LEAP WIRELESS INTERNATIONAL INC, 10-KT, 2000-10-30

LEAP WIRELESS INTERNATIONAL INC
10-KT, 2000-10-30
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)

Previous: MORGAN STANLEY DEAN WITTER S&P 500 SELECT FUND, NSAR-A, EX-27, 2000-10-30

Next: LEAP WIRELESS INTERNATIONAL INC, 10-KT, EX-21.1, 2000-10-30

<PAGE>

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

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)

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

For the fiscal year ended________________________________________________

[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from September 1, 1999 to December 31, 1999

Commission file number 0-29752

Leap Wireless International, Inc.
(Exact Name of Registrant as Specified in its Charter)

Delaware 33-0811062
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

10307 Pacific Center Court, San Diego, CA 92121
(Address of Principal Executive Offices) (Zip Code)

(858) 882-6000
(Registrant's Telephone Number, Including Area Code)

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

None.

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

Common Stock, $.0001 par value
(Title of Class)

Preferred Stock Purchase Rights
(Title of Class)

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

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

As of October 26, 2000, the aggregate market value of the registrant's
voting stock held by non-affiliates of the registrant was approximately
$1,117,289,322, based on the closing price of Leap's Common Stock on the Nasdaq
National Market on October 26, 2000 of $43.50 per share.

As of October 26, 2000, 26,882,426 shares of registrant's Common Stock
$.0001 par value, were outstanding.
<PAGE>

Leap Wireless International, Inc.
Transition Report on Form 10-K
for the Transition Period Ended
December 31, 1999

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I
Item. 1 Business..................................................................... 1
Item 2. Properties................................................................... 31
Item 3. Legal Proceedings............................................................ 31
Item 4. Submission of Matters to a Vote of Security Holders.......................... 32

Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters........ 33
Item 6. Selected Financial Data...................................................... 34
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations.................................................................. 35
Item 7A. Quantitative and Qualitative Disclosures About Market Risk................... 48
Item 8. Financial Statements and Supplementary Data.................................. 49
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.................................................................. 79

Part III
Item 10. Directors and Executive Officers of the Registrant........................... 80
Item 11. Executive Compensation....................................................... 85
Item 12. Security Ownership of Certain Beneficial Owners and Management............... 91
Item 13. Certain Relationships and Related Transactions............................... 92

Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............. 97
</TABLE>
<PAGE>

PART I

Forward Looking Statements; Cautionary Statement

Except for the historical information contained herein, this document contains
forward-looking statements reflecting management's current forecast of certain
aspects of Leap's future. Some forward-looking statements can be identified by
forward-looking words such as "believe," "may," "could," "will," "estimate,"
"continue," "anticipate," "intend," "seek," "plan," "expect," "should," "would"
and similar expressions in this report. This document is based on current
information, which Leap has assessed but which by its nature is dynamic and
subject to rapid and even abrupt changes. Leap's actual results could differ
materially from those stated or implied by such forward looking statements due
to risks and uncertainties associated with Leap's business. Factors that could
cause actual results to differ include but are not limited to: changes in the
economic conditions of the various markets the operating companies serve which
could adversely affect the market for wireless services; the ability of Leap or
its operating companies to access capital markets; Leap's ability to roll
out networks in accordance with its plans; failure of the systems to perform
according to expectations; the effect of competition; the acceptance of the
product offering by our target customers; our ability to retain customers; our
ability to maintain our cost, market penetration and pricing structure in the
face of competition; uncertainties relating to negotiating and executing
definitive agreements and the closing of transactions described in this report;
rulings by courts or the FCC adversely affecting our rights to own and/or
operate certain wireless licenses; as well as other factors detailed in our SEC
filings. The forward-looking statements should be considered in the context of
these and other risk factors detailed in the section entitled "Risk Factors"
included elsewhere in this report. Investors and prospective investors are
cautioned not to place undue reliance on such forward-looking statements. We
disclaim any obligation to update the forward-looking statements contained
herein to reflect future events or developments.

Item 1. Business

The words "Leap," "we," "our," "ours" and "us" refer to Leap Wireless
International, Inc. and, unless the context otherwise requires, its consolidated
subsidiaries.

Overview

Leap is a wireless communications carrier that is deploying innovative, low-
cost, simple wireless services designed to accelerate the transformation of
mobile wireless into a mass consumer product. We generally seek to address a
much broader population segment than incumbent wireless operators have addressed
to date. In the United States, we are offering wireless service under the brand
name "Cricket(TM)." Our innovative Cricket strategy is to extend the benefits of
mobility to the mass market by offering wireless service that is as simple to
understand and use as, and priced competitively with, traditional landline
service. To expand the Cricket service, we currently have acquired or agreed to
acquire wireless licenses covering approximately 41.7 million potential
customers. We are also currently a minority shareholder and actively involved on
the board of Pegaso Telecomunicaciones, a company involved in developing and
operating a nationwide digital wireless network in Mexico. In each of our
markets, we are deploying 100% digital, CDMA networks that provide higher
capacity and more efficient deployment of capital than competing technologies.
This, when combined with our efforts to streamline operation and distribution
systems, allows us to be a low-cost provider of wireless services in each of our
markets.

Business Strategy

Our business strategy is to bring innovative wireless communications products
and services to markets with strong growth potential in the U.S. and elsewhere
in the Americas. Key elements of this strategy include:

1
<PAGE>

. Enhancing the Mass Market Appeal of Wireless Service. We are working to
remove the price and complexity barriers that we believe have prevented
many potential customers from using wireless service. We believe that large
segments of the population do not use wireless service because they view
wireless service as an expensive luxury item, believe they cannot control
the cost of service, or find existing service plans too confusing. Our
service plans are designed to offer appealing value in simple formats that
customers can understand and budget for.

. Offering an Appealing Value Proposition. Specific service plans will differ
among our operations and ventures; however, we strive to provide service
offerings that combine high quality and advanced features with simplicity
and attractive pricing to create a "high value/reasonable price"
proposition and broaden the market for wireless services. These offerings
include, for example, the Cricket flat rate service plan in the U.S. and
such innovative features as a fully-functioning phone out-of-the-box and
per-second billing in our Mexican operations.

. Controlling and Minimizing Costs. To become one of the lowest-cost
providers in the wireless industry, we are deploying advanced network
technology to minimize our capital costs and streamlining marketing,
distribution and back-office procedures.

. Leveraging CDMA Technology. We are deploying state-of-the-art CDMA networks
that provide higher capacity at a lower capital cost and can be easily
upgraded to support enhanced capacity. We believe this enables us to
operate superior networks that support rapid customer growth and high usage
with lower costs per unit than other wireless carriers. In addition, we
believe our CDMA networks will provide a better platform to expand into
data and other services based on advances in second generation systems and
on third generation digital technology in the future.

. Expanding Our Service Through Acquisitions of Domestic Licenses. We intend
to expand the Cricket service to selected metropolitan areas in the U.S.
through the acquisition of additional wireless licenses. We believe that
our designated entity status gives us opportunities that are not available
to many of our larger competitors to acquire additional wireless licenses
at generally attractive prices.

. Investing Selectively in New Foreign Ventures. While our current emphasis
is on our U.S.-based operations, we plan to selectively pursue wireless
ventures in foreign markets with strong growth potential. When investing in
foreign ventures, we generally seek investment partners that provide
familiarity and marketing know-how in their local markets, financial and
technical resources, an ability to facilitate development in a particular
market, or other attributes that can contribute to a successful network-
building enterprise. We expect to be actively involved in the operations of
each foreign venture in which we participate. We seek to ensure that our
strategic alliances will enable us to better prepare and equip our
subsidiaries and ventures for successful development.

Although each of Cricket Communications Holdings, Inc., our wholly-owned
subsidiary that is implementing the Cricket strategy, and Pegaso has adopted a
strategy particular to its competitive strengths and market opportunities, they
both strive to offer high-quality, digital CDMA-based services to customers
under simple, value-conscious rate plans.

Although we may not hold a majority ownership in many of the ventures in which
we elect to participate due to, among other things, regulatory requirements or
our investment priorities, we expect to exercise, to varying degrees,
significant management influence and oversight over the businesses in which we
invest. We believe our experience and business relationships enable us to add
value to our subsidiaries and ventures and increase their performance and
likelihood of success.

2
<PAGE>

Leap Operating Companies

Cricket

General. In the U.S., our business strategy is different from existing models
used by typical cellular or PCS wireless providers. Most of these providers
offer consumers a complex array of rate plans that include additional charges
for minutes above a set maximum as well as fees for roaming and long distance
that may result in monthly service charges that are higher than expected.
Approximately 65% of the U.S. population currently does not subscribe to
wireless service, and we believe that many of these potential customers perceive
wireless service to be too expensive and complicated. The Cricket service is
based on our vision that the mass market wants mobile wireless service to be:
predictable, affordable and as simple to understand and use as traditional
landline telephone service, but with the benefits of mobility.

We have designed the Cricket service to appeal to consumers who make the
majority of their calls from within the local areas in which they live, work and
play. The Cricket service allows customers to make and receive virtually
unlimited calls within a local calling area for a low, flat monthly rate of
$29.95 that is competitive with landline service. Because the Cricket service is
provided on an advance-pay basis only, there are no long-term contracts or
credit checks, and customers are not obligated to continue to pay for a service
that may not meet their needs. In addition to local calling, long distance
minutes can be purchased on a prepaid basis and direct dialed without the use of
a special code or card by debiting the customer's prepaid long distance balance.

We expect Cricket's simple pricing to attract customers who have been
apprehensive about the more complicated and unpredictable pricing plans offered
by other wireless providers. The simplicity of the Cricket service also allows
us to control costs by eliminating costly features of wireless services, such as
expansive geographic coverage and roaming, that our target customers are likely
to use infrequently. We are therefore able to offer our customers a high quality
mobile service at a compelling price.

Strategy. We believe that the Cricket service offering will help transform
wireless phone service from a luxury product into a mass consumer product. The
Cricket strategy is to provide digital wireless service to the mass market with
a simple, easy to understand approach. As a part of the Cricket strategy, we
intend to:

. attract new customers more quickly than other wireless providers that offer
complex pricing plans with peak/off-peak rates, roaming charges and
expensive "extra" minutes;

. maintain lower customer acquisition costs by offering one simple service
plan with a choice of only one or two handsets, and distributing our
product through company stores and multiple points of sale where the mass
market shops;

. sustain lower operating costs per customer compared to other wireless
providers through streamlined billing procedures, reduced customer care
expenses, lower credit investigation costs and reduced bad debt; and

. deploy our capital more efficiently by building our networks to cover only
the urban and suburban areas of our markets where our potential customers
live, work and play, while avoiding rural areas and corridors between
distant markets.

Market Opportunity. Wireless penetration was approximately 35% in the U.S. at
the end of June 2000. Wireless companies have generally focused their U.S.
marketing on highly mobile customers, including business users, who are

3
<PAGE>

likely to generate the highest revenues. Customers are typically offered
multiple service plans with prices based on the customer's minutes of use during
the billing period. Leap believes that the numerous plans offered by wireless
companies have tended to confuse many potential customers. Market research
indicates that many people are interested in a wireless product but are
concerned about the cost and complexity of wireless pricing plans.

Sales and Distribution. We expect to distinguish the Cricket service concept
and increase our market share through promoting a simplified buying process and
focusing marketing efforts on potential customers in the communities covered by
our local wireless networks. The Cricket approach is to rapidly penetrate our
target markets while minimizing our sales and marketing expenses, primarily by
keeping the customer's purchase decision simple and minimizing the need for
sales agents.

The Cricket service and wireless handsets are sold through three main
channels:

. Cricket retail stores in high-traffic malls and Cricket kiosks located in
major shopping malls;

. the local stores of national retail chains; and

. independent third-party dealers who are well positioned through their
principal lines of business to reach our target potential customers, such
as furniture and appliance retailers and rental companies, convenience
stores, beauty shops and other local service businesses.

The Cricket service plan is designed so that a potential customer can make a
purchase decision with little or no sales assistance. Customers can read about
the Cricket service on the retail package for our wireless handsets and learn
virtually all they need to know about the service without consulting a
complicated plan summary or a specialized sales person. We simplify the
customer's decision process by limiting the Cricket handset options to just two
models. Upon opening the box and dialing any telephone number from a new Cricket
handset, the customer is automatically routed to the Cricket customer care
center for immediate activation and any assistance required in using the phone.
We believe the sales costs for the Cricket service are lower than most other
wireless providers because of this streamlined sales approach.

We currently offer just two types of handsets, priced with the first month's
Cricket service included: one is presented as an economically-priced handset at
approximately $100, and the other is positioned as a premium handset at
approximately $130. We expect to continue to charge customers a subsidized price
for handsets to ensure that they have made an investment in the equipment
related to our wireless service and provide a moderate economic incentive to
maintain the Cricket service rather than switching to the services of a
competitor. We do not, however, require customers to sign a service contract, a
feature which we believe customers find appealing compared to other wireless
providers that require long-term commitments.

We combine mass marketing strategies and tactics to build awareness of the
Cricket service concept and brand name within the communities we service.
Because the Cricket service is offered in distinct markets with local calling
capacity only, we target our advertising at the community level. We advertise in
local publications, on local radio stations and in local spot television
commercials. In addition to local advertising efforts, we maintain an
informational Web site for the Cricket service, although we currently do not
sell our products or services over the Internet.

Network and Operations. The Cricket service is based on providing customers
with near-landline levels of usage at prices that are competitive with
traditional landline services and substantially lower than most of our wireless
competitors. We believe our success depends on designing our networks to provide
high, concentrated capacity rather than broad, geographically dispersed
coverage. We plan to

4
<PAGE>

build the Cricket networks only in high-use local population centers of self-
contained communities where roaming is not an important component of service for
our target customers. Unlike traditional wireless providers who build
comprehensive networks to permit full-roaming by their customers, we believe
that we can deploy our capital more efficiently by tailoring our networks only
to our target population centers and omitting underutilized roaming sites
between those population centers.

The principal objectives for the build-out of the Cricket networks are to:

. Establish quality wireless networks in targeted markets that enable us to
offer appealing service with full mobility throughout the local population
centers where a high concentration of potential customers live, work and
play.

. Initiate service in new markets on a phased basis. The appeal of our
service in any given market is not dependent on the Cricket service having
ubiquitous coverage in the rest of the country or region surrounding the
market. Because our business model is scalable, we can roll out our
networks on a market-by-market basis.

. Complete or commence building networks in 17 markets in the year 2000. We
believe we can build each new market with an average expected time from
initiating network construction to commercial launch of 12 to 15 months. By
the end of 2000, we expect Cricket networks in the U.S. will cover
approximately 7.0 million potential customers.

. Deploy capital efficiently by tailoring the coverage footprint of local
Cricket networks to the urban and suburban areas of our target markets and
purchasing network infrastructure equipment in large volumes and at
correspondingly favorable prices and terms. We also intend to rely on tower
co-locations to minimize cell site costs and to employ third generation
equipment which is less expensive to operate than the existing technology
already installed by many incumbent wireless providers.

We believe that our status as a "designated entity" under FCC rules will allow
us to acquire C-Block and F-Block licenses at attractive prices and terms. We
acquired 36 wireless licenses in the federal government's 1999 reauction of
wireless licenses, which was open only to designated entities. Since January
1999, we have entered into agreements to purchase 40 wireless licenses, 17 of
which have been consummated and 23 of which are pending.

The following table shows the wireless licenses for approximately 41.7 million
potential customers that we have acquired or agreed to acquire.

<TABLE>
<CAPTION>
1998 BTA
Population(1) MHz
---------------- -----
<S> <C> <C>
Markets Launched
Chattanooga, TN....................... 548,320 15
Nashville, TN......................... 1,662,927 15
Knoxville, TN......................... 1,073,640 15
-----------
3,284,887
===========
Other Markets
South East Region
Florence, AL.......................... 183,960 15
Albany, GA............................ 343,557 15
Columbus, GA.......................... 357,914 30
Macon, GA............................. 640,286 30
Lakeland, FL(2)....................... 450,761 10
Middlesboro, KY....................... 120,774 15
Charlotte, NC......................... 1,915,210 10
Greensboro, NC........................ 1,371,782 10
Hickory, NC........................... 322,521 10
Clarksville, TN....................... 258,087 15
</TABLE>

5
<PAGE>

<TABLE>
<CAPTION>
1998 BTA
Population(1) MHz
---------------- -----
<S> <C> <C>
Cookeville, TN........................ 131,891 15
Kingsport, TN......................... 690,437 15
-----------
6,787,180
===========
North West Region
Anchorage, AK......................... 442,324 30
Merced, CA............................ 211,145 15
Modesto, CA........................... 477,212 15
Redding, CA........................... 276,425 15
Visalia, CA(2)........................ 471,766 15
Boise, ID............................. 534,196 30
Idaho Falls, ID....................... 212,301 30
Lewiston, ID.......................... 123,479 30
Twin Falls, ID........................ 158,946 30
Eugene, OR(2)(4)...................... 313,316 10
Salem, OR............................. 512,535 30
Bozeman, MT........................... 78,996 30
Reno, NV(2)........................... 548,661 10
Kenewick, WA.......................... 183,433 15
Spokane, WA........................... 725,591 15
Yakima, WA............................ 253,207 15
Casper, WY............................ 142,951 30
-----------
5,666,484
===========
North East Region
Adrian, MI(2)......................... 98,691 15
Battle Creek, MI(2)................... 238,991 15
Grand Rapids, MI(2)................... 1,027,192 15
Jackson, MI(2)........................ 203,672 15
Muskegon, MI(2)....................... 220,532 15
Buffalo, NY(2)........................ 1,224,119 10
Syracuse, NY(2)....................... 791,282 15
Dayton, OH............................ 1,222,446 10
Sandusky, OH(2)....................... 140,841 15
Toledo, OH(2)......................... 785,760 15
Pittsburgh, PA(2)..................... 2,503,395 10
-----------
8,456,921
===========

Central Region
Blytheville, AR....................... 72,228 30
Fayetteville, AR...................... 287,594 30
Fort Smith AR......................... 312,750 30
Hot Springs, AR....................... 132,519 15
Little Rock, AR(4).................... 928,467 20
Pine Bluff, AR(4)..................... 150,421 20
Russellville, AR...................... 93,530 15
Ft. Collins, CO(2)(4)................. 229,386 10
Greeley, CO(2)(4)..................... 157,890 10
Coffeyville, KS....................... 61,901 15
Pittsburg, KS(2)...................... 90,471 30
Wichita, KS........................... 633,382 30
Lincoln, NB........................... 333,096 15
Omaha, NB(2).......................... 970,593 10
Fargo, ND............................. 310,802 30
Grand Forks, ND....................... 212,006 15
Tulsa, OK............................. 913,095 15
Dyersburg, TN......................... 118,191 15
Jackson, TN........................... 275,578 15
Memphis, TN........................... 1,499,222 15
-----------
7,783,122(3)
===========
South West Region
Nogales, AZ........................... 38,020 30
Phoenix, AZ(2)........................ 3,089,889 10
Tucson, AZ............................ 790,975 15
Denver, CO(2)......................... 2,471,889 10
Pueblo, CO............................ 299,154 30
Albuquerque, NM....................... 800,201 15
Roswell, NM(2)........................ 80,005 15
Gallup, NM............................ 140,668 15
Santa Fe, NM.......................... 205,922 15
Provo, UT............................. 341,401 30
Salt Lake City, UT.................... 1,527,987 30
-----------
9,786,111
===========
</TABLE>

__________

6
<PAGE>

(1) Demographic data related to 1998 population and population growth estimates
provided by Easy Analytic Software Incorporated.

(2) Represents licenses that Leap has agreed to acquire. These acquisitions
remain subject to FCC approval and other closing conditions. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -Recent or Pending Acquisitions" at Item 7 below.

(3) Leap has agreed to divest two wireless licenses covering 233,716 potential
customers in Grand Island and North Platte, Nebraska, which, accordingly,
are not included in the table above.

(4) Leap has agreed to transfer 10 MHz of licenses in Pine Bluff and Little
Rock, Arkansas to American Wireless in exchange for 10 MHz licenses in Fort
Collins and Greeley, Colorado and Eugene, Oregon. An acquisition agreement
has been signed, but the transaction has not been completed. The
transaction is subject to FCC approval and other closing conditions.

Cricket Communications has entered into infrastructure equipment purchase
agreements with Lucent Technologies, Inc., Nortel Networks, Inc. and Ericsson
Wireless Communications, Inc. to lead the overall build-out of our initial phase
of Cricket networks. Under the terms of the agreements, Cricket Communications
expects to contract most site acquisition activities and other services
associated with site development to third parties, including but not limited to
these vendors. To the extent the vendors are contracted to perform such
services, we expect that they will subcontract many of these services to a
number of different suppliers.

As part of the Cricket strategy, we seek to maintain lower operating costs
than other wireless providers and large landline carriers and pass the savings
on to customers in the form of our low, flat monthly charges. We believe that
our network operating costs are less than those of most other wireless service
providers because of the concentrated coverage footprint of a Cricket network
compared to the broad, geographically dispersed footprints of our wireless
competitors. Based on call traffic patterns in Chattanooga and Nashville, we
believe the inbound/outbound call ratio of Cricket networks is higher than other
wireless carriers. The Cricket service also does not permit roaming, which
allows us to sustain lower costs than other wireless providers. The technology
used in Cricket networks is designed to permit migration to third generation
technology which costs less to operate than less-advanced wireless platforms.

We also seek to maintain lower operating costs through simplified billing.
Our simple, straight-forward bills show the monthly flat rate of $29.95 and no
per-call itemization. This simple format should result in fewer billing
inquiries to our customer service center. Fewer calls to our customer service
center should, in turn, result in reduced customer service expenses compared to
more traditional wireless providers. In addition, because Cricket customers
prepay each month's service, we minimize our costs of credit checks, bad debt
expenses and customer fraud. We also maintain low operating costs by outsourcing
our customer service center to third-party call centers. By centralizing
customer service in a few locations, we are able to streamline our customer care
operations and gain economies of scale while maximizing customer service
availability.

Leap's Rights and Interests. Our wholly-owned subsidiary, Cricket
Communications Holdings, Inc., owns Cricket Communications, Inc., which is the
operating company that is implementing the Cricket strategy.

On June 15, 2000, through a subsidiary merger, we acquired the 5.11% of
Cricket Communications Holdings that we did not already own. These shares were
owned by individuals and entities, including directors and employees of Leap and
Cricket Communications Holdings. Under the terms of the merger, each issued and
outstanding share of Cricket Communications Holdings common stock not held by
Leap was converted into the right to receive 0.315 of a fully paid and
nonassessable share of Leap common

7
<PAGE>

stock. As a result, an aggregate of 1,048,628 shares of Leap common stock were
issued. We also assumed Chase Telecommunications Holdings' warrant to purchase
1% of the common stock of Cricket Communications Holdings, which was converted
into a warrant to acquire 202,566 shares of our common stock, at an aggregate
exercise price of $1.0 million. The aggregate fair value of the shares issued
and warrant assumed in excess of the carrying value of the minority interest
will be allocated to goodwill. In addition, we assumed all unexpired and
unexercised Cricket Communications Holdings stock options outstanding at the
time of the merger, whether vested or unvested, which upon conversion amounted
to options to purchase 407,784 shares of Leap common stock.

Capital Requirements and Projected Investments. We will require substantial
capital to develop and operate wireless networks in the numerous markets in
which we plan to operate the Cricket service in the U.S. The amount of financing
that we will require for these efforts will vary depending on the number of
these networks that are developed, including any markets covered by our future
license acquisitions, and the speed at which we construct and launch these
networks. In fiscal 2000, we expect to finance these development and operation
costs largely through vendor financing, as well as from a portion of the net
proceeds from our units and equity offerings completed in February 2000 and
other financings. We expect, however, that we will also need to raise additional
capital to fund our planned roll-out of domestic networks and acquisitions of
spectrum in fiscal 2000.

Regulatory Environment. Our business plan anticipates and depends primarily on
our acquisition and operation of C-Block and F-Block licenses in the U.S. We are
also acquiring and considering the acquisition of other wireless licenses.
Although C-Block and F-Block licenses are generally more available and less
expensive to obtain than licenses in other wireless blocks, a licensee may hold
these licenses only if it qualifies as a "designated entity" under FCC rules.
For a description of the extensive regulation governing our domestic business,
see "--Government Regulation."

In July 1999, the FCC issued an opinion and order that found that we were
qualified to acquire C-Block and F-Block licenses. The order also approved our
acquisition of the 36 C-Block licenses for which we were the high bidder in the
FCC's 1999 spectrum reauction, and approved the transfer to Leap of three F-
Block licenses covering portions of North Carolina, in each case subject to the
fulfillment of some conditions. In October 1999, the FCC issued the 36 licenses
we acquired in the reauction.

The FCC's grants of our C-Block and F-Block licenses are subject to certain
conditions. Each of the conditions imposed by the FCC in the opinion and order
has been satisfied. We have a continuing obligation, during the designated
entity holding period for our C-Block and F-Block licenses, to limit our debt to
Qualcomm to 50% or less of our outstanding debt and to ensure that persons who
are or were previously officers or directors of Qualcomm do not comprise a
majority of our board of directors or a majority of our officers. If we fail to
continue to meet any of the conditions imposed by the FCC or otherwise fail to
maintain our qualification to own C-Block and F-Block licenses, that failure
could have a material adverse effect on our financial condition and business
prospects.

Various parties previously challenged our qualification to hold C-Block and F-
Block licenses, which challenges were rejected in the FCC's July 1999 order. One
of these parties, a wireless operating company, requested that the FCC review
its order, as well as the order consenting to the transfer of licenses to Leap
from Chase Telecommunications and PCS Devco, Inc. That wireless operating
company also has opposed all of our pending assignment or transfer applications
at the FCC. In July 2000, the FCC affirmed its July 1999 order as well as the
order consenting to the transfer of licenses to Leap from Chase
Telecommunications and PCS Devco, and the wireless operating company
subsequently appealed the FCC's decision to the Court of Appeal for the D.C.
Circuit, which appeal is currently pending. In addition, Nextel Communications,
Inc. has opposed one of our pending FCC applications, alleging that we may no
longer be compliant with C-and F-Block "total asset" eligibility requirements.
Further judicial review of the FCC's orders granting Leap licenses is possible.
In addition, licenses awarded to Leap at auction may be subject to the outcome
of pending judicial proceedings by parties challenging the auction process or
the FCC's decision or authority to auction or reauction certain C-Block or F-
Block licenses. Leap may also be affected by other pending or future FCC,
legislative or judicial proceedings that generally affect the rules governing C-
and F-Block licensees or other designated entities. For example, recent FCC
rules changes have made it easier for large companies to acquire C-Block and F-
Block licenses at auction and in the aftermarket.

8
<PAGE>

Competition. The U.S. telecommunications industry is very competitive and
competition is increasing. The Cricket service will compete directly with other
wireless providers and traditional landline carriers in each of our markets,
many of whom have greater resources than we do and entered the market before us.
A few of our competitors have recently launched rate plans substantially similar
to the Cricket service plan in markets in which we expect to launch service. A
few of our competitors operate wireless telecommunications networks covering
most of the U.S. Competitors' earlier entry and broader presence in the U.S.
telecommunications market may have a negative effect on our ability to
successfully implement our strategy. Furthermore, the FCC is actively pursuing
policies designed to increase the number of wireless competitors in each of our
markets. The FCC continues to auction licenses that will authorize the entry of
additional wireless providers in each market. In addition, other wireless
providers in the U.S. could attempt to implement our domestic strategy of
providing virtually unlimited local service at a low, flat monthly rate if our
strategy proves successful. The landline services with which we will compete
generally are used already by our potential customers, and we may not be
successful in our efforts to persuade potential customers to adopt our wireless
service in addition to, or in replacement of, their current landline service.
Also, some competitors will likely market other services, including cable
television access, landline telephone service and Internet access, that we do
not currently intend to market. We also expect to compete with new entrants to
the U.S. wireless market as well as other telecommunications technologies,
including paging, enhanced specialized mobile radio and global satellite
networks.

Chase Telecommunications

The Cricket service was introduced in Chattanooga, Tennessee in March 1999 by
Chase Telecommunications, a company that we acquired in March 2000. Chase
Telecommunications owned wireless licenses covering approximately 6.6 million
potential customers in a region that includes approximately 97% of Tennessee.
Chase Telecommunications began offering wireless service in Chattanooga in
October 1998. In March 1999, Chase Telecommunications re-launched its service,
offering the Cricket concept in Chattanooga, Tennessee under a management
agreement that required the management of Chase Telecommunications to control
the business until our acquisition received all necessary governmental approvals
and was completed. In Chattanooga, our network covers approximately 315,000 of
the 550,000 potential customers in the license area, concentrated in an area
that is similar to Chattanooga's local calling area for landline telephone
service. At the time we completed the acquisition of Chase Telecommunications,
it had begun efforts to expand the Cricket service to other markets in
Tennessee. Cricket service was launched in Nashville, Tennessee in late January
2000 and in Knoxville, Tennessee in late October 2000.

On March 17, 2000, we completed the acquisition of substantially all the
assets of Chase Telecommunications Holdings, Inc. The acquisition was effected
pursuant to an asset purchase agreement entered into in December 1998. We
acquired all of the outstanding common stock of ChaseTel Licensee Corp., and our
indirect subsidiary, Cricket Communications, Inc., acquired substantially all of
the other assets of Chase Telecommunications Holdings, including all of the
outstanding common stock of Chase Telecommunications, Inc. The purchase price
paid included:

. approximately $6.3 million in cash;

. a five-year warrant to purchase 1% of the common stock of Cricket
Communications Holdings, which was converted into a warrant to acquire
202,566 shares of Leap common stock, at an aggregate exercise price of $1.0
million;

9
<PAGE>

. the return to Chase Telecommunications Holdings of shares of Chase
Telecommunications Holdings common stock held by us; and

. contingent earn-out payments of up to $41.0 million based on Chase
Telecommunications' earnings during the fifth full year following the
closing of the acquisition.

We and Cricket acquired the Chase Telecommunications Holdings assets subject
to outstanding indebtedness:

. to Qualcomm Incorporated in the amount of approximately $29 million;

. to Cricket in the amount of approximately $77 million; and

. to the FCC in the principal amount of approximately $79 million.

Concurrently with the completion of the acquisition, the outstanding
indebtedness to Qualcomm Incorporated was repaid with the proceeds of borrowings
under Cricket's credit facility with Lucent Technologies Inc., and following the
completion of the acquisition, the outstanding indebtedness to Cricket was
forgiven.

Pegaso

General. We were a founding shareholder and currently own 20.1% of Pegaso, a
joint venture formed to construct and operate the first 100% digital wireless
communications network in Mexico. In October 1998, a wholly owned subsidiary of
Pegaso acquired nine regional PCS licenses and a public telecommunications
network license constituting nationwide coverage generally in the 1900 MHz band
in Mexico for approximately $234 million (based on exchange rates in effect on
the dates the license payments were made). Pegaso launched commercial service in
Tijuana in February 1999 and extended its coverage area with launches in
Mexico's three largest cities, Mexico City, Guadalajara and Monterrey, in
December, September and August 1999, respectively. As of September 30, 2000,
Pegaso had approximately 360,000 customers. In December 1999, Pegaso launched
service in Mexico City, bringing its total covered potential customers in Mexico
to approximately 27.7 million. Pegaso is continuing its network expansion and
plans to build networks in up to 63 additional metropolitan areas throughout
Mexico.

Strategy. To implement its goal of becoming a leading provider of wireless
communications services in Mexico, Pegaso's strategy is to:

. compete with other wireless service providers by delivering higher-quality
digital service through Mexico's only all-digital wireless network;

. offer Pegaso handsets and services through multiple points of sale targeted
to a broad range of consumers;

. simplify the purchase process for wireless phones and service by offering a
fully functional "phone in a box" that is activated in prepaid mode when
initially turned on after purchase, after which a customer service
representative contacts the new customer to determine the most appropriate
rate plans going-forward;

. promote distinct Pegaso brand awareness that focuses on Pegaso's core
philosophy of simplicity, honesty, and commitment to innovation;

10
<PAGE>

. offer service plans that provide superior value, for example by billing
calls per the second, and offer superior prepaid service options,
including Mexico's only 100% digital prepaid plans and the ability of
prepaid customers to obtain value-added features such as voicemail; and

. leverage the strengths of its strategic investors, including Leap, Sprint
and Grupo Pegaso.

Market Opportunity. In early 1998, Pegaso acquired nine regional PCS licenses
and a public telecommunications network license constituting nationwide coverage
of Mexico's population of approximately 99 million people. Before Pegaso entered
the market, only two wireless carriers operated in each of Mexico's nine
regions. Although other licensees may begin to offer nationwide coverage, we
believe Pegaso currently is well-positioned to obtain a significant market share
because it is one of only three nationwide mobile wireless carriers. Mexico's
population is approximately 70% urban with approximately 45% living in the
regions containing Mexico City, Guadalajara and Monterrey.

Sales and Distribution. Pegaso's sales strategy is to offer a simplified
"phone in a box" product which enables broad distribution through multiple
channels and makes it easy for a customer to obtain a wireless handset and begin
service. This sales approach is designed to make the purchase of a wireless
handset and accompanying service as simple as the sale of any consumer
electronics item.

Pegaso's distribution channels include Pegaso-owned stores, grocery store
chains, master distributors, other retail chains and a direct sales force
targeting corporate and other large accounts. The majority of Pegaso's sales
currently occur at grocery stores, convenience retail stores, and Pegaso-owned
stores. In addition, Pegaso has negotiated distribution agreements with select
national and regional merchandisers specializing in consumer electronics and
appliances. Similar to the Cricket strategy, Pegaso's "phone in a box" approach
permits potential customers to make a purchase decision with little or no sales
assistance. Pegaso offers a variety of handsets, which are packaged in brightly
colored boxes that are well-suited for in-store displays. Each handset includes
a block of prepaid minutes which permits a new customer to begin making wireless
calls immediately upon purchase. Within hours of a customer's first use of a
Pegaso handset, a customer service representative calls the new customer to
offer assistance with any questions about the service and to explain Pegaso's
postpaid and prepaid plans to determine the package best-suited for that
particular customer. This "Welcome to Pegaso" phone call is a key part of
Pegaso's customer service and follow-on sales strategy.

As part of its dynamic sales strategy, Pegaso seeks to develop innovative
payment options to reduce the barriers to entry to Mexican consumers of
utilizing its wireless service. Pegaso's initial prepaid service from its "phone
in a box" followed by the option to adopt a postpaid plan permits the consumer
ongoing flexibility in payment options. Pegaso offers the same choice of
handsets, roaming capabilities and access to calling features to prepaid and
postpaid customers. Customers who select the prepaid option may purchase phone
cards for wireless minutes in various denominations at approximately 1,300
retail outlets in Mexico.

Pegaso seeks to differentiate its wireless service with simplicity, honesty,
and a commitment to innovation. Pegaso's primary marketing message for its
initial launch into the Mexican market is "Pago Justo Por Segundo" which means
"pay just for the second and justly for what you use," referring to Pegaso's per
second billing approach. Also, we believe that other providers charge from the
moment customers press the "send" button on their wireless phone while Pegaso
charges only for connected calls.

Pegaso also offers roaming across the U.S-Mexico border as a result of its
agreement with Sprint PCS. The agreement permits Pegaso customers to use Sprint
PCS's nationwide wireless network in the

11
<PAGE>

U.S. and will allow Sprint PCS customers to roam on Pegaso's network in Mexico.
Pegaso believes this feature will be attractive to the highly-mobile customers
in Mexico's border cities.

Pegaso believes that, to achieve long-term success, it must establish a
strong national brand position throughout Mexico. Pegaso builds brand
recognition though national television and print advertising coupled with a
strong local radio presence and sponsorship of local and regional sports teams
and events. Pegaso has sponsored the Mexican national soccer team and other
professional soccer teams in its efforts to increase consumer awareness of the
Pegaso wireless brand. Pegaso maintains a Web site that provides product and
service information, although no sales currently are transacted over the
Internet.

Pegaso operates one central customer care center in Mexico City. Pegaso
distinguishes its customer care from its competitors through "one touch"
service, whereby the customer service representative who answers the initial
call is trained to respond to all of the customer's concerns without
transferring the customer to another department. The center's information
technology systems permit representatives to identify new customers for the
initial "Welcome to Pegaso" call and monitor the status of customer inquiries
from the first call to the customer care center to ultimate resolution of the
question.

Network and Operations. Pegaso's principal objective for the build-out of its
network is to target its capital expenditures to provide full coverage within
targeted geographic areas, rather than building out the widest possible coverage
area. It has successfully launched service in Mexico's four largest cities --
Mexico City, Guadalajara, Monterrey and Tijuana - and plans to expand coverage
and increase capacity in those cities plus launch an additional seven cities by
the end of 2000. In addition, Pegaso intends to selectively build sites along
major highways to connect the cities it currently services or will service.
Ultimately, Pegaso plans to construct and operate wireless systems in up to an
additional 63 metropolitan areas in Mexico, subject to the availability of
additional capital.

The following table presents the approximate number of potential customers
covered by Pegaso's network in the four cities in which Pegaso launched service
in 1999.

1999
Covered
Potential
Licensed Areas Customers
-------------- ----------
Mexico City.................... 19,200,000
Guadalajara.................... 3,900,000
Monterrey...................... 3,500,000
Tijuana........................ 1,100,000
----------
Total................... 27,700,000
==========

In bidding for its wireless licenses, Pegaso agreed to provide coverage to
municipalities containing at least 20% of the total population of most of the
licensed regions by October 2001 and to provide coverage to municipalities
containing at least 50% of the total population of most of the licensed regions
by October 2003.

Because Pegaso's systems are 100% digital, it does not face the operating
difficulties of many of its wireless competitors that are seeking to manage both
analog and digital systems and to transition to all-digital platforms while
maintaining quality analog systems. Pegaso's operations include an advanced
prepaid platform and related systems that administer customers' use of their
prepaid wireless minutes and other features. Pegaso's advanced information
technology systems also support the billing process and the variety of payment
plans offered to Pegaso's customers, and assist the customer care center's
activities, including scheduling "Welcome to Pegaso" calls and monitoring
customer inquiries.

12
<PAGE>

Leap has entered into a management and operations agreement with Pegaso to
provide operator services and, in turn, has subcontracted those services to GTE
Data Services Mexico, a subsidiary of GTE. These arrangements are expected to
end in July 2001.

Strategic Partners. In addition to Leap, Pegaso Comunicaciones y Servicios,
S.A. de C.V. and Sprint Mexico Inc. have interests in Pegaso. Pegaso
Comunicaciones y Servicios is 99%-owned by Alejandro Burillo Azcarraga, a member
of our board of directors, and is affiliated with Grupo Pegaso, a private
investment group with investments in various industries including cable
television, communications, retail electronics, real estate, sports and
entertainment. Our management believes that the strong financing resources of
Sprint and Grupo Pegaso, as well as their political access in Mexico, provide
Pegaso critical resources and relationships for assisting the network build-out
and in marketing and distributing Pegaso's wireless services. Citicorp, the
Latin America Infrastructure Fund and Nissho Iwai have also invested in Pegaso.

