and  E-Block
licenses  are not  reserved for any  specific  class of  applicants.  The FCC is
currently  in the  process of  re-auctioning  a number C, D, E and  F-Block  PCS
licenses that were reclaimed.

                   LIMITATIONS OF CELLULAR TELEPHONE INDUSTRY

          Despite  its  widespread  availability  and  growth  to  date,  analog
cellular  services  have several  limitations,  including  inconsistent  service
quality,  lack of privacy,  limited  capacity and,  currently,  the inability to
transfer data without a modem. Most current cellular services transmit voice and
data signals over  analog-based  systems,  which use one  continuous  electronic
signal  that  varies in  amplitude  or  frequency  over a single  radio  channel
accommodating one  conversation.  In contrast,  digital networks,  including PCS
networks,  convert  voice or data signals into a stream of digits and  typically
use  voice  compression  techniques  to allow a single  radio  channel  to carry
multiple simultaneous signal transmissions.  This enhanced capacity,  along with
improvements  in  digital  protocols,  allows  PCS and  other  digital  wireless
technologies to offer greater call privacy and single number  service,  and more
robust data transmission features.

          We believe that due to relatively  high per minute airtime charges and
unpredictable  monthly bills,  there is a  price-sensitive  mass consumer market
that refrains from  subscribing to or extensively  using cellular  services.  We
believe

                                      -10-

<PAGE>

that if the mass  consumer  market were offered  significantly  lower per minute
airtime  charges  and  more  predictable  and  affordable  pricing  plans,  mass
consumers  would  increase  their  use  of  wireless  communications   services,
contributing  to a new phase of growth in the  industry.  We also  believe  that
business customers who are high- volume users of wireless communications will be
attracted to lower priced  airtime  service,  as they would realize  substantial
aggregate savings. We believe that PCS operators have the opportunity to capture
a substantial  market share due to technical and other advantages that they will
have relative to incumbent cellular operators, including (i) greater flexibility
to reduce per minute airtime usage charges,  (ii)  increased  network  capacity,
(iii)  enhanced  voice  quality  and  (iv)  the  ability  to  include   enhanced
capabilities such as advanced calling features,  data  transmissions to and from
portable computers, and short messaging and facsimile services without need of a
modem.

THE PCS SOLUTION

          PCS operators are constructing all-digital wireless telephony networks
and will compete primarily with each other and with existing cellular  telephone
operators.  PCS operators using digital  technology will have several  technical
and  capacity  related  advantages  relative to analog  cellular  providers.  We
believe that the enhanced  capacity of PCS networks  will allow PCS operators to
offer   wireless   communications   services  at  per  minute   airtime   prices
significantly  below the per minute  airtime prices  currently  being charged by
cellular operators. As a result PCS subscribers are expected to use more airtime
minutes per month than cellular  subscribers due to both lower effective airtime
pricing and  enhanced  features.  We believe  that PCS  operators  will  realize
substantial revenue growth from broad penetration and greater levels of usage.

          PCS was introduced in the United States in the Washington, D.C. MTA in
late 1995.  Despite the PCS network  having a much smaller  geographic  coverage
area than  existing  cellular  competitors  and no current  roaming  capability,
approximately  90,000  customers  subscribed for PCS services in the first seven
months of commercial  availability.  The Company believes that the experience in
international  markets where PCS has already been introduced provides additional
support for the potential  growth of PCS in the United States.  For example,  in
approximately  three years,  the two PCS  operators  in the United  Kingdom have
gained over 1.1 million  subscribers.  In Japan,  approximately  600,000 new PCS
subscriptions were activated during the first year of operations.

INDUSTRY OUTLOOK

          Industry  sources  expect the  wireless  telecommunications  market in
general and the PCS market in  particular  to grow at a rapid rate in the United
States.  As of June  30,  1998,  according  to the  Cellular  Telecommunications
Industry Association,  there were 60.8 million wireless telephone subscribers in
the United States,  representing an overall  wireless  penetration rate of 22.4%
and a subscriber  growth rate of 24.9% from June 30, 1997. Paul Kagan Associates
estimates that the number of cellular and PCS wireless service  subscribers will
reach  98.4  million  by 2001.  We  believe  that a  significant  portion of the
predicted  growth in the consumer  market for wireless  telecommunications  will
result  from  anticipated  declines in costs of  service,  increased  functional
versatility,  and  increased  awareness  of the  productivity,  convenience  and
privacy benefits  associated with the services provided by PCS providers,  which
are the  first  direct  wireless  competitors  of  cellular  providers  to offer
all-digital  mobile networks.  We also believe that the rapid growth of notebook
computers and personal  digital  assistants,  combined  with  emerging  software
applications for delivery of electronic mail, fax and database  searching,  will
contribute to the growing demand for wireless service.

DIGITAL TECHNOLOGY SELECTION

          There are three prominent  network  technologies  that provide digital
service in the 1850-1990 MHZ frequency band: CDMA, TDMA and GSM.

          PCS service areas are divided into multiple  regions  called  "cells,"
each of which  contains a base station  consisting of low-power  transmitter,  a
receiver and signaling equipment. The cells are typically configured on a grid

                                      -11-

<PAGE>

in a honeycomb-like  pattern,  although terrain factors  (including  natural and
man-made  obstructions)  and signal coverage  patterns may result in irregularly
shaped cells and overlaps or gaps in coverage.  The base station in each cell is
connected  to a base station  controller  and each base  station  controller  is
connected to a switching office by microwave, fiber optic cable, telephone wires
or a hard-wired  interface.  The switching  office controls the operation of the
wireless telephone networks for its entire service area,  performing  inter-base
station  hand-offs,  managing call delivery to handsets,  allocating calls among
the  cells  within  the  networks  and  connecting  calls to and from the  local
landline  telephone  system or to a long distance  telephone  carrier.  Wireless
service  providers have  interconnection  agreements  with various LECs and long
distance carriers, thereby integrating wireless telephone networks with landline
telecommunications   systems.   Because  two-way  wireless  networks  are  fully
interconnected  with landline  telephone  networks and long  distance  networks,
subscribers  can  receive and  originate  both local  distance  calls from their
wireless telephones.

          The signal  strength  of a  transmission  between a handset and a base
station  declines  as the  handset  moves  away  from the base  station,  so the
switching  office and the base stations  monitor the signal strength of calls in
progress.  In an analog system, when the signal strength of a call declines to a
predetermined  level,  the  switching  office may "hand off" the call to another
base  station that can  establish a stronger  signal  within the  handset.  It a
handset leaves the service area of the wireless  service  provider,  the call is
disconnected unless an appropriate  technical interface is available to hand off
the call to an adjacent system.

          There are different radio air-interface  standards  established in the
United  States for the  provisions  of PCS to multiple  users over the allocated
spectrum. The primary methods of digital wireless communications widely accepted
by the  wireless  industry  are based on TDMA and CDMA.  These  multiple  access
techniques provide for communications  over the radio channel either by dividing
it into distinct  time slots and  transmitting  user-specific  data in each time
slot (a method known as TDMA) or by assigning  specific  codes to each packet of
user data that in  conjunction  with many other users' data comprise a signal (a
method  known as  CDMA).  While  the FCC has  mandated  that  licensed  cellular
networks in the U.S. must utilize compatible analog signaling protocols, the FCC
has intentionally  avoided mandating a universal digital signaling  protocol for
PCS. Three principal  competing,  incompatible  digital wireless  standards have
been proposed by various vendors for use in PCS networks; CDMA, GSM and TDMA. An
older version of TDMA developed in Europe,  GSM  constitutes the oldest and most
extensive PCS technology in international  markets.  TDMA, while currently being
offered by cellular  providers in certain  U.S.  cities,  has, in the  Company's
opinion,  often been  associated  with poor sound  quality and numerous  dropped
calls.  CDMA is  currently  being  deployed  by a  number  of  cellular  and PCS
providers in the U.S., and also has been  implemented  on a commercial  basis in
Hong Kong and South  Korea.  CDMA  networks  are in  operation in over 40 cities
worldwide and at least 100 additional networks are currently under construction.
Although  CDMA has only  recently  been widely  deployed in the U.S.,  it is the
mostly widely  subscribed by PCS service providers and the Company believes that
CDMA  technology  will be less costly to deploy and will provide better quality,
greater capacity and more flexibility than either GSM or TDMA.

          Because these protocols  currently are incompatible with each other as
well as with analog cellular, a subscriber utilizing a GSM handset, for example,
will be unable to use his handset  when  traveling  in an area covered only by a
CDMA or TDMA based network unless he carries a dual-mode/dual-band  handset that
permits the  subscriber to use the analog  cellular  networks in that area.  For
this  reason,  the success of each  protocol  will depend both on its ability to
offer quality wireless service and on the extent to which its users will be able
to use their  handsets when roaming  outside  their  service  area.  PCS service
providers holding licenses covering 99% of the U.S. population have announced an
intent to use CDMA technology, including all of the top 100 markets in the U.S.

COMPETITION

          The wireless communications market in the United States is expected to
become increasingly competitive.  Cellular operators and other wireless services
providers  are  already  exploiting   existing  wireless   technology  and  have
established and continue to augment  wireless  telecommunications  networks that
will directly compete with many of the

                                      -12-

<PAGE>

services to be offered by us. Additionally,  other PCS operators are expected to
compete with us in each market. Our success will depend largely upon our ability
to satisfy the mass  consumer  and business  markets,  which we believe have not
been  adequately  served by  existing  cellular  service  operators.  We plan to
compete  with  cellular  and other  PCS  operators  on the  basis of  affordable
pricing, predictable monthly bills and voice transmission quality.

