<PAGE>

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                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                        ______________________________

                                   FORM 10-K

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
     ACT OF 1934

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
     EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM________ TO_________

FOR THE YEAR ENDED DECEMBER 31, 1997            COMMISSION FILE NUMBER 000-21091
                                    ____________

                         ADVANCED RADIO TELECOM CORP.
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


           DELAWARE                                            52-1869023
  (STATE OR OTHER JURISDICTION                              (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION)                          IDENTIFICATION NO.)

       500 108TH AVENUE, NE
            SUITE 2600
        BELLEVUE, WASHINGTON                                     98004
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                       (ZIP CODE)


                                (425) 688-8700
             (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
                                 _____________

          Securities registered pursuant to Section 12(b) of the Act:

                                         NAME OF EACH EXCHANGE
           TITLE OF EACH CLASS            ON WHICH REGISTERED
          ---------------------          ---------------------
                 None                             None

          Securities registered pursuant to Section 12(g) of the Act:


           TITLE OF EACH CLASS:        COMMON STOCK ($.001 PAR VALUE)
          ---------------------


  Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes [x] No [_].

  Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [_].

  The aggregate market value of the registrant's voting stock held by non-
affiliates was approximately $303 million on March 25, 1998, based on the
closing sales price of the registrant's common stock as reported on the Nasdaq
National Market as of such date.

  The number of shares outstanding of each of the registrant's classes of common
stock as of March 25, 1998 was as follows:

     Common Stock, $.001 par value: 22,113,665

                      DOCUMENTS INCORPORATED BY REFERENCE

  The following documents are incorporated herein by reference:  PART III:
Portions of the Registrant's definitive Proxy Statement to be filed with the
Securities and Exchange Commission in connection with the Registrant's 1998
Annual Meeting of Stockholders.

                          Exhibit Index is on page 26.

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                                     PART I

ITEM 1.  BUSINESS

     Advanced Radio Telecom Corp. ("ART" or the "Company") intends to become the
leading provider of broadband data services to businesses not served by fiber
optic networks.  Utilizing its national footprint of 38 GHz spectrum licenses,
the Company plans to serve up to 100 of the top metropolitan markets over the
next five years, beginning in 1998 with Seattle, Washington and Washington,
D.C. With  Lucent Technologies, Inc. ("Lucent") as the Company's technology
partner, the Company is building its own fixed wireless, packet-switched
broadband data networks utilizing Asynchronous Transfer Mode ("ATM"), Internet
Protocol ("IP"), Ethernet and Frame Relay technology. As networks are deployed
and interconnected using leased fiber optic backbone, ART plans to provide its
customers with end-to-end connectivity on a metropolitan, regional and national
basis. ART intends to offer an integrated package of data solutions including
Internet access, gateway networks such as intranets, extranets, virtual private
networks, local and wide area networks ("LANs" and "WANs"), and ultimately video
conferencing and other video services, voice and fax over IP and other value-
added data services.

     The data services market has been the fastest growing segment of the
communications industry over the last five years, expanding at a rate five times
faster than voice.  Bandwidth-intensive data applications require high-speed
connectivity that today is generally only available on fiber-optic networks.
However, approximately 95% of U.S. commercial buildings are not currently served
by fiber and receive their data services through the copper telephone networks
provided by the incumbent local exchange carriers ("ILECs").  These copper
networks are limited in their ability to meet the demand for data services,
creating a "bottleneck" in the local connection to end-users.  The Company
believes that a significant portion of these off-fiber buildings are not
currently economically attractive to fiber-based providers.  For businesses
located in these buildings, access to the fiber backbone networks and as a
result, high-speed connectivity is generally unavailable, or is available only
at significant expense and with significant lead time.

     Recognizing this market opportunity, ART has refocused its business to
offer high-speed data connectivity and products directly to off-fiber
businesses.  With its broadband data networks, the Company expects to deliver
services such as high-speed Internet access and gateway network services to the
customer premise rapidly and economically.

     The Company is a Delaware corporation organized in 1993 under the name  of
Advanced Radio Technologies Corporation.  In October 1996, the Company through a
wholly owned subsidiary merged with Advanced Radio Telecom Corp., a corporation
organized by the Company and others in 1995 to acquire licenses and to operate
its business jointly with the Company.  Upon the merger, Advanced Radio Telecom
Corp. became a wholly owned subsidiary of the Company and changed its name to
ART Licensing Corp., and the Company changed its name to Advanced Radio Telecom
Corp.  In 1997 the Company acquired 129 38GHz licenses in exchange for 6 million
shares of common stock and acquired the remaining 50% interest in a partnership
jointly owned by the Company for $6 million. See Note 4 to the Consolidated
Financial Statements. The Company's original business strategy was to sell
connectivity to communications providers on a wholesale, carriers' carrier
basis.


ART'S COMPETITIVE ADVANTAGES

     The Company believes that it is well-positioned to compete in offering
broadband data services to off-fiber commercial buildings.  Advantages of ART's
wireless solution include:

     FOCUS ON DATA.  ART believes it is currently the only wireless
telecommunications company focusing exclusively on data services rather than
primarily on voice telephony.  Focusing on data allows ART's networks to be
completely packet-switched, generally providing higher capacity, higher speed
data services than a circuit-switched

                                      -2-
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network. ART intends to hire product development, technical, and sales personnel
with expertise in data applications and delivery, as opposed to telephony
experience. ART expects to direct its sales efforts toward information
technology managers rather than business managers in charge of telephony, which
the Company believes will be a sales advantage in selling data services.

     HIGH-SPEED, HIGH-CAPACITY, HIGH-QUALITY CONNECTIVITY.   ART's broadband
data services will be engineered to provide high-speed, high-capacity
connectivity with quality superior to copper and comparable to fiber.
Currently, ART's wireless service provides two-way data transfer rates of up to
45 megabits per second.

     LOWER COST NETWORK.   The Company expects its networks to cost less than
its competitors' fiber and wireless networks.  The Company's fixed wireless
networks do not require the same magnitude of installation and maintenance costs
as required by fiber networks.  The Company expects this cost differential to
increase over time because the cost of deploying fiber involves substantial
labor and right-of-way costs, which are not expected to decrease over time,
while the cost of ART's networks involves substantial electronic equipment
costs, which have and are expected to continue to decline over time. ART's
networks will also cost less than competing wireless networks that are designed
to carry voice. The Company's network will be entirely packet-switched, and
therefore the Company will not have to buy more expensive circuit switches
required by other fixed wireless networks.

     SUCCESS-BASED CAPITAL REQUIREMENTS.  ART is designing its networks so that
the Company's capital will be spent incrementally as ART attracts customers,
minimizing the deployment of non-revenue generating equipment. ART's network
will be designed to reach customers within its initial clusters of buildings
without having to build out an entire market.  ART's sales force will initially
target customers within buildings ready to be connected to the  ART network,
then new buildings within the range of established radio hub sites, and then
buildings to be connected in new clusters.  As needs change, ART's equipment can
be economically and rapidly deployed or relocated.

     RAPID MARKET COVERAGE.  Leveraging its 38 GHz licenses which cover 90 of
the top 100 U.S. markets (assuming the consummation of pending acquisitions),
ART intends to rapidly deploy a nationwide broadband network dedicated to
delivering data services to businesses off the fiber network. ART believes that
this rapid deployment will enable ART to establish its position as the leading
provider of broadband data services by penetrating the market in advance of many
wireline competitors who cannot or will not construct their networks as quickly.

     EXPERIENCED MANAGEMENT.  ART has assembled a management team with
substantial telecommunications experience.  Henry C. Hirsch, ART's Chairman,
President and Chief Executive Officer, was formerly Vice Chairman and CEO of
Williams Communications Group and President and Chief Operating Officer of
Williams Telecommunications Systems ("WilTel"). Company founder and Vice
Chairman Vernon L. Fotheringham was previously president and CEO of Norcom
Networks Corporation, and prior to that Senior Vice President of The Walter
Group. William J. Maxwell, Executive Vice President of Strategic Planning,
Marketing and Sales, previously served as Executive Vice President of ICG
Communications and President of ICG Telecom Group. Thomas A. Grina, Executive
Vice President and Chief Financial Officer, previously served as Executive Vice
President and Chief Financial officer of Dial Page, Inc. George R. Olexa, Senior
Vice President and Chief Technology Officer, was formerly Executive Vice
President of Engineering of Dial Call Communications Inc. and as Executive
Director of Network Engineering and Technology Applications for Pacific Bell,
was the architect of their cellular networks in major cities in the U.S. and
Europe.


BUSINESS STRATEGY

     ART's goal is to become a leading end-to-end solutions provider for
businesses needing a wide range of broadband data services. The Company is
implementing the following initiatives to achieve this objective:

                                      -3-
<PAGE>

     TARGET OFF-FIBER BUSINESSES.  ART plans to focus its primary marketing
efforts on businesses located off the fiber network. The Company will identify
building clusters in high-density off-fiber areas containing customers with high
potential for significant data services requirements, such as high-technology
companies that are typically located outside cities' main business districts.
Once ART has deployed its network to service these initial customers, it will be
able to reach new customers in the surrounding area rapidly without having to
replicate hub site infrastructure.

     OFFER END-USERS AN ARRAY OF BROADBAND DATA SERVICES.  ART intends to offer
business customers an integrated package of high-speed, broadband data services,
including Internet access, intranets, extranets, virtual private networks, LANs
and WANs, and ultimately IP telephony and fax, video on demand, service based
video, video conferencing, and other emerging high value-added services.  By
targeting end-user customers, ART believes it will maximize revenues and
profitability.

     DEVELOP STRATEGIC BUSINESS RELATIONSHIPS.   ART plans to enter into
business relationships to help the Company penetrate its markets, develop its
service offerings and provide additional distribution channels.  ART intends to
forge alliances with property management companies to gain access to buildings
and tenants.  ART also intends to develop partnerships with data-oriented sales
agents, including local data network integrators and telecom resellers that
focus primarily on data products.  ART also plans to expand its product
offerings by developing relationships with Internet service providers ("ISPs")
and private networking companies.   ART will seek to develop relationships with
inter-exchange carriers ("IXCs"), utilities, ILECs and competitive local
exchange carriers ("CLECs") to connect disparate parts of the Company's network,
thereby offering end-to-end connectivity to its customers.

     PROVIDE SUPERIOR CUSTOMER SERVICE.  ART plans to provide superior customer
service, with service features such as a 24-hour-a-day, seven-day-a-week call
center, a network quality control system and comprehensive customer support
services.  The Company hopes to differentiate itself from its competitors and
establish brand identity based on high quality service that is responsive to the
customer.


STRATEGIC AGREEMENT WITH LUCENT TECHNOLOGIES

     ART has signed letters of intent for Lucent to act as the supplier and
integrator of ART's planned wireless broadband data networks. The letters
outline the purchase of systems including equipment and professional services
and vendor financing valued at up to $200 million for the first phase of the
network construction, during which Lucent will deploy and commission networks in
Seattle, Washington and Washington D.C., followed by build-outs in an additional
ten cities. The Lucent financing is contingent upon various conditions,
including ART meeting a series of performance objectives as the network build
progresses, raising additional capital, execution of definitive agreements and
certain other conditions. There can be no assurance that definitive agreements
will be executed or that the transactions contemplated by the letter of intent
will be consummated.

     The letters of intent contemplate that Lucent will supply integrated
operating systems that incorporate a full suite of equipment including point-to-
multipoint radios, ATM switches, access concentrators, fiber and multiplexer
systems and communications software products. Under the letters of intent,
Lucent will also provide professional services and support.


NETWORK DEPLOYMENT

     ART believes it will be the first company to deploy state-of-the-art,
packet-based broadband metropolitan area networks ("BMANs") using IP routing and
ATM switching infrastructure.  ART's BMANs are expected to provide broadband
connectivity to buildings and office campuses with significant aggregation
opportunities for a

                                      -4-
<PAGE>

variety of data services. The Company will connect buildings and campuses to
ISPs, IXCs, CLECs and ILECs in a metropolitan area.

     Over the next five years, ART intends to build BMANs in up to 100 of the
top U.S. markets.  ART will initially build its networks in Seattle, Washington
and Washington, D.C.   After deploying the initial hub sites, the networks will
be expanded incrementally in response to demand.  Using leased capacity on long
haul fiber networks, ART plans to connect BMANS first in neighboring markets
with communities of interest, such as Boston, New York City, Philadelphia,
Baltimore and Washington, D.C.  Eventually, ART plans to interconnect its BMANs
into a national and global network using long haul fiber connections.  As BMANs
are connected, ART will be able to offer customers end-to-end connectivity,
carrying data between two end-users through its local wireless network in one
metropolitan area, over the long haul fiber backbone, and back through another
wireless network in a different metropolitan area.  This end-to-end connectivity
will also allow the Company to sell long haul capacity.


SALES & MARKETING

     ART plans to market its products to end-users and wholesale customers
through direct sales, indirect channels, telemarketing, and by developing
strategic partnerships.

     RETAIL END-USERS.  ART intends to use a building-centric approach to target
retail end-users.  ART will use demographic and geographic information systems
to identify clusters of buildings with unserved demand for high-speed data
services.  ART's direct sales force will then pre-sell in buildings as ART
constructs the radio network that will reach those buildings.  Once the network
is operating, ART's direct and indirect sales force will seek a deeper market
penetration by selling additional capacity and services to existing customers,
and by targeting new customers within the buildings that are connected to ART's
network.  ART salespeople will also sell to other buildings within the cluster
that can be easily connected to the network.

     ART will hire a direct sales force in each market as ART's network is
deployed, targeting sales personnel experienced in data services.  ART also
plans to utilize technology consultants to present customers with complete data
access solutions.  Direct mail and telemarketing account teams will target
smaller business.