On April 26, 2000, Sprint Corporation, through a subsidiary, invested $200
million in Pegaso by purchasing shares from Pegaso and shareholders other than
Leap. As a result of this transaction, Leap's percentage interest in Pegaso was
reduced from 28.6% to 22.4%. Several other existing investors contributed an
additional $50 million of financing in August 2000, reducing Leap's percentage
interest to 20.1%.

Leap's Rights and Interests. Leap currently owns a 20.1% interest in Pegaso
and has invested $100 million of the $546 million of capital that has been
contributed by the members of the joint venture. We expect that our ownership
interest in Pegaso will be reduced in the future. Pegaso is currently seeking
additional debt and equity financing. As noted above, we also provide operator
services to Pegaso under a management and operations agreement.

In December 1999, as a condition of our guarantee of a portion of Pegaso's
obligations under its working capital facility, Leap received an option to
subscribe for and purchase up to 243,090 limited voting series "N" treasury
shares of Pegaso. The number of shares to be purchased by Leap under the option
will be calculated based on a formula which will provide to the lenders a total
internal rate of return on the average outstanding balance up to a maximum of
$100 million of the bridge loan of 20%. The options have an exercise price of
$0.01 per share and expire ten years from the date of issuance. The options are
exercisable at any time after the date on which all amounts under the loan
agreement are paid in full.

Capital Requirements and Projected Investments. Pegaso has already raised or
obtained commitments for substantial amounts of capital. To date, the members of
the joint venture have contributed $546 million of equity. In addition, Qualcomm
and another equipment vendor have agreed to provide approximately $580 million
of secured equipment financing to the venture, a portion of which has already
been advanced. In May 1999, a Pegaso subsidiary also entered into a working
capital facility with several banks with credit support from Qualcomm. We
guaranteed 33% of Pegaso's obligations under the initial commitment from the
lenders of $100 million. The amount of the loan was subsequently increased to
$190 million although the amount of our guarantee was not increased. To complete
the build-out, launch and operation of its planned networks, however, Pegaso
will need to obtain substantial additional capital. As a result, Pegaso is
seeking additional debt and equity financing, including additional vendor
financing.

Regulatory Environment. The Mexican Secretariat of Communications and
Transportation, or SCT, and Federal Telecommunications Commission, or COFETEL,
an independent regulatory body within the SCT, regulate the provision and
operation of telecommunications services in Mexico. The principal law governing
the provision of telecommunications services in Mexico is the 1995 Federal
Telecommunications Law and regulations promulgated thereunder; however, other
federal laws and regulations apply.

13
<PAGE>

To provide PCS service in Mexico, the service provider must obtain two
licenses, or concessions, from the SCT: a frequency license and a public
telecommunications network license. A frequency license specifies the type of
service, for example, PCS; allocated spectrum; geographical region; and certain
other rights and obligations. A public telecommunications network license
specifies the licensee's rights and obligations as a provider of telephone
service to the public. Pegaso holds frequency licenses in each of the nine
geographic regions in Mexico allowing it to provide nationwide service. Pegaso
is also licensed as a public telecommunications network provider. The frequency
licenses are for initial terms of 20 years and may be renewed at the discretion
of the SCT. The public telecommunications network license is for an initial term
of 30 years, and may be renewed as long as Pegaso complies with applicable
regulations.

The SCT may grant licenses only to Mexican individuals and to Mexican
corporations in which non-Mexicans hold no more than 49% of the voting shares.
Cellular and PCS licensees may be more than 49% foreign-owned through a
structure involving limited- or non-voting interests with the prior approval of
the Mexican Foreign Investment Commission. Licenses may be sold or otherwise
transferred only with the prior authorization of the SCT. In addition, any
transfer of the shares of the holder of a license in excess of 10% of the total
equity outstanding requires the prior approval of the SCT and may require
notification to the Federal Competition Commission. A license may be terminated
upon expiration or dissolution of the holder of the license. The SCT may revoke
a license prior to its expiration under certain circumstances, including failure
to comply with the obligations and conditions specified in the license. The
Mexican government may also expropriate or temporarily seize assets related to a
license, but is obligated to compensate at market value the owner of such
assets.

Pegaso is interconnected nationwide with other Mexican wireless and landline
operators. Though interconnection arrangements are negotiated privately, Telmex
is required by law to interconnect with wireless operators, and COFETEL will
intervene where private parties reach an impasse. Wireless rates are not
regulated in Mexico but the rates must be registered with the SCT.

Competition. Although the deployment of advanced telecommunications services
is in its early stages in Mexico, we believe competition is increasing as a
number of international telecommunications companies, including Bell Atlantic,
AT&T, MCI, Motorola, Nextel and SBC, and local competitors such as Telmex and
other Mexican telecommunications companies, actively engage in developing
telecommunications services in Mexico. Following the Mexican government's recent
wireless auctions, there is one existing nationwide mobile wireless operator,
Telmex, which operates through its subsidiaries Telcel and Dipsa; one carrier,
Iusacell, with a large mixed band footprint consisting of four 800 MHz licenses
and two 1900 MHz licenses; and Pegaso, which holds PCS licenses with nationwide
coverage. In addition, Unefon has been granted nationwide licenses, and recently
launched wireless local loop service. There are also several regional wireless
carriers who offer wireless service in one or more of Mexico's nine regions but
who do not have a broad national presence.

Discontinued Foreign Ventures

Smartcom

14
<PAGE>

. approximately $156.8 million in cash;

. repayment of Smartcom indebtedness to us and Inversiones of approximately
$17.5 million and $35.8 million, respectively;

. release of cash collateral posted by us in the United States to
collateralize our reimbursement obligation with respect to a standby letter
of credit issued in favor of ABN AMRO Bank (Chile) to secure Smartcom
indebtedness of approximately $28.2 million; and

. three promissory notes issued by Endesa to Inversiones in the aggregate
amount of $143.2 million. One of the promissory notes is subject to a one
year right of set-off to secure the indemnification obligations of Leap and
Inversiones under the share purchase agreement between the parties. Another
of the promissory notes is subject to adjustment based upon an audit of the
closing balance sheet of Smartcom completed following the closing of the
agreement.

Each of the promissory notes matures on June 2, 2001 and bears interest at a
rate equal to the 3-month LIBOR, compounded semi-annually. In addition, the sale
of the Smartcom shares resulted in the removal of approximately $191.4 million
of Smartcom liabilities from our consolidated balance sheet.

Smartcom acquired a nationwide license in 1997 in the 1900 MHz band to offer
PCS services in Chile. Smartcom's nationwide system began operation in September
1998. In April 1999, we increased our ownership of Smartcom from 50% to 100%
when our Chilean subsidiary purchased 50% of Smartcom from Telex-Chile, a
Chilean telecommunications company, and one of its affiliates for $28 million in
cash and a $22 million interest-free note payable in three years. Following the
acquisition, we recruited a new management team, upgraded the network
capabilities and, in November 1999, relaunched service under a new brand name,
SMARTCOM PCS. As a result of the favorable terms offered by Endesa for purchase
of the Smartcom shares, which represented a substantial return on our original
investment, we concluded that we could realize greater stockholder return
through the sale than we could through continued investment in Smartcom.

Other Foreign Ventures

Through a subsidiary, we own a 35% interest in Orrengrove Investments
Limited, which in turn owns a 60% interest in three related companies referred
to as the Transworld Companies, which are being liquidated. The third party
satellite that the companies used to provide long distance service failed in
April 1999. The directors of the Transworld Companies voted to liquidate the
companies after reviewing a series of alternative business plans that did not
meet their minimum financial performance criteria. As a result, we wrote down
our investment in Orrengrove to the proceeds we expect to receive in connection
with the pending liquidations.

Through another subsidiary, we owned a 35% interest in Metrosvyaz Limited, a
company that is attempting to establish joint ventures in Russia to construct
and operate networks providing wireless local loop service. Metrosvyaz was
funding its activities in part through a working capital facility from us. In
August 1999, we declared default under loans to Metrosvyaz, stopped funding
those loans and wrote off our remaining $9.6 million investment in Metrosvyaz.

In August 1999, we sold our Australian subsidiary, OzPhone Pty. Limited, for
$16.0 million. We had invested approximately $6.9 million in OzPhone before the
sale. We concluded that we could achieve greater stockholder return through this
sale than we could through years of continued investment in and development of
OzPhone. Although OzPhone owned wireless licenses, it had not yet introduced
service.

15
<PAGE>

Government Regulation

The spectrum licensing, construction, operation, sale and interconnection
arrangements of wireless communications networks are regulated to varying
degrees by state regulatory agencies, the FCC, Congress, the courts and other
governmental bodies. Proceedings before these bodies, such as the FCC and state
regulatory authorities, could have a significant impact on the competitive
market structure among wireless providers and on the relationships between
wireless providers and other carriers. These mandates may impose significant
financial obligations on us and other wireless providers. We are unable to
predict the scope, pace or financial impact of legal or policy changes that
could be adopted in these proceedings.

Licensing of PCS Systems. A broadband PCS system operates under a protected
geographic service area license granted by the FCC for a particular market on
one of six frequency blocks allocated for broadband PCS. Broadband PCS systems
generally are used for two-way voice applications. Narrowband PCS systems, in
contrast, are for non-voice applications such as paging and data service and are
separately licensed. The FCC has segmented the U.S. PCS markets into 51 large
regions called major trading areas, which are comprised of 493 smaller regions
called basic trading areas. The FCC awards two broadband PCS licenses for each
major trading area and four licenses for each basic trading area. Thus,
generally, six licensees will be authorized to compete in each area. The two
major trading area licenses authorize the use of 30 MHz of spectrum. One of the
basic trading area licenses is for 30 MHz of spectrum, and the other three are
for 10 MHz each. The FCC permits licensees to split their licenses and assign a
portion, on either a geographic or frequency basis or both to a third party, and
the FCC in recent years has also further split licenses in connection with re-
auctions of PCS spectrum. Two cellular licenses are also available in each
market. Cellular markets are defined as either metropolitan statistical or rural
service areas.

The FCC's spectrum allocation for PCS includes two licenses, the 30 MHz C-
Block license and a 10 MHz F-Block license, that are designated as
"Entrepreneur's Blocks." The FCC requires holders of these licenses to meet
certain threshold financial size qualifications. In addition, the FCC has
determined that designated entities who qualify as small businesses or very
small businesses, as defined by a complex set of FCC rules, receive additional
benefits, such as bidding credits in C- or F-Block spectrum auctions or
reauctions, and in some cases, an installment loan from the federal government
for a significant portion of the dollar amount of the winning bids in the FCC's
initial auctions of C- and F-Block licenses. The FCC's rules also allow for
publicly traded corporations with widely dispersed voting power, as defined by
the FCC, to hold C- and F-Block licenses and to qualify as small or very small
businesses. In July 1999, the FCC issued an opinion and order that found that we
were entitled to acquire C-Block and F-Block licenses as a publicly traded
corporation with widely dispersed voting power and a very small business under
FCC rules. In July 2000, the FCC affirmed its July 1999 order.

Under the FCC's current rules specifying spectrum aggregation limits
affecting broadband PCS and cellular licensees, no entity may hold attributable
interests, generally 20% or more of the equity of, or an officer or director
position with, the licensee, in licenses for more than 45 MHz of PCS, cellular
and certain specialized mobile radio services where there is significant
overlap, except in rural areas. In rural areas, up to 55 MHz of spectrum may be
held. Passive investors may hold up to a 40% interest. Significant overlap will
occur when at least 10% of the population of the PCS licensed service area is
within the cellular and/or specialized mobile radio service area(s).

16
<PAGE>

All PCS licenses have a 10-year term, at the end of which they must be
renewed. The FCC will award a renewal expectancy to a PCS licensee that has:

. provided substantial service during its past license term; and

. has substantially complied with applicable FCC rules and policies and the
Communications Act.

All PCS licensees must satisfy buildout deadlines and geographic coverage
requirements. For 30 MHz and 15 MHz C-Block licensees, this requirement is met
when adequate service is offered to at least one-third of the population of the
licensed service area. For 10 MHz C- and F-Block licenses, the requirement is
met when adequate service is provided to at least one-quarter of the population
in the licensed service area. Licensees that fail to meet the coverage
requirements may be subject to forfeiture of the license.

For a period of up to five years after the grant of a PCS license, subject
to extension, a licensee will be required to share spectrum with existing
licensees that operate certain fixed microwave systems within its license area.
In an effort to balance the competing interests of existing microwave users and
newly authorized PCS licensees, the FCC has adopted a transition plan to
relocate such microwave operators to other spectrum blocks and a cost sharing
plan so that if the relocation of an incumbent benefits more than one PCS
licensee, those licensees will share the cost of the relocation. To secure a
sufficient amount of unencumbered spectrum to operate our PCS systems
efficiently and with adequate population coverage, we may need to relocate one
or more of these incumbent fixed microwave licensees.

This transition plan currently allows most microwave users to operate in the
PCS spectrum for a two-year voluntary negotiation period and an additional one-
year mandatory negotiation period. Parties unable to reach agreement within
these time periods may refer the matter to the FCC for resolution, but the
incumbent microwave user is permitted to continue its operations until final FCC
resolution of the matter. The transition and cost sharing plans expire on April
4, 2005, at which time remaining microwave incumbents in the PCS spectrum will
be responsible for the costs of relocating to alternate spectrum locations.

PCS services are subject to certain FAA regulations governing the location,
lighting and construction of transmitter towers and antennas and may be subject
to regulation under Federal environmental laws and the FCC's environmental
regulations. State or local zoning and land use regulations also apply to our
activities. We expect to use common carrier point to point microwave facilities
to connect the transmitter, receiver, and signaling equipment for each PCS or
cellular cell, the cell sites, and to link them to the main switching office.
The FCC licenses these facilities separately and they are subject to regulation
as to technical parameters and service.

The Communications Act preempts state and local regulation of the entry of,
or the rates charged by, any provider of private mobile radio service or of
commercial mobile radio service, which includes PCS. The FCC generally does not
regulate commercial mobile radio service or private mobile radio service rates.

Recent Modifications of C- and F-Block Eligibility Rules. The FCC has
announced plans to hold a reauction of C- and F-Block licenses in December 2000.
In response to the requests of a number of large carriers, including SBC
Communications, Nextel Communications, BellSouth Corporation, Verizon Wireless
and AT&T Wireless, the FCC has subdivided the C-Block licenses slated for
reauction into three 10 MHz licenses. For this reauction, the FCC also
subdivided the BTA service areas to which Entrepreneur's Block eligibility
restrictions would continue to apply into two tiers according to population. In
so-called "Tier 1" BTAs, service areas with a population equal to or greater
than 2.5 million, the FCC has removed all eligibility restrictions on two of the
newly-created 10 MHz C-Block licenses, and will sell them in open bidding to any
entity that purchases them, no matter how large. In these Tier 1 BTAs, one 10
MHz C-Block license will remain subject to a closed bidding process, such that
only entities meeting Entrepreneur's Block eligibility requirements will be
permitted to bid. In Tier 2 BTAs, service areas with a population less than 2.5
million, two of the 10 MHz C-Block licenses will remain subject to C- and F-
Block eligibility rules and thus reserved for closed bidding by designated
entities, while one 10 MHz C-Block license will be sold at open bidding. Several
15 MHz C-Block licenses and a number of F-Block licenses slated for reauction
also will be sold at open bidding, such that previous C- and F-Block eligibility
requirements will no longer apply.

The FCC's recent actions taken in connection with the scheduled December
reauction represent a compromise that makes some additional spectrum available
to large carriers, but also continues to preserve C- and F-Block spectrum for
designated entities. The FCC's C- and F-Block rules, as well as actions taken in
connection with previous C-Block auctions and reauctions, remain subject to
pending FCC and judicial proceedings. Continuing changes to the C- and F-Block
rules could, among other things, affect licenses available at FCC auction and in
the aftermarket. Such rule changes could have a material adverse effect on our
business and financial condition, including our ability to continue acquiring C-
and F-Block licenses.

Transfer and Assignment of PCS Licenses. The Communications Act and FCC rules
require the FCC's prior approval of the assignment or transfer of control of a
license for a PCS or cellular system. Non-controlling interests in an entity
that holds an FCC license generally may be bought or sold without FCC approval
subject to the FCC's spectrum aggregation limits.

C- and F-Block licenses historically have been subject to certain additional
transfer and assignment restrictions, including a prohibition on the assignment
or transfer of such licenses for a period of five years following the initial
license grant date to any entity that fails to satisfy C- and F-Block financial
qualification requirements. These rules were revised by the FCC in August 2000.
Under the revised rules, a C- or F-Block license may be transferred to non-
designated entities once the licensee has met its five-year coverage
requirement. Such transfers will remain subject to certain costs and
reimbursements to the government of any bidding credits or outstanding principal
and interest payments owed to the FCC.

<PAGE>

Foreign Ownership. Under existing law, no more than 20% of an FCC licensee's
capital stock may be owned, directly or indirectly, or voted by non-U.S.
citizens or their representatives, by a foreign government or its
representatives or by a foreign corporation. If an FCC licensee is controlled by
another entity, as is the case with our ownership structure, up to 25% of that
entity's capital stock may be owned or voted by non-US citizens or their
representatives, by a foreign government or its representatives or by a foreign
corporation. Foreign ownership above the 25% level may be allowed should the FCC
find such higher levels not inconsistent with the public interest. The FCC has
ruled that higher levels of foreign ownership, even up to 100%, are
presumptively consistent with the public interest with respect to investors from
certain nations. If our foreign ownership were to exceed the permitted level,
the FCC could revoke our wireless licenses, although we could seek a declaratory
ruling from the FCC allowing the foreign ownership or take other actions to
reduce our foreign ownership percentage in order to avoid the loss of our
licenses. We have no knowledge of any present foreign ownership in violation of
these restrictions.

Recent Industry Developments. FCC rules currently require wireless carriers
to make available emergency 911 services, including enhanced emergency 911
services that provide the caller's telephone number. While the FCC's rules
include a requirement that emergency 911 services be made available to users
with speech or hearing disabilities, the FCC has granted waivers of this
requirement to various vendors pending the development of adequate technology.
We may need to acquire such a waiver. Additionally, FCC regulations will require
wireless carriers to identify the location of emergency 911 callers by use of
either network-based or handset-based technologies, subject to a phase-in
schedule. The FCC has been considering waiver requests from wireless service
providers to extend the deadlines for emergency 911 implementation in order to
reflect and recognize new technologies whose implementations cannot be completed
in the allotted timeframe. On September 8, 2000, the FCC issued an order in
which it (1) extended from October 1, 2000 to November 9, 2000, the date for
wireless carriers to file emergency 911 implementation reports; (2) extended the
deadline for carriers to begin selling and activating handsets that provide
Automatic Location Identification, or ALI, capability from March 1, 2001 to
October 1, 2001; (3) adopted a revised phase-in schedule for deployment of ALI-
capable handsets; and (4) extended from December 31, 2004, to December 31, 2005,
the date for carriers to reach full penetration of ALI-capable handsets in their
total subscriber bases. The emergency 911 obligations of wireless carriers
remain subject to pending proceedings at the FCC, which could further affect the
types of emergency 911 solutions that wireless carriers will be permitted to
provide, as well as the deadlines for compliance.

18
<PAGE>

On November 18, 1999, the FCC made certain modifications to its wireless
emergency 911 requirements, including removal of a requirement that a mechanism
be in place for wireless carriers to recover their costs of emergency 911
implementation before the emergency 911 obligation is triggered. The potential
effect of this development on our business is uncertain.

The Telecommunications Act mandated significant changes in existing
regulation of the telecommunications industry intended to promote the
competitive development of new service offerings, expand the public availability
of telecommunications services and streamline regulation of the industry. The
Telecommunications Act establishes a general duty of all telecommunications
carriers, including PCS licensees, to interconnect with other carriers, directly
or indirectly. The Telecommunications Act also contains a detailed list of
requirements with respect to the interconnection obligations of local exchange
carriers. Certain aspects of the FCC's implementation of the interconnection
provisions of the Telecommunications Act remain subject to judicial review.

Under the FCC's rules, commercial mobile radio service providers are
potentially eligible to receive universal service subsidies for the first time.
However, they are also required to contribute to both federal and state
universal service funds. Many states are also moving forward to develop state
universal service fund programs, which require contributions from commercial
mobile radio service providers. Commercial mobile radio services providers
generally are subject to resale and roaming obligations. The FCC currently
requires a commercial mobile radio services provider to permit unrestricted
resale of its services. This rule is set to expire on November 24, 2002,
although resale arrangements will continue to be subject to the non-
discrimination and reasonableness requirements of Sections 201 and 202 of the
Communications Act after that date. FCC rules also require commercial mobile
radio services providers to provide mobile radio service upon request to any
subscriber in good standing, including roamers, while the subscriber is within
any portion of the licensee's licensed service area, and assuming that the
subscriber is using technically compatible mobile equipment. The rule only
mandates that carriers offer manual roaming, and does not require provision of
automatic roaming. While such roaming requirements are not implicated by our
local calling services, we could be affected by further FCC proceedings
regarding the roaming obligations of wireless carriers.

The FCC has adopted rules on telephone number portability that will enable
customers to migrate their landline and cellular telephone numbers to cellular
or PCS providers and from a cellular or PCS provider to another service
provider. On February 8, 1999, the FCC extended the deadline for compliance with
this requirement to November 24, 2002, subject to any later determination that
an earlier number portability deadline is necessary to conserve telephone
numbers. The FCC also has adopted rules requiring providers of wireless services
that are interconnected to the public switched telephone network to provide
functions to facilitate electronic surveillance by law enforcement officials. On
August 26, 1999, the FCC adopted an order requiring wireless providers to
provide information that identifies the cell sites at the origin and destination
of a mobile call to law enforcement personnel in response to a lawful court
order or other legal requirement. On May 31, 2000, Cricket petitioned the FCC
for a temporary waiver of these requirements and we are currently working with
law enforcement officials on a flexible deployment schedule. Section 222 of the
Communications Act restricts carrier use of customer proprietary network
information, or CPNI, which, among other things, identifies to whom, where, and
when a customer places a call, and identifies the types of service offerings to
which the customer subscribes and the extent to which the service is used. The
FCC adopted CPNI rules pursuant to Section 222, but the order adopting those
rules was overturned on appeal, and remains subject to further FCC review and
proceedings. The extent to which these requirements will be applicable to other
wireless carriers and us will be determined in these proceedings.

The FCC has determined that commercial mobile radio service providers are
subject to "rate integration" requirements added by the Telecommunications Act
that mandate providers of interstate interexchange, commonly referred to as
"long distance", services to charge the same rates for these services in every
state. However, the U.S. Court of Appeal for the D.C. Circuit recently vacated
this determination and remanded it back to the FCC for further review. Thus, the
implementation and application of these requirements to various commercial
mobile radio service offerings is still subject to pending FCC proceedings, and
neither the outcome of these proceedings nor the impact of the rate integration
requirement generally on our operations can be predicted at this time.

In addition, state commissions have become increasingly aggressive in their
efforts to conserve numbering resources. On March 17, 2000, the FCC released an
order intended to optimize numbering

19
<PAGE>

resources by ensuring that telephone numbers are not warehoused or left unused
by carriers. At the same time, it asked for further comment on other
administrative and technical measures that would promote more efficient
allocation and use of numbering resources. Adoption of some of the proposed
methods could have a disproportionate impact on commercial mobile radio services
providers.

The FCC has adopted billing rules for landline telecommunications service
providers and is considering whether to extend those rules to commercial mobile
radio services providers. The FCC may require that more billing detail be
provided to consumers, which could add to the expense of the billing process.
Adoption of some of the FCC's proposals could increase the complexity of our
billing processes and restrict our ability to bill customers for services in the
most commercially advantageous way.

The FCC has adopted an order that determines the obligations of
telecommunications carriers to make their services accessible to individuals
with disabilities under Section 255 of the Telecommunications Act. The order
requires telecommunications services providers, including Leap, to offer
equipment and services that are accessible to and usable by persons with
disabilities, if "readily achievable," meaning easily accomplishable and able to
be carried out without much difficulty or expense, as determined by a number of
factors enumerated in the Americans with Disabilities Act. The rules require us
to develop a process to evaluate the accessibility, usability and compatibility
of covered services and equipment. While we expect our vendors to develop
equipment compatible with the rules, we may be required to make material changes
to our network, product line or services, depending upon how the rules are
interpreted and enforced.

In June 1999, the FCC initiated an administrative rulemaking proceeding to
help facilitate the offering of calling party pays as an optional wireless
service. Under the calling party pays service, the party placing the call to a
wireless customer pays the wireless airtime charges. Most wireless customers in
the U.S. now pay both to place calls and to receive them. Adoption of a calling
party pays system on a widespread basis could make commercial mobile radio
service providers more competitive with traditional landline telecommunications
providers for the provision of regular telephone service. The FCC's
implementation of calling party pays may adversely affect our business.

The FCC is currently examining a request by Sprint to clarify that wireless
carriers are entitled to reciprocal compensation to cover the additional costs
of switching or delivering to wireless customers local calls that originate on
another network.

State Regulation and Local Approvals. Congress has given the FCC the
authority to preempt states from regulating rates or entry into commercial
mobile radio service, including PCS. The FCC, to date, has denied all state
petitions to regulate the rates charged by commercial mobile radio service
providers. State and local governments are permitted to manage public rights of
way and can require fair and reasonable compensation from telecommunications
providers, on a competitively neutral and nondiscriminatory basis for the use of
such rights of way by telecommunications carriers, including PCS providers, so
long as the compensation required is publicly disclosed by the government. The
siting of base stations also remains subject to state and local jurisdiction,
although proceedings are pending at the FCC to determine the scope of that
authority. States may also impose competitively neutral requirements that are
necessary for universal service, to protect the public safety and welfare, to
ensure continued service quality and to safeguard the rights of consumers. While
a state may not impose requirements that effectively function as barriers to
entry or create a competitive disadvantage, the scope of state authority to
maintain existing or to adopt new such requirements is unclear.

20
<PAGE>

RISK FACTORS

We Have a Limited Operating History

We have only operated as an independent company since September 1998. Because
we are at an early stage of development, we face risks generally associated with
establishing a new business enterprise. When considering our prospects,
investors must consider the risks, expenses and difficulties encountered by
companies in their early stages of development. These risks include possible
disruptions and inefficiencies associated with rapid growth and workplace
expansion, the difficulties associated with raising money to finance new
enterprises and the difficulties of establishing a significant presence in
highly competitive markets.

The Cricket Business Strategy is Unproven

Our business strategy in the United States, marketed under the brand name
Cricket, is to offer consumers a service plan that allows them to make and
receive virtually unlimited local calls for a low, flat monthly rate. This
strategy, which has been introduced in only a few markets, is a new approach to
marketing wireless services and may not prove to be successful. Our marketing
efforts may not draw the volume of customers necessary to sustain our business
plan, our capital and operating costs may exceed planned levels, and we may be
unable to compete effectively with landline and other wireless service providers
in our markets. In addition, potential customers may perceive the Cricket
service to be less appealing than other wireless plans, which offer more
features and options, including the ability to roam outside of the home service
area. If our business strategy proves to be successful, other wireless providers
are likely to adopt similar pricing plans and marketing approaches. Should our
competitors choose to adopt a strategy similar to the Cricket strategy, some of
them may be able to price their services more aggressively or attract more
customers because of their stronger market presence and geographic reach and
their larger financial resources.

The FCC's Decision that We are Qualified to Hold C-Block and F-Block Licenses is
Subject to Review and Appeal

Our business plan anticipates and depends primarily on our acquisition and
operation of C-Block and F-Block licenses in the U.S. We believe that currently
C-Block and F-Block licenses are generally more available and are less expensive
to obtain than licenses in other FCC auction blocks, partly because a licensee
may hold these licenses only if it qualifies as a "designated entity" under FCC
rules.

In July 1999, the FCC issued an opinion and order that found that we were
entitled to acquire C-Block and F-Block licenses. The order approved our
acquisition of the 36 C-Block licenses for which we were the highest bidder in
the FCC's 1999 spectrum re-auction, and the transfer of three F-Block licenses
from AirGate to one of our subsidiaries which cover portions of North Carolina,
in each case subject to the fulfillment of certain conditions. In October 1999,
the FCC issued to us the 36 re-auctioned licenses. In addition, in March 2000,
the FCC approved the transfer to us of 11 C-Block licenses from Chase
Telecommunications and one F-Block license from PCS Devco.

21
<PAGE>

Various parties previously challenged our qualification to hold C-Block and F-
Block licenses, which challenges were rejected in the FCC's July 1999 order. One
of these parties, a wireless operating company, requested that the FCC review
its order, as well as the order consenting to the transfer of licenses to us
from Chase Telecommunications and PCS Devco. That wireless operating company
also has opposed all of our pending assignment or transfer applications at the
FCC. In July 2000, the FCC affirmed its July 1999 order as well as the order
consenting to the transfer of licenses to us from Chase Telecommunications and
PCS Devco, and the wireless operating company subsequently appealed the FCC's
decision with the Court of Appeal for the D.C. Circuit, which appeal is
currently pending. In addition, Nextel Communications, Inc. has opposed one of
our pending applications, alleging that we may no longer be compliant with C-and
F-Block "total asset" eligibility requirements. Further judicial review of the
FCC's orders granting us licenses is possible. In addition, licenses awarded to
us at auction may be subject to the outcome of pending judicial proceedings by
parties challenging the auction process or the FCC's decision or authority to
auction or reauction certain C- or F-Block licenses. We may also be affected by
other pending or future FCC, legislative or judicial proceedings that generally
affect the rules governing C- and F-Block licensees or other designated
entities. For example, recent FCC rules changes have made it easier for large
companies to acquire C- and F-Block licenses at auction and in the aftermarket.

We may not prevail in connection with any such appeals or proceedings. If
the FCC determines that we are not qualified to hold C-Block or F-Block
licenses, it could take the position that some or all of our licenses should
be divested, cancelled or reauctioned.

We Have a History of Losses and Anticipate Future Losses

Leap experienced net losses of approximately $75.8 million in the period from
September 1, 1999 to December 31, 1999, $164.6 million in the year ended August
31, 1999, $46.7 million in the year ended August 31, 1998 and $5.2 million in
the year ended August 31, 1997. According to generally accepted accounting
principles, Leap must recognize some or all of its subsidiaries' losses. These
losses are likely to be significant for the next several years as we launch
service in new markets and seek to increase our customer bases in new and
existing markets. We may not generate profits in the short term or at all. If we
fail to achieve profitability, that failure could have a negative effect on the
market value of our common stock.

Leap May Fail to Raise Required Capital

We require significant additional capital to build-out and operate planned
networks and for general working capital needs. We also require additional
capital to invest in any new wireless opportunities, including capital for
license acquisition costs. Capital markets have recently been volatile and
uncertain. These markets may not improve, and we may not be able to access these
markets to raise additional capital. Developing companies in emerging markets
such as Latin America have found it particularly difficult to raise capital. If
we fail to obtain required new financing, that failure would have a material
adverse effect on our business and our financial condition. For example, if we
are unable to access capital markets, we may have to restrict our activities or
sell our interests in one or more of our subsidiaries or other ventures earlier
than planned or at a "distressed sale" price.

We Face Significant Competition

The wireless telecommunications industry generally is very competitive and
competition is increasing. Unlike many wireless providers, we also intend to
compete directly with landline service providers in the telecommunications
industry. Many competitors have substantially greater resources than we have,
and we may not be able to compete successfully. Some competitors have announced
rate plans substantially similar to the Cricket service plan in advance of our
planned launches in new markets. These competitive plans could adversely affect
our ability to maintain our pricing, market penetration and customer retention.

22
<PAGE>

In the U.S., we will compete directly with other wireless providers and
traditional landline carriers in each of our markets, many of whom have greater
resources than we do and entered the market before us. A few of our competitors
operate wireless telecommunications networks covering most of the U.S.
Competitors' earlier entry and broader presence in the U.S. telecommunications
market may have a negative effect on our ability to successfully implement our
strategy. Furthermore, the FCC is actively pursuing policies designed to
increase the number of wireless competitors in each of our markets. The FCC will
soon auction licenses that will authorize the entry of additional wireless
providers in each market. In addition, other wireless providers in the U.S.
could attempt to implement our domestic strategy of providing unlimited local
service at a low, flat monthly rate if our strategy proves successful. The
landline services with which we will compete are already used by some of our
potential customers, and we may not be successful in our efforts to persuade
potential customers to adopt our wireless service in addition to, or in
replacement of, their current landline service.

Although the deployment of advanced telecommunications services is in its
early stages in many developing countries, we believe competition is increasing
as businesses and foreign governments realize the market potential of
telecommunications services. In Mexico, a number of international
telecommunications companies, including Bell Atlantic, AT&T, MCI, Motorola,
Nextel and SBC, as well as local competitors such as Telmex and other Mexican
telecommunications companies, continue to actively engage in developing
telecommunications services. Pegaso also competes against landline carriers,
including government-owned telephone companies. We also expect the prices that
Pegaso may charge for its products and services in some regions will decline
over the next few years as competition increases in its markets. Our competitors
in Mexico have greater financial resources and more established operations than
Pegaso. Pegaso is at an early stage of development and may not be able to
compete successfully.

We compete with companies that use other communications technologies,
including paging and digital two-way paging, enhanced specialized mobile radio
and domestic and global mobile satellite service. These technologies may have
advantages over the technology we use and may ultimately be more attractive to
customers. We may compete in the future with companies who offer new
technologies and market other services, including cable television access,
landline telephone service and Internet access, that we do not currently intend
to market. Some of our competitors offer these other services together with
their wireless communications service, which may make their services more
attractive to customers. In addition, we expect that, over time, providers of
wireless communications services will compete more directly with providers of
traditional landline telephone services as do we, energy companies, utility
companies and cable operators who expand their services to offer communications
services.

A Shareholder's Ownership Interest in Leap Will Be Diluted Upon Issuance of
Shares We Have Reserved for Future Issuance

On October 20, 2000, 26,869,840 shares of our common stock were outstanding,
and 19,473,613 additional shares of our common stock were reserved for issuance.
The issuance of these additional shares will reduce a shareholder's percentage
ownership in Leap.

The following shares were reserved for issuance as of October 20, 2000:

. 4,500,000 shares reserved for issuance upon exercise of a warrant issued to
Qualcomm in connection with the spin-off of Leap, which is exercisable in
whole or in part at any time between now and September 2008;

23
<PAGE>

. 7,465,580 shares reserved for issuance upon the exercise of options or
awards granted or available for grant to employees, officers, directors and
consultants under Leap's equity incentive plans;

. 3,139,599 shares reserved for issuance upon exercise of options to purchase
Leap common stock granted to holders of Qualcomm options in connection with
the distribution of Leap's common stock to the stockholders of Qualcomm;

. 550,416 shares reserved for issuance upon consummation of our pending
acquisitions of wireless licenses in Denver, Colorado, Visalia California,
and Albany, Columbus and Macon, Georgia, and up to 785,598 shares (subject
to certain adjustments based on changes in the market value of wireless
licenses) reserved for issuance in connection with our pending acquisition
of wireless licenses in Buffalo and Syracuse, New York, all of which
acquisitions are subject to FCC approval and other conditions;

. 202,566 shares of common stock reserved for issuance upon exercise of a
warrant held by Chase Telecommunications Holdings, Inc.; and

. 2,829,854 shares of common stock reserved for issuance upon exercise of the
warrants issued in connection with our February 2000 units offering.

Dilution of the outstanding number of shares of our common stock could
adversely affect prevailing market prices for our common stock and our ability
to raise capital through an offering of equity securities.

High Levels of Debt Could Adversely Affect Our Business and Financial Condition

We have obtained and expect to continue to obtain much of our required capital
through debt financing. A substantial portion of the debt financing, including
all of our vendor financing, bears or is likely to bear interest at a variable
rate, exposing us to interest rate risk.

Our high leverage could have important consequences, including the following:

. our ability to obtain additional financing may be impaired;

. a substantial portion of our future cash flows from operations must be
dedicated to the servicing of our debt, thus reducing the funds available
for operations and investments;

. our leverage may reduce our ability to adjust rapidly to changing market
conditions and may make us more vulnerable to future downturns in the
general economy; and

. high levels of debt may reduce the value of stockholders' investments in
Leap because debt holders have priority regarding our assets in the event
of a bankruptcy or liquidation.

We may not have sufficient future cash flows to meet our debt payments or may
not be able to refinance any of our debt at maturity. We also face additional
risks with respect to our financing arrangements with vendors. These equipment
financings depend on meeting planned levels of performance such as meeting
specific target levels for potential and actual customers. If we fail to meet
performance requirements, our equipment financing may be restricted or
cancelled.

24
<PAGE>

Our Debt Instruments Contain Provisions and Requirements That Could Limit Our
Ability to Pursue Borrowing Opportunities

The restrictions contained in the indenture governing the notes issued in our
February 2000 units offering, and the restrictions contained in the senior debt
of our subsidiaries, may limit our ability to implement our business plan,
finance future operations, respond to changing business and economic conditions,
secure additional financing, if needed, and engage in opportunistic
transactions, such as the acquisition of wireless licenses. Such senior debt,
among other things, restricts our ability and the ability of our subsidiaries
and our future subsidiaries to do the following:

. create liens;

. make certain payments, including payments of dividends and distributions in
respect of capital stock;

. consolidate, merge and sell assets;

. engage in certain transactions with affiliates; and

. fundamentally change our business.

In addition, such senior debt requires us to maintain certain ratios,
including:

. leverage ratios;

. interest coverage ratios; and

. fixed charges ratios;

and to satisfy certain tests, including tests relating to:

. minimum covered population in order to incur additional indebtedness; and

. minimum number of subscribers to our services in order to incur additional
indebtedness.

We may not satisfy the financial ratios and tests under our senior debt due to
events that are beyond our control. If we fail to satisfy any of the financial
ratios and tests, we could be in default under our senior debt or may be limited
in our ability to access additional funds under our senior debt, which could
result in our being unable to make payments on our outstanding notes.

Adverse Regulatory Changes Could Impair Our Ability to Maintain Existing
Licenses and Obtain New Licenses

We must maintain our existing telecommunications licenses and those we acquire
in the future to continue offering wireless telecommunications services. Changes
in regulations or failure to comply with the terms of a license or failure to
have the license renewed could result in a loss of the license, penalties and
fines. For example, we could lose a license if we fail to construct or operate a
wireless network as required by the license. If we lose a license, that loss
could have a material adverse effect on our business and financial condition.

25
<PAGE>

State regulatory agencies, the FCC, the U.S. Congress, the courts and other
governmental bodies regulate the operation of wireless telecommunications
systems and the use of licenses in the U.S. The FCC, Congress, the courts or
other federal, state or local bodies having jurisdiction over our operating
companies may take actions that could have a material adverse effect on our
business and financial condition.