          Cellular Operators. The Company will compete with established cellular
telephone  service  operators  in the  markets it  intends  to enter.  Principal
cellular  providers in our markets are AT&T Wireless Services,  Inc.,  BellSouth
Mobility, Inc., GTE Mobile Communications Inc., AirTouch  Communications,  Inc.,
Centennial  Cellular Corp.,  U.S. Cellular Corp.,  Independent  Cellular Network
Inc. and Palmer  Wireless,  Inc.  Under FCC rules,  cellular  telephone  service
licensees  have enjoyed a duopoly  because the FCC only permits two licensees in
each market.  Cellular  licensees to date have faced  limited  competition  from
businesses that "resell" cellular  telephone service to customers,  but we could
face additional competition from resellers of cellular and PCS networks.

          The  introduction  of digital  transmission  technologies  to supplant
traditional  analog  cellular  systems will increase the capacity and quality of
existing  cellular  telephone  systems once deployed.  However,  we believe that
upgrading from analog to digital is expensive and that it will likely be several
years before  cellular  networks are fully converted to digital  technology.  We
expect the analog  infrastructure  to  continue  to be used for the  foreseeable
future  due in part to a lack of a  national  digital  technology  standard.  We
further  expect that many  cellular  licensees  will also  attempt to acquire an
additional 10 MHZ PCS license in the D- and E- Block  auctions in areas in which
they currently  provide  cellular  telephone  services,  as permitted by the FCC
under its PCS licensing  rules.  This would provide the cellular  operators with
greater  capacity and  potentially  allow them to add  additional  customers and
offer more advanced  services in their markets in the near term. We believe that
by providing  low-priced  services and new wireless  features on its digital PCS
networks, it will be competitive with cellular services.

          Other PCS  Operators.  We will compete with A- and B-Block  licensees,
many of whom are cellular-affiliated companies that will utilize PCS spectrum in
new markets to expand  their  national  or regional  coverage as well as C-Block
licenses.  In  September,  1997,  the FCC,  among other  options,  gave  C-Block
licensees  the right to turn back to the FCC 15 MHZ of their 30 MHZ of  spectrum
for a  reduction  of debt.  The  returned  spectrum  is in the  process of being
returned  would be  reauctioned.  Principal A-, B- and C-Block  licensees in the
Company's   markets  are  PCS  PrimeCo,   Cox  Enterprises,   American  Personal
Communications,  Nextwave,  PCS 2000 L.P.,  Alpine PCS, Inc.,  Pacific  Telesis,
Sprint  Spectrum,  Aerial Comm. and AT&T PCS, whose A- and B-Block licenses were
granted in June 1995, and whose C-Block  licenses were granted in September 1996
have all had  substantial  lead-time to develop their networks and some of these
parties,  particularly  the A- and B-Block licenses have  significantly  greater
financial, technical, marketing and other resources than ours.

          In addition,  we will compete with other F-Block  winners and with the
D- and E-Block  license  winners  (principally,  ATT Wireless PCS, Inc.,  Rivgam
Communicators,   L.L.C.,  Sprint  Comm.,   OPSCE-Galloway  Consol.,  Bell  South
Wireless, Inc. and Entertainment Unlimited) to the extent that such licenses are
not acquired by existing  cellular or A-, B- or C-Block PCS  licenses.  Although
the D- and E- and  F-Block  licenses  are for only 10 MHZ like our own  entities
can, subject to FCC's rules limiting  entities to 45 MHZ of cellular,  broadband
PCS  and SMR  spectrum  in a given  market,  can  acquire  10 MHZ  licenses  and
consolidate  them so as to design a 20 MHZ or 30 MHZ PCS system which could have
more capacity than ours.

          SMR and  "Enhanced"  SMR Services.  As a result of advances in digital
technology,  some  service  providers  have begun to design  and deploy  digital
mobile  networks,  which are  referred  to as  "Enhanced  SMR" or  "ESMR."  ESMR
networks increase the capacity of SMR system  frequencies to a level that may be
competitive with that of analog cellular  networks.  SMR service providers offer
or plan to offer fleet dispatch  services,  short  messaging,  data services and
interconnected  voice  telephony  services over wide  geographic  service areas.
Given  similar  developments  in the  deployment  of digital  technology  in the
cellular operators' networks, it is unclear at this time whether the quality and
capacity  of  SMR-based   digital  mobile  networks  will  be  able  to  compete
effectively with analog and digital cellular and

                                      -13-

<PAGE>

PCS networks.  However, Nextel has begun offering,  apparently  successfully,  a
competitive wireless service based on ESMR.

          Other Competition. The FCC's general polic in recent years has been to
promote  flexible  use of the  radio  spectrum,  which  has  resulted  in  rules
authorizing  a number  of  additional  spectrum-based  services  that may  offer
competitive wireless mobile services.  For example, among other actions, the FCC
has (i) authorized the use of the 37 and 39 GHZ bands for the provision of fixed
and mobile communications  services; (ii) created rules and assigned licenses to
permit WCS providers to provide a broad rante of fixed,  mobile,  radio location
and satellite broadcasting  services;  (iii) created rules and assigned licenses
to permit LMDS  providers to provide fixed and mobile  broadband  services;  and
authorized  MDS  providers to use their  spectrum to provide two -way  broadband
wireless  services.  The  FCC  is  expected  to  continue  making  new  spectrum
available,  and to allow for existing  allocated  spectrume to be developed,  in
fashion that will continue to expand competi  partitioning and disaggregation of
broadband PCS licenses into licenses to serve smaller service areas,  and/or use
smaller  spectrum  blocks.  The  purpose of the FCC's rule  change was to permit
existing  PCS  licensees  and new PCS entrants to have  greater  flexibility  to
determine how much spectrum and geographic  area they need or desire in order to
provide  PCS  service.  The FCC's  action  could also  result in A-, B-, C-, D-,
and/or E- Block PCS licensees in our PCS markets  partitioning or disaggregating
their licenses in a manner that provides  increased  competition to the Company.
See "Legislation and Government Regulation."

          In addition,  as a result of the  enactment of the 1996 Act,  regional
energy  utility  companies  are  expected  to enter the  wireless  and  wireline
telecommunications  markets by  leveraging  their  significant  capital  assets,
brand-name value, existing customer base and infrastructure  advantages in their
geographical  areas of  operation.  Similarly,  the  1996  Act  also  eliminates
barriers for cable  television  system  operators to provide wireline local loop
services over their existing wireline infrastructure.

                      LEGISLATION AND GOVERNMENT REGULATION

          As a recipient of licenses  acquired through the F-Block Auction,  the
Company's  ownership  structure  and  operations  are  and  will be  subject  to
substantial FCC regulation.

OVERVIEW

          FCC  Authority.  The  Communications  Act of  1934,  as  amended  (the
"Communications  Act"),  grants the FCC the  authority to regulate the licensing
and operation of all non-federal  government  radio-based services in the United
States.  The  scope  of  the  FCC's  authority  includes  (i)  allocating  radio
frequencies,   or   spectrum,   for   specific   services,   (ii)   establishing
qualifications  for  applicants  seeking  authority  to operate  such  services,
including  PCS  applicants,  (iii)  approving  initial  licenses,  modifications
thereto, license renewals, and the transfer or assignment of such licenses, (iv)
promulgating  and  enforcing  rules and  policies  that govern the  operation of
spectrum   licensees,   (v)  the  technical   operation  of  wireless  services,
interconnection  responsibilities between and among PCS, other wireless services
such as  cellular,  and  landline  carriers,  and (vi)  imposing  of  fines  and
forfeitures for any violations of those rules and  regulations.  Under its broad
oversight  authority  with  respect  to  market  entry  and the  promotion  of a
competitive  marketplace  for wireless  providers,  the FCC  regularly  conducts
rulemaking  and  adjudicatory  proceedings  to determine  and enforce  rules and
policies potentially affecting broadband PCS operations.

          Regulatory  Parity.  The FCC has  adopted  rules  designed  to  create
symmetry  in the manner in which it and the  states  regulate  similar  types of
mobile service providers. According to these rules, all "commercial mobile radio
service" ("CMRS") providers that provide  substantially similar services will be
subject to similar  regulation.  A CMRS service is one in which the mobile radio
service  is  provided  for a  profit,  interconnected  to  the  public  switched
telephone

                                      -14-

<PAGE>

networks, and made available to the public. Under these rules, providers of PCS,
SMR, and ESMR  services are subject to  regulations  similar to those  governing
cellular carriers if they offer an interconnected commercial mobile service. The
FCC announced that it would forbear from applying  several  regulations to these
services, including its rules concerning the filing of tariffs for the provision
of interstate services. Congress specifically authorized the FCC to forbear from
applying such regulation in the Omnibus Budget  Reconciliation Act of 1993. With
respect to PCS, the FCC has stated its intent to continue monitoring competition
in the PCS service marketplace. The FCC also concluded that Congress intended to
preempt  state  and  local  rate and  entry  regulation  of all CMRS  providers,
including PCS, but  established  procedures  for state and local  governments to
petition the FCC for authority to continue or initiate such regulation.

          Commercial Mobile Radio Service Spectrum  Ownership Limit. The FCC has
limited the amount of broadband CMRS spectrum (including cellular, broadband PCS
and  SMR) in which  an  entity  may  hold an  attributable  interest  in a given
geographic  area to 45 MHZ. For these  purposes only PCS and other CMRS licenses
are attributed to an entity where its investments  exceed certain  thresholds or
the  entity is an  officer or  director  of a  broadband  PCS,  cellular  or SMR
licensee. Thus, entities with attributable interests in cellular licenses (which
are for 25 MHZ) in certain  markets cannot hold more than 20 MHZ of PCS spectrum
in the same markets.  The Company's  ability to raise capital from entities with
attributable  broadband CMRS interests in certain  geographic areas is likely to
be limited by this restriction.


          Other FCC  Requirements.  The FCC had been  conducting  rulemakings to
address  interconnection  issues among CMRS  carriers and between CMRS and LECs.
These  proceedings  were  significantly   affected  by  the  1996  Act  and  FCC
rulemakings  conducted  pursuant to the 1996 Act.  See  "--1996  Act" and "--FCC
Interconnection Proceedings."

