LETS TALK CELLULAR & WIRELESS INC, 424B1, 1997-11-25

LETS TALK CELLULAR & WIRELESS INC
424B1, 1997-11-25
RADIOTELEPHONE COMMUNICATIONS

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<PAGE> 1
Filed Pursuant to Rule 424(B)(1)
Registration No. 333-34595

PROSPECTUS
2,337,245 SHARES

[LET'S TALK CELLULAR LOGO]

COMMON STOCK

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

Of the 2,337,245 shares of Common Stock offered hereby, 2,000,000 shares
are being offered by Let's Talk Cellular & Wireless, Inc. (the "Company") and
337,245 shares are being offered by certain shareholders of the Company (the
"Selling Shareholders"). The Company will not receive any of the proceeds from
the sale of shares by the Selling Shareholders. See "Principal and Selling
Shareholders."

Prior to the offering, there has been no public market for the Common
Stock. See "Underwriting" for a discussion of factors to be considered in
determining the initial public offering price.

The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol "LTCW."

SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
=======================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.............................. $12.00 $.84 $11.16 $11.16
- -----------------------------------------------------------------------------------------------------------------------
Total(3)............................... $28,046,940 $1,963,286 $22,320,000 $3,763,654
=======================================================================================================================
</TABLE>

(1) The Company and the Selling Shareholders have agreed to indemnify the
several Underwriters against certain liabilities, including certain
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting expenses payable by the Company estimated at $1,200,000.
(3) Certain shareholders have granted the Underwriters an option to purchase up
to an additional 350,587 shares of Common Stock, exercisable within 30 days
after the date hereof, solely to cover over-allotments, if any. If such
option is exercised in full, the total Price to Public, Underwriting
Discount, Proceeds to the Company and Proceeds to Selling Shareholders will
be $32,253,984, $2,257,779, $22,320,000 and $7,676,205, respectively. See
"Underwriting."

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

The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, subject to
approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the shares of Common Stock will be made in New York, New York on or
about December 1, 1997.

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

MERRILL LYNCH & CO. SALOMON BROTHERS INC
------------------------
The date of this Prospectus is November 24, 1997.
<PAGE> 2

[PHOTOS/MAP OF U.S.]

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF COMMON STOCK TO COVER
SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING."

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<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements
appearing elsewhere in this Prospectus. Unless otherwise indicated, the
information in this Prospectus assumes that the underwriters' over-allotment
option has not been exercised, and reflects a 3.289-for-one stock split effected
on October 20, 1997. Fiscal year references are to the respective fiscal year
ended July 31. References to Pro Forma Financial Information are to the
information set forth herein under "Unaudited Pro Forma Financial Data," giving
effect to the acquisition by the Company of Telephone Warehouse, Inc. and
National Cellular, Incorporated (collectively, "Telephone Warehouse") as if such
acquisition (the "Telephone Warehouse Acquisition") took place as of the
beginning of the periods presented. Unless otherwise indicated, cellular and PCS
industry statistics are obtained from the Cellular Telecommunications Industry
Association ("CTIA") and Paul Kagan Associates, Inc. and paging industry
statistics are obtained from The Strategis Group.

THE COMPANY

Let's Talk Cellular & Wireless, Inc. (together with its subsidiaries, the
"Company") is the largest independent specialty retailer of cellular and
wireless products, services and accessories in the United States, with 102
stores located in 12 states, the District of Columbia and Puerto Rico as of
September 30, 1997. The Company's stores, located predominantly in regional
shopping malls, seek to offer one-stop shopping for consumers to purchase
cellular, personal communication system ("PCS"), paging, internet, satellite,
and other wireless products and services and related accessories. The Company is
also a leading wholesaler of cellular and wireless products and accessories to
more than 1,000 accounts, consisting primarily of distributors, carriers and
smaller independent retailers.

The Company's business strategy is to offer the most extensive assortment
of wireless products and services at everyday low prices supported by
knowledgeable customer service, through conveniently located and attractively
designed stores. The Company believes that this strategy provides it with a
competitive advantage by combining the extensive product selection, competitive
prices and operating efficiencies typical of a "big box" retailer with the
superior customer service and upscale shopping experience characteristic of a
specialty retailer. The Company offers wireless products from well-known,
name-brand suppliers such as AT&T, Ericsson, Motorola, Nokia and Sony. The
Company's stores typically sell up to 40 different makes and models of cellular
and PCS phones and pagers and over 1,000 stock keeping units ("SKUs") of
wireless products and accessories, such as batteries, home and car chargers,
vehicle adapter kits and cases. The Company supports its broad product offering
with knowledgeable and personalized customer service focused on educating the
consumer and identifying the most appropriate products and services for each
consumer's individual needs. The Company offers everyday low prices that are
competitive with other retailers and supports this policy with price guarantee,
upgrade and trade-in programs.

The Company believes that its store level economics compare favorably to
other retailing sectors. The Company has developed both kiosk and in-line mall
stores, which average approximately 150 and 800 square feet in size,
respectively. In fiscal 1997, comparable stores (stores owned and operated by
the Company for at least 12 full months) generated average annual sales of
approximately $500,000 (excluding two stores that generate substantially higher
sales than other stores). In fiscal 1997, per store capital expenditures and
initial inventory for new kiosks and in-line stores averaged approximately
$66,000 and $141,000, respectively. Although sales per square foot vary by
format, the Company's stores had average sales per square foot of approximately
$1,000 in fiscal 1997.

The Company's revenues are generated principally from four sources: retail
sales, activation commissions paid by cellular carriers, residual payments and
wholesale sales. Retail sales involve the sale of cellular, PCS and wireless
products, such as phones, pagers and related accessories in the Company's retail
outlets. Activation commissions are payments the Company receives from the
applicable cellular carrier when a customer initially subscribes for the
cellular carrier's services. The amount of the activation commission paid by
cellular carriers is based upon various service plans offered by the carriers.
Residual payments are monthly payments ("residual income") made by certain
cellular carriers and pager customers. Cellular residual
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payments are based upon a percentage (usually 4-6%) of the customers' monthly
service charges. Pager residual payments are received for the pager airtime that
the Company buys wholesale from paging carriers and then resells to individuals
and small businesses. Wholesale sales involve the sale of wholesale cellular and
wireless products. Management believes the wholesale business, which was
acquired as part of the Telephone Warehouse Acquisition, provides the Company
with greater purchasing power and additional distribution capabilities that
complement the Company's retail operations.

The Company earns a profit on the cellular and PCS phones it retails as the
purchase price and/or activation commission exceeds the cost of the products
sold. The Company has recently made a strategic decision to accept increased
activation commissions from carriers in certain markets, in lieu of monthly
residual payments, to optimize cash flow and to facilitate the Company's growth
strategy.

INDUSTRY DYNAMICS

The wireless communications industry has grown substantially in recent
years. Cellular telephone service has been one of the fastest growing markets
within the industry. Since the inception of the cellular phone industry in 1983,
the number of U.S. cellular subscribers has grown to approximately 44 million by
year end 1996, having grown at an annual compound rate of 41% during the
previous five years. It is estimated that as of December 1996, this subscriber
base reflected an average market penetration of only 16.6%, based on the U.S.
population. In 1996, PCS wireless services were introduced in selected regions
of the U.S., which resulted in approximately 300,000 subscribers by year end.
Paul Kagan Associates, Inc. projects that by the year 2000 the number of
cellular and PCS subscribers in the U.S. will reach approximately 89 million.
According to CTIA, approximately $24 billion was spent on cellular service in
1996.

The paging market has also grown significantly. The number of U.S. pagers
in service has grown to approximately 42 million by year end 1996, having grown
at an annual compound rate of approximately 29% during the previous five years.
It is estimated that as of December 1996, this subscriber base reflected an
average market penetration of only 16%, based on the U.S. population. The
Strategis Group projects that by the year 2000 the number of U.S. pagers in
service will reach over 60 million. The Company believes that the U.S. market
for wireless communications products and services will continue to expand due to
advances in system technology and equipment, the emergence of new wireless
technologies, such as PCS, lower equipment prices and service charges and
increased consumer acceptance.

The Company believes that a shift is occurring in the distribution of
cellular and wireless services, products and accessories in the United States.
For many years cellular and wireless products and services were distributed to
consumers directly through telemarketing, direct mail, direct sales forces and,
to a lesser extent, carrier-owned retail outlets. As wireless services and
products have become more affordable, the market has expanded significantly and
shifted to a broader consumer base, which purchases for, among other reasons,
convenience and security purposes. In order to better access such a broad
consumer base, management believes carriers will seek multiple points of retail
distribution including established independent specialty retailers such as the
Company, their own retail outlets and "big box" electronics retailers.

COMPETITIVE POSITIONING

The Company believes that it has certain competitive advantages over other
retailers in satisfying consumers' changing needs and preferences. Compared to
"big box" retailers, the Company believes that its stores are more conveniently
located in regional shopping malls and typically have more selling space devoted
to wireless products. In addition, the Company believes that because it
exclusively focuses on wireless products, it is able to provide more specialized
and faster customer service than "big box" retailers. With the technological
advancements and continuous introductions of new products and service options in
the wireless industry, consumers demand increasingly higher levels of service
and support, access to a more extensive product selection and greater education
regarding all wireless products, including cellular, PCS, paging and internet
products.

Compared to carrier-owned stores, the Company has the advantage of
typically being able to offer wireless services from multiple carriers in any
given area whereas carrier-owned stores almost always offer only
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their own wireless service. As a result, the Company is able to offer a larger
number of service options, including PCS from up to five carriers as well as
paging services. Other advantages include the Company's expertise in retailing
communications products and services to consumers and its ability to serve as a
one-source retail distribution system for a wide variety of cellular and
wireless services.

GROWTH STRATEGY

The Company believes that the combination of its broad product offering,
highly visible and convenient store locations, excellent customer service and
everyday low pricing strategy positions it well for future growth. Key elements
of the Company's growth strategy are outlined below:

- New Store Expansion. The Company plans to open 65 to 75 new stores in
fiscal 1998 and 80 to 100 new stores in fiscal 1999, in both new and
existing markets, of which approximately 40% are expected to be kiosks and
60% are expected to be in-line stores. The Company believes that this
expansion rate, which is dependent upon a number of factors, is achievable
given the Company's existing infrastructure, the ease with which it can
replicate its store model and its successful opening of 45 new stores in
fiscal 1997. As of September 30, 1997, the Company had 4 store locations
under construction and had signed leases or reached an agreement in
principle for an additional 24 store locations. The Company's stores are
located in only 76 of the more than 1,000 regional malls in the
continental U.S. The Company intends to focus initially on the largest and
fastest growing wireless markets in the U.S., based on industry
statistics, by targeting additional mall locations and supplementing its
penetration in existing markets with power strip locations. Management
believes that the flexibility of the Company's kiosk and in-line store
formats permits the Company to take advantage of the best available
locations across a broad range of market areas.

- Pursue Selective Acquisitions. The Company intends to continue to
increase the number of its stores through selective acquisitions of other
specialty retailers of cellular and wireless products in addition to those
stores opened by the Company. The Company believes that the independent
retail market for cellular and wireless products is highly fragmented and
consists of numerous independent specialty retailers in each major
metropolitan area. Through selective acquisitions, the Company seeks to
obtain immediate access to desirable markets and locations, qualified
sales personnel and, in some cases, an existing subscriber base. The
Company believes it can successfully apply its operating strategy and
leverage its existing infrastructure and financial controls with such
acquisitions. Recent acquisitions completed by the Company include (i)
Peachtree Mobility, one of AirTouch Cellular's largest agents in Atlanta,
acquired in August 1996 and (ii) Telephone Warehouse, one of the largest
AT&T agents in the southwestern U.S., acquired in June 1997. In addition,
the Company has entered into definitive agreements for the acquisition of
(i) Cellular USA, Inc. ("Cellular USA"), one of AT&T's largest agents in
Las Vegas, which operates six retail stores (the "Cellular USA
Acquisition"), and (ii) Cellular Unlimited Corp. ("Cellular Unlimited"),
one of Cellular One's largest agents in upstate New York, which operates
15 retail stores (the "Cellular Unlimited Acquisition"). See "Recent
Acquisitions." As part of the Company's growth strategy, management
regularly reviews acquisition prospects that would augment or complement
the Company's existing operations.

- Increase Comparable Store Sales. The Company seeks to increase
comparable store sales by capitalizing on the changing industry dynamics
that are driving the growth in cellular and wireless usage and pursuing
repeat business from its existing customers for new products, product
upgrades and additional accessories. As the Company's stores increase
penetration into new and existing markets, the Company expects to obtain
greater brand name recognition through broader advertising, increased
repeat and referral business and corporate sales.

- Capitalize on Operating Leverage. The Company continues to invest in
infrastructure, including a management team and information systems, to
manage its rapidly growing chain of stores. These infrastructure
investments could result in a material reduction in income from operations
in the first half of fiscal 1998 compared with pro forma income from
operations for the corresponding period in fiscal 1997. As the Company
continues to expand internally and through acquisitions, it expects to
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leverage these investments and improve margins through economies of scale.
In addition, the Company believes its acquisition of Telephone Warehouse
will provide additional purchasing power as the wholesale operations of
Telephone Warehouse have historically been able to source inventory at
lower prices because of volume discounts.

HISTORY

Let's Talk Cellular & Wireless was founded by the Company's Chief Executive
Officer, Nick Molina, and Chairman, Brett Beveridge. Originally, the founders
sold cellular products and services at major public events until opening their
first store in 1989. During the first three years of operations the Company
opened three stores. By early 1995, the Company had grown to 14 stores primarily
in the southeastern United States. In June 1996, the Company, then operating 25
stores (one of which subsequently closed), received growth capital from HIG
Investment Group, L.P. and its affiliates ("HIG") and accelerated its store
expansion. See "Certain Transactions." From June 1996 through September 30,
1997, the Company opened 54 stores and acquired 24 stores, and as of September
30, 1997, the Company operated a total of 102 stores. The Company had total net
revenues of $74.4 million on a pro forma basis for the fiscal year ended July
31, 1997.

RECENT ACQUISITIONS

Cellular Unlimited Acquisition. On October 31, 1997, the Company entered
into a binding agreement for the acquisition of substantially all of the assets
of Cellular Unlimited, one of Cellular One's largest agents in upstate New York,
which operates 15 retail stores. The Company expects to close the acquisition
concurrently with the consummation of the offering. For the twelve months ended
July 31, 1997, Cellular Unlimited had total net revenues of approximately $6.4
million. The agreement provides for a cash purchase price of $2.1 million and up
to $225,000 in certain contingent payments in each of the six-month periods
ending July 31, 1998, January 31, 1999 and July 31, 1999. The Company intends to
change the store names to "Let's Talk Cellular & Wireless," increase in-stock
merchandise availability and integrate the accounting, sales and administrative
functions into the Company's corporate offices.

Cellular USA Acquisition. On October 28, 1997, the Company entered into a
binding agreement for the acquisition of all of the outstanding capital stock of
Cellular USA, one of AT&T's largest agents in Las Vegas, which operates six
retail stores. The Company expects to close the acquisition concurrently with
the consummation of the offering. For the twelve months ended July 31, 1997,
Cellular USA had total net revenues of approximately $3.0 million. The agreement
provides for a cash purchase price of $1,625,000 and certain contingent payments
of up to an aggregate of $175,000 in 1998 and 1999. The Company intends to
change the store names to "Let's Talk Cellular & Wireless," increase in-stock
merchandise availability and integrate the accounting, sales and administrative
functions into the Company's corporate offices.

Telephone Warehouse Acquisition. In June 1997, the Company acquired
Telephone Warehouse in exchange for 1,817,468 shares of the Company's Common
Stock and the assumption of $13.1 million of indebtedness. Telephone Warehouse
is one of the largest AT&T agents in the southwestern United States and operates
19 specialty cellular and wireless retail stores in Texas, Missouri and Kansas.
It also wholesales cellular and wireless products to over 1,000 regional and
local retailers, distributors and carriers. See "Certain Transactions." For the
twelve months ended December 31, 1996 and for the four months ended April 30,
1997, Telephone Warehouse had total net revenues of approximately $49.6 million
and $14.5 million, respectively. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for additional information
regarding the historical results of operations of Telephone Warehouse.

The Company's principal purpose in acquiring Telephone Warehouse was to
obtain immediate access to desirable markets, such as Dallas, San Antonio and
Kansas City, and locations and to qualified sales personnel and an existing
subscriber base. The Company intends to apply its operating strategy to
Telephone Warehouse, leverage Telephone Warehouse's existing infrastructure and
grow Telephone Warehouse's retail operations. In addition, the Company has the
opportunity to leverage the expertise of and benefit from Telephone Warehouse's
significant pager business. Management believes that the wholesale business,
which
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was acquired as part of the Telephone Warehouse Acquisition, provides the
Company with greater purchasing power and additional distribution capabilities.

Peachtree Mobility. In August 1996, the Company acquired Peachtree
Mobility, one of AirTouch Cellular's largest agents in Atlanta, which operates
five retail stores (the "Peachtree Acquisition"). Since the date of the
acquisition, the Company has changed the store names to "Let's Talk Cellular &
Wireless," increased in-stock merchandise availability and integrated the
accounting, sales and administrative functions into the Company's corporate
offices. The Company has also added three additional stores in the Atlanta
market.

The Company's executive offices are located at 800 Brickell Avenue, Suite
400, Miami, Florida 33131, and its telephone number is (305) 358-8255.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company.................. 2,000,000 shares
Common Stock offered by the Selling Shareholders..... 337,245 shares
Common Stock to be outstanding after the offering.... 8,199,762 shares(1)
Use of proceeds...................................... To repay the Company's outstanding bank
indebtedness and certain shareholder loans,
and, with the remaining net proceeds, to
finance the Company's expansion, including the
Cellular USA Acquisition and the Cellular
Unlimited Acquisition, the opening of new
stores and other possible acquisitions and for
other general corporate purposes.
Nasdaq National Market symbol........................ "LTCW"
</TABLE>

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(1) Does not include 447,606 shares of Common Stock issuable upon the exercise
of outstanding stock options, at a weighted average exercise price of $15.28
per share.
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SUMMARY FINANCIAL DATA

The following table presents (i) summary historical consolidated financial
data of the Company as of the dates and for the periods indicated and (ii)
summary unaudited pro forma financial data of the Company as of the dates and
for the periods indicated giving effect to the events described in the
"Unaudited Pro Forma Financial Data" included elsewhere herein as though they
had occurred on the dates indicated therein. The summary unaudited pro forma
financial data are not necessarily indicative of operating results or the
financial condition that would have been achieved had these events been
consummated on the date indicated and should not be construed as representative
of future operating results or financial condition. The summary historical
consolidated and unaudited pro forma financial data should be read in
conjunction with the financial statements and related notes thereto of the
Company and Telephone Warehouse and with the "Unaudited Pro Forma Financial
Data" and with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED JULY 31,
--------------------------------------------------------------
PRO
FORMA(1)
1994 1995 1996 1997 1997
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues:
Retail sales......................... $ 3,572 $ 6,120 $ 8,152 $ 13,230 $ 19,239
Activation commissions............... 461 1,651 4,366 12,575 19,194
Residual income...................... 228 533 1,075 1,948 10,135
Wholesale sales...................... -- -- -- 2,309 25,838
--------- --------- --------- --------- ---------
Total net revenues................. $ 4,261 $ 8,304 $ 13,593 $ 30,062 $ 74,406
Gross profit........................... $ 2,133 $ 4,044 $ 7,084 $ 15,239 $ 29,993
Selling, general and administrative
expenses............................. 1,918 3,896 6,601 13,993 23,547
Former shareholder compensation
expense.............................. -- -- -- 80 100
Depreciation and amortization.......... 43 100 225 451 640
Amortization of intangibles............ -- -- -- 418 2,176
--------- --------- --------- --------- ---------
Income from operations................. $ 172 $ 48 $ 258 $ 297 $ 3,530
Income (loss) before provision for
income taxes......................... $ 159 $ 8 $ 105 $ (43) $ 3,428
Income tax provision................... 70 -- 39 3 1,470
--------- --------- --------- --------- ---------
Net income (loss)...................... $ 89 $ 8 $ 66 $ (46) $ 1,958
========= ========= ========= ========= =========
Net income (loss) per share applicable
to common shareholders............... $ .01 $ -- $ .01 $ (.07)(2)(3) $ .23(3)
========= ========= ========= ========= =========
Weighted average shares outstanding.... 6,199,762 6,199,762 6,199,762 6,199,762 8,199,762
========= ========= ========= ========= =========
SELECTED OPERATING DATA:
EBITDA(4).............................. $ 215 $ 148 $ 492 $ 1,203 $ 6,405
========= ========= ========= ========= =========
Net cash provided by (used in)
operating activities................. $ 17 $ 92 $ 252 $ (472)
========= ========= ========= =========
Net cash used in investing
activities........................... $ 182 $ 809 $ 2,530 $ 1,666
========= ========= ========= =========
Net cash provided by financing
activities........................... $ 148 $ 895 $ 3,393 $ 1,860
========= ========= ========= =========
Stores open at end of period(5):
Kiosk................................ 5 13 14 35 35
In-line.............................. 3 9 11 58 58
--------- --------- --------- --------- ---------
Total............................. 8 22 25 93 93
Percentage change in comparable store
sales(6)............................. (2.2)% 10.5% 11.5% 5.4%
Average comparable store sales(7)...... $ 442,000 $ 450,000 $ 462,000 $ 500,000
Number of activations during period.... 1,661 5,205 14,803 43,360
Total gross square feet at end of
period............................... 2,447 7,006 9,529 96,093
</TABLE>

Footnotes on following page
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<TABLE>
<CAPTION>
AS OF JULY 31, 1997
-------------------------
ACTUAL AS ADJUSTED(8)
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<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................. $ 1,613 $ 9,976
Total assets................................................ 34,538 39,748
Long-term debt.............................................. 14,383 2,033
Shareholders' equity........................................ 6,610 26,152
</TABLE>

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(1) In June 1997 the Company acquired Telephone Warehouse in exchange for
1,817,468 shares of Common Stock and the assumption of Telephone Warehouse's
outstanding indebtedness. The unaudited pro forma financial data set forth
herein reflect (i) the combined operations of the Company and Telephone
Warehouse and (ii) the sale of the shares of Common Stock offered by the
Company hereby and the application of the estimated net proceeds therefrom
as set forth in "Use of Proceeds," as if such transactions had taken place
as of the beginning of the periods presented. For information regarding the
pro forma adjustments made to the Company's historical financial data, see
"Unaudited Pro Forma Financial Data."
(2) The fair value of the Common Stock distributed to the holder of the
Company's Series A Preferred Stock in order to induce the conversion of the
Series A Preferred Stock to Common Stock of $320,000 is deducted from net
loss for purposes of calculating net loss per share applicable to common
shareholders for fiscal 1997.
(3) Accretion to redemption value of the Series A Preferred Stock of $62,640,
has been deducted from net income (loss) for purposes of calculating net
income (loss) per share applicable to common shareholders. See "Unaudited
Pro Forma Financial Data."
(4) EBITDA is defined as net income (loss) plus (i) provision for income taxes,
(ii) gross interest expense and (iii) depreciation and amortization. EBITDA
is presented not as an alternative measure of operating results or cash flow
from operations (as determined in accordance with generally accepted
accounting principles ("GAAP")), but because it is a widely accepted
supplemental financial measure, and management believes it provides relevant
and useful information. The Company's calculation of EBITDA may not be
comparable to similarly titled measures reported by other companies since
all companies do not calculate this non-GAAP measure in the same fashion.
The Company's EBITDA calculation is not intended to represent cash provided
by (used in) operating activities, since it does not include interest and
taxes and changes in operating assets and liabilities, nor is it intended to
represent the net increase in cash, since it does not include cash provided
by (used in) investing and financing activities. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
(5) Pro forma information does not include six stores to be acquired pursuant to
the Cellular USA Acquisition and 15 stores to be acquired pursuant to the
Cellular Unlimited Acquisition.
(6) A store becomes comparable after it has been owned and operated by the
Company for at least 12 full months. Comparable store sales are comprised of
retail sales and activation income at the Company's retail stores, but do
not include residual income.
(7) Represents the average retail sales and activation income on a store by
store basis only for stores owned and operated by the Company for at least
12 full months as of period end (excluding two stores that generate
substantially higher sales than other stores). Therefore, period to period
figures may not be comparable.
(8) Adjusted to give effect to (i) the sale of the shares of Common Stock
offered by the Company and the application of the estimated net proceeds
therefrom as set forth in "Use of Proceeds" as if such transactions had
occurred at July 31, 1997, and (ii) a non-recurring charge of approximately
$738,000, net of tax, related to the write-off of deferred financing costs
in connection with the repayment of bank indebtedness with a portion of the
proceeds of this offering. See "Capitalization" and "Pro Forma Condensed
Consolidated Balance Sheet."
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RISK FACTORS

Prospective investors should carefully consider all of the information set
forth in this Prospectus and, in particular, should evaluate the following risks
in connection with an investment in the shares of Common Stock offered hereby.

RISKS ASSOCIATED WITH RAPID GROWTH

The Company's total net revenues have grown significantly in the past
several years, with sales increasing from $3.3 million in fiscal 1993 to $74.4
million on a pro forma basis for fiscal 1997. In connection with the recent
Telephone Warehouse Acquisition, the Company more than doubled the amount of its
assets and previous twelve months' total net revenues. The Company intends to
continue to pursue an aggressive growth strategy. The continued growth of the
Company is dependent, in large part, upon the Company's ability to construct and
operate new stores on a timely and profitable basis and upon the Company's
ability to acquire and profitably integrate the operations of new and acquired
stores. The Company plans to open approximately 65 to 75 new stores in fiscal
1998 and 80 to 100 new stores in fiscal 1999. However, the rate of new store
openings is subject to various contingencies, many of which are beyond the
Company's control. These contingencies include, among others, the Company's
ability to secure suitable store sites on a timely basis and on satisfactory
terms, the Company's ability to hire, train and retain qualified personnel, the
availability of adequate capital resources and the successful integration of new
stores into existing operations. There can be no assurance that the Company's
new stores will be profitable or achieve sales and profitability comparable to
the Company's existing stores. In addition, the Company expects that, as a
result of further infrastructure investments it plans to make during fiscal
1998, principally in order to integrate the operations of its new and acquired
stores, it may experience reduced operating margins in the near term.

The Company's growth will also depend on its ability to acquire additional
retailers, manage expansion, control costs of its operations and consolidate
acquisitions into existing operations. In connection with such acquisitions, the
Company will be required to review the operations of the acquired company,
including its management infrastructure and systems and financial controls, and
make operating adjustments or complete reorganizations as appropriate.
Unforeseen capital and operating expenses, or other difficulties and delays
frequently encountered in connection with the expansion and integration of
acquired operations, could have an adverse effect upon the Company's financial
results. Significant acquisitions, such as the Telephone Warehouse Acquisition,
require the integration of administrative, finance, sales, purchasing and
marketing organizations, as well as the coordination of common sales and
marketing efforts and the implementation of appropriate operational, financial
and management systems and controls. This will require substantial attention
from the Company's senior management team, who have limited acquisition
experience to date. The diversion of management attention required by the
acquisition and integration of acquired companies, as well as any other
difficulties that may be encountered in the transition and integration process,
could have an adverse effect on the results of operations of the Company. There
can be no assurance that the Company will identify suitable acquisition
candidates, that acquisitions will be consummated on acceptable terms or that
the Company will be able to successfully integrate the operations of any
acquired company. The Company's ability to continue to grow through the
acquisition of additional stores will also be dependent upon the availability of
suitable candidates, the Company's ability to attract and retain competent
management and the availability of capital to complete the acquisitions. See
"Business -- Growth Strategy." The Company currently intends to finance
acquisitions through a combination of cash resources, borrowings and, in
appropriate circumstances, the issuance of equity and/or debt securities. The
acquisition of additional stores has in the past and is expected in the future
to have a significant effect on the Company's results of operations and
financial position and could cause substantial fluctuations in the Company's
quarterly and yearly operating results. The accelerated amortization applied to
the value of the residual income acquired in connection with the Telephone
Warehouse Acquisition is expected to have a significantly negative effect on net
income in the fourth quarter of fiscal 1997 and for the next two fiscal years.
Future acquisitions by the Company involving residual income could result in
significant charges to net income from accelerated amortization. See Note 2 to
the "Pro Forma Condensed Consolidated Statements of Income."

10
<PAGE> 11

COMPETITION

The retail market for cellular and wireless products and service is
characterized by intense price competition and significant price erosion over
the life of a product. The Company competes with numerous well-established
retailers, carriers, wholesale distributors and suppliers of cellular and
wireless products and equipment, including the Company's carriers and suppliers,
many of which possess greater financial, marketing and other resources than the
Company. Substantially all of these competitors market the same or similar
products directly to the Company's customers and most have the financial
resources to withstand substantial price competition and implement extensive
advertising and promotional programs. Certain carriers are principal competitors
of the Company, and two carriers in particular provide the Company with
significant revenue (approximately 24% of total net revenue in fiscal 1997) from
activation and residual payments. Potential conflicts of interest could arise,
therefore, between the Company and its principal customers. In recent years, the
price of products and subscription rates for services that the Company and its
competitors have been able to charge their customers have decreased, primarily
as a result of lower costs and greater competition in the industry. The Company
believes that significant price-based competition will continue to exist in each
of the Company's markets for the foreseeable future. The cellular and wireless
retail industry is highly fragmented and characterized by low barriers to entry
and frequent introduction of new products. The Company's ability to continue to
compete successfully will be largely dependent on its ability to maintain its
current carrier and supplier relationships and to anticipate various competitive
factors affecting the industry, such as new or improved products, changes in
technology and consumer preferences, demographic trends, regional and local
economic conditions and discount pricing and promotion strategies by
competitors. The Company expects that there will be increasing competition in
the acquisition of other cellular and wireless retailers as industry
participants become larger. There can be no assurance that the Company will be
able to maintain or increase its size relative to its competitors or to maintain
its historical profit margins in the face of increased competition. See
"Business -- Competition."

DEPENDENCE ON CELLULAR AND PCS CARRIERS

Generally, a Company store operates pursuant to a carrier agreement between
one of the cellular and one or more of the PCS carriers operating in the
geographic area in which the store is located and the Company or its subsidiary
that owns the store. Payments from two of the Company's carriers constituted
approximately 24% of its total net revenues for fiscal 1997. The Company is
therefore highly dependent on its relationship with its carriers. Each cellular
and PCS carrier is responsible for maintaining the quality and consistency of
its signal, the capacity of the system to add new customers and the
competitiveness of the retail prices it charges for service. In addition, the
carriers create national and regional advertising as well as customer incentive
programs. The Company has no ability to control its carriers' funding for system
maintenance, capacity increases, marketing or the prices it charges for coverage
below regulatory ceilings. Consequently, the Company's ability to attract and
retain cellular and PCS customers is dependent upon the quality and pricing of
services provided by the Company's carriers. In addition, there are typically
only two licensed cellular carriers and up to five licensed PCS carriers in a
geographic area. The wireless communications industry is relatively new and
dynamic. While the Company currently believes that carriers have an incentive to
achieve broad distribution of wireless phone services and that the current
program of activation and residual payments will continue as a method of
subsidizing the cost of such distribution, no assurance can be given that such
payment programs will continue or will continue at the current rate of payments.
For instance, the Company does not receive activation commissions or residual
payments in connection with its recent sales of PCS phones but instead acquires
PCS phones from carriers at a significantly reduced cost than that paid by the
PCS carrier. The Company, in turn, resells such phones at a profit that may be
less than the total profit it would earn in connection with the sale and related
activation and residual payments associated with a cellular phone. The
activation commissions the Company receives from its cellular and paging
carriers are negotiated at the time the carrier agreements are executed and
remain constant over the life of the contract, unless renegotiated. There can be
no assurance that the Company will be able to maintain the size of the
activation commissions and residual payments it receives from carriers upon the
expiration or renegotiation of existing carrier agreements or in connection with
entering into new agreements with its existing or new carriers. Two of the
Company's cellular carrier agreements contain non-competition provisions that
prevent the Company from

11
<PAGE> 12

selling wireless services (including cellular and PCS) of a competing carrier
during the term of the agreement and for one year thereafter. In addition, most
of the carrier agreements provide for the carrier's termination of its residual
payments to the Company in the event the agreement is terminated by the Company
without cause. Accordingly, the Company has limited ability to change carriers
in a geographic area in the event its current carrier fails to provide cellular
or PCS services at competitive prices and terms. There can be no assurance that
the Company's carriers will continue to provide cellular and PCS services at
competitive prices and terms or that the Company will be able to change carriers
without a significant loss of revenues. In the event one or more of the
Company's carriers experiences financial difficulties or fails to maintain
competitive prices and services the Company's results of operations and
financial condition could be adversely affected. See "Business -- Carrier
Agreements."

CUSTOMER TURNOVER

The Company's results of operations can be significantly affected by
customer cancellations of cellular phone service and pagers. In the event that a
customer cancels service within a stipulated period (generally 180 days) of
activation, the cellular carrier assesses a charge-back to the Company relating
to the applicable customer. The sales and marketing costs associated with
attracting new cellular and paging customers are substantial relative to the
costs of providing cellular and paging service to existing customers. Although
the Company accrues for estimated deactivation losses, there can be no assurance
that any increase in the Company's cellular or pager customer disconnection rate
would not adversely affect the Company's results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- General."