The FCC has announced plans to hold a reauction of C- and F-Block licenses in
December 2000. In response to the requests of a number of large carriers,
including SBC Communications, Nextel Communications, BellSouth Corporation,
Verizon Wireless and AT&T Wireless, the FCC has subdivided the C-Block licenses
slated for reauction into three 10 MHz licenses. For this reauction, the FCC
also subdivided the BTA service areas to which Entrepreneur's Block eligibility
restrictions would continue to apply into two tiers according to population. In
so-called "Tier 1" BTAs, service areas with a population equal to or greater
than 2.5 million, the FCC has removed all eligibility restrictions on two of the
newly-created 10 MHz C-Block licenses, and will sell them in open bidding to any
entity that purchases them, no matter how large. In these Tier 1 BTAs, one 10
MHz C-Block license will remain subject to a closed bidding process, such that
only entities meeting Entrepreneur's Block eligibility requirements will be
permitted to bid. In Tier 2 BTAs, service areas with a population less than 2.5
million, two of the 10 MHz C-Block licenses will remain subject to C- and F-
Block eligibility rules and thus reserved for closed bidding by designated
entities, while one 10 MHz C-Block license will be sold at open bidding. Several
15 MHz C-Block licenses and a number of F-Block licenses slated for reauction
also will be sold at open bidding, such that previous C- and F-Block eligibility
requirements will no longer apply.

Foreign governmental authorities regulate the operation of wireless
telecommunications systems and the use of licenses in the foreign countries in
which we operate. In some cases, the regulatory authorities also operate our
competitors. Changes in the current regulatory environment of these markets
could have a negative effect on us. In addition, the regulatory frameworks in
some of these countries are relatively new, and the interpretation of
regulations is uncertain.

We believe that the process of acquiring new telecommunications licenses will
be highly competitive. If we are not able to obtain new licenses, or cannot
otherwise participate in companies that obtain new licenses, our ability to
expand our operations would be limited.

We Have Encountered Reliability Problems During the Initial Deployment of Our
Networks

As is typical with newly-constructed networks, we have experienced reliability
problems with respect to network infrastructure equipment in our initial years
of operation. We are working with equipment suppliers to address these problems.
Chase Telecommunications has replaced the majority of its network infrastructure
in Chattanooga with equipment from a different vendor that we believe is better
suited to the high usage patterns of the Cricket service. Replacing system
components requires significant expenditures and diverts management's attention
from other matters. If our network infrastructure equipment ultimately fails to
perform as expected, that failure could have a material adverse effect on our
business and financial condition.

We May Experience Difficulties in Constructing and Operating Our
Telecommunications Networks

We will need to construct new telecommunications networks and expand existing
networks. We will heavily depend on suppliers and contractors to successfully
complete these complex construction projects. We may experience quality
deficiencies, cost overruns and delays on these construction projects, including
deficiencies, overruns and delays not within our control or the control of our
contractors. In addition, the construction of new telecommunications networks
requires the receipt of permits and approvals from numerous governmental bodies
including municipalities and zoning boards. Failure to receive these approvals
in a timely fashion can delay system rollouts and can raise the costs of
completing construction projects. Pegaso's launch of commercial service in
Mexico City was delayed several months due to delays in obtaining the required
permits from local authorities for cell site construction and some

26
<PAGE>

planned 2000 launches have been delayed. One of our planned Cricket launches has
also been delayed a few weeks.

We may not complete construction projects within budget or on a timely basis.
A failure to satisfactorily complete construction projects could jeopardize
wireless licenses and customer contracts. As a result, a failure of this type
could have a material adverse effect on our business and financial condition.

Even if we complete construction in a timely and cost effective manner, we
will also face challenges in managing and operating our telecommunications
systems. These challenges include operating and maintaining the
telecommunications operating equipment and managing the sales, advertising,
customer support, billing and collection functions of the business. Our failure
in any of these areas could undermine customer satisfaction, increase customer
turnover, reduce revenues and otherwise have a material adverse effect on our
business and financial condition.

If We Experience a High Rate of Customer Turnover, Our Costs Could Increase

Many providers in the U.S. personal communications services, or PCS, industry
have experienced a high rate of customer turnover as compared to cellular
industry averages. In September 2000, our rate of customer turnover was
approximately 5.3%, down from over 7% in May 2000. The rate of customer turnover
may be the result of several factors, including limited network coverage,
reliability issues such as blocked or dropped calls, handset problems, inability
to roam onto cellular networks, affordability, customer care concerns and other
competitive factors. Our strategy to address customer turnover may not be
successful, or the rate of customer turnover may be unacceptable. In some
markets, our competitors have chosen to provide a service plan with pricing
similar to the Cricket service, and these competitive factors could also cause
increased customer turnover. A high rate of customer turnover could reduce
revenues and increase marketing costs in order to attract the minimum number of
replacement customers required to sustain our business plan, which, in turn,
could have a material adverse effect on our business and financial condition.

Call Volume Under Cricket Flat Price Plans Could Exceed the Capacity of Our
Wireless Networks

Our Cricket strategy in the U.S. is to offer consumers a service plan that
allows them to make virtually unlimited local calls for a low, flat monthly
rate. Our business plans for this strategy assume that Cricket customers will
use their wireless phones for substantially more minutes per month than
customers who purchase service from other providers under more traditional
plans. We intend to design our U.S. networks to accommodate the expected high
call volume. Although we believe CDMA-based networks will be well suited to
support high call volumes, if wireless use by Cricket customers exceeds the
capacity of our future networks, service quality may suffer, and we may be
forced to raise the price of Cricket service to reduce volume or otherwise limit
the number of new customers. If our planned networks cannot handle the call
volumes they experience, our competitive position and business prospects in the
U.S. could be materially adversely affected.

Risks Associated with Our International Operations Could Adversely Affect Our
Business

We face many risks from our international activities. Pegaso in Mexico largely
depends on the Mexican economy. The Mexican market is subject to rapid
fluctuations in currency exchange rates, consumer prices, inflation, employment
levels and gross domestic product.

Mexico's currency and financial markets continue to experience volatility. The
impact on the Mexican economy of the economic crisis that began in Asia and then
spread to Eastern Europe and Brazil

27
<PAGE>

has affected the ability of Mexican companies to access the capital markets. The
ability of Mexican companies to access the capital markets may not improve and
may deteriorate further in the future. The economy of Mexico historically is
affected by fluctuations in the price of oil and petroleum products.
Fluctuations in the prices of these products and continuing political tensions
in Mexico could negatively impact our prospects in Mexico.

In addition, foreign laws and courts govern many of the agreements of Pegaso.
Other parties may breach or may make it difficult to enforce these agreements.

Our Results of Operations May be Harmed by Foreign Currency Fluctuations

We are exposed to risk from fluctuations in foreign currency rates, which
could impact our results of operations and financial condition. Although we
report our financial statements in U.S. dollars, Pegaso reports its results in
Mexican pesos. Consequently, fluctuations in currency exchange rates between the
U.S. dollar and the applicable local currency will affect our results of
operations as well as the value of our ownership interest in Pegaso and other
future foreign ventures. We do not currently hedge against foreign currency
exchange rate risks.

Generally, our international ventures generate revenues that are paid in their
local currency. However, many of these ventures' major contracts, including
financing agreements and contracts with equipment suppliers, are denominated in
U.S. dollars. As a result, a significant change in the value of the U.S. dollar
against the national currency of an international venture could significantly
increase the venture's expenses and could have a material adverse effect on our
business and financial condition. For example, our international ventures may be
unable to satisfy their obligations under equipment supply agreements
denominated in U.S. dollars in the event of currency devaluations. In some
developing countries, including Mexico, significant currency devaluations
relative to the U.S. dollar have occurred and may occur again in the future. In
such circumstances, Leap and its international ventures may experience economic
loss with respect to the collectibility of payments from their business partners
and customers and the recoverability of their investments.

The Technologies That We Use May Become Obsolete, Which Would Limit Our Ability
to Compete Effectively

We have employed digital wireless communications technology based on CDMA
technology. We are required under an agreement entered into with Qualcomm in
connection with our spin-off to use only cdmaOne systems in international
operations through January 2004. Other digital technologies may ultimately prove
to have greater capacity or features and be of higher quality than CDMA. If
another technology becomes the preferred industry standard in any of the
countries in which we operate, we may be at a competitive disadvantage, and
competitive pressures may require us to change our digital technology at
substantial cost. We may not be able to respond to those pressures or implement
new technology on a timely basis, or at an acceptable cost. If CDMA technology
becomes obsolete at some time in the future, and we are unable to effect a cost-
effective migration path, it could materially and adversely affect our business
and financial condition.

If Wireless Handsets Pose Health and Safety Risks, We May Be Subject to New
Regulations, and Demand for Our Services May Decrease

Media reports have suggested that certain radio frequency emissions from
wireless handsets may be linked to various health concerns, including cancer,
and may interfere with various electronic medical devices, including hearing
aids and pacemakers. Concerns over radio frequency emissions may have the effect
of discouraging the use of wireless handsets, which would decrease demand for
our services. In

28
<PAGE>

recent years, the FCC has updated the guidelines and methods it uses for
evaluating radio frequency emissions from radio equipment, including wireless
handsets. In addition, interest groups have requested that the FCC investigate
claims that digital technologies pose health concerns and cause interference
with hearing aids and other medical devices. There also are some safety risks
associated with the use of wireless handsets while driving. Concerns over these
safety risks and the effect of any legislation that may be adopted in response
to these risks could limit our ability to market and sell our wireless service.

The Loss of Key Personnel Could Harm Our Business

We believe our success depends on the contributions of a number of our key
personnel. These key personnel include Harvey P. White, Chairman of the Board
and Chief Executive Officer of Leap, and Susan G. Swenson, President and Chief
Operating Officer of Leap and Chief Executive Officer of our Cricket
Communications subsidiary. If we lose the services of key personnel, that loss
could materially harm our business. We do not maintain "key person" life
insurance on any employee.

Our Stock Price is Volatile

The stock market in general, and the stock prices of telecommunications
companies and other technology-based companies in particular, have experienced
significant volatility that often has been unrelated to the operating
performance of any specific public companies. The market price of Leap common
stock has fluctuated widely in the past quarter and is likely to continue to
fluctuate in the future. Factors that may have a significant impact on the
market price of Leap common stock include:

. future announcements concerning Leap or its competitors, including the
announcement of joint development efforts;

. changes in the prospects of our business partners or equipment suppliers;

. delays in the construction of planned Cricket networks and in the general
implementation of our business plan;

. quality deficiencies in our networks;

. results of technological innovations;

. government regulation, including the FCC's review of our acquisition of
wireless licenses;

. changes in recommendations of securities analysts and rumors that may be
circulated about Leap or its competitors; and

. public perception of risks associated with our international operations.

Our future earnings and stock price may be subject to significant volatility,
particularly on a quarterly basis. Shortfalls in our revenues or earnings or
delays in network build-out in any given period relative to the levels and
schedule expected by securities analysts could immediately, significantly and
adversely affect the trading price of Leap common stock. In the past, following
periods of volatility in the market price of a company's securities, class
action litigation has often been instituted against the subject company.
Litigation of this type could result in substantial costs and a diversion of our
management's attention and resources which could, in turn, have a material
adverse effect on our business and financial condition.

29
<PAGE>

We Do Not Intend to Pay Dividends in the Foreseeable Future

We do not anticipate paying any cash dividends on our common stock in the
foreseeable future. The terms of the indenture governing the notes issued in our
February 2000 units offering restrict our ability to declare or pay dividends.
We intend to retain future earnings to fund our growth. Accordingly,
shareholders will not receive a return on their investment in our common stock
through the payment of dividends in the foreseeable future and may not realize a
return on their investment even if they sell their shares. Any future payment of
dividends to our stockholders will depend on decisions that will be made by our
board of directors and will depend on then existing conditions, including our
financial condition, contractual restrictions, capital requirements and business
prospects.

A Determination that Leap is an Investment Company Could Adversely Affect Our
Business

Our ownership interest in Pegaso was 20.1% as of October 10, 2000, and we
expect that future investments in ventures will include ownership interests of
less than 50% and that our interests will vary over time as the ventures raise
additional capital. As a result, we could be subject to the registration
requirements of the Investment Company Act of 1940. The Investment Company Act
of 1940 requires registration of companies that engage primarily in the business
of investing in stock. Because we intend to actively participate in the business
operations of our subsidiaries and other ventures, we do not believe that we are
primarily engaged in the business of investing in stock. We intend to monitor
and adjust our interests in our ventures to the extent practical to avoid being
subject to the Investment Company Act of 1940. If we must register as an
investment company under the Investment Company Act of 1940, compliance with
these regulations will negatively impact our business.

We Have Implemented or are Subject to Anti-Takeover Provisions That Could
Prevent or Delay an Acquisition of Leap That is Beneficial to our Stockholders

Leap's charter and bylaws could make it more difficult for a third party to
acquire us, even if doing so would benefit our stockholders. Our charter and
bylaw provisions could diminish the opportunities for a stockholder to
participate in tender offers. The charter and bylaws may also restrain
volatility in the market price of Leap common stock resulting from takeover
attempts. In addition, our board of directors may issue preferred stock that
could have the effect of delaying or preventing a change in control of Leap. The
issuance of preferred stock could also negatively affect the voting power of
holders of Leap common stock. The provisions of the charter and bylaws may have
the effect of discouraging or preventing an acquisition of Leap or a sale of its
businesses. In addition, Section 203 of the Delaware General Corporation Law
imposes restrictions on mergers and other business combinations between us and
any holder of 15% or more of our common stock.

We have adopted a rights plan that could discourage, delay or prevent an
acquisition of Leap at a premium price. The rights plan provides for preferred
stock purchase rights attached to each share of Leap common stock which will
cause substantial dilution to a person or group acquiring 15% or more of Leap's
stock if the acquisition is not approved by our board of directors.

The transfer restrictions imposed on the U.S. wireless licenses we own also
adversely affect the ability of third parties to acquire us. Our licenses may
only be transferred with prior approval by the FCC. In addition, we are
prohibited from voluntarily assigning or transferring control of our C-Block and
F-Block licenses for five years after grant date except to assignees or
transferees that satisfy the financial

30
<PAGE>

criteria established by the FCC for designated entities. Accordingly, the number
of potential transferees of our licenses is limited, and any acquisition, merger
or other business combination involving Leap would be subject to regulatory
approval.

In addition, the documents governing our indebtedness contain limitations on
our ability to enter into a change of control transaction. Under these
documents, the occurrence of a change of control transaction, in some cases
after notice and grace periods, would constitute an event of default permitting
acceleration of the indebtedness.

Financial Information Concerning Segments and Geographical Information

Financial information concerning Leap's operating segments and the geographic
areas in which it operates is set forth in Note 12 to the Consolidated Financial
Statements set forth in Item 8 of this report.

Employees

On October 1, 2000, Leap employed approximately 427 full time employees,
including the approximately 365 employees of its subsidiary, Cricket
Communications.

Item 2. Properties

Leap has leased two facilities totaling approximately 60,000 square feet of
office space in San Diego, California. Leap currently leases these facilities
for sales, marketing, product development and administrative purposes.
Approximately 10,000 square feet of these facilities are on a short-term lease.

In addition, Leap has leased nine facilities for regional and local offices
for markets in which it has or expects to launch service. These facilities range
from approximately 5,000 to approximately 19,000 square feet. Leap leases
approximately 25 retail facilities in markets in which it has launched or
intends to launch service that range from shopping center kiosks to stores of up
to approximately 2,400 square feet. In addition, Leap has leased 14 facilities
for central switch facilities and more than 400 cell sites in markets in which
it has launched or intends to launch service.

Item 3. Legal Proceedings

In July 1999, the FCC issued an opinion and order that found that Leap was
qualified to acquire C-Block and F-Block licenses. The order also approved
Leap's acquisition of the 36 C-Block licenses for which Leap was the high bidder
in the FCC's 1999 spectrum reauction, and approved the transfer to Leap of three
F-Block licenses covering portions of North Carolina, in each case subject to
the fulfillment of some conditions. Various parties previously challenged Leap's
qualification to hold C-Block and F-Block licenses, which challenges were
rejected in the FCC's July 1999 order. One of these parties, Carolina PCS
Limited Partnership I, L.P., a wireless operating company, requested that the
FCC review its order, as well as the order consenting to the transfer of
licenses to Leap from Chase Telecommunications and PCS Devco. In July 2000,
the FCC affirmed its July 1999 order, as well as the order consenting to the
transfer of licenses to Leap from Chase Telecommunications and PCS Devco, and
Carolina PCS subsequently appealed the FCC's decision to the U.S. Court of
Appeal for the D.C. Circuit. Leap has filed a motion seeking summary dismissal
of this appeal, based upon Leap's belief that Carolina PCS has no standing
to challenge the FCC's July 2000 order. The FCC has filed in support of
Leap's motion, which awaits disposition by the court. Leap believes
the arguments of Carolina PCS are without merit and intends to vigorously
contest the appeal.

31
<PAGE>

Various claims arising in the course of business, seeking monetary damages
and other relief, are pending. The amount of the liability, if any, from such
claims cannot be determined with certainty; however, in the opinion of Leap's
management, the ultimate liability for such claims will not have a material
adverse effect on Leap's consolidated financial position, results of operations
or cash flows.

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

At the Annual Meeting of Stockholders held on December 10, 1999, the
following matters were submitted and approved by stockholders, with each matter
receiving the number of votes indicated:

1. Election of Directors:

Affirmative Negative/Abstaining
----------- -------------------
Thomas J. Bernard 16,856,433 47,782
Alejandro Burillo Azcarraga 16,854,750 49,465
Robert C. Dynes 16,850,434 53,781

In addition, directors whose term of office continued after the annual
meeting are: Harvey P. White, Susan G. Swenson, Scot B. Jarvis, John J. Moores,
Michael B. Targoff and Jeffrey P. Williams.

In August 2000, Leap elected Anthony R. Chase and Jill E. Barad to newly
created seats on its Board of Directors.

2. Approval of prior adoption of the 1998 Stock Option Plan:

Affirmative Votes 5,556,774
Negative Votes 562,133
Abstaining 130,651
Broker Non-Votes 10,655,175

3. Approval of prior adoption of the 1999 Stock Option Plan of Cricket
Communications Holdings, Inc.:

Affirmative Votes 5,565,083
Negative Votes 560,181
Abstaining 124,444
Broker Non-Votes 10,655,025

4. Ratification of selection of PricewaterhouseCoopers LLP as Leap's
independent accountants:

Affirmative Votes 16,832,013
Negative Votes 29,194
Abstaining 43,008
Broker Non-Votes 0

32
<PAGE>

PART II

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

Leap's Common Stock, $.0001 par value per share, has traded on The Nasdaq
National Market under the symbol "LWIN" since September 24, 1998. The following
table sets forth the high and low sale prices for the Common Stock as reported
by the Nasdaq National Market in each of the periods indicated:

High Low
------- ------
Calendar Year - 1998
Third Quarter (from September 28, 1998).... $ 8.00 $ 4.00
Fourth Quarter............................. $ 7.50 $ 2.69
Calendar Year - 1999
First Quarter.............................. $ 14.88 $ 5.19
Second Quarter............................. $ 25.50 $11.38
Third Quarter.............................. $ 26.06 $14.56
Fourth Quarter............................. $ 94.06 $23.25
Calendar Year - 2000
First Quarter.............................. $110.50 $47.06
Second Quarter............................. $ 99.75 $32.25
Third Quarter.............................. $ 81.88 $44.75
Fourth Quarter (through October 26, 2000).. $ 66.63 $38.50

On October 26, 2000, the last reported sale price of Leap's common stock on
the Nasdaq National Market was $43.50. As of October 26, 2000 there were
26,882,426 shares of Common Stock outstanding held by approximately 1,632
holders of record.

Leap has never paid or declared any cash dividends on its Common Stock and
does not intend to pay dividends on its Common Stock in the foreseeable future.
The terms of the indenture governing the notes issued in Leap's February 2000
units offering restrict its ability to declare or pay dividends. Leap intends
to retain any earnings to fund its growth.

33
<PAGE>

Item 6. Selected Financial Data

SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data)

These tables should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and the audited
consolidated financial statements included elsewhere in this report.

<TABLE>
<CAPTION>
Period from
Year Ended August 31, September 1 to
--------------------------------------- December 31,
1996 1997 1998 1999 1999
------ -------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data(1):
Operating revenues............................................... $ -- $ -- $ -- $ 3,907 $ 6,772
Operating expenses:
Cost of revenues and operations................................. -- -- -- (3,810) (10,169)
Selling, general and administrative expenses.................... (396) (1,361) (23,888) (28,745) (19,344)
Depreciation and amortization................................... -- -- -- (5,824) (6,926)
------- ------- -------- --------- --------
Total operating expenses....................................... (396) (1,361) (23,888) (38,379) (36,439)
------- ------- -------- --------- --------
Operating loss.................................................. (396) (1,361) (23,888) (34,472) (29,667)
Equity in net loss of unconsolidated
wireless operating companies.................................... -- (3,793) (23,118) (100,300) (23,077)
Write-down of investments in unconsolidated wireless
operating companies............................................. -- -- -- (27,242) --
Interest income.................................................. -- -- 273 2,505 764
Interest expense................................................. -- -- -- (10,356) (12,283)
Foreign currency transaction losses.............................. -- -- -- (7,211) (8,247)
Gain on sale of wholly owned subsidiary.......................... -- -- -- 9,097 --
Gain on issuance of stock by unconsolidated wireless
operating company............................................... -- -- -- 3,609 --
Other income (expense), net...................................... -- -- -- (243) (3,336)
------- ------- -------- --------- --------
Net loss......................................................... $ (396) $(5,154) $(46,733) $(164,613) $(75,846)
======= ======= ======== ========= ========
Basic and diluted net loss per common share (2).................. $ (0.02) $ (0.29) $ (2.65) $ (9.19) $ (4.01)
======= ======= ======== ========= ========
Shares used to calculate basic and diluted net loss per common
share(2)........................................................ 17,648 17,648 17,648 17,910 18,928
======= ======= ======== ========= ========
</TABLE>

<TABLE>
<CAPTION>
As of August 31 As of
------------------------------------- December 31,
1996 1997 1998 1999 1999
------ ------- ------- --------- ------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data(1):
Cash and cash equivalents........................ $ -- $ -- $ -- $ 26,215 $ 44,109
Working capital (deficit)........................ (111) (279) (14,789) 6,587 50,361
Restricted cash equivalents ..................... -- -- -- -- 20,550
Total assets..................................... -- 42,267 157,752 335,331 360,765
Long-term debt................................... -- -- -- 221,812 303,818
Stockholders' equity (deficit)................... (111) 41,988 142,963 70,900 10,892
</TABLE>

_____________
(1) For the fourth quarter of the year ended August 31, 1999, and for
the period from September 1, 1999 to December 31, 1999, the
financial statements of Smartcom are included in the consolidated
financial data as a result of Leap's acquisition of the remaining
50% interest in Smartcom on April 19, 1999. Before the fourth
quarter, Leap's investment in Smartcom was accounted for using the
equity method of accounting. Leap subsequently divested its entire
interest in Smartcom in June 2000.

(2) The basic and diluted net loss per common share for the period
from September 1, 1999 to December 31, 1999 and for the year ended
August 31, 1999 was calculated by dividing the net losses by
18,927,981 and 17,910,440, respectively, the weighted average
number of common shares outstanding during each of the periods.
Leap was a wholly owned subsidiary of Qualcomm before September
23,

34
<PAGE>

1998. The basic and diluted net loss per common share for the years ended
August 31, 1998, 1997 and 1996 were calculated by dividing the net loss by
the 17,647,685 shares of Leap common stock issued in the distribution to
Qualcomm's stockholders on September 23, 1998.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation

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

The following discussion and analysis is based upon our financial statements
as of the dates and for the periods presented in this section. You should read
this discussion and analysis in conjunction with our financial statements and
related notes.

Except for the historical information contained herein, this document
contains forward-looking statements reflecting management's current forecast of
certain aspects of Leap's future. It is based on current information, which we
have assessed but which by its nature is dynamic and subject to rapid and even
abrupt changes. Our actual results could differ materially from those stated or
implied by such forward-looking statements due to risks and uncertainties
associated with our business. Factors that could cause actual results to differ
include, but are not limited to: changes in the economic conditions of the
various markets the operating companies serve which could adversely affect the
market for wireless services; the ability of Leap or its operating companies to
access capital markets; the delayed build-out of the systems; Leap's ability to
roll out networks in accordance with its plans; failure of the systems to
perform according to expectations; the effect of competition; the acceptance of
the product offering by our target customers; our ability to retain customers;
our ability to maintain our cost, market penetration and pricing structure in
the face of competition; uncertainties relating to negotiating and executing
definitive agreements and the closing of transactions described in this report;
rulings by courts or the FCC adversely affecting our rights to own and/or
operate certain wireless licenses; as well as other factors detailed in our SEC
filings. The forward-looking statements should be considered in the context of
these and other risk factors detailed in this report, under the heading "Risk
Factors." Investors and prospective investors are cautioned not to place undue
reliance on such forward-looking statements. We disclaim any obligation to
update the forward-looking statements contained herein to reflect future events
or developments.

Overview

Leap is a wireless communications carrier with an innovative approach to
providing digital wireless service that is designed to appeal to the mass
market. We intend to transform wireless into a mass consumer product by
deploying customer-oriented, low-cost, simple wireless services. We generally
seek to address a much broader population segment than incumbent wireless
operators have addressed to date. In the United States, we are employing an
innovative business strategy to extend the benefits of mobility to the mass
market by offering digital wireless service under the brand name Cricket that is
as simple as, and priced at rates competitive with, traditional landline
service. Chase Telecommunications, Inc., a company we acquired in March 2000,
introduced Cricket service in Chattanooga and Nashville, Tennessee in March 1999
and January 2000, respectively. Cricket service is operated by Cricket
Communications, Inc., a wholly owned subsidiary of Leap through Cricket
Communications Holdings. To expand the Cricket service, we currently have
acquired or agreed to acquire wireless licenses covering approximately 41.7
million potential customers.

Internationally, we are currently a minority shareholder and actively
involved on the board of Pegaso Telecomunicaciones, a company that is involved
in developing and operating a nationwide digital wireless system in Mexico.
While our current emphasis is on our U.S.-based operations, we plan to focus our
international

35
<PAGE>

efforts in markets primarily in the Americas where we believe the combination of
unfulfilled demand and our attractive wireless service offerings will fuel rapid
growth. In Mexico, we were a founding shareholder and have invested $100 million
in Pegaso, a joint venture with Grupo Pegaso. We currently own 20.1% of Pegaso,
which is deploying and operating the first 100% digital wireless communications
network in Mexico. Pegaso holds wireless licenses generally in the 1900 MHz band
to provide nationwide service covering all of Mexico, with approximately 99
million potential customers.

On June 2, 2000, we completed the sale of our Chilean operating subsidiary,
Smartcom, S.A., to Endesa, S.A., a Spanish utility company. Under the terms of
our agreement with Endesa, Endesa purchased all of the outstanding capital stock
of Smartcom from our subsidiary, Inversiones Leap Wireless Chile, S.A., and its
designated shareholder nominee (who held one share of the Series A preferred
stock of Smartcom in order to comply with Chilean law which requires two
shareholders for each Chilean sociedad anonima), in exchange for gross
consideration of approximately $381.5 million, consisting of cash, three
promissory notes, the repayment of intercompany debt due to Leap by Smartcom,
and the release of cash collateral. One of the promissory notes is subject to a
one year right of set-off to secure the indemnification obligations of Leap and
Inversiones under the share purchase agreement between the parties. Another of
the promissory notes is subject to adjustment based upon an audit of the closing
balance sheet of Smartcom completed following the closing of the agreement. In
addition, the sale of the Smartcom shares resulted in the removal of
approximately $191.4 million of Smartcom liabilities from our consolidated
balance sheet.

Smartcom holds a nationwide wireless license in the 1900 MHz band and
operates a nationwide digital wireless system in Chile. In April 1999, we
acquired the remaining 50% of Smartcom that we did not already own.
Subsequently, we recruited a new management team, upgraded the network
capabilities and, in November 1999, relaunched service under a new brand name,
SMARTCOM PCS. Smartcom's network is the only CDMA-based network in Chile.

In June 2000, through a subsidiary merger, we acquired the 5.11% of Cricket
Communications Holdings that we did not already own. These shares were owned by
individuals and entities, including directors and employees of Leap and Cricket
Communications Holdings. Under the terms of the merger, each issued and
outstanding share of Cricket Communications Holdings common stock not held by
Leap was converted into the right to receive 0.315 of a fully paid and non-
assessable share of our common stock. As a result, an aggregate of 1,048,635
shares of our common stock were issued. We also assumed Chase Telecommunications
Holdings' warrant to purchase 1% of the common stock of Cricket Communications
Holdings, which was converted into a warrant to acquire 202,566 shares of our
common stock, at an aggregate exercise price of $1.0 million. The aggregate fair
value of the shares issued and warrant assumed in excess of the carrying value
of the minority interest was allocated to goodwill. In addition, we assumed all
unexpired and unexercised Cricket Communications Holdings stock options
outstanding at the time of the merger, whether vested or unvested, which upon
conversion amounted to options to purchase 407,784 shares of our common stock.

We are in the early stages of development and our financial results continue
to reflect the considerable investment associated with completion of our network
build-outs and the initial launch of commercial service in new markets. As we
continue to expand our operations, our net operating losses and our
proportionate share of the losses in our unconsolidated wireless operating
companies are expected to grow.

The term "operating company" refers to Cricket Communications, Chase
Telecommunications, Smartcom and Pegaso.

Recent or Pending Acquisitions

Chase Telecommunications. In March 2000, we completed the acquisition of
substantially all of the assets of Chase Telecommunications Holdings, including
wireless licenses. The purchase price included approximately $6.3 million in
cash, the assumption of principal amounts of liabilities that totaled

36
<PAGE>

approximately $138.0 million (with a fair value of approximately $131.3
million), a warrant to purchase 1% of the common stock of Cricket Communications
Holdings (which has been converted into a warrant to acquire 202,566 shares of
Leap common stock) at an exercise price of $1.0 million (which had a fair value
of approximately $15.3 million at the acquisition date determined using the
Black Scholes option pricing model), and contingent earn-out payments of up to
$41.0 million (plus certain expenses) based on the earnings of the business
acquired during the fifth full year following the closing of the acquisition.
The liabilities assumed included approximately $78.8 million in principal
amounts owed to the FCC associated with the wireless licenses that bear interest
at the rate of 7.0% per annum and must be repaid in quarterly installments of
principal and interest through January 2007. Therefore, under the purchase
method of accounting, the total estimated fair value of the acquisition was
$152.9 million, of which $43.2 million has been allocated to property and
equipment and other assets and $109.7 million has been allocated to intangible
assets. Intangible assets consist of primarily wireless licenses which are to be
amortized over their estimated useful lives of 40 years upon commencement of
commercial service.

Wireless licenses. Leap acquired 36 licenses in the federal government's 1999
reauction of broadband PCS spectrum licenses for $18.7 in cash. From January
through October 2000, we completed the purchase of several additional licenses
in the United States from various third parties for an aggregate of $39.4
million in cash, 333,450 shares of our common stock that had an aggregate fair
value at the time of purchase of $18.7 million and the assumption of $12.4
million in debt owed to the FCC related to the licenses. During the same period,
we entered into agreements with third parties to purchase additional licenses in
exchange for cash, shares of common stock and the assumption of FCC debt with an
aggregate estimated value of $174.4 million as of October 26, 2000, subject to
certain adjustments based upon changes in the market value of wireless licenses.
Each of the pending agreements is subject to customary closing conditions,
including FCC approval, but no assurance can be given that they will be closed
on schedule or at all.

Various parties previously challenged our qualification to hold C-Block and F-
Block licenses, which challenges were rejected in the FCC's July 1999 order. One
of these parties, a wireless operating company, requested that the FCC review
its order, as well as the order consenting to the transfer of licenses to us
from Chase Telecommunications and PCS Devco. That wireless operating company
also has opposed all of our pending assignment or transfer applications at the
FCC. In July 2000, the FCC affirmed its July 1999 order as well as the order
consenting to the transfer of licenses to us from Chase Telecommunications and
PCS Devco, and the wireless operating company subsequently appealed the FCC's
decision to the Court of Appeal for the D.C. Circuit, which appeal is
currently pending. In addition, Nextel Communications, Inc. has opposed one of
our pending FCC applications, alleging that we may no longer be compliant with
C-and F-Block "total asset" eligibility requirements. Further judicial review of
the FCC's orders granting us licenses is possible. In addition, licenses awarded
to us at auction may be subject to the outcome of pending judicial proceedings
by parties challenging the auction process or the FCC's decision or authority to
auction or reauction certain C- or F-Block licenses. We may also be affected by
other pending or future FCC, legislative or judicial proceedings that generally
affect the rules governing C- and F-Block licenses or other designated
entities. For example, recent FCC rules changes have made it easier for large
companies to acquire C- and F-Block licenses at auction and in the aftermarket.

We may not prevail in connection with any such appeals or proceedings and we
may not remain qualified to hold C-Block or F-Block licenses. If the FCC
determines that we are not qualified to hold C-Block or F-Block licenses, it
could take the position that all of our licenses should be divested, cancelled
or reauctioned.

Presentation

37
<PAGE>

In April 1999, we increased our ownership interest in Smartcom from 50% to
100%. As a result of the reporting lag we have adopted for our foreign operating
companies, we began fully consolidating Smartcom's results of operations in June
1999, the beginning of the fourth quarter of the year ended August 31, 1999.
Before that, we accounted for our investment in Smartcom under the equity method
of accounting. On June 2, 2000, we sold all of the outstanding shares of
Smartcom to Endesa. We account for our interest in Pegaso under the equity
method of accounting. As of December 31, 1999 we owned 28.6% of Pegaso. We
currently own 20.1% of Pegaso.

The directors of the Transworld Companies, partially owned subsidiaries of
Orrengrove, a company in which we have an indirect interest, previously voted to
liquidate the companies. The decision followed the Transworld Companies' loss of
leased satellite transmission capacity and the companies' failure to develop an
acceptable business plan that did not utilize satellite transmission. As a
result of these developments, we wrote down our indirect investment in the
Transworld Companies in the fourth quarter of the year ended August 31, 1999. In
addition, we have ceased funding loans to Metrosvyaz and, as a result, have
written off our remaining investment in Metrosvyaz in the fourth quarter of the
year ended August 31, 1999.

On July 31, 2000, the Board of Directors of the Company elected to change the
Company's fiscal year from a year ending on August 31 to a year ending on
December 31. The first new twelve-month fiscal year will end on December 31,
2000. As a result of the change in year end, the Company is required to issue
consolidated financial statements as of and for the four month period ended
December 31, 1999. To accommodate the different fiscal periods of the Company
and its foreign operating companies, the Company recognized its share of net
earnings or losses of such foreign companies on a two month lag. In conjunction
with the Company's change in fiscal year end, this lag was extended to three
months beginning in the period from September 1, 1999 to December 31, 1999. The
effect of this change on previously reported amounts was adjusted in accumulated
deficit in the period from September 1, 1999 to December 31, 1999.

Results of Operations

Four Months Ended December 31, 1999 Compared to Four Months Ended December 31,
1998

We incurred a net loss of $75.8 million during the four month period ended
December 31, 1999 compared to a net loss of $26.1 million in the corresponding
period of the prior year. The increase relates primarily to the costs associated
with the launch of network service in new markets. Pegaso launched operations in
Tijuana, Guadalajara and Monterrey in February through September 1999. Cricket
wireless service was launched in Nashville, Tennessee in late January 2000. In
addition, in November 1999 we re-launched service in Chile under a new brand
name and corporate identity. As a result, total subscribers on our networks
reached approximately 206,000 subscribers at December 31, 1999 (22,000 in the
U.S., 78,000 in Chile and 106,000 in Mexico), compared to a total subscriber
base of approximately 23,000 subscribers at December 31, 1998.

As a direct result of the consolidation of Smartcom, we recorded $6.6 million
of operating revenues, $10.2 million of cost of operating revenues, $9.9 million
of additional selling, general and administrative

38
<PAGE>

expenses, $6.7 million of additional depreciation and amortization, $4.7 million
of additional net interest expense, and $8.2 million of foreign currency
transaction losses during the four month period ended December 31, 1999.
Smartcom's net loss of $33.1 million recognized during the four month period
ended December 31, 1999, before intercompany eliminations, compared to $4.5
million that we recognized under the equity method for our 50% interest in the
corresponding period of the prior year. During the four months ended December
31, 1998, we did not report any operating revenues because all of our revenue
generating operating companies were accounted for under the equity method of
accounting. Our operating companies did not generate material revenues in the
four months ended December 31, 1998.

We incurred $19.3 million of selling, general and administrative expenses
during the four month period ended December 31, 1999, compared to $5.3 million
in the corresponding period of the prior year. The increase included $9.9
million from the consolidation of Smartcom. Excluding Smartcom, selling, general
and administrative expenses increased by $4.1 million over the corresponding
four month period of the prior year due to increased staffing and business
development activities related to Cricket Communications. We expect that
selling, general and administrative expenses will increase in the future as a
result of ongoing business development efforts on current and new projects.

We incurred an operating loss of $29.7 million during the four month period
ended December 31, 1999 compared to an operating loss of $5.5 million in the
corresponding period of the prior year. The $24.2 million increase primarily
reflects the consolidation of Smartcom. We expect substantial growth in
subscribers, operating revenues and operating expenses as a result of our
acquisition and consolidation of Chase Telecommunications in March 2000 and the
planned development and launch of Cricket service in multiple U.S. markets. We
also expect substantial growth in Pegaso's subscribers, operating revenues and
operating expenses; however, because Pegaso is accounted for under the equity
method, its operating revenues and expenses are not consolidated.

Equity in net loss of unconsolidated wireless operating companies was $23.1
million during the four month period ended December 31, 1999 compared to $19.9
million in the corresponding period of the prior year. During the four months
ended December 31, 1999, our equity share in the net loss of our unconsolidated
wireless operating companies related to Pegaso and Chase Telecommunications.
During the corresponding period of the prior year, our equity share in the net
loss of our unconsolidated wireless operating companies also included Smartcom
(prior to Leap's acquisition of the remaining 50 percent interest) and our
Russian investments which have been subsequently written-down, liquidated or are
in the process of liquidation. Despite these changes, equity in net loss of
unconsolidated wireless operating companies increased as a result of the costs
associated with the launch of Pegaso's service and the expansion of Cricket
services by Chase.

Interest expense was $12.3 million during the four month period ended
December 31, 1999, compared to $1.3 million in the corresponding period of the
prior year. Interest expense related primarily to borrowings under our credit
agreement with Qualcomm and Smartcom's financing of its wireless communications
network. We expect interest expense to increase substantially in the future due
to our senior notes and senior discount notes borrowings in February 2000, new
financing agreements with infrastructure equipment vendors and expected
additional borrowings used to fund the construction of wireless networks in
various markets across the United States.

Foreign currency transaction losses of $8.2 million during the four month
period ended December 31, 1999 reflected unrealized foreign exchange losses
recognized by Smartcom on U.S. dollar denominated loans as a result of changes
in the exchange rate between the U.S. dollar and the Chilean peso.

Year Ended August 31, 1999 Compared to Year Ended August 31, 1998

We incurred a net loss of $164.6 million in the year ended August 31, 1999
compared to a net loss of $46.7 million in the year ended August 31, 1998. The
increase resulted primarily from start-up costs associated with our
international operating companies. Our share of these start-up costs, $100.3
million in

39
<PAGE>

the year ended August 31, 1999, is recorded as equity in net loss of
unconsolidated wireless operating companies. In addition, in the year ended
August 31, 1999, we recorded a write-down of equity investments of $27.2
million, interest expense and amortization of debt discount and facility fee of
$10.4 million, foreign currency transaction losses of $7.2 million, a gain on
the sale of a wholly owned subsidiary of $9.1 million and a gain on issuance of
stock by an unconsolidated wireless operating company of $3.6 million.

