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

                                   FORM 10-KSB

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934 (No Fee Required)

                   For the fiscal year ended December 31, 1998

[ ]  TRANSITION  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
     EXCHANGE ACT OF 1934 (No Fee Required)


For the transition period from ____________ to ____________


                           Commission file number 1-12937


                         ALL COMMUNICATIONS CORPORATION
             (Exact name of registrant as specified in its charter)


            New Jersey                                   22-3124655
     (State of incorporation)                      I.R.S. Employer Number


            225 Long Avenue, P.O. Box 794, Hillside, New Jersey 07205
                    (Address of Principal Executive Offices)


                                  973-282-2000
              (Registrant's Telephone Number, Including Area Code)


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


 Common Stock, no par value per share
Class A Common Stock Purchase Warrants               See * below
--------------------------------------           ---------------------
    Title of each class                          Name of each exchange 
                                                  on which registered

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

                                      None

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  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 in response to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [X]

     State  issuer's  revenues  for its most  recent  fiscal  year:  $13,217,083
     Aggregate market value of Common Stock held by nonaffiliates as of March 1,
     1999:  $3,318,750

     The number of shares  outstanding  of the  registrant's  Common Stock as of
March 1, 1999 was 4,910,000.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Registrant's definitive Proxy Statement for its 1999 Annual
Meeting  of  Stockholders  are  incorporated  by  reference  to Part III of this
report.


*    Effective  February 9, 1999,  the SEC granted the Company's  application to
     withdraw its  securities for listing and  registration  on the Boston Stock
     Exchange.  The  securities  continue  to be  listed  on the OTC  Electronic
     Bulletin Board. See Item 5 herein.

<PAGE>

                                     PART I


The  statements  contained in Part I and Part II herein,  other than  historical
information,  are or may be deemed to be  forward-looking  statements within the
meaning of Section 17A of the Securities Act of 1933, as amended and Section 21E
of the Securities Exchange Act of 1934, as amended,  and involve factors,  risks
and  uncertainties  that may  cause the  actual  results  of All  Communications
Corporation  (the  "Company") in future periods to differ  materially  from such
statements.  These factors, risks and uncertainties include the relatively short
operating  history of the Company;  market  acceptance and  availability  of new
products;  the non-binding and nonexclusive  nature of reseller  agreements with
manufacturers;  rapid  technological  change  affecting  products  sold  by  the
Company;  the impact of competitive products and pricing, as well as competition
from other resellers;  possible delays in the shipment of new products;  and the
availability of sufficient  financial  resources to enable the Company to expand
its operations.

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

     All  Communications  Corporation  and its wholly owned  subsidiary  AllComm
Products  Corporation  ("APC")  (collectively,  the "Company") is engaged in the
business  of  selling,  installing,  and  servicing  voice  (including  computer
telephony integration ("CTI")),  videoconferencing  communications  systems, and
structured  wiring  systems,  concentrating  in the  commercial  and  industrial
marketplace.  As a turnkey  provider,  the Company provides design,  production,
network implementation,  installation,  training and post-installation  support.
The  Company's  products and services  are intended  principally  for use by all
business and governmental  entities.  In connection with the sale and service of
its   products,   the  Company   also   markets   other   peripheral   data  and
telecommunications products.

     The  Company  was  organized  as a New  Jersey  corporation  in  1991.  The
Company's  headquarters  are located at 225 Long Avenue,  Hillside,  New Jersey,
07205.

INDUSTRY OVERVIEW

     VOICE  COMMUNICATIONS.  Advances in  telecommunications  technologies  have
facilitated the development of increasingly  sophisticated telephone systems and
applications.   Telecommunications  systems  have  evolved  from  simple  analog
telephones to sophisticated digital systems and applications. Users increasingly
rely  upon  a   variety   of   applications,   including   conference   calling,
speakerphones,   voice   processing   and   automated   attendant,   to  improve
communications  within  their  organizations  and with  customers  and  vendors.
Digital   technology   has   facilitated   the   integration  of  computing  and
telecommunications  technologies,  which  has  made  possible  a  number  of new
applications  that further enhance  productivity.  Examples of CTI  applications
include  caller  I.D.,  where a caller's  telephone  number is  displayed on the
telephone,  call  accounting,  which permits  accounting for telephone usage and
toll calls,  electronic data interchange  between  customers and vendors and the
use of automatic number  identification  coupled with "database  look-up," where
customer  information is retrieved  automatically  from a computerized  database
when the customer calls.

     Historically,   CTI  technologies   and   applications   were  utilized  in
conjunction with large telecommunications systems. However, small to medium size
businesses and other  organizations,  as well as small to medium size facilities
of larger organizations, are requiring and seeking out telecommunication systems
with advanced CTI features and applications at increasingly  lower price points,
in order to improve efficiency and enhance competitiveness.

                                       2

<PAGE>



     As the  telecommunications  needs of businesses  have become more advanced,
the  integration  of the  different  parts of a system has  become  increasingly
complex.   The  system   integration,   service  and  support   capabilities  of
telecommunications  suppliers have become significant  competitive  factors.  In
order to meet the needs of end users,  suppliers  such as the Company  have been
increasingly required to develop close relationships with their customers.

     VIDEOCONFERENCING.    Videoconferencing    communications    entails    the
transmission  of video and audio  signals and  computerized  data between two or
more locations through a digital  telecommunication  network.  Videoconferencing
communications  systems were first  introduced in the late 1970's in the form of
specialized  dedicated  conference  rooms  outfitted with  expensive  electronic
equipment  and  requiring  trained  operators.  Signals  were  transmitted  over
dedicated  transmission  lines  established  between  fixed  locations.   Market
acceptance of early systems was limited  because of the low quality of the video
output,  as well  as the  high  hardware  and  transmission  costs  and  limited
availability of transmission facilities.

     Technological developments in the 1980's resulted in a dramatic increase in
the quality of video  communications,  as well as a substantial reduction in its
cost. The proliferation of switched digital networks, which transmit digital, as
opposed to analog signals,  eliminated the requirement of dedicated transmission
lines.  Advances  in data  compression  and  decompression  technology,  and the
introduction  of devices for separating and  distributing  digital  signals over
several  channels   simultaneously  and  recombining  them  after  transmission,
resulted in products  with  substantially  improved  video and audio quality and
further reduced hardware costs.  Competition among  telecommunications  carriers
during the past decade, together with the expanded use of fiber optic technology
and the  development  of  integrated  switched  digital  networks  (`ISDN") have
further contributed to reduced transmission costs.

     Further  technological  developments  in the  1990's  in  videoconferencing
systems resulted in accepted industry standards, which now enables compatibility
among systems made by different manufacturers. These developments have increased
the  quality  and  features   available  in   videoconferencing   systems  while
significantly decreasing the costs to the customer.

     STRUCTURED  CABLING  SYSTEMS.  A cabling  or wiring  system is a  long-term
infrastructure  investment for voice and high-speed data transmission.  Computer
systems  requiring  high speed or maximum  bandwidth  for  connectivity  options
require  structured  wiring  systems to be in place.  These  systems  can now be
certified to meet connectivity  requirements for management  information systems
as well as have assurance of handling future modifications. The Company believes
that the demand for  structured  wiring  systems is increasing  due to a growing
demand for computer systems and local area networks to run at continually higher
speeds.

PRODUCTS AND SERVICES

     The  Company  provides  turnkey  integrated  voice  and   videoconferencing
solutions to its  customers.  The Company is a reseller of voice  communications
products  manufactured by Lucent  Technologies,  Inc.  ("Lucent"),  the Business
Telephone  System  Division of  Panasonic  Communications  and  Systems  Company
("Panasonic")    and   Active   Voice    Corporation    ("Active   Voice")   and
videoconferencing  products  manufactured by Polycom,  Inc. ("Polycom") and Sony
Electronics Inc.  ("Sony").  The Company sells,  installs and maintains the full
line of voice and videoconferencing products manufactured by these companies.

     VOICE  COMMUNICATIONS.  The Company is a reseller  of Lucent and  Panasonic
digital  key  and  hybrid  telephone  systems,  PBX  telephone  systems,   voice
processing systems and CTI solutions.  Lucent and Panasonic  manufacture digital
key and hybrid telephone systems which contain  multi-featured  fully electronic
digital  telephones,   common  control  units,  central  processing  units,  and
associated common equipment to provide service in the  approximately  2,000 line
and under marketplace.  The Company  distributes Lucent manufactured PBX systems
under the name Definity which has a capacity  expandable up to 25,000 ports. The
Company also distributes a Panasonic  manufactured PBX system under the name DBS
576 with a maximum  capacity of 576 ports. A key telephone  system provides each
telephone  with direct  access to  multiple  outside  trunk  lines and  internal
communications  through intercom lines. A PBX (private branch exchange)  system,
through a central  switching  system,  permits the  connection  of internal  and
external lines. A hybrid switching  systems provides,  in a single system,  both
key  telephone and PBX  features.  Key telephone  equipment may be used with PBX
equipment.

                                       3

<PAGE>


     The Company sells fully integrated voice processing systems manufactured by
Lucent,  Panasonic and Active Voice.  The systems range from 2 to 64 voice ports
and up to 330 hours of message  storage.  The systems have  automated  attendant
features  which  allow for  incoming  calls to be  answered  electronically  and
distributed to specific  extensions  without the use of a switchboard  operator.
The systems can be interactive  with display  telephone sets.  System users have
the ability to access stored messages from any touch-tone telephone. The systems
have the capability to automatically  notify a user outside the system of urgent
messages.  The systems have  additional  features which can be customized to the
needs of the end user.

     Several  of  Lucent  and  Panasonic   systems  support  open   architecture
interfaces  that allow  external  computers  to interact and control the systems
through industry standard interfaces. The systems support an RS-232 system level
interface,  an RS-232 Hayes based desktop  interface and a Windows  Dynamic Data
Exchanges (DDE) interface.  The systems have Developer  Toolkits  available that
include  the  detailed   interface   specifications,   applications   notes  and
development tools to assist third party software  developers to develop vertical
market CTI applications for the products.  Applications include database look-up
(which  utilizes   caller-ID   information  to  retrieve  customer   information
automatically from a computerized  database),  automated attendant,  interactive
voice  response and call  accounting  (which permits the monitoring of telephone
usage  and toll  cost).  Several  of the  systems  support  Microsoft  Telephone
Application   Programming   Interface  (TAPI)  and  Novell  Telephony   Services
Applications  Programming Interface (TSAPI). There are Windows-based  interfaces
available   for  personal   computers   to   facilitate   installation,   system
configuration and programming.

     The Company sells,  installs and services Panasonic products throughout the
United  States both  through  employees of the Company and  subcontractors.  The
Company  currently  sells Lucent  products  through its direct sales force,  and
installs and services Lucent products both through  employees of the Company and
nationwide  through  subcontracting  arrangements  with Lucent directly and with
other Lucent dealers.

     The Company also sells,  installs,  and maintains  peripheral equipment and
components  manufactured  by other  vendors.  Such  equipment and components are
readily available through multiple manufacturers and suppliers.

     VIDEOCONFERENCING.  The Company began selling videoconferencing products in
1994. The Company provides Sony and Polycom videoconferencing systems for United
States  customers on a global basis,  with a concentration  in the  Northeastern
United States. The Company's customers include business,  education, health care
and government  agencies.  The Company:  (i) provides its customers with systems
produced  by both  Sony  and  Polycom,  worldwide  manufacturers  of room  based
videoconferencing  equipment,  and ancillary  equipment  manufactured by others,
(ii) selects and integrates  those systems and components into complete  systems
designed to suit each customer's particular communications  requirements,  (iii)
develops  custom  software  and  hardware  components  when  necessary  and (iv)
provides  training  and other  continuing  services  designed to insure that its
customers fully and efficiently utilize their systems. In 1998, the Company sold
and installed over 300  videoconferencing  systems, as compared to approximately
100 systems in 1997.