     WHOLESALE CUSTOMERS.  ART plans to seek relationships with a variety of
telecommunications carriers who are willing to jointly deploy data networks and
share capacity and revenue opportunities.  ART believes its high-speed, high-
capacity connectivity may also be attractive to ISPs to help them develop
markets quickly, differentiate their service from other ISPs, increase their
margins, and serve higher volumes of customers.  The Company also believes it
may be an attractive partner for national and international high-speed data
carriers who are interested in building high-speed packet data networks using IP
technology, smaller carriers providing fiber backhaul, and IXCs looking for
local access providers other than the incumbent and competitive LECs.


PRODUCTS AND SERVICES

     ART intends to sell broadband data access solutions.  The Company plans to
deploy its networks on an initial basis to support a comprehensive and fully-
integrated product line that is designed to meet the broadband data
telecommunications needs of business customers located off the fiber network.

     INTERNET ACCESS.  ART plans to offer business customers an end-to-end
Internet access solution by bundling high-speed Internet access with transport
provided by ART's wireless data networks.  ART expects to provide Internet
service in conjunction with one or more Internet access partners.

     GATEWAY SERVICES.  ART's Gateway Services will provide broadband
connectivity between end-users or between a wholesale customer's networks.
Gateway Services will connect end-users' private networks, including remote
office

                                      -5-
<PAGE>

LAN and client server interconnectivity, remote Internet access, and integrated
voice, video and data offerings. It will also enable end-user businesses to
create virtual private networks, facilitating enterprise-wide communications
with local and national private networking capabilities. Gateway Services will
also offer end-users Intranet services connecting remote offices into a central
hub location, and Extranet services giving outside customers and clients access
to specific elements within the Intranet. Gateway Services will support ATM, IP,
Ethernet and Frame Relay technologies.

     INTERNET VALUE-ADDED SERVICES.  ART intends to eventually offer an array of
value-added Internet services, including web hosting, security services and
operational and support services (including consulting).

     FUTURE PRODUCTS AND SERVICES.  ART plans to offer an array of other
services which are currently under development. ART expects future Internet
services will include web caching and E-commerce Gateway Services, IP voice and
fax service and video conferencing services and other value added services as
they are developed.


ART'S NETWORK

     The Company believes that the U.S. local data network will remain a hybrid
of fiber, copper, coaxial and wireless networks connected with a national
ATM/SONET fiber backbone network.  ART plans to supply the wireless facilities
portion of this network and interface with the fiber backbone in metropolitan
areas and nationally to provide end-to-end high bandwidth data services.  ART
will initially build packet switched, point-to-point fixed wireless BMANs using
ATM, Ethernet, Frame Relay and IP technologies.  ART intends to incorporate
point-to-multipoint equipment as soon as it becomes commercially available.

     The network equipment will use digital wireless technology designed to
deliver high quality data services that ART believes will be comparable in
quality to fiber-based systems.  The Company will use radio hubs to transmit to
and receive signals from wireless equipment on customers' premise.  The
customer premise equipment includes two components: (1) an integrated
antenna/radio unit installed on the roof or an exterior wall, and (2) the indoor
customer interface equipment installed within the building.  The radio/antenna
unit will communicate with the hub via radio signal.  The base stations hubs
will have an average line-of-sight service radius of approximately one mile,
depending on a number of factors such as power levels used, customer density,
local weather environment and network design. A point-to-multipoint hub will
have the capability to support customers within line-of-sight in every direction
within a 360 degree coverage area.

     The Company's point-to-multipoint hardware and network capacity will be
shared among all the customers within the coverage area of a hub sector.  A key
feature of the Company's network architecture will be its ability to provide
bandwidth-on-demand, giving customers as much or as little bandwidth as they
need.

     Traffic between hub sites and the Company's ATM switching centers will be
carried over a backhaul network that will be a combination of wireless links and
fiber optic transmission facilities, as appropriate. The Company expects to work
with fiber network providers, through leasing arrangements or partnerships.


38 GHZ WIRELESS BROADBAND LICENSES

     The FCC has allocated the 38.6-40.0 GHz (the "38 GHz") band for wireless
broadband transmissions consisting of fourteen 100 MHz channels for the
provision of wireless telecommunications services within a specified geographic
footprint.

                                      -6-
<PAGE>

     The Company owns, manages, or has agreements to acquire or to resell on 358
38 GHz licenses.  Taken together, these licenses allow the Company to provide 38
GHz wireless broadband services in 210 U.S. markets, allowing it to provide
between 100 and 500 MHz of transmission capacity in 90 of the top 100 U.S.
markets.

     The Company may selectively utilize other radio frequencies to provide its
services under certain circumstances.  The Company may seek to acquire
additional licenses or businesses which hold licenses to expand its geographic
footprint or to enhance its ability to provide service within its current
markets.


FOREIGN LICENSES

     Foreign subsidiaries of the Company have been granted broadband wireless
authorizations covering Norway, Sweden, Denmark and the United Kingdom which
allow the provision of broadband wireless connectivity for communications
services with certain limitations.  Other foreign subsidiaries and entities in
which the Company has or expects to have an interest have applied for licenses
in other countries.  There can be no assurance that any of these entities will
be able to acquire, retain or exploit licenses, comply with applicable license
restrictions, obtain any other necessary governmental approvals, obtain
financing, implement business plans or operate in any country on a profitable
basis or at all.


COMPETITION

     ART does not believe any other company is currently offering broadband,
packet-switched data services to off-fiber businesses.  However,  ART faces
significant competition from other entities that currently, or could in the
future, deliver data services over copper wire, fiber and wireless networks,
including ILECs, CLECs, fiber service providers, wireless service providers,
cable television operators, satellite communications companies and ISPs.  In
addition, the consolidation of telecommunications companies and the formation of
strategic alliances and cooperative relationships in the telecommunications and
related industries, as well as the development of new technologies, could give
rise to significant new competitors to the Company. The Company expects to
compete primarily on the basis of  bandwidth, features, service, quality, price,
responsiveness to customer needs and reliability.  There can be no assurance
that the Company will be able to compete effectively in any of its market areas
with any of its existing and potential competitors. Many of the Company's
competitors have long-standing relationships with customers and suppliers,
greater name recognition and greater financial, technical and marketing
resources than the Company.  As a result, these competitors, among other things,
may be able to develop and exploit new or emerging technologies or adapt to
changes in customer requirements more quickly than the Company or devote greater
resources to the marketing and sale of their services than the Company.

     ILECS' COPPER NETWORKS. The Company faces significant competition from
ILECs, which typically deliver data services over copper networks.  ILECs have
long-standing relationships with their customers and substantial name
recognition.  In addition, the ILECs have employed or will likely employ digital
subscriber line products, such as ISDN (integrated services digital network) and
ADSL  (asymmetrical digital subscriber line), which are currently available, and
HDSL (high-speed digital subscriber line), and VDSL (video digital subscriber
line), which are under development, to enhance the performance of their copper
networks.

     FIBER NETWORKS.  The Company also faces competition from expanding fiber
optic networks owned by incumbent and competitive LECs, IXCs, electric utilities
and other companies in any building connected or able to be connected to the
fiber network.  Many of these companies have greater name recognition and
greater financial, technical and marketing resources than the Company.  Fiber
optic service generally offers broadband connectivity that is comparable, if not
superior to, the Company's wireless broadband connections.  In addition, fiber
technology may enjoy a greater degree of market acceptance than wireless
broadband technology.

                                      -7-
<PAGE>

     COAXIAL CABLE NETWORKS.  The Company is likely to face competition from
cable television operators deploying cable modems, which provide high-speed data
capability over installed coaxial cable television networks, and there can be no
assurance that such competition will not be significant.  Although cable modems
currently are not widely available and do not provide for data transfer rates
that are as rapid as those which can be provided by the Company's services, the
Company believes that the cable industry may support the deployment of cable
modems to residential customers through methods such as price subsidies.
Notwithstanding the cable industry's interest in rapid deployment of cable
modems, the Company believes that in order to provide broadband capacity to a
significant number of businesses and government users, cable operators will be
required to spend significant time and capital in order to upgrade their
existing networks to a more advanced hybrid fiber coaxial network architecture
and to extend these networks to reach businesses.  However, there can be no
assurance that cable modems will not emerge as a source of competition.

     OTHER FIXED WIRELESS NETWORKS.  The Company also faces competition from
other fixed wireless service providers within its market areas including WinStar
Communications, Inc., Teleport Communications Group, Inc. ("TCG"), and Teligent,
Inc. ("Teligent").  In many cases, one or all of these service providers hold
licenses to operate in the Company's market areas. WinStar and Teligent have
positioned themselves as wireless CLECs, and therefore will compete with the
Company in offering off-fiber connectivity to businesses and buildings, with the
potential to offer broadband data services. TCG, which AT&T has agreed to
acquire, also has the ability to provide wireless broadband services.  All three
companies have substantially greater financial resources than the Company.

     Various other entities also have 38GHz and other wireless broadband
licenses.  Due to the relative ease and speed of deployment of fixed wireless
technology, the Company could face intense price competition and competition for
customers from other service providers.

     The Company also faces potential competition from new entrants acquiring
licenses from FCC auctions.  The FCC has recently auctioned 28 GHz LMDS licenses
in all markets for the provision of high capacity, wide-area fixed wireless
point-to-multipoint systems.  LMDS licensees may use the spectrum to offer a
variety of services such as multichannel video programming, telephony, video
communications and data services in competition with the Company.  The FCC has
announced an auction of geographical wide area licenses for the operation of
fixed wireless point-to-point and point-to-multipoint communications services in
the 38 GHz band.

     MMDS service, provided at the 2 GHz spectrum band, also known as "wireless
cable," also competes for metropolitan wireless broadband services.  At present,
wireless cable licenses are used primarily for the distribution of video
programming and have only a limited capability to provide two-way communications
needed for wireless broadband telecommunications services, but there can be no
assurance that this will continue to be the case.

     In January 1997, the FCC allocated 300 MHz of spectrum in the 5 GHz band
for unlicensed devices to provide short-range, high-speed wireless digital
communications. These frequencies must be shared with incumbent users without
causing interference.  The allocation was designed to facilitate the creation of
new wireless local area networks, and thus may compete with the Company's
strategy of providing wireless connections between LANs.  It is too early to
predict, however, how and to what extent this particular frequency may be used
in competition with the Company.

     MOBILE WIRELESS NETWORKS.  Cellular, Personal Communications Services and
other mobile service providers may also offer data services over their licensed
frequencies.  The FCC has also allocated a number of spectrum blocks for use by
wireless devices that do not require site or network  licensing.  A number of
vendors have developed such devices that may provide competition to the Company,
in particular for certain low-speed data transmission services.

     SATELLITE NETWORKS.  Many other companies have filed applications with the
FCC for global broadband satellite systems proposed to be used for broadband
voice and data services.  If licensed and developed, these systems could also
represent future competition to the Company.

                                      -8-
<PAGE>

GOVERNMENT REGULATION

     The Company's wireless broadband services are subject to regulation by
federal, state and local governmental agencies. At the federal level, the FCC
has jurisdiction over the use of the electromagnetic spectrum (i.e., wireless
services) and has exclusive jurisdiction over all interstate telecommunications
services, that is, those that originate in one state and terminate in another
state. State regulatory commissions have jurisdiction over intrastate
communications, that is, those that originate and terminate in the same state.
Municipalities may regulate limited aspects of the Company's business by, for
example, imposing zoning requirements and requiring installation permits.

FEDERAL REGULATION

     FCC Licensing.  The Communications Act of 1934, as amended, (the
"Communications Act") and the FCC Rules and Regulations impose certain
requirements relating to licensing.  Acquisition and sale of the wireless
broadband operating radio systems that are needed to provide the services
offered by the Company.  Under current FCC rules, the recipient of a license for
38 GHz facilities is required to construct facilities to place the
station in operation within 18 months of the date of grant of the license.
Although, under current FCC regulations, the term "in operation" is not defined
beyond the requirement that the station be capable of providing service, the
industry custom is to establish at least one link between two transceivers in
each market area for which it holds a license. In the event that the recipient
fails to comply with the construction deadline, the license cancels
automatically.  In addition, if a station does not transmit operational traffic
(not test or maintenance signals) for a consecutive period of twelve months at
any time after construction is complete, or if removal of equipment or
facilities renders the station incapable of providing service, the license is
subject to forfeiture, absent a waiver of the FCC's rules.  It is possible that
this rule could be applied in such a way that could cause one or more of the
Company's licenses to be subject to forfeiture.

     All of the 38 GHz licenses owned or to be acquired by the Company are due
to expire in February 2001. The Company is entitled to a "renewal expectancy" if
it can demonstrate that it is providing substantial service within the
authorized area for each particular license when it files its renewal
application.  That showing will depend on the particular type of services
offered, but might consist of four links per million population within the
service area.

     Services Agreements.  The Company believes that the provisions of its
management and service agreements comply with the FCC's policies concerning
licensee control of FCC-licensed facilities.  No assurance can be given that the
Company's management and service agreements, if challenged, would be found to
comply with FCC policies or what modifications, if any, may need to be made to
comply with those policies. If the FCC were to void or require modifications of
the management and service arrangements, the Company's operating results could
be adversely affected.

     Competition. Over the last several years, the FCC has issued a series of
decisions and Congress has recently enacted legislation making the interstate
access services market more competitive by requiring reasonable and fair
interconnection by LECs. The Telecommunications Act of 1996 substantially
departs from prior legislation in the telecommunications industry by
establishing local exchange competition as a national policy through the removal
of state regulatory barriers to competition and the preemption of laws
restricting competition in the local exchange market. The provisions of the
Telecommunications Act are designed to ensure that regional Bell operating
companies ("RBOCs") take affirmative steps to level the playing field for their
competitors so that Competitive Access Providers, CLECs and others can compete
effectively.  The FCC, with advice from the United States Department of Justice,
and the states are given jurisdiction to enforce these requirements. There can
be no assurance, however, that the states and the FCC will implement the
Telecommunications Act in a manner favorable to the Company.