TECHNOLOGICAL CHANGE AND INVENTORY OBSOLESCENCE

The retail market for cellular and wireless communications products and
services is characterized by rapidly changing technology and evolving industry
standards, often resulting in short product life cycles, product obsolescence or
inventory price reductions. Future technological advances in the industry could
lead to the introduction of new products and services that compete with the
products and services offered by the Company or could lower the cost of
competitive products and services to the extent that the Company is required to
further reduce the price of its products and services. As the number of stores
the Company operates increases and as the Company enters into product wholesale
activities in connection with the Telephone Warehouse Acquisition, it will be
required to raise its inventory levels, thereby increasing its risk of loss from
inventory obsolescence or price reductions. Accordingly, the Company's success
is dependent upon its ability to anticipate technological changes in the
industry and to continually identify, obtain and successfully market new
products that satisfy evolving industry and consumer requirements. In the event
the Company is unable to obtain new products and services representing improved
technology, the Company's stores will be at a competitive disadvantage to
retailers offering technologically advanced products and services.

VARIABILITY OF RESULTS OF OPERATIONS

The Company's stores have historically experienced, and the Company expects
its stores to continue to experience, seasonal fluctuations in revenues, with a
larger percentage of revenues typically being realized in the second fiscal
quarter during the holiday season. In addition, the Company's results during any
fiscal period can be significantly affected by the timing of store openings and
acquisitions and the integration of new and acquired stores into the Company's
operations. Comparable store sales can also fluctuate significantly from period
to period as a result of a variety of factors, including the timing of periodic
promotions sponsored by carriers, the introduction of new wireless equipment and
the acquisition of large corporate accounts.

EFFECT OF CONSUMER SPENDING

The success of the Company's operations depends to a significant extent
upon a number of factors relating to discretionary consumer spending, including
economic conditions affecting disposable consumer income (such as employment,
business conditions, taxation and interest rates) and the ability of mall anchor
tenants and other attractions to generate customer traffic in the vicinity of
the Company's stores. There can be no assurance that consumer spending will not
be affected by adverse economic conditions, thereby affecting the Company's
results of operations and financial condition.

12
<PAGE> 13

POSSIBLE HEALTH RISKS ASSOCIATED WITH WIRELESS TELEPHONES

Lawsuits have been filed against suppliers and sellers of wireless
telephones alleging possible health risks, including brain cancer, associated
with electromagnetic fields emitted by portable hand-held wireless telephones.
To date, there has been only limited research in this area, and such research
has not been conclusive as to what effects, if any, exposure to electromagnetic
fields emitted by portable wireless telephones has on human cells. However, the
perception that health risks may exist could adversely affect the Company's
ability to market portable wireless telephone products. Inasmuch as most of the
Company's revenues are derived from sales of portable wireless telephones,
future studies confirming possible health risks associated with the use of such
products could have a material adverse effect on the wireless communications
industry and the Company. As a distributor of wireless telephones, the Company
may be subject to product liability and other lawsuits alleging health risks.
The costs associated with the defense of such lawsuits or a successful claim
against the Company could have a material adverse effect on the Company's
results of operations and financial condition.

DEPENDENCE ON KEY PERSONNEL

The success of the Company is substantially dependent upon its senior
management team, in particular the Company's Chief Executive Officer and
Chairman, Messrs. Molina and Beveridge, respectively. The loss of the services
of one or more of these persons could have a material adverse effect on the
Company. The Company has entered into five year employment agreements with
Messrs. Molina and Beveridge that limit the ability of the executives to compete
with the Company after their departure. See "Management -- Employment
Agreements." The Company's business will also be dependent upon its ability to
attract and retain additional qualified personnel, including, without
limitation, executive officers and key employees to manage the Company's
anticipated growth. The loss of Mr. Molina, Mr. Beveridge or other key personnel
could have a material adverse effect on the Company's results of operations and
financial condition. See "Management."

CONTROLLING SHAREHOLDER

Upon completion of this offering, HIG will beneficially own approximately
46.1% of the outstanding Common Stock (approximately 42.4% if the Underwriters'
over-allotment option is exercised in full). Accordingly, HIG will have
sufficient voting power to control substantially all matters requiring
shareholder approval, including the election of directors and the approval of
fundamental corporate transactions. See "Principal and Selling Shareholders."

ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER, BYLAW AND OTHER PROVISIONS

Certain provisions of the Company's Amended and Restated Articles of
Incorporation (the "Articles") and Amended and Restated Bylaws (the "Bylaws")
may be deemed to have anti-takeover effects and may discourage, delay, defer or
prevent a change in control of the Company. Certain of these provisions (i)
divide the Company's Board of Directors into three classes, each of which will
serve for different three-year periods, (ii) provide that the shareholders may
remove directors from office only for cause and by a supermajority vote, (iii)
provide that special meetings of the shareholders may be called only by the
Board of Directors, the Chairman of the Board of Directors or upon the written
demand of the holders of not less than fifty percent of the votes entitled to be
cast at a special meeting, (iv) establish certain advance notice procedures for
nomination of candidates for election as directors and for shareholder proposals
to be considered at annual shareholders' meetings, and (v) authorize the
issuance of 1,000,000 shares of "blank check" preferred stock with such
designation, rights and preferences as may be determined from time to time by
the Board of Directors. Accordingly, the Board of Directors is empowered,
without shareholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights that could materially adversely
affect the voting power or other rights of the holders of the Company's Common
Stock. In addition, certain provisions of the Florida Business Corporation Act
may be deemed to have certain anti-takeover effects. Certain anti-takeover
provisions of the Company's Articles concerning the number, term and removal of
directors may only be amended by a supermajority vote of shareholders. See
"Description of Capital Stock -- Anti-takeover Effects of Certain Provisions of
the Company's Articles of Incorporation and Bylaws and Other Provisions."

13
<PAGE> 14

DILUTION

Investors purchasing shares of Common Stock in this offering will
experience immediate and substantial dilution in net tangible book value of
$10.52 per share. See "Dilution."

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have outstanding an
aggregate of 8,199,762 shares of Common Stock. All of the shares sold in this
offering (plus an additional 350,587 shares if the Underwriters' over-allotment
option is exercised in full) will be freely tradeable without restriction or
further registration under the Securities Act of 1933, as amended (the
"Securities Act"), except for any shares purchased by an affiliate of the
Company that will be subject to the resale limitations of Rule 144 under the
Securities Act. Upon the expiration of lock-up agreements between each of the
executive officers, directors and existing shareholders and the Underwriters,
180 days after the date of this Prospectus (or earlier upon the written consent
of Merrill Lynch & Co., Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill
Lynch")), 4,404,600 shares of Common Stock (including options to acquire 182,348
shares of Common Stock) outstanding prior to this offering may be sold in the
public market by affiliates of the Company, subject to the limitations and
restrictions contained in Rule 144 under the Securities Act. Holders of
1,640,265 shares of Common Stock will not be able to sell their shares in
reliance on Rule 144 under the Securities Act prior to June 1998. In addition,
310,000 shares of Common Stock have been reserved for issuance under the
Company's 1997 Executive Incentive Compensation Plan (the "Incentive Plan").
Options to acquire an aggregate of 265,258 of such shares will be granted to
certain employees, officers, directors and independent contractors of the
Company under the Incentive Plan on the date of this Prospectus, a third of
which, in general, will vest in October of each of 1998, 1999 and 2000. 118,404
of such options will be held by two executive officers and will vest immediately
upon the termination of their employment for any reason other than cause. 3,289
of such options will be granted to a consultant to the Company and will vest
immediately upon the consummation of the offering. Upon completion of this
offering any shares of Common Stock issuable upon the exercise of such options
(subject to certain vesting terms and other limitations on exercise with respect
to such options) will be eligible for sale in the future pursuant to
registration on Form S-8. Sales of substantial amounts of Common Stock, or the
perception that substantial amounts of Common Stock are available for future
sale, could adversely affect the prevailing market price of the Common Stock.
Following the closing of the offering, one of the Company's existing
shareholders will have the right to require the Company to register the sale of
its 2,137,850 shares of Common Stock under the Securities Act. Following the
closing of the offering, all of the existing shareholders, who will hold an
aggregate of 6,044,865 shares (including options to acquire 182,348 shares),
will have the right to include such shares of Common Stock in registrations
proposed to be effected by the Company. Such shareholders have agreed not to
exercise their registration rights prior to 180 days from the date of this
Prospectus without the prior written consent of Merrill Lynch. See "Shares
Eligible for Future Sale," "Management -- Executive Incentive Compensation
Plan," "Principal and Selling Shareholders" and "Underwriting."

NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to this offering there has been no public market for the Common Stock
and there can be no assurance that an active trading market will develop or, if
developed, that such market will be sustained following the offering or that the
market price of the Common Stock will not decline below the initial public
offering price. The initial public offering price of the Common Stock will be
determined by negotiations between the Company, the Selling Shareholders and the
representatives of the Underwriters based on the factors described under
"Underwriting." The trading price of the Common Stock could be subject to
fluctuations in response to variations in the Company's results of operations,
as well as developments that affect the industry, the overall economy and the
financial markets. Upon commencement of this offering, the Common Stock will be
quoted on the Nasdaq National Market, which stock market has experienced and is
likely to experience in the future significant price and volume fluctuations
which could adversely affect the market price of the Common Stock without regard
to the operating performance of the Company.

14
<PAGE> 15

USE OF PROCEEDS

The net proceeds from the sale of the 2,000,000 shares of Common Stock
offered by the Company hereby (not including fees payable as described under
"Certain Transactions") are estimated to be approximately $21.1 million. The
Company will not receive any proceeds from the sale of Common Stock offered by
the Selling Shareholders. The Company intends to use approximately $14.4 million
of the net proceeds of the offering to repay its outstanding bank indebtedness
and certain shareholder loans and to apply the remaining net proceeds to finance
the Company's expansion, including the Cellular USA Acquisition and the Cellular
Unlimited Acquisition, the opening of new stores and other possible
acquisitions, and for other general corporate purposes, including the payment of
certain fees set forth under "Certain Transactions." Of the net proceeds to the
Company, (i) approximately $14.1 million will be used to repay the Company's
outstanding bank indebtedness incurred primarily to fund the Telephone Warehouse
Acquisition, (ii) approximately $258,100 will be used to repay loans from
Messrs. Molina and Beveridge bearing interest at 8.0% and maturing upon the
closing of this offering, (iii) approximately $1.6 million will be used to fund
the Cellular USA Acquisition and (iv) approximately $2.1 million will be used to
fund the Cellular Unlimited Acquisition. See "Certain Transactions." Bank loans
to be repaid by the Company consist of $13.1 million of term loans and $1.0
million of revolving loans, bearing interest at 4.5% and 3.75%, respectively,
over the commercial paper rate, and in each case payable May 2004. The bank
loans are secured by all of the assets of the Company and a first priority lien
on the Common Stock owned by HIG. Pending the application of the remaining net
proceeds, the Company will invest such proceeds in money market funds or other
short-term, investment-grade, interest bearing securities.

DIVIDEND POLICY

The Company does not intend to pay cash dividends to holders of its Common
Stock for the foreseeable future. Instead, the Company intends to apply
earnings, if any, to finance its growth. Any future determination to pay cash
dividends will be at the discretion of the Board of Directors and will be
dependent upon the Company's financial condition, restrictions contained in
financing agreements, results of operations, capital requirements and such other
factors as the Board of Directors may consider relevant.

15
<PAGE> 16

CAPITALIZATION

The following table sets forth the current portion of long-term debt and
capitalization of the Company as of July 31, 1997 on a historical basis and as
adjusted to reflect the sale of the 2,000,000 shares of Common Stock offered by
the Company hereby (after payment of the fees described under "Certain
Transactions") and the application of the net proceeds thereof as set forth in
"Use of Proceeds." The table should be read in conjunction with the Consolidated
Financial Statements and related notes and "Unaudited Pro Forma Financial Data"
appearing elsewhere in this Prospectus. See also "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

<TABLE>
<CAPTION>
AS OF JULY 31, 1997
------------------------
ACTUAL AS ADJUSTED
------- --------------
(IN THOUSANDS)
<S> <C> <C>
Bank line of credit, current portion of long-term debt and
capital lease obligations................................. $ 2,013 $ 32
======= =======
Long-term debt, less current maturities:
Bank term loans........................................... $12,350 $ --
8.0% subordinated note.................................... 2,000 2,000
Capital lease obligations................................. 33 33
------- -------
Total long-term debt................................... 14,383 2,033
------- -------
Shareholders' equity:
Preferred Stock, $.01 par value; 1,000,000 shares
authorized; none issued and outstanding................ -- --
Common Stock, $.01 par value; 50,000,000 shares
authorized; 6,093,166 shares issued and outstanding(1);
8,199,762 shares issued and outstanding, as
adjusted(2)............................................ 61 82
Additional paid-in capital................................ 6,166 26,425
Retained earnings (deficit)............................... 383 (355)
------- -------
Total shareholders' equity............................. 6,610 26,152
------- -------
Total capitalization.............................. $20,993 $28,185
======= =======
</TABLE>

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

(1) Does not include 106,596 shares of Common Stock that will be issued
immediately prior to the sale of the Common Stock offered hereby, for a per
share price of $.00003, upon exercise of warrants that are held by the bank
lender to the Company. See "Certain Transactions."
(2) Includes 106,596 shares of Common Stock that will be issued upon exercise of
warrants immediately prior to the sale of the Common Stock offered hereby.
Does not include 447,606 shares of Common Stock issuable upon the exercise
of outstanding stock options, at a weighted average exercise price of $15.28
per share.

16
<PAGE> 17

DILUTION

At July 31, 1997, the Company had a net tangible book value (deficiency) of
$(8.1) million, or $(1.31) per share of Common Stock. Net tangible book value
(deficiency) per share is determined by dividing the net tangible book value
(tangible assets less total liabilities) of the Company by the total number of
shares of Common Stock outstanding. Without taking into account any changes in
net tangible book value after July 31, 1997, other than to give effect to the
issuance and sale of the 2,000,000 shares of Common Stock offered by the Company
hereby, after deduction of the underwriting discount and estimated offering
expenses to be paid by the Company, the application of the net proceeds to pay
indebtedness as set forth in "Use of Proceeds" and the non-recurring charges
that will result from the repayment of the Company's bank indebtedness, the net
tangible book value of the Company at July 31, 1997 would have been $12.1
million, or $1.48 per share. This represents an immediate increase in net
tangible book value of $2.79 per share to existing shareholders and an immediate
dilution of $10.52 per share to new investors. The following table illustrates
this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $12.00
Net tangible book value (deficiency) per share as of July
31, 1997............................................... (1.31)
Increase in net tangible book value per share attributable
to new investors....................................... 2.79
------
Pro forma net tangible book value per share after the
offering.................................................. 1.48
------
Dilution per share to new investors......................... $10.52
======
</TABLE>

The following table summarizes as of July 31, 1997, the difference between
the number of shares of Common Stock purchased from the Company, the aggregate
consideration paid and the average price per share paid by existing shareholders
and new investors purchasing shares in this offering:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders(1)(2)....... 6,199,762 75.6% $ 6,227,400 20.6% $ 1.00
New investors(1).................. 2,000,000 24.4 $24,000,000 79.4% $ 12.00
--------- ----- ----------- -----
Total................... 8,199,762 100.0% $30,227,400 100.0%
========= ===== =========== =====
</TABLE>

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

(1) Sales by the Selling Shareholders in this offering will reduce the number of
shares held by the existing shareholders to 5,862,517, or 71.5% of the total
number of shares of Common Stock to be outstanding after this offering, and
the number of shares to be purchased by new investors will increase to
2,337,245, or 28.5% of the total shares of Common Stock to be outstanding.
If the Underwriters' over-allotment option is exercised in full, the number
of shares held by existing shareholders will decrease to 5,511,930 or 67.2%
of the total number of shares of Common Stock to be outstanding after this
offering, and the number of shares to be purchased by new investors will
increase to 2,687,832, or 32.8% of the total shares of Common Stock to be
outstanding. See "Principal and Selling Shareholders."
(2) Includes 106,596 shares of Common Stock that will be issued immediately
prior to the sale of the Common Stock offered hereby, for a per share price
of $.00003, upon exercise of warrants that are held by the bank lender to
the Company. See "Certain Transactions" and "Principal and Selling
Shareholders."

The foregoing table assumes no exercise of outstanding stock options after
the date hereof. As of the date of this Prospectus, there were options
outstanding to purchase a total 447,606 of shares of Common Stock, at a weighted
average exercise price of $15.28 per share. See "Management -- Executive
Incentive Compensation Plan" and Note 13 of Notes to Consolidated Financial
Statements.

17
<PAGE> 18

UNAUDITED PRO FORMA FINANCIAL DATA

The accompanying unaudited pro forma condensed consolidated statement of
income for the year ended July 31, 1997, reflects the historical statement of
operations of the Company, adjusted to reflect the effects of the Telephone
Warehouse Acquisition and related transactions, the sale of the Common Stock
offered hereby and the application of a portion of the net proceeds therefrom to
the repayment of outstanding bank indebtedness and certain shareholder notes as
if such transactions had occurred as of the beginning of the period presented.
Share and per share amounts included herein, give effect to a 3.289-for-one
stock split effected on October 20, 1997. The pro forma financial information
does not give effect to the Cellular USA Acquisition or the Cellular Unlimited
Acquisition.

On June 27, 1997 (effective June 30, 1997), the Company purchased all of
the outstanding shares of common stock of Telephone Warehouse from Texas
Cellular Partners, L.P. ("TCP"), an affiliate of HIG, in exchange for 1,817,468
shares of the Company's Common Stock and assumption of $13.1 million of
indebtedness. The fair value of the shares issued, as determined by management,
was approximately $2.8 million. The fair value of net assets acquired, including
approximately $1.6 million (net of deferred tax liability of $942,000) allocated
to acquired residual income, was approximately $4.9 million. The purchase price
exceeded the fair value of the net assets acquired by approximately $11.0
million, which amount will be amortized on a straight line basis over 30 years.
The allocated cost of residual income is being amortized on an accelerated
basis, which amortization is expected to have a significant negative effect on
net income for the next two fiscal years. See Note 2 to the Pro Forma Condensed
Consolidated Statements of Income. The acquisition was accounted for using the
purchase method of accounting. In connection with the acquisition of Telephone
Warehouse, the Company refinanced its debt and issued warrants to NationsCredit
Commercial Corporation, the Company's bank lender ("NationsCredit"), to purchase
a total of 106,596 shares of the Company's Common Stock at an exercise price of
$.00003 per share.

In a previous transaction, on January 1, 1997, TCP had purchased from the
President and sole shareholder of Telephone Warehouse, Ronald Koonsman, all of
the outstanding stock of Telephone Warehouse for a purchase price of $15.1
million including acquisition costs of approximately $200,000.

Simultaneous with the acquisition of Telephone Warehouse, the Company
induced the holder of the Company's outstanding Series A Preferred Stock to
convert all outstanding shares of the Series A Preferred Stock to Common Stock
by increasing the conversion ratio of the Series A Preferred Stock from 17.50 to
1 to 21.38 to 1. As a result of such conversion, the holder of the Company's
outstanding Series A Preferred Stock surrendered certain rights to enforce
various restrictive covenants regarding the Company's operations. Upon such
conversion, the holder of the Series A Preferred Stock received 2,137,850 shares
of Common Stock (388,701 shares in addition to the original conversion ratio).
Management determined that the fair value of the 388,701 shares at the date of
issuance was approximately $320,000.

The unaudited pro forma consolidated financial data and accompanying notes
should be read in conjunction with the Consolidated Financial Statements and the
related notes of the Company and the Combined Financial Statements and related
notes of Telephone Warehouse, all of which are included elsewhere in this
Prospectus. The Company believes that the assumptions used in the following
statements provide a reasonable basis on which to present the pro forma
financial data. The purchase price allocation is based on preliminary data. The
unaudited pro forma financial data is provided for informational purposes only
and should not be construed to be indicative of the Company's financial
condition or results of operations had the transactions and events above been
consummated on the dates assumed and are not intended to constitute projections
with regards to the Company's financial condition as of any future date or
results of operations for any future period.

18
<PAGE> 19

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED JULY 31, 1997
(UNAUDITED)

<TABLE>
<CAPTION>
TELEPHONE
WAREHOUSE
ELEVEN
MONTHS
THE ENDED PRO FORMA
COMPANY JUNE 30, 1997 ADJUSTMENTS PRO FORMA
----------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
Net revenues:
Retail sales............................ $13,230,085 $ 6,008,790 $19,238,875
Activation commissions.................. 12,574,633 6,618,948 19,193,581
Residual income......................... 1,948,169 8,186,855 10,135,024
Wholesale sales......................... 2,309,082 23,529,042 25,838,124
----------- ----------- ----------- -----------
Total net revenues................... 30,061,969 44,343,635 -- 74,405,604
Cost of sales............................. 14,822,617 29,589,564 44,412,181
----------- ----------- ----------- -----------
Gross profit.............................. 15,239,352 14,754,071 -- 29,993,423
Operating expenses:
Selling, general and administrative..... 13,993,392 9,588,511 $ (35,000)(1) 23,546,903
Former shareholder compensation
expense.............................. 80,000 1,080,000 (1,060,000)(1) 100,000
Depreciation and amortization........... 451,108 189,004 640,112
Amortization of intangibles............. 417,739 1,120,997 637,642(2) 2,176,378
----------- ----------- ----------- -----------
Total operating expenses............. 14,942,239 11,978,512 (457,358) 26,463,393
----------- ----------- ----------- -----------
Income from operations.................... 297,113 2,775,559 457,358 3,530,030
Interest expense, net..................... (340,102) (714,997) (846,477)(3) (109,550)
1,792,026(4)
Other..................................... -- 7,598 7,598
----------- ----------- ----------- -----------
Income (loss) before provision for income
taxes................................... (42,989) 2,068,160 1,402,907 3,428,078
Income tax provision...................... 2,842 680,402 786,315(5) 1,469,559
----------- ----------- ----------- -----------
Net income (loss).................... (45,831) 1,387,758 616,592 1,958,519
Fair value of Common Stock distributed to
preferred shareholder to induce
conversion of Series A Preferred
Stock................................... (320,000) -- 320,000(6) --
----------- ----------- ----------- -----------
Net income (loss) applicable to
common shareholders................ $ (365,831) $ 1,387,758 $ 936,592(7) $ 1,958,519
=========== =========== =========== ===========
Net income (loss) per share
applicable to common
shareholders....................... $ (0.07) $ 0.23(7)(8)
=========== ===========
Weighted average shares outstanding....... 6,199,762 8,199,762(8)
=========== ===========
</TABLE>

19
<PAGE> 20

NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

(1) Reflects reduction of compensation expense to $100,000 per year based on a
new employment agreement signed at the time of the Telephone Warehouse
Acquisition by Ronald Koonsman providing for the following: (i) for the six
month period beginning on July 1, 1997, a salary of $50,000 and (ii) for the
12 month period beginning on January 1, 1998, a salary of $100,000. The
agreement also provides for a non-recurring bonus of $950,000 payable on or
before December 31, 1997, provided that certain financial performance levels
are met for the twelve months ended December 31, 1997. As a non-recurring
charge, such bonus is not included herein. Also reflects a new employment
arrangement entered into at the time of the Telephone Warehouse Acquisition
with a Vice President of Telephone Warehouse that provided for a reduction
in compensation expense from 10% to 5% of annual income before interest,
taxes, depreciation and amortization and management fees.

(2) Reflects increase to amortization of intangible assets. Goodwill totaling
approximately $11.0 million is being amortized over 30 years and the
allocated cost of acquired residual income of approximately $2.5 million is
being amortized on an accelerated basis according to the anticipated timing
of acquired cash flows, resulting in incremental amortization as follows:

<TABLE>
<S> <C>
Incremental amortization of goodwill........................ $163,791
Incremental amortization of acquired residual income........ 473,851
--------
Pro forma adjustment.............................. $637,642
</TABLE>

The amortization of the allocated cost of acquired residual income
subsequent to July 31, 1997 is expected to be approximately as follows:

<TABLE>
<S> <C>
Fiscal 1998................................................. $1,507,000
Fiscal 1999................................................. 676,000
Fiscal 2000................................................. 189,000
Fiscal 2001................................................. 5,000
----------
$2,377,000
</TABLE>

(3) Reflects incremental interest expense and incremental amortization of
deferred financing costs on assumed debt of Telephone Warehouse, comprised
of $11.1 million in bank indebtedness and $2 million in note payable to
former shareholder, and new borrowings to fund the Telephone Warehouse
Acquisition of $2 million as if such debt was outstanding as of the
beginning of the period presented, as follows:

<TABLE>
<S> <C>
Incremental interest expense on assumed debt................ $583,706
Incremental interest expense on new borrowings.............. 51,125
Incremental amortization of deferred financing costs on
assumed debt.............................................. 137,590
Incremental amortization of deferred financing costs on new
debt...................................................... 74,056
--------
Pro forma adjustment.............................. $846,477
</TABLE>

(4) Reflects a reduction in interest expense assuming the repayment of bank
indebtedness of $14.1 million and certain shareholder notes of $258,100 with
a portion of the proceeds from the offering.

(5) Reflects recognition of income tax expense associated with the following:

<TABLE>
<S> <C>
Income tax provision as if all Telephone Warehouse entities
were C-Corporations as of August 1, 1996.................. $ 145,420
Tax effect of the pro forma adjustments at statutory
rates..................................................... 816,220
Tax benefit associated with the incremental amortization of
the acquired residual income.............................. (175,325)
---------
Pro forma adjustment.............................. $ 786,315
</TABLE>

(6) Reflects the reversal of a non-recurring distribution resulting from the
issuance of 388,701 shares of Common Stock distributed to induce the
conversion of the Series A Preferred Stock into a total of

20
<PAGE> 21

NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME -- (CONTINUED)

2,137,850 shares of Common Stock. The conversion of the Series A Preferred
Stock was a condition precedent to the Telephone Warehouse Acquisition.

(7) Does not include a non-recurring charge of approximately $738,000, net of
tax, relating to the write-off of deferred financing costs in connection
with the repayment of the bank indebtedness of $14.1 million with a portion
of the net proceeds of this offering.

(8) Net income per share applicable to common shareholders is calculated by
using the weighted average number of shares of Common Stock outstanding
during the period, assuming the conversion of the Series A Preferred Stock
into 2,137,850 shares of Common Stock, the issuance of 1,817,468 shares of
Common Stock to purchase Telephone Warehouse, the issuance of 106,596
warrants in connection with the Company's debt refinancing and the issuance
of 2,000,000 shares of Common Stock in connection with the offering had all
occurred as of August 1, 1996 resulting in 8,199,762 weighted average shares
outstanding. Accretion to redemption value of the Series A Preferred Stock
of $62,640, has been deducted from net income for purposes of calculating
net income per share applicable to common shareholders.

21
<PAGE> 22

SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth selected consolidated financial data for the
Company for the five years ended July 31, 1997 and has been derived from the
financial statements of the Company. The consolidated financial statements as of
and for the years ended July 31, 1996 and 1997 have been audited by Ernst &
Young LLP, independent auditors. The consolidated financial statements as of and
for the years ended July 31, 1994 and 1995 have been audited by Deloitte &
Touche, LLP, independent auditors. The consolidated financial statements as of
and for the year ended July 31, 1993 are unaudited. The financial data set forth
below should be read in conjunction with the financial statements and related
notes, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED JULY 31,
---------------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues:
Retail sales.......................... $ 2,834 $ 3,572 $ 6,120 $ 8,152 $ 13,230
Activation commissions................ 371 461 1,651 4,366 12,575
Residual income....................... 75 228 533 1,075 1,948
Wholesale sales....................... -- -- -- -- 2,309
--------- --------- --------- --------- ---------
Total net revenues.................. 3,280 4,261 8,304 13,593 30,062
Cost of sales........................... 1,596 2,128 4,260 6,509 14,823
--------- --------- --------- --------- ---------
Gross profit............................ 1,684 2,133 4,044 7,084 15,239
Selling, general and administrative
expenses.............................. 1,202 1,918 3,896 6,601 13,993
Former shareholder compensation......... -- -- -- -- 80
Depreciation and amortization........... 29 43 100 225 451
Amortization of intangibles............. -- -- -- -- 418
--------- --------- --------- --------- ---------
Income from operations.................. 453 172 48 258 297
Interest income (expense), net.......... 27 (13) (40) (153) (340)
--------- --------- --------- --------- ---------
Income (loss) before provision for
income taxes.......................... 480 159 8 105 (43)
Income tax provision.................... 194 70 -- 39 3
--------- --------- --------- --------- ---------
Net income (loss)....................... $ 286 $ 89 $ 8 $ 66 $ (46)
========= ========= ========= ========= =========
Net income (loss) applicable to common
shareholders.......................... $ 286 $ 89 $ 8 $ 66 $ (366)
========= ========= ========= ========= =========
Net income (loss) per share applicable
to common shareholders................ $ .05 $ .01 $ -- $ .01 $ (.07)(1)(2)
========= ========= ========= ========= =========
Weighted average shares outstanding..... 6,199,762 6,199,762 6,199,762 6,199,762 6,199,762
========= ========= ========= ========= =========
SELECTED OPERATING DATA:
EBITDA(3)............................... $ 536 $ 215 $ 148 $ 492 $ 1,203
========= ========= ========= ========= =========
Net cash provided by (used in) operating
activities............................ $ 270 $ 17 $ 92 $ 252 $ (472)
========= ========= ========= ========= =========
Net cash used in investing activities... $ 89 $ 182 $ 809 $ 2,530 $ 1,666
========= ========= ========= ========= =========
Net cash provided by (used in) financing
activities............................ $ (100) $ 148 $ 895 $ 3,393 $ 1,860
========= ========= ========= ========= =========
Stores open at end of period:
Kiosk................................. 3 5 13 14 35
In-Line............................... 1 3 9 11 58
--------- --------- --------- --------- ---------
Total.............................. 4 8 22 25 93
Percentage change in comparable store
sales(4).............................. (2.2)% 10.5% 11.5% 5.4%
Average comparable store sales(6)....... $ 442,000 $ 450,000 $ 462,000 $ 500,000
Number of activations during period..... 1,661 5,205 14,803 43,360
Total gross square feet at end of
period................................ 821 2,447 7,006 9,529 96,093
</TABLE>

22
<PAGE> 23

<TABLE>
<CAPTION>
AS OF JULY 31,
---------------------------------------
1993 1994 1995 1996 1997
---- ---- ------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficiency)............................ $165 $144 $ (110) $ 779 $ 1,613
Total assets............................................ 561 947 3,324 6,646 34,538
Long-term debt.......................................... -- 26 328 474 14,383
Preferred stock......................................... -- -- -- 2,937 --
Shareholders' equity.................................... 276 362 621 693 6,610
</TABLE>

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

(1) The fair value of the Common Stock distributed to the holder of the
Company's Series A Preferred Stock in order to induce the conversion of the
Series A Preferred Stock to Common Stock of $320,000 is deducted from net
loss for purposes of calculating net loss per share applicable to common
shareholders for fiscal 1997. See "Unaudited Pro Forma Financial Data."
(2) Accretion to redemption value of the Series A Preferred Stock of $62,640,
has been deducted from net income (loss) for purposes of calculating net
income (loss) per share applicable to common shareholders.
(3) EBITDA is defined as net income (loss) plus (i) provision for income taxes,
(ii) gross interest expense and (iii) depreciation and amortization. EBITDA
is presented not as an alternative measure of operating results or cash flow
from operations (as determined in accordance with GAAP), but because it is a
widely accepted supplemental financial measure, and management believes it
provides relevant and useful information. The Company's calculation of
EBITDA may not be comparable to similarly titled measures reported by other
companies since all companies do not calculate this non-GAAP measure in the
same fashion. The Company's EBITDA calculation is not intended to represent
cash provided by (used in) operating activities, since it does not include
interest and taxes and changes in operating assets and liabilities, nor is
it intended to represent the net increase in cash, since it does not include
cash provided by (used in) investing and financing activities. As such,
EBITDA does not address cash used to support increased inventory
requirements and build-out costs for new store expansion and to fund
acquisitions. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for further discussion of significant
trends and cash requirements not captured by EBITDA.
(4) A store becomes comparable after it has been owned and operated by the
Company for at least 12 full months. Comparable store sales are comprised of
retail sales and activation income at the Company's retail stores, but do
not include residual income.
(5) Information not available.
(6) Represents the average retail sales and activation income on a store by
store basis only for stores owned and operated by the Company for at least
12 full months as of period end (excluding two stores that generate
substantially higher sales than other stores). Therefore, period to period
figures may not be comparable.

23
<PAGE> 24

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion of the Results of Operations and Financial
Condition of the Company should be read in conjunction with the Company's
Consolidated Financial Statements and the Related Notes thereto included
elsewhere in this Prospectus.

GENERAL

The Company is the largest independent specialty retailer of cellular and
wireless products, services and accessories in the United States, with 102
stores located in 12 states, the District of Columbia and Puerto Rico. Since its
inception in 1989 through June 30, 1996, the Company opened 25 stores. During
that period, the Company had limited capital and opened stores with funds
derived primarily from cash generated from operations. In June 1996, the Company
issued $3.3 million of Series A Preferred Stock to HIG (which has been converted
into Common Stock) and accelerated its store expansion. During fiscal 1997, the
Company added a net total of 68 stores, including five stores acquired from
Peachtree Mobility in the Atlanta metropolitan area and 19 stores acquired from
Telephone Warehouse, and has executed letters of intent to acquire six stores
from Cellular USA and 15 stores from Cellular Unlimited.