     In  January   1999,   the  Company   executed  an  agreement   with  Sprint
Communications  Company  LP to act as an  authorized  sales  agent for  Sprint's
advanced  network and  videoconferencing  services in  Sprint's  Video  Partners
Program.  This  agreement  enables the  Company to provide a  telecommunications
network  service  component to its overall line of products and services.  Under
the agreement,  the Company  receives a percentage of Sprint's  monthly  charges
billed  to the  Company's  customers  for usage of  Sprint's  telecommunications
network.

     STRUCTURED  CABLING SYSTEMS.  The Company offers structured cabling systems
by NORDX/CDT and Lucent. Structured cabling systems offer state of the art, high
bandwidth,  standards based wiring  infrastructure  with a long life cycle which
support  current  technologies,  and also can support  higher  speeds for future
technologies.  Structured cabling systems can be implemented for a few end users
or up to thousands of end users per  installation  depending on the needs of the
end user.

During the fiscal years ended December 31, 1998 and 1997,  approximately 54% and
52%, respectively, of the Company's total sales were attributable to the sale of
voice communications equipment, and approximately 46% and 48%, respectively,  of
the Company's  total sales were  attributable  to the sale of  videoconferencing
communications equipment.


                                       4
<PAGE>


STRATEGY

     The  Company's  objective is to increase  revenue  through the expansion of
sales to new customers and sales of additional products and services to existing
customers.  The Company seeks to achieve this  objective  by: (i)  strengthening
business    relationships    with    customers   by   offering    leading   edge
telecommunications  solutions,  (ii) expanding sales and marketing efforts,  and
(iii)  training  technical and sales staff to enable the Company to maintain its
high level of expertise.

     The Company has aligned  itself  with  industry-leading  manufacturers  and
service providers of multi-medium  communications  through reseller  agreements,
distribution  agreements and partnering alliances.  These relationships position
the  Company to offer its  customers  a wide range of  technologically  advanced
products and services.  The Company uses its expertise to customize the products
and services as an integrated solution for its customers communications needs.

     The Company is  aggressively  selling its  products and services to new and
existing customers. During 1998, the Company opened two additional sales offices
and hired 13 additional sales people.  Additionally,  the Company  increased the
amount of business it does with Cendant  Corp.  and  established  a  significant
relationship with a new customer, Universal Health Services, Inc.

     The Company conducts  comprehensive training to seek to ensure expertise in
system design, product knowledge, installation and support. The Company believes
that customer satisfaction is what differentiates it from other resellers and is
essential in attracting  new  business,  gaining  repeat  business from existing
customers and  maintaining  its  alliances  with the leading  manufacturers  and
service providers in the industry.

RESELLER AGREEMENTS

     In  November  1997,  the  Company  entered  into  a two  year  nonexclusive
distribution agreement, with renewal options, with Polycom, Inc. ("Polycom") for
the  Polycom  ViewStation(R)  group  videoconferencing  system  and the  Polycom
ShowStation(R) IP integrated  conference  projector.  This agreement enables the
Company   to   market   and   sell  a  full   range  of   Polycom   manufactured
videoconferencing, audioconferencing and dataconferencing products.

     In November 1997, the Company signed a one year  nonexclusive  distribution
agreement with Lucent to sell,  install and maintain Lucent Partner,  Legend and
Definity telephone systems,  voice mail and CTI software as an authorized Lucent
dealer.  The Company also has authority to resell,  install and maintain  Lucent
peripheral products. This agreement has been renewed through March 2001.

     The Company has an  agreement  with  Panasonic  authorizing  the Company to
serve as its  nonexclusive  reseller  in the United  States.  The  agreement  is
automatically  renewable  for  successive  one-year  terms unless  terminated by
either party upon at least 30 days' prior notice,  or  immediately  by Panasonic
upon  written  notice  to  the  Company  if the  Company  is in  default  in the
performance of its  obligations  under the agreement,  or upon the bankruptcy or
insolvency of the Company

MAJOR CUSTOMERS

     The Company continues to sell its telephone and voice processing systems to
the  real  estate   brokerage   Franchisees  of  Cendant  Corp.   (formerly  HFS
Incorporated) pursuant to the Company's Preferred Vendor Agreement.  Sales under
this  agreement  accounted  for 12% and 15% of net  revenues for fiscal 1998 and
1997, respectively.

     In 1998, the Company established  significant  customer  relationships with
Universal Health Services, Inc., for Lucent and Sony products.  Universal Health
Services accounted for 11% of net revenues for fiscal 1998.

SALES AND MARKETING

     The  Company  markets  and sells its  products  and  services  directly  to
customers  through  a sales  and  marketing  organization  supported  by  sales,
technical and training  personnel versed in the  specifications  and features of
the voice communications and  videoconferencing  systems sold to customers.  The
Company markets both voice communications and videoconferencing  systems through
its direct  sales  force.  The Company  provides  training to its sales force to
maintain the expertise necessary to effectively market and promote the systems.

     The manufacturers,  which the Company represents,  furnish the Company with
sales,  advertising  and  promotional  materials,  which  the  Company  in  turn
furnishes to its existing  customers and  prospective  customers in  conjunction
with sales promotion programs of the manufacturers.  The Company maintains up to
date  systems  for  demonstration  and  promotion  to  customers  and  potential
customers.  Technical and training  personnel  attend  installation  and service
training  sessions  offered  by its  manufacturers  from time to time to enhance
their  knowledge  and  expertise  in the  installation  and  maintenance  of the
systems.



                                       5
<PAGE>


     The   Company   hosts   seminars   for  the   purposes   of   demonstrating
videoconferencing   systems  to  its  prospective  customers,   and  to  provide
prospective customers the opportunity to learn more about the Company's products
and services.

     The  Company   provides   customers   of  both  voice   communication   and
videoconferencing  systems with a full complement of services to ensure customer
satisfaction and optimal utilization of the systems. As a preliminary  component
of a sale to a customer or prospective customer, the Company provides consulting
services  in order to assess  the  customer's  needs and  specifications  and to
determine the most effective method to achieve those needs. Upon delivery of the
system,  Company  employees  install  and test the  equipment  to make  sure the
systems are fully  functional.  In  situations  where a customer is located at a
great distance from the Company's offices,  the Company,  on an as-needed bases,
will  engage the  services  of an  installation  subcontractor  located in close
geographic  proximity  to the  customer,  for the  installation  and  testing of
equipment sold by the Company to the customer.  The retention of an installation
subcontractor  located in close  proximity  to a customer  benefits the customer
through quick and cost-effective installation of the system. After the equipment
is  functional,  the Company  provides  training to all levels of the customer's
organization.  Training  includes  instruction  in systems  operation  and, with
respect to videoconferencing systems, planning and administration of meetings.

     The Company  maintains a 24-hour  toll-free  technical support hotline that
customers  may call.  The  Company  provides 7 by 24  real-time  support for its
global videoconferencing customers. The Company also provides onsite support and
maintenance which includes the repair and/or replacement of equipment.

     In  February  1999,  the  Company   established  a  web  site,  located  at
www.allcommunications.com.   Through  the  site,   users  can  access   detailed
information  on the products and services  offered by the Company.  During 1999,
the Company intends to sell products directly through the site.

EMPLOYEES, CONSULTANTS AND SUBCONTRACTORS

     As of March 1, 1999, the Company had fifty-four  (54) full-time  employees,
as well as a network of fifty (50) consultants and  installation  subcontractors
who are  available on an as-needed  basis for  marketing  support and to provide
contract  installation.  Twenty (20) of the  Company's  employees are engaged in
marketing and sales,  twenty (20) in installation  service and customer  support
and fourteen (14) in finance and administration. None of the Company's employees
are  represented  by a labor  union.  The  Company  believes  that its  employee
relations are good.

COMPETITION

     The  voice  and  videoconferencing   communications  industries  have  been
characterized  by pricing  pressures  and business  consolidations.  The Company
competes with other resellers,  as well as manufacturers of voice communications
and   videoconferencing   systems,  many  of  which  are  larger,  have  greater
recognition in the industry,  a longer operating  history and greater  financial
resources   than  the  Company.   The   Company's   competitors   in  the  voice
communications sector include Lucent,  Northern Telecom,  Toshiba America, Inc.,
Siemens  Corporation and NEC  Corporation.  The Company also competes with other
dealers  of voice  communication  products.  The  Company's  competitors  in the
videoconferencing communications sector include Picturetel Corporation, Tandberg
Inc., VTEL Corporation,  MCI Worldcomm and other dealers.  Existing  competitors
may continue to broaden their product lines and expand their retail  operations,
and potential  competitors  may enter into or increase  their focus on the voice
and/or videoconferencing communications market, resulting in greater competition
for the  Company.  In  particular,  management  believes  that as the demand for
videoconferencing  communications  systems  continues  to  increase,  additional
competitors,  many of which also will have greater  resources  than the Company,
will enter the videoconferencing market.



                                       6
<PAGE>


     The  Company  believes  that its  technical  expertise  and  commitment  to
customer service and support allow it to compete favorably. The Company conducts
comprehensive  sales  and  product  training  for all its  sales  and  marketing
personnel.  The Company  believes  that such  training  results in its employees
having a high level of product and  industry  knowledge  which makes the Company
more  attractive  to end users.  The Company also strives to provide  prompt and
efficient  installation,  customer  training and after sales  service  which the
Company believes results in repeat business as well as new referrals.

ITEM 2. DESCRIPTION OF PROPERTY

     The Company's  headquarters are located at 225 Long Avenue,  Hillside,  New
Jersey,  07205. These premises consist of 7,180 square feet of office space, and
7,400 square feet of secured warehouse facilities. The term of this lease is for
a period  of five  years  expiring  on May 31,  2002.  The base  rental  for the
premises  during the term of the lease is $87,040 per annum.  In  addition,  the
Company is also obligated to pay its share of the Landlord's  operating expenses
(i.e.,  those costs or expenses  incurred by the Landlord in connection with the
ownership,  operation,  management,  maintenance,  repair and replacement of the
premises,  including,  among other things,  the cost of common area electricity,
operational  services and real estate taxes). The Company has an option to renew
the lease for an additional  term of five years,  provided the Company is not in
default  under  the  terms of the  lease at the time of  renewal.  The  Hillside
premises  serve as the Company's  headquarters  and are utilized for  executive,
administrative and sales functions, the demonstration of the Company's voice and
videoconferencing systems and the warehousing of the Company's inventory. At the
present  time,  there is  additional  adjoining  space in both  the  office  and
warehouse areas should the Company seek to expand this facility.

     The Company maintains an office at 35 Nutmeg Drive, Trumbull,  Connecticut,
16611 under a written  lease for a five-year  term  expiring  November 30, 2002.
This facility is used primarily as a sales and demonstration office. It consists
of approximately  1,820 square feet at an annual rental of $20,020.  In addition
the  Company is required to pay its share of  lessor's  operating  expenses  and
electricity.

     During 1998,  the Company  opened an office on 116 John St., New York City,
New York 10038 and on 9257 Lee Avenue, Manassas, Virginia 20110. Both facilities
are used  primarily  as  sales  and  demonstration  offices.  The New York  City
facility  consists  of  approximately  2,000  square  feet at an annual  rent of
$47,500.  The term of the lease is five years. The Manassas facility consists of
approximately  1,000 square feet under a one-year lease term that continues on a
month-to-month basis. Monthly rent is $800.