As a direct result of the consolidation of Smartcom in the fourth quarter of
the year ended August 31, 1999, we recorded $3.9 million of operating revenues,
$3.8 million of cost of operating revenues, $4.5 million of additional selling,
general and administrative expenses, $5.3 million of additional depreciation and
amortization, $2.9 million of additional interest expense, and $7.2 million of
foreign currency transaction losses. Smartcom's full consolidation increased our
net loss in the year ended August 31, 1999 by $9.9 million. During the prior
year, we did not report any operating revenues because all of our operating
companies were accounted for under the equity method of accounting. Our
operating companies did not generate material revenues in the prior year.

We incurred $28.7 million of selling, general and administrative expenses in
the year ended August 31, 1999 compared to $23.9 million in the year ended
August 31, 1998. The increase resulted from the consolidation of Smartcom in the
fourth quarter of the year ended August 31, 1999. Excluding Smartcom, selling,
general and administrative expenses remained relatively flat.

We incurred an operating loss of $34.5 million in the year ended August 31,
1999 compared to an operating loss of $23.9 million in the year ended August 31,
1998. The $10.6 million increase primarily reflects the consolidation of
Smartcom in the fourth quarter of the year ended August 31, 1999.

Equity in net loss of unconsolidated wireless operating companies was $100.3
million in the year ended August 31, 1999 compared to $23.1 million in the year
ended August 31, 1998. The significant increase in our share of the net loss of
our unconsolidated wireless operating companies related primarily to the
expenditures they incurred in launching their network services, including
marketing and other expenses, and the amortization of their capitalized network
costs. Smartcom, accounted for under the equity method until the fourth quarter
of 1999, launched nationwide service in September 1998. Pegaso launched
operations in Tijuana, Guadalajara and Monterrey from February through September
1999. Chase Telecommunications launched its traditional mobile service in the
U.S. in September 1998 and re-launched service utilizing Leap's Cricket wireless
concept in March 1999. In addition, Petrosvyaz, a Metrosvyaz joint venture,
launched commercial service in St. Petersburg in April 1999. Equity in net loss
of unconsolidated wireless operating companies included a $16.9 million asset
impairment charge in the year ended August 31, 1999 as a result of the
satellite failures experienced by the Transworld Companies.

After reviewing a series of alternative business plans that did not meet
their minimum financial performance criteria, the directors of the Transworld
Companies voted to liquidate the companies and to distribute their net assets to
their stockholders. As a result, we recorded a $17.6 million write-down in the
fourth quarter of the year ended August 31, 1999, reducing our investment in
Orrengrove to the liquidation proceeds we expect to receive.

In August 1999, we declared default under loans to Metrosvyaz, stopped
funding those loans, wrote off our remaining $9.6 million investment in
Metrosvyaz and issued a demand for arbitration against Metrosvyaz and one of its
directors with respect to those loans. In response, on March 21, 2000,
Metrosvyaz filed suit against us and certain of our directors and officers in
the U.S. District Court for the

40
<PAGE>

Southern District of California. The Metrosvyaz suit alleged claims for libel,
trade libel, intentional and negligent interference with prospective advantage
and breach of fiduciary duty.

On April 27, 2000, we resolved our differences with Metrosvyaz. As part of
the settlement, Metrosvyaz dismissed its action against Leap and its officers in
the federal court in San Diego, Leap dismissed its demand for arbitration, and
both companies agreed to general releases. Leap surrendered its interest in a
joint venture company that owned an interest in Metrosvyaz, wrote off the
remaining balance of its investments in Russia and received a contractual right
to certain contingent payments from Qualcomm.

Interest expense in the year ended August 31, 1999 related primarily to
borrowings under our credit agreement with Qualcomm and the consolidation of
$2.9 million of Smartcom interest expense in the fourth quarter of the year
ended August 31, 1999. Smartcom's interest expense related primarily to the
financing of its wireless communications network. Leap did not incur any
interest expense during the year ended August 31, 1998.

Foreign currency transaction losses of $7.2 million in the year ended August
31, 1999 reflected unrealized foreign exchange losses recognized by Smartcom on
U.S. dollar denominated loans as a result of changes in the exchange rate
between the U.S. dollar and the Chilean peso during the fourth quarter of the
year ended August 31, 1999.

Gain on sale of wholly owned subsidiary of $9.1 million in the year ended
August 31, 1999 resulted from our sale of OzPhone Pty. Ltd., our Australian
operating company. OzPhone held wireless licenses but had not initiated service.

Gain on issuance of stock by unconsolidated wireless operating company of
$3.6 million in the year ended August 31, 1999 reflects a reduction in our share
of Pegaso's accumulated losses as a result of a decrease in our percentage
ownership of Pegaso. In July 1999, several other investors increased their
ownership interest in Pegaso by $50 million of capital as previously planned.

Year Ended August 31, 1998 Compared to Year ended August 31, 1997

General and administrative expenses were $23.9 million for the year ended
August 31, 1998, compared to $1.4 million for the year ended August 31, 1997.
The increase was due principally to increases in business development activities
relating to projects to create our operating companies in Mexico and Russia.
These development activities resulted in significantly higher consulting
expenses and an increase in Qualcomm's corporate overhead allocated to us.

Equity in net loss of unconsolidated wireless operating companies for the
year ended August 31, 1998 was $23.1 million, compared to $3.8 million in the
year ended August 31, 1997. The net loss for the year ended August 31, 1998
represented our share of the net losses of the wireless operating companies in
which we then held an ownership interest accounted for under the equity method
of accounting. These losses consisted of costs incurred before service launch
during the network build-out and testing phases. Equity in net loss of
unconsolidated wireless operating companies of $3.8 million for the year ended
August 31, 1997

41
<PAGE>

primarily reflected our equity share in the net loss of Chase Telecommunications
Holdings, which began network planning and initial build-out activities earlier
in the year.

Liquidity and Capital Resources

General

Over the next twelve months from October 2000, we have budgeted a total of
approximately $1,369.0 million for the following capital requirements:

. approximately $1,233.0 million for capital expenditures for the build-out
of Cricket networks and to fund operating losses;

. approximately $124.0 million in connection with our pending acquisitions
of wireless licenses; and

. approximately $12.0 million for general corporate overhead and other
expenses.

Our actual expenditures may vary significantly depending upon whether we
purchase additional wireless licenses, the progress of the build-out of our
networks and other factors, including unforeseen delays, cost overruns,
unanticipated expenses, regulatory expenses, engineering design changes and
other technological risks.

As of September 30, 2000, we had a total of approximately $2,378.4 million in
unused capital resources for our future cash needs as follows:

. approximately $740.9 million in consolidated cash, cash equivalents and
investments on hand;

. notes receivable of $146.5 million from the sale of Smartcom; and

. approximately $1,491.0 million in commitments under vendor financing
arrangements with Lucent Technologies, Nortel and Ericsson, with
availability based on a ratio of the total amounts of products and
services purchased.

Accordingly, we believe that if we do not make any additional license
acquisitions or any investments in new ventures, we have adequate capital
resources to fund our operations for the next twelve months.

We expect to incur significant operating losses and to generate significant
negative cash flow from operating activities in the future while we continue to
build-out our networks and build our customer base. Our ability to satisfy our
debt repayment obligations and covenants depends upon our future performance,
which is subject to a number of factors, many of which are beyond our control.
We cannot guarantee that we will generate sufficient cash flow from our
operating activities to meet our debt service and working capital requirements,
and we may need to refinance our indebtedness. However, our ability to refinance
our indebtedness will depend on, among other things, our financial condition,
the state of the public and private debt and equity markets, the restrictions in
the instruments governing our indebtedness and other factors, some of which may
be beyond our control. In addition, if we do not generate sufficient cash flow
to meet our debt service requirements or if we fail to comply with the covenants
governing our indebtedness, we may need additional financing in order to service
or extinguish our indebtedness. We may not be able to obtain financing or
refinancing on terms that are acceptable to us, or at all.

42
<PAGE>

We expect that we will require significant additional financing over the
next several years to substantially complete the build-out of our planned
wireless networks in the U.S., the planned acquisition of additional licenses
and the build-out of markets related to additional licenses. These capital
requirements include license acquisition costs, capital expenditures for network
construction, operating cash flow losses and other working capital costs, debt
service and closing fees and expenses. As is typical for start-up
telecommunications networks, we expect our networks to incur operating expenses
significantly in excess of revenues in their early years of operations. We are
exploring other public and private debt and equity financing alternatives,
including the sale from time to time of convertible preferred stock, convertible
debentures and other debt and equity securities. However, we may not be able to
raise additional capital on terms that are acceptable to us, or at all.

We have no direct obligation to fund the operations of Pegaso, our venture
in Mexico, and expect Pegaso to be funded independently. Although Pegaso has
raised or obtained commitments for debt and equity capital in excess of $1.2
billion, Pegaso will need to obtain substantial additional capital to complete
the build-out, launch and operation of its planned networks. As a result, Pegaso
is seeking additional debt and equity financing, including additional vendor
financing.

In February 2000, we completed a public equity offering of 4,000,000 shares
of common stock at a price of $88.00 per share. Net of underwriters' discounts
and commissions and other offering expenses, we received $82.72 per share, or
$330.0 million in the aggregate. A portion of the net proceeds from the equity
offering was used for the repayment of the Qualcomm credit agreement. The
remaining proceeds from the equity offering will be used for capital
expenditures, acquisitions of wireless licenses, strategic investments, sales
and marketing activities and working capital and general corporate purposes.

Credit Facilities and Other Financing Arrangements

Units Offering. In February 2000, we completed an offering of 225,000
senior units, each senior unit consisting of one 12.5% senior note due 2010
(Senior Note) and one warrant to purchase our common stock, and 668,000 senior
discount units, each senior discount unit consisting of one 14.5% senior
discount note due 2010 (Senior Discount Note) and one warrant to purchase our
common stock. The total gross proceeds from the sale of the senior units and
senior discount units were $225.0 million and $325.1 million, respectively, and
$164.4 million of the total proceeds were allocated to the fair value of the
warrants, estimated using the Black-Scholes option pricing model. In addition,
we capitalized debt issuance costs of $13.5 million, consisting of underwriting,
printing, legal and accounting fees. A portion of the net proceeds from the
units offering was used for the repayment of borrowings under the Qualcomm
credit agreement. The remaining proceeds from the units offering will be used
for capital expenditures, acquisitions of wireless licenses, strategic
investments, sales and marketing activities and working capital and general
corporate purposes.

Interest on the Senior Notes will be payable on April 15 and October 15 of
each year, beginning on April 15, 2000. We used $79.5 million of the proceeds
from the Senior Notes to purchase and pledge, for the benefit of the holders of
the Senior Notes, certain U.S. Government securities to provide for the payment
of the first seven scheduled interest payments on the Senior Notes. Each Senior
Discount Note has an initial accreted value of $486.68 and a principal amount at
maturity of $1,000. The Senior Discount Notes will not begin to accrue cash
interest until April 15, 2005. Interest on the Senior Discount Notes will be
payable on April 15 and October 15 of each year, beginning on October 15, 2005.

43
<PAGE>

Senior Discount Notes using proceeds from certain qualified equity offerings of
the Company's common stock at 112.5% of their principal amount and 114.5% of
their accreted value, respectively.

The notes rank equally with the Company's other unsecured senior
indebtedness. The notes are effectively subordinate to all of the Company's
secured indebtedness. The notes are guaranteed by the Company's domestic
subsidiary, Cricket Communications Holdings. The terms of the notes include
certain covenants that restrict the Company's ability to, among other things,
incur additional indebtedness, create liens, pay dividends, make investments,
sell assets and effect a consolidation or merger. The Company consummated an
exchange offer for the notes pursuant to an effective registration statement in
July 2000.

Each warrant included as part of the Senior Notes is initially exercisable
to purchase 5.146 shares (1,157,850 shares in aggregate) of our common stock at
an exercise price of $96.80 per share. Each warrant included as part of the
Senior Discount Notes is initially exercisable to purchase 2.503 shares
(1,672,004 shares in aggregate) of our common stock at an exercise price of
$96.80 per share. The warrants may be exercised at any time on or after February
23, 2001 and prior to April 15, 2010. We filed a shelf registration statement
covering the resale of the warrants and related common stock issuable upon
exercise of the warrants in August 2000.

Lucent Equipment Financing. In September 1999, Cricket Communications
agreed to purchase up to $330.0 million of infrastructure products and services
from Lucent, and in June 2000, increased the value of products and services that
can be purchased under the agreement to up to $900.0 million. The purchase
agreement is subject to early termination at Cricket Communications' convenience
subject to payments for products and services purchased from Lucent. Lucent
agreed to finance these purchases plus additional working capital under a credit
facility. The credit facility originally permitted up to $641.0 million in total
borrowings by Cricket Communications, which was increased to up to $1,350.0
million in June 2000, with borrowing availability generally based on a ratio of
the total amount of products and services purchased from Lucent. Lucent is not
required to make loans under the facility if the total of the loans held
directly or supported by Lucent is an amount greater than $815.0 million. The
agreement contains various covenants and conditions typical for a loan of this
type, including minimum levels of customers and covered potential customers that
must increase over time, limits on annual capital expenditures, dividend
restrictions and other financial ratio tests. Borrowings under the Lucent credit
facility accrue interest at a rate equal to LIBOR plus 3.5% to 4.25% or a bank
base rate plus 2.5% to 3.25%, in each case with the specific rate based on the
ratio of total indebtedness to EBITDA. Cricket Communications must pay a
commitment fee equal to 1.25% per annum on the unused commitment under the
facility, decreasing to 0.75% per annum. Principal payments are scheduled to
begin after three years with a final maturity after eight years. Repayment is
weighted to the later years of the repayment schedule. The obligations under the
Lucent credit agreement, together with the obligations under similar facilities
from Nortel Networks, Inc. and Ericsson Wireless Communications, Inc., are
secured by all of the stock of Cricket Communications, its subsidiaries and the
stock of each special purpose subsidiary of Leap formed to hold wireless
licenses used in Cricket Communications' business, and all of their respective
assets. At September 30, 2000, Cricket Communications had $308.8 million
outstanding under the Lucent credit agreement.

Nortel Equipment Financing. In August 2000, Cricket Communications entered
into a three-year supply agreement with Nortel for the purchase of
infrastructure products and services. Nortel agreed to finance these purchases
plus additional working capital under a credit facility. The credit facility
permits up to $525.0 million in total borrowings, with borrowing availability
generally based on a ratio of the total amount of equipment and services
purchased from Nortel. The credit agreement contains various covenants and
conditions typical for a loan of this type, including minimum levels of
customers and covered potential customers that must increase over time, limits
on annual capital expenditures and other financial ratio tests. The obligations
under the credit agreement, together with the obligations under similar
facilities from Lucent and Ericsson, are secured by all of the stock

44
<PAGE>

of Cricket Communications, its subsidiaries, and the stock of each special
purpose subsidiary of Leap formed to hold wireless licenses used in Cricket
Communications' business, and all of their respective assets. Borrowings under
the credit facility accrue interest at a rate equal to LIBOR plus 3.5% to 4.25%
or a bank base rate plus 2.5% to 3.25%, in each case with the specific rate
based on the ratio of total indebtedness to EBITDA. Cricket Communications must
pay a commitment fee equal to 1.25% per annum on the unused commitment under the
credit facility, decreasing to 0.75% per annum. Principal payments are scheduled
to begin after three years with a final maturity after eight years. Repayment is
weighted to the later years of the repayment schedule.

Ericsson Equipment Financing. In October 2000, Cricket Communications entered
into a three-year supply agreement with Ericsson for the purchase of up to
$330.0 million of infrastructure products and services. Ericsson Credit AB
agreed to finance these purchases plus additional working capital under a credit
facility. These agreements amended and replaced the binding memorandum of
agreement between the parties dated September 20, 1999. The credit facility
permits up to $495.0 million in total borrowings, with borrowing availability
generally based on a ratio of the total amount of products and services
purchased from Ericsson. The credit agreement contains various covenants and
conditions typical for a loan of this type, including minimum levels of
customers and covered potential customers that must increase over time, limits
on annual capital expenditures, dividend restrictions and other financial ratio
tests. The obligations under the credit agreement, together with the obligations
under similar facilities from Lucent and Nortel, are secured by all of the stock
of Cricket Communications, its subsidiaries, and the stock of each special
purpose subsidiary of Leap formed to hold wireless licenses used in Cricket
Communications' business, and all of their respective assets. Borrowings under
the credit facility accrue interest at a rate equal to LIBOR plus 3.5% to 4.25%
or a bank base rate plus 2.5% to 3.25%, in each case with the specific rate
based on the ratio of total indebtedness to EBITDA. Cricket Communications must
pay a commitment fee equal to 1.25% per annum on the unused commitment under the
credit facility, decreasing to 0.75% per annum. Principal payments are scheduled
to begin after three years with a final maturity after eight years. Repayment is
weighted to the later years of the repayment schedule.

Cricket Communications, Lucent, Nortel and Ericsson have entered into an
agreement pursuant to which Lucent, Nortel and Ericsson agreed to share
collateral and the parties agreed that Cricket Communications' total outstanding
balance of loans to the three vendors shall not exceed $1,800.0 million.

Obligations to the FCC. We have assumed $91.2 million in debt obligations to
the FCC as part of the purchase price for wireless licenses in 2000. We also
will assume additional debt obligations to the FCC in the aggregate principal
amount of approximately $3.8 million as part of the purchase price for the
pending acquisitions of wireless licenses.

Pegaso Financing

Qualcomm and another equipment vendor have agreed to provide approximately
$580.0 million of secured equipment financing to Pegaso, a portion of which has
already been advanced to the venture. The shares of Pegaso Communications y
Sistemas, S.A. de C.V., Pegaso's subsidiary that holds wireless licenses, serve
as collateral for Pegaso's obligations under the equipment financing.

In addition, in May 1999, Pegaso entered into a loan agreement with several
banks with credit support from Qualcomm. We guaranteed 33% of Pegaso's
obligations under the initial commitment from the lenders of $100 million. In
December 1999, as a condition of the guarantee, Leap received an option to
subscribe for and purchase up to 243,090 limited voting series "N" treasury
shares of Pegaso. The number of shares to be purchased by Leap under the option
will be calculated to provide a total internal rate of return on the average
outstanding balance of the bridge loan of 20%. The options have an exercise
price of $0.01 per share and expire ten years from the date of issuance. The
options are exercisable at any time after the date on which all amounts under
the loan agreement are paid in full. The amount of the loan was subsequently
increased to $190 million although the amount of the guarantee was not
increased.

In July 1999, several existing investors contributed $50.0 million to Pegaso
as previously planned. On April 26, 2000, Sprint PCS invested $200 million in
Pegaso by purchasing shares from Pegaso and

45
<PAGE>

shareholders other than Leap. In August 2000, several existing investors
contributed $50.0 million to Pegaso as previously planned. Pegaso expects to
fund a large portion of its development and operating activities in the year
ended December 31, 2000 with cash from operations, proceeds of the $100 million
in investments from several existing investors and the investment from Sprint
PCS, and borrowings under the $100 million loan agreement. In addition, Pegaso
is seeking additional debt and equity financing, including additional vendor
financing.

Operating Activities

We used $31.6 million in cash for operating activities during the four month
period ended December 31, 1999, compared to $13.5 million in the corresponding
period of the prior year. The increase is primarily attributable to our net
loss, as well as the effect of the full consolidation of Smartcom. We expect
that cash used in operating activities will increase substantially in the future
as a result of our acquisition and consolidation of Chase Telecommunications and
other activities related to the launch of our U.S. networks.

We used $34.1 million in cash for operating activities in the year ended
August 31, 1999, compared to $18.4 million in the year ended August 31, 1998 and
$1.2 million in the year ended August 31, 1997. Cash used in operating
activities in the year ended August 31, 1999 included $8.5 million attributable
to the consolidation of Smartcom during the fourth quarter.

Investing Activities

Cash used in investing activities was $27.8 million during the four month
period ended December 31, 1999 compared to $90.2 million in the corresponding
period of the prior year. Investments during the four month period ended
December 31, 1999 consisted primarily of $20.5 million held as restricted cash
to secure a Smartcom line of credit and capital expenditures, primarily by
Smartcom, of $4.6 million. Investments in the corresponding period of the prior
year consisted primarily of a $60.7 million capital contribution to Pegaso and
loans and advances of $26.1 million to our operating companies. In the year
ended December 31, 2000, Leap and its subsidiaries expect to make significant
investments in capital assets, including network equipment and wireless
communications licenses.

Cash used in investing activities was $158.3 million in the year ended August
31, 1999, compared to $140.7 million in the year ended August 31, 1998 and $46.0
million in the year ended August 31, 1997. Significant investments in the year
ended August 31, 1999 consisted of $124.5 million of investments in and loans to
our operating companies ($71.4 million made before we began to operate as an
independent company), $28.0 million for our acquisition of the remaining shares
of Smartcom, and $18.7 million on U.S. license acquisitions. Cash used in
investing activities was partially offset by $16.0 million provided from the
sale of our OzPhone subsidiary. Substantially all investments in the years ended
August 31, 1998 and 1997 consisted of investments in and loans to our operating
companies.

Financing Activities

Cash provided by financing activities during the four month period ended
December 31, 1999, primarily from proceeds of our borrowings under the credit
agreement with Qualcomm was $63.4 million. Cash provided by financing activities
in the corresponding period of the prior year was $118.7 million, representing
$95.3 million of funding from Qualcomm for our operating and investing
activities prior to the distribution of our common stock to Qualcomm's
stockholders in September 1998, and $23.3 million of borrowings under the
Qualcomm credit agreement.

46
<PAGE>

Cash provided by financing activities during the year ended August 31, 1999
amounted to $216.5 million, representing $95.3 million of funding from Qualcomm
for our operating and investing activities before the distribution of our common
stock to Qualcomm's stockholders in September 1998 and $111.1 million of net
borrowings under the credit agreement with Qualcomm after the distribution. Cash
provided by financing activities during the years ended August 31, 1998 and 1997
amounted to $159.1 million and $47.2 million, respectively, substantially all of
which represented funding from Qualcomm.

Currency Fluctuation Risks

We report our financial statements in U.S. dollars. Our international
operating companies report their results in local currencies. Consequently,
fluctuations in currency exchange rates between the U.S. dollar and the
applicable local currency will affect our results of operations as well as the
value of our ownership interests in our operating companies.

Generally, our international operating companies generate revenues that are
paid in their local currency. However, many of these operating companies' major
contracts, including financing agreements and contracts with equipment
suppliers, are denominated in U.S. dollars. As a result, a significant change in
the value of the U.S. dollar against the national currency of an operating
company could result in a significant increase in the operating company's
expenses and could have a material adverse effect on the operating company and
on us. In some emerging markets, including Mexico, significant devaluations of
the local currency have occurred and may occur again in the future.

We do not currently hedge against foreign currency exchange rate or interest
rate risks.

Inflation

Inflation has had and may continue to have negative effects on the economies
and securities markets of emerging market countries and could have negative
effects on our operating companies and any new start-up project in those
countries, including their ability to obtain financing. Mexico, for example, has
periodically experienced relatively high rates of inflation. Our operating
companies, where permitted and subject to competitive pressures, intend to
increase their tariffs to account for the effects of inflation. However, in
those jurisdictions where tariff rates are regulated or specified in the
wireless license, the operating companies may not successfully mitigate the
impact of inflation on their operations.

Future Accounting Requirements

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which is effective for the
Company's year ending December 31, 2001. In June 2000, the FASB issued SFAS No.
138 which amended SFAS No. 133 for certain derivative instruments and hedging
activities. Under SFAS No. 133, all derivatives must be recognized as assets and
liabilities and measured at fair value. We do not expect that the adoption of
SFAS No. 133 will have a material impact on our consolidated financial position
or results of operations.

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements". SAB No. 101 summarizes certain of the Staff's interpretations in
applying generally accepted accounting principles to revenue recognition. The
provisions of SAB No. 101 are effective for the Company's quarter ending
December 31, 2000. Leap does

47
<PAGE>

not expect that the adoption of SAB No. 101 will have a material impact on its
consolidated financial position or results of operations.

In March 2000, the FASB issued Financial Accounting Standards Interpretation
("FIN") No. 44, "Accounting for Certain Transactions Involving Stock
Compensation - an Interpretation of APB 25." FIN 44 clarifies the application of
Opinion 25 for (a) the definition of employee for purposes of applying Opinion
25, (b) the criteria for determining whether a plan qualifies as a
noncompensatory plan, (c) the accounting consequences of various modifications
to the terms of a previously fixed stock option or award, and (d) the accounting
for an exchange of stock compensation awards in a business combination. FIN 44
is effective July 1, 2000, but certain conclusions cover specific events that
occur after either December 15, 1998 or January 12, 2000. Leap does not expect
that the adoption of FIN 44 will have a material impact on its financial
position or results of operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk. Our exposure to market risk for changes in interest rates
relates primarily to our variable rate long-term debt obligations. For a
description of our long-term debt obligations, see Note 5 to the Consolidated
Financial Statements which are included in Item 8 of this report. The general
level of U.S. interest rates and/or LIBOR affect the interest expense that we
recognize on our variable rate long-term debt obligations. As of December 31,
1999, the principal amounts of our variable rate long-term debt obligations
amounted to approximately $287.2 million. An increase of 10% in interest rates
would increase our interest expense for the year 2000 by approximately $3.5
million. This hypothetical amount is only suggestive of the effect of changes in
interest rates on our results of operations for the year 2000.

Hedging Policy. Leap does not currently have a policy to systematically hedge
against foreign currency exchange rate or interest rate risks.

48
<PAGE>

Item 8. Financial Statements and Supplementary Data

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
of Leap Wireless International, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations and comprehensive loss, of cash flows and
of stockholders' equity present fairly, in all material respects, the financial
position of Leap Wireless International, Inc. and its subsidiaries at December
31, 1999 and August 31, 1999 and 1998, and the results of their operations
and their cash flows for the period from September 1, 1999 to December 31, 1999
and for each of the three years in the period ended August 31, 1999 in
conformity with accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States of
America, which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Diego, California
October 30, 2000

49
<PAGE>

LEAP WIRELESS INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

December 31, August 31,
1999 1999 1998
-------------- ------------- ------------
<S> <C> <C> <C>
Assets
Cash and cash equivalents............................................ $ 44,109 $ 26,215 $ --
Restricted cash equivalents ......................................... 20,550 -- --
Accounts receivable, net............................................. 3,927 2,726 --
Inventories.......................................................... 4,329 5,410 --
Recoverable taxes.................................................... 6,592 3,907 --
Other current assets................................................. 7,634 1,926 --
--------- --------- --------
Total current assets............................................ 87,141 40,184 --
--------- --------- --------
Property and equipment, net.......................................... 113,059 116,947 --
Investments in and loans receivable from unconsolidated
wireless operating companies....................................... 85,878 94,429 150,914
Intangible assets, net............................................... 71,475 73,944 6,838
Deposits and other assets............................................ 3,212 9,827 --
--------- --------- --------
Total assets.................................................... $ 360,765 $ 335,331 $157,752
========= ========= ========

Liabilities and Stockholders' Equity
Accounts payable and accrued liabilities............................. $ 19,097 $ 16,372 $ 5,789
Loans payable to banks............................................... 17,683 17,225 9,000
--------- --------- --------
Total current liabilities....................................... 36,780 33,597 14,789
--------- --------- --------
Long-term debt....................................................... 303,818 221,812 --
Other long-term liabilities.......................................... 9,275 8,504 --
--------- --------- --------
Total liabilities............................................... 349,873 263,913 14,789
--------- --------- --------
Commitments and contingencies (Note 9)

Minority interest in consolidated subsidiary......................... -- 518 --
--------- --------- --------
Stockholders' equity:
Preferred stock -- authorized 10,000,000 shares; $.0001
par value, no shares issued and outstanding..................... -- -- --
Common stock -- authorized 75,000,000 shares; $.0001 par value,
20,039,556, 18,370,974 and 0 shares issued and outstanding at
December 31, 1999 and August 31, 1999 and 1998, respectively.... 2 2 --
Additional paid-in capital......................................... 292,933 291,189 --
Former parent company's investment................................. -- -- 197,598
Accumulated deficit................................................ (277,720) (216,896) (52,283)
Accumulated other comprehensive loss............................... (4,323) (3,395) (2,352)
--------- --------- --------
Total stockholders' equity...................................... 10,892 70,900 142,963
--------- --------- --------
Total liabilities and stockholders' equity................... $ 360,765 $ 335,331 $157,752
========= ========= ========
</TABLE>

See accompanying notes to consolidated financial statements.

50
<PAGE>

LEAP WIRELESS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except per share data)

<TABLE>
<CAPTION>
Period from
September 1, 1999
to December 31, Year Ended August 31,
1999 1999 1998 1997
----------------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Operating revenues......................................................... $ 6,772 $ 3,907 $ -- $ --
-------------- --------- -------- --------
Operating expenses:
Cost of revenues and operations.......................................... (10,169) (3,810) -- --
Selling, general and administrative expenses............................. (19,344) (28,745) (23,888) (1,361)
Depreciation and amortization............................................ (6,926) (5,824) -- --
-------------- --------- -------- --------
Total operating expenses......................................... (36,439) (38,379) (23,888) (1,361)
-------------- --------- -------- --------
Operating loss........................................................... (29,667) (34,472) (23,888) (1,361)

Equity in net loss of unconsolidated wireless
operating companies...................................................... (23,077) (100,300) (23,118) (3,793)
Write-down of investments in unconsolidated wireless
operating companies...................................................... -- (27,242) -- --
Interest income............................................................ 764 2,505 273 --
Interest expense .......................................................... (12,283) (10,356) -- --
Foreign currency transaction losses........................................ (8,247) (7,211) -- --
Gain on sale of wholly owned subsidiary.................................... -- 9,097 -- --
Gain on issuance of stock by unconsolidated wireless
operating company........................................................ -- 3,609 -- --
Other income (expense), net................................................ (3,336) (243) -- --
-------------- --------- -------- --------
Net loss................................................................. (75,846) (164,613) (46,733) (5,154)

Other comprehensive income (loss):
Foreign currency translation (losses) gains.............................. (928) (1,043) (2,412) 60
-------------- --------- -------- --------
Comprehensive loss....................................................... $ (76,774) $(165,656) $(49,145) $(5,094)
============== ========= ======== =======
Basic and diluted net loss per common share................................ $ (4.01) $ (9.19) $ (2.65) $ (0.29)
============== ========= ======== =======
Shares used to calculate basic and diluted net loss
per common share......................................................... 18,928 17,910 17,648 17,648
============== ========= ======== =======
</TABLE>

See accompanying notes to consolidated financial statements.

51
<PAGE>

LEAP WIRELESS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

<TABLE>
<CAPTION>
Period from
September 1,
1999 to
December 31, Year Ended August 31,
1999 1999 1998 1997
-------------- --------- -------- --------
<S> <C> <C> <C> <C>
Operating activities:
Net loss....................................................................... $ (75,846) $ (164,613) $ (46,733) $ (5,154)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization................................................ 6,926 5,824 -- --
Gain on sale of wholly owned subsidiary...................................... -- (9,097) -- --
Gain on issuance of stock by unconsolidated wireless
operating company.......................................................... -- (3,609) -- --
Equity in net loss of unconsolidated wireless operating companies............ 23,077 100,300 23,118 3,793
Write-down of investments in unconsolidated wireless
operating companies........................................................ -- 27,242 -- --
Interest accrued to loans receivable and payable -- net...................... 7,023 8,251 (273) --
Other........................................................................ (381) (386) -- --
Changes in assets and liabilities, net of effects of acquisition:
Accounts receivable, net................................................... (491) (1,203) -- --
Inventories................................................................ 25 1,873 -- --
Recoverable taxes.......................................................... (2,571) (599) -- --
Deposits and other assets.................................................. 4,765 (5,989) -- --
Accounts payable and accrued liabilities................................... 493 9,671 5,510 168
Other liabilities.......................................................... 5,410 (1,770) -- --
--------- ---------- --------- --------
Net cash used in operating activities............................................ (31,570) (34,105) (18,378) (1,193)
--------- ---------- --------- --------
Investing activities:
Purchase of property and equipment............................................. (4,568) (3,935) -- --
Investments in and loans to unconsolidated wireless
operating companies.......................................................... (2,744) (124,471) (133,904) (46,000)
Loan receivable - related party................................................ -- (17,500) -- --
Repayment of loan receivable from related party................................ -- 17,500 -- --
Acquisitions, net of cash acquired............................................. -- (26,942) (564) --
Purchase of wireless communications licenses................................... -- (19,009) (6,274) --
Proceeds from sale of wholly owned subsidiary.................................. -- 16,024 -- --
Restricted cash equivalents (Note 2)........................................... (20,500) -- -- --
--------- ---------- --------- --------
Net cash used in investing activities............................................ (27,812) (158,333) (140,742) (46,000)
--------- ---------- --------- --------
Financing activities:
Proceeds from loans payable to banks........................................... -- 6,720 9,000 --
Borrowings under credit agreement.............................................. 61,650 128,584 -- --
Repayment of borrowings under credit agreement................................. -- (17,500) -- --
Issuance of common stock....................................................... 1,721 2,301 -- --
Exercise of subsidiary stock options........................................... -- 1,103 -- --
Former parent company's investment............................................. -- 95,268 150,120 47,193
--------- ---------- --------- --------
Net cash provided by financing activities........................................ 63,371 216,476 159,120 47,193
--------- ---------- --------- --------
Effect of exchange rate changes on cash and cash equivalents..................... 7,210 2,177 -- --
Effect of change in foreign company reporting lag on cash and cash equivalents... 6,695 -- -- --
--------- ---------- --------- --------
Net increase in cash and cash equivalents........................................ 17,894 26,215 -- --
Cash and cash equivalents at beginning of period................................. 26,215 -- -- --
--------- ---------- --------- --------
Cash and cash equivalents at end of period....................................... $ 44,109 $ 26,215 $ -- $ --
========= ========== ========= ========
Supplemental disclosure of non-cash investing and financing activities:
Loans to unconsolidated wireless operating companies
converted to equity investment............................................... $ -- $ 50,196 $ -- $ --
Long-term financing to purchase assets......................................... $ -- $ 8,791 $ -- $ --
Facility fee due on long-term debt............................................. $ -- $ 5,300 $ -- $ --
Repurchase of warrant.......................................................... $ -- $ 5,355 $ -- $ --
Effect of change in foreign company reporting lag on investment
in unconsolidated wireless operating company................................. $ 2,913 $ -- $ -- $ --
Long-term financing for loan to unconsolidated wireless operating company...... $ 8,562 $ -- $ -- $ --
Supplemental disclosure of cash used for acquisitions:
Total purchase price........................................................... $ -- $ 43,699 $ 564 $ --
Note payable issued, net of discount........................................... -- (15,699) -- --
Cash acquired.................................................................. -- (1,058) -- --
--------- ---------- --------- --------
Cash used for acquisitions..................................................... $ -- $ 26,942 $ 564 $ --
========= ========== ========= ========
</TABLE>

See accompanying notes to consolidated financial statements.

52
<PAGE>

LEAP WIRELESS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share data)

Accumulated
Former Other
Common Stock Additional Parent Comprehensive
------------------ Paid-In Company's Accumulated Income
Shares Amount Capital Investment Deficit (Loss) Total
---------- ------ ----------- ----------- ------------ -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at August 31, 1996............ -- $ -- $ -- $ 285 $ (396) $ -- $ (111)
Transfers from former
parent............................ -- -- -- 47,193 -- -- 47,193
Net loss............................ -- -- -- -- (5,154) -- (5,154)
Foreign currency translation
adjustment........................ -- -- -- -- -- 60 60
---------- ------ --------- --------- ---------- -------- ---------
Balance at August 31, 1997............ -- -- -- 47,478 (5,550) 60 41,988
Transfers from former
parent............................ -- -- -- 150,120 -- -- 150,120
Net loss............................ -- -- -- -- (46,733) -- (46,733)
Foreign currency translation
adjustment........................ -- -- -- -- -- (2,412) (2,412)
---------- ------ --------- --------- ---------- -------- ---------
Balance at August 31, 1998............ -- -- -- 197,598 (52,283) (2,352) 142,963
Transfers from former parent........ -- -- -- 95,268 -- -- 95,268
Distribution by former
parent (Note 1)................... 17,647,685 2 292,864 (292,866) -- -- --
Repurchase of warrant............... -- -- (5,355) -- -- -- (5,355)
Issuance of common stock............ 723,289 -- 2,356 -- -- -- 2,356
Effect of subsidiary and
unconsolidated wireless
operating company equity
transactions...................... -- -- 1,324 -- -- -- 1,324
Net loss............................ -- -- -- -- (164,613) -- (164,613)
Foreign currency translation
adjustment........................ -- -- -- -- -- (1,043) (1,043)
---------- ------ --------- --------- ---------- -------- ---------
Balance at August 31, 1999............ 18,370,974 2 291,189 -- (216,896) (3,395) 70,900
Issuance of common stock............ 1,668,582 -- 1,744 -- -- -- 1,744
Effect of change in foreign
company reporting lag
(Note 2).......................... -- -- -- -- 15,022 -- 15,022
Net loss............................ -- -- -- -- (75,846) -- (75,846)
Foreign currency translation
adjustment........................ -- -- -- -- -- (928) (928)
---------- ------ --------- --------- ---------- -------- ---------
Balance at December 31, 1999.......... 20,039,556 $ 2 $ 292,933 $ -- $ (277,720) $ (4,323) $ 10,892
========== ====== ========= ========= ========== ======== =========
</TABLE>

See accompanying notes to consolidated financial statements.

53
<PAGE>

LEAP WIRELESS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. The Company

The Company and Nature of Business

Leap Wireless International, Inc. (the "Company" or "Leap") is a wireless
communications carrier that deploys, owns, operates and participates in all-
digital wireless networks in the United States, Mexico and Chile. The Company's
domestic service is operated by its wholly owned subsidiary Cricket
Communications, Inc. ("Cricket Communications"), a wholly owned subsidiary of
Cricket Communications Holdings, Inc. ("Cricket Communications Holdings"), and
is marketed under the name "Cricket". Pegaso, a Mexican corporation in which the
Company had a 28.6% interest at December 31, 1999, operates a wireless network
in Mexico. Smartcom, a wholly owned subsidiary at December 31, 1999, has
operated a nationwide wireless network in Chile since September 1998. On June 2,
2000, the Company completed the sale of all of the issued and outstanding shares
of Smartcom for total consideration of $300.0 million plus the repayment of
intercompany debt due from Smartcom of $53.3 million and the release of cash
collateral securing Smartcom's indebtedness of $28.2 million.