The Company opened 45 stores in fiscal 1997 and presently plans to open 65
to 75 new stores in fiscal 1998 and 80 to 100 new stores in fiscal 1999. To
prepare for this expansion, during the past year management has been building
the infrastructure necessary to support a rapidly growing chain of stores. The
Company hired senior management, established a field structure of district
managers, developed employee training programs, enhanced its financial controls
and procedures and finalized standards of store design and visual presentation.
The Company plans to continue its infrastructure investments, which could result
in a material reduction in income from operations in the first half of fiscal
1998 compared with pro forma income from operations for the corresponding period
in fiscal 1997. As the Company continues to expand through new store openings
and acquisitions, it expects to leverage these investments and improve margins
through economies of scale.

The Company's revenues are generated principally from four sources:

(i) Retail Sales. The Company sells cellular and wireless products,
such as phones, pagers and related accessories in the Company's retail
outlets.

(ii) Activation Commissions. The Company receives an activation
commission from the applicable cellular carrier when a customer initially
subscribes for the cellular carrier's service. The amount of the activation
commission paid by cellular carriers is based upon various service plans
offered by the carriers and is recognized by the Company at the time of
sale. New subscription activation commissions are fully refundable if the
subscriber cancels its subscription prior to completion of a minimum period
of continuous active service (generally 180 days). Customers generally sign
a service agreement with the Company that requires a customer deposit that
is forfeited in the event of early cancellation. The Company then applies
the customer's deposit to reduce or offset its resulting deactivation loss
owed to the carrier. The Company accrues for estimated deactivation losses,
net of cancellation fees, by creating a reserve against carrier accounts
receivable.

(iii) Residual Income. The Company receives monthly payments made by
certain cellular carriers and pager customers. Cellular residual payments
are based upon a percentage (usually 4-6%) of the customers' monthly
service charges and are recognized as income when received. Pager residual
payments are received on a monthly basis directly from pager customers for
the pager airtime that the Company buys wholesale from paging carriers and
then resells to individuals and small businesses.

(iv) Wholesale Sales. The Company began to wholesale cellular and
wireless products when it acquired Telephone Warehouse in June 1997. The
wholesale business typically has higher volumes and lower margins than the
retail business, but provides the Company with greater purchasing power and
additional distribution capabilities.

24
<PAGE> 25

Comparable stores sales include only stores owned and operated by the
Company for at least 12 full months and are comprised of retail sales and
activation commissions, as residual income is not allocated among stores.

Historically, retail sales have accounted for most of the Company's net
revenues. As sales of discounted and "free" cellular phones designed to attract
new subscribers have increased significantly, the number of activations has
increased and activation commissions have become increasingly significant to the
Company's net revenues. Activation commissions for the Company were $1.6
million, $4.4 million and $12.6 million in fiscal 1995, 1996 and 1997,
respectively. The Company has recently made a strategic decision to accept
increased activation commissions in connection with certain new carrier
agreements in lieu of monthly residual payments to optimize cash flow and to
facilitate the Company's growth strategy. As a result, management believes that
activation commissions may account for an increased share of the Company's
future net revenues relative to residual income.

To date, the cost of wireless products has gradually decreased over time.
With such lower costs, the Company typically has offered lower prices to attract
more subscribers, which has increased its total activation commissions and
contributed to gross profit improvements. Consequently, the Company believes
that as prices of wireless products decrease they become more affordable to
consumers, expanding the wireless communications market and creating an
opportunity to attract new subscribers and increase activation commissions.

The Company has developed two distinct mall-based store formats,
free-standing kiosks and traditional "in-line" stores. The average capital
expenditures for new kiosk and in-line locations approximate $34,000 and
$94,000, respectively. The initial inventory for a new store approximates
$32,000 for a kiosk and $47,000 for an in-line store. Management believes that
the flexibility of the Company's kiosk and in-line store formats permits the
Company to take advantage of the best available locations across a broad range
of market areas. Pre-opening costs for new stores such as travel and the hiring
and training of new employees are expensed as incurred and typically average
$3,000 per store. In fiscal 1997, comparable stores generated average annual
sales of approximately $500,000 (excluding two stores that generate
substantially higher sales than other stores). Generally, the Company's new
store sales reach normal operating levels after three months of operations.

In connection with the offering, the Company expects to incur a write-off
of deferred financing costs of approximately $738,000, net of tax, in connection
with the repayment of bank indebtedness with a portion of the proceeds of this
offering.

ACQUISITION OF TELEPHONE WAREHOUSE

In June 1997, the Company more than doubled the amount of its assets and
previous twelve months' total net revenues by acquiring Telephone Warehouse, one
of the largest AT&T cellular agents in the Southwest. Telephone Warehouse
operates 19 wireless specialty retail stores in Texas, Missouri and Kansas and
wholesales cellular and wireless products to over 1,000 regional and local
retailers, distributors and carriers. On a pro forma basis, the Company had
$74.4 million in total net revenues, $30.0 million in gross profit and $3.7
million in income from operations for the fiscal year ended July 31, 1997. See
"Unaudited Pro Forma Financial Data."

Telephone Warehouse had total net revenues of $49.6 million ($22.4 million
of which were from retail sales and activation commissions and residual income
and the remaining were from wholesale operations) and income from operations of
$4.0 million for its fiscal year ended December 31, 1996. Activation commissions
for Telephone Warehouse were $9.3 million, $7.3 million and $1.9 million in
1995, 1996 and the four months ended April 31, 1997, respectively.

The accelerated amortization applied to the value of the residual income
acquired in connection with the Telephone Warehouse Acquisition is expected to
have a significantly negative effect on net income in the fourth quarter of
fiscal 1997 and for the next two fiscal years. See Note 2 to the "Pro Forma
Condensed Consolidated Statements of Income."

25
<PAGE> 26

Prior to its acquisition by the Company, Telephone Warehouse was operated
with different strategic and financial objectives. Former management sought to
maximize cash flow and shareholder distributions, rather than reinvest earnings
in new store growth. As a result, Telephone Warehouse's net revenues and number
of stores did not grow significantly in recent years.

In connection with the Telephone Warehouse Acquisition, the Company issued
1,817,468 shares of Common Stock and assumed $13.1 million of indebtedness. The
Company recorded intangibles of approximately $13.5 million, of which $11.0
million was allocated to goodwill, to be amortized over a 30-year period, and
$2.5 million was allocated to acquired residual income, substantially all of
which is to be amortized through the year 2000 on an accelerated basis according
to the anticipated timing of acquired cash flows. The Company has accounted for
the Telephone Warehouse Acquisition using the purchase method of accounting and,
as a result, does not include in its financial statements the results of
operations of Telephone Warehouse prior to the date it was acquired by the
Company.

RESULTS OF OPERATIONS

The following table summarizes for the periods presented certain selected
income statement data of the Company expressed as a percentage of total net
revenues:

<TABLE>
<CAPTION>
FISCAL YEAR
ENDED JULY 31,
---------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Total net revenues.......................................... 100.0% 100.0% 100.0%
Cost of sales............................................... 51.3 47.9 49.3
----- ----- -----
Gross profit................................................ 48.7 52.1 50.7
Selling, general and administrative expenses................ 46.9 48.6 46.8
Depreciation and amortization............................... 1.2 1.7 1.5
Amortization of intangibles................................. -- -- 1.4
----- ----- -----
Income from operations...................................... 0.6 1.8 1.0
Interest expense, net....................................... 0.5 1.1 1.1
Income tax provision........................................ -- 0.3 --
----- ----- -----
Net income (loss)........................................... 0.1% 0.4% (0.1)%
===== ===== =====
Number of stores at end of period........................... 22 25 93
</TABLE>

26
<PAGE> 27

THE COMPANY

YEAR ENDED JULY 31, 1997 COMPARED TO YEAR ENDED JULY 31, 1996

Total net revenues increased $16.5 million, or 121.1%, to $30.1 million in
fiscal 1997 from $13.6 million in fiscal 1996 due to increases in retail sales,
activation commissions and residual income, and to the acquisition of Telephone
Warehouse on June 30, 1997 and the resulting inclusion of Telephone Warehouse's
operations in the Company's consolidated revenues for the month of July 1997.
Retail sales increased 62.2% to $13.2 million from $8.2 million, activation
commissions increased 188.0% to $12.6 million from $4.4 million and residual
income increased $800,000, or 81.2%, to $1.9 from $1.1 million. Comparable store
sales increased 5.4% and accounted for $634,000, or 3.8%, of the increase in
total net revenues. Sales relating to 45 new stores opened, 24 stores acquired
since July 31, 1996 and the four stores that were not yet open for 12 full
months accounted for $12.6 million, or 76.3%, of the increase in total net
revenues. The comparable stores sales growth was primarily attributable to
increased advertising during the holiday season in the second fiscal quarter and
the growth of cellular subscriptions in the wireless communication industry
overall. Wholesale sales increased to $2.3 million as a result of the
acquisition of Telephone Warehouse on June 30, 1997. The increase in residual
income was due to the inclusion of Telephone Warehouse's residual income
($720,000 for the month of July 1997), the increase in the number of cellular
activations (43,360 in fiscal 1997 as compared to 14,803 in fiscal 1996) and the
addition of cellular subscribers resulting from the Peachtree Acquisition and
the Company's store expansion. The Company had 93 stores open at July 31, 1997
as compared to 25 at July 31, 1996.

Gross profit increased $8.1 million, or 115.1%, to $15.2 million in fiscal
1997 from $7.1 million in fiscal 1996. As a percentage of total net revenues,
gross profit decreased to 50.7%, from 52.1%, primarily due to the inclusion of
Telephone Warehouse's wholesale operations, which have lower margins than the
Company's retail sales. Management expects that in fiscal 1998 gross profit as a
percentage of revenues will decrease due to the inclusion of Telephone
Warehouse's wholesale sales in the Company's operations for a full fiscal year.

Selling, general and administrative expenses increased $7.5 million, or
113.2%, to $14.1 million in fiscal 1997 from $6.6 million in fiscal 1996,
primarily as a result of higher personnel, rent and related costs associated
with the opening of 45 stores, the acquisition of five Peachtree Mobility stores
and the inclusion of Telephone Warehouse's operations for the month of July
1997. Higher advertising costs were incurred in connection with entering new
markets and additional expenses related to infrastructure investments were
incurred to support this expansion. Management believes that more advertising is
required to support sales in new markets than is required to support the same
level of sales in existing markets and, as a result, expects advertising to
increase in future periods as the Company expands into new markets with new
store openings. A charge of $264,000 was recorded in fiscal 1997 in connection
with the write-off of assets associated with underperforming stores and one
store closing. As a percentage of total net revenues, selling, general and
administrative expenses decreased to 46.8% during fiscal 1997 from 48.6% in
fiscal 1996.

Amortization of intangibles consisted of (i) $220,000 associated with the
thirty month noncompete agreement entered into in August 1996 in connection with
the Peachtree Acquisition, and (ii) $198,000 associated with the amortization of
goodwill and acquired residual income resulting from the acquisition of
Telephone Warehouse on June 30, 1997.

Income from operations increased $39,000 to $297,000 in fiscal 1997 from
$258,000 in fiscal 1996 and decreased as a percentage of total net revenues to
1.0% from 1.9%.

Interest expense, net increased $187,000 to $340,000 in fiscal 1997 from
$153,000 in fiscal 1996 primarily due to increased bank borrowings.

Income tax provision was $3,000 in fiscal 1997 as compared to $39,000 in
fiscal 1996 primarily as a result of a $148,000 decrease in income before
provision for income taxes.

Net loss was $46,000 in fiscal 1997 compared to net income of $66,000 in
fiscal 1996.

Net loss applicable to common shareholders was $366,000 in fiscal 1997 as
compared to $66,000 of income in fiscal 1996 primarily due to the fair value of
the Common Stock, $320,000, distributed to the

27
<PAGE> 28

preferred shareholder to induce conversion of the Series A Preferred Stock. This
amount is reflected as a deduction from net loss.

YEAR ENDED JULY 31, 1996 COMPARED TO YEAR ENDED JULY 31, 1995

Total net revenues increased $5.3 million, or 63.7%, to $13.6 million in
fiscal 1996 from $8.3 million in fiscal 1995. Retail sales increased 33.2% to
$8.2 million from $6.1 million, activation commissions increased 164.6% to $4.4
million from $1.7 million and residual income increased 101.6% to $1.1 million
from $533,000. Comparable store sales increased 11.5% and accounted for
$855,000, or 16.2%, of the increase in total net revenues. Net revenues from the
three stores opened during fiscal 1996 and the 14 stores that were not yet open
for 12 full months accounted for $4.4 million, or 83.2%, of the increase in
total net revenues. The comparable store sales increase was primarily
attributable to the introduction of a new model of cellular phone to the market
during the fourth quarter of fiscal 1996, increased number of activations
relating to corporate accounts, increased carrier promotions conducted in
certain of the Company's significant cellular markets and the growth of cellular
subscribers in the wireless industry overall. The increase in residual income
was due to the growth in the number of the Company's cellular subscribers
corresponding to the increase in cellular activations (to 14,803 in fiscal 1996
from 5,205 in fiscal 1995). The Company had 25 stores open at July 31, 1996 as
compared to 22 at July 31, 1995.

Gross profit increased $3.0 million, or 75.2%, to $7.0 million in fiscal
1996 from $4.0 million in fiscal 1995. As a percentage of total net revenues,
gross profit increased to 52.1% in fiscal 1996 from 48.7% in fiscal 1995,
primarily due to activation income increasing at a faster rate than the cost of
merchandise sold.

Selling general and administrative expense increased $2.7 million, or
69.4%, to $6.6 million in fiscal 1996 from $3.9 million in fiscal 1995 primarily
as a result of higher personnel, rent and related costs associated with the
opening of new stores. As a percentage of total net revenues, selling, general
and administrative expense increased to 48.6% in fiscal 1996 from 46.9% in
fiscal 1995. This increase resulted from higher expenses associated with new
stores with lower initial sales volumes compared to established stores and
increased general and administrative expenses related to adding field management
and increasing advertising to support expansion into new markets.

Income from operations increased $210,000 to $258,000 in fiscal 1996 from
$48,000 in fiscal 1995 and increased as a percentage of total net revenues to
1.9% from 0.6%.

Interest expense, net increased $113,000 to $153,000 in fiscal 1996 from
$40,000 in fiscal 1995 primarily as a result of higher bank borrowings to
finance the increase in the Company's working capital requirements and
additional store openings.

Income tax provision was $39,000 in fiscal 1996 as a result of $97,000
increase in income before provision for income taxes.

Net income was $66,000 in fiscal 1996 from $8,000 in fiscal 1995.

YEAR ENDED JULY 31, 1995 COMPARED TO YEAR ENDED JULY 31, 1994

Total net revenues increased $4.0 million, or 94.9%, to $8.3 million in
fiscal 1995 from $4.3 million in fiscal 1994. Retail sales increased 71.3% to
$6.1 million in fiscal 1995 from $3.6 million in fiscal 1994, activation
commissions increased 258.0% to $1.7 million in fiscal 1995 from $461,000 in
fiscal 1994 and residual income increased 133.5% to $533,000 in fiscal 1995 from
$228,000 in fiscal 1994. Comparable store sales increased 10.5% and accounted
for $424,000, or 10.5%, of total net revenues. Net revenues from the 14 stores
opened during fiscal 1995 and the four stores that were not yet open for 12 full
months accounted for $3.6 million, or 89.1%, of the increase in total net
revenues. The comparable store sales growth was primarily attributed to improved
merchandise assortments, higher focus on activations and retention of more
qualified sales associates through an improved store payroll structure. The
increase in residual income was due to the growth in the number of the Company's
cellular subscribers corresponding to the increase in cellular activations (to
5,205 in fiscal 1995 from 1,661 in fiscal 1994). The Company had 22 stores open
at July 31, 1995 as compared to 8 stores open at July 31, 1994.

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<PAGE> 29

Gross profit increased $1.9 million, or 89.5%, to $4.0 million in fiscal
1995 from $2.1 million in 1994. As a percentage of total net revenues, gross
profit decreased to 48.7% in fiscal 1995 from 50.1% in fiscal 1994, primarily
due to the introduction of discounts on the retail price of phones.

Selling, general and administrative expense increased $2.0 million, or
103.1%, to $3.9 million in fiscal 1995 from $1.9 million in fiscal 1994
primarily due to increases in payroll, rent and other costs associated with the
opening of 14 stores in fiscal 1995. Higher payroll costs were incurred due to
modifications to the store payroll structure designed to attract and retain
quality sales associates. As a percentage of total net revenues, selling general
and administrative expense increased to 46.9% in fiscal 1995 from 45.0% in
fiscal 1994. This increase resulted from higher expenses associated with new
stores with lower initial sales volume compared to established stores.

Income from operations decreased $124,000 to $48,000 in fiscal 1995 from
$172,000 in fiscal 1994 and decreased as a percentage of total net revenues to
0.6% from 4.0%.

Interest expense, net increased $27,000 to $40,000 in fiscal 1995 from
$13,000 in fiscal 1994 primarily as a result of higher bank borrowings.

Net income was $8,000 in fiscal 1995 compared to $89,000 in fiscal 1994.

TELEPHONE WAREHOUSE

FOUR MONTHS ENDED APRIL 30, 1997 COMPARED TO FOUR MONTHS ENDED APRIL 30, 1996

Total net revenues decreased $565,000, or 3.8%, to $14.5 million for the
four months ended April 30, 1997 from $15.0 million for the four months ended
April 30, 1996. Retail sales and activation commissions decreased 4.3% to $4.2
million and wholesale sales decreased 8.5% to $7.4 million. These decreases were
partially offset by an increase in residual income of 11.5% to $2.9 million from
$2.6 million. Comparable store sales, based on retail sales and activation
commissions, were flat. The decrease in retail sales, activation commissions and
wholesale sales was primarily due to the diversion of management's attention
during the period preceding the acquisition of Telephone Warehouse. In addition,
Telephone Warehouse closed two stores during the four months ended April 30,
1997. The decrease in wholesale sales resulted from high levels of Ericsson
digital phone sales during the four months ended April 30, 1996. Due to lower
cost sourcing, special discounted prices on the Ericsson phones were offered
during the four months ended April 30, 1996, which were not repeated in the
comparable period in 1997. The increase in residual income is primarily
attributable to the increase in the number of pager activations.

Gross profit decreased $284,000, or 5.5%, to $4.9 million during the four
months ended April 30, 1997 from $5.2 million during the four months ended April
30, 1996. As a percentage of total net revenues, gross profit decreased to 33.8%
in the four months ended April 30, 1997 from 34.4% in the four months ended
April 30, 1996 primarily due to increased promotions offering free accessories
to promote cellular activations in the retail stores. In addition, the four
month period ended April 30, 1996 had higher wholesale margins due to lower cost
sourcing associated with the high levels of Ericsson digital phone sales, and
such higher wholesale margins were not repeated in the comparable period in
1997.

Selling, general and administrative expenses remained constant at $3.2
million for the four months ended April 30, 1997 and, as a percentage of total
net revenues, increased to 22.3% from 21.6% for the comparable period in 1996
due to the decrease in total net revenues.

Amortization of intangibles consisted of $773,000 for the four months ended
April 30, 1997 associated with the amortization of goodwill and acquired
residual income resulting from the acquisition of Telephone Warehouse by TCP, an
affiliate of HIG.

Income from operations decreased $805,000 to $495,000 for the four months
ended April 30, 1997 from $1.3 million for the four months ended April 30, 1996
and decreased as a percentage of total net revenues to 3.4% from 8.6%.

29
<PAGE> 30

Interest expense, net was $437,000 for the four months ended April 30, 1997
compared to a net interest income of $26,000 for the four months ended April 30,
1996, primarily due to the indebtedness incurred in connection with the
acquisition of Telephone Warehouse.

Net income. As a result of the foregoing, Telephone Warehouse incurred a
net loss of $3,000 during the four months ended April 30, 1997 compared to a net
income of $1,102,000 during the four months ended April 30, 1996.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

Total net revenues increased $4.8 million, or 10.7%, to $49.6 million in
1996 from $44.8 million in 1995. Wholesale sales increased $7.0 million, or
34.4%, to $27.3 million in 1996 from $20.3 million in 1995 primarily due to high
levels of Ericsson digital phones sales. Due to lower cost sourcing, special
discounted prices on Ericsson digital phones were offered during the first half
of the year. Residual income increased $1.1 million, or 14.6%, to $8.3 million
in 1996 from $7.3 million in 1995 due to an increase in cellular and pager
subscribers. Retail sales and activation commissions decreased $3.2 million, or
18.8%, to $14.0 million in 1996 from $17.3 million in 1995 due to a decline in
carrier promotions, which resulted in fewer activations and equipment sales. In
addition, the Company increased promotions of free pagers, which resulted in a
corresponding decline in retail product sales.

Gross profit increased $1.8 million, or 12.4%, to $16.2 million in 1996
from $14.4 million in 1995. Gross profit as a percentage of total net revenues
increased to 32.7% in 1996 from 32.3% in 1995 primarily due to an increase in
residual income and higher wholesale margins associated with the Ericsson
digital phone sales.

Selling, general and administrative expense increased $178,000, or 1.7%, to
$10.4 million in 1996 from $10.2 million in 1995. As a percentage of total net
revenues, selling, general and administrative expense decreased to 20.9% in 1996
from 22.7% in 1995 because sales increased more rapidly than selling, general
and administrative expense.

Income from operations increased $2.1 million to $4.0 million in 1996 from
$1.9 million in 1995 and increased as a percentage of total net revenues to 8.1%
from 4.1%.

Interest income, net increased $19,000 to $30,000 in 1996 from $11,000 in
1995.

Net income increased to $3.4 million in 1996 from $1.7 million in 1995 for
the above reasons and due to the decrease in former shareholder compensation
expense of $529,000.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

Total net revenues increased $2.4 million, or 5.5%, to $44.8 million in
1995 from $42.4 million in 1994. Wholesale sales increased 8.0% to $20.3 million
in 1995 from $18.8 million in 1994 primarily due to the addition of sales
personnel in the wholesale operations. Residual income increased 30.2% to $7.3
million in 1995 from $5.6 million in 1994 due to the increase in cellular and
pager subscribers. Retail sales and activation commissions decreased 4.7% to
$17.3 million in 1995 from $18.1 million in 1994, due to increased product
discounting.

Gross profit increased $2.3 million, or 19.1%, to $14.4 million in 1995
from $12.1 million in 1994. Gross profit as a percentage of total net revenues
increased to 32.2% in 1995 from 28.6% in 1994 primarily due to a decrease in the
cost of wireless products.

Selling, general and administrative expense increased $1.4 million, or
15.8%, to $10.2 million in 1995 from $8.8 million in 1994 primarily due to
increases in payroll, rent, advertising resulting from the opening of new
stores. As a percentage of total net revenues, selling, general and
administrative expense increased to 22.7% in 1995 from 20.7% in 1994. This
increase resulted from higher expenses associated with new stores with lower
initial sales volumes compared to established stores.

Income from operations increased by $1.9 million to $1.9 million in 1995
from a loss from operations of $85,000 in 1994 and increased as a percentage of
total net revenues to 4.1% from a loss of 0.2%

30
<PAGE> 31

Interest income, net decreased $9,000 to $11,000 in 1995 from $20,000 in
1994.

Net income increased to $1.7 million from a loss of $86,000 in 1994 for the
above reasons and due to a decrease in former shareholder compensation expense
of $1.1 million.

LIQUIDITY AND CAPITAL RESOURCES

The Company's liquidity requirements have been primarily to support its
increased inventory requirements and build-out costs for new store expansion and
to fund acquisitions. The Company has historically financed its liquidity needs
through a combination of bank borrowings, capital contributions, loans from
shareholders and cash provided by operations. Telephone Warehouse's liquidity
requirements have been primarily to finance its working capital requirements.
Telephone Warehouse has historically financed its liquidity needs primarily
through loans from its former shareholder.

The Company's working capital increased $843,843 to $1.6 million at July
31, 1997 from $778,830 at July 31, 1996. The Company's cash requirements during
fiscal 1997 were affected by the need for increased working capital to fund the
Company's growth. Accounts receivable and inventory increased $9.6 million to
$11.4 million at July 31, 1997 from $1.8 million at July 31, 1996. This increase
was partially offset by an increase in accounts payable of $5.7 million to $6.6
million at July 31, 1997 from $841,490 at July 31, 1996.

The Company's net cash used in operating activities increased to $471,768
for fiscal 1997 compared to net cash provided by operating activities of
$252,184 for fiscal 1996. The decrease in net cash provided by operating
activities resulted primarily from an increase in inventories and accounts
receivable partially offset by an increase in current liabilities and net income
reflecting the growth in the Company's operations. Net cash provided by
operating activities in fiscal 1996 was primarily attributable to net income
before a non-cash charge of $225,159 for depreciation and amortization.

The Company's net cash used in investing activities decreased to $1.7
million for fiscal 1997 from $2.5 million for fiscal 1996. Net cash used by
investing activities in fiscal 1997 primarily consisted of capital expenditures
of $3.6 million and the Company's acquisition of Northpoint Cellular (more
commonly known as Peachtree Mobility) for $850,000, largely offset by the
release of $2.0 million of escrowed cash relating to HIG's preferred stock
investment in the Company and the $823,846 of cash acquired in connection with
the Telephone Warehouse Acquisition. Net cash used in investing activities in
fiscal 1996 primarily consisted of $594,185 in capital expenditures and $2.0
million in escrowed cash from HIG, both of which were used principally to fund
new store openings.

The Company's net cash provided by financing activities decreased to $1.9
million in fiscal 1997 from $3.4 million in fiscal 1996. During fiscal 1996, net
cash provided by financing activities primarily reflected $2.9 million of
proceeds from the Company's sale of Series A Preferred Stock to HIG in June
1996.

At July 31, 1997, the Company's projected short-term capital expenditures
(through fiscal 1998) were approximately $6.0 million. Of this amount,
approximately $4.6 is budgeted for new store openings, $650,000 is budgeted for
enhancements to the Company's management information system and, $765,000 is
budgeted for renovation of existing stores and new corporate offices. The
average capital expenditures for new kiosk and in-line locations approximate
$34,000 and $94,000, respectively. Initial inventory for a new store
approximates $32,000 for a kiosk and $47,000 for an in-line store. Start-up
costs for new stores such as travel and the hiring and training of new employees
are expensed as incurred and typically average $3,000 per store. At July 31,
1997, the Company's projected long-term capital expenditures (fiscal 1999) were
approximately $6.2 million. Of this amount, approximately $5.9 million is
budgeted for new store openings, and $300,000 is budgeted for renovation of
existing stores. No assurance can be given that the amount of capital
expenditures anticipated to be made by the Company during fiscal 1998 or
thereafter will, in fact, be made. The timing and amount of capital expenditures
is dependent upon a variety of factors, including the availability of suitable
sites for the construction of new stores, the size of the store and the extent
of build-out required at the selected site and possible store acquisitions.

The Company's existing credit facility provides for borrowings of up to
$22.1 million, of which $14.1 million was outstanding as of July 31, 1997. The
credit facility, which expires in January 2004, is secured by

31
<PAGE> 32

substantially all of the Company's assets, including the capital stock of
Telephone Warehouse owned by the Company, and by the capital stock of the
Company owned by HIG. The credit facility is comprised of a $9.0 million
revolving loan and an aggregate of $13.1 million in term loans. The revolving
credit facility's availability is based on a formula of eligible receivables and
inventories, and at July 31, 1997 the Company had an additional $5.9 million
available for borrowing. Advances under the revolving credit line bear interest
at 3.75% above the commercial paper rate. The term loans are payable in
increasing quarterly payments over seven years and bear interest at 4.5% over
the commercial paper rate.

The Company intends to use a portion of the net proceeds of this offering
to repay all amounts outstanding under its existing bank term loans and credit
facility. The Company expects that it will thereupon terminate its existing
credit facility and secure other credit facilities with a commercial bank. The
Company anticipates that net proceeds from the offering of Common Stock, cash
provided by operations and borrowings under credit facilities, will be
sufficient to meet currently foreseeable liquidity requirements.

SEASONALITY

The Company's stores have historically experienced, and the Company expects
its stores to continue to experience, seasonal fluctuations in revenues with a
larger percentage of revenues typically being realized in the second fiscal
quarter during the holiday season. In addition, the Company's quarterly results
can be significantly affected by the timing of store openings and acquisitions
and the integration of new and acquired stores into the Company's operations.

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<PAGE> 33

BUSINESS

GENERAL

The Company is the largest independent specialty retailer of cellular and
wireless products, services and accessories in the United States, with 102
stores located in 12 states, the District of Columbia and Puerto Rico as of
September 30, 1997. The Company's stores, located predominantly in regional
shopping malls, seek to offer one-stop shopping for consumers to purchase
cellular, PCS, paging, internet, satellite, and other wireless products and
services and related accessories. The Company is also a leading wholesaler of
cellular and wireless products and accessories to more than 1,000 accounts,
consisting primarily of distributors, carriers and smaller independent
retailers.

The Company's business strategy is to offer the most extensive assortment
of wireless products and services at everyday low prices supported by
knowledgeable customer service, through conveniently located and attractively
designed stores. The Company believes that this strategy provides it with a
competitive advantage by combining the extensive product selection, competitive
prices and operating efficiencies typical of a "big box" retailer with the
superior customer service and upscale shopping experience characteristic of a
specialty retailer. The Company offers wireless products from well-known,
name-brand suppliers such as AT&T, Ericsson, Motorola, Nokia and Sony. The
Company's stores typically sell up to 40 different makes and models of cellular
and PCS phones and pagers and over 1,000 SKUs of wireless products and
accessories, such as batteries, home and car chargers, vehicle adapter kits and
cases. The Company supports its broad product offering with knowledgeable and
personalized customer service focused on educating the consumer and identifying
the most appropriate products and services for each consumer's individual needs.
The Company offers everyday low prices that are competitive with other retailers
and supports this policy with price guarantee, upgrade and trade-in programs.

INDUSTRY DYNAMICS

The wireless communications industry provides voice and data communications
services through cellular telephone, personal communications services,
satellite, enhanced specialized mobile radio and paging services. Advances in
system technology and equipment, combined with lower equipment prices and
service charges, have increased consumer acceptance and have caused significant
increases in worldwide demand for wireless communications products and services.

Cellular/PCS Market

Cellular telephone service has been one of the fastest growing markets
within the industry. Since the inception of the cellular phone industry in 1983,
the number of U.S. cellular subscribers has grown to approximately 44 million by
year end 1996, having grown at an annual compound rate of 41% during the
previous five years. It is estimated that as of December 1996, this subscriber
base reflected an average market penetration of only 16.6%, based on the U.S.
population. In 1996, PCS wireless services were introduced in selected regions
of the U.S., which resulted in approximately 300,000 subscribers by year end.
Paul Kagan Associates, Inc. projects that by the year 2000 the number of
cellular and PCS subscribers in the U.S. will reach approximately 89 million.
According to CTIA, approximately $24 billion was spent on cellular service in
1996.

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<PAGE> 34

The following table sets forth certain information with respect to the
cellular telephone market for the last five years:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------- 1992-96
1992 1993 1994 1995 1996 CAGR(1)
----- ----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Cellular subscribers
(millions).................... 11.0 16.0 24.1 33.8 44.0 41.4%
% Growth...................... 46.0% 45.1% 50.8% 40.0% 30.4% --
Cellular penetration............ 4.3% 6.2% 9.1% 12.9% 16.6% --
Cellular service revenue ($
billions)..................... $ 7.8 $10.9 $14.2 $19.1 $23.6 31.8%
% Growth...................... 37.0% 39.2% 30.6% 34.0% 23.9% --
</TABLE>

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

(1) Compound annual growth rate measured from 1992 through 1996.

In recent years the number of systems and services has expanded within the
cellular industry. Until 1993, cellular systems in the U.S. were based upon
analog radio frequency technology. Primarily in response to the growth in the
number of cellular subscribers, many cellular carriers are upgrading their
existing cellular systems from analog to digital radio frequency technology to
increase capacity. Digital technology offers advantages over analog systems for
consumers, such as better quality, improved call security, lower service charges
and the ability to provide data transmission services. The Company believes it
will benefit from the increased availability of digital systems as demand
increases for cellular service and new cellular products. In 1996, PCS wireless
services were introduced as an alternative to cellular technology. PCS utilizes
digital technology similar to digital cellular service, but operates on
different transmission frequencies. As a result, PCS telephones offer many of
the same benefits as digital cellular telephones but currently have more limited
coverage areas and service plans.

The Company believes that it will benefit from the increase in the number
of wireless service providers. Prior to 1995, the Federal Communications
Commission (the "FCC") allowed two carriers to provide cellular service to each
metropolitan service area. In 1995 and 1996, the FCC completed auctions of major
area PCS licenses. As a result, up to five PCS carriers have been granted
licenses to operate in each metropolitan service area, increasing the total
number of potential PCS and cellular carriers to as many as seven per market.
The Company sells PCS in most of its markets where PCS service is available. The
Company believes that an increase in the number of wireless service providers
will increase competition among carriers. Such competition could result in
increased demand for wireless communications products, lower prices, increased
advertising and improved service quality. As such competition increases between
cellular and PCS carriers, management believes that agents with multiple points
of distribution, such as the Company, will become more important to the growth
of carrier sales.

Paging Market

The paging market has also grown significantly in recent years. The number
of U.S. pagers in service has grown to approximately 42 million by year end
1996, having grown at an annual compound rate of approximately 29% during the
previous five years. It is estimated that as of December 1996, this subscriber
base reflected an average market penetration of only 16%, based on the U.S.
population. The Strategis Group projects that by the year 2000, the number of
U.S. pagers in service will reach over 60 million.

