<PAGE>
                                 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 FOR THE FISCAL YEAR
                            ENDED DECEMBER 31, 1998

                                      OR

     [   ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934 
          FOR THE TRANSITION PERIOD FROM ___________ TO ____________

                        Commission File Number 01-14271

                        FirstLink Communications, Inc.               
             -----------------------------------------------------
            (Exact name of Registrant as specified in its charter)

               Oregon                        93-1197477          
             -----------------------------------------------------
     (State or other jurisdiction of         (I.R.S. Employer
     incorporation or organization)          Identification Number)

                190 SW Harrison Street, Portland, Oregon 97201
             -----------------------------------------------------
                   (Address of principal executive offices)

      Registrant's telephone number, including area code: (503) 306-4444

                                Not Applicable                    
             -----------------------------------------------------
             (Former name, former address and former fiscal year,
                         if changed since last report)

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

     Check here if there is no disclosure of delinquent filers in response to
Item 405.  [X]

     The issuer's revenues for its most recent fiscal year was $1,246,011.

     The aggregate market value of the voting stock held as of April 5, 1999
by non-affiliates of the issuer was $5,539,872, based on the last sale price
of its Common Stock on such date. As of April 5, 1999, the issuer had
3,597,150 shares of its no par value Common Stock issued and outstanding.

     Transitional Small Business Disclosure Format.  YES  [  ]     NO  [X]


<PAGE>
                                     INDEX

PART I
     Item 1.   Business
               The Company
               Business Strategy
               Properties
               Products and Services
               The Market
               Marketing Strategy
               Competition
               Key Suppliers
               Employees
               Legislation and Regulation
     Item 2.   Properties
     Item 3.   Legal Proceedings
     Item 4.   Submission of Matters to a Vote of Security Holders

PART II
     Item 5.   Market for Registrant's Common Equity and Related Stockholder
               Matters
     Item 6.   Management's Discussion and Analysis of Financial Condition and
               Results of Operations
               Introduction
               Results of Operations
               Liquidity and Capital Resources
               Year 2000
               Adoption of New Accounting Standards
     Item 7.   Financial Statements and Supplementary Data
     Item 8.   Changes In and Disagreements with Accountants on Accounting and
               Financial Disclosure

PART III
     Item 9.   Directors and Executive Officers of the Registrant
     Item 10.  Executive Compensation
     Item 11.  Security Ownership of Certain Beneficial Owners and Management
     Item 12.  Certain Relationships and Related Transactions

PART IV
     Item 13.  Exhibits and Reports on Form 8-K
               Exhibits
               Financial Statement Schedule
     Signatures

<PAGE>
<PAGE>
                                    PART I

Item 1.   Business

The Company

     FirstLink Communications, Inc. (the "Company") provides integrated
telecommunications and entertainment services to residents of multi-family
apartment and condominium complexes ("MDUs"). Services provided include cable
television ("CATV") and enhanced local and long-distance telephone services,
collectively referred to as residential multi-tenant services ("RMTS"). In
certain properties, the Company also provides high-speed internet services.

     The Company provides its services under right of entry contracts ("ROEs")
with MDU property owners and service agreements with MDU residents. The ROEs
allow the Company to exclusively market RMTS services to the property
residents. The Company offers incentives to property owners such as revenue
sharing, the ability to deal with one single provider for all
telecommunication services, and the ability to differentiate their property by
offering integrated telecommunication services to their residents.

     On February 9, 1999, the Company signed a letter of intent (the "LOI")
with Peregrine Capital, Inc. ("Peregrine"), a Portland based investment
company. Under terms of the LOI, Peregrine will purchase five million shares
of the Company's common stock for $10 million, of which $6 million is to be
paid in cash with the remainder to be paid under a three-year note agreement.
Additionally, the LOI calls for Peregrine to arrange for a $25 million credit
facility (the "Credit Facility") on the Company's behalf and that Peregrine
must also deliver contracts with property owners totaling at least 60,000
units passed at closing. Peregrine may use proceeds from the Credit Facility
to acquire the 60,000 units. Further, Peregrine will receive four million
warrants to purchase the Company's common stock, exercisable for a period of
four years commencing one year after closing of the transaction; two million
warrants are exercisable at $5.50 per share and two million warrants are
exercisable at $11.00 per share. The Company anticipates it will enter into a
definitive agreement by April 30, 1999. The definitive agreement will be
subject to approval by a majority of the Company's stockholders.

     The Company intends to use the proceeds from the Peregrine financing to
grow its subscriber base by acquiring subscribers and ROEs from private and
wireless cable operators. This represents a change in the Company's business
strategy which previously relied solely on directly marketing to property
owners and managers to grow its base.

     Pursuant to this new strategy, on March 11, 1999, a wholly owned
subsidiary of Peregrine signed a letter of intent to acquire the assets and
assume certain liabilities of U.S. Online Communications, Inc. ("USOL"), an
Austin, Texas based provider of telecommunication services to residents of
MDUs. USOL serves properties in Austin, Dallas, San Antonio, Denver and
Washington, D.C., passing 15,000 total units.

     Upon consummation of the Company's transaction with Peregrine, the
Company will acquire the assets and assumed liabilities of USOL from the
Peregrine subsidiary. As consideration, the Company will issue 1.5 million
shares of common stock to USOL stockholders and management, 750,000 of which
vest over a three-year period. Additionally, the Company will also issue to
USOL stockholders five-year warrants to purchase 1.5 million shares of the
Company's common stock exercisable at $5.50 per share.

     The Company was organized in 1995 under the laws of the State of Oregon
and its headquarters are located at 190 SW Harrison Street, Portland, Oregon
97201. Its telephone number is (503) 306-4444.

     The Company currently has ROEs with 16 residential developments in three
cities in the United States. As of December 31, 1998, 12 of those properties
were online, all in Portland, Oregon, representing 2,819 apartment units. As
of December 31, 1998, the Company had 1,697 and 1,178 CATV and telephone
customers, respectively.

Business Strategy

     The Company's primary objective is to become a leading provider of RMTS
in the United States. The Company plans on accomplishing this objective by
growing primarily through acquisitions and by providing outstanding customer
service.

     The Company seeks to maximize enterprise value by acquiring private and
wireless cable operators and their ROEs at attractive prices in strategic
geographical clusters. The Company believes that it can improve the
penetration rates in the acquired properties by offering improved channel
line-ups, better customer service and additional services such as telephony
and internet. Once the Company has established a presence in a market through
acquisition, it plans to maximize the benefits of clustering by marketing
directly to property owners and managers in that market.

     In order to facilitate its growth strategy, the Company intends to
provide CATV services as a private cable operator ("PCO"). As a PCO, the
Company will acquire programming through program access agreements and
distribute the product through network on the MDU premises. The Company
expects to leverage the expertise of USOL, which currently operates as a PCO.
The Company has concluded that this change in CATV fulfillment methodology is
necessary for the following reasons.

     First, the Company believes that it will become increasingly more
difficult, if at all possible, to negotiate favorable bulk CATV resell
agreements with the local multiple system operators ("MSOs"). The Company has
experienced this in its recent negotiations with Tele-Communications, Inc.
("TCI"). It is the Company's belief that as TCI and AT&T begin to provide
bundled phone and video products, they may view the Company as a competitor as
opposed to a partner. Second, although more capital intensive, by operating as
a PCO, the Company expects to significantly improve its CATV operating
margins, thus reducing the time necessary to reach positive operating cash
flow. Third, because the Company was acquiring signal from the local MSO, the
MSO required an ROE agreement with the property owner in addition to the
Company's. As a result, if the Company chooses to stop purchasing signal from
the MSO, the MSO has the right to compete with the Company at the property.
The Company has concluded that such joint CATV ROEs may diminish the
enterprise value of the subscriber base. The Company will continue to honor
its commitments under existing bulk CATV agreements.

     In addition, the Company is also exploring other ways to provide enhanced
local dial tone, such as reselling services of competitive local exchange
carriers ("CLECs"). Traditionally, the Company has provided local phone
service by utilizing purchased switching hardware and software in combination
with leased networks from the incumbent local exchange carrier ("LEC").

     The Company plans on growing as rapidly as its infrastructure and
financing will allow, while maintaining its commitment to quality customer
service. The Company believes that the back office infrastructure of USOL,
such as its customer service call center, billing system and management
information systems provide a scalable platform to support the Company's
growth and strategy. It is the Company's intention to operate the business
from Austin utilizing the USOL facilities.

Properties

     The Company currently has ROEs with 16 residential developments in five
cities in the United States, including properties owned or managed by Equity
Residential Properties Trust, Trammell Crow Residential, Harsh Investment
Corp., and an affiliate of Prudential Insurance Company of America. Twelve of
those properties were online as of December 31, 1998, representing 2,819
units. Contract terms range from five to 20 years with an average remaining
term of 7.9 years.

<TABLE>
<CAPTION>

          Property Location   Units Under Contract     Units Online
          -----------------   --------------------     ------------
          <S>                  <C>                     <C>         

          Portland, OR                3,500                   2,819
          Seattle, WA                   351                       -
          Denver, CO                    315                       -
                                    -------                --------
                                      4,166                   2,819
                                     =======                =======
</TABLE>

Products and Services

     The Company offers standard and enhanced local and long-distance
telecommunications and CATV services to residents of MDUs. The Company has
historically provided CATV services by acquiring and reselling signal from the
local franchised MSO. Enhanced local phone service has been provided by
utilizing purchased switching hardware and software in combination with leased
networks from the incumbent LEC, while long-distance telephone has been
provided by reselling services purchased from inter-exchange carriers
("IXCs").

     As previously described, the Company anticipates changing the way it
provides CATV services. The following discussion describes how the Company
plans to provide CATV.

     The Company will deliver its CATV services by retransmitting programming
signals via antenna and principal headend electronic equipment that receive
and process signals from satellites. The Company will obtain its programming
through program access agreements with suppliers of programming. The Company's
private cable systems will also process and distribute off-air transmission
signals from local network affiliates and independent television stations. The
Company's cable system architecture generally eliminates the need for set-top
converter boxes when it is connected to cable-ready television sets, and
enables the Company to activate service for subscribers without entering into
an apartment. It is anticipated that many of the Company's systems will use 18
GHz microwave relays to link more than one apartment community to a single
headend, enabling the Company to realize grater economies of scale. In the
future, management plans to employ whatever technology provides the most
attractive return on invested capital without compromising its service,
including analyzing and/or beta testing fiber optics and interdiction
(automated work order processing) to provide expanded and enhanced services.

     The Company will offer to its subscribers a full range of popular CATV
programming at competitive prices. Its basic MDU programming package will be
generally priced competitively with the rate charged by incumbent MSOs. The
Company will offer premium television services, including uninterrupted full-
length motion pictures, regional sports channels, sporting events, concerts
and other entertainment programming. Premium channels, including HBO, Cinemax,
Showtime and The Disney Channel will be generally offered individually or in
discounted packages with basic or other services. The Company will also offer
movies, sporting events, concerts and other special events on a pay-per-view
basis. In addition, the Company will offer each property its own dedicated
channel, call "Community Link," that provides on-site management with the
ability to communicate electronically with residents.

     The Company plans to introduce high-speed internet access to certain
properties during 1999, utilizing the network of a national provider. The
Company believes that its customers can experience speeds of up to 1 Mb per
second, which is approximately 27 times faster than the 56K per second speed
provided by dial-up modems for use over existing telephone lines.

The Market

     The United States telecommunications industry is large and robust. The
cable television industry's revenues exceed $28 billion while local and long-
distance telephone traffic is in excess of $200 billion.

     As a result of technological and regulatory changes that have occurred
over the past few years, smaller companies have been able to compete more
effectively in the CATV and telephony markets traditionally dominated by
larger companies. This shift has enabled the RMTS industry to evolve as an
early stage competitor in the CATV and telephony markets. The potential market
for RMTS remains largely undeveloped, creating significant opportunities for
companies with the technological, operational and administrative ability to
manage growth effectively. First, there are few competitors relative to the
size of the potential market, which is estimated to be approximately 6 million
units across the United States located in MDUs of 200 units or more. Second,
RMTS providers can offer their services selectively and at rates below those
offered by traditional CATV and telecommunications companies. Due to their
lower cost structure, reduced regulatory oversight, and economics of scale
realized from an increased range of products and services offered, RMTS
providers can generally offer revenue-sharing agreements to property owners to
induce them to enter into long-term ROEs.

     The regulatory environment in the telecommunications industry has changed
dramatically over the past few years. In 1990, the Federal Communications
Commission (the "FCC") mandated that states act to shift the ownership of
telephone wiring in customer premises from regional bell operating companies
("RBOCs") to property owners. This decision relieved regulated local telephone
companies of the burden of wire maintenance and allowed property owners to
decide how to use existing wiring. This regulatory development created the
opportunity for private telecommunications operators to serve MDUs as
resellers of local telephone network services. In the past, however, the cost
of switching equipment and tariffs in local and long-distance exchange markets
prevented private telecommunications operators from taking advantage of this
opportunity.