Cricket service was introduced in March 1999 in Tennessee using the existing
infrastructure of Chase Telecommunications, Inc. ("Chase Telecommunications")
and wireless licenses owned by a subsidiary of Chase Telecommunications,
companies that Leap acquired in March 2000 (see Note 3). Leap has introduced
Cricket service in other markets in Tennessee in 2000 and plans to introduce
Cricket service to additional markets in the United States in the future. The
Company acquired 36 licenses in the federal government's 1999 reauction of
broadband PCS spectrum licenses for $18.7 million in cash. From January through
October 2000, the Company completed the purchase of several additional licenses
in the United States from various third parties for an aggregate of $39.4
million in cash, 333,450 shares of the Company's common stock that had an
aggregate fair value at the time of purchase of $18.7 million and the assumption
of $12.4 million in debt owed to the Federal Communications Commission ("FCC")
related to the licenses. During the same period, the Company entered into
agreements with third parties to purchase additional licenses in exchange for
cash, shares of common stock and the assumption of FCC debt with an aggregate
estimated value of $174.4 million as of October 26, 2000, subject to certain
adjustments based upon changes in the market value of wireless licenses. Each of
the pending agreements is subject to customary closing conditions, including FCC
approval, but no assurance can be given that they will be closed on schedule or
at all.

In July 1999, the FCC issued an opinion and order that found the Company was
qualified to acquire and operate C-Block and F-Block PCS spectrum licenses in
the United States, subject to specified conditions. The order also approved the
Company's acquisition of the 36 reauction licenses and approved the transfer of
three licenses in North Carolina to Leap. Another wireless company has appealed
the FCC's order. Although Leap believes that the appeal will be denied, there
can be no assurance that it will prevail in connection with any further judicial
review of the order or that it will otherwise remain qualified to hold C-Block
or F-Block spectrum licenses.

The FCC's grants of Leap's C-Block and F-Block licenses are subject to certain
conditions. Each of the conditions imposed by the FCC in the opinion and order
has been satisfied. The Company has a continuing obligation, during the
designated entity holding period for its C-Block and F-Block licenses, to limit
its debt to Qualcomm to 50% or less of its outstanding debt and to ensure that
persons who are or were previously officers or directors of Qualcomm do not
comprise a majority of the Company's board of directors or a majority of its
officers. If the Company fails to continue to meet any of the conditions imposed
by the FCC or otherwise fails to maintain its qualification to own C-Block and
F-Block licenses, that failure could have a material adverse effect on the
Company's financial condition and business prospects.

The Distribution

The Company was incorporated in Delaware on June 24, 1998 as a wholly owned
subsidiary of Qualcomm Incorporated ("Qualcomm"). On September 23, 1998 (the
"Distribution Date"), Qualcomm distributed all of the outstanding shares of
common stock of the Company to Qualcomm's stockholders as a taxable dividend
(the "Distribution"). Following the Distribution, the Company and Qualcomm
operate as independent companies. Qualcomm transferred to the Company its equity
interests in certain operating

54
<PAGE>

companies. Qualcomm also transferred to the Company cash and its right to
receive payment from working capital and other loans Qualcomm made to the
operating companies, as well as other miscellaneous assets and liabilities. The
aggregate net tangible book value of the assets transferred by Qualcomm to the
Company in connection with the Distribution was approximately $236.0 million.
The consolidated financial statements reflect the Company as if it were a
separate entity for all periods presented.

Change in Year End

Financing Risks

The Company experienced net losses for the period from September 1, 1999 to
December 31, 1999 and the years ended August 31, 1999, 1998 and 1997 of $75.8
million, $164.6 million, $46.7 million and $5.2 million, respectively. Further,
the operating companies are in the early stages of developing and deploying
their respective telecommunications systems. Such systems require significant
expenditures, a substantial portion of which is incurred before corresponding
revenues are generated. In addition, the Company and its operating companies are
highly leveraged which will lead to significant interest expense and principal
repayment obligations. The Company expects to incur significant expenses in
advance of generating revenues and, as a result, to incur substantial additional
losses in the foreseeable future. There can be no assurance that the Company or
any of its operating companies will achieve or sustain profitability in the
future. Furthermore, there can be no assurance that the Company will generate
sufficient cash flows to meet its debt obligations or successfully refinance any
of its debt at maturity.

In February 2000, Leap received $330.0 million in net proceeds from an
underwritten public offering (the "Equity Offering") of its common stock and
received $536.6 million in net proceeds from the issuance of units (the "Units
Offering") consisting of notes and warrants (see Note 13). Cricket
Communications has credit agreements with three infrastructure vendors that
permit up to a total of $1,800.0 million in borrowings for products and services
and additional working capital (see Notes 5 and 13). However, Leap will require
substantial additional financing to build-out and operate its planned networks
and to acquire additional spectrum. There can be no assurance that the Company
will be able to obtain the additional financing it requires on acceptable terms,
or at all. The failure of the Company to obtain sufficient financing and build-
out its networks as planned would have a significant adverse effect on the
Company's ability to become profitable, meet its debt obligations and achieve
its business objectives.

55
<PAGE>

Note 2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of Leap and its
wholly owned and majority owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in the consolidated financial
statements. Investments in entities in which Leap exercises significant
influence but does not control are accounted for using the equity method. To
accommodate the different fiscal periods of the Company and its foreign
operating companies, the Company recognized its share of net earnings or losses
of such foreign companies on a two month lag. In conjunction with the Company's
change in fiscal year end, this lag was extended to three months beginning in
the period from September 1, 1999 to December 31, 1999. The effect of this
change on previously reported amounts was adjusted in accumulated deficit in the
period from September 1, 1999 to December 31, 1999.

For the period from September 1, 1999 to December 31, 1999 and the fourth
quarter of the year ended August 31, 1999, the financial statements of Smartcom
are included in the consolidated financial statements of the Company as a result
of the Company's acquisition of the remaining 50% of Smartcom that it did not
already own. The accounts of Smartcom have been consolidated using the same lag
periods as described above.

Use of Estimates in Financial Statement Preparation

The consolidated financial statements are prepared using generally accepted
accounting principles. These principles require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported amounts of
revenues and expenses. Actual results could differ from those estimates. Certain
prior period amounts have been reclassified to conform to the current period
presentation.

Issuance of Stock by Subsidiaries and Equity Investees

The Company recognizes gains and losses on issuance of stock by subsidiaries
and equity investees in its results of operations, except for those subsidiaries
and equity investees that are in the development stage. For those entities in
the development stage, gains and losses are reflected in "effect of subsidiary
and unconsolidated wireless operating company equity transactions" in
stockholders' equity.

Foreign Currency Translation and Transactions

The Company uses the local currency as the functional currency for all of its
international consolidated and unconsolidated operating companies, except where
such operating companies operate in highly inflationary economies. Assets and
liabilities are translated into U.S. dollars at the exchange rate in effect at
the balance sheet date. Revenues and expense items are translated at the average
exchange rate prevailing during the period. Resulting unrealized gains and
losses are accumulated and reported as other comprehensive income or loss.

The functional currency of the Company's foreign investees that operate in
highly inflationary economies is the U.S. dollar. The monetary assets and
liabilities of these foreign investees are re-measured into U.S. dollars at the
exchange rate in effect at the balance sheet date. Revenues, expenses, gains and
losses are translated at the average exchange rate for the period, and non-
monetary assets and liabilities are translated at historical rates. Resulting
re-measurement gains or losses are recognized in results of operations.

56
<PAGE>

Mexico ceased to be considered a highly inflationary economy as of January 1,
1999 and, as a result, Pegaso changed its functional currency from the U.S.
dollar to its local currency on that date.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity
of three months or less to be cash equivalents. At December 31, 1999, the
Company's cash and cash equivalents consist of deposits with banks and
investments in money market accounts and mutual funds. The Company has not
experienced any losses on its cash and cash equivalents.

Restricted Cash Equivalents

Restricted cash equivalents consist of debt securities with original
maturities of three months or less which have been pledged to collateralize the
Company's obligations under a letter of credit agreement with a bank.

Fair Value of Financial Instruments

The carrying amounts of certain of the Company's financial instruments,
including cash equivalents, accounts receivable, recoverable taxes and accounts
payable, approximate fair value due to their short-term maturities. Loans
payable to banks and other long-term debts approximate fair value due to their
risk adjusted market rates of interest.

Inventories

Inventories consist of handsets and accessories not yet placed into service
and are stated at the lower of cost or market. The Company uses the first-in,
first-out method of determining inventory cost.

Recoverable Taxes

Recoverable taxes relate to value added taxes (VAT) incurred on the supply of
goods and services which are eventually borne by the final consumer. VAT
payments made by the Company on the build-out of its wireless communications
networks are recovered in cash from customers as services are provided.

Investments in Unconsolidated Wireless Operating Companies

The Company uses the equity method to account for investments in corporate
entities in which it exercises significant influence but does not control. Under
the equity method, the investment is originally recorded at cost and adjusted to
recognize the Company's share of net earnings or losses of the investee, limited
to the extent of the Company's investment in, advances to and financial
guarantees for the investee. Such earnings or losses of the Company's investees
are adjusted to reflect the amortization of any differences between the carrying
value of the investment and the Company's equity in the net assets of the
investee. For those equity investees where the Company is the only contributor
of assets, equity in net losses of wireless operating companies includes 100% of
the losses of the equity investee.

Property and Equipment

Property and equipment are recorded at cost. Constructed assets are recorded
at cost plus capitalized interest and direct costs incurred during the
construction phase. Depreciation is applied using the straight-line method over
the estimated useful lives of the assets once the assets are placed in service,
generally as follows:

57
<PAGE>

Estimated
Description Useful Life
----------- -----------
Buildings and Infrastructure Ten Years
Machinery and Equipment Ten Years
Computer Equipment and Other Two to Five Years

Leasehold improvements, which are included in buildings and infrastructure,
are amortized over the shorter of their estimated useful lives or the remaining
term of the related lease. Repairs and maintenance costs are expensed as
incurred.

Intangible Assets

Intangible assets, primarily wireless licenses and rights to wireless network
systems, are recorded at cost and amortized using the straight-line method over
their estimated useful lives upon commencement of commercial service, which
currently range from ten to forty years.

Long-Lived Assets

The Company reviews long-lived assets and certain identifiable intangibles for
impairment whenever events or changes in circumstances indicate that the total
carrying amount of an asset may not be recoverable. An impairment loss would be
recognized when the sum of the expected undiscounted future cash flows expected
to result from the use of the asset and its eventual disposition is less than
its carrying amount.

Debt Discount and Facility Fees

Debt discount and facility fees are amortized and recognized as interest
expense under the interest method.

Revenue recognition

Operating revenues from telecommunications services are recognized as services
are rendered and as handsets and other products are delivered to customers.

Advertising and Promotion Costs

Advertising and promotion costs are expensed as incurred.

Stock-based Compensation

The Company measures compensation expense for its employee and director stock-
based compensation plans using the intrinsic value method. The Company provides
pro forma disclosures of net

58
<PAGE>

income (loss) and net income (loss) per share as if a fair value method had been
applied in measuring compensation expense. Stock-based compensation is amortized
over the related vesting periods of the stock awards.

Income Taxes

Current income tax benefit (expense) is the amount expected to be receivable
(payable) for the current year. A deferred tax asset and/or liability is
computed for both the expected future impact of differences between the
financial statement and tax bases of assets and liabilities and for the expected
future tax benefit to be derived from tax loss and tax credit carry forwards.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be "more likely than not" realized in future
tax returns. Tax rate changes are reflected in income in the period such changes
are enacted.

Basic and Diluted Net Loss Per Common Share

Basic and diluted net loss per common share for the period from September 1,
1999 to December 31, 1999 and for the years ended August 31, 1999, 1998 and 1997
was calculated by dividing the net loss for each of the periods by the weighted
average number of common shares outstanding for each of the periods of
18,927,981, 17,910,440, 17,647,685 and 17,647,685, respectively. The weighted
average number of common shares outstanding assumes that the 17,647,685 shares
issued at the Distribution were outstanding for the periods prior to the
Distribution. The exercise of stock options for 5,697,288 and 5,939,715 common
shares at December 31, 1999 and August 31, 1999, respectively, the conversion of
Qualcomm's Trust Convertible Preferred Securities which are convertible into
925,353 and 2,270,573 shares of the Company's common stock at December 31, 1999
and August 31, 1999, respectively, and the exercise of a warrant issued to
Qualcomm for 4,500,000 shares of the Company's common stock have not been
considered in calculating basic and diluted net loss per common share because
their effect would be anti-dilutive. As a result, the Company's basic and
diluted net loss per common share are the same.

Future Accounting Requirements

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which is effective for the
Company's year ending December 31, 2001. In June 2000, the FASB issued SFAS No.
138 which amended SFAS No. 133 for certain derivative instruments and hedging
activities. Under SFAS No. 133, all derivatives must be recognized as assets and
liabilities and measured at fair value. The Company does not expect that the
adoption of SFAS No. 133 will have a material impact on its consolidated
financial position or results of operations.

In March 2000, the FASB issued Financial Accounting Standards Interpretation
("FIN") 44, "Accounting for Certain Transactions Involving Stock Compensation -
an Interpretation of APB 25." FIN 44 clarifies the application of Opinion 25 for
(a) the definition of employee for purposes of applying Opinion 25, (b) the
criteria for determining whether a

59
<PAGE>

stock option or award plan qualifies as a non-compensatory plan, (c) the
accounting consequences of various modifications to the terms of a previously
fixed stock option or award, and (d) the accounting for an exchange of stock
compensation awards in a business combination. FIN 44 is effective July 1, 2000,
but certain conclusions cover specific events that occur after either December
15, 1998 or January 12, 2000. The company does not expect that the adoption of
FIN 44 will have a material effect on its consolidated financial position or
results of operations.

Note 3. Investments in and Loans to Wireless Operating Companies

The Company accounts for its equity interests in wireless operating companies,
except for Smartcom, under the equity method. For the fourth quarter of the year
ended August 31, 1999 and for the period from September 1, 1999 to December 31,
1999, the financial statements of Smartcom have been consolidated. The Company's
ability to withdraw funds, including dividends, from its participation in such
investments is dependent in many cases on receiving the consent of lenders and
the other participants over which the Company has no control. The Company's
equity investments in wireless operating companies consist of the following:

<TABLE>
<CAPTION>
Percentage of Ownership
August 31,
December 31, ---------------------
1999 1999 1998
------------ --------- ---------
<S> <C> <C> <C>
Chase Telecommunications Holdings (United States)..................................... 7.2% 7.2% 7.2%
Smartcom (Chile)...................................................................... 100% 100% 50%
Pegaso (Mexico)....................................................................... 28.6% 28.6% 49%
Metrosvyaz (Russia)................................................................... - 50% 50%
Orrengrove (Russia)................................................................... - 50% 50%
OzPhone (Australia)................................................................... - - 100%
</TABLE>

Condensed combined financial information for the operating companies accounted
for under the equity method is summarized as follows (in thousands):

<TABLE>
<CAPTION>
August 31,
December 31, ------------------------------
1999 1999 1998
------------ -------------- --------------
<S> <C> <C> <C>
Current assets................................................................. $ 33,940 $ 140,899 $ 82,575
Non-current assets............................................................. 578,326 576,765 263,543
Current liabilities............................................................ (91,217) (112,539) (99,134)
Non-current liabilities........................................................ (349,262) (347,590) (178,491)
--------- --------- ---------
Total stockholders' capital.................................................. 171,787 257,535 68,493
Other stockholders' share of capital........................................... 85,909 146,059 (9,208)
--------- --------- ---------
Company's share of capital..................................................... 85,878 111,476 77,701
Excess cost of investment...................................................... -- -- 20,018
Lag period loans and advances.................................................. -- 10,195 53,195
Write-down in investments...................................................... -- (27,242) --
--------- --------- ---------
Investments in and loans receivable from unconsolidated wireless operating
companies................................................................... $ 85,878 $ 94,429 $ 150,914
========= ========= =========
</TABLE>

60
<PAGE>

Period from
September 1 to Year Ended August 31,
December 31, -------------------------------------------
1999 1999 1998 1997
--------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Operating revenues............................................ $ 4,955 $ 8,233 $ 22 $ --
-------- --------- -------- --------
Operating expenses............................................ (70,804) (153,062) (20,739) (5,234)
Other income (expense), net................................... (14,516) (22,471) (18,403) (18,108)
Foreign currency transaction gains (losses)................... 8,612 (1,532) (3,970) --
-------- --------- -------- --------
Net loss................................................... (71,753) (168,832) (43,090) (23,342)
Other stockholders' share of net loss......................... (47,212) (62,491) (19,402) (19,549)
-------- --------- -------- --------
Company's share of net loss................................... (24,541) (106,341) (23,688) (3,793)
Amortization of excess cost of investment..................... -- (630) -- --
Elimination of intercompany transactions...................... 1,464 6,671 570 --
-------- --------- -------- --------
Equity in net loss of unconsolidated wireless operating
companies................................................. $(23,077) $(100,300) $(23,118) $ (3,793)
======== ========= ======== ========
</TABLE>

Chase Telecommunications Holdings

The Company purchased its original 7.2% ownership position in Chase
Telecommunications Holdings for $4.0 million in December 1996. The Company had
also provided a working capital facility to Chase Telecommunications Holdings.
At December 31, 1999, borrowings under the facility totaled $56.3 million,
including $5.0 million of accrued and capitalized interest. Because the facility
was the only source of working capital for Chase Telecommunications Holdings,
Leap has recognized 100% of the net losses of Chase Telecommunications Holdings
to the extent of its investment and loans. As a result, the carrying values of
Leap's investment and the loans under the facility have been reduced to zero.
The Company recorded equity losses from Chase Telecommunications Holdings of
$9.7 million, $20.9 million, $11.8 million and $4.0 million during the period
from September 1, 1999 to December 31, 1999 and the years ended August 31, 1999,
1998 and 1997, respectively.

In March 2000, the Company completed the acquisition of substantially all of
the assets of Chase Telecommunications Holdings, including wireless licenses.
The purchase price included approximately $6.3 million in cash, the assumption
of principal amounts of liabilities that totaled approximately $138.0 million
(with a fair value of $131.3 million), a warrant to purchase 1% of the common
stock of Cricket Communications Holdings at an exercise price of $1.0 million
(which had a fair value of approximately $15.3 million at the acquisition date
determined using the Black-Scholes option pricing model), and contingent earn-
out payments of up to $41.0 million (plus certain expenses) based on the
earnings of the business acquired during the fifth full year following the
closing of the acquisition. The fair value of the warrant was recorded in
minority interest. The liabilities assumed included approximately $78.8 million
in principal amounts owed to the FCC associated with the wireless licenses that
bear interest at the rate of 7.0% per annum and must be repaid in quarterly
installments of principal and interest through January 2007. Therefore, under
the purchase method of accounting, the total estimated fair value of the
acquisition was $152.9 million, of which $43.2 million has been allocated to
property and equipment and other assets and $109.7 million has been allocated to
intangible assets. Intangible assets consist of primarily wireless licenses
which are to be amortized over their estimated useful lives of 40 years upon
commencement of commercial service.

Smartcom

In April 1999, Leap acquired the remaining 50% of Smartcom that it did not
already own from Telex-Chile S.A. and its operating affiliate, Chilesat S.A.
(collectively "Telex-Chile"). In exchange, the Company paid $28.0 million in
cash and issued a $22.0 million, non-interest-bearing note payable to Telex-
Chile due in May 2002. The present value of the $22.0 million non-interest-
bearing note payable to Telex-Chile was $15.7 million upon issuance. Therefore,
the total purchase price was $43.7 million. The Company accounted for the
transaction as a purchase and allocated the $40.8 million excess investment

61
<PAGE>

over the fair value of the net assets acquired to intangible assets, which
include wireless licenses and rights to wireless network systems.

The following unaudited pro forma information presents the results of
operations of the Company as if the acquisition had taken place on September 1,
1997 (in thousands, except per share data):

<TABLE>
<CAPTION>
Year Ended
August 31,
---------------------------
1999 1998
------------- ------------
<S> <C> <C>
Revenues............................................................... $ 7,577 $ --
========= ========
Net loss............................................................... $(184,782) $(55,435)
========= ========
Pro forma basic and diluted net loss per common share.................. $ (10.32) $ (3.14)
========= ========
</TABLE>

As a result of the reporting lag, the Company began fully consolidating
Smartcom's results of operations commencing June 1, 1999. Prior to this time,
the Company accounted for its investment in Smartcom under the equity method of
accounting. The Company recorded equity (income) losses from Smartcom of $13.1
million, $3.1 million and $(0.2) million during the years ended August 31, 1999,
1998 and 1997, respectively.

On June 2, 2000, the Company completed the sale of all of the issued and
outstanding shares of Smartcom to Endesa, S.A., a Spanish utility company
("Endesa"), for $156.8 million in cash and one year notes totaling $143.2
million, subject to certain post closing adjustments, plus repayment of
intercompany debt owed to the Company by Smartcom totaling $53.3 million and the
release of cash collateral posted by Leap securing Smartcom indebtedness of
$28.2 million. In addition, the Company's loans payable to banks in Chile of
$10.3 million and $7.6 million were repaid by the Company.

Pegaso

During the year ended August 31, 1998, the Company provided working capital
advances and a loan of $27.4 million to Pegaso. In September 1998, the Company
provided $60.7 million of additional funding and converted its advances and
loan, with accrued interest, into capital stock of Pegaso. The Company's total
investment in Pegaso after these transactions was $100.0 million. On the same
date, other investors also purchased capital stock of Pegaso such that, after
these transactions, the total carrying value of the common equity of Pegaso was
$300.0 million. As a result, the Company's ownership interest in Pegaso was
diluted from 49.0% to 33.3%. In July 1999, several of the other investors
purchased an additional $50.0 million of capital stock of Pegaso. As a result,
the Company's ownership interest was diluted from 33.3% to 28.6%. The Company
recorded equity losses from Pegaso of $13.4 million, $23.6 million and $2.1
million during the period from September 1, 1999 to December 31, 1999 and the
years ended August 31, 1999 and 1998, respectively. For the year ended August
31, 1999, the Company recognized a gain in results of operations of $3.6 million
on the issuance of stock by Pegaso and recorded $0.8 million directly to
additional paid-in capital for the change in interest that occurred during
Pegaso's development stage.

In April 2000, Sprint PCS invested approximately $200.0 million in Pegaso by
purchasing shares from Pegaso and shareholders other than Leap. As a result, the
Company's ownership interest in Pegaso was diluted from 28.6% to 22.4%. In June
2000, the General Director of Pegaso invested $50.0 million in Pegaso by
purchasing shares from Pegaso and shareholders other than Leap. As a result,
the Company's ownership interest was further diluted to 20.1%. The Company has
recorded gains due to these transactions totaling $32.6 million.

62
<PAGE>

Metrosvyaz

The Company's investment in Metrosvyaz consisted primarily of an outstanding
loan facility to Metrosvyaz, less its share of equity losses. The Company
recorded equity losses of $20.0 million and $6.1 million from Metrosvyaz in the
years ended August 31, 1999 and 1998, respectively. In the fourth quarter of the
year ended August 31, 1999, the Company recorded a write-down of $9.6 million,
the Company's remaining investment in Metrosvyaz, when the Company stopped
funding loans to Metrosvyaz. In April 2000, the Company resolved its differences
with Metrosvyaz, surrendered its interest in Metrosvyaz and received a
contractual right to certain contingent payments from Qualcomm.

Orrengrove

In August 1998, Orrengrove acquired a 60% interest in Transworld
Telecommunications, Inc., Transworld Communications Services, Inc., and
Transworld Communications (Bermuda), Ltd. (collectively, the "Transworld
Companies"). The Transworld Companies had obtained the rights to utilize the
capacity on certain Russian satellites in order to provide commercial long-
distance voice, video and data services to the Russian Federation. As a result
of the failure of the satellite transmission equipment in April 1999, Orrengrove
recognized an impairment loss of $16.9 million in the third quarter of the year
ended August 31, 1999 to write off certain satellite related assets. After
failing to develop an acceptable business plan that did not utilize satellite
transmission, the directors of the Transworld Companies voted to liquidate those
companies and to distribute the net assets to their stockholders. As a result,
the Company recorded a $17.6 million write-down in the fourth quarter of the
year ended August 31,1999, reducing its investment in Orrengrove to the expected
liquidation proceeds. The Company recorded equity losses of $22.6 million from
Orrengrove during the year ended August 31, 1999, which included the write-off
of the satellite related assets.

OzPhone

In June 1998, the Company purchased all the shares of OzPhone, an Australian
company, for $564,000. The entire purchase price was allocated to goodwill.
OzPhone then acquired several wireless licenses to provide mobile and wireless
local loop services in Australia. The total cost of the licenses was $6.3
million. In August 1999, the Company sold all of the shares of OzPhone for $16.0
million in cash and recorded a gain of $9.1 million.

Note 4. Loans Payable to Banks

Between July and November 1998, the Company borrowed $15.7 million under
notes payable to banks in Chile. The loans of $9.0 million and $6.7 million,
along with capitalized interest and fees of $1.9 million, at December 31, 1999
bore interest at rates of 8.1% and 8.5% per annum, respectively. The loans were
repaid in June 2000.

In November 1999, the Company and Smartcom entered into a loan arrangement
with a bank. At December 31, 1999, the Company deposited funds with the bank
totaling $20.6 million as collateral for borrowings under the credit
arrangement. These funds are recorded as restricted cash equivalents in the
accompanying consolidated balance sheet. At December 31, 1999, borrowings from
the bank totaled $14.1 million, which are not included in the consolidated
financial statements due to the three month reporting lag for Smartcom (see Note
2). The borrowings bore interest at the weighted-average rate of 7.01% per annum
and were repaid in July 2000.

63
<PAGE>

Note 5. Long-Term Debt

As of December 31, 1999, long-term debt is summarized as follows (in
thousands):

<TABLE>
<S> <C>
Qualcomm Credit Agreement, net of facility fee.......................................... $187,570
Lucent Credit Agreement................................................................. 10,421
Deferred Payment Agreement.............................................................. 89,220
Note payable to Telex-Chile, net of discount (see Note 3)............................... 16,607
--------
$303,818
========
</TABLE>

Qualcomm Credit Agreement

The Company entered into a secured Credit Agreement with Qualcomm on
September 23, 1998. The Credit Agreement consists of two sub-facilities. The
working capital sub-facility enables the Company to borrow up to $35.2 million
solely to meet the normal working capital and operating expenses of the Company,
including salaries and overhead, but excluding, among other things, strategic
capital investments in wireless operators, substantial acquisitions of capital
equipment, and the acquisition of telecommunications licenses. The investment
capital sub-facility enables the Company to borrow up to $229.8 million solely
to make certain identified investments. Under the terms of the Credit Agreement,
if Qualcomm assigns 10% or more of the total funding commitments to other
lenders, Leap must pay a commitment fee to the lenders on unused balances.

At December 31, 1999, the Company had borrowed $19.0 million under the
working capital sub-facility. The Company paid Qualcomm a 2% facility fee of
$5.3 million when the Credit Agreement was secured, which is being amortized
over the term of the Credit Agreement ($0.2 million and $0.6 million of the
facility fee was amortized during the period from September 1 to December 31,
1999 and the year ended August 31, 1999, respectively). At December 31, 1999,
the Company had borrowed $162.1 million under the investment capital sub-
facility to make further loans to and investments in its operating companies.

Amounts borrowed under the Credit Agreement were due September 23, 2006.
Qualcomm had a collateral interest in substantially all of the assets of the
Company as long as any amounts were outstanding under the Credit Agreement. The
Credit Agreement required the Company to meet certain financial and operating
covenants. Amounts borrowed under the Credit Agreement bore interest at either a
prime or LIBOR rate, plus an applicable margin. At December 31, 1999, the
weighted average effective rate of interest was 12.0%. Interest was payable
quarterly beginning after September 2001 and, prior to such time, accrued
interest was added to the principal amount outstanding. At December 31, 1999,
$11.0 million of capitalized and accrued interest had been added to the Credit
Agreement.

In February 2000, the Company used a portion of the net proceeds of the Units
Offering and Equity Offering (see Note 13) to repay in full $226.7 million
outstanding under the Qualcomm Credit Agreement. In connection with the
repayment of the Qualcomm Credit Agreement, the related unamortized debt issue
costs of $4.4 million were written off and reported as an extraordinary loss.

Lucent Credit Agreement

In September 1999, Cricket Communications agreed to purchase up to $330.0
million of products and services from Lucent Technologies, Inc. ("Lucent") and
in June 2000, increased the value of products and services that can be purchased
under the agreement to up to $900.0 million. The purchase agreement is subject
to early termination at Cricket Communications' convenience subject to

64
<PAGE>

payments for products and services purchased from Lucent. Lucent agreed to
finance these purchases plus additional working capital under a credit facility.
The credit facility originally permitted up to $641.0 million in total
borrowings, which was increased to up to $1,350.0 million in June 2000, with
borrowing availability generally based on a ratio of the total amounts of
products and services purchased from Lucent. Lucent is not required to make
loans under the facility if the total of the loans held directly or supported by
Lucent is an amount greater than $815.0 million. The agreement contains various
covenants and conditions typical for a loan of this type, including minimum
levels of customers and covered potential customers that must increase over
time, limits on annual capital expenditures, dividend restrictions and other
financial ratio tests. Borrowings under the credit facility accrue interest at a
rate equal to LIBOR plus 3.5% to 4.25% or a bank base rate plus 2.5% to 3.25%,
in each case with the specific rate based on the ratio of total indebtedness to
EBITDA. Cricket Communications must pay a commitment fee equal to 1.25% per
annum on the unused commitment under the facility, decreasing to 0.75% per
annum. Principal payments are scheduled to begin after three years with a final
maturity after eight years. Repayment is weighted to the later years of the
repayment schedule. The obligations under the credit agreement, together with
the obligations under similar facilities from Nortel Networks, Inc. ("Nortel")
and Ericsson Wireless Communications, Inc. ("Ericsson"), are secured by all of
the stock of Cricket Communications, its subsidiaries and the stock of each
special purpose subsidiary of the Company formed to hold wireless licenses used
in Cricket Communications' business, and all their respective assets. At
December 31, 1999, the Company had $10.4 million outstanding under the Lucent
credit agreement at an interest rate of 10.4%.

Smartcom and Qualcomm are parties to a Deferred Payment Agreement related to
Smartcom's purchase of equipment, software and services from Qualcomm. The
assets of Smartcom collateralize its obligations under the Deferred Payment
Agreement. The Deferred Payment Agreement requires Smartcom to meet certain
financial and operating covenants, including a debt to equity ratio and
restrictions on Smartcom's ability to pay dividends and to distribute assets.
Smartcom was in violation of certain covenants at August 31, 1999; however,
Qualcomm and Smartcom amended the Deferred Payment Agreement subsequent to
August 31, 1999 to revise the covenants that were in default and defer the dates
of repayment of the loan.

In February 2000, Qualcomm agreed to defer collection of amounts up to a
maximum of $115.7 million, including capitalized interest, under the amended
Deferred Payment Agreement with Smartcom. Amounts deferred under the agreement
must be repaid by September 2006. The deferred payments bear interest at either
a prime or LIBOR rate, plus an applicable margin. Accrued interest may be added
to the outstanding principal amount of the applicable borrowing until October
2001.

65
<PAGE>

Debt Repayment Schedule

The scheduled principal repayments for long-term debt at December 31, 1999 are
as follows (in thousands):

<TABLE>
<CAPTION>
Year ending December 31:
------------------------
<S> <C>
2000.................................................................................... $ --
2001.................................................................................... 25,874
2002.................................................................................... 26,090
2003.................................................................................... 4,871
2004.................................................................................... 14,314
Thereafter.............................................................................. 242,524
--------
313,673
Less unamortized discount and facility fee.............................................. (9,855)
--------
Total......................................................................... $303,818
========
</TABLE>

Note 6. Income Taxes

The components of the Company's deferred tax assets (liabilities) are
summarized as follows (in thousands):

<TABLE>
<CAPTION>
December 31, August 31,
---------------------------
1999 1999 1998
-------------- ------------ -------------
<S> <C> <C> <C>
U.S. deferred tax assets:
Net operating loss carryovers.............................................. $ 36,939 $ 32,498 $ 8,754
Equity losses in unconsolidated company.................................... 21,312 16,320 6,417
Deferred charges........................................................... 5,339 3,502 --
Reserves and allowances.................................................... 3,820 3,402 2,984
-------- -------- --------
67,410 55,722 18,155
Foreign deferred tax assets:
Net operating loss carryovers.............................................. 10,682 8,000 --
Reserves and allowances.................................................... 210 1,259 --
-------- -------- --------
10,892 9,259 --
-------- -------- --------
Gross deferred tax assets.................................................... 78,302 64,981 18,155

Foreign deferred tax liabilities:
Intangible assets.......................................................... (7,925) (9,136) --
-------- -------- --------
Net deferred tax asset....................................................... 70,377 55,845 18,155
Valuation allowance.......................................................... (70,377) (55,845) (18,155)
-------- -------- --------
$ -- $ -- $ --
======== ======== ========
</TABLE>

Management has established a valuation allowance against its deferred tax
assets due to the uncertainty surrounding the realization of such assets.

The net operating losses generated prior to the Distribution were retained by
Qualcomm. At December 31, 1999, the Company had federal and state net operating
loss carryforwards of approximately $103.1 million and $15.1 million, which will
begin to expire in 2019 and 2004, respectively. In addition, the Company had
foreign net operating loss carryforwards of approximately $71.2 million, which
do not expire. Should a substantial change in the Company's ownership occur as
defined under Internal Revenue Code section 382, there will be an annual
limitation on its utilization of net operating loss carryforwards.

Deferred tax assets of approximately $4.8 million as of December 31, 1999
relate to certain net operating loss carryforwards resulting from exercise of
employee stock options. When recognized, the tax

66
<PAGE>

benefit of these loss carryforwards will be accounted for as a credit to
additional paid-in capital rather than a reduction of the income tax provision.

A reconciliation of the income tax provision (benefit) to the amount computed
by applying the statutory federal income tax rate to income before income tax
provision is summarized as follows (in thousands):

<TABLE>
<CAPTION>
Period from
September 1,
1999 to Year Ended August 31,
December 31, ----------------------------------------
1999 1999 1998 1997

<S> <C> <C> <C> <C>
Amounts computed at statutory federal rate..................... $(26,304) $(57,615) $(16,357) $(1,804)
Non-deductible losses of foreign subsidiaries and investees.... 17,387 16,649 2,150 --
State income tax, net of federal benefit....................... 563 (5,740) (1,428) (229)
Foreign income tax benefit..................................... (2,844) (123) -- --
Other.......................................................... 163 508 (487) --
Increase in valuation allowance................................ 11,035 46,321 16,122 2,033
-------- -------- -------- -------
$ -- $ -- $ -- $ --
======== ======== ======== =======
</TABLE>

Note 7. Stockholders' Equity

Stockholder Rights Plan

In September 1998, the Company's Board of Directors adopted a Stockholder
Rights Plan (the "Rights Plan"). Pursuant to the Rights Plan, the Board of
Directors declared a dividend, payable on September 16, 1998, of one preferred
purchase right (a "Right") for each share of common stock, $.0001 par value, of
the Company outstanding at the close of business on September 11, 1998. Similar
Rights will generally be issued in respect to common stock subsequently issued.
Each Right entitles the registered holder to purchase from the Company a one
one-thousandth share of Series A Junior Participating Preferred Stock, $.0001
par value, at a purchase price of $90 (subject to adjustment). The Rights are
exercisable only if a person or group (an "Acquiring Person"), other than
Qualcomm with respect to its exercise of the warrant granted to it in connection
with the Distribution, acquires beneficial ownership of 15% or more of the
Company's outstanding shares of common stock. Upon exercise, holders other than
an Acquiring Person, will have the right (subject to termination) to receive the
Company's common stock or other securities having a market value (as defined)
equal to twice the purchase price of the Right. The Rights, which expire on
September 10, 2008, are redeemable in whole, but not in part, at the Company's
option at any time for a price of $.01 per Right. In conjunction with the
distribution of the Rights, the Company's Board of Directors designated 75,000
shares of Preferred Stock as Series A Junior Participating Preferred Stock and
reserved such shares for issuance upon exercise of the Rights. At December 31,
1999, no shares of Preferred Stock were outstanding.

In March 2000, the Company's Board of Directors approved an amendment to the
Company's Rights Plan that increases the purchase price from $90 to $350 for
each one one-thousandth share of Series A Junior Participating Preferred Stock.

Warrant

In connection with the Distribution, the Company issued to Qualcomm a warrant
to purchase 5,500,000 shares of the Company's common stock. In March 1999,
Qualcomm agreed to reduce the number of shares to 4,500,000 for consideration of
$5.4 million, which was the estimated fair value of the warrant repurchase as
determined by an option pricing model. This warrant is currently exercisable and
remains exercisable until September 2008.

67
<PAGE>

Trust Convertible Preferred Securities

Under the conversion agreement between the Company and Qualcomm, Leap has
agreed to issue up to 2,271,060 shares of its common stock upon the conversion
of the Trust Convertible Preferred Securities of a wholly owned statutory
business trust of Qualcomm. After conversion of the Trust Convertible Preferred
Securities, Qualcomm will have some of its debt reduced, but Leap will receive
no benefit or other consideration. At December 31, 1999, 1,345,707 shares of the
Company's common stock had been issued upon conversion.

Note 8. Benefit Plans

Employee Savings and Retirement Plan

In September 1998, the Company adopted a 401(k) plan that allows eligible
employees to contribute up to 15% of their salary, subject to annual limits. The
Company matches a portion of the employee contributions and may, at its
discretion, make additional contributions based upon earnings. The Company's
contribution expense for the period from September 1, 1999 to December 31, 1999
and for the year ended August 31, 1999 was $52,000 and $133,000, respectively.

Stock Option Plans

In September 1998, the Company adopted the 1998 Stock Option Plan (the "1998
Plan") that allows the Board of Directors to grant options to selected
employees, directors and consultants to the Company to purchase shares of the
Company's common stock. A total of 8,000,000 shares of common stock were
reserved for issuance under the 1998 Plan. The 1998 Plan provides for the grant
of both incentive and non-qualified stock options. Incentive stock options are
exercisable at a price not less than 100% of the fair market value of the common
stock on the date of grant. Non-qualified stock options are exercisable at a
price not less than 85% of the fair market value of the common stock on the date
of grant. Generally, options vest over a five-year period and are exercisable
for up to ten years from the grant date. The Company also adopted the 1998 Non-
Employee Directors Stock Option Plan (the "1998 Non-Employee Directors Plan"),
under which options to purchase common stock are granted to non-employee
directors on an annual basis. A total of 500,000 shares of common stock were
reserved for issuance under the 1998 Non-Employee Directors Plan. The options
are exercisable at a price equal to the fair market value of the common stock on
the date of grant, vest over a five-year period and are exercisable for up to
ten years from the grant date.

In September 2000, the Company's shareholders approved the adoption of the
2000 Stock Option Plan ("the 2000 Plan"). A total of 2,250,000 shares of common
stock have been reserved for issuance under the 2000 Plan. Terms of the Plan are
comparable to the Company's 1998 Stock Option Plan.