The Company believes that the growth in the paging industry has been and
will continue to be driven by higher speed services, new features and growth in
the wireless communications industry. Paging continues to be a lower-cost,
wireless alternative to cellular and PCS service. In addition, paging is also
complementary to cellular, offering users the ability to screen incoming calls
and to minimize usage-based charges.

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<PAGE> 35

The following table sets forth certain information with respect to the
paging market for the last five years:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------ CAGR(1)
1992 1993 1994 1995 1996 1992-96
---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Pagers in service (millions)......... 15.3 19.3 26.3 34.5 42.3 28.9%
% Growth........................... 29.7% 26.1% 36.3% 31.2% 22.6% --
Paging penetration................... 6% 8% 10% 13% 16% --
</TABLE>

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

(1) Compound annual growth rate measured from 1992 through 1996.

Emerging Wireless Technologies

The Company anticipates that the emergence of new wireless communications
technologies and services such as enhanced specialized mobile radio ("ESMR") and
satellite communications systems, will increase the variety of wireless services
and expand the potential retail market for wireless products. The Company
intends to sell other products and services incorporating new technologies as
they become available. The Company believes that certain of its existing
carriers will be participants in developing new communications technologies and
its current suppliers will be suppliers of products incorporating these new
technologies. The Company anticipates that its relationships with these carriers
and suppliers will enable the Company to take advantage of opportunities to sell
new products and services. Management also believes that carriers of advanced
technologies will have a financial incentive to utilize the Company's retail
distribution capabilities to increase consumer acceptance and use of their new
systems.

Distribution Channels

The Company believes that a shift is occurring in the distribution of
cellular and wireless services, products and accessories in the United States.
For many years cellular and wireless products and services were distributed to
consumers directly through telemarketing, direct mail, direct sales forces and,
to a lesser extent, retail outlets. As wireless services and products have
become more affordable, the market has expanded significantly and shifted to a
broader consumer base, which purchases for, among other reasons, convenience and
security purposes. In order to better access such a broad consumer base,
management believes carriers will seek multiple points of retail distribution
including established independent specialty retailers such as the Company, their
own retail outlets and "big box" electronics retailers.

OPERATING STRATEGY

The Company's operating strategy is to enhance its position as the largest
independent specialty retailer of cellular and wireless products and services in
the United States by emphasizing the following competitive strengths:

- Prime Store Locations. The Company seeks to locate its retail stores in
prime locations in regional shopping malls or other high traffic locations
in selected geographic markets having desirable demographic statistics.
Management believes that the Company's market presence, established
relationships with national mall developers, attractive store design and
relatively high average sales volume per square foot give the Company a
competitive advantage in securing desirable mall locations on attractive
terms. The Company utilizes either kiosk or in-line store formats to have
greater flexibility to place stores in the best available locations.

- Strong Store-Level Economics. The Company believes that its store level
economics compare favorably to other retailing sectors. The Company has
developed both kiosk and in-line mall stores, which average approximately
150 and 800 square feet in size, respectively. In fiscal 1997, comparable
stores (stores owned and operated by the Company for at least 12 full
months) generated average annual sales of approximately $500,000
(excluding two stores that generate substantially higher sales than other
stores) and, although sales per square foot vary by format, overall the
Company's stores had average sales per square foot of approximately
$1,000. In fiscal 1997, per store capital expenditures and

35
<PAGE> 36

initial inventory for new kiosks and in-line stores averaged approximately
$66,000 and $141,000, respectively.

- Attractive Store Design. Let's Talk Cellular & Wireless stores are
designed to create a warm and inviting atmosphere that emphasizes the
Company's distinctive, upscale image and encourages impulse purchases. The
typical store utilizes a combination of light wood, glass and bright
colors to attract walk-in traffic and encourage browsing. Merchandise is
displayed in large glass cases with prominent signage containing simple
explanations of product and service features and benefits, as well as
pricing and subscription information. The Company believes its attractive
store design, merchandise presentations and signage are a significant
factor in establishing, differentiating and reinforcing the "Let's Talk
Cellular & Wireless" brand.

- Extensive Merchandise Selection. The Company seeks to offer the most
extensive selection of cellular and wireless products, services and
accessories in the industry from leading suppliers such as Motorola,
Nokia, Ericsson, Sony and AT&T for cellular phones, Ericsson and Sony for
PCS phones and Motorola, NEC, Panasonic and Sony for numeric, alpha
numeric and two-way pagers. A typical store offers up to 40 different
makes and models of cellular and PCS phones and pagers and over 1,000 SKUs
of other wireless products and accessories, such as batteries, home and
car chargers, vehicle adapter kits and cases. The Company believes that
its stores offer a significantly greater breadth of products than the
typical carrier-owned store. The Company attempts to emphasize in-stock
availability of products that reflect the latest technology and industry
trends. As an independent retailer, the Company has the advantage of being
able to objectively select from among the available carriers and suppliers
in choosing services and products to offer its customers. The Company
believes it provides individuals and small businesses with one-stop
shopping for all of their wireless communications needs.

- Exceptional Customer Service. The Company believes that providing high
quality, knowledgeable and personalized customer service differentiates
the Company from its competitors. The Company has implemented extensive
employee training programs on an ongoing basis designed to ensure that its
sales associates are thoroughly familiar with the latest technical and
functional elements of its products and services as they are introduced.
With the technological advancements and introductions of new products and
service options in the wireless industry, customers are more likely to
require the advice of increasingly qualified salespeople to assist in
product and service selections. Management believes that its emphasis on
training and customer service distinguishes the Company within the
industry and is an important part of its business strategy. The Company
emphasizes a consultative selling process, in which sales personnel
inquire about the needs and desires of each customer, in an attempt to
recommend the most appropriate products and services.

- Competitive Everyday Low Pricing. The Company maintains everyday low
prices that are competitive with prices charged by other retailers within
each local market. The Company supports this policy with a lowest-price
guarantee, a 7-day return policy and a 30-day satisfaction guarantee to
provide customer assurance and satisfaction. In addition, customers are
eligible to receive 100% credit for their product purchases if they
upgrade within 12 months of the original purchase.

- Sophisticated Financial Controls. Each Let's Talk Cellular & Wireless
store is equipped with a modern point-of-sale computer terminal. The
point-of-sale terminals are linked to a central computer at the Miami
headquarters, allowing the Company's finance staff to continuously monitor
sales and inventory levels. The system is capable of generating financial
statements at the store level, providing management with key operating and
financial data in a timely manner, thereby allowing the Company to respond
quickly to changes in consumer preferences and emerging industry trends.
The Company anticipates spending approximately $650,000 during fiscal 1998
in connection with the upgrading of its entire corporate MIS system, which
will allow the Company to efficiently monitor up to 300 retail locations.
This new system is expected to be fully tested and on-line by April 1998.

- Wholesale Strategy. Management believes the wholesale business provides
the Company greater purchasing power and additional distribution
capabilities which complement the Company's retail operations. The Company
intends to continue to expand its wholesale business by aggressively
seeking

36
<PAGE> 37

to obtain more accounts with distributors, carriers and independent
retailers. In addition, the Company intends to utilize its Miami
distribution facility to support its wholesale operations and offer faster
delivery and lower-cost shipping to its east coast accounts. The Company
also intends to purchase substantially all of its cellular and wireless
product inventory through its wholesale operations and, as a result of the
increased volume of wholesale purchases, obtain such products at lower
cost.

GROWTH STRATEGY

Since opening its first store in 1989, the Company has grown through
internal expansion and acquisitions, and operated 102 stores as of September 30,
1997. The following table shows the development of the Company's stores during
the past five years.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED JULY 31,
---------------------------------------
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Open at beginning of year................................... 2 3 4 8 22 25
Opened during year.......................................... 1 1 4 14 5 45
Acquired during year........................................ -- -- -- -- -- 24
Closed during year.......................................... -- -- -- -- 2 1
--- --- --- ---- ---- ----
Open at end of year......................................... 3 4 8 22 25 93
=== === === ==== ==== ====
Weighted average open during year......................... 2.1 3.7 6.3 14.5 25.5 69.8
</TABLE>

- New Store Expansion. The Company plans to open 65 to 75 new stores in
fiscal 1998 and 80 to 100 stores in fiscal 1999 in both new and existing
markets, of which approximately 40% are expected to be kiosks and 60% are
expected to be in-lines. The Company believes that this expansion rate is
achievable given the Company's existing infrastructure, the ease with
which it can replicate the Company's store model and its successful
opening of 45 new stores in fiscal 1997. The Company's new store expansion
rate is subject to a number of factors. See "Risk Factors -- Risks
Associated with Rapid Growth." As of September 30, 1997, the Company had 4
store locations under construction and has signed leases or reached an
agreement in principle for an additional 24 store locations. The Company's
store expansion strategy is to target initially the largest and fastest
growing wireless markets in the U.S., based on industry statistics.
Management believes that the flexibility of the Company's kiosk and
in-line store formats permits the Company to take advantage of the best
available locations across a broad range of market areas. Within each
selected market, the Company intends to open a cluster of 5-15 stores in
order to achieve scale economies and to obtain greater marketing benefits.
Specific components of the Company's store expansion program include the
following:

- Target Additional Mall Locations. The Company intends to continue
opening both kiosks and in-line stores in shopping malls where it can
obtain desirable locations with high traffic flow. Currently, the
Company owns stores in only 76 of the more than 1,000 regional malls
located in the continental U.S., many of which are managed by
companies with which the Company has established strong relationships.
The Company believes that the combination of its market presence,
established relationships with national mall developers, attractive
store design and high average sales volume per square foot give the
Company a competitive advantage in securing desirable mall locations
on attractive terms. The Company's kiosk and in-line mall stores
average approximately 150 and 800 square feet, respectively.

- Penetrate Power Strip Locations in Existing Markets. The Company
intends to open power-strip locations to further penetrate existing
markets and supplement its geographic expansion in selected markets.
Power strips are generally anchored by one or more large retailers,
and typically contain a variety of smaller specialty stores. The
Company's power-strip stores typically range in size from 2,000 to
4,000 square feet.

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<PAGE> 38

cellular and wireless products is highly fragmented and consists of
numerous independent specialty retailers in each major metropolitan area.
Through selective acquisitions, the Company seeks to obtain immediate
access to desirable markets and locations, qualified sales personnel and,
in some cases, an existing subscriber base. The Company believes it can
successfully apply its operating strategy and leverage its existing
infrastructure and financial controls with such acquisitions. Potential
acquisition candidates include other independent wireless retailers that
the Company believes have excellent market demographics and management. In
assessing acquisition candidates, the Company reviews numerous factors,
including purchase price, store locations, number of potential customers,
market penetration and growth, availability of capital and local
competition. The Company believes that, following the offering, it will
have a competitive advantage over non-public specialty retailers in making
acquisitions as a result of its improved access to the capital markets and
its ability to use its common stock as acquisition currency.

Management has had successful experiences in acquiring other specialty
retailers of cellular and wireless products. In August 1996, the Company
acquired Peachtree Mobility, an Atlanta based retailer with five stores.
Since the acquisition, the Company has changed the store names to "Let's
Talk Cellular & Wireless," increased the number of product offerings in
the stores, improved in-stock availability, integrated the accounting and
sales and administrative functions into the Company's corporate offices.
The Company has also added three additional stores in the Atlanta market.
In June 1997, the Company acquired 19 stores located in Texas, Kansas and
Missouri through the Telephone Warehouse Acquisition. In October 1997, the
Company entered into definitive agreements for the acquisition of (i)
Cellular USA, one of AT&T's largest agents in Las Vegas, which operates
six retail stores and (ii) Cellular Unlimited, one of Cellular One's
largest agents in upstate New York, which operates 15 retail stores. The
Company expects to close these acquisitions concurrently with the
consummation of the offering. The Company intends to change the store
names to "Let's Talk Cellular & Wireless," increase in-stock merchandise
availability and integrate the accounting, sales and administrative
functions into the Company's corporate offices, as it has done with the
Peachtree Mobility stores. The Company reviews acquisitions on a
continuing basis as opportunities arise, however, there can be no
assurance that any of the Company's expansion plans will be consummated or
prove successful.

- Increase Comparable Store Sales. The Company seeks to increase
comparable store sales by capitalizing on the changing industry dynamics
that are driving the growth in cellular and wireless usage, and pursuing
repeat business from its existing customers for new products, product
upgrades and additional accessories. As the Company's stores increase
penetration into new and existing markets, the Company expects to obtain
greater brand name recognition through broader advertising, increased
repeat and referral business and corporate sales.

- Capitalize on Operating Leverage. The Company continues to invest in an
infrastructure, including a management team and information systems, to
manage a rapidly growing chain of stores. These infrastructure investments
could result in a material reduction in income from operations in the
first half of fiscal 1998 compared with pro forma income from operations
for the corresponding period in fiscal 1997. As the Company continues to
expand internally and through acquisitions, it expects to leverage these
investments and improve margins through economies of scale. For example,
Telephone Warehouse has historically been able to acquire inventory at
lower prices than the Company. The Company recently has combined its
purchasing department with that of Telephone Warehouse and expects to
attain further cost reductions based on greater volume purchases and other
economies of scale as the Company grows.

38
<PAGE> 39

PRODUCTS AND SERVICES

The Company offers an extensive selection of cellular and wireless
communications products and services as described below:

- Cellular Phones, Services and Accessories. The Company offers up to 25
different makes and models of cellular phones, with an emphasis on having
in-stock availability of phones that reflects the latest technology and
industry trends. The Company displays the phones by four price categories
and rates them for excellence in quality, design and performance. With
such prominent displays of product information, the Company believes that
it encourages browsing, better educates customers and increases impulse
purchases. The Company offers cellular telephone service from leading
carriers such as AirTouch Cellular, AT&T, Bell Atlantic/NyNex, BellSouth,
Cellular One and L.A. Cellular and markets all of their various service
plans and available options, such as night and weekend programs and call
waiting. In addition, the Company offers pre-paid cellular service, when
available from the carrier, to customers who would not otherwise
financially qualify for cellular service. Let's Talk Cellular & Wireless
stores also display a wide assortment of cellular phone hardware and
accessories such as batteries, home and car chargers, vehicle adapter
kits, cases and starter kits from leading name-brand suppliers.

- PCS Phones, Services and Accessories. The Company offers up to 5
different makes and models of PCS phones in its markets where PCS service
is available. PCS telephones operate in a manner similar to cellular
telephones, but utilize different transmission frequencies. Differences
exist in the service features available, the service coverage areas, and
the service plan pricing options and structure. The Company offers PCS
service from leading PCS carriers such as PCS Sprint, Omnipoint, PrimeCo
and PCS phones from Ericsson and Sony. The Company also rates PCS phones
to help customers differentiate quality, design and performance and offers
a complete line of PCS accessories from various suppliers.

- Pagers, Services and Accessories. The Company offers up to 10 different
makes and models of wireless pagers, including numeric (standard pagers
that can only display numbers), alphanumeric (pagers that can display
numbers and/or text) and 2-way (alphanumeric pagers that give users the
ability to respond to messages with the touch of a button) from leading
name-brand suppliers including Motorola, NEC, Panasonic and Sony. The
Company offers paging services from leading national carriers such as CTI,
McCaw, Metrocall, PageMart, PageNet, and offers local, regional or
nationwide paging coverage. The Company also offers additional services
such as voice mail and custom greeting as well as a broad selection of
pager hardware and accessories to complement its sales of pagers and pager
services.

- Other Products. The Company's stores seek to continuously offer the
latest in wireless products and services as they become available for
consumer use. The Company merchandises internet products such as
Mindspring, WebTV and WebPhones and intends to offer other internet
products and services that become available in the future. The Company
intends to sell Sprint long distance services and prepaid calling cards
for long distance telephone service. The Company offers the Carcop
hand-held automobile security system which utilizes global positioning
system ("GPS") technology to identify the location of automobiles.
Additionally, the Company intends to offer other after-market automobile
navigation devices which utilize GPS technology when such devices become
more widely used and affordable in price. The Company sells several
electronic products and services to business customers, such as an
automated electronic phone answering service and call routing system that
utilizes voice recognition technology to route calls. Additionally, the
Company sells hand-held voice organizers that utilize voice recognition
technology, digitally store names, calendars, address books and messages,
and transfer data between laptop computers and other portable electronic
devices. The Company intends to carry satellite phones and other devices
that take advantage of new wireless technologies as they become available
in the future. The Company carries Personal Digital Assistants ("PDA"),
electronic devices that contain the functions and capabilities of a palm
top computer, a cellular phone, a beeper, an internet browser and an
e-mail retriever and are capable of sending and receiving facsimile

39
<PAGE> 40

transmissions. The Company's strategy is to provide one-stop shopping for
its customers and to maintain its reputation as a retailer of the latest
technological advances in the communications industry. Management believes
that the flexibility of its merchandising positions the Company as an
attractive distribution network for new products and services.

TYPICAL RETAIL TRANSACTIONS

Cellular. In a typical cellular retail transaction, a customer subscribes
for service with one carrier and receives a phone for free or at a substantial
discount to its retail value. The Company's cost for the "free" phone,
approximately $100-$140, is more than offset by an activation commission paid by
the carrier, and by volume bonuses and co-op advertising payments. In some
cases, the carrier pays the Company 4-6% of the customer's ongoing monthly
service bills as residual payments for as long as the subscription remains in
effect. The Company seeks to supplement its sales with wireless accessories,
such as batteries, chargers and carrying cases, which generate an average gross
margin of approximately 65% for the Company.

PCS. In a typical PCS retail transaction, the customer buys the phone from
the Company at a price in excess of the Company's cost and subscribes for
service with a selected PCS carrier. The Company does not receive activation
commissions or residual payments in connection with its recent sales of PCS
phones but instead acquires PCS phones from carriers at a significantly reduced
cost than that paid by the PCS carrier. The Company, in turn, resells such
phones at a profit.

Paging. In a typical paging retail transaction, the customer buys a pager
and 12 months of service at one low price. Alternatively, a customer can
purchase a pager at full retail price and subscribe for three months of service.
In each case, the customer's initial payment exceeds the cost of the pager.

STORE DESIGN

The Company believes its attractive store design, merchandise presentations
and signage are a significant factor in establishing, differentiating and
reinforcing the Let's Talk Cellular & Wireless brand. The Company seeks to
create an inviting and enjoyable shopping environment that emphasizes the
Company's distinctive, upscale image, attracts walk-in traffic and encourages
impulse purchases. The typical Let's Talk Cellular & Wireless store utilizes a
combination of light wood, glass and bright colors to attract walk-in traffic.
Kiosks are typically oval or rectangular in shape, with glass merchandise
display cases forming the outside perimeter. The Company pays careful attention
to detail in the layout of each of its stores, particularly lighting, colors,
choice of material and placement of display cases. Each store features
merchandise displays and other materials that are designed to provide easy
customer access and information to encourage browsing. The Company seeks to
present customers with simple explanations of product and service features and
benefits, as well as pricing and sign-up information.

To facilitate the opening of multiple stores, the Company utilizes two
basic designs for kiosk and three basic designs for in-line stores. The designs
incorporate modular fixtures and can be easily adjusted to reflect different
sized and shaped locations, permitting faster and more cost effective
construction. The Company believes that a number of its key store design
elements can be used in a wide variety of retail settings.

SALES AND MARKETING

The Company's marketing strategy is to attract new customers, create name
awareness and promote repeat business through its use of local radio, direct
mail and print media as well as in-store promotional programs and special price
and product offerings. The Company seeks to place its stores in highly visible
locations where its distinctive store design will attract the attention of
prospective customers. The Company believes that its stores benefit from
increased traffic flow created by the advertising, marketing and promotional
efforts of the mall itself as well as other mall tenants. The Company clusters
stores in target markets in order to provide it with a sufficient base to
undertake management, marketing and advertising efforts.

40
<PAGE> 41

The Company's marketing programs are supplemented by carriers and suppliers
in the form of cooperative advertising allowances, market development funds, and
new store allowances. For fiscal 1997, the Company received an aggregate of $1.5
million of such funds. Cooperative advertising allowances are provided for store
advertising that features their services or products. Market development funds
are additional funds provided for marketing and advertising in new markets. New
store allowances are funds provided to offset the costs of developing new
stores.

CUSTOMER SERVICE

With the technological advancements and introductions of new products and
service options in the wireless industry, customers are more likely to require
the advice of increasingly qualified salespeople to assist in product and
service selections. Management believes that its emphasis on training and
customer service distinguishes the Company within the industry and is an
important part of its business strategy. The Company seeks to maximize customer
satisfaction as well as repeat and referral business by providing high quality,
knowledgeable and personalized customer service. The Company has implemented
extensive employee training programs on an ongoing basis designed to ensure that
its sales associates are thoroughly familiar with the latest technical and
functional elements of its products and services as they are introduced. Each
sales professional receives two weeks of classroom training and two additional
weeks of in-store training prior to his permanent assignment. New products and
services are introduced to the Company's sales staff by supplier and carrier
representatives prior to the public. The Company emphasizes a consultative
selling process in which sales personnel inquire about the needs and desires of
each customer, in an attempt to recommend the most appropriate products and
services. The Company's sales representatives' compensation is comprised of a
base salary and a sales commission on product sales. In addition to in-store
promotions, the Company's sales force generate repeat and referral business by
contacting existing and prospective customers via telephone. The Company offers
everyday low prices that are competitive with other retailers and supports this
policy with a lowest-price guarantee, a 7-day return policy and a 30-day
satisfaction guarantee to provide customer assurance and satisfaction. In
addition, customers are eligible to receive 100% credit for their product
purchases if they upgrade within 12 months of the original purchase.

CARRIER AGREEMENTS

Generally, the Company's stores offer cellular and PCS telephone services
and paging service pursuant to carrier agreements between one or more of the
carriers operating in the geographic area where the store is located and the
Company. There are only two licensed cellular carriers in a geographic market.
In each market the Company has an exclusive agreement with one such cellular
carrier. The Company's cellular carrier agreements range in duration from one to
five years. In most of the Company's cellular carrier agreements, the Company
receives activation commissions and monthly residual fees based on the number of
subscribers enlisted and the volume of their usage. The Company can receive
bonus commissions when the volume of activations exceeds certain levels. There
are up to five PCS carriers in a geographic market, depending on the size of the
market, and therefore, the Company's PCS carrier agreements are nonexclusive.
The Company typically offers multiple PCS services to its customers, although
two of Telephone Warehouse's carrier agreements covering the Texas markets have
provisions prohibiting the Company from offering competing cellular or PCS
telephone service during the term of the agreements and for a period of one year
after termination. The Company's PCS carrier agreements are typically for a term
of one year. In fiscal 1995, 1996 or 1997 sales to the following carriers
represented more than 10% of the Company's net revenues: (i) BellSouth Mobility
represented 11%, 23% and 12%, respectively; (ii) AirTouch Cellular represented
0%, 0% and 12%, respectively; and (iii) Bell Atlantic/NyNex represented 5%, 11%
and 13%, respectively. In fiscal 1994, 1995 and 1996 and for the four months
ended April 30, 1997, Telephone Warehouse had sales to AT&T Wireless of 26%,
20%, 13% and 18% of total net revenues, respectively. For fiscal 1997, on a pro
forma basis, AT&T Wireless was the only carrier to whom sales exceeded 10% of
total net revenues. Management believes that in most instances, the cancellation
or non-renewal of any of its carrier agreements would not have a material
adverse effect on the Company's financial condition or results of operations, as
it believes that a canceled agreement could likely be replaced with an agreement
with one of the carrier's competitors. However, in certain markets where the
Company receives substantial residual payments from the carrier, the

41
<PAGE> 42

cancellation or non-renewal could have a significant effect on the Company's
financial condition and results of operations. The Company is also a reseller of
paging services, buying blocks of paging time from paging carriers at a
substantial discount and reselling paging services to its customers. The
Company's paging carrier agreements range in duration from one to 10 years.
Paging customers are charged a monthly fee for local service and additional fees
for service in other markets. The Company offers cellular and paging coverage
throughout the continental United States and PCS coverage in the five U.S.
markets where it is available to the Company's stores. Set forth below is a list
of the Company's cellular, PCS and paging carriers, the geographic territory
where the services are sold and the expiration dates of their agreements:

<TABLE>
<CAPTION>
TYPE OF
CARRIER SERVICE GEOGRAPHIC AREA EXPIRES
- ------- ------- --------------- -------
<S> <C> <C> <C>
AirTouch Cellular........... Cellular Atlanta December 1998
AT&T Wireless............... Cellular Dallas/Fort Worth December 2001
AT&T Wireless............... Cellular Denver(1) September 2001
AT&T Wireless............... Cellular New York City metropolitan
area December 1998
AT&T Wireless............... Cellular San Antonio December 2001
Bell Atlantic/NyNex......... Cellular District of Columbia,
Maryland, Philadelphia, New
Jersey February 1998
BellSouth Mobility.......... Cellular South and Central Florida(2) March 1998
Cellular One................ Cellular Puerto Rico January 1998
Cellular One................ Cellular Kansas City December 1999
L.A. Cellular............... Cellular Los Angeles January 1998
Cellular One................ Paging Puerto Rico May 31, 2002
CTI......................... Paging Nationwide December 1997
McCaw....................... Paging San Antonio March 1998
Metrocall................... Paging Dallas/Fort Worth August 2004
PageMart.................... Paging Nationwide October 1997
PageNet..................... Paging Texas, Louisiana, Oklahoma,
Arkansas, Kansas, Missouri February 2006(3)
Omnipoint................... PCS New York City metropolitan
area
PrimeCo..................... PCS South Florida, Tampa,
Orlando October 2001
Sprint...................... PCS Nationwide April 1998
</TABLE>

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

(1) In September 1996, the Company entered into a Kiosk Staffing Agreement with
AT&T Wireless. Pursuant to the agreement the Company provides personnel and
management expertise to operate AT&T Wireless kiosks and in-line stores in
the greater Denver metropolitan area through September 2001 in exchange for
receiving commissions and fees for services and products sold at such
stores. The Company currently operates 3 such AT&T Wireless stores. The
agreement provides incremental operating income with no requirements for
capital expenditures.
(2) The Company currently offers BellSouth Mobility cellular service in South
and Central Florida, although its carrier agreement with Bell South Mobility
permits the Company to offer such services wherever BellSouth Mobility
offers cellular service, which is currently throughout the Southeastern
United States.
(3) Pursuant to a non-binding memorandum of understanding.

SUPPLIERS

The Company purchases its inventory from a variety of sources, such as
suppliers, carriers and other large wholesale distributors. The Company
purchases all of its inventory through a centralized purchasing department that
tracks the inventory needs of each of its stores. The Company deals with its
suppliers on an order-by-order basis and seeks to find the lowest price with
quantity discounts. The purchasing department negotiates payment terms, vendor
financing of inventory and merchandise discounts with suppliers. The Company
currently purchases inventory from over 40 suppliers. Because cellular and
wireless products can be sourced from numerous suppliers, the Company does not
believe it is dependent on any particular source of supply for its inventory
needs.

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<PAGE> 43

Historically, Telephone Warehouse has purchased inventory at lower prices
than the Company because of its large volume discounts, which are primarily
associated with its wholesale business. The wholesale business maintains
competitive pricing by purchasing products from multiple sources such as
suppliers, carriers and large distributors, often on a "spot" basis to take
advantage of discounts. Management believes that the acquisition of Telephone
Warehouse, combined with continued new store expansion and an improved capital
structure resulting from the offering, will give the Company increased
purchasing capabilities and enable the Company to qualify for better quantity
discounts.

SITE SELECTION

The Company's strategy for opening stores is to seek prime locations in
regional shopping malls or other high traffic locations in selected geographic
markets having attractive demographic statistics. Markets for new stores are
selected on the basis of factors such as attractive demographics, household
income levels, growth potential and real estate availability. Within a specific
market, management carefully selects each site by evaluating store location,
visibility, accessibility and walk-by traffic volume, among other factors.
Management believes that the Company's market presence, established
relationships with national mall developers, attractive store design and high
average sales volume per square foot give the Company a competitive advantage in
securing desirable mall locations on attractive terms. The Company utilizes
either kiosk or in-line store formats to have greater flexibility to place
stores in the best available locations.

WHOLESALE OPERATIONS

The Company wholesales cellular phones and accessories to over 1,000
accounts, consisting primarily of distributors, carriers and smaller independent
retailers. The Company seeks to provide superior customer service as compared to
larger distributors in the industry by locating "hard to find" items, responding
quickly to customer inquiries and credit decisions, quickly turning around
repairs and providing same day shipping service. The wholesale business
maintains competitive pricing by purchasing products from multiple sources such
as suppliers, carriers and large distributors, often on a "spot" basis to take
advantage of discounts. The Company believes its wholesale business serves a
niche market in which customers are willing to pay higher prices for better
customer service. Management plans to continue to grow the wholesale business
because it believes the business will continue to complement the Company's
retail operations by providing economies of scale for purchasing and
distributing products and enabling the Company to purchase its cellular and
wireless product inventory through its wholesale operations at lower cost.

MANAGEMENT INFORMATION SYSTEMS

Each Company store is equipped with a modern computer terminal. The
point-of-sale terminals are linked to a central computer at the Miami
headquarters, allowing the Company's finance staff to continuously monitor sales
and inventory levels. The Company's MIS system provides sales, cost, gross
margin and commission information from store point-of-sale terminals that are
polled nightly. Customer, product and control information is also updated
nightly. The MIS system is also linked to the accounting system for general
ledger and accounts payable functions. The MIS system is capable of generating
financial statements at the store level and providing management with key
operating and financial data in a timely manner, thereby allowing the Company to
respond quickly to changes in customer preferences and emerging industry trends.
The Company is in the process of upgrading its corporate MIS system, which will
allow the Company to monitor up to 300 retail locations. This new system is
expected to be fully tested and on-line by April 1998.

COMPETITION

The Company is the largest independent specialty retailer of cellular and
wireless products and services. However, the industry is characterized by
intense competition, is highly fragmented and is composed of national chains of
"big box" electronic and consumer goods retailers, carrier-owned retail stores,
and regional and local chains of other specialty cellular retailers, among
others. Certain of the Company's competitors have significantly greater
resources than the Company. Competition is based in part on local market
conditions and varies from one location or geographic area to another. The
Company believes that the primary elements of

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<PAGE> 44

competition in the industry are price, breadth of product, in-stock availability
of products and services that meet the latest industry trends, level of customer
service and convenience of store location. The Company believes it competes
favorably with national and regional retailers. See "Business -- Competitive
Strengths" and "Risk Factors -- Competition."

PROPERTIES

The Company currently leases all of its existing store locations other than
the AT&T Wireless stores in Denver and one store owned by Telephone Warehouse.
The Company expects that its policy of leasing rather than owning will continue
as it expands. The Company's leases generally provide for initial lease terms
ranging from three to five years for kiosks and up to 10 years for in-line and
power strip stores. Rent is generally computed as a percentage of the store's
gross sales in excess of a fixed minimum base rent plus a portion of the mall
common area maintenance expenses, taxes, insurance and electrical service for
the premises and mall common areas. Lease rental payments are also subject to
annual increases for taxes, common area maintenance and insurance.

As current leases expire, the Company believes that it will generally be
able either to obtain lease renewals if desired for present store locations, or
to obtain leases for equivalent or better locations in the same general area.
Certain of the Company's store leases contain provisions requiring the
landlord's written consent for, or permitting the landlord to terminate the
lease upon, a change in control of the ownership of the lessee. The foregoing
provisions may be applicable in certain cases as a result of the Telephone
Warehouse Acquisition (see "Certain Transactions -- the Telephone Warehouse
Acquisition"). Based primarily on the absence of lease terminations following
the Telephone Warehouse Acquisition, the Company's historic ability to secure
leases for suitable locations and the significant number of Company stores,
management believes that such provisions will not have a material adverse effect
on the business or financial position of the Company.

In addition to its stores, the Company currently leases an approximately
9,220 square foot building in Miami, Florida, for its distribution facility. The
Company leases approximately 11,000 square feet of office space in Miami,
Florida, for its corporate headquarters, which management believes will be
adequate for the Company's anticipated growth. The Company also owns an
approximately 4,600 square foot building in Irving, Texas, which it uses as a
retail store.

EMPLOYEES

As of September 30, 1997, the Company had approximately 524 employees, of
whom approximately 398 are involved in retail operations, 5 are involved in
wholesale operations and 121 are corporate office personnel. None of the
Company's employees is covered by a collective bargaining agreement and
management believes that the Company's relations with its employees are good.

SERVICEMARKS

The Company has filed an application to register the name "Let's Talk
Cellular & Wireless" and the Company's logo as a servicemark in the United
States Patent and Trademark Office. The Company is actively engaged in a program
to consolidate its store operations under the "Let's Talk Cellular & Wireless"
tradename and achieve a consistent and distinctive store appearance. As of
September 30, 1997, 76% of the Company's 102 stores were operated under the
"Let's Talk Cellular & Wireless" tradename. In the Texas, Kansas and Missouri
markets, the Company conducts its retail operations under the name Telephone
Warehouse, pending an orderly transition to the "Let's Talk Cellular & Wireless"
tradename. Following the Cellular USA Acquisition and the Cellular Unlimited
Acquisition, the Company intends to operate the stores under the Cellular USA
and Cellular Unlimited names, pending an orderly transition to the "Let's Talk
Cellular & Wireless" tradename.

LEGAL PROCEEDINGS

The Company is not a party to any legal proceedings other than routine
litigation incidental to its business, none of which is material.