     The Company  maintains  various  demonstration  facilities  throughout  the
northeast,  Atlantic  coast and  Pacific  coast  areas.  It leases  premises  in
Washington,  D.C. at 1130 Connecticut Avenue, NW Suite 425, 20036. The occupancy
is under an informal  month to month lease for which the Company  pays a monthly
rental of $2,500.  There are several  other  locations not under lease which the
Company  uses,  from time to time,  for  demonstration  purposes in exchange for
permitting the lessor to use the demonstration  equipment and in some cases, the
Company  reimburses  the lessor for the use of ISDN lines.  These sites are 2974
Scott Blvd.,  Santa Clara, CA 95054;  1301 West Copans Road,  Suite F-1, Pompano
Beach, Florida; The Chamber of Commerce Building,  200 South Broad Street, Suite
700,  Philadelphia,  Pennsylvania,  19102 and 331  River  Street,  West  Newton,
Massachusetts, 02165.

ITEM 3. LEGAL PROCEDINGS

     On July 16, 1998,  MaxBase,  Inc. filed a Complaint against the Company and
APC in the Superior Court of New Jersey,  Law Division,  in Bergen  County.  The
Complaint alleges that the Company breached its agreement with MaxBase Inc., for
Maxshare 2 units by failing to meet the required  minimum  purchase  obligations
thereunder.  The Complaint  further alleges  misrepresentation  and unfair trade
practices.  The  Complaint  also seeks to enjoin the Company from  enforcing any
rights the Company has under the  agreement.  Maxbase claims damages of $508,200
in lost profits for units not  purchased  and $945,300 in lost profits for units
sold to the Company  below market  price,  as well as  unspecified  punitive and
treble  damages.  In March 1999,  the plaintiff  added claims for defamation and
tortious  interference.  A trial is expected to occur in late 1999.  The Company
believes the claims by MaxBase are without merit and intends to fully defend the
suit and  assert  its  rights  under  the  agreement.  The  Company  has filed a
counterclaim for alleged defects in the Maxshare 2 units.




                                       7
<PAGE>


     On  November  24,  1997,  Moutain  Plaza  Associates,  the  landlord of the
Company's  former  headquarters,  filed a  complaint  against the Company in the
Superior  Court of New Jersey,  Law  Division,  in Essex  County.  The  landlord
alleges  that the Company  defaulted  on and  breached its lease by vacating the
premises during the lease term, and seeks  compensatory  damages of $233,720 and
recovery of legal costs. The Company believes it has meritorious defenses to the
claims and has asserted counterclaims against the plaintiff. A trial is expected
to occur in May 1999. In the opinion of management,  the ultimate outcome of the
lawsuit is not  expected to have a material  impact on the  Company's  financial
condition or results of operations.

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

     None

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Common Stock has been listed and traded on the OTC Electronic  Bulletin
Board since April 28, 1997 under the symbol  "ACUC".  The  following  table sets
forth the high and low bid prices of a share of Common Stock for each quarter as
set forth below.  Quotations  may reflect  inter-dealer  prices,  without retail
mark-up, mark-down or commission and may not represent actual transactions.


                           1997                         High      Low
        ----------------------------------------------------------------
        2nd quarter (from April 28, 1997)               9-1/4     5-7/8
        3rd quarter                                    10-1/4     3-1/2
        4th quarter                                     4-3/8       1/2


                          1998                          High      Low
        ----------------------------------------------------------------
        1st quarter                                     1-7/16       3/8
        2nd quarter                                    1-11/16    1-1/16
        3rd quarter                                      1-1/8    1-1/16
        4th quarter                                     1-1/16       1/2


     The  Common  Stock also had been  listed  and  traded on the  Boston  Stock
Exchange  ("BSE")  from April 28, 1997 through the close of business on February
8, 1999,  under the symbol  "CMN".  Effective  at the  opening  of  business  on
February 9, 1999, the Securities and Exchange  Commission  granted the Company's
application  to withdraw  the Common Stock and  Redeemable  Class A Common Stock
Purchase  Warrants for listing and  registration  on the BSE.  The  overwhelming
percentage of trading in the Company's  securities  occurs on the OTC Electronic
Bulletin Board. In view of the costs and expenses attendant upon continuing such
listing,  particularly  in view  of the  paucity  of  trading  of the  Company's
securities  on the BSE, the Company  decided to withdraw its listing on the BSE.
The  following  table sets forth the high and low closing  prices for a share of
Common Stock for each quarter as set forth below.

                            1997                        High      Low
        ----------------------------------------------------------------

         2nd quarter (from April 28, 1997)                   9         9
         3rd quarter                                    5-1/16     4-5/8
         4th quarter                                     4-5/8   1-27/32


                            1998                        High      Low
        ----------------------------------------------------------------

        1st quarter                                      4-5/8   1-27/32
        2nd quarter                                     1-7/16     1-1/4
        3rd quarter                                     1-5/32    1-5/32
        4th quarter                                     1-5/32    1-5/32


     The Company has not  declared  or paid any cash or stock  dividends  on the
Common Stock and is prohibited  from doing so under its working  capital  credit
facility.



                                       8
<PAGE>


     As of March 18,  1999,  there  were 38  record  holders  of  Common  Stock.
Institutions,  as holders of record, may hold Common Stock in nominees or street
name accounts on behalf of multiple beneficial owners.

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

     The following  discussion  should be read in conjunction with the Company's
financial  statements and the notes thereto.  The discussion of results,  causes
and trends should not be construed to imply any conclusion  that such results or
trends will necessarily continue in the future.

     The statements contained herein, other than historical information,  are or
may be deemed to be  forward-looking  statements and involve factors,  risks and
uncertainties  that may cause the Company's  actual results in future periods to
differ materially from such statements.  These factors,  risks and uncertainties
include the relatively short operating history of the Company; market acceptance
and  availability of new products;  the non-binding and  nonexclusive  nature of
reseller  agreements with manufacturers;  rapid  technological  change affecting
products sold by the Company; the impact of competitive products and pricing, as
well as competition from other resellers; possible delays in the shipment of new
products;  and the availability of sufficient  financial resources to enable the
Company to expand its operations.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1998 ("FISCAL 1998") COMPARED TO YEAR ENDED DECEMBER 31,
1997 ("FISCAL 1997")

     NET REVENUES. Net revenues increased in fiscal 1998 by $6,292,000,  or 91%,
to $13,217,000,  a record level for a twelve-month period, as compared to fiscal
1997 revenues of $6,925,000.  Sales were higher in both the voice communications
and videoconferencing categories.

     Voice  communications-Sales  of voice communications  products and services
increased in fiscal 1998 by  $3,497,000,  or 97%, to  $7,146,000  as compared to
fiscal 1997  revenues of  $3,649,000.  The increase was due in part to increased
marketing  efforts,  including the hiring of additional  sales personnel in 1998
and 1997, as well as increased  revenue generated by the sale of Lucent products
to a significant  new customer,  Universal  Health  Services,  Inc.  Revenues in
fiscal  1998  were  derived  primarily  from the sale of  Lucent  and  Panasonic
telecommunications  systems and software packages.  Revenues in fiscal 1997 were
derived primarily from the sale of Panasonic systems.  Sales under the Company's
Preferred  Vendor  Agreement  with  Cendant  accounted  for  12%  and 15% of net
revenues for fiscal 1998 and 1997, respectively.

     In 1998, the Company established  significant  customer  relationships with
Universal Health Services,  Inc. for Lucent and Sony products.  Universal Health
Services  accounted  for  11% of net  revenues  for  fiscal  1998.  The  Company
anticipates  continued growth in the voice communications  division for the year
ending  December  31, 1999 due in part to  projected  revenue  increases  in the
structured cable division and from the Company's  relationships with Cendant and
Universal Health Services.

     Videoconferencing-Sales  of  videoconferencing  systems increased in fiscal
1998 by  $2,795,000,  or 85%, to $6,071,000 as compared to $3,276,000 for fiscal
1997. The company increased its  videoconferencing  customer base in fiscal 1998
through the introduction of lower cost videoconferencing systems manufactured by
Polycom. The reduction in the average selling price of videoconferencing systems
has been more than offset by the increase in units sold. The Company anticipates
the  continued  expansion of its customer  base  throughout  1999, as lower cost
systems become more  affordable to a larger group of customers.  Increased sales
of these lower cost systems,  however, have started to lower the Company's gross
margins.  The Company  anticipates selling peripheral items at higher margins to
help maintain the Company's historical gross margin levels.

     GROSS  MARGINS.  Gross margin dollars  increased by $1,741,000,  or 86%, to
$3,769,000 or 29% of net revenues in fiscal 1998, as compared to $2,028,000,  or
29% of net revenues in fiscal 1997. Margins as a percentage of total revenue are
expected to  fluctuate,  depending on such factors as sales  volume,  the mix of
product  revenues,  and changes in fixed costs  during a given  period.  Cost of
revenues consists primarily of net product, direct labor,  insurance,  warranty,
and  depreciation  costs.  The increase in gross margin dollars is the result of
increased revenue.



                                       9
<PAGE>


     SELLING. Selling expenses, which include sales salaries, commissions, sales
overhead, and marketing costs,  increased by $1,402,000,  or 77%, to $3,214,000,
or 24% of net revenues in fiscal 1998,  as compared to  $1,812,000 or 26% of net
revenues in fiscal 1997.  The dollar  increase was due in part to higher  salary
expense  resulting  from  additions  to sales  personnel  in 1998,  the costs of
maintaining a new sales office in New York City, establishing a structured cable
division,  as well  as  higher  commission-based  videoconferencing  sales.  The
Company added 13  salespeople  during 1998. The Company  expects  selling costs,
reflected in dollars,  to increase in 1999 due to projected  revenue  growth and
investments in product marketing.

     GENERAL AND ADMINSTRATIVE. General and administrative expenses increased by
$374,000,  or 40%, to  $1,310,000,  or 10%, of net revenues in fiscal  1998,  as
compared  to  $936,000,  or 14%,  of net  revenues  in fiscal  1997.  The dollar
increase is  attributable  primarily to higher salary  expense and related costs
associated  with the  increase  in  administrative  staff  necessary  to  manage
expanded operations,  higher occupancy costs and other administrative  overhead.
For the foreseeable future, the Company expects general and administrative costs
to decrease, as a percentage of revenues, as revenue growth continues.

     OTHER  (INCOME)  EXPENSES.  In 1998,  this  category  includes  $20,000  of
amortization  of deferred  financing costs related to the working capital credit
facility as compared with a  non-recurring  charge of $315,000  associated  with
bridge financing in 1997 (See Notes to the Consolidated  Financial  Statements).
The Company also  reported  interest  income of $56,000 and $118,000 in 1998 and
1997,  respectively.  The  reduction  in  interest  income  is a  result  of the
Company's  use of cash  raised  in 1997 to fund  operations.  The  Company  also
reported interest expense of $57,000 and $28,000 in 1998 and 1997, respectively.
The  increase in interest  expense is a result of the Company  using its working
capital credit facility to fund growth. The Company expects interest expense, in
1999, to increase over 1998 levels due to expected increases in bank borrowings.

     INCOME  TAXES.  The income tax provision in 1998  consists  principally  of
amounts due to various state taxing  authorities.  The 1997  provision  includes
refundable taxes of $47,000 from the carryback of the current year's federal net
operating  loss.  The Company has  established  a valuation  allowance to offset
additional tax benefits from the carryforward of unused federal operating losses
of $829,000  and other  deferred  tax assets,  due to the  uncertainty  of their
realization.  Management evaluates the recoverability of deferred tax assets and
the valuation allowance on a quarterly basis. At such time it is determined that
it is more  likely  than  not that  deferred  tax  assets  are  realizable,  the
valuation allowance will be appropriately reduced.