     FCC Rulemaking.  On December 15, 1995, the FCC announced the issuance of a
notice of proposed Rulemaking and Order (the "NPRM"), pursuant to which it
proposed to amend its current rules to provide for, among other things, (i) the
adoption of an auction procedure for the issuance of licenses in the 38 GHz
band, including a possible auction of the lower fourteen proposed 100 MHZ
channels (which are similar to those used by the Company)

                                      -9-
<PAGE>

and the lower four proposed 50 MHZ channels in the 38 GHz band that have not
been previously available for commercial use and a possible auction of the
unlicensed areas in the upper fourteen 100 MHZ channels, (ii) licensing
frequencies using predefined geographic service areas ("Basic Trading Areas"),
(iii) the imposition of substantially stricter construction requirements for
licenses that are not received pursuant to auctions as a condition to the
retention of such licenses and (iv) the implementation of certain technical
rules designed to avoid radio frequency interference among licensees. In
addition, the FCC ordered that those applications subject to mutual exclusivity
with other applicants or placed on public notice by the FCC after September 13,
1995 would be held in abeyance pending the outcome of the NPRM and might then be
dismissed (the "freeze"). On January 17, 1997, the FCC adopted an Memorandum
Opinion and Order that partially lifted the freeze on the processing of pending
applications. Among other actions, the order provides that the FCC will process
certain amendments filed before December 15, 1995 that have the effect of
eliminating mutual exclusivity among pending applications. The FCC has granted
additional 38 GHz licenses to various applicants, including the Company. On
March 24, 1997, the FCC released another notice of proposed rulemaking ("FNPRM")
in which it proposed an omnibus spectrum allocation plan for the frequencies
located above 38 GHz. The FCC proposed to allocate the spectrum band that the
Company currently uses (38.6-40.0 GHz) for wireless services. In the FNPRM, the
FCC noted that it has already issued licenses for fixed operations throughout
this band and that it has proposed to continue to license these services in that
band. In addition, the FCC has proposed to designate the spectrum bands that
surround the Company's licenses (37.5-38.5 GHz and 40.5-41.5 GHz) as well as
48.2-50.2 GHz bands predominantly for fixed-satellite services.

     On October 24, 1997, the FCC adopted the Report and Order and Second Notice
of Proposed Rulemaking ("Order"), which  amended the rules for fixed microwave
service in the 38.6-40.0 GHz band ("38 GHz") and adopted a conforming set of
rules for the 37.0-38.6 GHz band ("39 GHz").  The rules adopted were intended to
provide terrestrial licenses, such as the Company's, with sufficient flexibility
to provide the public with innovative services. In the Order, the FCC provided
for licensing in both bands by Basic Trading Areas ("BTAs") and for the
employment of competitive bidding procedures as a means for choosing among
mutually exclusive license applicants. The new rules permit point-to-multipoint,
as well as point-to-point operations, and provide for mobile operations in the
38 GHz band.

     More specifically, the FCC rules retained the existing 38 GHz channeling
plan and ensured protection for incumbent licensees, such as the Company, that
are authorized for rectangular service areas, conditioned on them satisfying the
newly-adopted build-out requirements. The order also provided for overlaying 38
GHz BTA-based licenses that will be awarded through competitive bidding, or
auctions.  The newly-adopted build-out obligations require a showing of
substantial service at renewal, a standard described as intentionally flexible
to promote innovation and not to unnecessarily limit the types of service
offerings a license may offer.  There is an outstanding issue as to when
incumbent renewal applications must be filed, and, therefore, when incumbents
must provide the substantial service showing.  The FCC did not adopt any limit
on the amount of 38 GHz spectrum that can be held by a single entity, nor did it
limit the entities eligible to apply for such licenses.  Further, the Order
included rules for the issuance of 38GHz licenses through competitive bidding.

     Petitions for reconsideration of various aspects of the Report and Order,
in particular the treatment of pending applications and amendments and the
timing of the substantial service showing for incumbents, have been filed by a
number of entities, including the Company.  It is not possible to determine when
the FCC will dispose of them or what outcome is likely.  There also can be no
assurance that any final rules will not have a material adverse effect on the
Company. The Company has not determined whether to seek additional licenses in
the event of an auction.

STATE REGULATION

     Many of the Company's services, either now or in the future, may be
classified as intrastate and therefore may be subject to state regulation.
Under current state regulatory schemes, entities can compete with ILECs in the
provision of (i) local access services, (ii) dedicated access services, (iii)
private network services, including WAN services, for businesses and other
entities and (iv) long distance toll services.

                                      -10-
<PAGE>

RESEARCH AND DEVELOPMENT

     During 1997 and 1996, the Company spent $421,236 and $1,269,579,
respectively, with respect to research and development.


EMPLOYEES

     As of March 1, 1998 the Company had a total of 94 employees. None of the
Company's employees is represented by a collective bargaining agreement.


ITEM 2.  PROPERTIES

     The Company leases approximately 55,057 square feet of office, technical
operations and engineering field services depot space in Bellevue, Washington,
under leases expiring in April and May 2002 of which 5,227 square feet has been
subleased.  In addition, the Company also leases approximately 29,659 square
feet of office space in 12 cities nationwide of which 9,083 square feet has been
subleased.


ITEM 3.  LEGAL PROCEEDINGS

     The Company is not a party to any material litigation.


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

     The Company did not submit any matter to a vote of the security holders
during the fourth quarter of the 1997 fiscal year.


ITEM 4A.  EXECUTIVE OFFICERS OF THE REGISTRANT

     The executive officers of the Company are as follows:
<TABLE>
<CAPTION>

NAME                      AGE  POSITION
----                      ---  --------
<S>                       <C>  <C>

Henry C. Hirsch.........   55  Chairman of the Board of Directors, President and Chief
                               Executive Officer
Vernon L. Fotheringham..   49  Vice Chairman of the Board of Directors
Thomas A. Grina.........   40  Executive Vice President and Chief Financial Officer
William J. Maxwell......   55  Executive Vice President, Strategic Planning, Marketing & Sales
George R. Olexa.........   42  Senior Vice President, Chief Technology Officer
Thomas M. Walker........   33  Vice President, General Counsel and Secretary
-----------
</TABLE>


     Henry C. Hirsch has served as Chairman of the Board of Directors, President
and Chief Executive Officer of the Company since November, 1997.  From 1996 to
1997, Mr. Hirsch was the Vice Chairman and Chief Executive Officer of Williams
Communications Group, a wholly-owned subsidiary of The Williams Companies that
provides

                                      -11-
<PAGE>

businesses with enterprise network solutions, services and advanced multimedia
applications. From 1992 to 1996, Mr. Hirsch served as President and Chief
Operating Officer of WilTel, a nationwide systems integration company. From 1989
to 1992, he was Executive Vice President of Sales and Marketing as well as Chief
Financial Officer of WilTel.

     Vernon L. Fotheringham has served as Vice Chairman of the Board of
Directors since November, 1997. Prior to that, Mr. Fotheringham served as
Chairman of the Board of Directors and Chief Executive Officer of the Company
since inception. From 1993 to 1995, Mr. Fotheringham served as president and
Chief Executive Officer of Norcom Networks Corporation, a nationwide provider of
mobile satellite services.  He presently serves as Chairman of American
Broadband Productions, an Internet content provider, and as Vice Chairman of
Angel Technology Corp. From 1988 to 1994, Mr. Fotheringham served as Senior Vice
President of The Walter Group, Inc., a wireless telecommunications consulting
and project management firm.

     Thomas A. Grina has served as Executive Vice President, Finance and Chief
Financial Officer of the Company since April 1996. From 1989 to 1996, Mr. Grina
served as Executive Vice President, Finance and Chief Financial Officer of Dial
Page, Inc., a paging services provider, and from 1993 to 1996 he simultaneously
served in the same capacity at its wholly-owned subsidiary, Dial Call
Communications, Inc. ("Dial Call"), a wireless communications company.

     William J. Maxwell has served as Executive Vice President of Strategic
Planning, Sales and Marketing of the Company since December, 1997.  From 1992 to
1997, Mr. Maxwell was Executive Vice President of ICG Communications Inc. and
the President and Chief Executive Officer of ICG Telecom Group.  From 1991 to
1992, Mr. Maxwell was a senior marketing executive with WilTel.  From 1989 to
1991, Mr. Maxwell was the President and Chief Executive Officer of MidAmerican
Communications Corporation, a regional long distance company.

     George R. Olexa has served as Senior Vice President and Chief Technology
Officer since February, 1998. From 1996 to 1997, Mr. Olexa was Chief Operating
Officer at Superconducting Core Technologies, a high-technology equipment
manufacturer for the telecommunications industry, supplying high-performance,
superconducting filters and cryoelectronics for wireless infrastructures. From
1993 to 1996, Mr Olexa served as Executive Vice President of Engineering of Dial
Call.  From 1988 to 1993, he was Executive Director of Network Engineering and
Technology Applications for Pacific Bell.

     Thomas M. Walker has served as vice president and general counsel of the
Company since 1997, and served as associate general counsel from 1996 to 1997.
From 1994 to 1996, Mr. Walker practiced in the law firm of Buchalter, Nemer,
Fields & Younger in its Los Angeles, California office, advising
telecommunications and other clients on corporate matters. From 1991 to 1994, Mr
Walker practiced with the national law firm of Pillsbury Madison & Sutro.


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

     ART's common stock is traded in the over-the-counter market and is reported
on the Nasdaq National Market under the symbol "ARTT." The following table sets
forth for the periods indicated the high and low sales information of the common
stock as reported on the Nasdaq National Market. Such transactions reflect
inter-dealer prices, without retail markup, markdown or commission and may not
necessarily represent actual transactions.

                                      -12-
<PAGE>

<TABLE>
<CAPTION>
                                                          PRICE RANGE
                                                     --------------------
                                                        HIGH       LOW
                                                     ---------  ---------
<S>                                                   <C>      <C>
     1996 Fourth Quarter (commencing on November 5)..  $16.250  $11.125

     1997 First Quarter..............................  $14.625  $10.375
          Second Quarter.............................  $11.250  $ 6.625
          Third Quarter..............................  $ 9.500  $ 6.313
          Fourth Quarter.............................  $10.625  $ 7.500
</TABLE>
     On March 25, 1998, the last sale price of common stock as reported on the
Nasdaq National Market was $14.936 per share.  As of March 25, 1998 there were
159 record holders of ART's Common Stock and 3,395 beneficial holders.

     ART has not paid any cash dividends on its common stock in the past and
does not anticipate paying any cash dividends on its common stock in the
foreseeable future. ART's Board of Directors intends to retain earnings to
finance the expansion of ART's business and fund ongoing operations for the
foreseeable future. In addition, the terms of the indenture relating to the
Company's 14% Senior Notes due 2007 restrict the ability of the Company to pay
dividends on common stock.


RECENT SALES OF UNREGISTERED SECURITIES.

     In 1997, the Company did not sell any of its securities in unregistered
sales that were not reported in previous quarterly reports on Form 10-Q.

                                      -13-
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

     The selected financial data presented below as of December 31, 1993, 1994,
1995, 1996 and 1997 and for the period from August 23, 1993 (date of inception)
to December 31, 1993 and the years ended December 31, 1994, 1995, 1996 and 1997
were derived from and should be read in conjunction with the audited financial
statements of the Company.
<TABLE>
<CAPTION>

                                                  AUGUST 23, 1993
                                                (DATE OF INCEPTION)                    YEAR ENDED DECEMBER 31
                                                   TO DECEMBER 31,    ------------------------------------------------------
                                                       1993               1994          1995          1996           1997
                                               --------------------   ----------   -----------   ------------   ------------
<S>                                             <C>                  <C>          <C>           <C>            <C>
STATEMENT OF OPERATIONS DATA:
Service revenue............................         $       --        $       --   $     5,793   $    247,116   $    708,883
Equipment sales and construction revenue...                 --                --            --      2,660,811        396,970
Consulting revenue.........................                 --           137,489            --             --             --
Technical and network operations expenses..                 --                --            --      3,402,948      7,252,512
Cost of equipment sales and construction...                 --                --            --      1,590,779        254,444
Sales and marketing expenses...............                 --                --       191,693      5,548,584     13,469,898
General and administrative expenses........              5,906           253,453     2,911,273     12,896,134     12,789,866
Research and development expenses..........                 --                --            --      1,269,579        421,236
Equipment impairment.......................                 --                --            --             --      7,166,920
Depreciation and amortization..............                688             8,281        15,684      1,017,959      6,018,172
Loss from operations.......................             (6,594)         (124,245)   (3,112,857)   (22,818,056)   (46,266,995)
Interest and other expenses, net...........                 --             4,375       121,986      6,512,251     16,817,180
Income tax benefit.........................                 --                --            --             --      1,355,249
Extraordinary loss.........................                 --                --            --      1,339,996             --
Net loss...................................             (6,594)         (128,620)   (3,234,843)   (30,670,303)   (61,728,926)
Basic and diluted net loss per share.......                 --             (0.04)        (0.54)         (3.97)         (3.23)
Weighted average number of shares of
 common stock outstanding..................          1,820,555         3,337,685     5,946,338      7,717,755     19,083,304

OTHER FINANCIAL DATA:
EBITDA (1).................................         $   (5,906)       $ (115,964)  $(2,007,568)  $(14,348,920)  $(30,811,151)
Capital expenditures.......................                 --             5,175     3,585,144     16,631,451     16,685,436

                                                                              AS OF DECEMBER 31,
                                                    -----------------------------------------------------------------------
                                                       1993              1994          1995           1996           1997
                                                    ----------        ----------   -----------   ------------   ------------

BALANCE SHEET DATA:
Working capital surplus (deficit)..........         $   13,958        $  (76,556)  $(3,008,510)  $ (9,623,905)  $ 25,608,821
Property and equipment, net................                 --             3,448     3,581,561     19,303,849     25,294,946
FCC licenses, net..........................                 --                --     4,235,734      4,330,906    131,210,102
Total assets...............................             74,513            42,611     9,876,559     36,648,701    232,559,749
Long-term debt.............................                 --                --     6,450,000      4,977,246    108,299,359
Accumulated deficit........................             (6,594)         (135,214)   (3,370,057)   (34,040,360)   (95,769,286)
Total stockholders' equity (deficit).......             54,542           (39,078)     (312,860)    19,949,920     76,257,063
</TABLE>

--------

                                      -14-
<PAGE>

(1)  EBITDA consists of loss before interest and financing expense (net of
     interest income), income tax expense, depreciation and amortization
     expense, non-cash compensation expense, non-cash equipment charges and non-
     cash market development expense. EBITDA is not intended to represent cash
     flows from operating activities, as determined in accordance with generally
     accepted accounting principles. EBITDA should not be considered as an
     alternative to, or more meaningful than, operating income or loss, net
     income or loss or cash flow as an indicator of the Company's performance.
     Not all companies calculate EBITDA in the same fashion and therefore EBITDA
     as presented may not be comparable to other similarly titled measures of
     other companies.