          The FCC has adopted rules that prohibit  broadband  PCS,  cellular and
certain  SMR  licensees  from  unreasonably  restricting  the  resale  of  their
services.  The FCC has determined that the  availability of resale will increase
competition  at a faster pace by allowing new  entrants to the  wireless  market
quickly  through  the  resale  of their  competitors'  services  while  they are
building out their own facilities.  This  prohibition will expire on November 4,
2002.  Additionally,  the FCC requires such carriers to provide  manual  roaming
service  to  subscribers  of  other  such  carriers,   through  which  traveling
subscribers  of other  carriers  may make calls after  establishing  a method of
payment with a host carrier.

          The FCC has revised its rules to permit CMRS operators,  including PCS
licensees,  to use their assigned spectrum to provide fixed local loop and other
services on a co-primary basis with mobile  services.  The FCC is continuing its
rulemaking  proceeding to determine the extent to which such fixed services fall
within the scope of CMRS regulation.

          The FCC has  adopted  requirements  for CMRS  providers  to  implement
various enhanced 911 capabilities between April 1998 and October 2001. FCC rules
also require CMRS  providers to meet several  number  portability  requirements,
including  enabling calls from their networks to be delivered to ported wireline
numbers. CMRS providers must offer long-term service provider number portability
in the 100 largest MSAs, including the ability to support nationwide roaming, by
November 24, 2002.

          In addition, the Communications Assistaance for Law Enforcement Act of
1994 ("CALEA")  requires all  telecommunications  carriers,  including  wireless
carriers,  as of June 30,  2000,  to ensure that their  equipment  is capable of
permitting  the   government,   pursuant  to  a  court  order  or  other  lawful
authorization,  to intercept any wire and electronic  communications  carried by
the carrier to or from its  subscribers  and to access certain  call-identifying
information that is reasonably  available to carriers.  Although final standards
have yet to be  promulgated,  compliance  with the  requirements  of CALEA could
impose  significant  additional  direct and/or indirect on us and other wireless
carriers.

                                      -15-

<PAGE>
          The FCC has adopted new  guidelines  and  methods for  evaluating  the
effects of  radiofrequency  emissions  from  transmitters  including  PCS mobile
telephones and base stations. The guidelines, which are generally more stringent
than previous requirements, were effective immediately for hand-held devices and
otherwise became effective January 1, 1997.

          Other Federal  Regulations.  Wireless  networks are subject to certain
Federal  Aviation  Administration  and FCC  guidelines  regarding  the location,
lighting and construction of transmitter towers and antennas.  In addition,  the
FCC has authority to enforce  certain  provisions of the National  Environmental
Policy Act as they would apply to the Company's facilities.  The Company intends
to  use  common  carrier  point-to-point   microwave  and  traditional  landline
facilities  to connect base station  sites and to link them to their  respective
main switching  offices.  These  microwave  facilities  have  historically  been
separately licensed by the FCC on a first-come, first-served basis (although the
FCC has proposed to auction  certain such  licenses) and are subject to specific
service rules.

          Wireless  providers  also must  satisfy a variety of FCC  requirements
relating  to  technical  and  reporting  matters.  One such  requirement  is the
coordination  of  proposed   frequency  usage  with  adjacent   wireless  users,
permittees  and  licensees  in order to avoid  electrical  interference  between
adjacent  networks.   In  addition,   the  height  and  power  of  base  station
transmitting  facilities  and the type of  signals  they emit  must fall  within
specified parameters.

          State and Local  Regulation.  The scope of state regulatory  authority
covers such matters as the terms and conditions of interconnection  between LECs
and wireless  carriers under FCC oversight,  customer  billing  information  and
practices,   billing  disputes,   other  consumer  protection  matters,  certain
facilities  construction issues,  transfers of control, the bundling of services
and equipment and  requirements  relating to making capacity  available to third
party carriers on a wholesale basis. In these areas,  particularly the terms and
conditions of interconnection  between LECs and wireless providers,  the FCC and
state regulatory  authorities share regulatory  responsibilities with respect to
interstate and intrastate issues, respectively.

          The FCC and a number of state  regulatory  authorities  have initiated
proceedings or indicated their  intention to examine access charge  obligations,
mutual compensation  arrangements for interconnections between LECs and wireless
providers, the pricing of transport and switching facilities provided by LECs to
wireless providers,  the implementation of "number  portability" rules to permit
telephone customers to retain their telephone numbers when they change telephone
service  providers,  and  alterations  in the  structure  of  universal  service
funding, among other matters.

          Proceedings with respect to the foregoing policy issues before the FCC
and  state  regulatory  authorities  could  have  a  significant  impact  on the
competitive  market  structure  among wireless  providers and the  relationships
between wireless providers and other carriers.

GENERAL PCS REGULATIONS

          In June 1994 the FCC  allocated  spectrum for  broadband  PCS services
between the 1850 to 1990 MHZ bands.  Of the 140 MHZ  available for PCS services,
the FCC created six separate  blocks of spectrum  identified  as the A-, B-, C-,
D-,  E- and  F-Blocks.  The A-, B- and  C-Blocks  are each  allocated  30 MHZ of
spectrum, the D-, E- and F-Blocks are allocated 10 MHZ each. For each block, the
FCC adopted a 10-year PCS license term with an opportunity  to renew.  20 MHZ of
spectrum within the PCS band is reserved for unlicensed use.

          The FCC adopted a "rebuttable  presumption" that all PCS licensees are
common carriers,  subject to Title II of the  Communications  Act.  Accordingly,
each PCS licensee deemed to be a common carrier must provide services

                                      -16-

<PAGE>

upon reasonable  request and the rates, terms and conditions of service must not
be unjustly or unreasonably discriminatory.

          Structure  of PCS Block  Allocations.  The FCC defines the  geographic
contours  of the  licenses  within  each  PCS  block  based on the MTAs and BTAs
developed  by Rand  McNally & Co. The FCC awarded A- and B-Block  licenses in 51
MTAs.  The C-, D-, E- and F-Block  spectrum  were  allocated on the basis of 493
smaller BTAs. In addition,  there are spectrum aggregation caps on PCS licensees
limiting them to 45 MHZ of broadband  CMRS spectrum  (e.g.,  no more than one 30
MHZ PCS license and one 10 MHZ license) in any given market.

          All but  three  of the 102  total  A-Block  licenses  and all  B-Block
licenses  were  auctioned  in 1995.  The three  A-Block  licenses  were  awarded
separately pursuant to the FCC's "pioneer's  preference"  program. The auctioned
A- and B- Block licenses were awarded in June 1995. The C- and F-Block spectrums
are reserved for Entrepreneurs.  See "--F-Block  License  Requirements." The FCC
completed  its auction for C-Block  licensees in May,  1996 and  reallocated  18
C-Block licenses on which initial auction winners  defaulted in a reauction that
ended in July 1996.  The FCC  completed  its auction for the D-, E-, and F-Block
licenses in January 1997.

          In  December  1996 the FCC  adopted  rules  permitting  broadband  PCS
carriers to  partition  any service  areas  within  their  license  areas and/or
disaggregate  any amount of spectrum  within their  spectrum  blocks to entities
that meet the eligibility  requirements for the spectrum blocks.  The purpose of
the FCC's rule change was to permit  existing PCS licensees and new PCS entrants
to have greater  flexibility to determine how much spectrum and geographic  area
they need or desire in order to  provide  PCS  service.  Thus,  A-,  B-, D-, and
E-Block  licensees may sell or lease  partitioned or  disaggregated  portions of
their  licenses  at any  time to  entities  that  meet the  minimum  eligibility
requirements  of  the  Communications  Act.   Entrepreneur  (C-  and  F-)  Block
licensees,  such  as  the  Company,  may  only  sell  or  lease  partitioned  or
disaggregated portions of their licenses to other qualified entrepreneurs during
the first five years of their license terms.  Thereafter,  if Entrepreneur Block
licensees  partition or  disaggregate  to  non-entrepreneurs,  they must repay a
proportional share of the outstanding balance on their installment  payments and
a share of any bidding credits that they received.

TELECOMMUNICATIONS ACT OF 1996

          On February 8, 1996, the President signed the  Telecommunications  Act
of  1996  (the  "1996  Act"),   which  effected  a  sweeping   overhaul  of  the
Communications Act of 1934 (the  "Communication  Act"). In particular,  the 1996
Act  substantially  amended Title II of the  Communications  Act,  which governs
telecommunications  common  carriers.  The policy  underlying  this  legislative
reform  was the  opening  of the  telephone  exchange  service  markets  to full
competition.  The 1996 Act makes all state  and local  barriers  to  competition
unlawful,  whether they are direct or  indirect.  It directs the FCC to initiate
rulemaking   proceedings  on  local  competition  matters  and  to  preempt  all
inconsistent  state  and  local  laws and  regulations.  The  1996 Act  requires
incumbent   wireline  LECs  to  open  their  networks  to  competition   through
interconnection and access to unbundled network elements and prohibits state and
local barriers to the provision of interstate and intrastate  telecommunications
services.

          The 1996 Act prohibits state and local  governments from enforcing any
law, rule or legal  requirement  that prohibits or has the effect of prohibiting
any person from providing interstate or intrastate  telecommunications services.
States  retain  jurisdiction  under  the  1996 Act to adopt  laws  necessary  to
preserve  universal  service,  protect  public  safety and  welfare,  ensure the
continued  quality of  telecommunications  services and  safeguard the rights of
consumers.

          Implementation  of the  provisions of the 1996 Act will be the task of
the FCC, the state public utility commissions and a joint  federal-state  board.
Much of the  implementation  of the  1996  Act is being  completed  in  numerous
rulemaking proceedings with short statutory deadlines. These proceedings address
issues and  proposals  that were  already  before the FCC in pending  rulemaking
proceedings  affecting  the  wireless  industry as well as  additional  areas of
telecommunications  regulation  not  previously  addressed  by the  FCC  and the
states.