     NET LOSS.  The Company  reported a net loss in fiscal 1998 of $777,000,  or
$.16 per  share as  compared  to  $892,000  or $.21 per  share in  fiscal  1997.
Increased  costs  associated  with  expanded  operations  have more than  offset
continued increases in net revenues.

Liquidity and Capital Resources

     At  December  31,  1998 the  Company  had  working  capital of  $5,702,000,
including approximately $326,000 in cash.

     Net cash used by  operating  activities  in fiscal 1998 and fiscal 1997 was
$3,842,000 and $2,004,000,  respectively.  During the year,  accounts receivable
levels rose by  $2,277,000  due to a 91% increase in revenues.  The Company also
increased  inventory  levels by $2,442,000.  These  increases more than offset a
$1,023,000 increase in accounts payable and accrued expenses. The Company funded
operating cash needs from cash reserves and through  borrowings under its credit
facility.  The Company  believes that its credit  facilities  together with cash
generated from operations will be sufficient  enough to provide adequate working
capital during 1999.

     The Company continues to stock significant inventories of selected products
to maintain favorable vendor pricing and to ensure product  availability to meet
sales projections. Inventories also include approximately $394,000 of MaxShare 2
Units.  During  1998,  the  Company  identified  performance  problems  with the
MaxShare 2 product in certain applications and believes that MaxBase,  Inc., the
supplier of MaxShare 2, has a  contractual  obligation  to correct any technical
defects in the  product.  Pending  resolution  of this  matter,  the Company has
ceased  ordering  product  under its purchase  commitment,  and has also limited
shipments to  distribution  partners.  On July 16, 1998,  MaxBase,  Inc. filed a
Complaint against the Company and APC for breach of contract, misrepresentations
and unfair  trade  practices.  The  Company  believes  the claims by MaxBase are
without  merit and intends to fully  defend the suit and assert its rights under
the agreement. See "Legal Proceedings".



                                       10
<PAGE>


     Investing  activities for 1998 included  purchases of $330,000 for building
improvements,  office furniture,  and equipment.  The more significant purchases
include computer systems necessary to upgrade the Company's information systems,
demonstration   equipment  used  to  sell  both   videoconferencing   and  voice
communications  equipment,  and loaner  equipment  used to satisfy  warranty and
maintenance requirements. Investing activities used $399,000 of cash in 1997.

     Cash flows from financing  activities  provided net cash of $2,330,000.  In
May 1998, the Company  closed on a $5,000,000  working  capital credit  facility
with an  asset-based  lender.  Loan  availability  is based  on 75% of  eligible
accounts  receivable,  as defined and 50% of eligible  finished goods inventory,
with a cap of $1,200,000 on inventory  financing.  Outstanding  borrowings  bear
interest at the  lender's  base rate plus 1% per annum  (8.75% at  December  31,
1998), payable monthly, and are collateralized by a lien on accounts receivable,
inventories,  and intangible  assets. The credit facility has an initial term of
two years,  with annual  renewals  thereafter  subject to the  lender's  review.
During the 1998 period,  the Company borrowed  $2,403,000 on its working capital
credit  facility  to help  finance  the  increase  in  accounts  receivable  and
inventory.  At December  31,  1998,  the Company had  $1,369,000  available  for
borrowing under this facility.

     The credit facility contains certain financial  covenants.  At December 31,
1998, the Company was in violation of both the net worth and net loss covenants.
On March 17, 1999, the Company received a waiver from the lender regarding these
requirements  as of December 31, 1998 and has  established  new  covenants as of
June 30, 1999. At December 31, 1998, the loan has been classified as non current
in the Company's  balance sheet  because,  in the opinion of  management,  it is
probable that the new covenants will be satisfied.

     At December 31, 1998, the Company had net operating loss  carryforwards  of
$829,000  and   $1,037,000,   for  federal  and  state   income  tax   purposes,
respectively.  These net operating  loss  carryforwards  are available to offset
future taxable income, if any through, 2013.

     The Company does not presently  have any material  commitments  for capital
expenditures.

Inflation

     Management does not believe  inflation had a material adverse effect on the
financial statements for the period presented.

Year 2000

     In early 1998,  Management  initiated a company-wide program to prepare the
Company's  computer  systems and  applications  for the year 2000, as well as to
identify  critical  third parties  which the Company  relies upon to operate its
business to assess their  readiness  for the year 2000.  The  Company's  primary
computer  network  includes  a Novell  operating  system  running on a Dell File
Server.  The Company's  main  computer  applications  include  MAS90  accounting
software and Top Of Mind customer service software. Individual desktop computers
are  running on a Windows  95, 98 or NT  operating  system and  include  desktop
applications  such as  Microsoft  Office  97.  The  Company  uses Dell  personal
computers on most desktops.

     The  Company  has  received   confirmation  from  an  independent   outside
consultant that the Novell  operating system that runs the Company's file server
is year  2000  compliant.  Dell has  indicated  that all of the  Company's  Dell
computers  are year 2000  compliant.  The  Company has also  upgraded  the MAS90
accounting  system and the Top Of Mind customer service software to be year 2000
compliant.  The software  upgrades to the MAS90 accounting system and the Top Of
Mind customer  service  software  were included as part of the Company's  annual
maintenance  contracts.  The  Company  has not tested its  systems for year 2000
readiness and, presently, does not intend to do so.

     The Company recognizes,  as critical third parties,  major vendors, such as
Lucent,  Panasonic,  Sony, and Polycom;  major customers,  such as Cendant,  and
Universal Health Services,  Inc; and other parties such as Landlords and utility
companies.

     The Company has received written notice from all of its key vendors, Lucent
Technologies,  Sony, Panasonic,  and Polycom that all of their products that the
Company sells are currently year 2000 compliant.  The Company believes it has no
year 2000 warranty exposure for products already sold.

     During the 4th  quarter of 1998,  the  Company  mailed a  questionnaire  to
critical third parties to assess their year 2000  readiness.  The  questionnaire
addressed  issues such as where  companies  stand in their year 2000  compliance
programs and how their  relationship  with the Company  would be affected by any
failure to address year 2000 issues. The responses received indicated that third
parties are addressing and implementing programs to address the year 2000 issue.
The Company does not feel that a contingency plan is necessary.

     As of December  31, 1998,  the Company had not  incurred  any  expenditures
relating to the year 2000 issue. The Company does not expect any additional cost
to be material to the Company's operations or financial condition.


                                       11
<PAGE>

Effect of Recently issued Accounting Pronouncements

     In June 1998, the Financial  Accounting Standards Board issued SFAS No. 133
"Accounting   for  Derivative   Instruments  and  Hedging   Activities,"   which
establishes  accounting and reporting standards for all derivative  instruments.
SFAS No. 133 is effective for fiscal years  beginning  after June 15, 1999.  The
adoption  of SFAS No.  133 is not  expected  to have an impact on the  Company's
financial position or results of operations.

ITEM 7.  FINANCIAL STATEMENTS

The following financial statements are filed in this item 7:

     Report of Independent Certified Public Accountants

     Consolidated Balance sheets at December 31, 1998 and 1997

     Consolidated  Statements  of  Operations  for each of the two  years in the
     period ended December 31, 1998.

     Consolidated  Statements of Stockholders'  Equity for each of the two years
     in the period ended December 31, 1998.

     Consolidated  Statements  of Cash  Flows  for each of the two  years in the
     period ended December 31, 1998.

     Notes to Consolidated Financial Statements


                                       12


<PAGE>


                          INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and the
Stockholders of All Communications Corporation

We  have  audited  the   accompanying   consolidated   balance   sheets  of  All
Communications  Corporation  and Subsidiary as of December 31, 1998 and 1997 and
the related  consolidated  statements of operations,  stockholders'  equity, and
cash  flows  for the  years  then  ended.  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 consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial position of All Communications
Corporation  and  Subsidiary  at December 31, 1998 and 1997,  and the results of
their  operations  and their cash  flows for the years then ended in  conformity
with generally accepted accounting principles.

BDO Seidman, L.L.P.

Woodbridge, New Jersey
February 16, 1999 (except for
Note 6 which is as of
March 17, 1999)


                                       13
<PAGE>


                         ALL COMMUNICATIONS CORPORATION
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                                   December 31,
                                                                                            -------------------------
                                                                           Notes               1998           1997
                                                                           -----            -----------    -----------
<S>                                                                         <C>             <C>            <C>        
ASSETS
Current assets
   Cash and cash equivalents                                                  2             $   325,915    $ 2,175,226
   Accounts receivable (net of allowance for doubtful accounts of                                                 
      $117,700 and $60,500 respectively)                                                      4,317,853      2,041,350
   Inventory                                                                  2               3,540,281      1,097,883
   Advances to Maxbase, Inc.                                                  3                    --          127,080
   Other current assets                                                                          45,577         96,218
                                                                                            -----------    -----------
   Total current assets                                                                       8,229,626      5,537,757
                                                                                            -----------    -----------

Furniture, equipment and leasehold improvements-net                          2,4                611,518        438,490

Deferred financing costs                                                      6                  43,271           --  
Other assets                                                                                     38,214         31,359
                                                                                            -----------    -----------
   Total assets                                                                             $ 8,922,629    $ 6,007,606
                                                                                            ===========    ===========
LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                  
                                                                                                                      
Current liabilities                                                                                                   
   Current portion of capital lease obligations                               6             $    17,365    $      --  
   Accounts payable                                                                           1,412,616        909,785
   Accrued expenses                                                           5                 844,082        323,892
   Income taxes payable                                                      2,9                  2,860          2,453
   Deferred revenue                                                                             156,133           --  
   Customer deposits                                                                             94,721         37,052
                                                                                            -----------    -----------
   Total current liabilities                                                                  2,527,777      1,273,182
                                                                                            -----------    -----------

Noncurrent liabilities                                                                                                
   Bank loan payable                                                          6               2,403,216           --  
   Capital lease obligations, less current portion                            6                  23,221           --  
                                                                                            -----------    -----------
                                                                                                                  
   Total noncurrent liabilities                                                               2,426,437           --  
                                                                                            -----------    -----------
   Total liabilities                                                                          4,954,214      1,273,182
                                                                                            -----------    -----------

COMMITMENTS  AND CONTINGENCIES                                               2,10
                                                                                                                      
STOCKHOLDERS' EQUITY                                                          8                                       
Preferred stock, $.01 par value;                                                                                      
  1,000,000 shares authorized, none issued or outstanding                                          --             --
Common Stock, no par value; 100,000,000 authorized;                                                                   
  4,910,000 shares issued and outstanding                                                     5,229,740      5,229,740
Additional paid-in capital                                                                      327,943        316,611
Accumulated deficit                                                                          (1,589,268)      (811,927)
                                                                                            -----------    -----------
       Total stockholders' equity                                                             3,968,415      4,734,424
                                                                                            -----------    -----------
       Total liabilities and stockholders' equity                                           $ 8,922,629    $ 6,007,606
                                                                                            ===========    ===========
</TABLE>


          See accompanying notes to consolidated financial statements

                                       14


<PAGE>


                         ALL COMMUNICATIONS CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                                 Year ended
                                                                                                December 31,
                                                                                         ----------------------------
                                                                          Notes              1998            1997
                                                                          -----          ------------    ------------  
<S>                                                                       <C>            <C>             <C>           
Net revenues                                                               2             $ 13,217,083    $  6,925,169  
Cost of revenues                                                                            9,447,592       4,897,176  
                                                                                         ------------    ------------  
Gross margin                                                                                3,769,491       2,027,993  
                                                                                                                       