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

OVERVIEW

     From its inception in 1993 to the fourth quarter of 1996, the Company
primarily focused on acquiring licenses, hiring management and other key
personnel, raising capital, acquiring equipment and roof rights and developing
its operating and support systems and infrastructure.  In the fourth quarter of
1996, the Company started commercial operations primarily selling connectivity
to various telecommunications companies as a wholesale carriers' carrier. During
the first quarter of 1998, the Company altered its strategy to begin deploying
broadband data networks and selling a variety of data services to end user
customers.

RESULTS OF OPERATIONS

1997 Compared to 1996

     Revenues for the year ended December 31, 1997 were approximately $1.1
million compared to $2.9 million in 1996.  Included in revenues was
approximately $0.4 million in 1997 and $2.7 million in 1996 representing non-
recurring sales and construction revenue associated with radio links installed
for a third party.  The Company does not expect routinely to sell equipment and
install radio links for third parties in the future.

     Operating costs and expenses were approximately $47.4 million for the year
ended December 31, 1997 compared to approximately $25.7 million in 1996.  The
increase was primarily due to an overall increase in expenses associated with
the commencement of commercial operations.  Included in operating costs and
expenses for 1997 and 1996 was approximately $0.3 million and $1.6 million,
respectively, related to non-recurring sales and construction revenue. Sales and
marketing expenses in 1996 included a $1.1 million charge relating to a
distribution agreement. General and administrative expenses in 1996 included
$7.6 million of non-cash compensation charges, including $6.8 million related to
release of escrowed shares to executive officers. In connection with employment
arrangements with its new Chairman and Chief Executive Officer, the Company
incurred a non-recurring charge of approximately $1.2 million in 1997 with
respect to a stock grant and other expenses. During the fourth quarter of 1997
the Company recorded $8.1 million of non-cash equipment charges, including
approximately $7.2 million to write down certain radio equipment that is not
expected to be an integral part of the Company's broadband data network. The
Company incurred non-recurring severance and office closure costs of
approximately $950,000 in the third and fourth quarters of 1997 in connection
with management-initiated restructuring activities intended to align the
Company's organization with its marketing and business development plans and to
conserve capital resources. While such restructurings are expected to reduce
expenses in the near term, in future periods the Company expects increases in
cash expenses for network operations and sales and marketing as the Company
deploys and markets its networks. Depreciation and amortization was
approximately $6.0 million for 1997 compared to approximately $1.0 million in
1996. The increase was due to additional equipment placed in service and
amortization of FCC licenses. Excluding non-cash and non-recurring items,
operating costs and expenses for the year ended December 31, 1997 were
approximately $30.9 million compared to $14.4 million in 1996.

                                      -15-
<PAGE>

     Net interest and other expenses were approximately $16.8 million for the
year ended December 31, 1997 compared to $6.5 million in 1996. Interest expense
increased in 1997 due to increased borrowings in 1997.  Included in interest and
other expenses was approximately $2.7 million in 1997 and $3.7 million in 1996
related to a financing commitment which was terminated in 1997 upon the sale of
the Company's 14% Senior Notes due 2007 (the "Senior Notes").   The issuance of
the Senior Notes in February 1997 caused interest expense to increase
substantially and will continue to cause interest expense to increase in future
periods.  Interest income increased due to the purchases of short-term
investments and pledged securities.  The early repayment in November 1996 of
bridge financings resulted in a non-cash extraordinary loss of approximately
$1.3 million arising from the write-off of associated unamortized offering
discount and deferred financing costs.

1996 Compared to 1995

     Revenues for the year ended December 31, 1996 were approximately $2.9
million compared to $5,793 in 1995. Included in 1996 revenues was approximately
$2.7 million representing non-recurring sales and construction revenue
associated with approximately 100 radio links installed for a third party.

     Operating expenses other than interest were approximately $25.7 million for
the year ended December 31, 1996 compared to approximately $3.1 million in 1995.
The increase was primarily due to an overall increase in costs and expenses
associated with preparing for the commencement of commercial operations.
Included in 1996 was approximately $1.6 million of non-recurring expenses for
sales and construction performed for a third party, non-cash compensation
expense of approximately $7.6 million, including approximately $6.8 million
arising from the termination of an arrangement involving the escrow of shares
and subsequent release of such shares to certain employees, as well as higher
general and administrative, sales and marketing expenses, technical and network
operating expenses and research and development expenses. Included in sales and
marketing expenses for 1996 were non-cash marketing costs of approximately $1.1
million related to a distribution agreement.

     Net interest and other expenses were approximately $6.5 million for the
year ended December 31, 1996 compared to $121,986 in 1995.  Included in interest
and other expenses for 1996 was approximately $1.2 million relating to an
unsuccessful debt offering in July 1996 and approximately $3.7 million related
to a financing commitment which was terminated in 1997 upon the sale of the
Senior Notes.  Interest expense increased in 1996 due to increased borrowings in
1996.

LIQUIDITY AND CAPITAL RESOURCES

     To date, funding for the Company's acquisitions, capital expenditures and
net operating losses has been provided from private placements of equity and
bridge financings in 1994 through 1996, the Company's initial public offering in
November 1996 and the Company's public offering of its Senior Notes in February
1997.  Approximately $51 million of the approximately $130 million net proceeds
from the sale of the Senior Notes was used to purchase a portfolio of U.S.
Treasury securities that will provide for interest payments on the Senior Notes
through February 2000.  Because the Senior Notes have "significant original
issue discount" for tax purposes, the Company is not able to deduct the interest
expense related to the accretion of this original issue discount for tax
purposes.

     During 1997 the Company issued six million shares of common stock to
acquire certain FCC licenses.  In addition, the Company has entered into
agreements to acquire certain additional FCC licenses, including agreements to
acquire licenses in exchange for 1.34 million shares of common stock, and shares
of common stock valued at approximately $28 million at the time of closing.  The
Company may continue to acquire additional licenses in exchange for common
stock.

      The Company will require significant additional capital to fund its
operations and business plan. ART currently estimates that it

                                      -16-
<PAGE>

will require in excess of $1 billion over the next five years for capital
expenditures, working capital and funding of operating losses. The Company has
signed a letter of intent with Lucent to provide vendor financing of up to $200
million which is contingent upon various conditions, including achieving
performance targets and raising additional capital. The Company expects to seek
additional financing to satisfy its capital requirements and to raise
substantial capital in 1998. If the Company is unable to obtain such additional
financing, the Company's capital was sufficient at March 31, 1998 to fund its
operations at levels at that date through the end of 1998 and to meet its
capital commitments at that date through the end of the year. However, without
additional capital, the Company will not be able to implement its business plan.
There can be no assurance that the Company will be able to obtain any financing
when required, or, if available, that the Company will be able to obtain it on
acceptable terms. If the Company fails to obtain additional financing when
required, such failure could result in the modification, delay or abandonment of
some or all of the Company's development and expansion plans and could
materially adversely affect the Company.

     ART's actual capital requirements will be affected, possibly materially,
by various factors including the speed of the Company's build out, the cost and
amount of equipment acquired, the number of  markets served and the penetration
of those markets, customer acceptance and demand and the prices charged for
services, competition and technological change.  The Company expects to be able
to adjust its capital requirements in part in response to customer demand by
changing the rate at which it adds new markets and builds out existing markets.
If the assumptions underlying the Company's business plan change or prove to be
inaccurate or the Company changes its business plan, the Company's capital
requirements may change.

INFLATION

     Management does not believe that its business is impacted by inflation to a
significantly different extent than is the general economy.

OTHER

     The Company has implemented a program to identify and resolve the effect of
Year 2000 software issues on the integrity and reliability of its financial and
operational systems.  In addition, the Company is also communicating with its
principal vendors and service providers to coordinate Year 2000 conversion.
Although the Company cannot yet assess the cost of year 2000 issues, the Company
does not expect the costs of achieving Year 2000 compliance to have a material
impact on the Company's business, operations or its financial condition.


CAUTIONARY STATEMENT

     This Item and other Items in this Report include "forward-looking"
information as that term is defined in the Private Securities Litigation Reform
Act of 1995 or by the Securities and Exchange Commission in its rules,
regulations and releases. The Company cautions investors that any such
statements made by the Company are not guarantees of future performance and that
known and unknown risks, uncertainties, and other factors including those risk
factors identified in Exhibit 99 to this Report may cause actual results to
differ materially from those in the forward-looking statements.  The Company
does not undertake to update or revise its forward-looking statements publicly
even if experience or future changes make it clear that any projected results
expressed or implied herein will not be realized.

                                      -17-
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Advanced Radio Telecom Corp.

     We have audited the accompanying consolidated balance sheets of Advanced
Radio Telecom Corp. and Subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for the years ended December 31, 1997, 1996 and 1995. 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 consolidated financial position of Advanced Radio
Telecom Corp. and Subsidiaries as of December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for the years
ended December 31, 1997, 1996 and 1995, in conformity with generally accepted
accounting principles.

                                                        Coopers & Lybrand L.L.P.

Seattle, Washington
March 10, 1998

                                      F-1
<PAGE>

                 ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                          DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
                                                          1997                 1996
                                                        -------               -----
<S>                                                 <C>                 <C>
                     ASSETS
Current assets:
  Cash and cash equivalents.......................   $    7,135,427        $   1,974,407
  Short-term investments..........................       18,210,220
  Pledged securities..............................       18,517,640
  Restricted cash.................................        1,032,060
  Accounts receivable.............................          199,316            1,819,593
  Prepaid expenses and other current assets.......          112,825              196,791
                                                     --------------        -------------
    Total current assets..........................       45,207,488            3,990,791

Pledged securities................................       25,842,275
Restricted cash...................................                             1,032,060
Property and equipment, net.......................       25,294,946           19,303,849
FCC licenses, net.................................      131,210,102            4,330,906
Deferred financing costs, net.....................        4,502,330            3,255,688
Other assets......................................          502,608            4,735,407
                                                     --------------        -------------
    Total assets..................................   $  232,559,749        $  36,648,701
                                                     ==============        =============

      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Trade accounts payable..........................   $    3,067,984        $   9,425,834
  Accrued compensation and benefits...............        1,775,646            1,350,894
  Book overdraft..................................        3,055,759
  Other accrued liabilities.......................        3,109,631              927,648
  Accrued interest payable........................        7,113,391               17,159
  Current portion of long-term debt...............        1,476,256            1,893,161
                                                     --------------        -------------
    Total current liabilities.....................       19,598,667           13,614,696
Long-term debt, net of current portion............      106,823,103            3,084,085
Deferred income tax liability.....................       29,880,916
                                                     --------------        -------------
    Total liabilities.............................      156,302,686           16,698,781

Commitments and contingencies

Stockholders' equity:
  Serial preferred stock, $.001 par value,
  10,000,000 shares authorized, none issued
  and outstanding
  Common stock, $.001 par value, 100,000,000
  shares authorized 21,429,485 and 13,559,420
  shares issued and outstanding...................           21,429               13,559
Additional paid-in capital........................      172,892,420           53,976,721
Note receivable from stockholder..................         (887,500)
Accumulated deficit...............................      (95,769,286)         (34,040,360)
                                                     --------------        -------------
 Total stockholders' equity.......................       76,257,063           19,949,920
                                                     --------------        -------------
    Total liabilities and stockholders' equity....   $  232,559,749        $  36,648,701
                                                     ==============        =============

</TABLE>
   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      F-2
<PAGE>

                 ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>

                                                               1997              1996              1995
                                                               ----              ----              ----
<S>                                                  <C>                   <C>                <C>
Service revenue......................................     $    708,883       $    247,116        $     5,793
Equipment sales and construction revenue.............          396,970          2,660,811
                                                          ------------       ------------        -----------
     Total revenue...................................        1,105,853          2,907,927              5,793
                                                          ------------       ------------        -----------
Costs and expenses:
  Technical and network operations...................        7,252,512          3,402,948
  Cost of equipment sales and construction...........          254,444          1,590,779
  Sales and marketing................................       13,469,898          5,548,584            191,693
  General and administrative.........................       12,789,866         12,896,134          2,911,273
  Research and development...........................          421,236          1,269,579
  Equipment impairment...............................        7,166,720
  Depreciation and amortization......................        6,018,172          1,017,959             15,684
                                                          ------------       ------------        -----------
     Total operating costs and expenses..............       47,372,848         25,725,983          3,118,650
                                                          ------------       ------------        -----------
Operating loss.......................................      (46,266,995)       (22,818,056)        (3,112,857)

Interest and other:
  Interest expense...................................       18,931,303          1,695,489            131,540
  Financing commitment expense.......................        2,699,881          3,687,644
  Other..............................................                           1,248,000
  Interest income....................................       (4,814,004)          (118,882)            (9,554)
                                                          ------------       ------------        -----------
     Loss before income taxes and extraordinary
      item...........................................      (63,084,175)       (29,330,307)        (3,234,843)