A summary of stock option transactions for the 1998 Plan and the 1998 Non-
Employee Directors Plan follows (number of shares in thousands):

<TABLE>
<CAPTION>
Options Outstanding
-------------------------------
Options Weighted
Available Number of Average
For Grant Shares Exercise Price
--------- ----------- --------------
<S> <C> <C> <C>
Options authorized............................................... 8,500
Options granted at Distribution.................................. (5,542) 5,542 $ 3.73
Options granted after Distribution............................... (1,768) 1,768 10.52
</TABLE>

68
<PAGE>

<TABLE>
<S> <C> <C> <C>
Options cancelled................................................ 513 (720) 4.03
Options exercised................................................ -- (650) 3.11
------ -----
August 31, 1999.................................................. 1,703 5,940 5.78
Options granted.................................................. (127) 127 36.23
Options cancelled................................................ 67 (67) 8.17
Options exercised................................................ -- (303) 7.88
------ -----
December 31, 1999................................................ 1,643 5,697 $ 6.56
====== =====
</TABLE>

The following table summarizes information about stock options outstanding
under the 1998 Plan and the 1998 Non-Employee Directors Plan at December 31,
1999 (number of shares in thousands):

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------- -------------------------------
Weighted
Average
Remaining Weighted Weighted
Contractual Average Average
Range of Number Life Exercise Number Exercise
Exercise Prices of Shares (in Years) Price of Shares Price
--------------- --------- ------------ -------- --------- --------
<S> <C> <C> <C> <C> <C>
$ 0.78 to $ 3.63 2,505 6.09 $ 2.78 1,391 $ 2.59
$ 3.67 to $ 5.04 1,691 7.53 $ 4.46 490 $ 4.25
$ 5.06 to $ 10.38 607 7.99 $ 5.86 205 $ 5.65
$15.56 to $ 22.00 830 9.54 $21.60 12 $18.29
$49.25 to $ 55.44 64 9.94 $55.03 1 $53.64
----- -----
5,697 7.26 $ 6.56 2,099 $ 3.39
===== =====
</TABLE>

In June 1999, Cricket Communications Holdings adopted its own 1999 Stock
Option Plan (the "1999 Cricket Plan") that allows the Cricket Communications
Holdings Board of Directors to grant options to selected employees, directors
and consultants to purchase shares of Cricket Communications Holdings common
stock. A total of 7,600,000 shares of Cricket Communications Holdings common
stock were reserved for issuance under the 1999 Cricket Plan. The 1999 Cricket
Plan provides for the grant of both incentive and non-qualified stock options.
Incentive stock options are exercisable at a price not less than 100% of the
fair market value of the common stock on the date of grant. Non-qualified stock
options are exercisable at a price not less than 85% of the fair market value of
the common stock on the date of grant. Generally, options vest over a five-year
period and are exercisable for up to ten years from the grant date.

In June 1999, a total of 1,205,000 options to purchase Cricket Communications
Holdings common stock were granted to two directors of the Company, exercisable
at $1.00 per share with accelerated vesting provisions. In July 1999, all of
these options vested and were fully exercised. In addition, 795,000 other
options granted in June 1999 at $1.00 per share were exercised in July 1999.
Cricket Communications Holdings received promissory notes totaling $0.9 million
and cash of $1.1 million as consideration for the issuance of the shares.

In connection with Leap's purchase of the remaining 5.11% of Cricket
Communications Holdings that it did not already own on June 15, 2000 (see Note
13), each outstanding unexpired and unexercised option under the 1999 Cricket
Plan was converted into a stock option to purchase 0.315 shares of Leap common
stock. The intrinsic value of the Leap replacement options on the date of the
transaction was $24.3 million and was recorded as unearned stock-based
compensation.

A summary of stock option transactions for the 1999 Cricket Plan follows
(number of shares in thousands):

<TABLE>
<CAPTION>
Options Outstanding
----------------------------
Weighted
Options Average
Available Number of Exercise
For Grant Shares Price
----------- ------------- -------------
<S> <C> <C> <C>
Options authorized........................................ 7,600
Options granted........................................... (3,335) 3,335 $1.16
</TABLE>

69
<PAGE>

Options cancelled................. 2 (2) 1.00
Options exercised................. -- (2,000) 1.00
------ ------
August 31, 1999................... 4,267 1,333 1.41
Options granted................... (600) 600 4.53
Options cancelled................. 21 (21) 3.82
------ ------
December 31, 1999................. 3,688 1,912 $ 2.35
====== ======

The following table summarizes information about stock options outstanding
under the 1999 Cricket Plan at December 31, 1999 (number of shares in
thousands):

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------ -----------------------------
Weighted
Average
Remaining Weighted Weighted
Contractual Average Average
Number Life Exercise Number Exercise
Exercise Prices of Shares (in Years) Price of Shares Price
------------------- ------------- -------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
$ 1.00 850 9.47 $ 1.00 123 $ 1.00
$ 2.00 458 9.54 2.00 -- --
$ 4.00 445 9.73 4.00 -- --
$ 6.00 159 9.90 6.00 -- --
----- ---
1,912 9.58 $ 2.35 123 $ 1.00
===== ===
</TABLE>

Employee Stock Purchase Plan

In September 1998, the Company adopted the 1998 Employee Stock Purchase Plan
(the "1998 ESP Plan") for all eligible employees to purchase shares of common
stock at 85% of the lower of the fair market value of such stock on the first or
the last day of each offering period. A total of 200,000 shares of common stock
were reserved for issuance under the 1998 ESP Plan. Employees may authorize the
Company to withhold up to 15% of their compensation during any offering period,
subject to certain limitations. During the period from September 1, 1999 to
December 31, 1999 and the year ended August 31, 1999, a total of 17,366 and
63,779 shares were issued under the 1998 ESP Plan at $15.51 and $3.83 per share,
respectively. At December 31, 1999, 118,855 shares were available for future
issuance.

Executive Retirement Plan

In September 1998, the Company adopted a voluntary retirement plan that allows
eligible executives to defer up to 100% of their income on a pre tax basis. On a
quarterly basis, participants receive up to a 10% match of their income in the
form of the Company's common stock based on the then current market price, to be
issued to the participant upon eligible retirement. The income deferred and the
Company match are unsecured and subject to the claims of general creditors of
the Company. The plan authorized up to 100,000 shares of common stock to be
allocated to participants. During the period from September 1, 1999 to December
31, 1999 and the year ended August 31, 1999, 3,953 and 8,718 shares,
respectively, were allocated under the plan and the Company's matching
contribution amounted to $162,000 and $86,000, respectively. At December 31,
1999, 87,329 shares were available for future allocation.

Executive Officer Deferred Stock Plan

In December 1999, the Company established an Executive Officer Deferred Stock
Plan that provides for mandatory deferral of 25% and voluntary deferral of up to
75% of executive officer bonuses. Bonus deferrals are converted into share units
credited to the participant's account, with the number of share units calculated
by dividing the deferred bonus amount by the fair market value of the Company's
common stock on the bonus payday. Share units represent the right to receive
shares of the Company's

70
<PAGE>

common stock in accordance with the plan. The Company will also credit to a
matching account that number of share units equal to 20% of the share units
credited to the participant's accounts. Matching share units vest ratably over
three years on each anniversary date of the applicable bonus payday. The Company
has reserved 25,000 shares of its common stock for issuance under the plan.

Pro Forma Information

For purposes of pro forma disclosures, the fair value of options granted has
been estimated at the date of grant using the Black-Scholes option-pricing model
using the following weighted average assumptions:

Period from
September 1,
1999 to Year Ended
December 31, August 31,
1999 1999
----------------------------
Risk-free interest rate:
1998 Stock Option Plan............... 6.55% 5.0%
1999 Cricket Plan.................... 6.55% 5.0%
1998 ESP Plan........................ 5.74% 4.5%
Volatility:
1998 Stock Option Plan............... 50.0% 50.0%
1999 Cricket Plan.................... 0.0% 0.0%
1998 ESP Plan........................ 55.0% 55.0%
Dividend yield (all plans)............. 0.0% 0.0%
Expected life (years):.................
1998 Stock Option Plan............... 6.0 6.0
1999 Cricket Plan.................... 6.0 6.0
1998 ESP Plan........................ 0.5 0.5

The weighted average estimated grant date fair values of stock options were as
follows:

Period from
September 1,
1999 to Year Ended
December 31, August 31,
1999 1999
----------------------------
1998 Stock Option Plan............... $20.35 $ 1.57
1999 Cricket Plan.................... $ 1.42 $ 0.12
1998 ESP Plan........................ $ 3.46 $ 2.37

The Company's pro forma information is as follows (in thousands, except per
share data):

<TABLE>
<CAPTION>
Period
from
September 1,
1999 to Year Ended
December 31, August 31,
1999 1999
-------------------------------
<S> <C> <C>
Net loss:
As reported................................................ $ (75,846) $(164,613)
Pro forma.................................................. $ (76,815) $(171,415)
Basic and diluted net loss per common share:
As reported................................................ $ (4.01) $ (9.19)
Pro forma.................................................. $ (4.06) $ (9.57)
</TABLE>

71
<PAGE>

Note 9. Commitments and Contingencies

In May 1999, Pegaso entered into a $100.0 million loan agreement. The Company
guaranteed 33% of Pegaso's obligations under this loan agreement in the event of
Pegaso's default. The amount of the loan was subsequently increased to $190.0
million although the amount of the guarantee was not increased. In December
1999, as a condition of the guarantee, the Company received an option to
subscribe for and purchase up to 243,090 limiting voting series "N" treasury
shares of Pegaso. The number of shares to be purchased by the Company under the
option will be calculated to provide a total internal rate of return on the
average outstanding balance of the bridge loan of 20%. The options have an
exercise price of $0.01 per share and expire 10 years from the date of issuance.
The options are exercisable at any time after the date on which all amounts
under the loan agreement are paid in full.

The Company has entered into non-cancelable operating lease agreements to
lease its facilities, certain equipment and rental of sites for towers and
antennas required for the operation of its wireless system in Chile. Future
minimum rental payments required for all non-cancelable operating leases at
December 31, 1999 are as follows (in thousands):

Year Ended December 31:
-----------------------
2000............................................ $ 6,093
2001............................................ 1,120
2002............................................ 5,809
2003............................................ 1,019
2004............................................ 5,389
Thereafter...................................... 13,232
-------
Total...................................... $32,662
=======

Rent expense totaled $0.9 million and $1.2 million for the period from
September 1, 1999 to December 31, 1999 and the year ended August 31, 1999,
respectively. No rent expense was incurred by the Company prior to the
Distribution.

Various claims arising in the course of business, seeking monetary damages and
other relief, are pending. The amount of the liability, if any, from such claims
cannot be determined with certainty; however, in the opinion of management, the
ultimate liability for such claims will not have a material adverse effect on
the Company's consolidated financial position, results of operations or cash
flows.

72
<PAGE>

Note 10. Balance Sheet Components

<TABLE>
<CAPTION>
August 31,
December 31, ------------------------
1999 1999 1998
------------- ------------- ---------
<S> <C> <C> <C>
(in thousands)
Accounts receivable, net:
Trade accounts receivable....................................................... $ 3,455 $ 2,197
Other accounts receivable....................................................... 1,185 1,112
-------- --------
4,640 3,309
Allowance for doubtful accounts................................................. (713) (583)
-------- --------
$ 3,927 $ 2,726
======== ========

Property and equipment, net:
Land............................................................................ $ 302 $ 310
Buildings and infrastructure.................................................... 103,882 108,958
Machinery and equipment......................................................... 3,069 2,558
Computer equipment and other.................................................... 21,893 17,158
-------- --------
129,146 128,984
Accumulated depreciation and amortization....................................... (16,087) (12,037)
-------- --------
$113,059 $116,947
======== ========
Intangible assets, net:
Wireless licenses............................................................... $ 57,982 $ 58,488 $6,274
Rights to wireless network systems.............................................. 14,991 16,225 --
Goodwill........................................................................ -- -- 564
-------- -------- ------
72,973 74,713 6,838
Accumulated amortization........................................................ (1,498) (769) --
-------- -------- ------
$ 71,475 $ 73,944 $6,838
======== ======== ======
Accounts payable and accrued liabilities:
Trade accounts payable.......................................................... $ 4,167 $ 1,523 $ --
Accrued payroll and related benefits............................................ 4,827 4,597 --
Accrued loss on handset purchase commitment..................................... 5,074 7,035 --
Other accrued liabilities....................................................... 5,029 3,217 5,789
-------- -------- ------
$ 19,097 $ 16,372 $5,789
======== ======== ======
</TABLE>

73
<PAGE>

Note 11. Comparative Financial Information

The following is summarized results of operations and cash flows
information for the periods from September 1, 1999 to December 31, 1999 and
from September 1, 1998 to December 31, 1998 (unaudited):

<TABLE>
<CAPTION>
Period from Period from
September 1, September 1,
1999 to 1998 to
December 31, December 31,
1999 1998
------------- --------------
<S> <C> <C>
(unaudited)
Statement of Operations Information:
Operating revenues........................................................... $ 6,772 $ --
Operating expenses........................................................... (36,439) (5,502)
-------- --------
Operating loss............................................................. (29,667) (5,502)
Equity in net loss of unconsolidated wireless operating companies............ (23,077) (19,908)
Other income (expense), net.................................................. (23,102) (697)
-------- --------
Net loss................................................................... $(75,846) $(26,107)
======== ========
Basic and diluted net loss per common share.................................. $ (4.01) $(1.48)
======== ========

Cash Flows Information:
Operating activities:
Net loss..................................................................... $(75,846) $(26,107)
Equity in net loss of unconsolidated wireless operating companies............ 23,077 19,908
Other........................................................................ 21,199 (7,318)
-------- --------
(31,570) (13,517)
-------- --------
Investing activities:
Investments in and loans to unconsolidated wireless operating companies...... (2,744) (86,791)
Restricted cash equivelents.................................................. (20,500) --
Other........................................................................ (4,568) (3,399)
-------- --------
(27,812) (90,190)
-------- --------
Financing activities:
Borrowings under credit agreement............................................ 61,650 23,315
Former parent company's investment........................................... -- 95,268
Other........................................................................ 1,721 104
-------- -------
63,371 118,687
-------- -------
Effect of exchange rate changes................................................ 7,210 --
Effect of change in foreign company reporting log.............................. 6,695 --
-------- --------
Net increase in cash and cash equivalents...................................... $ 17,894 $ 14,980
======== ========
</TABLE>

Note 12. Segment Data

The Company's reportable segments are countries in which it manages,
supports, operates and participates in wireless communications business
ventures. These reportable segments are evaluated separately because each
geographic region presents different marketing strategies and operational
issues, as well as distinct economic climates and regulatory constraints. The
Company's reportable segments are comprised of Cricket Communications and Chase
Telecommunications in the United States, and Leap's operating companies in
Mexico and Chile.

The accounting policies of the various segments are the same as those
described in Note 2, "Summary of Significant Accounting Policies". The key
operating performance criteria used by Leap include revenue growth, operating
income (loss), depreciation and amortization, capital expenditures, and
purchases of wireless licenses. Segment assets exclude corporate assets.
Corporate expenses are comprised primarily of general and administrative
expenses, which are separately managed. The segment results of Chile and Mexico
do not include any corporate allocations of general and administrative expenses
from Leap.

74
<PAGE>

Summary information by segment is as follows (in thousands):

As of
December 31, 1999
and for the period from As of and for the Year Ended August 31,
September 1 to ---------------------------------------------
December 31, 1999 1999 1998 1997
----------------------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
United States:
Revenues................................................ $ 3,142 $ 3,337 $ 22 $ --
Operating loss.......................................... (22,951) (22,414) (20,017) (4,959)
Depreciation and amortization........................... (13,863) (2,033) (120) (120)
Capital expenditures.................................... (15,691) (6,177) (12,852) (9,971)
Purchase of wireless licenses........................... -- (18,920) -- --
Total assets............................................ 113,205 109,437 88,991
Chile:
Revenues................................................ 6,644 7,444 -- --
Operating loss.......................................... (20,096) (27,479) (4,380) (274)
Depreciation and amortization........................... (6,714) (9,409) (60) --
Capital expenditures.................................... (2,899) (26,666) (85,036) (15,058)
Total assets............................................ 190,297 186,645 124,614
Mexico:
Revenues................................................ 1,813 1,203 -- --
Operating loss.......................................... (47,169) (68,847) (5,350) --
Depreciation and amortization........................... (3,337) (2,320) -- --
Capital expenditures.................................... (36,279) (8,315) (822) --
Purchase of wireless licenses........................... -- (175,864) (57,666) --
Total assets............................................ 514,918 551,098 71,760
</TABLE>

A reconciliation of the Company's segment revenues, operating expenses,
depreciation and amortization and total assets to the corresponding consolidated
amounts is as follows (in thousands):

<TABLE>
<CAPTION>
As of
December 31, 1999
and for the period from
September 1, As of and for the Year Ended August 31,
1999 to December 31, -----------------------------------------
1999 1999 1998 1997
----------------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Segment revenues............................................... $ 11,599 $ 11,984 $ 22 $ --
Revenues of unconsolidated wireless operating
companies.................................................... (4,955) (8,190) (22) --
Other unallocable revenues..................................... 128 113 -- --
--------- --------- --------- --------
Consolidated revenues........................................ $ 6,772 $ 3,907 $ -- $ --
========= ========= ========= ========
Segment operating losses....................................... $ (90,216) $(118,740) $ (29,747) $ (5,233)
Operating losses of unconsolidated wireless operating
companies.................................................... 65,850 101,528 15,151 5,233
Corporate and eliminations..................................... (5,301) (17,260) (9,292) (1,361)
--------- --------- --------- --------
Consolidated operating loss.................................. $ (29,667) $ (34,472) $ (23,888) $ (1,361)
========= ========= ========= ========
Segment depreciation and amortization.......................... $ (23,914) $ (13,762) $ (180) $ (120)
Depreciation and amortization of unconsolidated
wireless operating companies................................. 17,200 8,501 180 120
Corporate depreciation and amortization........................ (212) (563) -- --
--------- --------- --------- --------
Consolidated depreciation and amortization................... $ (6,926) $ (5,824) $ -- $ --
========= ========= ========= ========
Segment total assets........................................... $ 818,420 $ 847,180 $ 285,365
Total assets of unconsolidated wireless operating
</TABLE>

75
<PAGE>

As of
December 31, 1999
and for the period from As of and for the Year Ended August 31,
September 1, 1999 to -----------------------------------------
December 31, 1999 1999 1998 1997
----------------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
companies.................................................... (612,266) (639,738) (285,365)
Investments in and loans to unconsolidated wireless
operating companies.......................................... 85,878 94,429 150,914
Corporate assets............................................... 68,733 33,460 6,838
--------- --------- ---------
Consolidated total assets.................................... $ 360,765 $ 335,331 $ 157,752
========= ========= =========
</TABLE>

Revenues and long-lived assets related to operations in the United States and
other countries are as follows (in thousands):

<TABLE>
<CAPTION>
As of
December 31, 1999
and for
the period from
September 1 to As of and for the Year Ended August 31,
December 31, -------------------------------------------
1999 1999 1998 1997
----------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
United States................................................ $ -- $ -- $ -- $ --
Other countries.............................................. 6,772 3,907 -- --
-------- -------- -------- --------
Total consolidated revenues................................ $ 6,772 $ 3,907 $ -- $ --
======== ======== ======== ========
LONG-LIVED ASSETS:
United States................................................ $ 33,147 $ 23,599 $ -- $ --
Other countries.............................................. 240,477 264,369 104,557 42,267
-------- -------- -------- --------
Total consolidated long-lived assets....................... $273,624 $287,968 $104,557 $ 42,267
======== ======== ======== ========
</TABLE>

Note 13. Subsequent Events

Nortel Supply and Credit Agreements

In August 2000, Cricket Communications entered into a three-year supply
agreement with Nortel for the purchase of infrastructure products and services.
Nortel agreed to finance these purchases plus additional working capital under a
credit facility. The credit facility permits up to $525.0 million in total
borrowings, with borrowing availability generally based on a ratio of the total
amount of products and services purchased from Nortel. The credit agreement
contains various covenants and conditions typical for a loan of this type,
including minimum levels of customers and covered potential customers that must
increase over time, limits on annual capital expenditures and other financial
ratio tests. The obligations under the credit agreement, together with the
obligations under similar facilities from Lucent and Ericsson, are secured by
all of the stock of Cricket Communications, its subsidiaries and the stock of
each special purpose subsidiary of the Company formed to hold wireless licenses
used in Cricket Communications' business, and all their respective assets.
Borrowings under the credit facility accrue interest at a rate equal to LIBOR
plus 3.5% to 4.25% or a bank base rate plus 2.5% to 3.25%, in each case with the
specific rate based on the ratio of total indebtedness to EBITDA. Cricket
Communications must pay a commitment fee equal to 1.25% per annum on the unused
commitment under the credit facility, decreasing to 0.75% per annum. Principal
payments are scheduled to begin after three years with a final maturity after
eight years. Repayment is weighted to the later years of the repayment schedule.

Ericsson Supply and Credit Agreements

76
<PAGE>

In October 2000, Cricket Communications entered into a three-year supply
agreement with Ericsson for the purchase of up to $330.0 million of
infrastructure products and services. Ericsson Credit AB agreed to finance these
purchases plus additional working capital under a credit facility. These
agreements amended and replaced the binding memorandum of agreement between the
parties dated September 20, 1999. The credit facility permits up to $495.0
million in total borrowings, with borrowing availability generally based on a
ratio of the total amount of products and services purchased from Ericsson. The
credit agreement contains various covenants and conditions typical for a loan of
this type, including minimum levels of customers and covered potential customers
that must increase over time, limits on annual capital expenditures, dividend
restrictions and other financial ratio tests. The obligations under the credit
agreement, together with the obligations under similar facilities from Lucent
and Nortel, are secured by all of the stock of Cricket Communications, its
subsidiaries and the stock of each special purpose subsidiary of the Company
formed to hold wireless licenses and used in Cricket Communications' business,
and all their respective assets. Borrowings under the credit facility accrue
interest at a rate equal to LIBOR plus 3.5% to 4.25% or a bank base rate plus
2.5% to 3.25%, in each case with the specific rate based on the ratio of total
indebtedness to EBITDA. Cricket Communications must pay a commitment fee equal
to 1.25% per annum on the unused commitment under the credit facility,
decreasing to 0.75% per annum. Principal payments are scheduled to begin after
three years with a final maturity after eight years. Repayment is weighted to
the later years of the repayment schedule.

Units Offering

In February 2000, the Company completed an offering of 225,000 senior
units, each senior unit consisting of one 12.5% senior note due 2010 ("Senior
Note") and one warrant to purchase the Company's common stock, and 668,000
senior discount units, each senior discount unit consisting of one 14.5% senior
discount note due 2010 ("Senior Discount Note") and one warrant to purchase the
Company's common stock. The total gross proceeds from the sale of the senior
units and senior discount units were $225.0 million and $325.1 million,
respectively, of which $164.4 million of the total proceeds was allocated to the
fair value of the warrants, estimated using the Black-Scholes option pricing
model. In addition, the Company capitalized debt issuance costs of $13.5
million, consisting of underwriting, printing, legal and accounting fees. A
portion of the net proceeds from the units offering was used for the repayment
of borrowings under the Company's credit agreement with Qualcomm. The remaining
proceeds from the units offering will be used for capital expenditures,
acquisitions of wireless licenses, strategic investments, sales and marketing
activities, and working capital and general corporate purposes. Qualcomm
purchased $150.0 million of the Senior Discount Notes.

Interest on the Senior Notes will be payable on April 15 and October 15 of
each year, beginning on April 15, 2000. The Company used $79.5 million of the
proceeds from the Senior Notes to purchase and pledge, for the benefit of the
holders of the Senior Notes, certain U.S. Government securities to provide for
the payment of the first seven scheduled interest payments on the Senior Notes.

Each Senior Discount Note has an initial accreted value of $486.68 and a
principal amount at maturity of $1,000. The Senior Discount Notes will not begin
to accrue cash interest until April 15, 2005. Interest on the Senior Discount
Notes will be payable on April 15 and October 15 of each year, beginning on
October 15, 2005.

The Company may redeem any of the notes beginning April 15, 2005. The
initial redemption price of the Senior Notes is 106.25% of their principal
amount plus accrued interest. The initial redemption price of the Senior
Discount Notes is 107.25% of their principal amount at maturity plus accrued
interest. In addition, before April 15, 2003, the Company may redeem up to 35%
of both the Senior Notes and the Senior Discount Notes using proceeds from
certain qualified equity offerings of the Company's common stock at 112.5% of
their principal amount and 114.5% of their accreted value, respectively.

77
<PAGE>

Each warrant included as part of the Senior Notes is initially exercisable
to purchase 5.146 shares (1,157,850 shares in aggregate) of the Company's common
stock at an exercise price of $96.80 per share. Each warrant included as part of
the Senior Discount Notes is initially exercisable to purchase 2.503 shares
(1,672,004 shares in aggregate) of the Company's common stock at an exercise
price of $96.80 per share. The warrants may be exercised at any time on or after
February 23, 2001 and prior to April 15, 2010. The Company filed a shelf
registration statement covering the resale of the warrants and related common
stock issuable upon exercise of the warrants in August 2000.

Equity Offering

In February 2000, the Company completed a public equity offering of
4,000,000 shares of common stock at a price of $88.00 per share. Net of
underwriters' discounts and commissions, the Company received $82.72 per share,
or $330.9 million in the aggregate. The Company paid approximately $0.9 million
of expenses related to the equity offering, and these costs have been recorded
as reductions to additional paid-in capital. A portion of the net proceeds from
the equity offering was used for the repayment of the credit agreement with
Qualcomm. The remaining proceeds from the equity offering will be used for
capital expenditures, acquisitions of wireless licenses, strategic investments,
sales and marketing activities and working capital and general corporate
purposes.

Stockholders' Equity

In September 2000, the Company's shareholders approved the amendment and
restatement of the Company's Certificate of Incorporation to increase the
aggregate number of authorized shares of common stock from 75,000,000 to
300,000,000.

Cricket Communications Holdings

On June 15, 2000, through a subsidiary merger, the Company acquired the
remaining 5.11% of Cricket Communications Holdings that it did not already own.
These shares were owned by individuals and entities, including directors and
employees of the Company and Cricket Communications Holdings. Each issued and
outstanding share of Cricket Communications Holdings common stock not held by
the Company was converted into the right to receive 0.315 of a fully paid and
nonassessable share of the Company's common stock. As a result, 1,048,635 shares
of the Company's common stock were issued. The Company also assumed Chase
Telecommunications Holdings' warrant to purchase 1% of the common stock of
Cricket Communications Holdings, which was converted into a warrant to acquire
202,566 shares of its common stock, at an aggregate exercise price of $1.0
million. The aggregate fair value of the shares issued and warrant assumed in
excess of the carrying value of the minority interest was allocated to goodwill.
As a result, goodwill of $29.2 million was recorded in June 2000. In addition,
the Company assumed all unexpired and unexercised Cricket Communications
Holdings stock options outstanding at the time of the merger, whether vested or
unvested, which upon conversion amounted to options to purchase 407,784 shares
of the Company's common stock.

* * * *

78
<PAGE>

Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure

None.

79
<PAGE>

PART III

Item 10. Directors and Executive Officers of the Registrant

The following table sets forth information concerning the directors and
executive officers of Leap as of October 26, 2000:

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Harvey P. White.......................... 66 Chairman of the Board, Chief Executive Officer and
Director
Thomas J. Bernard........................ 68 Vice Chairman, President - International Business
Division and Director
Susan G. Swenson......................... 52 President, Chief Operating Officer and Director of Leap
and Chief Executive Officer of Cricket Communications
James E. Hoffmann........................ 50 Senior Vice President, General Counsel and Secretary
Stewart Douglas Hutcheson................ 44 Senior Vice President, Wireless Data Development
Daniel O. Pegg........................... 54 Senior Vice President, Public Affairs
Leonard C. Stephens...................... 43 Senior Vice President, Human Resources
Thomas D. Willardson..................... 50 Senior Vice President, Finance and Treasurer
Jill E. Barad............................ 49 Director
Alejandro Burillo Azcarraga.............. 48 Director
Anthony R. Chase......................... 45 Director
Robert C. Dynes.......................... 57 Director
Scot B. Jarvis........................... 40 Director
John J. Moores........................... 56 Director
Michael B. Targoff....................... 56 Director
Jeffrey P. Williams...................... 49 Director
</TABLE>

Additional information concerning the directors and executive officers is set
forth below:

Harvey P. White has served as Chairman of the Board, Chief Executive Officer
and a Director of Leap since its formation in June 1998 and also served as
President of Leap from June 1998 to July 1999. Mr. White is one of the founders
of Qualcomm and served as Vice Chairman of the Board of Qualcomm from June 1998
to September 1998. From May 1992 until June 1998, he served as President of
Qualcomm and from February 1994 to August 1995, as Chief Operating Officer of
Qualcomm. Before May 1992, he was Executive Vice President and Chief Operating
Officer, and was also a Director of Qualcomm since it began operations in July
1985 until he resigned in September 1998 when Leap became an independent,
publicly-traded company. From March 1978 to June 1985, Mr. White was an officer
of LINKABIT (M/A-COM LINKABIT after August 1980), where he was successively
Chief Financial Officer, Vice President, Senior Vice President and Executive
Vice President. Mr. White became Chief Operating Officer of LINKABIT in July
1979 and a Director of LINKABIT in December 1979. Mr. White is currently a
Director of Verance, Inc., a privately-held multimedia technology start-up
company, Applied Micro Circuits Corporation, a supplier of high-bandwidth
silicon connectivity and Cibernet Corp., a company that provides financial
settlement services to telecommunications companies. Mr. White holds a B.A. from
Marshall University.

Thomas J. Bernard has served as a Director of Leap since its formation in June
1998. Mr. Bernard is also the Vice Chairman and President - International
Business Division of Leap. From June 1998 to July 1999, he served as Executive
Vice President of Leap. From April 1996 to June 1998, Mr. Bernard served as a
Senior Vice President of Qualcomm and General Manager of Qualcomm's
Infrastructure Products division. Mr. Bernard had retired in April 1994, but
returned to Qualcomm in August 1995 as Executive Consultant and became Senior
Vice President, Marketing, in December 1995. Mr. Bernard first joined Qualcomm
in September 1986. He served as Vice President and General Manager for the
OmniTRACS

80
<PAGE>

division and in September 1992 was promoted to Senior Vice President of
Qualcomm. Before joining Qualcomm, Mr. Bernard was Executive Vice President and
General Manager, M/A-COM LINKABIT, Telecommunications Division, Western
Operations. Mr. Bernard also serves as a Director of AirFiber Inc., a privately-
held company that markets high-speed open-air optical communication systems; and
Advanced Remote Communications Solutions, Inc., a provider of remote information
technology solutions.

Susan G. Swenson has served as President and a Director since July 1999 and
Chief Operating Officer since October 1999. She has also served as Cricket
Communications's Chief Executive Officer since July 1999. From March 1994 to
July 1999, she served as President and Chief Executive Officer of Cellular One,
a joint venture between AirTouch and AT&T Wireless that provided wireless
telecommunications services to regions covering approximately 10 million
potential customers. From 1979 to 1994, Ms. Swenson held various operating
positions with Pacific Telesis Group, including Vice President and General
Manager of Pacific Bell's San Francisco Bay Area operating unit for one year and
President and Chief Operating Officer of PacTel Cellular for two and one-half
years. Ms. Swenson also serves as a Director of Wells Fargo & Company, General
Magic, Inc. and Palm Computing, Inc., a subsidiary of 3Com Corporation. Ms.
Swenson holds a B.A. from San Diego State University.

James E. Hoffmann has served as Senior Vice President, General Counsel and
Secretary of Leap since its formation in June 1998. Mr. Hoffmann also served as
a Director of Leap from September 1998 to July 1999. From June 1998 to September
1998, Mr. Hoffmann was Vice President, Legal Counsel of Qualcomm. From February
1995 to June 1998, he served as Vice President of Qualcomm and Division Counsel
for the Infrastructure Products Division, having joined Qualcomm as Senior Legal
Counsel in June 1993. Before joining Qualcomm, Mr. Hoffmann was a partner in the
law firm of Gray, Cary, Ames & Frye, where he practiced transactional corporate
law. Mr. Hoffmann holds a B.S. from the United States Naval Academy, an M.B.A.
from Golden Gate University and a J.D. from University of California, Hastings
College of the Law.

Stewart Douglas Hutcheson has served as Senior Vice President, Wireless Data
Development since July 2000, having previously served as Senior Vice President,
Business Development from April 2000 to July 2000 and as Vice President,
Business Development from Leap's formation in September 1998 to April 2000. From
February 1995 to September 1998, Mr. Hutcheson served as Vice President,
Marketing in the Wireless Infrastructure division at Qualcomm. Before joining
Qualcomm, Mr. Hutcheson held operational and technical management positions at
Solar Turbines, Inc. for 13 years. Mr. Hutcheson holds a B.S. in mechanical
engineering from California State Polytechnic University and an M.B.A. from
University of California, Irvine.

Daniel O. Pegg has served as Senior Vice President, Public Affairs since
September 1998. From March 1997 to September 1998, Mr. Pegg served as Senior
Vice President, Public Affairs of Qualcomm. Before joining Qualcomm, Mr. Pegg
was President and Chief Executive Officer of the San Diego Economic Development
Corporation for 14 years. Mr. Pegg served on the Board of Directors of Gensia
Pharmaceuticals from 1986 to 1996. Mr. Pegg holds a B.A. from California State
University at Los Angeles.

Leonard C. Stephens has served as Senior Vice President, Human Resources
since September 1998. From December 1995 to September 1998, Mr. Stephens was
Vice President, Human Resources Operations for Qualcomm. Before joining
Qualcomm, Mr. Stephens was employed by Pfizer Inc., where he served in a number
of human resources positions over a 14 year career. Mr. Stephens holds a B.A.
from Howard University.

Thomas D. Willardson has served as Senior Vice President, Finance and
Treasurer since July 1998. From July 1995 to July 1998, Mr. Willardson was Vice
President and Associate Managing Director of

81
<PAGE>

Bechtel Enterprises, Inc., a wholly owned investment and development subsidiary
of Bechtel Group, Inc. From January 1986 to July 1995, Mr. Willardson was a
principal at The Fremont Group, an investment company. Mr. Willardson has served
as a Director of Cost Plus, Inc. since March 1991. Mr. Willardson holds a B.S.
in Finance from Brigham Young University and an M.B.A. from the University of
Southern California.

Jill E. Barad has served as a Director of Leap since August 2000. Ms. Barad
was Chairman of the Board and Chief Executive Officer of Mattel, Inc. from
October 1997 to February 2000. She served as President and CEO of Mattel, Inc.
from January 1997 to October 1997 and as President and COO of Mattel, Inc. from
July 1992 to January 1997. Ms. Barad started her career at Mattel as a product
manager in 1981. Ms. Barad graduated from Queens College in 1973 with a B.A. in
English Literature and Psychology. Ms. Barad is also a member of the Board of
Directors at Pixar Animation Studios. She is a member of the UCLA Executive
Board of Medical Sciences, the Board of Governors of Town Hall Los Angeles, the
Board of Fellows of Claremont University Center and Graduate School and Trustee
Emeritus of the Queens College Foundation. She is Chairman of the Executive
Advisory Board of the Children Affected by AIDS Foundation, and a member of the
Advisory Committee Board of the For All Kids Foundation. Ms. Barad is also on
the Board of Advisors of the Children's Scholarship Fund.

Alejandro Burillo Azcarraga has served as a Director of Leap since September
1998. Mr. Burillo has more than 30 years experience working for Grupo Televisa.
Mr. Burillo presently serves as Vice-Chairman of the Board of Directors of Grupo
Televisa, a position to which he was appointed in 1991. In addition, Mr. Burillo
served as President of International Affairs of Grupo Televisa from 1997 to
1999, and before that time served as Chief Operating Officer of Grupo Televisa.
Mr. Burillo also holds a controlling interest in Grupo Pegaso, a private
investment group with interests in various industries including cable
television, communications, retail electronics, real estate, sports and
entertainment. Mr. Burillo also serves as a Director of Grupo Desc, an NYSE-
listed company and one of Mexico's main industrial groups.

Anthony R. Chase has served as a Director of Leap since August 2000. Mr.
Chase has served as Chairman and CEO of Chasecom LP since 1998, Chairman and CEO
of Chase Radio Partners, Inc. since 2000, and Chairman and CEO of both Faith
Broadcasting Corporation and Chase Telecommunications, Inc. since 1993. Mr.
Chase is also Chairman and Co-Founder, together with SBC Communications, Inc.,
of the Telecom Opportunity Institute. Mr. Chase began teaching communications
law and contracts at the University of Houston Law School in 1990 and received
tenure in 1996. Mr. Chase received a B.A. with honors from Harvard University
in 1977 and his M.B.A. and J.D. from Harvard Business School and Harvard Law
School in 1981. Mr. Chase serves on the Boards of Directors of Cornell
Companies, Inc. (NYSE), Northern Trust Bank of Texas, numerous not-for-profit
organizations, and is a member of the Council on Foreign Relations.

Robert C. Dynes has served as a Director of Leap since July 1999. He has
served as the Chancellor of the University of California, San Diego since 1996
and as a Professor of Physics at UCSD since 1991 and was Senior Vice Chancellor
-- Academic Affairs of UCSD from 1995 to 1996. Before 1991, Chancellor Dynes
held numerous research science positions at AT&T Bell Laboratories. Chancellor
Dynes holds a B.Sc. in Mathematics and Physics from the University of Western
Ontario and a M.Sc. and Ph.D. in Physics from McMaster University in Hamilton,
Ontario. Chancellor Dynes is a member of the National Academy of Sciences and a
Fellow of the American Academy of Arts and Sciences, the Canadian Institute of
Advanced Research and the American Physical Society. Chancellor Dynes serves on
numerous scientific and educational boards and committees.

Scot B. Jarvis has served as a Director of Leap since September 1998. Mr.
Jarvis is a cofounder and managing member of Cedar Grove Partners, LLC, a
privately-owned company formed to make investments in telecommunications
ventures. From 1994 to 1996, Mr. Jarvis was a Vice President of

82
<PAGE>

Operations for Eagle River, Inc., a telecommunications investment company owned
by Craig O. McCaw. While at Eagle River, Mr. Jarvis was the cofounder and acting
President of Nextlink Communications, Inc., now a publicly-traded competitive
local exchange company. Mr. Jarvis was also responsible for certain operations
and was a Director of NEXTEL Communications, a nationwide provider of
specialized mobile radio service. From 1985 to 1994, Mr. Jarvis held a number of
executive positions at McCaw Cellular Communications which was sold to AT&T in
August 1994. His responsibilities included Acquisitions and Development,
International Development, and he operated two separate Cellular One Districts
in California from 1990 to 1993. Mr. Jarvis also serves as a Director of
Point.com, Metawave Communications Corp. and Wireless Facilities, Inc. Mr.
Jarvis holds a B.A. from the University of Washington.

John J. Moores has served as a Director of Leap since June 1999. Since
December 1994, Mr. Moores has served as owner and Chairman of the Board of the
San Diego Padres Baseball Club, L.P., and since September 1991 as Chairman of
the Board of JMI Services, Inc., a private investment company. In 1980, Mr.
Moores founded BMC Software, Inc. and served as its President and Chief
Executive Officer from 1980 to 1986 and as Chairman of its Board of Directors
from 1980 to 1992. Mr. Moores also serves as a Director of Bindview Development
Corporation, NEON Systems, Inc., Peregrine Systems, Inc. and several privately-
held corporations. Mr. Moores holds a B.S. and a J.D. from the University of
Houston.