                                      -17-

<PAGE>
          Some specific  provisions of the 1996 Act which are expected to affect
wireless providers are summarized below:

          Expanded  Interconnection  Obligations:  The  1996 Act  establishes  a
general  duty  of  all  telecommunications   carriers,   including  F-Block  PCS
licensees, to interconnect with other carriers, directly or indirectly. The 1996
Act  also  contains  a  detailed  list  of  requirements  with  respect  to  the
interconnection  obligations of LECs. These  "interconnect"  obligations include
resale,  number  portability,   dialing  parity,  access  to  rights-of-way  and
reciprocal compensation.

          LECs designated as "incumbents"  (i.e., those providing landline local
exchange telephone service at the time the 1996 Act was adopted) have additional
obligations including: to negotiate in good faith; to interconnect on terms that
are  reasonable  and  non-discriminatory  at any  technically  feasible point at
cost-based  rates (plus a reasonable  profit);  to provide  non-  discriminatory
access to facilities and network  elements on an unbundled  basis;  to offer for
resale at wholesale  rates any service that LECs provide on a retail basis;  and
to provide actual  co-location  of equipment  necessary for  interconnection  or
access.

          The 1996 Act establishes a framework for state  commissions to mediate
and  arbitrate  negotiations  between  incumbent  LECs and  carriers  requesting
interconnection,   services  or  network  elements.  The  1996  Act  establishes
deadlines,  policy  guidelines for state commission  decision making and federal
preemption in the event a state commission fails to act.

          Review of Universal  Service  Requirements.  The 1996 Act contemplates
that interstate  telecommunications  providers,  including CMRS providers,  will
"make an equitable and  non-discriminatory  contribution" to support the cost of
providing  universal  service.  Telecommunications  providers  are to base their
contributions  on end  user  interstate  and  for  certain  programs  intrastate
revenues.

          Prohibition Against Subsidized  Telemessaging  Services.  The 1996 Act
prohibits  incumbent LECs from subsidizing  telemessaging  services (i.e., voice
mail,  voice  storage/retrieval,  live operator  services and related  ancillary
services)  from their  telephone  exchange  service or exchange  access and from
discriminating in favor of its own telemessaging operations.

          Conditions on RBOC Provision of In-Region InterLATA Services. The 1996
Act generally  requires that before engaging in landline long distance  services
in the states in which they provide  landline local exchange service referred to
as in-region interLATA services, the Regional Bell Operating Companies ("RBOCs")
must  (1)  provide  access  and  interconnection  to  one or  more  unaffiliated
competing  facilities-based providers of telephone exchange service, or after 10
months after  enactment of the 1996 Act, no such provider  requested such access
and  interconnection  more than three  months  before the RBOCs has  applied for
authority  and (2)  demonstrate  to the FCC its  satisfaction  of the 1996 Act's
"competitive checklist."

          The specific interconnection requirements contained in the competitive
checklist,  which the RBOCs must offer on a  non-discriminatory  basis,  include
interconnection  and  unbundled  access;  access to poles,  ducts,  conduits and
rights-of-way owned or controlled by the RBOCs; unbundled local loops, unbundled
transport  and  unbundled   switching;   access  to  emergency  911,   directory
assistance,  operator  call  completion  and white  pages;  access to  telephone
numbers,  databases  and  signaling  for call  routing  and  completion;  number
portability; local dialing parity; reciprocal compensation; and resale.

          The 1996 Act eliminates the previous  prohibition on RBOC provision of
out- of-region,  interLATA services and all interLATA  services  associated with
the provision of CMRS service, including in-region CMRS service.

          RBOC  Commercial  Mobile Joint  Marketing.  The RBOCs are permitted to
market jointly and sell wireless services in conjunction with telephone exchange
service,  exchange  access,  intraLATA  and  interLATA   telecommunications  and
information services.

                                      -18-

<PAGE>
          CMRS Facilities  Siting.  The 1996 Act limits the rights of states and
localities  to regulate  placement of CMRS  facilities  so as to  "prohibit"  or
prohibit  effectively  the provision of wireless  services or to  "discriminate"
among providers of such services. It also eliminates  environmental effects from
RF emissions  (provided the wireless  system complies with FCC rules) as a basis
for states and localities to regulate the placement,  construction  or operation
of wireless  facilities.  The FCC's  implementation  of these provisions and the
scope  thereof  have  neither  been  adopted by the agency nor  reviewed  by the
courts.

          Equal Access.  The 1996 Act provides  that wireless  providers are not
required to provide equal access to common  carriers for toll services.  The FCC
is authorized to require unblocked access subject to certain conditions.

          Deregulation.  The FCC is  required  to  forebear  from  applying  any
statutory   or   regulatory   provision   that   is  not   necessary   to   keep
telecommunications  rates and terms reasonable or to protect consumers.  A state
may not apply a  statutory  or  regulatory  provision  that the FCC  decides  to
forebear from applying. In addition,  the FCC must review its telecommunications
regulations every two years and change any that are no longer necessary.

FCC INTERCONNECTION PROCEEDINGS

          In August 1996 the FCC adopted rules to implement the  interconnection
provisions of the 1996 Act. In its  interconnection  order,  the FCC  determined
that CMRS-to-CMRS  interconnection  may be accomplished  indirectly  through the
interconnection  of each CMRS provider to an incumbent  LEC's  network.  The FCC
determined  that  LECs  are  required  to  enter  into  reciprocal  compensation
arrangements  with all CMRS providers for the transport and  termination of LEC-
originated traffic.  Additionally, the FCC established default "proxy" rates for
reciprocal  compensation,  interconnection  and unbundled network elements to be
used unless or until a state  develops  rates for these items based on the Total
Element Long Run Incremental Cost  ("TELRIC").  The proxy rates for CMRS- to-LEC
interconnection  would result in  significant  savings when  compared with rates
that CMRS providers, principally cellular carriers, have been paying to LECs.

          In July 1997 the U.S. Court of Appeals for the Eighth Circuit,  acting
on consolidated petitions for review of the FCC's interconnection order, vacated
the rate-related portions of the order. The court found that the FCC was without
jurisdiction to establish pricing  regulations  regarding  intrastate  telephone
service.

          On January 25, 1999, the Supreme Court  reversed the Eighth  Circuit's
ruling, and held, among other things,  that the FCC has general  jurisdiction to
implement the local competition provisions of the 1996 Act. Although the Supreme
Court affirmed the FCC's  authority to develop  pricing  guidelines,  it did not
evaluate the FCC's TELRIC  methodology,  and has remanded the case to the Eighth
Circuit  for  further  proceedings.  There  will also be  additional  remand and
related proceedings at the FCC. It is not possible at this time to determine the
final  outcome of the Eighth  Circuit or FCC remand  proceedings,  or the effect
that such proceedings will have on the Company or on CMRS providers generally.

          The portions of the FCC's  interconnection  order that are not related
to pricing  issues have gone into  effect.  In  addition to the federal  circuit
court,  several  parties  have  petitioned  the FCC for  reconsideration  of its
decision.  It is not  possible  to  determine  the  final  outcome  of the court
proceedings or the petitions for reconsideration or the effect such outcome will
have on CMRS carriers, including the Company.

RELOCATION OF INCUMBENT FIXED MICROWAVE LICENSEES

          In an effort to balance the competing  interests of existing microwave
users and newly authorized PCS licensees in the spectrum  allocated for PCS use,
the FCC has adopted (i) a transition plan to relocate fixed microwave  operators
that  currently are operating in the PCS spectrum,  and (ii) a cost sharing plan
so that if the  relocation of an incumbent  benefits more than one PCS licensee,
the benefitting PCS licensees will help defray the costs of the relocation.  PCS
licensees will only be required to relocate fixed  microwave  incumbents if they
cannot share the same spectrum.  The transition and cost sharing plans expire on
April 4, 2005,  at which time  remaining  incumbents in the PCS spectrum will be
responsible for their costs to relocate to alternate spectrum locations.

          Relocation generally involves a PCS operator compensating an incumbent
for costs  associated with system  modifications  and new equipment  required to
move to alternate,  readily available spectrum. This transition plan allows most
microwave  users  to  operate  in the  PCS  spectrum  for a  two-year  voluntary
negotiation period and an additional

                                      -19-

<PAGE>

one-year mandatory  negotiation  period. For public safety entities dedicating a
majority of their system  communications for police,  fire, or emergency medical
service  operations,  the voluntary  negotiation  period is three years. The FCC
currently is considering whether to shorten the voluntary  negotiation period by
one year.  Parties unable to reach agreement within these time periods may refer
the  matter  to the  FCC for  resolution,  but the  existing  microwave  user is
permitted to continue its operations until final FCC resolution of the matter.

          The FCC's  cost-sharing  plan allows PCS licensees that relocate fixed
microwave  links outside of their license areas to receive  reimbursements  from
later-entrant PCS licensees that benefit from the clearing of their spectrum.  A
non-profit  clearinghouse  will be  established  to  administer  the FCC's cost-
sharing plan.