     Recent changes in the telecommunications industry have enabled private
telephone operators to package and resell all types of telecommunications
services to MDU residents at competitive prices. These changes include (i) the
development of highly reliable, efficient, low-cost private branch exchange
and switching equipment, (ii) the proliferation of fiber optic transmission
capacity, and (iii) the gradual decrease in barriers to entry into local
markets. While these changes have created opportunities for private telephone
operators, they have also created pricing pressures which may depress profit
margins for such private telephone operators in the future.

Marketing Strategy

     The Company believes that it is important to enter target markets as
quickly as practicable to establish an early market presence and to gain
critical operating mass in advance of competitors. The Company currently
targets apartment complexes with 150 or more units. The selling cycle for the
Company's services includes proposal presentation, contract negotiations and
service implementation, a cycle that can require more than six months to
complete. While the Company plans to grow primarily through acquisition,
securing new ROEs through direct marketing efforts is also an integral part of
the Company's strategy to grow and achieve operating efficiencies.

     Both new construction and existing MDUs will be targeted. The Company
will seek to secure new ROEs through one-on-one contracts, real estate
investment trusts ("REITS"), associations and organizations and strategic
agreements. One such strategic agreement the Company has executed is with Web
Service Company, Inc. ("WEB").

     In August 1998, the Company entered into an exclusive marketing agreement
with WEB (the "WEB Agreement"), one of the largest operators of coin operated
laundry equipment in apartment and condominium complexes in the United States.

     Under terms of the WEB Agreement, WEB will exclusively market the
Company's services to properties with which WEB has an existing relationship
that have more than 150 units in Dallas, Denver, Seattle and the San Francisco
Bay Area (the "Exclusive Territories"). Based on information provided by WEB,
the Company believes that WEB provides ancillary services to approximately 590
apartment complexes of that size passing approximately 150,000 units in the
Exclusive Territories. Due to the Company changing its focus to an acquisition
strategy, the Company and WEB have mutually agreed to delay commencing
marketing activities under the WEB Agreement. The Company and WEB are
currently evaluating what role, if any, WEB can and should play in its future
business activities.

Competition

     The market for CATV and telephony services is highly competitive. The
Company competes for ROEs with other private cable operators and
telecommunications providers. Under the terms of its ROEs, the Company
generally is required to provide products and services that are competitive
with those offered by other cable and telecommunications providers. The
Company competes for customers on the basis of price, services offered and
customer service. Franchised CATV operators, referred to as MSOs, and local
telecommunications companies, known as RBOCs, represent the Company's
principal competition. These competitors are typically very large companies
with significantly greater resources than those of the Company. The Company
competes directly for ROEs with these companies. The Telecommunications Act of
1996 (the "1996 Act") allows RBOCs to enter the cable business as well. The
principal RMTS competitors of the Company are GE/RESCOM, OpTel, Inc., Cable
Plus Group Company, LP, and OnePoint Communications, L.L.C.

Key Suppliers

     The Company currently leases transmission facilities from US WEST
Communications, Inc. ("USWC"), MCI Worldcom and Frontier Communications. Cable
television signal is acquired by the Company from TCI Cablevision of Oregon,
Inc. and KBL Cablesystems of the Southwest, a Time Warner company. Switching
hardware used by the Company is manufactured by Digital Telecommunications
Inc. and Cortelco, formerly ITT Solid State. Its internet services provider is
GTE Intelligent Network Services, Inc. The Company believes that alternative
sources are available for all critical equipment and services that it utilizes
from the above suppliers, and that such equipment and services can be obtained
at prices comparable to those the Company is presently paying.

Employees

     The Company employs 13 persons on a full-time basis in its Portland
offices. Of these employees, five are administrative or management and eight
are in the areas of customer service, billing and operations. The Company
believes its relationship with its employees to be good and none of the
employees are union members. All of the Company's employees are at will.

Legislation and Regulation

     Government Regulation --General

     The Company is subject to regulation under both state and federal
telecommunications laws which is fluid and rapidly changing. On the state
level, rules and policies are set by each state's Public Utility Commission or
Public Service Commission ("PUC" or "PSC"). On a federal level, the FCC, among
other agencies, dictates the rules and policies which govern interstate
communications providers. The FCC is also the main agency in charge of
creating rules and regulations to implement the recently enacted 1996 Act.

     Government Regulation -- CATV Regulatory Issues

     REGULATORY STATUS AND REGULATION OF PRIVATE CABLE OPERATORS. Franchise
cable operators are subject to a wide range of FCC regulations regarding such
matters as the rates charged for certain services, transmission of local
television broadcast signals, customer services standards/procedures,
performance standards and system testing requirements. In addition, the
operator's franchise, which can be issued at the municipal, county or state
level, typically imposes additional requirements for operation. These relate
to such matters as system design and construction, provision of channel
capacity and production facilities for public educational and government use,
and the payment of franchise fees and the provision of other "in kind"
benefits to the city.

     The operator of a video distribution system that serves subscribers
without using any public right-of-way, referred to generally as a private
cable operator, is exempt from the majority of FCC regulations applicable to
franchised systems which do use public rights-of-way. Moreover, a state or
local government cannot impose a franchise requirement on such operators.

     To remain exempt from extensive FCC regulation and local franchising
requirements, the Company intends to confine its video distribution facilities
to contiguous private property and obtain programming primarily via satellite
master antenna television ("SMATV") facilities. The Company intends to rely on
18 GHz microwave links to cross public rights-of-way where necessary and
technically feasible. The use of microwave frequencies to transmit video
signals across a public right-of-way is not considered a "use" of the right-
of-way sufficient to trigger a local franchising requirement or FCC regulation
applicable to franchised operators. The Company intends to be a private cable
operator in all of the markets that it serves.

     The use of 18 GHz microwave links nationwide could be affected generally
by two ongoing proceedings at the FCC. In the first proceeding, the FCC is
considering whether to provide for routine "blanket" licensing of large
numbers of small antenna earth stations in a range of frequency bands
including the 18 GHz band. If the proposed operations are allowed, it is
possible that the Company would be required to use more sophisticated and more
expensive equipment to maintain signal quality in its point-to-point 18 GHz
microwave links. It is also possible that the proposed operations would cause
interference with these links that could not be remedied entirely. In the
second proceeding, initiated on April 1, 1998, the FCC has been asked to
authorize the use of the 12 GHz band for transmission of video programming.
Such action would expand the general availability of microwave links. More
importantly, a 12 GHz link can cover approximately twice the distance of an 18
GHz link and consequently would allow the Company to integrate systems over a
larger area.

     Even structuring its operations in the foregoing manner, the Company will
have to comply with various FCC rules, including the following: the FCC's
signal leakage rules, which require monitoring and testing of its facilities,
various Equal Employment Opportunity requirements (including annual reports
and implementation of a nondiscrimination policy and a positive program to
encourage equal opportunity), requirements that the Company obtain the consent
of commercial broadcast stations for transmission of the stations' signals and
rules requiring the closed captioning of programming.

     ACCESS TO PROPERTY.  Federal law provides franchise cable operators
access to public rights-of-way and certain private easements. These provisions
generally have been limited by the courts to apply only to external easements
and franchise operators have not been able to use these rights to access the
interior of MDUs without owner consent. In some jurisdictions, franchise
operators have been able to use state or local access laws to gain access to
property over the owner's objection and in derogation of a competing
provider's exclusive contractual right to serve the property. These statutes,
referred to as "mandatory access" provisions, typically empower only franchise
cable operators to force access to an MDU to provide service to the residents
regardless of whether the owner objects or has entered into a contract with an
alternative provider of video services such as the Company. Thus, in
jurisdictions where a mandatory access provision has been enacted, a franchise
operator would be able to access an MDU and provide service in competition
with the Company regardless of whether the Company has an exclusive ROE with
the owner. The ability of franchise operators to force access to an MDU and
take a portion of the subscriber base could negatively effect the Company's
operating margin at a particular property. It is often the case, particularly
at the local level, that the mandatory access provision is suspect under
constitutional principles because, for example, it does not provide the MDU
owner to be compensated for the "taking" of its property which results.

     An ongoing FCC proceeding raises the possibility that direct broadcast
satellite ("DBS") and multi-channel, multi-point distribution service ("MMDS")
operators will be granted rights on a national basis similar to the mandatory
access provided to franchise cable operators in some state and local
jurisdictions. The FCC recently adopted rules prohibiting homeowners
associations, manufactured housing parks and state and local governments from
imposing any restriction on a property owner that impairs the owner's
installation, maintenance or use of DBS and MMDS antennas one meter or less in
diameter or diagonal measurement.  The FCC has sought comment on the
possibility of adopting rules that would prohibit MDU owners from imposing
such restrictions on residents of their rental properties. If the FCC were to
adopt such rules, DBS and MMDS operators, through tenant choice, presumably
would be able to gain access to serve individual residential units within MDUs
without the owner's consent.

     INSIDE WIRING. Last year, the FCC issued new rules governing the
disposition of inside wiring by incumbent operators in MDUs upon termination
of service when the incumbent operator owns the wiring. In some instances, a
new provider such as the Company faces difficulty in taking over a property
because the ownership of the wiring is uncertain or contested and the property
owner is hesitant to allow installation of additional wiring. The new rules
address this issue and facilitate competition from new providers by requiring
the incumbent operator to choose between sale, removal or abandonment of the
wiring within certain time constraints and by allowing installation of wiring
within an incumbent's molding in certain instances. The rules are currently
the subject of petitions for reconsideration at the FCC and at least one
judicial challenge in the Eighth Circuit Court of Appeals.

     In conjunction with the issuance of the inside wiring provisions, the FCC
sought comment on a number of related issues which it will address in new
rules. It is considering, among other things, whether to (i) adopt a cap on
the duration of exclusive contracts equal to the amount of time reasonably
necessary to recover capital costs (the FCC has proposed a cap of seven
years); (ii) limit the ability of multi-channel video programming distributors
("MVPDs") with market power (typically the local franchisee) to enter into
exclusive contracts, (iii) take action to address the anti-competitive effects
of perpetual exclusive contracts (those continuing though all future renewals
of the franchise), such as by allowing MDU owners to void these contracts
pursuant to a "fresh look" mechanism; (iv) require competing providers to
share a single system of wiring; (v) extend existing rules on cable home
wiring (that wiring within residential units up to twelve inches outside each
unit) to all MVPDs and not just franchise operators; and/or (vi) extend rights
of subscribers to install their own cable wiring within MDUs. The comments
filed in this proceeding are divided on many of the key issues regarding
treatment of exclusive and perpetual contracts.

     Given the limited subscriber base at MDUs, it is important for the
Company to be able to rely upon exclusive contracts as a means of maximizing
its revenue at a particular property. Thus, if in implementing rules to
address the foregoing issues, the FCC imposes too short a cap on exclusive
contracts or otherwise unduly limits their use, it could have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, the perpetual contracts often utilized by franchise
operators inhibit competition from alternative providers such as the Company
or stifle it altogether if such contracts are exclusive.  If the FCC does not
grant MDU owners broad enough powers to extricate themselves from perpetual
contracts with franchise operators, the number of MDUs at which the Company
could compete would be diminished, which could have a material adverse effect
on the Company's business, financial condition and results of operations.

     REGULATION OF DBS PROVIDERS. Congress is considering legislation that, if
enacted, could make it easier for the Company to use DBS as a source of
programming while at the same time making it easier for DBS providers to
compete. The proposals would greatly expand the areas in which DBS providers
can distribute local TV stations and network signals and would reduce the
license fees that DBS providers must pay for carrying broadcast signals.
Finally, proposed FCC regulations could limit the ability of MDU owners to
deny tenants the right to subscribe to DBS service.

     REGULATION OF FRANCHISE CABLE TELEVISION RATES. The FCC regulates the
rates that franchise cable systems charge for basic monthly service, expanded
basic service and certain customer premises equipment. As an exception to the
general uniform rate requirement, the regulations allow certain "bulk"
discounts to MDU customers, enabling franchise cable systems to be more
competitive with private operators such as the Company. In addition, rate
regulation does not apply if the franchise operator is subject to "effective
competition" as defined by the FCC or if the operator qualified for the "small
operator" exemption. The FCC is currently considering revisions to the uniform
rate regulations and the foregoing exemptions, which revisions may affect the
level of protection the regulations afford private operators. More generally,
the regulations do not prohibit discriminatory pricing for services other than
rate-regulated services and associated installation and equipment costs.
Although regulation of rates for expanded basic service is scheduled to be
eliminated in March 1999, recent cable rate increases have resulted in
pressure on Congress to extend this "sunset" date.