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<PAGE> 45

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers, directors and key employees of the Company are as
follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Nicolas Molina............................ 29 Chief Executive Officer and Director
Brett Beveridge........................... 32 President and Chairman of the Board
Anne Gozlan............................... 35 Chief Financial Officer
Ronald Koonsman........................... 54 President -- Telephone Warehouse
Anthony Tamer............................. 39 Director
Sami Mnaymneh............................. 36 Director
John Bolduc............................... 33 Director
Douglas Berman............................ 31 Director
Allan Sorensen............................ 59 Director
KEY EMPLOYEES
Richard Berglund.......................... 50 Vice President -- Sales
Fernando Perez............................ 37 Director of Information Systems
Chris Howard.............................. 31 Director of Construction and Design
Sheril Miller............................. 41 Vice President -- Real Estate
Lazarus Rothstein......................... 39 General Counsel and Secretary
</TABLE>

Nicolas Molina is a co-founder of the Company and serves as Chief Executive
Officer and a director of the Company. Since the inception of the Company in
1989, Mr. Molina has been a director and Chief Executive Officer of the Company
and has been primarily responsible for the Company's finance, administration,
human resources, MIS, expansion of the Company's retail operations, including
real estate site selection, leasing and construction, as well as other general
corporate matters. Prior to the formation of the Company, Mr. Molina was a
corporate account executive for McCaw Communications.

Brett Beveridge is a co-founder of the Company and serves as Chairman of
the Board of Directors and President of the Company. Since the inception of the
Company in 1989, Mr. Beveridge has been a director and President of the Company
and has been primarily responsible for the Company's retail operations,
marketing, merchandising, distribution, carrier and vendor relationships and
other general operational matters. Prior to the formation of the Company, Mr.
Beveridge was a Divisional Sales Manager for Bally Corporation's health club
division in Miami, Florida from 1984 to 1988.

Anne Gozlan has served as Chief Financial Officer of the Company since May
1995. From 1992 to 1995, Ms. Gozlan served as controller of Perfumania, Inc., a
publicly traded specialty retailer of perfumes and related products. Prior to
joining Perfumania, Ms. Gozlan was an audit manager at Price Waterhouse, where
she was employed from 1984 to 1992.

Ronald Koonsman was the founder and has served as President and Chief
Executive Officer of Telephone Warehouse and its affiliates since January 1984.
Mr. Koonsman joined the Company upon the consummation of the Telephone Warehouse
Acquisition in June 1997 and has over 27 years of experience in the
telecommunications industry, having been employed by Southwestern Bell and AT&T
in a variety of management positions from 1970 to 1983.

Anthony Tamer has been a director of the Company since June 1996 and a
Managing Director of HIG Capital Management, Inc., an affiliate of HIG
Investment Group, L.P. since 1993. Mr. Tamer was previously a Partner at Bain &
Company ("Bain") from 1986 to 1993. Mr. Tamer attended Harvard Business School
where he was awarded a Master in Business Administration degree. He also holds a
Master degree in Electrical Engineering from Stanford University, and a Bachelor
of Science degree in Electrical Engineering from Rutgers University.

45
<PAGE> 46

Sami Mnaymneh has been a director of the Company since June 1997 and a
Managing Director of HIG Capital Management, Inc. since 1993. Mr. Mnaymneh was
previously a Managing Director at The Blackstone Group from 1990 to 1993 and
prior to such time was a Vice President in the Mergers and Acquisitions Group at
Morgan Stanley & Co. Mr. Mnaymneh attended Columbia University in New York,
where he was elected to Phi Beta Kappa. He subsequently attended Harvard
Business School and Harvard Law School where he was awarded a Master in Business
Administration degree and a Juris Doctor degree, respectively, with honors.

John Bolduc has been a director of the Company since June 1997 and a
Managing Director of HIG Capital Management, Inc. since 1993. Prior to joining
HIG, Mr. Bolduc was with Bain from 1990 to 1993. Mr. Bolduc holds a Master in
Business Administration from the Darden Graduate School of Business at the
University of Virginia and a Bachelor of Science degree in Computer Engineering
from Lehigh University.

Douglas Berman has been a director of the Company since June 1997 and a
Vice President of HIG Capital Management, Inc. since 1996. Prior to joining HIG,
Mr. Berman was with Bain from 1992 to 1996. Mr. Berman is a graduate of the
Wharton School of the University of Pennsylvania, where he received a Master in
Business Administration. He also holds a Bachelor of Arts degree in Economics
from the University of Virginia, where he was elected to Phi Beta Kappa.

Allan Sorensen has served as Vice Chairman of the Board and a Director of
the Company since 1994. Mr. Sorensen is also Chairman of the Board of Interim
Services, Inc., a New York Stock Exchange company, where he has served on the
Board of Directors since 1967. He has also served as Temporary Chairman of The
Appletree Companies since August 1996 and Director since February 1996. He was a
member of the Board of Directors of H&R Block, Inc. from 1979 until September
1993 when Interim Services was spun off in an initial public offering. He is the
past five-term Chairman of the Board and a director of the Home Health Services
and Staffing Association (HHSSA). He is a past president and member of the Board
of Directors of the National Association of Temporary & Staffing Services
(NATSS) and recipient of their 1992 Leadership Award.

Richard Berglund has served as Vice President -- Sales of the Company since
October 1996. From 1992 to 1996, Mr. Berglund served as Director of Stores at
Herman's World of Sporting Good's, Inc.

Fernando Perez has served as the Director of Information Systems for the
Company since August 1996. Prior to such time, Mr. Perez was employed by
Sunglass Hut International, Inc., where he served as Manager of Systems and
Programming for over 5 years. Before joining Sunglass Hut, he served as the
Manager of Operations for Savin Florida, a retailer of office products, from
1988 to 1991 after serving as its Manager of Information Systems from 1984 to
1987.

Chris Howard has served as the Company's Director of Construction and
Design since July 1996. From 1992 to 1996, Mr. Howard served as a Director of
Construction for Spec's Music Co. Prior to joining Spec's Music Co., Mr. Howard
served as a senior project manager for Scherer Construction & Engineering from
1989 to 1992.

Sheril Miller has served as Vice President -- Real Estate of the Company
since August 1997. From July 1994 until August 1997, Ms. Miller was employed by
Lord Associates, a leasing, marketing and real estate development firm, as a
leasing executive. From February 1993 until July 1994, Ms. Miller was employed
by General Growth, a real estate development firm, and prior to February 1993
was employed for eight years by Kravco, a real estate development firm.

Lazarus Rothstein has served as General Counsel and Secretary of the
Company since May 1997. Prior to joining the Company, Mr. Rothstein engaged in
the private practice of law for 13 years, primarily in the areas of real estate,
securities and business transactions and commercial litigation.

The Company's Board of Directors intends to appoint at least one additional
director who is not affiliated with the Company within 90 days of the
consummation of this offering. This additional director has not yet been
identified.

The Company also intends to establish an Audit Committee and a Compensation
Committee in connection with the appointment of such additional directors. The
Compensation Committee will be

46
<PAGE> 47

responsible for setting and administering policies that govern annual
compensation for the Company's executive officers and administering the
Company's Incentive Plan. See "-- Executive Incentive Compensation Plan." The
duties and responsibilities of the Audit Committee will include (i) recommending
to the full Board the appointment of the Company's auditors and any termination
or engagement, (ii) reviewing the plan and scope of audits, (iii) reviewing the
Company's significant accounting policies and internal controls, (iv)
administering the Company's compliance programs, (v) having general
responsibility for all related auditing matters and (vi) approving all material
transactions with affiliates.

The Company's Articles provide that the Board of Directors be divided into
three classes, with regular three year staggered terms and initial terms of one,
two and three years for each of the classes of directors. Accordingly, Messrs.
Bolduc, Berman and Sorensen will hold office until the annual meeting of
shareholders to be held in 1998. Messrs. Mnaymneh and Tamer and one of the
contemplated independent directors will hold office until the 1999 annual
meeting and Messrs. Molina and Beveridge and another contemplated independent
director will hold office until the 2000 annual meeting.

DIRECTOR COMPENSATION

The Company does not currently intend to pay any fees to directors. The
Company will reimburse all directors for out-of-pocket expenses incurred in
connection with the rendering of services as a director.

EXECUTIVE COMPENSATION

The following table sets forth the compensation paid by the Company, for
services rendered during the past year to the Company's Chief Executive Officer
and certain other officers whose total 1997 salary and bonus exceeded $100,000
(the "Named Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS
------------------------------------------ ------------
SECURITIES
FISCAL OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS
--------------------------- ------ -------- ------- ------------ ------------
($) ($) ($) (#)
<S> <C> <C> <C> <C> <C>
Nicolas Molina............................ 1997 $198,000 $25,000 $33,960(2) 91,174(3)
Chief Executive Officer
Brett Beveridge........................... 1997 $198,000 $25,000 $34,800(2) 91,174(3)
President and Chairman of the Board
Anne Gozlan............................... 1997 $100,000 -- -- --
Chief Financial Officer
</TABLE>

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

(1) The column for "All Other Compensation" has been omitted because there is no
compensation required to be reported in such column.
(2) Represents the value of perquisites and other personal benefits, including
premium payments and related expense for life insurance, disability
insurance and group health insurance totaling $19,927 and $20,199 for
Messrs. Molina and Beveridge, respectively.
(3) See "Option Grants Table" below for additional information about these
options.

OPTION GRANTS, EXERCISES AND FISCAL YEAR-END VALUES

The following table sets forth information with respect to grants of
options to purchase shares of Common Stock during the fiscal year ended July 31,
1997 to the Named Officers. The amounts shown as potential realizable values on
the options are based on assumed annualized rates of appreciation in the price
of the Common Stock of 0%, 5% and 10% over the term of the options, as set forth
in rules of the Securities and Exchange Commission. Actual gains, if any, on
stock option exercises are dependent on future performance of the Common Stock.
There can be no assurance that the potential realizable values reflected in this
table will be achieved.

47
<PAGE> 48

STOCK OPTION GRANTS IN THE FISCAL YEAR ENDED JULY 31, 1997

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM(1)
---------------------------------------------------------------- ------------------------------
PERCENT OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE OR
UNDERLYING OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE 0%($) 5%($) 10%($)
- ---- ------------------ ---------------- ----------- ---------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Nicolas Molina............ 91,174 50% $20.04 7/27/07 -- -- --
Brett Beveridge........... 91,174 50% $20.04 7/27/07 -- -- --
</TABLE>

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

(1) The Company determined that the Common Stock had a fair market value of
$1.55 on the date of grant.

The following table sets forth information concerning the value of
unexercised options as of July 31, 1997 held by the Company's Named Officers. No
options were exercised during fiscal 1997.

YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS AT FISCAL MONEY OPTIONS AT FISCAL
YEAR-END YEAR-END
------------------------- ----------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- ---- ------------------------- ----------------------------
<S> <C> <C>
Nicolas Molina................................. 91,174 --/--
Brett Beveridge................................ 91,174 --/--
</TABLE>

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

(1) The Company determined that the Common Stock had a fair market value of
$1.55 per share on July 31, 1997.

EXECUTIVE INCENTIVE COMPENSATION PLAN

The Company has adopted a 1997 Executive Incentive Compensation Plan (the
"Incentive Plan") which is designed to assist the Company in attracting,
motivating, retaining and rewarding high-quality executives and other employees,
officers, directors and independent contractors (collectively, the
"Participants") by enabling the Participants to acquire or increase a
proprietary interest in the Company, as well as providing the Participants with
annual and long-term performance incentives to expend their maximum efforts in
the creation of shareholder value. Pursuant to the terms of the Incentive Plan
the Company may grant Participants stock options, stock appreciation rights,
restricted stock, deferred stock, other stock-related awards and performance or
annual incentive awards that may be settled in cash, stock or other property
(collectively, the "Awards"). A committee comprised of at least two non-employee
directors (the "Committee"), or in the absence thereof the Board of Directors,
will administer and interpret the Incentive Plan and is authorized to grant
Awards thereunder to all eligible Participants. The Incentive Plan has a term of
10 years.

Under the Incentive Plan, the total number of shares of Common Stock that
may be subject to the granting of Awards during the term of the Incentive Plan
shall be equal to 310,000 shares, plus the number of shares with respect to
Awards previously granted under the Incentive Plan that terminate without being
exercised and the number of shares of Common Stock that are surrendered in
payment of any Awards or any tax withholding requirements. The following is a
description of the Awards that may be granted under the Incentive Plan:

Stock Options and Stock Appreciation Rights -- The Committee is
authorized to grant stock options, including both incentive and
non-qualified stock options, and stock appreciation rights ("SAR")
entitling a Participant to receive the amount by which the fair market
value of a share of Common Stock on the date of exercise exceeds the grant
price of the SAR. The exercise price per share subject to an option and the
grant price of an SAR are determined by the Committee, but must not be less
than the fair market value of a share of Common Stock on the date of grant.
Each option is exercisable after the period or periods specified in the
related option agreement, but no option may be exercisable after the
expiration of ten years from the date of grant. Options granted to an
individual who owns (or is deemed to own) at

48
<PAGE> 49

least 10% of the total combined voting power of all classes of stock of the
Company must have an exercise price of at least 110% of the fair market
value of the Common Stock on the date of grant and a term of no more than
five years. Options may be exercised by payment of the exercise price in
cash, shares of Common Stock, outstanding Awards or other property having a
fair market value equal to the exercise price, as the Committee may
determine from time to time.

Restricted and Deferred Stock -- The Committee is authorized to grant
restricted stock and deferred stock. Restricted stock is a grant of shares
of Common Stock which may not be sold or disposed of, and which may be
forfeited in the event of termination of employment, prior to the end of a
restricted period specified by the Committee. A Participant granted
restricted stock generally has all the rights of a shareholder of the
Company, unless otherwise determined by the Committee. An Award of deferred
stock confers upon the Participant the right to receive shares of Common
Stock at the end of a specified deferral period, subject to possible
forfeiture of the Award in the event of termination of employment prior to
the end of a specified restricted period. Prior to the issuance of shares
of Common Stock, an Award of deferred stock carries no voting or dividend
rights.

Bonus Stock and Awards in Lieu of Cash Obligations -- The Committee is
authorized to grant shares of Common Stock as a bonus, free of
restrictions, or to grant shares of Common Stock or other Awards in lieu of
cash under the Incentive Plan, subject to such terms as the Committee may
specify.

Other Stock-based Awards -- The Committee is authorized to grant
Awards that are denominated or payable in, valued by reference to, or
otherwise based on or related to, shares of Common Stock. Such Awards might
include convertible or exchangeable debt securities, other rights
convertible or exchangeable into shares of Common Stock, purchase rights
for shares of Common Stock, Awards with value and payment contingent upon
performance by the Company or any other factors designated by the
Committee, and Awards valued by reference to the book value of shares of
Common Stock or the value of securities of or the performance of specified
subsidiaries or business units. The Committee determines the terms and
conditions of such Awards.

The right of a Participant to exercise or receive a grant or settlement of
an Award, and the timing thereof, may be subject to such performance conditions
(including subjective individual goals) as may be specified by the Committee. In
addition, the Incentive Plan authorizes specific annual incentive Awards, which
represent a conditional right to receive cash, shares of Common Stock or other
Awards upon achievement of certain preestablished performance goals and
subjective individual goals during a specified fiscal year.

Awards may be settled in the form of cash, shares of Common Stock, other
Awards or other property at the discretion of the Committee. The Committee may
condition any payment relating to an Award on the withholding of taxes and may
provide that a portion of any shares of Common Stock or other property to be
distributed will be withheld (or previously acquired shares of Common Stock or
other property surrendered by the Participant) to satisfy withholding and other
tax obligations. Awards granted under the Incentive Plan generally may not be
pledged or otherwise encumbered and are not transferable except by will or by
the laws of descent and distribution, or to a designated beneficiary upon the
Participant's death, except that the Committee may, in its discretion, permit
transfers for estate planning or other purposes subject to any applicable
restrictions.

The Company had no Awards outstanding prior to fiscal 1997. The Company
will grant on the date of this Prospectus options to purchase an aggregate of
265,258 shares of Common Stock under the Incentive Plan, all at an exercise
price equal to the initial public offering price of the Common Stock.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

In June 1996, the Company's Board of Directors established a Compensation
Committee, consisting of Messrs. Tamer and Molina, to set executive compensation
levels. All compensation decisions affecting Mr. Molina were approved by the
Company's directors, exclusive of Mr. Molina. Upon consummation of this
offering, the Compensation Committee will consist of Mr. Sorensen.

49
<PAGE> 50

EMPLOYMENT AGREEMENTS

Effective June 27, 1997, the Company amended and restated employment
agreements with each of Messrs. Molina and Beveridge. Mr. Molina's agreement
provides for his employment as the Chief Executive Officer of the Company, and
Mr. Beveridge's agreement provides for his employment as the President of the
Company. Both agreements provide for five year terms with base salaries of
$210,000 per year, to be increased annually by the greater of the annual
increase in the consumer price index or 5%, as well as annual bonuses of not
less than $50,000, subject to the achievement of reasonable performance targets
set by the Board. Upon termination of his employment by the Company for reasons
other than death, disability or cause, the executive shall be entitled to
receive the greater of (i) his salary and bonus for the remainder of the
employment period or (ii) two years' salary and bonus, except that these amounts
shall be reduced by any amounts of earned income the executive may be receiving
from any new employer.

In May 1995, the Company entered into an employment agreement with Ms.
Gozlan, which was subsequently amended in June 1996. The agreement provides for
a three-year term with a base salary of $100,000 to be increased annually by the
greater of the annual increase in the consumer price index or 5%. Upon
termination of her employment by the Company for reasons other than death,
disability or cause, Ms. Gozlan shall be entitled to receive her salary for the
following 12 months. In August 1997, the term of Ms. Gozlan's employment
agreement was extended through December 1998.

In June 1997, Telephone Warehouse amended and restated its employment
agreement with Mr. Koonsman, its former owner in connection with the Telephone
Warehouse Acquisition. The agreement provides for a two-year term expiring in
December 1998 and compensation in the form of (i) a $50,000 salary through
December 1997, (ii) a $100,000 salary from January 1998 through December 1998
and (iii) a $950,000 bonus paid in December 1997 provided that Telephone
Warehouse's earnings exceed certain targets. Upon termination of his employment
by the Company for reasons other than death, cause or resignation, Mr. Koonsman
shall be entitled to receive all payments of his compensation. See "Certain
Transactions."

50
<PAGE> 51

CERTAIN TRANSACTIONS

GENERAL

The Company from time to time has entered into transactions with certain of
its officers, directors and principal shareholders and entities in which such
parties have an interest. The Company believes that each such transaction has
been on terms no less favorable to the Company than could be obtained in a
transaction with an independent third party.

SERIES A PREFERRED STOCK

In June 1996 the Company issued 100,000 shares of Series A Preferred Stock
to HIG Fund V, Inc., a subsidiary of HIG ("Fund V"), in exchange for an
aggregate of $3.3 million pursuant to the Series A Preferred Stock Purchase
Agreement, dated June 25, 1996, among the Company, Messrs. Molina and Beveridge
and Fund V (the "Purchase Agreement"). HIG and Messrs. Tamer, Mnaymneh, Bolduc
and Berman own shares in Fund V.

Simultaneously with the Telephone Warehouse Acquisition, the Company
induced Fund V to convert the Series A Preferred Stock to Common Stock by
increasing the conversion ratio of the Series A Preferred Stock from 17.50 to 1
to 21.38 to 1. As a result of such conversion, Fund V surrendered certain rights
to enforce restrictive covenants regarding the Company's operations. Upon such
conversion, the Company issued to Fund V 2,137,850 shares of Common Stock, of
which 388,701 were in addition to the original conversion feature. In connection
with such conversion, Fund V agreed to terminate the provisions of the Purchase
Agreement other than provisions relating to registration rights pertaining to
shares of Common Stock issued in connection with such conversion.

TELEPHONE WAREHOUSE ACQUISITION

TCP, a subsidiary of HIG, acquired all of the outstanding capital stock of
Telephone Warehouse, Inc. and National Cellular, Incorporated from Mr. Ronald
Koonsman on December 31, 1996 for $15.1 million, consisting primarily of $12.9
million in cash and a $2.0 million 8% subordinated note (the "Seller Note"). The
acquisition was financed by $13.1 million in senior indebtedness provided by
NationsCredit, a limited partner of TCP, and the Seller Note. In addition, Mr.
Koonsman's employment agreement provided that he would receive an additional
$1.0 million in 1997 and up to $2.0 million in 1998 upon the two companies
reaching certain financial performance targets. The Seller Note was secured by a
second priority lien on TCP's stock in Telephone Warehouse, Inc. and National
Cellular, Incorporated and was guaranteed by the two companies. HIG,
NationsCredit and Messrs. Tamer, Mnaymneh, Bolduc and Berman own beneficial
interests in TCP.

In June 1997 the Company issued 1,817,468 shares of common stock to TCP in
exchange for all of the outstanding capital stock of Telephone Warehouse, Inc.
and National Cellular, Incorporated and assumed all of TCP's indebtedness,
approximately $13.1 million at such date. Mr. Koonsman's employment agreement
was amended to provide as follows: (i) for the six month period beginning on
July 1, 1997, a salary of $50,000, (ii) for the 12 month period beginning on
January 1, 1998, a salary of $100,000 and (iii) a bonus of $950,000 payable on
or before December 31, 1997, provided that Telephone Warehouse, Inc. and
National Cellular, Incorporated reach certain financial targets for the 12
months ended December 31, 1997. The Seller Note was modified to increase the
principal amount by up to $1,585,000 (subject to Telephone Warehouse, Inc. and
National Cellular, Incorporated reaching certain financial performance targets,
whether or not Mr. Koonsman is employed by the Company), to add the Company as a
guarantor, to add a second lien on Fund V's stock in the Company as additional
collateral for the loan and to provide for the release of the pledge of TCP's
and Fund V's stock in the Company upon the Company's initial public offering.

In connection with the Telephone Warehouse Acquisition, the Company
refinanced its debt and issued stock purchase warrants to NationsCredit. Such
warrants permit NationsCredit to purchase an aggregate of 106,596 shares of
Common Stock at an exercise price of $.00003 per share. NationsCredit has
informed the Company that it intends to exercise such warrants in full prior to
the issuance of the shares of Common Stock offered hereby and sell the 106,596
underlying shares to the Underwriters as part of this offering. See

51
<PAGE> 52

"Principal and Selling Shareholders." A portion of the proceeds of this offering
will be used to repay all of the Company's indebtedness to NationsCredit,
thereby releasing the guarantees and collateral for the loans.

Pursuant to Ms. Gozlan's employment agreement with the Company, 21,378
shares of the Common Stock restricted stock bonus granted to her vested in May
1997, and 21,378 shares vested upon the consummation of the Telephone Warehouse
Acquisition.

Concurrently with the Telephone Warehouse Acquisition, the Company issued
stock options to purchase 91,174 shares of Common Stock, with an exercise price
of $20.04 per share, to each of Nicolas Molina and Brett Beveridge. See
"Management -- Option Grants, Exercises and Fiscal Year-end Values."

MANAGEMENT

During fiscal 1995 Messrs. Molina and Beveridge together loaned the Company
an aggregate of $258,100 to fund the opening of new stores and for other working
capital purposes. These loans bear interest at 8.0% per annum, are unsecured and
mature upon the earlier of June 1, 1998 or the consummation of the offering. The
Company intends to repay these loans from the proceeds of the offering. During
fiscal 1997 the Company paid Messrs. Molina and Beveridge approximately $20,650
in interest on the loans.

HIG Capital Management, Inc., an affiliate of HIG, provided to the Company
certain (i) investment banking services in connection with this offering, for an
aggregate fee of $840,000, and (ii) management and consulting services from July
1997 through the date hereof, for a fee of $29,167 per month. The fee described
in clause (i) will be paid by the Company from the proceeds of the offering. The
fees described in clause (ii) have already been paid.

In addition, HIG Capital Management, Inc. has identified and presented to
the Board of Directors certain potential acquisition targets for the Company.
The Company has agreed to pay HIG Capital Management, Inc. an investment banking
fee equal to 2.0% of the purchase price paid with respect to any such company
acquired.

52
<PAGE> 53

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth information concerning the beneficial
ownership of the Common Stock immediately prior to this offering and as adjusted
to reflect the sale of the shares offered by this Prospectus by (i) each of the
Company's executive officers and directors, (ii) each person who is the
beneficial owner of more than 5% of the Common Stock and (iii) all executive
officers and directors as a group.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO THE NUMBER OF OWNED AFTER THE
OFFERING(2) SHARES TO OFFERING(2)
---------------------- BE SOLD IN ----------------------
NAME AND ADDRESS(1) NUMBER PERCENTAGE THE OFFERING NUMBER PERCENTAGE
- ------------------- --------- ---------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
HIG Investment Group, L.P.(3)(4)......... 3,955,318 64.9% 177,203 3,778,115 46.1%
Nicolas Molina(4)(5)..................... 1,021,138 16.5 -- 1,021,138 12.3
Brett Beveridge(4)(5).................... 1,021,138 16.5 -- 1,021,138 12.3
NationsCredit Commercial
Corporation(6)......................... 283,799 4.6 283,799 -- --
Anne Gozlan(7)........................... 64,135 1.1 -- 64,135 1.0
Ronald Koonsman.......................... -- -- -- -- --
Anthony Tamer(4)(8)...................... 3,955,318 64.9 177,203 3,778,115 46.1
Sami Mnaymneh(4)(8)...................... 3,955,318 64.9 177,203 3,778,115 46.1
John Bolduc(4)(8)........................ 3,955,318 64.9 177,203 3,778,115 46.1
Douglas Berman(4)(8)(9).................. 3,955,318 64.9 177,203 3,778,115 46.1
Allan Sorensen(10)....................... 213,785 3.5 53,446 160,339 2.0
All directors and executive officers of
the Company as a group (9
persons)(11)........................... 6,275,514 100.0% 337,245(4) 6,044,865 72.1%
</TABLE>

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

* Less than 1%
(1) Unless otherwise indicated, the address of each of the beneficial owners is
c/o the Company, 800 Brickell Avenue, Suite 400, Miami, Florida 33131.
(2) Based on 6,093,166 shares outstanding at September 30, 1997 and 8,199,762
as adjusted after the offering. Pursuant to the rules of the Commission,
certain shares which a person has the right to acquire within 60 days of
the date hereof pursuant to the exercise of stock options and warrants are
deemed to be outstanding for the purpose of computing the percentage
ownership of such person but are not deemed outstanding for the purpose of
computing the percentage ownership of any other person.
(3) Includes 2,137,850 shares (35.1%) held of record by Fund V and 1,817,468
shares (29.8%) held of record by TCP prior to the offering. Fund V will not
sell any shares in the offering, and TCP will sell 177,203 shares in the
offering, resulting in Fund V continuing to own 2,137,850 shares (26.1%)
and TCP owning 1,640,265 (20.0%). NationsCredit is a limited partner of TCP
and beneficially owns 177,203 of the shares owned of record by TCP. TCP is
selling 177,203 shares in the offering on behalf of NationsCredit. HIG
Investment Group, L.P. disclaims beneficial ownership of such shares. HIG
Investment Group, L.P. is the controlling shareholder of Fund V and the
controlling shareholder of TCP's general partner. Mr. Tamer and Mr.
Mnaymneh are directors of the Company, Managing Directors of HIG Capital
Management, Inc., directors of Fund V and TCP, and are controlling
shareholders of the general partner of HIG Investment Group, L.P. Mr.
Bolduc is a director of the Company, Managing Director of HIG Capital
Management, Inc., director of Fund V and director of TCP. Mr. Berman is a
director of the Company, Vice President of HIG Capital Management, Inc.,
Vice President of Fund V and Vice President of TCP. Messrs. Tamer,
Mnaymneh, Bolduc and Berman may, by virtue of their relationship with Fund
V, TCP and HIG Investment Group, L.P., be deemed to beneficially own the
securities held by Fund V, TCP or HIG Investment Group, L.P., and to share
voting and investment power with respect to such securities. Messrs. Tamer,
Mnaymneh, Bolduc and Berman each disclaims beneficial ownership of the
securities, except to the extent of his respective investment interests in
Fund V, TCP or HIG Investment Group, L.P. The address of Fund V, TCP and
HIG Investment Group, L.P. and Messrs. Tamer, Mnaymneh, Bolduc and Berman
is c/o HIG Capital Management, Inc., 1001 South Bayshore Drive, Suite 2708,
Miami, Florida 33131.
(4) Does not reflect the possible sale of shares upon exercise of the
Underwriters' over-allotment option. Fund V and Messrs. Molina and
Beveridge have granted an option to the Underwriters, exercisable for 30
days after the date of this Prospectus, to purchase up to an aggregate of
350,587 additional shares of Common Stock at the initial public offering
price set forth on the cover page of this Prospectus, less the underwriting
discount. If the Underwriters exercise the option in full, Fund V will sell
298,649 shares and Messrs. Molina and Beveridge will each sell 25,969
shares, resulting in Fund V owning 1,839,201 shares (22.4%) and Messrs.
Molina and Beveridge each owning 995,169 shares (12.0%) after the closing
of the offering. See "Underwriting."
(5) Includes (i) 929,964 shares directly owned, and (ii) 91,174 shares subject
to presently exercisable options. Excludes 59,202 shares subject to
unexercisable options.
(6) Includes (i) 106,596 shares issuable upon the exercise of outstanding
warrants issued to NationsCredit as the Company's lender and (ii) 177,203
shares owned by TCP, which represent NationsCredit's proportionate interest
in the 1,817,468 shares owned by TCP based upon NationsCredit's limited
partnership interest in TCP. The address of NationsCredit is One Canterbury
Green, Stamford, Connecticut 06912. See "Certain Transactions."
(7) Includes 64,135 shares directly owned. Excludes 16,445 shares subject to
unexercisable options.
(8) Reflects shares held of record by Fund V and TCP. See footnote (3).
(9) Excludes 13,156 shares subject to unexercisable options.
(10) The address of Mr. Sorensen is c/o Interim Services, 2050 Spectrum
Boulevard, Ft. Lauderdale, Florida 33309.
(11) Includes 91,174 shares subject to presently exercisable options held by
each of Messrs. Molina and Beveridge. Excludes (i) 3,955,318 shares owned
of record by Fund V and TCP and (ii) an aggregate of 148,005 shares subject
to unexercisable options held by Messrs. Molina, Beveridge and Berman and
Ms. Gozlan.

53
<PAGE> 54

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of (i) 50,000,000
shares of Common Stock, par value $.01 per share, 8,199,762 shares of which will
be outstanding upon the consummation of the offering and (ii) 1,000,000 shares
of preferred stock, par value $.01 per share, none of which will be outstanding.
The following summary description of the capital stock of the Company is
qualified in its entirety by reference to the Amended and Restated Articles of
Incorporation and Amended and Restated Bylaws of the Company, copies of which
are filed as exhibits to the Registration Statement of which this Prospectus is
a part. See "Additional Information."

COMMON STOCK

Subject to the rights of the holders of any preferred stock which may be
outstanding, each holder of Common Stock on the applicable record date is
entitled to receive such dividends as may be declared by the Board of Directors
out of funds legally available therefor, and, in the event of liquidation, to
share pro rata in any distribution of the Company's assets after payment or
providing for the payment of liabilities and the liquidation preference of any
outstanding preferred stock. Each holder of Common Stock is entitled to one vote
for each share held of record on the applicable record date on all matters
presented to a vote of shareholders, including the election of directors.
Holders of Common Stock have no cumulative voting rights or preemptive rights to
purchase or subscribe for any stock or other securities and there are no
conversion rights or redemption or sinking fund provisions with respect to such
stock. All outstanding shares of Common Stock are, and the shares of Common
Stock offered hereby will be when issued, fully paid and nonassessable.

The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company, New York, New York.

PREFERRED STOCK

The Company's Board of Directors may, without further action by the
Company's shareholders, from time to time, direct the issuance of shares of
preferred stock in series and may, at the time of issuance, determine the
rights, preferences and limitations of each series. Satisfaction of any dividend
preferences of outstanding shares of preferred stock would reduce the amount of
funds available for the payment of dividends on shares of Common Stock. Holders
of shares of preferred stock may be entitled to receive a preference payment in
the event of any liquidation, dissolution or winding-up of the Company before
any payment is made to the holders of shares of Common Stock. Under certain
circumstances, the issuance of shares of preferred stock may render more
difficult or tend to discourage a merger, tender offer or proxy contest, the
assumption of control by a holder of a large block of the Company's securities
or the removal of incumbent management. The Board of Directors of the Company,
without shareholder approval, may issue shares of preferred stock with voting
and conversion rights which would adversely affect the holders of shares of
Common Stock. Upon consummation of the offering, there will be no shares of
preferred stock outstanding, and the Company has no present intention to issue
any shares of preferred stock.

ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE COMPANY'S
ARTICLES OF INCORPORATION AND BYLAWS AND OTHER PROVISIONS

Certain provisions of the Articles and Bylaws of the Company and Florida
law summarized in the following paragraphs may be deemed to have an
anti-takeover effect and may delay, defer or prevent a tender offer or takeover
attempt that a shareholder might consider in its best interest, including those
attempts that might result in a premium over the market price for the shares
held by shareholders.

Classified Board of Directors. The Articles provide for the Board of
Directors to be divided into three classes of directors serving staggered
three-year terms. As a result, approximately one-third of the Board of Directors
will be elected each year. The Articles also provide that shareholders may
remove a director upon the affirmative vote of two-thirds of all votes entitled
to be cast for the election of directors. This provision, when coupled with the
provision of the Bylaws authorizing only the Board of Directors to fill vacant
directorships, will preclude a shareholder from removing incumbent directors
without cause and simultane-

54
<PAGE> 55

ously gaining control of the Board of Directors by filling the vacancies created
by such removal with its own nominees. The Company's Articles provide that the
provisions described in this paragraph may only be amended by an affirmative
vote of two-thirds of all votes entitled to be cast for the election of
directors.