Michael B. Targoff has served as a Director of Leap since September 1998. He
is founder and CEO of Michael B. Targoff and Co., a company that seeks
controlling investments in telecommunications and related industry companies.
From its formation in January 1996 through January 1998, Mr. Targoff was
President and Chief Operating Officer of Loral Space & Communications Limited.
Before that time, Mr. Targoff was Senior Vice President of Loral Corporation.
From 1991, Mr. Targoff was a Director and a principal Loral executive
responsible for Loral's satellite manufacturing joint venture with Alcatel,
Aerospatiale, Alenia and Daimler Benz Aerospace. Mr. Targoff was also the
President and is a Director of Globalstar Telecommunications Limited, the
company that is the public owner of Globalstar, Loral's global mobile satellite
system. Before joining Loral Corporation in 1981, Mr. Targoff was a Partner in
the New York law firm of Willkie Farr and Gallagher. Mr. Targoff is also a
Director of Foremost Corporation of America. Mr. Targoff holds a B.A. from Brown
University and a J.D. from Columbia University School of Law, where he was a
Hamilton Fisk Scholar and Editor of the Columbia Journal of Law and Social
Problems.

Jeffrey P. Williams has served as a Director of Leap since September 1998. He
has been a Managing Partner at Greenhill & Co., LLC, an investment banking firm,
since 1998. From September 1996 to January 1998, Mr. Williams was Executive Vice
President, Strategic Development and Global Markets for McGraw-Hill Companies,
and from 1984 through 1996, he was an investment banker with Morgan Stanley &
Co. Incorporated in their Telecommunications and Media Group. Mr. Williams has a
Bachelor of Architecture from the University of Cincinnati and an M.B.A. from
Harvard University Graduate School of Business Administration.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the Leap's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Leap's equity securities to file with the Securities and
Exchange Commission (the "Commission") initial reports of ownership and reports
of changes in ownership of common stock and other equity securities of Leap.
Officers, directors and greater-than-ten-percent beneficial owners are required
by Commission regulations to furnish Leap with copies of all Section 16(a) forms
they file.

To Leap's knowledge, based solely on a review of the copies of such reports
furnished to Leap and written representations that no other reports were
required, during the fiscal year ended December 31,

83
<PAGE>

1999, all Section 16(a) filing requirements applicable to its officers,
directors and greater-than-ten-percent beneficial owners were complied with,
except for William R. Hinchliff, who became subject to Section 16(a) filing
requirements on October 7, 1999, but his Form 3 was filed on October 10, 2000.

84
<PAGE>

Item 11. Executive Compensation

The following table sets forth certain compensation information with respect
to Leap's Chief Executive Officer and other four most highly-paid executive
officers for the fiscal year ended December 31, 1999 (the "Named Executive
Officers"). Leap first hired employees on September 23, 1998. Prior to that
date, all of the Named Executive Officers were employees of Qualcomm. As a
result, the information set forth in the following tables reflects compensation
earned by the Named Executive Officers for services they rendered to Leap during
the twelve months ended December 31, 1999 and August 31, 1999 and to Qualcomm
during its fiscal years 1997 and 1998.

Summary Compensation Table

<TABLE>
<CAPTION>
Long-Term
Annual Compensation(1) Compensation
-------------------------------------------------- ---------------
Other Securities
Name and Principal Positions Annual Underlying All Other
At the Company Year Salary Bonus Compensation(4) Options Compensation(7)
--------------------------------------------- --------- ------------ --------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Harvey P. White.............................. 1999(2) $550,000 $305,000 $ 0 197,250 $684,331
Chairman of the Board and 1999(3) $488,464 $305,000 $ 0 497,000(5) $273,222
Chief Executive Officer 1998 $477,853 $320,000 $ 0 75,000 $108,902
1997 $395,713 $250,000 $ 0 0 $ 37,011

Thomas J. Bernard............................ 1999(2) $332,500 $150,000 $ 0 113,625 $ 59,334
Vice Chairman, President -- International 1999(3) $280,924 $150,000 $ 0 180,000(5) $ 46,351
Business Division and Director 1998 $287,509 $120,000 $ 0 0 $ 34,545
1997 $245,142 $ 65,000 $ 0 0 $ 6,086

James E. Hoffmann............................ 1999(2) $245,000 $ 80,000 $ 0 48,900 $ 16,308
Senior Vice President, 1999(3) $224,117 $ 80,000 $ 0 83,000(5) $ 5,219
General Counsel, and Secretary 1998 $178,930 $ 60,000 $ 0 4,000 $ 13,899
1997 $149,283 $ 50,000 $ 0 3,000 $ 10,048

Leonard C. Stephens.......................... 1999(2) $220,000 $ 80,000 $ 0 48,900 $ 23,995
Senior Vice President, 1999(3) $197,270 $ 80,000 $ 0 76,000(5) $ 13,464
Human Resources 1998 $176,930 $ 55,000 $104,947 6,000 $ 2,258
1997 $146,828 $ 45,000 $ 42,268 3,000 $ 1,816

Daniel O. Pegg............................... 1999(2) $230,000 $ 70,000 $ 0 22,600 $ 51,681
Senior Vice President, 1999(3) $204,504 $ 70,000 $ 0 52,500(5) $ 32,726
Public Affairs 1998 $209,868 $ 68,000 $ 0 0 $ 41,745
1997 $111,174(6) $ 55,000 $ 0 50,000 $ 3,463
</TABLE>
__________

(1) As permitted by rules established by the Commission, no amounts are
shown with respect to certain "perquisites" where such amounts do not
exceed the lesser of either $50,000 or 10% of the total of annual
salary and bonus.

(2) New fiscal year ended December 31, 1999.

(3) Fiscal year ended August 31, 1999. Amounts reflect compensation paid
to the Named Executive Officers by Leap after the September 23, 1998
spin-off from Qualcomm, representing approximately eleven months of
the prior fiscal year ended August 31, 1999.

(4) In December 1995, Leonard C. Stephens joined Qualcomm as Vice
President of Human Resources. Qualcomm made payments related to his
relocation as shown above and in fiscal 1998 also reimbursed Mr.
Stephens $50,705 for income taxes arising from the relocation payment.

(5) In connection with the spin-off of Leap by Qualcomm in September 1998,
Leap was contractually obligated to issue options to purchase Leap
Common Stock to the holders of outstanding options to

85
<PAGE>

purchase Qualcomm common stock (the "Distribution Options"). This
arrangement was made to preserve the value of the outstanding Qualcomm
options at the time of the spin-off. Distribution Options granted to
the Named Executive Officers were 91,000 shares to Mr. White; 15,000
shares to Mr. Bernard; 8,000 shares to Mr. Hoffmann; 6,000 shares to
Mr. Stephens; and 12,500 shares to Mr. Pegg.

(6) Mr. Pegg joined Qualcomm in March 1997. If he had been employed by
Qualcomm during the entire 1997 fiscal year at the same annual base
salary rate, his salary for fiscal 1997 would have been $212,000.

(7) Includes matching 401(k) contributions, executive benefits payments,
executive retirement stock matching and financial planning services as
follows:

Matching Executive Executive Financial Total
401(k) Benefits Retirement Planning Other
Name Year Contributions Payments Contributions(3) Services Compensation
---- ------ ---------------- --------- ---------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Harvey P. White................... 1999(1) $ 4,800 $ 6,971 $50,000 $ 0 $684,331(4)
1999(2) $ 4,615 $ 1,850 $47,077 $16,640 $273,222(5)
1998 $ 2,313 $ 2,520 $48,919 $38,070 $108,902(6)
1997 $ 2,145 $ 2,520 $32,346 $ 0 $ 37,011

Thomas J. Bernard................. 1999(1) $ 4,800 $ 9,161 $39,938 $ 0 $ 59,334
1999(2) $ 3,269 $14,596 $17,870 $10,616 $ 46,351
1998 $ 2,659 $ 4,270 $26,532 $ 1,084 $ 34,545
1997 $ 1,816 $ 4,270 $ 0 $ 0 $ 6,086

James E. Hoffmann................. 1999(1) $ 4,800 $ 3,508 $ 8,000 $ 0 $ 16,308
1999(2) $ 2,032 $ 3,187 $ 0 $ 0 $ 5,219
1998 $ 2,659 $ 0 $ 8,916 $ 2,324 $ 13,899
1997 $ 2,145 $ 0 $ 7,903 $ 0 $ 10,048

Leonard C. Stephens............... 1999(1) $ 4,800 $ 8,955 $ 8,000 $ 2,240 $ 23,995
1999(2) $ 4,182 $ 7,042 $ 0 $ 2,240 $ 13,464
1998 $ 2,258 $ 0 $ 0 $ 0 $ 2,258
1997 $ 1,816 $ 0 $ 0 $ 0 $ 1,816

Daniel O. Pegg.................... 1999(1) $ 4,800 $19,033 $25,000 $ 1,559 $ 51,681
1999(2) $ 3,269 $10,796 $17,559 $ 1,102 $ 32,726
1998 $14,048 $ 4,475 $ 9,174 $14,048 $ 41,745
1997 $ 0 $ 0 $ 3,463 $ 0 $ 3,463
</TABLE>
__________

(1) New fiscal year ended December 31, 1999.

(2) Fiscal year ended August 31, 1999.

(3) Leap has a voluntary retirement plan that allows eligible executives to
defer up to 100% of their income on a pre-tax basis. The participants
receive a 50% company stock match on a maximum deferral of 15% of income
payable only upon eligible retirement. Participants become fully vested in
the stock benefit at age 65, with partial vesting beginning after the
participant reaches the age of 61 and has at least three years of
employment with Leap or has participated in the plan for more than ten
years. The employee contributions and the stock benefit are unsecured and
subject to the general creditors of Leap. At December 31, 1999, 5,848
shares were vested on behalf of Harvey P. White, 2,025 shares were vested
on behalf of Thomas J. Bernard, 1,990 shares have been issued but have not
yet vested on behalf of Daniel O. Pegg, 431 shares have been issued but
have not vested on behalf of James E. Hoffmann and 279 shares have been
issued but have not vested on behalf of Leonard C. Stephens.

86
<PAGE>

(4) Also includes $622,560, the dollar value of the benefits of premiums paid
for a split-dollar life insurance policy (unrelated to term life insurance
coverage) (the "Split-Dollar Insurance") reflecting the present value of
the economic benefit of the premiums paid by Leap during the twelve months
ended December 31, 1999.

(5) Also includes $203,040, the dollar value of the benefits of premiums paid
for the Split-Dollar Insurance reflecting the present value of the
economic benefit of the premiums paid by Leap during the twelve months
ended August 31, 1999.

(6) Also includes $17,080, the dollar value of the benefit of premiums paid
for the Split Dollar Insurance reflecting the present value of the
economic benefit of the premiums paid by Qualcomm during its 1998 fiscal
year.

The following table shows specified information with respect to options to
purchase Leap common stock granted to the Named Executive Officers during the
twelve months ended December 31, 1999, including option grants to purchase
Cricket Communications Holdings, Inc. common stock, which were converted into
options to purchase Leap common stock in connection with the merger of Cricket
Communications Holdings into a wholly-owned subsidiary of Leap in June 2000.

Option Grants in Last Fiscal Year

<TABLE>
<CAPTION>
Number of % of Total
Securities Options Granted Potential Realizable Value
Underlying To at Assumed Annual Rates of
Options Company Stock Price Appreciation for
Granted Employees in Exercise Expiration Option Term(2)
----------------------------------
Name (#)(1) Fiscal Year Price Date 5% 10%
------------------------------------- ------- --------------- -------- ---------- ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Harvey P. White...................... 150,000 10.51% $ 19.25 06/22/09 $ 1,815,304.56 $ 4,599,975.94
47,250(3) 3.31% $ 12.70 09/23/09 $ 1,256,848.76 $ 2,356,388.91

Thomas J. Bernard.................... 90,000 6.31% $ 19.25 06/22/09 $ 1,089,182.74 $ 2,759,985.56
23,625(3) 1.66% $ 12.70 09/23/09 $ 628,424.38 $ 1,178,194.45

James E. Hoffmann.................... 30,000 2.10% $ 19.25 06/22/09 $ 363,060.91 $ 919,995.19
18,900(3) 1.32% $ 12.70 09/23/09 $ 502,739.50 $ 942,555.56

Leonard C. Stephens.................. 30,000 2.10% $ 19.25 06/22/09 $ 363,060.91 $ 919,995.19
18,900(3) 1.32% $ 12.70 09/23/09 $ 502,739.50 $ 942,555.56

Daniel O. Pegg....................... 10,000 0.70% $ 19.25 06/22/09 $ 121,020.30 $ 306,665.06
12,600(3) 0.88% $ 12.70 09/23/09 $ 335,159.67 $ 628,370.38
</TABLE>
__________

(1) Options granted by Leap to executive officers in its fiscal year ending
December 31, 1999 become exercisable in equal installments on the first
through fifth anniversaries of the date of grant.

(2) Calculated on the assumption that the market value of the underlying Common
Stock increases at the stated values, compounded annually. Options granted
under Leap's 1998 Stock Option Plan generally have a maximum term of ten
years. The total appreciation of the options over their ten year terms at 5%
and 10% is 63% and 158%, respectively.

(3) Represents options to purchase Cricket Communications Holdings common stock
converted into options to purchase Leap common stock in connection with the
merger of Cricket Communications Holdings into a wholly-owned subsidiary of
Leap in June 2000, whereby each issued and outstanding share of Cricket
Communications Holdings not held by Leap was converted into the right to
receive 0.315 of a fully paid and nonassessable share of Leap Common Stock.
Leap also assumed all unexpired and unexercised Cricket Communications
Holdings stock options outstanding at the time of

87
<PAGE>

the merger, whether vested or unvested, which upon conversion amounted to
options to purchase 407,784 shares of Leap common stock.

Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values

The following table sets forth certain information with respect to the
exercise of options to purchase Common Stock of Leap during the twelve months
ended December 31, 1999, and the unexercised options held and the value thereof
at that date, for each of the Named Executive Officers.

<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Fiscal Year-End Options at Fiscal Year-End
Shares Value (#) ($)(1)
Acquired on Realized -------------------------------- ------------------------------------
Name Exercise ($) Exercisable Unexercisable Exercisable Unexercisable
---------------------------------- ----------- ------------ --------------- -------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Harvey P. White................... 11,000 $ 159,453 54,950 380,550 $ 4,137,477 $ 6,253,214
Thomas J. Bernard................. 6,000 $ 10,500 16,500 157,500 $ 1,243,710 $ 10,421,250
James E. Hoffmann................. 0 $ 0 15,700 67,300 $ 1,187,888 $ 4,590,597
Daniel O. Pegg.................... 0 $ 0 11,000 41,500 $ 818,920 $ 2,952,930
Leonard C. Stephens............... 2,100 $ 28,167 9,200 64,700 $ 693,132 $ 4,393,108
</TABLE>
__________

(1) Represents the closing price per share of the underlying shares on the last
trading day of the year ended December 31, 1999 less the option exercise
price multiplied by the number of shares. The closing value per share was
$78.50 on the last trading day of the year as reported on the Nasdaq
National Market.

Employment Agreement

Leap and Ms. Swenson entered into an employment offer letter dated June 11,
1999 which provides that Ms. Swenson will serve as President of Leap. Ms.
Swenson currently serves as President, Chief Operating Officer and Director of
Leap and Chief Executive Officer of Cricket Communications. Under the letter,
Ms. Swenson is entitled to an annual salary of $400,000 and, beginning with
fiscal 1999, an annual bonus of up to 60% of her base salary. In connection with
the letter, Ms. Swenson received an option under Leap's option plan to acquire
250,000 shares of Leap common stock at a price of $19.00 per share. The option
vests at the rate of 20% per year upon each anniversary of the grant date. Under
the letter, Ms. Swenson also received an option to purchase 350,000 shares of
Cricket Communications Holdings, Inc. common stock at a price of $2.00 per share
(which were converted into options to purchase 110,250 shares of Leap common
stock at a price of $6.35 per share upon the merger of Cricket Communications
Holdings with a subsidiary of Leap), that will become fully vested after five
years from the grant date. Under the letter, Ms. Swenson is eligible to
participate in Leap's executive retirement plan and is also entitled to
comprehensive benefits. The letter includes a special termination provision that
requires Leap to pay to Ms. Swenson 12 months base pay if her employment is
terminated for other than gross misconduct or gross neglect of duty within 12
months of her date of hire. If Ms. Swenson is terminated for other than gross
misconduct or gross neglect of duty within 13 to 24 months of her date of hire,
Leap is required to make payment to Ms. Swenson equal to nine months of her base
pay.

88
<PAGE>

Executive Officer Deferred Stock Plan

In December 1999, Leap established an Executive Officer Deferred Stock Plan
that provides for mandatory deferral of 25% and voluntary deferral of up to 75%
of executive officer bonuses. Bonus deferrals are converted into share units
credited to the participant's account, with the number of share units calculated
by dividing the deferred bonus amount by the fair market value of Leap's common
stock on the bonus payday. Share units represent the right to receive shares of
Leap's common stock in accordance with the plan. Leap will also credit to a
matching account that number of shares units equal to 20% of the share units
credited to the participant's accounts. Matching share units vest ratably over
three years on each anniversary date of the applicable bonus payday. Leap has
reserved 25,000 shares of its common stock for issuance under the plan.

Compensation of Directors

Directors of Leap do not receive any compensation for their services as
director except that each non-employee director receives an option to purchase
20,000 shares of Leap Common Stock when he or she first serves as a non-employee
director and an option to purchase 10,000 additional shares of Leap Common Stock
at the time of each subsequent annual meeting that occurs while he or she
continues to serve as a non-employee director. Commencing in 2001, a director
will also receive an additional option to purchase 10,000 shares of Leap common
stock for each year during which such director serves as chair of either the
Audit Committee or Compensation Committee.

The exercise price for each option is the fair market value of Leap's Common
Stock on the date the option is granted. Each option becomes exercisable over
five years according to the following schedule: as long as the optionee
continues to serve as a non-employee director, employee or consultant to Leap,
20% of the shares subject to the option first become exercisable on each of the
first five anniversaries of the date of grant. Each option has a term of 10
years, provided that the options terminate 30 days after the optionee ceases to
be a non-employee director, employee or consultant to Leap. Special exercise and
termination rules apply if the optionee's relationship with Leap is terminated
as a result of retirement at age 70 after at least nine years of service on the
Board, permanent and total disability, or death.

Leap also reimburses directors for their travel expenses incurred in
connection with attendance at Board and Board committee meetings.

Compensation Committee Interlocks and Insider Participation

The current members of Leap's Compensation Committee are Messrs. Dynes and
Moores. During the fiscal year ended December 31, 1999, Messrs. Burillo, Jarvis,
Targoff and Williams also served at various times as members of the
Compensation Committee.

Prior to the spin-off of Leap from Qualcomm, Messrs. Jarvis and Williams
worked with Qualcomm to develop the "Cricket(R)" unlimited local calling
strategy that Leap has adopted and refined for use in domestic wireless markets.
Messrs. Jarvis and Williams are also directors of Cricket Communications
Holdings, Inc., a subsidiary of Leap that is implementing the Cricket strategy.
In June 1999, Cricket Communications Holdings granted Messrs. Jarvis and
Williams options to purchase 795,000 and 410,000 shares, respectively, of its
common stock, exercisable at $1.00 per share. Messrs. Jarvis and Williams
exercised these options in full and as a result they owned approximately 1.5%
and 0.8%, respectively, of the outstanding common stock of Cricket
Communications Holdings.

Mr. Jarvis fully exercised his Cricket Communications Holdings stock options
in July 1999. Upon exercise, Mr. Jarvis paid $346,334 in cash and issued to
Cricket Communications Holdings a promissory

89
<PAGE>

note for the remaining balance of $448,666. The promissory note is secured by
498,666 shares of Cricket Communications Holdings common stock. The note accrues
interest at a rate of 9% per annum, compounded annually, on the outstanding
balance of the loan. The loan matures on August 31, 2000.

Mr. Williams fully exercised his Cricket Communications Holdings stock options
in July 1999 and paid to Cricket Communications Holdings the exercise price of
$410,000 in cash.

In December 1999, Mr. Jarvis and Mr. Williams and Michael B. Targoff, also a
director of Leap, purchased 121,483, 63,700 and 166,667 shares of Cricket
Communications Holdings, respectively, at a price of $6.00 per share. The shares
were acquired in exchange for issuance of secured demand promissory notes issued
to Cricket Communications Holdings by Messrs. Jarvis, Williams and Targoff on
the amounts of $728,898, $382,200 and $1,000,002, respectively. The promissory
notes have been paid in full and were secured by the shares and accrued interest
at the rate of 10% per annum.

In connection with the merger of Cricket Communications Holdings into a
wholly-owned subsidiary of Leap in June 2000, each issued and outstanding share
of Cricket Communications Holdings not held by Leap was converted into the right
to receive 0.315 of a fully paid and nonassessable share of Leap's Common Stock.

As previously disclosed, in late September 1998, Leap provided a $17.5 million
loan to Pegaso Comunicaciones y Servicios, S.A. de C.V. ("Pegaso
Comunicaciones"), a Mexican company 99%-owned by Alejandro Burillo Azcarraga, a
Director of Leap and a member of the Board's Compensation Committee. The
purposes of this loan were to facilitate investment by Pegaso Comunicaciones in
Pegaso Telecomunicaciones, S.A. de C.V. ("Pegaso"), a joint venture in which
Leap has an interest, and to ensure that the investors in Pegaso made all
capital contributions to Pegaso that were required for the acquisition of
certain Mexican telecommunications licenses on September 30, 1998. The Pegaso
Loan was paid in full, as scheduled, in two payments of $7.5 million and $10
million made in October 1998 and December 1998, respectively. Leap earned
interest at the rate of 13% per annum on the loan to Pegaso Comunicaciones.

In April 1999, Leap entered into an agreement with Pegaso to provide it with
network management and operations services for five years, subject to earlier
termination in accordance with the terms of the agreement. Leap generally
subcontracted these services to a subsidiary of an international
telecommunications company. From the September 23, 1998 spin-off of Leap until
April 1999, Leap also provided management and operations services to Pegaso
through a subsidiary of the international telecommunications company. In fiscal
1999, Pegaso paid Leap $28.2 million for services plus related expenses under
these arrangements. Mr. Burillo and his affiliates own an interest of
approximately 14.6% in Pegaso. Leap owns an interest of approximately 20.1% in
Pegaso.

90
<PAGE>

Item 12. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth, as of October 20, 2000, information with
respect to the beneficial holdings of each director, the Chief Executive Officer
and the four most highly-paid executive officers during the year ended December
31, 1999, and all of Leap's executive officers and directors as a group, as well
as each of Leap's stockholders who, based on its records, was known to Leap to
be the beneficial owner, as defined in Rule 13d-3 under the Securities Exchange
Act of 1934, of more than 5% of its common stock.

<TABLE>
<CAPTION>
Beneficial Ownership (1)
--------------------------------------
Number of Percent of
Directors, Officers and 5% Stockholders Shares (2) Total
--------------------------------------- --------------------------------------
<S> <C> <C>
Qualcomm Incorporated (3) 4,500,000 14.3%
Harvey P. White (4)(5)(10) 656,626 2.4
Thomas J. Bernard (5)(6)(10) 93,232 *
James E. Hoffmann (5)(7)(10) 50,165 *
Daniel O. Pegg (5)(8) 30,816 *
Leonard C. Stephens (5)(10) 49,274 *
Scot B. Jarvis (5)(9) 301,392 1.1
Alejandro Burillo Azcarraga (5) 12,000 *
Jeffrey P. Williams (5) 161,215 *
Robert C. Dynes (5) 6,000 *
John J. Moores (5) 6,000 *
Michael B. Targoff (5) 58,500 *
Anthony R. Chase (11) 205,056 *
Jill E. Barad 0 *
All Officers and Directors as a group (16 persons) 1,809,910 6.7%
</TABLE>

__________

* Less than one percent.

(1) This table is based upon information supplied by officers, directors and
principal stockholders of Leap and by Schedules 13D and 13G filed with the
Commission. Unless otherwise indicated in the footnotes to this table and
subject to marital property laws where applicable, each of the stockholders
named in this table has sole voting and investment power with respect to the
shares indicated as beneficially owned and has a business address of Leap
Wireless International, Inc., 10307 Pacific Center Court, San Diego,
California 92121. Applicable percentages are based on 26,869,840 shares of
Leap Common Stock outstanding, adjusted as required by rules promulgated by
the Commission.

(2) In addition to shares held in the individual's sole name, this column
includes shares held by the spouse and other members of the named person's
immediate household who share that household with the named person, and
shares held in family trusts.

(3) Consists entirely of the right to purchase shares of Leap Common Stock for
approximately $6.11 per share, or an aggregate purchase price of
approximately $27.5 million, under a warrant. The warrant is fully
exercisable and expires in September 2008. On a fully diluted basis, as of
October 20, 2000, Qualcomm would own approximately 9.6% of Leap Common Stock
upon exercise of the warrant. This table does not include warrants to
purchase approximately 771,450 shares of Common Stock at an exercise price
of $96.80 per share which Qualcomm purchased in our February 2000 units
offering.
91
<PAGE>

Such warrants are not exercisable until February 23, 2001. Qualcomm's
business address is 5775 Morehouse Dr., San Diego, California 92121.

(4) Includes 2,500 shares held in a foundation of which Mr. White disclaims
beneficial ownership. Also includes 357,429 shares held in family trusts,
7,500 shares held in a family limited partnership, 250 shares held in a
charitable remainder trust, 78,765 shares held in a family trust for the
benefit of grandchildren and 60,032 shares held in trusts for the benefit
of relatives.

(5) Includes shares issuable upon exercise of options exercisable within 60
days of October 20, 2000 as follows: Mr. Bernard, 52,500 shares; Mr.
Burillo, 6,000 shares; Mr. Chase, 1,890 shares; Mr. Dynes, 6,000 shares;
Mr. Hoffmann, 31,450 shares; Mr. Jarvis, 12,000 shares; Mr. Moores, 6,000
shares; Mr. Pegg, 24,020 shares; Mr. Stephens, 25,150 shares; Mr. Targoff,
6,000 shares; Mr. White, 150,150 shares; and Mr. Williams, 12,000 shares.

(6) Includes 5,710 shares held by Mr. Bernard's spouse.

(7) Includes 2,500 shares held in a custodial account for the benefit of Mr.
Hoffmann's spouse and 16,215 shares held in a family trust.

(8) Includes 5,000 shares held by a family trust, 525 shares held in a
custodial account for the benefit of Mr. Pegg's spouse and 25 shares held
for the benefit of Mr. Pegg's minor son.

(9) Includes 50 shares held in an IRA account and 150 shares held for the
benefit of Mr. Jarvis' children.

(10) Includes shares subject to vesting 20% per year over a five-year period
commencing September 24, 1999 as follows: Mr. White, 47,250 shares; Mr.
Bernard, 23,625 shares; Mr. Hoffmann, 7,560 shares; and Mr. Stephens,
18,900 shares.

(11) Includes 202,566 shares issuable upon exercise of a warrant held by Chase
Telecommunications Holdings, Inc., a company through which Mr. Chase, by
virtue of his position as an officer and director, has the power to vote
and direct the disposition of such shares. Mr. Chase holds a 41.25%
ownership interest in Chase Telecommunications Holdings, Inc. and disclaims
beneficial ownership of all but 83,558 of the 202,566 shares issuable upon
exercise of the warrant.

Item 13. Certain Relationships and Related Transactions

Transactions with Directors

Before the spin-off of Leap from Qualcomm, Scot B. Jarvis and Jeffrey P.
Williams, two of our directors, worked with Qualcomm to develop the Cricket
unlimited local calling strategy that Leap has adopted and refined for use in
domestic wireless markets. Messrs. Jarvis and Williams are also directors of
Cricket Communications Holdings, Inc., a subsidiary of Leap that is implementing
the Cricket strategy. In June 1999, Cricket Communications Holdings granted
Messrs. Jarvis and Williams options to purchase 795,000 and 410,000 shares,
respectively, of its common stock, exercisable at $1.00 per share. Messrs.
Jarvis and Williams have exercised these options in full, and as a result they
own approximately 1.5% and 0.8%, respectively, of the outstanding common stock
of Cricket Communications Holdings.

Mr. Jarvis fully exercised his Cricket Communications Holdings stock options
in July 1999. Upon exercise, Mr. Jarvis paid $346,334 in cash and issued to
Cricket Communications Holdings a promissory note for the remaining balance of
$448,666. The promissory note is secured by 498,666 shares of Cricket

92
<PAGE>

Communications Holdings common stock. The note accrues interest at a rate of 9%
per annum, compounded annually, on the outstanding balance of the loan. The loan
was paid in full on August 31, 2000.

Mr. Williams fully exercised his Cricket Communications Holdings stock options
in July 1999 and paid to Cricket Communications the exercise price of $410,000
in cash.

In December 1999, Mr. Jarvis and Mr. Williams and Michael B. Targoff, also a
director of Leap, purchased 121,483, 63,700, and 166,667 shares of Cricket
Communications Holdings, respectively, at a price of $6.00 per share. The shares
were acquired in exchange for issuance of demand promissory notes issued to
Cricket Communications Holdings by Messrs. Jarvis, Williams and Targoff in the
amounts of $728,898, $382,200 and $1,000,002, respectively. The promissory notes
are secured by the shares and accrue interest at the rate of 10% per annum.

In connection with the merger of Cricket Communications Holdings into a
wholly-owned subsidiary of Leap, each issued and outstanding share of Cricket
Communications Holdings not held by Leap was converted into the right to receive
0.315 of a fully-paid and nonassessable share of Leap common stock.

In late September 1998, we provided a $17.5 million loan to Pegaso
Comunicaciones y Servicios, S.A. de C.V., a Mexican company 99%-owned by
Alejandro Burillo Azcarraga, one of our directors and a member of the board's
compensation committee. The purposes of this loan were to facilitate investment
by Pegaso Comunicaciones in Pegaso, a joint venture in which we have an
interest, and to ensure that the investors in Pegaso made all capital
contributions to Pegaso that were required for the acquisition of certain
Mexican telecommunications licenses on September 30, 1998. This loan was paid in
full, as scheduled, in two payments of $7.5 million and $10 million made in
October 1998 and December 1998, respectively. We earned interest at the rate of
13% per annum on the loan to Pegaso Comunicaciones.

In April 1999, we entered into an agreement with Pegaso to provide it with
network management and operations services for five years, subject to earlier
termination in accordance with the terms of the agreement. We generally
subcontracted these services to a subsidiary of an international
telecommunications company. From the September 23, 1998 spin-off of Leap until
April 1999, we also provided management and operations services to Pegaso
through a subsidiary of the international telecommunications company. In the
year ended August 31, 1999, Pegaso paid us $28.2 million for services plus
related expenses under these arrangements. Mr. Burillo is a director of Leap and
he and his affiliates own an interest of approximately 14.6% in Pegaso. We own
an interest of approximately 20.1% in Pegaso.

In March 2000, Leap acquired substantially all of the assets of Chase
Telecommunications Holdings, Inc., a company partially owned and controlled by
Mr. Chase. As partial consideration of that acquisition, (i) Mr. Chase entered
into a Consulting Agreement with a wholly-owned subsidiary of Leap pursuant to
which Mr. Chase will receive $250,000 per year for 5 years and was granted
options to purchase 9,450 shares of Leap Common Stock, (ii) Chase
Telecommunications Holdings, Inc. received a warrant to purchase 202,566 shares
of Leap Common Stock for an aggregate exercise price of $1,000,000, and (iii)
Chase Telecommunications Holdings, Inc. received a contingent earn-out payment
of up to $41.0 million (plus certain expenses) based on the earnings of the
business acquired from Chase Telecommunications Holdings, Inc. during the fifth
full year following the closing of the acquisition.

Transactions with Qualcomm

Leap was formed as a Delaware corporation in June 1998 as a subsidiary of
Qualcomm. In September 1999, Qualcomm distributed all of the common stock of
Leap to Qualcomm's stockholders as a taxable dividend. To transfer the Leap
business from Qualcomm to us, Qualcomm entered into various agreements with us
that are described below. The agreements have been amended from time to time,
including changes required by the FCC as a condition to allowing us to acquire
specific wireless licenses. In May 1999, Qualcomm sold its network
infrastructure division to Ericsson. In connection with that sale, Qualcomm
transferred to Ericsson its rights to sell network infrastructure equipment to
Leap and its subsidiaries and ventures. In February 2000, Qualcomm sold its
subscriber division to Kyocera. In connection with that sale, Qualcomm
transferred to Kyocera its rights to sell customer equipment to Leap and its
subsidiaries and ventures.

Qualcomm purchased $150.0 million (original purchase price) of senior discount
units in our units offering in February 2000. We used a portion of the net
proceeds from our February 2000 equity offering to repay all outstanding
borrowings under our credit agreement with Qualcomm and terminated the credit
agreement. As a result of Qualcomm's participation in the units offering,
however, Qualcomm remains a

93
<PAGE>

significant lender to us. Our relationship with Qualcomm may also create
conflicts of interest between us and Qualcomm. In addition, Qualcomm is not
restricted from competing with us or directly pursuing wireless
telecommunications businesses or interests which would also be attractive to us.

Separation and Distribution Agreement

Immediately before the distribution of Leap common stock to Qualcomm's
stockholders, we entered into the Separation and Distribution Agreement with
Qualcomm. The Separation and Distribution Agreement governed the principal
transactions required to effect the separation of the companies and the
distribution, and other agreements governing the relationship between the
parties.

To effect the separation of the companies, Qualcomm transferred some of its
businesses and ventures to us. Qualcomm also contributed to us the following:

. $10 million in cash;

. Qualcomm's right to receive payment of approximately $113 million of debt
from Leap's operating companies;

. Qualcomm's rights under specific agreements relating to our business and
ventures; and

. other assets.

Qualcomm's performance as an equipment vendor was not a condition of payment
to us under the notes and other debt transferred. We did not receive any
intellectual property in connection with the separation of the companies, and
Qualcomm retained all rights not expressly transferred regarding agreements with
our subsidiaries and ventures.

In connection with the transfer of assets and rights by Qualcomm, we issued a
warrant to Qualcomm to purchase 5,500,000 shares of our common stock for $6.11
per share. In March 1999, in exchange for consideration valued at $5.4 million,
Qualcomm agreed to amend the warrant to reduce the number of shares which may be
acquired upon exercise of the warrant to 4,500,000. The warrant is currently
exercisable and remains exercisable until 2008. Qualcomm has agreed that it will
not exercise the warrant in a manner that would cause Qualcomm and its officers
and directors to collectively hold more than 15% of our outstanding common
stock.

In the Separation and Distribution Agreement, we also assumed some liabilities
of Qualcomm, including:

. funding obligations to our subsidiaries and ventures totaling approximately
$75 million;

. Qualcomm's rights and obligations to manage our subsidiaries and ventures;
and

. $2 million of accrued liabilities regarding our employees.

The Separation and Distribution Agreement provides for:

. releases of claims of each party against the other;

. the allocation of potential liabilities; and

94
<PAGE>

. indemnification rights between the parties.

The Separation and Distribution Agreement also provides that, in international
markets, we will deploy, and will cause our affiliates to deploy, only systems
using cdmaOne until January 1, 2004.

CdmaOne is the original standard for fixed or mobile wireless communications
systems based on or derived from Qualcomm's CDMA technology and successor
standards that Qualcomm has adopted. The Telecommunications Industry Association
and other recognized international standards bodies have adopted cdmaOne as an
industry standard. We also agreed that, in international markets, we would
invest only in companies using cdmaOne systems until January 1, 2004.

Under the Separation and Distribution Agreement, we also granted Qualcomm a
non-exclusive, royalty-free license to any patent rights developed by us or our
affiliates. In addition, under the Separation and Distribution Agreement, we
granted Qualcomm a right of first refusal for a period of three years with
respect to proposed transfers by us of our investments and joint venture
interests. We further agreed to take an active role in the management of
companies in which we hold stock or joint venture interests. The parties also
generally agreed that, for a period of three years following our spin-off from
Qualcomm, neither party would solicit or hire employees of the other.

Master Agreement Regarding Equipment Acquisition

The Master Agreement Regarding Equipment Acquisition contains our obligations
regarding the purchase and sale of terrestrial-based cdmaOne infrastructure and
customer equipment. As a result of Qualcomm's sale of its network infrastructure
division to Ericsson, we owe some purchase obligations to Ericsson with respect
to network equipment and, as a result of the sale of Qualcomm's subscriber
division to Kyocera, with respect to customer equipment. Under the Master
Agreement Regarding Equipment Acquisition, we generally agreed that:

For five years, we will purchase at least 50% of our requirements for
infrastructure equipment from Ericsson and 50% of our requirements for customer
equipment from Kyocera.

For each initial investment by us made before October 2002 in a wireless
telecommunication entity operating in the U.S., we will require the U.S.
operator to enter into an equipment requirements agreement with Kyocera and
Ericsson. The equipment requirements agreement will require the U.S. operator to
purchase at least 50% of its requirements for infrastructure equipment from
Ericsson and 50% of its requirements for customer equipment from Kyocera, in
each case for a five year period.

For each investment by us in a U.S. operator of wireless communications made
after October 2002, we will attempt to require the U.S. operator to provide
Ericsson and Kyocera with an opportunity to bid on its requirements for
infrastructure equipment and customer equipment, respectively. We also will
encourage the U.S. operator to acquire equipment from Ericsson and Kyocera.

Leap and the U.S. companies in which it invests must comply with these
requirements only if Kyocera or Ericsson, as applicable, offers competitive
equipment on competitive terms, and its bid to sell equipment and related
services is less than or equal to the lowest competing bid that Leap or such
companies would accept; provided, however, until Kyocera has received contracts
from us and the companies in which we invest for at least $250 million of
customer equipment for use in the U.S., Leap and U.S. companies in which it
initially invests before 2002 must comply with these requirements if Kyocera's
bid is 110% or less than the lowest competing bid Leap or such other company
would accept.

95
<PAGE>

Under the terms of the agreement, because we have already received more than
$60 million in financing from parties other than Qualcomm, if we make an initial
investment in a wireless communications company operating outside of the U.S.,
we will seek to provide Kyocera and Ericsson with an opportunity to bid on the
foreign operator's infrastructure and customer equipment. We will also encourage
the foreign operator to acquire its equipment from Kyocera and Ericsson. The
obligations of all the foreign operators will depend on Kyocera and Ericsson
offering competitive equipment on competitive terms, including price.

All the obligations of Leap regarding equipment purchases under the Master
Agreement Regarding Equipment Acquisition will expire in September 2007. If Leap
attempts to acquire equipment on a "bundled" basis, then Ericsson and Kyocera
are entitled, in some cases, to respond separately to each portion of the
proposed bundled acquisition. If Leap does not attempt to acquire the equipment
on a competitive basis from multiple vendors, but instead decides to negotiate
exclusively with Ericsson or Kyocera, then Ericsson or Kyocera, as applicable,
will offer and sell the equipment to us on a "most favored pricing" basis.