     Actions by the FCC that expand the freedom of franchise operators to set
rates or the termination of rate regulation altogether could allow franchise
operators to subsidize competition at MDUs through their citywide operations.
This could have a material adverse effect on the Company's business, financial
condition and results of operations.

     COPYRIGHT. The broadcast programming to be distributed by the Company
contains copyrighted material. Accordingly, the Company will have to pay
copyright fees for its use of that material (copyright liability for
satellite-delivered programming is typically assumed by the supplier). The
U.S. Copyright Office recently ruled that private systems located in
"contiguous communities" (or operating from one headend) will be treated as
one system and that the revenue for such systems must be combined in the
calculation of copyright fees. If the combined revenue figure is high enough,
it results in more complicated fee calculations and higher fees. The Company
intends to structure its programming to minimize the revenue associated with
retransmission of television and radio broadcasts in an effort to maintain a
simplified filing status and to reduce its copyright liability in the event it
must file under the more complicated formula.

     Government Regulation -- Telephony Regulatory Issues

     In providing telecommunications services to its customers, the Company
will operate as either a shared tenant service ("STS") provider or a CLEC, as
well as an IXC. Fewer than a dozen states impose certification and/or
tariffing requirements on STS providers, while virtually all states do so with
respect to CLECs. While the FCC and a majority of states impose certification
and/or tariffing requirements on IXCs, federal and state regulation of IXCs
has been relaxed substantially over the past few years. CLECs remain subject
to a wide array of regulatory constraints and obligations. By contrast,
regulation of STS providers is minimal. The Company is certified as a CLEC in
the states of Colorado, Oregon, Washington, and Texas and intends to seek like
authority when it enters other states. The Company also has authority to
operate as an IXC in the same states and will seek authority to act as an IXC
to the extent such authority is required when the Company enters new states.

     The 1996 Act opened the local telecommunications markets to competition
by mandating the elimination of legal, regulatory, economic and operational
barriers to competitive entry. These changes provided the Company with new
opportunities to provide local telephone services on a more cost-effective
basis. The 1996 Act, however, also provides the RBOCs with a means to enter
the long-distance market, which introduced a number of substantial new
competitors in that market. On balance, management believes that the Company
will benefit significantly from the market-opening provisions of the 1996 Act.

Item 2.   Properties

     The Company leases 2,100 square feet of office space at 190 SW Harrison
Street in Portland, Oregon under a five-year lease expiring on October 31,
2001. In addition, the Company has leased 4,500 square feet of office space at
117 SW Taylor in Portland, Oregon under an eight-year agreement with an option
to terminate at any time after the sixtieth month.

     It was the Company's intention to relocate its headquarters to the Taylor
Street location. However, given the USOL acquisition and the Company's plan to
manage operations from the USOL facility in Austin, the Taylor Street location
is no longer necessary. It is the Company's plan to remain in the Harrison
Street location, utilizing the space for its Portland field office and
sublease the office space at Taylor Street. The Company believes it will be
able to sublease the aforementioned space. The Company believes its office
space is sufficient for the next several years. Additionally, the Company
maintains equipment, primarily switches, at various locations to provide local
dial tone for its customers.

Item 3.   Legal Proceedings

     There are no material existing or pending legal proceedings to which the
Company is a party.

Item 4.   Submission of Matters to a Vote of Security Holders

     Not applicable.

<PAGE>
<PAGE>
                                    PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder
          Matters

     The Company's common stock and certain common stock purchase warrants
trade on the Nasdaq SmallCap Market under the symbols "FLCI" and "FLCIW",
respectively.

     Set forth in the following table are high and low bid quotations for each
quarter in the fiscal year ended December 31, 1998. The Company completed its
initial public offering ("IPO") on July 27, 1998 and, accordingly, there was
no public market for its stock or warrants prior to that date. The quotations
represent inter-dealer quotations without retail markups, markdowns or
commissions, and may not represent actual transactions.

<TABLE>
<CAPTION>
                              Common Stock            Warrants           
                       ------------------------------------------------
  Quarter Ended           High          Low        High          Low     
  -------------        ----------    --------- ----------   --------------
  <S>                  <C>           <C>       <C>          <C>

  March 31, 1998              N/A          N/A        N/A             N/A
  June 30, 1998               N/A          N/A        N/A             N/A
  September 30, 1998   $     4.50    $    1.50 $      .56   $         .13
  December 31, 1998    $     2.31    $    1.13 $      .25   $         .06

</TABLE>

     There were approximately 550 holders of record of the Company's common
stock as of April 5, 1999.

     No dividends have been declared or paid by the Company, nor does the
Company anticipate paying cash dividends on the shares of common stock in the
foreseeable future.

Item 6.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations

Introduction

     The following discussion of the financial condition and results of
operations of the Company, the description of the Company's business, as well
as other sections of this Form 10-KSB contain certain forward-looking
statements. The Company's actual results could differ materially from those
discussed herein and its current business plans could be altered in response
to market conditions and other factors beyond the Company's control.

     The Company provides integrated telecommunications and entertainment
services to residents of multi-family apartment and condominium complexes.
Services provided include cable television and enhanced local and long-
distance telephone services. In certain properties, the Company also provides
high-speed internet access. The Company's primary objective is to become a
leading provider of RMTS in the United States. The Company plans to accomplish
this objective by growing primarily through acquisitions and by providing
outstanding customer service. The Company seeks to maximize enterprise value
by acquiring private and wireless cable operators and their ROEs at attractive
prices in strategic geographical clusters. The Company believes that it can
improve the penetration rates in the acquired properties by offering improved
channel line-ups, better customer service and additional services such as
telephony and internet access.

     In order to finance this strategy, subsequent to year end the Company
signed the LOI with Peregrine, a Portland based investment company. Under
terms of the LOI, Peregrine will purchase five million shares of the Company's
common stock for $10 million, of which $6 million is to be paid in cash with
the remainder to be paid under a three-year note agreement. The note accrues
interest at 5% per annum and will be payable three years from the date of the
note. Additionally, the LOI calls for Peregrine to arrange for a $25 million
credit facility (the "Credit Facility") on the Company's behalf and that
Peregrine must also deliver contracts with property owners totaling at least
60,000 units passed at closing. Peregrine may use proceeds from the Credit
Facility to acquire the 60,000 units. Further, Peregrine will receive four
million warrants to purchase the Company's common stock, exercisable for a
period of four years commencing one year after closing of the transaction; two
million warrants are exercisable at $5.50 per share and two million warrants
are exercisable at $11.00 per share. The Company anticipates it will enter
into a definitive agreement by April 30, 1999. The definitive agreement will
be subject to approval by a majority of the Company's stockholders.

     The Company intends on using the proceeds from the Peregrine financing to
grow its subscriber base by acquiring subscribers and ROEs from private and
wireless cable operators. This represents a change in the Company's business
strategy which previously relied solely on directly marketing to property
owners and managers to grow its base.

     Pursuant to this new strategy, on March 11, 1999, a wholly owned
subsidiary of Peregrine signed a letter of intent to acquire the assets and
assume certain liabilities of USOL, an Austin, Texas based provider of
telecommunication services to residents of MDUs. USOL serves properties in
Austin, Dallas, San Antonio, Denver and Washington, D.C., passing 15,000 total
units.

     Upon consummation of the Company's transaction with Peregrine, the
Company will acquire the assets and assumed liabilities of USOL from the
Peregrine subsidiary. As consideration, the Company will issue 1.5 million
shares of common stock to USOL stockholders and management, 750,000 of which
vest over a three-year period. Additionally, the Company will also issue to
USOL stockholders five-year warrants to purchase 1.5 million shares of the
Company's common stock exercisable at $5.50 per share.

     The Company's first property, the 525-unit Portland Center Apartments
complex, went online in September 1994. The properties under contract as of
December 31, 1998 totaled 4,166 units, of which 2,819 were online. Contract
terms range from five to 20 years.

Results of Operations

     Year Ended December 31, 1998 Compared to December 31, 1997

     The Company reported a net loss of $1,833,974 for the year ended December
31, 1998 compared to a net loss of $578,276 for the year ended December 31,
1997. The increase in net loss is primarily attributable to increased selling,
general and administrative expenses that were incurred as the Company added
management and other personnel for its anticipated growth.

     Revenue increased by $366,108, or 42%, for the year ended December 31,
1998, compared to the prior year. The increase in revenue is due to the
Company having an average of 2,628 units online during 1998, compared to 1,620
during 1997.

     Operating expenses increased by $387,918, or 67%, for the year ended
December 31, 1998, compared to the prior year. Operating expenses were 78% of
revenue during 1998, compared to 66% of revenue during 1997. The increase in
operating expenses resulted primarily from the increase in revenue as such
expenses are generally variable with revenue. However, the Company also
experienced a deterioration in margins, specifically long distance and cable.
Long distance margins were adversely impacted by several factors, including
the utilization of more aggressive pricing plans which reduced the average
revenue per minute, and a change in the mix of calls made which resulted in an
increase in international and calling card calls, both of which have lower
margins for the Company. Cable margins decreased due to the bulk agreements
signed during 1998 having higher costs per unit than those the Company
operated under during 1997. The Company plans to address its long-distance
call mix and pricing structures in order to improve margins. Additionally, as
previously mentioned, the Company plans to operate as a private cable operator
and discontinue purchasing in bulk from the local MSO in most cases. This
should result in improving cable margins significantly. It is critical that
the Company improve its operating margins if it is to achieve positive
operating cash flow. Management believes that the USOL acquisition will help
improve margins for the Company.

     Selling, general and administrative expenses increased by $1,071,049, or
153%, for the year ended December 31, 1998, compared to the prior year.
Selling, general and administrative expenses were 142% of revenue during 1998,
compared to 80% during 1997. Selling, general and administrative expenses
increased as a result of increases in salary and related expenses associated
with the additional personnel hired by the Company to manage and execute the
Company's planned growth. Additional expenses that increased substantially
between years were insurance, public relations, legal and regulatory, rent,
and travel and entertainment, many of which were directly related to the
Company's new public status.

     Depreciation and amortization expenses increased by $33,193, or 47%, for
the year ended December 31, 1998, compared to the prior year. Depreciation and
amortization expense was 8% of revenue in both 1998 and 1997. The increase in
depreciation and amortization expense is due to an increase in property and
equipment resulting from an increase in properties online between years.

     Other expense increased by $129,646, or 122%, for the year ended
December 31, 1998, compared to the prior year. Other expense was 19% of
revenue during 1998, compared to 12% during 1997. The increase between years
resulted from a one-time noncash charge to other expense related to the
induced conversion of certain convertible notes during the first quarter of
1998, and down payments on certain switching equipment that were forfeited
when the Company decided not to purchase the equipment. These charges were
partially offset by interest income earned on the Company's investments and
cash equivalents.

     The Company has net operating loss carryforwards which are available to
offset future financial reporting and taxable income. Net operating loss
carryforwards for tax purposes totaled approximately $2,500,000 at
December 31, 1998, and expire in 2011 through 2018.

     A provision of the Internal Revenue Code ("IRC") requires the utilization
of net operating losses be limited when there is a change of more than 50% in
ownership of the Company. Such a change occurred in 1996, 1997 and 1998. If
the Company's agreement with Peregrine is approved by the Company's
stockholders, the Company will have incurred another ownership change under
IRC Section 382. These ownership changes would limit the utilization of any
net operating losses incurred prior to the change in ownership date.

     The difference between expected tax benefit, computed by applying the
federal statutory rate of 34% to loss before taxes, and the actual tax benefit
of $0 is primarily due to the increase in the valuation allowance for deferred
taxes.

Liquidity and Capital Resources

     At December 31, 1998, the Company had cash and cash equivalents of
$1,617,582, compared to $389,415 at December 31, 1997. Additionally, the
Company held investment securities of $3,284,495 at December 31, 1998,
compared to $0 at December 31, 1997. The increase in the Company's cash and
investment position is due to the proceeds received from the Company's IPO.
Net cash of $1,640,918 was used in operating activities for the year ended
December 31, 1998, which resulted from the Company's net loss offset by
noncash charges for the induced conversion of certain convertible notes, as
well as a charge related to stock options.

     Net cash of $3,936,823 was used in investing activities for the year
ended December 31, 1998. This consisted of $652,328 utilized for capital
expenditures and $3,284,495 spent on the purchase of investment securities.
Capital expenditures consisted of computers, a billing system, a new Portland
switchroom, and leasehold improvements and furniture related to the Company's
new office. Total expenditures on the new office and switchroom totaled
approximately $339,000.

     Net cash of $6,805,908 was provided by financing activities during the
year ended December 31, 1998. This was primarily the result of the Company
completing the IPO of its common stock, which raised approximately $6,364,000
of net cash proceeds. Additionally, the Company sold stock in two private
transactions (prior to the IPO being completed) netting an additional
$490,000. Principal payments under capital leases totaled $49,352 and
partially offset the proceeds from sales of common stock.