Deferred income tax benefit..........................        1,355,249
                                                          ------------       ------------        -----------
  Loss before extraordinary item.....................      (61,728,926)       (29,330,307)        (3,234,843)
Extraordinary loss on early retirement of debt.......                          (1,339,996)
                                                          ------------       ------------        -----------
  Net loss............................................    $(61,728,926)      $(30,670,303)       $(3,234,843)
                                                          ============       ============        ===========


Basic and diluted loss per common share before
 extraordinary item..................................     $      (3.23)      $      (3.80)       $     (0.54)
Basic and diluted extraordinary loss per common
 share...............................................                               (0.17)
                                                          ------------       ------------        -----------
Basic and diluted net loss per common share..........     $      (3.23)      $      (3.97)       $     (0.54)
                                                          ============       ============        ===========

Weighted average common shares.......................       19,083,304          7,717,755          5,946,338
                                                          ============       ============        ===========

</TABLE>
   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      F-3
<PAGE>

                 ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>

                                                          SERIAL                         NOTE
                                   COMMON STOCK       PREFERRED STOCK      ADDITIONAL  RECEIVABLE
                              --------------------   ------------------     PAID-IN       FROM        ACCUMULATED
AMOUNTS                        SHARES    PAR VALUE    SHARES  PAR VALUE     CAPITAL    STOCKHOLDER      DEFICIT        TOTAL
-------                       -------    ---------   -------  ---------    ---------   -----------     ---------     ---------
<S>                          <C>        <C>        <C>       <C>       <C>             <C>          <C>            <C>
Balance, December 31, 1994.   2,141,830   $  2,142                        $     93,994               $   (135,214)   $   (39,078)
Issuance of common stock
 to ART West...............      26,773         27                              24,973                                    25,000
Issuance of common stock
 to existing stockholders..   1,472,508      1,472                              (1,472)
Conversion of note payable
 and interest to
 paid-in capital...........                                                     75,250                                    75,250
Issuance of common stock
 to Landover and
 affiliates for cash.......   3,120,000      3,120                              (2,100)                                    1,020
Issuance of serial
 preferred stock to limited
 partnerships affiliated
  with Landover for cash...                           419,811    $  419      1,999,581                                 2,000,000
Issuance of serial
 preferred stock for cash..                            61,640        62      1,999,938                                 2,000,000
Shares issued to reflect
 anti-dilution
 adjustments...............      62,655         63      7,041         7            (70)
Preferred stock issuance
 costs.....................                                                   (229,814)                                 (229,814)
Redemption of common stock.    (293,791)      (294)                         (1,999,706)                               (2,000,000)
Increase in additional
 paid-in capital as a
 result of the release of
 Escrow Shares.............                                                    802,002                                   802,002
Accrued stock option
 compensation..............                                                    287,603                                   287,603
Net loss...................                                                                             (3,234,843)   (3,234,843)
                             ----------   --------   --------    ------   ------------   ---------   -------------   -----------
Balance, December 31, 1995.   6,529,975      6,530    488,492       488      3,050,179                  (3,370,057)     (312,860)

Issuance of serial
 preferred stock for cash..                           232,826       233      4,672,953                                 4,673,186
Shares issued to reflect
 anti-dilution
 adjustments...............      56,984         57    150,740       151           (208)
Issuance of serial
 preferred stock and
 warrants in exchange for
 cash and the Ameritech
 strategic distribution
 agreement.................                            48,893        49      3,552,951                                 3,553,000
Preferred stock issuance
 costs.....................                                                   (150,000)                                 (150,000)
Increase in additional
 paid-in capital as a
 result of the release of
 Escrow Shares.............                                                  6,795,514                                 6,795,514
Value ascribed to the
 equipment financing
 warrants..................                                                    484,937                                   484,937
Value ascribed to the
 Bridge Financing
 Warrants..................                                                  1,795,533                                 1,795,533
Issuance of common stock
 in an initial public
 offering..................   2,300,500      2,301                          34,505,199                                34,507,500
Initial public offering
 common stock issuance
 costs.....................                                                 (6,081,098)                               (6,081,098)
Conversion of preferred
 stock to common stock
 in connection with the
  initial public offering..   4,353,587      4,353   (920,951)     (921)        (3,432)
Value ascribed to the CIBC
 Warrants..................                                                  4,503,848                                 4,503,848
Accrued stock option
 compensation..............                                                    850,663                                   850,663
Common stock issued in
 connection with the
exercise of the Ameritech
 warrants..................     318,374        318                                (318)
Net loss...................                                                                            (30,670,303)  (30,670,303)
                             ----------   --------   --------    ------   ------------   ---------   -------------   -----------
Balance, December 31, 1996.  13,559,420     13,559                          53,976,721                 (34,040,360)   19,949,920

Common stock issued in
 connection with the
 acquisition of the
 CommcoCCC, Inc. licenses..   6,000,000      6,000                          87,744,000                                87,750,000
Value ascribed to warrants
 issued with Senior Notes..                                                 29,707,509                                29,707,509
Warrant issuance costs.....                                                 (1,254,698)                               (1,254,698)
Accrued stock option
 compensation..............                                                    449,313                                   449,313
Stock options exercised....     286,100        286                             496,159                                   496,445
Warrants exercised.........   1,583,965      1,584                              (1,584)
Common stock issuable for
 note receivable from
  stockholder..............                                                    887,500   $(887,500)
Common stock issuable
 under employment
   agreement...............                                                    887,500                                   887,500
Net loss...................                                                                           (61,728,926)   (61,728,926)
                             ----------   --------   --------    ------   ------------   ---------   -------------   -----------
Balance December 31, 1997..  21,429,485   $ 21,429                        $172,892,420   $(887,500)  $(95,769,286)   $76,257,063
                             ==========   ========   =========   ======   ============   =========   =============   ===========
</TABLE>
   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      F-4
<PAGE>

                 ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>

                                                             1997           1996           1995
                                                         -------------  -------------  -------------
<S>                                                      <C>            <C>            <C>
Cash Flows from operating activities:
  Net loss.............................................  $(61,728,926)  $(30,670,303)  $ (3,234,843)
  Adjustments to reconcile net loss to net cash
     used in operating activities:
   Non-cash compensation expense.......................     1,336,813      7,646,177      1,089,605
   Non-cash equipment charges..........................     8,100,859
   Non-cash marketing expense..........................                    1,053,000
   Depreciation and amortization.......................     6,018,172      1,017,959         15,684
   Non-cash interest expense...........................     1,466,698        772,221        110,828
   Financing commitment expense........................     2,699,881      3,687,644
   Deferred income tax benefit.........................    (1,355,249)
   Extraordinary loss on early debt retirement.........                    1,339,996
   Changes in operating assets and liabilities:
     Accrued interest on investments and securities....    (2,194,497)
     Accounts receivable...............................     1,620,277     (1,819,593)
     Prepaid expenses and other current assets.........        83,966       (144,466)       (56,337)
     Other assets......................................      (137,321)
     Accounts payable and accrued liabilities..........     1,098,448      3,615,884        563,351
     Accrued interest payable..........................     7,096,232         17,159
                                                         ------------   ------------   ------------
       Net cash used in operating activities...........   (35,894,647)   (13,484,322)   ( 1,511,712)
                                                         ------------   ------------   ------------

Cash flows from investing activities:
   Capital expenditures for property and equipment.....   (24,051,854)    (9,439,481)      (621,364)
   Additions to FCC licenses and acquisitions..........    (5,747,844)    (3,201,183)    (3,292,883)
   Purchases of pledged securities.....................   (51,245,250)
   Purchases of short-term investments.................   (47,065,154)
   Investment in restricted cash.......................                   (1,032,060)
   Proceeds from maturities of pledged securities......     8,863,315
   Proceeds from sales of short-term investments.......    29,071,448
   Other...............................................        88,718     (1,425,032)      (280,000)
                                                         ------------   ------------   ------------
       Net cash used in investing activities...........   (90,086,621)   (15,097,756)    (4,194,247)
                                                         ------------   ------------   ------------

Cash flows from financing activities:
  Proceeds from issuance of Senior Notes and warrants..   135,000,000
  Warrant issuance costs...............................    (1,254,698)
  Proceeds from issuance of common stock...............       496,445     34,507,500          1,020
  Proceeds from issuance of preferred stock............                    2,500,000      4,050,000
  Stock issuance costs.................................                   (6,231,098)     (213,884)
  Proceeds from loans and debt financings..............                   14,445,000      5,133,500
  Book overdraft.......................................     3,055,759
  Repayments of loans and debt financings..............    (2,018,743)   (13,131,443)        (8,500)
  Redemption  of common stock..........................                                  (2,000,000)
  Additions to deferred financing costs................    (4,136,475)    (2,167,128)      (452,656)
  Other................................................                                    (175,000)
                                                         ------------   ------------   ------------
     Net cash provided by financing activities.........   131,142,288     29,922,831      6,334,480
                                                         ------------   ------------   ------------
Net increase in cash and cash equivalents..............     5,161,020      1,340,753        628,521
Cash and cash equivalents, beginning of period.........     1,974,407        633,654          5,133
                                                         ------------   ------------   ------------
Cash and cash equivalents, end of period...............  $  7,135,427   $  1,974,407   $    633,654
                                                         ============   ============   ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      F-5
<PAGE>

                 ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  THE COMPANY AND BASIS OF PRESENTATION:

     Advanced Radio Telecom Corp. ("ART", and collectively with its
subsidiaries, the "Company") provides wireless broadband telecommunications
services using point-to-point microwave transmissions in the 38 GHz band of the
radio spectrum throughout the United States. Prior to the commencement of full-
scale commercial operations during 1996, the Company's principal business
activities included the acquisition of spectrum rights, build out of its
systems, development of its operating infrastructure, and raising of funds to
implement its business plan.  The Company is building fixed wireless broadband
packet-switched data networks to provide broadband data services to businesses
not served by fiber optic networks.

     ART, formerly named Advanced Radio Technologies Corporation, was organized
as a Delaware corporation in August 1993. Advanced Radio Technology Ltd.,
renamed Advanced Radio Telecom Corp. ("Telecom"), was organized in March 1995 by
ART and Landover Holdings Corporation ("Landover") for the purpose of acquiring
certain 38 GHz licenses and to facilitate Landover's commitment to invest or
cause to invest $7 million in the Company. Pursuant to the related purchase,
shareholder, and services agreements, ART and Telecom were operated as a single
entity pending approval of their merger from the Federal Communications
Commission ("FCC"). Such approval was received and Telecom became a wholly-owned
subsidiary of ART by merger in October 1996. The merger was accounted for in a
manner consistent with a reorganization of entities under common control which
is similar to that of a pooling of interests, and the financial statements of
prior periods have been restated.

     Under the current business plan, the Company will require significant
financing in 1998 and over the next several years to fund the development and
expansion of its national wireless broadband operations.  The Company has signed
letters of intent for up to $200 million of equipment vendor financing subject
to definitive agreement, additional financing and other conditions and is
pursuing other sources of financing.  In addition, the Company has significant
radio equipment on hand available for deployment.  Management believes that, in
the event the Company is unable to obtain the additional funding contemplated in
its business plan for 1998, its current funds are sufficient to enable the
Company to fund its operations at current levels and meet its present capital
commitments through the end of 1998.  There can be no assurance that the Company
will be able to obtain financing when required or, if available, that the
Company will be able to obtain it on acceptable terms.  In the event that the
Company fails to obtain additional financing when needed, such failure could
result in modification, delay or abandonment of some or all of the Company's
development and expansion plans which in turn, could have a material adverse
effect on the Company.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Consolidation

     The consolidated financial statements include all majority owned
subsidiaries in which the Company has the ability to exercise control. All
intercompany transactions have been eliminated in consolidation.

Development Stage Enterprise

     During 1996, the Company commenced commercial operations, and is no longer
considered to be in the development stage as defined in Statement of Financial
Accounting Standards No. 7, "Accounting and Reporting by Development Stage
Enterprises." Such change in classification of the Company had no impact on the
net loss or stockholders' equity (deficit) for any periods presented.

                                      F-6
<PAGE>

Cash and Cash Equivalents

     The Company considers all highly liquid investments purchased with
remaining maturities of three months or less to be cash equivalents.  The
Company places its temporary cash investments with major financial institutions.
At December 31, 1997, the Company's temporary cash investments were principally
placed in two entities.  Checks issued but not presented to banks are classified
as "Book overdrafts" for accounting purposes in the consolidated balance sheet.

Short-term Investments and Pledged Securities

     Short-term investments are comprised of commercial paper and other similar
investments purchased with a term to maturity of more than three months.  Short-
term investments are held as available for sale and are carried at market value.
Pledged securities consist of U.S. Treasury securities that are held to maturity
and are carried at amortized cost.

Property and Equipment

     Property and equipment are stated at cost. Depreciation and amortization
are computed using the straight-line method over the estimated useful lives,
generally five years for wireless transmission equipment placed in service and
three to five years for other property and equipment.

     The costs of normal maintenance and repairs are charged to expense as
incurred. Direct costs of placing assets into service and major improvements are
capitalized. Gains or losses on the disposition of assets are recorded at the
time of disposition.

Capitalized Software

     Purchased software is capitalized at cost and amortized over its estimated
useful life of three to five years.

FCC Licenses

     The direct costs of obtaining 38 GHz radio spectrum licenses by grant from
the FCC or by purchase from others and the cost of perfecting such licenses are
capitalized and amortized on a straight-line basis over a 40 year period.
Accumulated amortization as of December 31, 1997 and December 31, 1996 totaled
$2,930,798 and $106,011, respectively.  All of the Company's licenses expire in
2001 and it is management's expectation that they will be renewed by the FCC for
successive ten year periods.