Operating expenses:                                                                                                    
   Selling                                                                                  3,213,965       1,811,924  
   General and administrative                                                               1,309,577         935,967  
                                                                                         ------------    ------------  
Total operating expenses                                                                    4,523,542       2,747,891  
                                                                                         ------------    ------------  
Loss from operations                                                                         (754,051)       (719,898) 
                                                                                         ------------    ------------  
Other (income) expenses                                                                                            
   Amortization of deferred financing costs                                6                   19,669         315,406  
   Interest income                                                         2                  (56,446)       (118,354) 
   Interest expense                                                        6                   57,167          27,779  
                                                                                         ------------    ------------  
Total other expenses, net                                                                      20,390         224,831  
                                                                                         ------------                  
Loss before income taxes                                                                     (774,441)       (944,729) 
                                                                                                                       
Income tax provision (benefit)                                            2,9                   2,900         (52,404) 
                                                                                         ------------    ------------  
Net loss                                                                                 $   (777,341)   $   (892,325) 
                                                                                         ============    ============  
Net loss per share:                                                                       
   Basic and diluted                                                       2             $       (.16)   $       (.21) 
                                                                                         ============    ============  
Weighted average shares outstanding                                                         4,910,000       4,200,888  
                                                                                         ============    ============  
</TABLE>

          See accompanying notes to consolidated financial statements

                                       15




<PAGE>



                         ALL COMMUNICATIONS CORPORATION
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     YEARS ENDED DECEMBER 31, 1997 AND 1998
                                                                               
<TABLE>
<CAPTION>
                                                                                                       Retained       
                                                            Common Stock             Additional        Earnings       
                                                  ----------------------------        Paid-in        (Accumulated)     
                                                     Shares           Amount          Capital          (Deficit)           Total
                                                  -----------      -----------      -----------       -----------       -----------
<S>                                                 <C>            <C>              <C>               <C>               <C>        
Balance at January 1, 1997                          3,000,000      $    90,000      $   375,000       $    80,398       $   545,398

Issuance of common stock through
   Initial Public Offering                          1,610,000        4,539,740             --                --           4,539,740

Conversion of subordinated notes                      300,000          600,000             --                --             600,000

Repayment of convertible note                            --               --            (75,000)             --             (75,000)

Issuance of underwriter option                           --               --                 70              --                  70

Issuance of stock options for services                   --               --             16,541              --              16,541

Net loss for the year                                    --               --               --            (892,325)         (892,325)
                                                  -----------      -----------      -----------       -----------       -----------
Balance at December 31, 1997                        4,910,000      $ 5,229,740      $   316,611       $  (811,927)      $ 4,734,424

Issuance of  stock options for services                  --               --             11,332              --              11,332

Net loss for the year                                    --               --               --            (777,341)         (777,341)
                                                  -----------      -----------      -----------       -----------       -----------
Balance at December 31, 1998                        4,910,000      $ 5,229,740      $   327,943       $(1,589,268)      $ 3,968,415
                                                  ===========      ===========      ===========       ===========       ===========
</TABLE>


          See accompanying notes to consolidated financial statements

                                       16



<PAGE>


                         ALL COMMUNICATIONS CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                           Year ended
                                                                                          December 31,
                                                                                   --------------------------
                                                                                       1998          1997
                                                                                   -----------    -----------
<S>                                                                                <C>            <C>         
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                                         $  (777,341)   $  (892,325)
  Adjustments to reconcile net loss                       
  to net cash used by operating activities:               
     Depreciation and amortization                                                     224,474        398,158
     Loss on disposal of equipment                                                       3,209          6,575
     Non cash compensation                                                              11,332         16,541
     Increase (decrease) in cash attributable             
     to changes in assets and liabilities                 
         Accounts receivable                                                        (2,276,503)    (1,359,939)
         Inventory                                                                  (2,442,398)      (600,530)
         Advances to Maxbase, Inc.                                                     127,080       (127,080)
         Other current assets                                                           50,641        (84,623)
         Other assets                                                                   (6,855)        30,051
         Accounts payable                                                              502,831        404,465
         Accrued expenses                                                              520,190        215,633
         Income taxes payable                                                              407          2,453
         Deferred income taxes                                                            --           (5,679)
         Deferred revenue                                                              156,133           --
         Customer deposits                                                              57,669         22,109
                                                                                   -----------    -----------
    Net cash used by operating activities                                           (3,849,131)    (1,974,191)
                                                                                   -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES                  
  Purchases of furniture, equipment and leasehold improvements                        (330,031)      (398,834)
                                                                                   -----------    -----------
    Net cash used by investing activities                                             (330,031)      (398,834)
                                                                                   -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES                            
  Proceeds from issuance of common stock                                                  --        5,635,070
  Stock offering costs                                                                    --       (1,062,760)
  Deferred financing costs                                                             (62,939)          --
  Repayment of convertible subordinated note                                              --         (150,000)
  Proceeds from bank loans                                                           2,403,216        125,000
  Payments on bank loans                                                                  --         (644,673)
  Payments on capital lease obligations                                                (10,426)          --
                                                                                   -----------    -----------
    Net cash provided by financing activities                                        2,329,851      3,902,637
                                                                                   -----------    -----------
INCREASE IN CASH AND CASH EQUIVALENTS                                               (1,849,311)     1,529,612
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                     2,175,226        645,614
                                                                                   -----------    -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                         $   325,915    $ 2,175,226
                                                                                   ===========    ===========
Supplemental  disclosures of cash flow  information 
  Cash paid (received) during the period for:        
     Interest                                                                      $    45,404    $    27,779
                                                                                   ===========    ===========
     Income taxes                                                                  $   (52,183)   $     1,910
                                                                                   ===========    ===========
  Acquisition of equipment                
     Cost of equipment                                                             $    58,844    $      --
     Capital lease payable incurred                                                     51,012           --
                                                                                   -----------    -----------
     Cash down payment                                                             $     7,832    $      --
                                                                                   ===========    ===========
Supplemental disclosures of non-cash financing activities
  Conversion of subordinated promissory notes to capital                           $      --      $   600,000
                                                                                   ===========    ===========
  Reclassification of deferred financing costs to paid-in capital                  $      --      $    75,000
                                                                                   ===========    ===========
</TABLE>


          See accompanying notes to consolidated financial statements

                                       17


<PAGE>


                         ALL COMMUNICATIONS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - DESCRIPTION OF BUSINESS

     All  Communications  Corporation (the "Company") is engaged in the business
     of  selling,   installing  and  servicing   voice,   dataconferencing   and
     videoconferencing  communications  systems to commercial and  institutional
     customers  located  principally  within the United  States.  The Company is
     headquartered in Hillside, New Jersey.

     Most of the products sold by the Company are purchased under  non-exclusive
     dealer   agreements  with  various   manufacturers,   including   Panasonic
     Communications  & Systems Company  ("Panasonic")  and Lucent  Technologies,
     Inc. for digital business telephone systems and related products,  and with
     Polycom,  Inc. for dataconferencing and  videoconferencing  equipment.  The
     agreements  typically  specify,  among  other  things,  sales  territories,
     payment terms,  purchase quotas and reseller prices.  All of the agreements
     provide for early  termination on short notice with or without  cause.  The
     termination of any of the Company's dealer agreements,  or their renewal on
     less  favorable  terms  than  currently  in  effect,  could have a material
     adverse  impact on the  Company's  business.  The  Company  also  purchases
     videoconferencing and distance learning products from Sony Electronics Inc.
     under an informal reseller arrangement.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

     The  consolidated   financial   statements  include  the  accounts  of  All
     Communications  Corporation  and  its  wholly  owned  subsidiary,   AllComm
     Products  Corporation  (APC).  All  material   intercompany   balances  and
     transactions have been eliminated in consolidation.

Inventory

     Inventory is valued at the lower of cost  (determined  on a first in, first
     out basis), or market.

Use of estimates

     Preparation of the  consolidated  financial  statements in conformity  with
     generally  accepted  accounting  principles  requires  management  to  make
     estimates and  assumptions  that affect the reported  amounts of assets and
     liabilities and disclosure of contingent assets and liabilities at the date
     of the  financial  statement  and the  reported  amounts  of  revenues  and
     expenses during the reporting period.  The more significant  estimates made
     by  management  include the  provision  for doubtful  accounts  receivable,
     warranty  reserves,  and the  valuation  allowance for deferred tax assets.
     Actual   amounts   could  differ  from  the  estimates   made.   Management
     periodically  evaluates  estimates used in the preparation of the financial
     statements for continued reasonableness.  Appropriate adjustments,  if any,
     to the  estimates  used are made  prospectively  based  upon such  periodic
     evaluation.

Revenue recognition

     Product  revenues  are  recognized  at the time a product is shipped or, if
     services such as installation and training are required to be performed, at
     the time such services are  provided,  with  reserves  established  for the
     estimated   future   costs  of   parts-and-service   warranties.   Customer
     prepayments  are deferred until product systems are shipped and the Company
     has no  significant  further  obligations  to the  customer.  Revenues from
     services not covered by product  warranties  are recognized at the time the
     services are rendered.



                                       18
<PAGE>


Earnings per share

     The Company has adopted the provisions of Statement of Financial Accounting
     Standards No. 128,  "Earnings Per Share."  Accordingly,  basic earnings per
     share is calculated  by dividing net income (loss) by the  weighted-average
     number of common  shares  outstanding  during  the  period  (4,910,000  and
     4,200,888 shares in 1998 and 1997, respectively).

     Diluted  earnings per share is  calculated by dividing net income (loss) by
     the weighted-average number of common shares outstanding,  adjusted for net
     shares that would be issued upon  exercise  of stock  options and  warrants
     using  the  treasury  stock  method.  Diluted  loss per  share has not been
     presented because the effects of the computation were anti-dilutive.

Cash and cash equivalents

     The Company considers all highly liquid debt instruments with a maturity of
     three months or less when purchased to be cash equivalents.

Concentration of credit risk

     Financial  instruments that potentially  subject the Company to significant
     concentrations   of  credit  risk  consist   principally   of  cash,   cash
     equivalents, and trade accounts receivable. The Company places its cash and
     cash equivalents primarily in commercial checking accounts and money market
     funds.  Commercial  bank  balances  may from  time to time  exceed  federal
     insurance limits; money market funds are uninsured.

     The Company  performs  ongoing  credit  evaluations of its customers and to
     date has not experienced any material losses.  Revenues  generated from the
     Cendant  agreement  accounted for 12% and 15% of net revenues for the years
     ended  December 31, 1998 and 1997,  respectively.  At December 31, 1998 and
     1997, receivables from those sales represented  approximately 6% and 15% of
     net accounts receivable, respectively.

     In 1998,  the Company  established  customer  relationships  with Universal
     Health  Services,  Inc.  for Lucent  and Sony  products.  Universal  Health
     Services accounted for 11% of net revenues for fiscal 1998.

Depreciation and amortization

     Furniture,  equipment  and  leasehold  improvements  are  stated  at  cost.
     Furniture and equipment are depreciated  over the estimated useful lives of
     the  related  assets,  which  range  from  three to five  years.  Leasehold
     improvements  are amortized  over the shorter of either the asset's  useful
     life  or  the  related  lease  term.   Depreciation   is  computed  on  the
     straight-line  method for financial  reporting purposes and on the modified
     accelerated cost recovery system (MACRS) for income tax purposes.