F-BLOCK LICENSE REQUIREMENTS

          When the FCC allocated  spectrum to PCS, it designated  the F-Block as
an  "Entrepreneurs'  Block." FCC rules  require  F-Block  Entrepreneurs  to meet
various  qualifications to hold F-Block licenses or to receive certain financing
preferences.  Among these are: (i) the various structural requirements governing
equity  investments,  including the Entrepreneurs  Requirements,  Small Business
Requirements and Control Group Requirements,  all of which apply specifically to
Entrepreneurs,  and  the  Foreign  Ownership  Limitations,  which  apply  to all
communications   entities  governed  by  the  FCC;  (ii)  transfer  restrictions
limiting,  among other  things,  the sale of F-Block  licenses;  and (iii) other
ongoing   requirements  that  mandate  network  build-out  schedules  and  limit
cross-ownership of cellular and other wireless investments.  The Company was the
winning bidder for 5 licenses in the F-Block  Auction.  The FCC also  determined
that  Entrepreneurs  that qualify as a Very Small  Business would be eligible to
receive a 25% bidding credit and a F-Block Loan from the federal  government for
80% of the dollar  amount of their  winning  bids in the  F-Block  Auction.  The
Government Financing provided to the Company is F- Block Loans. See "Description
of Certain  Indebtedness." 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 FCC's  qualifications  or requirements,  and
the failure to do so would have a material  adverse  effect on the Company.  See
"Risk Factors"

STRUCTURAL REQUIREMENTS

          Entrepreneurs  Requirements.  In order to hold a F-Block  license,  an
entity must: (i) meet the Entrepreneurs  Revenues Limit by having less than $125
million in gross revenues and (ii) meet the Entrepreneurs  Asset Limit by having
less  than  $500  million  in total  assets  (excluding  the  value  of  C-Block
licenses).  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 Short Form. For at least
five years after winning a 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 to enter
the  F-Block  Auction.  If the FCC were to  determine  that the  Company did not
satisfy the Entrepreneur 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.   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. See "Risk Factors"


                                      -20-

<PAGE>
          Small Business  Requirements.  An entity that meets the  Entrepreneurs
Requirements may also receive certain  preferential  financing terms if it meets
the Small Business  Requirements.  These preferential  financing terms include a
15% bidding credit for Small  Businesses and a 25% Bidding Credit for Very Small
Businesses (such as the Company) and the ability to make quarterly interest-only
payments  on its F-Block  Loan for the first two years of the license  term (for
Very  Small  Businesses).  To meet the Small  Business  or Very  Small  Business
Requirements, a licensee must have had annual average gross revenues of not more
than $40 million or $15  million,  respectively,  for the three  calendar  years
preceding  the date it filed its Short Form. In  calculating a licensee's  gross
revenues for purposes of the Small and 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 Bidding  Credit.  If the FCC were to  determine  that the  Company  does not
qualify as a Very Small Business,  the Company would, at a minimum, be forced to
repay the portion of the Bidding  Credit to which it was not entitled.  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. See "Risk Factors"

          Control Group  Requirements.  If a F-Block  licensee meets the Control
Group  Requirements,  the FCC excludes  certain  assets and  revenues  from such
licensee's total revenues and assets,  making it easier for the licensee to meet
the Entrepreneurs Requirements and the 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 the Qualifying Investor
Option if its  Control  Group is  comprised  of the  following:  (i)  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
Control  Group  Members  that hold at least 10% of the  equity  interest  in the
F-Block licensee.  Additional Control Group Members must be either: (a) the same
Qualifying  Investors  in 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 hold any of the licensee's
equity  interest  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.  See
"Description  of Capital Stock." 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. See "Risk Factors"

          Asset  and  Revenue  Calculation.  In  determining  whether  an entity
qualifies  as an  Entrepreneur  and/or as a 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 "passive"  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 passive investor,

                                      -21-

<PAGE>

an entity  may not own more than 25% of the  Company's  total  equity on a fully
diluted  basis,  unless the Control  Group owns at least 50.1% 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 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 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 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.

          Foreign Ownership  Limitations.  The  Communications Act requires that
non-U.S.  citizens,  their representatives,  foreign governments or corporations
otherwise subject to domination and control by non-U.S.  citizens may not own of
record or vote (i) more than 20% of the capital contribution to a common carrier
radio station directly, or (ii) more than 25% of the capital contribution to the
parent  corporation  of a  common  carrier  radio  station  licensee  if the FCC
determines  such  holding  are not within the public  interest.  Because the FCC
classifies  PCS as a common carrier  offering,  PCS licensees are subject to the
foreign ownership limits.  Congress recently eliminated restrictions on non-U.S.
citizens  serving as members on the board of directors  and officers of a common
carrier radio licensee or its parent.  The FCC also recently adopted rules that,
subject to a public interest finding by the FCC, could allow additional indirect
foreign  ownership of CMRS  companies  to the extent that the  relevant  foreign
states extend reciprocal  treatment to U.S.  investors.  The Company's Long Form
filed by the Company with the FCC after the  completion  of the F-Block  Auction
indicates  that the  Company  is in  compliance  with the FCC  foreign-ownership
rules.  However,  if the foreign  ownership of the Company were to exceed 25% in
the future,  the FCC could  revoke the  Company's  PCS  licenses or impose other
penalties.  Further,  the Company's  Certificate  of  Incorporation  enables the
Company to redeem shares from holders of common stock whose  acquisition of such
shares results in a violation of such  limitation.  The  restrictions on foreign
ownership could  adversely  affect the Company's  ability to attract  additional
equity financing from entities that are, or are owned by, non-U.S. entities. The
recent World Trade  Organization  ("WTO") agreement on basic  telecommunications
services could eliminate or loosen foreign  ownership  limitation but could also
increase the Company's competition.  Under this agreement, the United States and
other   members   of   the   WTO   committed   themselves   to   opening   their
telecommunications  markets to competition and foreign ownership and to adopting
regulatory measures to protect competitors against  anticompetitive  behavior by
dominant telephone  companies,  effective as early as January 1, 1998. See "Risk
Factors"

TRANSFER RESTRICTIONS

          License Transfer  Restrictions.  During the first five years after the
License Grant Date, transfer or assignment of a F-Block license is prohibited to
any entity  that  fails to satisfy  the  Entrepreneurs  Requirements.  If such a
transfer occurs to an entity that does not qualify for bidding  credits,  such a
sale would be subject to payment of the  bidding  credit and the  licensee  must
adjust its  installment  payments to the FCC to effect the  bidding  credits and
payment plan  applicable  to the new entity (e.g.,  an enterprise  that is not a
Very Small  Business).  After five years,  all such transfers and assignments of
the licenses remain subject to the Unjust Enrichment Penalties.

          Unjust  Enrichment.  Any  transfer  during the full  license  term (10
years) may require certain costs and reimbursements to the government of bidding
credits  and/or  outstanding   principal  and  interest  payments  (the  "Unjust
Enrichment Penalties"). In addition, if the Company wishes to make any change in
ownership  structure  during the initial license term involving the de facto and
de jure control of the Company,  it must seek FCC approval and may be subject to
the same costs and reimbursement conditions indicated above.

                                      -22-

<PAGE>
F-BLOCK RULES

          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 its securities,
including  certain  restrictions  on ownership,  in a matter  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 licenses.  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  that 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. See "Risk Factors"

OTHER ONGOING REQUIREMENTS

          Build-Out  Requirements.  The FCC has mandated that  recipients of PCS
licenses  adhere  to a five  year  build-out  requirement.  Under  the five year
build-out requirement, all 10 MHZ PCS licensees (such as F-Block licensees) must
construct  facilities  to offer  adequate  service to at least  one-third of the
population  in their  service  area  within  five years from the date of initial
license  grants or make a showing of  substantial  service in its licensed areas
within five years of the initial  license  grants.  Service  must be provided to
two-thirds of the population within 10 years. Violation of this regulation could
result in license revocations or forfeitures or fines.

          Additional  Requirements.  As a F-Block licensee,  the Company will be
subject to certain  restrictions that limit,  among other things,  the number of
PCS  licenses  it may  hold  as  well as  certain  cross-ownership  restrictions
pertaining to cellular and other wireless investments.

          Penalties for Payment  Default.  In the event that the Company were to
become unable to meet its obligations  under the Government  Financing,  the FCC
could in such  instances  reclaim  some or  possibly  all of the  Company's  PCS
licenses,  reauction them, and subject the Company to a penalty comprised of the
difference  between the price at which it acquired its license and the amount of
the winning bid at reauction, plus an additional penalty of three percent of the
lesser of the subsequent  winning bid and the defaulting bidders bid amount. See
"Risk Factors"

ITEM 2. PROPERTIES

          The Company has no properties except 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

          Not applicable.

                                      -23-
<PAGE>
                                     PART II

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



                 PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

          The  Class A common  stock is traded on the OTC  Bulletin  Board.  The
following  table  sets  forth the high and low bid prices for the Class A common
stock,  for the  periods  indicated,  as  reported  by  published  sources.  All
quotations reflect  inter-dealer  prices,  without retail mark-up,  mark-down or
commission, and may not represent actual transactions.

                                         LOW                        HIGH
1998 FISCAL YEAR
First Quarter                          $0.609375                   $1.25
Second Quarter                          1.00                        2.50
Third Quarter                           1.859375                    3.00
Fourth Quarter                          0.75                        1.625

          On March 18, 1999, the closing sales price of the Class A common stock
on the OTC Bulletin Board was $1.75.

          At  March  30,  1999  the  records  of the  Company's  transfer  agent
indicated that there were 990 holders of record of the Company's  Class A Common
Stock.

          At March 30, 1999, 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.

          We have not  declared  any cash  dividend on our Class A common  stock
since  inception.  We do not  anticipate  that we will pay cash dividends in the
foreseeable  future.  Under the  provisions  of our Preferred  Stock,  we cannot
declare  dividends  on our Class A or Class B common  stock  until  all  accrued
dividends  on our  Preferred  Stock are paid.  We  currently  plan to retain any
earnings to provide for our development and growth.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN
        OF OPERATION

          We are a  development  stage  company with no  significant  results of
operations to date. We hold 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. 80% of the cost of the licenses (or $15.2
million) was financed  over ten years by the FCC, with only payments of interest
during the first two years after award of the licenses.

          We believe that our PCS licenses have substantial potential.  However,
we have not yet  adopted  a  business  plan or  determined  how to  finance  our
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,  we have not yet  determined  whether to develop  our PCS
licenses  on its own,  joint  venture  our  licenses  with  other  PCS  wireless
telephone  licenses  holders or operators or others,  or sell some or all of our
licenses. We expect to continually evaluate these factors and to adopt a plan or
plans  once  the  financing,  regulatory  and  market  aspects  of PCS are  less
uncertain. Our principal expense to date has been interest, including commitment
fees, plus minor administrative expenses.