Conversion Agreement

Under the Conversion Agreement, we agreed to issue up to 2,271,060 shares of
our common stock to the holders of the Trust Convertible Preferred Securities of
Qualcomm Financial Trust I, a wholly owned statutory business trust of Qualcomm,
upon the conversion of their securities. On March 6, 2000, Qualcomm issued a
call for the redemption of the remaining outstanding Trust Convertible Preferred
Securities, all of which have now been converted or redeemed. In sum, we issued
an aggregate of 2,268,732 shares of our common stock to the holders of the Trust
Convertible Preferred Securities under the Conversion Agreement. The remaining
2,328 shares reserved for issuance under the Conversion Agreement were not
issued as a result of cash payments in lieu of fractional shares that would have
been issued upon conversion of the Trust Convertible Preferred Securities and as
a result of redemptions by Qualcomm. Upon conversion of the Trust Convertible
Preferred Securities, Qualcomm received a benefit in the form of forgiveness of
debt, but we received no benefit or other consideration.

Deferred Payment Agreements with Smartcom

Smartcom entered into a Deferred Payment Agreement, as amended and restated,
with Qualcomm related to Smartcom's purchase of equipment, software and services
from Qualcomm. Under the terms of the Deferred Payment Agreement, Qualcomm
agreed to defer collection of principal amounts up to a maximum of $115.7
million, including capitalized interest. The obligations under the Deferred
Payment Agreement were secured by all of the assets of Smartcom. Inversiones had
agreed to pledge its shares in Smartcom as collateral for its guarantee of
Smartcom's obligations to Qualcomm under the agreement. The Deferred Payment
Agreement required Smartcom to meet certain financial and operating covenants,
including a debt to equity ratio and restrictions on Smartcom's ability to pay
dividends and to distribute assets. As a result, substantially all the net
assets of Smartcom were restricted from distribution to Leap. The deferred
payments bore interest at a rate equal to LIBOR plus 5.0% to 6.5% or a bank base
rate plus 4.0% to 5.5%, in each case with the specific rate based on specific
financial ratios. Accrued interest could be added to the outstanding principal
amount of the applicable borrowing until September 2001.

Amounts deferred under the agreement were to have been repaid by September
2006. In February 2000, Smartcom and Qualcomm entered into an
Equipment Credit Agreement related to Smartcom's equipment supply and service
agreements with a vendor. The Equipment Credit Agreement permitted up to $38.5
million of borrowings, including capitalized interest. The Equipment Credit
Agreement provided for financial and operating covenants similar to the Deferred
Payment Agreement. Borrowings under the

96
<PAGE>

Equipment Credit Agreement accrued interest at a rate equal to LIBOR plus 5.0%
to 7.0% or a bank base rate plus 4.0% to 6.0%, in each case with the specific
rate based on certain financial ratios. Principal payments were scheduled to
begin in March 2002 with a final maturity of September 2006. At May 31, 2000,
Smartcom had financed amounts totaling $16.3 million, including capitalized
interest, under the Equipment Credit Agreement.

In February 2000, Smartcom and Qualcomm entered into a Subscriber Deferred
Payment Agreement related to Smartcom's purchase of handsets and accessories and
test equipment from Qualcomm. Under the terms of the agreement, Qualcomm had
agreed to defer collection of amounts up to a maximum of $11.2 million,
including capitalized interest. The Subscriber Deferred Payment Agreement
provided for certain financial and operating covenants similar to the Deferred
Payment Agreement. Borrowings under the Subscriber Deferred Payment Agreement
accrued interest at a rate equal to LIBOR plus 3.5% to 5.0% or a bank base rate
plus 2.5% to 4.0%, in each case with the specific rate based on certain
financial ratios. Principal outstanding was due at maturity in September 2001.

At May 31, 2000, Smartcom had financed amounts totaling $11.2 million under
the Subscriber Deferred Payment Agreement.

In connection with our sale of Smartcom, we entered into a Waiver, Release and
Termination of Obligations with Qualcomm, Inversiones and Smartcom, whereunder
Qualcomm released us and Inversiones from our respective obligations under the
Deferred Payment Agreement, the Equipment Credit Agreement, the Subscriber
Deferred Payment Agreement and all other related agreements.

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

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

1. Financial Statements:

The financial statements of Leap listed below are set forth in Item 8
of this report:

Consolidated Balance Sheets at December 31, 1999 and August 31, 1999
and 1998

Consolidated Statements of Operations and Comprehensive Loss for the
period from September 1, 1999 to December 31, 1999 and for each of the
three years in the period ended August 31, 1999

Consolidated Statements of Cash Flows for the period from September 1,
1999 to December 31, 1999 and for each of the three years in the
period ended August 31, 1999

Consolidated Statements of Stockholders' Equity for the period from
September 1, 1999 to December 31, 1999 and for each of the three years
in the period ended August 31, 1999

Notes to Consolidated Financial Statements

Report of Independent Accountants

2. Financial Statement Schedules:

Report of Independent Accountants on Financial Statement Schedule

97
<PAGE>

Schedule I--Condensed Financial Information at December 31, 1999 and
August 31, 1999 and 1998, for the period from September 1, 1999 to
December 31, 1999 and for each of the three years in the period ended
August 31, 1999

All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements
or notes thereto.

3. Exhibits:

Exhibit No. Description of Exhibit
----------- ----------------------

2.1(16) Share Purchase Agreement, dated as of June 2, 2000 among Endesa
S.A., Leap Wireless International, Inc. and Inversiones Leap
Wireless Chile, S.A.
3.1.1(2) Amended and Restated Certificate of Incorporation of the
Registrant.
3.1.2(15) Certificate of Amendment of Amended and Restated Certificate of
Incorporation of the Registrant.
3.2(2) Amended and Restated Bylaws of the Registrant.
3.3(3) Form of Certificate of Designation of Series A Junior
Participating Preferred Stock of Registrant.
4.1(2) Form of Common Stock Certificate.
4.2.1(4) Letter, dated as of May 5, 1999, from Qualcomm Incorporated to
the Registrant.
4.2.2(5) Superceding Warrant, dated as of August 9, 1999, between the
Registrant and various officers and directors of Qualcomm
Incorporated.
4.2.3(5) Form of Voting Agreement, dated as of August 9, 1999, issued to
Qualcomm.
4.2.4(5) Amended and Restated Agreement Concerning Share Ownership, dated
as of August 4, 1999, between the Registrant and Qualcomm.
4.3.1(3) Rights Agreement, dated as of September 14, 1998, between the
Registrant and Harris Trust Company of California.
4.3.2(16) First Amendment to Rights Agreement, dated as of February 8,
2000, between Leap Wireless International, Inc. and Harris Trust
Company of California.
4.3.3(16) Second Amendment to Rights Agreement, dated as of March 30,
2000, between Leap Wireless International, Inc. and Harris Trust
Company of California.
4.4(1) Warrant Agreement, dated as of February 23, 2000, by and between
the Registrant and State Street Bank and Trust Company
(including Form of Warrant Certificate).
4.5(1) Warrant Registration Rights Agreement, dated as of February 23,
2000, by and between the Registrant and Morgan Stanley & Co.
Incorporated.
4.6(1) Trust Indenture, dated as of February 23, 2000, by and among the
Registrant, Cricket Communications Holdings, Inc. and State
Street Bank and Trust Company (including Forms of Notes).
4.7(1) Pledge Agreement, dated as of February 23, 2000, by and between
the Registrant and State Street Bank and Trust Company.
4.8(1) Registration Rights Agreement, dated February 23, 2000, by and
among the Registrant, Cricket Communications Holdings, Inc. and
Morgan Stanley & Co. Incorporated.
10.1(6) Separation and Distribution Agreement, dated as of September 23,
1998, between Qualcomm and the Registrant.
10.1.1(5) First Amendment to Separation and Distribution Agreement, dated
as of August 6, 1999, between the Registrant and Qualcomm.
10.2(6) Credit Agreement, dated as of September 23, 1998, between
Qualcomm and the Registrant.
10.3(6) Tax Matters Agreement, dated as of September 23, 1998, between
Qualcomm and the Registrant.
10.4(6) Interim Services Agreement, dated as of September 23, 1998,
between Qualcomm and

98
<PAGE>

Exhibit No. Description of Exhibit
----------- ----------------------
the Registrant.
10.5(6) Master Agreement Regarding Equipment Acquisition, dated as of
September 23, 1998, between Qualcomm and the Registrant.
10.5.1(5) First Amendment to Master Agreement Regarding Equipment
Procurement, dated as of August 6, 1999, between the Registrant
and Qualcomm.
10.6(6) Employee Benefits Agreement, dated as of September 23, 1998,
between Qualcomm and the Registrant.
10.7(6) Conversion Agreement, dated as of September 23, 1998, between
Qualcomm and the Registrant.
10.8(6) Assignment and Assumption Agreement, dated as of September 23,
1998, between Qualcomm and the Registrant.
10.9(7) 1998 Stock Option Plan, as amended through April 13, 1999.
10.10(2) Form of non-qualified/incentive stock option under the 1998
Stock Option Plan.
10.11(2) Form of non-qualified stock option under the 1998 Stock Option
Plan granted to Qualcomm option holders in connection with the
distribution of the Registrant's common stock.
10.12(2) Form of the Registrant's 1998 Non-Employee Directors' Stock
Option Plan.
10.13(2) Form of non-qualified stock option under the 1998 Non-Employee
Directors' Stock Option Plan.
10.14(2) Form of the Registrant's Employee Stock Purchase Plan.
10.15(2) Assignment and Assumption of Lease dated August 11, 1998 between
Qualcomm and Vaxa International, Inc.
10.16(2) Form of Indemnity Agreement to be entered into between the
Registrant and its directors and officers.
10.17(8) Loan Agreement, dated as of September 28, 1998, between Pegaso
Comunicaciones y Servicios, S.A. de C.V. and the Registrant.
10.18(8) Promissory Note, executed September 25, 1998, payable to the
Registrant by Pegaso Comunicaciones y Servicios, S.A. de C.V.
10.19(8) Pledge Agreement, dated September 28, 1998, by and among the
Guarantors, the Issuers and the Registrant.
10.20(9) Asset Purchase Agreement, dated December 24, 1998, by and among
Chase Telecommunications Holdings, Inc., Anthony Chase, Richard
McDugald and the Registrant.
10.21.1(10) Stock Purchase Agreement, dated April 12, 1999, by and among
Inversiones Leap Chile S.A., Telex-- Chile S.A., and Chilesat
S.A.
10.21.2(7) Novation and Assumption of Payment Obligation Agreement, dated
May 11, 1999, by and among Chilesat Telefonia Personal S.A.,
Inversiones Leap Chile S.A. and Chilesat S.A. (In Spanish and
accompanied by a translation in English).
10.22(5) Cricket Communications, Inc. 1999 Stock Option Plan (now known
as Cricket Communications Holdings, Inc.).
10.22.1(1) Amendment No. 1 to 1999 Stock Option Plan of Cricket
Communications, Inc. (now known as Cricket Communications
Holdings, Inc.).
10.23(5) Form of non-qualified/incentive stock option under the Cricket
Communications, Inc. 1999 Stock Option Plan (now known as
Cricket Communications Holdings, Inc.).

99
<PAGE>

Exhibit No. Description of Exhibit
----------- ----------------------
10.24(5) Employment offer letter to Susan G. Swenson from Registrant,
dated July 9, 1999.
10.25(11) System Equipment Purchase Agreement, dated September 20, 1999,
by and between Cricket Wireless Communications, Inc. and Lucent
Technologies, Inc. Portions of this exhibit (indicated by
asterisks) have been omitted pursuant to a request for
confidential treatment pursuant to Rule 406 under the Securities
Act of 1933 and Rule 24b-2 under the Securities Exchange Act of
1934.
10.26(11) Credit Agreement, dated as of September 29, 1999, among Cricket
Communications, Inc., Cricket Wireless Communications, Inc., the
Lenders party thereto, and Lucent Technologies, Inc., as
Administrative Agent. Portions of this exhibit (indicated by
asterisks) have been omitted pursuant to a request for
confidential treatment pursuant to Rule 406 under the Securities
Act of 1933 and Rule 24b-2 under the Securities Exchange Act of
1934.
10.26.1(11) Exhibit A-- Form of Borrower Pledge Agreement.
10.26.2(11) Exhibit B-- Form of Collateral Agency and Intercreditor
Agreement.
10.26.3(11) Exhibit C-- Form of Guarantee Agreement.
10.26.4(11) Exhibit D-- Form of Indemnity, Subrogation and Contribution
Agreement.
10.26.5(11) Exhibit E-- Form of Parent Agreement.
10.26.6(11) Exhibit F-- Form of Parent Pledge Agreement.
10.26.7(11) Exhibit G-- Form of Perfection Certificate.
10.26.8(11) Exhibit H-- Form of Security Agreement.
10.26.9(11) Exhibit I-- Form of Subordination Agreement.
10.26.10(1) First Amendment, dated as of November 24, 1999, to the Credit
Agreement, dated as of September 20, 1999, among Cricket
Communications, Inc., Cricket Wireless Communications, Inc., and
Lucent Technologies, Inc., as Administrative Agent. Portions of
this exhibit (indicated by asterisks) have been omitted pursuant
to a request for confidential treatment pursuant to Rule 24b-2
under the Securities Exchange Act of 1934.
10.26.11(1) Second Amendment, dated as of January 27, 2000, to the Credit
Agreement, dated as of September 20, 1999, among Cricket
Communications Holdings, Inc., Cricket Communications, Inc., the
lenders party thereto and Lucent Technologies, Inc., as
Administrative Agent. Portions of this exhibit (indicated by
asterisks) have been omitted pursuant to a request for
confidential treatment pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
10.26.12(1) First Amendment dated as of January 27, 2000, to the Parent
Agreement, dated as of September 17, 1999, between the
Registrant and Lucent Technologies, Inc., as Administrative
Agent.
10.27(12) Memorandum of Agreement, dated September 20 1999, by and between
Ericsson Wireless Communications Inc., the Registrant and
Cricket Wireless Communications, Inc. Portions of this exhibit
(indicated by asterisks) have been omitted pursuant to a request
for confidential treatment pursuant to Rule 406 under the
Securities Act of 1933 and Rule 24b-2 under the Securities
Exchange Act of 1934.
10.28(11) Second Amended and Restated Deferred Payment Agreement, dated
October 12, 1999, among Chilesat Telefonia Personal S.A.,
Inversiones Leap Chile S.A., and Qualcomm Incorporated, as
Vendor, Administrative Agent and Collateral Agent Subsidiaries
of the Registrant.

100
<PAGE>

Exhibit No. Description of Exhibit
---------- ----------------------

10.29.1(13) Executive Officer Deferred Stock Plan.

10.29.2(16) First Amendment to Executive Officer Deferred Stock Plan.

10.30(14) License Purchase Agreement, dated September 11, 1998, by and
between the Registrant and AirGate Wireless, L.L.C.

10.31(14) First Amendment to License Purchase Agreement, dated December
17, 1999, by and between Cricket Holdings, Inc. and AirGate
Wireless, L.L.C.

10.32(14) Agreement for Purchase and Sale of Licenses, dated January 7,
2000, by and between Radiofone PCS, L.L.C. and the Registrant.

10.33(15) 2000 Stock Option Plan.

21.1* Subsidiaries of the Registrant.

23.1* Consent of PricewaterhouseCoopers LLP, independent accountants.

27.1* Financial Data Schedule.

_______________
* Filed herewith.

(1) Filed as an exhibit to Leap's Quarterly Report on Form 10-Q for the
quarter ended February 29, 2000, as filed with the SEC on April 14, 2000,
and incorporated herein by reference.

(2) Filed as an exhibit to Leap's Registration Statement on Form 10, as
amended (File No. 0-29752), and incorporated herein by reference.

(3) Filed as an exhibit to Leap's Current Report on Form 8-K dated September
14, 1998, and incorporated herein by reference.

(4) Filed as an exhibit to Leap's Quarterly Report on Form 10-Q for the
quarter ended February 28, 1999, as filed with the SEC on April 14, 1999,
and incorporated herein by reference.

(5) Filed as an exhibit to Leap's Post-Effective Amendment No. 2 to
Registration Statement on Form S-1 (File No. 333-64459) dated August 10,
1999, and incorporated herein by reference.

(6) Filed as an exhibit to Leap's Amendment No. 1 to Registration Statement on
Form S-1 (File No. 333-64459) dated October 13, 1998, and incorporated
herein by reference.

(7) Filed as an exhibit to Leap's Quarterly Report on Form 10-Q for the
quarter ended May 31, 1999, as filed with the SEC on July 15, 1999, and
incorporated herein by reference.

(8) Filed as an exhibit to Leap's Annual Report on Form 10-K for the fiscal
year ended August 31, 1998, as filed with the SEC on November 30, 1998, as
amended, and incorporated herein by reference.

(9) Filed as an exhibit to Leap's Quarterly Report on Form 10-Q for the
quarter ended November 30, 1998, as filed with the SEC on January 14,
1999, and incorporated herein by reference.

(10) Filed as an exhibit to Leap's Current Report on Form 8-K dated May
4, 1999, and incorporated herein by reference.

(11) Filed as an exhibit to Leap's Annual Report on Form 10-K for the fiscal
year ended August 31, 1999, as filed with the SEC on October 20, 1999, as
amended, and incorporated herein by reference.

101
<PAGE>

(12) Filed as an exhibit to Leap's Amendment No. 1 to Annual Report on Form 10-
K/A for the fiscal year ended August 31, 1999, as filed with the SEC on
December 13, 1999, and incorporated herein by reference.

(13) Filed as an exhibit to Leap's Registration Statement on Form S-8 (File No.
333-94389) dated January 11, 2000, and incorporated herein by reference.

(14) Filed as an exhibit to Leap's Registration Statement on Form S-3 (File No.
333-93073) dated February 16, 2000, and incorporated herein by reference.

(15) Filed as an exhibit to Leap's Current Report on Form 8-K dated September
28, 2000, and incorporated herein by reference.

(16) Filed as an exhibit to Leap's Quarterly Report on Form 10-Q for the
quarter ended May 31, 2000, as filed with the SEC on July 17, 2000, and
incorporated herein by reference.

(b) Reports on Form 8-K

Leap did not file any reports on Form 8-K during the period from September
1, 1999 through December 31, 1999.

102
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

LEAP WIRELESS INTERNATIONAL, INC.
October 30, 2000
By: /s/ Harvey P. White
-------------------------------
Harvey P. White,
Chief Executive Officer and Director

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

Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Harvey P. White Chief Executive Officer and October 30, 2000
-------------------------------------------- Director
Harvey P. White (Principal Executive Officer)

/s/ Susan G. Swenson President, Chief Operating Officer October 30, 2000
-------------------------------------------- and Director
Susan G. Swenson

/s/ Thomas J. Bernard Vice Chairman, President - October 30, 2000
-------------------------------------------- International Business Division
Thomas J. Bernard and Director

/s/ Thomas D. Willardson Senior Vice President, Finance and October 30, 2000
-------------------------------------------- Treasurer
Thomas D. Willardson (Principal Financial Officer)

/s/ Stephen Dhanens Controller October 30, 2000
-------------------------------------------- (Principal Accounting Officer)
Stephen Dhanens

-------------------------------------------- Director October __, 2000
Alejandro Burillo Azcarraga

/s/ Jill E. Barad
-------------------------------------------- Director October 30, 2000
Jill E. Barad

-------------------------------------------- Director October __, 2000
Anthony R. Chase

/s/ Robert C. Dynes
-------------------------------------------- Director October 30, 2000
Robert C. Dynes

/s/ Scot B. Jarvis
-------------------------------------------- Director October 30, 2000
Scot B. Jarvis

/s/ John J. Moores
-------------------------------------------- Director October 30, 2000
John J. Moores

/s/ Michael B. Targoff
-------------------------------------------- Director October 30, 2000
Michael B. Targoff

/s/ Jeffrey P. Williams
-------------------------------------------- Director October 30, 2000
Jeffrey P. Williams
</TABLE>

<PAGE>

Report of Independent Accountants on
Financial Statement Schedule

To the Board of Directors and Stockholders
of Leap Wireless International, Inc.:

Our audits of the consolidated financial statements referred to in our report
dated October 30, 2000 appearing in this Transition Report on Form 10-K of Leap
Wireless International, Inc. also included an audit of the financial statement
schedule listed in Item 14(a)(2) of this Transition Report on Form 10-K. In our
opinion, this financial statement schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.

PricewaterhouseCoopers LLP

San Diego, California
October 30, 2000
<PAGE>

SCHEDULE I

Page 1 of 4

LEAP WIRELESS INTERNATIONAL, INC.

CONDENSED INFORMATION AS TO THE
FINANCIAL CONDITION OF THE REGISTRANT
(in thousands, except share data)

August 31,
December 31, -----------------------------------
1999 1999 1998
------------------ --------------- -------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents............................................. $ 35,713 $ 17,502 $ -
Restricted cash equivalents........................................... 20,550 - -
Accounts receivable................................................... 717 825 -
Other current assets.................................................. 2,967 55 -
--------- --------- --------
Total current assets............................................ 59,947 18,382 -
--------- --------- --------
Property and equipment, net........................................... 2,467 2,630 -
Investments in and loans receivable from subsidiaries................. 118,506 161,350 141,805
Intangible assets, net................................................ 18,920 18,920 6,838
Deposits and other assets............................................. 2,496 1,449 -
--------- --------- --------
Total assets.................................................... $ 202,336 $ 202,731 $148,643
========= ========= ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities.............................. $ 3,810 $ 11,620 $ 5,680
--------- --------- --------
Total current liabilities....................................... 3,810 11,620 5,680
--------- --------- --------
Long-term debt........................................................ 187,570 120,161 -
Other long-term liabilities........................................... 64 50 -
--------- --------- --------
Total liabilities............................................... 191,444 131,831 5,680
--------- --------- --------

Stockholders' equity:
Preferred stock - authorized 10,000,000 shares;
$.0001 par value, no shares issued and outstanding.............. - - -
Common stock - authorized 75,000,000 shares;
$.0001 par value, 20,039,556 shares issued and outstanding...... 2 2 -
Additional paid-in capital.......................................... 292,933 291,189 -
Former parent company's investment.................................. - - 197,598
Accumulated deficit................................................. (277,720) (216,896) (52,283)
Accumulated other comprehensive loss................................ (4,323) (3,395) (2,352)
--------- --------- --------
Total stockholders' equity...................................... 10,892 70,900 142,963
--------- --------- --------
Total liabilities and stockholders' equity...................... $ 202,336 $ 202,731 148,643
========= ========= ========
</TABLE>

See accompanying notes to condensed financial statements
<PAGE>

SCHEDULE I

Page 2 of 4

LEAP WIRELESS INTERNATIONAL, INC.

CONDENSED INFORMATION AS TO THE
RESULTS OF OPERATIONS AND COMPREHENSIVE LOSS
OF THE REGISTRANT
(in thousands, except per share data)

<TABLE>
<CAPTION>
Period from
September 1, 1999 to Year Ended August 31,
December 31, ----------------------------------
1999 1999 1998 1997
------------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
General and administrative expenses....................... $ (5,095) $ (17,567) $ (9,292) $(1,361)
------------ --------- -------- -------
Operating loss......................................... (5,095) (17,567) (9,292) (1,361)
Equity in net loss of subsidiaries........................ (62,351) (123,655) (38,284) (3,793)
Write-down of investments in subsidiaries................. - (27,242) - -
Interest income........................................... 1,022 960 843 -
Interest expense ......................................... (6,196) (6,102) - -
Gain on sale of wholly owned subsidiary................... - 9,097 - -
Other income (expense), net............................... (3,226) (104) - -
------------ --------- -------- -------
Net loss............................................... (75,846) (164,613) (46,733) (5,154)
Other comprehensive income (loss):
Foreign currency translation (losses) gains............. (928) (1,043) (2,412) 60
------------ --------- -------- -------
Comprehensive loss.................................... $ (76,774) $(165,656) $(49,145) $(5,094)
============ ========= ======== =======
Basic and diluted net loss per
common share............................................ $ (4.01) $ (9.19) $ (2.65) $ (0.29)
============ ========= ======== =======
Shares used to calculate basic and
diluted net loss per common share....................... 18,928 17,910 17,648 17,648
============ ========= ======== =======
</TABLE>

See accompanying notes to condensed financial statements

<PAGE>

SCHEDULE I

Page 3 of 4

LEAP WIRELESS INTERNATIONAL, INC.

CONDENSED INFORMATION AS TO THE
CASH FLOWS OF THE REGISTRANT
(in thousands)

<TABLE>
<CAPTION>
Period from
September 1, 1999 to Year Ended August 31,
December 31, ----------------------------------------------
1999 1999 1998 1997
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Net cash used in operating activities.................... $ (5,620) $ (17,286) $ (9,322) $ (1,193)
-------- --------- --------- --------

Investing activities:
Purchase of property and equipment..................... (50) (3,182) - -
Investments in and loans to subsidiaries............... (18,990) (186,707) (140,234) (46,000)
Loan receivable to related party....................... - (17,500) - -
Repayment of loan receivable from related party........ - 17,500 - -
Acquisition of subsidiary.............................. - - (564) -
Proceeds from sale of subsidiary....................... - 16,024 - -
Restricted cash equivalents............................ (20,500) - - -
-------- --------- --------- --------
Net cash used in investing activities.................... (39,540) (173,865) (140,798) (46,000)
-------- --------- --------- --------

Financing activities:
Borrowings under credit agreement...................... 61,650 128,584 - -
Repayment of borrowings under credit agreement......... - (17,500) - -
Issuance of common stock............................... 1,721 2,301 - -
Former parent company's investment..................... - 95,268 150,120 47,193
-------- --------- --------- --------
Net cash provided by financing activities................ 63,371 208,653 150,120 47,193
-------- --------- --------- --------

Net increase in cash and cash equivalents................ 18,211 17,502 - -
Cash and cash equivalents at beginning of period......... 17,502 - - -
-------- --------- --------- --------
Cash and cash equivalents at end of period............... $ 35,713 $ 17,502 $ - $ -
======== ========= ========= ========

Supplemental disclosure of non-cash investing
and financing activities

Facility fee due on long-term debt..................... $ - $ 5,300 $ - $ -
Repurchase of warrant.................................. $ - $ 5,355 $ - $ -
</TABLE>

See accompanying notes to condensed financial statements
<PAGE>

SCHEDULE I

Page 4 of 4

LEAP WIRELESS INTERNATIONAL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

Leap Wireless International, Inc. ("Leap"), a Delaware corporation, is the
parent company of all Leap subsidiaries. The accompanying condensed financial
statements reflect the financial position, results of operations and
comprehensive loss and cash flows of Leap on a separate basis. All subsidiaries
of Leap are reflected as investments accounted for under the equity method of
accounting.

No cash dividends were paid to Leap by its subsidiaries during the four month
period ended December 31, 1999 or the years ended August 31, 1999, 1998 and
1997.

For accounting policies and other information, see the Notes to Consolidated
Financial Statements included in this Annual Report on Form 10-KT.
<PAGE>

EXHIBIT INDEX

Exhibit No. Description of Exhibit
----------- ----------------------
2.1(16) Share Purchase Agreement, dated as of June 2, 2000 among Endesa
S.A., Leap Wireless International, Inc. and Inversiones Leap
Wireless Chile, S.A.
3.1.1(2) Amended and Restated Certificate of Incorporation of the
Registrant.
3.1.2(15) Certificate of Amendment of Amended and Restated Certificate of
Incorporation of the Registrant.
3.2(2) Amended and Restated Bylaws of the Registrant.
3.3(3) Form of Certificate of Designation of Series A Junior Participating
Preferred Stock of Registrant.
4.1(2) Form of Common Stock Certificate.
4.2.1(4) Letter, dated as of May 5, 1999, from Qualcomm Incorporated to the
Registrant.
4.2.2(5) Superceding Warrant, dated as of August 9, 1999, between the
Registrant and various officers and directors of Qualcomm
Incorporated.
4.2.3(5) Form of Voting Agreement, dated as of August 9, 1999, issued to
Qualcomm.
4.2.4(5) Amended and Restated Agreement Concerning Share Ownership, dated as
of August 4, 1999, between the Registrant and Qualcomm.
4.3.1(3) Rights Agreement, dated as of September 14, 1998, between the
Registrant and Harris Trust Company of California.
4.3.2(16) First Amendment to Rights Agreement, dated as of February 8, 2000,
between Leap Wireless International, Inc. and Harris Trust Company
of California.
4.3.3(16) Second Amendment to Rights Agreement, dated as of March 30, 2000,
between Leap Wireless International, Inc. and Harris Trust Company
of California.
4.4(1) Warrant Agreement, dated as of February 23, 2000, by and between
the Registrant and State Street Bank and Trust Company (including
Form of Warrant Certificate).
4.5(1) Warrant Registration Rights Agreement, dated as of February 23,
2000, by and between the Registrant and Morgan Stanley & Co.
Incorporated.
4.6(1) Trust Indenture, dated as of February 23, 2000, by and among the
Registrant, Cricket Communications Holdings, Inc. and State Street
Bank and Trust Company (including Forms of Notes).
4.7(1) Pledge Agreement, dated as of February 23, 2000, by and between the
Registrant and State Street Bank and Trust Company.
4.8(1) Registration Rights Agreement, dated February 23, 2000, by and
among the Registrant, Cricket Communications Holdings, Inc. and
Morgan Stanley & Co. Incorporated.
10.1(6) Separation and Distribution Agreement, dated as of September 23,
1998, between Qualcomm and the Registrant.
10.1.1(5) First Amendment to Separation and Distribution Agreement, dated as
of August 6, 1999, between the Registrant and Qualcomm.
10.2(6) Credit Agreement, dated as of September 23, 1998, between Qualcomm
and the Registrant.
10.3(6) Tax Matters Agreement, dated as of September 23, 1998, between
Qualcomm and the Registrant.
10.4(6) Interim Services Agreement, dated as of September 23, 1998, between
Qualcomm and the Registrant.
10.5(6) Master Agreement Regarding Equipment Acquisition, dated as of
September 23, 1998, between Qualcomm and the Registrant.
10.5.1(5) First Amendment to Master Agreement Regarding Equipment
Procurement, dated as of August 6, 1999, between the Registrant and
Qualcomm.
<PAGE>

Exhibit No. Description of Exhibit
----------- ----------------------
10.6(6) Employee Benefits Agreement, dated as of September 23, 1998,
between Qualcomm and the Registrant.
10.7(6) Conversion Agreement, dated as of September 23, 1998, between
Qualcomm and the Registrant.
10.8(6) Assignment and Assumption Agreement, dated as of September 23,
1998, between Qualcomm and the Registrant.
10.9(7) 1998 Stock Option Plan, as amended through April 13, 1999.
10.10(2) Form of non-qualified/incentive stock option under the 1998 Stock
Option Plan.
10.11(2) Form of non-qualified stock option under the 1998 Stock Option Plan
granted to Qualcomm option holders in connection with the
distribution of the Registrant's common stock.
10.12(2) Form of the Registrant's 1998 Non-Employee Directors' Stock Option
Plan.
10.13(2) Form of non-qualified stock option under the 1998 Non-Employee
Directors' Stock Option Plan.
10.14(2) Form of the Registrant's Employee Stock Purchase Plan.
10.15(2) Assignment and Assumption of Lease dated August 11, 1998 between
Qualcomm and Vaxa International, Inc.
10.16(2) Form of Indemnity Agreement to be entered into between the
Registrant and its directors and officers.
10.17(8) Loan Agreement, dated as of September 28, 1998, between Pegaso
Comunicaciones y Servicios, S.A. de C.V. and the Registrant.
10.18(8) Promissory Note, executed September 25, 1998, payable to the
Registrant by Pegaso Comunicaciones y Servicios, S.A. de C.V.
10.19(8) Pledge Agreement, dated September 28, 1998, by and among the
Guarantors, the Issuers and the Registrant.
10.20(9) Asset Purchase Agreement, dated December 24, 1998, by and among
Chase Telecommunications Holdings, Inc., Anthony Chase, Richard
McDugald and the Registrant.
10.21.1(10) Stock Purchase Agreement, dated April 12, 1999, by and among
Inversiones Leap Chile S.A., Telex -- Chile S.A., and Chilesat S.A.
10.21.2(7) Novation and Assumption of Payment Obligation Agreement, dated May
11, 1999, by and among Chilesat Telefonia Personal S.A.,
Inversiones Leap Chile S.A. and Chilesat S.A. (In Spanish and
accompanied by a translation in English).
10.22(5) Cricket Communications, Inc. 1999 Stock Option Plan (now known as
Cricket Communications Holdings, Inc.).
10.22.1(1) Amendment No. 1 to 1999 Stock Option Plan of Cricket
Communications, Inc. (now known as Cricket Communications Holdings,
Inc.).
10.23(5) Form of non-qualified/incentive stock option under the Cricket
Communications, Inc. 1999 Stock Option Plan (now known as Cricket
Communications Holdings, Inc.).
10.24(5) Employment offer letter to Susan G. Swenson from Registrant, dated
July 9, 1999.
10.25(11) System Equipment Purchase Agreement, dated September 20, 1999, by
and between Cricket Wireless Communications, Inc. and Lucent
Technologies, Inc. Portions of this exhibit (indicated by
asterisks) have been omitted pursuant to a request for confidential
treatment pursuant to Rule 406 under the Securities Act of 1933 and
Rule 24b-2 under the Securities Exchange Act of 1934.
<PAGE>

Exhibit No. Description of Exhibit
----------- ----------------------
10.26(11) Credit Agreement, dated as of September 29, 1999, among Cricket
Communications, Inc., Cricket Wireless Communications, Inc., the
Lenders party thereto, and Lucent Technologies, Inc., as
Administrative Agent. Portions of this exhibit (indicated by
asterisks) have been omitted pursuant to a request for confidential
treatment pursuant to Rule 406 under the Securities Act of 1933 and
Rule 24b-2 under the Securities Exchange Act of 1934.
10.26.1(11) Exhibit A -- Form of Borrower Pledge Agreement.
10.26.2(11) Exhibit B -- Form of Collateral Agency and Intercreditor Agreement.
10.26.3(11) Exhibit C -- Form of Guarantee Agreement.
10.26.4(11) Exhibit D -- Form of Indemnity, Subrogation and Contribution
Agreement.
10.26.5(11) Exhibit E -- Form of Parent Agreement.
10.26.6(11) Exhibit F -- Form of Parent Pledge Agreement.
10.26.7(11) Exhibit G -- Form of Perfection Certificate.
10.26.8(11) Exhibit H -- Form of Security Agreement.
10.26.9(11) Exhibit I -- Form of Subordination Agreement.
10.26.10(1) First Amendment, dated as of November 24, 1999, to the Credit
Agreement, dated as of September 20, 1999, among Cricket
Communications, Inc., Cricket Wireless Communications, Inc., and
Lucent Technologies, Inc., as Administrative Agent. Portions of
this exhibit (indicated by asterisks) have been omitted pursuant to
a request for confidential treatment pursuant to Rule 24b-2 under
the Securities Exchange Act of 1934.
10.26.11(1) Second Amendment, dated as of January 27, 2000, to the Credit
Agreement, dated as of September 20, 1999, among Cricket
Communications Holdings, Inc., Cricket Communications, Inc., the
lenders party thereto and Lucent Technologies, Inc., as
Administrative Agent. Portions of this exhibit (indicated by
asterisks) have been omitted pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934.
10.26.12(1) First Amendment dated as of January 27, 2000, to the Parent
Agreement, dated as of September 17, 1999, between the Registrant
and Lucent Technologies, Inc., as Administrative Agent.
10.27(12) Memorandum of Agreement, dated September 20 1999, by and between
Ericsson Wireless Communications Inc., the Registrant and Cricket
Wireless Communications, Inc. Portions of this exhibit (indicated
by asterisks) have been omitted pursuant to a request for
confidential treatment pursuant to Rule 406 under the Securities
Act of 1933 and Rule 24b-2 under the Securities Exchange Act of
1934.
10.28(11) Second Amended and Restated Deferred Payment Agreement, dated
October 12, 1999, among Chilesat Telefonia Personal S.A.,
Inversiones Leap Chile S.A., and Qualcomm Incorporated, as Vendor,
Administrative Agent and Collateral Agent Subsidiaries of the
Registrant.
10.29.1(13) Executive Officer Deferred Stock Plan.
10.29.2(16) First Amendment to Executive Officer Deferred Stock Plan.
10.30(14) License Purchase Agreement, dated September 11, 1998, by and
between the Registrant and AirGate Wireless, L.L.C.
10.31(14) First Amendment to License Purchase Agreement, dated December 17,
1999, by and between Cricket Holdings, Inc. and AirGate Wireless,
L.L.C.
<PAGE>

Exhibit No. Description of Exhibit
----------- ----------------------
10.32(14) Agreement for Purchase and Sale of Licenses, dated January 7, 2000,
by and between Radiofone PCS, L.L.C. and the Registrant.
10.33(15) 2000 Stock Option Plan.
21.1* Subsidiaries of the Registrant.
23.1* Consent of PricewaterhouseCoopers LLP, independent accountants.
27.1* Financial Data Schedule.
____________
* Filed herewith.

(1) Filed as an exhibit to Leap's Quarterly Report on Form 10-Q for the quarter
ended February 29, 2000, as filed with the SEC on April 14, 2000, and
incorporated herein by reference.

(2) Filed as an exhibit to Leap's Registration Statement on Form 10, as amended
(File No. 0-29752), and incorporated herein by reference.

(3) Filed as an exhibit to Leap's Current Report on Form 8-K dated September
14, 1998, and incorporated herein by reference.

(4) Filed as an exhibit to Leap's Quarterly Report on Form 10-Q for the quarter
ended February 28, 1999, as filed with the SEC on April 14, 1999, and
incorporated herein by reference.

(5) Filed as an exhibit to Leap's Post-Effective Amendment No. 2 to
Registration Statement on Form S-1 (File No. 333-64459) dated August 10,
1999, and incorporated herein by reference.

(6) Filed as an exhibit to Leap's Amendment No. 1 to Registration Statement on
Form S-1 (File No. 333-64459) dated October 13, 1998, and incorporated
herein by reference.

(7) Filed as an exhibit to Leap's Quarterly Report on Form 10-Q for the quarter
ended May 31, 1999, as filed with the SEC on July 15, 1999, and
incorporated herein by reference.

(8) Filed as an exhibit to Leap's Annual Report on Form 10-K for the fiscal
year ended August 31, 1998, as filed with the SEC on November 30, 1998, as
amended, and incorporated herein by reference.

(9) Filed as an exhibit to Leap's Quarterly Report on Form 10-Q for the quarter
ended November 30, 1998, as filed with the SEC on January 14, 1999, and
incorporated herein by reference.

(10) Filed as an exhibit to Leap's Current Report on Form 8-K dated May 4, 1999,
and incorporated herein by reference.

(11) Filed as an exhibit to Leap's Annual Report on Form 10-K for the fiscal
year ended August 31, 1999, as filed with the SEC on October 20, 1999, as
amended, and incorporated herein by reference.

(13) Filed as an exhibit to Leap's Registration Statement on Form S-8 (File No.
333-94389) dated January 11, 2000, and incorporated herein by reference.
<PAGE>

(14) Filed as an exhibit to Leap's Registration Statement on Form S-3 (File No.
333-93073) dated February 16, 2000, and incorporated herein by reference.

(15) Filed as an exhibit to Leap's Current Report on Form 8-K dated September
28, 2000, and incorporated herein by reference.

(16) Filed as an exhibit to Leap's Quarterly Report on Form 10-Q for the
quarter ended May 31, 2000, as filed with the SEC on July 17, 2000, and
incorporated herein by reference.