     In the Company's prospectus, it was anticipated that the net cash
proceeds would be $6,539,000. The difference between actual and estimated
proceeds was due to actual offering costs exceeding estimated costs by
$175,000, Through December 31, 1998, the Company had spent approximately
$1,463,000 of the offering proceeds applied as follows: capital expenditures
$465,000; system improvements $116,000; and salaries and other general and
administrative costs $882,000. The actual expenditures were within the
estimated allocation parameters disclosed under "Use of Proceeds" in the
Company's prospectus.

     In February 1999, the Company signed a letter of intent with Peregrine to
provide $35 million of equity and debt to finance the Company's acquisition
strategy. In addition, the Company has available a $2 million master lease
agreement for purchases of telecommunications equipment, computers and office
equipment, of which $500,000 is available immediately and $1.5 million is
subject to performance requirements. The Company believes that the financing
provided by Peregrine, combined with existing cash and investment securities
as well as amounts available under its lease line, will be sufficient to fund
the Company's business plan for at least the next 12 months.

     It is the Company's belief that the Peregrine financing, cash and
investments on hand, and available lease financing should be sufficient to
acquire and/or develop a number of MDUs that would enable the Company to
achieve positive operating cash flow (EBITDA). The Company believes this
break-even level to be approximately 60,000 units passed given historical
penetration rates. However, to grow the business beyond the 60,000-unit level,
the Company will require additional financing. Such financing may include a
secondary offering of the Company's common stock, public or private debt
placements, or financing from traditional lending institutions.

     The Company has agreements with certain cable operators to purchase bulk
cable signals at the Company's properties. As of December 31, 1998, the
Company's commitment was $32,759 per month for such services. At December 31,
1998, there were no commitments for capital expenditures.

Year 2000

     The Company has completed a comprehensive review of its information and
support systems to determine whether such systems will properly function in
the year 2000 and thereafter. Systems reviewed principally include the
Company's switches and network operations systems, billing and financial
systems, and the Company's internal communications systems. Although the
Company relies primarily on systems developed with current technology that
were designed to be year 2000 compliant, the Company will have to replace
certain equipment. The Company has identified its Cortelco switch as being
noncompliant and it will have to be replaced sometime during 1999. The Company
is currently evaluating several solutions for replacing the Cortelco switch.
At December 31, 1998, the switch had a net book value of $70,649.
Additionally, the Company has identified that its DXC switch will require a
software upgrade to be year 2000 compliant. The Company anticipates completing
the upgrade during the second quarter of 1999. The Company's due diligence
also included an evaluation of vendor provided technology and the
implementation of new policies to require vendors to confirm that they have
disclosed and will correct any year 2000 compliance issues.

     The costs associated with investigating and resolving year 2000 issues
have been minor and have been expensed as incurred. Replacing the Cortelco and
upgrading the DXC switches are not expected to have a material impact on the
Company's financial condition or results of operations. The Company estimates
year 2000 remediation will be approximately $180,000. While the Company
believes that its software applications will be year 2000 compliant, there can
be no assurance until the year 2000 occurs that all systems will then function
adequately. Further, if the software applications of local exchange carriers,
long-distance carriers, cable providers or other on whose services the Company
depends are not year 2000 compliant, it could have a material adverse effect
on the Company's financial condition and results of operations. The Company is
continuing to monitor its operations for year 2000 readiness, including
developing its contingency plan to be year 2000 compliant. If additional year
2000 compliance issues are discovered, the Company will evaluate the need for
repair or replacement or contingency plans to such issues.

Adoption of New Accounting Standards

     In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. SFAS No.
133 standardizes the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts. Under SFAS No. 133,
entities are now required to carry all derivative instruments in the balance
sheet at fair value. The accounting for changes in fair value (i.e., gains and
losses) of a derivative instrument depends on whether it has been designated
and qualifies as part of a hedging relationship and, if so, on the reason for
holding it. The Company must adopt SFAS No. 133 by January 1, 2000. The
Company has not determined the impact that SFAS No. 133 will have on its
financial statements and believes that such determination will not be
meaningful until closer to the date of initial adoption.

     In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, Reporting on the Costs of Start-Up
Activities ("SOP 98-5"). SOP 98-5 requires that costs incurred during start-up
activities, including organization costs, be expensed as incurred and that
previously capitalized costs related to such activities be expensed as a
cumulative effect of a change in accounting principles upon adoption. The
Company will adopt the provisions of SOP 98-5 at the beginning of 1999 and
does not anticipate that this new standard will have a material impact on
future results of operations.

Item 7.   Financial Statements and Supplementary Data

     The financial statements of the Company appear on page F-1 of this Form
10-KSB. The financial statement schedule required under Regulation S-X is
filed pursuant to Item 13 of this Form 10-KSB, and appears on page S-1 of this
Form 10-KSB.

     All other schedules are omitted as the required information is not
applicable or the information is presented in the financial statements,
related notes or other schedules.

Item 8.   Changes In and Disagreements with Accountants on Accounting and
          Financial Disclosure

     Not applicable.

<PAGE>
<PAGE>
                                   PART III

Item 9.   Directors and Executive Officers of the Registrant

     The directors and executive officers of the Company, and their ages as of
the date of this Form 10-KSB, are as follows:

<TABLE>
<CAPTION>

          Name                             Age         Position
          ----                              ---        --------
          <S>                              <C>         <C>

          A. Roger Pease (2)(3)             52     Chairman of the Board
                                                  Chief Executive Officer
          Thomas E. McChesney (1)(2)(3)     51           Director
          Robert F. Olsen (1)(3)            49           Director
          Jeffrey S. Sperber                34    Chief Financial Officer
                                                         Secretary
          James F. Twaddell (1)(2)          58           Director

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

(1)  Independent directors. The Company will maintain at least two (2)
     independent directors on it Board of Directors.
(2)  Member of Audit Committee.
(3)  Member of Compensation Committee.

     A. Roger Pease was appointed President and Chief Executive Officer of the
Company in January 1996. From June 1994, Mr. Pease served as Chief Executive
Officer, President or Manager of the Company's predecessors. Previously, Mr.
Pease was President and Chief Executive Officer of Payline Systems, Inc. since
1987. From 1983 to 1987, he was employed by Lattice Semiconductor Corporation
as Vice President of Finance, Vice President of Strategic Planning and
Administration, and as a consultant. From 1979 to 1983, Mr. Pease was a
Partner with the Portland office of the accounting firm of Touche, Ross & Co.,
where he served as Director of Management Consulting Operations. Mr. Pease, a
certified public accountant, holds a Masters of Business Administration degree
from Northwestern University (1970) and a Bachelor of Arts degree in Finance
from the University of Illinois (1968).

     Thomas E. McChesney was appointed as a Director in January 1996. He is a
registered representative of Blackwell Donaldson & Co., a securities broker-
dealer. From January 1996 to October 1996, Mr. McChesney was associated with
Bathgate McColley Capital Group, LLC. Previously, Mr. McChesney was an officer
and director of Paulson Investment Co. and Paulson Capital Corporation from
March 1977 to June 1995. Mr. McChesney also serves on the boards of Labor
Ready, Inc., a company listed on the Nasdaq Stock Market; T. Angell & Co.,
Inc.; and Nation's Express, Inc.

     Robert F. Olsen was appointed as a Director in January 1996. Mr. Olsen
previously served as Director of Payline Systems from May 1992 until May 1995.
Mr. Olsen is the Chairman and Chief Executive Officer of J.R. Roberts
Corporation, which he co-founded in 1980. J.R. Roberts Corporation is the
largest construction company in Sacramento, California, specializing in
commercial, industrial and multi-family housing projects.  J.R. Roberts
Corporation has offices in Sacramento, Seattle, Portland, and Orange County.
From 1971 to 1980, he served as Manager of Marketing and Director of East
Coast Construction and Special Projects for Continental Heller, a large
national construction company based in California. Mr. Olsen holds two degrees
from Oregon State University: a Bachelor of Science degree in Civil
Engineering and a Bachelor of Arts degree in Business Administration (1971).

     Jeffrey S. Sperber was appointed Chief Financial Officer in October 1997
and Secretary in March 1999. From August 1995 to September 1997, Mr. Sperber
was the Controller of TCI Wireline, Inc., a business unit of Tele-
Communications, Inc., engaged in providing local telephone service. From
August 1991 to August 1995, he was employed by Concord Services, Inc., a
privately held international conglomerate based in Denver, Colorado, where he
was responsible for the accounting and finance of both public and privately
held entities, most recently, as Chief Financial Officer of its manufacturing
and processing business unit. From September 1986 to August 1991, he was
employed by Arthur Andersen & Co. in Denver, Colorado, as a senior auditor.

     James F. Twaddell was elected as a Director of the Company in February
1998. He is a member of the investment banking group of Schnieder Securities,
Inc., located in Providence, Rhode Island. From 1974 through 1995, Mr.
Twaddell served as Chairman of Barclay Investments, Inc., a member firm of the
National Association of Securities Dealers, Inc. (the "NASD"). Mr. Twaddell
also served as Chairman of Regional Investment Brokers, Inc., a 125-member
cooperative association of regional investment bankers and broker/dealers
conducting business throughout the United States. For the 1993 to 1995 term,
he was elected to serve on both the NASD District 11 Committee and the
District Business Conduct Committee. He has served as Chairman of the Board of
First Mutual Fund, a 30-year-old publicly traded mutual fund, since 1979. He
has also served as a Trust Manager of Grove Property Trust, a public REIT that
is engaged in the acquisition, repositioning, management and operation of mid-
priced, multi-family communities in the Northeastern United States, since
1994. Mr. Twaddell received his Bachelor of Arts degree from Brown University
in 1961.

     There are no family relationships among directors or persons nominated or
chosen by the Company to become a director, nor any arrangements or
understandings between any director and any other person pursuant to which any
director was elected as such. Each director is elected to serve for a term of
one (1) year until the next annual meeting of stockholders or until a
successor is duly elected and qualified. The present term of office of each
director will expire at the next annual meeting of stockholders.

     The executive officers of the Company are elected annually at the first
meeting of the Company's Board of Directors held after each annual meeting of
stockholders. Each executive officer will hold office until his successor is
duly elected and qualified, until his resignation or until he shall be removed
in the manner provided by the Company's Bylaws.

     During 1998, the Company formed the Audit and Compensation Committees of
the Board of Directors. The Audit Committee is chaired by Mr. McChesney, and
the Compensation Committee chaired by Mr. Olsen. Those committees consist of
three members each, including two outside directors. No member of those
committees will receive any additional compensation for his service as a
member of that committee. The Audit Committee is responsible for providing
assurance that financial disclosures made by management of the Company
reasonably portray the Company's financial condition, results of operations,
plan and long-term commitments. To accomplish this, the Audit Committee
oversees the external audit coverage, including the annual nomination of the
independent public accountants, reviews accounting policies and policy
decisions, reviews the financial statements, including interim financial
statements and annual financial statements, together with auditor's opinions,
inquires about the existence and substance of any significant accounting
accruals, reserves or estimates made by management, reviews with management
the Management's Discussion and Analysis section of the Annual Report, reviews
the letter of management representations given to the independent public
accountants, meets privately with the independent public accountants to
discuss all pertinent matters, and reports regularly to the Board of Directors
regarding its activities.

Director Nominee

     The Company has granted ProFutures Bridge Capital, LP ("ProFutures"), a
substantial stockholder, the right to nominate a director, subject to the
Company's approval. ProFutures has not exercised that right as of the date of
this Form 10-KSB.

     Upon closing of the transaction with Peregrine, Peregrine shall have the
right to designate a majority of the Company's directors.

Director Compensation

     Directors who are also executive officers of the Company receive no
additional compensation for their services as directors. Directors who are not
executive officers of the Company are paid a $500 fee for each board meeting
they attend. In addition, directors are entitled to be reimbursed for their
expenses associated with attendance at meetings or otherwise incurred in
connection with the discharge of their duties as directors of the Company.
Additionally, directors are eligible for stock options under the Company's
option plans. A total of 80,000 options have been granted to outside
directors.

Limitation on Directors' Liability; Indemnification

     The Company has adopted provisions in its Articles of Incorporation and
Bylaws that limit the liability of its directors to the fullest extent
permitted by the Oregon Business Corporation Act (the "OBCA"). Under the
Company's Articles and Bylaws, as permitted by the OBCA, no director is liable
to the Company or its stockholders for monetary damages for his conduct as a
director of the Company. Such limitation of liability does not affect a
director's liability for (a) a breach of the director's duty of loyalty to the
Company or its stockholders; (b) any acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of the law; or
(c) any unlawful distribution, or a transaction from which the director
receives an improper personal benefit. Such limitation of liability also does
not affect the availability of equitable remedies such as injunctive relief or
rescission.