                                      -24-

<PAGE>
          Unless we sell our PCS business or joint venture our PCS licenses with
an entity that has the capacity to provide  substantial  funds,  we will need to
raise  substantial  capital to fund our installment  payments to the FCC and the
build out of our PCS licenses.  Under the government financing,  we have to make
payments of approximately  $2.3 million in 1999 including an interest payment of
$337,658  that was due on October 31,  1998,  $2.6  million in the year 2000 and
$2.4 million for the next 8 years.

          The following are the scheduled  interest and principal  payments over
the next two years:


                       Due Date                             Amount
             April 29, 1999                                   $388,307(1)
             May 1, 1999                                       354,541(2)
             April 30, 1999                                    337,658
             July 31, 1999                                     534,641
             October 31, 1999                                  706,566
                                                            $2,321,713

             January 31, 2000                               $  706,566
             April 30, 2000                                    706,566
             July 31, 2000                                     605,879
             October 31, 2000                                  605,879
                                                            $2,624,890

          Under FCC rules,  scheduled  payments may be delayed for up to 90 days
upon  payment of a 5% penalty and for 90-180 days upon payment of a 15% penalty.
The  April 29,  1999  payment  may not be  further  delayed  and the May 1, 1999
payment may only be delayed for an additional 90 days. We do not have a reliable
estimate  of the cost to  build  out our PCS  licenses  but it is  likely  to be
substantial.

          We will have to raise funds shortly in order to make interest payments
on the  government  financing  and for working  capital  and  general  corporate
purposes.  We believe that we will be required to borrow  additional  funds from
certain of our directors in order to meet our April 29, 1999 payment  obligation
under the same terms and  provisions of prior loans received from our directors.
The report of our independent  auditors with respect to our financial statements
as of December 31, 1998 and 1997, for the years ended December 31, 1998 and 1997
and the period from July 26, 1996  (inception)  to December 31, 1998  contains a
paragraph indicating that substantial doubt exists as to our ability to continue
as a going concern. Among the factors cited by the auditors as raising

--------
(1)   Scheduled  payment was $337,658,  which was due on October 31, 1998. Above
      amount  includes a 15%  penalty,  as provided in the loan  documents,  for
      payments made between 90-180 days after the due date.

(2)   Scheduled  payment was $337,658,  which was due on January 31, 1998. Above
      amount  includes a 5%  penalty,  as provided  in the loan  documents,  for
      payments made within 90 days after due date.


                                      -25-

<PAGE>
substantial doubt as to our ability to continue as a going concern is that, with
respect to the periods covered, we have incurred losses since inception and have
not yet adopted a business plan or determined  how to finance our operations and
will need to obtain capital in order to fund our interest and principal  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, 1998 was $15,466,177, compared to shareholders equity of $22,860. During the
period from July 26, 1996  (inception)  to December 31, 1998, we had no revenues
or operating  profits and cannot  predict when the Company may have any revenues
or operating profits.

          In April 1997, the FCC suspended  interest  payments on the government
financing through March 31, 1998. On March 24, 1998, the FCC indicated that such
interest will be resumed not earlier than 90 days  subsequent to the publication
in the Federal  Register of the Order on  Reconsideration.  Such publication was
made on April 8, 1998 requiring  cumulative  suspended  interest  payments to be
made in eight  quarterly  installments  of $100,686  each  beginning on July 31,
1998.  Also on that date,  the accrued  interest of $311,324,  from the date the
interest suspension ended, March 31, 1998, until July 31, 1998. Payment was made
on October 28, 1998, within the 90-day non-delinquency  period, in the amount of
$432,611  comprising  accrued  interest of $412,010 and a 5% penalty of $20,600.
Accordingly,  during  the  remainder  of  1998,  we were  required  to  issue an
additional  interest  payment of $236,972 plus  suspended  interest of $100,686.
Total interest  payments  required for year 1998 amounted to $749,688.  Interest
payments  for 1999,  are  projected  to be  $944,810  plus  quarterly  suspended
interest of $402,744 for the year.

          Management  has  elected  to defer  payment of  interest  due on loans
payable  to FCC due on October  31,  1998 in the  amount of  $337,658.  Payments
issued  within 90 days of the due date will be subject  to a 5% penalty  and 15%
penalty if paid within 90 to 180 days of the due date.

          On October  22,  1998,  the Company  borrowed  $300,000  from  certain
directors of the Company.  The loans are  evidenced by  promissory  notes in the
amount of $150,000 each to Mario J. Gabelli and T. Gibbs Kane,  Jr., which notes
bear  interest at a rate of 5.00% per year,  and which become due and payable on
the earlier of i) October 22, 1999 or ii) upon the receipt of proceeds from this
offering,  sufficient to pay the full amount of principal and interest then owed
on the notes.

YEAR 2000 COMPLIANCE

          We have considered the potential impact of the year 2000 on our future
business and  operations.  Any programs that  recognize a date using "00" as the
year 1900 rather than the year 2000 could  result in errors or system  failures.
If we decide to develop  our PCS  licenses,  we may utilize a number of computer
programs.  Because we currently have no operations,  we are unable to assess the
potential  impact  of the year 2000 on any  systems  we may use nor have we been
able to  complete  our  assessment  of any year 2000  issues  which  may  affect
third-parties.  We believe that the costs of addressing this issue in the future
will not have a material adverse impact on our financial  position.  However, if
the  Company  and third  parties  upon which we rely are unable to address  this
issue  in a timely  manner,  it  could  result  in a  material  financial  risk,
including  the  possibility  that we may be liable to such third  parties  for a
material failure of our systems due to year 2000 issues

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.

                                      -26-

<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 following sets forth the name, business address, present principal
occupation,   employment  and  material  occupations,   positions,   offices  or
employments  for the past  five  years  and  ages as of  March  1,  1999 for the
executive  officers  and  directors  of the  Company.  Members are the board are
elected and serve for one year terms or until their  successors are duly elected
and shall have qualified.  All executive officers serve at the discretion of the
board.

NAME                         AGE          POSITION WITH EAST/WEST*
----                         ---          ------------------------

Victoria G. Kane(1)           50          Class B Director,  Chairman  and Chief
                                          Executive Officer
T. Gibbs Kane, Jr.(1)         51          Class B Director
Mario J. Gabelli              56          Class A Director(2)
Robert E. Dolan               47          Assistant Secretary

----------------------
*        Under the Company's  Certificate of  Incorporation  each of the Class B
         Directors has one and one-half  votes and each of the Class A Directors
         has one  vote on all  matters  properly  brought  before  the  Board of
         Directors.

(1)      T. Gibbs Kane, Jr. and Victoria G. Kane are husband and wife.
(2)      One of the  two  available  Class A  Director  positions  is  currently
         vacant.

         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,  has served as Chairman,  Chief Executive Officer and
Chief Investment  Officer of Gabelli Funds,  Inc. and Gabelli Asset  Management,
Inc. and their  predecessors  since  November  1976.  In  connection  with those
responsibilities,  he serves as Chairman and/or President of thirteen registered
investment companies managed by Gabelli Funds, LLC. Mr. Gabelli also serves as a
Governor of the  American  Stock  Exchange,  and  Chairman  and Chief  Executive
Officer  of  Lynch   Corporation,   a  public  company  engaged  in  multimedia,
specialized transportation and manufacturing..  Mr. Gabelli received a B.S. from
Fordham  University and an M.B.A.  from Columbia  University  Graduate School of
Business.

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

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.


                                      -27-

<PAGE>
EXECUTIVE COMPENSATION

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

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
         AND MANAGEMENT

                             PRINCIPAL STOCKHOLDERS

          The  following   table  sets  forth  certain   information   regarding
beneficial  ownership  of our common stock by (i) each person who is known by us
to own beneficially more than five percent of our common stock, (ii) each of our
officers and directors,  (iii) and all current executive  officers and directors
as a group.

<TABLE>
<CAPTION>

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

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

<S>                               <C>                   <C>           <C>                   <C>           <C>                  <C>  
Aer Force                              --                --           1,779,301             100%          1,779,301            50.1%
Communications,
Inc.(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%
Mario J. Gabelli (2)              441,184               24.9%                --               --            441,184            12.4%
Robert E. Dolan (3)                   235                --                  --               --                235             --
Elisa Gabelli (4)                 200,043               11.3%                 -                -            200,043             5.6%
All Directors and                 441,419               24.9%         1,779,301             100%          2,220,720            62.5%
Executive Officers as a
Group (3 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.
          Victoria  Kane has sole voting and  dispositive  power with respect to
          the shares  owned by AFC. 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)       Includes 261,262 shares owned directly by Mr. Gabelli (including 3,120
          shares held for the benefit of Mr. Gabelli in the Lynch 401(k) Savings
          Plan),  758 shares held by GFI,  2,000  shares  owned by a  charitable
          foundation of which Mr. Gabelli is a trustee, 70,000 shares owned by a
          limited  partnership in which Mr.  Gabelli is the general  partner and
          has a 20% interest and 107,164  shares  subject to a voting  agreement
          which  terminates  June 26, 2001 for which Mr. Gabelli has sole voting
          power. 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, NY 10580.

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

(4)       Consists of 200,043 shares held in trusts for which Ms. Gabelli is the
          trustee or  beneficiary  and for which Ms. Gabelli has sole voting and
          investment  power and 5,043  shares held by Ms.  Gabelli for which she
          holds sole  investment  power.  Ms.  Gabelli is the  daughter of Mario
          Gabelli.

                                      -28-

<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

          AFC and Lynch PCS  Corporation  F  ("LPCS"),  a  subsidiary  of Lynch,
formed a limited partnership,  Aer Force Communications B, L.P. 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 agreed to loan the partnership an additional  $11.4
million,  primarily for down-payments and to service installment payments on PCS
licenses won in the auction.

          On August 13, 1997,  East/West succeeded to the rights and obligations
of Aer Force  Communications  B, L.P. . At that  time,  AFC  received  1,779,301
shares of our Class B common  stock and LPCS  received  1,772,198  shares of our
Class A common stock.  Concurrently,  LPCS  transferred the 1,772,198  shares to
Lynch, which subsequently  transferred  1,417,048 shares to its stockholders and
355,150 shares to GFI in satisfaction  of Lynch's  obligation to share a profits
interest in LPCS's partnership interest.