Recoverability of Long-Lived Assets

     The recoverability of property and equipment and capitalized FCC licenses
is dependent on, among other things, the successful deployment of networks in
each of the respective markets, or sale of such assets. Management estimates
that it will recover the carrying amount of those costs from undiscounted cash
flows generated by the networks once they have been deployed. However, it is
reasonably possible that such estimates will change in the near term as a result
of technological, regulatory or other changes. The Company periodically reviews
the carrying value of its capitalized assets for impairment and recoverability.

Financing Costs

     Direct costs associated with obtaining debt financing are deferred and
charged to interest expense using the effective interest rate method over the
term of the debt. Direct costs of obtaining commitments for financing are
deferred and charged to expense over the term of the commitments. Direct costs
associated with obtaining equity financing are deferred and charged to
additional paid-in capital as the related funds are raised. Deferred costs
associated with unsuccessful financings are charged to other expense.

                                      F-7
<PAGE>

     Accumulated amortization of deferred financing costs totaled $290,756 and
$3,753,605 at December 31, 1997 and 1996, respectively. Deferred costs of
approximately $1.2 million associated with an incomplete public debt offering
were charged to other expense in 1996.

Revenue Recognition

     Revenue from telecommunications services is recognized ratably over the
period such services are provided.

     Equipment sales and construction revenue is recorded at the time the
equipment is delivered and construction is completed. Cost of equipment sales
are based on the average cost method.

     Two customers accounted for approximately forty-five percent of the
Company's service revenues in 1997, and a single customer accounted for
approximately forty-two percent of the Company's service revenues in 1996.
Additionally, the Company entered into an equipment sales and construction
services agreement with another customer during 1996 to act as a sub-contractor
to provide transmission facilities construction services and the related
wireless transmission equipment.  This agreement was substantially completed
during 1996 and total equipment sales and construction revenues are attributable
to this customer. The receivables from this customer accounted for approximately
ninety-four percent of total accounts receivable at December 31, 1996.

Research and Development

     Research and development costs are charged to expense as incurred.

Income Taxes

     The Company accounts for income taxes under the liability method of
accounting. Under the liability method, deferred taxes are determined based on
the differences between the financial statement and tax bases of assets and
liabilities at enacted tax rates in effect in the year in which the differences
are expected to reverse. Valuation allowances are established, when necessary,
to reduce deferred tax assets to the amounts expected to be realized.

Net Loss Per Share

     During 1997 the Company adopted, and applied retroactively, Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128").  This
statement specifies the computation, presentation, and disclosure requirements
for earnings per share ("EPS"), simplifies the computational guidelines, and
increases comparability on an international basis.  This statement replaced
"primary" EPS with "basic" EPS, the principal difference being the exclusion of
common stock equivalents in the computation of basic EPS. In connection with the
adoption of SFAS 128, the Company also adopted the provisions of SEC Staff
Accounting Bulletin No. 98 ("SAB 98"), which provides for the inclusion of
nominal issuances of potentially dilutive equity instruments in the calculation
of net loss per share.  The adoption of SFAS 128 and SAB 98 by the Company had
no impact on previously reported net loss per share.

Use of Estimates

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

                                      F-8
<PAGE>

Reclassifications

     Certain reclassifications have been made to prior year amounts to conform
to current year presentation.  Such reclassifications had no effect on
previously reported net loss, stockholders' equity or cash flows.


3.  PROPERTY AND EQUIPMENT:

     Property and equipment at December 31 were as follows:
<TABLE>
<CAPTION>

                                                                     1997         1996
                                                                 ------------  -----------
<S>                                                              <C>           <C>

  Wireless transmission equipment placed in service............  $ 5,879,673   $ 5,303,386
  Wireless transmission equipment not yet placed in operation..   16,730,010    10,727,923
  Computer hardware............................................    1,673,288     1,063,928
  Computer software............................................      934,127     2,334,683
  Office furniture and equipment...............................    1,601,190       458,698
  Other equipment and vehicles.................................      489,220       333,152
                                                                 -----------   -----------
                                                                  27,307,508    20,221,770
Accumulated depreciation                                          (2,012,562)     (917,921)
                                                                 -----------   -----------
                                                                 $25,294,946   $19,303,849
                                                                 ===========   ===========

</TABLE>
     Depreciation expense for the years ended December 31, 1997, 1996 and 1995
was $3,021,380,  $909,163, and $7,031, respectively.

     During the fourth quarter of 1997, the Company recorded non-cash equipment
charges of $8.1 million, including a charge of approximately $7.2 million to
write down certain radio equipment that is not expected to be an integral part
of the Company's expanded broadband network.  The amount of the write-down was
based on discounted projected future cash flows from such equipment under
current deployment plans.


4.  FCC LICENSES:

     CommcoCCC Licenses

     In June 1996, the Company agreed to acquire 129 38 GHz licenses from
CommcoCCC, Inc. ("CommcoCCC") in exchange for 6 million shares of the Company's
common stock, which acquisition was consummated in February 1997. The total
acquisition cost was approximately $122.2 million, comprised of the aggregate
market value of the common shares issued to CommcoCCC of approximately $88
million, direct costs and the related deferred tax liability of approximately
$31.2 million. The Company incurred approximately $3 million in fees in
connection with this acquisition, of which approximately $1 million had been
paid as of December 31, 1996 and included in other assets.

     In connection with this transaction, the Company gave a stockholder of
CommcoCCC an option to acquire twelve 38 GHz FCC licenses in specified markets,
in which the Company has more than one license.  Such option was exercised in
June 1997, with closing subject to FCC approval.  The purchase price will be
paid by a non-recourse note and will be determined based on the sales price of
the Company's common stock on the day the option was exercised and the
population covered by the twelve licenses.  The Company has the right to be a
reseller with respect to these licenses for a term of five years at market
rates.

                                      F-9
<PAGE>

     ART West Licenses

     In February 1997, the Company completed its acquisition from Extended
Communications, Inc. ("Extended") of the remaining 50% interest in ART West, a
partnership jointly controlled by Extended and the Company, for $6 million in
cash, of which $3 million was paid in November 1996.  The Company's initial 50%
interest was obtained in 1995 through its initial capital contribution of
$255,000 in cash and 26,773 shares of common stock.  Acquisition costs incurred
through December 31, 1996 were included in other assets in the consolidated
balance sheet.  ART West held certain 38 GHz licenses that were transferred to
the Company upon the completion of the acquisition.  An employee of the Company
is the president and a shareholder of Extended.

     EMI Licenses

     In November 1995, the Company acquired certain FCC licenses from EMI
Communications Corp. in exchange for $3 million in cash and a $1.5 million
promissory note.

     Pending License Acquisitions

     During 1997, the Company entered into agreements to acquire certain 38 GHz
licenses, including twenty three licenses from Columbia Capital Corporation and
Columbia Millimeter Communications, L.P., for approximately 1.34 million shares
of common stock to be issued at closing.  In January 1998, the Company also
entered into a definitive agreement with DCT Communications, Inc. to acquire
forty-nine 38 GHz licenses in exchange for shares of the Company's common stock
with a value of approximately $28 million, subject to adjustment based upon the
trading price of the Company's shares at the time of closing.  These
transactions are subject to various closing conditions, including approval by
the FCC.


5.  INCOME TAXES:

A reconciliation of the Company's effective tax rate and the Federal statutory
rate follows:

<TABLE>
<CAPTION>
                                                           1997           1996           1995
                                                       -------------  -------------  ------------
<S>                                                    <C>            <C>            <C>
Net loss before taxes                                  $(63,084,175)  $(30,670,303)  $(3,234,843)
                                                       ============   ============   ===========
Federal income tax at
 statutory rate                                                35.0%          35.0%         35.0%
Non-deductible interest                                        (0.6)
Non-deductible compensation                                                   (7.8)         (8.7)
State benefit, net of Federal tax benefit                       2.0            1.6           1.4
Other                                                          (0.1)                        (2.3)
Valuation allowance                                           (34.2)         (28.8)        (25.4)
                                                       ------------   ------------   -----------
Effective income tax rate                                       2.1%           0.0%          0.0%
                                                       ============   ============   ===========
Income tax benefit                                     $ (1,355,249)  $          0   $         0
                                                       ============   ============   ===========


</TABLE>


                                      F-10
<PAGE>

Deferred tax assets and liabilities at December 31, were as follows:

<TABLE>
<CAPTION>
                                          1997           1996
                                      -------------  ------------
<S>                                   <C>            <C>

Deferred tax assets:
 Net operating loss carryforwards     $ 28,385,000   $ 9,100,000
 Equipment impairment                    2,652,000
 Accrued compensation and benefits         755,000       470,000
 Depreciation                              419,000
 Valuation allowance                   (18,833,916)   (9,258,000)
                                      ------------   -----------
                                        13,377,084       312,000
                                      ------------   -----------

Deferred tax liabilities:
 FCC Licenses                          (43,258,000)
 Depreciation and amortization                          (312,000)
                                      ------------   -----------
                                       (43,258,000)     (312,000)
                                      ------------   -----------
 Net deferred tax liability           $(29,880,916)  $         0
                                      ============   ===========

</TABLE>
     Differences between the tax bases of assets and liabilities and their
financial statement amounts are reflected as deferred income taxes based on
enacted tax rates. The net deferred tax assets have been reduced by a valuation
allowance based on management's determination that the recognition criteria for
realization has not been met.  In February 1997, the Company reversed
approximately $12.8 million of its deferred tax asset valuation allowance as a
result of recording deferred taxes arising from the CommcoCCC acquisition.

     At December 31, 1997, the Company has accumulated net operating loss
carryforwards for Federal income tax purposes of approximately $76.7 million
which expire between 2008 and 2012. The Company's ability to use its net
operating losses to offset future income is subject to restrictions in the
Internal Revenue Code which could limit the Company's future use of its net
operating losses if certain stock ownership changes occur.

6.  LONG-TERM DEBT, BRIDGE, AND OTHER FINANCINGS:

Long-Term Debt

     Long-term debt as of December 31 consisted of the following:
<TABLE>
<CAPTION>
                                                                                                          1997           1996
                                                                                                      -------------  ------------
<S>                                                                                                   <C>            <C>

  Senior Notes, with 14% semi-annual interest, due 2007.............................................  $135,000,000   $        --
  Discount on Senior Notes..........................................................................   (28,672,995)           --
  Equipment financing note,  payable in monthly installments
   of $92,694 including interest at 17.26%, and
   final payment of $642,305 due April 29, 1998.....................................................       877,854     1,446,699
 Note payable in quarterly installments of principal of $187,500
   plus interest at prime plus 2% (10.5% at December 31, 1997)
   through September 1998...........................................................................       562,500     1,312,500
  GTE software financing............................................................................                   2,079,372
  Other.............................................................................................       532,000       138,675
                                                                                                      ------------   -----------
                                                                                                       108,299,359     4,977,246
Less current portion................................................................................    (1,476,256)   (1,893,161)
                                                                                                      ------------   -----------
                                                                                                      $106,823,103   $ 3,084,085
                                                                                                      ============   ===========

</TABLE>

                                      F-11
<PAGE>

The aggregate amount of the principal payments for long-term debt as of December
 31, 1997 follows:
     YEAR ENDED DECEMBER 31:
<TABLE>
 <S>                                      <C>
     1998................................. $   1,476,256
     1999.................................       496,098
     2000.................................            --
     2001.................................            --
     2002.................................            --
     Thereafter...........................   135,000,000
     Discount on Senior Notes.............   (28,672,995)
                                           -------------
                                           $ 108,299,359
                                           =============

</TABLE>
Senior Notes

     In February 1997, the Company received $135 million of gross proceeds from
a public offering of $135 million of 14% Senior Notes (the "Senior Notes") and
warrants to purchase an aggregate of 2,731,725 shares of the Company's common
stock for $0.01 per share, approximately $51 million of which proceeds were used
to purchase a portfolio of U.S. Treasury securities that will provide for
interest payments on the Senior Notes through February 2000. The aggregate value
ascribed to the warrants of approximately $29.7 million, was reflected as both a
debt discount and an increase in additional paid-in capital. The debt discount
is accounted for as a component of interest expense using the effective interest
rate method. The Senior Notes are considered to have "significant original issue
discount" under Federal tax rules and the Company is not able to deduct the
accretion of the debt discount for Federal income tax purposes.

     The Senior Notes are unsecured senior obligations of the Company, due
February 2007, with interest payable on February 15 and August 15 of each year
and are redeemable at the Company's option beginning in February 2002 at
redemption prices declining to par. The Senior Notes were issued under an
indenture which contains covenants limiting the Company's ability to incur
additional debt, pay dividends or make other distributions, incur liens, merge
or sell assets, or enter into certain transactions with related parties, among
other restrictions.

Equipment Financing Note

     The equipment financing note is collateralized by a portion of the
Company's wireless transmission equipment and a $1 million certificate of
deposit. The certificate of deposit is included in restricted cash. In
connection with the issuance of the equipment financing note, certain
shareholders of the Company guaranteed payment of the note in exchange for
warrants to purchase 118,181 shares of the Company's common stock for $17.19 per
share and $225,000 in fees. In November 1996, the shareholders were released
from the guarantee.

Bridge Financings

     During 1996 the Company issued in the aggregate $12 million of bridge
financings in three private placements, consisting of $5 million of 10% notes
issued in March 1996, $3 million of 14.75% notes issued in July 1996, and $4
million of 14.75% notes issued in September and October 1996. Of these notes,
approximately $8.1 million principal amount was issued to certain shareholders
of the Company and CommcoCCC. Warrants to purchase in the aggregate 603,637
shares of the Company's common stock (the "Bridge Financing Warrants") at a
price per share ranging from $15.00 to $17.19, were issued in connection with
these bridge financings.

                                      F-12
<PAGE>

     In November 1996, the Company repaid these bridge financings with the
proceeds from the initial public offering of the Company's common stock. The
early repayment of these bridge financings resulted in an extraordinary loss
arising from the write-off of the unamortized note discounts and the related
deferred financing costs.