     The Company's Articles of Incorporation permit, and its Bylaws require,
the Company to indemnify officers and directors to the fullest extent
permitted by the OBCA. These agreements, among other provisions, provide
indemnification for certain expenses (including attorney fees), judgments,
fines and settlement amounts incurred in any action or proceeding, including
any action by or in the right of the Company.

     The effect of this provision in the Company's Articles of Incorporation
is to eliminate the rights of the Company and its stockholders (through
stockholder's derivative suits on behalf of the Company) to recover monetary
damages against a director for breach of his fiduciary duty of care as a
director described in clauses (a) through (c) above. This provision does not
limit nor eliminate the rights of the Company or any stockholder to seek non-
monetary relief such as an injunction or rescission in the event of a breach
of a director's duty of care. The Bylaws provide that if Oregon law is
amended, in the case of alleged occurrences of actions or omissions preceding
any such amendment, the amended indemnification provisions shall apply only to
the extent that the amendment permits the Company to provide broader
indemnification rights than the OBCA permitted the Company to provide prior to
such amendment.

     Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy and is, therefore, unenforceable.

Item 10.  Executive Compensation

     The following table summarizes the compensation paid to the Company's
Chief Executive Officer and to its Chief Financial Officer, its most highly
compensated executive officers, for all services rendered in all capacities to
the Company for each of the last three fiscal years, which represents all
officers compensated in excess of $100,000.

<TABLE>
                                    TABLE 1
                          SUMMARY COMPENSATION TABLE
<CAPTION>
                                                        Long Term Compensa-
                           Annual Compensation(1)       tion Awards Payouts
                         --------------------------     -------------------
                                                         Other        
                                                        Annual   Securities
Name and                                                Compen-  Underlying
Principal                Fiscal    Salary    Bonus      sation     Options
Position                  Year       ($)      ($)      ($)(1)(2)   (SARs) 
---------------          -------  --------   -----     --------- ----------
<S>                     <C>      <C>        <C>         <C>        <C>    

A. Roger Pease, 
  President and CEO       1998    $96,908   $10,000     $30,000   $100,000
                          1997          -         -      96,000    160,000
                          1996          -         -      96,000           -
Jeffrey S. Sperber, CFO   1998    $88,321   $10,000     $10,809   $  33,333
                          1997          -         -      13,500      66,667
                          1996          -         -           -           -
</TABLE>

------------------------------
(1)  Mr. Pease was paid $8,000 per month pursuant to an oral management
     agreement with the Company during 1996 and 1997. During January 1998
     through March 1998, he was paid $10,000 per month under the same oral
     agreement. Beginning in April 1998, the oral agreement was terminated and
     Mr. Pease became an employee. His current salary is $150,000 per year.
(2)  Mr. Sperber was paid as a contractor through February 15, 1998. He became
     an employee effective February 16, 1998. His current salary is $105,000
     per year.

Salary Continuation Agreements

     The Company has entered into Salary Continuation Agreements with Messrs.
Pease and Sperber, as well as Ms. Ramona L. Kelly, a key employee. Under the
terms of the agreements, which are substantially similar, these individuals
would receive one year's salary as severance if involuntarily terminated, as
defined in the agreements. Additionally, if involuntarily terminated, all
vested stock options do not have to be exercised until one year after the
shares underlying the option plans have been registered. If the option plans
have not been registered by January 30, 2000, then these individuals would
have cashless exercise rights, as defined in the agreements.

Stock Incentive Plan

     In August 1998, the Company established the FirstLink Communications,
Inc. 1998-1999 Combined Incentive and Nonqualified Stock Option Plan (the
"1998 Plan"). Options issued under the 1998 Plan shall not be priced at less
than fair market value and expire no later than ten years from the date of
grant. The vesting periods are at the discretion of the Company's Board of
Directors. The 1998 Plan is subject to ratification by the majority vote of
the holders of the Company's common stock within one year from the effective
date of adoption for any incentive options granted under the 1998 Plan. Until
ratified, all options issued under the 1998 Plan will be non-qualified as the
Board of Directors has the authority to issue non-qualified options. The
Company has made available 500,000 shares for grant under the 1998 Plan.
During 1998, the Company issued options to purchase 199,999 shares of common
stock with vesting terms of 33% on each anniversary date over a three-year
period. In February 1997, the Company's Board of Directors adopted the 1997
Restated Combined Incentive Stock and Non-qualified Stock Option Plan (the
"1997 Plan"), which was ratified by the stockholders in February 1998. Options
issued under the 1997 Plan shall not be priced at less than fair market value
and expire no later than ten years from the date of grant. The vesting periods
are at the discretion of the Company's Board of Directors. The Company has
made available 533,333 shares for grant under the 1997 Plan. As of December
31, 1998, the Company had issued options to purchase 505,000 shares of common
stock with varying three-year vesting terms under the 1997 Plan.

     The following tables set forth certain information as of December 31,
1998, concerning non-qualified stock options granted to and exercised by the
named executive officer and the fiscal year end value of unexercised options
on an aggregated basis.

<PAGE>
<TABLE>
                                    TABLE 2
                          Option/SAR Grants for Last
                        Fiscal Year - Individual Grants

<CAPTION>
                          Number of   % of Total
                         Securities  Options/SARs
                         Underlying   Granted to     Exercise
                        Options/SARs Employees in     or Base    Expiration
Name/Title/Fiscal Yr     Granted (#)  Fiscal Year  Price ($/Sh)     Date
----------------------  ------------ ------------  ------------  ----------
<S>                       <C>          <C>           <C>          <C>     

A. Roger Pease,
  President and CEO
  1998                     100,000        29%          $2.31     August 2008
  1997                     160,000        38%          $1.13      Feb 2007
Jeffrey S. Sperber, CFO
  1998                     33,333         10%          $2.31     August 2008
  1997                     66,667         16%          $1.13      Oct 2007

</TABLE>

---------------------

(1)  Value realized is determined by calculating the difference between the
     aggregate exercise price of the options and the aggregate fair market
     value of the common stock on the date the options are exercised.
(2)  The value of unexercised options is determined by calculating the
     difference between the fair market value of the securities underlying the
     options at fiscal year end and the exercise price of the options. The
     fair market value of the securities underlying the options, based on the
     closing bid price on December 31, 1998, was $1.19 per share.

Item 11.  Security Ownership of Certain Beneficial Owners and Management

     The following table sets forth certain information regarding beneficial
ownership of the Company's common stock as of December 31, 1998 by (i) each
person who owns beneficially more than 5% of the Company's common stock;
(ii) each of the Company's directors and executive officers; and (iii) all
directors and executive officers as a group. Each named beneficial owner has
sole voting and investment power with respect to the shares held, unless
otherwise stated.

<TABLE>
<CAPTION>
                               Number of Shares      Percentage of Shares
Name and Address of Owner    Beneficially Owned(1)   Beneficially Owned(2)
-------------------------    --------------------    --------------------
<S>                          <C>                     <C>

  A. Roger Pease(3)               226,667                     6.1%
  190 SW Harrison Street
  Portland, OR  97201

  Robert F. Olsen(4)              125,346                     3.5%
  7745 Greenback Lane
  Citrus Heights, CA  95610

  Jeffrey S. Sperber(5)            33,333                      <1%
  190 SW Harrison Street
  Portland, OR  97201

  Steven M. Bathgate(6)(7)        424,720                    11.4%
  5350 S. Roslyn Way, #380
  Englewood, CO  80111

  Thomas E. McChesney(8)          149,101                     4.1%
  200 SW Market Street
  Portland, OR  97201

  Eugene C. McColley(6)(9)        331,020                     9.0%
  5350 S. Roslyn Way, #380
  Englewood, CO  80111

  James F. Twaddell                 2,000                      <1%
  Two Charles Street
  Providence, RI  02904

  ProFutures Bridge               212,800                     5.8%
    Capital Fund, L.P. (10)
  5350 S. Roslyn Way, #380
  Englewood, CO  80111

  All Executive Officers and                         536,447      14.7%
    Directors as a Group
    (5 persons)

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

(1)  Except as set forth in the footnotes to this table, the persons named in
     this table have sole voting and investment power with respect to all
     shares. Shares not outstanding but deemed beneficially owned by virtue of
     the individual's right to acquire them as of December 31, 1998, or within
     sixty (60) days of such date, all treated as outstanding when determining
     the percent of the class owned by such person and when determining the
     percent owned by a group.
(2)  Applicable percentage is based on 3,597,150 shares of common stock
     outstanding on March 1, 1999.
(3)  103,334 shares are owned by Mr. Pease in his individual retirement
     account. Also includes 3,333 shares owned by Mr. Pease's wife, of which
     he disclaims beneficial ownership; and presently exercisable stock
     options by Mr. Pease to purchase 120,000 shares of common stock at $1.13
     per share.
(4)  Includes 96,654 shares beneficially owned by J.R. Roberts Corporation, of
     which Mr. Olsen is the Chairman and Chief Executive Officer, and options
     exercisable to purchase 20,000 shares of common stock at $1.13 per share.
(5)  Consists of presently exercisable options to purchase shares of common
     stock.
(6)  Includes 152,720 shares and warrants to purchase 14,445 shares owned by
     Caribou Bridge Fund, LLC. Messrs. Bathgate and McColley own the
     Administrator of Caribou. They disclaim beneficial ownership of such
     shares. Also includes 29,161 shares of common stock and 4,445 shares of
     common stock underlying presently exercisable warrants owned by Kiawah
     Capital Partners, an entity that Messrs. Bathgate and McColley own
     equally. Fifty percent of those shares and warrants are attributable to
     each Mr. Bathgate and McColley.
(7)  Includes 18,667 shares owned by Bathgate Family Partnership II, of which
     Mr. Bathgate is a general partner.
(8)  Includes 7,779 shares of common stock owned by Mr. McChesney's wife, of
     which he disclaims beneficial ownership. Also includes 28,580 shares of
     common stock and 20,000 shares of common stock underlying presently
     exercisable warrants and vested options, respectively.
(9)  Includes 48,000 shares of common stock underlying presently exercisable
     warrants.
(10) Includes 53,333 shares of common stock underlying presently exercisable
     warrants. ProFutures is a limited partnership. Its general partners are
     Bridge Capital Partners, Inc. James H. Perry is the President, Director
     and sole stockholder of Bridge Capital Partners, Inc.

Item 12.  Certain Relationships and Related Transactions

     In April 1994, Payline Systems, Inc. ("Payline"), a publicly traded
corporation, entered into a five-year contract with Pacific Union Property
Services, the management company for Portland Center Apartments, to provide
telecommunications services to the tenants of the Portland Center Apartments.
Shortly thereafter, Payline formed FirstLink Communications, L.L.C. ("FLC"),
and assigned that contract to FLC. In January 1995, FLC signed a seven-year
contract with RiverPlace II Joint Venture to provide services to the tenants
of RiverPlace.  Subsequently, FLC borrowed a total of $250,000 from three
investors, including J.R. Roberts Corporation and Thair Q. Schneiter, a
director and major stockholder of the Company. The investors obtained as
collateral for the loan a security interest in all assets of FLC, including
the two contracts and certain equipment. In May 1995, the investors foreclosed
on their notes, which were in default, and obtained the assets of FLC. They
assigned the assets to a newly formed limited liability company, FirstLink
Tenant Services, L.L.C. ("FTS"). On January 1, 1996, the Company acquired
substantially all of the assets of FTS, in exchange for 133,333 shares of
common stock. The acquisition of these net assets was accounted for using the
purchase method of accounting. As the Company and FTS were entities under
common control, the assets and liabilities of FTS were recorded by the Company
using the carryover basis in such assets and liabilities of $82,790. Because
of the nature of this transaction, it cannot be considered to have resulted
from an arms-length negotiation between the Company and the investors.

     In October 1996, the Company issued 6,667 shares of common stock to each
of Mr. McChesney, a Director of the Company, and Messrs. Bathgate and
McColley, who are substantial stockholders of the Company, in consideration of
their guaranteeing a $125,000 equipment lease. The Company also agreed to
issue an additional 200 shares per month to each of those individuals for each
month that the guarantee is outstanding. Through December 31, 1998, the
Company had issued an additional 5,800 shares to each such individual.

     In 1997, the Company issued 8,692 shares to Mr. Olsen, and 1,060 shares
to Mr. McChesney, directors of the Company, as consideration for their
guarantees of a second lease.

     Messrs. Bathgate and McColley are principals of Bathgate McColley Capital
Group, LLC ("BMCG"), who acted as the Company's Placement Agent in three
private offerings of the Company in 1997 and 1998. In connection with such
offerings, they were paid commissions aggregating $135,852 in 1997 and $38,000
in 1998, and issued persons affiliated with BMCG warrants to purchase a total
of 157,000 shares of common stock.