          As  a  part  of  these  transactions,  AFC  and  LPCS  contributed  an
additional $125,250 and $124,750, respectively, in cash, as equity to East/West,
and LPCS  contributed  to  East/West's  capital,  $4.5  million of our  existing
indebtedness to LPCS. Our remaining indebtedness to LPCS was converted into $7.8
million of redeemable  preferred stock and LPCS's obligations to make additional
loans to East/West terminated.

          On October  22,  1998,  the Company  borrowed  $300,000  from  certain
directors of the Company.  The loans are  evidenced by  promissory  notes in the
amount of $150,000 each to Mario J. Gabelli and T. Gibbs Kane,  Jr., which notes
bear  interest at a rate of 5.00% per year,  and which become due and payable on
the earlier of i) October 22, 1999 or ii) upon the receipt of proceeds from this
offering,  sufficient to pay the full amount of principal and interest then owed
on the notes.

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       Certificate of  Incorporation  of East/West  Communications,
                    Inc.
          3.2       By-Laws of East/West Communications, Inc.
         10.1       Expenses  Agreement  dated as of July 31,  1996  among AER
                    Force   Communications   B,  L.P.,   a  Delaware   limited
                    partnership,  AER Force  Communications  Inc.,  a New York
                    corporation,  and  Lynch  PCS  Corporation  F, a  Delaware
                    corporation.


                                      -29-

<PAGE>




           10.2     Limited Partnership  Agreement of AER Force Communications
                    B, L.P.  entered into as of July 26, 1996,  by and between
                    AER Force Communications Inc., a New York corporation,  as
                    general  partner,  and Lynch PCS Corporation F, a Delaware
                    corporation, as the Initial Limited Partner.
           10.3     Loan Agreement  dated as of August 12, 1996 by and between
                    AER Force  Communications  B,  L.P.,  a  Delaware  limited
                    partnership,  and  Lynch  PCS  Corporation  F, a  Delaware
                    corporation.
          10.4      Form of Security Agreement
          10.5      Form of Installment Payment Plan Note
         *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 filed as exhibits to  Registrant's
Form S-1 filed November 25, 1997.


(B) REPORTS ON FORM 8-K

          None




                                      -30-

<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,  1998 and 1997,  and the  related
statements of operations,  changes in shareholders'  equity (deficit),  and cash
flows for the years  ended  December  31, 1998 and 1997 and the period from July
26, 1996  (inception) to December 31, 1998.  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,
1998 and 1997,  and the  results  of its  operations  and its cash flows for the
years  ended  December  31,  1998 and 1997 and the  period  from  July 26,  1996
(inception)  to  December  31,  1998,  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  and  principal  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
March 19, 1999

                                      -31-

<PAGE>

                       EAST/WEST COMMUNICATIONS, INC.

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

                                 BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                             12/31/98         12/31/97
                                                                           ----------------------------
ASSETS
Current Assets
<S>                                                                      <C>               <C>         
      Cash and cash equivalents                                          $      61,805     $    254,427
                                                                         -------------     ------------
Total current assets                                                            61,805          254,427

PCS Licenses                                                                18,957,721       18,957,721
Capitalized costs                                                            2,188,626        1,240,434
                                                                         =============     ============
Total assets                                                             $  21,208,152     $ 20,452,582
                                                                         =============     ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:  
      Accounts payable and accrued expenses                              $   1,250,939     $    654,853
      Loans from shareholders                                                  300,000                -
      Current portion of Loan from FCC                                         743,580                -
                                                                         ------------------------------
Total current liabilities                                                    2,294,519          654,853

Loan from FCC                                                               14,422,597       15,166,177
Deferred income taxes                                                          444,000          500,000

Redeemable preferred stock,  $1,000 par value; 5% cumulative
      dividends,  16,000 shares authorized, 7,800 issued and
      outstanding (liquidation value - $7,800,000)                           4,024,176        3,389,487

Shareholders' equity:
Common stock, Class A, $.0001 par value, 3,600,000 shares
      authorized, 1,772,198 shares issued and outstanding                          177              177
Common stock, Class B, $.0001 par value, 16,000,000 shares
      authorized, 1,779,301 shares issued and outstanding                          178              178
Additional paid-in capital                                                   4,949,645        4,949,645
Shareholders' deficit accumulated during development stage                  (4,927,140)      (4,207,935)

                                                                           ------------    ------------
Total shareholders' equity                                                      22,860          742,065
                                                                          -------------    ------------
Total liabilities and shareholders' equity                               $  21,208,152     $ 20,452,582
                                                                          =============    ============
</TABLE>


<PAGE>
                         EAST/WEST COMMUNICATIONS, INC.

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

                            STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                                    JANUARY 1        JANUARY 1       JULY 26, 1996
                                                                    TO DEC 31,       TO DEC 31,      (INCEPTION) TO
                                                                       1998            1997          DEC 31, 1998
                                                                    -----------------------------------------------

<S>                                                                <C>             <C>               <C>        
Interest income                                                    $    9,818      $          0      $     9,818
Interest expense, including commitment  and late fees                 (74,124)       (1,987,562)      (3,640,186)
Other expenses                                                        (76,210)          (87,607)        (163,817)
                                                                    ---------------------------------------------
          Loss before income taxes                                   (140,516)       (2,075,169)      (3,794,185)

Income tax benefit (expense)                                           56,000          (500,000)        (444,000)
                                                                    ---------------------------------------------
          Net loss                                                    (84,516)       (2,575,169)      (4,238,185)

Dividend requirement on preferred stock                              (634,689)          (54,266)        (688,955)
                                                                    ---------------------------------------------

Loss applicable to common shares                                   $ (719,205)     $ (2,629,435)     $(4,927,140)
                                                                    =============================================

Basic and diluted loss per common share                                 (0.20)            (0.74)
                                                                    ==========      ============

Number of shares used in computation                                3,551,499         3,551,499
                                                                    ==========      ============
</TABLE>

<PAGE>
                         EAST/WEST COMMUNICATIONS, INC.

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

             STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)

       FOR THE PERIOD FROM JULY 26, 1996 (INCEPTION) TO DECEMBER 31, 1998

<TABLE>
<CAPTION>

                                                                                                      LIMITED             TOTAL
                                                    ADDITIONAL                          GENERAL      PARTNERS         SHAREHOLDER'S
                                          COMMON     PAID IN            ACCUMULATED    PARTNER'S     EQUITY             EQUITY
                                          STOCK      CAPITAL              DEFICIT       EQUITY       (DEFICIT)          (DEFICIT)
                                       ---------------------------------------------------------------------------------------------
Balance at July 26, 1996
<S>                                    <C>          <C>               <C>              <C>         <C>                <C>         
      (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

         Net loss                           -                  -          (84,516)             -              -            (84,516)
Preferred dividends                         -                  -         (634,689)             -              -           (634,689)
                                         ===========================================================================================
Balance at December 31, 1998           $  355      $   4,949,645  $    (4,927,140)     $       -   $          -          $  22,860
                                         ===========================================================================================
</TABLE>

<PAGE>
                         EAST/WEST COMMUNICATIONS, INC.

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

                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                       JULY 26, 1996
                                                          JANUARY 1      JANUARY 1    (INCEPTION) TO
                                                          TO DEC 31,     TO DEC 31,      DEC 31,
                                                            1998            1997          1998
                                                         --------------------------------------------

Cash Flows from Operating Activities:
<S>                                                     <C>           <C>             <C>          
   Net Loss                                             $  (84,516)   $ (2,575,169)   $ (4,238,185)
   Adjustments to reconcile net loss to net
   cash used in operating activities:
      Deferred income tax (benefit) expense                (56,000)        500,000         444,000
      Changes in operating assets and liabilities:
         Increase in accounts payable and
             accrued expenses                               57,335          60,920         118,255
      Interest accrued, including commitment fees         (409,441)      1,975,946       3,145,005
                                                       -------------------------------------------

Net cash used in Operating Activities                     (492,622)        (38,303)       (530,925)

Cash Flows from Investing Activities:
  Deposits with FCC                                           --        10,104,228      (1,895,772)
  Purchase of PCS licenses                                    --        (1,895,772)     (1,895,772)
                                                       -------------------------------------------
Net cash provided by (used in) Investing Activities           --         8,208,456      (3,791,544)

Cash Flows from Financing Activities:
  Proceeds from shareholders' loan                         300,000                         300,000
  Proceeds from loans from the Limited
      Partner                                                 --         1,938,502      13,738,502
  Repayment of loans from the Limited Partner                 --       (10,104,228)    (10,104,228)
  Capital contributions                                       --           250,000         450,000
                                                       -------------------------------------------

Net Cash provided by (used in) Financing Activities        300,000      (7,915,726)      4,384,274

(Decrease) Increase in Cash and Cash Equivalents          (192,622)        254,427          61,805

Cash and cash equivalents, beginning of period             254,427            --              --
                                                       -------------------------------------------

Cash and cash equivalents, end of period                $   61,805    $    254,427    $     61,805
                                                       ===========================================
</TABLE>

<PAGE>

                         EAST/WEST COMMUNICATIONS, INC.

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

                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1998


NOTE 1     ACCOUNTING POLICIES:

                 DESCRIPTION OF BUSINESS:
                 East/West Communications, Inc. ("the Company") was incorporated
                 on August 13, 1997, to succeed to the rights and obligations of
                 Aer Force  Communications  B,  L.P.  ("the  Partnership").  The
                 Partnership  was  formed  in July  1996,  to bid  for  personal
                 communications   services   ("PCS")  licenses  in  the  Federal
                 Communications  Commission's  ("FCC") F-Block auction. PCS is a
                 second  generation  digital wireless  service  utilizing voice,
                 video or data  devices  that  allow  people to  communicate  at
                 anytime and virtually anywhere.  Over the past three years, the
                 FCC  auctioned  off PCS  licenses  with 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.