Special Meeting of Shareholders. The Articles provide that special
meetings of shareholders of the Company may be called only by the Board of
Directors, the Company's Chairman of the Board of Directors or the holders of
not less than 50% of all votes entitled to be cast on any issue proposed to be
considered at such special meeting. This provision will make it more difficult
for shareholders to take actions opposed by the Board of Directors.

Advance Notice for Shareholder Proposals and Director Nominations. The
Articles provide that shareholders seeking to bring business before an annual
meeting of shareholders, or to nominate candidates for election as directors at
an annual or special meeting of shareholders, must provide timely notice thereof
in writing. To be timely with respect to an annual meeting, a shareholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Company not less than 120 days nor more than 180 days prior to
the first anniversary of the date of the Company's notice of annual meeting
provided with respect to the previous year's meeting. The Articles also specify
certain requirements for a shareholder's notice to be in proper written form.
These provisions may preclude shareholders from bringing matters before or from
making nominations for directors at an annual or special meeting.

Authorized But Unissued Shares. Subject to the applicable requirements of
the Nasdaq National Market, the authorized but unissued shares of Common Stock
and preferred stock are available for future issuance without shareholder
approval. These additional shares may be utilized for a variety of corporate
purposes, including future public offerings to raise additional capital,
corporate acquisitions and employee benefit plans. The existence of authorized
but unissued and unreserved Common Stock and preferred stock may enable the
Board of Directors to issue shares to persons friendly to current management
which could render more difficult or discourage an attempt to obtain control of
the Company by means of a proxy contest, tender offer, merger or otherwise, and
thereby protect the continuity of the Company's management.

Certain Florida Legislation. The State of Florida has enacted legislation
that may deter or frustrate takeovers of Florida corporations. The Florida
Control Share Act generally provides that shares acquired in excess of certain
specified thresholds will not possess any voting rights unless such voting
rights are approved by a majority of a corporation's disinterested shareholders.
The Florida Affiliated Transactions Act generally requires supermajority
approval by disinterested shareholders of certain specified transactions between
a public corporation and holders of more than 10% of the outstanding voting
shares of the corporation (or their affiliates). Florida law and the Company's
Articles also authorize the Company to indemnify the Company's directors,
officers, employees and agents under certain circumstances and presently limit
the personal liability of corporate directors for monetary damages, except where
the directors (i) breach their fiduciary duties and (ii) such breach constitutes
or includes certain violations of criminal law, a transaction from which the
directors derived an improper personal benefit, certain unlawful distributions
or certain other reckless, wanton or willful acts or misconduct. The Company may
also indemnify any person who was or is a party to any proceeding by reason of
the fact that he is or was a director, officer, employee or agent of such
corporation (or is or was serving at the request of such corporation in such a
position for another entity) against liability to be in the best interests of
such corporation and, with respect to criminal proceedings, had no reasonable
cause to believe his conduct was unlawful.

55
<PAGE> 56

SHARES ELIGIBLE FOR FUTURE SALE

Upon consummation of this offering, the Company will have 8,199,762 shares
of Common Stock issued and outstanding. Of the Common Stock outstanding upon
completion of this offering, the 2,337,245 shares of Common Stock sold in this
offering (2,687,832 if the Underwriters' over-allotment option is exercised in
full) will be freely tradable by the holders thereof without restriction or
further registration under the Securities Act except for any shares held by
"affiliates" of the Company, as that term is defined under the Securities Act
and the regulations promulgated thereunder (an "affiliate"), or persons who have
been affiliates within the preceding three months. Upon the expiration of
lock-up agreements between each of the executive officers, directors and
existing shareholders and the Underwriters, 180 days after the date of this
Prospectus (or earlier upon the written consent of Merrill Lynch), 4,404,600
shares of Common Stock (including options to acquire 182,348 shares of Common
Stock) outstanding prior to this offering may be sold in the public market by
affiliates of the Company, subject to the limitations and restrictions contained
in Rule 144 under the Securities Act. Holders of 1,640,265 shares of Common
Stock will not be able to sell their shares in reliance on Rule 144 under the
Securities Act prior to June 1998.

In general, under Rule 144 as currently in effect, a holder (or holders
whose shares are aggregated) of "restricted securities," including persons who
may be deemed affiliated with the Company, whose shares meet a one-year holding
period requirement are entitled to sell, within any three-month period, a number
of these shares that does not exceed the greater of 1% of the then outstanding
shares of Common Stock (approximately 8,199,762 shares immediately after this
offering) or the average weekly reported trading volume in the Common Stock
during the four calendar weeks preceding the date on which notice of the sale is
given, provided certain manner of sale and notice requirements and requirements
as to the availability of current public information about the Company are
satisfied. Under Rule 144(k), a holder of "restricted securities" who is deemed
not to have been an affiliate of the Company during the three months preceding a
sale by him, and whose shares meet a two-year holding period requirement, is
entitled to sell those shares, without regard to these restrictions and
requirements. In addition, affiliates of the Company must comply with the
restrictions and requirements of Rule 144, other than the one-year holding
period requirement, in order to sell shares of Common Stock which are not
"restricted securities" (such as shares acquired by affiliates in the offering).

The Company has reserved an aggregate of 310,000 shares of Common Stock for
issuance under the Incentive Plan. On the date of this Prospectus, options to
purchase an aggregate of 265,258 shares of Common Stock will be granted under
the Incentive Plan, a third of which, in general, will vest in October of each
of 1998, 1999 and 2000. 118,404 of such options will be held by two executive
officers and will vest immediately upon the termination of their employment for
any reason other than cause. 3,289 of such options will be granted to a
consultant to the Company and will vest immediately upon the consummation of the
offering. See "Management -- Executive Incentive Compensation Plan." After the
offering, the Company may file a registration statement under the Securities Act
to register the Common Stock to be issued under this plan. After the effective
date of such registration statement, shares issued under the Incentive Plan will
be freely tradable without restriction or further registration under the
Securities Act, unless acquired by affiliates of the Company.

Prior to this offering, there has been no trading market for the Common
Stock. No prediction can be made as to the effect, if any, that future sales of
shares pursuant to Rule 144 or otherwise will have on the market price
prevailing from time to time. Sales of substantial amounts of the Common Stock
in the public market following this offering or the perception that such sales
might occur could adversely affect the then prevailing market price. The
Company's existing shareholders have agreed that they will not sell or otherwise
transfer any shares of Common Stock to the public for 180 days after this
offering. See "Underwriting."

REGISTRATION RIGHTS

Following the closing of this offering, Fund V will be entitled, subject to
the lock-up agreements, to require the Company to register the sale of its
2,137,850 shares of outstanding Common Stock under the Securities Act, and the
Company must use all commercially reasonable efforts to effect such
registration. Pursuant to agreements entered into between the Company and each
of Fund V, TCP, Mr. Molina,

56
<PAGE> 57

Mr. Beveridge, Mr. Sorensen and Ms. Gozlan, under certain circumstances and
subject to certain limitations and the lock-up agreements, following the closing
of this offering, such shareholders may require the Company to include an
aggregate of 6,044,865 shares of Common Stock held by them (including options to
acquire 182,348 shares of Common Stock) in the event the Company proposes to
register any of its securities, either for its own account or for the account of
a security holder, subject to certain limitations on the number of shares to be
included in the registration by the underwriter of such offering.

57
<PAGE> 58

UNDERWRITING

Subject to the terms and conditions set forth in the Purchase Agreement
(the "Purchase Agreement"), the Company and the Selling Shareholders have agreed
to sell to each of the underwriters named below (the "Underwriters") and each of
the Underwriters, for whom Merrill Lynch and Salomon Brothers Inc are acting as
representatives (the "Representatives"), severally has agreed to purchase, the
number of shares of Common Stock set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... 853,623
Salomon Brothers Inc........................................ 853,622
BancAmerica Robertson Stephens.............................. 60,000
Donaldson, Lufkin & Jenrette Securities Corporation......... 60,000
The Robinson-Humphrey Company, LLC.......................... 60,000
Smith Barney Inc............................................ 60,000
UBS Securities LLC.......................................... 60,000
J.C. Bradford & Co.......................................... 30,000
Cleary Gull Reiland & McDevitt Inc.......................... 30,000
Cowen & Company............................................. 30,000
Gruntal & Co., L.L.C........................................ 30,000
Legg Mason Wood Walker, Incorporated........................ 30,000
Morgan Keegan & Company, Inc................................ 30,000
Rauscher Pierce Refsnes, Inc................................ 30,000
Ramond James & Associates, Inc.............................. 30,000
Sands Brothers & Co., Ltd................................... 30,000
SoundView Financial Group, Inc.............................. 30,000
Stephens Inc................................................ 30,000
---------
Total.......................................... 2,337,245
=========
</TABLE>

The Representatives have advised the Company and the Selling Shareholders
that the Underwriters propose to offer the Common Stock to the public initially
at the public offering price set forth on the cover page of this Prospectus and
to certain dealers at such price less a concession not in excess of $.50 per
share and that the Underwriters may allow, and such dealers may reallow,
discounts not in excess of $.10 per share to certain other dealers. After the
initial public offering, the offering price, concession and discount may be
changed.

NationsCredit has informed the Company that it intends to exercise its
warrants to purchase shares of Common Stock in full prior to this offering and
sell the aggregate of such underlying shares to the Underwriters. See "Principal
and Selling Shareholders."

Fund V and Messrs. Molina and Beveridge have granted an option to the
Underwriters, exercisable for 30 days after the date of this Prospectus, to
purchase up to an aggregate of 350,587 additional shares of Common Stock at the
initial public offering price set forth on the cover page of this Prospectus,
less the underwriting discount. Messrs. Molina and Beveridge have each granted
such option with respect to 25,969 of their shares of Common Stock, and Fund V
has granted such option with respect to 298,649 of its shares. The Underwriters
may exercise this option only to cover over-allotments, if any, made on the sale
of the Common Stock offered hereby. To the extent that the Underwriters exercise
this option, each Underwriter will be obligated, subject to certain conditions,
to purchase a number of additional shares of Common Stock proportionate to such
Underwriter's initial amount reflected in the foregoing table.

At the request of the Company, the Underwriters have reserved for sale, at
the initial public offering price, up to 275,000 shares to be sold and offered
hereby by the Company to certain employees of the Company and other persons. The
number of shares of Common Stock available for sale to the general public

58
<PAGE> 59

will be reduced to the extent such persons purchase such reserved shares. Any
reserved shares which are not orally confirmed for purchase within one day of
the pricing of the offering will be offered by the Underwriters to the general
public on the same terms as the other shares offered hereby. Certain individuals
purchasing reserved shares may be required to agree not to sell, offer or
otherwise dispose of any shares of Common Stock for a period of three months
after the date of this Prospectus.

The Company, its executive officers, directors and all existing
shareholders have agreed, subject to certain exceptions, not to directly or
indirectly (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant for the sale of or otherwise dispose of or transfer any shares
of Common Stock or securities convertible into or exchangeable or exercisable
for Common Stock, whether now owned or thereafter acquired by the person
executing the agreement or with respect to which the person executing the
agreement thereafter acquires the power of disposition, or file a registration
statement under the Securities Act with respect to the foregoing or (ii) enter
into any swap or other agreement that transfers, in whole or in part, the
economic consequence of ownership of the Common Stock whether any such swap or
transaction is to be settled by delivery of Common Stock or other securities, in
cash or otherwise, without the prior written consent of Merrill Lynch for a
period of 180 days after the date of this Prospectus. See "Shares Eligible for
Future Sale."

Prior to the offering, there has been no public market for the Common Stock
of the Company. The initial public offering price has been determined through
negotiations among the Company, the Selling Shareholders and the
Representatives. The factors considered in determining the initial public
offering price, in addition to prevailing market conditions, are price-earnings
ratios of publicly traded companies that the Representatives believe to be
comparable to the Company, certain financial information of the Company, the
history of, and the prospects for, the Company and the industry in which it
competes, and the Company's past and present operations, the prospects for, and
timing of, future revenues of the Company, the present state of the Company's
development, and the above factors in relation to market values and various
valuation measures of other companies engaged in activities similar to those of
the Company. There can be no assurance that an active trading market will
develop for the Common Stock or that the Common Stock will trade at or above the
initial public offering price. The initial public offering price set forth on
the cover page of this Prospectus should not be considered an indication of the
actual value of the Common Stock. Such price is subject to change as a result of
market conditions and other factors. The Common Stock has been approved for
quotation on the Nasdaq National Market under the symbol "LTCW."

The Underwriters do not intend to confirm sales of the Common Stock offered
hereby to any accounts over which they exercise discretionary authority.

The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including certain liabilities under
the Securities Act or to contribute to payments Underwriters may be required to
make in respect thereof.

Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters and
certain selling group members to bid for and purchase the Common Stock. As an
exception in these rules, Merrill Lynch is permitted to engage in certain
transactions that stabilize the price of the Common Stock. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the Common Stock.

If the Underwriters create a short position in the Common Stock in
connection with the offering, (i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus) Merrill Lynch may
reduce that short position by purchasing Common Stock in the open market.
Merrill Lynch may also elect to reduce any short position by exercising all or
part of the over-allotment option described above.

Merrill Lynch may also impose a penalty bid on certain Underwriters and
selling group members. This means that if Merrill Lynch purchases shares of
Common Stock in the open market to reduce the Underwriters' short position or to
stabilize the price of the Common Stock, Merrill Lynch may reclaim the amount of
the selling concession from the Underwriters and selling group members who sold
those shares as part of the offering.

59
<PAGE> 60

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.

Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representation that Merrill
Lynch will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.

LEGAL MATTERS

The legality of the shares of Common Stock offered hereby will be passed
upon for the Company by Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A.,
Miami, Florida. Certain legal matters will be passed upon for the Underwriters
by Brown & Wood LLP, New York, New York.

EXPERTS

The consolidated financial statements of the Company at July 31, 1996 and
1997 and for each of the two years in the period ended July 31, 1997 and the
combined financial statements of Telephone Warehouse at December 31, 1995 and
1996, and for each of the three years in the period ended December 31, 1996
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, and the consolidated financial
statements of the Company at July 31, 1995 and for each of the two years in the
period then ended have been audited by Deloitte & Touche LLP, independent
auditors, as set forth in their respective reports thereon appearing elsewhere
herein, and are included in reliance upon such reports given upon the authority
of such firms as experts in accounting and auditing.

The Company's Board of Directors appointed Ernst & Young LLP as the
independent accountants for the Company in July 1996 to replace Deloitte &
Touche LLP, who were the independent accountants from July 1994 until such time.
During the period of Deloitte & Touche LLP's retention by the Company, there
were no disagreements between Deloitte & Touche LLP on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of Deloitte
& Touche LLP, would have caused them to make reference to the disagreement in
any of their reports on the Company's financial statements. In addition, the
reports of Deloitte & Touche LLP on the financial statements of the Company at
and for the years ended July 31, 1994 and 1995 contained no adverse opinion or a
disclaimer of opinion and were not qualified or modified as to uncertainty, the
scope of the audit performed or accounting principles. During the two years
ended July 31, 1995, there have been no reportable events described in Item
304(a)(1)(v) of Regulation S-K promulgated by the Commission. The Company has
requested Deloitte & Touche LLP furnish it with a letter addressed to the
Commission stating whether or not it agrees with the above statements. A copy of
such letter has been filed as an exhibit to the registration statement of which
this Prospectus forms a part. The Company engaged Ernst & Young LLP as its new
independent accountants as of July 12, 1996 to perform audit services commencing
with the year ended July 31, 1996. During the year ended July 31, 1995, the
Company had not consulted Ernst & Young LLP on items which (i) were or should
have been subject to Statement on Accounting Standards No. 50 or (ii) concerned
the subject matter of a disagreement or reportable event (as described in Item
304(a)(1)(iv) of Regulation S-K).

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (together with all
amendments, exhibits and schedules thereto, the "Registration Statement") under
the Securities Act of 1933, as amended (the "Act"), with respect to the Common
Stock offered hereby. This Prospectus does not contain all of the information
set forth in the Registration Statement. For further information with respect to
the Company and the Common Stock offered hereby, reference is hereby made to
such Registration Statement. Statements contained in this Prospectus as to the
contents of any contract or other document are not necessarily complete and, in
each instance, reference

60
<PAGE> 61

is made to the copy of such contract or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. Copies of the Registration Statement may be obtained from the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549,
upon payment of the fees prescribed by the Commission, or may be examined
without charge at the offices of the Commission. The Commission also maintains a
World Wide Web site on Internet at http://www.sec.gov that contains reports,
proxy and information statements and other information filed electronically with
the Commission. Information concerning the Company will also be available for
inspection at the offices of the Nasdaq National Market, Reports Section, 1735 K
Street, N.W., Washington, D.C. 20006.

The Company intends to furnish its shareholders with annual reports
containing audited financial statements which have been certified by its
independent public accountants, and quarterly reports containing unaudited
summary financial information for each of the first three quarters of each
fiscal year.

61
<PAGE> 62

INDEX TO FINANCIAL STATEMENTS

LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES:

<TABLE>
<S> <C>
Report of Independent Certified Public Accountants.......... F-2
Report of Independent Certified Public Accountants.......... F-3
Consolidated Balance Sheets................................. F-4
Consolidated Statements of Operations....................... F-5
Consolidated Statements of Changes in Redeemable,
Convertible Preferred Stock and Common Shareholders'
Equity.................................................... F-6
Consolidated Statements of Cash Flows....................... F-7
Notes to Consolidated Financial Statements.................. F-8

TELEPHONE WAREHOUSE:
Report of Independent Auditors.............................. F-21
Combined Balance Sheets..................................... F-22
Combined Statements of Operations........................... F-23
Combined Statements of Changes in Shareholders' Equity...... F-24
Combined Statements of Cash Flows........................... F-25
Notes to Combined Financial Statements...................... F-26
</TABLE>

F-1
<PAGE> 63

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Shareholders
Let's Talk Cellular & Wireless, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Let's Talk
Cellular & Wireless, Inc. and subsidiaries as of July 31, 1996 and 1997, and the
related consolidated statements of operations, changes in redeemable,
convertible preferred stock and common shareholders' equity, and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Let's Talk
Cellular & Wireless, Inc. and subsidiaries at July 31, 1996 and 1997, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.

/s/ ERNST & YOUNG LLP

Miami, Florida
September 19, 1997, except for the
third paragraph of Note 18, as to
which the date is October 20, 1997

F-2
<PAGE> 64

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Shareholders
Let's Talk Cellular & Wireless, Inc. and Subsidiaries

We have audited the accompanying statements of operations, shareholders'
equity and cash flows of Let's Talk Cellular & Wireless, Inc. (formerly Let's
Talk Cellular of America, Inc.) for the year ended July 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the results of operations and cash flows of Let's Talk
Cellular & Wireless, Inc. and subsidiaries for the year ended July 31, 1995 in
conformity with generally accepted accounting principles.

/s/ DELOITTE & TOUCHE LLP
Miami, Florida
October 31, 1995
(October 20, 1997 as to the effects
of the stock split discussed in the
third paragraph of Note 18)

F-3
<PAGE> 65

LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JULY 31,
------------------------
1996 1997
---------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $1,357,172 $ 1,080,014
Accounts receivable, net.................................. 620,521 5,706,983
Inventories............................................... 1,210,159 5,712,420
Prepaid expenses.......................................... 31,224 265,859
Income taxes receivable (Note 11)......................... -- 291,099
Other current assets...................................... 42,511 600,385
Deferred tax asset (Note 11).............................. 17,174 475,245
---------- -----------
Total current assets.............................. 3,278,761 14,132,005
Cash held in escrow (Note 12)............................... 2,009,194 --
Property and equipment, net (Note 4)........................ 1,324,852 5,296,743
Other assets, net........................................... 32,780 1,353,097
Intangible assets, net (Notes 3, 5 and 14).................. -- 13,755,696
---------- -----------
Total assets...................................... $6,645,587 $34,537,541
========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable.................................... $ 841,490 $ 6,583,542
Bank lines of credit (Note 6)............................. 827,000 1,023,285
Accrued expenses.......................................... 512,486 3,120,493
Loans payable to shareholders and officers (Note 7)....... -- 258,100
Current portion of bank term loans and obligations under
capital leases (Notes 6 and 8)......................... 115,236 732,195
Income taxes payable (Note 11)............................ 59,217 --
Deferred revenues......................................... 79,886 693,038
Customer deposits......................................... 64,616 108,673
---------- -----------
Total current liabilities......................... 2,499,931 12,519,326
Bank term loans, less current portion (Note 6).............. 190,000 12,350,000
Loans payable to shareholders and officers (Note 7)......... 258,100 2,000,000
Obligations under capital leases, less current portion (Note
8)........................................................ 26,226 32,859
Other liabilities........................................... 35,565 72,808
Deferred tax liability (Note 11)............................ 5,572 952,596
Commitments and contingencies (Note 9)
Series A preferred stock, $30 par value, 150,000 shares
authorized, 100,000 and none issued and outstanding,
respectively (Note 12).................................... 2,937,360 --
Shareholders' equity (Notes 13 and 18):
Preferred stock, $.01 par value, 1,000,000 shares
authorized, none issued and outstanding (Note 13)...... -- --
Common stock, $.01 par value, 50,000,000 shares
authorized, 2,137,848 and 6,093,166 shares issued and
outstanding, respectively.............................. 21,379 60,932
Additional paid-in capital.................................. 243,077 6,166,474
Retained earnings........................................... 428,377 382,546
---------- -----------
Total common shareholders' equity................. 692,833 6,609,952
---------- -----------
Total liabilities and shareholders' equity........ $6,645,587 $34,537,541
========== ===========
</TABLE>

See accompanying notes.

F-4
<PAGE> 66

LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
----------------------------------------
1995 1996 1997
---------- ----------- -----------
<S> <C> <C> <C>
Net revenues:
Retail sales....................................... $6,119,990 $ 8,151,904 $13,230,085
Activation commissions............................. 1,650,318 4,366,343 12,574,633
Residual income.................................... 533,273 1,075,035 1,948,169
Wholesale sales.................................... -- -- 2,309,082
---------- ----------- -----------
Total net revenues......................... 8,303,581 13,593,282 30,061,969
Cost of sales........................................ 4,259,814 6,509,282 14,822,617
---------- ----------- -----------
Gross profit......................................... 4,043,767 7,084,000 15,239,352
Operating expenses:
Selling, general and administrative................ 3,896,453 6,601,077 13,993,392
Former shareholder compensation expense............ -- -- 80,000
Depreciation and amortization...................... 99,732 225,159 451,108
Amortization of intangible assets.................. -- -- 417,739
---------- ----------- -----------
Total operating expenses................... 3,996,185 6,826,236 14,942,239
---------- ----------- -----------
Income from operations............................... 47,582 257,764 297,113
Interest expense, net................................ (39,898) (152,827) (340,102)
---------- ----------- -----------
Income (loss) before provision (benefit) for income
taxes.............................................. 7,684 104,937 (42,989)
Provision (benefit) for income taxes................. (455) 38,939 2,842
---------- ----------- -----------
Net income (loss).......................... 8,139 65,998 (45,831)
Fair value of Common Stock distributed to preferred
shareholder to induce conversion of Series A
Preferred Stock.................................... -- -- (320,000)
---------- ----------- -----------
Net income (loss) applicable to common
shareholders............................. $ 8,139 $ 65,998 $ (365,831)
========== =========== ===========
Net income (loss) per share applicable to
common shareholders...................... $ -- $ .01 $ (.07)
========== =========== ===========
Weighted average shares outstanding.................. 6,199,762 6,199,762 6,199,762
========== =========== ===========
</TABLE>

See accompanying notes.

F-5
<PAGE> 67

LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE,
CONVERTIBLE PREFERRED STOCK AND COMMON SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
REDEEMABLE COMMON SHAREHOLDERS' EQUITY
CONVERTIBLE ---------------------------------------------------
PREFERRED STOCK COMMON STOCK PAID-IN
---------------------- --------------------- CAPITAL RETAINED
SHARES AMOUNT SHARES(1) AMOUNT(1) (DEFICIENCY)(1) EARNINGS
--------- ---------- --------- --------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at July 31,
1994.................... -- $ -- 2,137,848 $21,379 $ (13,129) $354,240
Capital contributions..... -- -- -- -- 250,000 --
Net income................ -- -- -- -- -- 8,139
--------- ---------- --------- ------- ---------- --------
Balance at July 31,
1995.................... -- -- 2,137,848 21,379 236,871 362,379
Issuance of Series A
Preferred Stock for
cash.................... 100,000 3,295,000 -- -- -- --
Issuance costs associated
with Series A Preferred
Stock................... -- (358,702) -- -- -- --
Accretion of Series A
Preferred Stock to
redemption value........ -- 1,062 -- -- (1,062) --
Issuance of stock under
stock bonus plan........ -- -- -- -- 7,268 --
Net income................ -- -- -- -- -- 65,998
--------- ---------- --------- ------- ---------- --------
Balance at July 31,
1996.................... 100,000 2,937,360 2,137,848 21,379 243,077 428,377
Accretion of Series A
Preferred Stock to
redemption value........ -- 62,640 -- -- (62,640) --
Issuance of stock under
stock bonus plan........ -- -- -- -- 29,651 --
Redemption of Series A
Preferred Stock in
exchange for common
stock................... (100,000) (3,000,000) 2,137,850 21,379 2,978,621 --
Issuance of common stock
to purchase Telephone
Warehouse............... -- -- 1,817,468 18,174 2,811,826 --
Warrants issued in
connection with debt
refinancing............. -- -- -- -- 165,939 --
Net loss.................. -- -- -- -- -- (45,831)
--------- ---------- --------- ------- ---------- --------
Balance at July 31,
1997.................... -- $ -- 6,093,166 $60,932 $6,166,474 $382,546
========= ========== ========= ======= ========== ========
</TABLE>

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

(1) Number of shares and related amounts have been restated to reflect a 3.289
for 1 stock split effected on October 20, 1997 (see Note 18).

See accompanying notes.

F-6
<PAGE> 68

LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
--------------------------------------
1995 1996 1997
---------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $ 8,139 $ 65,998 $ (45,831)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization............................. 99,732 225,159 451,108
Amortization of intangible assets......................... -- -- 417,739
Amortization of deferred financing costs.................. -- -- 40,998
Provision for activation adjustments and cancellation
losses.................................................. -- 65,638 151,041
Deferred income taxes..................................... 19,999 (31,601) (137,739)
Loss on disposal of property and equipment................ -- 50,476 128,184
Loss on impairment of leasehold improvements.............. -- -- 135,167
Issuance of stock under stock bonus plan.................. -- 7,268 29,651
Changes in operating assets and liabilities, net of
acquisitions:
Accounts receivable..................................... (387,717) (175,516) (1,945,325)
Inventories............................................. (719,560) (18,807) (2,389,231)
Prepaid expenses........................................ (133,886) 139,230 (58,233)
Other current assets.................................... (120,748) 85,740 (357,874)
Income tax receivable................................... -- -- (291,099)
Other assets............................................ (10,663) (9,718) (267,408)
Trade accounts payable.................................. 1,014,614 (390,116) 2,886,454
Accrued expenses........................................ 216,619 146,641 791,505
Other liabilities....................................... 2,711 32,854 37,243
Income taxes payable.................................... -- 59,217 (63,348)
Customer deposits....................................... 4,659 17,738 (27,528)
Deferred revenues....................................... 97,903 (18,017) 42,758
---------- ----------- -----------
Net cash provided by (used in) operating activities......... 91,802 252,184 (471,768)
INVESTING ACTIVITIES
Cash acquired in connection with the acquisition of
Telephone Warehouse....................................... 823,846
Acquisition of Northpoint Cellular.......................... -- -- (850,000)
Proceeds from disposals of property and equipment........... -- 73,680 --
Purchases of property and equipment......................... (809,182) (594,185) (3,648,761)
Decrease (increase) in cash held in escrow.................. -- (2,009,194) 2,009,194
---------- ----------- -----------
Net cash used in investing activities....................... (809,182) (2,529,699) (1,665,721)
FINANCING ACTIVITIES
Net borrowings under bank lines of credit................... 312,493 364,507 196,286
Increase (decrease) in loans from shareholders.............. 332,792 (100,897) --
Proceeds from capital contributions......................... 250,000 -- --
Proceeds from bank term loan................................ -- 300,000 2,600,000
Payments on bank term loan and capital leases............... -- (107,041) (935,955)
Proceeds from sale of preferred stock, net of issuance
costs..................................................... -- 2,936,298 --
---------- ----------- -----------
Net cash provided by financing activities................... 895,285 3,392,867 1,860,331
---------- ----------- -----------
Net increase (decrease) in cash and cash equivalents........ 177,905 1,115,352 (277,158)
Cash and cash equivalents at beginning of year.............. 63,915 241,820 1,357,172
---------- ----------- -----------
Cash and cash equivalents at end of year.................... $ 241,820 $ 1,357,172 $ 1,080,014
========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest...................................... $ 31,269 $ 152,358 $ 373,079
========== =========== ===========
Cash paid for income taxes.................................. $ 9,812 $ -- $ 502,700
========== =========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES
Common stock issued to acquire Telephone Warehouse.......... $ -- $ -- $ 2,830,000
========== =========== ===========
Common stock issued to convert Redeemable Preferred Stock... $ -- $ -- $ 3,000,000
========== =========== ===========
Warrants issued in connection with debt refinancing......... $ -- $ -- $ 165,939
========== =========== ===========
Acquisition of property and equipment under capital
leases.................................................... $ 135,683 $ 21,552 $ 36,412
========== =========== ===========
</TABLE>

See accompanying notes.

F-7
<PAGE> 69

LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1997

1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Let's Talk Cellular & Wireless, Inc. (LTC) and its wholly-owned
subsidiaries (collectively, the Company) ( known as Let's Talk Cellular of
America, Inc. prior to June 27, 1997) is an independent specialty retailer and
wholesale distributor of cellular and wireless products, services and
accessories.

The Company's stores have historically experienced, and the Company expects
its stores to continue to experience, seasonal fluctuations in revenues with a
larger percentage of revenues typically being realized in the second fiscal
quarter during the holiday season. In addition, the Company's results during any
fiscal period can be significantly affected by the timing of store openings and
acquisitions and the integration of new and acquired stores into the Company's
operations. As of July 31, 1995, 1996 and 1997, the Company operated 22, 25 and
93 stores, respectively, located throughout the United States and Puerto Rico.

On June 27, 1997 (effective June 30, 1997), the Company purchased 100% of
the outstanding shares of common stock of National Cellular, Incorporated, and
Telephone Warehouse, Inc. (collectively Telephone Warehouse), from Texas
Cellular Partners, L.P. (TCP), an affiliate of HIG Fund V, Inc. (HIG Fund V).
The Series A Preferred Stock of the Company, owned by HIG Fund V, was converted
into Common Stock simultaneously with this acquisition (see Note 12). This
acquisition has been accounted for as a purchase and, accordingly, the
consolidated financial statements include the net assets and results of
operations of Telephone Warehouse beginning July 1, 1997 (see Note 3).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Let's Talk
Cellular and Wireless, Inc. and its wholly-owned subsidiaries LTC Kiosk
Management Corporation, Let's Talk Cellular of Bayside, Inc., Telephone
Warehouse, Inc. (since July 1, 1997) and National Cellular, Incorporated (since
July 1, 1997). All intercompany balances and transactions have been eliminated
in consolidation.

CASH AND CASH EQUIVALENTS

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

ACCOUNTS RECEIVABLE

A substantial portion of the Company's accounts receivable are due from
carriers of wireless communication services. Wholesale accounts receivable are
primarily due from distributors and small retailers. Credit is extended to
wholesale customers based on the evaluation of the customers financial
condition. Collateral is not required and terms are generally between 30 and 60
days. Accounts receivable are net of allowances of $65,638 and $686,804 as of
July 31, 1996 and 1997, respectively (of which $0 and $132,721 relates to the
Company's wholesale operations, respectively), which are primarily reserves for
deactivations. The reserve for deactivations is calculated based on a historical
percentage of deactivations over a one year period.

INVENTORIES

Inventories, consisting of cellular and wireless products and related
accessories, are valued at the lower of cost, based on the average cost method,
or market.

F-8
<PAGE> 70

LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the related assets.
Leasehold improvements are amortized over the shorter of their useful life or
the remainder of the noncancelable lease period (including renewal options) (see
Note 4).

OTHER ASSETS

At July 31, 1996 and 1997, other assets includes unamortized deferred
financing costs totaling $16,667 and $1,004,956, net of accumulated amortization
of $5,812 and $16,479, respectively. Deferred financing costs are being
amortized on the interest method over the terms of the related debt, which is
seven years.

INTANGIBLE ASSETS

Intangible assets includes cost in excess of identifiable assets acquired
(goodwill) and cost allocable to the estimated fair value of acquired residual
income and the noncompete arrangement entered into in connection with the
Northpoint Cellular, Inc. acquisition (see Note 14).

The Company reviews the carrying value of intangible assets on an ongoing
basis. When factors indicate that an intangible asset may be impaired, the
Company uses an estimate of the undiscounted future cash flows over the
remaining life of the asset in measuring whether the intangible asset is
recoverable. If such an analysis indicates that impairment has in fact occurred,
the book value of the intangible asset is written down to its estimated fair
value. Goodwill is being amortized over 30 years, acquired residual income is
being amortized on an accelerated basis based on the timing of acquired cash
flows through the year 2000 and the noncompete arrangement is amortized over the
life of the arrangement, which is thirty months.