     Each of the above transactions, except the transaction in which the
Company acquired the assets of FTS, were approved or ratified by a majority of
disinterested directors. The Board of Directors has determined that any future
transactions with officers, directors, or principal stockholders will be
approved by the disinterested directors and will be on terms no less favorable
than could be obtained from an unaffiliated third party. The Board of
Directors will obtain independent counsel or other independent advice to
assist in that determination.

<PAGE>
<PAGE>
                                    PART IV

Item 13.  Exhibits and Reports on Form 8-K

     (a)  For Financial Statements filed as a part of this Report, reference
          is made to "Index to Financial Statements" on page F-1 of this
          Report. For a list of Exhibits filed as a part of this Report, see
          Exhibit Index on page 21 of this Report.

     (b)  During the last quarter of the period covered by this Report, the
          Company did not file any reports on Form 8-K.

<PAGE>
<PAGE>
                                  SIGNATURES

     In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.

Dated:    April 13, 1999
                              FIRSTLINK COMMUNICATIONS, INC.


                              By:  /s/ A. Roger Pease
                                   ------------------------------------
                                   A. Roger Pease, President

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints A. Roger Pease and Jeffrey S. Sperber, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and re-substitution, for him and in his name, place, and stead,
in any and all capacities, to sign any and all amendments (including post-
effective amendments) to this Form 10-KSB, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof. 

     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.

Dated:    April 13, 1999           /s/ A. Roger Pease
                                   ------------------------------------
                                   A. Roger Pease, Chief Executive Officer,
                                   President and Director


Dated:    April 13, 1999           /s/ Jeffrey S. Sperber
                                   ------------------------------------
                                   Jeffrey S. Sperber, Chief Financial
                                   Officer and Secretary


Dated:    April 13, 1999           /s/ Thomas E. McChesney
                                   ------------------------------------
                                   Thomas E. McChesney, Director


Dated:    April 13, 1999           /s/ Robert F. Olsen
                                   ------------------------------------
                                   Robert F. Olsen, Director


Dated:    April 13, 1999           /s/ James F. Twaddell
                                   ------------------------------------
                                   James F. Twaddell, Director<PAGE>
<PAGE>

<PAGE>
                               INDEX TO EXHIBITS

                                  FORM 10-KSB

Exhibit Number      Description
--------------      -----------
     (3.)(ii)       Bylaws (1)
     (23)           Consent of Independent Auditors
     (24)           Power of Attorney (included on page 20)

(1)  Filed with the initial Registration Statement of Form SB-2, filed April
     2, 1998, Commission File No. 333-49291.

<PAGE>
<PAGE>
                        FIRSTLINK COMMUNICATIONS, INC.
                         INDEX TO FINANCIAL STATEMENTS


                                                                          Page
                                                                          ----
Independent Auditors' Report                                               F-2
Balance Sheet                                                              F-3
Statements of Operations                                                   F-4
Statements of Stockholders' Equity                                         F-5
Statements of Cash Flows                                                   F-6
Notes to Financial Statements                                              F-7
Independent Auditors' Report on Financial Statement Schedule               S-1
Schedule of Valuation and Qualifying Accounts                              S-2

<PAGE>
<PAGE>
                             KPMG PEAT MARWICK LLP
                        1211 SW 5th Avenue, Suite 2000
                              Portland, OR 97204
          (503) 221-6500 (telephone)      (503) 796-7650 (facsimile)




                         Independent Auditors' Report
                         ----------------------------

The Board of Directors
FirstLink Communications, Inc.

We have audited the accompanying balance sheet of FirstLink Communications,
Inc. as of December 31, 1998, and the related statements of operations,
stockholders' equity, and cash flows for each of the years in the two-year
period ended December 31, 1998.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of FirstLink Communications,
Inc. as of December 31, 1998, and the results of its operations and its cash
flows for each of the years in the two-year period ended December 31, 1998, in
conformity with generally accepted accounting principles.  

KPMG PEAT MARWICK LLP
Portland, Oregon

January 29, 1999, except for note 1
  which is at March 11, 1999)

<PAGE>
<PAGE>
                        FIRSTLINK COMMUNICATIONS, INC.
                                 Balance Sheet
                               December 31, 1998

<TABLE>
<CAPTION>
<S>                                               <C> 

Current assets:
  Cash and cash equivalents                       $    1,617,582 
  Investments                                          3,284,495 
  Accounts receivable, net of allowance for
     doubtful accounts of $33,194                         87,131 
  Other receivables                                       55,872 
Prepaid and other current assets                          35,953 
                                                  --------------- 
       Total current assets                            5,081,033 
                                                  --------------- 
Property and equipment, net of accumulated
  depreciation                                         1,173,668 
Other assets                                               9,078 
                                                  --------------- 
       Total assets                               $    6,263,779 
                                                  =============== 
Current liabilities:
  Accounts payable                                $      206,916 
  Accrued liabilities                                    169,105 
  Current portion of capital lease obligations            62,051 
                                                  --------------- 
       Total current liabilities                         438,072 
                                                  --------------- 
Capital lease obligations, less current portion          177,279 

Commitments and contingencies (note 9)                           

Stockholders' equity:
  Preferred stock, no par value; 1,000,000 shares
     authorized; no shares issued or outstanding               - 
  Common stock, no par value; 20,000,000 shares
     authorized; 3,593,550 shares issued and
     outstanding                                       8,458,495 
  Retained deficit                                    (2,810,067)
                                                  --------------- 
       Total stockholders' equity                      5,648,428 
                                                  --------------- 
       Total liabilities and stockholders' equity $    6,263,779 
                                                  =============== 
</TABLE>



                See accompanying notes to financial statements.  
<PAGE>
<PAGE>
                        FIRSTLINK COMMUNICATIONS, INC.
                           Statements of Operations

<TABLE>
<CAPTION>
                                        Years ended December 31    
                                     ------------------------------
                                          1998            1997     
                                     -------------   --------------
<S>                                  <C>             <C>

Revenue                               $  1,246,011     $    879,903 
                                      -------------   --------------
Expenses:
  Operating                                968,115          580,197 
  Selling, general and administrative    1,772,421          701,372 
  Depreciation and amortization            103,148           69,955 
                                      -------------   --------------
       Total expenses                    2,843,684        1,351,524 
                                      -------------   --------------
       Operating loss                   (1,597,673)        (471,621)
                                      -------------   --------------
Other (income) expense:
  Interest, net                             96,998          107,305 
  Other                                    139,303             (650)
                                      -------------   --------------
                                           236,301          106,655 
                                      -------------   --------------
Net loss                              $ (1,833,974)        (578,276)
                                      =============   ==============
Net loss per share, basic and diluted $       (.68)            (.50)
                                      =============   ==============
Weighted average common shares, basic
 and diluted                             2,716,867        1,162,397 
                                      =============   ==============
</TABLE>









                See accompanying notes to financial statements.
<PAGE>
<PAGE>
                        FIRSTLINK COMMUNICATIONS, INC.
                      Statements of Stockholders' Equity

<TABLE>
<CAPTION>

                                                                  Total
                               Common Stock                   Stockholders'
                            ------------------    Retained       Equity
                            Shares      Amount     Deficit      (deficit)
                             -------    -------   ---------   -------------
<S>                          <C>        <C>       <C>          <C>

Balance at December
  31, 1996                    766,400   $234,702   (397,817)      (163,115)

Common stock issued
  pursuant to Promissory
  Notes                        52,800     17,424           -        17,424 
Common stock issued in
  payment of Promissory
  Note interest                 3,879      4,364           -         4,364 
Conversion of Promissory
  Notes into common stock     217,780    245,000           -       245,000 
Sale of common stock, net
  of stock offering costs     728,888    721,449           -       721,449 
Common stock issued
  pursuant to guarantor
  agreements                   16,961     17,163           -        17,163 
Net loss                            -          -   (578,276)      (578,276)
                             --------   --------   ---------   ------------
Balance at December
 31, 1997                   1,786,708  1,240,102   (976,093)       264,009 

Conversion of Convertible
  Notes into common
  stock, net of offering
  costs                       186,667    304,552           -       304,552 
Common stock purchased under
  stock option agreements         833        937           -           937 
Non-cash stock compensation         -     48,000           -        48,000 
Sale of common stock, net of
  stock offering costs      1,613,889  6,854,323           -     6,854,323 
Common stock issued
  pursuant to guarantor
  agreements                    5,453     10,581           -        10,581 
Net loss                            -          - (1,833,974)    (1,833,974)
                             --------   --------   ---------   ------------
Balance at December
  31, 1998                  3,593,550 $8,458,495 (2,810,067)     5,648,428 

                             ========   ========   =========   ============
</TABLE>



                See accompanying notes to financial statements.
<PAGE>
<PAGE>
                        FIRSTLINK COMMUNICATIONS, INC.
                           Statements of Cash Flows

<TABLE>
<CAPTION>
                                                  Years ended December 31  
                                                 -------------------------
                                                     1998         1997     
                                                 ------------  -----------
<S>                                                       <C>          <C>

Cash flows from operating activities:
 Net loss                                       $ (1,833,974)  $ (578,276)
 Adjustments to reconcile net loss to net
  cash used in operating activities:
   Depreciation and amortization                     125,395      130,262 
   Provision for losses on accounts
     receivable                                       51,574       43,250 
   Non-cash charge for stock options                  48,000            - 
   Non-cash charge for debt conversions to
     equity                                          105,000            - 
   Changes in assets and liabilities:
     Accounts receivable                            (119,088)     (39,196)
     Prepaid and other current assets                (25,948)     (59,563)
     Accounts payable and accrued
       liabilities                                   134,311       17,408 
     Other current liabilities                      (126,188)     (50,233)
                                                 ------------  -----------
       Net cash used in operating
       activities                                 (1,640,918)    (536,348)
                                                 ------------  -----------
Cash flows from investing activities:
 Capital expenditures                               (652,328)     (70,090)
 Purchase of investment securities                (3,284,495)           - 
                                                 ------------  -----------
       Net cash used in investing
       activities                                 (3,936,823)     (70,090)
                                                 ------------  -----------
Cash flows from financing activities:
 Net proceeds from sales of common stock           6,855,260      738,873 
 Proceeds from Promissory Notes                            -      102,576 
 Repayments of Promissory Notes                            -       (5,000)
 Proceeds from Convertible Notes                           -      172,077 
 Principal payments under capital leases             (49,352)     (27,792)
                                                 ------------  -----------
       Net cash provided by financing
       activities                                  6,805,908      980,734 

       Net increase in cash and cash
       equivalents                                 1,228,167      374,296 

Cash and cash equivalents, beginning of
 year                                                389,415       15,119 
                                                 ------------  -----------
Cash and cash equivalents, end of year          $  1,617,582   $  389,415 
                                                 ============  ===========
Supplemental disclosure of cash flow
 information:
 Cash paid for interest                         $     77,929   $   51,791 
 Cash paid for income taxes                                -            - 

Supplemental cash flow information of
 non-cash investing and financing
 activities:
  Assets acquired under capital leases                81,435       73,694 
  Conversion of Convertible Notes to equity          199,552            - 
  Conversion of Promissory Notes to equity                 -      245,000 
  Other                                               33,781        15,024

</TABLE> 

                See accompanying notes to financial statements.
<PAGE>
<PAGE>
                        FIRSTLINK COMMUNICATIONS, INC.
                         Notes to Financial Statements
                               December 31, 1998


(1)  Business and Organization

     FirstLink Communications, Inc. (FirstLink or the Company), an Oregon
corporation, is an integrated telecommunications service company providing
local telephone, long distance telephone, enhanced calling features and cable
television services to residents of multi-family apartment and condominium
complexes.  The services are provided to the tenants in accordance with
long-term operating agreements between the Company and the property owners
under which the property owners share in the telecommunication revenues
generated from their properties.  The agreements provide the tenants with the
option to use either FirstLink or the local telephone company and long
distance carriers for telephone services.  Tenants desiring to subscribe to
cable television must utilize FirstLink.  

     On February 9, 1999, the Company signed a letter of intent (the LOI) with
Peregrine Capital, Inc. (Peregrine) a Portland based investment company. 
Under terms of the LOI, Peregrine will purchase 5 million shares of the
Company's common stock for $10 million, of which $6 million is to be paid in
cash with the remainder to be paid under a three year note agreement.  The
note accrues interest at 5% per annum and will be payable three years from the
date of the note.  Additionally, the LOI calls for Peregrine to arrange for a
$25 million Credit Facility (the Credit Facility) on the Company's behalf and
that Peregrine must also deliver contracts with property owners totaling at
least 60,000 units passed at closing.  Peregrine may use proceeds from the
Credit Facility to acquire the 60,000 units.  Further, Peregrine will receive
4 million warrants to purchase the Company's common stock, exercisable for a
period of four years commencing one year after closing of the transaction; 2
million warrants are exercisable at $5.50 per share and 2 million are
exercisable at $11.00 per share.  The definitive agreement will be subject to
approval by a majority of the Company's shareholders.  