<PAGE>
                         EAST/WEST COMMUNICATIONS, INC.

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

                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1998

NOTE 1      ACCOUNTING POLICIES (CONTINUED):

                 DESCRIPTION OF BUSINESS (CONTINUED):
                 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.

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

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


<PAGE>
                         EAST/WEST COMMUNICATIONS, INC.

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

                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1998


NOTE 1      ACCOUNTING POLICIES (CONTINUED):

                 BASIS OF PRESENTATION (CONTINUED):
                 The Company has incurred  losses since  inception and will need
                 to obtain  capital in order to fund its interest and  principal
                 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.  Management has elected
                 to defer payment of interest due on the loan payable to the FCC
                 which was due on October  31,  1998 in the amount of  $337,658.
                 The Company intends,  to make the required  payment,  including
                 applicable  penalties  of  approximately  $390,000 on or before
                 April 29,  1999.  However,  if such  payment  is not made,  the
                 Company will forfeit its rights to the licenses.

                 Certain prior year amounts have been reclassified to conform to
                 the current year presentation.

                 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.
<PAGE>
                         EAST/WEST COMMUNICATIONS, INC.

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

                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1998


NOTE 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 (excluding penalty interest and late fees) and
                 commitment   fees  on   outstanding   loan   balances  will  be
                 capitalized.  These costs amounted to $2,188,626 and $1,240,434
                 at December 31, 1998 and 1997, respectively. Such costs include
                 $1,845,150 and $897,267 of capitalized interest at December 31,
                 1998 and 1997 respectively.  Total interest charges amounted to
                 $947,883,  $1,119,111,  and  $2,765,160  for  the  years  ended
                 December  31,  1998 and 1997 and the period  from July 26, 1996
                 (inception) to December 31, 1998, respectively.

                 The cost of the PCS licenses (including capitalized costs) will
                 be  amortized  over a  period,  consistent  with  the  industry
                 practice, which will begin when operations commence.

                 Pursuant to FCC  regulations,  license  holders are required to
                 commence  providing  service  to  one-third  or the  population
                 within  the  license  area  within  five years from the date of
                 award and  two-thirds of the  population  within ten years from
                 the date of award.  Such  licenses may only be  transferred  to
                 other  entities  that  meet the FCC  requirements  for  F-Block
                 license  holders  during the first  five  years of the  initial
                 license  term.  Transfers  of such  licenses  to  entities  not
                 meeting  such  requirements  in years  six  through  ten of the
                 initial  license term will  subject the Company to  substantial
                 unjust enrichment penalties.

                 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
                 common 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 common 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.

<PAGE>
                         EAST/WEST COMMUNICATIONS, INC.

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

                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1998


NOTE 1      ACCOUNTING POLICIES (CONTINUED):

                 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, 1998 and 1997,
                 net  deferred  tax  liabilities  represent  the tax  effect  of
                 taxable temporary differences  (pertaining to capitalized costs
                 of  approximately  $1.3 million)  which existed at the date the
                 Partnership  converted to a C-Corporation  offset,  in part, by
                 accumulated net operating losses of  approximately  $140,000 in
                 1998. The Company's net operating losses expire in 2012.

NOTE 2      RELATED PARTIES:
                 On October 22, 1998, the Company borrowed $300,000 from certain
                 directors of the  Company.  The loans in the amount of $150,000
                 from Mario J. Gabelli and T. Gibbs Kane,  Jr., bear interest at
                 a rate of 5.00% per year,  and  become  due and  payable on the
                 earlier  of i)  October  22,  1999 or ii) upon the  receipt  of
                 proceeds from an offering of rights (the "Rights  Offering") to
                 purchase  shares of Class A Common Stock  sufficient to pay the
                 full amount of principal  and interest  then owed on the notes.
                 The  Company  plans to offer  rights  in  connection  with such
                 Rights Offering to existing shareholders of the Company's Class
                 A and Class B Common Stock during 1999 (See Note 8).

NOTE 3     PARTNERSHIP AGREEMENT:
                 The Partnership was formed in July 1996 to bid for PCS licenses
                 in  the  "F-Block"  auction.  The  General  Partner  originally
                 contributed  $100,200  to the  Partnership  for a 50.1%  equity
                 interest  and the Limited  Partner  contributed  $99,800 to the
                 Partnership for a 49.9% equity interest. Under the terms of the
                 Partnership  Agreement all deductions  with respect to interest
                 expense and  commitment  fees were allocated 99% to the Limited
                 Partner  and 1% to the  General  Partner.  All  profits  of the
                 Partnership were allocated 99% to the Limited Partner and 1% to
                 the  General  Partner  until  all the  aggregate  amount of all
                 profits  allocated to the Limited  Partner and General  Partner
                 equal the  deductions  with  respect to  interest  expense  and
                 commitment fees.

<PAGE>
                         EAST/WEST COMMUNICATIONS, INC.

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

                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1998


 NOTE 3     PARTNERSHIP AGREEMENT (CONTINUED):
                 Subsequently,  all profits and losses were to be  allocated  to
                 the Limited  Partner and General Partner in proportion to their
                 respective  interests,  49.9%  and  50.1%,   respectively.   On
                 December 4, 1997, the Partnership was terminated.

NOTE 4     LONG TERM DEBT:
                 Long term debt at December  31,  1998 and 1997  consists of 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
                        Less amounts due within one year      (743,580)
                                                         -------------
                                                         $  14,422,597
                                                         -------------

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

                 All of the FCC  financing  bears  interest  at 6.25% per annum.
                 Quarterly  interest  payments of $236,972 were required for the
                 first two years of the  license  (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 through March 31,
                 1998. On March 24, 1998,  the FCC indicated  that such interest
                 payments will be resumed not earlier that 90 days subsequent to
                 publication   in  the   Federal   Register  of  its  "Order  on
                 Reconsideration of the Second Report and Order." Such order was
                 published on April 8, 1998,  requiring the  suspended  payments
                 (aggregating $805,488) to

<PAGE>
                         EAST/WEST COMMUNICATIONS, INC.

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

                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1998


NOTE 4     LONG TERM DEBT (CONTINUED):
                 be made in eight quarterly  installments of $100,686  beginning
                 in July 1998, plus regular interest  payments for the period of
                 March  31,  1998 to July 31,  1998,  of  $311,324,  subject  to
                 deferral  of up to a  maximum  180  days.  Payment  was made on
                 October 28, 1998, within the 90-day non-delinquency  period, in
                 the amount of $432,610  comprising accrued interest of $412,010
                 and a 5% penalty fee of $20,600.

                 Management  has elected to defer payment of interest due on the
                 loan  payable to the FCC,  which was due on October 31, 1998 in
                 the amount of $337,658. Payments made within 90 days of the due
                 date will be subject to a 5% penalty  which  increases to a 15%
                 penalty  if paid  within 90 to 180 days of the due date.  A 15%
                 interest penalty has been accrued in the financial  statements.
                 The   Company   intends  to  make  the   required   payment  of
                 approximately  $390,000 (including  applicable penalties) on or
                 before April 29,1999. However, if such payment is not made, the
                 Company will forfeit its rights to the licenses.

                 Aggregate  principal  maturities of long-term  debt for each of
                 the  next  five  years  are as  follows:  1999--$.744  million,
                 2000--$1.558  million,   2001--$1.658   million,   2002--$1.764
                 million and 2003--$1.877 million.

 NOTE 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.

<PAGE>
                         EAST/WEST COMMUNICATIONS, INC.

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

                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1998


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

 NOTE 6     REDEEMABLE PREFERRED STOCK :
                 The Company is  authorized  to issue 16,000 shares of Preferred
                 Stock and at December 31, 1998 and 1997 had  outstanding  7,800
                 shares of  Preferred  Stock,  par value  $1,000 per share.  The
                 Preferred  Stock (i) is entitled to  preferred  dividends at an
                 annual rate of five (5) shares of  additional  Preferred  Stock
                 for each one hundred  shares of  Preferred  Stock  outstanding,
                 (ii) has no voting  rights except as provided by law, and (iii)
                 is entitled  to be  redeemed at $1,000 per share (plus  accrued
                 and unpaid  dividends)  on the earlier of (i) 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  under  certain  circumstances.  The
                 difference  between the  carrying  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  account in the balance
                 sheets and the dividend  requirement on preferred  stock in the
                 statements of operations.

NOTE 7           LEGAL MATTERS:
                 The  United   States   Department   of  Justice   initiated  an
                 investigation  during 1997 to determine  whether there had 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,  had 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.

<PAGE>
                         EAST/WEST COMMUNICATIONS, INC.

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

                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1998


NOTE 8      RIGHTS OFFERING:
                 The Company has announced that it intends to offer,  at no cost
                 to the holders of its Class A Common Stock, a  non-transferable
                 right to purchase up to 443,050 shares of Class A Common Stock.
                 The rights  entitle  shareholders  to purchase  one  additional
                 share of Class A Common  Stock for every four shares of Class A
                 Common Stock held @ $1.50 per share.  In addition,  the Company
                 intends  to sell  444,825  shares of Class B Common  Stock at a
                 price of $1.50 per share to the current owners of the Company's
                 Class B Common Stock.

                 The Company  intends to file a Registration  Statement with the
                 Securities  and  Exchange  Commission  ("SEC")  in  April  1999
                 commencement  of the proposed  sale will be as soon as possible
                 after the Registration  Statement is declared  effective by the
                 SEC.
<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
31st  day of  March,  1999 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 her 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, Chief    March 31, 1999
----------------------------    Executive Officer
Victoria Kane                   and Director

/s/ T. Gibbs Kane, Jr.
----------------------------    Director                        March 31, 1999
T. Gibbs Kane, Jr.

/s/ Mario J. Gabelli
----------------------------    Director                        March 31, 1999
Mario J. Gabelli


                                      -31-