     In November 1995, the Company issued $4.95 million in 10% promissory notes
and one share of the Company's Series A redeemable preferred stock to certain
limited partnerships controlled by Advent International Corp. in exchange for $5
million in cash. In February 1996, the notes, related accrued interest and the
redeemable preferred stock were exchanged for 232,826 shares of Series E
preferred stock.

CIBC Financing Commitment

     In November 1996, in connection with Company's initial public offering of
common stock, the Company entered into agreements with certain lenders which
provided for the issuance of up to $50 million of senior collateralized notes
(the "CIBC Financing Commitment"), at any time at the Company's option through
February 1997. In connection with the CIBC Financing Commitment, the Company
paid placement and commitment fees and other expenses of approximately $1.9
million and issued warrants to purchase 300,258 shares of common stock (the
"CIBC Warrants") at an exercise price of $0.01 per share. No amounts were
borrowed under the CIBC Financing Commitment. The CIBC Financing Commitment was
terminated in connection with the issuance of the Senior Notes.

7.  COMMITMENTS AND CONTINGENCIES:

Operating Leases

     The Company has entered into operating leases for office space and antenna
sites which expire between 1998 and 2006. Lease expense amounted to
approximately $1,753,962, $618,000 and $16,000 for 1997, 1996 and 1995,
respectively.  Future annual minimum lease payments as of December 31, 1996 are
as follows:
<TABLE>

<S>                          <C>
               1998........   $ 2,690,905
               1999........     2,736,249
               2000........     2,235,533
               2001........     2,107,011
               2002........     1,498,481
               Thereafter..       261,946
                              -----------
                              $11,530,125
                              ===========
</TABLE>

Employment Agreements

     The Company has entered into various employment agreements with certain
executives that provide for annual base salaries and cash bonuses based on
achievement of specific performance goals.

Contingencies

     The Company is party to certain claims and makes routine filings with the
FCC and state regulatory authorities. Management believes that the resolution of
any such claims or matters arising from such filings, if any, will not have a
material adverse impact on the consolidated financial position, results of
operations or cash flows of the Company.

                                      F-13
<PAGE>

8.  CAPITAL STOCK:

Preferred Stock

     The Company is authorized to issue 10 million shares of $0.001 par value
serial preferred stock. Each series of the preferred stock issued is a separate
class and, as a class, has a liquidation preference equal to the aggregate
purchase price paid for such class.

     The historical share information regarding the Company's preferred stock
activity follows:

<TABLE>
<CAPTION>
                                                                               SERIAL PREFERRED STOCK
                                                       --------------------------------------------------------------------
                                                       SERIES A    SERIES B  SERIES C  SERIES D  SERIES E   SERIES F  TOTAL
                                                       --------    --------  --------  --------  --------   --------  -----
<S>                                                  <C>          <C>       <C>       <C>       <C>        <C>       <C>
Year ended December 31, 1995:
Issuance of preferred stock to limited partnerships
  affiliated with Landover for cash..................   332,091     82,318    5,402                                   419,811
Issuance of Series D preferred stock for cash........                                  61,640                          61,640
Shares issued to reflect  anti-dilution..............     2,852      4,189                                              7,041
                                                       --------   --------  -------   -------  ------   -------       -------
                                                        334,943     86,507    5,402    61,640                         488,492

Year ended December 31, 1996:
Issuance of serial preferred stock...................                                            232,826              232,826
Shares issued to reflect anti-dilution...............   120,607     28,172    1,961                                   150,740
Issuance of serial preferred stock to Ameritech......                                                       48,893     48,893
                                                       --------   --------  -------   -------  ------   -------       -------
                                                        455,550    114,679    7,363    61,640    232,826    48,893    920,951
Serial preferred stock converted to common stock
  in connection with initial public offering of
  common stock.......................................  (455,550)  (114,679)  (7,363)  (61,640)  (232,826)  (48,893)  (920,951)

Balance at December 31, 1996.........................      ----       ----     ----      ----       ----      ----       ----
                                                       ========   ========   ======   =======   ========   =======   ========

</TABLE>
Common Stock

     The Company was initially formed in August 1993 and during November 1993,
the Company issued additional shares of common stock in a private placement to a
limited partnership.  During March 1994, an affiliate of the limited partnership
contributed $100,000 to the Company in exchange for 214,183 shares of common
stock and a $70,000 promissory note.  In connection with this financing, the
Company issued an additional 856,732 shares of common stock to all of the then
existing shareholders. In March 1995, the limited partnership agreed to assign
the $70,000 promissory note, plus accrued interest, in exchange for two new
promissory notes executed by the executives. Concurrent with the exchange of the
promissory notes, the executives contributed the $70,000 promissory notes plus
accrued interest to the Company, for which contribution there were no additional
shares issued.

     In March and April 1995, the Company entered into certain agreements with
Landover pursuant to which Landover agreed to invest or cause to be invested $7
million in the Company (the "Landover Funding Commitment") in exchange for
approximately 3.1 million shares of the Company's common stock issued to
Landover and certain of its affiliates. The agreements also contained provisions
under which additional shares of the Company's preferred and common stock would
be issued to shareholders of the Company, excluding Landover, for no
consideration, such that the additional securities issued to satisfy the
Landover Funding Commitment would dilute only Landover's ownership interest in
the Company. The preferred stock transactions in 1995 and 1996 satisfied the
Landover Funding Commitment and, as a result, the anti-dilution provisions
terminated. As the actual cash proceeds received from these preferred stock
transactions were in excess of Landover's commitment, the Company redeemed
293,791 shares of common stock from Landover for $2 million.

                                      F-14
<PAGE>

     As part of the Landover Funding Commitment, approximately 1.9 million
shares of the Company's common stock previously held by certain individual
shareholders were placed in escrow to be released upon attainment of certain
objectives, including the acquisition of a specified number of 38 GHz licenses
("Escrow Shares"). In November 1995, 681,102 Escrow Shares, with an estimated
fair value of approximately $800,000, were released as a result of the
acquisition of certain FCC licenses.  In February 1996, the remaining Escrow
Shares, with an estimated fair value of $6.8 million, were released as part of a
reorganization of the Company. The estimated fair values of the Escrow Shares on
the dates such shares were released were recorded as compensation expense and as
an increase in additional paid-in capital.

     In February 1996, the Company sold 48,893 shares of preferred stock for an
aggregate purchase price of $2.5 million to Ameritech Development Corporation
("Ameritech"). In addition, the Company entered into a strategic distribution
agreement with Ameritech Corp., the parent of Ameritech, and, as partial
consideration, granted warrants to Ameritech to purchase up to 318,959 shares of
common stock at an exercise price of $0.01 per share. The Company recorded the
estimated value of the strategic distribution agreement of $1.1 million as
marketing expense and additional paid-in capital in 1996. The Company incurred
fees of $150,000 in connection with this transaction. In December 1996,
Ameritech exercised its warrants and was issued 318,374 shares of common stock
by the Company.

     The financial statements and footnotes reflect the effects of various
common stock splits and reverse stock splits, including a 1 for 2.75 reverse
split of the Company's common stock effected in October 1996. All references to
the number of shares, per share amounts and par value amounts have been restated
for all stock splits and reverse stock splits. Such stock splits and reverse
stock splits have no impact on the total amount of stockholders' equity
(deficit).

Initial Public Common Stock Offering

     During November 1996, the Company completed an initial public offering of
2,300,500 shares of common stock, raising approximately $34.5 million of gross
proceeds. The Company incurred approximately $6.1 million of expenses in
connection with this offering.

Warrants to Purchase Common Stock

     The Company has issued warrants to purchase common stock in connection with
its financing activities during the years ended December 31, 1997 and 1996. The
following summarizes the warrants outstanding related to these financing
activities at December 31, 1997:
<TABLE>
<CAPTION>

                                                Exercise
                                     Number of  Price per  Period of
                                      Shares      Share    Exercise
                                     ---------  ---------  ---------
<S>                                  <C>        <C>        <C>

     Equipment financing warrants..    118,181     $17.19       2001
     Bridge Financing Warrants.....    400,000     $17.19       2001
     Bridge Financing Warrants.....    203,637     $15.00       2001
     CIBC Warrants.................    300,258     $ 0.01       2001
     Senior Note Warrants..........  1,147,760     $ 0.01       2007
</TABLE>

The warrants contain certain anti-dilution provisions.

 Stock Compensation

     Pursuant to the Restated Equity Incentive Plan (the "Plan"), the Company
may grant incentive and non-qualified options and other equity incentives with
respect to up to 4 million shares to employees and certain other persons or
entities.

                                      F-15
<PAGE>

     Pursuant to the 1997 Equity Incentive Plan for Non-Employee Directors, non-
employee directors are given annual automatic grants of stock options and may
annually elect to take fees in common stock to be issued covering up to an
aggregate of 500,000 shares.

     The Company applies the accounting provisions of Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations for its stock-based plans. Accordingly, compensation costs for
employee stock options is measured as the excess, if any, of the fair value of
the Company's stock at the measurement date over the amount an employee must pay
to acquire the stock. Deferred compensation costs charged to operations was
$449,313, $850,663 and $287,603 in 1997, 1996 and 1995, respectively.

     A summary of the stock option transactions follows:
<TABLE>
<CAPTION>
                                                           Weighted Average
                                                 Shares     Exercise Price
                                               ----------  ----------------
<S>                                            <C>         <C>

     Options granted in 1995.................    382,630         $ 2.28
                                               ---------

     Options outstanding, December 31, 1995..    382,630           2.28
       Options granted.......................    461,112          16.07
       Options canceled......................    (16,363)         12.25
                                               ---------

     Options outstanding, December 31, 1996..    827,379           9.95
       Options granted.......................  2,320,263          10.23
       Options exercised.....................   (286,100)          1.74
       Options canceled......................   (564,210)         15.87
                                               ---------         ------

     Options outstanding, December 31, 1997..  2,297,332         $ 9.82
                                               =========         ======
</TABLE>

     The Company has adopted the disclosure provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
No. 123"). Had the Company elected to recognize compensation costs as provided
for by SFAS No. 123, the Company's net loss and per share amounts on a pro forma
basis for the years ended December 31 would have been as follows:

                                      F-16
<PAGE>

<TABLE>
<CAPTION>


                                                 1997           1996           1995
                                               Pro Forma      Pro Forma     Pro Forma
                                             -------------  -------------  ------------
<S>                                         <C>            <C>            <C>

     Loss before extraordinary item........  $(63,848,637)  $(29,410,915)  $(3,049,032)
     Extraordinary item....................                   (1,339,996)
                                             ------------   ------------   -----------

     Net loss..............................  $(63,848,637)  $(30,750,911)  $(3,049,032)
                                             ============   ============   ===========

     Basic and diluted loss per share
      before extraordinary item............  $      (3.35)  $      (3.81)  $     (0.51)
     Basic and diluted extraordinary loss
      per share............................                        (0.17)
                                             ------------   ------------   -----------

     Basic and diluted net loss per share..  $      (3.35)  $      (3.98)  $     (0.51)
                                             ============   ============   ===========
</TABLE>

     The weighted average fair values per share at the date of grant for options
granted during the years ended December 31, 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>

                                                                  1997   1996   1995
                                                                  -----  -----  -----
<S>                                                               <C>    <C>    <C>

  Options granted with exercise prices equal to the fair value
       of the stock at the date of grant........................  $8.71  $6.59  $0.82
  Options granted with exercise prices greater than the fair
     value of the stock at the date of grant....................  $8.50  $7.04
</TABLE>

  The assumptions applied in these valuations for periods prior to the Company
becoming a public entity were (i) use of the minimum value method, (ii) risk
free interest rates ranging from 6.1% to 6.5%, (iii) assumed expected lives of 3
to 5 years, and (iv) no expected dividends. The assumptions applied for periods
subsequent to the Company becoming a public entity were (i) use of the Black-
Scholes option pricing model, (ii) risk free interest rates ranging from 5.0% to
6.0%, (iii) expected volatility rates ranging from 60% to approximately 65%,
(iv) assumed expected lives of 3 to 5 years, and (v) no expected dividends.

  The following table summarizes information about fixed-price options
outstanding at December 31, 1997 as follows:
<TABLE>
<CAPTION>

                                             Weighted-
                                Number        Average            Weighted-         Number        Weighted-
                             Outstanding      Remaining            Average        Exercisable      Average
Exercise Price               at 12/31/97    Contractual Life    Exercise Price    at 12/31/97    Exercise Price
--------------               -----------    -----------------  ----------------   ------------   --------------
<S>                          <C>           <C>                <C>               <C>            <C>
  $ 1.62 to 4.54...........      68,926            2.8               $ 3.61           41,356          $ 3.61
  $7.13 to 10.38...........   1,614,527            4.5               $ 8.64          133,812          $ 7.88
  $11.25 to 15.00..........     602,970            4.4               $13.54           13,949          $13.04
  $17.19...................      10,909            3.6               $17.19            3,818          $17.19
</TABLE>

     During 1997, the Company entered into an employment agreement with its
Chief Executive Officer that provides for, among other things, the issuance of
100,000 shares of common stock deliverable in 2001 that has been reflected as a
non-cash compensation charge of $887,500 in 1997 and the issuance of 100,000
shares of common stock in exchange for a recourse note of $887,500 with interest
at the minimum applicable federal rate.

                                      F-17
<PAGE>

9.  RELATED PARTY TRANSACTIONS:

     In 1995 and 1996, the Company entered into various management consulting
agreements with Landover. Fees paid to Landover under the agreements totaled
approximately $830,000 and $70,000 in 1996 and 1995, respectively. The
agreements with Landover terminated in November 1996. Additionally, the Company
paid Landover approximately $390,000 for expenses in connection with the
Landover Funding Commitment.  In 1995, Landover advanced $175,000 to the Company
to fund a portion of the cost of certain FCC licenses acquired.  The advance was
repaid in the same year.