     The Company intends on using the proceeds from the Peregrine financing to
grow its subscriber base by acquiring subscribers and right of entry
agreements from private and wireless cable operators.  This represents a
change in the Company's business strategy which previously relied on directly
marketing to property owners and managers, solely to grow its base.  

     Additionally, the Company plans to provide cable television signal to its
properties by acting as a private cable operator (PCO).  As a PCO, the Company
will acquire programming through program access agreements and distribute the
product through network located on the property premises.  This approach marks
a change from the Company's previous cable fulfillment method which was to buy
in bulk from the incumbent franchised cable operator and resell it to its
customers.  

     On March 11, 1999, a wholly owned subsidiary of Peregrine signed a letter
of intent to acquire the assets and assume certain liabilities of U.S. Online
Communications, Inc. (USOL), an Austin, Texas based provider of
telecommunication services to residents of multi-family apartments and
condominiums.  USOL serves properties in Austin, Dallas, San Antonio, Denver
and Washington D.C., passing 15,000 total units.  

     Upon consummation of the Company's transaction with Peregrine, the
Company will acquire the assets and assumed liabilities of USOL from the
Peregrine subsidiary.  In exchange, the Company will issue 1.5 million shares
of common stock to USOL shareholders and management, 750,000 of which will
vest over a three year period.  Additionally, the Company will also issue to
USOL shareholders five-year warrants to purchase 1.5 million shares of the
Company's common stock exercisable at $5.50 per share. 

(2)  Summary of Significant Accounting Policies

Cash and Cash Equivalents

     The Company considers all highly liquid instruments purchased with
original maturities of three months or less to be cash equivalents.  

Investments

     The Company's investment securities are comprised of U.S. Treasury
securities and have been classified as held to maturity in accordance with
Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for
Certain Investments in Debt and Equity Securities, at December 31, 1998. Such
securities, which mature between two and nine months, are recorded at
amortized cost which approximates fair value.  

Property and Equipment

     Property and equipment is stated at cost, including installation cost.
The Company provides for depreciation using the straight-line method over
estimated useful lives of three to five years on computer and office equipment
and ten years on network equipment. Property and equipment held under capital
leases are amortized straight-line over the shorter of the lease term or
estimated useful life of the asset. Repairs and maintenance are expensed as
incurred.  

Revenue Recognition

     Revenue is recognized when services are provided.  

Financial Instruments

     The carrying amount of cash equivalents, investments, trade accounts
receivable, accounts payable and accrued liabilities approximate fair value
because of the short-term nature of these instruments. The fair value of
capital lease obligations were estimated by discounting the future cash flows
using market interest rates and does not differ significantly from that
reflected in the financial statements.  Fair value estimates are made at a
specific point in time, based on relevant market information about the
financial instrument.  These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and therefore cannot be
determined with precision. Changes in assumptions could significantly affect
the estimates.  

Use of Estimates

     The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Reverse Stock Split

     In connection with the Company's initial public offering, the Company's
Board of Directors authorized a 1 for 1.5 reverse stock split, effective July
27, 1998.  All share and per share amounts in the financial statements reflect
the reverse stock split as if it had occurred on January 1, 1997. Unit amounts
have not been restated.

Common Stock and Loss Per Share

     The Company adopted SFAS No. 128, Earnings per Share.  Under SFAS No.
128, basic EPS excludes dilution for common stock equivalents and is computed
by dividing income or loss available to common stockholders by the weighted
average number of common shares outstanding during the period.  Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock
resulted in the issuance of common stock.  

     In accordance with SFAS No. 128, the calculation of basic and diluted EPS
does not assume the conversion, exercise or contingent issuance of securities
that would have an anti-dilutive effect on earnings per share.  Common stock
equivalents related to stock options and warrants totaling 128,828 and 646 are
anti-dilutive during 1998 and 1997, respectively, and were not included in the
diluted net loss per share calculation.  

Stock-Based Compensation

     The Company accounts for its stock-based employee compensation plan using
the intrinsic value based method prescribed by Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, and related
Interpretation (APB No. 25).  The Company has provided pro forma disclosures
as if the fair value based method of accounting for these plans, as prescribed
by SFAS No. 123, Accounting for Stock-Based Compensation, had been applied.

Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

     The Company accounts for long-lived assets in accordance with the
provisions of SFAS No. 121, Accounting for Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of.  This Statement requires that long-
lived assets and certain identifiable intangibles be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable.  Recoverability of assets to be held and
used is measured by a comparison of the carrying amount of an asset to future
net cash flows expected to be generated by the asset.  If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceed the fair value of the
assets.  Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.  

Comprehensive Income

     Effective January 1, 1998, the Company adopted the provisions of SFAS No.
130, Reporting Comprehensive Income.  The objective of SFAS No. 130 is to
report all changes in equity that result from transactions and economic events
other than transactions with owners.  There is no difference between net loss
and comprehensive loss for years ended December 31, 1998 and 1997.  

Income Taxes

     The Company accounts for income taxes under the provisions of SFAS
No. 109, Accounting for Income Taxes.  Under the asset and liability method of
SFAS No. 109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases.  Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.  Under
SFAS No. 109, the effect on deferred tax assets and liabilities of a change in
tax rate is recognized in income in the period that includes the enactment
date.  

(3)  Property and Equipment

     Property and equipment, including assets owned under capital leases of
$324,693 is comprised of the following:

<TABLE>
<CAPTION>

     <S>                                     <C>

     Network equipment                       $   840,674 
     Computers and office equipment              306,611 
     Leasehold improvements                      237,365 
                                             ------------
                                               1,384,650 
     Less accumulated depreciation,
          including $53,906 applicable
          to assets under capital leases        (210,982)
                                             ------------
     Net property and equipment              $ 1,173,668 
                                             ============

</TABLE>

(4)  Accrued Liabilities

     Accrued liabilities consist of the following at December 31, 1998:

<TABLE>
<CAPTION>

          <S>                                <C>

          Excise tax                         $    92,154 
          Commissions                             43,337 
          Audit                                   31,000 
          Other                                    2,614 
                                             ------------
                                             $   169,105 
                                             ============
</TABLE>

(5)  Income Taxes

     The difference between expected tax benefit, computed by applying the
federal statutory rate of 34% to loss before taxes, and the actual tax benefit
of $-0- is primarily due to the increase in the valuation allowance for
deferred taxes.  

     The Company's deferred tax assets are comprised of the following
components at December 31, 1998:

<TABLE>
<CAPTION>

          <S>                                <C>

          Net operating loss carryforwards   $   983,000 
          Other                                   49,000 
                                             ------------
          Total gross deferred tax assets      1,032,000 
          Less valuation allowance            (1,032,000)
                                             ------------
          Net deferred tax assets            $         - 
                                             ============
</TABLE>

     The valuation allowance for deferred tax assets as of January 1, 1998 and
1997 was $373,000 and $152,000, respectively.  The net change in the total
valuation allowance for the years ended December 31, 1998 and 1997 was an
increase of $659,000 and $221,000, respectively.  The Company has established
a valuation allowance due to the uncertainty that the full amount of the
operating loss carryforwards will be utilized.  Although management expects
future results of operations to be profitable, it emphasized past performance
rather than growth projections when determining the valuation allowance.  Any
subsequent adjustments to the valuation allowance, if deemed appropriate due
to changed circumstances, will be recognized as a separate component of the
provision for income taxes.

     The Company has net operating loss carryforwards which are available to
offset future financial reporting and taxable income.  Net operating loss
carryforwards for tax purposes totaled approximately $2,500,000 at
December 31, 1998 and expire in 2011 through 2018.  

     A provision of the Internal Revenue Code requires the utilization of net
operating losses be limited when there is a change of more than 50% in
ownership of the Company.  Such a change occurred in 1996, 1997 and 1998.  If
the Company's agreement with Peregrine is approved by the Company's
shareholders, the Company will have incurred another ownership change under
IRC Section 382.  These ownership changes would limit the utilization of any
net operating losses incurred prior to the change in ownership date.  

(6)  Debt

Promissory Notes

     During 1997 and 1996, the Company issued unsecured promissory notes (the
Promissory Notes) aggregating $250,000.  The Promissory Notes bore interest at
8% per annum with both principal and interest payable on or before March 31,
1997.  As an additional inducement, the holders of the Promissory Notes
received 440 shares of the Company's common stock for each $1,000 of
principal.  The Promissory Notes were originally recorded at $213,700, which
represents the $250,000 in proceeds less a discount of $36,300 assigned to the
common stock.  The fair value of the common stock was based on other recent
equity transactions with third parties.  The discount was accreted to the debt
over the life of the Promissory Notes as a financing cost.  The accretion of
the value assigned to the common stock is included in interest expense in the
accompanying financial statements.  In 1997, $245,000 of the Promissory Notes,
plus accrued interest, were converted into 221,659 shares of the Company's
common stock.  The remaining $5,000 and accrued interest was paid in full
during 1997.  

Convertible Notes

     During 1997, the Company issued unsecured convertible notes (the
Convertible Notes) with a face value of $420,000 and 560,000 shares of common
stock pursuant to a private placement memorandum (the Private Placement). 
Total proceeds from the Private Placement was $840,000.  The Convertible Notes
bore interest at 6% per annum, payable semiannually commencing June 30, 1998,
matured three years from the date of issuance and were convertible into shares
of the Company's common stock at $3.00 per share.  The Convertible Notes were
originally recorded at $210,000, which represents the face value of $420,000
less a discount of $210,000 which was assigned to the common stock.  The
560,000 shares of common stock were recorded at the estimated fair market
value of such shares which was $630,000 less stock offering costs of $37,301,
resulting in net proceeds of $592,699.  The fair market value of the common
stock was based on other recent equity transactions with third parties.  The
discount was accreted to the debt using the interest method over three years. 
The accretion value assigned to the common stock is included in interest
expense in the accompanying financial statements.  

     During 1998, the Company asked the holders of the Convertible Notes to
convert the Convertible Notes into shares of common stock.  As an inducement
to convert, the Company reduced the conversion price to $2.25 per share from
the $3.00 conversion price stated on the Convertible Notes for those holders
converting on or before March 9, 1998.  All of the Notes were converted into
186,667 shares of common stock.  The induced conversion resulted in a $105,000
charge to operations, classified as other expense in the accompanying
financial statements.  

(7)  Stockholders' Equity

Initial Public Offering

     On July 27, 1998, the Company completed its initial public offering (IPO)
of its common stock to the public.  The Company sold 1,400,000 units (the
Units), with each Unit consisting of one detachable share of common stock and
one detachable common stock purchase warrant (the Warrants).  Two Warrants
entitle the holder to purchase one share of the Company's common stock at a
price of $8.10 per share during the three-year period commencing July 27,
1998.  As a result of the IPO, the Company received net proceeds of
$6,363,932.

Private Placements

     During February and March 1998, the Company sold 283,333 units with each
unit consisting of one share of common stock and one common stock purchase
warrant pursuant to a private placement memorandum.  Subsequent to the IPO,
the warrants sold pursuant to this private placement were exchanged for the
Warrants.  The net proceeds from the offering were $390,391.  

     In May 1998, the Company sold 25,000 shares of common stock for $100,000
in a private transaction.  In connection with the sale, the Company issued
three-year warrants to purchase an additional 12,500 shares of the Company's
common stock at $8.10 per share.  

     During 1997, the Company issued 290,000 units, with each unit consisting
of two shares of common stock and one common stock purchase warrant pursuant
to a private placement memorandum.  The Company sold 126,667 units (the
Private Units) resulting in 168,888 shares for $190,000 with the remaining
163,333 Private Units being issued to the holders of the Promissory Notes in
exchange for converting $245,000 of the Promissory Notes plus accrued interest
into 221,659 shares of common stock (see note 6 above).  Stock offering cost
associated with the sale of the Private Units was $61,250.

Stock Option Plans

     In August 1998, the Company established the FirstLink Communications,
Inc. 1998-1999 Combined Incentive and Non-Qualified Stock Option Plan (the
1998 Plan).  Options issued under the 1998 Plan shall not be priced at less
than fair market value and expire no later than ten years from the date of
grant.  The vesting periods are at the discretion of the Company's Board of
Directors.  The 1998 Plan is subject to ratification by the majority vote of
the holders of the Company's common stock within one year from the effective
date of adoption for any incentive options granted under the 1998 Plan.  Until
ratified, all options issued under the 1998 Plan will be non-qualified as the
Board of Directors has the authority to issue non-qualified options.  The
Company has made available 500,000 shares for grant under the 1998 Plan. 
During 1998, the Company issued options to purchase 199,999 shares of common
stock with vesting terms of 33% on each anniversary date over a three-year
period.  In February 1997, the Company's Board of Directors adopted the 1997
Restated Combined Incentive Stock and Non-Qualified Stock Option Plan (the
1997 Plan) which was ratified by the shareholders in February 1998.  Options
issued under the 1997 Plan shall not be priced at less than fair market value
and expire no later than ten years from the date of grant.  The vesting
periods are at the discretion of the Company's Board of Directors.  The
Company has made available 533,333 shares for grant under the 1997 Plan.  As
of December 31, 1998, the Company had issued options to purchase 505,000
shares of common stock with varying three-year vesting terms.  