PREOPENING EXPENSES

The Company expenses store preopening costs as incurred.

ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS

In fiscal 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of
Long-Lived Assets. SFAS No. 121 requires impairment losses to be recorded on
long-lived assets when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount. The adoption of SFAS No. 121 did not have a material impact on
the results of operations of the Company.

REVENUE RECOGNITION

Product Sales

Revenue from retail product sales is recorded upon customer purchase.
Revenue from wholesale product sale is recognized upon shipment of goods.

Activation Commissions

The Company receives activation commissions from cellular carriers for each
new cellular phone subscription sold by the Company. Revenue from such
commissions is recorded upon customer subscription. New subscription activation
commissions are fully refundable if the subscriber cancels service within a
certain minimum period of continuous active service (generally 180 days).
Customers generally sign a service agreement that requires a customer deposit
which is forfeited in case of early cancellation. The allowance for accounts
receivable includes an amount for estimated cancellation losses, net of deposit
forfeitures.

F-9
<PAGE> 71

LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Residual Income

The Company generally receives monthly residual income from the cellular
service providers based on a percentage of actual phone usage by subscribers.
Revenue from residual income is generally recorded as the cellular service is
provided. Revenue from prepaid pager service (approximately $385,000, $689,000
and $1,054,000 for the fiscal years ended July 31, 1995, 1996 and 1997,
respectively) is deferred and recognized over the period service is provided,
usually three to twelve months. Revenue from monthly installment pager service
contracts is recorded as received.

ADVERTISING

The Company expenses advertising costs as incurred. Advertising expense
which is included in selling, general and administrative is recorded net of
cooperative advertising payments received. Net advertising expense amounted to
$130,277, $77,168 and $590,513 for the years ended July 31, 1995, 1996 and 1997,
respectively. These amounts are net of $181,550, $654,687 and $1,804,867 of
cooperative advertising payments received for the years ended July 31, 1995,
1996 and 1997, respectively.

INCOME TAXES

Deferred income tax assets and liabilities are determined based upon
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates that will be in effect when the
differences are expected to reverse.

NET INCOME (LOSS) PER SHARE APPLICABLE TO COMMON SHAREHOLDERS

Net income (loss) per share applicable to common shareholders is calculated
using the weighted average number of common and common equivalent shares
outstanding during the respective periods. Common shares and common equivalent
shares issued at prices below the Company's estimated public offering price
during the 12 months immediately preceding the date of the initial filing of the
registration statement are included in the calculation of common equivalent
shares, as if they were outstanding for all periods presented. As such,
2,137,850 shares of Common Stock issued upon conversion of the redeemable
convertible preferred stock (see Note 12), 1,817,468 shares issued to acquire
Telephone Warehouse (see Note 3) and the issuance of 106,596 stock purchase
warrants issued in connection with the Company's debt refinancing (see Note 6)
are included in the calculation of the weighted average number of common and
common equivalent shares for all periods presented. For the years ended July 31,
1996 and 1997, accretion to redemption value of the redeemable convertible
preferred stock of $1,062 and $62,640, respectively, has been deducted from net
income (loss) for purposes of calculating net income (loss) per share applicable
to common shareholders.

Net income (loss) per share applicable to common shareholders without
including common equivalent shares prior to their issuance date, is as follows:

<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
---------------------------------------
1995 1996 1997
---------- ---------- -----------
<S> <C> <C> <C>
Net income (loss) applicable to common
shareholders............................... $ 8,139 $ 65,998 $ (365,831)
Net income (loss) per share applicable to
common shareholders(1)..................... $ .00 $ .03 $ (.10)
Weighted average shares outstanding(1)....... 2,137,848 2,310,367 4,083,424
</TABLE>

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

(1) Excluding common equivalent shares prior to their issuance.

F-10
<PAGE> 72

LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ACCOUNTING FOR STOCK-BASED COMPENSATION

SFAS No. 123, "Accounting for Stock-Based Compensation," became effective
January 1, 1996. The new standard defines a fair value method of accounting for
issuance of stock options and other equity instruments. Under the fair value
method, compensation cost is measured at the grant date based on the fair value
of the award and is recognized over the service period, which is usually the
vesting period. Pursuant to SFAS No. 123, companies are encouraged, but are not
required, to adopt the fair value method of accounting for employee stock-based
transactions. Companies are also permitted to continue to account for such
transactions under Accounting Principles Board Opinion No. 25 "Accounting for
Stock Issued to Employees," (APB Opinion 25) but are required to disclose in a
note to the consolidated financial statements pro forma net income and per share
amounts as if the Company had applied the new method of accounting.

The Company applies APB Opinion 25 and Related Interpretations in
Accounting for its employee stock-based transactions and has complied with the
disclosure requirements of SFAS No. 123.

USE OF ESTIMATES

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

NEW ACCOUNTING PRONOUNCEMENTS

In February 1997, the Financial Accounting Standards Board issued a new
accounting pronouncement, SFAS No. 128, Earnings per Share, which will change
the current method of computing earnings per share. The new standard requires
presentation of "basic earnings per share" and "diluted earnings per share"
amounts, as defined. SFAS No. 128 will be effective for the Company's quarter
ending January 1, 1998, and upon adoption, all prior-period earnings per share
presented shall be restated to conform with the provisions of the new
pronouncement.

Application earlier than the Company's quarter ending January 31, 1998 is
not permitted. The restated basic and diluted earnings or loss per share to be
reported upon adoption of SFAS No. 128 will not differ from amounts reported
under the existing accounting rules for all periods reported by the Company
through July 31, 1997.

3. ACQUISITION

On June 27, 1997 (effective June 30, 1997), the Company purchased Telephone
Warehouse in exchange for 1,817,468 shares of the Company's common stock and
assumption of approximately $13,075,000 of indebtedness. The fair value of the
shares issued to TCP were determined by management to be approximately
$2,830,000. The fair value of net assets acquired, including approximately
$2,545,000 allocated to acquired residual income was approximately $4,877,000. A
deferred tax liability of $942,000 was provided related to the acquired residual
income. The purchase price exceeded the fair value of the net assets acquired by
approximately $11,028,000. The purchase price allocation is based on preliminary
data.

In connection with the acquisition, the Company assumed an employment
agreement with the former shareholder of Telephone Warehouse (the Former
Shareholder) providing for the following: (i) for the six month period beginning
on July 1, 1997, a salary of $50,000, (ii) for the 12 month period beginning on
January 1, 1998, a salary of $100,000 and (iii) a bonus of $950,000 payable on
or before December 31, 1997, provided that certain financial performance levels
are met for the twelve months ended December 31, 1997. Payments to be made
beginning July 1, 1997 through December 31, 1997 under the employment agreement

F-11
<PAGE> 73

LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

totaling $1,000,000, will be treated as compensation expense for such period, of
which $560,000 has been included in accrued expenses at July 31, 1997.

In addition, a note payable to the Former Shareholder of $2 million,
included in assumed indebtedness of $13,075,000, provides for additional
payments to be made in March 1999 for up to $1,585,000 contingent upon the
results of Telephone Warehouse for the year ended December 31, 1998, whether or
not the Former Shareholder remains employed by the Company (see Note 7).

In a previous transaction, on January 1, 1997, TCP had purchased from the
president and sole shareholder of Telephone Warehouse (the Former Shareholder),
all of the outstanding stock of Telephone Warehouse for a purchase price of
approximately $15,100,000, including acquisition costs of approximately
$200,000. The purchase price included a $2 million subordinated promissory note
issued to the Former Shareholder, which was assumed by the Company on June 27,
1997. (see Note 7)

The following table summarizes, on an unaudited pro forma basis, the
results of operations for the years ended July 31, 1997 and 1996 as though the
acquisition of Telephone Warehouse had occurred as of the beginning of the
respective periods:

<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-------------------------
1996 1997
----------- -----------
<S> <C> <C>
Net revenues................................................ $60,669,000 $74,406,000
Income before taxes......................................... $ 588,000 $ 736,000
Net income.................................................. $ 246,000 $ 344,000
Accretion of Series A Preferred Stock....................... (1,000) (63,000)
Fair value of common stock distributed to preferred
shareholder to induce conversion of Series A Preferred
Stock..................................................... -- (320,000)
----------- -----------
Net income (loss) applicable to common shareholders......... $ 245,000 $ (39,000)
Net income (loss) per share applicable to common
shareholders.............................................. $ 0.04 $ (.01)
</TABLE>

4. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
JULY 31,
USEFUL LIVES -----------------------
(YEARS) 1996 1997
------------ ---------- ----------
<S> <C> <C> <C>
Computer equipment................................. 5 $ 239,185 $ 778,628
Furniture, vehicles and equipment.................. 5-7 716,724 1,826,484
Office equipment................................... 5-7 33,216 78,032
Building........................................... 30 -- 254,998
Leasehold improvements............................. 2-10 734,012 3,174,432
Construction in progress........................... 3,850 2,750
---------- ----------
1,726,987 6,115,324
Less accumulated depreciation and amortization..... (402,135) (818,581)
---------- ----------
$1,324,852 $5,296,743
========== ==========
</TABLE>

Office equipment under capital leases totaled $157,235 and $179,482 at July
31, 1996 and 1997, respectively. Accumulated amortization for assets under
capital leases was $44,121 and $70,292 at July 31, 1996 and 1997, respectively.

During 1997, the Company recorded a loss on impairment of leasehold
improvements of approximately $135,000. Additionally, the Company wrote-off
approximately $0, $50,500 and $128,000 of property and equipment related to
store closings for the years ended July 31, 1995, 1996 and 1997, respectively.

F-12
<PAGE> 74

LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. INTANGIBLE ASSETS

Intangible assets consist of the following at July 31, 1997:

<TABLE>
<S> <C>
Goodwill.................................................... $11,028,312
Acquired residual income.................................... 2,545,123
Non compete agreement....................................... 600,000
-----------
14,173,435
Accumulated amortization.................................... (417,739)
-----------
$13,755,696
===========
</TABLE>

6. BANK LINES OF CREDIT AND BANK TERM LOAN

On June 27, 1997, in connection with the purchase of Telephone Warehouse
from TCP, the Company assumed the debt of Telephone Warehouse owed to Nations
Credit Commercial Corporation (NCCC), a limited partner of TCP, which consisted
of the then outstanding balance of $13,075,000 under a term loan agreement, and
simultaneously refinanced the Company's debt with NCCC. The Company's new credit
facility provides for borrowings of up to $9 million under a revolving credit
facility ($1,023,285 is outstanding at July 31, 1997) and a $13,075,000 term
loan (see below). The revolving credit facility is secured by substantially all
of the Company's assets and availability is based on a formula of eligible
receivables and inventories. Borrowings under this facility bear interest at
3.75% above the commercial paper rate. At July 31, 1997, $5,927,000 was
available under the revolving credit facility based on eligible collateral at
that date.

On September 5, 1995, the Company entered into a line of credit agreement
with a bank. Under the line of credit, the Company could borrow up to $1,300,000
(as amended on December 4, 1995) based on a formula of eligible receivables and
inventories ($827,000 was outstanding at July 31, 1996). Advances under the line
of credit were payable on demand and bore interest at 2% above the bank's prime
rate (10.25% at July 31, 1996). The line of credit was secured by a pledge of
substantially all of the Company's assets and was personally guaranteed by the
Company's majority shareholders. The line of credit was repaid and terminated on
June 27, 1997 in connection with the Company's acquisition of Telephone
Warehouse.

F-13
<PAGE> 75

LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Amounts outstanding under bank term loans are as follows:

<TABLE>
<CAPTION>
JULY 31,
-----------------------
1996 1997
-------- -----------
<S> <C> <C>
NCCC term loan of $13,075,000 payable in quarterly principal
payments over 7 years through May 2004 bearing interest at
4.5% over the commercial paper rate (10.157% at July 31,
1997), secured by substantially all of the Company's
assets.(a)................................................ -- 13,050,000
Bank term loan of $300,000 payable in 35 monthly principal
installments of $5,000 with the remaining principal
balance due in September 1998 bearing interest 2.5% above
the bank's prime rate (10.75% at July 31, 1996), secured
by substantially all of the Company's assets and
personally guaranteed by two of the Company's
shareholders(b)........................................... 250,000 --
-------- -----------
250,000 13,050,000
Less current portion........................................ (60,000) (700,000)
-------- -----------
Long-term portion........................................... $190,000 $12,350,000
======== ===========
</TABLE>

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

(a)In connection with the Company's debt refinancing, the Company issued stock
purchase warrants to NCCC to purchase a total of 106,596 shares of the
Company's common stock at an exercise price of $.00003 per share. Deferred
interest expense of $165,939 was recorded at June 27, 1997, representing the
estimated value of the warrants, which is being recognized as interest
expense over the term of the credit facilities of 7 years. The warrants
expire on December 31, 2006.

(b)This term loan was repaid on June 27, 1997 in connection with the Company's
acquisition of Telephone Warehouse.

The NCCC credit facility contains certain restrictive covenants that, among
other things, restrict the payment of dividends, restrict additional
indebtedness and obligations, limit capital expenditures and require maintenance
of certain financial ratios.

Maturities of the bank term loan as of July 31, 1997, are as follows:

<TABLE>
<S> <C>
1998........................................................ $ 700,000
1999........................................................ 1,225,000
2000........................................................ 1,775,000
2001........................................................ 2,175,000
2002........................................................ 1,400,000
Thereafter.................................................. 5,775,000
-----------
Total............................................. $13,050,000
===========
</TABLE>

7. LOANS PAYABLE TO SHAREHOLDERS AND OFFICERS

Loans payable to shareholders and officers are as follows:

<TABLE>
<CAPTION>
JULY 31,
----------------------
1996 1997
-------- ----------
<S> <C> <C>
Loans payable to shareholders............................... $258,100 $ 258,100
8% subordinated note payable to officer (Former
Shareholder).............................................. -- 2,000,000
-------- ----------
258,100 2,258,100
Less current portion........................................ -- (258,100)
-------- ----------
Long term portion........................................... $258,100 $2,000,000
======== ==========
</TABLE>

F-14
<PAGE> 76

LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

As of July 31, 1996, loans from shareholders, amounting to $258,100,
consisted of unsecured notes payable to two shareholders bearing interest at 8%,
due monthly, and payable on October 2001.

On June 27, 1997, the Company entered into amended and restated promissory
notes (Amended Shareholder Notes) with these shareholders. The Amended
Shareholder Notes call for the principal to be payable in full on the earlier to
occur of (a) a Qualified Public Offering, as defined, or (b) June 1, 1998. All
accrued and unpaid interest under the Amended Shareholder Notes is due and
payable monthly and bears interest at 8%.

In connection with the acquisition of Telephone Warehouse, the Company
assumed a $2 million subordinated term note due to the Former Shareholder of
Telephone Warehouse. Interest on the note is payable quarterly at an interest
rate of 8%. The note is due on March 15, 2002. The note is subordinated to
borrowings under the Company's line of credit and term loan agreements.

8. CAPITAL LEASE OBLIGATIONS

The Company leases certain office equipment under capital leases. These
lease obligations are payable in monthly installments. During 1996, total
payments under such leases aggregated $52,820. The future minimum lease payments
at July 31, 1997 relating to these capital leases are as follows:

<TABLE>
<S> <C>
Year Ending July 31,:
1998................................................. $39,858
1999................................................. 8,575
2000................................................. 8,575
2001................................................. 8,575
2002................................................. 6,431
-------
Total payments remaining under capital leases........ 72,014
Less amount representing interest at 9%.............. (6,960)
-------
Present value of capital lease obligations........... (65,054)
Less current portion................................. (32,195)
-------
Capital lease obligations, net of current portion.... $32,859
=======
</TABLE>

9. COMMITMENTS AND CONTINGENCIES

The Company leases retail, office and warehouse space and certain equipment
under operating leases which expire at various dates through 2007 with options
to renew certain of such leases for additional periods. The lease agreements
covering retail space provide for minimum rentals and/or rentals based on a
percentage of sales.

Future minimum payments under operating leases at July 31, 1997 are
approximately as follows:

<TABLE>
<S> <C>
Year Ending July 31:
1998................................................... $ 3,539,400
1999................................................... 2,994,500
2000................................................... 2,363,500
2001................................................... 1,353,400
Thereafter............................................. 3,214,900
-----------
Total............................................. $13,465,700
===========
</TABLE>

F-15
<PAGE> 77

LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Total rent expense for the years ended July 31, 1995, 1996 and 1997 was
approximately, $874,500, $1,566,600 and $2,985,000, respectively, of which
approximately $21,100, $10,600 and $8,000, respectively, was paid for rentals
based on a percentage of sales.

On June 27, 1997, the Company entered into amended and restated employment
agreements with two officers, who are also shareholders of the Company which
provide for five year terms and base salaries subject to annual increases and
annual bonuses subject to achievement of defined performance targets.

The Company is the defendant in certain legal proceedings that have arisen
in the ordinary course of business. In the opinion of management, the ultimate
resolution of such pending legal proceedings will not have a material adverse
effect on the Company's results of operations or financial position.

10. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of cash and cash equivalents, accounts receivable,
amounts due under the lines of credit, trade accounts payable and accrued
expenses approximate fair value because of their short duration to maturity. The
carrying amounts of the bank term loans approximates fair value because the
interest rate is tied to a quoted variable index. The carrying value of the
loans from shareholders approximate fair value because the interest rate
approximates the Applicable Federal Rate (AFR).

11. INCOME TAXES

The components of the provision (benefit) for income taxes are as follows:

<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
---------------------------------
1995 1996 1997
-------- -------- ---------
<S> <C> <C> <C>
Current........................................... $(20,454) $ 70,540 $ 140,581
Deferred.......................................... 19,999 (31,601) (137,739)
-------- -------- ---------
Total................................... $ (455) $ 38,939 $ 2,842
======== ======== =========
</TABLE>

The differences between the effect of applying the federal statutory income
tax rate and the effective income tax rate are summarized below:

<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
------------------------------
1995 1996 1997
------- ------- --------
<S> <C> <C> <C>
Tax provision (benefit) at federal statutory rate.... $ 2,613 $35,679 $(14,616)
State income taxes, net of federal benefit........... 279 3,809 274
Permanent differences................................ 3,950 6,023 17,184
Other................................................ (7,297) (6,572) --
------- ------- --------
$ (455) $38,939 $ 2,842
======= ======= ========
</TABLE>

F-16
<PAGE> 78

LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Significant components of the Company's net deferred income taxes are as
follows:

<TABLE>
<CAPTION>
JULY 31,
--------------------
1996 1997
------- ---------
<S> <C> <C>
Deferred tax assets:
Inventory................................................. $ -- $ 88,654
Vacation accrual.......................................... -- 79,328
Long-lived assets......................................... -- 50,863
Allowances................................................ 5,885 216,591
Miscellaneous accruals.................................... 11,289 39,809
------- ---------
Total current deferred tax asset............................ 17,174 475,245
Deferred tax liabilities:
Depreciation.............................................. (5,572) (48,933)
Amortization of residual income........................... -- (903,663)
------- ---------
Total deferred tax liability................................ (5,572) (952,596)
------- ---------
Net deferred tax asset (liability).......................... $11,602 $(477,351)
======= =========
</TABLE>

At July 31, 1997 income taxes receivable represents an overpayment of
federal income taxes. The Company expects to apply this overpayment to future
tax liabilities.

12. CASH HELD IN ESCROW AND REDEEMABLE, CONVERTIBLE PREFERRED STOCK

On June 25, 1996, the Company entered into a Series A Preferred Stock
Purchase Agreement (the Agreement) with HIG Fund V and issued 100,000 shares of
the Company's Series A Redeemable, Convertible Preferred Stock (the Series A
Preferred Stock), par value $30 per share at a price of $32.95 per share for an
aggregate purchase price of $3,295,000 of which $1,000,000, net of $358,702 in
certain issuance costs, was paid at closing. The balance of $2,000,000 was
released from escrow to the Company in September and December of 1996.

Under the escrow agreement, the release of funds occurred upon management
providing certain representations, including: (a) that the Company had
substantially used all of the previous amounts funded as set forth in the
Agreement, which provided in general that funds were to be used for capital
expenditures and not to repay shareholder notes or to pay down the Company's
line of credit to less than a specified amount; and (b) that there had been no
material adverse change (as defined by management) in the Company's condition or
prospects.

Each holder of the Series A Preferred Stock was entitled to vote on all
matters and was entitled to that number of votes equal to the largest number of
whole shares of Common Stock into which such holders shares of Series A
Preferred Stock could be converted. Any share of Series A Preferred Stock was,
at the option of the holder, to be converted at any time into 11.51 shares of
Common Stock, subject to certain adjustments to prevent dilution. As of June 27,
1997, the conversion rate increased to 17.50 shares of Common Stock since
certain performance thresholds were not met, as defined in the agreement.

In connection with the original issuance of the Series A Preferred Stock
and until the Company's first Qualified Public Offering, as defined, the Company
agreed with the preferred stockholders to comply with certain restrictive
covenants, including covenants concerning limitations on: investments,
distributions, dealings with affiliates, mergers, the issuance of options,
rights or warrants, indebtedness, compensation, and consulting agreements and
capital expenditures. As a condition precedent to the acquisition of Telephone
Warehouse, on June 27, 1997, the Company issued 2,137,850 shares of Common Stock
to HIG Fund V in exchange for the conversion of all the outstanding Series A
Preferred Stock. Of the 2,137,850 shares issued, 388,701 shares were issued in
addition to the original conversion feature of the Series A Preferred Stock in

F-17
<PAGE> 79

LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

order to induce HIG Fund V to convert the Series A Preferred Stock and in
exchange for relief from the limitations placed on the Company by the HIG Fund
V. Management determined that the fair value of the 388,701 shares at the date
of issuance was approximately $320,000.

13. PREFERRED AND COMMON STOCK

On September 16, 1997, the Company amended and restated its Articles of
Incorporation such that the par value of the Common Stock was increased to $.01
per share and the number of shares of authorized capital stock was increased to
51,000,000 shares, consisting of 50,000,000 shares of common stock and 1,000,000
shares of preferred stock -- par value $.01 per share (preferred stock). The
1996 financial statements have been restated to reflect the change in par value.

During 1995 and 1996, the Company issued an aggregate of 64,135 shares of
the Company's Common Stock under a stock bonus agreement, as amended, and
recognized $0, $7,268, and $29,651 in compensation expense, in 1995, 1996, and
1997, respectively, associated with the vesting provisions of the agreement,
which provided for all of the shares to be fully vested as of June 27, 1997, due
to a change in control of the Company. Upon termination of the employee, the
Company may, at its option and in its sole discretion, redeem all or a portion
of these shares, at a price equal to the higher of a per share value based on
earnings or book value. This redemption provision expires upon a successful
initial public offering.

On June 27, 1997, the Company issued stock options to purchase 182,348
shares of Common Stock, with an exercise price of $20.04 per share, to two
officers of the Company. These options vested immediately.

As required by SFAS No. 123, pro forma information regarding net income and
earnings per share has been determined as if the Company had accounted for its
employee stock options under the fair value provision of that statement. The
fair value for these options was estimated at the date of grant using a Black-
Scholes option pricing model with the following weighted average assumptions for
1997: risk-free rate of 6.0%; no dividend yield; zero to minimal volatility
factors as the Company's stock does not have a market history; and a weighted
average expected life of the option of 5 years. The weighted average fair value
of the stock options for the year ended 1997 approximated the fair value of the
options at the date of grant, thus not requiring the recognition of compensation
expense under the fair value provisions of SFAS No. 123.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimates, the
existing models, in management's opinion, do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

In August 1997, the Company established the 1997 Executive Incentive
Compensation Plan (the Incentive Plan). Pursuant to the terms of the Incentive
Plan the Company may grant participants stock options, stock appreciation
rights, restricted stock, deferred stock, other stock-related awards and
performance or annual incentive awards that may be settled in cash, stock or
other property (collectively, the Awards). Under the Incentive Plan, the total
number of shares of Common Stock that may be subject to the granting of Awards
during the term of the Incentive Plan shall be equal to 310,000 shares, plus the
number of shares with respect to Awards previously granted under the Incentive
Plan that terminate without being exercised and the number of shares of Common
Stock that are surrendered in the payment of any Awards.

The Company intends to grant, in accordance with the provisions of the
Incentive Plan, stock options to purchase an aggregate of 265,258 shares of
Common Stock to certain key employees and directors of the Company immediately
prior to a successful initial public offering. Such stock options will have an
exercise price equal to the initial public offering price and will vest over a
three year period.

F-18
<PAGE> 80

LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. ACQUISITION OF NORTHPOINT CELLULAR, INC.

On August 31, 1996, the Company entered into an asset purchase agreement
with a third party (Northpoint Cellular, Inc., a company also known as Peachtree
Mobility) to purchase the assets of five stores located in the Georgia area for
a total purchase price of $850,000. The assets purchased amounted to $250,000
and consisted mostly of leasehold improvements. In conjunction with the
purchase, Northpoint Cellular, Inc. entered into a noncompete arrangement for
aggregate consideration of $600,000 which was paid on August 31, 1996. The
noncompete arrangement expires August 31, 1999.

15. RELATED PARTY TRANSACTIONS

On June 27, 1997, the Company entered into a consulting agreement with HIG
Capital Management, Inc., an affiliate of the general partner of TCP, to provide
management, consulting and financial services. The agreement, as amended and
restated on October 8, 1997, requires that the Company pay $350,000 per year,
payable in monthly installments. This agreement will remain in effect until the
earlier to occur of (i) a liquidation, reorganization or public offering or (ii)
June 25, 2001. For the year ended July 31, 1997, the Company paid $29,167 under
this agreement.

This consulting agreement also provides for the Company to pay HIG Capital
Management, Inc. an investment banking fee of $840,000 upon the occurrence of an
initial public offering.

16. SIGNIFICANT CUSTOMERS

One customer accounted for 11%, 23% and 12%, of the Company's net revenues
for the years ended July 31, 1995, 1996 and 1997, respectively. Accounts
receivable from this customer accounted for 51% and 6% of the total net accounts
receivable at July 31, 1996 and 1997, respectively.

A second customer accounted for 12% of net revenues for the year ended July
31, 1997 and 7.5% of the net accounts receivable at July 31, 1997.

A third customer accounted for 11% and 13% of net revenues for the years
ended July 31, 1996 and 1997, respectively. This customer accounted for 25% and
8% of the net accounts receivable at July 31, 1996 and 1997, respectively.

17. EMPLOYEE BENEFIT PLAN

In August 1996, the Company adopted a defined contribution plan (401K Plan)
for all eligible employees based on years of service. The basis for determining
contributions is a percentage of the employees' compensation not to exceed 15%.
Contributions made by the Company are at the discretion of the Board of
Directors. The Company did not make any contributions during the year ended July
31, 1997.

18. SUBSEQUENT EVENTS

On September 15, 1997, the Company executed a letter of intent for the
acquisition of all of the outstanding capital stock of Cellular USA, Inc. The
Company expects to close the acquisition concurrently with the consummation of
an anticipated initial public offering. The letter of intent provides for a cash
purchase price of $1,625,000 and certain contingent payments of up to an
aggregate of $175,000 in 1998 and 1999.

Additionally, on September 26, 1997, the Company executed a letter of
intent for the acquisition of substantially all of the assets of Cellular
Unlimited Corp. The Company expects to close the acquisition concurrently with
the consummation of an anticipated initial public offering. The letter of intent
provides for a cash purchase price of $2,000,000 and up to $225,000 in certain
contingent payments in each of the six-month periods ending July 31, 1998,
January 31, 1999 and July 31, 1999.

F-19
<PAGE> 81

LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On October 20, 1997, the Company effected a stock split of 3.289 for 1. The
financial statements have been restated to give retroactive recognition to the
stock split in the prior periods, including all references in the financial
statements to number of shares and per share amounts.

F-20
<PAGE> 82

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholder
National Cellular, Inc.
Telephone Warehouse, Inc.
Telephone Warehouse -- San Antonio, Inc.
Telephone Warehouse -- KC, Inc.

We have audited the accompanying combined balance sheets of National
Cellular, Inc., Telephone Warehouse, Inc., Telephone Warehouse -- San Antonio,
Inc. and Telephone Warehouse -- KC, Inc. (collectively referred to as Telephone
Warehouse or Predecessor) as of December 31, 1995 and 1996, and the related
combined statements of operations, changes in shareholder's equity, and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the companies' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of National
Cellular, Inc., Telephone Warehouse, Inc., Telephone Warehouse -- San Antonio,
Inc. and Telephone Warehouse -- KC, Inc. at December 31, 1995 and 1996, and the
combined results of their operations and their cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.

/s/ ERNST & YOUNG LLP
--------------------------------------

Dallas, Texas
July 25, 1997

F-21
<PAGE> 83

TELEPHONE WAREHOUSE

COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ APRIL 30,
1995 1996 1997
----------- ---------- -----------
(PREDECESSOR) (UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 2,114,591 $1,265,919 $ 573,872
Accounts receivable, net.................................. 4,803,664 4,390,030 2,483,069
Inventory, net............................................ 2,070,164 3,267,965 3,201,119
Prepaid expenses.......................................... 110,395 90,834 287,702
Deferred tax asset (Note 9)............................... 118,318 119,479 353,176
----------- ---------- -----------
Total current assets............................... 9,217,132 9,134,227 6,898,938
Property and equipment, net (Note 3)........................ 877,843 757,184 694,015
Other assets, net........................................... 86,302 80,169 951,565
Intangible assets, net (Note 4)............................. -- -- 12,684,181
Total assets....................................... $10,181,277 $9,971,580 $21,228,699
=========== ========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Trade accounts payable.................................... $ 3,494,156 $4,658,232 $ 2,755,370
Accrued expenses.......................................... 1,125,892 834,376 1,304,836
Current portion of term note (Note 5)..................... -- -- 500,000
Income taxes payable...................................... 32,259 434,953 157,573
Deferred revenues......................................... 631,672 562,788 716,237
Customer deposits......................................... 100,849 96,679 89,039
----------- ---------- -----------
Total current liabilities.......................... 5,384,828 6,587,028 5,523,055
Deferred tax liability (Note 9)............................. 2,272 2,272 708,938
Loans from former shareholder (Note 5)...................... 1,065,000 1,065,000 --
Bank line of credit (Note 5)................................ -- -- 300,000
Note payable to former shareholder (Note 5)................. -- -- 2,000,000
Term note, less current portion (Note 5).................... -- -- 10,700,000
Commitments and contingencies (Note 7)
Shareholder's equity:
National Cellular, Inc.:
Common stock $1 par value, 10,000,000 shares authorized;
20,000 shares issued and outstanding at December 31,
1995 and 1996 and $0.01 par value, 3,000 shares
authorized; 1,000 shares issued and outstanding at
April 30, 1997........................................ 20,000 20,000 10
Additional paid in capital.............................. -- -- 999,990
Telephone Warehouse, Inc.:
Common stock no par value, 1,000,000 shares authorized;
2,000 shares issued and outstanding at December 31,
1995 and 1996 and $0.01 par value, 3,000 shares
authorized; 1,000 shares issued and outstanding at
April 30, 1997........................................ -- -- 10
Additional paid in capital.............................. 1,000 1,000 999,990
Telephone Warehouse -- San Antonio, Inc.:
Common stock no par value, 1,000,000 shares authorized;
1,000 shares issued and outstanding at December 31,
1995 and 1996......................................... -- -- --
Additional paid in capital.............................. 1,000 1,000 --
Telephone Warehouse -- KC, Inc.:
Common stock $1 par value, 1,000,000 shares authorized;
1,000 shares issued and outstanding at December 31,
1995 and 1996......................................... -- -- --
Additional paid in capital.............................. 1,000 1,000 --
Retained earnings (accumulated deficit)................... 3,706,177 2,294,280 (3,294)
----------- ---------- -----------
Total shareholder's equity......................... 3,729,177 2,317,280 1,996,706
----------- ---------- -----------
Total liabilities and shareholder's equity......... $10,181,277 $9,971,580 $21,228,699
=========== ========== ===========
</TABLE>

See accompanying notes.

F-22
<PAGE> 84

TELEPHONE WAREHOUSE

COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FOUR MONTHS ENDED APRIL 30,
--------------------------------------- ---------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ------------ ------------
(PREDECESSOR) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues:
Retail sales and activation
commissions................ $18,103,704 $17,261,537 $14,023,500 $ 4,339,690 $ 4,153,753
Residual income............... 5,586,406 7,275,971 8,337,688 2,643,661 2,947,009
Wholesale sales............... 18,768,104 20,273,747 27,253,550 8,055,859 7,373,530
----------- ----------- ----------- ----------- -----------
Total net revenues.... 42,458,214 44,811,255 49,614,738 15,039,210 14,474,292
Cost of sales................... 30,321,312 30,360,447 33,368,653 9,868,826 9,587,580
----------- ----------- ----------- ----------- -----------
Gross profit.................... 12,136,902 14,450,808 16,246,085 5,170,384 4,886,712
Operating expenses:
Selling, general and
administrative............. 8,802,304 10,193,631 10,371,732 3,251,874 3,234,527
Former shareholder
compensation expense....... 3,256,000 2,169,000 1,640,000 553,075 320,000
Depreciation and
amortization............... 164,026 231,966 225,109 65,934 64,163
Amortization of intangible
assets..................... -- -- -- -- 773,356
----------- ----------- ----------- ----------- -----------
Total operating
expenses............ 12,222,330 12,594,597 12,236,841 3,870,883 4,392,046
----------- ----------- ----------- ----------- -----------
Income (loss) from operations... (85,428) 1,856,211 4,009,244 1,299,501 494,666
Other income (expense):
Interest income (expense),
net........................ 19,651 10,754 29,542 26,004 (436,758)
Other......................... 12,928 12,203 2,639 55 --
----------- ----------- ----------- ----------- -----------
Total other income
(expense)........... 32,579 22,957 32,181 26,059 (436,758)
----------- ----------- ----------- ----------- -----------
Income (loss) before provision
for income taxes.............. (52,849) 1,879,168 4,041,425 1,325,560 57,908
Provision for income taxes...... 33,042 174,702 678,322 223,370 61,202
----------- ----------- ----------- ----------- -----------
Net (loss) income............... $ (85,891) $ 1,704,466 $ 3,363,103 $ 1,102,190 $ (3,294)
=========== =========== =========== =========== ===========
Unaudited pro forma information
Historical (loss) income before
provision for income taxes.... $ (52,849) $ 1,879,168 $ 4,041,425 $ 1,325,560
Pro forma provision (benefit)
for income taxes.............. (7,368) 712,240 1,462,710 491,306
----------- ----------- ----------- -----------
Pro forma net (loss) income..... $ (45,481) $ 1,166,928 $ 2,578,715 $ 834,254
=========== =========== =========== ===========
</TABLE>

See accompanying notes.