     The Company has paid legal fees to a law firm in which a principal of the
law firm was also an officer of the Company. Total fees paid to such law firm
were approximately $666,695, $520,000 and $34,800 in 1997, 1996 and 1995,
respectively.

     During 1996, the Company funded approximately $400,000 of research and
development related to development of wireless transmission equipment with an
entity, of which an executive of the Company was a shareholder and director.


10.  FAIR VALUES OF FINANCIAL INSTRUMENTS:

     The carrying amounts and the estimated fair values of the Company's
financial instruments at December 31 were as follows:
<TABLE>
<CAPTION>


                                             1997                     1996
                                  --------------------------  ----------------------
                                    Carrying        Fair       Carrying      Fair
                                     Amount        Value        Amount      Value
                                  ------------  ------------  ----------  ----------
<S>                               <C>           <C>           <C>         <C>

     Cash and cash equivalents..  $  7,135,427  $  7,135,427  $1,974,407  $1,974,407
     Restricted cash............     1,032,060     1,032,060   1,032,060   1,032,060
     Short-term investments.....    18,210,220    18,210,220        ----        ----
     Pledged securities.........    44,359,915    44,230,640        ----        ----
     Senior Notes...............   106,327,005   129,600,000        ----        ----
     Note payable...............       562,500       562,500   1,312,500   1,312,500
     Equipment financing note...       877,854       877,854   1,446,699   1,446,699
     Other long-term debt.......       532,000       532,000   2,218,047   2,218,047
</TABLE>

     Cash, cash equivalents and restricted cash: The carrying amount reported in
the balance sheet approximates fair value.  Short-term investments and pledged
securities:  The fair values are based on published market values for the
respective investment instruments.  Senior Notes: the fair value is based upon
published market value.  Note payable, equipment financing note and other debt:
The fair values are based upon interest rates currently available to the Company
for issuance of similar debt with similar terms and maturities.

                                      F-18
<PAGE>

11.  SUPPLEMENTAL CASH FLOW INFORMATION:

     Supplemental disclosure of cash flow information are summarized below for
the years ended December 31:
<TABLE>
<CAPTION>

                                                      1997        1996       1995
                                                   ----------  ----------  ---------
<S>                                               <C>        <C>         <C>
Non-cash financing and investing activities:
  Additions to property and equipment............ $ 2,181,684  $ 9,548,102  2,666,360
  Value ascribed to warrants.....................  29,707,509    2,115,388
  Issuance of shares for licenses................  87,750,000
  Accrued deferred financing costs...............                  300,405    370,617
  Issuance of note payable for certain FCC
    licenses.....................................                           1,500,000
  Exchange of notes for serial preferred stock,
    net of deferred financing costs..............                4,673,186
  Termination of software license agreement......   1,774,087
  Common stock issuable in exchange for note
    receivable...................................     887,500
Interest paid....................................  10,368,374    926,821

</TABLE>
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

 None.

                                      F-19
<PAGE>

                                   PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information relating to the executive officers of the Company is included
in Item 4A of Part I of this Form 10-K.

     Information relating to the directors of the Company is incorporated herein
by reference to the information included under "Election of Directors" and
"Certain Transactions" in the Company's definitive Proxy Statement to be filed
with the Commission in connection with the Company's 1998 Annual Meeting of
Stockholders (the "Proxy Statement").



ITEM 11.  EXECUTIVE COMPENSATION.

     The information set forth under "Compensation" in the Proxy Statement is
incorporated herein by reference.



ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The information set forth under "Common Stock Ownership" in the Proxy
Statement is incorporated herein by reference.

     For the sole purpose of calculating the aggregate market value of voting
stock held by non-affiliates of the Company as set forth on the cover page, it
was assumed that only directors, executive officers and greater than five
percent stockholders as of the calculation date (other than the Landover
Holdings Corporation) constituted affiliates; no acknowledgment by such persons
of affiliate status is implied.



ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The information set forth under "Certain Transactions" in the Proxy
Statement is incorporated herein by reference.



                                    PART IV

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

     (a)  The following documents are filed as part of this report:

          (1)  Consolidated Financial Statements:

               Consolidated Balance Sheets as of December 31, 1997 and 1996.
               Consolidated Statements of Operations for the years ended
               December 31, 1997, 1996 and 1995.
               Consolidated Statements of Stockholders Equity (Deficit) for the
               years ended December 31, 1997, 1996 and 1995.
               Consolidated Statements of Cash Flows for the years ended
               December 31, 1997, 1996 and 1995.


                                     -22-
<PAGE>

          (2)  Financial Statement Schedules:

               None

          (3)  Exhibits

               The following Exhibits are, as indicated on the Exhibit Index,
               either filed herewith or have heretofore been filed with the
               Securities and Exchange Commission and are referred to and
               incorporated herein by reference to such filings.


                                     -23-
<PAGE>

  Exhibit
    No.                     Title
   ------                   ------

     3.1    Amended and Restated Certificate of Incorporation.
     3.2    Restated and Amended Bylaws of Registrant.
     4.1    Specimen of Common Stock Certificate.
     4.2    Indenture relating to the Company's 14% Senior Notes (the "Notes")
            due 2007.
     4.3    Specimen of Note (included in Exhibit 4.2).
     4.4    Collateral Pledge and Security Agreement relating to the Notes.
     4.5    Form of Warrant Agreement in connection with offering of Notes.
     4.6    Specimen of Warrant Certificate in connection with offering of Notes
            (included in Exhibit 4.5).
     4.7    Shareholders Rights Agreement.
     4.8    Form of Rights Certificate.
     9.1    Voting Trust Agreement dated November 5, 1996.
     9.2    Form of Trustee Indemnification Agreement.
     10.1   Employment Agreement between the Company and Vernon L. Fotheringham
            dated December 16, 1995.
     10.2   Amendment No. 1 to Employment Agreement between the Company and
            Vernon L. Fotheringham dated October 17, 1997.
     10.3   Employment Agreement between the Company and Thomas A. Grina, dated
            August 21, 1997.
     10.4   Employment Agreement between the Company and Henry C. Hirsch dated
            October 17, 1997.
     10.5   Change of Control Agreement between the Company and Henry C. Hirsch
            dated October 17, 1997.
     10.6   Form of Director Indemnification Agreement.
     10.7   Company's Restated Equity Incentive Plan, as amended.
     10.8   Company's 1997 Equity Incentive Plan for Non-Employee Directors.
     10.9   Company's 1996 Non-Employee Directors Incentive Stock Option Plan.
     10.10  Second Restated and Amended Registration Rights Agreement dated July
            3, 1996 with ART Licensing and the stockholders of each of ART
            Licensing and the Company.
     10.11  Amendment No. 1 to Registration Rights Agreement dated as of October
            16, 1996.
     10.12  Form of Indemnity Warrant.
     10.13  Form of Subscription Agreement dated March 8, 1996, including Forms
            of Bridge Note and Bridge Warrant.
     10.14  Option Agreement dated July 3, 1996 with Commco, L.L.C.
     10.15  Form of September Bridge Warrant.
     10.16  Form of CIBC Warrants.
     21     Subsidiaries of the Company.
     23     Consent of Independent Accountants.
     27     Financial Data Schedule.
     99     Risk Factors.


   (4)      Reports on Form 8-K

   The Company did not file any reports on Form 8-K during the fourth quarter of
1997.

                                     -24-
<PAGE>

                                   SIGNATURES

     PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED ON THIS 30TH DAY OF
MARCH 1998.

                                    Advanced Radio Telecom Corp

                                    /s/ Thomas A. Grina

                                    By: _________________________________
                                        EXECUTIVE VICE PRESIDENT AND
                                        CHIEF FINANCIAL OFFICER


     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 IN THE CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>

          SIGNATURE                         TITLE                    DATE
<S>                             <C>                             <C>

  /s/ Henry C. Hirsch           Chairman, President, Chief      March 30, 1998
------------------------------  Executive Officer and Director
  HENRY C. HIRSCH

  /s/ Vernon L. Fotheringham    Vice Chairman and Director      March 30, 1998
------------------------------
  VERNON L. FOTHERINGHAM

  /s/ James Cook                Director                        March 30, 1998
------------------------------
  JAMES COOK

  /s/ Mark C. Demetree          Director                        March 30, 1998
------------------------------
  MARK C. DEMETREE

  /s/ Andrew I. Fillat          Director                        March 30, 1998
------------------------------
  ANDREW I. FILLAT

  /s/ James B. Murray, Jr.      Director                        March 30, 1998
------------------------------
  JAMES B. MURRAY, JR.

  /s/ Alan Z. Senter            Director                        March 30, 1998
------------------------------
  ALAN Z. SENTER

  /s/ Thomas A. Grina           Executive Vice President,       March 30, 1998
------------------------------  Chief Financial Officer
     THOMAS A. GRINA
</TABLE>

                                     -25-
<PAGE>

                                 EXHIBIT INDEX
<TABLE>
<CAPTION>

 EXHIBIT
    NO.                        TITLE                                                 PAGE
---------                      -----                                                 ----
<S>        <C>                                                                     <C>
  3.1       Amended and Restated Certificate of Incorporation.(11)
  3.2       Restated and Amended Bylaws of Registrant.(11)
  4.1       Specimen of Common Stock Certificate.(3)
  4.2       Indenture relating to the Company's 14% Senior Notes
              due 2007.(10)
  4.3       Specimen of Note (included in Exhibit 4.2).(10)
  4.4       Collateral Pledge and Security Agreement relating to the Notes.(10)
  4.5       Form of Warrant Agreement in connection with offering of Notes.(10)
  4.6       Specimen of Warrant Certificate in connection with offering of Notes
              of Notes (included in Exhibit 4.5).(10)
  4.7       Shareholders Rights Agreement.(12)
  4.8       Form of Rights Certificate.(12)
  9.1       Voting Trust Agreement dated November 5, 1996.(9)
  9.2       Form of Trustee Indemnification Agreement.(3)
  10.1      Employment Agreement between the Company and Vernon L. Fotheringham,
              dated December 16, 1995.(1)
  10.2      Amendment No. 1 dated October 17, 1997 to Employment Agreement
              between the Company and Vernon L. Fotheringham.(13)
  10.3        Employment Agreement between the Company and Thomas A. Grina dated
               April 26, 1996.(8)
  10.4      Employment Agreement between the Company and Henry C. Hirsch dated
               October 17, 1997.(13)
  10.5      Change of Control Agreement between the Company and Henry C. Hirsch
               dated October 17, 1997.(13)
  10.6      Form of Director Indemnification Agreement.(1)
  10.7      Company's Restated Equity Incentive Plan, as amended.
  10.8      Company's 1997 Equity Incentive Plan for Non-Employee Directors.
  10.9      Company's 1996 Non-Employee Directors Incentive Stock Option
               Plan.(1)
  10.10     Second Restated and Amended Registration Rights Agreement dated July
               3, 1996 with ART Licensing and the stockholders of each of ART
               Licensing and the Company.(2)
  10.11     Amendment No. 1 to Registration Rights Agreement dated as of October
               16, 1996.(9)
  10.12     Form of Indemnity Warrant.(1)
  10.13     Form of Subscription Agreement dated March 8, 1996, including Forms
              of Bridge Note and Bridge Warrant.(2)
  10.14     Option Agreement dated July 3, 1996 with Commco, L.L.C.(2)
  10.15     Form of September Bridge Warrant.(9)
  10.16     Form of CIBC Warrants.(7)
  21        Subsidiaries of the Company.(2)
  23        Consent of Independent Accountants.
  27        Financial Data Schedule.
  99        Risk Factors.

</TABLE>
--------

                                     -26-
<PAGE>

(1)  Previously filed with the Company's Registration Statement on Form S-1,
     effective November 5, 1996 (SEC Reg. No. 333-04388) and incorporated by
     reference herein.
(2)  Previously filed with Amendment 1 to the Company's Registration Statement
     on Form S-1, effective November 5, 1996 (SEC Reg. No. 333-04388) and
     incorporated by reference herein.
(3)  Previously filed with Amendment 2 to the Company's Registration Statement
     on Form S-1, effective November 5, 1996 (SEC Reg. No. 333-04388) and
     incorporated by reference herein.
(4)  Previously filed with Amendment 4 to the Company's Registration Statement
     on Form S-1, effective November 5, 1996 (SEC Reg. No. 333-04388) and
     incorporated by reference herein.
(5)  Previously filed with Amendment 6 to the Company's Registration Statement
     on Form S-1, effective November 5, 1996 (SEC Reg. No. 333-04388) and
     incorporated by reference herein.
(6)  Previously filed with Amendment 7 to the Company's Registration Statement
     on Form S-1, effective November 5, 1996 (SEC Reg. No. 333-04388) and
     incorporated by reference herein.
(7)  Previously filed with Amendment 8 to the Company's Registration Statement
     on Form S-1, effective November 5, 1996 (SEC Reg. No. 333-04388) and
     incorporated by reference herein.
(8)  Previously filed with the Company's Registration statement on Form S-1,
     filed May 15, 1996 (SEC Reg. No. 333-03735) and incorporated by reference
     herein.
(9)  Previously filed with the Company's Registration Statement Form S-1,
     effective February 3, 1997 (SEC Reg. No. 333-19295) and incorporated by
     reference herein.
(10) Previously filed with Amendment 2 to the company's Registration Statement
     on Form S-1, effective February 3, 1997 (SEC Reg. No. 333-19295) and
     incorporated by reference herein.
(11) Previously filed with the Company's Annual Report on Form 10-K for the
     fiscal year ended December 31, 1996 and incorporated by reference herein.
(12) Previously filed with the Company's Registration Statement on Form 8-A,
     filed on July 10, 1997 (SEC Reg.  No. 000-21091) and incorporated by
     reference herein.
(13) Previously filed with the Company's Quarterly Report on Form 10-Q, dated
     November 14, 1997.  (SEC Reg. No. 000-21091) and incorporated by reference
     herein.

                                     -27-