Income taxes

     The Company uses the  liability  method to determine its income tax expense
     as required under Statement of Financial Accounting Standards No. 109 (SFAS
     109).  Under SFAS 109,  deferred  tax assets and  liabilities  are computed
     based on  differences  between  the  financial  reporting  and tax basis of
     assets and liabilities,  principally certain accrued expenses and allowance
     for doubtful  accounts,  and are  measured  using the enacted tax rates and
     laws that will be in effect when the differences are expected to reverse.

     Deferred tax assets are reduced by a valuation  allowance  if, based on the
     weight of available  evidence,  it is more likely than not that all or some
     portion of the  deferred  tax assets  will not be  



                                       19
<PAGE>


     realized. The ultimate realization of the deferred tax asset depends on the
     Company's ability to generate sufficient taxable income in the future.

Long-lived assets

     In  accordance  with  SFAS  No.  121,  "Accounting  for the  Impairment  of
     Long-Lived Assets and for Long-lived Assets to be Disposed of", the Company
     records   impairment  losses  on  long-lived  assets  used  in  operations,
     including  goodwill and intangible  assets,  when events and  circumstances
     indicate that the assets might be impaired and the undiscounted  cash flows
     estimated  to be  generated  by those  assets  are less  than the  carrying
     amounts of those assets.

Stock options

     Under SFAS No. 123, "Accounting for Stock-based Compensation",  the Company
     must either  recognize in its  financial  statements  costs  related to its
     employee  stock-based  compensation  plans,  such as stock option and stock
     purchase plans,  using the fair value method, or make pro forma disclosures
     of such costs in a footnote to the  financial  statements.  The Company has
     elected to continue to use the intrinsic  value-based method of APB Opinion
     No.  25, as  allowed  under  SFAS No.  123,  to  account  for its  employee
     stock-based  compensation  plans,  and to include  the  required  pro forma
     disclosures based on fair value accounting.

Recently issued accounting pronouncements

     In June 1998, the Financial  Accounting Standards Board issued SFAS No. 133
     "Accounting  for  Derivative  Instruments  and Hedging  Activities,"  which
     establishes   accounting   and  reporting   standards  for  all  derivative
     instruments.  SFAS No. 133 is effective  for fiscal years  beginning  after
     June 15,  1999.  The  adoption  of SFAS No. 133 is not  expected to have an
     impact on the Company's financial position or results of operations.

NOTE 3 - ADVANCES TO MAXBASE, INC

     In September  1997,  the Company  entered  into an  exclusive  distribution
     agreement with Maxbase,  Inc., the manufacturer of "MaxShare 2", a patented
     bandwidth-on-demand  line  sharing  device.  Advances to Maxbase  represent
     advances  against  purchase  orders  for  MaxShare  2 units.  Purchases  of
     MaxShare 2 product  amounted  to  $520,350  and $50,400 for the years ended
     December  31,  1998 and 1997,  respectively.  The  Company  has  identified
     performance  problems with the MaxShare 2 product in certain  applications,
     and believes that MaxBase, Inc. (MaxBase),  the supplier of MaxShare 2, has
     a contractual  obligation to correct any technical  defects in the product.
     Pending  resolution of this matter, the Company has ceased ordering product
     under  its  purchase   commitment,   and  has  also  limited  shipments  to
     distribution  partners. On July 16, 1998, MaxBase filed a Complaint against
     the Company and APC for breach of contract,  among other claims.  (See Note
     10)




                                       20
<PAGE>


NOTE 4 - FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

     Furniture, equipment and leasehold improvements consist of the following:


                                                     December 31,
                                                 -------------------
                                                   1998       1997
                                                 --------   --------
            Leasehold improvements               $ 85,028   $ 69,216
            Office furniture                      119,683     96,196
            Computer equipment and software       186,244     86,310
            Demonstration equipment               301,487    161,864
            Loaner/Warranty equipment              39,656       --
            Vehicles                              199,834    140,991
                                                 --------   --------
                                                  931,932    554,577
            Less:  Accumulated depreciation      (320,414)  (116,087)
                                                 --------   --------
                                                 $611,518   $438,490
                                                 ========   ========

     Depreciation  expense was $204,805 and $82,752 for the years ended December
     31, 1998 and 1997, respectively.

NOTE 5 - ACCRUED EXPENSES

     Accrued expenses consist of the following:


                                                     December 31,
                                                --------------------
                                                  1998        1997
                                                --------    --------
            Sales tax payable                   $ 92,098    $ 35,217
            Accrued warranty costs                75,000      67,749
            Accrued installation costs           300,764      36,466
            Other                                376,180     184,460
                                                --------    --------
                                                $844,042    $323,892
                                                ========    ========


NOTE 6 - NOTES PAYABLE AND LONG-TERM DEBT

Bank loan payable

     In 1997, the Company had a $600,000 working capital line of credit.  In May
     1997, the Company  terminated the credit facility and repaid all oustanding
     loans upon  completion of its initial  public  offering.  

     In May 1998,  the Company  closed on a $5,000,000  working  capital  credit
     facility with an asset-based  lender.  Loan availability is based on 75% of
     eligible  accounts  receivable,  as defined,  and 50% of eligible  finished
     goods  inventory,   with  a  cap  of  $1,200,000  on  inventory  financing.
     Outstanding  borrowings bear interest at the lender's base rate plus 1% per
     annum (8.75% at December 31, 1998), payable monthly, and are collateralized
     by a lien on accounts receivable,  inventories,  and intangible assets. The
     credit  facility  will  have an  initial  term of two  years,  with  annual
     renewals  thereafter  subject to the lender's  review.  The credit facility
     contains certain financial covenants.  At December 31, 1998 the Company was
     in  violation  of both the net worth and net loss  covenants.  On March 17,
     1999  the  Company  received  a  waiver  from the  lender  regarding  these
     requirements  as of December 31, 1998 and has  established new covenants as
     of June 30, 1999. At December 31, 1998, the loan has been classified as non
     current  in the  accompanying  balance  sheet  because,  in the  opinion of
     management, it is probable that the new covenants will be satisfied.




                                       21
<PAGE>


12% Convertible Subordinated Notes Payable

     In December  1996,  the Company  realized net  proceeds of $734,594  from a
     private   placement  of  $750,000   principal  amount  of  12%  Convertible
     Subordinated Notes (the "Bridge Notes"). The notes provided for interest at
     the rate of 12% per annum and became due and payable  together with accrued
     interest,  to the extent not  converted,  upon  completion of the Company's
     IPO. The notes were convertible,  at the holders' option, into an aggregate
     of  375,000  Bridge  Units  at the  rate  of one  Unit  per  $2.00  of note
     principal.

     Each Bridge Unit  consisted of one share of the Company's  Common Stock and
     one warrant to purchase  one share of Common  Stock at a price of $4.25 per
     share.  In May 1997,  a total of  $600,000  of Bridge  Note  principal  was
     converted  into 300,000 Bridge Note Units.  The  conversion  feature on the
     remaining  $150,000 Bridge Note was cancelled  during the IPO  registration
     process, and that note was subsequently repaid with interest.

     Costs  incurred  in  connection  with the  Bridge  Note  private  placement
     totaling  $315,406  were charged to  operations  during  fiscal 1997.  This
     amount  included an imputed  value of  $300,000,  or $1.00 per Bridge Unit,
     assigned to the conversion feature of the Bridge Notes. The $75,000 imputed
     value  relating to the cancelled  conversion  feature  discussed  above was
     charged to paid-in capital.

NOTE 7 - STOCK OPTIONS

Non-qualified options

     In March  1997,  the  Company  issued to its  president  750,000  five-year
     non-qualified  options  with an  exercise  price  of  $5.00  per  share  in
     conjunction  with the amendment of his  employment  agreement.  The Company
     issued a total of 179,000 and 232,500  additional  options  during 1998 and
     1997 respectively,  to various  employees,  directors,  and advisors,  with
     exercise prices ranging from $.50 to $4.00 per share.

Stock Option Plan

     In December 1996, the Board of Directors adopted the Company's Stock Option
     Plan (the  "Plan") and  reserved up to 500,000  shares of Common  Stock for
     issuance thereunder.  In June 1998, the Company's  shareholders approved an
     amendment  to the  Company's  Stock  Option Plan  increasing  the amount of
     shares  available  under the plan to  1,500,000.  The Plan provides for the
     granting of options to officers,  directors,  employees and advisors of the
     Company.  The exercise price of incentive stock options  ("ISOs") issued to
     employees  who are less  than 10%  stockholders  shall not be less than the
     fair market value of the underlying shares on the date of grant or not less
     than 110% of the fair market value of the shares in the case of an employee
     who is a 10%  stockholder.  The exercise price of restricted  stock options
     shall  not be less than the par  value of the  shares  to which the  option
     relates. Options are not exercisable for a period of one year from the date
     of grant.  Thereafter,  options may be exercised as determined by the Board
     of  Directors  at the date of  grant,  with  maximum  terms of ten and five
     years,  respectively,  for ISO's issued to employees  who are less than 10%
     stockholders and employees who are 10% stockholders. In addition, under the
     plan, no individual  will be given the opportunity to exercise ISO's valued
     in excess of $100,000,  in any calendar year,  unless and to the extent the
     options have first become  exercisable  in the preceding  year. The maximum
     number of  shares  with  respect  to which  options  may be  granted  to an
     individual  during  any  twelve-month  period  is  100,000.  The Plan  will
     terminate in 2006.



                                       22
<PAGE>


     A summary of Plan and other  options  outstanding  as of December 31, 1998,
     and changes during fiscal 1997 and 1998 are presented below:

<TABLE>
<CAPTION>
                                                                              Range of
                                                                Fixed         Exercise
                                                               Options         Prices
                                                              ---------      ----------
<S>                                                           <C>            <C>    
           Options outstanding, January 1, 1997                    --              --
           Granted                                            1,250,000      $.875-5.00
                                                              ---------      ----------
           Options outstanding December 31, 1997              1,250,000       .875-5.00
           Granted                                              396,500        .50-4.00
                                                              ---------      ----------
           Options outstanding December 31, 1998              1,646,500        .50-5.00
                                                              =========      ==========
           Shares of common stock available for future
                  grant under the plan                        1,015,000
                                                              =========
</TABLE>

     Additional  information  as of  December  31,  1998  with  respect  to  all
     outstanding options is as follows:


<TABLE>
<CAPTION>
                                          Options Outstanding                    Options Exercisable
                               -------------------------------------------  ----------------------------
                                               Weighted
                                                Average         Weighted                      Weighted
                                               Remaining        Average                       Average
                                 Number       Contractual       Exercise        Number        Exercise
            Range of Price     Outstanding   Life (in years)      Price       Exercisable      Price
          -------------------- ------------- ----------------- -----------  -------------- -------------
<S>                               <C>              <C>         <C>            <C>            <C>     
          $              5.00       750,000        3.25        $    5.00        750,000      $   5.00
          $       3.85 - 4.00        50,974        3.61        $    3.92         25,974      $   3.85
          $       2.50 - 3.50       424,026        3.58        $    3.44        281,026      $   3.50
          $      1.063 - 1.50       266,500        4.40        $    1.14          4,000      $   1.09
          $        .50 - .875       155,000        4.08        $     .74        155,000      $    .74
                               ------------- ----------------- -----------  -------------- --------------
                                  1,646,500        3.61        $    3.54      1,216,000      $   4.07
                               ============= ================= ===========  ============== =============
</TABLE>

     The  Company  has elected to use the  intrinsic  value-based  method of APB
     Opinion No. 25 to account for all of its employee stock-based  compensation
     plans.  Accordingly,  no  compensation  cost  has  been  recognized  in the
     accompanying  financial  statements  for stock options  issued to employees
     because the exercise  price of each option equals or exceeds the fair value
     of the underlying  common stock as of the grant date for each stock option.
     The  weighted-average  grant date fair value of options granted during 1998
     and 1997 under the  Black-Scholes  option  pricing model was $.37 and $2.51
     per option, respectively.