F-23
<PAGE> 85

TELEPHONE WAREHOUSE

COMBINED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY

<TABLE>
<CAPTION>
NATIONAL CELLULAR INC. TELEPHONE WAREHOUSE, INC.
------------------------------- ----------------------------
ADDITIONAL ADDITIONAL
COMMON PAID-IN COMMON PAID-IN
SHARES STOCK CAPITAL SHARES STOCK CAPITAL
------- -------- ---------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
PREDECESSOR:
Balance at December 31, 1993................................ 20,000 $ 20,000 $ -- 2,000 $-- $ 1,000
Formation of Telephone Warehouse -- San Antonio, Inc. on
February 19, 1994......................................... -- -- -- -- -- --
Net income.......................................... -- -- -- -- -- --
------- -------- -------- ------ --- --------
Balance at December 31, 1994................................ 20,000 20,000 -- 2,000 -- 1,000
Formation of Telephone Warehouse -- KC, Inc. on January 19,
1995...................................................... -- -- -- -- -- --
Net income.......................................... -- -- -- -- -- --
Dividends........................................... -- -- -- -- -- --
------- -------- -------- ------ --- --------
Balance at December 31, 1995................................ 20,000 20,000 -- 2,000 -- 1,000
Net income.......................................... -- -- -- -- -- --
Dividends........................................... -- -- -- -- -- --
------- -------- -------- ------ --- --------
Balance at December 31, 1996................................ 20,000 20,000 -- 2,000 -- 1,000
SUCCESSOR:
Capital contribution by TCP................................. 1,000 10 999,990 1,000 10 999,990
Acquisition of National Cellular, Inc., Telephone Warehouse,
Inc., Telephone Warehouse -- KC, Inc., and Telephone
Warehouse -- San Antonio, Inc. by TCP and amendments to
par value, and the number of authorized, issued and
outstanding shares (Unaudited)............................ (20,000) (20,000) (2,000) -- (1,000)
Net loss (Unaudited)................................ -- -- -- -- -- --
------- -------- -------- ------ --- --------
Balance at April 30, 1997 (Unaudited)....................... 1,000 $ 10 $999,990 1,000 $10 $999,990
======= ======== ======== ====== === ========
</TABLE>

<TABLE>
<CAPTION>
TELEPHONE WAREHOUSE -- TELEPHONE WAREHOUSE --
SAN ANTONIO, INC. KC, INC.
----------------------------- ---------------------------- RETAINED
ADDITIONAL ADDITIONAL EARNINGS TOTAL
COMMON PAID-IN COMMON PAID-IN (ACCUMULATED SHAREHOLDER'S
SHARES STOCK CAPITAL SHARES STOCK CAPITAL DEFICIT) EQUITY
------ ------- ---------- ------ ------ ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PREDECESSOR:
Balance at December 31, 1993........ $ -- $ -- $ -- -- $ -- $ -- $ 3,987,602 $ 4,008,602
Formation of Telephone
Warehouse -- San Antonio, Inc. on
February 19, 1994................. 1,000 -- 1,000 -- -- -- -- 1,000
Net income.................. -- -- -- -- -- -- (85,891) (85,891)
------ ------- ------- ------ ------ ------- ----------- -----------
Balance at December 31, 1994........ 1,000 -- 1,000 -- -- -- 3,901,711 3,923,711
Formation of Telephone
Warehouse -- KC, Inc. on January
19, 1995.......................... -- -- -- 1,000 -- 1,000 -- 1,000
Net income.................. -- -- -- -- -- -- 1,704,466 1,704,466
Dividends................... -- -- -- -- -- -- (1,900,000) (1,900,000)
------ ------- ------- ------ ------ ------- ----------- -----------
Balance at December 31, 1995........ 1,000 -- 1,000 1,000 -- 1,000 3,706,177 3,729,177
Net income.................. -- -- -- -- -- -- 3,363,103 3,363,103
Dividends................... -- -- -- -- -- -- (4,775,000) (4,775,000)
------ ------- ------- ------ ------ ------- ----------- -----------
Balance at December 31, 1996........ 1,000 -- 1,000 1,000 -- 1,000 2,294,280 2,317,280
SUCCESSOR:
Capital contribution by TCP......... -- -- -- -- -- -- -- 2,000,000
Acquisition of National Cellular,
Inc., Telephone Warehouse, Inc.,
Telephone Warehouse -- KC, Inc.,
and Telephone Warehouse -- San
Antonio, Inc. by TCP and
amendments to par value, and the
number of authorized, issued and
outstanding shares (Unaudited).... (1,000) -- (1,000) (1,000) -- (1,000) (2,294,280) (2,317,280)
Net loss (Unaudited)........ -- -- -- -- (3,294) (3,294)
------ ------- ------- ------ ------ ------- ----------- -----------
Balance at April 30, 1997
(Unaudited)....................... -- $ -- $ -- -- $ -- $ -- $ (3,294) $ 1,996,706
====== ======= ======= ====== ====== ======= =========== ===========
</TABLE>

See accompanying notes.

F-24
<PAGE> 86

TELEPHONE WAREHOUSE

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOUR MONTHS ENDED
YEAR ENDED DECEMBER 31, APRIL 30,
--------------------------------------- --------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- ------------
(PREDECESSOR) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income...................... $ (85,891) $ 1,704,466 $ 3,363,103 $ 1,102,190 $ (3,294)
Adjustments to reconcile net (loss)
income to net cash (used in) provided
by operating activities:
Depreciation and amortization........ 164,026 231,966 225,109 65,934 64,163
Amortization of intangibles.......... -- -- -- -- 773,356
Amortization of deferred financing
costs.............................. -- -- -- -- 51,539
Bad debt expense..................... 142,688 57,650 30,281 15,550 12,050
Deferred income taxes................ (22,892) 5,412 (1,161) (53,569) (208,925)
Changes in operating assets and
liabilities:
Accounts receivable................ (1,720,296) 427,238 383,353 1,663,804 1,894,911
Inventory.......................... (1,292,344) 376,685 (1,197,801) (187,907) 66,846
Prepaid expenses and other
assets........................... (54,849) (62,019) 25,694 (2,797) (193,060)
Trade accounts payable............. 1,451,571 429,303 1,164,076 (1,864,336) (1,902,862)
Accrued expenses and customer
deposits......................... 674,631 43,799 (295,686) (25,469) 462,820
Income taxes payable............... 37,130 (19,267) 402,694 150,589 (277,380)
Deferred revenues.................. 118,792 113,120 (68,884) 121,034 153,449
----------- ----------- ----------- ----------- ------------
Net cash (used in) provided by
operating activities................. (587,434) 3,308,353 4,030,778 985,023 893,613
INVESTING ACTIVITIES
Acquisition of business, net of cash
acquired............................. -- -- -- -- (11,827,004)
Proceeds from disposals of property and
equipment............................ 14,489 22,987 20,099 13,100 20,912
Purchases of property and equipment.... (265,496) (390,806) (124,549) (15,459) (21,906)
----------- ----------- ----------- ----------- ------------
Net cash used in investing
activities........................... (251,007) (367,819) (104,450) (2,359) (11,827,998)
FINANCING ACTIVITIES
Increase in loans from former
shareholder.......................... 275,000 790,000 -- -- --
Borrowings on bank term loan........... -- -- -- -- 11,200,000
Proceeds from bank line of credit...... -- -- -- -- 2,200,000
Payment on loans from former
shareholder.......................... -- -- -- -- (1,065,000)
Payment on bank line of credit......... -- -- -- -- (1,900,000)
Debt acquisition costs................. (926,743)
Capital contributions.................. 1,000 1,000 -- -- 2,000,000
Dividends.............................. -- (1,900,000) (4,775,000) (1,275,000) --
----------- ----------- ----------- ----------- ------------
Net cash provided by (used in)
financing activities................. 276,000 (1,109,000) (4,775,000) (1,275,000) 11,508,257
----------- ----------- ----------- ----------- ------------
Net (decrease) increase in cash and
cash equivalents..................... (562,441) 1,831,534 (848,672) (292,336) 573,872
Cash and cash equivalents at beginning
of period............................ 845,498 283,057 2,114,591 2,114,591 --
----------- ----------- ----------- ----------- ------------
Cash and cash equivalents at end of
period............................... $ 283,057 $ 2,114,591 $ 1,265,919 $ 1,822,255 $ 573,872
=========== =========== =========== =========== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid for interest................. $ -- $ 20,750 $ 68,300 $ 30,300 $ 340,330
=========== =========== =========== =========== ============
Cash paid for income taxes............. $ 31,627 $ 109,333 $ 460,127 $ 29,083 $ 435,000
=========== =========== =========== =========== ============
SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING ACTIVITY
Issuance of note payable to Former
Shareholder.......................... $ -- $ -- $ -- $ -- $ 2,000,000
=========== =========== =========== =========== ============
</TABLE>

See accompanying notes.

F-25
<PAGE> 87

TELEPHONE WAREHOUSE

NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(INFORMATION PERTAINING TO THE FOUR MONTHS
ENDED APRIL 30, 1996 AND 1997 IS UNAUDITED)

1. BASIS OF PRESENTATION AND NATURE OF OPERATIONS

BASIS OF PRESENTATION

The accompanying combined financial statements as of December 31, 1996 and
for each of the three years then ended are the combined financial statements of
Telephone Warehouse (or Predecessor) which was comprised of four entities:
National Cellular, Inc. (NCI), Telephone Warehouse, Inc., Telephone
Warehouse -- San Antonio, Inc. and Telephone Warehouse -- KC, Inc. Each such
entity was owned 100% by a sole shareholder (the Former Shareholder). All
transactions among the combined companies have been eliminated.

Effective January 1, 1997, Texas Cellular Partners, L.P. (TCP) acquired all
of the capital stock of Telephone Warehouse from the Former Shareholder for
approximately $12,896,000 of cash and a subordinated promissory note of
$2,000,000. At the time of such acquisition, Telephone Warehouse entered into a
two year employment agreement with the Former Shareholder that provided for
payment of up to $3,000,000 upon Telephone Warehouse reaching certain financial
performance levels in 1997 and 1998. TCP, in connection with the acquisition:
(i) merged Telephone Warehouse -- San Antonio, Inc. and Telephone Warehouse --
KC, Inc. with and into Telephone Warehouse, Inc. (ii) amended the par value, and
the number of authorized, issued and outstanding shares of NCI and Telephone
Warehouse, Inc., and (iii) contributed $1,000,000 to NCI. and $1,000,000 to
Telephone Warehouse, Inc.

The accompanying combined financial statements as of April 30,1997 and for
the four months then ended are the combined financial statements of Telephone
Warehouse (or Successor). In connection with the acquisition described above and
effective as of January 1, 1997, Telephone Warehouse is comprised of two
entities: NCI and Telephone Warehouse, Inc. All transactions between the
combined companies have been eliminated.

The purchase price exceeded the fair value of tangible net assets acquired
by approximately $13,458,000 of such amount $2,672,000 was allocated to the
estimated fair value of acquired residual income at December 31, 1996 and
$10,786,000 was allocated to the costs in excess of identifiable assets
(goodwill). A deferred tax liability of $989,000 was provided related to the
acquired residual income. The fair value of assets acquired, not including
intangibles, was approximately $10,278,000 (including $307,000 of deferred taxes
not recorded at Telephone Warehouse due to its Subchapter S status) and the fair
value of liabilities assumed, including the deferred tax liability of $989,000
described above, totaled approximately $8,643,000. The purchase price allocation
is based on preliminary data.

In accordance with pushdown basis of accounting in financial statements of
subsidiaries, this purchase transaction has been reflected in the combined
financial statements of the Company as of January 1, 1997.

In connection with the acquisition and the repayment of amounts due to the
former shareholder, the Company obtained $12.7 million and $2.0 million of bank
debt and seller financing, respectively (see Note 5). In connection with the
acquisition, the Company incurred $927,000 and $197,000 related to deferred
financing costs and acquisition costs, respectively.

NATURE OF OPERATIONS

Telephone Warehouse (the Company) is an independent specialty retailer and
wholesale distributor of cellular and wireless products and services. As of
December 31, 1995 and 1996 and April 30, 1997, the Company's retail business
operated 19, 20 and 18 stores, respectively, located in Dallas and San Antonio,
Texas and Kansas City, Kansas and Missouri. The Company's wholesale business
distributes wireless

F-26
<PAGE> 88

TELEPHONE WAREHOUSE

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

communications products to numerous retail and wholesale outlets throughout the
United States from its warehouse located in Arlington, Texas.

The Company's stores have historically experienced, and the Company expects
its stores to continue to experience, seasonal fluctuations in revenues with a
larger percentage of revenues typically being realized in the fourth quarter
during the holiday season. In addition, the Company's results during any fiscal
period can be significantly affected by the timing of store openings and
acquisitions and the integration of new and acquired stores into the Company's
operations.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS

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

ACCOUNTS RECEIVABLE

The Company's retail accounts receivable are due primarily from carriers of
wireless communications services. Wholesale accounts receivable are primarily
due from distributors and small retailers. Credit is extended to wholesale
customers based on the evaluation of the customers financial condition.
Collateral is not required and terms are generally between 30 and 60 days.
Accounts receivable are net of allowances of approximately $625,000, $572,000
and $472,000 as of December 31, 1995, 1996 and April 30, 1997, of which
$139,000, $123,000 and $133,000 relates to the Company's wholesale operations,
respectively. The remaining balances are comprised primarily of reserves for
early cellular deactivations.

INVENTORIES

Inventories, consisting of cellular and wireless products and related
accessories, are valued at the lower of cost or market, cost being determined by
the average cost method.

PROPERTY AND EQUIPMENT

OTHER ASSETS

At April 30, 1997, unamortized deferred financing costs totaling $875,000
are included in other assets and are being amortized on the interest method over
the terms of the related debt, which is seven years.

INTANGIBLE ASSETS

Intangible assets includes cost in excess of identifiable assets acquired
(goodwill) and cost allocable to the estimated fair value of acquired residual
income.

The Company reviews the carrying value of intangible assets on an ongoing
basis. When factors indicate that an intangible assets may be impaired, the
Company uses an estimate of the undiscounted future cash flows over the
remaining life of the asset in measuring whether the intangible asset is
recoverable. If such an analysis indicates that impairment has in fact occurred,
the book value of the intangible asset is written down to its estimated fair
value. Goodwill is being amortized over 30 years and acquired residual income is
being amortized on an accelerated basis based on the timing of acquired cash
flows through the year 2000.

F-27
<PAGE> 89

TELEPHONE WAREHOUSE

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS

During 1996, the Company adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED
ASSETS. SFAS No. 121 which requires impairment losses to be recorded on
long-lived assets when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount. The adoption of SFAS No. 121 had no effect on the Company's
combined financial statements.

REVENUE RECOGNITION

Product Sales

Revenue from retail product sales is recorded upon customer purchase.
Revenue from wholesale product sales is recognized upon shipment of goods.

Activation Commissions

The Company receives activation commissions from cellular service providers
for each new cellular phone subscription sold by the Company. Revenue from such
activations is recorded upon customer subscription. New subscription activation
commissions are fully refundable if the subscriber cancels service within a
certain minimum period of continuous active service (generally 180 days).
Customers generally sign a service agreement that requires a customer deposit
which is forfeited in case of early cancellation. The allowance for doubtful
accounts includes an amount for estimated cancellation losses, net of deposit
forfeitures.

Residual Income

The Company generally receives monthly residual income from the cellular
service providers based on a percentage of actual phone usage by subscribers.
Revenue from residual income is generally recorded as the cellular service is
provided. Revenue from prepaid pager service ($2,790,402, $3,924,746,
$4,859,113, $1,520,339, $1,841,281 for the years ended December 31, 1994, 1995,
1996 and the four months ended April 30, 1996 and 1997, respectively) is
deferred and recognized over the period service is provided, usually three to
twelve months. Revenue from monthly installment pager service contracts is
recorded as received.

ADVERTISING

The Company expenses advertising costs as incurred. Advertising expense
which is included in selling, general and administrative is recorded net of
cooperative advertising payments received. Net advertising expense amounted to
approximately $846,000, $977,000, $933,000, $162,000 and $209,000 for the years
ended December 31, 1994, 1995, 1996 and the four months ended April 30, 1996 and
1997, respectively. These amounts are net of approximately $1,874,000,
$1,842,000, $1,364,000, $346,000 and $311,000 of cooperative advertising
payments received for the years ended December 31, 1994, 1995, 1996 and the four
months ended April 30, 1996 and 1997, respectively.

INCOME TAXES

NCI, a C corporation for all periods presented, adopted the provisions of
Statement of Financial Accounting Standards No. 109, ACCOUNTING FOR INCOME TAXES
(SFAS 109) in its separate financial statements. Under SFAS 109, deferred tax
assets and liabilities are recognized based on differences between financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse.

F-28
<PAGE> 90

TELEPHONE WAREHOUSE

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Prior to January 1, 1997, the Former Shareholder elected S Corporation
treatment for Telephone Warehouse, Inc., Telephone Warehouse -- San Antonio,
Inc. and Telephone Warehouse -- KC, Inc. As a result, the net income for those
entities is reflected in the Former Shareholder's personal tax return.
Therefore, no provision or credit for federal income tax amounts for those
entities has been included in these combined financial statements for the three
year period ended December 31, 1996. Concurrent with the acquisition of the
Company by TCP on January 1, 1997, such three entities were merged into
Telephone Warehouse, Inc. which became a C Corporation. Subsequent to January 1,
1997, Telephone Warehouse, Inc. began accounting for income taxes under SFAS
109.

PRO FORMA STATEMENTS OF INCOME INFORMATION

Pro forma net income reflects adjustments for income taxes which would have
been recorded if Telephone Warehouse, Inc., Telephone Warehouse -- San Antonio,
Inc. and Telephone Warehouse -- KC, Inc. had been C-corporations for the three
years ended December 31, 1996.

INTERIM FINANCIAL DATA

In the opinion of the management of the Company, the accompanying unaudited
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position of the
Company as of April 30, 1997, the results of operations and cash flows for the
four months ended April 30, 1996 and 1997 and the changes in shareholder's
equity for the four months ended April 30, 1997.

USE OF ESTIMATES

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

3. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
USEFUL LIVES ----------------------- APRIL 30,
(YEARS) 1995 1996 1997
------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Computer equipment..................... 5 $ 47,634 $ 78,600 $ 90,796
Furniture, vehicles and equipment...... 5 - 7 623,690 575,909 554,997
Office equipment....................... 7 18,535 18,535 18,535
Building............................... 30 324,000 324,000 324,000
Leasehold improvements................. 2 - 6 603,981 676,074 685,784
---------- ---------- ----------
1,617,840 1,673,118 1,674,112
Less accumulated depreciation and
amortization......................... (739,997) (915,934) (980,097)
========== ========== ==========
$ 877,843 $ 757,184 $ 694,015
========== ========== ==========
</TABLE>

F-29
<PAGE> 91

TELEPHONE WAREHOUSE

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

4. INTANGIBLE ASSETS

Intangible assets consist of the following at April 30, 1997:

<TABLE>
<S> <C>
Goodwill.................................................... $10,785,888
Acquired residual income.................................... 2,671,649
-----------
13,457,537
Accumulated amortization.................................... (773,356)
-----------
$12,684,181
===========
</TABLE>

5. REVOLVING LINE OF CREDIT, LOANS FROM FORMER SHAREHOLDER AND TERM NOTE

The Company had a $2 million revolving line of credit with a bank for which
the maximum borrowings were limited to the sum of (a) 80% of the outstanding
eligible accounts receivable and (b) the lesser of (i) 50% of the eligible
inventory (as defined in the loan agreement) or (ii) $750,000, less any amounts
advanced to the Company. Interest was due and payable quarterly based on the
bank's prime rate. The line was secured by accounts receivable, contract rights,
inventory and general intangibles of the Company. At December 31, 1995 and 1996,
no amounts were outstanding under the line. This revolving line of credit was
terminated on January 1, 1997.

Amounts due to the Former Shareholder at December 31, 1995 and 1996 totaled
$1,065,000. The interest rates on amounts due the Former Shareholder varied
between 7% and 9.5% with maturities between March 1999 and October 2000.
Interest was paid annually and the notes were unsecured. These loans and accrued
interest amounting to $1,103,577 were repaid on January 1, 1997 in connection
with the acquisition of the Company by TCP (see Note 11).

In connection with the January 1, 1997 acquisition, the Company entered
into a $11.2 million term note (Term Note) with NationsCredit Commercial
Corporation (NCCC), a limited partner of TCP. The Term Note requires quarterly
principal payments beginning in May 1997 and continuing through February 2004.
The Company may also be required to make additional incremental principal
payments beginning in January 1998 if the Company's cash flow exceeds certain
levels agreed to in the Term Note. Interest is payable monthly at the 30 day
commercial paper rate plus 4.5% (10.2% at April 30, 1997). The Term Note is
collateralized by substantially all of the assets of the Company.

Additionally, the Company entered into a $5 million credit facility (Line
of Credit) with NCCC. The Line of Credit requires monthly interest payments at
an interest rate based on the 30 day commercial paper rate plus 3.75% on all
outstanding amounts, and monthly commitment fees of 0.25% on any unused amounts.
The Line of Credit expires on January 1, 2004 with any borrowings outstanding
payable on that date. The Line of Credit is collateralized by substantially all
of the assets of the Company. The Company borrowed $1,500,000 in conjunction
with the January 1, 1997 acquisition of the Company by TCP. As of April 30,
1997, $300,000 is outstanding under the Line of Credit and based upon the
borrowing base, as defined, the available borrowings are $2,456,000.

The Term Note and Line of Credit agreement contain certain restrictive
covenants that, among other things, restrict the payment of dividends, restrict
additional indebtedness and obligations, limits capital expenditures, and
require maintenance of certain financial ratios.

The Company incurred deferred financing costs totaling approximately
$927,000 (see Note 6) in association with obtaining the Term Note and Line of
Credit.

A $2 million subordinated term note due to the Former Shareholder (Seller
Note) was issued to the Former Shareholder in connection with the January 1,
1997 acquisition of the Company by TCP. Interest is

F-30
<PAGE> 92

TELEPHONE WAREHOUSE

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

payable quarterly at an interest rate of 8%. The Seller Note is due on March 15,
2002. The Seller Note is subordinated to borrowings under the Term Note and the
Line of Credit (see Note 11).

Maturities of the outstanding borrowings at April 30, 1997, are as follows:

<TABLE>
<S> <C>
Twelve months ending April 30:
1998...................................................... $ 500,000
1999...................................................... 1,000,000
2000...................................................... 1,500,000
2001...................................................... 2,200,000
2002...................................................... 2,500,000
Thereafter................................................ 5,800,000
-----------
Total............................................. $13,500,000
===========
</TABLE>

6. RELATED PARTY TRANSACTIONS

The Former Shareholder (an officer of the Company) received compensation of
$3,256,000, $2,169,000, $1,640,000, and $553,000 for the years ended December
31, 1994, 1995, 1996 and the four months ended April 30, 1996, respectively.
Dividends paid to the Former Shareholder were $1,900,000, $4,775,000 and
$1,275,000 for the years ended December 31, 1995, 1996 and the four months ended
April 30, 1996, respectively. No compensation or dividends were paid to the
Former Shareholder during the four months ended April 30, 1997. Accrued expenses
at April 30, 1997 includes $320,000 related to estimated amounts due under the
employment agreement. No dividends were paid to the Former Shareholder for the
year ended December 31, 1994.

On January 1, 1997, the Company entered into a management agreement with
HIG Capital Management, Inc., an affiliate of the general partner of TCP,
requiring a $20,800 monthly payment in exchange for consulting services to be
rendered. Included in selling, general and administrative expenses is $83,200 in
fees paid in connection with this agreement for the period ended April 30, 1997.
HIG Capital Management Inc. was paid $500,000 for acquisition and financing
services rendered in connection with the acquisition of the Company by TCP and
the attainment of the Term Note and Line of Credit described in Note 5.

The Company has entered into various debt agreements with NCCC (see Note
5). Total debt outstanding at April 30, 1997 to NCCC was $11,500,000. Interest
payments to NCCC for the period ended April 30, 1997 amounted to approximately
$392,000 and $4,000 of unused line of credit fee. Deferred financing costs
include $243,000 paid to NCCC for services rendered in connection with the
attainment of the Term Note and Line of Credit described in Note 5.

The Company issued the Seller Note (see Note 5) to the Former Shareholder
(an officer of the Company). Interest payments for the period ended April 30,
1997 amounted to approximately $53,000 (see Note 11).

7. COMMITMENTS AND CONTINGENCIES

The Company leases retail, offices and warehouse space and certain
equipment under operating leases which expire at various dates through 2000 with
options to renew certain of such leases for additional periods. Certain of the
Company's leases include rent escalation provisions over the life of the lease.

F-31
<PAGE> 93

TELEPHONE WAREHOUSE

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum payments under operating leases at December 31, 1996 are
approximately as follows:

<TABLE>
<S> <C>
1997........................................................ $ 645,421
1998........................................................ 384,588
1999........................................................ 160,516
2000........................................................ 22,960
----------
Total............................................. $1,213,485
==========
</TABLE>

Total rent expense for the years ended December 31, 1994, 1995, 1996 and
the four months ended April 30, 1996 and 1997 was approximately $536,000,
$796,000, $964,000, $314,000 and $323,000, respectively.

8. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of cash and cash equivalents, accounts receivable,
trade accounts payable and accrued expenses approximate fair value because of
their short duration to maturity. The carrying amounts of the bank line of
credit and term note approximate fair value because the interest rate is tied to
a quoted variable index.

9. INCOME TAXES

HISTORICAL

The historical income tax information for the period prior to January 1,
1997 reflects disclosures for NCI only.

The components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
FOUR MONTHS ENDED
YEARS ENDED DECEMBER 31, APRIL 30,
-------------------------------- ---------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Current...................... $ 56,000 $170,000 $679,000 $277,000 $ 270,000
Deferred..................... (23,000) 5,000 (1,000) (54,000) (209,000)
-------- -------- -------- -------- ---------
Total.............. $ 33,000 $175,000 $678,000 $223,000 $ 61,000
======== ======== ======== ======== =========
</TABLE>

The difference between the federal statutory income tax rate and the
effective income tax rate are summarized below:

<TABLE>
<CAPTION>
FOUR MONTHS ENDED
YEARS ENDED DECEMBER 31, APRIL 30,
----------------------------------- --------------------
1994 1995 1996 1996 1997
-------- --------- ---------- --------- -------
<S> <C> <C> <C> <C> <C>
Tax at federal statutory
rate...................... $(18,000) $ 639,000 $1,374,000 $ 451,000 $19,000
State income taxes, net of
federal benefit........... 11,000 73,000 89,000 40,000 1,000
Amortization of goodwill.... -- -- -- -- 41,000
Income earned in non-tax
paying entities........... 40,000 (537,000) (785,000) (268,000) --
-------- --------- ---------- --------- -------
Total............. $ 33,000 $ 175,000 $ 678,000 $ 223,000 $61,000
======== ========= ========== ========= =======
</TABLE>

F-32
<PAGE> 94

TELEPHONE WAREHOUSE

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Significant components of the Company's net deferred income taxes are as
follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- APRIL 30,
1995 1996 1997
-------- -------- ---------
<S> <C> <C> <C>
Deferred tax assets:
Depreciation...................................... $ -- $ -- $ 24,000
Allowance for doubtful accounts................... 49,000 53,000 161,000
Inventory......................................... 50,000 56,000 90,000
Deferred revenue.................................. -- -- 17,000
Deferred rent..................................... -- -- 12,000
Other............................................. 19,000 10,000 87,000
-------- -------- ---------
Total deferred tax asset.................. 118,000 119,000 391,000
Deferred tax liabilities:
Depreciation...................................... (2,000) (2,000) --
Amortization of residual income................... -- -- (747,000)
-------- -------- ---------
Total deferred tax liabilities............ (2,000) (2,000) (747,000)
-------- -------- ---------
Net deferred tax asset (liability).................. $116,000 $117,000 $(356,000)
======== ======== =========
</TABLE>

PRO FORMA

The pro forma provision for income taxes for the three years ended December
31, 1996 reflects income tax expense as if Telephone Warehouse, Inc., Telephone
Warehouse -- San Antonio, Inc. and Telephone Warehouse -- KC, Inc. had been
taxed as C corporations.

The components of the pro forma provision for income taxes is as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, FOUR MONTHS
---------------------------------- ENDED
1994 1995 1996 APRIL 30, 1996
--------- --------- ---------- --------------
<S> <C> <C> <C> <C>
Current................................. $ 129,000 $ 816,000 $1,393,000 $526,000
Deferred................................ (136,000) (104,000) 70,000 (35,000)
--------- --------- ---------- --------
Total......................... $ (7,000) $ 712,000 $1,463,000 $491,000
========= ========= ========== ========
</TABLE>

The differences between the federal statutory income tax rate and the pro
forma effective income tax rate are summarized below:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, FOUR MONTHS
---------------------------------- ENDED
1994 1995 1996 APRIL 30, 1996
--------- --------- ---------- --------------
<S> <C> <C> <C> <C>
Tax at federal statutory rate........... $ (18,000) $ 639,000 $1,374,000 $451,000
State income taxes, net of federal
benefit............................... 11,000 73,000 89,000 40,000
--------- --------- ---------- --------
Total......................... $ (7,000) $ 712,000 $1,463,000 $491,000
========= ========= ========== ========
</TABLE>

10. SIGNIFICANT CUSTOMERS

During the year ended December 31, 1994, 1995, 1996 and the four months
ended April 30, 1996 and 1997, the Company recognized activation income and
residual income from two cellular service providers of approximately
$12,304,000, $12,574,000, $10,797,000, $3,056,000 and $2,996,000, respectively.
At December 31, 1995, 1996 and April 30, 1997, accounts receivable included
approximately $2,627,000, $1,627,000 and $838,000, respectively, due from these
two cellular service providers.

F-33
<PAGE> 95

TELEPHONE WAREHOUSE

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

11. SUBSEQUENT EVENTS

On June 27, 1997 (effective June 30, 1997), TCP sold 100% of the
outstanding shares of NCI and Telephone Warehouse, Inc. to Let's Talk Cellular &
Wireless, Inc. (LTC), an entity partially owned by an affiliate of the general
partners of TCP.

On June 27, 1997, in connection with the sale of the Company, TCP and the
Former Shareholder negotiated certain amendments to the terms of the Seller Note
and the Former Shareholder's employment agreement to provide for the following:
(i) for the six month period beginning on July 1, 1997, a salary of $50,000,
(ii) for the 12 month period beginning on January 1, 1998, a salary of $100,000
and (iii) a bonus of $950,000 payable on or before December 31, 1997, provided
that certain financial performance levels are met for the twelve months ended
December 31, 1997. Accrued expenses at April 30, 1997 includes $320,000 related
to estimated amounts due under the employment agreement. The Seller Note of $2.0
million was renegotiated to provide for additional payments to be made in March
1999 for up to $1.585 million contingent upon the results of the Company for the
year ended December 31, 1998, whether or not the Former Shareholder remains
employed by the Company.

Based on the terms of the amended employment agreement and the $2 million
Seller Note, any bonus paid to the Former Shareholder during the year ended
December 31, 1997 will be treated as compensation, any amounts paid in 1998 (in
excess of the original $2 million Seller Note), will be accounted for as
additional purchase price related to the acquisition by TCP.

F-34
<PAGE> 96

======================================================

NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING SHAREHOLDERS OR THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 10
Use of Proceeds....................... 15
Dividend Policy....................... 15
Capitalization........................ 16
Dilution.............................. 17
Unaudited Pro Forma Financial Data.... 18
Selected Consolidated Financial
Data................................ 22
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 24
Business.............................. 33
Management............................ 45
Certain Transactions.................. 51
Principal and Selling Shareholders.... 53
Description of Capital Stock.......... 54
Shares Eligible for Future Sale....... 56
Underwriting.......................... 58
Legal Matters......................... 60
Experts............................... 60
Additional Information................ 60
Index to Financial Statements......... F-1
</TABLE>

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

UNTIL DECEMBER 19, 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
======================================================
======================================================
2,337,245 SHARES

LET'S TALK CELLULAR [LOGO]

COMMON STOCK

---------------------
PROSPECTUS
---------------------

MERRILL LYNCH & CO.

SALOMON BROTHERS INC

NOVEMBER 24, 1997
======================================================