     The following table provides additional information concerning options
granted under the 1998 and 1997 Plans:

<TABLE>
<CAPTION>
                                                     Weighted
                                                      Average
                                         Number of   Exercise
                                          Shares       Price   
                                        ----------- -----------
<S>                                     <C>         <C>

Outstanding, January 1, 1997                     -  $         -

Granted                                    416,667         1.13
Exercised                                        -            -
Forfeited                                        -            -
                                        ----------- -----------
Outstanding, January 1, 1998               416,667         1.13

Granted                                    344,998         2.30
Exercised                                     (833)        1.13
Forfeited                                  (55,833)        1.13
                                        ----------- ------------
Outstanding, December 31, 1998             704,999  $      1.71
                                        =========== ============
</TABLE>

     A total of 181,667 options were exercisable at December 31, 1998 at a
weighted average exercise price of $1.13.  The weighted average remaining
contractual life of options outstanding at December 31, 1998 is 8.8 years.

     Additionally, in October 1998, the Company entered into a consulting
agreement with a financial public relations firm which provides for the
Company to issue stock options to purchase up to 60,000 shares of the
Company's common stock at prices ranging from $2.00 to $7.00 per share.  This
agreement is cancelable upon 10 days written notice.  As of December 31, 1998,
the Company had issued options to purchase 15,000 shares of the Company's
stock at a price of $2.00 per share.  All of the issued options are vested as
of December 31, 1998.  The agreement expires on March 31, 2000.

     The Company has elected to account for its stock-based compensation plans
under APB 25; however, the Company has computed the fair value of options
granted using the Black-Scholes option pricing model during 1998, and the
minimum value option pricing model during 1997.   The per share weighted
average fair value of stock options granted during 1998 and 1997 is $1.56 and
$0.30, respectively, on the date of grant using the following weighted average
assumptions:

<TABLE>
<CAPTION>
                                           1998        1997    
                                        ----------- -----------
<S>                                     <C>         <C>

Risk-free interest                            5.00%       6.25%
Expected dividend yield                           -           -
Expected lives                              5 years     5 years
Expected volatility                             81%           -

</TABLE>

     Had the Company determined compensation cost based on the fair value at
the grant date for its stock options under SFAS No. 123, the Company's net
loss and loss per common share would have increased to the pro forma amounts
indicated below:

<TABLE>
<CAPTION>
                                       Years ended December 31,  
                                      -------------------------
                                           1998          1997    
                                      -----------     -----------
<S>                                   <C>            <C>

Net loss:
  As reported                         $(1,833,974)   $  (578,276)
  Pro forma                            (2,065,306)      (609,276)

Net loss per common share, basic
  and diluted:
  As reported                                (.68)          (.50)
  Pro forma                                  (.76)          (.52)

</TABLE>

Warrants

     The Company has issued various stock purchase warrants in connection with
its financing activities to investors and placement agents.  The following
table provides additional information related to stock purchase warrants:

<TABLE>
<CAPTION>
                          Number of
                           Shares      Range of          Range of
                         Underlying     Exercise        Expiration
Description               Warrants      Prices             Dates        
-----------              -----------  ----------- ----------------------
<S>                      <C>         <C>          <C>

1997:
  Private Placement
    Warrants                193,333  $      2.25          5/05/00
  Placement Agent
    Warrants                157,000   .75 - 3.00    4/30/02 - 11/30/02
  Other                       6,667         1.13          2/1/00
1998:
  Private Placement
    Warrants                106,944         8.10     5/22/01 - 7/28/01
  Public Offering
    Warrants                700,000         8.10          7/28/01

</TABLE>

(8)  Related Party Transactions

     During 1998 and 1997, the Company had a management agreement with an
officer and director of the Company whereby from time to time a management fee
was paid for his services.  Amounts paid under this arrangement totaled
$30,000 and $96,000 in 1998 and 1997, respectively.  This agreement was
terminated in March 1998 at which time this individual became an employee.  

(9)  Commitments and Contingencies

Lease Commitments

     The Company leases certain switching equipment under capital leases.  In
addition, the Company leases office space under two non-cancelable operating
leases expiring on October 31, 2001 and August 31, 2003, respectively. 
Operating lease payments for the years ended December 31, 1998 and 1997
totaled $53,610 and $29,160, respectively.  At December 31, 1998, future
minimum lease payments under capital and non-cancelable operating leases are
as follows:

<TABLE>
<CAPTION>
                                       Capital     Operating
                                       Leases       Leases  
                                     ----------   ----------
<S>                                  <C>          <C>

Year ending:
     1999                            $  98,914      104,910 
     2000                               96,820       99,660 
     2001                               82,315       96,300 
     2002                               31,984       72,000 
     2003                                1,293       48,000 
                                     ----------   ----------
     Total minimum lease payments      311,326    $ 420,870 

Less amount representing interest      (71,996)
                                     ----------
     Net minimum lease payments        239,330 

Less current portion of capital less
  obligations                           62,051 
                                     ----------
     Capital lease obligations, less
       current portion               $ 177,279 
                                     ==========
</TABLE>

     In connection with entering into certain of the capital lease agreements,
certain stockholders, including directors of the Company (the Guarantors),
entered into personal guaranty arrangements with the lessor on behalf of the
Company.  The Company, in turn, agreed to issue common stock to each of the
Guarantors upon execution of and throughout the duration of the leases.  5,453
and 16,961 shares of common stock were issued to the Guarantors during 1998
and 1997, respectively.  

     The common stock was assigned values of $10,581 and $17,163 for the
shares issued during 1998 and 1997, respectively, based on the public market
price of the stock, or recent equity transactions with third parties for stock
issuances prior to the stock being publicly traded.  The value assigned to the
common stock is being amortized using the interest method over the lives of
the leases.  The accretion value is included in interest expense in the
accompanying financial statements.  

Master Lease Agreement

     The Company has available a $2 million Master Lease Agreement (the
Facility).  The Facility provides for 100% financing for purchases of
telecommunications equipment (including switches), computers and office
equipment.  Under terms of the Facility, payments are made over a 60-month
period with a bargain purchase option at the end of the lease.  Additionally,
there is a 1% commitment fee which the Company paid during 1998.  At
December 31, 1998, the Company had the ability to draw $500,000 under the
Facility.  The remaining $1.5 million is subject to minimum performance
requirements.  At December 31, 1998, there were no borrowings under the
Facility.  

Web Service Company

     In August 1998, the Company entered into an exclusive marketing agreement
with Web Service Company, Inc. (WEB or the WEB Agreement), one of the largest
operators of coin operated laundry equipment in apartment and condominium
complexes in the United States.  

     Under terms of the WEB Agreement, WEB will exclusively market the
Company's services to properties with which WEB has an existing relationship
that have more than 150 units in Dallas, Denver, Seattle and the San Francisco
Bay Area (the Exclusive Territories).  Based on information provided by WEB,
the Company believes that WEB provides ancillary services to approximately 590
apartment complexes of that size passing approximately 150,000 units in the
Exclusive Territories.  As compensation for WEB's sales of the Company's
services, the Company has granted WEB a warrant to purchase 2,000,000 shares
of its common stock, subject to vesting requirements requiring WEB to deliver
one customer for each 25 shares.  In other words, in order to earn the
2,000,000 warrants, WEB must, by May 22, 2004, deliver 80,000 phone and cable
customers who subscribe to the Company's services.  If WEB is unable to
deliver a certain number of subscribers each year (which number increases over
the life of the contract), a portion of the unvested warrants expire.  The
maximum number of vested shares that can be exercised by WEB cannot exceed 20%
of the issued and outstanding common stock of the Company regardless of the
number of shares vested.  The warrants are exercisable at $5.40 per share for
five years after they are issued, but no later than May 22, 2012.  The Company
may record marketing expense to the extent that value is associated with the
warrants as determined under the Black-Scholes method as prescribed under FASB
123.  As of December 31, 1998, no warrants had vested under the WEB Agreement. 

     The Company will also pay WEB a commission of 1.75% on collected revenues
for WEB customers (2.25% for customers in any property in which the Company
has achieved a penetration rate in excess of 60%).  The commission is paid for
the life of the Company's contract with the property.  

     The Company and WEB have mutually agreed to delay commencing marketing
activities under the WEB Agreement.  The Company and WEB are currently
evaluating what role, if any, WEB can and should play in its future business
activities.  

Commitment with Cable Providers

     The Company has agreements with TCI Cablevision of Oregon, Inc. (TCI) and
Paragon Cable (Paragon) to purchase bulk cable signals at the Company's
properties.  The agreements provide for the Company to pay fixed monthly
amounts regardless of the number of customers the Company has at the
properties.  As of December 31, 1998, the Company's monthly commitment was
$32,759 per month.  The TCI agreements provide for annual rate increases not
to exceed 5%.  The agreements all have five-year terms and expire during July
1999 through September 2003.  

Salary Continuation Agreements

     The Company has salary continuation agreements with certain key employees
that provide for one-year severance in the event of involuntary termination,
as defined in the agreements. The total obligation under these agreements in
the event of involuntary termination is $315,000.

Litigation

     From time to time, the Company is involved in various litigation in the
normal course of business.  Management believes that the outcomes will not
have a material impact to the Company's financial statements.  

(10) Segment Disclosure

     The Company operates in a single industry segment, telecommunications. 
The Company provides integrated telephony and video services to residents of
multi-family apartment and condominium complexes in Portland, Oregon.  The
Company's management team monitors the Company's products and services
according to the following categories:

     -    Local telephone - local dialtone with enhanced calling features that
          provide incoming and outgoing calls over the public switched
          network.

     -    Long distance telephone - services include all originating minutes
          for calls placed outside the local calling area, including those
          generated from calling cards.

     -    Video - basic, expanded basic and premium cable television services.

     The revenues generated by these products and services as of December 31
were as follows:

<TABLE>
<CAPTION>
                                        1998         1997   
                                     ----------   ----------
<S>                                  <C>          <C>

Local telephone                      $ 351,706     $255,298 
Long distance telephone                343,485      308,388 
Video                                  511,822      295,907 
Other                                   38,998       20,310 
                                    -----------  -----------
                                    $1,246,011     $879,903 
                                    ===========  ===========
</TABLE>

     The direct costs included in operating expense associated with these
products and services as of December 31 were as follows:

<TABLE>
<CAPTION>

                                        1998         1997   
                                     ----------   ----------
<S>                                  <C>          <C>

Local telephone                      $ 263,652    $ 187,426 
Long distance telephone                251,457      175,866 
Video                                  324,895      160,147 
                                     ----------   ----------
                                     $ 840,004    $ 523,439 
                                     ==========   ==========
</TABLE>

     There are a number of shared expenses incurred related to managing the
different revenue streams.  Management believes that any allocation of these
expenses would be impractical and arbitrary, and management does not currently
make such allocations internally.

<PAGE>
<PAGE>
                             KPMG PEAT MARWICK LLP
                        1211 SW 5th Avenue, Suite 2000
                              Portland, OR 97204
          (503) 221-6500 (telephone)      (503) 796-7650 (facsimile)




         Independent Auditors' Report on Financial Statement Schedule
         ------------------------------------------------------------


The Board of Directors
FirstLink Communications, Inc.

Under date of January 29, 1999, except for note 1 which is at March 11, 1999,
we reported on the balance sheet of FirstLink Communications, Inc. as of
December 31, 1998 and the related statements of operations, shareholders'
equity, and cash flows for each of the years in the two-year period ended
December 31, 1998, which are included in the annual report on Form 10-KSB for
the year ended December 31,  1998. In connection with our audit of the
aforementioned financial statements, we also audited the related financial
statement schedule as listed in the accompanying index. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits.

In our opinion, such financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.


KPMG PEAT MARWICK LLP
Portland, Oregon
January 29, 1999, except for note 1
  which is at March 11, 1999

<PAGE>
<PAGE>
                                  SCHEDULE II



                        FIRSTLINK COMMUNICATIONS, INC.

                       VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>

                 Balance at  Charge to  Charge to
                  Beginning   Cost and      Other                Balance at
   Accounts       of Period    Expense   Accounts  Deductions End of Period
--------------- ----------- ----------  ---------  ---------- -------------
<S>             <C>         <C>         <C>       <C>          <C>       

1997:
 Allowance for
   doubtful
   accounts     $    4,000  $  43,250   $      -  $   38,534    $ 8,716 

1998:
 Allowance for
   doubtful
   accounts     $    8,716  $  51,574   $      -  $   27,096      $ 33,194 

</TABLE>