                                       23
<PAGE>


     The Company has adopted  the pro forma  disclosure  provisions  of SFAS No.
     123.  Had   compensation   cost  for  all  of  the  Company's   stock-based
     compensation  grants been  determined in a manner  consistent with the fair
     value  approach  described in SFAS No. 123, the  Company's net loss and net
     loss per  share as  reported  would  have been  increased  to the pro forma
     amounts indicated below:

                                       Year ended               Year ended      
                                    December 31, 1998       December 31, 1997   
                                 -----------------------   ---------------------
            Net loss:                                                           
            As reported                 $(777,341)             $  (892,325)     
            Adjusted pro forma           (884,675)              (3,819,968)     
                                                                                
            Net loss per share:                                                 
            As reported                 $    (.16)             $      (.21)     
            Adjusted pro forma               (.18)                    (.89)     
                                                                                
                                                                                
     Compensation  expense  recognized in the Company's  Statement of Operations
     totaled $11,332 and $16,541 in 1998 and 1997, respectively.

     The fair value of each option  granted in 1998 and 1997 is estimated on the
     date of  grant  using  the  Black-Scholes  option-pricing  model  with  the
     following weighted average assumptions:


                                             1998              1997      
                                           ----------       ----------   
            Risk free interest rates          5.56%           6.14%      
            Expected option lives          3.46 years       4.76 years   
            Expected volatilities             46.5%            46.5%     
            Expected dividend yields          None             None      
                                                                         
                                       
NOTE 8 - STOCKHOLDERS' EQUITY

Initial Public Offering

     In May 1997, the Company  completed a public  offering of 805,000 Units for
     $7.00 per Unit.  Each Unit  consisted of two shares of Common Stock and two
     Redeemable  Class A Warrants.  The Warrants are  exercisable for four years
     commencing one year from the effective date of the offering,  at a price of
     $4.25 per share. The Company may redeem the Warrants at a price of $.10 per
     warrant, commencing eighteen months from the effective date of the offering
     and continuing for a four-year period,  provided the price of the Company's
     Common  Stock is $10.63 for at least 20  consecutive  trading days prior to
     issuing a notice of redemption.

     The Company  also issued to the  underwriter  of the public  offering,  for
     nominal consideration, an option to purchase up to 70,000 Units. The Option
     is  exercisable  for a  four-year  period  commencing  one  year  from  the
     effective  date of the offering,  at a per Unit exercise price of $8.40 per
     Unit. The Units are similar to those offered to the public.

     The  Company   received   proceeds  from  the  offering  of   approximately
     $4,540,000, net of related costs of registration.



                                       24
<PAGE>


Preferred Stock

     On December 6, 1996,  the Company's  stockholders  approved an amendment to
     the Company's  Certificate of Incorporation to authorize the issuance of up
     to 1,000,000  shares of Preferred  Stock.  The rights and privileges of the
     Preferred Stock have not yet been designated.

NOTE 9 - INCOME TAXES

     The income tax provision (benefit) consists of the following:

                                                        Years ended
                                                        December 31,
                                                   ----------------------
                                                     1998         1997
                                                   ---------    ---------
     Current:
       Federal                                     $    --      $ (46,905)
       State                                           2,900          180
                                                   ---------    ---------
     Total current                                     2,900      (46,725)
                                                   ---------    ---------
     Deferred:                                     
       Federal                                      (252,791)     (97,724)
       State                                         (73,582)     (49,152)
       Valuation allowance                           326,373      141,197
                                                   ---------    ---------
     Total deferred                                     --         (5,679)
                                                   ---------    ---------
     Provision for income taxes (benefit)          $   2,900    $ (52,404)
                                                   =========    =========
                                              
     The  current  portion  of the 1997  federal  income  tax  benefit  reflects
     refundable taxes from the carryback of net operating losses.

     The Company's  effective  tax rate differs from the  statutory  federal tax
     rate as shown in the following table:

                                                         Years ended
                                                         December 31,
                                                   ----------------------
                                                      1998         1997
                                                   ----------   ---------
     Computed "expected" tax benefit               $ (263,310)   $(321,208)
     State tax benefit, net of      
     federal benefit                                  (41,557)     (32,298)
     Non-deductible financing costs                      --       102,000
     Valuation allowance                              326,373     141,197
     Other                                            (18,606)     57,905
                                                   ----------   ---------
                                                   $    2,900   $ (52,404)
                                                   ==========   =========



                                       25
<PAGE>


     The tax effects of the temporary  differences that give rise to significant
     portions of the deferred tax assets and liabilities as of 1998 and 1997 are
     presented below:

<TABLE>
<CAPTION>
                                                                    December 31,
                                                               ----------------------
                                                                 1998         1997
                                                               ---------    ---------
<S>                                                            <C>          <C>      
      Deferred tax assets:
            Reserves and allowances                            $ 126,640    $  51,300
            Tax benefit of net operating loss carryforwards      349,211      107,618
            Other                                                 12,073        6,615
                                                               ---------    ---------
            Total deferred tax assets                            487,924      165,533

      Deferred tax liabilities:
            Depreciation                                          20,354       24,336
                                                               ---------    ---------
            Total deferred tax liabilities                        20,354       24,336
                                                               ---------    ---------
      Subtotal                                                   467,570      141,197
      Valuation allowance                                       (467,570)    (141,197)
                                                               =========    =========
      Net deferred tax liabilities                                  --           --
                                                               =========    =========
</TABLE>

     Based on its review of available  evidence,  management  has  established a
     valuation  allowance to offset the benefits of the  Company's  net deferred
     tax assets because their realization is uncertain.

     The  Company  and APC file  federal  returns  on a  consolidated  basis and
     separate  state tax  returns.  At  December  31,  1998 the  Company had net
     operating loss  carryforwards  of $829,007 and $1,036,888,  for federal and
     state  income  tax  purposes,   respectively.   These  net  operating  loss
     carryforwards are available to offset future taxable income, if any through
     2013.

Note 10 - Commitments and Contingencies

Employment Agreements

     The Company's  board of directors has approved  employment  agreements  for
     three of its officers,  effective  January 1, 1997.  The agreement with the
     Company's  president,  as amended in March  1997,  has a six-year  term and
     provides for an annual salary of $133,000 in the first year,  increasing to
     $170,000 and $205,000 in the second and third years, respectively. In years
     four, five, and six the president's  base salary will be $205,000,  but can
     be  increased at the  discretion  of the board of  director's  compensation
     committee.  Under  the  agreement,  the  Company  will  secure  and pay the
     premiums on a $1,000,000  life insurance  policy payable to the president's
     designated  beneficiary or his estate.  The agreement  further provides for
     medical  benefits,  the  use  of  an  automobile,  and  grants  of  750,000
     non-qualified  stock options, as well as 25,974 incentive stock options and
     74,026  non-qualified  stock options  issuable  under the  Company's  Stock
     Option Plan.

     The other two agreements each have a three-year term and provide for annual
     salaries  of  $104,000 in the first year  increasing  by $10,000  each year
     thereafter.  The agreements further provide for an incentive bonus equal to
     1/2 of 1% of net sales payable twice yearly to both officers. Each employee
     is also entitled to a monthly automobile  allowance.  Effective January 11,
     1999, both of these  employment  agreements were amended.  In consideration
     for extending the term of the  agreements for an additional  year,  through
     December 31, 2000, the Company  granted  additional  options outside of the
     Company's stock option plan to purchase up to 300,000 shares each of Common
     Stock. The options vest over a twenty-three month period.

     Each agreement may be terminated by the employee without cause upon written
     notice to the Company.


                                       26

<PAGE>


Operating Leases

     In March 1997, the Company  entered into a five-year  non-cancelable  lease
     for the use of office and  warehouse  space in  Hillside,  New Jersey.  The
     lease provides for annual base rent of $87,040 plus a  proportionate  share
     of  operating  expenses,  and  includes a  five-year  renewal  option.  The
     facility is owned by an entity in which a member of the Company's  board of
     directors is a part owner.  The Company  believes that the lease reflects a
     fair rental  value for the  property.  Also in 1997,  the Company  signed a
     five-year lease for a Connecticut sales office.  Base rent under this lease
     is $20,020 per year.

     In April 1998, the Company  entered into a five-year  non-cancelable  lease
     for the use of office space in New York City. The lease provides for annual
     base rent of $47,500 plus a proportionate share of operating expenses. Also
     in 1998,  the company  signed a one-year lease for a Virginia sales office.
     Base rent under this lease is $800 per month and  continues  monthly  after
     expiration of the initial term. Future minimum rental commitments under all
     non-cancelable leases are as follows:

                  Year ending
                  December 31,
              ---------------------
                      1999                         $  162,560  
                      2000                            154,560  
                      2001                            154,560  
                      2002                            109,372  
                      2003                             15,833  
                                                   ----------
                                                   $  596,885  
                                                   ========== 
 
 
     Total rent  expense  for the years  ended  December  31,  1998 and 1997 was
     $284,630 and $148,768, respectively.

Capital Lease Obligations

     The Company leases certain vehicles under  non-cancelable lease agreements.
     These leases are accounted for as capital leases.  As of December 31, 1998,
     vehicle  costs under the capital  lease  arrangements  aggregated  $58,844.
     Accumulated   depreciation  and  depreciation   expenses  related  to  this
     equipment  totaled  $7,846 as of and for the year ended  December 31, 1998.
     Future minimum lease  payments under capital lease  obligations at December
     31, 1998 are as follows:


            1999                                   $  21,528
            2000                                      21,528
            2001                                       5,382
                                                   ---------
            Total minimum payments                    48,438
            Less amount representing interest         (7,852)
                                                   ---------
            Total principal                           40,586
            Less portion due within one year         (17,365)
                                                   ---------
            Long-term portion                      $  23,221
                                                   =========

Legal Matters

     On July 16, 1998, MaxBase, a vendor,  filed a Complaint against the Company
     and APC alleging that the Company breached its agreement with MaxBase Inc.,
     for  Maxshare  2 units by  failing to meet the  required  minimum  purchase
     obligations thereunder. The Complaint further alleges misrepresentation and
     unfair trade practices. The Complaint also seeks to enjoin the Company from
     enforcing any rights the


                                       27
<PAGE>


     Company has under the agreement. Maxbase claims damages of $508,200 in lost
     profits for units not purchased and $945,300 in lost profits for units sold
     to the Company  below market  price,  as well as  unspecified  punitive and
     treble  damages.  In 1999,  the plaintiff  added claims for  defamation and
     tortious  interference.  A trial is  expected  to occur in late  1999.  The
     Company  believes  the claims by MaxBase are  without  merit and intends to
     fully  defend  the suit and  assert its  rights  under the  agreement.  The
     Company  has filed a  counterclaim  for alleged  defects in the  Maxshare 2
     units.

     The Company is the subject of a civil  action  filed by the landlord of its
     former headquarters. The landlord alleges that the Company defaulted on and
     breached  its lease by vacating  the  premises  during the lease term,  and
     seeks  compensatory  damages of $233,720 and  recovery of legal costs.  The
     Company believes it has meritorious defenses to the claims and has asserted
     counterclaims  against the  plaintiff.  A trial is expected to occur in May
     1999. In the opinion of management  the ultimate  outcome of the lawsuit is
     not expected to have a material impact on the Company's financial condition
     or results of operations.

NOTE 11 - FAIR VALUE OF FINANCIAL INSTRUMENTS

     Financial  instruments  reported in the Company's  balance sheet consist of
     cash,  accounts  receivable and accounts payable,  all of which approximate
     fair  value  at  December  31,  1998.  The  fair  value  of  the  financial
     instruments  disclosed  therein are not necessarily  representative  of the
     amount that could be realized  or settled,  nor does the fair value  amount
     consider the tax consequences of realization or settlement.


                                       28
<PAGE>


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

     On February 16, 1998, the certified  public  accounting  firm of Schneider,
Ehrlich & Wengrover,  LLP ("Schneider")  resigned as independent  accountants of
the Company by mutual agreement with the Company.

     On  February  16,  1998,  the Audit  Committee  of the  Company's  Board of
Directors approved the engagement of BDO Seidman, LLP as the Company's principal
accountant to audit the Company's financial statements.

     During the  Company's  fiscal year ended  December  31, 1997 and the period
from January 1, 1998 to February 16, 1998, there were no  disagreements  between
the Company and Schneider on any matter of  accounting  principles or practices,
financial statements disclosure or auditing scope or procedure.

     For the  Company's  fiscal year ended  December  31,  1997,  the  principal
accountant's  report on the financial  statements of the Company did not contain
an adverse opinion or a disclaimer of opinion, and was not qualified or modified
as to uncertainty, audit scope or accounting principles.

     For the Company's  fiscal year ended December 31, 1997, and the period from
January 1, 1998 to February  16, 1998,  Schneider  did not advise the Company of
any of the following:

     i)   Internal  controls  necessary  for the  Company  to  develop  reliable
          financial statements did not exist;

     ii)  Information had come to Schneider's attention that led it to no longer
          be able to rely on management's  representations,  or that had made it
          unwilling to be associated with the financial  statements  prepared by
          management;

     iii) The  need to  expand  significantly  the  scope  of its  audit or that
          information  had come to its  attention  that if further  investigated
          may: (1)  materially  impact the fairness or  reliability  of either a
          previously issued audit report or the underlying financial statements,
          or the financial statements issued or to be issued covering the fiscal
          period(s)  subsequent  to  the  date  of  the  most  recent  financial
          statements  covered by an audit report or (2) cause it to be unwilling
          to rely on  management's  representations  or be  associated  with the
          Company's financial statements, or

     iv)  Information had come to its attention that it had concluded materially
          impacted the fairness or reliability  of either (1) previously  issued
          audit  report  or the  underlying  financial  statements  or  (2)  the
          financial  statements  issued to or to be issued  covering  the fiscal
          period(s)  subsequent  to  the  date  of  the  most  recent  financial
          statement covered by an audit report.

                                    PART III

     The Company  intends to file with the Securities  and Exchange  Commission,
within 120 days  after the end of the fiscal  year  covered  by this  report,  a
definitive  Proxy  Statement (the "Proxy  Statement") for use in connection with
the Company's 1999 Annual Meeting of  Stockholders.  In accordance  with General
Instruction  E (3) of Form 10-KSB the  information  required by Items 9, 10, 11,
and 12 below is incorporated herein by reference to the Proxy Statement.


                                       29

<PAGE>




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

     The information required by this Item 9 is incorporated herein by reference
to the sections  entitled  "Election of  Directors",  "Executive  Officers"  and
"Section  16  (a)  Beneficial  Ownership  Reporting  Compliance"  in  the  Proxy
Statement.

ITEM 10. EXECUTIVE COMPENSATION.

     The  information  required  by  this  Item  10 is  incorporated  herein  by
reference to the section entitled "Executive  Compensation" and "Compensation of
Directors" in the Proxy Statement.

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

     The  information  required  by  this  Item  11 is  incorporated  herein  by
reference to the section  entitled  "Security  Ownership  of Certain  Beneficial
Owners and Management."

ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The  information  required  by  this  Item  12 is  incorporated  herein  by
reference  to  the  section   entitled   "Certain   Relationships   and  Related
Transactions" in the Proxy Statement.

ITEM 13.     EXHIBITS AND REPORTS ON FORM 8-K

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

     (1)  A list of the financial statements filed as part of this report is set
          forth in Item 7 and is incorporated herein by reference

     (2)  Exhibits:

          The  information  required  by this Item  13(a)(2) is set forth in the
          Index to Exhibits and is incorporated herein by reference. Included in
          the  Index  to  Exhibits  are  the  following  management   contracts,
          compensatory plans and arrangements:

          (i)    10.3 Employment Agreement, effective  January 1,  1997, between
                 the Registrant and Richard Reiss.

          (ii)   10.4 Amendment  to  the Employment  Agreement in   Exhibit 10.3
                 above, effective March 21, 1997.

          (iii)  10.5 Employment Agreement, effective  January 1, 1997,  between
                 the Registrant and Joseph Scotti.

          (iv)   10.6 Amendment  No. 1 to the Employment  Agreement  between the
                 Registrant and Joseph Scotti, effective January 11, 1999.

          (v)    10.7  Employment  Agreement, effective January 1, 1997, between
                 the Registrant and Leo Flotron.

          (vi)   10.8 Amendment No. 1 to the  Employment  Agreement  betwee  the
                 Registrant and Leo Flotron, effective January 11, 1999.

          (vii)  10.12 Registrant's Stock Option Plan.

          (viii) 10.13 Amendment No. 1 to Registrant's Stock Option Plan

(b)  No reports on Form 8-K were filed by the Company  during the fourth quarter
     of 1998.

                                       30

<PAGE>

                                   SIGNATURES

     In  accordance  with  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.

                                          ALL COMMUNICATIONS CORPORATION

Dated:   March 31, 1999                   By:      /S/ RICHARD REISS
                                                 ----------------------------
                                                 Richard Reiss, Chairman,
                                                 Chief Executive Officer and
                                                 President

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

       SIGNATURE                         TITLE                         DATE
---------------------    --------------------------------------   --------------

/S/  RICHARD REISS       Chairman of the Board of Directors       March 31, 1999
---------------------    President (Principal Executive Officer)
     RICHARD REISS       
                         
                         
/S/  SCOTT TANSEY        Vice President - Finance                 March 31, 1999
---------------------    (Principal Financial and 
     SCOTT TANSEY        Accounting Officer)      
                         
                         
/S/  ROBERT B. KRONER    Director                                 March 31, 1999
---------------------    
     ROBERT B. KRONER   
                         
                         
/S/  ERIC FRIEDMAN       Director                                 March 31, 1999
---------------------    
     ERIC FRIEDMAN      
                         
                         
/S/  PETER MALUSO        Director                                 March 31, 1999
---------------------    
     PETER MALUSO       
                         
                         
/S/  ANDREA GRASSO       Director                                 March 31, 1999
---------------------    
     ANDREA GRASSO      
                            

                                       31

<PAGE>

                                INDEX TO EXHIBITS

Exhibit No. DESCRIPTION OF DOCUMENT
----------  -----------------------

   3.1      Certificate of Incorporation of the Registrant, as amended. (1)

   3.2      By-Laws, as amended. (1)

   4.1      Form of Amended Warrant Agreement among the Registrant and American
            Stock Transfer & Trust Company, as Warrant Agent. (1)

   4.2      Specimen Common Stock Certificate of Registrant. (1)

   4.3      Specimen Class A Warrant Certificate of Registrant. (1)

  10.1      Agreement dated December 9, 1996 between the Registrant and HFS
            Incorporated. (1)

  10.2      Dealer Agreement dated May 20, 1992, between the Registrant and
            Panasonic Communications & Systems Company. (1)

  10.3      Employment Agreement, effective January 1, 1997, between the
            Registrant and Richard Reiss. (1)

  10.4      Amendment to the Employment Agreement between the Registrant and
            Richard Reiss, effective March 21, 1997 (1)

  10.5      Employment Agreement, effective January 1, 1997, between the
            Registrant and Joseph Scotti. (1)

 *10.6      Amendment No. 1 to the Employment Agreement between the Registrant
            and Joseph Scotti, effective January 11, 1999

  10.7      Employment Agreement, effective January 1, 1997, between the
            Registrant and Leo Flotron. (Incorporated herein by reference to
            Exhibit No. 10.6 to the Registrant's Registration Statement on Form
            SB-2, Registration No. 333-21069).

 *10.8      Amendment No. 1 to the Employment Agreement between the Registrant
            and Leo Flotron, effective January 11, 1999.

  10.9      Lease Agreement for premises located at 1450 Route 22, Mountainside,
            New Jersey, dated April 13, 1995, between the Registrant and
            Mountain Plaza Associates. (Incorporated herein by reference to
            Exhibit 10.7 to the Registrant's Registration Statement on Form
            SB-2, Registration No. 333-21069).

  10.10     First Amendment to Lease Agreement for premises located at 1450
            Route 22, Mountainside, New Jersey dated June 27, 1996, between the
            Registrant and Mountain Plaza Associates. (Incorporated herein by
            reference to Exhibit 10.8 to the Registrant's Registration Statement
            on Form SB-2, Registration No. 333-21069).

  10.11     Sublease Agreement for premises located at 1130 Connecticut Avenue,
            NW, Washington D.C., dated July 1, 1996, between the Registrant and
            Charles L. Fishman, P.C. (Incorporated herein by reference to
            Exhibit 10.9 to the Registrant's Registration Statement on Form
            SB-2, Registration No. 333-21069).

  10.12     Registrant's Stock Option Plan. (Incorporated herein by reference to
            Exhibit 10.10 to the Registrant's Registration Statement on Form
            SB-2, Registration No. 333-21069).

 *10.13     Amendment No. 1 to Registrant's Stock Option Plan.

  10.14     Lease Agreement for premises located at 225 Long Avenue, Hillside,
            New Jersey, dated March 20, 1997, between the Registrant and Vitamin
            Realty Associates, L.L.C. (Incorporated herein by reference to
            Exhibit 10.13 to the Registrant's Registration Statement on Form
            SB-2, Registration No. 333-21069).



                                       32
<PAGE>


  10.15     Agreement, dated September 10, 1997, between the Company and
            Maxbase, Inc. (Incorporated herein by reference to the Registrant's
            Current Report on Form 8-K filed September 18, 1997, Commission File
            No. 1-12937).

  10.16     Reseller Agreement dated November 21, 1997, between Polycom, Inc.
            and the Registrant. (Incorporated herein by reference to Exhibit No.
            10.15 to the Registrant's Annual Report on Form 10-KSB for the
            fiscal year ended December 31, 1997, Commission File No. 1-12937).

  10.17     Dealer Agreement, dated November 26, 1997, between Lucent
            Technologies, Inc. and the Registrant. (Incorporated herein by
            reference to Exhibit No. 10.16 to the Registrant's Annual Report on
            Form 10-KSB for the fiscal year ended December 31, 1997, Commission
            File No. 1-12937).

  16.1      Letter re Change in Certifying Accountant. (Incorporated herein by
            reference to the Registrant's Current Report on Form 8-K filed
            February 20, 1998, Commission File No. 1-12937).

  21.1      Subsidiaries of the Registrant. (Incorporated herein by reference to
            Exhibit No, 21.1 to the Registrant's Annual Report on Form 10-KSB
            for the fiscal year ended December 31, 1997, Commission File No.
            1-12937).

 *27.1      Financial Data Schedule.

-------------
*    Filed herewith

(1)  Incorporated herein by reference to the corresponding exhibit number to the
     Registrant's Registration Statement on Form SB-2, Registration No.
     333-21069.




                                       33